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COMMITMENTS AND CONTINGENCIES | 9 Months Ended
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Sep. 30, 2021
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Los Angeles International Airport In October 2017, the Company executed a lease agreement with Los Angeles World Airports ("LAWA") (the "T1.5 Lease"). Under the T1.5 Lease, the Company oversaw and managed the design, development, financing, construction, and commissioning of a passenger processing facility between Terminals 1 and 2 (the "Terminal 1.5 Project"). The Terminal 1.5 Project included ticketing, baggage claim, passenger screening, and a bus gate. Construction on the Terminal 1.5 Project began during third quarter 2017 and was substantially completed at December 31, 2020. The project final cost was approximately $410 million. During second quarter 2021, LAWA repaid the outstanding loan and purchased the remaining completed assets for accounting purposes, at which time the Terminal 1.5 Project right-of-use asset and lease liability of $365 million on the balance sheet were de-recognized in accordance with applicable accounting guidance. This repayment was also reported as a supplemental noncash transaction on the unaudited Condensed Consolidated Statement of Cash Flows, net of Assets constructed for others additions during the period. Dallas Love Field During 2008, the City of Dallas approved the Love Field Modernization Project ("LFMP"), a project to reconstruct Dallas Love Field with modern, convenient air travel facilities. Pursuant to a Program Development Agreement with the City of Dallas and the Love Field Airport Modernization Corporation (or the "LFAMC," a Texas non-profit "local government corporation" established by the City of Dallas to act on the City of Dallas' behalf to facilitate the development of the LFMP), the Company managed this project. Major construction was effectively completed in 2014. During second quarter 2017, the City of Dallas approved using the remaining bond funds for additional terminal construction projects, which were effectively completed in 2018. Although the City of Dallas received commitments from various sources that helped to fund portions of the LFMP project, including the Federal Aviation Administration ("FAA"), the Transportation Security Administration, and the City of Dallas' Aviation Fund, the majority of the funds used were from the issuance of bonds. The Company guaranteed principal and interest payments for Series 2010 and 2012 bonds issued by the LFAMC. Given the Company’s guarantee associated with the bonds issued to fund LFMP, the remaining debt service amount was considered a minimum lease payment under the adoption of ASC Topic 842, Leases, and therefore was recorded as a lease liability with a corresponding right-of-use asset within the Company’s unaudited Condensed Consolidated Balance Sheet. All of the outstanding Series 2010 bonds, in the principal amount of $310 million were redeemed on September 28, 2021 (Redemption Date) at the redemption price plus accrued interest of $7 million. The source of the funds used to pay the principal and interest on the Series 2010 bonds was proceeds from the sale of LFAMC General Airport Revenue Bonds, Series 2021, which also occurred on the Redemption Date. As the Series 2010 bonds have been fully repaid following the Redemption Date, the Company’s guarantee associated with the Series 2010 bonds no longer exists. This refinancing transaction was considered a lease modification in accordance with applicable guidance, and the Company's obligation was remeasured as of the transaction date. This remeasurement resulted in a reduction of the Company's right-of-use asset and lease liability in the amount of $343 million, which has been reflected in the unaudited Condensed Consolidated Balance Sheet as of September 30, 2021. This refinancing transaction results in a reduction of the Company’s future maturities of lease liabilities, which includes both principal and interest, by $8 million during the remainder of 2021, by $16 million each in 2022, 2023, 2024, 2025, and by $474 million beyond 2025. As of September 30, 2021, $89 million of principal remained outstanding associated with the Series 2012 bonds. The net present value of the future principal and interest payments associated with the bonds was $100 million as of September 30, 2021, and was reflected as part of the Company's operating lease right–of–use assets and lease obligations in the unaudited Condensed Consolidated Balance Sheet. Contractual Obligations and Contingent Liabilities and Commitments Based on growth opportunities and ongoing fleet modernization plans for more fuel efficient aircraft, the Company has entered into supplemental agreements with The Boeing Company ("Boeing") during 2021 to increase its 2022 firm orders of 737 MAX 7 ("-7") aircraft. Additionally, the Company accelerated options into 2022, 2023, 2024, and 2025, and added new options into 2026 and 2027. During third quarter 2021, the Company exercised eight of its 2022 options for -7 aircraft. Fleet and capacity plans will continue to evolve as the Company manages through this recovery period, and it will continue to evaluate its remaining MAX options for 2022. However, with its cost-effective order book, the Company retains significant flexibility to manage its fleet size, including opportunities to accelerate fleet modernization efforts if growth opportunities do not materialize. Additional information regarding the Company's delivery schedule is included in the following table as of September 30, 2021. The delivery schedule for the -7 is dependent on the FAA issuing required certifications and approvals to Boeing and the Company. The FAA will ultimately determine the timing of the -7 certification and entry into service, and the Company therefore offers no assurances that current estimations and timelines are correct.
|  |  | The Boeing Company |  |  |  |  |  |  |
|  |  | -7 Firm Orders | -8 Firm Orders |  |  | -7 or -8 Options |  | Additional -8s |  |  | Total |  |
2021 |  |  | — |  | 19 |  |  |  | — |  |  | 9 |  |  |  | 28 |  | (a) |
2022 |  |  | 72 |  | — |  |  |  | 42 |  |  | — |  |  |  | 114 |  | (b) |
2023 |  |  | 30 |  | — |  |  |  | 60 |  |  | — |  |  |  | 90 |  | (c) |
2024 |  |  | 30 |  | — |  |  |  | 56 |  |  | — |  |  |  | 86 |  |  |
2025 |  |  | 30 |  | — |  |  |  | 56 |  |  | — |  |  |  | 86 |  |  |
2026 |  |  | 15 |  | 15 |  |  |  | 40 |  |  | — |  |  |  | 70 |  |  |
2027 |  |  | 15 |  | 15 |  |  |  | 6 |  |  | — |  |  |  | 36 |  |  |
2028 |  |  | 15 |  | 15 |  |  |  | — |  |  | — |  |  |  | 30 |  |  |
2029 |  |  | 20 |  | 30 |  |  |  | — |  |  | — |  |  |  | 50 |  |  |
2030 |  |  | 15 |  | 45 |  |  |  | — |  |  | — |  |  |  | 60 |  |  |
2031 |  |  | — |  | 10 |  |  |  | — |  |  | — |  |  |  | 10 |  |  |
|  |  | 242 | 149 |  | (d) | 260 |  | 9 |  | (e) | 660 |  |
(a) All 28 -8s were delivered as of September 30, 2021, consisting of 19 owned and 9 leased aircraft. (b) During third quarter 2021, the Company exercised eight -7 options for delivery in 2022. (c) The Company exercised eight -7 options for delivery in 2023 on October 1, 2021. (d) The Company has flexibility to designate firm orders or options as -7s or -8s, upon written advance notification as stated in the contract. (e) These 9 additional -8 aircraft were leased from various third parties and delivered as of September 30, 2021. Based on the Company's existing agreement with Boeing as reflected in the delivery schedule above, the Company's cash capital commitments associated with its firm orders as of September 30, 2021, were as follows: $33 million for 2021, $1.7 billion in 2022, $1.2 billion in 2023, $1.1 billion in 2024, $837 million in 2025, $961 million in 2026, and $7.0 billion thereafter. Contingencies The Company is from time to time subject to various legal proceedings and claims arising in the ordinary course of business, including, but not limited to, examinations by the Internal Revenue Service ("IRS"). The Company's management does not expect that the outcome of any of its currently ongoing legal proceedings or the outcome of any adjustments presented by the IRS, individually or collectively, will have a material adverse effect on the Company's financial condition, results of operations, or cash flow.

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