Long-Lived Assets
The following table shows our property and equipment:
|
| | | | | | | |
| | December 31, |
(in millions, except for estimated useful life) | Estimated Useful Life | 2013 | 2012 |
Flight equipment | 21-30 years | $ | 23,373 |
| $ | 21,481 |
|
Ground property and equipment | 3-40 years | 4,596 |
| 4,254 |
|
Flight and ground equipment under capital leases | Shorter of lease term or estimated useful life | 1,296 |
| 1,381 |
|
Advance payments for equipment | | 381 |
| 253 |
|
Less: accumulated depreciation and amortization(1) | | (7,792 | ) | (6,656 | ) |
Total property and equipment, net | | $ | 21,854 |
| $ | 20,713 |
|
(1) Includes accumulated amortization for flight and ground equipment under capital leases in the amount of $657 million and $653 million at December 31, 2013 and 2012, respectively.
We record property and equipment at cost and depreciate or amortize these assets on a straight-line basis to their estimated residual values over their estimated useful lives. The estimated useful life for leasehold improvements is the shorter of lease term or estimated useful life. Depreciation expense for each of the years ended December 31, 2013, 2012 and 2011 was approximately $1.4 billion. Residual values for owned aircraft, engines, spare parts and simulators are generally 5% to 10% of cost.
We capitalize certain internal and external costs incurred to develop and implement software, and amortize those costs over an estimated useful life of three to seven years. For the years ended December 31, 2013, 2012 and 2011, we recorded $110 million, $76 million and $64 million, respectively, for amortization of capitalized software. The net book value of these assets totaled $383 million and $344 million at December 31, 2013 and 2012, respectively.
We record impairment losses on flight equipment and other long-lived assets used in operations when events and circumstances indicate the assets may be impaired and the estimated future cash flows generated by those assets are less than their carrying amounts. Factors which could cause impairment include, but are not limited to, (1) a decision to permanently remove flight equipment or other long-lived assets from operations, (2) significant changes in the estimated useful life, (3) significant changes in projected cash flows, (4) permanent and significant declines in fleet fair values and (5) changes to the regulatory environment. For long-lived assets held for sale, we discontinue depreciation and record impairment losses when the carrying amount of these assets is greater than the fair value less the cost to sell.
To determine whether impairments exist for aircraft used in operations, we group assets at the fleet-type level (the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity, passenger mile yield, fuel costs, labor costs and other relevant factors. If an impairment occurs, the impairment loss recognized is the amount by which the aircraft's carrying amount exceeds its estimated fair value. We estimate aircraft fair values using published sources, appraisals and bids received from third parties, as available.
