Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases property, four aircraft, aircraft engines and other types of equipment under operating leases. Property leases include hangars, warehouses, offices and other space at certain airports with fixed rent payments and lease terms ranging from one month to seven years. The Company is obligated to pay the lessor for maintenance, real estate taxes, insurance and other operating expenses on certain property leases. These expenses are variable and are not included in the measurement of the lease asset or lease liability. These expenses are recognized as variable lease expense when incurred and are not material. Equipment leases include ground support and industrial equipment as well as computer hardware with fixed rent payments and terms of one month to five years.

The Company records the initial right-to-use asset and lease liability at the present value of lease payments scheduled during the lease term. For the year ended December 31, 2019, non-cash transactions to recognize right-to-use assets and corresponding liabilities for new leases were $17.0 million. Unless the rate implicit in the lease is readily determinable, the Company discounts the lease payments using an estimated incremental borrowing rate at the time of lease commencement. The Company estimates the incremental borrowing rate based on the information available at the lease commencement date, including the rate the Company could borrow for a similar amount, over a similar lease term with similar collateral. The Company's weighted-average discount rate for operating leases at December 31, 2019 was 4.7%. Leases often include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. Although not material, the amount of such options is reflected below in the maturity of operating lease liabilities table. Lease expense is recognized on a straight-line basis over the lease term. Our weighted-average remaining lease term is 4.6 years.

For the year ended December 31, 2019, cash payments against operating lease liabilities were $19.7 million. As of December 31, 2019, the maturities of operating lease liabilities are as follows (in thousands):



	Operating Leases
2020	$	14,549
2021	10,425
2022	6,764
2023	6,138
2024	4,940
2025 and beyond	5,155
Total undiscounted cash payments	47,971
Less: amount representing interest	(4,780		)
Present value of future minimum lease payments	43,191
Less: current obligations under leases	12,857
Long-term lease obligation	$	30,334

The Company expects to lease two additional passenger aircraft commencing in 2020 that are not reflected in the table above.

The future minimum lease payments of the Company as of December 31, 2018 are scheduled below (in thousands):



	Operating Leases
2019	$	17,505
2020	15,418
2021	12,703
2022	6,735
2023	4,641
2024 and beyond	12,462
Total minimum lease payments	$	69,464

Purchase Commitments

The Company has agreements with Israel Aerospace Industries Ltd. ("IAI") for the conversion of Boeing 767 passenger aircraft into a standard configured freighter aircraft. The conversions primarily consist of the installation of a standard cargo door and loading system. As of December 31, 2019, the Company had eight aircraft that were in or awaiting the modification process. As of December 31, 2019, the Company had placed non-refundable deposits of $23.2 million to purchase 15 more Boeing 767-300 passenger aircraft through 2021. As of December 31, 2019, the Company's commitments to acquire and convert aircraft totaled $369.1 million through 2021.

Guarantees and Indemnifications

Certain leases and agreements of the Company contain guarantees and indemnification obligations to the lessor, or one or more other parties that are considered reasonable and customary (e.g. use, tax and environmental indemnifications), the terms of which range in duration and are often limited. Such indemnification obligations may continue after expiration of the respective lease or agreement.

Other

In addition to the foregoing matters, the Company is also a party to legal proceedings in various federal and state jurisdictions from time to time arising out of the operation of the Company's business. The amount of alleged liability, if any, from these proceedings cannot be determined with certainty; however, the Company believes that its ultimate liability, if any, arising from pending legal proceedings, as well as from asserted legal claims and known potential legal claims which are probable of assertion, taking into account established accruals for estimated liabilities, should not be material to our financial condition or results of operations.

Employees Under Collective Bargaining Agreements

As of December 31, 2019, the flight crewmember employees of ABX, ATI and Omni and flight attendant employees of ATI and Omni were represented by the labor unions listed below:



Airline	Labor Agreement Unit	Percentage of the Company’s Employees
ABX	International Brotherhood of Teamsters	5.3%
ATI	Air Line Pilots Association	8.3%
OAI	International Brotherhood of Teamsters	7.1%
ATI	Association of Flight Attendants	0.9%
OAI	Association of Flight Attendants	7.3%