American Airlines 2010 Annual Report Download - page 69

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5. Leases
AMR's subsidiaries lease various types of equipment and property, primarily aircraft and airport facilities. The
future minimum lease payments required under capital leases, together with the present value of such payments,
and future minimum lease payments required under operating leases that have initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 2010, were (in millions):
Year Ending December 31,
Capital
Leases
Operating
Leases
2011
$ 186
$ 1,254
2012
136
1,068
2013
120
973
2014
98
831
2015
87
672
2016 and thereafter
349
6,006
$ 976
$ 10,804
(1)
Less amount representing interest
372
Present value of net minimum lease payments
$ 604
(1) As of December 31, 2010, included in Accrued liabilities and Other liabilities and deferred credits on the accompanying
consolidated balance sheet is approximately $1.1 billion relating to rent expense being recorded in advance of future
operating lease payments.
At December 31, 2010, the Company was operating 202 jet aircraft and 39 turboprop aircraft under operating
leases and 70 jet aircraft under capital leases. The aircraft leases can generally be renewed at rates based on fair
market value at the end of the lease term for one to five years. Some aircraft leases have purchase options at or
near the end of the lease term at fair market value, but generally not to exceed a stated percentage of the defined
lessor's cost of the aircraft or a predetermined fixed amount.
During 2010, the Company financed 36 deliveries of Boeing 737-800 aircraft through sale leaseback transactions
resulting in gains which are being amortized over the respective remaining lease terms. During 2009 non-recurring
charges related to losses on certain sale leasebacks of vintage aircraft of $88 million were realized and included in
Other operating income.
Special facility revenue bonds have been issued by certain municipalities primarily to improve airport facilities and
purchase equipment. To the extent these transactions were committed to prior to May 21, 1998, they are
accounted for as operating leases under U.S. GAAP. Approximately $1.5 billion of these bonds (with total future
payments of approximately $3.2 billion as of December 31, 2010) are guaranteed by American, AMR, or both.
Approximately $177 million of these special facility revenue bonds contain mandatory tender provisions that
require American to make operating lease payments sufficient to repurchase the bonds at various times: $112
million in 2014 and $65 million in 2015. Although American has the right to remarket the bonds, there can be no
assurance that these bonds will be successfully remarketed. Any payments to redeem or purchase bonds that are
not remarketed would generally reduce existing rent leveling accruals or be considered prepaid facility rentals and
would reduce future operating lease commitments. The special facility revenue bonds that contain mandatory
tender provisions are listed in the table above at their ultimate maturity date rather than their mandatory tender
provision date.
Rent expense, excluding landing fees, was $1.5 billion, $1.3 billion and $1.3 billion in 2010, 2009 and 2008,
respectively.
American has determined that it holds a significant variable interest in, but is not the primary beneficiary of,
certain trusts that are the lessors under 83 of its aircraft operating leases. These leases contain a fixed price
purchase option, which allows American to purchase the aircraft at a predetermined price on a specified date.
However, American does not guarantee the residual value of the aircraft. As of December 31, 2010, future lease
payments required under these leases totaled $1.1 billion.