XML 26 R13.htm IDEA: XBRL DOCUMENT
v3.19.3

LEASES (Notes) | 9 Months Ended
--- | ---
Sep. 30, 2019
Leases [Abstract] |
Leases of Lessee Disclosure [Text Block] | LEASES In 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)," which requires lessees to recognize assets and liabilities for certain operating leases. Under the new standard, a lessee must recognize a liability on the balance sheet representing the lease payments owed, and a lease asset representing its right to use the underlying asset for the lease term. In 2018, the FASB issued ASU 2018-11, "Targeted Improvements - Leases (Topic 842)," which amended Topic 842 to provide a transition method that would not require adjusting comparative period financial information. The Company transitioned to the new lease accounting standard effective January 1, 2019 utilizing the alternative transition method. Upon transition, the Company recorded a cumulative-effect adjustment to the opening balance of retained earnings of $3 million. The new standard eliminated build-to-suit lease accounting guidance and resulted in the derecognition of build-to-suit assets and liabilities of approximately $150 million each. The Company elected certain practical expedients under the standard, including the practical expedient allowing a policy election to exclude from recognition short-term lease assets and lease liabilities for leases with an initial term of 12 months or less. Such expense was not material for the nine months ended September 30, 2019. Additionally, the Company elected the available package of practical expedients allowing for no reassessment of lease classification for existing leases, no reassessment of expired contracts, and no reassessments of initial direct costs for existing leases. The Company has five asset classes for operating leases: aircraft, capacity purchase arrangements with aircraft (CPA aircraft), airport and terminal facilities, corporate real estate and other equipment. All capitalized lease assets have been recorded on the condensed consolidated balance sheet as of September 30, 2019 as Operating lease assets, with the corresponding liabilities recorded as Operating lease liabilities. Consistent with past accounting, operating rent expense is recognized on a straight-line basis over the term of the lease. At September 30, 2019, the Operating lease assets balance by asset class was as follows (in millions):
| Operating lease assets
Aircraft | $ | 974 |
CPA aircraft | 609 |
Airport and terminal facilities | 18 |
Corporate real estate and other | 46 |
Total Operating lease assets | $ | 1,647 |
Aircraft At September 30, 2019, the Company had operating leases for 10 Boeing 737 (B737), 62 Airbus, and eight Bombardier Q400 aircraft. Additionally, the Company operates 32 Embraer 175 (E175) aircraft through its capacity purchase arrangement with SkyWest Airlines, Inc. (SkyWest). Remaining lease terms for these aircraft extend up to 12 years, with options to extend, subject to negotiation at the end of the term. As extension is not certain, and rates are highly likely to be renegotiated, the extended term is only capitalized when it is reasonably determinable. While aircraft rent is primarily fixed, certain leases contain rental adjustments throughout the lease term which would be recognized as variable expense as incurred. Variable lease expense for aircraft was $1 million and $4 million for the three and nine months ended September 30, 2019, respectively. Capacity purchase agreements with aircraft (CPA aircraft) At September 30, 2019, Alaska had CPAs with three carriers, including the Company’s wholly-owned subsidiary, Horizon. Horizon sells 100% of its capacity under a CPA with Alaska. Alaska also has CPAs with SkyWest to fly certain routes in the Lower 48 and Canada, and with Peninsula Aviation Services, Inc., (PenAir) to fly certain routes in the state of Alaska. Under these agreements, Alaska pays the carriers an amount which is based on a determination of their cost of operating those flights and other factors intended to approximate market rates for those services. As Horizon is a wholly-owned subsidiary, intercompany leases between Alaska and Horizon have not been recognized under the standard. The agreement with PenAir does not contain a leasing arrangement, resulting in no asset or liability recognized. Remaining lease terms for CPA aircraft range from 8 years to 11 years. Financial arrangements of the CPAs include a fixed component, representing the costs to operate each aircraft and is capitalized under the new lease accounting standard. CPAs also include variable rent based on actual levels of flying, which is expensed as incurred. Variable lease expense for CPA aircraft for the three and nine months ended September 30, 2019 was not material. Airport and terminal facilities The Company leases ticket counters, gates, cargo and baggage space, ground equipment, office space and other support areas at numerous airports. For this asset class, the Company has elected to combine lease and non-lease components. The majority of airport and terminal facility leases are not capitalized because they do not meet the definition of controlled assets under the standard, or because the lease payments are entirely variable. For airports where leased assets are identified, and where the contract includes fixed lease payments, operating lease assets and lease liabilities have been recorded. The Company is also commonly responsible for maintenance, insurance and other facility-related expenses and services under these agreements. These costs are recognized as variable expense in the period incurred. Airport and terminal facilities variable lease expense was $86 million and $231 million for the three and nine months ended September 30, 2019, respectively. In 2018, the Company leased 12 airport slots at LaGuardia Airport and eight airport slots at Reagan National Airport to a third party. For these leases, the Company recorded $3 million and $9 million of lease income during the three and nine months ended September 30, 2019, respectively. Corporate real estate and other leases Leased corporate real estate is primarily for office space in hub cities, data centers, land leases, and reservation centers. For this asset class, the Company has elected to combine lease and non-lease components under the standard. Other leased assets are comprised of other ancillary contracts and items including leased flight simulators and spare engines. Variable lease expense related to corporate real estate and other leases for the nine months ended September 30, 2019 was $8 million. Components of Lease Expense The impact of leases, including variable lease cost, on earnings for the three and nine months ended September 30, 2019 was as follows (in millions):
| Classification | Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
Expense |  |  |  |
Aircraft | Aircraft rent | $ | 62 |  |  | $ | 186 |
CPA aircraft | Aircraft rent | 20 |  |  | 61 |
Airport and terminal facilities | Landing fees and other rentals | 87 |  |  | 233 |
Corporate real estate and other | Landing fees and other rentals | 5 |  |  | 14 |
Total lease expense |  | $ | 174 |  |  | $ | 494 |
Revenue |  |  |  |
Lease income | Cargo and other revenues | (3 | ) |  | (9 | )
Net lease impact |  | $ | 171 |  |  | $ | 485 |
Total rent expense for the three and nine months ended September 30, 2018 was $165 million and $455 million, respectively. Supplemental Cash Flow Information Supplemental cash flow information related to leases was as follows (in millions):
| Nine Months Ended September 30, 2019
Cash paid for capitalized operating leases | $ | 259 |
Operating lease assets obtained in exchange for lease obligations | $ | 47 |
Lease Term and Discount Rate As most leases do not provide an implicit interest rate, the Company generally utilizes the incremental borrowing rate (IBR) based on information available at the commencement date of the lease to determine the present value of lease payments. The weighted average IBR and weighted average remaining lease term (in years) for all asset classes were as follows at September 30, 2019:
| Weighted Average IBR |  | Weighted Average Remaining Lease Term
Aircraft | 4.1 | % |  | 6.7
CPA aircraft | 4.3 | % |  | 9.5
Airports and terminal facilities | 4.1 | % |  | 10.2
Corporate real estate and other | 4.3 | % |  | 36.4
Maturities of Lease Liabilities Future minimum lease payments under non-cancellable leases as of September 30, 2019 (in millions):
| Aircraft |  | CPA Aircraft |  | Airport and Terminal Facilities |  | Corporate Real Estate & Other
Remainder of 2019 | $ | 63 |  |  | $ | 20 |  |  | 1 |  |  | $ | 2 |
2020 | 234 |  |  | 79 |  |  | 3 |  |  | 7 |
2021 | 196 |  |  | 79 |  |  | 3 |  |  | 6 |
2022 | 171 |  |  | 79 |  |  | 2 |  |  | 4 |
2023 | 116 |  |  | 79 |  |  | 2 |  |  | 4 |
Thereafter | 330 |  |  | 408 |  |  | 12 |  |  | 77 |
Total lease payments | $ | 1,110 |  |  | $ | 744 |  |  | $ | 23 |  |  | $ | 100 |
Less: Imputed interest | (140 | ) |  | (135 | ) |  | (4 | ) |  | (54 | )
Total operating lease liabilities | $ | 970 |  |  | $ | 609 |  |  | $ | 19 |  |  | $ | 46 |
All future lease contracts have remaining non-cancelable lease terms ranging from 2019 to 2031.

X
- References No definition available. + Details
Name: | us-gaap_LeasesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -URI http://asc.fasb.org/topic&trid=2208923 + Details
Name: | us-gaap_LeasesOfLesseeDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration