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COMMITMENTS AND CONTINGENCIES | 3 Months Ended
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Mar. 31, 2022
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES 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 on bonds issued by the LFAMC (the "Series 2010" bonds and the "Series 2012" bonds). 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 by LFAMC 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. As of March 31, 2022, $79 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 Series 2012 bonds was $89 million as of March 31, 2022, 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, during first quarter 2022, the Company exercised 15 Boeing 737-8 ("-8") options for delivery in 2022 and 12 Boeing 737-7 ("-7") options for delivery in 2023. Fleet and capacity plans will continue to evolve as the Company manages through the COVID-19 recovery period, and it will continue to evaluate its remaining Boeing 737 MAX ("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 March 31, 2022:
|  |  | The Boeing Company |  |  |  |  |  |  |
|  |  | -7 Firm Orders |  | -8 Firm Orders |  |  | -7 or -8 Options |  |  |  |  | Total |  |
2022 |  |  | 72 |  |  | 15 |  |  |  | 27 |  |  |  |  |  | 114 |  |  |
2023 |  |  | 64 |  |  | — |  |  |  | 26 |  |  |  |  |  | 90 |  |  |
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 |  |  |
|  |  | 276 | (a) | 145 |  | (b) | 211 |  |  |  |  | 632 |  |
(a) 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 assurance that current estimations and timelines are correct. The Company entered into an agreement with Boeing in April 2022 to replace the majority of its -7 firm orders with -8 firm orders in the short-term, among other adjustments to its near-term order book. (b) The Company has flexibility to designate firm orders or options as -7s or -8s, upon written advance notification as stated in the contract. Based on the Company's existing agreement with Boeing, capital commitments associated with its firm orders as of March 31, 2022, were: $2.1 billion remaining in 2022, $1.9 billion in 2023, $1.0 billion in 2024, $839 million in 2025, $975 million in 2026, $1.0 billion in 2027, and $6.0 billion thereafter. In addition, subsequent to March 31, 2022, and through May 2, 2022, due to the current status of the -7 certification, the Company converted 40 2022 -7 firm orders into 2022 -8 orders, moved one 2022 -7 firm order into 2023, and accelerated one 2023 -8 option into 2022. In April 2022, the Company also exercised 16 -8 options for delivery in 2022, exercised 2 -7 options for delivery in 2023, accelerated and exercised 10 2023 -8 options into 2022, and shifted 10 2022 MAX firm orders into 2023. Combined, the Company's aircraft order book activity subsequent to March 31, 2022, has resulted in additional capital commitments associated with firm orders of $689 million and $188 million in 2022 and 2023, respectively. 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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