XML 19 R17.htm IDEA: XBRL DOCUMENT

Leases

9 Months Ended

Sep. 30, 2019

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, among other items. Certain of these leases include provisions for variable lease payments which are based on several factors, including, but not limited to, relative leased square footage, available seat miles, enplaned passengers, passenger facility charges, terminal equipment usage fees, departures, and airports' annual operating budgets. Due to the variable nature of the rates, these leases are not recorded on our balance sheet as a right-of-use asset and lease liability.

For leases with terms greater than 12 months, we record the related right-of-use asset and lease liability at the present value of lease payments over the lease term. Leases with an initial term of 12 months or less with purchase options or extension options that are not reasonably certain to be exercised are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the term of the lease. We combine lease and non-lease components, such as common area maintenance costs, in calculating the right-of-use assets and lease liabilities for all asset groups except for our capacity purchase agreements ("CPAs"), which contain embedded leases for regional aircraft. In addition to the lease component cost for regional aircraft, our CPAs also include non-lease components primarily related to the regional carriers' operating costs incurred in providing regional aircraft services. We allocate consideration for the lease components and non-lease components of each CPA based on their relative standalone values.

Lease Cost. The Company's lease cost for the three and nine months ended September 30 included the following components (in millions):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Operating lease cost	$	255		$	302		$	786		$	940
Variable and short-term lease cost	643			664			1,910			1,944
Amortization of finance lease assets	15			17			51			57
Interest on finance lease liabilities	27			17			86			26
Sublease income	(8		)	(9		)	(25		)	(30		)
Total lease cost	$	932		$	991		$	2,808		$	2,937

Lease terms and commitments. United's leases include aircraft leases for aircraft that are directly leased by United and aircraft that are operated by regional carriers on United's behalf under CPAs (but excluding aircraft owned by United) and non-aircraft leases. Aircraft operating leases relate to leases of 117 mainline and 325 regional aircraft while finance leases relate to leases of 26 mainline and 28 regional aircraft. United's aircraft leases have remaining lease terms of one month to 10 years with expiration dates ranging from 2019 through 2029. Under the terms of most aircraft 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 a percentage of cost.

Non-aircraft leases have remaining lease terms of one month to 34 years, with expiration dates ranging from 2019 through 2053.

The table below summarizes the Company's scheduled future minimum lease payments under operating and finance leases, recorded on the balance sheet, as of September 30, 2019 (in millions):



	Operating Leases			Finance Leases
Last three months of 2019	$	195		$	80
2020	1,004			58
2021	788			54
2022	660			44
2023	647			33
After 2023	4,611			70
Minimum lease payments	7,905			339
Imputed interest	(2,186		)	(61		)
Present value of minimum lease payments	5,719			278
Less: current maturities of lease obligations	(778		)	(92		)
Long-term lease obligations	$	4,941		$	186

As of September 30, 2019, we have additional leases of approximately $915 million for several mainline aircraft, regional jets under a CPA and a maintenance facility that have not yet commenced. These leases will commence between 2019 and 2020 with lease terms of up to 34 years.

To the extent a lease agreement includes an extension option that is reasonably certain to be exercised, we have recognized those amounts as part of our right-of-use assets and lease liabilities.

Our lease agreements do not provide a readily determinable implicit rate nor is it available to us from our lessors. Instead, we estimate United's incremental borrowing rate based on information available at lease commencement in order to discount lease payments to present value. The table below presents additional information related to our leases as of September 30:



	2019			2018
Weighted-average remaining lease term - operating leases	11 years			11 years
Weighted-average remaining lease term - finance leases	5 years			5 years
Weighted-average discount rate - operating leases	5.3	%		5.2	%
Weighted-average discount rate - finance leases	44.8	%	(a)	39.5	%	(a)

(a) During the third quarter of 2018, United entered into an agreement with the lessor of 54 Embraer ERJ 145 aircraft to purchase those aircraft in 2019. The provisions of these lease agreements resulted in a change in accounting classification of these leases from operating leases to finance leases up until the purchase date. The discount rates used for these leases were adjusted so that the present value of lease payments did not exceed the fair value of the asset being recognized.

The table below presents supplemental cash flow information related to leases during the nine months ended September 30 (in millions):



	2019		2018
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	743	$	842
Operating cash flows for finance leases	63		30
Financing cash flows for finance leases	105		57

LEASES

Lease Cost. The Company's lease cost for the three and nine months ended September 30 included the following components (in millions):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Operating lease cost	$	255		$	302		$	786		$	940
Variable and short-term lease cost	643			664			1,910			1,944
Amortization of finance lease assets	15			17			51			57
Interest on finance lease liabilities	27			17			86			26
Sublease income	(8		)	(9		)	(25		)	(30		)
Total lease cost	$	932		$	991		$	2,808		$	2,937

Non-aircraft leases have remaining lease terms of one month to 34 years, with expiration dates ranging from 2019 through 2053.

The table below summarizes the Company's scheduled future minimum lease payments under operating and finance leases, recorded on the balance sheet, as of September 30, 2019 (in millions):



	Operating Leases			Finance Leases
Last three months of 2019	$	195		$	80
2020	1,004			58
2021	788			54
2022	660			44
2023	647			33
After 2023	4,611			70
Minimum lease payments	7,905			339
Imputed interest	(2,186		)	(61		)
Present value of minimum lease payments	5,719			278
Less: current maturities of lease obligations	(778		)	(92		)
Long-term lease obligations	$	4,941		$	186

To the extent a lease agreement includes an extension option that is reasonably certain to be exercised, we have recognized those amounts as part of our right-of-use assets and lease liabilities.



	2019			2018
Weighted-average remaining lease term - operating leases	11 years			11 years
Weighted-average remaining lease term - finance leases	5 years			5 years
Weighted-average discount rate - operating leases	5.3	%		5.2	%
Weighted-average discount rate - finance leases	44.8	%	(a)	39.5	%	(a)

The table below presents supplemental cash flow information related to leases during the nine months ended September 30 (in millions):



	2019		2018
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	743	$	842
Operating cash flows for finance leases	63		30
Financing cash flows for finance leases	105		57