Alaska Airlines and Horizon Air 2013 Annual Report Download - page 123

promotional activities related to our brand
refresh, and revenue-related costs.
Other Operating Expenses
Other operating expenses increased $30 million,
or 12%, compared to 2012. The increase is driven
by a variety of factors such as higher professional
fees, IT costs, losses on the disposal of assets,
property taxes and new uniforms.
We expect other operating expenses to be higher
in 2014 due to an expected increase in IT
spending and higher professional service costs.
CONSOLIDATED NONOPERATING INCOME
(EXPENSE)
Net nonoperating expense increased $4 million
from 2012. This is due to the overhaul and
repair of three aircraft that were previously
subleased to another carrier. These three aircraft
will be operated by Skywest under a CPA.
Partially offsetting the sublease loss was a gain
on the sale of equity securities.
Operating Costs per Available Seat Mile
Additionally, we are presenting our line-item
expenses below both in absolute dollars and on
an ASM basis to highlight areas in which costs
have increased or decreased either more or less
than capacity.
2013 2012 2013 2012 % Change
(in millions,
except CASM) Amount Amount CASM CASM CASM
Wages and
benefits ..... $1,086 $1,038 3.23¢ 3.30¢ (2.1)%
Variable
incentive
pay ........ 105 88 0.31 0.28 10.7%
Aircraft
maintenance . 247 222 0.73 0.71 2.8%
Aircraft rent .... 119 116 0.35 0.37 (5.4)%
Landing fees
and other
rentals ..... 262 243 0.78 0.77 1.3%
Contracted
services .... 221 200 0.66 0.64 3.1%
Selling
expenses . . . 179 168 0.53 0.53 —%
Depreciation
and
amortization . 270 264 0.80 0.84 (4.8)%
Food and
beverage
service ..... 84 79 0.25 0.25 —%
Other ........ 278 248 0.83 0.79 5.1%
Non-fuel
Expenses . . . $2,851 $2,666 8.47¢ 8.48¢ (0.1)%
Additional Segment Information
Refer to the Notes of the Condensed
Consolidated Financial Statements for a detailed
description of each segment. Below is a
summary of each segments' profitability.
Alaska Mainline
Pretax profit for Alaska Mainline was $530
million in 2013 compared to 466 million in
2012. The $206 million increase in Mainline
passenger revenue is described previously, as
well as the increased revenues from the
modified credit card agreement. Mainline
operating expense excluding fuel increased by
$162 million, driven mainly by increased wages
and incentive pay, landing fees and rents due to
increased rates and volumes, and other
expenses to support our growth in operations.
Economic fuel cost as defined above increased
due to a 6.8% increase in consumption, on a
slight decrease in the economic price per gallon.
Alaska Regional
Pretax profit for Alaska Regional was $69 million
in 2013 compared to $62 million in 2012. The
$31 million increase in Alaska Regional
passenger revenue is described previously.
Alaska Regional expenses were slightly higher
due to additional flying by Skywest and higher
rates from PenAir, and increased landing fees
and rents due to increased flying and higher
rates. Also impacting pretax profit is the $12
million loss due to the overhaul and repair of
three aircraft that were previously subleased to
another carrier.
Horizon
Pretax profit for Horizon was $20 million in 2013
compared to $24 million in 2012. CPA Revenues
(100% of which are from Alaska and eliminated
in consolidation) decreased due to lower
operational incentives being met. The $3 million
increase in Horizon's non-fuel operating
expenses was driven by wages and incentive
pay, and an increase in airframe checks and
other unscheduled events.
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ŠForm 10-K