Spirit Airlines 2011 Annual Report Download - page 63

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The difference between aircraft fuel expense and economic fuel expense is shown below:
Although our average economic fuel cost for 2011 was $3.18 per gallon ( $3.24 per gallon without giving effect to hedge transactions),
fuel prices have continued to increase. For example, our into-plane fuel cost as of February 9, 2012 was approximately $3.32 per gallon.
The increase in labor costs during 2011 was primarily due to increased headcount and increased pilot rates. Our pilot and flight attendant
headcount increased 10% and 16%, respectively, as we increased our fleet size by 15.6% via the addition of five aircraft during 2011. The
increase in labor costs was also driven by the increase in pilot labor rates by approximately 11% during 2011.
During 2011, aircraft rent increased 14.9% mainly due to taking delivery of five Airbus A320 aircraft which were financed via operating
leases. In addition, approximately $1.5 million in maintenance reserves were expensed as supplemental rent in 2011 as it was deemed they
would not be reimbursed.
The increase in distribution expense of 24.7% , or approximately $10.2 million , in 2011 compared to 2010 was due primarily to increased
credit card fees driven by the 37.1% increase in revenue. Additionally, there was a shift in the percentage of bookings made from our website to
more expensive third-party distribution channels (GDSs), which increased to approximately 22.5% in 2011 from approximately 14.0% in 2010 .
The following table shows our distribution channel usage:
Maintenance, materials and repair costs increased 26.1% in 2011. This increase was primarily due to a 31.7% increase in flight-hour-
based
maintenance expenses driven by higher flight hours. Non-flight-hour based maintenance increased 18.0% as a result of the timing of scheduled
maintenance events and the aging fleet. As the fleet ages, we expect that maintenance costs and related out of service time to complete the
maintenance will increase.
The increase in capacity during 2011 resulted in increased landing fees and other operating expenses in 2011 compared to 2010.
Other operating expenses increased 8.5% year over year and are generally driven by the increase in capacity, new stations start-ups, and
increases in rates. We experienced notable increases in ground handling and crew travel and lodging cost partly due to increased flights and the
changes in route mix. These increases in cost were offset by a decrease in costs incurred to accommodate displaced passengers due to the
aggressive management of cost and strict adherence to our accommodation policy.
Special charges increased $2.6 million period over period due to termination costs incurred in connection with the IPO during the second
quarter of 2011, comprised of $1.8 million paid to Indigo Partners, LLC to terminate its professional services agreement with us and $0.5 million
paid to three individual, unaffiliated holders of our subordinated notes.
55
Year Ended December 31,
Percentage
Change
2011
2010
(in thousands, except per-gallon
amounts)
Into-plane fuel expense
$
392,278
$
251,754
55.8 %
Less: Cash received from settled derivatives, net of cash settlements paid
$
(7,436
)
$
(1,483
)
401.4 %
Economic fuel expense
$
384,842
$
250,271
53.8 %
Fuel gallons consumed
121,030
106,628
13.5 %
Economic fuel cost per gallon
$
3.18
$
2.35
35.3
%
Year Ended December 31,
2011
2010
Change
Website
67.1
%
76.5
%
(9.4
)
Third-party travel agents
22.5
14.0
8.5
Call center
10.4
9.5
0.9