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JFK Redevelopment (Notes)
12 Months Ended
Dec. 31, 2012
JFK Redevelopment [Abstract]  
JFKRedevelopment [Text Block]
JFK REDEVELOPMENT

During 2010, we began a redevelopment project at John F. Kennedy International Airport (“JFK”). At JFK, we currently operate domestic flights primarily at Terminal 2 and international flights at Terminal 3 under leases with the Port Authority of New York and New Jersey (“Port Authority”), which operates JFK. We also conduct flights from Terminal 4, which is operated by JFK International Air Terminal LLC (“IAT”), a private party, under its lease with the Port Authority.

We estimate the redevelopment project, which will be completed in stages concluding in 2015, will cost approximately $1.2 billion. The project currently includes the (1) enhancement and expansion of Terminal 4, including the construction of nine new international gates; (2) demolition of Terminal 3, which was constructed in 1960; and (3) development of the Terminal 3 site for aircraft parking positions. Construction at Terminal 4 is expected to be complete in May 2013, at which time we will relocate our operations from Terminal 3 to Terminal 4 and expect that passengers will benefit from an enhanced customer experience and improved operational performance, including reduced taxi times and better on-time performance. Subsequent to our relocation, we will proceed with the demolition of Terminal 3 and thereafter conduct coordinated flight operations from Terminals 2 and 4.

In December 2010, the Port Authority issued approximately $800 million principal amount of special project bonds to fund the substantial majority of the project. Also in December 2010, we entered into a 33 year agreement with IAT (“Sublease”) to sublease space in Terminal 4. IAT is unconditionally obligated under its lease with the Port Authority to pay rentals from the revenues it receives from its operation and management of Terminal 4, including among others our rental payments under the Sublease, in an amount sufficient to pay principal and interest on the bonds. We do not guarantee payment of the bonds. The balance of the project costs will be provided by Port Authority passenger facility charges, Transportation Security Administration funding and our contributions. Our future rental payments will vary based on our share of total passenger and baggage counts at Terminal 4, the number of gates we occupy in Terminal 4, IAT's actual expenses of operating Terminal 4 and other factors.

We are responsible for the management and construction of the project and bear construction risk, including cost overruns. We record an asset for project costs as construction takes place regardless of funding source. These costs include design fees, labor and construction permits, as well as physical construction costs such as paving, systems, utilities and other costs generally associated with construction projects. The project will also include capitalized interest based on amounts we spend calculated based on our weighted average incremental borrowing rate. The related construction obligation is recorded as a non-current liability and is equal to project costs funded by parties other than us. Future rental payments will reduce the construction obligation and result in the recording of interest expense, calculated using the effective interest method. During the construction period, we are also incurring costs for construction site ground rental expense and any remediation and abatement activities, all of which will be expensed as incurred. As of December 31, 2012, we have recorded $585 million as a fixed asset as if we owned the asset and $473 million as the related construction obligation.

We have an equity-method investment in the entity which owns IAT, our sublessor at Terminal 4. The Sublease requires us to pay certain fixed management fees. We determined the investment is a variable interest and assessed whether we have a controlling financial interest in IAT. Our rights under the Sublease with respect to management of Terminal 4 are consistent with rights granted to an anchor tenant under a standard airport lease. Accordingly, we do not consolidate the entity in which we have an investment in our Consolidated Financial Statements.