Annual Report of DELTA AIR LINES, INC\.  for year 2019

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|:--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------:|:--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------:|:--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------:|:-----------------------------------:|:-----------------------------------:|:-----------------------------------:|:- |:- |:- |
|                                                                                Table of Contents                                                                                |                                                                                Table of Contents                                                                                |                                                                                Table of Contents                                                                                |          Table of Contents          |          Table of Contents          |          Table of Contents          |  |  |  |
|                                                                                |                                                                                |                                                                                |                Page                 |                Page                 |                Page                 |
|                                                                 [Forward\-Looking Statements](http://ir.delta.com/.#i_0_13)                                                                  |                                                                 [Forward\-Looking Statements](http://ir.delta.com/.#i_0_13)                                                                  |                                                                 [Forward\-Looking Statements](http://ir.delta.com/.#i_0_13)                                                                  |  [1](http://ir.delta.com/.#i_0_13)  |  [1](http://ir.delta.com/.#i_0_13)  |  [1](http://ir.delta.com/.#i_0_13)  |
|                                                                                PART I                                                                                |                                                                                PART I                                                                                |                                                                                PART I                                                                                |                                     |                                     |                                     |
|                                                                      [ITEM 1\. BUSINESS](http://ir.delta.com/.#i_0_19)                                                                       |                                                                      [ITEM 1\. BUSINESS](http://ir.delta.com/.#i_0_19)                                                                       |                                                                      [ITEM 1\. BUSINESS](http://ir.delta.com/.#i_0_19)                                                                       |  [2](http://ir.delta.com/.#i_0_19)  |  [2](http://ir.delta.com/.#i_0_19)  |  [2](http://ir.delta.com/.#i_0_19)  |
|                                                                           [General](http://ir.delta.com/.#i_0_22)                                                                            |                                                                           [General](http://ir.delta.com/.#i_0_22)                                                                            |                                                                           [General](http://ir.delta.com/.#i_0_22)                                                                            |  [2](http://ir.delta.com/.#i_0_22)  |  [2](http://ir.delta.com/.#i_0_22)  |  [2](http://ir.delta.com/.#i_0_22)  |
|                                                             [Executive Officers of the Registrant](http://ir.delta.com/.#i_0_43)                                                             |                                                             [Executive Officers of the Registrant](http://ir.delta.com/.#i_0_43)                                                             |                                                             [Executive Officers of the Registrant](http://ir.delta.com/.#i_0_43)                                                             | [12](http://ir.delta.com/.#i_0_43)  | [12](http://ir.delta.com/.#i_0_43)  | [12](http://ir.delta.com/.#i_0_43)  |
|                                                                    [ITEM 1A\. RISK FACTORS](http://ir.delta.com/.#i_0_49)                                                                    |                                                                    [ITEM 1A\. RISK FACTORS](http://ir.delta.com/.#i_0_49)                                                                    |                                                                    [ITEM 1A\. RISK FACTORS](http://ir.delta.com/.#i_0_49)                                                                    | [13](http://ir.delta.com/.#i_0_49)  | [13](http://ir.delta.com/.#i_0_49)  | [13](http://ir.delta.com/.#i_0_49)  |
|                                                                [Risk Factors Relating to Delta](http://ir.delta.com/.#i_0_52)                                                                |                                                                [Risk Factors Relating to Delta](http://ir.delta.com/.#i_0_52)                                                                |                                                                [Risk Factors Relating to Delta](http://ir.delta.com/.#i_0_52)                                                                | [13](http://ir.delta.com/.#i_0_52)  | [13](http://ir.delta.com/.#i_0_52)  | [13](http://ir.delta.com/.#i_0_52)  |
|                                                        [Risk Factors Relating to the Airline Industry](http://ir.delta.com/.#i_0_55)                                                         |                                                        [Risk Factors Relating to the Airline Industry](http://ir.delta.com/.#i_0_55)                                                         |                                                        [Risk Factors Relating to the Airline Industry](http://ir.delta.com/.#i_0_55)                                                         | [18](http://ir.delta.com/.#i_0_55)  | [18](http://ir.delta.com/.#i_0_55)  | [18](http://ir.delta.com/.#i_0_55)  |
|                                                             [ITEM 1B\. UNRESOLVED STAFF COMMENTS](http://ir.delta.com/.#i_0_58)                                                              |                                                             [ITEM 1B\. UNRESOLVED STAFF COMMENTS](http://ir.delta.com/.#i_0_58)                                                              |                                                             [ITEM 1B\. UNRESOLVED STAFF COMMENTS](http://ir.delta.com/.#i_0_58)                                                              | [21](http://ir.delta.com/.#i_0_58)  | [21](http://ir.delta.com/.#i_0_58)  | [21](http://ir.delta.com/.#i_0_58)  |
|                                                                     [ITEM 2\. PROPERTIES](http://ir.delta.com/.#i_0_61)                                                                      |                                                                     [ITEM 2\. PROPERTIES](http://ir.delta.com/.#i_0_61)                                                                      |                                                                     [ITEM 2\. PROPERTIES](http://ir.delta.com/.#i_0_61)                                                                      | [22](http://ir.delta.com/.#i_0_61)  | [22](http://ir.delta.com/.#i_0_61)  | [22](http://ir.delta.com/.#i_0_61)  |
|                                                                       [Flight Equipment](http://ir.delta.com/.#i_0_64)                                                                       |                                                                       [Flight Equipment](http://ir.delta.com/.#i_0_64)                                                                       |                                                                       [Flight Equipment](http://ir.delta.com/.#i_0_64)                                                                       | [22](http://ir.delta.com/.#i_0_64)  | [22](http://ir.delta.com/.#i_0_64)  | [22](http://ir.delta.com/.#i_0_64)  |
|                                                                      [Ground Facilities](http://ir.delta.com/.#i_0_67)                                                                       |                                                                      [Ground Facilities](http://ir.delta.com/.#i_0_67)                                                                       |                                                                      [Ground Facilities](http://ir.delta.com/.#i_0_67)                                                                       | [23](http://ir.delta.com/.#i_0_67)  | [23](http://ir.delta.com/.#i_0_67)  | [23](http://ir.delta.com/.#i_0_67)  |
|                                                                  [ITEM 3\. LEGAL PROCEEDINGS](http://ir.delta.com/.#i_0_70)                                                                  |                                                                  [ITEM 3\. LEGAL PROCEEDINGS](http://ir.delta.com/.#i_0_70)                                                                  |                                                                  [ITEM 3\. LEGAL PROCEEDINGS](http://ir.delta.com/.#i_0_70)                                                                  | [24](http://ir.delta.com/.#i_0_70)  | [24](http://ir.delta.com/.#i_0_70)  | [24](http://ir.delta.com/.#i_0_70)  |
|                                                               [ITEM 4\. MINE SAFETY DISCLOSURES](http://ir.delta.com/.#i_0_73)                                                               |                                                               [ITEM 4\. MINE SAFETY DISCLOSURES](http://ir.delta.com/.#i_0_73)                                                               |                                                               [ITEM 4\. MINE SAFETY DISCLOSURES](http://ir.delta.com/.#i_0_73)                                                               | [24](http://ir.delta.com/.#i_0_73)  | [24](http://ir.delta.com/.#i_0_73)  | [24](http://ir.delta.com/.#i_0_73)  |
|                                                                                PART II                                                                                |                                                                                PART II                                                                                |                                                                                PART II                                                                                |                                     |                                     |                                     |
| [ITEM 5\. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER](http://ir.delta.com/.#i_0_79)

[MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](http://ir.delta.com/.#i_0_79) | [ITEM 5\. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER](http://ir.delta.com/.#i_0_79)

[MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](http://ir.delta.com/.#i_0_79) | [ITEM 5\. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER](http://ir.delta.com/.#i_0_79)

[MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](http://ir.delta.com/.#i_0_79) | [25](http://ir.delta.com/.#i_0_79)  | [25](http://ir.delta.com/.#i_0_79)  | [25](http://ir.delta.com/.#i_0_79)  |
|                                                               [ITEM 6\. SELECTED FINANCIAL DATA](http://ir.delta.com/.#i_0_91)                                                               |                                                               [ITEM 6\. SELECTED FINANCIAL DATA](http://ir.delta.com/.#i_0_91)                                                               |                                                               [ITEM 6\. SELECTED FINANCIAL DATA](http://ir.delta.com/.#i_0_91)                                                               | [27](http://ir.delta.com/.#i_0_91)  | [27](http://ir.delta.com/.#i_0_91)  | [27](http://ir.delta.com/.#i_0_91)  |
|            [ITEM 7\. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND](http://ir.delta.com/.#i_0_94)

[RESULTS OF OPERATION](http://ir.delta.com/.#i_0_94)S             |            [ITEM 7\. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND](http://ir.delta.com/.#i_0_94)

[RESULTS OF OPERATION](http://ir.delta.com/.#i_0_94)S             |            [ITEM 7\. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND](http://ir.delta.com/.#i_0_94)

[RESULTS OF OPERATION](http://ir.delta.com/.#i_0_94)S             | [29](http://ir.delta.com/.#i_0_94)  | [29](http://ir.delta.com/.#i_0_94)  | [29](http://ir.delta.com/.#i_0_94)  |
|                                                                     [Financial Highlights](http://ir.delta.com/.#i_0_97)                                                                     |                                                                     [Financial Highlights](http://ir.delta.com/.#i_0_97)                                                                     |                                                                     [Financial Highlights](http://ir.delta.com/.#i_0_97)                                                                     | [29](http://ir.delta.com/.#i_0_97)  | [29](http://ir.delta.com/.#i_0_97)  | [29](http://ir.delta.com/.#i_0_97)  |
|                                                                    [Results of Operations](http://ir.delta.com/.#i_0_100)                                                                    |                                                                    [Results of Operations](http://ir.delta.com/.#i_0_100)                                                                    |                                                                    [Results of Operations](http://ir.delta.com/.#i_0_100)                                                                    | [31](http://ir.delta.com/.#i_0_100) | [31](http://ir.delta.com/.#i_0_100) | [31](http://ir.delta.com/.#i_0_100) |
|                                                                   [Non\-Operating Results](http://ir.delta.com/.#i_0_118)                                                                    |                                                                   [Non\-Operating Results](http://ir.delta.com/.#i_0_118)                                                                    |                                                                   [Non\-Operating Results](http://ir.delta.com/.#i_0_118)                                                                    | [35](http://ir.delta.com/.#i_0_118) | [35](http://ir.delta.com/.#i_0_118) | [35](http://ir.delta.com/.#i_0_118) |
|                                                                        [Income Taxes](http://ir.delta.com/.#i_0_121)                                                                         |                                                                        [Income Taxes](http://ir.delta.com/.#i_0_121)                                                                         |                                                                        [Income Taxes](http://ir.delta.com/.#i_0_121)                                                                         | [35](http://ir.delta.com/.#i_0_121) | [35](http://ir.delta.com/.#i_0_121) | [35](http://ir.delta.com/.#i_0_121) |
|                                                                      [Refinery Segment](http://ir.delta.com/.#i_0_124)                                                                       |                                                                      [Refinery Segment](http://ir.delta.com/.#i_0_124)                                                                       |                                                                      [Refinery Segment](http://ir.delta.com/.#i_0_124)                                                                       | [36](http://ir.delta.com/.#i_0_124) | [36](http://ir.delta.com/.#i_0_124) | [36](http://ir.delta.com/.#i_0_124) |
|                                                              [Financial Condition and Liquidity](http://ir.delta.com/.#i_0_127)                                                              |                                                              [Financial Condition and Liquidity](http://ir.delta.com/.#i_0_127)                                                              |                                                              [Financial Condition and Liquidity](http://ir.delta.com/.#i_0_127)                                                              | [37](http://ir.delta.com/.#i_0_127) | [37](http://ir.delta.com/.#i_0_127) | [37](http://ir.delta.com/.#i_0_127) |
|                                                                   [Contractual Obligations](http://ir.delta.com/.#i_0_130)                                                                   |                                                                   [Contractual Obligations](http://ir.delta.com/.#i_0_130)                                                                   |                                                                   [Contractual Obligations](http://ir.delta.com/.#i_0_130)                                                                   | [40](http://ir.delta.com/.#i_0_130) | [40](http://ir.delta.com/.#i_0_130) | [40](http://ir.delta.com/.#i_0_130) |
|                                                         [Critical Accounting Policies and Estimates](http://ir.delta.com/.#i_0_133)                                                          |                                                         [Critical Accounting Policies and Estimates](http://ir.delta.com/.#i_0_133)                                                          |                                                         [Critical Accounting Policies and Estimates](http://ir.delta.com/.#i_0_133)                                                          | [41](http://ir.delta.com/.#i_0_133) | [41](http://ir.delta.com/.#i_0_133) | [41](http://ir.delta.com/.#i_0_133) |
|                                                                  [Supplemental Information](http://ir.delta.com/.#i_0_136)                                                                   |                                                                  [Supplemental Information](http://ir.delta.com/.#i_0_136)                                                                   |                                                                  [Supplemental Information](http://ir.delta.com/.#i_0_136)                                                                   | [46](http://ir.delta.com/.#i_0_136) | [46](http://ir.delta.com/.#i_0_136) | [46](http://ir.delta.com/.#i_0_136) |
|                                                                  [Glossary of Defined Terms](http://ir.delta.com/.#i_0_139)                                                                  |                                                                  [Glossary of Defined Terms](http://ir.delta.com/.#i_0_139)                                                                  |                                                                  [Glossary of Defined Terms](http://ir.delta.com/.#i_0_139)                                                                  | [47](http://ir.delta.com/.#i_0_139) | [47](http://ir.delta.com/.#i_0_139) | [47](http://ir.delta.com/.#i_0_139) |
|                                            [ITEM 7A\. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](http://ir.delta.com/.#i_0_142)                                             |                                            [ITEM 7A\. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](http://ir.delta.com/.#i_0_142)                                             |                                            [ITEM 7A\. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](http://ir.delta.com/.#i_0_142)                                             | [48](http://ir.delta.com/.#i_0_142) | [48](http://ir.delta.com/.#i_0_142) | [48](http://ir.delta.com/.#i_0_142) |
|                                                    [ITEM 8\. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](http://ir.delta.com/.#i_0_145)                                                     |                                                    [ITEM 8\. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](http://ir.delta.com/.#i_0_145)                                                     |                                                    [ITEM 8\. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](http://ir.delta.com/.#i_0_145)                                                     | [49](http://ir.delta.com/.#i_0_145) | [49](http://ir.delta.com/.#i_0_145) | [49](http://ir.delta.com/.#i_0_145) |
|            [ITEM 9\. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND](http://ir.delta.com/.#i_0_274)

[FINANCIAL DISCLOSURE](http://ir.delta.com/.#i_0_274)            |            [ITEM 9\. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND](http://ir.delta.com/.#i_0_274)

[FINANCIAL DISCLOSURE](http://ir.delta.com/.#i_0_274)            |            [ITEM 9\. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND](http://ir.delta.com/.#i_0_274)

[FINANCIAL DISCLOSURE](http://ir.delta.com/.#i_0_274)            | [96](http://ir.delta.com/.#i_0_274) | [96](http://ir.delta.com/.#i_0_274) | [96](http://ir.delta.com/.#i_0_274) |
|                                                              [ITEM 9A\. CONTROLS AND PROCEDURES](http://ir.delta.com/.#i_0_277)                                                              |                                                              [ITEM 9A\. CONTROLS AND PROCEDURES](http://ir.delta.com/.#i_0_277)                                                              |                                                              [ITEM 9A\. CONTROLS AND PROCEDURES](http://ir.delta.com/.#i_0_277)                                                              | [96](http://ir.delta.com/.#i_0_277) | [96](http://ir.delta.com/.#i_0_277) | [96](http://ir.delta.com/.#i_0_277) |
|                                                                 [ITEM 9B\. OTHER INFORMATION](http://ir.delta.com/.#i_0_283)                                                                 |                                                                 [ITEM 9B\. OTHER INFORMATION](http://ir.delta.com/.#i_0_283)                                                                 |                                                                 [ITEM 9B\. OTHER INFORMATION](http://ir.delta.com/.#i_0_283)                                                                 | [98](http://ir.delta.com/.#i_0_283) | [98](http://ir.delta.com/.#i_0_283) | [98](http://ir.delta.com/.#i_0_283) |
|                                                                                PART III                                                                                |                                                                                PART III                                                                                |                                                                                PART III                                                                                |                                     |                                     |                                     |
|                 [ITEM 10\. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE](http://ir.delta.com/.#i_0_289)

[REGISTRANT](http://ir.delta.com/.#i_0_289)                  |                 [ITEM 10\. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE](http://ir.delta.com/.#i_0_289)

[REGISTRANT](http://ir.delta.com/.#i_0_289)                  |                 [ITEM 10\. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE](http://ir.delta.com/.#i_0_289)

[REGISTRANT](http://ir.delta.com/.#i_0_289)                  | [98](http://ir.delta.com/.#i_0_289) | [98](http://ir.delta.com/.#i_0_289) | [98](http://ir.delta.com/.#i_0_289) |
|                                                              [ITEM 11\. EXECUTIVE COMPENSATION](http://ir.delta.com/.#i_0_292)                                                               |                                                              [ITEM 11\. EXECUTIVE COMPENSATION](http://ir.delta.com/.#i_0_292)                                                               |                                                              [ITEM 11\. EXECUTIVE COMPENSATION](http://ir.delta.com/.#i_0_292)                                                               | [98](http://ir.delta.com/.#i_0_292) | [98](http://ir.delta.com/.#i_0_292) | [98](http://ir.delta.com/.#i_0_292) |


Annual Report of Southwest Airlines Co\. for year 2019

Southwest Airlines Co\.

Consolidated Statement of Comprehensive Income

(in millions)

|                                                                                |                             |                             |                             |
| ----------------------------------------------------------------------------------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                                                                | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|                                                                                | **2019**                    | **2018**                    | **2017**                    |
| **NET INCOME**                                                                                | $2,300                      | $2,465                      | $3,357                      |
| Unrealized gain (loss) on fuel derivative instruments, net of

 deferred taxes of ($16), ($7), and $185    | (53

)                | (26

)                | 317                         |
| Unrealized gain (loss) on interest rate derivative instruments, net of

 deferred taxes of ($8), $1, and $4 | (25

)                | 6                           | 7                           |
| Unrealized gain (loss) on defined benefit plan items, net of deferred

 taxes of ($9), $15, and $2          | (29

)                | 52                          | 3                           |
| Other, net of deferred taxes of $8, ($2), and $5                                                                  | 26                          | (6

)                 | 8                           |
| **OTHER COMPREHENSIVE INCOME (LOSS)**                                                                             | $

(81

)       | $26                         | $335                        |
| **COMPREHENSIVE INCOME**                                                                                | $2,219                      | $2,491                      | $3,692                      |

See accompanying notes\.

66


Annual Report of United Continental Holdings, Inc\. and United Airlines, Inc\. for year 2017

##### [Table of Contents](https://www.example.com#toc) #####

|                                                                |                             |                             |                             |                             |                             |
|:-------------------------------------------------------------- | ---------------------------:| ---------------------------:| ---------------------------:| ---------------------------:| ---------------------------:|
|                                                                | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| **Mainline**                                                   |                    **2017** |                    **2016** |                    **2015** |                    **2014** |                    **2013** |
| Passengers (thousands) (a)                                     |                    108,017  |                    101,007  |                     96,327  |                     91,475  |                     91,329  |
| Revenue passenger miles (“RPMs”) (millions) (b)                |                    193,444  |                    186,181  |                    183,642  |                    179,015  |                    178,578  |
| Available seat miles (“ASMs”) (millions) (c)                   |                    234,576  |                    224,692  |                    219,989  |                    214,105  |                    213,007  |
| Cargo ton miles (millions)                                     |                      3,316  |                      2,805  |                      2,614  |                      2,487  |                      2,213  |
| Passenger load factor (d)                                      |                      82\.5% |                      82\.9% |                      83\.5% |                      83\.6% |                      83\.8% |
| Passenger revenue per available seat mile (“PRASM”) (cents)    |                     11\.32  |                     11\.31  |                     11\.97  |                     12\.51  |                     12\.20  |
| Total revenue per available seat mile (cents)                  |                     13\.51  |                     13\.50  |                     14\.19  |                     14\.81  |                     14\.51  |
| Average yield per revenue passenger mile (“Yield”) (cents) (e) |                     13\.73  |                     13\.65  |                     14\.34  |                     14\.96  |                     14\.56  |
| Cost per available seat mile (“CASM”) (cents)                  |                     12\.59  |                     12\.22  |                     12\.42  |                     14\.03  |                     14\.31  |
| Average price per gallon of fuel, including fuel taxes         |                    $ 1\.72  |                    $ 1\.49  |                    $ 1\.96  |                    $ 2\.98  |                    $ 3\.12  |
| Fuel gallons consumed (millions)                               |                      3,357  |                      3,261  |                      3,216  |                      3,183  |                      3,204  |
| Average stage length (miles) (f)                               |                      1,806  |                      1,859  |                      1,922  |                      1,958  |                      1,934  |
| Average daily utilization of each aircraft (hours) (g)         |                      10:27  |                      10:06  |                      10:24  |                      10:26  |                      10:28  |
| **Consolidated**                                               |                             |                             |                             |                             |                             |
| Passengers (thousands) (a)                                     |                    148,067  |                    143,177  |                    140,369  |                    138,029  |                    139,209  |
| RPMs (millions) (b)                                            |                    216,261  |                    210,309  |                    208,611  |                    205,559  |                    205,167  |
| ASMs (millions) (c)                                            |                    262,386  |                    253,590  |                    250,003  |                    246,021  |                    245,354  |
| Passenger load factor (d)                                      |                      82\.4% |                      82\.9% |                      83\.4% |                      83\.6% |                      83\.6% |
| PRASM (cents)                                                  |                     12\.35  |                     12\.40  |                     13\.11  |                     13\.72  |                     13\.50  |
| Total revenue per available seat mile (cents)                  |                     14\.38  |                     14\.42  |                     15\.15  |                     15\.81  |                     15\.60  |
| Yield (cents) (e)                                              |                     14\.98  |                     14\.96  |                     15\.72  |                     16\.42  |                     16\.14  |
| CASM (cents)                                                   |                     13\.05  |                     12\.70  |                     13\.08  |                     14\.85  |                     15\.09  |
| Average price per gallon of fuel, including fuel taxes         |                     $1\.74  |                     $1\.49  |                     $1\.94  |                     $2\.99  |                     $3\.13  |
| Fuel gallons consumed (millions)                               |                      3,978  |                      3,904  |                      3,886  |                      3,905  |                      3,947  |
| Average stage length (miles) (f)                               |                      1,460  |                      1,473  |                      1,487  |                      1,480  |                      1,445  |

(a) The number of revenue passengers measured by each flight segment flown\.

(b) The number of scheduled miles flown by revenue passengers\.

(c) The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown\.

(d) RPM divided by ASM\.

(e) The average passenger revenue received for each revenue passenger mile flown\.

(f) Average stage length equals the average distance a flight travels weighted for size of aircraft\.

(g) The average number of hours per day that an aircraft flown in revenue service is operated (from gate departure to gate arrival)\.

27


Annual Report of Southwest Airlines Co\. for year 2018

Initial spoilage estimates for both tickets and funds available for future use are routinely adjusted and ultimately finalized once the tickets expire, which is typically twelve months after the original purchase date\. Spoilage estimates are based on the Company's Customers' historical travel behavior as well as assumptions about the Customers' future travel behavior\. Assumptions used to generate spoilage estimates can be impacted by several factors including, but not limited to: fare increases, fare sales, changes to the Company's ticketing policies, changes to the Company’s refund, exchange and unused funds policies, seat availability, and economic factors\.

**Loyalty Program**

The Company records a liability for the relative fair value of providing free travel under its loyalty program for all points earned from flight activity or sold to companies participating in the Company’s loyalty program as business partners\. The loyalty liability represents the outstanding performance obligations that will be satisfied when a member redeems points for travel or other goods and services, or upon spoilage of the points\. Points earned from flight activity are valued at their relative standalone selling price based on coefficients in place that determine the worth of loyalty points in relation to their redemption value to the Customer\. Points purchased by business partners are subjected to an allocation methodology in which the relative fair value of the transportation and marketing elements, if any, identified in the contract are first determined, then applied to the contractual rate paid by the business partner\. The terms for these agreements are no more than 10 years in length\. The Company’s liability for loyalty benefits include a portion that are expected to be redeemed during the following twelve months (classified as a component of Air traffic liability), and a portion that are not expected to be redeemed during the following twelve months (classified as Air traffic liability \- noncurrent)\. The Company continually updates this analysis and adjusts the split between current and non\-current liabilities as appropriate\.

In order to determine the value of each loyalty point, certain assumptions must be made at the time of measurement, which include the following:

|   |                                                                                |
| - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | *Allocation of Passenger Revenue*  \- Revenues from Passengers, related to travel, who also earn Rapid Rewards Points have been allocated between flight (recognized as revenue when transportation is provided) and Rapid Rewards Points (deferred until points are redeemed or spoil) based on each obligation’s relative standalone selling price\. The Company utilizes historical earning patterns to assist in this allocation\. |

|   |                                                                                |
| - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | *Fair Value of Rapid Rewards Points*  \- Determined from the base fare value of tickets which were purchased using prior point redemptions for travel and other products and services, which the Company believes to be indicative of the fair value of points as perceived by Customers and representative of the value of each point at the time of redemption\. The Company’s booking site allows a Customer to toggle between fares utilizing either cash or point redemptions, which provides the Customer with an approximation of the equivalent value of their points\. The value can differ, however, based on demand, the amount of time prior to the flight, and other factors\. The fare mix during the period measured represents a constraint, which could result in the assumptions above changing at the measurement date, as fare classes can have different coefficients used to determine the total loyalty points needed to purchase an award ticket\. The mixture of these fare classes and changes in the coefficients used by the Company could cause the fair value per point to increase or decrease\.  |

For points that are expected to expire unused, the Company recognizes spoilage in proportion to the pattern of points used by the Customer, which approximates the average period over which the population of Rapid Reward Members redeem their points\. The Company utilizes historical behavioral data to develop a predictive statistical model to analyze the amount of spoilage expected for points sold to business partners and earned through flight\. The Company continues to evaluate expected spoilage annually and applies appropriate adjustments in the fourth quarter of each year, or other times, if changes in Customer behavior are detected\. Changes to spoilage estimates impact revenue recognition prospectively\. In most historical periods, the impact of changes in the estimated spoilage rate has not resulted in material changes to revenue recognition\. However, due to the size of the Company’s liability for loyalty benefits as a result of the elimination of the incremental cost method of accounting for flight points, changes in Customer behavior and/or expected future redemption patterns could result in more significant variations in Passenger revenue under the New Revenue Standard\. These analyses have not resulted in material adjustments in 2018, 2017, or 2016\.

87


Annual Report of American Airlines Group Inc\. for year 2017

*Nonoperating Results*

|                                 |                                              |                                              |                                              |                                                       |
| ------------------------------- | -------------------------------------------- | -------------------------------------------- | -------------------------------------------- | ----------------------------------------------------- |
|                                 | **Year Ended**

**December 31,**       | **Year Ended**

**December 31,**       | **Increase**

**(Decrease)**           | **Percent**

**Increase**

**(Decrease)** |
|                                 | **2016**                                     | **2015**                                     | **Increase**

**(Decrease)**           | **Percent**

**Increase**

**(Decrease)** |
|                                 | **(In millions, except percentage changes)** | **(In millions, except percentage changes)** | **(In millions, except percentage changes)** | **(In millions, except percentage changes)**          |
| Interest income                 | $104                                         | $49                                          | $55                                          | nm                                                    |
| Interest expense, net           | (906)                                        | (796)                                        | (110)                                        | 13\.8                                                 |
| Other, net                      | (59)                                         | (774)                                        | 715                                          | (92\.4)                                               |
| Total nonoperating expense, net | $(861)                                       | $(1,521)                                     | $660                                         | (43\.4)                                               |

American’s short\-term investments in each period consisted of highly liquid investments that provided nominal returns\. Interest income increased $55 million due to higher interest\-bearing related party receivables from American’s parent company, AAG, as well as a 50 basis point increase in average yields in 2016 as compared to 2015\.

Interest expense, net increased in 2016 primarily due to higher outstanding debt as a result of aircraft financings associated with American’s fleet renewal program\.

In 2016, other nonoperating expense, net primarily included $49 million of net special charges associated with debt refinancings and extinguishments\.

In 2015, other nonoperating expense, net primarily included a $592 million special charge to write off all of the value of Venezuelan bolivars held by American due to continued lack of repatriations and deterioration of economic conditions in Venezuela\. American also incurred $159 million of net foreign currency losses\. The foreign currency losses in 2015 were driven primarily by the strengthening of the U\.S\. dollar relative to other currencies, principally in Latin American and European markets\.

*Income Taxes*

American is part of the AAG consolidated income tax return\.

In 2016, American recorded an income tax provision of $1\.7 billion at an effective rate of approximately 37%, which was substantially non\-cash due to American’s utilization of NOLs\. Substantially all of American’s income before income taxes was attributable to the United States\.

In 2015, American reversed $3\.5 billion of the valuation allowance on its deferred tax assets, which resulted in a special non\-cash tax benefit recorded in American’s consolidated statement of operations\.

See Note 4 to American’s Consolidated Financial Statements in Part II, Item 8B for additional information on income taxes\.

**Liquidity and Capital Resources**

***Liquidity***

As of December 31, 2017, AAG had approximately $7\.6 billion in total available liquidity and $318 million in restricted cash and short\-term investments\. Additional detail of our available liquidity is provided in the table below (in millions):

|                                     |                  |                  |                  |                  |
| ----------------------------------- | ---------------- | ---------------- | ---------------- | ---------------- |
|                                     | **AAG**          | **AAG**          | **American**     | **American**     |
|                                     | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|                                     | **2017**         | **2016**         | **2017**         | **2016**         |
| Cash                                | $295             | $322             | $287             | $310             |
| Short\-term investments             | 4,771            | 6,037            | 4,768            | 6,034            |
| Undrawn revolving credit facilities | 2,500            | 2,425            | 2,500            | 2,425            |
| Total available liquidity           | $7,566           | $8,784           | $7,555           | $8,769           |

65


Annual Report of Southwest Airlines Co\. for year 2018

**6****\. LONG\-TERM DEBT**

|                                                                       |                       |                       |
| --------------------------------------------------------------------- | --------------------- | --------------------- |
| **(in millions)**                                                     | **December 31, 2018** | **December 31, 2017** |
| French Credit Agreements due June 2018 \- 2\.54%                      | $—                    | $1                    |
| Fixed\-rate 737 Aircraft Notes payable through January 2018 \- 7\.03% | —                     | 3                     |
| 2\.75% Notes due November 2019                                        | 300                   | 300                   |
| Term Loan Agreement payable through May 2019 \- 6\.315%               | 23                    | 66                    |
| Term Loan Agreement payable through July 2019 \- 4\.84%               | 10                    | 19                    |
| 2\.65% Notes due 2020                                                 | 492                   | 491                   |
| Term Loan Agreement payable through 2020 \- 5\.223%                   | 187                   | 237                   |
| 737 Aircraft Notes payable through 2020                               | 67                    | 155                   |
| 2\.75% Notes due 2022                                                 | 300                   | 300                   |
| Pass Through Certificates due 2022 \- 6\.24%                          | 250                   | 294                   |
| Term Loan Agreement payable through 2026 \- 3\.88%                    | 197                   | 215                   |
| 3\.00% Notes due 2026                                                 | 300                   | 300                   |
| 3\.45% Notes due 2027                                                 | 300                   | 300                   |
| 7\.375% Debentures due 2027                                           | 125                   | 127                   |
| Capital leases                                                        | 845                   | 885                   |
|                                                                       | $3,396                | $3,693                |
| Less current maturities                                               | 606                   | 348                   |
| Less debt discount and issuance costs                                 | 19                    | 25                    |
|                                                                       | $2,771                | $3,320                |

AirTran Holdings is party to aircraft purchase financing facilities, and as of December 31, 2018, nine Boeing 737 aircraft remained that were financed under floating\-rate facilities\. Each note is secured by a first mortgage on the aircraft to which it relates\. The notes bear interest at a floating rate per annum equal to a margin plus the three or six\-month LIBOR in effect at the commencement of each semi\-annual or three\-month period, as applicable\. As of December 31, 2018, the weighted average interest rate was 4\.06 percent\. Principal and interest under the notes are payable semi\-annually or every three months as applicable\. As of December 31, 2018, the remaining debt outstanding may be prepaid without penalty under all aircraft loans provided under such facilities\. The remaining notes mature in years 2019 and 2020\. As discussed further in Note 10, a portion of the above floating\-rate debt has been effectively converted to a fixed rate via interest rate swap agreements which expire as the underlying notes mature\.

AirTran Holdings was previously a party to an additional aircraft purchase financing facility, and one Boeing 737 aircraft was financed under the fixed\-rate facility\. The note was secured by a first mortgage on the aircraft to which it related\. The remaining note matured on January 11, 2018\.

During November 2017, the Company issued $300 million senior unsecured notes due 2022\. The notes bear interest at 2\.75 percent\. Interest is payable semi\-annually in arrears on May 16 and November 16\.

Also during November 2017, the Company issued $300 million senior unsecured notes due 2027\. The notes bear interest at 3\.45 percent\. Interest is payable semi\-annually in arrears on May 16 and November 16\.

During November 2016, the Company issued $300 million senior unsecured notes due 2026\. The notes bear interest at 3\.00 percent\. Interest is payable semi\-annually in arrears on May 15 and November 15\.

During October 2016, the Company entered into a term loan agreement providing for loans to the Company aggregating up to $215 million, to be secured by mortgages on seven of the Company's 737\-800 aircraft\. The Company borrowed the full $215 million and secured this loan with the requisite seven aircraft mortgages\. The loan matures on October 31, 2026, and is repayable via semi\-annual installments of principal that began on April 30, 2018\. The loan bears

91


Annual Report of American Airlines Group Inc\. for year 2018

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC\.**

**11\. Accumulated Other Comprehensive Loss**

The components of AOCI are as follows (in millions):

|                                                            |                                                                                |                                    |                                                         |       |           |
| ---------------------------------------------------------- | --------------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------------------------- | ----- | --------- |
|                                                            | **Pension,
Retiree
Medical and
Other
Postretirement
Benefits** | **Unrealized Loss on Investments** | **Income Tax
Benefit
(Provision)**  **^(1)^** |       | **Total** |
| Balance at December 31, 2016                               | $(4,406)                                                                                | $—                                 | $(677)                                                  |       | $(5,083)  |
| Other comprehensive income (loss) before reclassifications | (30)                                                                                | (1)                                | 15                                                      |       | (16)      |
| Amounts reclassified from AOCI                             | (87)                                                                                | —                                  | 32                                                      | ^(2)^ | (55)      |
| Net current\-period other comprehensive income (loss)      | (117)                                                                                | (1)                                | 47                                                      |       | (71)      |
| Balance at December 31, 2017                               | (4,523)                                                                                | (1)                                | (630)                                                   |       | (5,154)   |
| Other comprehensive income (loss) before reclassifications | (62)                                                                                | (4)                                | 15                                                      |       | (51)      |
| Amounts reclassified from AOCI                             | (88)                                                                                | —                                  | 19                                                      | ^(2)^ | (69)      |
| Net current\-period other comprehensive income (loss)      | (150)                                                                                | (4)                                | 34                                                      |       | (120)     |
| Balance at December 31, 2018                               | $(4,673)                                                                                | $(5)                               | $(596)                                                  |       | $(5,274)  |

|       |                                                                                |
| ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(1)^ | Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net income until the obligations are fully extinguished\. |

|       |                                                                                |
| ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(2)^ | Relates to pension, retiree medical and other postretirement benefits obligations and is recognized within the income tax provision on our consolidated statements of operations\. |

Reclassifications out of AOCI for the years ended December 31, 2018 and 2017 are as follows (in millions):

|                                                                             |                                    |                                    |                                                                                |
| --------------------------------------------------------------------------- | ---------------------------------- | ---------------------------------- | ------------------------------------------------------------------------------ |
|                                                                             | **Amounts reclassified from AOCI** | **Amounts reclassified from AOCI** | **Affected line items on the
consolidated statements of
operations** |
|                                                                             | **Year Ended December 31,**        | **Year Ended December 31,**        | **Affected line items on the
consolidated statements of
operations** |
| **AOCI Components**                                                         | **2018**                           | **2017**                           | **Affected line items on the
consolidated statements of
operations** |
| Amortization of pension, retiree medical and other postretirement benefits: |                                    |                                    |                                                                                |
| Prior service benefit                                                       | $(161)                             | $(132)                             | Nonoperating other income, net                                                 |
| Actuarial loss                                                              | 92                                 | 77                                 | Nonoperating other income, net                                                 |
| Total reclassifications for the period, net of tax                          | $(69)                              | $(55)                              |                                                                                |

Amounts allocated to other comprehensive income (OCI) for income taxes as further described in Note 7 will remain in AOCI until we cease all related activities, such as termination of the pension plan\.

120


Annual Report of ALASKA AIR GROUP, INC\. for year 2017

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Stockholders and Board of Directors

Alaska Air Group, Inc\.:

*Opinion on Internal Control Over Financial Reporting*

We have audited Alaska Air Group, Inc\. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2017, based on criteria established in *Internal Control \- Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission\. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in *Internal Control \- Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission\.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive operations, shareholders’ equity, and cash flows for each of the years in the three\-year period ended December 31, 2017, and the related notes (collectively, the “consolidated financial statements”), and our report dated February 14, 2018 expressed an unqualified opinion on those consolidated financial statements\.

*Basis for Opinion*

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting\. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit\. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U\.S\. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB\.

We conducted our audit in accordance with the standards of the PCAOB\. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects\. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk\. Our audit also included performing such other procedures as we considered necessary in the circumstances\. We believe that our audit provides a reasonable basis for our opinion\.

*Definition and Limitations of Internal Control Over Financial Reporting*

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles\. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements\.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements\. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate\.

KPMG LLP

Seattle, Washington

February 14, 2018

 96


Annual Report of ALASKA AIR GROUP, INC\. for year 2019

The following table sets forth the status of the qualified defined\-benefit pension plans (in millions):

|                                    |                                    |                                    |         |  |  |  |         |
|:---------------------------------- |:---------------------------------- |:---------------------------------- | -------:|:- |:- |:- | -------:|
|                                    |                                    |                                    |    2019 |  |  |  |    2018 |
| Projected benefit obligation (PBO) | Projected benefit obligation (PBO) | Projected benefit obligation (PBO) |         |  |  |  |         |
| Beginning of year                  | Beginning of year                  | Beginning of year                  | $ 2,225 |  |  |  | $ 2,387 |
| Service cost                       | Service cost                       | Service cost                       |      42 |  |  |  |      48 |
| Interest cost                      | Interest cost                      | Interest cost                      |      89 |  |  |  |      79 |
| Actuarial (gain)/loss              | Actuarial (gain)/loss              | Actuarial (gain)/loss              |     359 |  |  |  |   (191) |
| Benefits paid                      | Benefits paid                      | Benefits paid                      |   (113) |  |  |  |    (98) |
| End of year                        | End of year                        | End of year                        | $ 2,602 |  |  |  | $ 2,225 |
| Plan assets at fair value          | Plan assets at fair value          | Plan assets at fair value          |         |  |  |  |         |
| Beginning of year                  | Beginning of year                  | Beginning of year                  | $ 1,858 |  |  |  | $ 2,083 |
| Actual return on plan assets       | Actual return on plan assets       | Actual return on plan assets       |     429 |  |  |  |   (127) |
| Employer contributions             | Employer contributions             | Employer contributions             |      65 |  |  |  |       — |
| Benefits paid                      | Benefits paid                      | Benefits paid                      |   (113) |  |  |  |    (98) |
| End of year                        | End of year                        | End of year                        | $ 2,239 |  |  |  | $ 1,858 |
| Unfunded status                    | Unfunded status                    | Unfunded status                    | $ (363) |  |  |  | $ (367) |
| Percent funded                     | Percent funded                     | Percent funded                     |    86 % |  |  |  |    84 % |

The accumulated benefit obligation for the combined qualified defined\-benefit pension plans was $2\.4 billion and $2\.1 billion at December 31, 2019 and 2018\.

The amounts recognized in the consolidated balance sheets (in millions):

|                                                         |                                                         |                                                         |       |  |  |  |       |
|:------------------------------------------------------- |:------------------------------------------------------- |:------------------------------------------------------- | -----:|:- |:- |:- | -----:|
|                                                         |                                                         |                                                         |  2019 |  |  |  |  2018 |
| Accrued benefit liability\-long term                    | Accrued benefit liability\-long term                    | Accrued benefit liability\-long term                    | $ 412 |  |  |  | $ 392 |
| Plan assets\-long term (within Other noncurrent assets) | Plan assets\-long term (within Other noncurrent assets) | Plan assets\-long term (within Other noncurrent assets) |  (49) |  |  |  |  (25) |
| Total liability recognized                              | Total liability recognized                              | Total liability recognized                              | $ 363 |  |  |  | $ 367 |

The amounts not yet reflected in net periodic benefit cost and included in AOCL (in millions):

|                                    |                                    |                                    |       |  |  |  |       |
|:---------------------------------- |:---------------------------------- |:---------------------------------- | -----:|:- |:- |:- | -----:|
|                                    |                                    |                                    |  2019 |  |  |  |  2018 |
| Prior service credit               | Prior service credit               | Prior service credit               | $ (6) |  |  |  | $ (8) |
| Net loss                           | Net loss                           | Net loss                           |   595 |  |  |  |   607 |
| Amount recognized in AOCL (pretax) | Amount recognized in AOCL (pretax) | Amount recognized in AOCL (pretax) | $ 589 |  |  |  | $ 599 |

The expected amortization of prior service credit and net loss from AOCL in 2020 is $1 million and $35 million for the qualified defined\-benefit pension plans\.

Net pension expense for the qualified defined\-benefit plans included the following components (in millions):

|                                      |                                      |                                      |      |  |  |  |       |  |  |  |       |
|:------------------------------------ |:------------------------------------ |:------------------------------------ | ----:|:- |:- |:- | -----:|:- |:- |:- | -----:|
|                                      |                                      |                                      | 2019 |  |  |  |  2018 |  |  |  |  2017 |
| Service cost                         | Service cost                         | Service cost                         | $ 42 |  |  |  |  $ 48 |  |  |  |  $ 39 |
| Interest cost                        | Interest cost                        | Interest cost                        |   89 |  |  |  |    79 |  |  |  |    74 |
| Expected return on assets            | Expected return on assets            | Expected return on assets            | (95) |  |  |  | (107) |  |  |  | (106) |
| Amortization of prior service credit | Amortization of prior service credit | Amortization of prior service credit |  (1) |  |  |  |   (1) |  |  |  |   (1) |
| Recognized actuarial loss            | Recognized actuarial loss            | Recognized actuarial loss            |   37 |  |  |  |    33 |  |  |  |    26 |
| Net pension expense                  | Net pension expense                  | Net pension expense                  | $ 72 |  |  |  |  $ 52 |  |  |  |  $ 32 |

There are no current statutory funding requirements for the Company’s plans in 2020\.

75