Item 2. Properties

Aircraft

Southwest operated a total of 704 Boeing 737 aircraft as of December 31, 2015, of which 95 and 28 were under operating and capital leases, respectively. The following table details information on the 704 aircraft as of December 31, 2015:

As of December 31, 2015, the Company had firm deliveries and options for Boeing 737-700, 737-800, 737 MAX 7, and 737 MAX 8 aircraft as follows:

(a) The Company has flexibility to substitute MAX 7 in lieu of MAX 8 firm orders beginning in 2019.

(b) To be acquired in leases from various third parties.

Ground Facilities and Services

Southwest either leases or pays a usage fee for terminal passenger service facilities at each of the airports it serves, to which various leasehold improvements have been made. The Company leases the land and/or structures on a long-term basis for its aircraft maintenance centers (located at Dallas Love Field, Houston Hobby, Phoenix Sky Harbor, Chicago Midway, Hartsfield-Jackson Atlanta International Airport and Orlando International Airport), its flight training center at Dallas Love Field (which houses ten 737 simulators), and its main corporate headquarters building, also located at Dallas Love Field. The Company also leases a warehouse and engine repair facility in Atlanta. The Company owns an energy-efficient, modern building designed to house certain operational and training functions, including its 24-hour operations. This additional headquarters building is located across the street from the Company’s current headquarters building on land owned by the Company.

The Company’s international expansion in 2015 was facilitated by the completion of construction of a new five-gate international terminal at Houston’s William P. Hobby Airport with international passenger processing facilities, an expanded security checkpoint, and an upgraded Southwest ticketing area. The Company controlled this expansion and related financial terms pursuant to an Airport Use and Lease Agreement with the City of Houston. Additional information regarding this project is provided below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 4 to the Consolidated Financial Statements.

Pursuant to an agreement with Broward County, Florida, which owns and operates Fort Lauderdale-Hollywood International Airport, the Company is also overseeing and managing the design and construction of the airport’s Terminal 1 Modernization Project. In addition to significant improvements to the existing Terminal 1, the project includes the design and construction of a new five-gate Concourse A with an international processing facility. Major construction on the project began during third quarter 2015 and is estimated to be completed during 2017. Additional information regarding this project is provided below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 4 to the Consolidated Financial Statements.

Pursuant to a lease agreement with Los Angeles World Airports, which owns and operates Los Angeles International Airport, the Company is also overseeing and managing the design, development, financing, construction, and commissioning of the airport's Terminal 1 Modernization Project. Construction on the project began during fourth quarter 2014 and is estimated to be completed during 2018. Additional information regarding this project is provided below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 4 to the Consolidated Financial Statements.

The Company also managed the reconstruction of Dallas Love Field with modern, convenient air travel facilities (“Love Field Modernization Program”). The project consisted of the complete replacement of gate facilities with a new 20-gate facility, including infrastructure, systems and equipment, aircraft parking apron, fueling system, roadways and terminal curbside, baggage handling systems, passenger loading bridges and support systems, and other supporting infrastructure. The Love Field Modernization Program is discussed in more detail below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 4 to the Consolidated Financial Statements.

As of December 31, 2015, the Company operated seven Customer Support and Services call centers. The centers located in Atlanta, San Antonio, Chicago, Albuquerque, and Oklahoma City occupy leased space. The Company owns its Houston and Phoenix centers.

The Company performs substantially all line maintenance on its aircraft and provides ground support services at most of the airports it serves. However, the Company has arrangements with certain aircraft maintenance firms for major component inspections and repairs for its airframes and engines, which comprise the majority of the Company’s annual aircraft maintenance costs.