Alaska Airlines and Horizon Air 2013 Annual Report Download - page 128

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.
2012 2011 2012 2011 % Change
(in millions, except CASM) Amount Amount CASM CASM CASM
Wages and benefits ............................................... $1,038 $ 991 3.30¢ 3.34¢ (1.2)%
Variable incentive pay .............................................. 88 72 0.28 0.24 16.7%
Aircraft maintenance ............................................... 222 206 0.71 0.70 1.4%
Aircraft rent ...................................................... 116 116 0.37 0.39 (5.1)%
Landing fees and other rentals ....................................... 243 238 0.77 0.80 (3.8)%
Contracted services ................................................ 200 185 0.64 0.62 3.2%
Selling expenses .................................................. 168 175 0.53 0.59 (10.2)%
Depreciation and amortization ....................................... 264 247 0.84 0.83 1.2%
Food and beverage service .......................................... 79 67 0.25 0.23 8.7%
Other ........................................................... 248 235 0.79 0.79 —%
Fleet transition costs ............................................... —39 —(a) (a)
Non-fuel Expenses ................................................ $2,666 $2,571 8.48¢ 8.55¢ (0.8)%
(a) Included to reconcile total non-fuel expenses. Special one time charges are not included in CASMex.
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
$466 million in 2012 compared to $375 million
in 2011. The $289 million increase in Mainline
passenger revenue is described previously.
Mainline operating expense excluding fuel
increased by $162 million, driven mainly by
increased wages and incentive pay, depreciation
expense, food and beverage expense, and other
expenses to support our growth in operations.
Economic fuel cost as defined above increased
due to an 6.4% increase in consumption, and an
increase economic price per gallon.
Alaska Regional
Pretax profit for Alaska Regional was $62 million
in 2012 compared to $68 million in 2011. The
$33 million increase in Alaska Regional
passenger revenue is described previously.
Alaska Regional expenses were higher due to
additional flying by Skywest, which began flying in
May 2011.
Horizon
Pretax profit for Horizon was $24 million in 2012
compared to $22 million in 2011. CPA Revenues
(100% of which are from Alaska and eliminated
in consolidation) were flat with the prior year. The
$2 million decrease in Horizon's non-fuel
operating expenses was driven by cost savings
as more overhead expense was transitioned
under the CPA arrangement, partially offset by
higher engine maintenance costs in the second-
half of 2012.
LIQUIDITY AND CAPITAL
RESOURCES
Our primary sources of liquidity are:
• Our existing cash and marketable securities
balance of $1.3 billion, and our expected
cash from operations;
• Our 61 unencumbered aircraft as of
December 31, 2013 in our operating fleet
that could be financed, if necessary;
• Our combined $200 million bank line-of-
credit facilities, with none currently
outstanding;
In 2013, we took free and clear delivery of nine
B737-900ER, and three Q400 aircraft. We made
scheduled debt payments totaling $161 million.
42