Alaska Airlines and Horizon Air 2009 Annual Report Download - page 111

established aircraft noise reduction programs,
including the imposition of nighttime curfews. We
believe we have sufficient scheduling flexibility to
accommodate local noise restrictions.
Although we do not currently anticipate that
these regulatory matters, individually or
collectively, will have a material effect on our
financial condition, results of operations or cash
flows, new regulations or compliance issues that
we do not currently anticipate could have the
potential to harm our financial condition, results
of operations or cash flows in future periods.
CUSTOMER SERVICE
Along with other domestic airlines, we have
implemented a customer service commitment
plan to address a number of service goals,
including, but not limited to, goals relating to
lowest fare availability, delays, cancellations and
diversions, baggage delivery and liability,
guaranteed fares and ticket refunds. All of our
employees are required to periodically attend our
Customer Experience Workshop to enhance our
customer service focus and ultimately improve
the experience our customers have when
traveling with us.
In December 2009, the DOT adopted new rules
effective in April 2010 that set fines of as much
as $27,500 per passenger when airlines leave
passengers on the aircraft for more than three
hours while on the ground. These new rules are
in response to recent incidents involving other
airlines that resulted in lengthy tarmac delays.
Bills have been introduced in several states,
including the state of Washington, which propose
to regulate airlines when operating in those
specific states. However, we believe these bills
would be preempted by federal law. We do not
believe these bills are necessary.
MILEAGE PLAN PROGRAM
All major airlines have developed frequent flyer
programs as a way of increasing passenger
loyalty. Alaska’s Mileage Plan allows members to
earn mileage by flying on Alaska, Horizon and
other participating airlines and by using the
services of non-airline partners, which include a
credit card partner, a grocery store chain, a
telephone company, hotels, car rental agencies,
and other businesses. Alaska is paid by
non-airline partners for the miles it credits to
member accounts. With advance notice, Alaska
has the ability to change the Mileage Plan terms,
conditions, partners, mileage credits, and award
levels or to terminate the program.
Mileage can be redeemed for free or discounted
travel and for various other awards. Upon
accumulating the necessary mileage, members
notify Alaska of their award selection. Mileage
Plan accounts are generally deleted after two
years of inactivity in a member’s account. Over
80% of the free flight awards on Alaska and
Horizon in 2009 were subject to capacity-
controlled seating.
As of December 31, 2009 and 2008,
approximately 3.0 million and 3.4 million,
respectively, round-trip flight awards were eligible
for redemption by Mileage Plan members. Of
those eligible awards, we estimate that
approximately 88% will ultimately be redeemed.
For the years 2009, 2008 and 2007,
approximately 1,190,000, 685,000 and
600,000 round-trip awards and 260,000,
410,000 and 250,000 one-way flight awards
were redeemed and flown on Alaska and Horizon.
These awards represent approximately 15.0%,
9.3%, and 7.0% for 2009, 2008, and 2007,
respectively, of the total passenger miles flown
on Alaska and Horizon. For the years 2009,
2008, and 2007, approximately 181,000,
214,000, and 243,000, respectively, round-trip
flight awards were redeemed and flown on airline
partners. In November 2008, we began charging
a $25 fee for awards redeemed on our airline
partners.
We also have awards that allow for redemption
of one-half the mileage redemption rate plus
50% of the fare for eligible award travel. Our
members redeemed approximately 730,000,
620,000, and 560,000 one-way equivalent
awards under this program in 2009, 2008, and
2007, respectively.
We sell mileage credits to our non-airline
partners. We defer a majority of the sales
proceeds and recognize revenue when award
transportation is provided.
15
ŠForm 10-K