Item 2. Properties

Aircraft

Southwest operated a total of 723 Boeing 737 aircraft as of December 31, 2016, of which 83 and 51 were under operating and capital leases, respectively. The following table details information on the 723 aircraft as of December 31, 2016:

As of December 31, 2016, the Company had firm deliveries and options for Boeing 737-700, 737-800, 737-7, and 737-8 aircraft as follows:

(a) Includes two -800 options exercised in January 2017.

(b) The Company has flexibility to substitute 737-7 in lieu of 737-8 firm orders beginning in 2019.

(c) 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 current flight training center at Dallas Love Field (which currently houses Boeing 737 flight 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 has commitments associated with various airport improvement projects, including ongoing construction at Fort Lauderdale-Hollywood International Airport and Los Angeles International Airport. These projects include the construction of new facilities and the rebuilding or modernization of existing facilities. Additional information regarding these projects 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 owns an additional headquarters building, located across the street from the Company’s main headquarters building, on land owned by the Company. This energy-efficient, modern building, called TOPS, houses certain operational and training functions, including its 24-hour operations. In 2016, the Company broke ground on an additional headquarters building, called Wings, designed to house flight simulators, classroom space for Pilot training, and additional work areas. The Wings building is scheduled to be completed in 2018 and is also located across the street from the Company’s main headquarters building on land owned by the Company. The Company expects to begin moving its 12 737 flight simulators to the Wings building during 2017 and expects to have all of its flight simulators in the Wings building by mid-2018. In 2017, the Company expects to add a pedestrian safety bridge to its corporate campus in order to connect the main headquarters building, the TOPS building, and the Wings building. As of December 31, 2016, 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.