Disclosure Subsequent to the Adoption of the New Lease Accounting Standard (ASU 2016-02)

The following table is a summary of the components of net lease cost for the period ended May 31, 2020 (in millions):

	2020
Operating lease cost⁽¹⁾	$	2,668
Finance lease cost:
Amortization of right-of-use assets		18
Interest on lease liabilities		12
Total finance lease cost		30
Short-term lease cost		197
Variable lease cost⁽¹⁾		1,160
Net lease cost	$	4,055

⁽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 accompanying consolidated statements of income.

Supplemental cash flow information related to leases for the period ended May 31 is as follows (in millions):

Supplemental balance sheet information related to leases as of May 31 is as follows (dollars in millions):

	2020
Operating leases:
Operating lease right-of-use assets, net	$	13,917

Current portion of operating lease liabilities		1,923
Operating lease liabilities		12,195
Total operating lease liabilities	$	14,118

Finance leases:
Net property and equipment	$	480

Current portion of long-term debt		51
Long-term debt, less current portion		434
Total finance lease liabilities	$	485

Weighted-average remaining lease term
Operating leases		9.9
Finance leases		32.0

Weighted-average discount rate
Operating leases		3.19	%
Finance leases		3.58	%

We utilize certain aircraft, land, facilities, retail locations and equipment under finance and operating leases that expire at various dates through 2060. We leased 5% of our total aircraft fleet under operating leases as of May 31, 2020 and 6% as of May 31, 2019. A portion of our supplemental aircraft are leased by us under agreements that provide for cancellation upon 30 days’ notice. Our leased facilities include national, regional and metropolitan sorting facilities, retail facilities and administrative buildings.

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 May 31, 2020 is as follows (in millions):

	Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases
2021	$	250		$	2,099		$	2,349		$	67		$	2,416
2022		233			2,007			2,240			26			2,266
2023		198			1,789			1,987			25			2,012
2024		102			1,563			1,665			24			1,689
2025		69			1,365			1,434			81			1,515
Thereafter		245			6,661			6,906			646			7,552
Total lease payments		1,097			15,484			16,581			869			17,450
Less imputed interest		(92	)		(2,371	)		(2,463	)		(384	)		(2,847	)
Present value of lease liability	$	1,005		$	13,113		$	14,118		$	485		$	14,603

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 May 31, 2020, 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 2021 to fiscal 2022.

FedEx Express makes payments under certain leveraged operating leases that are sufficient to pay principal and interest on certain pass-through certificates. The pass-through certificates are not direct obligations of, or guaranteed by, FedEx or FedEx Express.

We are the lessee under certain operating leases covering a portion of our leased aircraft in which the lessors are trusts established specifically to purchase, finance and lease these aircraft to us. These leasing entities are variable interest entities. We are not the primary beneficiary of the leasing entities, as the lease terms are at market at the inception of the lease and do not include a residual value guarantee, fixed-price purchase option or similar feature that obligates us to absorb decreases in value or entitles us to participate in increases in the value of the aircraft. Therefore, we are not required to consolidate any of these entities as the primary beneficiary. Our maximum exposure under these leases is included in the summary of future minimum lease payments.

Comparative Disclosures Prior to the Adoption of the New Lease Accounting Standard (ASU 2016-02)

The following table is a summary of the Company’s net rental expense for operating leases for the years ended May 31, 2019 and 2018 (in millions):

Future minimum lease payments under noncancelable operating leases with an initial or remaining term in excess of one year at May 31, 2019 were as follows (in millions):

	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