Quarterly report pursuant to Section 13 or 15(d)

Right-of-Use Asset and Operating Lease Liability

Right-of-Use Asset and Operating Lease Liability
9 Months Ended
Sep. 30, 2022
Leases [Abstract]  
Right-of-Use Asset and Operating Lease Liability Right-of-Use Asset and Operating Lease Liability
Blade’s operating leases consist of airport and heliport terminals, offices and aircraft leases that are embedded within certain capacity purchase agreements (“CPAs”). Upon meeting certain criteria as stated in ASC 842 Leases, the lease component of a capacity purchase agreement would be accounted for as an embedded lease, with a corresponding balance included in the operating right-of-use (“ROU”) asset and lease liability.
As of September 30, 2022, the Company has three significant leases: an operating lease for office space located at 55 Hudson Yards in New York, New York for an initial term of 2.5 years, signed in May 2022; and aircraft leases that are embedded within two of our capacity purchase agreements, one signed in April 2022 for a three-year term for up to 6 aircraft and the other signed in September 2022 (the “Europe AOA”, see Note 3). The Europe AOA was signed simultaneously with the acquisition of Blade Europe and is for an initial ten-year term for 14 aircraft. The Company allocated the consideration in the capacity purchase agreements to the lease and nonlease components based on their relative standalone value. The nonlease components for these agreements primarily consist of the costs associated with
flight operations. The Company determined its best estimate of the standalone value of the individual components by considering observable information from publicly available market rates.

Under the April 2022 capacity purchase agreement, Blade has the right to terminate the agreement without cause upon 60 days’ written notice, upon such termination the flight hour guarantee will be pro-rated to the date of the termination and the operator will be entitled to retain any unapplied deposit paid by Blade at the time of such termination, in addition, Blade has the right for immediate termination with no penalty if a government authority enacts travel restrictions.

Under the Europe AOA, the number of aircraft available to Blade and the corresponding number of minimum flight hours guaranteed to the operators by Blade, could be adjusted at the beginning of each calendar year upon reaching a mutual agreement.

See Note 9, “Commitments and Contingencies”, for additional information about our capacity purchase agreements.
Balance sheet information related to the Company’s leases is presented below:
Operating leases: September 30, 2022 December 31, 2021
Operating right-of-use asset $ 16,944  $ 713 
Operating lease liability, current 2,627  438 
Operating lease liability, long-term 14,516  278 

As of September 30, 2022, included in the table above is $13,839, $1,080 and $12,855 of operating right-of-use asset, current operating lease liability, and long-term operating lease liability, respectively, under aircraft leases that are embedded within the capacity purchase agreements. As of December 31, 2021 there were no aircraft leases embedded within a capacity purchase agreement.

The following provides details of the Company’s lease expense:
Three Months Ended September 30,
Nine Months Ended September 30,
Lease cost: 2022 2021 2022 2021
Short-term lease cost
$ 116  $ 43  $ 213  $ 121 
Operating lease cost
341  112  751  343 
Operating lease cost - Cost of revenue
398  —  648  — 
Total $ 855  $ 155  $ 1,612  $ 464 
Operating lease costs related to aircraft leases that are embedded within a capacity purchase agreements are reported as part of Cost of revenue.

Other information related to leases is presented below:
September 30, 2022
Weighted-average discount rate – operating lease
8.40  %
Weighted-average remaining lease term – operating lease (in years)
As of September 30, 2022, the expected annual minimum lease payments of the Company’s operating lease liabilities were as follows:
For the Year Ended December 31,
Remainder of 2022
$ 593 
2023 4,535 
2024 4,117 
2025 2,136 
Thereafter 11,017 
Total future minimum lease payments, undiscounted
Less: Imputed interest for leases in excess of one year
Present value of future minimum lease payments
$ 17,143