XML 56 R26.htm IDEA: XBRL DOCUMENT v3.22.0.1
Leases and Capacity Purchase Agreements
 12 Months Ended
Dec. 31, 2021
Leases [Abstract]  
Leases and Capacity Purchase Agreements 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, 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 fixed lease payments over the lease term. 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. 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 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 years ended December 31 included the following components (in millions):
202120202019
Operating lease cost$958 $933 $1,038 
Variable and short-term lease cost2,291 1,968 2,548 
Amortization of finance lease assets89 88 68 
Interest on finance lease liabilities16 16 85 
Sublease income(26)(23)(32)
Total lease cost$3,328 $2,982 $3,707 
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 118 mainline and 282 regional aircraft while finance leases relate to leases of 25 mainline and 58 regional aircraft. United's aircraft leases have remaining lease terms of 1 month to 12 years with expiration dates ranging from 2022 through 2033. 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 1 month to 31 years, with expiration dates ranging from 2022 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 December 31, 2021 (in millions):
Operating LeasesFinance Leases
2022$857 $89 
2023825 57 
2024775 53 
2025655 41 
2026637 26 
After 20263,982 72 
Minimum lease payments7,731 338 
Imputed interest(2,023)(43)
Present value of minimum lease payments5,708 295 
Less: current maturities of lease obligations(556)(76)
Long-term lease obligations$5,152 $219 
As of December 31, 2021, we have additional leases of approximately $415 million for several regional aircraft under CPAs and airport facilities and office space leases that have not yet commenced. These leases will commence in 2022 through 2024 with lease terms of up to 12 years.
In August 2021, at the request of United, the City of Houston, Texas issued its approximately $289 million special facilities revenue bonds for the purpose of (a) financing the costs of construction of a multi-terminal baggage handling system, tenant improvements, fixtures, equipment, personnel areas and related facilities, as well as an early baggage system building (together with a related fire pump room) at George Bush Intercontinental Airport (IAH), all to be installed by and for use by United and (b) paying related costs of issuance. The bonds bear interest at 4.0% per annum, payable semiannually, commencing in January 2022 through the July 2041 maturity date. United is accounting for the payments for these special facilities revenue bonds as lease payments under an operating lease recognized as a right-of-use asset and lease liability on the Company's balance sheet.
In 2020, United entered into agreements with third parties to finance through sale and leaseback transactions new Boeing model 787 aircraft and Boeing model 737 MAX aircraft subject to purchase agreements between United and Boeing. In connection with the delivery of each aircraft from Boeing, United assigned its right to purchase such aircraft to the buyer, and simultaneous with the buyer's purchase from Boeing, United entered into a long-term lease for such aircraft with the buyer as lessor. Twenty-four Boeing model aircraft were delivered in 2021 under these transactions (and each is presently subject to a long-term lease to United). Upon delivery of aircraft in these sale and leaseback transactions in 2021, the Company accounted for seven of these aircraft, which have a repurchase option at a price other than fair value, as part of Flight equipment on the Company's consolidated balance sheet and the related obligation recorded in Current maturities of other financial liabilities and Other financial liabilities since they do not qualify for sale recognition. The remaining 17 aircraft that qualified for sale recognition were recorded as Operating lease right-of-use assets and Current/Long-term obligations under operating leases on the Company's consolidated balance sheet after recognition of related gains on such sale. See Note 14 of this report for additional information. In 2021, under these sale and leaseback agreements, United gave notice of its intent to exercise repurchase options in 2022 for six Boeing 787 aircraft. The liabilities associated with these aircraft are reflected in Current maturities of other financial liabilities on the Company's consolidated balance sheet at December 31, 2021. In January 2022, the Company gave notice of its intent to exercise repurchase options in 2023 for eight Boeing 737 MAX aircraft under these sale and leaseback agreements. The liabilities associated with these aircraft are reflected in Other financial liabilities on the Company's consolidated balance sheet at December 31, 2021.
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 December 31:
20212020
Weighted-average remaining lease term - operating leases10 years11 years
Weighted-average remaining lease term - finance leases6 years4 years
Weighted-average discount rate - operating leases5.0 %5.1 %
Weighted-average discount rate - finance leases4.8 %4.4 %
The table below presents supplemental cash flow information related to leases during the year ended December 31 (in millions):
202120202019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$977 $788 $902 
Operating cash flows for finance leases18 20 70 
Financing cash flows for finance leases216 66 151 
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 rate adjustment based on agreed performance metrics, subject to annual adjustments. The fees are based on specific rates multiplied by specific operating statistics (e.g., block hours, departures), as well as fixed monthly amounts. Under these CPAs, the Company is also 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. In some cases, the Company owns some or all of the aircraft subject to the CPA and leases such aircraft to the regional carrier. United's CPAs are for 518 regional aircraft as of December 31, 2021, and the CPAs have terms expiring through 2036. Aircraft operated under CPAs include aircraft leased directly from the regional carriers and those owned by United and operated by the regional carriers. See Part I, Item 2. Properties, of this report for additional information.
In September 2021, United entered into a new CPA with Republic for Republic to operate 38 Embraer E175LL aircraft on United's behalf starting in 2022 for a 12-year term. The new Embraer E175LL aircraft will replace the Embraer E170 aircraft currently being flown by Republic for United.
United recorded approximately $0.6 billion, $0.6 billion and $1.0 billion in expenses related to its CPAs with its regional carriers in which United is a minority shareholder, for the years ended December 31, 2021, 2020 and 2019, respectively. There were approximately $102 million and $68 million in accounts payable due to these companies as of December 31, 2021 and December 31, 2020, respectively. There were no material accounts receivables due from these companies as of December 31, 2021 and December 31, 2020. 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 operating leases above. 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 recent 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, 2021, our future payments through the end of the terms of our CPAs are presented in the table below (in billions):
2022$2.1 
20232.1 
20242.0 
20251.7 
20261.5 
After 20264.2 
$13.6 
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 2022 would result in a corresponding change in annual cash obligations under the CPAs of approximately $125 million.
Leases and Capacity Purchase Agreements 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, 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 fixed lease payments over the lease term. 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. 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 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 years ended December 31 included the following components (in millions):
202120202019
Operating lease cost$958 $933 $1,038 
Variable and short-term lease cost2,291 1,968 2,548 
Amortization of finance lease assets89 88 68 
Interest on finance lease liabilities16 16 85 
Sublease income(26)(23)(32)
Total lease cost$3,328 $2,982 $3,707 
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 118 mainline and 282 regional aircraft while finance leases relate to leases of 25 mainline and 58 regional aircraft. United's aircraft leases have remaining lease terms of 1 month to 12 years with expiration dates ranging from 2022 through 2033. 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 1 month to 31 years, with expiration dates ranging from 2022 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 December 31, 2021 (in millions):
Operating LeasesFinance Leases
2022$857 $89 
2023825 57 
2024775 53 
2025655 41 
2026637 26 
After 20263,982 72 
Minimum lease payments7,731 338 
Imputed interest(2,023)(43)
Present value of minimum lease payments5,708 295 
Less: current maturities of lease obligations(556)(76)
Long-term lease obligations$5,152 $219 
As of December 31, 2021, we have additional leases of approximately $415 million for several regional aircraft under CPAs and airport facilities and office space leases that have not yet commenced. These leases will commence in 2022 through 2024 with lease terms of up to 12 years.
In August 2021, at the request of United, the City of Houston, Texas issued its approximately $289 million special facilities revenue bonds for the purpose of (a) financing the costs of construction of a multi-terminal baggage handling system, tenant improvements, fixtures, equipment, personnel areas and related facilities, as well as an early baggage system building (together with a related fire pump room) at George Bush Intercontinental Airport (IAH), all to be installed by and for use by United and (b) paying related costs of issuance. The bonds bear interest at 4.0% per annum, payable semiannually, commencing in January 2022 through the July 2041 maturity date. United is accounting for the payments for these special facilities revenue bonds as lease payments under an operating lease recognized as a right-of-use asset and lease liability on the Company's balance sheet.
In 2020, United entered into agreements with third parties to finance through sale and leaseback transactions new Boeing model 787 aircraft and Boeing model 737 MAX aircraft subject to purchase agreements between United and Boeing. In connection with the delivery of each aircraft from Boeing, United assigned its right to purchase such aircraft to the buyer, and simultaneous with the buyer's purchase from Boeing, United entered into a long-term lease for such aircraft with the buyer as lessor. Twenty-four Boeing model aircraft were delivered in 2021 under these transactions (and each is presently subject to a long-term lease to United). Upon delivery of aircraft in these sale and leaseback transactions in 2021, the Company accounted for seven of these aircraft, which have a repurchase option at a price other than fair value, as part of Flight equipment on the Company's consolidated balance sheet and the related obligation recorded in Current maturities of other financial liabilities and Other financial liabilities since they do not qualify for sale recognition. The remaining 17 aircraft that qualified for sale recognition were recorded as Operating lease right-of-use assets and Current/Long-term obligations under operating leases on the Company's consolidated balance sheet after recognition of related gains on such sale. See Note 14 of this report for additional information. In 2021, under these sale and leaseback agreements, United gave notice of its intent to exercise repurchase options in 2022 for six Boeing 787 aircraft. The liabilities associated with these aircraft are reflected in Current maturities of other financial liabilities on the Company's consolidated balance sheet at December 31, 2021. In January 2022, the Company gave notice of its intent to exercise repurchase options in 2023 for eight Boeing 737 MAX aircraft under these sale and leaseback agreements. The liabilities associated with these aircraft are reflected in Other financial liabilities on the Company's consolidated balance sheet at December 31, 2021.
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 December 31:
20212020
Weighted-average remaining lease term - operating leases10 years11 years
Weighted-average remaining lease term - finance leases6 years4 years
Weighted-average discount rate - operating leases5.0 %5.1 %
Weighted-average discount rate - finance leases4.8 %4.4 %
The table below presents supplemental cash flow information related to leases during the year ended December 31 (in millions):
202120202019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$977 $788 $902 
Operating cash flows for finance leases18 20 70 
Financing cash flows for finance leases216 66 151 
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 rate adjustment based on agreed performance metrics, subject to annual adjustments. The fees are based on specific rates multiplied by specific operating statistics (e.g., block hours, departures), as well as fixed monthly amounts. Under these CPAs, the Company is also 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. In some cases, the Company owns some or all of the aircraft subject to the CPA and leases such aircraft to the regional carrier. United's CPAs are for 518 regional aircraft as of December 31, 2021, and the CPAs have terms expiring through 2036. Aircraft operated under CPAs include aircraft leased directly from the regional carriers and those owned by United and operated by the regional carriers. See Part I, Item 2. Properties, of this report for additional information.
In September 2021, United entered into a new CPA with Republic for Republic to operate 38 Embraer E175LL aircraft on United's behalf starting in 2022 for a 12-year term. The new Embraer E175LL aircraft will replace the Embraer E170 aircraft currently being flown by Republic for United.
United recorded approximately $0.6 billion, $0.6 billion and $1.0 billion in expenses related to its CPAs with its regional carriers in which United is a minority shareholder, for the years ended December 31, 2021, 2020 and 2019, respectively. There were approximately $102 million and $68 million in accounts payable due to these companies as of December 31, 2021 and December 31, 2020, respectively. There were no material accounts receivables due from these companies as of December 31, 2021 and December 31, 2020. 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 operating leases above. 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 recent 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, 2021, our future payments through the end of the terms of our CPAs are presented in the table below (in billions):
2022$2.1 
20232.1 
20242.0 
20251.7 
20261.5 
After 20264.2 
$13.6 
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 2022 would result in a corresponding change in annual cash obligations under the CPAs of approximately $125 million.