Alaska Airlines and Horizon Air 2014 Annual Report Download - page 105

Similarly, there are a number of legislative and regulatory initiatives and reforms at the federal, state,
and local level, including increasingly stringent laws protecting the environment, minimum wage
requirements, and health care mandates that could affect our relationship with our workforce and cause
our expenses to increase without an ability to pass through these costs.
Almost all commercial service airports are owned and/or operated by units of local or state
governments. Airlines are largely dependent on these governmental entities to provide adequate airport
facilities and capacity at an affordable cost. Many airports have increased their rates and charges to air
carriers related to higher security costs, increased costs related to updated infrastructures, and other
costs. Additional laws, regulations, taxes, and airport rates and charges have been proposed from time
to time that could significantly increase the cost of airline operations or reduce the demand for air
travel. Although lawmakers may impose these additional fees and view them as “pass-through” costs,
we believe that a higher total ticket price will influence consumer purchase and travel decisions and
may result in an overall decline in passenger traffic, which would harm our business.
The airline industry continues to face potential security concerns and related costs.
The terrorist attacks of September 11, 2001 and their aftermath negatively affected the airline industry,
including our company. Additional terrorist attacks, the fear of such attacks or other hostilities involving
the U.S. could have a further significant negative effect on the airline industry, including us, and could:
‰significantly reduce passenger traffic and yields as a result of a potentially dramatic drop in
demand for air travel;
‰significantly increase security and insurance costs;
‰make war risk or other insurance unavailable or extremely expensive;
‰increase fuel costs and the volatility of fuel prices;
‰increase costs from airport shutdowns, flight cancellations and delays resulting from security
breaches and perceived safety threats; and
‰result in a grounding of commercial air traffic by the FAA.
The occurrence of any of these events would harm our business, financial condition and results of
operations.
We rely on third-party vendors for certain critical activities.
We have historically relied on outside vendors for a variety of services and functions critical to our
business, including airframe and engine maintenance, ground handling, fueling, computer reservation
system hosting, telecommunication systems, and information technology infrastructure and services. As
part of our cost-reduction efforts, our reliance on outside vendors has increased and may continue to do
so in the future, especially since we rely on timely and effective third-party performance in conjunction
with many of our technology-related initiatives. In addition, in recent years, Alaska and Horizon have
subcontracted their heavy aircraft maintenance, fleet service, facilities maintenance, and ground
handling services at certain airports, including Seattle-Tacoma International Airport, to outside vendors.
Even though we strive to formalize agreements with these vendors that define expected service levels,
our use of outside vendors increases our exposure to several risks. In the event that one or more
vendors go into bankruptcy, ceases operation or fails to perform as promised, replacement services
may not be readily available at competitive rates, or at all. If one of our vendors fails to perform
adequately, we may experience increased costs, delays, maintenance issues, safety issues or negative
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ŠForm 10-K