Airtran 2001 Annual Report Download - page 13

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1
Depreciation expense increased by
S5.1
million (22.0 percent overall or 10.3 percent on aCASM basis) due to an increase in DC-9 capitalized improve-
ments, the reassessment
of
our B737 salvage values and the provisioning
of
spare parts for
our
growing B717 aircraft fleet.
Other operating expenses increased $8.6 million
(12.1
percent overall or 0.8 percent
on
aCASM basis) primarily due
to
significant increases
to
passen-
ger liability insurance coverage and security costs in the fourth quarter
of
2001, employee training costs and passenger-related costs associated with
our growth during 2001.
Impairment loss/lease termination expenses represent $38.8 million
of
charges related to decreases in the fair market values
of
our DC-9 and B737
aircraft fleets. These charges were calculated
in
accordance with Statement
of
Financial Accounting Standards No.
121
(SFAS
121),
"Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of."
In
addition, we recorded a$7.3 million charge related to the
termination
of
a
8737
lease. See Note
13
to the consolidated financial statements.
Special charges primarily represent operating costs incurred during the
FAA's
ground stop order following the
september
11
Events.
Government grant represents the entire amount
of
compensation
we
expect to receive from the U.S. government pursuant to the Stabilization Act.
This amount is discussed in Note 3to the consolidated financial statements.
Nonoperating Expenses
Other expense, net, included interest income and interest expense, aspecial item and an adjustment related to
our
fuel hedges in accordance with
SFAS 133. Interest income decreased
11.5
percent primarily due
to
lower rates
of
return on invested cash, partially offset
by
higher amounts
of
invested cash. Interest expense decreased 4.8 percent primarily due to overall lower debt obligations. partially offset
by
higher interest rates associated
with our refinanced
debt
(see Note 7to the consolidated financial statements). The special item represents additional
debt
discount amortization
resulting from the exercise
of
conversion rights on approximately two·thirds
of
our 7.75% Convertible Noles. Upon conversion.
we
expensed $3.8 mil-
lion
of
the
debt
discount and $0.5 million
of
debt issuance costs associated with our 7.75% Convertible Notes. These amounts are shown on the
Consolidated Statements
of
Operations as Convertible Debt Discount Amortization.
In
accordance
willl
SFAS
133 (see Notes 5and 16 to the
consolidated financial statemenls) we also recognized fuel-hedging gains of $2.2 million.
Provision for Income Taxes
Our income tax expense was $3.2 million compared to
SO
in the prior
year.
The 2001 tax expense resulted from the utilization
of
aportion
of
our
8141.0 million
of
net operating loss (NOL) carryforwards existing at December 31. 1998. offset in part
by
alternative minimum tax and the application
to goodwill
of
the tax benefit related
to
the realization of aportion of the Airways
Cor~ation,
Inc.
NOL
carryforwards. We have not recognized any
benefit from the future use
of
operating loss carryforwards, because
our
evaluation
of
all the available evidence in assessing the realizability
of
tax
benefits
of
such loss carryforwards indicates that the underlying assumptions
of
ruture profitable operations contain risks that do not provide sufficient
assurance
to
recognize such tax benefits currently.
2000
Compared to
1999
Summary
For 2000,
we
recorded operating income
of
$81.2 million, pre-tax income and net income
of
$47.4 million and earnings per common share
of
$0.69
on adiluted basis. For 1999, including apre-tax impairment charge
of
$147.7 million and alitigation settlement gain
of
$19.6 million, we recorded an
operating loss of $72.0 million, apre-tax loss
of
$96.7 million, anet loss of $99.4 million and aloss per
common
share
of
$1.53 on abasic and diluted
basis. The impairment loss and litigation settlement gain increased our loss per
common
share
by
S1.98.
Operating Revenues
Operating revenues increased by
S1OO.6
million (19.2 percent) primarily due to an increase in passenger revenues. The increase in passenger revenues
was principally driven
by
a6.7 percentage point increase
in
load factor and a4.9 percent increase in passenger yield. As aresult.
our
unit revenue or
RASM increased 16.0 percent to 10.3 cents.
During 2000. we increased
our
capacity, or ASMs. by
7.2
percent with the addition
of
eight new 8717 aircraft.
In
addition, RPMs increased
by
18.5 percent, resulting in arecord load factor
or
70.2 percent. The increase
in
passenger yield resulted primarily from additional business travelers
purchasing higher fares during the
year.
Notwithstanding the improved passenger yield and passenger load factor,
we
continue to experience aggressive
competition that could negatively impact future yields and loads.