COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS

NOTE 9. COMMITMENTS AND CONTINGENCIES

Future minimum fixed payments for commitments as of December 31, 2014 (in millions):

	Aircraft Leases		Facility Leases		Aircraft Commitments		Capacity Purchase Agreements		Engine Maintenance
2015	$	111	$	95	$	516	$	51	$	10
2016	102		93		496		56		—
2017	72		89		471		60		—
2018	57		41		430		42		—
2019	46		40		393		31		—
Thereafter	164		196		653		245		—
Total	$	552	$	554	$	2,959	$	485	$	10

Lease Commitments

At December 31, 2014, the Company had lease contracts for 64 aircraft, which have remaining noncancelable lease terms ranging from 2015 to 2028. Of these aircraft, 14 are subleased to a third-party carrier, and seven aircraft are E-175 regional jets, of which five aircraft will begin operations under a CPA with SkyWest during 2015. The majority of airport and terminal facilities are also leased. Rent expense was $288 million, $290 million, and $275 million, in 2014, 2013, and 2012, respectively.

Aircraft Commitments

As of December 31, 2014, the Company is committed to purchasing 73 B737 aircraft (36 B737-900ER aircraft and 37 B737 MAX aircraft, with deliveries in 2015 through 2022) and three Q400 aircraft, with deliveries in 2015 through 2017. In addition, the Company has options to purchase an additional 48 B737 aircraft and five Q400 aircraft, and options to increase capacity with 16 E-175 aircraft through our CPA with SkyWest.

Capacity Purchase Agreements (CPAs)

In November 2014, Alaska amended its CPA with SkyWest, which includes a 12-year lease for seven Embraer E-175s. The seven aircraft have delivery dates ranging from June 2015 to February 2016. The future minimum lease payments related to the aircraft in the amended contract are included in the aircraft leases column and the minimum lease payments associated with operating the flights are included in the capacity purchase agreements column of the commitments table.

At December 31, 2014, Alaska had CPAs with three carriers, including the Company's wholly-owned subsidiary, Horizon. Horizon sells 100% of its capacity under a CPA with Alaska. In addition, Alaska has a CPA with PenAir to fly certain routes in the state of Alaska. Under these agreements, Alaska pays the carriers an amount which is based on a determination of their cost of operating those flights and other factors intended to approximate market rates for those services. Future payments (excluding Horizon) are based on minimum levels of flying by the third-party carriers, which could differ materially due to variable payments based on actual levels of flying and certain costs associated with operating flights such as fuel.

Engine Maintenance

The Company has a power-by-the-hour (PBH) maintenance agreement for some of the B737-700 and B737-900 engines. This agreement transfers risk to a third-party service provider and fixes the amount the Company pays per flight hour in exchange for maintenance and repairs under a predefined maintenance program. Future payments are based on minimum flight hours.

CONTINGENCIES

Contingencies

The Company is a party to routine litigation matters incidental to its business and with respect to which no material liability is expected. Management believes the ultimate disposition of these matters is not likely to materially affect the Company's financial position or results of operations. This forward-looking statement is based on management's current understanding of the relevant law and facts, and it is subject to various contingencies, including the potential costs and risks associated with litigation and the actions of arbitrators, judges and juries.