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Commitments and Contingencies
 6 Months Ended
Jun. 30, 2022
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Flight Equipment Commitments
As of June 30, 2022, the Company’s firm aircraft and engine orders consisted of the following:
A320neoA321neoTotal
Aircraft		Engines
Year Ending
Remainder of 20224 5 9 2 
2023— 21 21 4 
2024— 24 24 2 
202517 13 30 4 
202619 22 41 4 
Thereafter31 73 104 5 
Total71 158 229 21 
During December 2017, the Company entered into an amendment to the previously existing master purchase agreement (“backlog aircraft”) with Airbus. Pursuant to this amendment and subsequent amendments, the Company has a commitment to purchase an incremental 67 A320neo and 67 A321neo aircraft (“incremental aircraft”) with deliveries expected to begin in September 2022, continuing through 2028. In November 2021, the Company entered into an amendment with Airbus to add an additional 91 A321neo aircraft (“supplemental aircraft”) to the committed purchase agreement, with deliveries expected to begin in 2023, continuing through 2029. The Company, at its option, has the right to convert 18 A320neo aircraft to A321XLR aircraft. The conversion right is available until December 31, 2022 and is not reflected in the table above as this option has not been exercised. The Company’s agreements with Airbus provide for, among other things, varying purchase incentives, which have been allocated proportionally and are accounted for as an offsetting reduction to the cost of the backlog A320neo aircraft and increase to the cost of the incremental A320neo aircraft. As a result, cash paid for backlog A320neo aircraft will be more than the associated capitalized cost of the aircraft and results in the recognition of a deferred purchase incentive within other assets on the Company’s condensed consolidated balance sheets, which will ultimately be offset by the lower cash payments in connection with the purchase of the incremental A320neo aircraft.
In April 2022, the agreement with Pratt & Whitney, the provider of engines for the Company’s incremental order book, was amended to include additional spare engine commitments and adjust the timing of remaining deliveries, which has been reflected in the table above.
As of June 30, 2022, purchase commitments for these aircraft and engines, including estimated amounts for contractual price escalations and PDPs, were approximately $509 million for the remainder of 2022, $1,227 million in 2023, $1,453 million in 2024, $1,770 million in 2025, $2,363 million in 2026 and $6,219 million thereafter.
During July 2021, the Company signed a letter of intent with two of its leasing partners to add ten additional A321neo aircraft through direct leases, with deliveries beginning in the second half of 2022 and continuing into the first half of 2023. As of June 30, 2022, lease agreements for all of the additional aircraft have been executed. None of these ten aircraft that will be acquired through direct leases are reflected in the table above given these are not committed purchase agreements.
Litigation and Other Contingencies
On March 12, 2021, the DOT advised the Company that it was in receipt of information indicating that the Company had failed to comply with certain DOT consumer protection requirements relating to consumer refund and credit practices and requested that the Company provide certain information to the DOT. The original DOT request
for information and subsequent correspondence and requests have been focused on the Company’s refund practices on Company initiated flight cancellations and/or significant schedule changes in flights as a result of the COVID-19 pandemic. The Company is fully cooperating with the DOT request and the review of this matter is still in process.
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 regularly evaluates the status of such matters to assess whether a loss is probable and reasonably estimable in determining whether an accrual is appropriate. Furthermore, in determining whether disclosure is appropriate, the Company evaluates each matter to assess if there is at least a reasonable possibility that a loss or additional losses may have been incurred and whether an estimate of possible loss or range of loss can be made. 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 condensed consolidated financial position, liquidity, or results of operations and that the Company’s current accruals cover matters where loss is deemed probable and can be reasonably estimated.
The ultimate outcome of legal actions is unpredictable and can be subject to significant uncertainties, and it is difficult to determine whether any loss is probable or even possible. Additionally, it is also difficult to estimate the amount of loss and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Thus, actual losses may be in excess of any recorded liability or the range of reasonably possible loss.
Employees
The Company has seven union-represented employee groups that together represent approximately 87% of all employees as of June 30, 2022. The table below sets forth the Company’s employee groups and status of the collective bargaining agreements as of June 30, 2022:
Percentage of Workforce
Employee GroupRepresentativeAmendable DateJune 30, 2022
PilotsAir Line Pilots Association (ALPA)January 202432%
Flight AttendantsAssociation of Flight Attendants (AFA-CWA)
May 2024
51%
Aircraft TechniciansInternational Brotherhood of Teamsters (IBT)
May 2025(a)
2%
Aircraft Appearance AgentsIBTOctober 2023
1%
DispatchersTransport Workers Union (TWU)
December 2021(b)
1%
Material SpecialistsIBT
March 2022(b)
<1%
Maintenance ControllersIBTOctober 2023
<1%
__________________
(a)The Company conducted off-cycle negotiations with its aircraft technicians, represented by IBT, where the amendable date was extended from March 2024 to May 2025.
(b)The Company’s collective bargaining agreements with its dispatchers and material specialists, represented by TWU and IBT, respectively, were amendable as of June 30, 2022 and negotiations are ongoing, however, each agreement is operating under its current arrangement until an amendment has been reached.
The Company is self-insured for health care claims, subject to a stop-loss policy, for eligible participating employees and qualified dependent medical and dental 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 million for health care claims including those estimated to be incurred but not yet paid as of June 30, 2022 and December 31, 2021, which is included as a component of other current liabilities on the Company’s condensed consolidated balance sheets.
General Indemnifications
The Company has various leases with respect to real property as well as various agreements among airlines relating to fuel consortia or fuel farms at airports. Under some of these contracts, the Company is party to joint and several liability regarding environmental damages. Under others, where the Company is a member of an LLC or other entity that contracts directly with the airport operator, liabilities are borne through the fuel consortia structure.
The Company’s aircraft, services, equipment lease and sale and financing agreements typically contain provisions requiring us, as the lessee, obligor or recipient of services, to indemnify the other parties to those agreements, including certain of those parties’ related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or such other equipment. The Company believes that its insurance would cover most of its exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft, services, equipment lease and sale and financing agreements described above.
Certain of the Company’s aircraft and other financing transactions include provisions that require payments to preserve an expected economic return to the lenders if that economic return is diminished due to certain changes in law or regulations. In certain of these financing transactions and other agreements, the Company also bears the risk of certain changes in tax laws that would subject payments to non-U.S. entities to withholding taxes.
Certain of these indemnities survive the length of the related financing or lease. The Company cannot reasonably estimate the potential future payments under the indemnities and related provisions described above because it cannot predict (i) when and under what circumstances these provisions may be triggered, and (ii) the amount that would be payable if the provisions were triggered because the amounts would be based on facts and circumstances existing at such time.