retirement of certain B-747-400 aircraft.  

 

Other. Other operating expense increased primarily due to costs associated with sales of non-jet fuel products to third parties by our oil refinery.  



Results of Operations - 2013 Compared to 2012  

 

Operating Revenue  

Passenger Revenue

Passenger revenue increased $1.2 billion , or 4% , on a 3% PRASM increase and a 3% increase in passenger mile yield. Revenue remained strong despite lower fuel prices. In addition, the increase in passenger revenue reflects in-flight product enhancements such as the Economy Comfort product and higher corporate sales.  

 

Our geographic regions performed well compared to the prior year, with the domestic region leading year-over-year unit revenue improvement as a result of higher passenger mile yield. Unit revenues of the domestic region rose by over 5% with notable improvements in the New York market. New York unit revenues increased as we continue to see improvements due to our investments in JFK and LaGuardia, as well as many in-flight product enhancements. Revenues related to our international regions increased 3% year-over-year, with slight unit revenue improvements in both Atlantic and Latin America regions. Our Pacific region experienced a slight decline in unit revenues primarily due to the Japanese yen devaluation.  





Operating Expense 

 

Fuel Expense. Including regional carriers, fuel expense decreased $787 million due to a 4% decrease in fuel market price per gallon and fuel hedge gains, partially offset by a 2% increase in consumption. The table below presents fuel expense, gallons consumed and our average price per gallon, including the impact of hedging and the refinery. 



   Fuel Purchase Cost. Fuel purchase cost is based on the market price for jet fuel at airport locations.  

 

Airline Segment Fuel Hedge Impact and MTM Adjustments. During the year ended December 31, 2013, our airline segment fuel hedge gains of $444 million included $276 million of favorable MTM adjustments. These MTM adjustments are based on market prices as of the end of the reporting period for contracts settling in future periods. Such market prices are not necessarily indicative of the actual future value of the underlying hedge in the contract settlement period. The MTM adjustments are reflected in the table above to calculate an effective fuel cost for the period.  

 

Refinery Segment Impact. The refinery results include the impact on fuel expense of self-supply from the production of the refinery and from refined products exchanged with certain counterparties. To the extent that we account for exchanges of refined products as nonmonetary transactions, we include the results of those transactions within fuel expense. For additional information regarding the refinery segment impact, see "Refinery Segment" below.  

 

We adjust fuel expense for these items to arrive at a more meaningful measure of fuel cost. Our average price per gallon, adjusted (a non-GAAP financial measure) was $3.07 for the year ended December 31, 2013.  

 

Salaries and Related Costs . The increase in salaries and related costs is primarily due to investments in our employees.