Southwest Airlines 2014 Annual Report Download - page 71

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variable rental rates charged by several airports during 2013 due to additional space being occupied by
the Company in some locations and/or as a result of higher airport debt service costs passed through to
the airlines in certain cities.
Depreciation and amortization expense for 2013 increased by $23 million, or 2.7 percent,
compared with 2012, primarily due to depreciation associated with large software projects that were
placed into service during 2013. Aircraft depreciation was relatively flat year-over-year, as the increase
in expense related to the purchase of new 737-800 aircraft was offset by a decline in expense from the
retirement of older owned 737-300 and 737-500 aircraft. On a per ASM basis, Depreciation and
amortization expense for 2013 was relatively flat, compared with 2012.
Acquisition and integration expense for 2013 decreased by $97 million, or 53.0 percent,
compared with 2012. The decrease was primarily due to charges recorded in 2012 related to the
Company’s 717-200 lease and sublease agreements.
Other operating expense for 2013 increased by $87 million, or 4.3 percent, compared with
2012. On a per ASM basis, Other operating expense for 2013 increased 1.2 percent, compared with
2012. Approximately half of both the dollar and per ASM increases were the result of increased
Customer usage of WiFi onboard the Company’s aircraft and approximately half were the result of
higher consulting and contract programming expenses, net of capitalized costs.
Other
Other expenses (income) include interest expense, capitalized interest, interest income, and
other gains and losses. Interest expense for 2013 decreased by $16 million, or 10.9 percent, compared
with 2012, primarily due to the repayment of the Company’s $385 million 6.5% notes in March 2012.
Capitalized interest for 2013 increased by $3 million, or 14.3 percent, compared with 2012,
primarily due to an increase in average progress payment balances for scheduled future aircraft
deliveries.
Interest income for 2013 decreased by $1 million, or 14.3 percent, compared with 2012,
primarily due to lower interest rates.
Other (gains) losses, net, primarily includes amounts recorded as a result of the Company’s
hedging activities. See Note 10 to the Consolidated Financial Statements for further information on the
Company’s hedging activities. The following table displays the components of Other (gains) losses,
net, for the years ended December 31, 2013, and 2012:
Year ended December 31,
(in millions) 2013 2012
Mark-to-market impact from fuel contracts settling in future periods $ (103) $ (221)
Ineffectiveness from fuel hedges settling in future periods 11 42
Realized ineffectiveness and mark-to-market (gains) or losses 3 (42)
Premium cost of fuel contracts 60 36
Other (3) 4
$ (32) $ (181)
63