Spirit Airlines 2015 Annual Report Download - page 52

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the twelve months ended December 31, 2014. Total unrealized losses arising from mark-to-market adjustments to our
outstanding fuel derivatives for the twelve months ended December 31, 2013 was $0.3 million.
Labor costs in 2014 increased by $51.8 million, or 19.8%, compared to 2013, due mainly to a 19.1% increase in our pilot
and flight attendant workforce required to operate the eleven new aircraft deliveries in 2014 and the implementation of new
crew duty and rest rules (FAR 117) beginning in January of 2014, which resulted in the hiring of additional pilots to fly our
schedule. On a per-ASM basis, labor costs increased primarily due to an increase in our group health care costs and the
implementation of FAR 117, which resulted in carrying a higher ratio of pilots compared to the prior period.
During 2014, aircraft rent increased $26.1 million, or 15.4%, compared to 2013. This increase was primarily driven by
the delivery of seven new leased aircraft during 2014. On a per-ASM basis, aircraft rent expense decreased due to lease
extensions that effectively lowered the lease rate for 14 A319 aircraft at the end of the second quarter of 2013, providing for a
full year of benefit in 2014 versus 7 months of benefit in 2013. In addition, we had the delivery of four purchased aircraft
during the fourth quarter of 2014 that increased capacity but had no affect on aircraft rent expense as these assets are being
depreciated over their useful life.
Landing fees and other rents for 2014 increased by $21.5 million, or 25.7%, compared to 2013 primarily due to
a 13.6% increase in departures as well as increased volume at higher cost airports. On a per-ASM basis, landing fees and other
rents increased, as compared to the prior year period, due to increased rates at certain airports, expiration of incentives, as well
as increased volume at higher-cost airports.
The increase in distribution expense of $7.3 million, or 10.9%, in 2014 compared to 2013 was primarily due to increased
sales volume and an increase of approximately 0.9 percentage points, year over year, in sales from third-party travel agents,
which are more expensive than selling directly through our website. On a per-ASM basis, distribution expense decreased
primarily due to a $2.9 million settlement gain received in 2014.
The following table shows our distribution channel usage:
Year Ended
December 31,
2014 2013 Change
Website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.1% 61.0% 0.1
Third-party travel agents . . . . . . . . . . . . . . . . . . . . . . . . . . 34.4 33.5 0.9
Call center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 5.5 (1.0)
Maintenance, materials and repair costs increased by $13.8 million, or 23.0%, in 2014, as compared to 2013. The
increase in maintenance costs was primarily due to the aging of our fleet, which requires more comprehensive work during
routine scheduled maintenance, as well as the timing of the mix of maintenance checks performed during 2014 as compared
to 2013. In addition, during the third quarter of 2014, we recorded $2.3 million of expense in connection with an engine failure
incident that occurred in 2013. For a detailed discussion of the engine expense, please see “Notes to the Financial Statements—
1. Summary of Significant Accounting Policies.”. In addition, the increase in maintenance costs on a dollar basis and per unit
basis resulted from an increase in both the number and cost of scheduled maintenance events during the year ended December
31, 2014, as compared to the prior year. We expect maintenance expense to increase significantly as our fleet continues to grow
and age, resulting in the need for additional or more frequent repairs over time.
Depreciation and amortization increased by $15.0 million, or 47.0%, primarily due to higher amortization of deferred
heavy maintenance. As our fleet continues to age, the amount of deferred heavy maintenance events capitalized will increase
and will result in an increase in the amortization of those costs.
Other operating expenses in 2014 increased by $5.1 million, or 3.5%, compared to 2013 primarily due to an increase in
departures of 13.6% and our overall growth. On a per-ASM basis, our other operating expenses decreased, as compared to the
same period in 2013, due to lower passenger re-accommodation expense resulting from improved operational reliability.