LEASES

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

LEASES

LEASES

The Company enters into leases for aircraft, property, and other types of equipment in the normal course of business. As allowed under ASC 842, Leases, the Company has elected a practical expedient to exclude from recognition lease assets and lease liabilities associated with leases that have an initial term of twelve months or less. Such expense was not material for the twelve months ended December 31, 2023, 2022, and 2021.

As of December 31, 2023, the Company held aircraft leases with remaining terms extending up to 10 years. The aircraft leases generally can be renewed for three months to three years at rates based on the fair market value at the end of the lease term. Residual value guarantees included in the Company's lease agreements are not material.

In fourth quarter 2022, the Company signed an aircraft sale agreement with AerCap Ireland Limited (“AerCap”) to purchase 39 -700 aircraft, all of which were already in the Company's fleet under finance lease terms. As each aircraft purchase was finalized, the Company relieved its related lease liability and continued to recognize the cost of the aircraft within Property and equipment section in the Consolidated Balance Sheet. The Company completed the purchase of 31 of these aircraft during fourth quarter 2022, and the remaining eight aircraft during first quarter 2023. The Company paid the lessor $365 million and $88 million in fourth quarter 2022 and first quarter 2023, respectively, as part of this transaction, of which $191 million and $50 million were recorded as the elimination of the Company’s remaining finance lease obligation for the aircraft, and which was also reflected within Payments of long-term debt and finance lease obligations in the accompanying Consolidated Statement of Cash Flows. The remaining $174 million and $38 million was the net purchase price of the aircraft and is included as part of the Company’s Capital expenditures for fourth quarter 2022 and first quarter 2023, respectively.

In second and third quarter 2023, the Company also entered into additional transactions with third parties to purchase four -700 aircraft, all of which were already in the Company's fleet under finance lease terms. The Company paid the lessors $44 million in 2023, of which $3 million was recorded as the elimination of the Company's remaining finance lease obligation for the aircraft, and which was also reflected within Payments of

long-term debt and finance lease obligations in the accompanying Consolidated Statement of Cash Flows. The remaining $41 million was the net purchase price of the aircraft and is included as part of the Company's Capital expenditures for 2023. There was no gain or loss recorded as a result of these transactions. As of December 31, 2023, the Company has 24 finance leased aircraft remaining.

At each airport where the Company conducts flight operations, the Company has lease agreements, generally with a governmental unit or authority, for the use of airport terminals, airfields, office space, cargo warehouses, gates, and/or maintenance facilities. These leases are classified as operating lease agreements and have remaining lease terms extending up to 37 years. Certain leases can be renewed from one year to 11 years. The majority of the airport terminal leases contain certain provisions for periodic adjustments to rates that depend upon airport operating costs or use of the facilities, and are reset at least annually. Because of the variable nature of these rates, these leases are not recorded as a right-of-use asset or a lease liability on the Consolidated Balance Sheet.

The Company also leases certain technology assets, fuel storage tanks, and various other equipment that qualify as leases under the applicable accounting guidance with lease terms extending up to three years. Certain leases can be renewed from six months to one year.

Lease-related assets and liabilities recorded on the Consolidated Balance Sheet were as follows:

(in millions)	Balance Sheet location	December 31, 2023		December 31, 2022
Assets
Operating	Operating lease right-of-use assets (net)	$	1,223	$	1,394
Finance	Property and equipment (net of allowance for depreciation and amortization of $477 million and $634 million)	125		297
Total lease assets		$	1,348	$	1,691
Liabilities
Current
Operating	Current operating lease liabilities	$	208	$	225
Finance	Current maturities of long-term debt	29		42
Noncurrent
Operating	Noncurrent operating lease liabilities	985		1,118
Finance	Long-term debt less current maturities	75		147
Total lease liabilities		$	1,297	$	1,532

The components of lease costs, included in the Consolidated Statement of Income, were as follows:

(in millions)	Year ended December 31, 2023		Year ended December 31, 2022		Year ended December 31, 2021
Operating lease cost - aircraft (a)	$	186	$	188	$	204
Operating lease cost - other	89		84		81
Short-term lease cost	2		2		1
Variable lease cost	1,733		1,447		1,406
Amortization of finance lease liabilities	44		106		112
Interest on finance lease liabilities	5		15		19
Total net lease cost	$	2,059	$	1,842	$	1,823

(a) Net of sublease income of $7 million, $17 million, and $41 million for the years ended December 31, 2023, 2022, and 2021.

Supplemental cash flow information related to leases, included in the Consolidated Statement of Cash Flows, was as follows:

(in millions)	Year ended December 31, 2023		Year ended December 31, 2022		Year ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	251	$	303	$	346
Operating cash flows for finance leases	5		16		19
Financing cash flows for finance leases	32		78		83
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	82		58		327

As of December 31, 2023, maturities of lease liabilities were as follows:

(in millions)	Operating leases		Finance leases
2024	$	242	$	33
2025	201		24
2026	186		16
2027	179		16
2028	168		12
Thereafter	431		13
Total lease payments	$	1,407	$	114
Less imputed interest	(214)		(10)
Total lease obligations	1,193		104
Less current obligations	(208)		(29)
Long-term lease obligations	$	985	$	75

The table below presents additional information related to the Company's leases:

Weighted average remaining lease term	December 31, 2023		December 31, 2022
Operating leases	8 years		8 years
Finance leases	5 years		6 years
Weighted average discount rate
Operating leases	4.0	%	3.6	%
Finance leases	3.9	%	3.9	%

LEASES

LEASES

The Company enters into leases for aircraft, property, and other types of equipment in the normal course of business. As allowed under ASC 842, Leases, the Company has elected a practical expedient to exclude from recognition lease assets and lease liabilities associated with leases that have an initial term of twelve months or less. Such expense was not material for the twelve months ended December 31, 2023, 2022, and 2021.

As of December 31, 2023, the Company held aircraft leases with remaining terms extending up to 10 years. The aircraft leases generally can be renewed for three months to three years at rates based on the fair market value at the end of the lease term. Residual value guarantees included in the Company's lease agreements are not material.

In fourth quarter 2022, the Company signed an aircraft sale agreement with AerCap Ireland Limited (“AerCap”) to purchase 39 -700 aircraft, all of which were already in the Company's fleet under finance lease terms. As each aircraft purchase was finalized, the Company relieved its related lease liability and continued to recognize the cost of the aircraft within Property and equipment section in the Consolidated Balance Sheet. The Company completed the purchase of 31 of these aircraft during fourth quarter 2022, and the remaining eight aircraft during first quarter 2023. The Company paid the lessor $365 million and $88 million in fourth quarter 2022 and first quarter 2023, respectively, as part of this transaction, of which $191 million and $50 million were recorded as the elimination of the Company’s remaining finance lease obligation for the aircraft, and which was also reflected within Payments of long-term debt and finance lease obligations in the accompanying Consolidated Statement of Cash Flows. The remaining $174 million and $38 million was the net purchase price of the aircraft and is included as part of the Company’s Capital expenditures for fourth quarter 2022 and first quarter 2023, respectively.

In second and third quarter 2023, the Company also entered into additional transactions with third parties to purchase four -700 aircraft, all of which were already in the Company's fleet under finance lease terms. The Company paid the lessors $44 million in 2023, of which $3 million was recorded as the elimination of the Company's remaining finance lease obligation for the aircraft, and which was also reflected within Payments of

long-term debt and finance lease obligations in the accompanying Consolidated Statement of Cash Flows. The remaining $41 million was the net purchase price of the aircraft and is included as part of the Company's Capital expenditures for 2023. There was no gain or loss recorded as a result of these transactions. As of December 31, 2023, the Company has 24 finance leased aircraft remaining.

At each airport where the Company conducts flight operations, the Company has lease agreements, generally with a governmental unit or authority, for the use of airport terminals, airfields, office space, cargo warehouses, gates, and/or maintenance facilities. These leases are classified as operating lease agreements and have remaining lease terms extending up to 37 years. Certain leases can be renewed from one year to 11 years. The majority of the airport terminal leases contain certain provisions for periodic adjustments to rates that depend upon airport operating costs or use of the facilities, and are reset at least annually. Because of the variable nature of these rates, these leases are not recorded as a right-of-use asset or a lease liability on the Consolidated Balance Sheet.

The Company also leases certain technology assets, fuel storage tanks, and various other equipment that qualify as leases under the applicable accounting guidance with lease terms extending up to three years. Certain leases can be renewed from six months to one year.

Lease-related assets and liabilities recorded on the Consolidated Balance Sheet were as follows:

(in millions)	Balance Sheet location	December 31, 2023		December 31, 2022
Assets
Operating	Operating lease right-of-use assets (net)	$	1,223	$	1,394
Finance	Property and equipment (net of allowance for depreciation and amortization of $477 million and $634 million)	125		297
Total lease assets		$	1,348	$	1,691
Liabilities
Current
Operating	Current operating lease liabilities	$	208	$	225
Finance	Current maturities of long-term debt	29		42
Noncurrent
Operating	Noncurrent operating lease liabilities	985		1,118
Finance	Long-term debt less current maturities	75		147
Total lease liabilities		$	1,297	$	1,532

The components of lease costs, included in the Consolidated Statement of Income, were as follows:

(in millions)	Year ended December 31, 2023		Year ended December 31, 2022		Year ended December 31, 2021
Operating lease cost - aircraft (a)	$	186	$	188	$	204
Operating lease cost - other	89		84		81
Short-term lease cost	2		2		1
Variable lease cost	1,733		1,447		1,406
Amortization of finance lease liabilities	44		106		112
Interest on finance lease liabilities	5		15		19
Total net lease cost	$	2,059	$	1,842	$	1,823

(a) Net of sublease income of $7 million, $17 million, and $41 million for the years ended December 31, 2023, 2022, and 2021.

Supplemental cash flow information related to leases, included in the Consolidated Statement of Cash Flows, was as follows:

(in millions)	Year ended December 31, 2023		Year ended December 31, 2022		Year ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	251	$	303	$	346
Operating cash flows for finance leases	5		16		19
Financing cash flows for finance leases	32		78		83
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	82		58		327

As of December 31, 2023, maturities of lease liabilities were as follows:

(in millions)	Operating leases		Finance leases
2024	$	242	$	33
2025	201		24
2026	186		16
2027	179		16
2028	168		12
Thereafter	431		13
Total lease payments	$	1,407	$	114
Less imputed interest	(214)		(10)
Total lease obligations	1,193		104
Less current obligations	(208)		(29)
Long-term lease obligations	$	985	$	75

The table below presents additional information related to the Company's leases:

Weighted average remaining lease term	December 31, 2023		December 31, 2022
Operating leases	8 years		8 years
Finance leases	5 years		6 years
Weighted average discount rate
Operating leases	4.0	%	3.6	%
Finance leases	3.9	%	3.9	%

LEASES

LEASES

The Company enters into leases for aircraft, property, and other types of equipment in the normal course of business. As allowed under ASC 842, Leases, the Company has elected a practical expedient to exclude from recognition lease assets and lease liabilities associated with leases that have an initial term of twelve months or less. Such expense was not material for the twelve months ended December 31, 2023, 2022, and 2021.

As of December 31, 2023, the Company held aircraft leases with remaining terms extending up to 10 years. The aircraft leases generally can be renewed for three months to three years at rates based on the fair market value at the end of the lease term. Residual value guarantees included in the Company's lease agreements are not material.

In fourth quarter 2022, the Company signed an aircraft sale agreement with AerCap Ireland Limited (“AerCap”) to purchase 39 -700 aircraft, all of which were already in the Company's fleet under finance lease terms. As each aircraft purchase was finalized, the Company relieved its related lease liability and continued to recognize the cost of the aircraft within Property and equipment section in the Consolidated Balance Sheet. The Company completed the purchase of 31 of these aircraft during fourth quarter 2022, and the remaining eight aircraft during first quarter 2023. The Company paid the lessor $365 million and $88 million in fourth quarter 2022 and first quarter 2023, respectively, as part of this transaction, of which $191 million and $50 million were recorded as the elimination of the Company’s remaining finance lease obligation for the aircraft, and which was also reflected within Payments of long-term debt and finance lease obligations in the accompanying Consolidated Statement of Cash Flows. The remaining $174 million and $38 million was the net purchase price of the aircraft and is included as part of the Company’s Capital expenditures for fourth quarter 2022 and first quarter 2023, respectively.

In second and third quarter 2023, the Company also entered into additional transactions with third parties to purchase four -700 aircraft, all of which were already in the Company's fleet under finance lease terms. The Company paid the lessors $44 million in 2023, of which $3 million was recorded as the elimination of the Company's remaining finance lease obligation for the aircraft, and which was also reflected within Payments of

long-term debt and finance lease obligations in the accompanying Consolidated Statement of Cash Flows. The remaining $41 million was the net purchase price of the aircraft and is included as part of the Company's Capital expenditures for 2023. There was no gain or loss recorded as a result of these transactions. As of December 31, 2023, the Company has 24 finance leased aircraft remaining.

At each airport where the Company conducts flight operations, the Company has lease agreements, generally with a governmental unit or authority, for the use of airport terminals, airfields, office space, cargo warehouses, gates, and/or maintenance facilities. These leases are classified as operating lease agreements and have remaining lease terms extending up to 37 years. Certain leases can be renewed from one year to 11 years. The majority of the airport terminal leases contain certain provisions for periodic adjustments to rates that depend upon airport operating costs or use of the facilities, and are reset at least annually. Because of the variable nature of these rates, these leases are not recorded as a right-of-use asset or a lease liability on the Consolidated Balance Sheet.

The Company also leases certain technology assets, fuel storage tanks, and various other equipment that qualify as leases under the applicable accounting guidance with lease terms extending up to three years. Certain leases can be renewed from six months to one year.

Lease-related assets and liabilities recorded on the Consolidated Balance Sheet were as follows:

(in millions)	Balance Sheet location	December 31, 2023		December 31, 2022
Assets
Operating	Operating lease right-of-use assets (net)	$	1,223	$	1,394
Finance	Property and equipment (net of allowance for depreciation and amortization of $477 million and $634 million)	125		297
Total lease assets		$	1,348	$	1,691
Liabilities
Current
Operating	Current operating lease liabilities	$	208	$	225
Finance	Current maturities of long-term debt	29		42
Noncurrent
Operating	Noncurrent operating lease liabilities	985		1,118
Finance	Long-term debt less current maturities	75		147
Total lease liabilities		$	1,297	$	1,532

The components of lease costs, included in the Consolidated Statement of Income, were as follows:

(in millions)	Year ended December 31, 2023		Year ended December 31, 2022		Year ended December 31, 2021
Operating lease cost - aircraft (a)	$	186	$	188	$	204
Operating lease cost - other	89		84		81
Short-term lease cost	2		2		1
Variable lease cost	1,733		1,447		1,406
Amortization of finance lease liabilities	44		106		112
Interest on finance lease liabilities	5		15		19
Total net lease cost	$	2,059	$	1,842	$	1,823

(a) Net of sublease income of $7 million, $17 million, and $41 million for the years ended December 31, 2023, 2022, and 2021.

Supplemental cash flow information related to leases, included in the Consolidated Statement of Cash Flows, was as follows:

(in millions)	Year ended December 31, 2023		Year ended December 31, 2022		Year ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	251	$	303	$	346
Operating cash flows for finance leases	5		16		19
Financing cash flows for finance leases	32		78		83
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	82		58		327

As of December 31, 2023, maturities of lease liabilities were as follows:

(in millions)	Operating leases		Finance leases
2024	$	242	$	33
2025	201		24
2026	186		16
2027	179		16
2028	168		12
Thereafter	431		13
Total lease payments	$	1,407	$	114
Less imputed interest	(214)		(10)
Total lease obligations	1,193		104
Less current obligations	(208)		(29)
Long-term lease obligations	$	985	$	75

The table below presents additional information related to the Company's leases:

Weighted average remaining lease term	December 31, 2023		December 31, 2022
Operating leases	8 years		8 years
Finance leases	5 years		6 years
Weighted average discount rate
Operating leases	4.0	%	3.6	%
Finance leases	3.9	%	3.9	%