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LEASES

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

LEASES

LEASES

The Company enters into leases for aircraft, property, and other types of equipment in the normal course of business. The accounting for these leases follows the requirements of ASC 842, Leases.

As of December 31, 2021, the Company held aircraft leases with remaining terms ranging from one month to 12 years. The aircraft leases generally can be renewed for three months to three years at rates based on the fair market value at the end of the lease term. Residual value guarantees included in the Company's lease agreements are not material.

On July 9, 2012, the Company signed an agreement with Delta Air Lines, Inc. and Boeing Capital Corp. to lease or sublease 88 AirTran Airways, Inc. Boeing 717-200 aircraft ("B717s") to Delta at agreed-upon lease rates. The Company's future sublease income associated with the 14 remaining B717s on operating lease as of December 31, 2021, was as follows: $17 million in 2022, $7 million in 2023, and $1 million in 2024. There are no contingent payments and no significant residual value conditions associated with the transaction.

In second quarter 2020, the Company entered into transactions with third parties, involving ten of the Company’s Boeing 737-800 aircraft and ten of the Company's Boeing 737 MAX 8 aircraft that qualified as sale-leaseback arrangements under applicable accounting guidance. The Company sold the ten 737-800 aircraft to a third party for $405 million, then immediately leased the aircraft back for approximately ten years. The Company sold the ten 737 MAX 8 aircraft to a third party for $410 million, then immediately leased the aircraft back for approximately 13 years. As such, the aircraft were de-recognized from Property and equipment at their remaining net book values. All of the leases from the sale-leasebacks are accounted for as operating leases, and thus are now reflected as part of the Company’s Operating lease right-of-use assets and operating lease liabilities in the accompanying Consolidated Balance Sheet. For 2020, the 737-800 and 737 MAX 8 sale-leaseback transactions resulted in a recognized gain of $153 million and $69 million, respectively, reflected within Other operating expenses, net in the accompanying Consolidated Statement of Income (Loss).

At each airport where the Company conducts flight operations, the Company has lease agreements, generally with a governmental unit or authority, for the use of airport terminals, airfields, office space, cargo warehouses, gates, and/or maintenance facilities. These leases are classified as operating lease agreements and have lease terms remaining ranging from one month to 39 years. Certain leases can be renewed from 1 year to ten years. The majority of the airport terminal leases contain certain provisions for periodic adjustments to rates that depend upon airport operating costs or use of the facilities, and are reset at least annually. Due to the nature and variability of the rates, the majority of these leases are not recorded on the Consolidated Balance Sheet.

The Company also leases certain technology assets, fuel storage tanks, and various other equipment that qualify as leases under the applicable accounting guidance. The remaining lease terms range from three months to five years. Certain leases can be renewed from six months to three years.

Lease-related assets and liabilities recorded on the Consolidated Balance Sheet were as follows:

(in millions)			Balance Sheet location			December 31, 2021						December 31, 2020
Assets
Operating			Operating lease right-of-use assets (net)			$	1,590					$	1,892
Finance			Property and equipment (net of allowance for depreciation and amortization of $679 million and $567 million)			556						667
Total lease assets						$	2,146					$	2,559
Liabilities
Current
Operating			Current operating lease liabilities			$	239					$	306
Finance			Current maturities of long-term debt			82						83
Noncurrent
Operating			Noncurrent operating lease liabilities			1,315						1,562
Finance			Long-term debt less current maturities			377						459
Total lease liabilities						$	2,013					$	2,410

The components of lease costs, included in the Consolidated Statement of Income (Loss), were as follows:

(in millions)			Statement of Comprehensive Income (Loss) location			Year ended December 31, 2021						Year ended December 31, 2020						Year ended December 31, 2019
Operating lease cost - aircraft (a)			Other operating expenses			$	204					$	216					$	182
Operating lease cost - other			Landing fees and airport rentals, and Other operating expenses			81						89						89
Short-term lease cost			Other operating expenses			1						1						4
Variable lease cost			Landing fees and airport rentals, and Other operating expenses			1,406						1,260						1,377
Finance lease cost:
Amortization of lease liabilities			Depreciation and amortization			112						113						116
Interest on lease liabilities			Interest expense			19						22						26
Total net finance lease cost						$	131					$	135					$	142

(a) Net of sublease income of $41 million, $78 million, and $97 million for the years ended December 31, 2021, 2020, and 2019.

Supplemental cash flow information related to leases, included in the Consolidated Statement of Cash Flows, was as follows:

(in millions)			Year ended December 31, 2021						Year ended December 31, 2020						Year ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases			$	346					$	398					$	379
Operating cash flows for finance leases			19						22						26
Financing cash flows for finance leases			83						85						85
Right-of-use assets obtained in exchange for lease obligations:
Operating leases			327						915						230
Finance leases			—						—						1

As of December 31, 2021, maturities of lease liabilities were as follows:

(in millions)			Operating leases						Finance leases
2022			$	285					$	98
2023			249						94
2024			221						90
2025			184						74
2026			176						54
Thereafter			680						102
Total lease payments			$	1,795					$	512
Less imputed interest			(241)						(53)
Total lease obligations			1,554						459
Less current obligations			(239)						(82)
Long-term lease obligations			$	1,315					$	377

The table below presents additional information related to the Company's leases:

Weighted average remaining lease term			December 31, 2021						December 31, 2020
Operating leases			8 years						10 years
Finance leases			6 years						7 years
Weighted average discount rate
Operating leases (a)			3.5		%				3.8		%
Finance leases			3.8		%				3.8		%

(a) Upon adoption of ASU No. 2016-02, Leases, codified in ASC 842, the incremental borrowing rate used for existing leases was established as of January 1, 2019.

LEASES

LEASES

The Company enters into leases for aircraft, property, and other types of equipment in the normal course of business. The accounting for these leases follows the requirements of ASC 842, Leases.

As of December 31, 2021, the Company held aircraft leases with remaining terms ranging from one month to 12 years. The aircraft leases generally can be renewed for three months to three years at rates based on the fair market value at the end of the lease term. Residual value guarantees included in the Company's lease agreements are not material.

On July 9, 2012, the Company signed an agreement with Delta Air Lines, Inc. and Boeing Capital Corp. to lease or sublease 88 AirTran Airways, Inc. Boeing 717-200 aircraft ("B717s") to Delta at agreed-upon lease rates. The Company's future sublease income associated with the 14 remaining B717s on operating lease as of December 31, 2021, was as follows: $17 million in 2022, $7 million in 2023, and $1 million in 2024. There are no contingent payments and no significant residual value conditions associated with the transaction.

In second quarter 2020, the Company entered into transactions with third parties, involving ten of the Company’s Boeing 737-800 aircraft and ten of the Company's Boeing 737 MAX 8 aircraft that qualified as sale-leaseback arrangements under applicable accounting guidance. The Company sold the ten 737-800 aircraft to a third party for $405 million, then immediately leased the aircraft back for approximately ten years. The Company sold the ten 737 MAX 8 aircraft to a third party for $410 million, then immediately leased the aircraft back for approximately 13 years. As such, the aircraft were de-recognized from Property and equipment at their remaining net book values. All of the leases from the sale-leasebacks are accounted for as operating leases, and thus are now reflected as part of the Company’s Operating lease right-of-use assets and operating lease liabilities in the accompanying Consolidated Balance Sheet. For 2020, the 737-800 and 737 MAX 8 sale-leaseback transactions resulted in a recognized gain of $153 million and $69 million, respectively, reflected within Other operating expenses, net in the accompanying Consolidated Statement of Income (Loss).

At each airport where the Company conducts flight operations, the Company has lease agreements, generally with a governmental unit or authority, for the use of airport terminals, airfields, office space, cargo warehouses, gates, and/or maintenance facilities. These leases are classified as operating lease agreements and have lease terms remaining ranging from one month to 39 years. Certain leases can be renewed from 1 year to ten years. The majority of the airport terminal leases contain certain provisions for periodic adjustments to rates that depend upon airport operating costs or use of the facilities, and are reset at least annually. Due to the nature and variability of the rates, the majority of these leases are not recorded on the Consolidated Balance Sheet.

The Company also leases certain technology assets, fuel storage tanks, and various other equipment that qualify as leases under the applicable accounting guidance. The remaining lease terms range from three months to five years. Certain leases can be renewed from six months to three years.

Lease-related assets and liabilities recorded on the Consolidated Balance Sheet were as follows:

(in millions)			Balance Sheet location			December 31, 2021						December 31, 2020
Assets
Operating			Operating lease right-of-use assets (net)			$	1,590					$	1,892
Finance			Property and equipment (net of allowance for depreciation and amortization of $679 million and $567 million)			556						667
Total lease assets						$	2,146					$	2,559
Liabilities
Current
Operating			Current operating lease liabilities			$	239					$	306
Finance			Current maturities of long-term debt			82						83
Noncurrent
Operating			Noncurrent operating lease liabilities			1,315						1,562
Finance			Long-term debt less current maturities			377						459
Total lease liabilities						$	2,013					$	2,410

The components of lease costs, included in the Consolidated Statement of Income (Loss), were as follows:

(in millions)			Statement of Comprehensive Income (Loss) location			Year ended December 31, 2021						Year ended December 31, 2020						Year ended December 31, 2019
Operating lease cost - aircraft (a)			Other operating expenses			$	204					$	216					$	182
Operating lease cost - other			Landing fees and airport rentals, and Other operating expenses			81						89						89
Short-term lease cost			Other operating expenses			1						1						4
Variable lease cost			Landing fees and airport rentals, and Other operating expenses			1,406						1,260						1,377
Finance lease cost:
Amortization of lease liabilities			Depreciation and amortization			112						113						116
Interest on lease liabilities			Interest expense			19						22						26
Total net finance lease cost						$	131					$	135					$	142

(a) Net of sublease income of $41 million, $78 million, and $97 million for the years ended December 31, 2021, 2020, and 2019.

Supplemental cash flow information related to leases, included in the Consolidated Statement of Cash Flows, was as follows:

(in millions)			Year ended December 31, 2021						Year ended December 31, 2020						Year ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases			$	346					$	398					$	379
Operating cash flows for finance leases			19						22						26
Financing cash flows for finance leases			83						85						85
Right-of-use assets obtained in exchange for lease obligations:
Operating leases			327						915						230
Finance leases			—						—						1

As of December 31, 2021, maturities of lease liabilities were as follows:

(in millions)			Operating leases						Finance leases
2022			$	285					$	98
2023			249						94
2024			221						90
2025			184						74
2026			176						54
Thereafter			680						102
Total lease payments			$	1,795					$	512
Less imputed interest			(241)						(53)
Total lease obligations			1,554						459
Less current obligations			(239)						(82)
Long-term lease obligations			$	1,315					$	377

The table below presents additional information related to the Company's leases:

Weighted average remaining lease term			December 31, 2021						December 31, 2020
Operating leases			8 years						10 years
Finance leases			6 years						7 years
Weighted average discount rate
Operating leases (a)			3.5		%				3.8		%
Finance leases			3.8		%				3.8		%

(a) Upon adoption of ASU No. 2016-02, Leases, codified in ASC 842, the incremental borrowing rate used for existing leases was established as of January 1, 2019.

LEASES

LEASES

The Company enters into leases for aircraft, property, and other types of equipment in the normal course of business. The accounting for these leases follows the requirements of ASC 842, Leases.

As of December 31, 2021, the Company held aircraft leases with remaining terms ranging from one month to 12 years. The aircraft leases generally can be renewed for three months to three years at rates based on the fair market value at the end of the lease term. Residual value guarantees included in the Company's lease agreements are not material.

On July 9, 2012, the Company signed an agreement with Delta Air Lines, Inc. and Boeing Capital Corp. to lease or sublease 88 AirTran Airways, Inc. Boeing 717-200 aircraft ("B717s") to Delta at agreed-upon lease rates. The Company's future sublease income associated with the 14 remaining B717s on operating lease as of December 31, 2021, was as follows: $17 million in 2022, $7 million in 2023, and $1 million in 2024. There are no contingent payments and no significant residual value conditions associated with the transaction.

In second quarter 2020, the Company entered into transactions with third parties, involving ten of the Company’s Boeing 737-800 aircraft and ten of the Company's Boeing 737 MAX 8 aircraft that qualified as sale-leaseback arrangements under applicable accounting guidance. The Company sold the ten 737-800 aircraft to a third party for $405 million, then immediately leased the aircraft back for approximately ten years. The Company sold the ten 737 MAX 8 aircraft to a third party for $410 million, then immediately leased the aircraft back for approximately 13 years. As such, the aircraft were de-recognized from Property and equipment at their remaining net book values. All of the leases from the sale-leasebacks are accounted for as operating leases, and thus are now reflected as part of the Company’s Operating lease right-of-use assets and operating lease liabilities in the accompanying Consolidated Balance Sheet. For 2020, the 737-800 and 737 MAX 8 sale-leaseback transactions resulted in a recognized gain of $153 million and $69 million, respectively, reflected within Other operating expenses, net in the accompanying Consolidated Statement of Income (Loss).

At each airport where the Company conducts flight operations, the Company has lease agreements, generally with a governmental unit or authority, for the use of airport terminals, airfields, office space, cargo warehouses, gates, and/or maintenance facilities. These leases are classified as operating lease agreements and have lease terms remaining ranging from one month to 39 years. Certain leases can be renewed from 1 year to ten years. The majority of the airport terminal leases contain certain provisions for periodic adjustments to rates that depend upon airport operating costs or use of the facilities, and are reset at least annually. Due to the nature and variability of the rates, the majority of these leases are not recorded on the Consolidated Balance Sheet.

The Company also leases certain technology assets, fuel storage tanks, and various other equipment that qualify as leases under the applicable accounting guidance. The remaining lease terms range from three months to five years. Certain leases can be renewed from six months to three years.

Lease-related assets and liabilities recorded on the Consolidated Balance Sheet were as follows:

(in millions)			Balance Sheet location			December 31, 2021						December 31, 2020
Assets
Operating			Operating lease right-of-use assets (net)			$	1,590					$	1,892
Finance			Property and equipment (net of allowance for depreciation and amortization of $679 million and $567 million)			556						667
Total lease assets						$	2,146					$	2,559
Liabilities
Current
Operating			Current operating lease liabilities			$	239					$	306
Finance			Current maturities of long-term debt			82						83
Noncurrent
Operating			Noncurrent operating lease liabilities			1,315						1,562
Finance			Long-term debt less current maturities			377						459
Total lease liabilities						$	2,013					$	2,410

The components of lease costs, included in the Consolidated Statement of Income (Loss), were as follows:

(in millions)			Statement of Comprehensive Income (Loss) location			Year ended December 31, 2021						Year ended December 31, 2020						Year ended December 31, 2019
Operating lease cost - aircraft (a)			Other operating expenses			$	204					$	216					$	182
Operating lease cost - other			Landing fees and airport rentals, and Other operating expenses			81						89						89
Short-term lease cost			Other operating expenses			1						1						4
Variable lease cost			Landing fees and airport rentals, and Other operating expenses			1,406						1,260						1,377
Finance lease cost:
Amortization of lease liabilities			Depreciation and amortization			112						113						116
Interest on lease liabilities			Interest expense			19						22						26
Total net finance lease cost						$	131					$	135					$	142

(a) Net of sublease income of $41 million, $78 million, and $97 million for the years ended December 31, 2021, 2020, and 2019.

Supplemental cash flow information related to leases, included in the Consolidated Statement of Cash Flows, was as follows:

(in millions)			Year ended December 31, 2021						Year ended December 31, 2020						Year ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases			$	346					$	398					$	379
Operating cash flows for finance leases			19						22						26
Financing cash flows for finance leases			83						85						85
Right-of-use assets obtained in exchange for lease obligations:
Operating leases			327						915						230
Finance leases			—						—						1

As of December 31, 2021, maturities of lease liabilities were as follows:

(in millions)			Operating leases						Finance leases
2022			$	285					$	98
2023			249						94
2024			221						90
2025			184						74
2026			176						54
Thereafter			680						102
Total lease payments			$	1,795					$	512
Less imputed interest			(241)						(53)
Total lease obligations			1,554						459
Less current obligations			(239)						(82)
Long-term lease obligations			$	1,315					$	377

The table below presents additional information related to the Company's leases:

Weighted average remaining lease term			December 31, 2021						December 31, 2020
Operating leases			8 years						10 years
Finance leases			6 years						7 years
Weighted average discount rate
Operating leases (a)			3.5		%				3.8		%
Finance leases			3.8		%				3.8		%

(a) Upon adoption of ASU No. 2016-02, Leases, codified in ASC 842, the incremental borrowing rate used for existing leases was established as of January 1, 2019.

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- Definition

The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

+ References

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI http://asc.fasb.org/subtopic&trid=77888251

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The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

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Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI http://asc.fasb.org/subtopic&trid=77888251

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 30
-URI http://asc.fasb.org/subtopic&trid=77888252

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