Alaska Airlines and Horizon Air 2012 Annual Report Download - page 106

We rely on partner airlines for codeshare and
frequent flyer marketing arrangements.
Alaska and Horizon are parties to marketing
agreements with a number of domestic and
international air carriers, or “partners,” including,
but not limited to, American Airlines and Delta Air
Lines. These agreements provide that certain
flight segments operated by us are held out as
partner “codeshare” flights and that certain
partner flights are held out for sale as Alaska
codeshare flights. In addition, the agreements
generally provide that members of Alaska’s
Mileage Plan program can earn miles on or
redeem miles for partner flights and vice versa.
We receive a significant amount of revenue from
flights sold under codeshare arrangements. In
addition, we believe that the frequent flyer
arrangements are an important part of our
Mileage Plan program. The loss of a significant
partner or certain partner flights through
bankruptcy, consolidation, or otherwise, could
have a negative effect on our revenues or the
attractiveness of our Mileage Plan, which we
believe is a source of competitive advantage.
INFORMATION TECHNOLOGY
We rely heavily on automated systems to
operate our business, and a failure to invest in
new technology, or a disruption of our current
systems or their operators could harm our
business.
We depend on automated systems to operate
our business, including our airline reservation
system, our telecommunication systems, our
website, our maintenance systems, our check-in
kiosks, and other systems. Substantially all of
our tickets are issued to passengers as
electronic tickets and the majority of our
customers check in using our website or our
airport kiosks. We depend on our reservation
system to be able to issue, track and accept
these electronic tickets. In order for our
operations to work efficiently, we must continue
to invest in new technology to ensure that our
website, reservation system, and check-in
systems are able to accommodate a high volume
of traffic, maintain secure information, and
deliver important flight information. Substantial
or repeated website, reservations system or
telecommunication systems failures or service
disruptions could reduce the attractiveness of
our services and cause our customers to do
business with another airline. In addition, we rely
on other automated systems for crew
scheduling, flight dispatch, and other operational
needs. Disruptions, untimely recovery, or a
breach of these systems could result in the loss
of important data, an increase of our expenses,
an impact on our operational performance, or a
possible temporary cessation of our operations.
If we do not maintain the privacy and security
of our information, we could damage our
reputation and incur substantial legal and
regulatory costs.
We accept, store, and transmit information about
our customers, our employees, our business
partners and our business. In addition, we
frequently rely on third-party hosting sites and
data processors, including cloud providers. Our
sensitive information relies on secure
transmission over public and private networks. A
compromise of our systems, the security of our
infrastructure, or those of other business
partners that result in our information being
accessed or stolen by unauthorized persons
could adversely affect our operations and our
reputation.
FINANCIAL CONDITION AND FINANCIAL
MARKETS
Our business, financial condition, and results of
operations are substantially exposed to the
volatility of jet fuel prices. Increases in jet fuel
costs would harm our business.
Fuel costs constitute a significant portion of our
total operating expenses, accounting for 35%,
34% and 27% of total operating expenses for the
years ended 2012, 2011 and 2010,
respectively. Future increases in the price of jet
fuel may harm our business, financial condition
and results of operations, unless we are able to
increase fares or add additional ancillary fees to
attempt to recover increasing fuel costs.
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