LEASES

6 Months Ended

Jun. 30, 2024

Leases [Abstract]

LEASES

LEASES

We have finance and operating leases for real estate (primarily package centers, airport facilities and warehouses), aircraft and engines, information technology equipment, vehicles and various other equipment used in operating our business. Certain leases for real estate and aircraft contain options to purchase, extend or terminate the lease.

Aircraft

In addition to the aircraft that we own, we charter aircraft to handle package and cargo volume on certain international trade lanes and domestic routes. Due to the nature of these agreements, primarily being that either party can cancel the agreement with short notice, we have classified these as short-term leases. A majority of our long-term aircraft operating leases are operated by a third party to handle package and cargo volume in geographic regions where, due to government regulations, we are restricted from operating an airline.

Transportation equipment and other equipment

We enter into both long-term and short-term leases for transportation equipment to supplement our capacity or meet contractual demands. Some of these assets are leased on a month-to-month basis and the leases can be terminated without penalty. We also enter into equipment leases to increase capacity during periods of high demand. These leases are treated as short-term as the cumulative right of use is less than 12 months over the term of the contract.

Some of our transportation and technology equipment leases require us to make additional lease payments based on the underlying usage of the assets. Due to the variable nature of these costs, these are expensed as incurred and are not included in the right of use lease asset and associated lease obligation.

The components of lease expense for the three and six months ended June 30, 2024 and 2023 were as follows (in millions):

	Three Months Ended  June 30,				Six Months Ended  June 30,
	2024		2023		2024		2023
Operating lease costs	$	231	$	219	$	462	$	426
Finance lease costs:
Amortization of assets	31		28		66		57
Interest on lease liabilities	5		5		10		9
Total finance lease costs	36		33		76		66
Variable lease costs	78		68		154		140
Short-term lease costs	192		226		391		503
Total lease costs(1)	$	537	$	546	$	1,083	$	1,135

(1)    This table excludes sublease income as it was not material for the three and six months ended June 30, 2024 and 2023.

In addition to the lease costs disclosed in the table above, we monitor all lease categories for any indicators that the carrying value of the assets may not be recoverable. There were no material lease impairments recognized during the three or six months ended June 30, 2024 or 2023.

Supplemental information related to leases and location within our consolidated balance sheets is as follows (in millions, except lease term and discount rate):

	June 30, 2024			December 31, 2023
Operating Leases:
Operating lease right-of-use assets	$	4,088		$	4,308
Current maturities of operating leases	$	683		$	709
Non-current operating leases	3,561			3,756
Total operating lease obligations	$	4,244		$	4,465
Finance Leases:
Property, plant and equipment, net	$	667		$	856
Current maturities of long-term debt, commercial paper and finance leases	$	106		$	104
Long-term debt and finance leases	331			368
Total finance lease obligations	$	437		$	472
Weighted average remaining lease term (in years):
Operating leases	10.7			10.8
Finance leases	7.2			7.4
Weighted average discount rate:
Operating leases	3.35		%	3.20		%
Finance leases	3.99		%	3.88		%

Supplemental cash flow information related to leases is as follows (in millions):

	Six Months Ended  June 30,
	2024		2023
Cash paid for amounts included in measurement of obligations:
Operating cash flows from operating leases	$	448	$	419
Operating cash flows from finance leases	10		8
Financing cash flows from finance leases	58		79
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	232	$	826
Finance leases	$	23	$	106

Maturities of lease obligations as of June 30, 2024 were as follows (in millions):

	Finance Leases		Operating Leases
2024	$	64	$	396
2025	105		828
2026	79		721
2027	49		619
2028	42		468
Thereafter	173		2,067
Total lease payments	512		5,099
Less: Imputed interest	(75)		(855)
Total lease obligations	437		4,244
Less: Current obligations	(106)		(683)
Long-term lease obligations	$	331	$	3,561

As of June 30, 2024, we had $628 million of additional leases which had not commenced. These leases will commence later in 2024 through 2026 when we are granted access to the property, such as when leasehold improvements are completed by the lessor or a certificate of occupancy is obtained.

LEASES

LEASES

We have finance and operating leases for real estate (primarily package centers, airport facilities and warehouses), aircraft and engines, information technology equipment, vehicles and various other equipment used in operating our business. Certain leases for real estate and aircraft contain options to purchase, extend or terminate the lease.

Aircraft

In addition to the aircraft that we own, we charter aircraft to handle package and cargo volume on certain international trade lanes and domestic routes. Due to the nature of these agreements, primarily being that either party can cancel the agreement with short notice, we have classified these as short-term leases. A majority of our long-term aircraft operating leases are operated by a third party to handle package and cargo volume in geographic regions where, due to government regulations, we are restricted from operating an airline.

Transportation equipment and other equipment

We enter into both long-term and short-term leases for transportation equipment to supplement our capacity or meet contractual demands. Some of these assets are leased on a month-to-month basis and the leases can be terminated without penalty. We also enter into equipment leases to increase capacity during periods of high demand. These leases are treated as short-term as the cumulative right of use is less than 12 months over the term of the contract.

Some of our transportation and technology equipment leases require us to make additional lease payments based on the underlying usage of the assets. Due to the variable nature of these costs, these are expensed as incurred and are not included in the right of use lease asset and associated lease obligation.

The components of lease expense for the three and six months ended June 30, 2024 and 2023 were as follows (in millions):

	Three Months Ended  June 30,				Six Months Ended  June 30,
	2024		2023		2024		2023
Operating lease costs	$	231	$	219	$	462	$	426
Finance lease costs:
Amortization of assets	31		28		66		57
Interest on lease liabilities	5		5		10		9
Total finance lease costs	36		33		76		66
Variable lease costs	78		68		154		140
Short-term lease costs	192		226		391		503
Total lease costs(1)	$	537	$	546	$	1,083	$	1,135

(1)    This table excludes sublease income as it was not material for the three and six months ended June 30, 2024 and 2023.

In addition to the lease costs disclosed in the table above, we monitor all lease categories for any indicators that the carrying value of the assets may not be recoverable. There were no material lease impairments recognized during the three or six months ended June 30, 2024 or 2023.

Supplemental information related to leases and location within our consolidated balance sheets is as follows (in millions, except lease term and discount rate):

	June 30, 2024			December 31, 2023
Operating Leases:
Operating lease right-of-use assets	$	4,088		$	4,308
Current maturities of operating leases	$	683		$	709
Non-current operating leases	3,561			3,756
Total operating lease obligations	$	4,244		$	4,465
Finance Leases:
Property, plant and equipment, net	$	667		$	856
Current maturities of long-term debt, commercial paper and finance leases	$	106		$	104
Long-term debt and finance leases	331			368
Total finance lease obligations	$	437		$	472
Weighted average remaining lease term (in years):
Operating leases	10.7			10.8
Finance leases	7.2			7.4
Weighted average discount rate:
Operating leases	3.35		%	3.20		%
Finance leases	3.99		%	3.88		%

Supplemental cash flow information related to leases is as follows (in millions):

	Six Months Ended  June 30,
	2024		2023
Cash paid for amounts included in measurement of obligations:
Operating cash flows from operating leases	$	448	$	419
Operating cash flows from finance leases	10		8
Financing cash flows from finance leases	58		79
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	232	$	826
Finance leases	$	23	$	106

Maturities of lease obligations as of June 30, 2024 were as follows (in millions):

	Finance Leases		Operating Leases
2024	$	64	$	396
2025	105		828
2026	79		721
2027	49		619
2028	42		468
Thereafter	173		2,067
Total lease payments	512		5,099
Less: Imputed interest	(75)		(855)
Total lease obligations	437		4,244
Less: Current obligations	(106)		(683)
Long-term lease obligations	$	331	$	3,561

As of June 30, 2024, we had $628 million of additional leases which had not commenced. These leases will commence later in 2024 through 2026 when we are granted access to the property, such as when leasehold improvements are completed by the lessor or a certificate of occupancy is obtained.