Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Aircraft-Related Commitments and Financing Arrangements

The Company’s contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers. During the first quarter of 2018, the Company negotiated revisions to its A320 aircraft order. The Company originally had 14 A320neo aircraft scheduled for delivery in 2019. Pursuant to the revisions, 5 of the 14 scheduled A320neo aircraft were converted to A320ceo aircraft, of which 3 were delivered in the fourth quarter of 2018 and the remaining 2 are scheduled to be delivered in 2019. As of December 31, 2018, the Company's firm aircraft orders consisted of the following:



	Airbus		Third-Party Lessor
	A320ceo	A320neo	A320neo	Total
2019	2	9	5	16
2020		16		16
2021		18		18
	2	43	5	50

During the first quarter of 2018, the Company entered into an aircraft purchase agreement for the purchase of 14 A319 aircraft, which were previously financed under operating lease agreements. The contract was deemed a lease modification which resulted in a change in classification from operating leases to capital leases for the 14 aircraft. As a result, the Company recorded a short-term capital lease asset of $236.7 million within flight equipment and a short-term capital lease obligation of $143.8 million, net of the related maintenance reserves and security deposits, within current maturities of long-term debt and capital leases on the Company's balance sheet as of March 31, 2018. The purchase of all 14 aircraft was completed during the second quarter of 2018 for an aggregate gross purchase price of $285.0 million, which was comprised of cash payments, net of the application of cash maintenance and security deposits held by the previous lessor. For additional information, refer to Note 5, Special Charges.

The Company also has two spare engine orders for V2500 SelectTwo engines with IAE and eight spare engine orders for PurePower PW 1100G-JM engines with Pratt & Whitney. Spare engines are scheduled for delivery from 2019 through 2024. Purchase commitments for these aircraft and engines, including estimated amounts for contractual price escalations and pre-delivery payments, are expected to be $583.8 million in 2019, $811.4 million in 2020, $775.6 million in 2021, $17.7 million in 2022, $8.4 million in 2023, and $0.0 million in 2024 and beyond. As of December 31, 2018, the Company had secured debt financing commitments of $70.0 million for 2 aircraft, scheduled for delivery in 2019. In addition, as of December 31, 2018, the Company had secured financing for five aircraft to be leased directly from a third-party lessor, scheduled for delivery in 2019. Aircraft rent commitments for these 5 aircraft are expected to be approximately $18.2 million in 2019, $20.2 million in 2020, $20.2 million in 2021, $20.2 million in 2022, $20.2 million in 2023, and $143.3 million in 2024 and beyond. The Company did not have financing commitments in place for the remaining 43 Airbus aircraft currently on firm order, which are scheduled for delivery in 2019 through 2021.

Interest commitments related to the secured debt financing of 60 delivered aircraft as of December 31, 2018 are $83.3 million in 2019, $76.2 million in 2020, $69.2 million in 2021, $62.4 million in 2022, $52.3 million in 2023, and $150.3 million in 2024 and beyond. For principal commitments related to these financed aircraft, refer to Note 13, Debt and Other Obligations. As of December 31, 2018, principal and interest commitments related to the Company's future secured debt financing of two

undelivered aircraft are approximately $5.7 million in 2019, $9.4 million in 2020, $8.1 million in 2021, $7.1 million in 2022, $7.1 million in 2023, and $52.4 million in 2024 and beyond.

In July 2015, the Company executed an upgrade service agreement with Airbus Americas Customer Services Inc. ("Airbus") to reconfigure the seating and increase capacity in 40 of the Company’s A320ceos from 178 to 182 seats (the "reconfiguration"). The reconfiguration of the aircraft commenced in the first quarter of 2016 and was completed in the second quarter of 2018. As of December 31, 2018, the Company had no further commitments related to this agreement. The amounts related to the reconfiguration are capitalized within flight equipment on the Company's balance sheet.

The Company is contractually obligated to pay the following minimum guaranteed payments for its reservation system and other miscellaneous subscriptions and services as of December 31, 2018: $14.4 million in 2019, $14.3 million in 2020, $11.3 million in 2021, $11.2 million in 2022, $11.3 million in 2023, and $56.0 million in 2024 and beyond. During the first quarter of 2018, the Company entered into a contract renewal with its reservation system provider which expires in 2028.

Litigation

The Company is subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. The Company believes the ultimate outcome of such lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on its financial position, liquidity or results of operations.

Employees

The Company has five union-represented employee groups that together represent approximately 80% of all employees at December 31, 2018. The Company had four union-represented employee groups that together represented approximately 75% of all employees at December 31, 2017. The table below sets forth the Company's employee groups and status of the collective bargaining agreements as of December 31, 2018.



Employee Groups	Representative	Amendable Date	Percentage of Workforce
Pilots	Air Line Pilots Association, International (ALPA)	February 2023	27%
Flight Attendants	Association of Flight Attendants (AFA-CWA)	May 2021	45%
Dispatchers	Professional Airline Flight Control Association (PAFCA)	October 2023	1%
Ramp Service Agents	International Association of Machinists and Aerospace Workers (IAMAW)	June 2020	4%
Passenger Service Agents	Transport Workers Union of America (TWU)	NA	3%

In August 2015, the Company's collective bargaining agreement with its pilots, represented by ALPA, became amendable. In June 2016, ALPA requested the services of the National Mediation Board ("NMB") to facilitate negotiations for an amended agreement and the Company joined ALPA in the request. In January 2018, under the guidance of the NMB assigned mediators, the parties reached a tentative agreement. In February 2018, the pilot group voted to approve the new five-year agreement with the Company. The new agreement includes a one-time ratification incentive of $80.2 million, including payroll taxes, and an $8.5 million adjustment related to other contractual provisions which was recorded in special charges within operating expenses in the statement of operations for the year ended 2018. For additional information, refer to Note 5, Special Charges.

In March 2016, under the supervision of the NMB, the Company and AFA-CWA reached a tentative agreement for a five-year contract with the Company's flight attendants. In May 2016, the flight attendants voted to approve the new five-year contract with the Company. In connection with this agreement, the Company paid a $9.6 million ratification incentive payment to the flight attendants recorded within salaries, wages and benefits in the statement of operations. Of the total ratification incentive, $8.4 million was recorded during 2016 as the remaining $1.2 million was previously accrued in 2015.

In December 2017, PAFCA filed an application with the NMB seeking to represent our dispatchers, who were previously represented by the TWU. In January 2018, the NMB determined that a representation election would be held. The voting period for the representation election took place through February 20, 2018 and the dispatchers elected to be represented by the PAFCA. In June 2018, the Company commenced negotiations with PAFCA for an amended agreement with its dispatchers. In October 2018, PAFCA and the Company reached a tentative agreement for a new five-year agreement, which was ratified by the PAFCA members in October 2018.

In June 2018, the NMB notified the Company that the TWU filed an application seeking a representation election for the Company's passenger service agents. The NMB determined that a representation election would be held and the voting period

for the election took place through September 4, 2018. The Company's passenger service agents voted to be represented by the TWU, but the representation applies only to the Company's Fort Lauderdale station where the Company has direct employees in the passenger service classification. The Company and the TWU began meeting in late October 2018 to negotiate an initial collective bargaining agreement. As of December 31, 2018, the Company continued to negotiate with the TWU.

The Company is self-insured for health care claims, subject to a stop-loss policy, for eligible participating employees and qualified dependent medical claims, subject to deductibles and limitations. The Company’s liabilities for claims incurred but not reported are determined based on an estimate of the ultimate aggregate liability for claims incurred. The estimate is calculated from actual claim rates and adjusted periodically as necessary. The Company has accrued $4.4 million and $3.9 million, for health care claims as of December 31, 2018, and 2017, respectively, recorded within other current liabilities on the Company's balance sheet.