Southwest Airlines 2014 Annual Report Download - page 75

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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 and may choose to provide letters of credit in place of posting
cash collateral related to its fuel hedging positions. Although the letters of credit are off-balance sheet,
the majority of the obligations to which they relate are reflected as liabilities in the Consolidated
Balance Sheet. Outstanding letters of credit totaled $440 million at December 31, 2014.
The following table aggregates the Company’s material expected contractual obligations and
commitments as of December 31, 2014:
Obligations by period (in millions)
Contractual obligations 2015 2016 - 2017 2018 - 2019 Beyond 2019 Total
Long-term debt (1) $ 232 $ 1,023 $ 737 $ 455 $ 2,447
Interest commitments - fixed (2) 102 163 84 82 431
Interest commitments -
floating (3) 15 31 22 — 68
Operating lease commitments (4) 684 1,228 926 2,317 5,155
Capital lease commitments (5) 33 87 87 202 409
Aircraft purchase
commitments (6) 836 2,384 2,136 5,692 11,048
Other commitments 230 131 17 64 442
Total contractual obligations $ 2,132 $ 5,047 $ 4,009 $ 8,812 $ 20,000
(1) Includes principal only and includes $68 million in 2015 associated with the Company’s convertible senior
notes due 2016. See Note 6 to the Consolidated Financial Statements.
(2) Related to fixed-rate debt only.
(3) Interest obligations associated with floating-rate debt (either at issuance or through swaps) is estimated
utilizing forward interest rate curves as of December 31, 2014 and can be subject to significant fluctuation.
(4) Includes Love Field Modernization Program commitment amounts, and includes the impact of the Boeing
717 lease/sublease transaction entered into in 2012. See Note 7 to the Consolidated Financial Statements.
(5) Includes interest on capital leases.
(6) Firm orders from Boeing and commitments with other parties.
Cumulative costs associated with the acquisition and integration of AirTran, as
of December 31, 2014, totaled $536 million (before profitsharing and taxes). The Company expects
total acquisition and integration costs to be approximately $550 million (before profitsharing and
taxes) upon completing the transition of AirTran 717-200s out of the fleet in 2015. These costs have
been, and are expected to continue to be, funded with cash from operations. Given that the AirTran
integration process had been effectively completed as of December 31, 2014, the Company does not
anticipate significant future integration expenditure requirements. The Company believes that its
current liquidity position, including unrestricted cash and short-term investments of $3.0 billion as of
December 31, 2014, anticipated future internally generated funds from operations, and its fully
available, unsecured revolving credit facility of $1 billion that expires in April 2018, will enable it to
meet its future known obligations in the ordinary course of business. However, if a liquidity need were
to arise, the Company believes it has access to financing arrangements because of its current
investment grade credit ratings, large value of unencumbered assets, and modest leverage, which
should enable it to meet its ongoing capital, operating, and other liquidity requirements. The Company
will continue to consider various borrowing or leasing options to maximize liquidity and supplement
cash requirements as necessary.
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