XML 44 R24.htm IDEA: XBRL DOCUMENT v3.20.4
Leases and Aircraft Maintenance Deposits
 12 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Leases and Maintenance Deposits Leases and Aircraft Maintenance Deposits
The Company leases aircraft, engines, airport terminals, maintenance and training facilities, aircraft hangars, commercial real estate and office and computer equipment, among other items. Certain of these leases include provisions for variable lease payments which are based on several factors, including, but not limited to, relative leases square footage, enplaned passengers, and airports' annual operating budgets. Due to the variable nature of the rates, these leases are not recorded on the Company's consolidated balance sheets as a right-of-use asset and lease liability. Lease terms are generally 8 to 18 years for aircraft and up to 99 years for other leased equipment and property.
As of December 31, 2020, the Company had a fleet consisting of 157 A320 family aircraft. As of December 31, 2020, the Company had 56 aircraft financed under operating leases with lease term expirations between 2022 and 2038. In addition, the Company owned 101 aircraft of which 29 were purchased off lease and are currently unencumbered. As of December 31, 2020, the Company also had 8 spare engines financed under operating leases with lease term expiration dates ranging from 2023 to 2027 and owned 16 spare engines, all of which as of December 31, 2020, were pledged as collateral under the Company's 2022 revolving credit facility.
Total rent expense for all leases charged to operations for the years ended 2020, 2019 and 2018 was $371.6 million, $345.0 million and $312.0 million, respectively. Total rental expense charged to operations for aircraft and engine operating leases for the years ended December 31, 2020, 2019 and 2018 was $196.4 million, $182.6 million and $177.6 million, respectively.
Some of the Company’s aircraft and engine master lease agreements provide that the Company pays maintenance reserves to aircraft lessors to be held as collateral in advance of the Company’s required performance of major maintenance activities. Maintenance reserve payments that are substantively and contractually related to the maintenance of the leased asset are accounted for as aircraft maintenance deposits to the extent they are expected to be recoverable. A majority of these maintenance reserve payments are calculated based on a utilization measure, such as flight hours or cycles, while some maintenance reserve payments are fixed, time-based contractual amounts. Fixed maintenance reserve payments that are not probable of being recovered are considered lease payments and are included in the right-of-use asset and lease liability. Maintenance reserve payments that are based on a utilization measure and are not probable of being recovered are considered variable lease payments that are recognized when they are probable of being incurred and are not included in the right-of-use asset and lease liability.
These lease agreements generally provide that maintenance reserves are reimbursable to the Company upon completion of the maintenance event. Some of the master lease agreements do not require that the Company pay maintenance reserves so long as the Company's cash balance does not fall below a certain level. As of December 31, 2020, the Company is in full compliance with those requirements and does not anticipate having to pay reserves related to these master leases in the future.

Under the terms of the lease agreements, the Company will continue to operate and maintain the aircraft. Payments under the majority of the lease agreements are fixed for the term of the lease. The lease agreements contain standard termination events, including termination upon a breach of the Company's obligations to make rental payments and upon any other material breach of the Company's obligations under the leases, and standard maintenance and return condition provisions. These return provisions are evaluated at inception of the lease and throughout the lease terms and are accounted for as either fixed or variable lease payments (depending on the nature of the lease return condition) when it is probable that such amounts will be incurred. When determining probability and estimated cost of lease return obligations, there are various other factors that need to be considered such as the contractual terms of the lease, the ability to swap engines or other aircraft components, current condition of the aircraft, the age of the aircraft at lease expiration, utilization of engines and other components, the extent of repairs needed at return, return locations, current configuration of the aircraft and cost of repairs and materials at the time of return. Management assesses the factors listed above and the need to accrue lease return costs throughout the lease as facts and circumstances warrant an assessment. As a result of COVID-19, the Company is currently operating its aircraft at lower utilization levels. If the Company continues flying its aircraft at lower utilization levels beyond its current projections, the timing of future maintenance events may change such that the Company will be required to accrue lease return costs and/or record reserves against its maintenance deposits earlier than it would have expected and such amounts could be significant. The Company expects lease return costs and unrecoverable maintenance deposits will increase as individual aircraft lease agreements approach their respective termination dates and the Company begins to accrue the estimated cost of return conditions for the corresponding aircraft. Upon a termination of the lease due to a breach by the Company, the Company would be liable for standard contractual damages, possibly including damages suffered by the lessor in connection with remarketing the aircraft or while the aircraft is not leased to another party.
Aircraft rent expense consists of monthly lease rents for aircraft and spare engines under the terms of the Company's aircraft and spare engine lease agreements recognized on a straight-line basis. Supplemental rent, recorded within aircraft rent expense, is made up of maintenance reserves paid to aircraft lessors that are not probable of being reimbursed and probable and estimable return condition obligations. The Company expensed $3.3 million, $4.8 million and $3.4 million of supplemental rent recorded within aircraft rent during 2020, 2019 and 2018, respectively. The Company did not expense any paid maintenance reserves as supplemental rent in 2020. During 2019 and 2018, the Company expensed $0.5 million and $1.3 million, respectively, of paid maintenance reserves as supplemental rent. As of December 31, 2020, the Company had $126.3 million of aircraft maintenance deposits ($73.1 million in aircraft maintenance deposits and $53.2 million in long-term aircraft maintenance deposits) on the Company's consolidated balance sheets.
During the twelve months ended December 31, 2020, the Company took delivery of eight aircraft under secured debt arrangements, one aircraft under a sale-leaseback transaction and three aircraft under direct operating leases. In addition, the Company purchased two previously leased aircraft. The Company also purchased two new engines and returned one previously leased engine.
Prior to the adoption of Topic 842 on January 1, 2019, gains and losses on sale-leaseback transactions were generally deferred and recognized in income over the lease term. Under Topic 842, gains and losses on sale-leaseback transactions, subject to adjustment for off-market terms, are recognized immediately and recorded within loss on disposal of assets on the Company's consolidated statements of operations.
On December 31, 2019, the Company entered into an aircraft purchase agreement to acquire two A319 aircraft previously operated by the Company under operating leases. The contract was deemed a lease modification, which resulted in a change of classification from operating leases to finance leases for the two aircraft. The Company recorded a finance lease obligation of $44.1 million calculated as the present value of the remaining lease payments, including the final payment to purchase the aircraft and included within current maturities of long-term debt and finance leases on the Company's consolidated balance sheets as of December 31, 2019. In addition, the Company recorded finance lease assets of $48.4 million which include related amounts previously recorded as maintenance reserves and security deposits and included within flight equipment on the Company's consolidated balance sheets as of December 31, 2019. In January 2020, the purchase of the two aircraft was completed and the aircraft were recorded within flight equipment on the Company's consolidated balance sheets.
The remainder of the Company's finance lease obligations relate to the lease of computer equipment used by the Company's flight crew and office equipment. Payments under these finance lease agreements are fixed for terms ranging from 4 to 5 years. Finance lease assets are recorded within property and equipment and the related liabilities are recorded within current maturities of long-term debt and finance leases and long-term debt and finance leases, less current maturities on the Company's consolidated balance sheets.
During the fourth quarter of 2019, the Company purchased an 8.5-acre parcel of land for $41.0 million and entered into a 99-year lease agreement for the lease of a 2.6-acre parcel of land, in Dania Beach, Florida, where the Company intends to build a new headquarters campus. In connection with the lease agreement, the Company is expected to build a 200-unit residential building. The 8.5-acre parcel of land is capitalized within ground property and equipment on the Company's consolidated balance sheets. The 99-year lease was determined to be an operating lease and is recorded within operating lease right-of-use asset and operating lease liability on the Company's consolidated balance sheets. Operating lease commitments related to this lease are included in the table below within property facility leases.
The following table provides details of the Company's future minimum lease payments under finance lease liabilities and operating lease liabilities recorded on the Company's consolidated balance sheets as of December 31, 2020. The table does not include commitments that are contingent on events or other factors that are currently uncertain and unknown.
Finance LeasesOperating LeasesTotal Operating and Finance Lease Obligations
Aircraft and Spare Engine LeasesProperty Facility Leases
(in thousands)
2021 (1)$753 $236,101 $4,683 $241,537 
2022725 209,911 4,397 215,033 
2023349 197,267 3,383 200,999 
202498 175,204 2,772 178,074 
2025— 153,146 1,060 154,206 
2026 and thereafter— 975,682 143,093 1,118,775 
Total minimum lease payments$1,925 $1,947,311 $159,388 $2,108,624 
Less amount representing interest137 562,493 134,628 697,258 
Present value of minimum lease payments$1,788 $1,384,818 $24,760 $1,411,366 
Less current portion671 130,484 3,307 134,462 
Long-term portion$1,117 $1,254,334 $21,453 $1,276,904 
(1) Includes $27.3 million of aircraft and spare engine rent payment deferrals due to COVID-19 which are recorded in other current liabilities within the Company's consolidated balance sheets.    
Commitments related to the Company's noncancellable short-term operating leases not recorded on the Company's consolidated balance sheets are expected to be $1.4 million for 2021 and none for 2022 and beyond. During 2020, the Company entered into agreements to defer payments in 2020 related to facility rents and other airport service contracts at certain locations. Also during 2020, the Company entered into agreements to defer payments related to certain aircraft and engine leases from 2020 into 2021. The Company elected to apply the practical expedient issued by the Financial Accounting Standards Board in April 2020 which allows companies to treat a lease concession related to COVID-19 as though enforceable rights and obligations for the concessions existed regardless of whether those enforceable rights and obligations explicitly exist in the lease agreement. Amounts deferred as of December 31, 2020 are recorded in accrued rent within other current liabilities on the Company's consolidated balance sheet.
The table below presents information for lease costs related to the Company's finance and operating leases:
Year Ended December 31,
20202019
(in thousands)
Finance lease cost
Amortization of leased assets$824 $998 
Interest of lease liabilities194 674 
Operating lease cost
Operating lease cost (1)
201,474 179,959 
Short-term lease cost (1)
25,195 5,144 
Variable lease cost (1)
125,534 140,417 
Total lease cost$353,221 $327,192 
    (1) Expenses are classified within aircraft rent and landing fees and other rents on the Company's consolidated statements of operations.
The table below presents lease-related terms and discount rates as of December 31, 2020:
December 31, 2020December 31, 2019
Weighted-average remaining lease term
Operating leases12.9 years13.0 years
Finance leases2.6 years0.1 years
Weighted-average discount rate
Operating leases6.08 %5.86 %
Finance leases5.54 %2.46 %
Leases and Maintenance Deposits Leases and Aircraft Maintenance Deposits
The Company leases aircraft, engines, airport terminals, maintenance and training facilities, aircraft hangars, commercial real estate and office and computer equipment, among other items. Certain of these leases include provisions for variable lease payments which are based on several factors, including, but not limited to, relative leases square footage, enplaned passengers, and airports' annual operating budgets. Due to the variable nature of the rates, these leases are not recorded on the Company's consolidated balance sheets as a right-of-use asset and lease liability. Lease terms are generally 8 to 18 years for aircraft and up to 99 years for other leased equipment and property.
As of December 31, 2020, the Company had a fleet consisting of 157 A320 family aircraft. As of December 31, 2020, the Company had 56 aircraft financed under operating leases with lease term expirations between 2022 and 2038. In addition, the Company owned 101 aircraft of which 29 were purchased off lease and are currently unencumbered. As of December 31, 2020, the Company also had 8 spare engines financed under operating leases with lease term expiration dates ranging from 2023 to 2027 and owned 16 spare engines, all of which as of December 31, 2020, were pledged as collateral under the Company's 2022 revolving credit facility.
Total rent expense for all leases charged to operations for the years ended 2020, 2019 and 2018 was $371.6 million, $345.0 million and $312.0 million, respectively. Total rental expense charged to operations for aircraft and engine operating leases for the years ended December 31, 2020, 2019 and 2018 was $196.4 million, $182.6 million and $177.6 million, respectively.
Some of the Company’s aircraft and engine master lease agreements provide that the Company pays maintenance reserves to aircraft lessors to be held as collateral in advance of the Company’s required performance of major maintenance activities. Maintenance reserve payments that are substantively and contractually related to the maintenance of the leased asset are accounted for as aircraft maintenance deposits to the extent they are expected to be recoverable. A majority of these maintenance reserve payments are calculated based on a utilization measure, such as flight hours or cycles, while some maintenance reserve payments are fixed, time-based contractual amounts. Fixed maintenance reserve payments that are not probable of being recovered are considered lease payments and are included in the right-of-use asset and lease liability. Maintenance reserve payments that are based on a utilization measure and are not probable of being recovered are considered variable lease payments that are recognized when they are probable of being incurred and are not included in the right-of-use asset and lease liability.
These lease agreements generally provide that maintenance reserves are reimbursable to the Company upon completion of the maintenance event. Some of the master lease agreements do not require that the Company pay maintenance reserves so long as the Company's cash balance does not fall below a certain level. As of December 31, 2020, the Company is in full compliance with those requirements and does not anticipate having to pay reserves related to these master leases in the future.

Under the terms of the lease agreements, the Company will continue to operate and maintain the aircraft. Payments under the majority of the lease agreements are fixed for the term of the lease. The lease agreements contain standard termination events, including termination upon a breach of the Company's obligations to make rental payments and upon any other material breach of the Company's obligations under the leases, and standard maintenance and return condition provisions. These return provisions are evaluated at inception of the lease and throughout the lease terms and are accounted for as either fixed or variable lease payments (depending on the nature of the lease return condition) when it is probable that such amounts will be incurred. When determining probability and estimated cost of lease return obligations, there are various other factors that need to be considered such as the contractual terms of the lease, the ability to swap engines or other aircraft components, current condition of the aircraft, the age of the aircraft at lease expiration, utilization of engines and other components, the extent of repairs needed at return, return locations, current configuration of the aircraft and cost of repairs and materials at the time of return. Management assesses the factors listed above and the need to accrue lease return costs throughout the lease as facts and circumstances warrant an assessment. As a result of COVID-19, the Company is currently operating its aircraft at lower utilization levels. If the Company continues flying its aircraft at lower utilization levels beyond its current projections, the timing of future maintenance events may change such that the Company will be required to accrue lease return costs and/or record reserves against its maintenance deposits earlier than it would have expected and such amounts could be significant. The Company expects lease return costs and unrecoverable maintenance deposits will increase as individual aircraft lease agreements approach their respective termination dates and the Company begins to accrue the estimated cost of return conditions for the corresponding aircraft. Upon a termination of the lease due to a breach by the Company, the Company would be liable for standard contractual damages, possibly including damages suffered by the lessor in connection with remarketing the aircraft or while the aircraft is not leased to another party.
Aircraft rent expense consists of monthly lease rents for aircraft and spare engines under the terms of the Company's aircraft and spare engine lease agreements recognized on a straight-line basis. Supplemental rent, recorded within aircraft rent expense, is made up of maintenance reserves paid to aircraft lessors that are not probable of being reimbursed and probable and estimable return condition obligations. The Company expensed $3.3 million, $4.8 million and $3.4 million of supplemental rent recorded within aircraft rent during 2020, 2019 and 2018, respectively. The Company did not expense any paid maintenance reserves as supplemental rent in 2020. During 2019 and 2018, the Company expensed $0.5 million and $1.3 million, respectively, of paid maintenance reserves as supplemental rent. As of December 31, 2020, the Company had $126.3 million of aircraft maintenance deposits ($73.1 million in aircraft maintenance deposits and $53.2 million in long-term aircraft maintenance deposits) on the Company's consolidated balance sheets.
During the twelve months ended December 31, 2020, the Company took delivery of eight aircraft under secured debt arrangements, one aircraft under a sale-leaseback transaction and three aircraft under direct operating leases. In addition, the Company purchased two previously leased aircraft. The Company also purchased two new engines and returned one previously leased engine.
Prior to the adoption of Topic 842 on January 1, 2019, gains and losses on sale-leaseback transactions were generally deferred and recognized in income over the lease term. Under Topic 842, gains and losses on sale-leaseback transactions, subject to adjustment for off-market terms, are recognized immediately and recorded within loss on disposal of assets on the Company's consolidated statements of operations.
On December 31, 2019, the Company entered into an aircraft purchase agreement to acquire two A319 aircraft previously operated by the Company under operating leases. The contract was deemed a lease modification, which resulted in a change of classification from operating leases to finance leases for the two aircraft. The Company recorded a finance lease obligation of $44.1 million calculated as the present value of the remaining lease payments, including the final payment to purchase the aircraft and included within current maturities of long-term debt and finance leases on the Company's consolidated balance sheets as of December 31, 2019. In addition, the Company recorded finance lease assets of $48.4 million which include related amounts previously recorded as maintenance reserves and security deposits and included within flight equipment on the Company's consolidated balance sheets as of December 31, 2019. In January 2020, the purchase of the two aircraft was completed and the aircraft were recorded within flight equipment on the Company's consolidated balance sheets.
The remainder of the Company's finance lease obligations relate to the lease of computer equipment used by the Company's flight crew and office equipment. Payments under these finance lease agreements are fixed for terms ranging from 4 to 5 years. Finance lease assets are recorded within property and equipment and the related liabilities are recorded within current maturities of long-term debt and finance leases and long-term debt and finance leases, less current maturities on the Company's consolidated balance sheets.
During the fourth quarter of 2019, the Company purchased an 8.5-acre parcel of land for $41.0 million and entered into a 99-year lease agreement for the lease of a 2.6-acre parcel of land, in Dania Beach, Florida, where the Company intends to build a new headquarters campus. In connection with the lease agreement, the Company is expected to build a 200-unit residential building. The 8.5-acre parcel of land is capitalized within ground property and equipment on the Company's consolidated balance sheets. The 99-year lease was determined to be an operating lease and is recorded within operating lease right-of-use asset and operating lease liability on the Company's consolidated balance sheets. Operating lease commitments related to this lease are included in the table below within property facility leases.
The following table provides details of the Company's future minimum lease payments under finance lease liabilities and operating lease liabilities recorded on the Company's consolidated balance sheets as of December 31, 2020. The table does not include commitments that are contingent on events or other factors that are currently uncertain and unknown.
Finance LeasesOperating LeasesTotal Operating and Finance Lease Obligations
Aircraft and Spare Engine LeasesProperty Facility Leases
(in thousands)
2021 (1)$753 $236,101 $4,683 $241,537 
2022725 209,911 4,397 215,033 
2023349 197,267 3,383 200,999 
202498 175,204 2,772 178,074 
2025— 153,146 1,060 154,206 
2026 and thereafter— 975,682 143,093 1,118,775 
Total minimum lease payments$1,925 $1,947,311 $159,388 $2,108,624 
Less amount representing interest137 562,493 134,628 697,258 
Present value of minimum lease payments$1,788 $1,384,818 $24,760 $1,411,366 
Less current portion671 130,484 3,307 134,462 
Long-term portion$1,117 $1,254,334 $21,453 $1,276,904 
(1) Includes $27.3 million of aircraft and spare engine rent payment deferrals due to COVID-19 which are recorded in other current liabilities within the Company's consolidated balance sheets.    
Commitments related to the Company's noncancellable short-term operating leases not recorded on the Company's consolidated balance sheets are expected to be $1.4 million for 2021 and none for 2022 and beyond. During 2020, the Company entered into agreements to defer payments in 2020 related to facility rents and other airport service contracts at certain locations. Also during 2020, the Company entered into agreements to defer payments related to certain aircraft and engine leases from 2020 into 2021. The Company elected to apply the practical expedient issued by the Financial Accounting Standards Board in April 2020 which allows companies to treat a lease concession related to COVID-19 as though enforceable rights and obligations for the concessions existed regardless of whether those enforceable rights and obligations explicitly exist in the lease agreement. Amounts deferred as of December 31, 2020 are recorded in accrued rent within other current liabilities on the Company's consolidated balance sheet.
The table below presents information for lease costs related to the Company's finance and operating leases:
Year Ended December 31,
20202019
(in thousands)
Finance lease cost
Amortization of leased assets$824 $998 
Interest of lease liabilities194 674 
Operating lease cost
Operating lease cost (1)
201,474 179,959 
Short-term lease cost (1)
25,195 5,144 
Variable lease cost (1)
125,534 140,417 
Total lease cost$353,221 $327,192 
    (1) Expenses are classified within aircraft rent and landing fees and other rents on the Company's consolidated statements of operations.
The table below presents lease-related terms and discount rates as of December 31, 2020:
December 31, 2020December 31, 2019
Weighted-average remaining lease term
Operating leases12.9 years13.0 years
Finance leases2.6 years0.1 years
Weighted-average discount rate
Operating leases6.08 %5.86 %
Finance leases5.54 %2.46 %