Commitments and Contingencies

3 Months Ended

Mar. 31, 2019

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. As of March 31, 2019, the Company's aircraft orders consisted of the following:



	Airbus		Third-Party Lessor
	A320ceo	A320neo	A320neo	Total
remainder of 2019	1	8	1	10
2020		17		17
2021		18		18
	1	43	1	45

As of March 31, 2019, the Company has no contractual aircraft purchase commitments beyond 2021. The Company also has two spare engine orders for V2500 SelectTwo engines with International Aero Engines ("IAE") and seven spare engine orders for PurePower PW1100G-JM engines with Pratt & Whitney. Spare engines are scheduled for delivery from 2019 through 2023. Purchase commitments for these aircraft and engines, including estimated amounts for contractual price escalations and pre-delivery payments, are expected to be $466.6 million for the remainder of 2019, $865.7 million in 2020, $775.7 million in 2021, $17.6 million in 2022, $8.3 million in 2023, and $0.0 million in 2024 and beyond. As of March 31, 2019, the Company had secured debt financing commitments of $35.0 million for 1 aircraft, being delivered in May 2019. In addition, the Company has secured financing for one aircraft leased directly from a third-party lessor, which was delivered in April 2019. Aircraft rent commitments for this 1 leased aircraft are approximately $3.0 million for the remainder of 2019, $4.1 million in 2020, $4.1 million in 2021, $4.1 million in 2022, $4.1 million in 2023, and $29.4 million in 2024 and beyond. As of March 31, 2019, the Company does not have financing commitments in place for the remaining 43 Airbus aircraft on firm order, which are scheduled for delivery in the remainder of 2019 through 2021.

Interest commitments related to the secured debt financing of 61 delivered aircraft as of March 31, 2019 are $64.9 million for the remainder of 2019, $77.4 million in 2020, $70.3 million in 2021, $63.4 million in 2022, $53.2 million in 2023, and $154.2 million in 2024 and beyond. For principal commitments related to these financed aircraft, refer to Note 12, Debt and Other Obligations. As of March 31, 2019, principal and interest commitments related to the Company's future secured debt financing of 1 undelivered aircraft under bank debt are $2.2 million for the remainder of 2019, $4.7 million in 2020, $4.7 million in 2021, $3.5 million in 2022, $3.6 million in 2023, and $26.2 million in 2024 and beyond.

The Company is contractually obligated to pay the following minimum guaranteed payments for its reservation system and other miscellaneous subscriptions and services as of March 31, 2019: $9.3 million for the remainder of 2019, $14.4 million in 2020, $11.3 million in 2021, $11.2 million in 2022, $11.3 million in 2023, and $56.0 million thereafter. 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.

Credit Card Processing Arrangements

The Company has agreements with organizations that process credit card transactions arising from the purchase of air travel, baggage charges, and other ancillary services by customers. As is standard in the airline industry, the Company's contractual arrangements with credit card processors permit them, under certain circumstances, to retain a holdback or other collateral, which the Company records as restricted cash, when future air travel and other future services are purchased via credit card transactions. The required holdback is the percentage of the Company's overall credit card sales that its credit card processors hold to cover refunds to customers if the Company fails to fulfill its flight obligations.

The Company's credit card processors do not require the Company to maintain cash collateral provided that the Company satisfies certain liquidity and other financial covenants. Failure to meet these covenants would provide the processors the right to place a holdback resulting in a commensurate reduction of unrestricted cash. As of March 31, 2019 and December 31, 2018, the Company was in compliance with such liquidity and other financial covenants in its credit card processing agreements and the processors were holding back no remittances.

The maximum potential exposure to cash holdbacks by the Company's credit card processors, based upon advance ticket sales and $9 Fare Club memberships as of March 31, 2019 and December 31, 2018, was $455.5 million and $321.0 million, respectively.

Employees

The Company has 5 union-represented employee groups that together represented approximately 79% of all employees at March 31, 2019. The table below sets forth the Company's employee groups and status of the collective bargaining agreements as of March 31, 2019.



Employee Groups	Representative	Amendable Date	Percentage of Workforce
Pilots	Air Line Pilots Association, International ("ALPA")	February 2023	26%
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 February 2018, the pilot group voted to approve a new five-year agreement with the Company. In connection with the new agreement, the Company recorded a one-time ratification incentive of $80.7 million, including payroll taxes, and an $8.5 million adjustment related to other contractual provisions. These amounts totaling $89.2 million were recorded in special charges within operating expenses in the condensed statement of operations for the three months ended March 31, 2018. For additional information, refer to Note 4, Special Charges.

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 March 31, 2019, the Company continued to negotiate with the TWU.

The Company is self-insured for health care claims, up to a stop loss amount 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 $5.1 million and $4.4 million in health care claims as of March 31, 2019 and December 31, 2018, respectively.