Southwest Airlines 1998 Annual Report Download - page 50

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50
SOUTHWEST AIRLINES CO. ¤ SIX STORIES OF FREEDOM
(In thousands) 1998 1997
Flight equipment $230,486 $227,803
Less accumulated amortization 133,073 122,346
$97,413 $105,457
Future minimum lease payments under capital leases and noncancelable operating
leases with initial or remaining terms in excess of one year at December 31, 1998,
were:
(In thousands) Capital Leases Operating Leases
1999 $20,245 $247,208
2000 16,871 235,955
2001 17,391 222,688
2002 17,561 208,311
2003 17,750 190,925
After 2003 120,049 1,901,005
Total minimum lease payments 209,867 $3,006,092
Less amount representing interest 76,677
Present value of minimum lease payments 133,190
Less current portion 9,400
Long-term portion $123,790
The aircraft leases generally can be renewed, at rates based on fair market value at
the end of the lease term, for one to five years. Most aircraft leases have purchase
options at or near the end of the lease term at fair market value, but generally not to
exceed a stated percentage of the lessor’s defined cost of the aircraft.
6. FINANCIAL INSTRUMENTS
The Company utilizes purchased crude oil call options and fixed price swap
agreements to hedge a portion of its exposure to fuel price fluctuations. Prior to
December 1998, outstanding call options and swap agreements were not material. At
December 31, 1998, the Company had hedged its exposure to fuel price fluctuations on
approximately 77 percent of its first quarter 1999 and 56 percent of its second quarter
1999 anticipated fuel requirements, or 290 million gallons of fuel products. The fair