Right-of-Use Asset and Operating Lease Liability |
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| 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, vehicles 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.
During the nine months ended September 30, 2023, the Company has added the following leases in accordance with ASC 842, the details of which are discussed as follows.
A CPA for two aircraft was executed in August 2023, commencing from May 23, 2023 until August 31, 2024. In case of early termination by Blade, a one-year flight hour guarantee will be pro-rated to the date of the termination. In addition, Blade has the right for immediate termination with no penalty if a government authority enacts travel restrictions.
A CPA for three aircraft was restated and amended in September 2023 for modified revenue guarantees and additional five months (for a total three-year term ending July 31, 2026). In case of early termination by Blade, a one-year revenue guarantee will be pro-rated to the date of the termination. In addition, Blade has the right for immediate termination with no penalty if a government authority enacts travel restrictions.
A CPA for seven aircraft was restated and amended in March 2023 for an additional two years for a total five-year term, ending March 31, 2028 (previous term was for three-years ending March 31, 2025 for six aircraft). Blade has the right to terminate the agreement without cause upon 60 days’ written notice, upon such termination a one-year 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.
The Company allocated the consideration in the capacity purchase agreements to the lease and non-lease components based on their relative standalone value. The non-lease 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.
In addition, during the third quarter of 2023, the Company recognized a right-of-use asset and a lease liability for a pre-existing terminal facility lease in New York City. Prior to the third quarter this lease had been accounted for as short term lease, in accordance with its contractual terms. Following the completion of leasehold improvements to the facilities, the Company reassessed the likelihood of renewal and determined that the lease would be extended to a longer term. As a result, this lease is now accounted for as an operating lease with a corresponding balance included in the ROU asset and lease liability on the balance sheet.
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:
As of September 30, 2023, included in the table above is $20,709, $3,140 and $18,576 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, 2022, included in the table above is $14,916, $1,748 and $13,705 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.
The following provides details of the Company’s lease expense:
Operating lease costs related to aircraft leases that are embedded within capacity purchase agreements are reported as part of Cost of revenue.
Other information related to leases is presented below:
As of September 30, 2023, the expected annual minimum lease payments of the Company’s operating lease liabilities were as follows:
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