Alaska Airlines and Horizon Air 2012 Annual Report Download - page 118

OPERATING REVENUES
Total operating revenues increased $339 million,
or 8%, during 2012 compared to the same
period in 2011. The changes are summarized in
the following table:
Year Ended December 31,
(in millions) 2012 2011 % Change
Passenger
Mainline ........ $3,284 $2,995 10
Regional ........ 746 713 5
Total passenger
revenue .......... $4,030 $3,708 9
Freight and mail ......... 111 109 2
Other—net ............. 516 501 3
Total operating revenues . . $4,657 $4,318 8
Passenger Revenue—Mainline
Mainline passenger revenue for 2012 increased
by 10% on a 6.3% increase in capacity and a
3.2% increase in PRASM compared to 2011. The
increase in capacity was driven by new routes
added in 2012, most of which were to and from
Hawaii. The increase in PRASM was driven by a
1.4% increase in ticket yield and a 1.4-point
increase in load factor compared to the prior
year. The increase in yield is due to strong
demand throughout the year, while the increase
in load factor is due to adding more traffic in our
high density markets.
Passenger Revenue—Regional
Regional passenger revenue increased by $33
million, or 5%, compared to 2011 on a 4.4%
increase in capacity and flat PRASM compared to
2011. PRASM was affected by a 1.1% decrease
in ticket yield, offset by a 1.2-point increase in
load factor compared to the prior year. The
decrease in yield is due to increased competition
in certain markets, while the increase in load
factor is due to better matching of supply with
demand.
Freight and Mail
Freight and mail revenue increased $2 million, or
2%, primarily due to higher freight volumes and
an increase in fuel and security surcharges,
which offset a decrease in mail volumes.
Other—Net
Other—net revenue increased $15 million, or
3%, from 2011. This is primarily due to an
increase in our Mileage Plan revenues of 7% and
buy-on-board sales of 20%. Buy-on-board
improved due to an increase in food sales of
24% and beverage sales of 14%. These
increases were partially offset by a decrease in
bag fees of 2% due to general shifts in customer
behavior and our Club 49 program that launched
in the fourth quarter of 2011, which waives the
checked bag fee for residents in the state of
Alaska who have joined the program.
OPERATING EXPENSES
Total operating expenses increased $256
million, or 7%, compared to 2011 mostly as a
result of higher fuel costs. We believe it is useful
to summarize operating expenses as follows,
which is consistent with the way expenses are
reported internally and evaluated by
management:
Year Ended December 31,
(in millions) 2012 2011 % Change
Fuel expense ............ $1,459 $1,298 12
Non-fuel expenses ....... 2,666 2,571 4
Total Operating
Expenses ............. $4,125 $3,869 7
Significant operating expense variances from
2011 are more fully described below.
Wages and Benefits
Wages and benefits increased during 2012 by
$47 million, or 5%, compared to 2011. The
primary components of wages and benefits are
shown in the following table:
Year Ended December 31,
(in millions) 2012 2011 % Change
Wages ............. $ 726 $703 3
Pension and defined-
contribution
retirement
benefits .......... 103 88 17
Medical benefits ..... 109 108 1
Other benefits and
payroll taxes ....... 100 92 9
Total wages and
benefits .......... $1,038 $991 5
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