Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

The aggregate market value of common equity held by non-affiliates of the registrant as of June 30, 2011,2012, was approximately $740,000,000$1,050,000,000 computed by reference to the closing price at which the common stock was sold on the Nasdaq Global Select Market on that date. This figure has been calculated by excluding shares owned beneficially by directors and executive officers as a group from total outstanding shares solely for the purpose of this response.

The number of shares of the registrant’s Common Stock outstanding as of the close of business on February 1, 20122013 was 19,081,407.19,336,016.

Portions of the Proxy Statement to be used in connection with the solicitation of proxies to be voted at the registrant’s annual meeting to be held on June 5, 2012,4, 2013, and to be filed with the Commission subsequent to the date hereof, are incorporated by reference into Part III of this Report on Form 10-K.

We are a leisure travel company focused on providing travel services and products to residents of small, underserved cities in the United States.  We were founded in 1997 and in conjunction with our initial public offering in 2006, we incorporated in the state of Nevada.  Our unique business model provides diversified revenue streams from various travel service and product offerings which distinguish us from other travel companies.  We operate a low-cost passenger airline marketed primarily to leisure travelers in small cities, allowing us to sell air transportation both on a stand-alone basis and bundled with the sale of air-related and third party services and products.  In addition, we provide air transportation under fixed fee flying arrangements.  Our developed route network, pricing philosophy, advertising and product offeringofferings built around relationships with premier leisure companies are all intended to appeal to leisure travelers and make it attractive for them to purchase travel services and products from us.

A brief description of the travel services and products we provide to our customers:

We have developed a unique business model that focuses on leisure travelers in small cities.  The business model has evolved as our experienced management team has looked differently at the traditional way business has been conducted in the airline and travel industry.  Our focus on the leisure customer allows us to eliminate the costly complexity which others in our industry are burdened with in their goal to be all things to all customers.

Since the beginning of 2004, we have expanded our route network (including seasonal service) from six small cities to 64 small cities as of February 1, 2012.  We have established a route network with a national footprint, providing service on 168191 routes predominantly between these 6472 small cities and 1113 leisure destinations.  Our entire route network provides service in 39 states.destinations, and serving 37 states as of February 1, 2013.  In most of these cities, we provide service to more than one of our leisure destinations. We currently provide service to the popular leisure destinations of Las Vegas, Nevada, Orlando, Florida, Phoenix, Arizona, Tampa Bay/St. Petersburg, Florida, Los Angeles, California, Ft. Lauderdale, Florida, and the San Francisco Bay Area.  We also currently provide limited service to other leisure destinations ofArea, California, Punta Gorda, Florida, Honolulu, Hawaii, Maui, Hawaii and San Diego, California andCalifornia.  We currently provide service on a seasonal basis to Palm Springs, California along with seasonal service toand Myrtle Beach, South Carolina.  We are currently working with the Federal Aviation Administration (“FAA”) to gain flag carrier status and complete the ETOPS certification process in order to launch service to Hawaii in the second halfThe geographic diversity of 2012.  We believe our route network reflects geographic diversity which protects us from regional variations in the economy and insulateshelps to insulate us from competitive actions (asas it would be difficult for a competitor to materially impact our business by targeting one city or region).region.  Our widespread route network also contributes to the continued growth in our customer base.

As we have developed our unique business model, our ancillary offerings, including the sale of third party products and services, have been a significant source of our total operating revenue growth.  We have increased ancillary revenue per passenger from $5.87 in 2004 to $36.36$41.20 in 2011.  In 2010, we began an effort to upgrade our IT hardware infrastructure and E-Commerce platform to allow for more selling flexibility, offer a more customer centric buying experience and further develop our hotel packaging and ancillary product offerings.2012.  We own and manage our own automation systemdistribution platform which gives us the ability to modify or upgrade our software applications to enhance product offerings based on specific needs instead ofwithout being dependent on non-customized product upgrades from outside suppliers.  We believe the control of our automation systems has allowed us to be innovators in the industry in providing our customers with a variety of different travel services and products.  We expect initial implementation of these technology enhancements in the first quarter of 2012 with further enhancements to follow.

We believe the following strengths from our unique business model allow us to maintain a competitive advantage in the markets we serve:

We believe small cities represent a large market, especially for leisure travel.  Prior to our initiation of service, travelers from the small city markets we serve had limited desirable options to reach leisure destinations as existing carriers are generally focused on having business customers connect into their business hubs.  These limited options provide us with significant growth opportunities in these small city markets.  We believe our nonstop service, along with our low prices and leisure company relationships, make it attractive for leisure travelers to purchase our travel services and products.  The size of these markets and our focus on the leisure customer requires less frequencyallow us to adequately serve our markets with less frequency and allows us to vary our air transportation capacity to match seasonal demand patterns.

 By focusing on small cities, we believe we avoid the intense competition in high traffic domestic air corridors. In our typical small city market, travelers faced high airfares and cumbersome connections or long drives to major airports to reach our leisure destinations before we started providing service.  Based on published data from the U.S. Department of Transportation (“DOT”), we believe the initiation of our service stimulates demand as there has beenis typically a substantial increase in traffic after we have begunbegan service on new routes. We believe our market strategy has had the benefit of not appearing hostile to either legacy carriers, whose historical focus has been connecting small cities to business markets with regional jets, or traditional low cost carriers (“LCCs”), which have tended to focus more on larger markets than the small city markets we serve.

We aggressively mangemanage seat capacity to match leisure demand patterns into our leisure destinations.  The management of our seat capacity includes increasing utilization of our aircraft during periods of high leisure demand and decreasing utilization in low leisure demand periods.  During 2012, our system average block hours per aircraft per day, was 5.7 for the full year.  During our peak demand period in March we averaged 7.6 system block hours per aircraft per day while in September, one of our lowest months for demand, we averaged 4.2 system block hours per aircraft per day.  Our management of seat capacity also includes changes in weekly frequency of certain markets based on identified peak travel periods throughout the year.  For example, the leisure destination of Palm Springs, CA, is more desirable for our customers from Bellingham, WA to visit during winter months.  Therefore, we have a seasonal adjustment to the frequency of our Bellingham-Palm Springs route from two flights per week during a period of low demand in the summer to six flights per week during a period of high demand in the winter.  With our ability to generate strong ancillary revenue and the ability to spread out our costs over a larger number of passengers, we price our fares and actively manage our capacity to achievetarget a 90% load factor which has allowed us to operate profitably throughout periods of high fuel prices and economic recessions.  Our low cost aircraft facilitates our ability to adjust service levels quickly and maintain profitability during difficult economic times.

We believe our low cost structure is essential to competitive success in the airline industry. Our operating expense per available seat mile (“ASM”) or operating CASM was 10.37¢ and 10.90¢ in 2012 and 8.95¢ in 2011, and 2010, respectively. Excluding the cost of fuel, our operating CASM was 5.32¢ for 2012 and 5.70¢ for 2011 and 5.05¢ for 2010.2011.  We continue to focus on low operating costs through the following:

We believe most leisure travelers are concerned primarily with purchasing air travel for the least expensive price. As such, we have unbundled the air transportation product and created sources of revenue by charging fees for services many U.S. airlines historically bundled in their product offering. We believe by offering a simple base product at an attractive low fare we can stimulate demand and generate incremental revenue as customers pay additional amounts for conveniences they value.  For example, we do not offer complimentary advance seat assignments; however, customers who value this product can purchase advance seat assignments for a small incremental cost. We also sell snacks and beverages on board the aircraft so our customers can pay for only the items they value. We aim to continue increasing ancillary revenue by further unbundling our air travel product, and with our automation advancements, specifically enable third party product growth.

Our third party product offerings allow our customers the opportunity to purchase hotels, rental cars, show tickets, night club packages and other attractions packaged with air travel.  We provide a low price guarantee to our customer and seek to maintain the most attractive products for our customers to choose from.  Our third party offerings are available to customers based on our agreements with various premier travel and leisure companies.  For example, we have contracts with Caesars Entertainment Inc. and MGM MIRAGE, among others, that allow us to provide hotel rooms sold in packages sold to our customers.  We offer hotel rooms in packages at more than 450 properties throughout our entire network.  In addition, we have an exclusive agreement with one national rental car operator for the sale of rental cars packaged with air travel at most of our leisure destinations.  Pricing of attractions, shows and tours are based on a net-pricing model. The pricing of each product can be adjusted market to market based on customer demand.

Since approximately 88.8%90.1% of our scheduled service revenue was purchased directly through our website in 2011,2012, we are able to establish direct relationships with our customers by utilizing their email addresses in our database. This information provides us multiple cost effective opportunities to market products and services, including at the time they purchase their travel, between the time they purchase and initiate their travel, and after they have completed their travel. In addition, we market products and services to our customers during the flight. We believe the breadth of options we can offer them allows us to provide a “one-stop” shopping solution to enhance their travel experience.

We have a strong financial position with significant cash balances.  As of December 31, 2011,2012, we had $319.5$352.7 million of unrestricted cash, cash equivalents and investment securities.  As of December 31, 2011, oursecurities, total debt was $146.1of $150.9 million and oura debt to total capitalization ratio was 29.4%of 27.4%.  We also have grown profitably with generationThe majority of net income in nine consecutive years.  On March 10, 2011, we borrowedour debt is from the $125.0 million borrowed in March 2011 under a senior secured term loan facility (“Term Loan”).  Our ability to generate operating cash flows with our capital structure has allowed us to grow profitably with generation of net income in ten consecutive years.  We believe the Term Loan has further strengthenedwe have more than adequate resources, with our financialcurrent liquidity position and provide us greater financial flexibilityfuture financing opportunities, to growinvest in the businessgrowth of our fleet, information technology infrastructure and weather sudden industry disruptions or U.S. macroeconomic events.development, while meeting our short-term obligations.

The airline industry is highly competitive. Passenger demand and fare levels have historically been influenced by, among other things, the general state of the economy, international events, industry capacity and pricing actions taken by other airlines. The principal competitive factors in the airline industry are fare pricing, customer service, routes served, flight schedules, types of aircraft, safety record and reputation, code-sharing relationships and frequent flyer programs.

  

Our competitors include legacy airlines, LCCs, regional airlines and new entrant airlines. Many of these airlines are larger, have significantly greater financial resources and serve more routes than we do. In a limited number of cases, following our entry into some markets, competitors have chosen to add service, reduce their fares or both.  In a few cases, other airlines have entered after we have developed a market.

Our small city strategy has reduced the intensity of competition we might otherwise face.  As of February 1, 2012,2013, we are the only domestic scheduled carrier operating out of the Orlando Sanford International Airport and one of twothree domestic scheduled carriers operating out of Phoenix-Mesa Gateway Airport in Phoenix and one of only three carriers serving the St. Petersburg-Clearwater International Airport, butAirport.  Although few domestic scheduled carriers operate in these three airports, virtually all U.S. airlines serve the nearby major airportairports serving Orlando, Phoenix and Tampa.  In addition, virtually all U.S. airlines serve Las Vegas, Los Angeles, and Ft. Lauderdale and Honolulu so we could face greater competition on our routes to those destinations in the future.

Indirectly, we compete with Southwest,Southwest/Airtran, US Airways, AirTran, Delta and other carriers that provide nonstop service to our leisure destinations from airports near our small city markets. For example, we fly from Bellingham, Washington, which is a two-hour drive from Seattle-Tacoma International Airport, where travelers can access nonstop service to Las Vegas, Los Angeles, Phoenix and San Francisco on various other carriers. We also face indirect competition from legacy carriers offering hub-and-spoke connections to our markets. For example, travelers can travel to Las Vegas from Peoria on United, American or Delta, although all of these legacy carriers currently utilize regional aircraft to access their hubs and mainline jets to access Las Vegas. Legacy carriers offering these segments with connecting flights and use of regional aircraft tend to charge higher and restrictive fares. In addition, these alternatives to our direct flight service have a much longer elapsed time of travel.

We also face indirect competition from automobile travel in our short-haul flights, primarily to our Florida leisure destinations. We believe our low cost pricing model customer service, and the convenience of air transportation help us compete favorably against automobile travel.

In our fixed fee operations, we compete with the aircraft of other scheduled airlines as well as with independent passenger charter airlines such as Xtra.airlines.  We also compete with aircraft owned or controlled by large tour companies. The basis of competition in the fixed fee market is cost, equipment capabilities, service and reputation.

In an effort to reduce our fuel costs, we have sought to become involved at an earlier stage in the fuel distribution channels. In this regard, we formed a wholly-owned subsidiary which entered into a limited liability company operating agreement with an affiliate of Orlando Sanford International Airport to engage in contract fueling transactions for the provision of aviation fuel to airline users at that airport. In addition, we have invested in fuel storage units and fuel transportation facilities involved in the fuel distribution process. These efforts could result in the creation of additional joint ventures to further our involvement in the fuel distribution process. By reason of these activities, we could potentially incur material liabilities, including possible environmental liabilities, to which we would not otherwise be subject.

We believe our growth potential and the achievement of our corporate goals are directly linked to our ability to attract and retain some of the best professionals available in the airline business. Full-time equivalent employees at February 1, 2012 consisted of 351 pilots, 397 flight attendants, 52 airport operations personnel, 287 mechanics, 126 reservation agents, and 281 management and other personnel. As of February 1,December 31, 2012, we employed 1,4941,693 full-time and 225245 part-time employees, which we consider to be 1,6131,821 full-time equivalent employees.  Full-time equivalent employees consisted of 350 pilots, 507 flight attendants, 122 airport operations personnel, 196 mechanics, 130 reservation agents, and 516 management and other personnel.

Salaries and benefits expense represented approximately 17% of total operating expenses during each of 2012 and 2011.  We place great emphasis onhave three employee groups which have voted for union representation, which consist of 47% of our total employees.  We are in various stages of negotiations for collective bargaining agreements with the selection and training of enthusiastic employees with potential to add value to our business and who we believe fit in with and contribute to our business culture. The recruiting and training process begins with an evaluation and screening process, followed by multiple interviews and experience verification. We provide extensive training intended to meet all FAA requirements for security, safety and operations for our pilots, flight attendants and customer service agents.labor organizations representing these employee groups.

To help retain talented and highly motivated employees, we offer competitive compensation packages as well as affordable health and retirement savings options. We offer medical, dental and 401(k) plans to full-time employees. Other salaried benefits include paid time off, as well as supplemental life insurance and long-term disability. WeOur relations with these labor organizations are governed by the Railway Labor Act (RLA).  Under this act, if direct negotiations do not have a defined benefit pension plan for any employees. We review our compensation packages on a regular basisresult in an effortagreement, either party may request the National Mediation Board (NMB) to ensure that we remain competitive and are ableappoint a federal mediator.  If no agreement is reached in these mediated discussions, the NMB may offer binding arbitration to the parties. If either party rejects binding arbitration, a “cooling off” period begins. At the end of this “cooling-off” period, the parties may engage in self-help, which among other events, could result in a strike from employees or for us to hire and retainnew employees to replace any striking workers.  The table below identifies the best people possible.status of these initial collective bargaining agreements:

In December 2010,addition to the potential demands the unionization of these employee groups could have on our flight attendant employee group voted for representation from the Transport Workers Union (“TWU”).  Weoperating expenses, if we are currently in negotiations with TWU forunable to reach a labor agreement and lookwith these employee groups, we may be subject to maintain a mutually satisfactory arrangement consistent with the existing compensation arrangement negotiated with the flight attendant in-house association prior to the selection of TWU.work interruptions or stoppages.  We have never previously experienced any work interruptions or stoppages from our nonunionized employee groups or from these employee groups which have voted for union representation.

  

We have an FAA-approved maintenance program, which is administered by our maintenance department headquartered in Las Vegas. Consistent with our core value of safety, all mechanics and avionics specialists employed by us have appropriate training and experience and hold required licenses issued by the FAA. We provide them with comprehensive training and maintain our aircraft and associated maintenance records in accordance with FAA regulations. The maintenance performed on our aircraft can be divided into three general categories: line maintenance, heavy maintenance, and component and engine overhaul and repair. Scheduled line maintenance is generally performed by our personnel. We contract with outside organizations to provide heavy maintenance and component and engine overhaul and repair. We have chosen not to invest in facilities or equipment to perform our own heavy maintenance, engine overhaul or component work. Our management closely supervises all maintenance functions performed by our personnel and contractors employed by us, and by outside organizations. We closely supervise the outsourced work performed by our heavy maintenance and engine overhaul contractors.  In addition to the maintenance contractors we presently utilize, we believe there are sufficient qualified alternative providers of maintenance services that we can use to satisfy our ongoing maintenance needs.

We maintain insurance policies we believe are of types customary in the industry and as required by the DOT and are in amounts we believe are adequate to protect us against material loss. The policies principally provide coverage for public liability, passenger liability, baggage and cargo liability, property damage, including coverages for loss or damage to our flight equipment and workers’ compensation insurance. There is no assurance, however, that the amount of insurance we carry will be sufficient to protect us from material loss.

We are subject to federal, state and local laws affecting the airline industry and to extensive regulation by the DOT, the FAA and other governmental agencies.

We hold a DOT certificatecertificates of public convenience and necessity authorizing us to engage in:in (i) scheduled air transportation of passengers, property and mail within the United States, its territories and possessions and between the United States and all countries that maintain a liberal aviation trade relationship with the United States (known as “open skies” countries), and (ii) charter air transportation of passengers, property and mail on a domestic and international basis.

The FAA also has the authority to promulgate rules and regulations and issue maintenance directives and other mandatory orders relating to, among other things, inspection, repair and modification of aircraft and engines, increased security precautions, aircraft equipment requirements, noise abatement, mandatory removal and replacement of aircraft parts and components, mandatory retirement of aircraft and operational requirements and procedures. Such rules, regulations and directives are normally issued with theafter an opportunity tofor public comment, however, they may be issued without advance notice or opportunity for comment if, in the FAA’s judgment, safety requires such action.

We believe we are operating in compliance with applicable DOT and FAA regulations, interpretations and policies and we hold all necessary operating and airworthiness authorizations, certificates and licenses.

Federal law recognizes the right of airport operators with special noise problems to implement local noise abatement procedures so long as those procedures do not interfere unreasonably with interstate and foreign commerce and the national air transportation system. These restrictions can include limiting nighttime operations, directing specific aircraft operational procedures during takeoff and initial climb, and limiting the overall number of flights at an airport. None of the airports we serve currently restricts the number of flights or hours of operation, although it is possible one or more such airports may do so in the future with or without advance notice.

The quality of water used for drinking and hand-washing aboard aircraft is subject to regulation by the Environmental Protection Agency (“EPA”). To the extent we are subject to EPA requirements, we willintend to continue to comply with those requirements.

We are responsible for collection and remittance of federally imposed and federally approved taxes and fees applicable to air transportation passengers. We believe we are in compliance with these requirements, and we willintend to continue to comply with them.

Our operations may become subject to additional federal requirements in the future under certain circumstances. For example, our labor relations are covered under Title II of the Railway Labor Act of 1926, as amended, and are subject to the jurisdiction of the National Mediation Board. During a period of past fuel scarcity, air carrier access to jet fuel was subject to allocation regulations promulgated by the Department of Energy.  Changes to the federal excise tax and other government fees imposed on air transportation have been proposed from time to time and may result in an increased tax burden for airlines and their passengers.

We are also subject to state and local laws, regulations and ordinances at locations where we operate and to the rules and regulations of various local authorities that operate the airports we serve. None of the airports in the small cities in which we operate have slot control, gate availability or curfews that pose meaningful limitations on our operations. However, some small city airports have short runways that require us to operate some flights at less than full capacity.

International air transportation, whether provided on a scheduled or charter basis, is subject to the laws, rules, regulations and regulationslicensing requirements of the foreign countries to, from and over which the international flights operate. Foreign laws, rules, regulations and regulationslicensing requirements governing air transportation are generally similar, in principle, to the regulatory scheme of the United States as described above, although in some cases foreign requirements are comparatively less onerous and in others, more onerous. We must comply with the laws, rules and regulations of each country to, from or over which we operate. International flights are also subject to U.S. Customs and Border Protection, Immigration and Agriculture requirements and the requirements of equivalent foreign governmental agencies.

Both the cost and availability of aircraft fuel are subject to many meteorological, economic and political factors and events occurring throughout the world over which we have no control.  Meteorological events may also result in short-term disruptions in the fuel supply.  Aircraft fuel availability is also subject to periods of market surplus and shortage and is affected by demand for heating oil, gasoline and other petroleum products. Because of the effect of these events on the price and availability of aircraft fuel, our ability to control this cost is limited and the price and future availability of fuel cannot be predicted with any degree of certainty.  Due to the high percentage of our operating costs represented by fuel, a relatively small increase in the price of fuel cancould have a significant negative impact on our operating costs.  A fuel supply shortage or higher fuel prices could possibly result in curtailment of our service.service during the period affected.

We have made a business decision in recent years not to purchase financial derivatives to hedge against increases in the cost of fuel.  This decision may make our operating results more vulnerable to the impact of fuel price increases.

The severity and duration of U.S. economy continues to be impacted byor global economic recession, high unemployment, depressed housing market and other factors whichstock prices, and low levels of consumer confidence may reduce the wealthhave a negative impact on discretionary spending by consumers and tighten spending of consumers.our financial results.  Leisure travel is aligned with discretionary spending and it is uncertain to what extent the continuance of thesecustomers we serve may reduce or eliminate such purchases from their spending in difficult economic conditions will affect consumers and leisure travel in the future.times. These conditions could impact demand for airline travel in our small city markets or to our leisure destinations.

An accident or incident involving one of our MD-80 aircraft, even if fully insured, could cause a public perception that we are less safe or reliable than other airlines, which would harm our business. There is no assurance, however, that the amount of insurance we carry will be sufficient to protect us from material loss.  Because we are smaller than most airlines, an accident would likely adversely affect us to a greater degree than a larger, more established airline.

As of December 31, 2011,2012, we owed $123.5$122.4 million under a senior secured term loan facility (the “Term Loan”).  The Term Loan contains restrictive covenants that, among other things, limit:

As a result of theseThese restrictive covenants we may be limited incould potentially limit how we conduct our business and we may be unablecould affect our ability to raise additional debt or equity financing in the event we do not choose to operate during difficult times or to take advantage of new business opportunities.prepay the debt with our cash resources.

We have announcedexpect to add the first of these aircraft to our intention to begin to serve Hawaiioperating fleet in the secondfirst half of 2012. Before beginning2013, subject to serve Hawaii, we will need to obtainreceipt of regulatory approval for extended over water operations. There is no assurance that we will be able to secure such authority in order to allow us to begin service when planned or at all.

We depend on automated systems to operate our business, including our computerized airline reservation system, our telecommunication systems, our website and other automated systems. Our continuing work on enhancing the capabilities of our automation systems and the migration of data to a new platform could increase the risk of automation failures during the process.  Any failure by us to handle our automation needs could negatively affect our internet sales (on which we rely heavily) and customer service and result in lost revenues and increased costs.

Our website and reservation system must be able to accommodate a high volume of traffic and deliver important flight information. Our automated systems cannot be completely protected against events that are beyond our control, such as natural disasters, telecommunications failures or computer viruses.  Although we have implemented security measures and have in place disaster recovery plans, we cannot assure investors these measures are adequate to prevent disruptions.  Substantial or repeated website, reservations system or telecommunication systems failures could reduce the attractiveness of our services. Any disruption in these systems could result in the loss of important data, loss of revenue, increase ourin expenses and generally harm our business.

  

 

We lease facilities at each of our leisure destinations and several of the other airports we serve. Our leases for our terminal passenger services facilities, which include ticket counter and gate space, and operations support areas, generally have terms of less thana term ranging from month-to-month to two years, in duration and can generallymay be terminated with a 30 to 60 day notice. We have also entered into use agreements at each of the airports we serve that provide for non-exclusive use of runways, taxiways and other facilities. Landing fees under these agreements are based on the number of landings and weight of the aircraft.

We have operational bases at airports at each of the major leisure destinations we serveserve.  In addition, we have an operational base in Wendover, Nevada to support our fixed fee flying under our agreement with Peppermill Resorts Inc., and additionally atan operational base in Bellingham, Washington.  In JanuaryDuring 2012, we announced the establishment of anestablished operational basebases at Oakland International Airport with seven new routesand Punta Gorda Airport, which required the leasing of additional facilities to servesupport operations.  We served these airports prior to the San Francisco Bay Area starting in April 2012.establishment of these operational bases.

The Bellingham International Airport is continuing an expansion project which began in 2010 and we believe will allow for sufficient gate space for long-term growth. We believe we have sufficient access to gate space for current and presently contemplated future operations at all other airports we serve.

 

Our primary corporate offices are located in Las Vegas, where we lease approximately 65,00070,000 square feet of space under a lease that expires in April 2019.2018. We also lease approximately 10,000 square feet of office space in a building adjacent to our corporate offices which is utilized for training and other corporate purposes.  In addition to base rent, we are also responsible for our share of common area maintenance charges. In both leases, the landlord is a limited liability company in which certain of our directors own significant interests as non-controlling members.

We are subject to certain legal and administrative actions we consider routine to our business activities. We believe the ultimate outcome of any pending legal or administrative matters will not have a material adverse effect on our financial position, liquidity or results of operations.

Not applicable.

Our common stock is quoted on the Nasdaq Global Select Market. On February 1, 2012,2013, the last sale price of our common stock was $56.27$74.86 per share. The following table sets forth the range of high and low sale prices for our common stock for the periods indicated.

The following table provides information regarding options, warrants and other rights to acquire equity securities under our equity compensation plans as of December 31, 2011:2012:

The following table reflectsDuring the three months ended December 31, 2012, we repurchased 54,730 shares under our share repurchase program authority, at an average cost of $72.73 per share, for a total expenditure of $4.0 million.  In addition, we had repurchases of our common stock during the fourth quarter of 2011. All stock repurchases during this period were madein October 2012 from employees who received restricted stock grants. AllThese stock repurchases were made at the election of each employee pursuant to an offer to repurchase by us. In each case, the shares repurchased constituted the portion of vested shares necessary to satisfy withholding tax requirements.

The following table reflects our repurchases of our common stock during the fourth quarter of 2012: 

The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return on the Nasdaq Composite Index and the AMEX Airline Index for the period beginning on December 31, 20062007 and ending on the last day of 2011.December 31, 2012.  The graph assumes an investment of $100 in our stock and the two indices, respectively, on December 31, 2006,2007, and further assumes the reinvestment of all dividends. Stock price performance, presented for the period from December 31, 20062007 to December 31, 2011,2012, is not necessarily indicative of future results.

The stock price performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report on Form 10-K into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.

The following financial information for each of the five years ended December 31, 2011,2012, has been derived from our consolidated financial statements. YouInvestors should read the selected consolidated financial data set forth below along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. Certain presentation changes and reclassifications have been made to prior year consolidated financial information to conform to 20112012 classifications.

The following terms used in this section and elsewhere in this annual report have the meanings indicated below:

TheDuring 2012, we achieved our tenth straight profitable year, with net income of $78.6 million or $4.06 earnings per share (diluted) on operating revenues of $908.7 million.  These net income and earnings per share results were both more than 50% higher than 2011, was another successful year for us, our ninth straight yearin which we ended with net income of profitability, while introducing our first Boeing 757-200 aircraft into revenue service, beginning our MD-80 seat reconfiguration program and further development in our system automation upgrades.  During 2011, we earned $49.4 million of net income or $2.57 earnings per share (diluted) on operating revenues of $779.1 million.  We experienced unit revenues atOur operating margin of 14.6% for 2012 was driven by our highest ever annual ancillary revenue per passenger of $41.20, a 13.3% increase compared to the highest levelsprior year, and a year-over-year reduction in our history,non-fuel unit costs of 6.7%.

 We grew our average number of aircraft in revenue service by 15.3% from 52.2 aircraft during 2011 to 60.2 aircraft during 2012.  The increase in average number of aircraft and the combination of increased seats in our MD-80 fleet, utilization of our Boeing 757-200 aircraft with a total average fare increase of 13.2% to $125.51 for 2011, which was achieved despite223 seats and a 1.9% increase in system capacity.  The totalour scheduled service average fare performance during the year allowed us to more than offset the effect of high fuel prices as our entire fuel cost increase was attributable to unit cost increases.  Our system average cost per gallon increased from $2.30 during 2010 to $3.07 in 2011.

Our total operating revenues in 2012 increased $129.6 million or 16.6% over 2011 due to a 15.4%14.1% increase in scheduled service passengers and a 3.7% increase in total scheduled service revenue andaverage fare to $130.10.  We grew our ancillary revenue per ASM (“TRASM”)passenger year-over-year by 13.3%, which drove the increase in total average fare despite our flat scheduled service average base fare.  An increase in charges for bags resulting from the implementation of a new carry-on bag fee and new boarding procedures was the main driver of our ancillary revenue per passenger increase.  Our capacity growth, driven by an increase in our average number of aircraft and larger gauge aircraft, and a load factor year-over-year decline of 2.3 percentage points, impacted our RASM which declined from 12.24¢ in 2011 compared with the same periodto 12.14¢ in 2012.  Our load factor was negatively impacted during 2012 by expanded service to Oakland (San Francisco Bay Area) and our new service to Hawaii.  

Our CASM, excluding fuel, decreased 6.7% from 5.70¢ in 2011 to 5.32¢ in 2012, mainly attributable to a 17.6% increase in system capacity which outpaced a 9.7% increase in non-fuel operating expenses.  Drivers of 2010.  We believe our improvementimproved CASM, excluding fuel, were reduced engine repair expense in unit revenue production was2012 due to changesthe completion of our 2011 engine overhaul program, better crew efficiency in 2012 and the impact of our variable pilot base pay scale.

As of December 31, 2011,2012, our total aircraft in service consisted of 5658 MD-80 aircraft and onefive Boeing 757-200.757-200 aircraft.  During 2011,2012, we placed fivetwo MD-80 aircraft into service which were previously held in storage and onefour Boeing 757-200 aircraft into service, along with the permanent withdrawal of one MD-80 aircraft (130-seat MD-87), which increased our aircraft in service to 57 aircraft at December 31, 2011.service.  The following table sets forth the number and type of aircraft in service and operated by us atas of the dates indicated:

Although fuel cost volatility has significantly impacted our operating results in prior years, crude oil prices stabilized during 2012, and we experienced a year-over-year increase of 3.6% in our system average cost per gallon from $3.07 to $3.18 mainly driven by crack spread increases.  Our fuel cost per ASM declined in 2012 as the higher capacity Boeing 757-200 and additional seats from our MD-80 seat reconfiguration program provided us additional capacity over which to spread our fuel costs.  In Januarycomparison with 2011, our ASMs per gallon of fuel increased 6.6% in 2012, revisionsas a result of the additional capacity from these seats.  As we introduce the Airbus aircraft into revenue service in 2013 and expansions toafter, we expect further increases in our ASMs per gallon of fuel as a varietyresult of DOT consumer-protection regulations became effective.  Among other changes, the new rules substantially reduce the flexibility concerning airline advertising and sales practices, including on websites. These new regulations curtail our ability to advertise, price and sell our servicesfuel efficiency of this aircraft type. Fuel costs in the particular mannerlong-term remain uncertain and fuel cost volatility would materially impact future operating costs.

Our operating revenue comprisesis comprised of both air travel on a stand-alone basis and bundled with hotels, rental cars and other travel-related services. We believe our diversified revenue streams distinguish us from other U.S. airlines and other travel companies.