Alaska Airlines and Horizon Air 2014 Annual Report Download - page 140

Contractual Obligations
The following table provides a summary of our principal payments under current and long-term debt
obligations, operating lease commitments, aircraft purchase commitments and other obligations as of
December 31, 2014.
(in millions) 2015 2016 2017 2018 2019
Beyond
2019 Total
Current and long-term debt obligations $ 117 $ 115 $ 121 $ 151 $ 114 $ 185 $ 803
Operating lease commitments(a) 206 195 161 98 86 360 1,106
Aircraft purchase commitments 516 496 471 430 393 653 2,959
Interest obligations(b) 37 33 28 21 14 13 146
Other obligations(c) 61 56 60 42 31 245 495
Total $ 937 $ 895 $ 841 $ 742 $ 638 $ 1,456 $ 5,509
(a) Operating lease commitments generally include aircraft operating leases, airport property and
hangar leases, office space, and other equipment leases. Included here are seven E-175 aircraft
that will be operated by SkyWest under a capacity purchase agreement beginning in 2015.
(b) For variable-rate debt, future obligations are shown above using interest rates in effect as of
December 31, 2014.
(c) Includes minimum obligations under our long-term power-by-the-hour maintenance agreements and
obligations associated with third-party CPAs with SkyWest and PenAir. Refer to the “Commitments”
note in the consolidated financial statements for further information.
Defined Benefit Pensions
The table above excludes contributions to our various pension plans, which could be approximately $30
to $35 million in 2015, although there is no minimum required contribution. The unfunded liability for
our qualified defined-benefit pension plans was $133 million at December 31, 2014, compared to a
$60 million overfunded position at December 31, 2013. This results in a 94% funded status on a
projected benefit obligation basis compared to 104% funded as of December 31, 2013.
Credit Card Agreements
We have agreements with a number of credit card companies to process the sale of tickets and other
services. Under these agreements, there are material adverse change clauses that, if triggered, could
result in the credit card companies holding back a reserve from our credit card receivables. Under one
such agreement, we could be required to maintain a reserve if our credit rating is downgraded to or
below a rating specified by the agreement or our cash and marketable securities balance fell below
$500 million. Under another such agreement, we could be required to maintain a reserve if our cash
and marketable securities balance fell below $500 million. We are not currently required to maintain
any reserve under these agreements, but if we were, our financial position and liquidity could be
materially harmed.
Deferred Income Taxes
For federal income tax purposes, the majority of our assets, as measured by value, are fully depreciated
over a seven-year life using an accelerated depreciation method or bonus depreciation if available. For
financial reporting purposes, the majority of our assets are depreciated over 15 to 20 years to an
estimated salvage value using the straight-line basis. This difference has created a significant deferred
tax liability. At some point in the future the depreciation basis will reverse, potentially resulting in an
increase in income taxes paid.
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