Alaska Airlines and Horizon Air 2009 Annual Report Download - page 163

at December 31, 2009 and 2008, respectively.
Inventory and supplies-net also includes fuel
inventory of $14.0 million and $15.9 million at
December 31, 2009 and 2008, respectively.
Repairable and rotable aircraft parts inventories
are included in flight equipment.
Property, Equipment and Depreciation
Property and equipment are recorded at cost and depreciated using the straight-line method over their
estimated useful lives, which are as follows:
Aircraft and related flight equipment:
Boeing 737-400/700/800/900 ............................. 20years
Bombardier Q400 ......................................... 15years
Buildings ................................................ 25-30 years
Minor building and land improvements ............................ 10years
Capitalized leases and leasehold improvements .................... Shorter of lease term or
estimated useful life
Computer hardware and software ................................ 3-5years
Other furniture and equipment .................................. 5-10 years
As a result of the early retirement of the MD-80
and Q200 fleets, all remaining flight equipment
of those fleets have been depreciated to their
expected salvage values. The estimated useful
lives are aligned with the fleet’s average
expected retirement date.
“Related flight equipment” includes rotable and
repairable spare inventories, which are
depreciated over the associated fleet life unless
otherwise noted.
Maintenance and repairs, other than engine
maintenance on B737-400, -700 and -900
engines, are expensed when incurred. Major
modifications that extend the life or improve the
usefulness of aircraft are capitalized and
depreciated over their estimated period of use.
Maintenance on B737-400, -700 and -900
engines is covered under power-by-the-hour
agreements with third parties, whereby the
Company pays a determinable amount, and
transfers risk, to a third party. The Company
expenses the contract amounts based on engine
usage.
The Company evaluates long-lived assets to be
held and used for impairment whenever events or
changes in circumstances indicate that the total
carrying amount of an asset or asset group may
not be recoverable. The Company groups assets
for purposes of such reviews at the lowest level
for which identifiable cash flows of the asset
group are largely independent of the cash flows of
other groups of assets and liabilities. An
impairment loss is considered when estimated
future undiscounted cash flows expected to result
from the use of the asset or asset group and its
eventual disposition are less than its carrying
amount. If the asset or asset group is not
considered recoverable, a write- down equal to the
excess of the carrying amount over the fair value
will be recorded. The Company determined that its
two owned CRJ-700 aircraft and the fleet’s related
spare parts were impaired during 2008. See
Note 2 for further discussion of this impairment
and other fleet transition costs.
Internally Used Software Costs
The Company capitalizes costs to develop
internal-use software that are incurred in the
application development stage. Amortization
commences when the software is ready for its
intended use and the amortization period is the
estimated useful life of the software, generally
three to five years. Capitalized costs primarily
include contract labor and payroll costs of the
individuals dedicated to the development of
internal-use software. The Company capitalized
software development costs of $0.7 million,
$1.0 million, and $3.0 million during the years
ended December 31, 2009, 2008, and 2007,
respectively.
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ŠForm 10-K