Commitments and Contingencies

9 Months Ended

Sep. 30, 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 and aircraft leasing companies. As of September 30, 2019, the Company's aircraft orders consisted of the following:



	Airbus	Third-Party Lessor
	A320neo	A320ceo	A320neo	Total
Remainder of 2019	7	2	0	9
2020	15	0	5	20
2021	20	0	7	27
	42	2	12	56

As of September 30, 2019, the Company has no contractual aircraft purchase commitments beyond 2021. The Company also has one spare engine order for a V2500 SelectTwo engine with International Aero Engines ("IAE") and six spare engine orders for PurePower PW1100G-JM engines with Pratt & Whitney. Spare engines are scheduled for delivery from 2020 through 2023. Purchase commitments for these aircraft and engines, including estimated amounts for contractual price escalations and pre-delivery payments, are expected to be $308.1 million for the remainder of 2019, $858.1 million in 2020, $776.1 million in 2021, $17.6 million in 2022, $8.3 million in 2023, and none in 2024 and beyond. As of September 30, 2019, the Company has secured sale-leaseback financing commitments for five aircraft being delivered from Airbus in the remainder of 2019. As of September 30, 2019, the Company does not have financing commitments in place for the remaining 37 Airbus aircraft on firm order, which are scheduled for delivery in the remainder of 2019 through 2021. Aircraft rent commitments for future aircraft deliveries to be financed under direct leases from third-party lessors are expected to be approximately $0.8

million for the remainder of 2019, $15.0 million in 2020, $42.0 million in 2021, $47.8 million in 2022, $47.8 million in 2023, and $420.4 million in 2024 and beyond.

In October 2019, the Company reached a memorandum of understanding with Airbus for the purchase of 100 new Airbus A320neo family aircraft with the option to purchase up to an additional 50 aircraft. The aircraft would be scheduled for delivery between 2022 and 2027. The memorandum is subject to finalization in the purchase agreement.

Interest commitments related to the secured debt financing of 62 delivered aircraft as of September 30, 2019 are $22.7 million for the remainder of 2019, $78.5 million in 2020, $71.3 million in 2021, $64.3 million in 2022, $54.1 million in 2023, and $157.9 million in 2024 and beyond. For principal commitments related to these financed aircraft, refer to Note 13, Debt and Other Obligations.

The Company is contractually obligated to pay the following minimum guaranteed payments for its reservation system and other miscellaneous subscriptions and services as of September 30, 2019: $3.4 million for the remainder of 2019, $17.5 million in 2020, $14.7 million in 2021, $13.9 million in 2022, $12.7 million in 2023, and $60.1 million thereafter. During the first quarter of 2018, the Company entered into a contract renewal with its reservation system provider which expires in 2028.

On October 17, 2019, the Company announced its intention to build a headquarter campus in Dania Beach, Florida of up to 500,000 square feet by 2022. The Company entered into an agreement in principle to secure the land and expects to have a finalized, definitive agreement by December 2019. The Company estimates the total capital outlay for the project will be approximately $250 million over 36 months.

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 September 30, 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 September 30, 2019 and December 31, 2018, was $399.0 million and $321.0 million, respectively.

Employees

The Company has 5 union-represented employee groups that together represented approximately 80% of all employees as of September 30, 2019. The table below sets forth the Company's employee groups and status of the collective bargaining agreements as of September 30, 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	46%
Dispatchers	Professional Airline Flight Control Association ("PAFCA")	October 2023	1%
Ramp Service Agents	International Association of Machinists and Aerospace Workers ("IAMAW")	June 2020	3%
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 $80.2 million, including payroll taxes, and an $8.5 million adjustment related to other contractual provisions. These amounts were recorded in special charges (credits) within operating expenses in the condensed statements of operations for the nine months ended September 30, 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 September 30, 2019, the Company continued to negotiate with the TWU.

The Company is self-insured for healthcare 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 $4.7 million and $4.4 million in health care claims as of September 30, 2019 and December 31, 2018, respectively.