Southwest Airlines 2013 Annual Report Download - page 104

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The Company is required to provide standby letters of credit to support certain obligations that arise in the
ordinary course of business. Although the letters of credit are an off-balance sheet item, the majority of the
obligations to which they relate are reflected as liabilities in the Consolidated Balance Sheet. Outstanding letters
of credit totaled $182 million at December 31, 2013.
The net book value of the assets pledged as collateral for the Company’s secured borrowings, primarily
aircraft and engines, was $2.2 billion at December 31, 2013. In addition, the Company has pledged a total of up
to 81 of its Boeing 737-700 aircraft at a net book value of $2.1 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, 2013, 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, 2018 and thereafter, were $546 million in 2014,
$170 million in 2015, $597 million in 2016, $506 million in 2017, $251 million in 2018, and $674 million thereafter.
8. LEASES
The Company had four aircraft classified as capital leases at December 31, 2013, compared to two aircraft
classified as capital leases at December 31, 2012. Amounts applicable to these aircraft that are included in
property and equipment were:
(in millions) 2013 2012
Flight equipment ........................... $ 69 $ 45
Less: accumulated amortization ............... 12 8
$57$37
Total rental expense for operating leases, both aircraft and other, charged to operations in 2013, 2012, and
2011 was $997 million, $943 million, and $847 million, respectively. The majority of the Company’s terminal
operations space, as well as 160 aircraft in the Company’s active fleet, were under operating leases at
December 31, 2013. 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, 2013, were:
(in millions)
Capital
leases
Operating
leases* Subleases
Operating
leases, net
2014............................................ $ 8 $ 689 $ (52) $ 637
2015............................................ 8 655 (90) 565
2016............................................ 8 544 (106) 438
2017............................................ 8 516 (106) 410
2018............................................ 8 429 (102) 327
Thereafter ....................................... 29 1,755 (242) 1,513
Total minimum lease payments ...................... 69 $ 4,588 $ (698) $ 3,890
Less amount representing interest ..................... 13
Present value of minimum lease payments .............. 56
Less current portion ............................... 6
Long-term portion ................................. $ 50
* Includes LFMP airport rental payments of $23 in 2014, $24 in 2015, $24 in 2016, $24 in 2017, $25 in 2018,
and $685 thereafter. See Note 4.
96