Alaska Airlines and Horizon Air 2014 Annual Report Download - page 130

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Additional Segment Information
Refer to the Notes of the 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 $834 million in 2014 compared to $530 million in 2013. The
$284 million increase in Mainline passenger revenue is described previously. Mainline operating
expense excluding fuel increased by $124 million, due to increased capacity, departures, expanding to
new locations, and higher advertising and promotional activity in Seattle and our new locations.
Additionally, we increased spending on IT infrastructure projects, and incurred more depreciation as we
continue to purchase aircraft. Economic fuel cost as defined above decreased due to a decline in the
economic price per gallon, and increased fuel efficiency, slightly offset by an increase in consumption.
Alaska Regional
Pretax profit for Alaska Regional was $74 million in 2014 compared to $69 million in 2013. The $28
million increase in Alaska Regional passenger revenue is described previously. The increased Regional
revenue was offset by higher expenses to support additional capacity. Additionally, we recorded a $12
million loss in 2013 related to overhaul and repair of three aircraft that were previously subleased to
another carrier.
Horizon
Pretax profit for Horizon was $17 million in 2014 compared to $20 million in 2013. CPA Revenues
(100% of which are from Alaska and eliminated in consolidation) increased due to additional capacity in
the state of Alaska. The $8 million increase in Horizon’s non-fuel operating expenses was driven by
increased wages to support additional aircraft in the fleet, higher pilot training costs, and increased
depreciation and amortization due to the three additional Q400 aircraft added in Q4 of 2013.
2013 COMPARED WITH 2012
Our consolidated net income for 2013 was $508 million, or $3.58 per diluted share, compared to net
income of $316 million, or $2.20 per diluted share, in 2012. Significant items impacting the
comparability between the periods are as follows:
‰Both periods include adjustments to reflect the timing of net unrealized mark-to-market gains or
losses related to our fuel hedge positions. For 2013, we recognized net mark-to-market gains of
$8 million ($5 million after tax, or $0.03 per diluted share) compared to losses of $38 million
($23 million after tax, or $0.17 per share) in 2012.
‰In 2013, we recognized a one-time, non-cash Special mileage plan revenue item of $192 million
($120 million after tax, or $0.85 per diluted share) that resulted from the application of new
accounting rules associated with the modified Bank of America Affinity Card Agreement, and the
effect of an increase in the estimate of the number of frequent flier miles expected to expire
unused.
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