COMMITMENTS

Future minimum fixed payments for commitments (in millions):



September 30, 2016	Aircraft Leases		Facility Leases		Aircraft Purchase Commitments		Capacity Purchase Agreements ^(a)
Remainder of 2016	$	20	$	24	$	146	$	17
2017	99		91		931		78
2018	90		43		724		81
2019	82		43		645		86
2020	73		40		334		92
Thereafter	400		188		397		746
Total	$	764	$	429	$	3,177	$	1,100

^(a)Includes all non-aircraft lease costs associated with CPA arrangements.

Lease Commitments

At September 30, 2016, the Company’s fleet includes lease contracts for 18 B737 aircraft and 15 Q400s. Additionally, the fleet includes 16 lease commitments under the CPA with SkyWest, comprising 3 CRJ-700s and 13 E175s. All lease contracts have remaining noncancelable lease terms ranging from 2016 to 2029. The Company has the option to increase capacity flown by SkyWest with 8 additional E175 aircraft with delivery in 2019.

The majority of airport and terminal facilities are also leased. Rent expense for aircraft and facility leases was $82 million and $77 million for the three months ended September 30, 2016 and 2015, respectively. Rent expense for aircraft and facility leases was $226 million and $217 million for the nine months ended September 30, 2016 and 2015, respectively.

Aircraft Purchase Commitments

As discussed in Note 11, subsequent to September 30, 2016 the Company deferred the delivery of four 737-MAX aircraft with deliveries in 2017 and 2018, and exercised five 737-900ER options for delivery in 2018. These changes are not reflected in the commitments table above. Inclusive of these changes, the Company is committed to purchasing 56 B737 aircraft (19 737-900ER aircraft and 37 737 MAX aircraft), and 33 E175 aircraft, with deliveries in 2016 through 2023. In addition, the Company has options to purchase 41 B737 aircraft, and 30 E175 aircraft, which are not reflected in the commitments table above.

Capacity Purchase Agreements (CPAs)

At September 30, 2016, 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 CPAs with SkyWest to fly certain routes in the Lower 48 and 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.

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 is subject to various contingencies, including the potential costs and risks associated with litigation and the actions of arbitrators, judges and juries.

On September 7, 2016, a private antitrust action captioned Daniel Grace, et al., v. Alaska Air Group, Inc., et al. was filed in the United States District Court for the Northern District of California, against the Company. The complaint was subsequently amended by the plaintiffs on October 28, 2016 to, among other matters, add Virgin America Inc. as a defendant and modify the list of named plaintiffs. The plaintiffs, each of whom the complaint describes as air passengers, allege that the pending merger of Virgin America Inc. with the Company would violate Section 7 of the Clayton Antitrust Act (15 U.S.C. §18), as well as Section 1 of the Sherman Antitrust Act (15 U.S.C. §1). The complaint seeks, among other matters, to preliminarily as well as permanently enjoin the pending merger, and also seeks attorneys’ fees. On October 19, 2016, the Court held a hearing on plaintiffs’ motion for a preliminary injunction. The Court did not rule at the hearing on whether to issue the preliminary injunction, but did subsequently issue an order requiring the defendants to provide the Court and the plaintiffs with at least seven calendar days’ notice before consummating the merger, noting that any consummation of the merger would be subject to divestiture. At the Court’s direction, the parties have submitted to the Court a proposed pretrial and trial schedule assuming a December 2016 trial date. The Company believes the allegations in this complaint are without merit and we intend to defend against them vigorously.