Southwest Airlines 2005 Annual Report Download - page 40

The following table aggregates the Company's material expected contractual obligations and commitments as of
December 31, 2005:
Obligations by Period
Beyond
Contractual Obligations 2006 2007-2008 2009-2010 2010 Total
(In millions)
Long-term debt(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 596 $ 123 $ 28 $1,222 $1,969
Interest commitments(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37 51 45 214 347
Capital lease commitments(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 32 31 12 91
Operating lease commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 332 583 454 1,164 2,533
Aircraft purchase commitments(4)ÏÏÏÏÏÏÏÏÏÏÏ 740 538 Ì Ì 1,278
Other purchase commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44 26 24 11 105
Total contractual obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,765 $1,353 $582 $2,623 $6,323
(1) Includes current maturities, but excludes amounts associated with interest rate swap agreements
(2) Related to fixed-rate debt
(3) Includes amounts classified as interest
(4) Firm orders from the manufacturer
The Company may issue a portion of its $1.3 bil- Financial Statements. The preparation of financial state-
lion in outstanding shelf registrations as public debt ments in accordance with GAAP requires the Com-
securities during 2006. pany's management to make estimates and assumptions
that affect the amounts reported in the Consolidated
There were no outstanding borrowings under the Financial Statements and accompanying footnotes. The
revolving credit facility at December 31, 2005. See Company's estimates and assumptions are based on
Note 6 to the Consolidated Financial Statements for historical experience and changes in the business envi-
more information on the Company's revolving credit ronment. However, actual results may differ from esti-
facility. mates under different conditions, sometimes materially.
Critical accounting policies and estimates are defined as
In January 2004, the Company's Board of Direc-
those that are both most important to the portrayal of
tors authorized the repurchase of up to $300 million of
the Company's financial condition and results and re-
the Company's common stock, utilizing present and
quire management's most subjective judgments. The
anticipated proceeds from the exercise of Employee
Company's most critical accounting policies and esti-
stock options. Repurchases were made in accordance
mates are described below.
with applicable securities laws in the open market or in
private transactions from time to time, depending on
Revenue Recognition
market conditions. This program was completed during
first quarter 2005, resulting in the total repurchase of As described in Note 1 to the Consolidated Finan-
approximately 20.9 million of its common shares. cial Statements, tickets sold for passenger air travel are
initially deferred as ""Air traffic liability.'' Passenger
In January 2006, the Company's Board of Direc-
revenue is recognized and air traffic liability is reduced
tors authorized the repurchase of up to $300 million of
when the service is provided (i.e., when the flight takes
the Company's common stock. Repurchases will be
place). ""Air traffic liability'' represents tickets sold for
made in accordance with applicable securities laws in
future travel dates and estimated future refunds and
the open market or in private transactions from time to
exchanges of tickets sold for past travel dates. The
time, depending on market conditions.
balance in ""Air traffic liability'' fluctuates throughout
the year based on seasonal travel patterns and fare sale
Critical Accounting Policies and Estimates
activity. The Company's ""Air traffic liability'' balance
The Company's Consolidated Financial State- at December 31, 2005 was $649 million, compared to
ments have been prepared in accordance with United $529 million as of December 31, 2004.
States GAAP. The Company's significant accounting
policies are described in Note 1 to the Consolidated
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