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

Generally, West Coast jet fuel prices are somewhat higher and more volatile than prices in the Gulf Coast or on the East Coast\. Our average raw fuel cost per gallon increased21% in 2017, after decreasing 19% in 2016 and 39% in 2015\.

The percentages of our aircraft fuel expense by crude oil and refining margins, as well as the percentage of our aircraft fuel expense of operating expenses are as follows:

|                       |          |                     |          |          |          |
| --------------------- | -------- | ------------------- | -------- | -------- | -------- |
|                       | **2017** | **2016**  **^(a)^** | **2015** | **2014** | **2013** |
| Crude oil             | 66%      | 69%                 | 62%      | 72%      | 71%      |
| Refining margins      | 23%      | 20%                 | 26%      | 18%      | 19%      |
| Other ^(b)^           | 11%      | 11%                 | 12%      | 10%      | 10%      |
| Total                 | 100%     | 100%                | 100%     | 100%     | 100%     |
| Aircraft fuel expense | 22%      | 18%                 | 22%      | 32%      | 34%      |

|     |                                                                                |
| --- | ---------------------------------------------------------------------------------------------------- |
| (a) | Includes information for Virgin America for the period December 14, 2016 through December 31, 2016\. |

|     |                                                                                |
| --- | --------------------------------------------------------------------------------------------------------------------------------------------------- |
| (b) | Other includes gains and losses on settled fuel hedges, unrealized mark\-to\-market fuel hedge gains or losses, taxes and other into\-plane costs\. |

We use crude oil call options as hedges to decrease our exposure to the volatility of jet fuel prices\. Call options effectively cap our pricing for crude oil, limiting our exposure to increasing fuel prices for about half of our planned fuel consumption\. With call options, we are hedged against spikes in crude oil prices, and during a period of decline in crude oil prices, we only forfeit cash previously paid for hedge premiums\. We begin hedging approximately 18 months in advance of crude oil consumption\.

We believe that operating fuel\-efficient aircraft is the best hedge against high fuel prices\. Alaska operates an all\-Boeing 737 fleet, Virgin America operates an all\-Airbus A320 family fleet, and Horizon currently operates a fleet including Embraer 175 jet aircraft and Bombardier Q400 turboprop aircraft\. Air Group's fuel\-efficiency rate expressed in available seat miles flown per gallon (ASMs/g) improved from 75\.3 ASMs/g in 2013 to 77\.9 ASMs/g in 2017\. These improvements have not only reduced our fuel consumption rate, but also the amount of greenhouse gases and other pollutants that our aircraft emit\.

**COMPETITION**

Competition in the airline industry is intense and unpredictable\. Our competitors consist primarily of other airlines and, to a lesser extent, other forms of transportation\. Competition can be direct, in the form of another carrier flying the exact non\-stop route, or indirect, where a carrier serves the same two cities non\-stop from an alternative airport in that city or via an itinerary requiring a connection at another airport\. We compete with other domestic airlines and a limited number of international airlines on nearly all of our scheduled routes\. Our largest competitor is Delta, who has significantly increased its capacity in Seattle over the past few years\. Approximately 75% of our capacity to and from Seattle competes with Delta\. As we grow in California and expand our transcontinental route offerings, United Airlines and Southwest Airlines have also become large competitors and have increased their capacity in markets we serve\. Our California and transcontinental routes have a higher concentration of competitors when compared to our historical route structure which was predominately concentrated in the Pacific Northwest\. Based on schedules filed with the U\.S\. Department of Transportation, we expect the amount of competitive capacity overlap with all carriers to increase by more than 6% in the first half of 2018, weighted based on our network\.

We believe that the following principal competitive factors are important to our guests:

|   |               |
| - | ------------- |
| • | Safety record |

Safety is our top priority and is at the core of everything we do\. In 2017, we were ranked by AirlineRatings\.com as one of only two U\.S\. airlines in the Top 20 safest airlines in the world\. We also received our 16th Diamond Award of Excellence from the Federal Aviation Administration, recognizing both Alaska and Horizon aircraft technicians for their commitment to training\.

|   |                                 |
| - | ------------------------------- |
| • | Customer service and reputation |

We compete with other airlines in areas of customer service such as on\-time performance, guest amenities—including first class and other premium seating, quality of on\-board products, aircraft type and comfort\. In 2017, Alaska Airlines ranked highest in customer satisfaction among traditional network carriers by J\.D\. Power and Associates for the tenth year in a row\. We have installed Boeing Space Bins on the majority of our Boeing 737\-900ER fleet, providing additional overhead bin space for our guests\. In 2017, we launched a Premium Class of service on our B737 aircraft that provides extra

 11


Annual Report of ALASKA AIR GROUP, INC\. for year 2018

10\-K 1 alk10\-k123118\.htm ALK 10\-K 12/31/2018

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

**FORM 10\-K**

|   |                                                                                |
| - | ---------------------------------------------------------------------------------------- |
| x | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

For the fiscal year ended December 31, 2018

OR

|   |                                                                                |
| - | -------------------------------------------------------------------------------------------- |
| ¨ | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

For the transition period from to

**Commission File Number 1\-8957**

**ALASKA AIR GROUP, INC\.**

|                          |                                          |
| ------------------------ | ---------------------------------------- |
| **Delaware**             | **91\-1292054**                          |
| (State of Incorporation) | (I\.R\.S\. Employer Identification No\.) |

|                                                              |
| ------------------------------------------------------------ |
| **19300 International Boulevard, Seattle, Washington 98188** |
| **Telephone: (206) 392\-5040**                               |

Securities registered pursuant to Section 12(b) of the Act:

|                                    |                             |
| ---------------------------------- | --------------------------- |
| **Common Stock, $0\.01 Par Value** | **New York Stock Exchange** |

 Securities registered pursuant to Section 12(g) of the Act:

**None**

Indicate by check mark if the registrant is a well\-known seasoned issuer, as defined in Rule 405 of the Securities Act\. Yesx No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act\. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days\. Yesx No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S\-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)\. Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S\-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10\-K or any amendment to this Form 10\-K\. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non\-accelerated filer or a smaller reporting company\. See definitions of “large accelerated filer”, "accelerated filer" and "smaller reporting company" in Rule 12b\-2 of the Exchange Act:

Large accelerated filerx Accelerated filer ¨ Non\-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b\-2 of the Exchange Act\.): Yes ¨ No x

As of January 31, 2019, shares of common stock outstanding totaled 123,116,410\. The aggregate market value of the shares of common stock of Alaska Air Group, Inc\. held by nonaffiliates on June 30, 2018, was approximately $7\.4 billion (based on the closing price of $60\.39 per share on the New York Stock Exchange on that date)\.

**DOCUMENTS INCORPORATED BY REFERENCE**

Portions of Definitive Proxy Statement relating to 2019 Annual Meeting of Shareholders are incorporated by reference in Part III\.


Annual Report of DELTA AIR LINES, INC\.  for year 2018

Refinery Segment

The refinery primarily produces gasoline, diesel and jet fuel\.  Monroe exchanges the non\-jet fuel products the refinery produces with third parties for jet fuel consumed in our airline operations\.  The jet fuel produced and procured through exchanging gasoline and diesel fuel produced by the refinery provides approximately 200,000 barrels per day for use in our airline operations\. We believe that the jet fuel supply resulting from the refinery's operation has contributed to reduced market price of jet fuel, and thus lowered our cost of jet fuel compared to what it otherwise would have been\.

During the December 2018 quarter, the refinery completed a planned maintenance event ("turnaround") and did not produce any refined products for approximately 60 days\. The turnaround was in accordance with the long\-term maintenance plan for the facility to allow for the safe completion of major repairs and upgrades\.

The refinery recorded operating revenues of  $5\.5 billion  in  2018 , compared to  $5\.0 billion  in  2017 \. Operating revenues in  2018  were primarily composed of  $3\.6 billion  of non\-jet fuel products exchanged with third parties to procure jet fuel,  $962 million  of sales of jet fuel to the airline segment and $900 million of non\-jet fuel product sales\. Refinery revenues increased compared to the prior year due to higher costs of crude oil leading to higher pricing for associated refined products and higher margins on distillate product\.

The refinery recorded income of  $58 million  and  $110 million  in  2018  and  2017 , respectively\. The refinery's income  in  2018  was lower primarily due to the turnaround in the December 2018 quarter and lower gasoline margins nationwide\.

A refinery is subject to annual EPA requirements to blend renewable fuels into the gasoline and on\-road diesel fuel it produces\. Alternatively, a refinery may purchase renewable energy credits, called RINs, from third parties in the secondary market\. The refinery, operated by Monroe, purchases the majority of its RINs requirement in the secondary market\. During 2018 observable RINs prices declined approximately 60%, which minimized our compliance costs during the current year\.

 For more information regarding the refinery's results, see  Note 15  of the Notes to the Consolidated Financial Statements\.

 37


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

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

**1\. Basis of Presentation and Summary of Significant Accounting Policies**

***(a) Basis of Presentation***

American Airlines Group Inc\. (we, us, our and similar terms, or AAG), a Delaware corporation, is a holding company whose primary business activity is the operation of a major network air carrier, providing scheduled air transportation for passengers and cargo through its mainline operating subsidiary, American Airlines, Inc\. (American) and its wholly\-owned regional airline subsidiaries, Envoy Aviation Group Inc\. (Envoy), Piedmont Airlines, Inc\. (Piedmont) and PSA Airlines, Inc\. (PSA) that operate under the brand American Eagle\. On December 9, 2013, a subsidiary of AMR Corporation (AMR) merged with and into US Airways Group, Inc\. (US Airways Group), a Delaware corporation, which survived as a wholly\-owned subsidiary of AAG, and AAG emerged from Chapter 11 (the Merger)\. Upon closing of the Merger and emergence from Chapter 11, AMR changed its name to American Airlines Group Inc\. On December 30, 2015, in order to simplify AAG’s internal corporate structure, US Airways Group merged with and into AAG, with AAG as the surviving corporation\. Immediately thereafter, US Airways, Inc\. (US Airways), a wholly\-owned subsidiary of US Airways Group, merged with and into American, with American as the surviving corporation\. All significant intercompany transactions have been eliminated\.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States (GAAP) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements\. Actual results could differ from those estimates\. The most significant areas of judgment relate to passenger revenue recognition, impairment of goodwill, impairment of long\-lived and intangible assets, the loyalty program, valuation allowance for deferred tax assets, as well as pension and retiree medical and other postretirement benefits\.

***(b) Short\-term Investments***

Short\-term investments are classified as available\-for\-sale and stated at fair value\. Realized gains and losses are recorded in nonoperating expense on the consolidated statement of operations\. Unrealized gains and losses are recorded in accumulated other comprehensive loss on the consolidated balance sheets\.

***(c) Restricted Cash and Short\-term Investments***

We have restricted cash and short\-term investments related primarily to collateral held to support workers’ compensation obligations\.

***(d) Aircraft Fuel, Spare Parts and Supplies, Net***

Aircraft fuel is recorded on a first\-in, first\-out basis\. Spare parts and supplies are recorded at average costs less an allowance for obsolescence\. These items are expensed when used\.

***(e) Operating Property and Equipment***

Operating property and equipment is recorded at cost and depreciated or amortized to residual values over the asset’s estimated useful life or the lease term, whichever is less, using the straight\-line method\. Residual values for aircraft, engines and related rotable parts are generally 5% to 10% of original cost\. Costs of major improvements that enhance the usefulness of the asset are capitalized and depreciated or amortized over the estimated useful life of the asset or the lease term, whichever is less\. The estimated useful lives for the principal property and equipment classifications are as follows:

|                                                     |                           |
| --------------------------------------------------- | ------------------------- |
| **Principal Property and Equipment Classification** | **Estimated Useful Life** |
| Aircraft, engines and related rotable parts         | 20 – 30 years             |
| Buildings and improvements                          | 5 – 30 years              |
| Furniture, fixtures and other equipment             | 3 – 10 years              |
| Capitalized software                                | 5 – 10 years              |

We assess impairment on operating property and equipment when events and circumstances indicate that the assets may be impaired\. An asset or group of assets is considered impaired when the undiscounted cash flows estimated

86


Annual Report of American Airlines Group Inc\. for year 2019

AMERICAN AIRLINES GROUP INC\.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share and per share amounts)

|                                                         |                             |                             |                             |
| ------------------------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                                         | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                                         | **2019**                    | **2018**                    | **2017**                    |
| **Operating revenues:**                                 |                             |                             |                             |
| Passenger                                               | $42,010                     | $40,676                     | $39,131                     |
| Cargo                                                   | 863                         | 1,013                       | 890                         |
| Other                                                   | 2,895                       | 2,852                       | 2,601                       |
| Total operating revenues                                | 45,768                      | 44,541                      | 42,622                      |
| **Operating expenses:**                                 |                             |                             |                             |
| Aircraft fuel and related taxes                         | 7,526                       | 8,053                       | 6,128                       |
| Salaries, wages and benefits                            | 12,609                      | 12,251                      | 11,954                      |
| Regional expenses                                       | 7,501                       | 7,133                       | 6,546                       |
| Maintenance, materials and repairs                      | 2,380                       | 2,050                       | 1,959                       |
| Other rent and landing fees                             | 2,055                       | 1,900                       | 1,806                       |
| Aircraft rent                                           | 1,326                       | 1,264                       | 1,197                       |
| Selling expenses                                        | 1,602                       | 1,520                       | 1,477                       |
| Depreciation and amortization                           | 1,982                       | 1,839                       | 1,702                       |
| Special items, net                                      | 635                         | 787                         | 712                         |
| Other                                                   | 5,087                       | 5,088                       | 4,910                       |
| Total operating expenses                                | 42,703                      | 41,885                      | 38,391                      |
| **Operating income**                                    | 3,065                       | 2,656                       | 4,231                       |
| **Nonoperating income (expense):**                      |                             |                             |                             |
| Interest income                                         | 127                         | 118                         | 94                          |
| Interest expense, net                                   | (1,095

)             | (1,056

)             | (1,053

)             |
| Other income, net                                       | 159                         | 166                         | 123                         |
| Total nonoperating expense, net                         | (809

)               | (772

)               | (836

)               |
| **Income before income taxes**                          | 2,256                       | 1,884                       | 3,395                       |
| Income tax provision                                    | 570                         | 472                         | 2,113                       |
| **Net income**                                          | $1,686                      | $1,412                      | $1,282                      |
| **Earnings per common share:**                          |                             |                             |                             |
| Basic                                                   | $3\.80                      | $3\.04                      | $2\.62                      |
| Diluted                                                 | $3\.79                      | $3\.03                      | $2\.61                      |
| **Weighted average shares outstanding (in thousands):** |                             |                             |                             |
| Basic                                                   | 443,363                     | 464,236                     | 489,164                     |
| Diluted                                                 | 444,269                     | 465,660                     | 491,692                     |
| **Cash dividends declared per common share**            | $0\.40                      | $0\.40                      | $0\.40                      |

See accompanying notes to consolidated financial statements\.

72


Annual Report of American Airlines Group Inc\. for year 2019

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

(n) Share\-based Compensation

We account for our share\-based compensation expense based on the fair value of the stock award at the time of grant, which is recognized ratably over the vesting period of the stock award\. The majority of our stock awards are time vested restricted stock units, and the fair value of such awards is based on the market price of the underlying shares of AAG common stock on the date of grant\. See Note 15 for further discussion of share\-based compensation\.

(o) Foreign Currency Gains and Losses

Foreign currency gains and losses are recorded as part of other income, net within total nonoperating expense, net in our consolidated statements of operations\. For the years ended  December 31, 2019 ,  2018  and  2017 , respectively, foreign currency  losses  were   $32 million ,   $55 million  and   $4 million \.

(p) Other Operating Expenses

Other operating expenses includes costs associated with ground and cargo handling, crew travel, aircraft food and catering, passenger accommodation, airport security, international navigation fees and certain general and administrative expenses\.

(q) Regional Expenses

Expenses associated with American Eagle operations are classified as regional expenses on our consolidated statements of operations\.Regional expenses consist of the following (in millions):

|                                                               |                             |                             |                             |
| ------------------------------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                                               | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                                               | **2019**                    | **2018**                    | **2017**                    |
| Aircraft fuel and related taxes                               | $1,869                      | $1,843                      | $1,382                      |
| Salaries, wages and benefits                                  | 1,781                       | 1,591                       | 1,452                       |
| Capacity purchases from third\-party regional carriers  ^(1)^ | 1,398                       | 1,431                       | 1,581                       |
| Maintenance, materials and repairs                            | 403                         | 340                         | 281                         |
| Other rent and landing fees                                   | 651                         | 610                         | 625                         |
| Aircraft rent                                                 | 29                          | 32                          | 35                          |
| Selling expenses                                              | 402                         | 369                         | 361                         |
| Depreciation and amortization                                 | 336                         | 318                         | 315                         |
| Special items, net                                            | 6                           | 6                           | 22                          |
| Other                                                         | 626                         | 593                         | 492                         |
| Total regional expenses                                       | $7,501                      | $7,133                      | $6,546                      |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| ^(1)^ | In  2019 ,  2018 , and  2017 , we recognized   $590 million ,   $565 million  and   $544 million , respectively, of expense under our capacity purchase agreement with Republic Airline Inc\. (Republic)\. We hold a   25%  equity interest in Republic Airways Holdings Inc\. (Republic Holdings), the parent company of Republic\. |

84


Annual Report of Southwest Airlines Co\. for year 2019

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Southwest Airlines Co\.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Southwest Airlines Co\. (the Company) as of  December 31, 2019  and  2018 , the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended  December 31, 2019 , and the related notes (collectively referred to as the “financial statements”)\. In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company at  December 31, 2019  and  2018 , and the consolidated results of its operations and its cash flows for each of the three years in the period ended  December 31, 2019 , in conformity with U\.S\. generally accepted accounting principles\.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of  December 31, 2019 , based on criteria established in Internal Control\-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated  February 3, 2020  expressed an unqualified opinion thereon\.

Adoption of New Accounting Standards

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for its leases in 2019 due to the modified retrospective adoption of ASU 2016\-02,  Leases (Topic 842),  and the Company changed its method of accounting for financial derivative instruments in 2018 due to the modified retrospective adoption of ASU 2017\-12,  Targeted Improvements to Accounting for Hedging Activities \.

Basis for Opinion

These financial statements are the responsibility of the Company’s management\. Our responsibility is to express an opinion on the Company’s financial statements based on our audits\. 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 audits in accordance with the standards of the PCAOB\. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud\. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to fraud or error, and performing procedures that respond to those risks\. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements\. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements\. We believe that our audits provide a reasonable basis for our opinion\.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments\. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate\.

110


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

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

|            |                 |                                                                                |
| ----------:|:--------------- |:------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| \*^10\.145 | UAL
United | [Supplemental Agreement No\. 52 to Purchase Agreement No\. 1951, dated August 31, 2009 (filed as Exhibit 10\.4 to Continental’s Form  10\-Q for the quarter ended September 30, 2009, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968709000050/fexhibit104.htm)       |
| \*^10\.146 | UAL
United | [Supplemental Agreement No\. 53 to Purchase Agreement No\. 1951, dated December 23, 2009 (filed as Exhibit 10\.22(bb) to Continental’s Form  10\-K for the year ended December 31, 2009, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968710000011/fexhibit1022bb.htm) |
| \*^10\.147 | UAL
United | [Supplemental Agreement No\. 54 to Purchase Agreement No\. 1951, dated March 2, 2010 (filed as Exhibit 10\.2 to Continental’s Form  10\-Q for the quarter ended March 31, 2010, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968710000020/exhibit102.htm)              |
| \*^10\.148 | UAL
United | [Supplemental Agreement No\. 55 to Purchase Agreement No\. 1951, dated March 31, 2010 (filed as Exhibit 10\.3 to Continental’s Form  10\-Q for the quarter ended March 31, 2010, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968710000020/exhibit103.htm)             |
| \*^10\.149 | UAL
United | [Supplemental Agreement No\. 56 to Purchase Agreement No\. 1951, dated August 12, 2010 (filed as Exhibit 10\.4 to Continental’s Form  10\-Q for the quarter ended September 30, 2010, Commission File Number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968710000067/exhibit104.htm)        |
| \*^10\.150 | UAL
United | [Supplemental Agreement No\. 57 to Purchase Agreement No\. 1951, dated March 2, 2011 (filed as Exhibit 10\.1 to UAL’s Form  10\-Q for the quarter ended March 31, 2011, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312511105320/dex101.htm)                           |
| \*^10\.151 | UAL
United | [Supplemental Agreement No\. 58 to Purchase Agreement No\. 1951, dated January 6, 2012 (filed as Exhibit 10\.1 to UAL’s Form  10\-Q for the quarter ended March 31, 2012, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312512186734/d316621dex101.htm)                  |
| \*^10\.152 | UAL
United | [Supplemental Agreement No\. 59 to Purchase Agreement No\. 1951, dated July 12, 2012 (filed as Exhibit 10\.5 to UAL’s Form  10\-Q for the quarter ended September 30, 2012, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312512435658/d408868dex105.htm)                |
| \*^10\.153 | UAL
United | [Supplemental Agreement No\. 60 to Purchase Agreement No\. 1951, dated November 7, 2012 (filed as Exhibit 10\.2 to UAL’s Form  10\-Q for the quarter ended June 30, 2013, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312513302696/d552832dex102.htm)                  |
| \*^10\.154 | UAL
United | [Supplemental Agreement No\. 61 to Purchase Agreement No\. 1951, dated September 11, 2013 (filed as Exhibit 10\.1 for the quarter ended September 30, 2013, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312513409916/d578285dex101.htm)                                |
| \*^10\.155 | UAL
United | [Supplemental Agreement No\. 62 to Purchase Agreement No\. 1951, dated January 14, 2015 (filed as Exhibit 10\.3 for the quarter ended March 31, 2015, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312515144255/d891332dex103.htm)                                      |
| \*^10\.156 | UAL
United | [Supplemental Agreement No\. 63 to Purchase Agreement No\. 1951, dated May 26, 2015 (filed as Exhibit 10\.1 for the quarter ended June 30, 2015, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312515261239/d941677dex101.htm)                                          |
| \*^10\.157 | UAL
United | [Supplemental Agreement No\. 64 to Purchase Agreement No\. 1951, dated June 12, 2015 (filed as Exhibit 10\.2 for the quarter ended June 30, 2015, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312515261239/d941677dex102.htm)                                         |

124


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

***We are at risk of losses and adverse publicity stemming from any public incident involving our company, our people or our brand, including any accident or other public incident involving our personnel or aircraft, or the personnel or aircraft of our regional, codeshare or joint business operators\.***

In a modern world where news can be captured and travel rapidly, we are at risk of adverse publicity stemming from any public incident involving our company, our people or our brand\. Such an incident could involve the alleged behavior of any of our more than 100,000 employees\. Further, if our personnel or one of our aircraft, or personnel of, or an aircraft that is operated under our brand by, one of our regional operators or an airline with which we have a marketing alliance, joint business or codeshare relationship, were to be involved in a public incident, accident or catastrophe, we could be exposed to significant reputational harm and potential legal liability\. The insurance we carry may be inapplicable or inadequate to cover any such incident, accident or catastrophe\. In the event that our insurance is inapplicable or not adequate, we may be forced to bear substantial losses from an incident or accident\. In addition, any such incident, accident or catastrophe involving our personnel or one of our aircraft (or personnel and aircraft of our regional operators and our codeshare partners) could create an adverse public perception, which could harm our reputation, result in air travelers being reluctant to fly on our aircraft or those of our regional operators or codeshare partners, and adversely impact our business, results of operations and financial condition\.

***Delays in scheduled aircraft deliveries or other loss of anticipated fleet capacity, and failure of new aircraft to perform as expected, may adversely impact our business, results of operations and financial condition\.***

The success of our business depends on, among other things, effectively managing the number and types of aircraft we operate\. In many cases, the aircraft we intend to operate are not yet in our fleet, but we have contractual commitments to purchase or lease them\. If for any reason we are unable to accept or secure deliveries of new aircraft on contractually scheduled delivery dates, this could have a negative impact on our business, results of operations and financial condition\. Our failure to integrate newly purchased aircraft into our fleet as planned might require us to seek extensions of the terms for some leased aircraft or otherwise delay the exit of certain aircraft from our fleet\. Such unanticipated extensions or delays may require us to operate existing aircraft beyond the point at which it is economically optimal to retire them, resulting in increased maintenance costs\. If new aircraft orders are not filled on a timely basis, we could face higher operating costs than planned\. In addition, if the aircraft we receive do not meet expected performance or quality standards, including with respect to fuel efficiency and reliability, our business, results of operations and financial condition could be adversely impacted\.

***We depend on a limited number of suppliers for aircraft, aircraft engines and parts\.***

We depend on a limited number of suppliers for aircraft, aircraft engines and many aircraft and engine parts\. These suppliers continue to consolidate as evidenced by the pending United Technologies acquisition of Rockwell Collins, the pending transaction involving Airbus and Bombardier and the public reports of a possible transaction involving Boeing and Embraer\. Due to the limited number of these suppliers, we are vulnerable to any problems associated with the performance of their obligation to supply key aircraft, parts and engines, including design defects, mechanical problems, contractual performance by suppliers, or adverse perception by the public that would result in customer avoidance or in actions by the FAA resulting in an inability to operate our aircraft\.

***Our business has been and will continue to be affected by many changing economic and other conditions beyond our control, including global events that affect travel behavior, and our results of operations could be volatile and fluctuate due to seasonality\.***

Our business, results of operations and financial condition have been and will continue to be affected by many changing economic and other conditions beyond our control, including, among others:

|   |                                                                                |
| - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | actual or potential changes in international, national, regional and local economic, business and financial conditions, including recession, inflation, higher interest rates, wars, terrorist attacks and political instability; |

|   |                                                                                |
| - | --------------------------------------------------------------------------------------- |
| • | changes in consumer preferences, perceptions, spending patterns and demographic trends; |

|   |                                                                                |
| - | ---------------------------------------------------------------------------------------------------------------------------------- |
| • | changes in the competitive environment due to industry consolidation, changes in airline alliance affiliations, and other factors; |

|   |                                                     |
| - | --------------------------------------------------- |
| • | actual or potential disruptions to the ATC systems; |

|   |                                                                     |
| - | ------------------------------------------------------------------- |
| • | increases in costs of safety, security, and environmental measures; |

|   |                                                        |
| - | ------------------------------------------------------ |
| • | outbreaks of diseases that affect travel behavior; and |

|   |                                 |
| - | ------------------------------- |
| • | weather and natural disasters\. |

28


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

American’s principal financing activities in 2017 included net proceeds of $3\.1 billion from the issuance of debt, including the issuance of $2\.0 billion of EETCs and $1\.0 billion borrowed in connection with the financing of certain aircraft\. These cash inflows were offset in part by $2\.3 billion in scheduled debt repayments\.

*2017* *Compared to* *2016*

*Operating Activities*

American’s net cash provided by operating activities was $2\.9 billion and $1\.8 billion in 2017 and 2016, respectively, a year\-over\-year increase of $1\.1 billion\. AAG has the ability to move funds freely between its subsidiaries to support its cash requirements\. The increase in operating cash flows was primarily due to a decrease in intercompany cash transfers from American to AAG\. This increase in operating cash flows was offset in part by lower profitability in 2017 driven by higher fuel costs and wage rates, which were offset in part by higher revenues\.

*Investing Activities*

American’s net cash used in investing activities was $3\.6 billion and $5\.6 billion in 2017 and 2016, respectively\.

American’s principal investing activities in 2017 included expenditures of $5\.9 billion for property and equipment, including 20 Airbus A321 aircraft, 20 Boeing 737\-800 aircraft, 16 Embraer E175 aircraft, 13 Boeing 787 family aircraft and four Boeing 737\-8 MAX aircraft\. American also made a $203 million equity investment in China Southern Airlines\. These cash outflows were offset in part by $1\.3 billion in net sales of short\-term investments, $922 million of net proceeds primarily from aircraft sale\-leaseback transactions, and a $309 million decrease in restricted short\-term investments\.

American’s principal investing activities in 2016 included expenditures of $5\.7 billion for property and equipment, including 25 Airbus A321 aircraft, 24 Embraer E175 aircraft, 20 Boeing 737\-800 aircraft, 18 Bombardier CRJ 900 aircraft, eight Boeing 787 aircraft and two Boeing 777 aircraft\.

*Financing Activities*

American’s net cash provided by financing activities was $668 million and $3\.8 billion in 2017 and 2016, respectively\.

American’s principal financing activities in 2017 included net proceeds of $3\.1 billion from the issuance of debt, including the issuance of $2\.0 billion of EETCs and $1\.0 billion borrowed in connection with the financing of certain aircraft\. These cash inflows were offset in part by $2\.3 billion in scheduled debt repayments\.

American’s principal financing activities in 2016 included net proceeds of $7\.7 billion from the issuance of debt, including the issuance of $2\.8 billion of EETCs, $2\.3 billion provided under term loan facilities and $1\.8 billion borrowed in connection with the financing of certain aircraft\. These cash inflows were offset in part by $3\.8 billion in debt repayments, including the repayment of $588 million and $970 million in remaining principal of the 2013 Citicorp Credit Facility tranche B\-2 and tranche B\-1 term loans, respectively\.

**Commitments**

For further information regarding our commitments, see the Notes to AAG’s Consolidated Financial Statements in Part II, Item 8A and the Notes to American’s Consolidated Financial Statements in Part II, Item 8B at the referenced footnotes below\.

|                                           |         |              |
| ----------------------------------------- | ------- | ------------ |
|                                           | **AAG** | **American** |
| Long\-term debt and debt covenants        | Note 5  | Note 3       |
| Leases                                    | Note 6  | Note 4       |
| Employee benefit plans                    | Note 10 | Note 8       |
| Commitments, contingencies and guarantees | Note 12 | Note 10      |

***Off\-Balance Sheet Arrangements***

An off\-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development arrangements with us\.

68


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

(b) Includes flights under Capacity Purchase Agreements operated by third\-party carriers\.

(c) See reconciliation to the most directly related Generally Accepted Accounting Principles (GAAP) measure in the "Results of Operations" section\.

(d) See "Glossary of Terms" for definitions of the abbreviated terms\.

30


Annual Report of Southwest Airlines Co\. for year 2018

The following table sets forth the Company's Employee groups subject to collective bargaining and the status of their respective collective\-bargaining agreements as of December 31, 2018:

|                                                                                |                                     |                                                                                |                                                                                |
| -------------------------------------------------------------------------------------------------- | ----------------------------------- | ----------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Employee Group**                                                                                | **Approximate Number of Employees** | **Representatives**                                                                 | **Status of Agreement**                                                                                |
| Southwest Pilots                                                                                | 9,100                               | Southwest Airlines Pilots' Association ("SWAPA")                                    | Amendable September 2020                                                                                |
| Southwest Flight Attendants                                                                        | 15,200                              | Transportation Workers of America, AFL\-CIO, Local 556 ("TWU 556")                  | In negotiations                                                                                |
| Southwest Ramp, Operations, Provisioning, Freight Agents                                           | 13,400                              | Transportation Workers of America, AFL\-CIO, Local 555 ("TWU 555")                  | Amendable February 2021                                                                                |
| Southwest Customer Service Agents, Customer Representatives, and Source of Support Representatives | 7,400                               | International Association of Machinists and Aerospace Workers, AFL\-CIO ("IAM 142") | In negotiations                                                                                |
| Southwest Material Specialists (formerly known as Stock Clerks)                                    | 300                                 | International Brotherhood of Teamsters, Local 19 ("IBT 19")                         | In negotiations\. The Company reached a tentative agreement with IBT 19 in January 2019\. If ratified by the Company's Material Specialists, the contract will become amendable in 2024\.          |
| Southwest Mechanics                                                                                | 2,400                               | Aircraft Mechanics Fraternal Association ("AMFA")                                   | In negotiations                                                                                |
| Southwest Aircraft Appearance Technicians                                                          | 200                                 | AMFA                                                                                | Amendable November 2020                                                                                |
| Southwest Facilities Maintenance Technicians                                                       | 40                                  | AMFA                                                                                | Amendable November 2022                                                                                |
| Southwest Dispatchers                                                                              | 300                                 | Transportation Workers of America, AFL\-CIO, Local 550 ("TWU 550")                  | Amendable June 2019                                                                                |
| Southwest Flight Simulator Technicians                                                             | 50                                  | International Brotherhood of Teamsters ("IBT")                                      | Amendable May 2019\. The Company reached a tentative agreement with IBT in February 2019\. If ratified by the Company's Flight Simulator Technicians, the contract will become amendable in 2024\. |
| Southwest Flight Crew Training Instructors                                                         | 130                                 | Transportation Workers of America, AFL\-CIO, Local 557 ("TWU 557")                  | Amendable January 2020                                                                                |
| Southwest Meteorologists                                                                           | 10                                  | TWU 550                                                                             | Amendable June 2019                                                                                |

**Additional Information About the Company**

The Company was incorporated in Texas in 1967\. The following documents are available free of charge through the Company's website, www\.southwest\.com: the Company’s annual report on Form 10\-K, quarterly reports on Form 10\-Q, current reports on Form 8\-K, and any amendments to those reports that are filed with or furnished to the Securities and Exchange Commission ("SEC") pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934\. These materials are made available through the Company's website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC\. In addition to its reports filed or furnished with the SEC, the Company publicly discloses material information from time to time in its press releases, at annual meetings of Shareholders, in publicly accessible conferences and Investor presentations, and through its website (principally in its Press Room and Investor Relations pages)\. References to the Company's website in this Form 10\-K are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Form 10\-K\.

20


Annual Report of Southwest Airlines Co\. for year 2019

PART III

Item 10\.  Directors, Executive Officers, and Corporate Governance

Directors and Executive Officers

The information required by this Item 10 regarding the Company’s directors will be set forth under the heading “Proposal 1 \- Election of Directors” in the Proxy Statement for the Company’s  2020  Annual Meeting of Shareholders and is incorporated herein by reference\. The information required by this Item 10 regarding the Company’s executive officers is set forth under the heading “Information about our Executive Officers” in Part I of this Form 10\-K and is incorporated herein by reference\.

Section 16(a) Compliance

If applicable, the information required by this Item 10 regarding compliance with Section 16(a) of the Exchange Act will be set forth under the heading “Delinquent Section 16(a) Reports” in the Proxy Statement for the Company’s  2020  Annual Meeting of Shareholders and is incorporated herein by reference\.

Corporate Governance

Except as set forth in the following paragraph, the remaining information required by this Item 10 will be set forth under the heading “Corporate Governance” in the Proxy Statement for the Company’s  2020  Annual Meeting of Shareholders and is incorporated herein by reference\.

The Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, and principal accounting officer or controller\. The Company’s Code of Ethics, as well as its Corporate Governance Guidelines and the charters of its Audit, Compensation, and Nominating and Corporate Governance Committees, are available on the Company’s website, www\.southwest\.com\. Copies of these documents are also available upon request to Investor Relations, Southwest Airlines Co\., P\.O\. Box 36611, Dallas, TX 75235\. The Company intends to disclose any amendments to, or waivers from, its Code of Ethics that apply to the Company’s principal executive officer, principal financial officer, and principal accounting officer or controller on the Company’s website, www\.southwest\.com, under the “About Southwest” caption, promptly following the date of any such amendment or waiver\.

Item 11\.  Executive Compensation

The information required by this Item 11 will be set forth under the headings “Compensation of Executive Officers” and “Compensation of Directors” in the Proxy Statement for the Company’s  2020  Annual Meeting of Shareholders and is incorporated herein by reference\.

Item 12\.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Except as set forth below regarding securities authorized for issuance under equity compensation plans, the information required by this Item 12 will be set forth under the heading “Voting Securities and Principal Shareholders” in the Proxy Statement for the Company’s  2020  Annual Meeting of Shareholders and is incorporated herein by reference\.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information as of  December 31, 2019 , regarding compensation plans under which equity securities of the Company are authorized for issuance\.

117


Annual Report of Southwest Airlines Co\. for year 2018

The Company has committed significant resources to technology improvements in support of its ongoing operations and initiatives that continue to shape and guide the strategic future of the Company\. The Company has completed a multi\-year initiative to completely transition its reservation system to the Amadeus Altéa Passenger Service System\. The new reservation system, which represented the single largest technology project in the Company's history, was designed to improve flight scheduling and inventory management, enable operational enhancements to manage flight disruptions, such as those caused by extreme weather conditions, enable revenue enhancements, support additional international growth, and enable other foundational and operational capabilities\.

The Company continues to focus on the prioritization and execution of its technology investments and is in the process of continually executing an evolving multi\-year plan for technology, with the goal of developing a stronger, adaptable, and more efficient technology foundation to support the Company’s strategic priorities\.

The Company continues to invest significantly in technology resources including, among others, the Company's systems related to (i) aircraft maintenance record keeping, (ii) flight planning and scheduling, (iii) crew scheduling, and (iv) technology infrastructure\.

**Regulation**

The airline industry is heavily regulated, especially by the federal government, and there are a significant number of governmental agencies and legislative bodies that have the ability to directly or indirectly affect the Company and/or the airline industry financially and/or operationally\. Examples of regulations affecting the Company and/or the airline industry, imposed by several of these governmental agencies and legislative bodies, are discussed below\.

**Economic and Operational Regulation**

***Consumer Protection Regulation by the U\.S\. Department of Transportation***

The DOT regulates economic operating authority for air carriers and consumer protection for airline passengers\. The FAA, an agency within the DOT, regulates aviation safety\. The DOT and the FAA may impose civil penalties on air carriers for violating their regulations\.

To provide passenger transportation in the United States, a domestic airline is required to hold both a Certificate of Public Convenience & Necessity from the DOT and an Air Carrier Operating Certificate from the FAA\. A Certificate of Public Convenience & Necessity is unlimited in duration, and the Company’s certificate generally permits it to operate among any points within the United States and its territories and possessions\. Additional DOT authority, in the form of a certificate or exemption from certificate requirements, is required for a U\.S\. airline to serve foreign destinations either with its own aircraft or via code\-sharing with another airline\. Exemptions granted by the DOT to serve international markets are generally limited in duration and are subject to periodic renewal requirements\. The DOT also has jurisdiction over international tariffs and pricing in certain markets\. The DOT may revoke a certificate or exemption, in whole or in part, for intentional failure to comply with federal aviation statutes, regulations, orders, or the terms of the certificate itself\.

The DOT's consumer protection and enforcement activities relate to areas such as unfair and deceptive practices and unfair competition by air carriers, deceptive airline advertising (concerning, e\.g\., fares, ontime performance, schedules, and code\-sharing), and violations of rules concerning denied boarding compensation, ticket refunds, and baggage liability requirements\. The DOT is also charged with prohibiting discrimination by airlines against consumers on the basis of (i) disability; and (ii) race, religion, national origin, sex, or ancestry\.

Under the above\-described authority, from 2008 through 2016, the DOT adopted so\-called "Passenger Protection Rules," which address a wide variety of matters, including flight delays on the tarmac, chronically delayed flights, denied boarding compensation, and advertising of airfares, among others\. Under the Passenger Protection Rules, U\.S\. passenger airlines are required to adopt contingency plans that include the following: (i) assurances that no domestic flight will remain on the airport tarmac for more than three hours before beginning to return to the gate and that no international flight will remain on the tarmac at a U\.S\. airport for more than four hours before beginning to return to the gate, unless the pilot\-in\-command determines there is a safety\-related or security\-related impediment to deplaning passengers, or air traffic control advises the pilot\-in\-command that returning to the gate or permitting passengers to disembark elsewhere would significantly disrupt airport operations; (ii) an assurance that air carriers will provide

10


Annual Report of Southwest Airlines Co\. for year 2017

Salaries, wages, and benefits expense for 2016 increased by $415 million, or 6\.5 percent, compared with 2015\. Salaries, wages, and benefits expense per ASM for 2016 increased 0\.7 percent, compared with 2015\. On both a dollar and per ASM basis, the increases were primarily due to wage rate increases as a result of agreements reached with multiple workgroups, increased training, additional headcount, and contractual increases\.

Fuel and oil expense for 2016 increased by $31 million, or 0\.9 percent, compared with 2015\. On a per ASM basis, Fuel and oil expense for 2016 decreased 4\.7 percent, compared with 2015, as the dollar increases were more than offset by the 5\.7 percent increase in capacity\. On a dollar basis, the increase was attributable to the $566 million increase in net losses resulting from the Company's fuel hedging program\. Excluding the impact of hedging, Fuel and oil expense would have decreased by $535 million, or 15\.9 percent, compared with 2015, due to lower market jet fuel prices\. The Company's average economic jet fuel price per gallon decreased 7\.2 percent year\-over\-year, from $2\.07 for 2015 to $1\.92 for 2016, not including premium expense of $0\.06 and $0\.08 per gallon, respectively\. Fuel gallons consumed increased 5\.0 percent, compared with 2015, while year\-over\-year capacity increased 5\.7 percent\. As a result of the Company's fuel hedging program, the Company recognized net losses totaling $820 million in Fuel and oil expense for 2016, compared with net losses totaling $254 million for 2015\. These totals include cash settlements realized from the settlement of fuel derivative contracts associated with the Company's economic fuel hedge totaling $1\.0 billion paid to counterparties for 2016, compared with $577 million paid to counterparties for 2015\. Additionally, these totals exclude gains and/or losses recognized from hedge ineffectiveness and from derivatives that did not qualify for hedge accounting\. These items are recorded as a component of Other (gains) losses, net\.

Maintenance materials and repairs expense for 2016 increased by $40 million, or 4\.0 percent, compared with 2015\. On a per ASM basis, Maintenance materials and repairs expense for 2016 decreased 2\.8 percent, compared with 2015, as the dollar increases were more than offset by the 5\.7 percent increase in capacity\. On a dollar basis, the majority of the increase was attributable to the timing of regular maintenance checks and ongoing cabin refresh projects including updates for the Company's new Heart cabin interior\. These increases were partially offset by lower engine expense as a result of the early retirement of the Classic fleet, as this decrease in engine repairs was only partially offset by higher 737\-700 engine expense due to increased flight hours\.

Aircraft rentals expense for 2016 decreased by $9 million, or 3\.8 percent, compared with 2015\. On a per ASM basis, Aircraft rentals expense decreased 11\.8 percent, compared with 2015\. On both a dollar and per ASM basis, the decreases were primarily due to the retirement of five 737\-300 leased aircraft and two 737\-500 leased aircraft since 2015, as well as the purchase of five leased 737\-300s that were previously on operating lease during 2016\. See Note Regarding Use of Non\-GAAP Financial Measures for further information\.

Landing fees and other rentals expense for 2016 increased by $45 million, or 3\.9 percent, compared with 2015\. On a per ASM basis, Landing fees and other rentals expense for 2016 decreased 1\.2 percent, compared with 2015, as the dollar increases were more than offset by the 5\.7 percent increase in capacity\. On a dollar basis, approximately 70 percent of the increase was due to higher space rental rates and usage at various airports\. The remainder was due to a 3\.5 percent increase in Trips flown coupled with heavier landing weights for the Company's higher capacity 737\-800 aircraft, which in 2016 made up a larger portion of the Company's fleet than in 2015\.

Depreciation and amortization expense for 2016 increased by $206 million, or 20\.3 percent, compared with 2015\. On a per ASM basis, Depreciation and amortization expense increased 13\.9 percent, compared with 2015\. On both a dollar and per ASM basis, approximately 60 percent of the increases were due to the accelerated depreciation expense resulting from a change in the estimated retirement dates of many of the Company's owned Classic fleet from mid\-2021 to third quarter 2017\. The remainder of the increases were due to the purchase and capital lease of new and used aircraft since 2015\.

The Company incurred no Acquisition and integration costs in 2016, compared with $39 million in 2015\. The 2015 costs primarily consisted of Employee training and certain expenses associated with the grounding and conversion costs resulting from the transition of the Company's Boeing 717\-200 fleet ("B717s") to Delta Air Lines ("Delta")\. See Note 7 to the Consolidated Financial Statements for further information\.

48


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

MD\-90 Fleet Retirement

As part of our ongoing fleet transformation, during 2019 we committed to accelerating the retirement of our MD\-90 fleet\. This fleet will now be retired by the end of 2022, which is approximately two years earlier than previously planned\. The decision to retire the fleet by 2022, including the permanent retirement of 35 aircraft during 2019, resulted in accelerated depreciation of $79 million during 2019, which is recorded in depreciation and amortization in our income statement\.

LATAM A350 Commitments

We have agreed to acquire four A350 aircraft from LATAM, which are included as purchase commitments in the table above\. In addition, we plan to assume ten of LATAM's A350 purchase commitments from Airbus, with deliveries through 2025\. See Note 4, "Investments," for further information on our investment in LATAM\.

Contract Carrier Agreements

We have contract carrier agreements with regional carriers expiring from 2020 to 2029\.

Capacity Purchase Agreements \. Most of our contract carriers operate for us under capacity purchase agreements\. Under these agreements, the contract carriers operate some or all of their aircraft using our flight designator codes, and we control the scheduling, pricing, reservations, ticketing and seat inventories of those aircraft and retain the revenues associated with those flights\. We pay those airlines an amount, as defined in the applicable agreement, which is based on a determination of their cost of operating those flights and other factors intended to approximate market rates for those services\.

The following table shows our minimum fixed obligations under our existing capacity purchase agreements with third\-party regional carriers\. The obligations set forth in the table contemplate minimum levels of flying by the contract carriers under the respective agreements and also reflect assumptions regarding certain costs associated with the minimum levels of flying such as the cost of fuel, labor, maintenance, insurance, catering, property tax and landing fees\. Accordingly, our actual payments under these agreements could differ materially from the minimum fixed obligations set forth in the table below\.

|               |               |               |                 |
|:------------- |:------------- |:------------- | ---------------:|
| (in millions) | (in millions) | (in millions) | Amount ^(1)(2)^ |
| 2020          | 2020          | 2020          |         $ 1,750 |
| 2021          | 2021          | 2021          |           1,432 |
| 2022          | 2022          | 2022          |           1,377 |
| 2023          | 2023          | 2023          |           1,132 |
| 2024          | 2024          | 2024          |           1,002 |
| Thereafter    | Thereafter    | Thereafter    |           2,349 |
| Total         | Total         | Total         |         $ 9,042 |

^(1)^ These amounts exclude contract carrier payments accounted for as operating leases of aircraft, which are described in Note 8, "Leases\."

^(2)^ In January 2020, we agreed not to renew our CRJ\-900 contract with GoJet Airlines, LLC and to end those operations by the end of 2020\. The table above reflects our commitments under that contract as of December 31, 2019\.

Revenue Proration Agreement \. As of December 31, 2019, a portion of our contract carrier agreement with SkyWest Airlines, Inc\. was structured as a revenue proration agreement\. This revenue proration agreement establishes a fixed dollar or percentage division of revenues for tickets sold to passengers traveling on connecting flight itineraries\.

87


Annual Report of United Continental Holdings, Inc\. and United Airlines, Inc\. for year 2019

[Table of Contents](https://www.example.com#s1B306C2BC5705F95B83EC9EC687675EF)

Seasonality\.  The air travel business is subject to seasonal fluctuations\. Historically, demand for air travel is higher in the second and third quarters, driving higher revenues, than in the first and fourth quarters, which are periods of lower travel demand\.

Industry Regulation

Domestic Regulation\.  All carriers engaged in air transportation in the United States are subject to regulation by the DOT\. Absent an exemption, no air carrier may provide air transportation of passengers or property without first being issued a DOT certificate of public convenience and necessity\. The DOT also grants international route authority, approves international codeshare arrangements and regulates methods of competition\. The DOT regulates consumer protection and maintains jurisdiction over advertising, denied boarding compensation, tarmac delays, baggage liability and other areas and may add additional expensive regulatory burdens in the future\. The DOT has launched investigations or claimed rulemaking authority to regulate commercial agreements among carriers or between carriers and third parties in a wide variety of contexts\.

Airlines are also regulated by the Federal Aviation Administration (the "FAA"), an agency within the DOT, primarily in the areas of flight safety, air carrier operations and aircraft maintenance and airworthiness\. The FAA issues air carrier operating certificates and aircraft airworthiness certificates, prescribes maintenance procedures, oversees airport operations, and regulates pilot and other employee training\. From time to time, the FAA issues directives that require air carriers to inspect, modify or ground aircraft and other equipment, potentially causing the Company to incur substantial, unplanned expenses\. The airline industry is also subject to numerous other federal laws and regulations\. The U\.S\. Department of Homeland Security ("DHS") has jurisdiction over virtually every aspect of civil aviation security\. The Antitrust Division of the U\.S\. Department of Justice ("DOJ") has jurisdiction over certain airline competition matters\. The U\.S\. Postal Service has authority over certain aspects of the transportation of mail by airlines\. Labor relations in the airline industry are generally governed by the Railway Labor Act ("RLA"), a federal statute\. The Company is also subject to investigation inquiries by the DOT, FAA, DOJ, DHS, the U\.S\. Food and Drug Administration ("FDA"), the U\.S\. Department of Agriculture ("USDA") and other U\.S\. and international regulatory bodies\.

Airport Access\.  Access to landing and take\-off rights, or "slots," at several major U\.S\. airports served by the Company are subject to government regulation\. Federally\-mandated domestic slot restrictions that limit operations and regulate capacity currently apply at three airports: Reagan National Airport in Washington, D\.C\. ("Reagan National"), John F\. Kennedy International Airport and LaGuardia Airport ("LaGuardia") in the New York City metropolitan region\. Of these three airports, United currently operates at two: Reagan National and LaGuardia\. Additional restrictions on takeoff and landing slots at these and other airports may be implemented in the future and could affect the Company's rights of ownership and transfer as well as its operations\.

Legislation \. The airline industry is subject to legislative actions (or inactions) that may have an impact on operations and costs\.  In 2018, the U\.S\. Congress approved a five\-year reauthorization for the FAA, which encompasses significant aviation tax and policy\-related issues\. The law includes a range of policy changes related to airline customer service and aviation safety which are ongoing and, depending on how they are implemented, could impact our operations and costs\. Additionally, the U\.S\. Congress may consider legislation related to aviation safety as well as environmental issues which could impact the Company and the airline industry\.

Catering Operations \. The Company owns and operates catering kitchens at airports in Denver, Cleveland, Newark, Houston, and Honolulu, which prepare ready\-to\-eat food for United flights\. Some of the Company's kitchens also prepare ready\-to\-eat food for other domestic and international airlines\. The Company's onboard food service operations are subject to FDA regulation through its interstate conveyance sanitation regulations, and the Company's catering operations are subject to regulation by the FDA and the USDA, as well as other federal, state, and local regulatory agencies\. In particular, the FDA enforces the Federal Food Safety Modernization Act which requires all food manufacturers, including ready\-to\-eat catering operations, to implement stringent risk\-based preventive controls\. As a result, the Company's catering and food service operations are periodically subject to inspections and enforcement by regulatory agencies\.

International Regulation\.  International air transportation is subject to extensive government regulation\. In connection with the Company's international services, the Company is regulated by both the U\.S\. government and the governments of the foreign countries the Company serves\. In addition, the availability of international routes to U\.S\. carriers is regulated by aviation agreements between the U\.S\. and foreign governments, and in some cases, fares and schedules require the approval of the DOT and/or the relevant foreign governments\.

Legislation\.  Foreign countries are increasingly enacting passenger protection laws, rules and regulations that meet or exceed U\.S\. requirements\. In cases where this activity exceeds U\.S\. requirements, additional burden and liability may be placed on the Company\. Certain countries have regulations requiring passenger compensation and/or enforcement penalties from the Company in addition to changes in operating procedures due to canceled and delayed flights\.

6


Annual Report of Southwest Airlines Co\. for year 2019

counterparties containing early termination rights and/or bilateral collateral provisions whereby security is required if market risk exposure exceeds a specified threshold amount or credit ratings fall below certain levels\. Collateral deposits provided to or held from counterparties serve to decrease, but not totally eliminate, the credit risk associated with the Company’s hedging program\. See  Note 10  for further information\.

As of  December 31, 2019 , the Company operated an all\-Boeing fleet, all of which are variations of the Boeing 737\. The Boeing 737 MAX aircraft ("MAX") are crucial to the Company’s growth plans and fleet modernization initiatives\. On March 13, 2019, the FAA issued an emergency order for all U\.S\. airlines to ground the MAX aircraft, including the   34  MAX aircraft in the Company’s fleet\. The MAX aircraft remains grounded and, based on continued uncertainty around the timing of the MAX return to service, the Company has removed the MAX from its flight schedule through June 6, 2020\. Based on recent guidance from Boeing estimating that the ungrounding of the MAX will be mid\-2020, the Company will likely extend MAX\-related flight schedule adjustments further to provide operational reliability and dependable flight schedules for our Customers booking their summer travel\. Further, MAX deliveries have remained suspended following the MAX groundings and Boeing is not currently manufacturing new MAX aircraft\. The Company does not know whether, on what conditions, or when the MAX groundings will end\. Regulatory approval of MAX return to service is subject to Boeing's ongoing work with the FAA, who will determine the timing of MAX return to service\.

The MAX groundings adversely affected operating results for the year ended December 31, 2019, and could have a material, adverse effect on the Company's operating results in future periods\. A continued prolonged extension or permanent grounding of the MAX aircraft would require additional flight schedule adjustments and result in further delays in aircraft deliveries, as well as lower operating revenues, operating income, and net income due to a variety of factors, including, among others, (i) lost revenue due to flight cancellations and disruptions as a result of a smaller operating aircraft fleet, (ii) the lack of ability to make corresponding reductions in expenses because of the fixed nature of many expenses, and (iii) possible negative effects on Customer confidence and airline choice\.

Boeing no longer manufactures versions of the 737 other than the 737 MAX family of aircraft\. If the 737 MAX aircraft were to remain unavailable for the Company’s flight operations, the Company’s growth would be restricted unless and until it could procure and operate other types of aircraft from Boeing or another manufacturer, seller, or lessor, and the Company’s operations would be materially adversely affected\. In particular, if the Company’s growth were to be dependent upon the introduction of a new aircraft make and model to the Company’s fleet, the Company would need to, among other things, (i) develop and implement new maintenance, operating, and training programs, (ii) secure extensive regulatory approvals, and (iii) implement new technologies\. The requirements associated with operating a new aircraft make and model could take an extended period of time to fulfill and would likely impose substantial costs on the Company\. A shift away from a single fleet type could also add complexity to the Company’s operations, present operational and compliance risks, and materially increase the Company's costs\. Any of these events would have a material, adverse effect on the Company's business, operating results, and financial condition\. The Company could also be materially adversely affected if the pricing or operational attributes of its aircraft were to become less competitive\. See Note 16 for further information\.

The Company is also dependent on sole or limited suppliers for aircraft engines and certain other aircraft parts and services and would, therefore, also be materially adversely impacted in the event of the unavailability of, inadequate support for, or a mechanical or regulatory issue associated with, engines and other parts\.

The Company has historically entered into agreements with some of its co\-brand, payment, and loyalty partners that contain exclusivity aspects which place certain confidential restrictions on the Company from entering into certain arrangements with other payment and loyalty partners\. These arrangements generally extend for the terms of the agreements, which typically are for five to seven years, but none of which are more than ten years in length\. Some of these agreements automatically renew on an annual basis, unless either party objects to such extension\. The Company believes the financial benefits generated by the exclusivity aspects of these arrangements outweigh the risks involved with such agreements\.

75


Annual Report of ALASKA AIR GROUP, INC\. for year 2018

The following table summarizes our expected fleet count by year, as of February 15, 2019:

|                                    |                        |                        |                                      |                                      |                                      |                                      |
| ---------------------------------- | ---------------------- | ---------------------- | ------------------------------------ | ------------------------------------ | ------------------------------------ | ------------------------------------ |
|                                    | **Actual Fleet Count** | **Actual Fleet Count** | **Contractual Deliveries** **^(a)^** | **Contractual Deliveries** **^(a)^** | **Contractual Deliveries** **^(a)^** | **Contractual Deliveries** **^(a)^** |
| **Aircraft**                       | **Dec 31, 2017**       | **Dec 31, 2018**       | **2019 Changes**                     | **Dec 31, 2019**                     | **2020 Changes**                     | **Dec 31, 2020**                     |
| B737 Freighters                    | 3                      | 3                      | —                                    | 3                                    | —                                    | 3                                    |
| B737 Passenger Aircraft ^(c)^      | 151                    | 159                    | 7                                    | 166                                  | 2                                    | 168                                  |
| Airbus Passenger Aircraft          | 67                     | 71                     | 1                                    | 72                                   | (2)                                  | 70                                   |
| **Total Mainline Fleet**           | 221                    | 233                    | 8                                    | 241                                  | —                                    | 241                                  |
| Q400 operated by Horizon ^(b)^     | 50                     | 39                     | (8)                                  | 31                                   | (8)                                  | 23                                   |
| E175 operated by Horizon ^(b)^     | 10                     | 26                     | 4                                    | 30                                   | —                                    | 30                                   |
| E175 operated by third party ^(b)^ | 23                     | 32                     | —                                    | 32                                   | —                                    | 32                                   |
| **Total Regional Fleet**           | 83                     | 97                     | (4)                                  | 93                                   | (8)                                  | 85                                   |
| **Total**                          | 304                    | 330                    | 4                                    | 334                                  | (8)                                  | 326                                  |

|       |                                                                                |
| ----- | ----------------------------------------------------------------------------------- |
| ^(a)^ | The expected fleet counts at  December 31, 2019  and  2020  are subject to change\. |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------ |
| ^(b)^ | Aircraft are either owned or leased by Horizon or operated under capacity purchase agreement with a third party\.  |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(c)^ | Aircraft deliveries reflect the supplemental agreement entered with Boeing in the first quarter of 2018 which deferred certain B737 deliveries\. Our first MAX9 delivery is scheduled for 2019\.  |

For future firm orders and option exercises, we may finance the aircraft through cash from operations, long\-term debt, or lease arrangements\.

***Future Fuel Hedge Positions***

All of our future oil positions are call options, which are designed to effectively cap the cost of the crude oil component of our jet fuel purchases\. With call options, we are hedged against volatile crude oil price increases; and, during a period of decline in crude oil prices, we only forfeit cash previously paid for hedge premiums\. Our crude oil positions are as follows:

|                     |                                                 |                                                  |                                     |
| ------------------- | ----------------------------------------------- | ------------------------------------------------ | ----------------------------------- |
|                     | **Approximate % of Expected Fuel Requirements** | **Weighted\-Average Crude Oil Price per Barrel** | **Average Premium Cost per Barrel** |
| First Quarter 2019  | 50%                                             | $72                                              | $1                                  |
| Second Quarter 2019 | 50%                                             | $76                                              | $1                                  |
| Third Quarter 2019  | 40%                                             | $77                                              | $2                                  |
| Fourth Quarter 2019 | 30%                                             | $76                                              | $2                                  |
|  **Full Year 2019** | **42%**                                         | **$75**                                          | **$2**                              |
| First Quarter 2020  | 20%                                             | $70                                              | $3                                  |
| Second Quarter 2020 | 10%                                             | $64                                              | $3                                  |
|  **Full Year 2020** | **7%**                                          | **$68**                                          | **$3**                              |

 50


Annual Report of DELTA AIR LINES, INC\.  for year 2017

[Table of Contents](http://ir.delta.com/.#s38B278257A885660AB93394F5F0EFBED)

We have not completed our assessment, but the adoption of this standard will have a significant impact on our Consolidated Balance Sheets\. However, we do not expect the adoption to have a significant impact on the recognition, measurement or presentation of lease expenses within the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows\. Information about our undiscounted future lease payments and the timing of those payments is in  Note 7 , "Lease Obligations\." We will adopt this standard effective January 1, 2019\.

Statement of Cash Flows\.  In 2016, the FASB issued ASU Nos\. 2016\-15 and 2016\-18 related to the classification of certain cash receipts and cash payments and the presentation of restricted cash within an entity's statement of cash flows, respectively\. We will adopt the standards effective January 1, 2018\.

Financial Instruments\.  In 2016, the FASB issued ASU No\. 2016\-01, "Financial Instruments—Overall (Subtopic 825\-10)\." This standard makes several changes, including the elimination of the available\-for\-sale classification of equity investments, and requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income\. We will adopt the standard effective January 1, 2018\. This standard does not apply to our investments in Grupo Aeroméxico and Virgin Atlantic, which are accounted for under the equity method\.

Our investments in GOL Linhas Aéreas Inteligentes, the parent company of VRG Linhas Aéreas (operating as GOL) and China Eastern are currently accounted for as available\-for\-sale with changes in fair value recognized in other comprehensive income\. At the time of adoption, the balance in accumulated other comprehensive income/(loss) ("AOCI") related to equity investments will be reclassified to retained earnings\. As of December 31, 2017, a net unrealized gain of   $162 million  related to these investments was recorded in AOCI on our Consolidated Balance Sheet\.

Our investment in Air France\-KLM is currently accounted for at cost as our investment agreement restricts the sale or transfer of these shares for five years\. Despite the restriction, upon adoption of ASU No\. 2016\-01, this investment will be accounted for at fair value with changes in fair value recognized in net income\.

Retirement Benefits\.  In 2017, the FASB issued ASU No\. 2017\-07, "Compensation—Retirement Benefits (Topic 715)\." This standard requires an entity to report the service cost component in the same line item as other compensation costs\. The other components of net (benefit) cost will be required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations\. In 2017, we recorded   $50 million  of non\-service costs that will be reclassified to non\-operating expense upon adoption\. This standard is effective for interim and annual reporting periods beginning after December 15, 2017\. We will adopt the standard effective January 1, 2018\.

Comprehensive Income \. In February 2018, the FASB issued ASU No\. 2018\-02, "Income Statement—Reporting Comprehensive Income (Topic 220)\." This standard provides financial statement preparers with an option to reclassify stranded tax effects within AOCI from retained earnings due to the U\.S\. federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017\. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted\. The adoption of the standard may impact tax amounts stranded in AOCI related to our pension plans\. See  Note 11  of the Notes to the Consolidated Financial Statements for more information\.

Cash and Cash Equivalents and Short\-Term Investments

Short\-term, highly liquid investments with maturities of three months or less when purchased are classified as cash and cash equivalents\.Investments with maturities of greater than three months, but not in excess of one year, when purchased are classified as short\-term investments\. Investments with maturities beyond one year when purchased may be classified as short\-term investments if they are expected to be available to support our short\-term liquidity needs\. All short\-term investments are classified as either available\-for\-sale or held\-to\-maturity, and realized gains and losses are recorded using the specific identification method\.

Accounts Receivable

Accounts receivable primarily consist of amounts due from credit card companies from the sale of passenger airline tickets, customers of our aircraft maintenance and cargo transportation services and other companies for the purchase of mileage credits under our frequent flyer program (the "SkyMiles program")\. We provide an allowance for uncollectible accounts equal to the estimated losses expected to be incurred based on historical chargebacks, write\-offs, bankruptcies and other specific analyses\. Bad debt expense was not material in any period presented\.

 56


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

As of December 31, 2017, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption\. As such, and assuming we do not enter into any future transactions to hedge our fuel consumption, we will continue to be fully exposed to fluctuations in fuel prices\. Our current policy is not to enter into transactions to hedge our fuel consumption, although we review that policy from time to time based on market conditions and other factors\.

***Other Costs***

We remain committed to actively managing our cost structure, which we believe is necessary in an industry whose economic prospects are heavily dependent upon two variables we cannot control: the health of the economy and the price of fuel\.

Our 2017 mainline CASM was 12\.96 cents, an increase of 8\.6%, from 11\.94 cents in 2016\. The increase was primarily driven by higher fuel costs and higher wage rates due to the mid\-contract pay increases described above\.

Our 2017 mainline CASM excluding special items and fuel was 10\.16 cents, an increase of 6\.4%, from 9\.54 cents in 2016, which was also driven by higher wage rates as described above\.

For a reconciliation of mainline CASM excluding special items and fuel, see Part II, Item 6\. Selected Consolidated Financial Data – *“Reconciliation of GAAP to Non\-GAAP Financial Measures\.”*

***Income Taxes***

As of December 31, 2017, we had approximately $10\.0 billion of federal NOLs and $3\.4 billion of state NOLs, substantially all of which we expect to be available in 2018 to reduce future federal and state taxable income\. While we currently do not pay federal cash income taxes, we believe the December 2017 enactment of the 2017 Tax Act represents a significant benefit for us and our stockholders\. Commencing in 2018, our effective tax rate has been reduced from approximately 38% to approximately 24%, which will significantly reduce our federal tax liability when we do become a cash tax payer\. In addition, we presently expect to receive cash tax refunds of approximately $170 million in both 2019 and 2020 due to the repeal of the corporate Alternative Minimum Tax (AMT)\.

***Liquidity***

As of December 31, 2017, we had approximately $7\.6 billion in total available liquidity, consisting of $5\.1 billion in unrestricted cash and short\-term investments and $2\.5 billion in undrawn revolving credit facilities\. We also had restricted cash and short\-term investments of $318 million\. As described above, in connection with our strategic objective “Ensure Long\-Term Financial Strength,” we completed several transactions during 2017 to ensure our long\-term competitiveness\. During 2017, we:

|   |                                                                                |
| - | -------------------------------------------------------------------------------------------------------------------- |
| • | Repriced $4\.9 billion of our term loans at lower rates and extended and increased our revolving credit facilities\. |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Continued to take advantage of historically low interest rates to finance new aircraft deliveries under our fleet renewal program\. We issued an aggregate principal amount of  $2\.0 billion  in Enhanced Equipment Trust Certificate (EETC) equipment notes at an average fixed interest rate of  3\.74% , as well as  $1\.0 billion  in other equipment notes, which primarily bear interest at variable rates based on LIBOR plus a margin, averaging  3\.08%  at December 31, 2017\. |

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------ |
| • | Raised approximately  $853 million  in net proceeds from aircraft sale\-leaseback transactions\. |

See Note 5 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 3 to American’s Consolidated Financial Statements in Part II, Item 8B for additional information on our debt obligations\.

48