XML 34 R24.htm IDEA: XBRL DOCUMENT

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Except as described in the paragraph below, we account for heavy maintenance costs for airframes and engines using the direct expense method. Under this method, heavy maintenance costs are charged to expense upon induction, based on our best estimate of the costs after considering multiple factors, including historical costs, experience and information provided by third-party maintenance providers. These estimates may be subsequently adjusted for changes and the final determination of actual costs incurred. As of June 30, 2022 and December 31, 2021, Accrued heavy maintenance was $72.3 million and $79.6 million, respectively.

We account for heavy maintenance costs for airframes and engines used in our Dry Leasing segment and engines used on our 747-8F and 777-200 aircraft using the deferral method. Under this method, we defer the expense recognition of scheduled heavy maintenance events, which are amortized over the shorter of the estimated period until the next scheduled heavy maintenance event is required or remaining lease term. Amortization of deferred maintenance expense included in Depreciation and amortization was $12.2 million and $23.3 million for the three and six months ended June 30, 2022, respectively. Amortization of deferred maintenance expense included in Depreciation and amortization was $12.3 million and $24.3 million for the three and six months ended June 30, 2021, respectively.

Deferred maintenance included within Deferred costs and other assets is as follows:


Balance as of December 31, 2021	$	180,675
Deferred maintenance costs		14,236
Special charge (1)		(1,628	)
Amortization of deferred maintenance		(23,325	)
Balance as of June 30, 2022	$	169,958

(1) See Note 6 for further discussion.

Property and Equipment

Committed capital expenditures are expected to be $501.8 million for the remainder of 2022 and $359.7 million in 2023. These expenditures include delivery payments for our January 2021 agreement to purchase four 747-8F aircraft from The Boeing Company (“Boeing”), the first of these aircraft was delivered during the second quarter of 2022 and the remaining three are expected to be delivered throughout 2022. These amounts also include pre-delivery and delivery payments for our December 2021 agreement to purchase four new 777-200LRF aircraft from Boeing, the first of these aircraft is expected to be delivered late in the fourth quarter of 2022 and the remaining three throughout 2023. In addition, the amounts include other agreements to acquire spare engines.

Payroll Support Program under the CARES Act

In May 2020, two subsidiaries of the Company, Atlas and Southern Air, Inc. (“Southern Air”, and together with Atlas, the “PSP Recipients”) entered into an agreement with the U.S. Treasury (the "PSP Agreement") with respect to payroll support funding available to cargo carriers under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). AAWW also entered into a Warrant Agreement (the “Warrant Agreement”) with the U.S. Treasury, and AAWW issued a senior unsecured promissory note to the U.S. Treasury (the “Promissory Note”), with the PSP Recipients as guarantor.

In connection with the payroll support funding received in 2020 under the PSP Agreement, we issued warrants to the U.S. Treasury to acquire up to 625,452 shares of our common stock. The warrants will expire in 2025 on the fifth anniversary of the issue date of each warrant. As of June 30, 2022, no portion of the warrants have been exercised.

We initially recognized deferred grant income within Accrued liabilities for the difference between the payroll support funding received in 2020 under the PSP Agreement and the amounts recorded for the Promissory Note and the Warrant Agreement. All grant income has been subsequently recognized within Other (income) expense, net in the consolidated statement of operations on a pro-rata basis over the periods that the qualifying employee wages, salaries and benefits were paid. During the six months ended June 30, 2021, we recognized the remaining $40.9 million of deferred grant income within Other (income) expense, net in the consolidated statement of operations.

Recent Accounting Pronouncements

Recent Accounting Pronouncement Adopted in 2022

In August 2020, the Financial Accounting Standards Board amended its accounting guidance for certain financial instruments with characteristics of liabilities and equity, including convertible debt instruments. For convertible debt with a cash conversion feature, the amended guidance removes the accounting model to separately account for the liability and equity components, which resulted in the amortization of a debt discount to interest expense. Under this amended guidance, such convertible debt is accounted for as a single debt instrument with no amortization of a debt discount, unless certain other conditions are met. The amended guidance also requires the use of the if-converted method when calculating the dilutive impact of convertible debt on earnings per share. Effective January 1, 2022, we adopted the amended guidance using the modified retrospective approach, under which the guidance was applied only to the most current period presented. On January 1, 2022, we recorded an increase of $31.0 million to the carrying value of our convertible notes, a reduction of $6.9 million to deferred tax liabilities, a reduction of $92.6 million to Additional paid-in capital and an increase of $68.5 million to Retained earnings for the cumulative effect of adoption.