Southwest Airlines 2008 Annual Report Download - page 72

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
transaction, the Company entered into an agreement
with ATA to acquire the leasehold rights to four
additional leased gates at Chicago Midway Airport in
exchange for a $20 million reduction in the
Company’s debtor-in-possession loan. Upon ATA’s
emergence from bankruptcy, which took place on
February 28, 2006, ATA repaid the remaining $20
million balance of the debtor-in-possession financing
to the Company, and provided a letter of credit to
support the Company’s obligation under the
construction loan to the City of Chicago.
The Company and ATA also had agreed on a
codeshare arrangement, under which each carrier
could exchange passengers on certain designated
flights beginning first quarter 2005. The Company
also marketed and sold ATA-only flights. In early
April 2008, ATA declared bankruptcy and
discontinued all scheduled passenger service,
effectively ending codeshare operations between the
companies. During third quarter 2008, the bankruptcy
court approved the termination of the codeshare
agreement between ATA and the Company.
Operating revenues from the Company’s codeshare
and marketing relationship with ATA were
approximately $40 million in 2007 and $6 million in
2008.
The Company offered assistance to all
Customers who purchased a ticket on
www.southwest.com and were scheduled to travel on
ATA, which included rebooking them or offering a
refund for any unused portion of a ticket. The cost
incurred by the Company related to ATA’s
discontinuation of service was approximately $8
million, the majority of which is reflected as a
reduction to 2008 operating income.
4. Commitments
The Company’s contractual purchase commitments primarily consist of scheduled aircraft acquisitions from
Boeing. As of December 31, 2008, the Company had the following contractual purchase commitments with
Boeing for aircraft deliveries:
Firm Options
Purchase
Rights Total Commitment
(In millions)
2009 .................................... 13 — — 13 $ 393
2010 .................................... 16 5 — 21 472
2011 .................................... 11 17 — 28 465
2012 .................................... 13 27 — 40 553
2013 .................................... 19 4 — 23 583
2014 .................................... 12 8 — 20 445
2015 .................................... 11 6 — 17 250
2016 .................................... 4 — — 4 73
Through 2018 ............................ — — 54 54 —
Total .................................... 99 67 54 220 $3,234
The Company has the option, which must be
exercised 18 months prior to the contractual delivery
date, to substitute 737-600s or 737-800s for the
737-700s.
During January 2009, the Company revised its
schedule of future deliveries from Boeing. As a result
of the change, the dollar commitment above did not
change materially in total, but the amounts allocated
to individual years did decline approximately
commensurate with the change in the number of
anticipated firm deliveries.
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