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

To determine whether impairments exist for aircraft used in operations, we group assets at the fleet\-type level or at the contract level for aircraft operated by regional carriers (i\.e\., the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity, passenger mile yield, fuel costs, labor costs and other relevant factors\. If an asset group is impaired, the impairment loss recognized is the amount by which the asset group's carrying amount exceeds its estimated fair value\. We estimate aircraft fair values using published sources, appraisals and bids received from third parties, as available\.

Goodwill and Other Intangible Assets

Our goodwill and identifiable intangible assets relate to the airline segment\. We apply a fair value\-based impairment test to the carrying value of goodwill and indefinite\-lived intangible assets on an annual basis (as of October 1) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis\. We assess the value of our goodwill and indefinite\-lived assets under either a qualitative or quantitative approach\. Under a qualitative approach, we consider various market factors, including certain of the key assumptions listed below\. We analyze these factors to determine if events and circumstances have affected the fair value of goodwill and indefinite\-lived intangible assets\. If we determine that it is more likely than not that the asset may be impaired, we use the quantitative approach to assess the asset's fair value and the amount of the impairment\. Under a quantitative approach, we calculate the fair value of the asset incorporating the key assumptions listed below into our calculation\.

We value goodwill and indefinite\-lived intangible assets primarily using market and income approach valuation techniques\. These measurements include the following key assumptions: (1) forecasted revenues, expenses and cash flows, (2) terminal period revenue growth and cash flows, (3) an estimated weighted average cost of capital, (4) assumed discount rates depending on the asset and (5) a tax rate\. These assumptions are consistent with those that hypothetical market participants would use\. Because we are required to make estimates and assumptions when evaluating goodwill and indefinite\-lived intangible assets for impairment, actual transaction amounts may differ materially from these estimates\.

Changes in certain events and circumstances could result in impairment or a change from indefinite\-lived to definite\-lived\. Factors which could cause impairment include, but are not limited to, (1) negative trends in our market capitalization, (2) reduced profitability resulting from lower passenger mile yields or higher input costs (primarily related to fuel and employees), (3) lower passenger demand as a result of weakened U\.S\. and global economies, (4) interruption to our operations due to a prolonged employee strike, terrorist attack or other reasons, (5) changes to the regulatory environment (e\.g\., diminished slot access or additional Open Skies agreements), (6) competitive changes by other airlines and (7) strategic changes to our operations leading to diminished utilization of the intangible assets\.

Goodwill\.  When we evaluate goodwill for impairment using a quantitative approach, we estimate the fair value of the reporting unit by considering both comparable public company multiples (a market approach) and projected discounted future cash flows (an income approach)\. If the reporting unit's fair value exceeds its carrying value, no further testing is required\. If it does not, we recognize an impairment charge if the carrying value of the reporting unit exceeds its estimated fair value\.

Identifiable Intangible Assets\.  Indefinite\-lived assets are not amortized and consist of routes, slots, the Delta tradename and assets related to alliances and collaborative arrangements\. Definite\-lived intangible assets consist primarily of marketing and maintenance service agreements and are amortized on a straight\-line basis or under the undiscounted cash flows method over the estimated economic life of the respective agreements\. Costs incurred to renew or extend the term of an intangible asset are expensed as incurred\.

We assess our indefinite\-lived assets under a qualitative or quantitative approach\. We analyze market factors to determine if events and circumstances have affected the fair value of the indefinite\-lived intangible assets\. If we determine that it is more likely than not that the asset value may be impaired, we use the quantitative approach to assess the asset's fair value and the amount of the impairment\. We perform the quantitative impairment test for indefinite\-lived intangible assets by comparing the asset's fair value to its carrying value\. Fair value is estimated based on (1) recent market transactions, where available, (2) the royalty method for the Delta tradename (which assumes hypothetical royalties generated from using our tradename) or (3) projected discounted future cash flows (an income approach)\. We recognize an impairment charge if the asset's carrying value exceeds its estimated fair value\.

61


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

|                                             |                                             |                                             |                                       |                                       |  |  |  |                                   |  |  |  |                                                                                |                                                                                |  |  |  |                                                                                |
|:------------------------------------------- |:------------------------------------------- |:------------------------------------------- | -------------------------------------:| -------------------------------------:|:- |:- |:- | ---------------------------------:|:- |:- |:- | -------------------------------------------------------------------------------------------:| -------------------------------------------------------------------------------------------:|:- |:- |:- | ---------------------------------------------------------------------------------------------------------------:|
|                                             |                                             |                                             | Total Number of
Shares Purchased | Total Number of
Shares Purchased |  |  |  | Average Price
Paid per Share |  |  |  | Total Number of Shares (or units) Purchased as Part of Publicly Announced Plans or Programs | Total Number of Shares (or units) Purchased as Part of Publicly Announced Plans or Programs |  |  |  | Maximum remaining
dollar value of shares
that can be purchased
under the plan
(in millions) |
| October 1, 2019 \- October 31, 2019 ^(a)^   | October 1, 2019 \- October 31, 2019 ^(a)^   | October 1, 2019 \- October 31, 2019 ^(a)^   |                              117,115  |                              117,115  |  |  |  |                          $66\.77  |  |  |  |                                                                                117,115  |                                                                                117,115  |  |  |  |                                                                                |
| November 1, 2019 \- November 30, 2019 ^(a)^ | November 1, 2019 \- November 30, 2019 ^(a)^ | November 1, 2019 \- November 30, 2019 ^(a)^ |                               97,053  |                               97,053  |  |  |  |                           70\.06  |  |  |  |                                                                                97,053  |                                                                                97,053  |  |  |  |                                                                                |
| December 1, 2019 \- December 31, 2019 ^(a)^ | December 1, 2019 \- December 31, 2019 ^(a)^ | December 1, 2019 \- December 31, 2019 ^(a)^ |                              104,633  |                              104,633  |  |  |  |                           68\.23  |  |  |  |                                                                                104,633  |                                                                                104,633  |  |  |  |                                                                                |
| Total                                       | Total                                       | Total                                       |                              318,801  |                              318,801  |  |  |  |                          $68\.25  |  |  |  |                                                                                318,801  |                                                                                318,801  |  |  |  |                                                                                $487  |

^(a)^ Purchased pursuant to the $1 billion repurchase plan authorized by the Board of Directors in August 2015\.

PERFORMANCE GRAPH

The following graph compares our cumulative total stockholder return since December 31, 2014 with the S&P 500 Index and the Dow Jones U\.S\. Airlines Index\. The graph assumes that the value of the investment in our common stock and each index (including reinvestment of dividends) was $100 on December 31, 2014\.

![alk\-20191231\_g1\.jpg](https://www.example.com/alk-20191231_g1.jpg)

28


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

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

|            |                 |                                                                                |
| ----------:|:--------------- |:-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| \*^10\.110 | UAL
United | [Supplemental Agreement No\. 17, including side letters, to Purchase Agreement No\. 1951, dated May 16, 2000 (filed as Exhibit 10\.2 to Continental’s Form  10\-Q for the quarter ended June 30, 2000, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968700000022/0000319687-00-000022-0003.htm) |
| \*^10\.111 | UAL
United | [Supplemental Agreement No\. 18, including side letters, to Purchase Agreement No\. 1951, dated September 11, 2000 (filed as Exhibit 10\.6 to Continental’s Form  10\-Q for the quarter ended September 30, 2000, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968700500009/exhibit-106.htm)    |
| \*^10\.112 | UAL
United | [Supplemental Agreement No\. 19, including side letters, to Purchase Agreement No\. 1951, dated October 31, 2000 (filed as Exhibit 10\.20(t) to Continental’s Form  10\-K for the year ended December 31, 2000, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968701500005/exhibit1020t.htm)     |
| \*^10\.113 | UAL
United | [Supplemental Agreement No\. 20, including side letters, to Purchase Agreement No\. 1951, dated December 21, 2000 (filed as Exhibit 10\.20(u) to Continental’s Form  10\-K for the year ended December 31, 2000, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968701500005/exhibit1020u.htm)    |
| \*^10\.114 | UAL
United | [Supplemental Agreement No\. 21, including side letters, to Purchase Agreement No\. 1951, dated March 30, 2001 (filed as Exhibit 10\.1 to Continental’s Form  10\-Q for the quarter ended March 31, 2001, Commission file number  1\-10323, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/319687/000031968701500009/exhibit101.htm)              |
| \*^10\.115 | UAL
United | [Supplemental Agreement No\. 22, including side letters, to Purchase Agreement No\. 1951, dated May 23, 2001 (filed as Exhibit 10\.3 to Continental’s Form  10\-Q for the quarter ended June 30, 2001, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968701500015/exhibit103.htm)                |
| \*^10\.116 | UAL
United | [Supplemental Agreement No\. 23, including side letters, to Purchase Agreement No\. 1951, dated June 29, 2001 (filed as Exhibit 10\.4 to Continental’s Form  10\-Q for the quarter ended June 30, 2001, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968701500015/exhibit104.htm)               |
| \*^10\.117 | UAL
United | [Supplemental Agreement No\. 24, including side letters, to Purchase Agreement No\. 1951, dated August 31, 2001 (filed as Exhibit 10\.11 to Continental’s Form  10\-Q for the quarter ended September 30, 2001, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968701500040/exhibit1011.htm)      |
| \*^10\.118 | UAL
United | [Supplemental Agreement No\. 25, including side letters, to Purchase Agreement No\. 1951, dated December 31, 2001 (filed as Exhibit 10\.22(z) to Continental’s Form  10\-K for the year ended December 31, 2001, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968702000006/exhibit1022z.htm)    |
| \*^10\.119 | UAL
United | [Supplemental Agreement No\. 26, including side letters, to Purchase Agreement No\. 1951, dated March 29, 2002 (filed as Exhibit 10\.4 to Continental’s Form  10\-Q for the quarter ended March 31, 2002, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968702000012/exhibit104.htm)             |
| \*^10\.120 | UAL
United | [Supplemental Agreement No\. 27, including side letters, to Purchase Agreement No\. 1951, dated November 6, 2002 (filed as Exhibit 10\.22(ab) to Continental’s Form  10\-K for the year ended December 31, 2002, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968703000006/exhibit1022ab.htm)   |
| \*^10\.121 | UAL
United | [Supplemental Agreement No\. 28, including side letters, to Purchase Agreement No\. 1951, dated April 1, 2003 (filed as Exhibit 10\.6 to Continental’s Form  10\-Q for the quarter ended March 31, 2003, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968703000014/exhibit106.htm)              |

121


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

As a result of the ASC 606 full retrospective adoption, 2017 tax expense increased by $26 million and 2016 tax expense decreased by $12 million\.

As a result of tax changes signed into law during 2017, the Company recorded a deferred tax benefit of $237 million as a result of the reduction in future corporate income tax rate and other state law changes\.

The Company incurred $39 million of acquisition\-related costs that are not deductible under U\.S\. federal tax law in 2016\. These expenses are included in Special items—merger\-related costs and other on the Company’s consolidated statement of operations and are reflected as a permanent unfavorable adjustment for the year ended December 31, 2016, in the table above\.

In 2017, adjustments were made to the Company's position on income sourcing in various states due to updated guidance from state taxing authorities\. The impact of this guidance is reflected as an increase in income tax expense of approximately $9 million for the year ended December 31, 2017\.

***Uncertain Tax Positions***

The Company has identified its federal tax return and its state tax returns in Alaska, Oregon and California as “major” tax jurisdictions\. A summary of the Company's jurisdictions and the periods that are subject to examination are as follows:

|                  |               |
| ---------------- | ------------- |
| **Jurisdiction** | **Period**    |
| Federal          | 2007 to 2017  |
| Alaska           | 2012 to 2017  |
| California       | 2007 to 2017  |
| Oregon           | 2003 to 2017  |

Certain tax years are open to the extent of net operating loss carryforwards\.

Changes in the liability for gross unrecognized tax benefits during 2018, 2017 and 2016 are as follows (in millions):

|                                                 |          |          |          |
| ----------------------------------------------- | -------- | -------- | -------- |
|                                                 | **2018** | **2017** | **2016** |
| Balance at January 1,                           | $43      | $40      | $32      |
| Additions related to prior years                | 1        | 16       | —        |
| Releases related to prior years                 | (4)      | (2)      | —        |
| Additions related to current year activity      | 2        | 2        | —        |
| Additions from acquisitions                     | —        | —        | 8        |
| Releases due to settlements                     | (1)      | (11)     | —        |
| Releases due to lapse of statute of limitations | (1)      | (2)      | —        |
| Balance at December 31,                         | $40      | $43      | $40      |

As of December 31, 2018, the Company had $40 million of accrued tax contingencies, of which $33 million, if fully recognized, would decrease the effective tax rate\. As of December 31, 2018, 2017 and 2016, the Company has accrued interest and penalties, net of federal income tax benefit, of $6 million, $5 million, and $3 million\. In 2018, 2017, and 2016, the Company recognized an expense of $1 million, $2 million, and $3 million for interest and penalties, net of federal income tax benefit\. At December 31, 2018, the Company has unrecognized tax benefits recorded as a liability\. The Company reduced $3 million of reserves for uncertain tax positions in 2018, primarily due to settlements on state incomes taxes and statute lapses on reserved amounts\. These uncertain tax positions could change as a result of the Company's ongoing audits, settlement of issues, new audits and status of other taxpayer court cases\. The Company cannot predict the timing of these actions\. Due to the positions being taken in various jurisdictions, the amounts currently accrued are the Company's best estimate as of December 31, 2018\.

 79


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

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

Investments presented in the table above have the same fair value as their carrying value\. The table below presents the carrying values and estimated fair values of financial instruments not presented in the tables above as of December 31 (in millions):

|                 |                                                      |                                                      |                                                      |                                                      |                                                      |                                                      |                                                      |                                                      |                                                      |                                                      |
|:--------------- | ----------------------------------------------------:| ----------------------------------------------------:| ----------------------------------------------------:| ----------------------------------------------------:| ----------------------------------------------------:| ----------------------------------------------------:| ----------------------------------------------------:| ----------------------------------------------------:| ----------------------------------------------------:| ----------------------------------------------------:|
|                 | **Fair Value of Debt by Fair Value Hierarchy Level** | **Fair Value of Debt by Fair Value Hierarchy Level** | **Fair Value of Debt by Fair Value Hierarchy Level** | **Fair Value of Debt by Fair Value Hierarchy Level** | **Fair Value of Debt by Fair Value Hierarchy Level** | **Fair Value of Debt by Fair Value Hierarchy Level** | **Fair Value of Debt by Fair Value Hierarchy Level** | **Fair Value of Debt by Fair Value Hierarchy Level** | **Fair Value of Debt by Fair Value Hierarchy Level** | **Fair Value of Debt by Fair Value Hierarchy Level** |
|                 |                                             **2017** |                                             **2017** |                                             **2017** |                                             **2017** |                                             **2017** |                                             **2016** |                                             **2016** |                                             **2016** |                                             **2016** |                                             **2016** |
|                 |                             **Carrying
Amount** |                                       **Fair Value** |                                       **Fair Value** |                                       **Fair Value** |                                       **Fair Value** |                             **Carrying
Amount** |                                       **Fair Value** |                                       **Fair Value** |                                       **Fair Value** |                                       **Fair Value** |
|                 |                                                      |                                                Total |                                              Level 1 |                                              Level 2 |                                              Level 3 |                                                      |                                                Total |                                              Level 1 |                                              Level 2 |                                              Level 3 |
| Long\-term debt |                                             $ 13,268 |                                             $ 13,787 |                                                  $—  |                                             $ 10,115 |                                              $ 3,672 |                                             $ 10,767 |                                             $ 11,055 |                                                  $—  |                                              $ 8,184 |                                              $ 2,871 |

Fair value of the financial instruments included in the tables above was determined as follows:

|                                                                          |                                                                                |
|:------------------------------------------------------------------------ |:----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------:|
| **Description**                                                          |                                                                                **Fair Value Methodology**                                                                                |
| *Cash and cash equivalents*                                              |                                                                                The carrying amounts approximate fair value because of the short\-term maturity of these assets\.                                                                                |
| *Short\-term investments,* *Equity securities, EETC and Restricted cash* |                                                                                Fair value is based on (a) the trading prices of the investment or similar instruments, (b) an income approach, which uses valuation techniques to convert future amounts into a single present amount based on current market expectations about those future amounts when observable trading prices are not available, or (c) broker quotes obtained by third\-party valuation services\.                                                                                |
| *Other investments measured at NAV*                                      | In accordance with the relevant accounting standards, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy\. The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position\. The investments measured using NAV are shares of mutual funds that invest in fixed\-income instruments including bonds, debt securities, and other similar instruments issued by various U\.S\. and  non\-U\.S\. public\- or private\-sector entities\. The Company can redeem its shares at any time at NAV subject to a  three\-day settlement period\. |
| *Long\-term debt*                                                        |                                                                                Fair values were based on either market prices or the discounted amount of future cash flows using our current incremental rate of borrowing for similar liabilities\.                                                                                |

86


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

Our most significant contract to sell miles relates to our co\-brand credit card relationship with American Express\. In early 2019, we amended our primary co\-brand agreement and other related agreements with American Express\. The new agreements increase the amount of total benefit that we receive and extend the duration of the relationship to 2029\. In 2019, cash sales from American Express totaled $4 billion, which is expected to grow to nearly $7 billion by 2023\.

Loyalty program miles can be redeemed for air travel (including upgrades) on Delta and participating airlines, for membership in our Delta Sky Clubs® and for other awards\. We are expanding redemption opportunities and recently began enabling customers to redeem miles for bag fees\. We offer last\-seat availability for travel awards on our own flights (including most Delta Connection flights)\. Miles are subject to certain transfer restrictions and travel awards on partner airlines are subject to capacity\-controlled seating\. In 2019, 8\.9% of revenue miles flown on Delta were from award travel, as program members redeemed miles in the loyalty program for 20 million award redemptions\.

Joint Ventures, Equity Investments and Alliances

Joint Venture Agreements\.  We have implemented four separate joint venture arrangements with foreign carriers, each of which has been granted antitrust immunity from the U\.S\. Department of Transportation ("DOT")\. We have reinforced a number of the agreements through equity investments in those carriers\.

Each of our joint venture arrangements provides for joint commercial cooperation with the relevant partner within the geographic scope of the arrangement, including the sharing of revenues and/or profits and losses generated by the parties on the joint venture routes, as well as joint marketing and sales, coordinated pricing and revenue management, network and schedule planning and other coordinated activities with respect to the parties' operations on joint venture routes\. Our implemented commercial joint ventures consist of the following:

• A combined joint venture with Air France, KLM and Virgin Atlantic with respect to transatlantic traffic flows\. In addition to the joint venture, we own a non\-controlling 49% equity stake in Virgin Atlantic Limited, the parent company of Virgin Atlantic Airways and a non\-controlling 9% ownership stake in the parent company of Air France and KLM\.

• A joint venture with Aeroméxico with respect to trans\-border traffic flows between the U\.S\. and Mexico\. In addition to the joint venture, we own a non\-controlling 51% equity stake in Grupo Aeroméxico, S\.A\.B\. de C\.V\., the parent company of Aeroméxico\. In addition, we and Aeroméxico have established a joint venture relating to an airframe MRO operation located in Queretaro, Mexico\.

• A joint venture with Korean Air with respect to traffic flows between the United States and certain countries in Asia\. In addition to the joint venture, we own a 10% equity stake in Hanjin\-KAL, the largest shareholder of Korean Air\.

• A joint venture with Virgin Australia and its affiliated carriers with respect to traffic flows between North America and Australia/New Zealand\.

We have entered into a joint venture agreement with WestJet with respect to trans\-border traffic flows between the U\.S\. and Canada\. Canadian authorities have approved the joint venture, but it remains subject to required approvals of the U\.S\. DOT\.

In 2019, we entered into a framework agreement with LATAM Airlines Group S\.A\. (“LATAM”) to form a strategic alliance\. Pursuant to that agreement, we acquired a non\-controlling 20% equity stake in LATAM in January 2020\. The parties are in the process of finalizing definitive agreements to implement the strategic alliance and once finalized, the agreements will be submitted for approval by regulatory authorities\. Pursuant to the framework agreement, we agreed to make transition payments to LATAM totaling $350 million, $200 million of which was disbursed in 2019, and also agreed to acquire four A350 aircraft from LATAM and plan to assume ten of LATAM’s A350 purchase commitments from Airbus, with deliveries through 2025\.  In order to facilitate the formation of our strategic alliance with LATAM, we have sold our ownership stake in GOL and are winding down our commercial agreements\.

Enhanced Commercial Agreements with China Eastern\.  We own a 3% equity interest in China Eastern, with whom we have a strategic joint marketing and commercial cooperation arrangement covering traffic flows between China and the U\.S\., which includes reciprocal codesharing, loyalty program participation, airport lounge access and joint sales cooperation\.

4


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

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

The following is our total passenger revenue by geographic region (in millions):

|                         |          |          |          |
| ----------------------- | -------- | -------- | -------- |
|                         | **2018** | **2017** | **2016** |
| Domestic                | $29,573  | $28,749  | $27,202  |
| Latin America           | 5,125    | 4,840    | 4,676    |
| Atlantic                | 4,376    | 4,028    | 3,873    |
| Pacific                 | 1,602    | 1,514    | 1,294    |
| Total passenger revenue | $40,676  | $39,131  | $37,045  |

We attribute passenger revenue by geographic region based upon the origin and destination of each flight segment\.

**Passenger Revenue**

We recognize all revenues generated from transportation on American and our regional flights operated under the brand name American Eagle, including associated baggage fees, ticketing change fees and other inflight services, as passenger revenue when transportation is provided\. Ticket and other related sales for transportation that has not yet been provided are initially deferred and recorded as air traffic liability on our consolidated balance sheets\. The air traffic liability principally represents tickets sold for future travel on American and partner airlines, as well as estimated future refunds and exchanges of tickets sold for past travel\.

The majority of tickets sold are nonrefundable\. A small percentage of tickets, some of which are partially used tickets, expire unused\. Due to complex pricing structures, refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized in passenger revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized\. These estimates are generally based on the analysis of our historical data\. We have consistently applied this accounting method to estimate revenue from forfeited tickets at the date of travel\. Estimated future refunds and exchanges included in the air traffic liability are routinely evaluated based on subsequent activity to validate the accuracy of our estimates\. Any adjustments resulting from periodic evaluations of the estimated air traffic liability are included in passenger revenue during the period in which the evaluations are completed\.

Various taxes and fees assessed on the sale of tickets to end customers are collected by us as an agent and remitted to taxing authorities\. These taxes and fees have been presented on a net basis in the accompanying consolidated statements of operations and recorded as a liability until remitted to the appropriate taxing authority\.

**Loyalty Revenue**

We currently operate the loyalty program, AAdvantage\. This program awards mileage credits to passengers who fly on American, any **one**world airline or other partner airlines, or by using the services of other program participants, such as the Citi and Barclaycard US co\-branded credit cards, hotels and car rental companies\. Mileage credits can be redeemed for travel on American and other participating partner airlines, as well as other non\-air travel awards such as hotels and rental cars\. For mileage credits earned by AAdvantage loyalty program members, we apply the deferred revenue method in accordance with the New Revenue Standard\.

*Mileage credits earned through travel*

For mileage credits earned through travel, we apply a relative selling price approach whereby the total amount collected from each passenger ticket sale is allocated between the air transportation and the mileage credits earned\. The portion of each passenger ticket sale attributable to mileage credits earned is initially deferred and then recognized in passenger revenue when mileage credits are redeemed and transportation is provided\. The estimated selling price of mileage credits is determined using an equivalent ticket value approach, which uses historical data, including award redemption patterns by geographic region and class of service, as well as similar fares as those used to settle award redemptions\. The estimated selling price of miles is adjusted for an estimate of miles that will not be redeemed based on historical redemption patterns\.

93


Annual Report of Southwest Airlines Co\. for year 2019

2 \. NEW ACCOUNTING PRONOUNCEMENTS AND ACCOUNTING CHANGES

On August 29, 2018, the Financial Accounting Standards Board (the "FASB") issued ASU No\. 2018\-15, Intangibles—Goodwill and Other—Internal\-Use Software\. This new standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal\-use software guidance in ASC 350\-40, Accounting for Internal\-Use Software, to determine which implementation costs to (i) capitalize as assets and amortize over the term of the hosting arrangement or (ii) expense as incurred\. This new standard is effective for public business entities in fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years\. Entities have the option to apply this standard prospectively to all implementation costs incurred after the date of adoption or retrospectively\. The Company will be adopting this ASU prospectively as of January 1, 2020\. The adoption of the new standard will impact the presentation of these costs as prepaid assets (versus Property and equipment under the existing guidance), however the impacts are not expected to be material\.

On August 28, 2018, the FASB issued ASU No\. 2018\-13, Fair Value Measurement\. This standard is effective for public business entities in fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years\. This new standard requires changes to the disclosure requirements for fair value measurements for certain Level 3 items, and specifies that some of the changes must be applied prospectively, while others should be applied retrospectively\. The Company will be adopting this ASU as of January 1, 2020\. While the Company is still evaluating this new standard, it does not expect it to have a significant impact on its financial statement disclosures\. See Note  11  for further information on the Company's fair value measurements\.

On August 28, 2017, the FASB issued the New Hedging Standard\. The New Hedging Standard amended the hedge accounting model to enable entities to better portray the economics of their risk management activities in the financial statements and enhance the transparency and understandability of hedge results\. The New Hedging Standard also simplified the application of hedge accounting in certain situations\. The New Hedging Standard was effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted in any interim or annual period\. The Company elected to early adopt the New Hedging Standard as of January 1, 2018, utilizing a modified retrospective approach, as required\. The most significant impacts of the New Hedging Standard on the Company's accounting were the elimination of the requirement to separately measure and record ineffectiveness for all cash flow hedges in a hedging relationship, as well as a change in classification of premium expense associated with option contracts\. Such premium expense for the Company's fuel hedges was previously reflected as a component of Other (gains) losses, net, in the Consolidated Statement of Income, but under the New Hedging Standard is reflected as a component of the line item to which the hedge relates, which is Fuel and oil expense\. As such, premium expense for the year ended December 31, 2017, was reclassified in order to be comparative with current period results in the accompanying Consolidated Statement of Income\. The impact of the cumulative effect of the adjustment to move the reporting of ineffectiveness as of January 1, 2018, to AOCI from Retained earnings, was a   $20 million  loss, net of taxes\. The adoption and resulting reclassification had no impact on the Company's Net income, earnings per share, or cash flows\. As a result of the adoption of the New Hedging Standard, however, the Company incurred no gains or losses due to ineffectiveness in Other (gains) losses, net, in the Consolidated Statement of Income, during 2018\.

On February 25, 2016, the FASB issued the New Lease Standard\. The New Lease Standard requires lessees to recognize a right\-of\-use asset and a lease liability on the balance sheet for all leases (with the exception of short\-term leases, as defined in the New Lease Standard) at the lease commencement date and recognize expenses on the income statement in a similar manner to the legacy guidance in ASC 840, Leases ("ASC 840")\.

The Company adopted the provisions of the New Lease Standard effective January 1, 2019, using the modified retrospective adoption method, utilizing the simplified transition option available in the New Lease Standard, which allows entities to continue to apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented in the year of adoption\. The Company elected the package of practical expedients available under the transition provisions of the New Lease Standard, including (i) not reassessing whether expired or existing contracts contain leases, (ii) not reassessing lease classification, and (iii) not revaluing initial direct costs for existing leases\.

76


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

|                                                    |
| -------------------------------------------------- |
| **ITEM 6\. SELECTED FINANCIAL AND OPERATING DATA** |

As the acquisition of Virgin America closed on December 14, 2016, results below include Virgin America for the twelve months ended December 31, 2017, but only for the period December 14, 2016 through December 31, 2016 in the twelve months ended December 31, 2016\.

 31


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

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY**

|                                               |                                |                  |                                    |                    |                                                   |                       |            |
| --------------------------------------------- | ------------------------------ | ---------------- | ---------------------------------- | ------------------ | ------------------------------------------------- | --------------------- | ---------- |
| ***(in millions)***                           | ***Common Stock Outstanding*** | **Common Stock** | **Capital in Excess of Par Value** | **Treasury Stock** | **Accumulated Other Comprehensive Income (Loss)** | **Retained Earnings** | **Total**  |
| **Balances at December 31, 2014**             | *131\.481*                     | $1               | $296                               | $(4)               | $(310)                                            | $2,144                | $2,127     |
| 2015 net income                               | —                              | —                | —                                  | —                  | —                                                 | 848                   | 848        |
| Other comprehensive income (loss)             | —                              | —                | —                                  | —                  | 7                                                 | —                     | 7          |
| Common stock repurchase                       | *(7\.208)*                     | —                | (259)                              | (246)              | —                                                 | —                     | (505)      |
| Stock\-based compensation                     | —                              | —                | 17                                 | —                  | —                                                 | —                     | 17         |
| Cash dividend declared                        | *—*                            | —                | —                                  | —                  | —                                                 | (102)                 | (102)      |
| Stock issued for employee stock purchase plan | *0\.281*                       | —                | 13                                 | —                  | —                                                 | —                     | 13         |
| Stock issued under stock plans                | *0\.621*                       | —                | 6                                  | —                  | —                                                 | —                     | 6          |
| **Balances at December 31, 2015**             | *125\.175*                     | 1                | 73                                 | (250)              | (303)                                             | 2,890                 | 2,411      |
| 2016 net income                               | —                              | —                | —                                  | —                  | —                                                 | 814                   | 814        |
| Other comprehensive income (loss)             | —                              | —                | —                                  | —                  | (2)                                               | —                     | (2)        |
| Common stock repurchase                       | *(2\.595)*                     | —                | —                                  | (193)              | —                                                 | —                     | (193)      |
| Stock\-based compensation                     | —                              | —                | 19                                 | —                  | —                                                 | —                     | 19         |
| Cash dividend declared                        | *—*                            | —                | —                                  | —                  | —                                                 | (136)                 | (136)      |
| Stock issued for employee stock purchase plan | *0\.309*                       | —                | 17                                 | —                  | —                                                 | —                     | 17         |
| Stock issued under stock plans                | *0\.439*                       | —                | 1                                  | —                  | —                                                 | —                     | 1          |
| **Balances at December 31, 2016**             | *123\.328*                     | 1                | 110                                | (443)              | (305)                                             | 3,568                 | 2,931      |
| 2017 net income                               | —                              | —                | —                                  | —                  | —                                                 | 1,034                 | 1,034      |
| Other comprehensive income (loss)             | —                              | —                | —                                  | —                  | (75)                                              | —                     | (75)       |
| Common stock repurchase                       | *(0\.981)*                     | —                | —                                  | (75)               | —                                                 | —                     | (75)       |
| Stock\-based compensation                     | —                              | —                | 34                                 | —                  | —                                                 | —                     | 34         |
| Cash dividend declared                        | *—*                            | —                | —                                  | —                  | —                                                 | (148)                 | (148)      |
| Stock issued for employee stock purchase plan | *0\.407*                       | —                | 24                                 | —                  | —                                                 | —                     | 24         |
| Stock issued under stock plans                | *0\.307*                       | —                | (4)                                | —                  | —                                                 | —                     | (4)        |
| **Balances at December 31, 2017**             | ***123\.061***                 | **$1**           | **$164**                           | **$(518)**         | **$(380)**                                        | **$4,454**            | **$3,721** |

See accompanying notes to consolidated financial statements\.

 66


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

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

In the years ended December 31,  2019 ,  2018  and  2017 , the Company recognized, in Other operating revenue,   $2\.0 billion ,   $2\.0 billion  (including a one\-time   $50 million  payment) and   $1\.8 billion , respectively, related to the marketing, advertising, non\-travel miles redeemed (net of related costs) and other travel\-related benefits of the mileage revenue associated with our various partner agreements including, but not limited to, our Chase co\-brand agreement\. The portion related to the MileagePlus miles awarded of the total amounts received is deferred and presented in the table above as an increase to the frequent flyer liability\.

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (e) | **Cash and Cash Equivalents and Restricted Cash—** Highly liquid investments with a maturity of three months or less on their acquisition date are classified as cash and cash equivalents\. |

Restricted cash primarily includes cash collateral for letters of credit and collateral associated with obligations for facility leases and other insurance\-related obligations\.  Restricted cash is classified as short\-term or long\-term in the consolidated balance sheets based on the expected timing of return of the assets to the Company\.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statements of consolidated cash flows (in millions):

|                                                                                |                                                                                |                                                                                |                     |                     |                     |                     |                     |                     |
| -------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ------------------- |
|                                                                                |                                                                                |                                                                                | **UAL**             | **UAL**             | **UAL**             | **United**          | **United**          | **United**          |
|                                                                                |                                                                                |                                                                                | **At December 31,** | **At December 31,** | **At December 31,** | **At December 31,** | **At December 31,** | **At December 31,** |
|                                                                                |                                                                                |                                                                                | **2019**            | **2018**            | **2017**            | **2019**            | **2018**            | **2017**            |
| Current assets:                                                                                | Current assets:                                                                                | Current assets:                                                                                |                     |                     |                     |                     |                     |                     |
| Cash and cash equivalents                                                                          | Cash and cash equivalents                                                                          | Cash and cash equivalents                                                                          | $2,762              | $1,694              | $1,482              | $2,756              | $1,688              | $1,476              |
| Restricted cash included in Prepaid expenses and other                                             | Restricted cash included in Prepaid expenses and other                                             | Restricted cash included in Prepaid expenses and other                                             | —                   | —                   | 18                  | —                   | —                   | 18                  |
| Other assets:                                                                                | Other assets:                                                                                | Other assets:                                                                                |                     |                     |                     |                     |                     |                     |
| Restricted cash                                                                                | Restricted cash                                                                                | Restricted cash                                                                                | 106                 | 105                 | 91                  | 106                 | 105                 | 91                  |
| Total cash, cash equivalents and restricted cash shown in the statement of consolidated cash flows | Total cash, cash equivalents and restricted cash shown in the statement of consolidated cash flows | Total cash, cash equivalents and restricted cash shown in the statement of consolidated cash flows | $2,868              | $1,799              | $1,591              | $2,862              | $1,793              | $1,585              |

|      |                                                                                |
| ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (f)  | **Investments—** Debt investments are classified as available\-for\-sale and are stated at fair value\. Realized gains and losses on sales of these investments are reflected in Miscellaneous, net in the consolidated statements of operations\. Unrealized gains and losses on available\-for\-sale securities are reflected as a component of accumulated other comprehensive income (loss)\. Equity investments with readily determinable fair values are measured at fair value\. Equity investments without readily determinable fair values are measured using the equity method, or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative)\. Changes in fair value are recorded in Unrealized gains (losses) on investments, net in the consolidated statements of operations\. |

|     |                                                                                |
| --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (g) | **Accounts Receivable—** Accounts receivable primarily consist of amounts due from credit card companies, non\-airline partners, and cargo transportation customers\. We provide an allowance for uncollectible accounts equal to the estimated losses expected to be incurred based on historical write\-offs and other specific analyses\. Bad debt expense and write\-offs were not material for the year ended December 31,  2019  and  2018 \. |

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (h) | **Aircraft Fuel, Spare Parts and Supplies—** The Company accounts for aircraft fuel, spare parts and supplies at average cost and provides an obsolescence allowance for aircraft spare parts with an assumed residual value of  10%  of original cost\. |

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (i) | **Property and Equipment—** The Company records additions to owned operating property and equipment at cost when acquired\. Property under finance leases and the related obligation for future lease payments are recorded at an amount equal to the initial present value of those lease payments\. Modifications that enhance the operating performance or extend the useful lives of airframes or engines are capitalized as property and equipment\. It is the Company's policy to record contractual damages received related to delays in delivery of aircraft as a reduction of the cost of the related aircraft\. |

Depreciation and amortization of owned depreciable assets is based on the straight\-line method over the assets' estimated useful lives\. Leasehold improvements are amortized over the remaining term of the lease, including estimated facility renewal options when renewal is reasonably certain at key airports, or the estimated useful life of the related asset, whichever is less\. Properties under finance leases are amortized on the straight\-line method over the life of the lease or, in the case of certain aircraft, over their estimated useful lives, whichever is shorter\. Amortization of finance lease assets is included in depreciation and amortization expense\.The estimated useful lives of property and equipment

58


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

risks and uncertainties that could cause actual results to differ materially from historical experience or the Company’s present expectations\.

You should not place undue reliance on our forward\-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control\.

Our forward\-looking statements are based on the information currently available to us and speak only as of the date on which this report was filed with the SEC\. We expressly disclaim any obligation to issue any updates or revisions to our forward\-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements\. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward\-looking statements, and such differences might be significant and materially adverse to our shareholders\. For a discussion of these and other risk factors in this Form 10\-K, see “Item 1A: Risk Factors\.” Please consider our forward\-looking statements in light of those risks as you read this report\.

3


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

PART II

|              |                                                                                |
| ------------ | ---------------------------------------------------------------------------------------------------------------------------- |
| **ITEM 5\.** | **MARKET FOR AMERICAN AIRLINES GROUP’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES** |

Stock Exchange Listing

Our common stock is listed on The Nasdaq Global Select Market under the symbol “AAL\.” There is no trading market for the common stock of American, which is a wholly\-owned subsidiary of AAG\.

As of  February 14, 2020 , the closing price of our common stock was  $29\.20  and there were  12,995  holders of record\. However, because many of the shares of our common stock are held by brokers and other institutions on behalf of stockholders, we believe there are substantially more beneficial holders of our common stock than record holders\.

Information on securities authorized for issuance under our equity compensation plans will be set forth in our Proxy Statement for the 2020 Annual Meeting of Stockholders of American Airlines Group Inc\. (the Proxy Statement) under the caption “Equity Compensation Plan Information” and is incorporated by reference into this Annual Report on Form 10\-K\.

Dividends on Common Stock

In  January 2020 , we announced that our Board of Directors declared a  $0\.10  per share cash dividend for stockholders of record on  February 5, 2020 , and payable on  February 19, 2020 \.

The total cash payment for dividends during the years ended December 31,  2019  and  2018  was  $178 million  and  $186 million , respectively\.  Any future dividends that may be declared and paid from time to time will be subject to market and economic conditions, applicable legal requirements and other relevant factors\. We are not obligated to continue a dividend for any fixed period, and the payment of dividends may be suspended or discontinued at any time at our discretion and without prior notice\.

Stock Performance Graph

The following stock performance graph and related information shall not be deemed “soliciting material” or “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing\.

The following stock performance graph compares the cumulative total stockholder returns during the period from December 31, 2014 to  December 31, 2019  of our common stock to the New York Stock Exchange (NYSE) ARCA Airline Index and the Standard and Poor’s (S&P) 500 Stock Index\. The comparison assumes $100 was invested on December 31, 2014 in our common stock and in each of the foregoing indices and assumes that all dividends were reinvested\. The stock performance shown on the following graph represents historical stock performance and is not necessarily indicative of future stock price performance\.

42


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

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

The components of our deferred tax assets and liabilities were (in millions):

|                                                    |                  |                  |
| -------------------------------------------------- | ---------------- | ---------------- |
|                                                    | **December 31,** | **December 31,** |
|                                                    | **2017**         | **2016**         |
| Deferred tax assets:                               |                  |                  |
| Operating loss carryforwards                       | $2,281           | $3,853           |
| Pensions                                           | 1,559            | 2,610            |
| Loyalty program liability                          | 420              | 485              |
| Alternative minimum tax (AMT) credit carryforwards | 344              | 344              |
| Postretirement benefits other than pensions        | 170              | 291              |
| Rent expense                                       | 160              | 256              |
| Gains from lease transactions                      | 107              | 213              |
| Reorganization items                               | 35               | 53               |
| Other                                              | 678              | 972              |
| Total deferred tax assets                          | 5,754            | 9,077            |
| Valuation allowance                                | (36)             | (29)             |
| Net deferred tax assets                            | 5,718            | 9,048            |
| Deferred tax liabilities:                          |                  |                  |
| Accelerated depreciation and amortization          | (5,045)          | (7,216)          |
| Other                                              | (279)            | (345)            |
| Total deferred tax liabilities                     | (5,324)          | (7,561)          |
| Net deferred tax asset                             | $394             | $1,487           |

At December 31, 2017, we had approximately $10\.0 billion of federal NOLs carried over from prior taxable years (NOL Carryforwards) to reduce future federal taxable income, substantially all of which we expect to be available for use in 2018\. The federal NOL Carryforwards will expire beginning in 2022 if unused\. We also had approximately $3\.4 billion of NOL Carryforwards to reduce future state taxable income at December 31, 2017, which will expire in years 2018 through 2037 if unused\. Our ability to deduct our NOL Carryforwards and to utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 where an “ownership change” has occurred\. Substantially all of our remaining federal NOL Carryforwards attributable to US Airways Group are subject to limitation under Section 382; however, our ability to utilize such NOL Carryforwards is not anticipated to be effectively constrained as a result of such limitation\. We elected to be covered by certain special rules for federal income tax purposes that permitted approximately $9\.0 billion (with $8\.4 billion of unlimited NOL still remaining at December 31, 2017) of our federal NOL Carryforwards to be utilized without regard to the annual limitation generally imposed by Section 382\. Similar limitations may apply for state income tax purposes\. Our ability to utilize any new NOL Carryforwards arising after the ownership changes is not affected by the annual limitation rules imposed by Section 382 unless another future ownership change occurs\. Under the Section 382 limitation, cumulative stock ownership changes among material stockholders exceeding 50% during a rolling three\-year period can potentially limit a company’s future use of NOLs and tax credits\. See Part I, Item 1A\. Risk Factors *– “Our ability to utilize our NOL Carryforwards may be limited”* for unaudited additional discussion of this risk\.

At December 31, 2017, we had an AMT credit carryforward of approximately $339 million available for federal income tax purposes, which is now expected to be refunded in 2019 and 2020 as a result of the repeal of corporate AMT\.

In 2017, we recorded an income tax provision of $1\.2 billion, with an effective rate of approximately 38%, which was substantially non\-cash as we utilized our NOLs described above\. Substantially all of our income before income taxes is attributable to the United States\.

We file our tax returns as prescribed by the tax laws of the jurisdictions in which we operate\. Our 2014 through 2016 tax years are still subject to examination by the Internal Revenue Service\. Various state and foreign jurisdiction tax years remain open to examination and we are under examination, in administrative appeals, or engaged in tax litigation in certain jurisdictions\. We believe that the effect of any assessments will not be material to our consolidated financial statements\.

103


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

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints W\. Douglas Parker and Derek J\. Kerr and each or any of them, his or her true and lawful attorneys and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to the registrants’ Annual Report on Form 10\-K for the fiscal year ended  December 31, 2019 , and to file the same with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each or any of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys and agents, and each of them, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof\.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of American Airlines Group Inc\. and in the capacities and on the dates noted:

|                         |                                                      |
| ----------------------- | ---------------------------------------------------- |
| Date: February 19, 2020 | /s/ W\. Douglas Parker                               |
|                         | W\. Douglas Parker                                   |
|                         | Chairman and Chief Executive Officer                 |
|                         | (Principal Executive Officer)                        |
| Date: February 19, 2020 | /s/ Derek J\. Kerr                                   |
|                         | Derek J\. Kerr                                       |
|                         | Executive Vice President and Chief Financial Officer |
|                         | (Principal Financial and Accounting Officer)         |
| Date: February 19, 2020 | /s/ James F\. Albaugh                                |
|                         | James F\. Albaugh, Director                          |
| Date: February 19, 2020 | /s/ Jeffrey D\. Benjamin                             |
|                         | Jeffrey D\. Benjamin, Director                       |
| Date: February 19, 2020 | /s/ John T\. Cahill                                  |
|                         | John T\. Cahill, Director                            |
| Date: February 19, 2020 | /s/ Michael J\. Embler                               |
|                         | Michael J\. Embler, Director                         |
| Date: February 19, 2020 | /s/ Matthew J\. Hart                                 |
|                         | Matthew J\. Hart, Director                           |

186


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

Our business and results of operations are dependent on the price of aircraft fuel\. High fuel costs or cost increases, including in the cost of crude oil, could have a material adverse effect on our operating results\.

Our operating results are significantly impacted by changes in the price of aircraft fuel\. Over the last decade, fuel prices have increased substantially at times and have been highly volatile\. In 2019, our average fuel price per gallon, including the impact of fuel hedges, was $2\.02, an 8\.2% decrease from our average fuel price in 2018\. In 2018, our average fuel price per gallon was $2\.20, a 31\.0% increase from our average fuel price in 2017 of $1\.68\. Fuel costs represented 21\.1%, 23\.0% and 19\.2% of our operating expense in 2019, 2018 and 2017, respectively\.

We acquire a significant amount of jet fuel from our wholly owned subsidiary, Monroe, and through strategic agreements that Monroe has with third parties\. The cost of the fuel we purchase under these arrangements remains subject to volatility in the cost of crude oil and jet fuel\. In addition, we continue to purchase a significant amount of aircraft fuel in addition to what we obtain from Monroe\. Our aircraft fuel purchase contracts alone do not provide material protection against price increases as these contracts typically establish the price based on industry standard market price indices\.

The competitive nature of the airline industry may affect our ability to pass along rapidly increasing fuel costs to our customers\. In addition, because passengers often purchase tickets well in advance of their travel, a significant rapid increase in fuel price may result in the fare charged not covering that increase\. At times in the past, we often were not able to increase our fares to offset fully the effect of increases in fuel costs, and we may not be able to do so in the future\.

Significant extended disruptions in the supply of aircraft fuel, including from Monroe, could have a material adverse effect on our operations and operating results\.

Weather\-related events, natural disasters, political disruptions or wars involving oil\-producing countries, changes in governmental policy concerning aircraft fuel production, transportation or taxes, changes in refining capacity, environmental concerns and other unpredictable events may impact crude oil and fuel supply and could result in shortages in the future\. Shortages in fuel supplies could have negative effects on our results of operations and financial condition\.

Because we acquire a large amount of our jet fuel from Monroe, the disruption or interruption of production at the refinery could have an impact on our ability to acquire jet fuel needed for our operations\. Disruptions or interruptions of production at the refinery could result from various sources including a major accident or mechanical failure, interruption of supply or delivery of crude oil, work stoppages relating to organized labor issues, or damage from severe weather or other natural or man\-made disasters, including acts of terrorism\. If the refinery were to experience an interruption in operations, disruptions in fuel supplies could have negative effects on our results of operations and financial condition\. In addition, the financial benefits from the operation of the refinery could be materially adversely affected (to the extent not recoverable through insurance) because of lost production and repair costs\.

If Monroe's cost of producing non\-jet fuel products exceeds the value it receives for those products, the financial benefits we expect to achieve through the ownership of the refinery and our consolidated results of operations could be materially adversely affected\.

An environmental or other incident associated with the operation of the Monroe refinery could have a material adverse effect on our consolidated financial results if insurance is unable to cover a significant liability\. In addition, such an incident could damage our reputation\.

Monroe's refining operations are subject to various hazards unique to refinery operations, including explosions, fires, toxic emissions and natural catastrophes\. Monroe could incur substantial losses, including cleanup costs, fines and other sanctions and third\-party claims, and its operations could be interrupted, as a result of such an incident\. Monroe's insurance coverage does not cover all potential losses, costs or liabilities, and Monroe could suffer losses for uninsurable or uninsured risks or in amounts greater than its insurance coverage\. In addition, Monroe's ability to obtain and maintain adequate insurance may be affected by conditions in the insurance market over which it has no control\. If Monroe were to incur a significant liability for which it is not fully insured or for which insurance companies do not or are unable to provide coverage, this could have a material adverse effect on our consolidated financial results of operations or consolidated financial position\. In addition, because of our ownership of Monroe, the occurrence of an environmental or other incident could result in damage to our reputation, which could have a material adverse effect on our financial results\.

16


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

***Interest***

Our earnings and cash flow are also affected by changes in interest rates due to the impact those changes have on our interest expense from variable rate debt instruments and our interest income from short\-term investments\.

Our largest exposure with respect to variable rate debt comes from changes in LIBOR\. We had variable rate debt instruments representing approximately 40% of our total long\-term debt at December 31, 2017\. We currently do not have an interest rate hedge program\. If annual interest rates increase 100 basis points, based on our December 31, 2017 variable\-rate debt and short\-term investments balances, annual interest expense on variable rate debt would increase by approximately $95 million and annual interest income on short\-term investments would increase by approximately $51 million\. Additionally, the fair value of fixed\-rate debt would have decreased by approximately $691 million for AAG and $664 million for American\.

79


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

**CONSOLIDATED STATEMENTS OF OPERATIONS**

|                                                                            |              |          |          |
| -------------------------------------------------------------------------- | ------------ | -------- | -------- |
| **Year Ended December 31**  ***(in millions, except per\-share amounts)*** | **2018**     | **2017** | **2016** |
| **Operating Revenues**                                                     |              |          |          |
| Passenger revenue                                                          | **7,632**    | 7,301    | 5,392    |
| Mileage Plan other revenue                                                 | **434**      | 418      | 370      |
| Cargo and other                                                            | **198**      | 175      | 163      |
| **Total Operating Revenues**                                               | **8,264**    | 7,894    | 5,925    |
| **Operating Expenses**                                                     |              |          |          |
| Wages and benefits                                                         | **2,190**    | 1,931    | 1,394    |
| Variable incentive pay                                                     | **147**      | 135      | 127      |
| Aircraft fuel, including hedging gains and losses                          | **1,936**    | 1,447    | 831      |
| Aircraft maintenance                                                       | **435**      | 391      | 270      |
| Aircraft rent                                                              | **315**      | 274      | 114      |
| Landing fees and other rentals                                             | **499**      | 460      | 320      |
| Contracted services                                                        | **306**      | 314      | 247      |
| Selling expense                                                            | **326**      | 368      | 248      |
| Depreciation and amortization                                              | **398**      | 372      | 363      |
| Food and beverage service                                                  | **211**      | 195      | 126      |
| Third\-party regional carrier expense                                      | **154**      | 121      | 95       |
| Other                                                                      | **572**      | 562      | 367      |
| Special items \- merger\-related costs                                     | **87**       | 116      | 117      |
| Special items \- other                                                     | **45**       | —        | —        |
| **Total Operating Expenses**                                               | **7,621**    | 6,686    | 4,619    |
| **Operating Income**                                                       | **643**      | 1,208    | 1,306    |
| **Nonoperating Income (Expense)**                                          |              |          |          |
| Interest income                                                            | **38**       | 34       | 27       |
| Interest expense                                                           | **(91)**     | (103)    | (55)     |
| Interest capitalized                                                       | **18**       | 17       | 25       |
| Other—net                                                                  | **(23)**     | 3        | 13       |
|                                                                            | **(58)**     | (49)     | 10       |
| **Income Before Income Tax**                                               | **585**      | 1,159    | 1,316    |
| Income tax expense                                                         | **148**      | 436      | 502      |
| Special income tax expense (benefit)                                       | **—**        | (237)    | 17       |
| **Total Income Tax Expense**                                               | **$148**     | $199     | $519     |
| **Net Income**                                                             | **$437**     | $960     | $797     |
| **Basic Earnings Per Share**                                               | **$3\.55**   | $7\.79   | $6\.45   |
| **Diluted Earnings Per Share**                                             | **$3\.52**   | $7\.75   | $6\.41   |
| Shares used for computation:                                               |              |          |          |
| Basic                                                                      | **123\.230** | 123\.211 | 123\.557 |
| Diluted                                                                    | **123\.975** | 123\.854 | 124\.389 |
| Cash dividend declared per share                                           | **$1\.28**   | $1\.20   | $1\.10   |

Certain historical information has been adjusted to reflect the adoption of new accounting standards\. See accompanying notes to consolidated financial statements\.

 58


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

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

Firm Order and Option Aircraft\.  As of  December 31, 2019 , United had firm commitments and options to purchase new aircraft from Boeing, Airbus and Embraer as presented in the table below:

|                   |                                         |                                   |                                   |
| ----------------- | --------------------------------------- | --------------------------------- | --------------------------------- |
|                   |                                         | **Scheduled Aircraft Deliveries** | **Scheduled Aircraft Deliveries** |
| **Aircraft Type** | **Number of Firm  <br>Commitments (a)** | **2020**                          | **After 2020**                    |
| Airbus A321XLR    | 50                                      | —                                 | 50                                |
| Airbus A350       | 45                                      | —                                 | 45                                |
| Boeing 737 MAX    | 171                                     | 44                                | 127                               |
| Boeing 777\-300ER | 2                                       | 2                                 | —                                 |
| Boeing 787        | 16                                      | 15                                | 1                                 |
| Embraer E175      | 20                                      | 20                                | —                                 |

(a) United also has options and purchase rights for additional aircraft\.

The aircraft listed in the table above are scheduled for delivery  through  2030 \.  The Company expects to assign the purchase obligation for each of the  20  Embraer E175 aircraft to one of its regional partners at the time of such aircraft's delivery, subject to certain conditions\.  To the extent the Company and the aircraft manufacturers with which the Company has existing orders for new aircraft agree to modify the contracts governing those orders, the amount and timing of the Company's future capital commitments could change\.  United also has agreements to purchase  20  used Airbus A319 aircraft with expected delivery dates through  2022  and  19  used Boeing 737\-700 aircraft with expected delivery dates through  2021 \.

The 44 Boeing 737 MAX aircraft in the table above include 16 Boeing B737 MAX aircraft of which the Company planned to take delivery in 2019, and 28 aircraft of which the Company planned to take delivery of in 2020; however, following the FAA Order, Boeing suspended deliveries of new Boeing 737 MAX aircraft\. The extent of the delay to the scheduled deliveries of new 737 MAX aircraft is expected to be impacted by the length of time the FAA Order remains in place, Boeing's production rate and the pace at which Boeing can deliver aircraft following the lifting of the FAA Order, among other factors\. As a result, the Company is unable to estimate the number of Boeing 737 MAX aircraft of which it will take delivery in 2020\.

See Notes 10 and 13 to the financial statements included in Part II, Item 8 of this report for additional information\.

Facilities\.  United leases gates, hangar sites, terminal buildings and other airport facilities in the municipalities it serves\. United has major terminal facility leases at SFO, Washington Dulles, Chicago O'Hare, LAX, Denver, Newark, Houston Bush and Guam with expiration dates ranging from  2020  through  2053 \. Substantially all of these facilities are leased on a net\-rental basis, resulting in the Company's responsibility for maintenance, insurance and other facility\-related expenses and services\.

United also maintains administrative, catering, cargo, training, maintenance and other facilities to support its operations in the cities it serves\. In addition, United has multiple leases, which expire from  2020  through  2033 , for its principal executive office and operations center in downtown Chicago and administrative offices in downtown Houston\.

|              |                         |
| ------------ | ----------------------- |
| **ITEM 3\.** | **LEGAL PROCEEDINGS\.** |

On June 30, 2015, UAL received a Civil Investigative Demand ("CID") from the Antitrust Division of the DOJ seeking documents and information from the Company in connection with a DOJ investigation related to statements and decisions about airline capacity\. The Company has completed its response to the CID\. The Company is not able to predict what action, if any, might be taken in the future by the DOJ or other governmental authorities as a result of the investigation\. Beginning on July 1, 2015, subsequent to the announcement of the CID, UAL and United were named as defendants in multiple class action lawsuits that asserted claims under the Sherman Antitrust Act, which have been consolidated in the United States District Court for the District of Columbia\. The complaints generally allege collusion among U\.S\. airlines on capacity impacting airfares and seek treble damages\. The Company intends to vigorously defend against the class action lawsuits\.

On October 13, 2015, United received a CID from the Civil Division of the DOJ\. The CID requested documents and oral testimony from United in connection with an industry\-wide DOJ investigation related to delivery scan and other data purportedly required for payment for the carriage of mail under United's International Commercial Air Contracts with the U\.S\. Postal Service\. The Company has been responding to the DOJ's request and cooperating in the investigation since that time\. On November 8, 2016, the DOJ Criminal Division met with representatives from the Company and advised they are conducting an industry\-wide investigation into the same matter\. The Company continues to cooperate with the government in their investigation and representatives from the Company have met with both the Civil and Criminal Divisions to provide additional information\. The Company cannot predict what action, if any, might be taken in the future by the DOJ or other governmental authorities as a result of these investigations\.

24


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

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

Investing Activities

Capital Expenditures\.  Our capital expenditures were  $3\.9 billion  in  2017 , $3\.4 billion in  2016  and $2\.9 billion in  2015 \. Our capital expenditures during 2017 were primarily related to the purchase of B\-737\-900ER aircraft to replace a portion of our older B\-757\-200 aircraft, purchases of A321\-200 and A330\-300 aircraft, advanced deposit payments on future aircraft order commitments and seat density projects for our domestic fleet\. Our capital expenditures during 2016 and 2015 were primarily for the purchase of aircraft and modifications to upgrade aircraft interiors that enhance our product offering\.

We have committed to future aircraft purchases that will require significant capital investment and have obtained long\-term financing commitments for a substantial portion of the purchase price of these aircraft\. We expect that we will invest approximately $4\.5 billion in 2018 primarily for (1) aircraft, including deliveries of B\-737\-900ERs, A321\-200s and A350\-900s, along with advance deposit payments for these and our new A330\-900neo and CS100 orders as well as for (2) aircraft modifications, the majority of which relate to increasing the seat density and enhancing the cabins on our domestic fleet\. We expect that the 2018 investments will be funded primarily through cash flows from operations\.

Equity Investments\.  During 2017, we completed a $622 million tender offer and settled derivative contracts for $173 million  to obtain additional capital stock of Grupo Aeroméxico, increasing our ownership percentage to a non\-controlling  49%  equity stake in Grupo Aeroméxico \. During the December 2017 quarter, we acquired shares of Air France\-KLM for $450 million, which provides us with a 10% ownership interest\.

Los Angeles International Airport Construction\.  During 2016, we executed a new lease agreement with Los Angeles World Airports ("LAWA"), which owns and operates LAX, and announced plans to modernize, upgrade and connect Terminals 2 and 3 at LAX over the next seven years\. Based on the lease agreement, we are designing and managing the construction of the initial investment of $350 million to renovate gate areas, support space and other amenities for passengers, upgrade the baggage handling systems in the terminals and facilitate the relocation of those airlines located in Terminals 2 and 3 to Terminals 5 and 6 and Tom Bradley International Terminal ("TBIT")\. The relocation activities were completed during the June 2017 quarter\. Subject to required approvals, we have an option to expand the project, which could cost an additional $1\.5 billion and would include (1) redevelopment of Terminal 3 and enhancement of Terminal 2, (2) rebuild of the ticketing, arrival hall and security checkpoint, (3) construction of infrastructure for the planned airport people mover, (4) ramp improvements and (5) construction of a secure connector to the north side of TBIT\.

A substantial majority of the project costs will be funded through the Regional Airports Improvement Corporation ("RAIC"), a California public benefit corporation, using an $800 million revolving credit facility provided by a group of lenders\. The credit facility was executed during 2017\. Loans made under the credit facility will be repaid with the proceeds from LAWA’s purchase of completed project assets\. We have guaranteed the obligations of the RAIC under the credit facility\. We expect to spend approximately $200 million on this project in 2018 using funding provided by the credit agreement and/or cash flows from operations\.

New York\-LaGuardia Redevelopment\.  As part of the terminal redevelopment project at LaGuardia Airport, we are partnering with the Port Authority of New York and New Jersey (the “Port Authority”) to replace Terminals C and D with a new state\-of\-the\-art terminal facility consisting of 37 gates across four concourses connected to a central headhouse\. The terminal will feature a new, larger Delta Sky Club, wider concourses, more gate seating and 30 percent more concessions space than the existing terminals\. The facility will also offer direct access between the parking garage and terminal and improved roadways and drop\-off/pick\-up areas\. The design of the new terminal will integrate sustainable technologies and improvements in energy efficiency\. Construction will be phased to limit passenger inconvenience and is expected to be completed by 2026\.

In connection with the redevelopment, during 2017, we entered into an amended and restated terminal lease with the Port Authority with a term through 2050\. Pursuant to the lease agreement we will (1) fund (through debt issuance and existing cash) and undertake the design, management and construction of the terminal and certain off\-premises supporting facilities, (2) receive a Port Authority contribution of $600 million to facilitate construction of the terminal and other supporting infrastructure, (3) be responsible for all operations and maintenance during the term of the lease and (4) have preferential rights to all gates in the terminal subject to Port Authority requirements with respect to accommodation of designated carriers\. We currently expect our costs for the project to be approximately $3\.3 billion and we bear the risks of project construction, including if the project’s actual costs exceed the projected costs\. We expect to spend approximately $550 million on this project in 2018 using funding provided by cash flows from operations and/or financing arrangements\.

 37


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

**ITEM 16\. FORM 10\-K SUMMARY**

None\.

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