Alaska Airlines and Horizon Air 2010 Annual Report Download - page 132

Additionally, the use of individually identifiable
data by our business and our business partners
is regulated at the international, federal and
state levels. Privacy and information security
laws and regulations change, and compliance
with them may result in cost increases due to
necessary systems changes and the
development of new administrative processes.
BRAND AND REPUTATION
The rebranding of the Horizon brand may result
in some loss of brand recognition.
With this change in structure in 2011, the
external Horizon brand will be phased out and
the Horizon fleet will be rebranded with Alaska
livery. As the Q400 fleet begins flying into new
markets, such as in the state of Alaska, we may
be subject to certain operational disruptions or
subject to severe weather conditions that does
not impact jet operation as heavily. Furthermore,
with the Horizon brand phase out, there is a
potential that we may lose some brand
recognition from our customers in areas that
Horizon has historically served.
LABOR RELATIONS AND LABOR STRATEGY
A significant increase in labor costs or change
in key personnel could adversely affect our
business and results of operations.
We compete against the major U.S. airlines and
other businesses for labor in many highly skilled
positions. If we are unable to hire, train and
retain qualified employees at a reasonable cost,
or if we lose the services of key personnel, we
may be unable to grow or sustain our business.
In such case, our operating results and business
prospects could be harmed. We may also have
difficulty replacing management or other key
personnel who leave and, therefore, the loss of
any of these individuals could harm our
business.
Labor costs are a significant component of our
total expenses, accounting for approximately
31% and 34% of our total operating expenses in
2010 and 2009, respectively. As of
December 31, 2010, labor unions represented
approximately 82% of Alaska’s and 47% of
Horizon’s employees. Each of our represented
employee groups has a separate collective
bargaining agreement, and could make demands
that would increase our operating expenses and
adversely affect our financial performance if we
agree to them. Although we have been
successful in negotiating new contracts or
extending existing contracts with all of our
represented groups in recent years, future
uncertainty around open contracts could be a
distraction to many employees, reduce employee
engagement in our business and divert
management’s attention from other projects and
issues.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
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