Quarterly report pursuant to Section 13 or 15(d)

LEASES

v3.23.3
LEASES
 9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
LEASES LEASES
We have finance and operating leases for real estate (primarily package centers, airport facilities and warehouses), aircraft and engines, information technology equipment, vehicles and various other equipment used in operating our business. Certain leases for real estate and aircraft contain options to purchase, extend or terminate the lease.
Aircraft
In addition to the aircraft that we own, we charter aircraft to handle package and cargo volume on certain international trade lanes and domestic routes. Due to the nature of these agreements, primarily being that either party can cancel the agreement with short notice, we have classified these as short-term leases. A majority of our long-term aircraft operating leases are operated by a third party to handle package and cargo volume in geographic regions where, due to government regulations, we are restricted from operating an airline.
Transportation equipment and other equipment
We enter into both long-term and short-term leases for transportation equipment to supplement our capacity or meet contractual demands. Some of these assets are leased on a month-to-month basis and the leases can be terminated without penalty. We also enter into equipment leases to increase capacity during periods of high demand. These leases are treated as short-term as the cumulative right of use is less than 12 months over the term of the contract.
Some of our transportation and technology equipment leases require us to make additional lease payments based on the underlying usage of the assets. Due to the variable nature of these costs, these are expensed as incurred and are not included in the right of use lease asset and associated lease obligation.
The components of lease expense for the three and nine months ended September 30, 2023 and 2022 were as follows (in millions):
Three Months Ended
 September 30,		 Nine Months Ended
 September 30,
2023 2022 2023 2022
Operating lease costs $ 219  $ 179  $ 645  $ 546 
Finance lease costs:
Amortization of assets 31  28  88  84 
Interest on lease liabilities 4  3  13  10 
Total finance lease costs 35  31  101  94 
Variable lease costs 63  62  203  194 
Short-term lease costs 243  319  746  944 
Total lease costs(1)
$ 560  $ 591  $ 1,695  $ 1,778 
(1) This table excludes sublease income as it was not material for the three and nine months ended September 30, 2023 or 2022.
In addition to the lease costs disclosed in the table above, we monitor all lease categories for any indicators that the carrying value of the assets may not be recoverable. There were no impairments recognized during the three months ended September 30, 2023. We recognized $13 million of impairments during the nine months ended September 30, 2023. There were no material impairments recognized during the three or nine months ended September 30, 2022.
Supplemental information related to leases and location within our consolidated balance sheets is as follows (in millions, except lease term and discount rate):
September 30,
2023		 December 31,
2022
Operating Leases:
Operating lease right-of-use assets $ 4,162  $ 3,755 
Current maturities of operating leases $ 664  $ 621 
Non-current operating leases 3,651  3,238 
Total operating lease obligations $ 4,315  $ 3,859 
Finance Leases:
Property, plant and equipment, net $ 810  $ 959 
Current maturities of long-term debt, commercial paper and finance leases $ 86  $ 92 
Long-term debt and finance leases 339  298 
Total finance lease obligations $ 425  $ 390 
Weighted average remaining lease term (in years):
Operating leases 11.0 10.8
Finance leases 8.1 8.4
Weighted average discount rate:
Operating leases 3.04  % 2.32  %
Finance leases 3.72  % 3.17  %

Supplemental cash flow information related to leases is as follows (in millions):
Nine Months Ended
 September 30,
2023 2022
Cash paid for amounts included in measurement of obligations:
Operating cash flows from operating leases $ 627  $ 523 
Operating cash flows from finance leases 10  3 
Financing cash flows from finance leases 101  123 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 1,013  $ 588 
Finance leases $ 136  $ 98 
Maturities of lease obligations as of September 30, 2023 were as follows (in millions):
Finance Leases Operating Leases
2023 $ 32  $ 180 
2024 97  789 
2025 74  713 
2026 51  612 
2027 44  532 
Thereafter 212  2,323 
Total lease payments 510  5,149 
Less: Imputed interest (85) (834)
Total lease obligations 425  4,315 
Less: Current obligations (86) (664)
Long-term lease obligations $ 339  $ 3,651 
As of September 30, 2023, we had $764 million of additional leases which had not commenced. These leases will commence between 2023 and 2025 when we are granted access to the property, such as when leasehold improvements are completed by the lessor or a certificate of occupancy is obtained.
LEASES LEASES
We have finance and operating leases for real estate (primarily package centers, airport facilities and warehouses), aircraft and engines, information technology equipment, vehicles and various other equipment used in operating our business. Certain leases for real estate and aircraft contain options to purchase, extend or terminate the lease.
Aircraft
In addition to the aircraft that we own, we charter aircraft to handle package and cargo volume on certain international trade lanes and domestic routes. Due to the nature of these agreements, primarily being that either party can cancel the agreement with short notice, we have classified these as short-term leases. A majority of our long-term aircraft operating leases are operated by a third party to handle package and cargo volume in geographic regions where, due to government regulations, we are restricted from operating an airline.
Transportation equipment and other equipment
We enter into both long-term and short-term leases for transportation equipment to supplement our capacity or meet contractual demands. Some of these assets are leased on a month-to-month basis and the leases can be terminated without penalty. We also enter into equipment leases to increase capacity during periods of high demand. These leases are treated as short-term as the cumulative right of use is less than 12 months over the term of the contract.
Some of our transportation and technology equipment leases require us to make additional lease payments based on the underlying usage of the assets. Due to the variable nature of these costs, these are expensed as incurred and are not included in the right of use lease asset and associated lease obligation.
The components of lease expense for the three and nine months ended September 30, 2023 and 2022 were as follows (in millions):
Three Months Ended
 September 30,		 Nine Months Ended
 September 30,
2023 2022 2023 2022
Operating lease costs $ 219  $ 179  $ 645  $ 546 
Finance lease costs:
Amortization of assets 31  28  88  84 
Interest on lease liabilities 4  3  13  10 
Total finance lease costs 35  31  101  94 
Variable lease costs 63  62  203  194 
Short-term lease costs 243  319  746  944 
Total lease costs(1)
$ 560  $ 591  $ 1,695  $ 1,778 
(1) This table excludes sublease income as it was not material for the three and nine months ended September 30, 2023 or 2022.
In addition to the lease costs disclosed in the table above, we monitor all lease categories for any indicators that the carrying value of the assets may not be recoverable. There were no impairments recognized during the three months ended September 30, 2023. We recognized $13 million of impairments during the nine months ended September 30, 2023. There were no material impairments recognized during the three or nine months ended September 30, 2022.
Supplemental information related to leases and location within our consolidated balance sheets is as follows (in millions, except lease term and discount rate):
September 30,
2023		 December 31,
2022
Operating Leases:
Operating lease right-of-use assets $ 4,162  $ 3,755 
Current maturities of operating leases $ 664  $ 621 
Non-current operating leases 3,651  3,238 
Total operating lease obligations $ 4,315  $ 3,859 
Finance Leases:
Property, plant and equipment, net $ 810  $ 959 
Current maturities of long-term debt, commercial paper and finance leases $ 86  $ 92 
Long-term debt and finance leases 339  298 
Total finance lease obligations $ 425  $ 390 
Weighted average remaining lease term (in years):
Operating leases 11.0 10.8
Finance leases 8.1 8.4
Weighted average discount rate:
Operating leases 3.04  % 2.32  %
Finance leases 3.72  % 3.17  %

Supplemental cash flow information related to leases is as follows (in millions):
Nine Months Ended
 September 30,
2023 2022
Cash paid for amounts included in measurement of obligations:
Operating cash flows from operating leases $ 627  $ 523 
Operating cash flows from finance leases 10  3 
Financing cash flows from finance leases 101  123 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 1,013  $ 588 
Finance leases $ 136  $ 98 
Maturities of lease obligations as of September 30, 2023 were as follows (in millions):
Finance Leases Operating Leases
2023 $ 32  $ 180 
2024 97  789 
2025 74  713 
2026 51  612 
2027 44  532 
Thereafter 212  2,323 
Total lease payments 510  5,149 
Less: Imputed interest (85) (834)
Total lease obligations 425  4,315 
Less: Current obligations (86) (664)
Long-term lease obligations $ 339  $ 3,651 
As of September 30, 2023, we had $764 million of additional leases which had not commenced. These leases will commence between 2023 and 2025 when we are granted access to the property, such as when leasehold improvements are completed by the lessor or a certificate of occupancy is obtained.