Alaska Airlines and Horizon Air 2013 Annual Report Download - page 163

include any assumptions for future disability. The
liability includes the discounted expected future
benefit payments and medical costs. The total
liability was $12 million and $11 million, which
was recorded net of a prefunded trust account of
$1 million and $1 million, and included in long-
term other liabilities on the consolidated balance
sheets as of December 31, 2013 and
December 31, 2012, respectively.
Employee Incentive-Pay Plans
Alaska and Horizon have employee incentive
plans that pay employees based on certain
financial and operational metrics. The aggregate
expense under these plans in 2013, 2012 and
2011 was $105 million, $88 million, and $72
million, respectively. The plans are summarized
below:
•Performance-Based Pay (PBP) is a program
that rewards all employees. The program is
based on four separate metrics related to
Air Group profitability, safety, achievement
of unit-cost goals, and employee
engagement as measured by customer
satisfaction.
• The Operational Performance Rewards
Program entitles all Air Group employees to
quarterly payouts of up to $300 per person
if certain operational and customer service
objectives are met.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Future minimum fixed payments for commitments as of December 31, 2013 (in millions):
Aircraft
Leases
Facility
Leases
Aircraft
Commitments
Capacity
Purchase
Agreements
Engine
Maintenance
2014 .......................... $128 $ 93 $ 407 $ 50 $ 11
2015 .......................... 105 81 338 44 10
2016 .......................... 82 72 289 32 —
2017 .......................... 51 68 341 32 —
2018 .......................... 36 19 429 14 —
Thereafter ...................... 43 117 1,034 — —
Total .......................... $445 $450 $2,838 $172 $ 21
Lease Commitments
At December 31, 2013, the Company had lease
contracts for 62 aircraft, which have remaining
noncancelable lease terms ranging from 2014 to
2021. Of these aircraft, 15 are non-operating
(i.e. not in the Company's fleet) and 13 are
subleased to third-party carriers. The majority of
airport and terminal facilities are also leased.
Rent expense was $290 million, $275 million,
and $275 million, in 2013, 2012, and 2011,
respectively.
During the third quarter, the Company had three
subleased Bombardier CRJ-700 aircraft returned.
In connection with these aircraft the Company
incurred costs to deliver the aircraft to SkyWest
Airlines, which will sublease and operate the
aircraft under a Capacity Purchase Agreement
(CPA).
Aircraft Commitments
As of December 31, 2013, the Company is
committed to purchasing 67 B737 aircraft,
including 30 B737-900ER aircraft and 37 B737
MAX aircraft, with deliveries in 2014 through
2022. In addition, the Company has options to
purchase an additional 64 B737 aircraft and
seven Q400 aircraft.
Capacity Purchase Agreements (CPAs)
At December 31, 2013, Alaska had CPAs with
three carriers, including the Company's wholly-
owned subsidiary, Horizon. Horizon sells 100% of
its capacity under a CPA with Alaska. On May 14,
2011, SkyWest Airlines, Inc. began flying certain
routes under a CPA with Alaska. In addition,
Alaska has a CPA with PenAir to fly certain routes
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ŠForm 10-K