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Leases | 12 Months Ended
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Dec. 31, 2021
Leases [Abstract] |
Leases | Leases Operating lease assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When available, we use the rate implicit in the lease to discount lease payments to present value. For leases that do not provide a readily determinable implicit rate, we estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. Leases with a term of 12 months or less are not recorded on the balance sheet. Our lease agreements do not contain any residual value guarantees. For facility leases, we account for the lease and non-lease components as a single lease component. The table below presents the lease-related assets and liabilities recorded on our consolidated balance sheets as of December 31, 2021 and 2020 (in millions):
|  |  |  | As of December 31,
|  |  |  | 2021 |  | 2020
Assets |  | Classification on Balance Sheet |  |  |  |
Operating lease assets |  | Operating lease assets |  | $ | 729 |  |  | $ | 804 |
Finance lease assets |  | Property and equipment, net |  | 3 |  |  | 131 |
Total lease assets |  |  |  | $ | 732 |  |  | $ | 935 |
Liabilities |  | Classification on Balance Sheet |  |  |  |
Current: |  |  |  |  |  |
Operating lease liabilities |  | Current operating lease liabilities |  | $ | 106 |  |  | $ | 113 |
Finance lease liabilities |  | Current maturities of long-term debt and finance lease obligations |  | 1 |  |  | 37 |
Long-term: |  |  |  |  |  |
Operating lease liabilities |  | Long-term operating lease liabilities |  | 690 |  |  | 752 |
Finance lease liabilities |  | Long-term debt and finance lease obligations |  | 2 |  |  | 26 |
Total lease liabilities |  |  |  | $ | 799 |  |  | $ | 928 |
|  |  |  | As of December 31,
|  |  |  | 2021 |  | 2020
Weighted average remaining lease term (in years) |  |  |  |
Operating leases |  | 9 |  | 9
Finance leases |  | 2 |  | 2
Weighted average discount rate |  |  |  |
Operating leases |  | 6.00 | % |  | 5.99 | %
Finance leases |  | 6.09 | % |  | 4.60 | %
Flight Equipment Leases We operated a fleet of 282 aircraft as of December 31, 2021. Of our fleet, 62 aircraft were accounted for as operating leases and none were accounted for as finance leases. These aircraft leases generally have long durations with remaining terms of 19 months to 7 years. Less than half of aircraft operating leases can be renewed at rates based on fair market value at the end of the lease term for one or two years. None of our aircraft operating leases have variable rent payments. We have purchase options for 30 of our aircraft leases for fixed amounts at specified periods within the lease terms. As a result of the unprecedented decline in demand for travel caused by the COVID-19 pandemic, we recorded impairment losses of $273 million for the year ended December 31, 2020 relating to our Embraer E190 fleet. These losses were attributed to aircraft and related spare parts including the ones under operating le ases. No impairment loss was recorded in 2021. Refer to Note 17 to our consolidated financial statements for further details. Facility Leases Our facility leases are primarily for space at the airports we serve. These leases are classified as operating leases and reflect our use of passenger terminal service facilities consisting of ticket counters, gate space, operations support area, and baggage service offices. We lease space directly or indirectly from the local airport authority on varying terms dependent on prevailing practices at each airport. The remaining terms of our airport leases vary from 1 month to 14 years. Our leases at certain airports contain provisions for periodic adjustments of rental rates based on the operating costs of the airports or the frequency of use of the facilities. Some of these leases also include renewal options and/or termination options that are factored into our determination of lease payments when appropriate. Because of the variable nature of the rates, these leases are not recorded as operating lease assets and operating lease liabilities on our consolidated balance sheets. We also have leases for our corporate offices, training center, and various hangars and airport support facilities at our focus cities. Other Ground and Property Equipment We lease certain IT assets, ground support equipment, and various other pieces of equipment. The lease terms of our ground support equipment are less than 12 months. The amount of other equipment we have is not significant. Lease Costs The table below presents certain information related to our lease costs during the years ended December 31, 2021, 2020, and 2019 (in millions):
|  | 2021 |  | 2020 |  | 2019
Operating lease cost |  | $ | 165 |  |  | $ | 160 |  |  | $ | 180 |
Short-term lease cost |  | 1 |  |  | 1 |  |  | 2 |
Finance lease cost: |  |  |  |  |  |
Amortization of assets |  | — |  |  | 6 |  |  | 9 |
Interest on lease liabilities |  | 1 |  |  | 2 |  |  | 3 |
Variable lease cost |  | 562 |  |  | 282 |  |  | 391 |
Sublease income |  | 10 |  |  | (5) |  |  | (19) |
Total net lease cost |  | $ | 739 |  |  | $ | 446 |  |  | $ | 566 |
Other Information The table below presents supplemental cash flow information related to leases during the years ended December 31, 2021, 2020, and 2019 (in millions):
|  | 2021 |  | 2020 |  | 2019
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |  |  |
Operating cash flows for operating leases |  | $ | 160 |  |  | $ | 146 |  |  | $ | 136 |
Operating cash flows for finance leases |  | 3 |  |  | 4 |  |  | 5 |
Financing cash flows for finance leases |  | 59 |  |  | 28 |  |  | 17 |
Lease Commitments The table below presents scheduled future minimum lease payments for operating and finance leases recorded on our consolidated balance sheets, as of December 31, 2021 (in millions):
|  | As of December 31, 2021
|  | Operating Leases |  | Finance Leases
2022 |  | $ | 151 |  |  | $ | 1 |
2023 |  | 152 |  |  | 2 |
2024 |  | 130 |  |  | — |
2025 |  | 91 |  |  | — |
2026 |  | 73 |  |  | — |
Thereafter |  | 443 |  |  | — |
Total minimum lease payments |  | 1,040 |  |  | 3 |
Less: amount of lease payment representing interest |  | (244) |  |  | — |
Present value of future minimum lease payment |  | 796 |  |  | 3 |
Less: current obligations under leases |  | (106) |  |  | (1) |
Long-term lease obligations |  | $ | 690 |  |  | $ | 2 |
We d id not ha ve any lease commitments that have not yet commenced as of December 31, 2021. Reaffirming our commitment to New York, in February 2022, we executed a new lease for our primarily corporate offices that will extend our stay in the present Long Island City location until 2039. The term of this lease will begin in 2023. We expect the new lease will increase our lease commitments by approximately $3 million in 2024, $6 million in 2025, $7 million in 2026, and $97 million thereafter. We have an one-time option to terminate the lease in 2034. At the end of the initial lease term, we have the option to renew the lease for either one renewal term of 10 years, or two renewal terms of five years each.
Leases | Leases Operating lease assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When available, we use the rate implicit in the lease to discount lease payments to present value. For leases that do not provide a readily determinable implicit rate, we estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. Leases with a term of 12 months or less are not recorded on the balance sheet. Our lease agreements do not contain any residual value guarantees. For facility leases, we account for the lease and non-lease components as a single lease component. The table below presents the lease-related assets and liabilities recorded on our consolidated balance sheets as of December 31, 2021 and 2020 (in millions):
|  |  |  | As of December 31,
|  |  |  | 2021 |  | 2020
Assets |  | Classification on Balance Sheet |  |  |  |
Operating lease assets |  | Operating lease assets |  | $ | 729 |  |  | $ | 804 |
Finance lease assets |  | Property and equipment, net |  | 3 |  |  | 131 |
Total lease assets |  |  |  | $ | 732 |  |  | $ | 935 |
Liabilities |  | Classification on Balance Sheet |  |  |  |
Current: |  |  |  |  |  |
Operating lease liabilities |  | Current operating lease liabilities |  | $ | 106 |  |  | $ | 113 |
Finance lease liabilities |  | Current maturities of long-term debt and finance lease obligations |  | 1 |  |  | 37 |
Long-term: |  |  |  |  |  |
Operating lease liabilities |  | Long-term operating lease liabilities |  | 690 |  |  | 752 |
Finance lease liabilities |  | Long-term debt and finance lease obligations |  | 2 |  |  | 26 |
Total lease liabilities |  |  |  | $ | 799 |  |  | $ | 928 |
|  |  |  | As of December 31,
|  |  |  | 2021 |  | 2020
Weighted average remaining lease term (in years) |  |  |  |
Operating leases |  | 9 |  | 9
Finance leases |  | 2 |  | 2
Weighted average discount rate |  |  |  |
Operating leases |  | 6.00 | % |  | 5.99 | %
Finance leases |  | 6.09 | % |  | 4.60 | %
Flight Equipment Leases We operated a fleet of 282 aircraft as of December 31, 2021. Of our fleet, 62 aircraft were accounted for as operating leases and none were accounted for as finance leases. These aircraft leases generally have long durations with remaining terms of 19 months to 7 years. Less than half of aircraft operating leases can be renewed at rates based on fair market value at the end of the lease term for one or two years. None of our aircraft operating leases have variable rent payments. We have purchase options for 30 of our aircraft leases for fixed amounts at specified periods within the lease terms. As a result of the unprecedented decline in demand for travel caused by the COVID-19 pandemic, we recorded impairment losses of $273 million for the year ended December 31, 2020 relating to our Embraer E190 fleet. These losses were attributed to aircraft and related spare parts including the ones under operating le ases. No impairment loss was recorded in 2021. Refer to Note 17 to our consolidated financial statements for further details. Facility Leases Our facility leases are primarily for space at the airports we serve. These leases are classified as operating leases and reflect our use of passenger terminal service facilities consisting of ticket counters, gate space, operations support area, and baggage service offices. We lease space directly or indirectly from the local airport authority on varying terms dependent on prevailing practices at each airport. The remaining terms of our airport leases vary from 1 month to 14 years. Our leases at certain airports contain provisions for periodic adjustments of rental rates based on the operating costs of the airports or the frequency of use of the facilities. Some of these leases also include renewal options and/or termination options that are factored into our determination of lease payments when appropriate. Because of the variable nature of the rates, these leases are not recorded as operating lease assets and operating lease liabilities on our consolidated balance sheets. We also have leases for our corporate offices, training center, and various hangars and airport support facilities at our focus cities. Other Ground and Property Equipment We lease certain IT assets, ground support equipment, and various other pieces of equipment. The lease terms of our ground support equipment are less than 12 months. The amount of other equipment we have is not significant. Lease Costs The table below presents certain information related to our lease costs during the years ended December 31, 2021, 2020, and 2019 (in millions):
|  | 2021 |  | 2020 |  | 2019
Operating lease cost |  | $ | 165 |  |  | $ | 160 |  |  | $ | 180 |
Short-term lease cost |  | 1 |  |  | 1 |  |  | 2 |
Finance lease cost: |  |  |  |  |  |
Amortization of assets |  | — |  |  | 6 |  |  | 9 |
Interest on lease liabilities |  | 1 |  |  | 2 |  |  | 3 |
Variable lease cost |  | 562 |  |  | 282 |  |  | 391 |
Sublease income |  | 10 |  |  | (5) |  |  | (19) |
Total net lease cost |  | $ | 739 |  |  | $ | 446 |  |  | $ | 566 |
Other Information The table below presents supplemental cash flow information related to leases during the years ended December 31, 2021, 2020, and 2019 (in millions):
|  | 2021 |  | 2020 |  | 2019
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |  |  |
Operating cash flows for operating leases |  | $ | 160 |  |  | $ | 146 |  |  | $ | 136 |
Operating cash flows for finance leases |  | 3 |  |  | 4 |  |  | 5 |
Financing cash flows for finance leases |  | 59 |  |  | 28 |  |  | 17 |
Lease Commitments The table below presents scheduled future minimum lease payments for operating and finance leases recorded on our consolidated balance sheets, as of December 31, 2021 (in millions):
|  | As of December 31, 2021
|  | Operating Leases |  | Finance Leases
2022 |  | $ | 151 |  |  | $ | 1 |
2023 |  | 152 |  |  | 2 |
2024 |  | 130 |  |  | — |
2025 |  | 91 |  |  | — |
2026 |  | 73 |  |  | — |
Thereafter |  | 443 |  |  | — |
Total minimum lease payments |  | 1,040 |  |  | 3 |
Less: amount of lease payment representing interest |  | (244) |  |  | — |
Present value of future minimum lease payment |  | 796 |  |  | 3 |
Less: current obligations under leases |  | (106) |  |  | (1) |
Long-term lease obligations |  | $ | 690 |  |  | $ | 2 |
We d id not ha ve any lease commitments that have not yet commenced as of December 31, 2021. Reaffirming our commitment to New York, in February 2022, we executed a new lease for our primarily corporate offices that will extend our stay in the present Long Island City location until 2039. The term of this lease will begin in 2023. We expect the new lease will increase our lease commitments by approximately $3 million in 2024, $6 million in 2025, $7 million in 2026, and $97 million thereafter. We have an one-time option to terminate the lease in 2034. At the end of the initial lease term, we have the option to renew the lease for either one renewal term of 10 years, or two renewal terms of five years each.

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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 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 + Details
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- Definition 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. + 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 + Details
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