Note 6 — Leases, Commitments and Contingencies

Effective January 1, 2019, the Company adopted Topic 842. The Company leases property and equipment under operating leases. For leases with durations longer than 12 months, the Company recorded the related asset and obligation at the present value of lease payments over the term. The Company used its incremental borrowing rate to discount the lease payments based on information available at lease commencement.

Aircraft

During the three months ended March 31, 2019, the Company acquired 52 CRJ aircraft under an early lease buyout arrangement with the lessor for $111.7 million. As of March 31, 2019, the Company had 89 aircraft under operating leases with remaining terms ranging from less than one year to nine years.

With the adoption of Topic 842, the Company evaluated whether leased aircraft asset groups within the Company’s fleet were impaired. Under the transition guidance for Topic 842, a company is permitted to recognize a previously unrecognized impairment related to a right-of-use asset in the period prior to the adoption date of Topic 842 if the event giving rise to the impairment occurred before the adoption date. In 2016, the Company recorded an impairment on certain of its long-lived assets, which included the Company’s 50-seat Bombardier CRJ200 regional jet aircraft (“CRJ200”). In 2016, the market lease rate was less than the contractual lease rate on the Company’s CRJ200 leased aircraft. The Company recorded an impairment of $13.1 million (net of tax) as an adjustment to the Company’s January 1, 2019 retained earnings related to the previously unrecognized impairment of these leased CRJ200s.

Airport facilities

The Company has operating leases for facility space including airport terminals, office space, cargo warehouses and maintenance facilities. The Company generally leases this space from government agencies that control the use of the airport. The remaining lease terms vary from one month to 37 years. The Company’s operating leases with lease rates that are variable based on airport operating costs, use of the facilities or other variable factors are excluded from the Company’s right-of-use assets and operating lease liabilities in accordance with accounting guidance.

Leases

As of March 31, 2019, the Company’s right-of-use assets were $341.9 million, the Company’s current maturities of operating lease liabilities were $73.5 million, and the Company’s noncurrent lease liabilities were $275.1 million. During the three months ended March 31, 2019, the Company had operating cash flows from operating leases of $19.7 million.

The table below presents lease related terms and discount rates as of March 31, 2019.



	March 31, 2019
Weighted-average remaining lease term
Operating leases		7.0 years
Weighted-average discount rate
Operating leases		6.4%

The Company’s lease costs for the periods indicated included the following components (in thousands):


	For the three months ended March 31,
	2019		2018		$ Change		% Change
Operating lease cost	$	27,221	$	52,833	$	(25,612)	(48.5)	%
Variable and short-term lease cost		1,475		1,419		56	3.9	%
Total lease cost	$	28,696	$	54,252	$	(25,556)	(47.1)	%

As of March 31, 2019, the Company leased aircraft, airport facilities, office space, and other property and equipment under non-cancelable operating leases which are generally on a long-term, triple net lease basis pursuant to which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased property. The Company expects that, in the normal course of business, such operating leases that expire will be renewed or replaced by other leases, or the property may be purchased rather than leased. The following table summarizes future minimum rental payments primarily related to leased aircraft required under operating leases that had initial or remaining non-cancelable lease terms as of March 31, 2019 (in thousands):


April 2019 through December 2019	$	54,799
2020		93,640
2021		75,898
2022		67,668
2023		62,498
Thereafter		87,591
	$	442,094

As of March 31, 2019, the Company had a firm purchase commitment for eleven E175 aircraft from Embraer, S.A. with scheduled delivery dates through 2021.

The following table summarizes the Company’s commitments and obligations as noted for each of the next five years and thereafter (in thousands):


	Total		Apr - Dec 2019		2020		2021		2022		2023		Thereafter
Operating lease payments for aircraft and facility obligations	$	442,094	$	54,799	$	93,640	$	75,898	$	67,668	$	62,498	$	87,591
Firm aircraft and spare engine commitments		329,327		139,974		131,657		57,696		—		—		—
Interest commitments (1)		628,528		95,377		114,048		98,884		84,754		68,950		166,515
Principal maturities on long-term debt		3,121,661		279,873		357,228		339,297		352,717		361,215		1,431,331
Total commitments and obligations	$	4,521,610	$	570,023	$	696,573	$	571,775	$	505,139	$	492,663	$	1,685,437

(1)

At March 31, 2019, the Company had variable rate notes representing only 0.2% of its total long-term debt.