Alaska Airlines and Horizon Air 2012 Annual Report Download - page 121

We expect selling expense will be higher in
2013, primarily due to increased advertising and
promotional activities and revenue related costs,
such as credit card commissions.
Depreciation and Amortization
Depreciation and amortization increased $17
million, or 7%, compared to the prior year. This is
primarily due to additional depreciation expense
for the annualization of B737 aircraft and Q400
aircraft delivered in 2011, as well as the
deliveries of B737 aircraft in 2012. In addition,
we incurred depreciation of $6 million since we
placed Terminal 6 at LAX into service in March
2012. These increases were offset by a
decrease in depreciation expense for the CRJ
700 aircraft removed from the fleet in 2011 and
other assets that became fully depreciated or
were removed from operation.
We expect depreciation and amortization to be
higher in 2013 in line with our nine aircraft
deliveries and the annualization of seven aircraft
deliveries in 2012.
Food and Beverage Service
Food and beverage costs increased $12 million,
or 18%, from the prior year due to an increased
number of passengers of 4.5%, increase in sales
of buy-on-board products of 20%, the higher cost
of some of our premium products served on
board, and increased costs associated with food
delivery.
We expect food and beverage costs to be higher
in 2013 due to an anticipated increase in sales
in line with an expected increase in the number
of passengers.
Other Operating Expenses
Other operating expenses increased $13 million,
or 6%, compared to 2011. The increase is
primarily driven by higher IT and professional
service costs of $8 million associated with our
key initiatives and infrastructure improvements,
and higher personnel non-wage costs such as
hotels, meals and per diems of $7 million.
We expect other operating expenses to be higher
in 2013 due to an expected increase in IT
spending of approximately $20 million and higher
professional service costs.
Fleet Transition and Restructuring Related
Expenses
Fleet transition costs decreased $39 million, as
we completed our transition to an all-Q400 fleet
at Horizon in 2011.
Operating Costs per Available Seat Mile
Our operating costs per ASM (CASM) are
summarized below:
Year Ended December 31,
2012 2011 % Change
Consolidated:
Total operating expenses per
ASM (CASM) ............. 13.12¢ 13.06¢ 0.5
Less the following components:
Aircraft fuel, including
hedging gains and
losses .............. 4.64 4.38 5.9
Fleet transition costs .... —0.13 NM
CASM, excluding fuel and
fleet transition costs ...... 8.48¢ 8.55¢ (0.8)
Mainline:
Total mainline operating
expenses per ASM
(CASM) ................. 12.09¢ 11.87¢ 1.9
Less the following components:
Aircraft fuel, including
hedging gains and
losses .............. 4.53 4.27 6.1
CASM, excluding fuel ....... 7.56¢ 7.60¢ (0.5)
NM–Not Meaningful
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ŠForm 10-K