Spirit Airlines 2012 Annual Report Download - page 68

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Notes to Financial Statements—(Continued)
The following table illustrates total cash proceeds received from the sale of mileage credits and the portion of such proceeds recognized in revenue immediately as
marketing component:
The total liability for future FREE SPIRIT award redemptions and unrecognized revenue from the sale of mileage credits was $2.4 million and $3.7 million at
December 31, 2012 and 2011 , respectively. These balances are recorded as a component of air traffic liability in the accompanying balance sheets.
Non-ticket Revenue Recognition
Non-ticket revenues are generated from air travel-related services for baggage, bookings through the Company’s call center or third-party vendors, advance seat
selection, itinerary changes and loyalty programs. Non-ticket revenues also consist of services not directly related to providing transportation such as the FREE SPIRIT
affinity credit card program, $9 Fare Club, and the sale of advertising to third parties on Spirit’s website and on board aircraft.
The following table summarizes the primary components of non-ticket revenue and the revenue recognition method utilized for each service or product:
Charges for services recognized at time of departure are initially recorded as a liability until time of departure. The passenger usage fee is charged for tickets sold
through the Company’s primary sales distribution channels, to cover the Company’s distribution costs. The primary sales distribution channels for which passenger usage
fees are charged include sales through the Company’s website, sales through the third-party provided call center, and sales through travel agents; the Company does not
charge a passenger usage fee for sales made at its airport ticket counters. Other non-ticket revenues include revenues from other air related charges as well as non-air related
charges. Other air related charges include optional services and products provided to passengers such as on-board products, travel insurance, and use of the Company’s call
center or travel agents, among others. Non-air related charges primarily consist of revenues from advertising on the Company’s aircraft and website, the Company’s $9 Fare
Club subscription-based membership program, and the Company’s FREE SPIRIT affinity credit card program.
Airframe and Engine Maintenance
The Company accounts for heavy maintenance and major overhaul and repair under the deferral method whereby the cost of heavy maintenance and major overhaul
and repair is deferred and amortized based on usage through the next overhaul event.
Amortization of heavy maintenance and major overhaul costs is charged to depreciation and amortization expense and was $9.1 million , $2.6 million , and $1.3
million for the years ended 2012 , 2011 , and 2010 , respectively. During the years ended 2012 , 2011 , and 2010 , the Company deferred $61.6 million , $22.1 million , and
$5.2 million , respectively, of costs for heavy maintenance. Accumulated heavy maintenance amortization was $14.0 million , $4.9 million , and $2.3 million for the years
ended 2012 and 2011 , and 2010
67
Cash proceeds from
sale of miles to non-
airline third parties
Portion of proceeds
recognized immediately as
marketing component
Year Ended (in thousands)
December 31, 2012 $
24,938
$
20,998
December 31, 2011
20,954
16,580
December 31, 2010
20,748
10,576
Year Ended December 31,
Non-ticket revenue Recognition method 2012
2011
2010
(in thousands)
Baggage Time of departure
$
217,536
$
168,290
$
91,393
Passenger usage fee Time of departure
149,577
71,757
47,367
Advance seat selection Time of departure
48,956
42,112
32,512
Service charges for changes and cancellations
When itinerary is changed
27,762
25,927
23,120
Other
91,765
73,450
48,904
Non-ticket revenue
$
535,596
$
381,536
$
243,296