Southwest Airlines 2015 Annual Report Download - page 68

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expense associated with operating leased aircraft, and retains the risk of loss for these aircraft, it has
not made guarantees to the lessors regarding the residual value (or market value) of the aircraft at the
end of the lease terms. As of December 31, 2015, the Company had 201 leased aircraft, including
78 B717s subleased to Delta. Of these leased aircraft, 171 are under operating leases, including
76 B717s subleased to Delta. Assets and obligations under operating leases are not included in the
Company’s Consolidated Balance Sheet. Disclosure of the contractual obligations associated with the
Company’s leased aircraft is included below.
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 $184 million at December 31, 2015.
The following table aggregates the Company’s material expected contractual obligations and
commitments as of December 31, 2015:
Obligations by period (in millions)
Contractual obligations 2016 2017 - 2018 2019 - 2020 Beyond 2020 Total
Long-term debt (1) $ 585 $ 732 $ 1,202 $ 239 $ 2,758
Interest commitments - fixed (2) 108 115 57 59 339
Interest commitments - floating (3) 18 47 42 — 107
Operating lease commitments (4) 557 1,019 714 1,529 3,819
Capital lease commitments (5) 46 91 89 209 435
Aircraft purchase commitments (6) 1,070 2,393 2,666 4,421 10,550
Other commitments 94 54 11 13 172
Total contractual obligations $ 2,478 $ 4,451 $ 4,781 $ 6,470 $ 18,180
(1) Includes principal only. 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, 2015, and can be subject to significant fluctuation.
(4) Includes Love Field Modernization Program commitment amounts, and includes the impact of the B717
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.
The Company believes that its current liquidity position, including unrestricted cash and short-term
investments of $3.1 billion as of December 31, 2015, anticipated future internally generated funds from
operations, and its fully available, unsecured revolving credit facility of $1.0 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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