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Commitment and Contingencies | 9 Months Ended
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Sep. 30, 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). 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. As of September 30, 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 $88 million as of September 30, 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 During third quarter 2022, the Company entered into a supplemental agreement with The Boeing Company ("Boeing") to replace the majority of its 2023 Boeing 737 MAX 7 ("-7") firm orders with Boeing 737 MAX 8 ("-8") firm orders, among other adjustments to its near-term contractual order book. The Company also exercised five -8 options for delivery in 2022 and four -7 options for delivery in 2023. While the Company remains contractually scheduled to receive 114 MAX deliveries this year, the Company continues to expect a portion of its deliveries to shift out of 2022 due to Boeing's supply chain challenges and the current status of the -7 certification, which has not yet been achieved but is expected in 2022 or 2023. Based on recent discussions with Boeing regarding the pace of expected deliveries for the remainder of this year, the Company continues to estimate it will receive a total of 66 -8 aircraft deliveries in 2022, including 31 -8 deliveries in fourth quarter 2022, and no -7 deliveries in 2022. The Company retains significant flexibility to manage its fleet size, including opportunities to accelerate fleet modernization efforts if growth opportunities do not materialize. Given the current supply chain and aircraft delivery delays, the Company will continue working with Boeing to solidify future delivery dates. Additional information regarding the Company's contractual order book is included in the following table as of September 30, 2022:
|  |  | The Boeing Company |  |  |  |  |  |  |
|  |  | -7 Firm Orders |  | -8 Firm Orders |  |  | -7 or -8 Options |  |  |  |  | Total |  |
2022 |  |  | 14 |  |  | 100 |  |  |  | — |  |  |  |  |  | 114 |  | (c) |
2023 |  |  | 42 |  |  | 48 |  |  |  | — |  |  |  |  |  | 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 |  |  |
|  |  | 196 | (a) | 278 |  | (b) | 158 |  |  |  |  | 632 |  |
(a) The delivery timing 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. (b) The Company has flexibility to designate firm orders or options as -7s or -8s, upon written advance notification as stated in the contract. (c) Includes 35 -8 deliveries received through September 30, 2022, and 31 expected -8 deliveries in fourth quarter 2022, for a total of 66 -8 deliveries in 2022. While the Company is contractually scheduled to receive 114 MAX deliveries, including options, this year, a portion of its deliveries are expected to shift out of 2022 due to Boeing's supply chain challenges and the current status of the -7 certification. Furthermore, given the current ongoing status of the -7 certification and pace of expected deliveries for the remainder of this year, it is the Company's assumption that it will receive no -7 aircraft deliveries in 2022, and has the ability to convert -7s to -8s as noted in footnote (b). Based on the Company's existing agreement with Boeing, capital commitments associated with its firm orders as of September 30, 2022, were: $1.9 billion remaining in 2022, $2.3 billion in 2023, $932 million in 2024, $853 million in 2025, $999 million in 2026, $1.1 billion in 2027, and $6.4 billion thereafter. Contingencies The Company is from time to time subject to various legal proceedings and claims arising in the ordinary course of business and records a liability for such claims when it is probable that a loss will be incurred and the amount is reasonably estimable. In recent years, the airline industry has experienced an increase in litigation asserting the application of state and local employment laws, particularly in California. On June 30, 2022, the U.S. Supreme Court denied review of the Ninth Circuit’s ruling in Bernstein v. Virgin America, Inc., which held that federal law did not preempt the California state meal-and-rest-break regulations for flight attendants at issue. The Company is a defendant in multiple proceedings asserting wage and hour claims with respect to certain employees who work in, or are based in, California. The Bernstein decision may adversely affect the Company’s defenses in some or all of those proceedings and may give rise to additional litigation in these or other areas previously believed to be preempted by federal law. The Company is currently not able to estimate a range of possible loss.

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