Airtran 2010 Annual Report Download - page 65

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk-Sensitive Instruments and Positions
We are subject to certain market risks, including changes in interest rates and commodity prices (i.e., aircraft fuel). The
adverse effects of changes in these markets pose a potential loss as discussed below. The sensitivity analyses do not
consider the effects that such adverse changes may have on overall economic activity, nor do they consider additional
actions we may take to mitigate our exposure to such changes. Actual results may differ. See the Notes to the
Consolidated Financial Statements for a description of our financial accounting policies and additional information.
Interest Rates
We had approximately $623.8 million and $665.7 million of variable-rate debt as of December 31, 2010 and
December 31, 2009, respectively. We have mitigated our exposure on certain variable-rate debt by entering into interest-
rate swap agreements. During 2010, we entered into three interest-rate swap arrangements pertaining to $65.0 million
notional amount of outstanding debt. The notional amount of the outstanding debt related to interest-rate swaps at
December 31, 2010 and December 31, 2009 was $479.1 million and $447.0 million, respectively. These swaps expire
between 2016 and 2020. The interest-rate swaps effectively result in us paying a fixed rate of interest on a portion of our
floating-rate debt securities through the expiration of the swaps. As of December 31, 2010, the fair market value of our
interest-rate swaps was a liability of $27.6 million. If average interest rates increased by 100 basis points during 2011, as
compared to 2010, our projected 2011 interest expense would increase by approximately $1.4 million.
As of December 31, 2010 and 2009, the fair value of our debt was estimated to be $1.0 billion and $1.1 billion,
respectively, versus a carrying amount of $1.0 billion and $1.2 billion as of December 31, 2010 and 2009, respectively.
The fair value of our debt was estimated using quoted market prices where available. For long-term debt not actively
traded, the fair value was estimated using a discounted cash flow analysis based on our current borrowing rates for
instruments with similar terms. The fair values of our other financial instruments and borrowings under our revolving line
of credit facility approximate their respective carrying values. Given the current volatility in the credit markets, there is an
atypical element of uncertainty associated with valuing debt securities, including our debt securities. Market risk on our
fixed rate debt, estimated as the potential increase in fair value resulting from a hypothetical 100 basis point decrease in
interest rates, was approximately $10.1 million as of December 31, 2010.
Aviation Fuel
Our results of operations can be significantly impacted by changes in the price and availability of aircraft fuel. Aircraft
fuel expense for the years ended December 31, 2010, 2009, and 2008 represented 34.8 percent, 31.4 percent, and 45.5
percent of our operating expenses, respectively.
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