Southwest Airlines 2012 Annual Report Download - page 103

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The net book value of the assets pledged as collateral for the Company’s secured borrowings, primarily
aircraft and engines, was $2.5 billion at December 31, 2012. In addition, the Company has pledged a total of up
to 50 of its Boeing 737-700 aircraft at a net book value of $1.1 billion, in the case that it has obligations related to
its fuel derivative instruments with counterparties that exceed certain thresholds. See Note 10 for further
information on these collateral arrangements.
As of December 31, 2012, aggregate annual principal maturities of debt and capital leases (not including
amounts associated with interest rate swap agreements, interest on capital leases, and amortization of purchase
accounting adjustments) for the five-year period ending December 31, 2017 and thereafter, were $186 million in 2013,
$534 million in 2014, $204 million in 2015, $615 million in 2016, $523 million in 2017, and $971 million thereafter.
8. LEASES
The Company had two aircraft classified as capital leases at December 31, 2012, compared to seven
aircraft classified as capital leases at December 31, 2011. Amounts applicable to these aircraft that are included
in property and equipment were:
(in millions) 2012 2011
Flight equipment ........................... $ 45 $ 177
Less: accumulated amortization ............... 8 132
$37$45
Total rental expense for operating leases, both aircraft and other, charged to operations in 2012, 2011, and
2010 was $943 million, $847 million, and $631 million, respectively. The majority of the Company’s terminal
operations space, as well as 187 aircraft, were under operating leases at December 31, 2012. For aircraft
operating leases and for terminal operations leases, expense is included in Aircraft rentals and in Landing fees
and other rentals, respectively, in the Consolidated Statement of Income. Future minimum lease payments under
capital leases and noncancelable operating leases and rentals to be received under subleases with initial or
remaining terms in excess of one year at December 31, 2012, were:
(in millions)
Capital
leases
Operating
leases* Subleases
Operating
leases, net
2013............................................ $ 5 $ 693 $ (5) $ 688
2014............................................ 6 663 (49) 614
2015............................................ 6 598 (91) 507
2016............................................ 5 497 (105) 392
2017............................................ 6 474 (105) 369
Thereafter ....................................... 18 2,161 (338) 1,823
Total minimum lease payments ...................... 46 $ 5,086 $ (693) $ 4,393
Less amount representing interest ..................... 10
Present value of minimum lease payments .............. 36
Less current portion ............................... 3
Long-term portion ................................. $ 33
* Includes LFMP airport rental payments. See Note 4.
The aircraft leases generally can be renewed for one to five years at rates based on fair market value at the
end of the lease term. 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.
95