Southwest Airlines 2015 Annual Report Download - page 70

Download and view the complete annual report

Please find page 70 of the 2015 Southwest Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

The Company’s liquidity could be impacted by this project to the extent there are instances in which
the Company chooses to make payments to contractors prior to receiving initial payment from Broward
County, although the Company currently does not expect this to occur often based on its past
experience with smaller projects conducted at the airport. The project is not expected to have a
significant impact on the Company’s capital resources or financial position. Major construction on the
project began during third quarter 2015 and is estimated to be completed during 2017.
Houston William P. Hobby Airport
The Company oversaw and managed the construction, at Houston William P. Hobby Airport, of a new
five-gate international terminal with international passenger processing facilities, expansion of the
existing security checkpoint, and upgrades to the Southwest ticketing counter area. The Company and
the City of Houston (“City”) entered into an Airport Use and Lease Agreement (“Lease”) to control the
execution of this expansion and the financial terms thereof. The project cost approximately $156
million, and the Company provided the funding for, and management of the project. In return, the
Company receives a monthly credit for the capital cost portions of the international terminal from the
date of initial occupancy of the terminal until expiration of the Lease. Additionally, a small portion of
the project qualified for rental credits that will be utilized against the Company’s 2016 lease payments
at the airport. At any time after the completion of the project, the City may buy out the Company’s
investment in the international terminal via a cash payment for the then-unamortized cost of the
project.
The Company’s liquidity has been impacted by this project from the point of initial funding through
the time at which it receives monthly credits, and whether or not the City chooses to buy out the
Company’s investment prior to the full amortization of the project. The project did not have a
significant impact on the Company’s capital resources or financial position. Construction began
during third quarter 2013 and was effectively completed in October 2015, at which time the Company
began operating from the new facility.
Los Angeles International Airport
In March 2013, the Company executed a lease agreement with Los Angeles World Airports
(“LAWA”), which owns and operates Los Angeles International Airport. Under the lease agreement,
which was amended in June 2014, the Company is overseeing and managing the design, development,
financing, construction and commissioning of the airport’s Terminal 1 Modernization Project (the
“Project”) at a cost not to exceed $526 million. The Project is being funded primarily using the
Regional Airports Improvement Corporation (“RAIC”), which is a quasi-governmental special purpose
entity that acts as a conduit borrower under a syndicated credit facility provided by a group of lenders.
Loans made under the credit facility are being used to fund the development of the Project, and the
outstanding loans will be repaid with the proceeds of LAWA’s payments to purchase completed
Project phases. The Company has guaranteed the obligations of the RAIC under the credit facility.
The Company’s liquidity could be impacted by this project under certain circumstances; however, the
Company does not expect this to occur based on its past experience with other projects. The project is
not expected to have a significant impact on the Company’s capital resources or financial position.
Construction on the Project began during 2014 and is estimated to be completed during 2018.
62