Alaska Airlines and Horizon Air 2010 Annual Report Download - page 72

*Note: Adjusted pre-tax profit means the net
income of Alaska Air Group as computed by
Generally Accepted Accounting Principles
(GAAP), adjusted for Excluded Items and
Alternative Account Treatments. “Excluded
Items” means (a) income taxes, (b) pretax
expense under any Alaska Air Group (or
subsidiary) profit sharing, performance-
based pay, operational performance
rewards, variable pay plan, or similar such
programs as determined in the discretion of
the Compensation Committee, and
(c) special income or expense items that, in
the discretion of the Compensation
Committee, should be excluded because
recognizing them would not appropriately
serve the goals of the Plan. These may
include, without limitation, gain or loss on
disposition of capital assets, impairments or
other fleet exit costs, expenses from
voluntary or involuntary severance programs,
government refunds or assistance and
cumulative effect of accounting changes.
“Alternative Accounting Treatments” means
expense or income items that, for purposes
of calculating Adjusted Pretax Profit, the
Company (or any subsidiary) will account for
based on non-GAAP methods because, in
the discretion of the Compensation
Committee, using GAAP accounting methods
would not appropriately serve the goals of
the Plan. These may include, without
limitation, fuel hedge accounting on an “as
settled” basis.
For 2010, a modifier was added to the
Performance-Based Pay plan that resulted in
plus or minus ten percentage points based
on Alaska Air Group’s non-ticket passenger
revenue per passenger. This measure
reinforced the Company’s 2010 strategic
goal of increasing revenues. The
performance measures are detailed below:
Modifier to Performance-Based Pay
Alaska Air Group Non-Ticket Passenger Revenue Per Passenger Performance Goal
-10 pts -10 pts -8 pts -6 pts -4 pts -2 pts No Adj. +1 pts +2 pts +4 pts +6 pts +8 pts +10 pts
$8.00 8.50 9.00 9.25 9.50 9.75 10.00 10.25 10.50 10.75 11.00 11.50 12.00
Following is an example of the calculation of the 2010 Performance-Based Pay plan payout for
an Alaska Airlines executive whose target participation is 75% of base salary.
2010 Performance-Based Pay Calculation*
Metrics Actual
% of Target
Achieved Weight Payout %
Safety - Lost-time injuries 5 0.0% 5.0% 0.0%
Safety - Aircraft ground damage 1.8 166.7% 5.0% 8.3%
Employee Engagement/Customer Satisfaction 12 months 200.0% 10.0% 20.0%
CASM (Cost per available seat mile, excluding fuel)* 7.85 cents 118.3% 10.0% 11.8%
Alaska Air Group Profitability >$350 million 200.0% 70.0% 140.0%
Non-Ticket Passenger Revenue $11.55 8.0%
Total Payout % 188.2%
Participation Rate** x 75.0%
Payout asa%ofBase Salary = 141.1%
* Based on Alaska Airlines’ performance.
** Participation rates vary based by position. The participation rate used in this example is for one of the NEOs.
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