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## Return on Invested Capital 

Return on invested capital, or ROIC, is an important financial metric which we believe provides meaningful information as to how well we generate returns relative to the capital invested in our business. During 2013 our ROIC improved to 5.3%. We are committed to taking appropriate actions which will allow us to continue to improve ROIC while adding capacity 

## Reconciliation of Return on Invested Capital (Non-GAAP) 

and continuing to grow. We believe this non-GAAP measure provides a meaningful comparison of our results to the airline industry and our prior year results. Investors should consider this non-GAAP financial measure in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. 

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(b) In determining the Invested Capital component of ROIC, we include a non-GAAP adjustment for aircraft operating leases, as operating lease obligations are not reflected on our balance sheets, but do represent a significant financing obligation. In making the adjustment, we used a multiple of 7 times our aircraft rent as this is the multiple which is routinely used with in the airline community to represent the financing component of aircraft operating lease obligations. 

## Analysis of Cash Flows 

We had cash and cash equivalents of $225 million as of December 31, 2013. This compares to $182 million and $673 million as of December 31, 2012 and 2011 respectively. We held both short and long term investments in 2013, 2012 and 2011. Our short-term investments totaled $402 million as of December 31, 2013 compared to $549 million and $553 million as of December 31, 2012 and 2011 respectively. Our long-term investments totaled $114 million as of December 31, 2013 compared to $136 million and $38 million as of December 31, 2012 and 2011 respectively. 

## Operating Activities 

Cash flows provided by operating activities totaled $758 million in 2013 compared to $698 million in 2012 and $614 million in 2011. There was a $60 million increase in cash flows from operating activities in 2013 compared to 2012. During 2013 we saw a 7% increase in capacity, a 4% increase in average fares and a 2% decrease in the price of fuel which all helped to improve operating cash flows. The $84 million increase in cash flows from operations in 2012 compared to 2011 was primarily as a result of the 2% increase in average fares and 8% increase in capacity but was offset by an increase of 1% in fuel prices. As of December 31, 2013, our unrestricted cash, cash equivalents and short-term investments as a percentage of trailing twelve months revenue was approximately 12%. We rely primarily on cash flows from operations to provide working capital for current and future operations. 

## Investing Activities 

The capital expenditure for seven new EMBRAER 190 aircraft, three new Airbus A320 aircraft and four new Airbus A321 aircraft during 2013 

was $365 million. We additionally paid $22 million for flight equipment deposits and $54 million for spare parts. Capital expenditures for other property and equipment, including ground equipment purchases, facilities improvements and LiveTV inflight-entertainment equipment inventory were $196 million. During 2013 LiveTV sold its investment in the Airfone business for $8 million in proceeds. Investing activities also include the net purchase of $161 million in investment securities. 

During 2012, capital expenditures related to our purchase of flight equipment included $344 million for seven Airbus A320 aircraft, four EMBRAER 190 aircraft and five spare engines. It also included $283 million for flight equipment deposits, including a $200 million prepayment in exchange for favorable pricing terms, and $32 million for spare part purchases. Capital expenditures for other property and equipment, including ground equipment purchases, facilities improvements and LiveTV inflight-entertainment equipment inventory were $166 million, which includes the final $32 million for the 16 slots we purchased at LaGuardia and Reagan National in 2011 and $17 million for T5i, which was paid for using cash from operations. The receipt of $46 million in proceeds from the sale of two EMBRAER 190 aircraft 

