Special Charges

3 Months Ended

Mar. 31, 2018

Special Charges and Credits [Abstract]

Special Charges

Special Charges

During the three months ended March 31, 2018, under the guidance of the National Mediation Board (NMB), the Company effectively negotiated and amended the collective bargaining agreement with the Air Line Pilots Association, International (ALPA). In connection with the amended agreement, the Company recorded $89.2 million in special charges within operating expenses in the statement of operations. The total amount includes a one-time $80.7 million ratification incentive bonus, including payroll taxes, and an $8.5 million adjustment related to other contractual provisions. The ratification incentive bonus is expected to be paid during the second quarter of 2018.

During the three months ended March 31, 2018, the Company recorded $9.2 million in special charges, non-operating within other (income) expense in the statement of operations. On March 28, 2018, the Company entered into an aircraft sale agreement to acquire fourteen A319-100 aircraft previously operated by the Company under operating leases. The agreement provides for the purchase by the Company of each aircraft to occur during the second quarter 2018. The aggregate gross purchase price for the 14 aircraft is $285.0 million, and the payment of the price for each aircraft at the time of the sale will be comprised of a cash payment net of the amount of maintenance reserves and security deposits for such aircraft held by the applicable lessor pursuant to the lease for such aircraft. The contract was deemed a lease modification which resulted in a change of classification from operating leases to capital leases for the 14 aircraft. The capital lease assets have been recorded at the fair value of the aircraft. The obligation will be accreted up to the net cash payment price with interest charges recognized in special charges, non-operating in the statement of operations. The Company determined the valuation of the aircraft based on third-party appraisals considering the condition of the aircraft (a Level 3 measurement). 

During the three months ended March 31, 2017, the Company purchased one engine which was previously financed under an operating lease agreement. The purchase price of the engine was $8.1 million, comprised of a cash payment of $3.8 million and the non-cash application of maintenance reserves and security deposits held by the previous lessor of $4.3 million. The Company estimated the fair value of the engine to be $3.1 million and has recorded the purchased engine at fair value within flight equipment on the condensed balance sheets. The Company determined the valuation of the engine based on a third-party appraisal considering the condition of the engine (a Level 3 measurement). The Company recognized $4.8 million

as a cost of terminating the lease within special charges on the condensed statement of operations, made up of the excess of the purchase price paid over the fair value of the engine, less other non-cash items of $0.2 million.