Southwest Airlines 2015 Annual Report Download - page 69

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Airport Projects
The Company has commitments associated with various airport improvement projects that will impact
its future liquidity needs in differing ways. These projects include the construction of new facilities and
the rebuilding or modernization of existing facilities and are discussed in more detail in Note 4 to the
Consolidated Financial Statements.
Dallas Love Field
For the rebuilding of the facilities at Dallas Love Field, the Company has guaranteed principal,
premium, and interest on $456 million in bonds issued by the Love Field Airport Modernization
Corporation (“LFAMC”) that were utilized to fund the majority of the project. Repayment of the bonds
will be through the “Facilities Payments” described below. Reimbursement of the Company for its
payment of Facilities Payments is expected to be made through recurring ground rents, fees, and other
revenues collected at the airport.
Prior to the issuance of the bonds by the LFAMC, the Company entered into two separate funding
agreements: (i) a “Facilities Agreement” pursuant to which the Company is obligated to make debt
service payments on the principal and interest amounts associated with the bonds (“Facilities
Payments”), less other sources of funds the City of Dallas may apply to the repayment of the bonds
(including but not limited to passenger facility charges collected from passengers originating from the
airport); and (ii) a “Revenue Credit Agreement” pursuant to which the City of Dallas will reimburse
the Company for the Facilities Payments made by the Company.
A majority of the monies transferred from the City of Dallas to the Company under the Revenue Credit
Agreement are expected to originate from a reimbursement account created in the “Use and Lease
Agreement” between the City of Dallas and the Company. The Use and Lease Agreement is a 20-year
agreement providing for, among other things, the Company’s lease of space at the Airport from the
City of Dallas. The remainder of such monies transferred from the City of Dallas to the Company
under the Revenue Credit Agreement is expected to originate from (i) use and lease agreements with
other airlines, (ii) various concession agreements, and (iii) other airport miscellaneous revenues.
The Company’s liquidity could be impacted by this project to the extent there are timing differences
between the Company’s payment of the Facilities Payments pursuant to the Facilities Agreement and
the transfer of monies back to the Company pursuant to the Revenue Credit Agreement; however, the
Company does not currently expect that to occur. The project is not expected to have a significant
impact on the Company’s capital resources or financial position.
Fort Lauderdale-Hollywood International Airport
The Company has committed to oversee and manage the design and construction of Fort-Lauderdale-
Hollywood International Airport’s Terminal 1 Modernization Project, including the design and
construction of a new five-gate Concourse A with an international processing facility, at a cost not to
exceed $295 million. Funding for the project will come directly from Broward County aviation
sources, but will flow through the Company in its capacity as manager of the project. In general, as
work is being completed on the project by various contractors, invoices would be submitted to
Broward County for initial payment to the Company, which would then make such payments to the
contractors performing the work.
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