Alaska Airlines and Horizon Air 2007 Annual Report Download - page 118

leases related to our aircraft, airport terminal
space, other airport facilities and office space.
As of December 31, 2007, future minimum
lease payments under noncancelable operating
leases with initial or remaining terms in excess
of one year were approximately $1.1 billion for
2008 through 2012 and an aggregate of $526.2
million for the years thereafter.
At December 31, 2007, we had firm orders to
purchase 46 aircraft requiring future aggregate
payments of approximately $1.0 billion through
2011. Although we have secured financing for a
number of these commitments, there is no
guarantee that additional financing will be
available when required. Our inability to secure
the financing could have a material adverse effect
on our cash balances or result in delays in or our
inability to take delivery of aircraft, which would
impair our growth or fleet-simplification plans.
Our outstanding long-term debt and other fixed
obligations could have important consequences.
For example, they could:
• limit our ability to obtain additional
financing to fund our growth strategy,
capital expenditures, acquisitions,
working capital or other purposes;
• require us to dedicate a material portion
of our operating cash flow to fund lease
payments and interest payments on
indebtedness, thereby reducing funds
available for other purposes; and
• limit our ability to withstand competitive
pressures and reduce our flexibility in
responding to changing business and
economic conditions, including reacting
to any economic slowdown in the airline
industry.
We cannot ensure that we will be able to
generate sufficient cash flow from our operations
to pay our debt and other fixed obligations as
they become due. If we fail to do so, our
business could be harmed.
Alaska is required to comply with specific
financial covenants in certain agreements. We
cannot be certain now that Alaska will be able to
comply with these covenants or provisions or
that these requirements will not limit our ability
to finance our future operations or capital needs.
Our operations are often affected by factors
beyond our control, including changing economic
and other conditions, which could harm our
financial condition and results of operations.
Like other airlines, our operations often are
affected by changes in economic and other
conditions caused by factors largely beyond our
control, including:
• economic recession, interest rate
increases, inflation, international or
domestic conflicts, terrorist activity, or
other changes in economic or business
conditions;
• air traffic congestion at airports or other
air traffic control problems;
• adverse weather conditions; and
• increased security measures or
breaches in security.
Delays and cancellations frustrate passengers,
reduce aircraft utilization and increase costs, all
of which affect our profitability. Due to our
geographic area of operations, we believe a
significant portion of our operation is more
susceptible to adverse weather conditions than
that of many of our competitors. Any general
reduction in airline passenger traffic as a result
of any of the above-mentioned factors could
harm our business, financial condition and
results of operations.
We depend on a few key markets to be
successful.
Our strategy is to focus on serving a few key
markets, including Seattle, Portland, Los Angeles
and Anchorage. A significant portion of our flights
occurs to and from our Seattle hub. In 2007,
traffic to and from Seattle accounted for 62% of
our total traffic.
We believe that concentrating our service
offerings in this way allows us to maximize our
investment in personnel, aircraft, and ground
facilities, as well as to gain greater advantage
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