Alaska Airlines and Horizon Air 2014 Annual Report Download - page 115

(a) In the third quarter of 2013, the Company adopted Accounting Standards Update 2009-13,
“Multiple-Deliverable Revenue Arrangements - a consensus of the FASB Emerging Issues Task
Force” (ASU 2009-13).
(b) Capitalized interest was $20 million, $21 million, $18 million, $12 million, and $6 million for 2014,
2013, 2012, 2011, and 2010, respectively.
(c) Includes flights under Capacity Purchase Agreements operated by PenAir and by SkyWest beginning
in May 2011.
(d) See reconciliation of RASM and CASMex to the most directly related GAAP measure in the “Results
of Operations” section.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) is intended to help the reader understand the Company, our operations and our present
business environment. MD&A is provided as a supplement to – and should be read in conjunction with –
our consolidated financial statements and the accompanying notes. All statements in the following
discussion that are not statements of historical information or descriptions of current accounting policy
are forward-looking statements. Please consider our forward-looking statements in light of the risks
referred to in this report’s introductory cautionary note and the risks mentioned in Part I, “Item 1A. Risk
Factors.” This overview summarizes the MD&A, which includes the following sections:
‰Year in Review—highlights from 2014 outlining some of the major events that happened during
the year and how they affected our financial performance.
‰Results of Operations—an in-depth analysis of our revenues by segment and our expenses from a
consolidated perspective for the three years presented in our consolidated financial statements.
To the extent material to the understanding of segment profitability, we more fully describe the
segment expenses per financial statement line item. We believe this analysis will help the reader
better understand our consolidated statements of operations. Financial and statistical data is
also included here. This section also includes forward-looking statements regarding our view of
2015.
‰Liquidity and Capital Resources—an analysis of cash flows, sources and uses of cash,
contractual obligations, commitments and off-balance sheet arrangements, and an overview of
financial position.
‰Critical Accounting Estimates—a discussion of our accounting estimates that involve significant
judgment and uncertainties.
YEAR IN REVIEW
Our 2014 consolidated pretax income was $975 million compared to $816 million in 2013. The $159
million improvement was primarily due to the net increase of $212 million in revenues, a decrease of
$49 million in our fuel expense, and $13 million in non-operating income compared to a non-operating
loss of $22 million in the prior year. Partially offsetting these benefits was an increase in non-fuel
operating expenses of $167 million, or 6%, to support the increased capacity of 7%.
The growth in revenues of $212 million was primarily due to an increase in passenger revenue of $312
million resulting from a 6.5% increase in traffic and 0.7% higher ticket yields, partially offset by a
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ŠForm 10-K