Southwest Airlines 2007 Annual Report Download - page 66

8. Leases
The Company had nine aircraft classified as capital leases at December 31, 2007. The amounts applicable to these
aircraft included in property and equipment were:
2007 2006
(In millions)
Flight equipment.................................................... $168 $168
Less accumulated depreciation .......................................... 133 123
$35 $45
Total rental expense for operating leases, both aircraft and other, charged to operations in 2007, 2006, and 2005 was
$469 million, $433 million, and $409 million, respectively. The majority of the Company’s terminal operations space, as
well as 86 aircraft, were under operating leases at December 31, 2007. Future minimum lease payments under capital
leases and noncancelable operating leases with initial or remaining terms in excess of one year at December 31, 2007,
were:
Capital Leases Operating Leases
(In millions)
2008 ................................................. $16 $ 400
2009 ................................................. 17 335
2010 ................................................. 15 298
2011 ................................................. 12 235
2012 ................................................. — 195
After 2012............................................. — 876
Total minimum lease payments .............................. 60 $2,339
Less amount representing interest ............................. 8
Present value of minimum lease payments ....................... 52
Less current portion ...................................... 13
Long-term portion ....................................... $39
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. Project Early Departure
Project Early Departure was a voluntary early retire-
ment program offered in July 2007 to eligible Employees,
in which the Company offered a cash bonus of $25,000
plus medical/dental continuation coverage and travel
privileges based on eligibility.
A total of 608 out of approximately 8,500 eligible
Employees elected to participate in the program. The
number of Employees from each group that accepted the
package is as follows: 395 from Reservations, 165 from
Ground Operations, 41 from Inflight and seven from
Provisioning. The participants’ last day of work falls
between September 30, 2007 and April 30, 2008, based
on the operational needs of particular work locations and
departments. The Company did not have a target or
expectation for the number of Employees expected to
accept the package.
Project Early Departure resulted in a pre-tax, pre-
profitsharing, one-time charge of approximately $25 mil-
lion during third quarter 2007, all of which is reflected in
“Salaries, wages and benefits” in the accompanying Con-
solidated Statement of Income. Approximately $14 mil-
lion remained to be paid and is recorded as an accrued
liability in the accompanying Consolidated Balance Sheet
as of December 31, 2007. The Company will continue to
address future staffing needs, but currently anticipates
that the majority of the positions will be filled with entry-
level Employees at lower wage rates to meet operational
demands. The purpose of this voluntary initiative and
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)