Alaska Airlines and Horizon Air 2009 Annual Report Download - page 125

carriers for the year with their 86.1% on-time
performance in 2009.
• For the second year in a row, Alaska Airlines
ranked “Highest in Customer Satisfaction
among Traditional Network Carriers” in 2009
by J.D. Power and Associates.
• Alaska won the 2008 “Program of the Year”
Freddie award for our Mileage Plan program
in 2009. This is the fifth time that we have
won this highest award and the second year
in a row. We also won top honors for “Best
Web Site,” “Best Elite-Level Program,” and
“Best Member Communications.”
• During the year, we reached agreements
with several of our labor groups that provide
for improved productivity and a common
gain-sharing formula. See “Update on Labor
Negotiations” below for further discussion.
• For the year, our employees earned $76
million in incentive pay for meeting certain
operational and financial goals. We also
contributed nearly $150 million to Alaska’s
defined benefit pension plans.
Update on Labor Negotiations
Both Alaska and Horizon have had success
recently with new bargaining agreements or
contract extensions with a number of
represented employees. All of the new
agreements or extensions ratified in 2009
include participation by the represented
employees in Air Group’s Performance-Based Pay
(PBP) incentive plan as approved by the
Compensation Committee of the Board of
Directors. PBP is described in Note 8 to the
consolidated financial statements. Our ultimate
goal is to include all Air Group employees in PBP
in order to have common goals and targets that
everyone is working together to achieve.
New Alaska Pilot Contract
On May 19, 2009, Alaska’s pilots, represented
by the Air Line Pilots Association, ratified a new
four-year contract. This negotiated agreement
replaces the contract that had been in place
since May 1, 2005. The terms of the 2005
contract were the result of an arbitrator’s
decision and included immediate wage
reductions that averaged approximately 26%
across the pilot group, work rule changes, and
higher employee health care contributions.
The significant terms of the new contract are as
follows:
• Average pilot wages increased approximately
14% effective April 1, 2009. The contract
also provides for step increases of 1.5% on
the first two anniversary dates of the
contract and 1.8% on the third anniversary.
• Participation in PBP.
• The defined-benefit pension plan for pilots is
now closed to new entrants. Newly hired
pilots will participate in a defined-
contribution plan that includes a contribution
by Alaska equal to 13.5% of eligible
wages. Incumbents had the option of
(1) remaining in the defined-benefit pension
plan, (2) moving to a new blended option
with lower service credit under the defined
benefit plan and higher 401(k) contribution
or (3) voluntarily freezing service credit in
the existing defined benefit plan in exchange
for a higher 401(k) contribution.
• Upon retirement, pilots are now allowed to
receive a cash payment of an amount
equivalent to 25% of their accrued sick
leave balance multiplied by their hourly rate.
• The new contract provides for better
productivity and flexibility. We expect to
realize savings from these productivity
enhancements when we resume capacity
growth.
Pilots received a one-time bonus of $20.3 million
in the aggregate following ratification of the
contract. The transition expense associated with
establishing the sick-leave payout program
described above was $15.5 million. These items
have been combined and reported in 2009 as
“New pilot contract transition costs” in the
consolidated statements of operations.
Contract Extensions at Alaska
In March 2009, Alaska’s flight attendants,
represented by the AFA, ratified a two-year
contract extension. The contract will become
amendable in April 2012. As part of the contract,
flight attendants will receive a 1.5% pay increase
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ŠForm 10-K