Alaska Airlines and Horizon Air 2012 Annual Report Download - page 153

NOTE 5. ASSETS CONSTRUCTED FOR OTHERS (TERMINAL 6 AT LAX)
In March 2012, the Company placed into service
assets constructed for others (Terminal 6 at
LAX), including a new baggage system, additional
gates, new common use systems, expansion of
security screening checkpoints, and a new ticket
lobby, all of which were constructed for the City
of Los Angeles and Los Angeles World Airports
(LAWA). Additionally, the Company placed into
service proprietary renovations in the ticketing
lobby and at the new gates included in Terminal
6. During the fourth quarter of 2012, the
Company was reimbursed for substantially all of
the non-proprietary renovations.
For accounting and financial reporting purposes,
the Company is considered to be the owners of
the assets constructed for others and did not
qualify for sale and leaseback accounting when
the non-proprietary assets were transferred to
the City of Los Angeles due to the Company’s
continuing involvement with the project. As a
result, all of the costs incurred to fund the
project are included in “Other property and
equipment” and all amounts that have been and
will be reimbursed will be in “Other liabilities” on
the balance sheet. These assets and liabilities
were as follows as of December 31 (in millions):
2012 2011
Proprietary assets of T6 at LAX ............ $ 17 $ 9
Assets constructed for others (T6 at LAX) .... 199 143
Other property and equipment ............. 216 152
Reimbursement for assets constructed ..... 187 12
Deferred interest income ................. 14 6
Other liabilities ........................ $201 $ 18
The assets will be depreciated over the life of
the lease based on the straight-line method,
while the liability will amortize on the effective
interest method based on the lease rental
payments. Because the Company will only
operate a small portion of the gates in the new
terminal, the asset and liability will depreciate
and amortize to an estimated fair value at the
end of the lease term, at which time we may
terminate the lease of the assets and
derecognize our obligation or we may extend our
lease term.
Future minimum payments related to the
Terminal 6 lease are included in facility leases
described in the “Commitments and
Contingencies” note.
NOTE 6. LONG-TERM DEBT
Long-term debt obligations were as follows at
December 31 (in millions):
2012 2011
Fixed-rate notes payable due through
2024 ......................... $ 844 $1,003
Variable-rate notes payable due through
2023 ......................... 188 304
Long-term debt .................... 1,032 1,307
Less current portion ................ 161 208
$ 871 $1,099
Weighted-average fixed-interest rate . . . 5.8% 5.8%
Weighted-average variable-interest
rate ........................... 2.0% 1.9%
All of the Company’s borrowings were secured by
aircraft.
During 2012, the Company made scheduled debt
payments of $172 million. The Company also
prepaid the full debt balance on seven
outstanding aircraft debt agreements totaling
$103 million. In 2011, the Company borrowed
approximately $107 million for six of the Q400
aircraft delivered in 2011. As of December 31,
2012, none of the Company’s borrowings were
restricted by covenants.
At December 31, 2012, long-term debt principal
payments for the next five years and thereafter
are as follows (in millions):
Total
2013 .................................. $ 161
2014 .................................. 117
2015 .................................. 113
2016 .................................. 111
2017 .................................. 116
Thereafter .............................. 414
Total principal payments ................... $1,032
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ŠForm 10-K