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Leases and Capacity Purchase Agreements | 12 Months Ended
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Dec. 31, 2022
Leases [Abstract] |
LEASES AND CAPACITY PURCHASE AGREEMENTS | LEASES AND CAPACITY PURCHASE AGREEMENTS 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 right-of-use asset and lease liability at the present value of fixed lease payments over the lease term. 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. 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 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 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 years ended December 31 included the following components (in millions):
|  | 2022 |  | 2021 |  | 2020 |  |
Operating lease cost |  | $ | 941 |  |  | $ | 958 |  |  | $ | 933 |  |  |
Variable and short-term lease cost |  | 2,603 |  |  | 2,291 |  |  | 1,968 |  |  |
Amortization of finance lease assets |  | 72 |  |  | 89 |  |  | 88 |  |  |
Interest on finance lease liabilities |  | 13 |  |  | 16 |  |  | 16 |  |  |
Sublease income |  | (33) |  |  | (26) |  |  | (23) |  |  |
Total lease cost |  | $ | 3,596 |  |  | $ | 3,328 |  |  | $ | 2,982 |  |  |
Lease terms and commitments. United's leases include aircraft leases for aircraft that are directly leased by United and aircraft that are operated by regional carriers on United's behalf under CPAs (but excluding aircraft owned by United) and non-aircraft leases. Aircraft operating leases relate to leases of 99 mainline and 318 regional aircraft while finance leases relate to leases of 26 mainline and 16 regional aircraft. United's aircraft leases have remaining lease terms of 1 month to 12 years with expiration dates ranging from 2023 through 2034. 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 30 years, with expiration dates ranging from 2023 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 December 31, 2022 (in millions):
|  | Operating Leases |  | Finance Leases
2023 |  | $ | 851 |  |  | $ | 114 |
2024 |  | 736 |  |  | 45 |
2025 |  | 616 |  |  | 39 |
2026 |  | 597 |  |  | 17 |
2027 |  | 779 |  |  | 10 |
After 2027 |  | 3,190 |  |  | 18 |
Minimum lease payments |  | 6,769 |  |  | 243 |
Imputed interest |  | (1,749) |  |  | (24) |
Present value of minimum lease payments |  | 5,020 |  |  | 219 |
Less: current maturities of lease obligations |  | (561) |  |  | (104) |
Long-term lease obligations |  | $ | 4,459 |  |  | $ | 115 |
As of December 31, 2022, we have additional leases of approximately $3.0 billion for several regional aircraft under CPAs and airport facility leases that have not yet commenced. These leases will commence starting in 2023 through 2025 with lease terms of up to 12 years. In 2020, United entered into agreements with third parties to finance through sale and leaseback transactions new Boeing model 787 aircraft and Boeing model 737 MAX aircraft subject to purchase agreements between United and Boeing. In connection with the delivery of each aircraft from Boeing, United assigned its right to purchase such aircraft to the buyer, and simultaneous with the buyer's purchase from Boeing, United entered into a long-term lease for such aircraft with the buyer as lessor. Upon delivery of the aircraft in these sale and leaseback transactions, the Company accounted for several of these aircraft, which have a repurchase option at a price other than fair value, as part of Flight equipment on the Company's consolidated balance sheet and the related obligation recorded in Current maturities of other financial liabilities and Other financial liabilities since they did not qualify for sale recognition (failed sale and leaseback). The remaining aircraft that qualified for sale recognition were recorded as Operating lease right-of-use assets and Current/Long-term obligations under operating leases on the Company's consolidated balance sheet after recognition of related gains on such sale. In 2022, under these sale and leaseback agreements, United exercised repurchase options for six Boeing 787 aircraft. The table below presents the Company's contractual payments at December 31, 2022 under then-outstanding failed sale and leaseback agreements in each of the next five calendar years (in millions):
|  | Other Financial Liabilities
2023 |  | $ | 75 |
2024 |  | 79 |
2025 |  | 80 |
2026 |  | 80 |
2027 |  | 373 |
After 2027 |  | 428 |
|  | 1,115 |
Imputed interest |  | (248) |
Current maturities of other financial liabilities |  | (23) |
Other financial liabilities |  | $ | 844 |
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 December 31:
|  | 2022 |  | 2021 |
Weighted-average remaining lease term - operating leases |  | 10 years |  | 10 years |
Weighted-average remaining lease term - finance leases |  | 3 years |  | 6 years |
Weighted-average remaining lease term - other financial liabilities |  | 9 years |  | 13 years |
Weighted-average discount rate - operating leases |  | 5.5 | % |  | 5.0 | % |
Weighted-average discount rate - finance leases |  | 6.4 | % |  | 4.8 | % |
Weighted-average interest rate - other financial liabilities |  | 6.0 | % |  | 6.0 | % |
The table below presents supplemental cash flow information related to leases during the year ended December 31 (in millions):
| 2022 |  | 2021 |  | 2020
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |
Operating cash flows for operating leases | $ | 919 |  |  | $ | 977 |  |  | $ | 788 |
Operating cash flows for finance leases | 13 |  |  | 18 |  |  | 20 |
Financing cash flows for finance leases | 124 |  |  | 216 |  |  | 66 |
Regional CPAs. United has contractual relationships with various regional carriers to provide regional aircraft service branded as United Express. Under these CPAs, the Company pays the regional carriers contractually agreed fees (carrier costs) for operating these flights plus a variable rate adjustment based on agreed performance metrics, subject to annual adjustments. The fees are based on specific rates multiplied by specific operating statistics (e.g., block hours, departures), as well as fixed monthly amounts. Under these CPAs, the Company is also responsible for all fuel costs incurred, as well as landing fees and other costs, which are either passed through by the regional carrier to the Company without any markup or directly incurred by the Company. In some cases, the Company owns some or all of the aircraft subject to the CPA and leases such aircraft to the regional carrier. United's CPAs are for 470 regional aircraft as of December 31, 2022, and the CPAs have terms expiring through 2036. Aircraft operated under CPAs include aircraft leased directly from the regional carriers and those owned by United and operated by the regional carriers. See Part I, Item 2. Properties, of this report for additional information. United recorded approximately $0.9 billion, $0.6 billion and $0.6 billion in expenses related to its CPAs with its regional carriers in which United is a minority shareholder, for the years ended December 31, 2022, 2021 and 2020, respectively. United had notes receivables with carrying values of $62 million and $28 million due from these companies, as of December 31, 2022 and 2021, respectively. There were no accounts payable due to these companies as of December 31, 2022 and $102 million in accounts payable due to these companies as of December 31, 2021. The CPAs with these related parties were executed in the ordinary course of business. In 2022, United entered into an amended CPA with Mesa to operate, starting in 2023, up to 38 CRJ-900 aircraft with a five-year term, dependent upon the number of Embraer E175 aircraft that Mesa is flying on United's behalf. Additionally in 2022, United amended a majority of its CPA agreements to increase the contractually agreed fees (carrier costs) paid to its regional carriers. The Company plans to wind down its CPA with Air Wisconsin in 2023. Our future commitments under our CPAs are dependent on numerous variables, and are, therefore, difficult to predict. The most important of these variables is the number of scheduled block hours. Although we are not required to purchase a minimum number of block hours under certain of our CPAs, we have set forth below estimates of our future payments under the CPAs based on our assumptions. The actual amounts we pay to our regional operators under CPAs could differ materially from these estimates. United's estimates of its future payments under all of the CPAs do not include the portion of the underlying obligation for any aircraft leased to a regional carrier or deemed to be leased from other regional carriers and facility rent that are disclosed as part of operating leases above. For purposes of calculating these estimates, we have assumed (1) the number of block hours flown is based on our anticipated level of flight activity or at any contractual minimum utilization levels if applicable, whichever is higher, (2) that we will reduce the fleet as rapidly as contractually allowed under each CPA, (3) that aircraft utilization, stage length and load factors will remain constant, (4) that each carrier's operational performance will remain at recent historic levels and (5) an annual projected inflation rate. These amounts exclude variable pass-through costs such as fuel and landing fees, among others. Based on these assumptions as of December 31, 2022, our future payments through the end of the terms of our CPAs are presented in the table below (in billions):
2023 | $ | 2.2 |
2024 | 1.9 |
2025 | 1.5 |
2026 | 1.3 |
2027 | 0.9 |
After 2027 | 3.2 |
| $ | 11.0 |
LEASES AND CAPACITY PURCHASE AGREEMENTS | LEASES AND CAPACITY PURCHASE AGREEMENTS 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 right-of-use asset and lease liability at the present value of fixed lease payments over the lease term. 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. 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 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 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 years ended December 31 included the following components (in millions):
|  | 2022 |  | 2021 |  | 2020 |  |
Operating lease cost |  | $ | 941 |  |  | $ | 958 |  |  | $ | 933 |  |  |
Variable and short-term lease cost |  | 2,603 |  |  | 2,291 |  |  | 1,968 |  |  |
Amortization of finance lease assets |  | 72 |  |  | 89 |  |  | 88 |  |  |
Interest on finance lease liabilities |  | 13 |  |  | 16 |  |  | 16 |  |  |
Sublease income |  | (33) |  |  | (26) |  |  | (23) |  |  |
Total lease cost |  | $ | 3,596 |  |  | $ | 3,328 |  |  | $ | 2,982 |  |  |
Lease terms and commitments. United's leases include aircraft leases for aircraft that are directly leased by United and aircraft that are operated by regional carriers on United's behalf under CPAs (but excluding aircraft owned by United) and non-aircraft leases. Aircraft operating leases relate to leases of 99 mainline and 318 regional aircraft while finance leases relate to leases of 26 mainline and 16 regional aircraft. United's aircraft leases have remaining lease terms of 1 month to 12 years with expiration dates ranging from 2023 through 2034. 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 30 years, with expiration dates ranging from 2023 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 December 31, 2022 (in millions):
|  | Operating Leases |  | Finance Leases
2023 |  | $ | 851 |  |  | $ | 114 |
2024 |  | 736 |  |  | 45 |
2025 |  | 616 |  |  | 39 |
2026 |  | 597 |  |  | 17 |
2027 |  | 779 |  |  | 10 |
After 2027 |  | 3,190 |  |  | 18 |
Minimum lease payments |  | 6,769 |  |  | 243 |
Imputed interest |  | (1,749) |  |  | (24) |
Present value of minimum lease payments |  | 5,020 |  |  | 219 |
Less: current maturities of lease obligations |  | (561) |  |  | (104) |
Long-term lease obligations |  | $ | 4,459 |  |  | $ | 115 |
As of December 31, 2022, we have additional leases of approximately $3.0 billion for several regional aircraft under CPAs and airport facility leases that have not yet commenced. These leases will commence starting in 2023 through 2025 with lease terms of up to 12 years. In 2020, United entered into agreements with third parties to finance through sale and leaseback transactions new Boeing model 787 aircraft and Boeing model 737 MAX aircraft subject to purchase agreements between United and Boeing. In connection with the delivery of each aircraft from Boeing, United assigned its right to purchase such aircraft to the buyer, and simultaneous with the buyer's purchase from Boeing, United entered into a long-term lease for such aircraft with the buyer as lessor. Upon delivery of the aircraft in these sale and leaseback transactions, the Company accounted for several of these aircraft, which have a repurchase option at a price other than fair value, as part of Flight equipment on the Company's consolidated balance sheet and the related obligation recorded in Current maturities of other financial liabilities and Other financial liabilities since they did not qualify for sale recognition (failed sale and leaseback). The remaining aircraft that qualified for sale recognition were recorded as Operating lease right-of-use assets and Current/Long-term obligations under operating leases on the Company's consolidated balance sheet after recognition of related gains on such sale. In 2022, under these sale and leaseback agreements, United exercised repurchase options for six Boeing 787 aircraft. The table below presents the Company's contractual payments at December 31, 2022 under then-outstanding failed sale and leaseback agreements in each of the next five calendar years (in millions):
|  | Other Financial Liabilities
2023 |  | $ | 75 |
2024 |  | 79 |
2025 |  | 80 |
2026 |  | 80 |
2027 |  | 373 |
After 2027 |  | 428 |
|  | 1,115 |
Imputed interest |  | (248) |
Current maturities of other financial liabilities |  | (23) |
Other financial liabilities |  | $ | 844 |
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 December 31:
|  | 2022 |  | 2021 |
Weighted-average remaining lease term - operating leases |  | 10 years |  | 10 years |
Weighted-average remaining lease term - finance leases |  | 3 years |  | 6 years |
Weighted-average remaining lease term - other financial liabilities |  | 9 years |  | 13 years |
Weighted-average discount rate - operating leases |  | 5.5 | % |  | 5.0 | % |
Weighted-average discount rate - finance leases |  | 6.4 | % |  | 4.8 | % |
Weighted-average interest rate - other financial liabilities |  | 6.0 | % |  | 6.0 | % |
The table below presents supplemental cash flow information related to leases during the year ended December 31 (in millions):
| 2022 |  | 2021 |  | 2020
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |
Operating cash flows for operating leases | $ | 919 |  |  | $ | 977 |  |  | $ | 788 |
Operating cash flows for finance leases | 13 |  |  | 18 |  |  | 20 |
Financing cash flows for finance leases | 124 |  |  | 216 |  |  | 66 |
Regional CPAs. United has contractual relationships with various regional carriers to provide regional aircraft service branded as United Express. Under these CPAs, the Company pays the regional carriers contractually agreed fees (carrier costs) for operating these flights plus a variable rate adjustment based on agreed performance metrics, subject to annual adjustments. The fees are based on specific rates multiplied by specific operating statistics (e.g., block hours, departures), as well as fixed monthly amounts. Under these CPAs, the Company is also responsible for all fuel costs incurred, as well as landing fees and other costs, which are either passed through by the regional carrier to the Company without any markup or directly incurred by the Company. In some cases, the Company owns some or all of the aircraft subject to the CPA and leases such aircraft to the regional carrier. United's CPAs are for 470 regional aircraft as of December 31, 2022, and the CPAs have terms expiring through 2036. Aircraft operated under CPAs include aircraft leased directly from the regional carriers and those owned by United and operated by the regional carriers. See Part I, Item 2. Properties, of this report for additional information. United recorded approximately $0.9 billion, $0.6 billion and $0.6 billion in expenses related to its CPAs with its regional carriers in which United is a minority shareholder, for the years ended December 31, 2022, 2021 and 2020, respectively. United had notes receivables with carrying values of $62 million and $28 million due from these companies, as of December 31, 2022 and 2021, respectively. There were no accounts payable due to these companies as of December 31, 2022 and $102 million in accounts payable due to these companies as of December 31, 2021. The CPAs with these related parties were executed in the ordinary course of business. In 2022, United entered into an amended CPA with Mesa to operate, starting in 2023, up to 38 CRJ-900 aircraft with a five-year term, dependent upon the number of Embraer E175 aircraft that Mesa is flying on United's behalf. Additionally in 2022, United amended a majority of its CPA agreements to increase the contractually agreed fees (carrier costs) paid to its regional carriers. The Company plans to wind down its CPA with Air Wisconsin in 2023. Our future commitments under our CPAs are dependent on numerous variables, and are, therefore, difficult to predict. The most important of these variables is the number of scheduled block hours. Although we are not required to purchase a minimum number of block hours under certain of our CPAs, we have set forth below estimates of our future payments under the CPAs based on our assumptions. The actual amounts we pay to our regional operators under CPAs could differ materially from these estimates. United's estimates of its future payments under all of the CPAs do not include the portion of the underlying obligation for any aircraft leased to a regional carrier or deemed to be leased from other regional carriers and facility rent that are disclosed as part of operating leases above. For purposes of calculating these estimates, we have assumed (1) the number of block hours flown is based on our anticipated level of flight activity or at any contractual minimum utilization levels if applicable, whichever is higher, (2) that we will reduce the fleet as rapidly as contractually allowed under each CPA, (3) that aircraft utilization, stage length and load factors will remain constant, (4) that each carrier's operational performance will remain at recent historic levels and (5) an annual projected inflation rate. These amounts exclude variable pass-through costs such as fuel and landing fees, among others. Based on these assumptions as of December 31, 2022, our future payments through the end of the terms of our CPAs are presented in the table below (in billions):
2023 | $ | 2.2 |
2024 | 1.9 |
2025 | 1.5 |
2026 | 1.3 |
2027 | 0.9 |
After 2027 | 3.2 |
| $ | 11.0 |

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