Southwest Airlines 2006 Annual Report Download - page 62

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$25 million in 2008, $27 million in 2009, $28 million in
2010, $25 million in 2011, and $1.5 billion thereafter.
8. Leases
The Company had nine aircraft classified as capital leases at December 31, 2006. The amounts applicable to these
aircraft included in property and equipment were:
2006 2005
(In millions)
Flight equipment.................................................... $168 $164
Less accumulated depreciation .......................................... 123 113
$45 $51
Total rental expense for operating leases, both aircraft and other, charged to operations in 2006, 2005, and 2004 was
$433 million, $409 million, and $403 million, respectively. The majority of the Company’s terminal operations space, as
well as 84 aircraft, were under operating leases at December 31, 2006. Future minimum lease payments under capital
leases and noncancelable operating leases with initial or remaining terms in excess of one year at December 31, 2006,
were:
Capital Leases Operating Leases
(In millions)
2007 ................................................. $16 $ 360
2008 ................................................. 16 318
2009 ................................................. 16 280
2010 ................................................. 15 250
2011 ................................................. 12 203
After 2011............................................. — 1,000
Total minimum lease payments .............................. 75 $2,411
Less amount representing interest ............................. 12
Present value of minimum lease payments ....................... 63
Less current portion ...................................... 12
Long-term portion ....................................... $51
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. Consolidation of Reservations Centers
In November 2003, the Company announced the
consolidation of its nine Reservations Centers into six,
effective February 28, 2004. This decision was made in
response to the established shift by Customers to the
internet as a preferred way of booking travel. The Com-
pany’s website, www.southwest.com, now accounts for
over 70 percent of ticket bookings and, as a consequence,
demand for phone contact has dramatically decreased.
During first quarter 2004, the Company closed its Res-
ervations Centers located in Dallas, Texas, Salt Lake City,
Utah, and Little Rock, Arkansas. The Company provided
the 1,900 affected Employees at these locations the
opportunity to relocate to another of the Company’s
remaining six centers. Those Employees choosing not
to relocate, approximately 55 percent of the total affected,
were offered support packages, which included severance
pay, flight benefits, medical coverage, and job-search
assistance, depending on length of service with the Com-
pany. The total cost associated with the Reservations
Center consolidation, recognized in first quarter 2004,
was approximately $18 million. Employee severance and
benefit costs were reflected in “Salaries, wages, and
benefits,” and the majority of other costs in “Other
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)