4. Property and Equipment

The following presents the Company’s aircraft as of December 31, 2019 and 2018.


*December 31, 2019*	Owned		Leased
CRJ-200		51		13


December 31, 2018	Owned		Leased
CRJ-200		37		26

As part of an agreement reached in January 2018 Bombardier Inc. (BBD) agreed to pay the Company $25,192 in installments through September 2019 provided that BBD had the right to deliver to the Company the unencumbered title to certain CRJ-200 aircraft in satisfaction of any installment payments that remained at the time of such delivery. Under the agreement, the Company and BBD also agreed to terminate all residual value guarantee agreements (RVG’s) on 35 owned aircraft and to terminate certain other agreements that limited BBD’s obligations under such guarantee agreements.

On July 1, 2019, BBD exercised its right under the agreement and delivered to the Company 14 CRJ-200 aircraft which had previously been leased to the Company. The delivery of the aircraft was in lieu of remaining installment payments due to the Company totaling $8,212. All installment payments received from BBD prior to July 1, 2019, were recorded as “Other income” in the statements of operations and amounted to $2,537 and $14,443, for the years ended December 31, 2019 and 2018, respectively.

The Company recorded the 14 CRJ-200 aircraft as “Flight property and equipment” on the Balance Sheet at their fair market value based on recent asset valuations completed around that time. Fair market value was determined to be $15,832 based on one hundred and forty dollars per remaining engine cycle with a minimum value of $50 per engine, and each of the aircraft airframes was assigned a fair market value of $100. The airframes and engines were then depreciated in accordance with the table under “Property and Equipment and Depreciation” as set forth in Note 1. The transaction resulted in a lease termination expense of $19,353 which is included as part of “Aircraft rent” on the 2019 statement of operations. The lease termination expense, net of the recording of the assets at fair market value as noted above, included a charge for the following Balance Sheet items at the time the aircraft were acquired:

•

Right-of-use assets in the amount of $26,275, offset by lease liabilities of $1,182.

•

Unamortized engine overhauls of $9,535, recorded under “Flight property and equipment” on the Balance Sheet, related to the 28 engines acquired as part of the transaction.

•

Leasehold improvements with a remaining book value of $738 and included on the Balance Sheet as “Flight property and equipment,” related to the 14 acquired aircraft.

The delivery in mid-2019 of the 14 CRJ-200 aircraft by BBD to the Company is reflected in the December 31, 2019, table above as an increase to Owned Aircraft and a reduction in Leased Aircraft.