Airtran 2010 Annual Report Download - page 54

Landing fees and other rents increased 6.9 percent on a cost per ASM basis primarily due to increased landing fees and
higher rental rates at various airports for gate and certain terminal space.
(Gain) loss on disposition of assets for the years ended December 31, 2009 and 2008 was ($3.0) million and ($20.0)
million, respectively. (Gain) loss on disposition of assets pertains primarily to aircraft related transactions. During 2009,
we recognized: $2.4 million loss for the write-off of capitalized interest related to the release of our obligation to
purchase two B737 aircraft which Boeing sold to an unrelated foreign airline, and $6.6 million gain related to the deposits
we previously received from the potential buyer who defaulted on its obligation to purchase two B737 aircraft in the third
quarter. During 2008, we sold eight B737 aircraft.
Other (Income) Expense
Other (income) expense, net decreased by $183.2 million to $41.7 million net expense for 2009 compared to $224.9
million net expense for 2008. Other (income) expense, net includes: interest income; interest expense, capitalized interest;
net (gains) losses on derivative financial instruments; and (gain) on extinguishment of debt.
Interest income increased by $2.0 million from 2008 to $5.7 million for 2009 primarily due to the net effects of the
unfavorable impact of lower interest rates and a $3.3 million gain classified as interest income upon the redemption of all
of our investments in an enhanced cash investment fund. During 2008, we recorded a charge of $5.2 million classified as
interest income for realized and unrealized losses related to our investments in available for sale securities.
Interest expense, including amortization of debt discount and debt issuance costs, decreased by $1.5 million from 2008 to
$84.0 million for 2009. The decrease was primarily due to the net effects of the following: the favorable impact of lower
interest rates applicable to variable-interest rate debt due to declines in market interest rates; the repurchase of $29.2
million of our 7.0% convertible notes; interest on our 5.5% convertible senior notes issued in May 2008; interest
associated with our Credit Facility obtained in the third quarter of 2008; and interest on our 5.25% convertible senior
notes issued in October 2009.
Capitalized interest decreased by $6.0 million from 2008 to $1.7 million for 2009. Capitalized interest represents the
interest cost to finance purchase deposits for future aircraft. These amounts are classified as part of the cost of the aircraft
upon delivery.
We reported net (gains) on derivative financial instruments of ($30.6 million) for 2009, compared to a net loss of $150.8
million for 2008. Net (gains) losses on derivative financial instruments consists primarily of realized and unrealized gains
and losses on fuel-related derivatives which either did not qualify for hedge accounting or were not designated as hedges
for financial accounting purposes.
During 2009, we repurchased $29.2 million of our 7.0% convertible notes resulting in a gain of $4.3 million.
Income Tax Expense (Benefit)
Our effective income tax rate was 0.5 percent and 11.4 percent for the years ended December 31, 2009 and 2008,
respectively. Our effective tax rate can differ from the 37.2 percent composite statutory tax rate (35 percent federal
statutory rate plus the 2.2 percent effective state tax rate) due to changes in the valuation allowance on our deferred tax
assets, certain expenses which are not deductible for income tax purposes, and non-recurring discrete items related to
restricted stock vesting. Non-deductible expense items and discrete items tend to increase the effective tax rate when pre-
tax income is reported and tend to decrease the effective tax rate when a pre-tax loss is reported. During 2009, we reported
income before taxes but did not recognize material tax expense due to the reduction in the valuation allowance which
largely offset income tax expense for the period. Beginning with the third quarter of 2008, we provided a valuation
allowance against substantially all of our net deferred tax assets, and as a result, our losses for the remainder of the year
were not reduced by any tax benefit. Consequently, our effective tax rate for 2008 was substantially lower than the
statutory rate.
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