Commitments and Contingencies

12 Months Ended

Dec. 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 and aircraft leasing companies. As of December 31, 2019, the Company's firm aircraft orders consisted of 135 A320 family aircraft with Airbus, including A319neos, A320neos and A321neos, with deliveries expected through 2027. In addition, the Company had 12 direct operating leases for A320neos with third-party lessors, with deliveries expected through 2021.

On December 20, 2019, the Company entered into an A320 NEO Family Purchase Agreement with Airbus for the purchase of 100 new Airbus A320neo family aircraft, with options to purchase up to 50 additional aircraft. This agreement includes a mix of Airbus A319neo, A320neo and A321neo aircraft with such aircraft scheduled for delivery through 2027. The Company also has one spare engine order for a V2500 SelectTwo engine with IAE and four spare engine orders for PurePower PW 1100G-JM engines with Pratt & Whitney. Spare engines are scheduled for delivery from 2020 through 2023. As of December 31, 2019, purchase commitments for these aircraft and engines, including estimated amounts for contractual price escalations and pre-delivery payments, are expected to be $988.0 million in 2020, $744.8 million in 2021, $123.7 million in 2022, $491.6 million in 2023, $1,002.5 million in 2024, and $3,605.4 million in 2025 and beyond. During the third quarter of 2019, the United States announced its decision to levy tariffs on certain imports from the European Union, including commercial aircraft and related parts. These tariffs include aircraft and other parts that the Company is already contractually obligated to purchase including those reflected above. The imposition of these tariffs may substantially increase the cost of new Airbus aircraft and parts required to service the Company's Airbus fleet. For further discussion on this topic, please refer to "Risk Factors - Risks Related to Our Business - Any tariffs imposed on commercial aircraft and related parts imported from outside the United States may have a material adverse effect on our fleet, business, financial condition and our results of operations."

As of December 31, 2019, the Company had secured debt financing commitments for 3 aircraft scheduled for delivery in 2020. In addition, as of December 31, 2019, the Company had secured financing for 12 aircraft to be leased directly from third-party lessors, scheduled for delivery in 2020 through 2021. The Company did not have financing commitments in place for the remaining 132 Airbus aircraft currently on firm order, which are scheduled for delivery through 2027. However, the Company has signed a financing letter of agreement with Airbus which provides backstop financing for a majority of the aircraft included in the A320 NEO Family Purchase Agreement. The agreement provides a standby credit facility in the form of senior secured mortgage debt financing.

As of December 31, 2019, principal and interest commitments related to the Company's future secured debt financing of 3 undelivered aircraft are approximately $9.6 million in 2020, $12.9 million in 2021, $13.0 million in 2022, $13.0 million in 2023, $13.1 million in 2024, and $83.3 million in 2025 and beyond. As of December 31, 2019, aircraft rent commitments for future aircraft deliveries to be financed under direct leases from third-party lessors are expected to be approximately $6.0 million in 2020, $34.9 million in 2021, $44.1 million in 2022, $44.1 million in 2023, $44.1 million in 2024, and $356.1 million in 2025 and beyond.

Interest commitments related to the secured debt financing of 64 delivered aircraft as of December 31, 2019 are $77.9 million in 2020, $71.0 million in 2021, $64.7 million in 2022, $54.6 million in 2023, $44.0 million in 2024, and $118.1 million in 2025 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 December 31, 2019: $21.9 million in 2020, $17.1 million in 2021, $17.2 million in 2022, $13.7 million in 2023, $13.9 million in 2024, and $50.3 million in 2025 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 81% of all employees at December 31, 2019. The table below sets forth the Company's employee groups and status of the collective bargaining agreements as of December 31, 2019.



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	47%
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 February 2018, the pilot group voted to approve the current five-year agreement with the Company. The current 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 December 31, 2018. For additional information, refer to Note 4, Special Charges.

The Company's passenger service agents are 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, 2019, 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 $5.2 million and $4.4 million, for health care claims as of December 31, 2019, and 2018, respectively, recorded within other current liabilities on the Company's balance sheet.