SkyWest Airlines 2015 Annual Report Download - page 80

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76
(5) Commitments and Contingencies
Lease Obligations
The Company leases 470 aircraft, as well as airport facilities, office space, and various other property and
equipment under non-cancelable operating leases which are generally on a long-term net rent basis where the Company
pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased property. The following
table summarizes future minimum rental payments required under operating leases that have non-cancelable lease terms
as of December 31, 2015 (in thousands):
Year ended December 31,
2016 . . . . . .........................................................
$ 269,520
2017 . . . . . .........................................................
192,122
2018 . . . . . .........................................................
154,077
2019 . . . . . .........................................................
121,107
2020 . . . . . .........................................................
133,659
Thereafter ..........................................................
349,038
$ 1,219,523
The majority of the Company’s leased aircraft are owned and leased through trusts whose sole purpose is to
purchase, finance and lease these aircraft to the Company; therefore, they meet the criteria of a variable interest entity.
However, since these are single owner trusts in which the Company does not participate, the Company is not considered
at risk for losses and is not considered the primary beneficiary. As a result, based on the current rules, the Company is
not required to consolidate any of these trusts or any other entities in applying the accounting guidance. The Company’s
management believes that the Company’s maximum exposure under these leases is the remaining lease payments.
The Company’s leveraged lease agreements typically obligate the Company to indemnify the equity/owner
participant against liabilities that may arise due to changes in benefits from tax ownership of the respective leased
aircraft. The terms of these contracts range up to 11 years. The Company did not accrue any liability relating to the
indemnification to the equity/owner participant because of management’s assessment that the probability of this
occurring is remote.
During the year ended December 31, 2015, the Company built a maintenance facility in Boise, Idaho and
entered into a sale lease-back agreement with the city of Boise. The sales price of the facility was $18.5 million and the
operating lease expires in 2040. The future lease obligations for the Boise maintenance facility are included in the above
future minimum rental payments schedule.
Total rental expense for non-cancelable aircraft operating leases was approximately $273.7 million, $305.3
million and $325.4 million for the years ended December 31, 2015, 2014 and 2013, respectively. The minimum rental
expense for airport station rents was approximately $35.1 million, $29.0 million and $35.1 million for the years ended
December 31, 2015, 2014 and 2013, respectively.
Self-insurance
The Company self-insures a portion of its potential losses from claims related to workers’ compensation,
environmental issues, property damage, medical insurance for employees and general liability. Losses are accrued based
on an estimate of the ultimate aggregate liability for claims incurred, using standard industry practices and the
Company’s actual experience. Actual results could differ from these estimates.