Southwest Airlines 2009 Annual Report Download - page 75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2009
Total rental expense for operating leases, both aircraft and other, charged to operations in 2009, 2008, and
2007 was $596 million, $527 million, and $469 million, respectively. The majority of the Company’s terminal
operations space, as well as 88 aircraft, were under operating leases at December 31, 2009. Future minimum
lease payments under capital leases and noncancelable operating leases with initial or remaining terms in excess
of one year at December 31, 2009, were:
(In millions) Capital leases
Operating
leases
2010 ........................................ $ 15 $ 414
2011 ........................................ 12 379
2012 ........................................ — 333
2013 ........................................ — 254
2014 ........................................ — 222
After 2014 .................................... — 1,032
Total minimum lease payments ................... 27 $2,634
Less amount representing interest ................. 2
Present value of minimum lease payments .......... 25
Less current portion ............................ 14
Long-term portion ............................. $ 11
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, generally limited to a stated percentage of the lessor’s defined cost of the aircraft.
9. EARLY RETIREMENT OFFERS
On April 16, 2009, the Company announced Freedom ’09, a one-time voluntary early retirement program
offered to eligible Employees, in which the Company offered cash bonuses, medical/dental coverage for a
specified period of time, and travel privileges based on work group and years of service. The purpose of this
voluntary initiative and other initiatives was to right-size headcount in conjunction with the Company’s decision
to reduce its capacity by approximately five percent in 2009, and to reduce costs. Virtually all of the Company’s
Employees hired before March 31, 2008, were eligible to participate in the program. Participants’ last day of
work will fall between July 31, 2009 and April 15, 2010, as assigned by the Company based on the operational
needs of particular work locations and departments, determined on an individual-by-individual basis. The
Company did not have a target for the number of Employees expected to accept the package.
A total of 1,404 Employees elected to participate in Freedom ‘09, consisting of the following breakdown
among workgroups: 439 from Customer Support and Services, 464 from Ground Operations and Provisioning,
113 Flight Attendants, 20 Pilots, 91 from Maintenance, and 277 Managerial and Administrative Employees. In
accordance with accounting guidance for voluntary termination benefits, the Company accrued total costs of
approximately $66 million during third quarter 2009 upon acceptance of the retirement offer by Employees—all
of which are reflected in salaries, wages, and benefits. Of this amount, approximately $42 million was paid out to
Employees who left the Company prior to December 31, 2009, and the remaining $24 million will be paid out in
2010. The Company may need to replace some of the positions with newly hired Employees to meet operational
demands; however, the Company expects that many of the positions will not be filled based on the Company’s
recent capacity reductions.
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