This excerpt taken from the AAI 10-Q filed Apr 23, 2008.
Aircraft Acquisitions and Current Aircraft Purchase Commitments
Pursuant to our strategy for responding to the high-cost of jet fuel we are also recasting our growth plans. In this regard, we have completed a comprehensive review of our future fleet and capacity plans and we are taking a number of steps to better match our capacity to the current environment. We intend to reduce our planned growth in capacity commencing in the last four months of 2008 from a planned 10 percent increase to no more than flat. We also intend to reduce planned capacity growth in 2009 from just under 10 percent to no more than flat. We have revised our fleet plan and based on scheduled and or planned fleet actions, we expect to end 2008 with 141 aircraft. Currently, we anticipate having 141 aircraft at the end of 2009 and 148 aircraft at the end of 2010. We intend to accomplish the reduction in our rate of growth, as measured by, among other things, number of aircraft, by taking one or more of the following actions: deferring deliveries of new aircraft, selling, leasing or subleasing new aircraft scheduled for delivery, and selling, leasing or subleasing existing aircraft.
Because we negotiated what we believe to be very favorable aircraft purchase prices in 2003 and because we believe demand for new fuel-efficient aircraft should continueparticularly outside of the U.S. where potential purchasers may also have favorable currency exchange rates we should have the ability to monetize and intend to monetize selected aircraft assets. We have sold three new B737 aircraft since April 2007 and have signed memoranda of understanding to sell two additional B737 aircraft during the remainder of 2008. We are also negotiating memoranda of understanding to sell additional aircraft during 2008. In addition to generating cash proceeds, each sale of new aircraft scheduled for future delivery frees up existing cash which would normally be paid as part of the purchase price and avoids the need for associated financing for the aircraft. We likewise are marketing the sale or lease of existing aircraft which we believe, in the case of a sale, would result in a gain to us or, in the case of a sublease, rental income to us in excess of our lease payments. Second, we intend to explore a variety of financing mechanisms by which we may opportunistically monetize a portion of the value of our existing aircraft fleet should we deem it in the companys best interest to do so. Such actions could include credit facilities secured by junior liens, sale and lease back transactions or other financing mechanisms.
During the three months ended March 31, 2008, we took delivery of three purchased B737 aircraft. As of March 31, 2008, we had on order 60 B737 aircraft with delivery dates between 2008 and 2012. The table includes certain aircraft which we have agreed to sell. As noted above, we may sell additional newly delivered aircraft to moderate the growth of our fleet size. The table below illustrates, as of March 31, 2008, all aircraft scheduled for delivery through 2012:
The table includes two B737 aircraft scheduled for delivery in the second quarter of 2008, one of which we have sold and one of which we have agreed to sell. These two aircraft were or are being acquired pursuant to our 2003 agreement with the manufacturer to purchase B737 aircraft. The decision to sell the two aircraft was driven by our conclusion that we would moderate the growth in our fleet size. During the three months ended June 30, 2008 we will recognize a gain of approximately $7.0 million related to the sale of these two aircraft. The gain on sale of the aircraft will be classified as a component of operating expense. The net cash proceeds from the sale of the two aircraft aggregate approximately $10 million including $5 million of deposits received prior to March 31, 2008. We also avoid the use of approximately $10 million of cash to fund the portion of the purchase of the two aircraft that would not have been financed by debt.
Aircraft purchase contracts typically require the purchaser to make pre-delivery deposits to the manufacturer. We have arranged pre-delivery aircraft deposit financing for a portion of our pre-delivery deposit requirements for aircraft scheduled to be delivered during the remainder of 2008, 2009, and some aircraft in 2010. The pre-delivery deposit financing typically funds between 75 percent and 80 percent of our pre-delivery deposit obligation for any given aircraft.
Our aircraft purchase commitments for the remainder of 2008 and for the next four years, in aggregate, are (in thousands): 2008$277,200; 2009$508,700; 2010$525,000; 2011$462,800; and 2012$397,700. Excluding the two aircraft being sold in the second quarter and the two aircraft for which we have a memorandum of understanding to sell in December 2008, our aircraft purchase commitments for the remainder of 2008 aggregate $133.9 million. These amounts include payment commitments, including payment of pre-delivery deposits, for aircraft on firm order. Aircraft purchase commitments include the forecasted impact of contractual price escalations. The aircraft purchase commitment totals do not reflect the effects of prearranged aircraft financings.