Leases, Commitments, Guarantees and Contingencies

6 Months Ended

Jun. 30, 2022

Leases, Commitments, Guarantees and Contingencies

Leases, Commitments, Guarantees and Contingencies

(7) Leases, Commitments, Guarantees and Contingencies

The Company leases property and equipment under operating leases. For leases with durations longer than 12 months, the Company recorded the related operating lease right-of-use asset and operating lease liability at the present value of lease payments over the term. The Company used its incremental borrowing rate to discount the lease payments based on information available at lease commencement.

Aircraft

As of June 30, 2022, excluding aircraft financed by the Company’s major airline partners that the Company operates for them under contract, the Company was the lessee on 43 aircraft under long-term lease agreements with remaining terms ranging from two years to eight years.

Airport facilities

The Company has operating leases for facility space including airport terminals, office space, cargo warehouses and maintenance facilities. The Company generally leases this space from government agencies that control the use of the various airports. The remaining lease terms for facility space vary from one month to 34 years. The Company’s operating leases with lease rates that are variable based on airport operating costs, use of the facilities or other variable factors are excluded from the Company’s right-of-use assets and operating lease liabilities in accordance with accounting guidance.

Leases

As of June 30, 2022, the Company’s right-of-use assets were $207.8 million, the Company’s current maturities of operating lease liabilities were $75.6 million, and the Company’s noncurrent lease liabilities were $134.6 million. During the six months ended June 30, 2022, the Company paid $35.0 million in operating leases reflected as a reduction from operating cash flows.

The table below presents lease related terms and discount rates as of June 30, 2022.

	As of June 30, 2022
Weighted-average remaining lease term for operating leases	6.3 years
Weighted-average discount rate for operating leases	6.0%

The Company’s lease costs for the three and six months ended June 30, 2022 and 2021 included the following components (in thousands):

	For the three months ended June 30,				For the six months ended June 30,
	2022		2021		2022		2021
Operating lease cost	$	21,822	$	22,085	$	43,663	$	44,211
Variable and short-term lease cost		805		1,056		1,822		2,280
Sublease income		(1,845)		(1,493)		(3,648)		(2,829)
Total lease cost	$	20,782	$	21,648	$	41,837	$	43,662

As of June 30, 2022, the Company leased aircraft, airport facilities, office space, and other property and equipment under non-cancelable operating leases, which are generally on a long-term, triple-net lease basis pursuant to which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased property. The Company expects that, in the normal course of business, such operating leases that expire may be renewed or replaced by other leases, or the property may be purchased rather than leased. The following table summarizes future minimum rental payments primarily related to leased aircraft required under operating leases that had initial or remaining non-cancelable lease terms as of June 30, 2022 (in thousands):

July 2022 through December 2022	$	45,893
2023		76,189
2024		32,796
2025		17,570
2026		15,491
Thereafter		72,850
	$	260,789

As of June 30, 2022, the Company had a firm purchase commitment for 17 E175 aircraft from Embraer, S.A. (“Embraer”) with anticipated delivery dates through the first half of 2023.

The following table summarizes the Company’s commitments and obligations as noted for each of the next five years and thereafter (in thousands):

	Total		Jul - Dec 2022		2023		2024		2025		2026		Thereafter
Operating lease payments for aircraft and facility obligations	$	260,789	$	45,893	$	76,189	$	32,796	$	17,570	$	15,491	$	72,850
Firm aircraft and spare engine commitments		471,924		425,905		46,019		—		—		—		—
Interest commitments (1)		496,915		62,331		111,522		93,886		75,297		57,720		96,159
Principal maturities on long-term debt		3,320,191		219,437		436,307		432,701		500,677		455,898		1,275,171
Total commitments and obligations	$	4,549,819	$	753,566	$	670,037	$	559,383	$	593,544	$	529,109	$	1,444,180

(1) At June 30, 2022, the Company’s long-term debt had fixed interest rates.

Guarantees

During the three months ended June 30, 2022, the Company agreed to guarantee $17.0 million of debt for a 14 CFR Part 135 air carrier. The debt is secured by the Part 135 air carrier’s aircraft and engines and has a five-year term. The purpose of the arrangement is to increase the potential number of commercial pilots in the Company’s hiring pipeline. In exchange for providing the guarantee, the Company received 6.5% of the guaranteed amount as consideration, payable in common stock of the Part 135 air carrier, which will be recorded in “Other income, net” on the Company’s consolidated statements of comprehensive income over the term of the guarantee. The Company also recorded the estimated credit loss associated with the guarantee in “Other long-term liabilities” on the Company’s

consolidated balance sheet based on publicly available historical default rates issued by a third party for companies with similar credit ratings, factoring the collateral and guarantee term.