Alaska Airlines and Horizon Air 2012 Annual Report Download - page 116

Our biggest concerns going forward are
increased competition in our markets,
particularly low-cost competitors, and our
unsigned labor agreements. Our goal is to sign
labor agreements prior to the amendable date to
to avoid the negative impacts of prolonged
negotiations and provide our employees with the
long-term stability that helps promote higher
customer satisfaction. To combat low-cost
competitors, we took delivery of four B737-
900ER aircraft in 2012 and will take delivery of
an additional nine in 2013, which will provide
additional efficiencies in fuel consumption and
overall unit cost reductions.
Our advance bookings suggest our load factors
will be up 0.5 pts in February and flat in March
compared to the same periods in 2012 on an
expected 8.5% increase in capacity for the first
quarter of 2013.
RESULTS OF OPERATIONS
2012 COMPARED WITH 2011
Our consolidated net income for 2012 was $316
million, or $4.40 per diluted share, compared to
net income of $245 million, or $3.33 per diluted
share, in 2011. Significant items impacting the
comparability between the periods are as
follows:
• Both periods include adjustments to reflect
the timing of net unrealized mark-to-market
gains or losses related to our fuel hedge
positions. For 2012, we recognized net
mark-to-market losses of $38 million ($23
million after tax, or $0.33 per share)
compared to losses of $30 million ($18
million after tax, or $0.26 per share) in
2011.
• In 2011, we incurred $39 million ($24
million after tax, of $0.33 per share) in
expense as part of Horizon’s fleet transition
to an all Q400 fleet.
ADJUSTED (NON-GAAP) RESULTS AND
PER-SHARE AMOUNTS
We believe disclosure of earnings excluding the
impact of these individual charges is useful
information to investors because:
• We believe it is the basis by which we are
evaluated by industry analysts;
• Our results excluding these items are most
often used in internal management and
board reporting and decision-making;
• Our results excluding these adjustments
serve as the basis for our various employee
incentive plans, thus the information allows
investors to better understand the changes
in variable incentive pay expense in our
consolidated statements of operations;
• It is useful to monitor performance without
these items as it improves a reader’s ability
to compare our results to those of other
airlines; and
• It is consistent with how we present
information in our quarterly earnings press
releases.
Although we are presenting these non-GAAP
amounts for the reasons above, investors and
other readers should not necessarily conclude
that these amounts are non-recurring, infrequent,
or unusual in nature.
Excluding the mark-to-market adjustments and
other special charges, our adjusted consolidated
net income for 2012 was $339 million, or $4.73
per diluted share, compared to an adjusted
consolidated net income of $287 million, or
$3.92 per share, in 2011.
Years Ended December 31,
2012 2011
(in millions, except per
share amounts) Dollars
Diluted
EPS Dollars
Diluted
EPS
Net income and diluted
EPS as reported ..... $316 $4.40 $245 $3.33
Fleet transition costs,
netoftax .......... —— 24 0.33
Mark-to-market fuel
hedge adjustments,
netoftax .......... 23 0.33 18 0.26
Non-GAAP adjusted
income and per share
amounts .......... $339 $4.73 $287 $3.92
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