Alaska Airlines and Horizon Air 2012 Annual Report Download - page 131

Contractual Obligations
The following table provides a summary of our principal payments under current and long-term debt
obligations, operating lease commitments, aircraft purchase commitments and other obligations as of
December 31, 2012.
(in millions) 2013 2014 2015 2016 2017
Beyond
2017 Total
Current and long-term debt obligations .... $161 $117 $113 $111 $116 $ 414 $1,032
Operating lease commitments (a) ........ 189 168 135 104 69 209 874
Aircraft purchase commitments .......... 372 332 254 204 322 1,488 2,972
Interest obligations (b) ................ 50 42 37 31 26 44 230
Other obligations (c) .................. 49 44 27 18 19 8 165
Total ............................... $821 $703 $566 $468 $552 $2,163 $5,273
(a) Operating lease commitments generally include aircraft operating leases, airport property and hangar leases, office space,
and other equipment leases.
(b) For variable-rate debt, future obligations are shown above using interest rates in effect as of December 31, 2012.
(c) Includes minimum obligations under our long-term power-by-the-hour maintenance agreements and obligations associated
with third-party CPAs with SkyWest and PenAir. Refer to the “Commitments” note in the consolidated financial statements for
further information.
Pension Obligations
The table above excludes contributions to our
various pension plans, which we estimate to be
$35 million to $50 million per year, although
there are no minimum required contributions.
The unfunded liability for our qualified defined-
benefit pension plans was $335 million at
December 31, 2012 compared to $306 million
at December 31, 2011. This results in an 82%
funded status on a projected benefit obligation
basis compared to 81% funded as of
December 31, 2011.
Credit Card Agreements
We have agreements with a number of credit
card companies to process the sale of tickets
and other services. Under these agreements,
there are material adverse change clauses that,
if triggered, could result in the credit card
companies holding back a reserve from our
credit card receivables. Under one such
agreement, we could be required to maintain a
reserve if our credit rating is downgraded to or
below a rating specified by the agreement or our
cash and marketable securities balance fell
below $500 million. Under another such
agreement, we could be required to maintain a
reserve if our cash and marketable securities
balance fell below $500 million. We are not
currently required to maintain any reserve under
these agreements, but if we were, our financial
position and liquidity could be materially harmed.
Deferred Income Taxes
For federal income tax purposes, the majority of
our assets are fully depreciated over a seven-
year life using an accelerated depreciation
method. For financial reporting purposes, the
majority of our assets are depreciated over 15 to
20 years to an estimated salvage value using
the straight-line basis. This difference has
created a significant deferred tax liability. At
some point in the future the depreciation basis
will reverse, potentially resulting in an increase in
income taxes paid.
While it is possible that we could have material
cash obligations for this deferred liability at
some point in the future, we cannot estimate the
timing of long-term cash flows with reasonable
accuracy. Taxable income and cash taxes
payable in the short term are impacted by many
items, including the amount of book income
generated, which can be volatile depending on
revenue and fuel prices, level of pension funding
(which is generally not known until late each
year), whether “bonus depreciation” provisions
are available, as well as other legislative
changes that are out of our control.
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ŠForm 10-K