LEASES

United leases aircraft, airport passenger terminal space, aircraft hangars and related maintenance facilities, cargo terminals, other airport facilities, other commercial real estate, office and computer equipment and vehicles, among other items. Certain of these leases include provisions for variable lease payments which are based on several factors, including, but not limited to, relative leased square footage, available seat miles, enplaned passengers, passenger facility charges, terminal equipment usage fees, departures, and airports’ annual operating budgets. Due to the variable nature of the rates, these leases are not recorded on our balance sheet as a right-of-use asset and lease liability.

For leases with terms greater than 12 months, we record the related asset and lease liability at the present value of lease payments over the lease term. Leases with an initial term of 12 months or less with purchase options or extension options that are not reasonably certain to be exercised are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the term of the lease. We combine lease and non-lease components, such as common area maintenance costs, in calculating the right-of-use assets and lease liabilities for all asset groups except for our capacity purchase agreements ("CPAs"), which contain embedded leases for regional aircraft. In addition to the lease component cost for regional aircraft, our CPAs also include non-lease components primarily related to the regional carriers’ operating costs incurred in providing regional aircraft services. We allocate consideration separately for the lease components and non-lease components of each CPA based on their relative standalone values.

Lease Cost. The Company's lease cost for the three months ended March 31 included the following components (in millions):



	2019			2018
Operating lease cost	$	272		$	326
Variable and short-term lease cost	606			611
Amortization of finance lease assets	18			23
Interest on finance lease liabilities	27			5
Sublease income	(8		)	(10		)
Total lease cost	$	915		$	955

Lease terms and commitments. United's leases include aircraft and non-aircraft leases. Aircraft operating leases relate to leases of 122 mainline and 341 regional aircraft while finance leases relate to leases of 30 mainline and 76 regional aircraft. United's aircraft leases have remaining lease terms of 2 months to 10 years with expiration dates ranging from 2019 through 2029. Under the terms of most aircraft leases, United has the right to purchase the aircraft at the end of the lease term, in some cases at fair market value, and in others, at a percentage of cost.

Non-aircraft leases have remaining lease terms of 1 month to 34 years, with expiration dates ranging from 2019 through 2053.

The table below summarizes the Company's scheduled future minimum lease payments under operating and finance leases, recorded on the balance sheet, as of March 31, 2019 (in millions):



	Operating Leases			Finance Leases
Last nine months of 2019	$	662		$	195
2020	985			96
2021	763			74
2022	630			47
2023	617			33
After 2023	4,252			69
Minimum lease payments	7,909			514
Imputed interest	2,125			145
Present value of minimum lease payments	5,784			369
Less: current maturities of lease obligations	(639		)	(133		)
Long-term lease obligations	$	5,145		$	236

As of March 31, 2019, we have additional leases that have not yet commenced with an aggregate value of approximately $140 million. These leases will commence between 2019 and 2020 with lease terms of up to 34 years.

To the extent a lease agreement includes an extension option that is reasonably certain to be exercised, we have recognized those amounts as part of our right-of-use assets and lease liabilities.

Our lease agreements do not provide a readily determinable implicit rate nor is it available to us from our lessors. Instead, we estimate United's incremental borrowing rate based on information available at lease commencement in order to discount lease payments to present value. The table below presents additional information related to our leases as of March 31:



	2019			2018
Weighted-average remaining lease term - finance leases	5 years			5 years
Weighted-average remaining lease term - operating leases	10 years			10 years
Weighted-average discount rate - finance leases	50.5	%	(a)	6.7	%
Weighted-average discount rate - operating leases	5.2	%		5.0	%

(a) During the third quarter of 2018, United entered into an agreement with the lessor of 54 Embraer ERJ 145 aircraft to purchase those aircraft in 2019. The provisions of these lease agreements resulted in a change in accounting classification of these leases from operating leases to finance leases up until the purchase date. The discount rates used for these leases were adjusted so that the present value of lease payments did not exceed the fair value of the asset being recognized.

The table below presents supplemental cash flow information related to leases during the three months ended March 31:



	2019		2018
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	285	$	279
Operating cash flows for finance leases	24		5
Financing cash flows for finance leases	20		18