LEASES AND CAPACITY PURCHASE AGREEMENTS

United leases aircraft, airport passenger terminal space, aircraft hangars and related maintenance facilities, cargo terminals, other airport facilities, other commercial real estate, office and computer equipment and vehicles.

In 2018, United entered into a new Airline Use and Lease Agreement at Chicago O'Hare International Airport ("Chicago O'Hare") with the City of Chicago with a lease term of approximately 15 years, effective May 12, 2018 through December 31, 2033. United also entered into several new ground and facility leases at Chicago O'Hare, effective May 12, 2018, for hangars, a ground equipment maintenance building, and employee parking with lease terms ranging from 15 years to 30 years.

At December 31, 2018, United's scheduled future minimum lease payments under operating leases having initial or remaining noncancelable lease terms of more than one year, aircraft leases, including aircraft rent under CPAs and capital leases (substantially all of which are for aircraft) were as follows (in millions):



	Capital Leases (b)			Facility and Other Operating Leases		Aircraft Operating Leases
2019	$	308		$	1,330	$	845
2020	170			1,351		682
2021	147			1,107		583
2022	123			970		407
2023	104			953		379
After 2023	1,268			7,029		1,160
Minimum lease payments (a)	$	2,120		$	12,740	$	4,056
Imputed interest	(837		)
Present value of minimum lease payments	1,283
Current portion	(149		)
Long-term obligations under capital leases	$	1,134

(a) Includes fair value lease and deferred financing fee balances, which are being amortized over the terms of their respective leases.

(b) Includes airport construction projects managed by United in which United has construction risk, including project cost overruns. The Company recorded an asset for project costs and a related liability equal to project costs funded by parties other than United. As of December 31, 2018, United had an asset balance of $886 million recorded in operating property and equipment and $920 million recorded in current and long-term obligations under capital leases for these airport construction projects.

As of December 31, 2018, United's aircraft capital lease minimum payments relate to leases of 28 mainline and 90 regional aircraft as well as to leases of nonaircraft assets. Imputed interest rate ranges are 3.5% to 115.1%.

Aircraft operating leases have initial terms of five to 26 years, with expiration dates ranging from 2019 through 2029. Under the terms of most leases, United has the right to purchase the aircraft at the end of the lease term, in some cases, at fair market value, and in others, at fair market value or a percentage of cost.

United is the lessee of real property under long-term operating leases at a number of airports where we are also the guarantor of approximately $1.3 billion of underlying debt and interest thereon as of December 31, 2018. These leases are typically with municipalities or other governmental entities, which are excluded from the consolidation requirements concerning a variable interest entity ("VIE"). To the extent United's leases and related guarantees are with a separate legal entity other than a governmental entity, United is not the primary beneficiary because the lease terms are consistent with market terms at the inception of the lease and the lease does not include a residual value guarantee, fixed-price purchase option, or similar feature. United has facility operating leases that extend to 2055.

United's nonaircraft rent expense was approximately $1.3 billion, $1.3 billion and $1.2 billion for the years ended December 31, 2018, 2017 and 2016, respectively.

In addition to nonaircraft rent and aircraft rent, which is separately presented in the consolidated statements of operations, United had aircraft rent related to regional aircraft operating leases, which is included as part of Regional capacity purchase expense in United's consolidated statement of operations, of $505 million, $458 million and $439 million for the years ended December 31, 2018, 2017 and 2016, respectively.

In connection with UAL Corporation's and United Air Lines, Inc.'s (predecessors to UAL and United) fresh-start reporting requirements upon their exit from Chapter 11 bankruptcy protection in 2006 and the Company's acquisition accounting adjustments related to the Company's merger transaction in 2010, lease valuation adjustments for operating leases were initially recorded in the consolidated balance sheet, representing the net present value of the differences between contractual lease rates and the fair market lease rates for similar leased assets at the time. An asset (liability) results when the contractual lease rates are more (less) favorable than market lease terms at the valuation date. The lease valuation adjustment is amortized on a straight-line basis as an increase (decrease) to rent expense over the individual applicable remaining lease terms, resulting in recognition of rent expense as if United had entered into the leases at market rates. The related remaining lease terms, primarily related to aircraft which make up the majority of the fair value lease adjustment balance, are one to six years for United. The lease valuation adjustments are classified within other noncurrent liabilities and the net accretion amounts are $60 million, $79 million and $82 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Regional CPAs

United has contractual relationships with various regional carriers to provide regional aircraft service branded as United Express. Under these CPAs, the Company pays the regional carriers contractually agreed fees (carrier costs) for operating these flights plus a variable reimbursement (incentive payment for operational performance) based on agreed performance metrics, subject to annual adjustments. The fees for carrier costs are based on specific rates for various operating expenses of the regional carriers, such as crew expenses, maintenance and aircraft ownership, some of which are multiplied by specific operating statistics (e.g., block hours, departures), while others are fixed monthly amounts. Under these CPAs, the Company is responsible for all fuel costs incurred, as well as landing fees and other costs, which are either passed through by the regional carrier to the Company without any markup or directly incurred by the Company, and, in some cases, the Company owns or leases some or all of the aircraft subject to the CPA, and leases or subleases, as applicable, such aircraft to the regional carrier. United's CPAs are for 559 regional aircraft as of December 31, 2018, and the CPAs have terms expiring through 2029. Aircraft operated under CPAs include aircraft leased directly from the regional carriers and those owned by United or leased from third-party lessors and operated by the regional carriers. See Part I, Item 2, Properties, of this report for additional information.

In 2017, United entered into a five-year CPA with Air Wisconsin Airlines for regional service under the United Express brand to operate up to 65 CRJ200 aircraft. In addition, United extended the term of its existing CPA with ExpressJet Airlines to operate up to approximately 125 aircraft through December 31, 2022.

United recorded approximately $979 million, $907 million and $935 million in expenses related to its CPAs with its regional carriers, in which United is a minority shareholder, for the years ended December 31, 2018, 2017 and 2016, respectively. There were approximately $53 million and $24 million in accounts payable due to these companies as of December 31, 2018 and December 31, 2017, respectively. There were no material accounts receivables due from these companies as of December 31, 2018 and December 31, 2017. The CPAs with these related parties were executed in the ordinary course of business.

Our future commitments under our CPAs are dependent on numerous variables, and are, therefore, difficult to predict. The most important of these variables is the number of scheduled block hours. Although we are not required to purchase a minimum number of block hours under certain of our CPAs, we have set forth below estimates of our future payments under the CPAs based on our assumptions. United's estimates of its future payments under all of the CPAs do not include the portion of the underlying obligation for any aircraft leased to a regional carrier or deemed to be leased from other regional carriers and facility rent that are disclosed as part of aircraft and nonaircraft operating leases. For purposes of calculating these estimates, we have assumed (1) the number of block hours flown is based on our anticipated level of flight activity or at any contractual minimum utilization levels if applicable, whichever is higher, (2) that we will reduce the fleet as rapidly as contractually allowed under each CPA, (3) that aircraft utilization, stage length and load factors will remain constant, (4) that each carrier's operational performance will remain at historic levels and (5) an annual projected inflation rate. These amounts exclude variable pass-through costs such as fuel and landing fees, among others. Based on these assumptions as of December 31, 2018, our future payments through the end of the terms of our CPAs are presented in the table below (in billions):



2019	$	2.2
2020	2.0
2021	1.8
2022	1.4
2023	0.8
After 2023	3.1
	$	11.3

The actual amounts we pay to our regional operators under CPAs could differ materially from these estimates. For example, a 10% increase or decrease in scheduled block hours for all of United's regional operators (whether as a result of changes in average daily utilization or otherwise) in 2019 would result in a corresponding change in annual cash obligations under the CPAs of approximately $160 million.