Southwest Airlines 2003 Annual Report Download - page 41

Average Number Number Number
737 Type Seats Age (Yrs) of Aircraft Owned Leased
-200 122 21.2 23 21 2
-300 137 12.6 194 110 84
-500 122 12.7 25 16 9
-700 137 3.3 146 145 1
TOTALS 9.6 388 292 96
The Company has engaged in off-balance sheet arrangements in the leasing of aircraft. The leasing of aircraft
provides flexibility to the Company by allowing for capacity and fleet growth, without the substantial cash outlay
necessary to purchase new aircraft. Although the Company is responsible for all maintenance, insurance, and
expense associated with operating the aircraft, and retains the risk of loss for leased aircraft, it has not made any
guarantees to the lessors regarding the residual value (or market value) of the aircraft at the end of the lease
terms.
As shown above and as disclosed in Note 8 to the Consolidated Financial Statements, the Company operates 96
aircraft that it has leased from third parties, of which 89 are operating leases. As prescribed by GAAP, assets
and obligations under operating lease are not included in the Company’s Consolidated Balance Sheet.
Disclosure of the contractual obligations associated with the Company’s leased aircraft are shown below as well
as in Note 8 to the Consolidated Financial Statements.
The following table aggregates the Company’s material expected contractual obligations and commitments as of
December 31, 2003:
2005 2007 Beyond
Contractual obligations 2004 - 2006 - 2008 2008 Total
Long-term debt (1) 196$ 658$ 110$ 511$ 1,475$
Capital lease commitments (2) 18 38 29 39 124
Operating lease commitments 283 492 392 1,328 2,495
Aircraft purchase commitments (3) 1,177 1,421 619 - 3,217
Other purchase commitments 90 133 5 - 228
Total contractual obligations 1,764$ 2,742$ 1,155$ 1,878$ 7,539$
(1) Includes current maturities, but excludes amounts associated with interest rate swap agreements
(2) Includes amounts classified as interest
(3) Firm orders from the manufacturer
Obligations by period (in millions)
The Company currently expects that it will issue a portion of its $1.0 billion in public debt securities and pass
through certificates from its outstanding shelf registrations during 2004, in order to fulfill some of its
obligations as noted above.
There were no outstanding borrowings under the revolving credit facility at December 31, 2003. See Note 6 to
the consolidated financial statements for more information.
In January 2004, the Company’s Board of Directors authorized the repurchase of up to $300 million of the
Company’s common stock, utilizing present and anticipated proceeds from the exercise of Employee stock
options. Repurchases will be made in accordance with applicable securities laws in the open market or in private
transactions from time to time, depending on market conditions.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company’s consolidated financial statements have been prepared in accordance with United States
GAAP. The Company’s significant accounting policies are described in Note 1 to the Consolidated
Financial Statements. The preparation of financial statements in accordance with GAAP requires the
Company’s management to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying footnotes. The Company’s estimates and assumptions