Alaska Airlines and Horizon Air 2010 Annual Report Download - page 121

• flight schedules,
• customer service,
• routes served,
• frequent flyer programs,
• on-time arrivals,
• baggage handling,
• on-board amenities,
• type of aircraft, and
• code-sharing relationships.
Together, Alaska and Horizon carry approximately
3.7% of all U.S. domestic passenger traffic. We
compete with one or more domestic or foreign
airlines on most of our routes, including
Southwest Airlines, United Airlines, Delta Air
Lines, American Airlines, US Airways, jetBlue
Airways, Virgin America, Allegiant and regional
affiliates associated with some of these carriers.
Due to its short-haul markets, Horizon also
competes with ground transportation in many
markets, including train, bus and automobile
transportation. Both carriers, to some extent,
also compete with technology such as video
conferencing and internet-based meeting tools
that have changed the need or frequency of
face-to-face business meetings.
TICKET DISTRIBUTION
Airline tickets are distributed through three
primary channels:
•Alaskaair.com: It is less expensive for us to
sell through this direct channel and, as a
result, we continue to take steps to drive
more business to our website. In addition,
we believe this channel is preferable from a
branding and customer-relationship
standpoint in that we can establish ongoing
communication with the customer and tailor
offers accordingly.
•Traditional and online travel agencies: Both
traditional and online travel agencies
typically use Global Distribution Systems
(GDS), such as Sabre, to obtain their fare
and inventory data from airlines. Bookings
made through these agencies result in a fee
that is charged to the airline. Many of our
large corporate customers require us to use
these agencies. Some of our competitors do
not use this distribution channel and, as a
result, have lower ticket distribution costs.
•Reservation call centers: These call centers
are located in Phoenix, AZ, Kent, WA, and
Boise, ID. We generally charge a $15 fee for
booking reservations through these call
centers.
Our sales by channel are as follows:
2010 2009
Alaskaair.com ............. 48% 48%
Traditional and online travel
agencies ............... 43% 42%
Reservation call centers ..... 8% 9%
All other channels .......... 1% 1%
Total ................ 100% 100%
EMPLOYEES
Labor costs have historically made up 30% to
40% of an airline’s total operating costs. Most
major airlines, including ours, have employee
groups that are covered by collective bargaining
agreements. Airlines with unionized work forces
have higher labor costs than carriers without
unionized work forces, and they may not have
the ability to adjust labor costs downward quickly
enough to respond to new competition. New
entrants into the U.S. airline industry generally
do not have unionized work forces, which can be
a competitive advantage for those airlines.
We had 12,039 (9,013 at Alaska and 3,026 at
Horizon) active full-time and part-time employees
at December 31, 2010, compared to 12,440
(9,046 at Alaska and 3,394 at Horizon) at
December 31, 2009. Wages, salaries and
benefits (including variable incentive pay)
represented approximately 43% of our total
non-fuel operating expenses in both 2010 and
2009.
At December 31, 2010, labor unions
represented 82% of Alaska’s and 47% of
Horizon’s employees. Our relations with our
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ŠForm 10-K