Alaska Airlines and Horizon Air 2007 Annual Report Download - page 187

NOTE 10. RESTRUCTURING CHARGES
In July 2006, Alaska reached new four-year
agreements with approximately 3,700 clerical,
office and passenger service employees and the
ramp service and stores agents, all represented
by the International Association of Machinists.
These agreements included a signing bonus, in
aggregate, of $1.9 million paid in July 2006,
which is included in wages and benefits in the
consolidated statement of operations, and an
immediate 2% wage increase. Additionally, the
agreements included a severance package
offered to employees in the top four wage-scale
steps that included cash payments based on
years of service, one year of medical coverage
after the severance date, and continued travel
privileges for a period of time. The resulting
charge was $21.0 million in 2006.
A new four-year contract with the Association of
Flight Attendants for Alaska’s approximately
2,500 flight attendants was ratified on April 26,
2006. Under this agreement, the Company paid
a signing bonus, in aggregate, of $2.7 million in
May 2006, which is included in wages and
benefits in the consolidated statement of
operations. The new agreement also included an
immediate 3% pay increase. Additionally, Alaska
offered a voluntary severance package to a
number of flight attendants that included, among
other things, a lump-sum payment of $2,000 per
year of service up to a maximum of 25 years and
continuing travel privileges. As a result, the
Company recorded a restructuring charge of $3.8
million related to the severance amounts.
During the second quarter of 2005, Alaska
contracted out ramp services at the Seattle-
Tacoma International Airport. This event resulted
in a reduction of approximately 475 employees
in Seattle. Severance and related costs
associated with this restructuring were originally
estimated at $16.1 million, which was recorded
in the second quarter of 2005.
The following table displays the activity and
balance of the severance and related cost
components of the Company’s restructuring
accrual as of and for the years ended
December 31, 2007, 2006 and 2005 (in
millions):
Accrual for Severance and
Related Costs 2007 2006 2005
Balance at beginning of year .... $ 19.9 $ 3.1 $ 38.7
Restructuring charges ......... —32.4 16.1
Restructuring charge
adjustments ............... —(7.6) (3.7)
Cash payments .............. (19.2) (8.0) (48.0)
Balance at end of year ........ $ 0.7 $19.9 $ 3.1
The Company will make the majority of the
remaining cash payments in the first quarter of
2008. The accrual for severance and related
costs is included in accrued wages, vacation and
payroll taxes in the consolidated balance sheets.
During March 2005, the Company notified the
Port of Oakland of its decision to terminate the
lease for the Oakland hangar as part of its
ongoing restructuring efforts. Accordingly, the
Company recorded an impairment charge of $7.7
million in the first quarter of 2005 for the
leasehold improvements that were abandoned
as a result of the lease termination. Additionally,
the Company recorded a charge of $0.3 million
for certain costs associated with the lease
termination, which have been paid.
87
ŠForm 10-K