Alaska Airlines and Horizon Air 2014 Annual Report Download - page 133
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Special Mileage Plan Revenue
In 2013, we modified and extended our co-branded credit card agreement with BAC. In connection with
this agreement and as a result of applying related accounting standards, we recorded a one-time, non-
cash Special mileage plan revenue item of $192 million primarily related to our revaluation of the
deferred revenue liability related to miles previously sold to BAC.
OPERATING EXPENSES
Total operating expenses increased $193 million, or 5%, compared to 2012, primarily driven by wages
and variable incentive pay. Fuel expense remained flat due to a decrease in fuel cost per gallon offset
by an increase in fuel consumption. We believe it is useful to summarize operating expenses as follows,
which is consistent with the way expenses are reported internally and evaluated by management:
Twelve Months Ended December 31,
(in millions) 2013 2011 % Change
Fuel expense $ 1,467 $ 1,459 1
Non-fuel expenses 2,851 2,666 7
Total Operating Expenses $ 4,318 $ 4,125 5
Significant operating expense variances from 2012 are more fully described below.
Wages and Benefits
Wages and benefits increased during 2013 by $48 million, or 5%, compared to 2012. The primary
components of wages and benefits are shown in the following table:
Twelve Months Ended December 31,
(in millions) 2013 2012 % Change
Wages $ 788 $ 742 6
Pension - Defined benefit plans 50 57 (12)
Defined contribution plans 44 43 2
Medical and other benefits 145 138 5
Payroll taxes 59 58 2
Total wages and benefits $ 1,086 $ 1,038 5
Wages increased 6%, primarily due to a ratified contract with Alaska’s pilots that was effective April 1,
2013. Additionally, we hired 2% more FTEs to support increased flying and other strategic initiatives,
such as IT and hassle-free projects.
Pension expense decreased 12%, compared to the same period in the prior year. The decline is due to
having a lower accumulated loss to amortize as a result of higher plan assets and improved funded
status compared to the prior year.
Medical benefits increased 5% from the prior year primarily due to an increase in employee health-care
claims and an increase in the cost of health care services.
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ŠForm 10-K