Leases

6 Months Ended

Nov. 30, 2019

(8) Leases

The following table is a summary of the components of net lease cost for the periods ended November 30 (in millions):

	Three Months Ended		Six Months Ended
	2019		2019
Operating lease cost⁽¹⁾	$	676	$	1,350
Finance lease cost:
Amortization of right-of-use assets		3		6
Interest on lease liabilities		1		2
Total finance lease cost		4		8
Short-term lease cost		46		81
Variable lease cost⁽¹⁾		282		549
Net lease cost	$	1,008	$	1,988

⁽¹⁾ Expenses are primarily accounted for in the “Rentals and landing fees” line item. Additional amounts related to embedded leases are accounted for in the “Purchased transportation,” “Fuel” and “Other” line items in the unaudited condensed consolidated statements of income.

Supplemental cash flow information related to leases for the six months ended November 30 is as follows (in millions):

	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	1,247
Operating cash flows paid for interest portion of finance leases		2
Financing cash flows paid for principal portion of finance leases		64
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,049
Right-of-use assets obtained in exchange for new finance lease liabilities	$	93

Supplemental balance sheet information related to leases as of November 30 is as follows (in millions, except lease term and discount rate):

	2019
Operating leases:
Operating lease right-of-use assets, net	$	14,097

Current portion of operating lease liabilities		1,928
Operating lease liabilities		12,432
Total operating lease liabilities	$	14,360

Finance leases:
Net property and equipment	$	99

Current portion of long-term debt		16
Long-term debt, less current portion		92
Total finance lease liabilities	$	108

Weighted-average remaining lease term
Operating leases		10.0
Finance leases		11.6

Weighted-average discount rate
Operating leases		3.24	%
Finance leases		3.99	%

A summary of future minimum lease payments under noncancelable operating and finance leases with an initial or remaining term in excess of one year at November 30, 2019 is as follows (in millions):

	Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases
2020 (remainder)	$	236		$	1,013		$	1,249		$	13		$	1,262
2021		253			2,102			2,355			14			2,369
2022		234			1,871			2,105			14			2,119
2023		198			1,668			1,866			13			1,879
2024		102			1,457			1,559			11			1,570
Thereafter		314			7,527			7,841			78			7,919
Total lease payments		1,337			15,638			16,975			143			17,118
Less imputed interest		(107	)		(2,508	)		(2,615	)		(35	)		(2,650	)
Present value of lease liability	$	1,230		$	13,130		$	14,360		$	108		$	14,468

While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations.

As of November 30, 2019, FedEx has entered into additional leases which have not yet commenced and are therefore not part of the right-of-use asset and liability. These leases are generally for build-to-suit facilities and have undiscounted future payments of approximately $1.6 billion, and will commence when FedEx gains beneficial access to the leased asset. Commencement dates are expected to be from fiscal 2020 to fiscal 2022.

As previously disclosed in our Annual Report and under the previous lease accounting standard, future minimum lease payments under noncancelable operating leases with an initial or remaining term in excess of one year at May 31, 2019 would have been as follows (in millions):

	Operating Leases
	Aircraft and Related Equipment		Facilities and Other		Total Operating Leases
2020	$	288	$	2,209	$	2,497
2021		230		2,033		2,263
2022		212		1,816		2,028
2023		154		1,625		1,779
2024		58		1,428		1,486
Thereafter		85		7,977		8,062
Total	$	1,027	$	17,088	$	18,115