Long-term Debt, Short-term Borrowings and Finance Lease Obligations (Notes)

3 Months Ended

Mar. 31, 2020

Long-term Debt, Short-term Borrowings, and Capital Lease Obligations

Long-term Debt, Short-term Borrowings and Finance Lease Obligations

During the three months ended March 31, 2020, we made scheduled principal payments of $102 million on our outstanding long-term debt and finance lease obligations.

We had pledged aircraft, engines, other equipment, and facilities with a net book value of $5.6 billion at March 31, 2020 as security under various financing arrangements.

At March 31, 2020, scheduled maturities of our short-term borrowings, long-term debt, and finance lease obligations were $235 million for the remainder of 2020, $1.3 billion in 2021, $319 million in 2022, $298 million in 2023, $169 million in 2024, and $867 million thereafter.

The carrying amounts and estimated fair values of our long-term debt, net of debt acquisition costs, at March 31, 2020 and December 31, 2019 were as follows (in millions):



	March 31, 2020				December 31, 2019
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Public Debt
Fixed rate special facility bonds, due through 2036	$	42	$	39	$	42	$	46
Fixed rate enhanced equipment notes:
Series AA, due through 2032	581		409		581		586
Series A, due through 2028	181		144		181		186
Non-Public Debt
Fixed rate enhanced equipment notes, due through 2023	125		124		133		141
Floating rate equipment notes, due through 2028	187		169		201		207
Fixed rate equipment notes, due through 2028	1,035		1,001		1,107		1,201
Total⁽¹⁾	$	2,151	$	1,886	$	2,245	$	2,367

(1) Total excludes finance lease obligations of $83 million and $89 million at March 31, 2020 and December 31, 2019, respectively.

The estimated fair values of our publicly held long-term debt are classified as Level 2 in the fair value hierarchy. The fair values of our enhanced equipment notes and our special facility bonds were based on quoted market prices in markets with low trading volumes. The fair value of our non-public debt was estimated using a discounted cash flow analysis based on our borrowing rates for instruments with similar terms and therefore classified as Level 3 in the fair value hierarchy. The fair values of our other financial instruments approximate their carrying values. Refer to Note 9 to our condensed consolidated financial statements for an explanation of the fair value hierarchy structure.

We have financed certain aircraft with Enhanced Equipment Trust Certificates, or EETCs. One of the benefits of this structure is being able to finance several aircraft at one time, rather than individually. The structure of EETC financing is that we create pass-through trusts in order to issue pass-through certificates. The proceeds from the issuance of these certificates are then used to purchase equipment notes, which are issued by us and are secured by our aircraft. These trusts meet the definition of a variable interest entity, or VIE, as defined in the Consolidations topic of the Codification, and must be considered for consolidation in our financial statements. Our assessment of our EETCs considers both quantitative and qualitative factors including the purpose for which these trusts were established and the nature of the risks in each. The main purpose of the trust structure is to enhance the credit worthiness of our debt obligation through certain bankruptcy protection provisions and liquidity facilities, and also to lower our total borrowing cost. We concluded that we are not the primary beneficiary in these trusts because our involvement in them is limited to principal and interest payments on the related notes, the trusts were not set up to pass along variability created by credit risk to us, and the likelihood of our defaulting on the notes. Therefore, we have not consolidated these trusts in our financial statements.

Short-term Borrowings

Citibank Line of Credit

In August 2019, we amended our revolving Credit and Guaranty Agreement with Citibank N.A. as the administrative agent. The amendment increased our borrowing capacity by $125 million to $550 million and extended the term of the facility through August 2023. Borrowings under the Credit and Guaranty Agreement bear interest at a variable rate equal to LIBOR, plus a margin. The Credit and Guaranty Agreement is secured by Slots at John F. Kennedy International Airport, LaGuardia Airport, and Reagan National Airport, as well as certain other assets. Slots are rights to take-off or land at a specific airport during a specific time period during the day and a means by which airport capacity and congestion can be managed. The Credit and Guaranty Agreement includes covenants that require us to maintain certain minimum balances in unrestricted cash, cash equivalents, and unused commitments available under revolving credit facilities. In addition, the covenants restrict our ability to, among other things, dispose of certain collateral, or merge, consolidate, or sell assets. As of and for the three months ended March 31, 2020 and December 31, 2019, we did not have a balance outstanding or any borrowings under this revolving credit facility.

On April 22, 2020, we borrowed $550 million under this revolving credit facility. Following this borrowing, we have no additional borrowing capacity available under this revolving credit facility.

Morgan Stanley Line of Credit

We have a revolving line of credit with Morgan Stanley for up to approximately $200 million. This line of credit is secured by a portion of our investment securities held by Morgan Stanley and the amount available to us under this line of credit may vary accordingly. This line of credit bears interest at a floating rate based upon LIBOR, plus a margin. As of and for the three months ended March 31, 2020 and December 31, 2019, we did not have a balance outstanding or any borrowings under this line of credit.

Morgan Stanley Delayed Draw Term Loan Agreement

In March 2020, we entered into a Delayed Draw Term Loan Credit Agreement with Morgan Stanley Senior Funding Inc., as the administrative agent. The credit agreement provides for a term loan facility of up to $1 billion. Borrowings under the credit agreement bear interest at a variable rate equal to LIBOR (but not less than 1% per annum), plus a margin of 1.75% per annum, or at our election, another rate based on certain market interest rates.

Our obligations under the credit agreement are secured by liens on certain aircraft and spare engines. The credit agreement includes provisions that require us to maintain unrestricted cash and cash equivalents and unused commitments available under all revolving credit facilities (including the term loan facility) aggregating not less than $550 million.

We borrowed the full amount of the term loan facility in March 2020. Amortization payments equal to 0.25% of the outstanding principal of the term loan will be due on the last day of each quarter during the term. The remaining outstanding principal amount of the term loan must be repaid in a single installment on the maturity date on March 15, 2021. We may prepay all or a portion of the term loan from time to time, at par plus accrued and unpaid interest. As of March 31, 2020, we had a balance of $1 billion outstanding under this term loan facility.