QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The risk inherent in our market risk sensitive instruments and positions is the potential loss arising from adverse changes to the price of fuel and interest rates as discussed below. The sensitivity analyses presented do not consider the effects that such adverse changes may have on the overall economic activity, nor do they consider additional actions we may take to mitigate our exposure to such changes. Variable-rate leases are not considered market sensitive financial instruments and, therefore, are not included in the interest rate sensitivity analysis below. Actual results may differ. See Notes 3 and 12 to our consolidated financial statements for accounting policies and additional information.

Aircraft fuel.    Our results of operations are affected by changes in the price and availability of aircraft fuel. To manage the price risk, we use crude oil option contracts. Market risk is estimated as a hypothetical 10% increase in the December 31, 2002 cost per gallon of fuel, including the effects of our fuel hedges. Based on projected 2003 fuel consumption, such an increase would result in an increase to aircraft fuel expense of approximately $7 million in 2003, compared to an estimated $7 million for 2002 measured as of December 31, 2001. As of December 31, 2002, we had hedged approximately 45% of our projected 2003 fuel requirements and approximately 18% of our projected 2004 fuel requirements through March 31, 2004.

Interest.    Our earnings are affected by changes in interest rates due to the impact those changes have on interest expense from variable-rate debt instruments and on interest income generated from our cash and investment balances. At December 31, 2002, all of our debt had floating interest rates. If interest rates average 10% higher in 2003 than they did during 2002, our interest expense would increase by approximately $1.3 million, compared to an estimated $1.5 million for 2002 measured as of December 31, 2001. If interest rates average 10% lower in 2003 than they did during 2002, our interest income from cash and investment balances would decrease by approximately $0.5 million, compared to $0.5 million for 2002 measured as of December 31, 2001. These amounts are determined by considering the impact of the hypothetical interest rates on our variable-rate debt, cash equivalent and short-term investment balances at December 31, 2002 and 2001.