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

cash flow or liquidity prepared in accordance with GAAP\. We are providing a reconciliation of reported non\-GAAP financial measures to their comparable financial measures on a GAAP basis\.

The table below presents the reconciliation of total operating expenses (GAAP measure) to total operating costs excluding net special items and fuel (non\-GAAP measure)\. Management uses total operating costs excluding net special items and fuel to evaluate our current operating performance and for period\-to\-period comparisons\. The price of fuel, over which we have no control, impacts the comparability of period\-to\-period financial performance\. The adjustment to exclude aircraft fuel and net special items allows management an additional tool to understand and analyze our non\-fuel costs and core operating performance\.

The major components of our total CASM and our total CASM excluding net special items and fuel for the years ended  December 31, 2019  and  2018  are as follows (amounts may not recalculate due to rounding):

|                                                  |                                           |                                           |                                                       |
| ------------------------------------------------ | ----------------------------------------- | ----------------------------------------- | ----------------------------------------------------- |
|                                                  | **Year Ended December 31,**               | **Year Ended December 31,**               | **Percent**

**Increase**

**(Decrease)** |
|                                                  | **2019**                                  | **2018**                                  | **Percent**

**Increase**

**(Decrease)** |
|                                                  | **(In cents, except percentage changes)** | **(In cents, except percentage changes)** | **(In cents, except percentage changes)**             |
| Total CASM:                                      |                                           |                                           |                                                       |
| Aircraft fuel and related taxes                  | 2\.64                                     | 2\.86                                     | (7\.5)                                                |
| Salaries, wages and benefits                     | 4\.42                                     | 4\.34                                     | 1\.8                                                  |
| Maintenance, materials and repairs               | 0\.83                                     | 0\.73                                     | 14\.9                                                 |
| Other rent and landing fees                      | 0\.72                                     | 0\.67                                     | 7\.0                                                  |
| Aircraft rent                                    | 0\.47                                     | 0\.45                                     | 3\.8                                                  |
| Selling expenses                                 | 0\.56                                     | 0\.54                                     | 4\.3                                                  |
| Depreciation and amortization                    | 0\.70                                     | 0\.65                                     | 6\.6                                                  |
| Special items, net                               | 0\.22                                     | 0\.28                                     | (20\.2)                                               |
| Other                                            | 1\.78                                     | 1\.80                                     | (1\.1)                                                |
| Regional expenses:                               |                                           |                                           |                                                       |
| Aircraft fuel and related taxes                  | 0\.66                                     | 0\.65                                     | 0\.3                                                  |
| Other                                            | 1\.98                                     | 1\.88                                     | 5\.3                                                  |
| Total CASM                                       | 14\.98                                    | 14\.85                                    | 0\.9                                                  |
| Mainline operating special items, net            | (0\.22)                                   | (0\.28)                                   | (20\.2)                                               |
| Aircraft fuel and related taxes                  |
                                    |
                                    |
                                                |
| Aircraft fuel and related taxes \- mainline      | (2\.64)                                   | (2\.86)                                   | (7\.5)                                                |
| Aircraft fuel and related taxes \- regional      | (0\.66)                                   | (0\.65)                                   | 0\.3                                                  |
| Total CASM, excluding net special items and fuel | 11\.46                                    | 11\.06                                    | 3\.6                                                  |

Significant changes in the components of total CASM are as follows:

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Mainline aircraft fuel and related taxes per ASM  decrease d  7\.5%  in  2019  as compared to  2018  primarily due to a  7\.1 %  decrease  in the average price per gallon of fuel including related taxes to  $2\.05  in  2019  from  $2\.21  in  2018 \.  |

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Maintenance, materials and repairs per ASM increased  14\.9 % in  2019  as compared to  2018  primarily due to a contract change that resulted in certain flight equipment transitioning to a flight hour based contract (referred to as power by the hour) whereby expense is incurred and recognized based on actual hours flown\. Previously, this flight equipment was covered by a time and materials based contract whereby expense is incurred and recognized as maintenance is performed\. An increase in the volume of airframe and engine overhauls performed under time and material based contracts as well as an increase in the volume of component part repairs also drove higher maintenance expenses in 2019\. |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Other rent and landing fees per ASM increased  7\.0 % in  2019  as compared to  2018  primarily due to an expansion at DFW that became fully operational in May 2019 and rate increases at certain hub airports\. |

54


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

**AMERICAN AIRLINES, INC\.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In millions)**

|                                                                                |                  |                  |                  |
| --------------------------------------------------------------------------------- | ---------------- | ---------------- | ---------------- |
|                                                                                | **December 31,** | **December 31,** | **December 31,** |
|                                                                                | **2017**         | **2016**         | **2015**         |
| **Cash flows from operating activities:**                                         |                  |                  |                  |
| Net income                                                                        | $1,922           | $2,781           | $8,120           |
| Adjustments to reconcile net income to net cash provided by operating activities: |                  |                  |                  |
| Depreciation and amortization                                                     | 1,964            | 1,762            | 1,560            |
| Deferred income tax provision (benefit)                                           | 1,298            | 1,652            | (3,467)          |
| Debt discount and lease amortization                                              | (119)            | (124)            | (126)            |
| Special items, non\-cash                                                          | 272              | 270              | 295              |
| Pension and postretirement                                                        | (132)            | (70)             | (194)            |
| Share\-based compensation                                                         | 90               | 100              | 284              |
| Other, net                                                                        | (25)             | (16)             | (21)             |
| **Changes in operating assets and liabilities:**                                  |                  |                  |                  |
| Decrease (increase) in accounts receivable                                        | (189)            | (169)            | 354              |
| Increase in other assets                                                          | (405)            | (205)            | (22)             |
| Increase in accounts payable and accrued liabilities                              | 266              | 336              | 214              |
| Increase (decrease) in air traffic liability                                      | 66               | 164              | (505)            |
| Increase in receivables from related parties, net                                 | (1,994)          | (4,862)          | (3,695)          |
| Increase (decrease) in loyalty program liability                                  | 2                | 264              | (295)            |
| Contributions to pension plans                                                    | (286)            | (32)             | (6)              |
| Increase (decrease) in other liabilities                                          | 140              | (101)            | 91               |
| Net cash provided by operating activities                                         | 2,870            | 1,750            | 2,587            |
| **Cash flows from investing activities:**                                         |                  |                  |                  |
| Capital expenditures and aircraft purchase deposits                               | (5,881)          | (5,657)          | (6,075)          |
| Proceeds from sale of property and equipment and sale\-leaseback transactions     | 922              | 115              | 26               |
| Purchases of short\-term investments                                              | (4,633)          | (6,241)          | (8,126)          |
| Sales of short\-term investments                                                  | 5,915            | 6,092            | 8,517            |
| Decrease in restricted cash and short\-term investments                           | 319              | 57               | 79               |
| Purchase of equity investment                                                     | (203)            | —                | —                |
| Net cash used in investing activities                                             | (3,561)          | (5,634)          | (5,579)          |
| **Cash flows from financing activities:**                                         |                  |                  |                  |
| Proceeds from issuance of long\-term debt                                         | 3,058            | 7,701            | 4,509            |
| Payments on long\-term debt and capital leases                                    | (2,332)          | (3,827)          | (2,153)          |
| Deferred financing costs                                                          | (85)             | (77)             | (80)             |
| Other financing activities                                                        | 27               | 33               | 96               |
| Net cash provided by financing activities                                         | 668              | 3,830            | 2,372            |
| Net decrease in cash                                                              | (23)             | (54)             | (620)            |
| Cash at beginning of year                                                         | 310              | 364              | 984              |
| Cash at end of year                                                               | $287             | $310             | $364             |

See accompanying notes to consolidated financial statements\.

129


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

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                |                                                                                |                                                                                |         |  |  |  |       |  |  |  |         |
|:---------------------------------------------------------------------------------- |:---------------------------------------------------------------------------------- |:---------------------------------------------------------------------------------- | -------:| -:| -:| -:| -----:| -:| -:| -:| -------:|
| Year Ended December 31  *(in millions)*                                            | Year Ended December 31  *(in millions)*                                            | Year Ended December 31  *(in millions)*                                            |    2019 |  |  |  |  2018 |  |  |  |    2017 |
| Cash flows from operating activities:                                              | Cash flows from operating activities:                                              | Cash flows from operating activities:                                              |         |  |  |  |       |  |  |  |         |
| Net income                                                                         | Net income                                                                         | Net income                                                                         |   $ 769 |  |  |  | $ 437 |  |  |  |   $ 960 |
| Adjustments to reconcile net income to net cash provided by operating activities:  | Adjustments to reconcile net income to net cash provided by operating activities:  | Adjustments to reconcile net income to net cash provided by operating activities:  |         |  |  |  |       |  |  |  |         |
| Depreciation and amortization                                                      | Depreciation and amortization                                                      | Depreciation and amortization                                                      |     423 |  |  |  |   398 |  |  |  |     372 |
| Stock\-based compensation and other                                                | Stock\-based compensation and other                                                | Stock\-based compensation and other                                                |      29 |  |  |  |    47 |  |  |  |      55 |
| Changes in certain assets and liabilities:                                         | Changes in certain assets and liabilities:                                         | Changes in certain assets and liabilities:                                         |         |  |  |  |       |  |  |  |         |
| Changes in deferred tax provision                                                  | Changes in deferred tax provision                                                  | Changes in deferred tax provision                                                  |     209 |  |  |  |   146 |  |  |  |      45 |
| (Increase) decrease in accounts receivable                                         | (Increase) decrease in accounts receivable                                         | (Increase) decrease in accounts receivable                                         |      43 |  |  |  |  (25) |  |  |  |    (39) |
| Increase (decrease) in air traffic liability                                       | Increase (decrease) in air traffic liability                                       | Increase (decrease) in air traffic liability                                       |     112 |  |  |  |  (18) |  |  |  |      45 |
| Increase (decrease) in deferred revenue                                            | Increase (decrease) in deferred revenue                                            | Increase (decrease) in deferred revenue                                            |     116 |  |  |  |   149 |  |  |  |     191 |
| Changes in pension and other postretirement benefits                               | Changes in pension and other postretirement benefits                               | Changes in pension and other postretirement benefits                               |      68 |  |  |  |    52 |  |  |  |      17 |
| Pension contribution                                                               | Pension contribution                                                               | Pension contribution                                                               |    (65) |  |  |  |     — |  |  |  |    (15) |
| Other \- net                                                                       | Other \- net                                                                       | Other \- net                                                                       |      18 |  |  |  |     9 |  |  |  |    (41) |
| Net cash provided by operating activities                                          | Net cash provided by operating activities                                          | Net cash provided by operating activities                                          |   1,722 |  |  |  | 1,195 |  |  |  |   1,590 |
| Cash flows from investing activities:                                              | Cash flows from investing activities:                                              | Cash flows from investing activities:                                              |         |  |  |  |       |  |  |  |         |
| Property and equipment additions:                                                  | Property and equipment additions:                                                  | Property and equipment additions:                                                  |         |  |  |  |       |  |  |  |         |
| Aircraft and aircraft purchase deposits                                            | Aircraft and aircraft purchase deposits                                            | Aircraft and aircraft purchase deposits                                            |   (356) |  |  |  | (686) |  |  |  |   (804) |
| Other flight equipment                                                             | Other flight equipment                                                             | Other flight equipment                                                             |   (178) |  |  |  | (105) |  |  |  |    (96) |
| Other property and equipment                                                       | Other property and equipment                                                       | Other property and equipment                                                       |   (162) |  |  |  | (169) |  |  |  |   (126) |
| Total property and equipment additions                                             | Total property and equipment additions                                             | Total property and equipment additions                                             |   (696) |  |  |  | (960) |  |  |  | (1,026) |
| Purchases of marketable securities                                                 | Purchases of marketable securities                                                 | Purchases of marketable securities                                                 | (1,810) |  |  |  | (834) |  |  |  | (1,569) |
| Sales and maturities of marketable securities                                      | Sales and maturities of marketable securities                                      | Sales and maturities of marketable securities                                      |   1,674 |  |  |  | 1,116 |  |  |  |   1,388 |
| Proceeds from disposition of assets and changes in restricted deposits             | Proceeds from disposition of assets and changes in restricted deposits             | Proceeds from disposition of assets and changes in restricted deposits             |      41 |  |  |  |    47 |  |  |  |      78 |
| Net cash used in investing activities                                              | Net cash used in investing activities                                              | Net cash used in investing activities                                              |   (791) |  |  |  | (631) |  |  |  | (1,129) |
| Cash flows from financing activities:                                              | Cash flows from financing activities:                                              | Cash flows from financing activities:                                              |         |  |  |  |       |  |  |  |         |
| Proceeds from issuance of long\-term debt, net of issuance costs                   | Proceeds from issuance of long\-term debt, net of issuance costs                   | Proceeds from issuance of long\-term debt, net of issuance costs                   |     450 |  |  |  |   339 |  |  |  |       — |
| Long\-term debt payments                                                           | Long\-term debt payments                                                           | Long\-term debt payments                                                           | (1,058) |  |  |  | (807) |  |  |  |   (397) |
| Common stock repurchases                                                           | Common stock repurchases                                                           | Common stock repurchases                                                           |    (75) |  |  |  |  (50) |  |  |  |    (75) |
| Cash dividend paid                                                                 | Cash dividend paid                                                                 | Cash dividend paid                                                                 |   (173) |  |  |  | (158) |  |  |  |   (148) |
| Other financing activities                                                         | Other financing activities                                                         | Other financing activities                                                         |      43 |  |  |  |    29 |  |  |  |      28 |
| Net cash used in financing activities                                              | Net cash used in financing activities                                              | Net cash used in financing activities                                              |   (813) |  |  |  | (647) |  |  |  |   (592) |
| Net increase (decrease) in cash, cash equivalents, and restricted cash             | Net increase (decrease) in cash, cash equivalents, and restricted cash             | Net increase (decrease) in cash, cash equivalents, and restricted cash             |     118 |  |  |  |  (83) |  |  |  |   (131) |
| Cash, cash equivalents, and restricted cash at beginning of year                   | Cash, cash equivalents, and restricted cash at beginning of year                   | Cash, cash equivalents, and restricted cash at beginning of year                   |     114 |  |  |  |   197 |  |  |  |     328 |
| Cash, cash equivalents, and restricted cash at end of year                         | Cash, cash equivalents, and restricted cash at end of year                         | Cash, cash equivalents, and restricted cash at end of year                         |   $ 232 |  |  |  | $ 114 |  |  |  |   $ 197 |
| Supplemental disclosure:                                                           | Supplemental disclosure:                                                           | Supplemental disclosure:                                                           |         |  |  |  |       |  |  |  |         |
| Cash paid during the year for:                                                     | Cash paid during the year for:                                                     | Cash paid during the year for:                                                     |         |  |  |  |       |  |  |  |         |
| Interest, net of amount capitalized                                                | Interest, net of amount capitalized                                                | Interest, net of amount capitalized                                                |    $ 60 |  |  |  |  $ 72 |  |  |  |    $ 84 |
| Income taxes, net of refunds received                                              | Income taxes, net of refunds received                                              | Income taxes, net of refunds received                                              |      31 |  |  |  |     — |  |  |  |     177 |
| Reconciliation of cash, cash equivalents, and restricted cash at end of the period | Reconciliation of cash, cash equivalents, and restricted cash at end of the period | Reconciliation of cash, cash equivalents, and restricted cash at end of the period |         |  |  |  |       |  |  |  |         |
| Cash and cash equivalents                                                          | Cash and cash equivalents                                                          | Cash and cash equivalents                                                          |   $ 221 |  |  |  | $ 105 |  |  |  |   $ 194 |
| Restricted cash included in Other noncurrent assets                                | Restricted cash included in Other noncurrent assets                                | Restricted cash included in Other noncurrent assets                                |      11 |  |  |  |     9 |  |  |  |       3 |
| Total cash, cash equivalents, and restricted cash at end of the period             | Total cash, cash equivalents, and restricted cash at end of the period             | Total cash, cash equivalents, and restricted cash at end of the period             |   $ 232 |  |  |  | $ 114 |  |  |  |   $ 197 |

See accompanying notes to consolidated financial statements\.

55


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

|                               |                                                                                |
| ----------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Exhibit**

**Number** | **Description**                                                                                |
| 4\.134                        | [Note Purchase Agreement, dated as of October 3, 2016, among American Airlines, Inc\., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4\.9 to American’s Current Report on Form 8\-K filed on October 4, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516730454/d359659dex49.htm)                                                                                |
| 4\.135                        | [Form of Participation Agreement (Participation Agreement among American Airlines, Inc\., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (included in Exhibit B to Exhibit 4\.9) (incorporated by reference to Exhibit 4\.9 to American’s Current Report on Form 8\-K filed on October 4, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516730454/d359659dex49.htm)                                                                                |
| 4\.136                        | [Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc\., and Wilmington Trust Company, as Loan Trustee) (included in Exhibit C to Exhibit 4\.9) (incorporated by reference to Exhibit C to Exhibit 4\.9 to American’s Current Report on Form 8\-K filed on October 4, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516730454/d359659dex49.htm)                                                                                |
| 4\.137                        | [Form of Pass Through Trust Certificate, Series 2016\-3AA (incorporated by reference to Exhibit A to Exhibit 4\.2 to American’s Current Report on Form 8\-K filed on October 4, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516730454/d359659dex42.htm)                                                                                |
| 4\.138                        | [Form of Pass Through Trust Certificate, Series 2016\-3A (incorporated by reference to Exhibit A to Exhibit 4\.3 to American’s Current Report on Form 8\-K filed on October 4, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516730454/d359659dex43.htm)                                                                                |
| 4\.139                        | [Revolving Credit Agreement (2016\-3AA), dated as of October 3, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016\-3AA, as Borrower, and KfW IPEX\-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4\.14 to American’s Current Report on Form 8\-K filed on October 4, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516730454/d359659dex414.htm)                                                                                |
| 4\.140                        | [Revolving Credit Agreement (2016\-3A), dated as of October 3, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016\-3A, as Borrower, and KfW IPEX\-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4\.15 to American’s Current Report on Form 8\-K filed on October 4, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516730454/d359659dex415.htm)                                                                                |
| 4\.141                        | [Trust Supplement No\. 2017\-1AA, dated as of January 13, 2017, between American Airlines, Inc\. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4\.2 to American’s Current Report on Form 8\-K filed on January 17, 2017 (Commission File No\. 1\-02691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517011067/d319419dex42.htm)                                                                                |
| 4\.142                        | [Trust Supplement No\. 2017\-1A, dated as of January 13, 2017, between American Airlines, Inc\. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014, (incorporated by reference to Exhibit 4\.3 to American’s Current Report on Form 8\-K filed on January 17, 2017 (Commission File No\. 1\-02691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517011067/d319419dex43.htm)                                                                                |
| 4\.143                        | [Trust Supplement No\. 2017\-1B, dated as of January 13, 2017, between American Airlines, Inc\. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4\.4 to American’s Current Report on Form 8\-K filed on January 17, 2017 (Commission File No\. 1\-02691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517011067/d319419dex44.htm)                                                                                |
| 4\.144                        | [Intercreditor Agreement (2017\-1), dated as of January 13, 2017, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2017\-1AA, as Trustee of the American Airlines Pass Through Trust 2017\-1A and as Trustee of the American Airlines Pass Through Trust 2017\-1B, Citibank N\.A\., as Class AA Liquidity Provider, Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4\.5 to American’s Current Report on Form 8\-K filed on January 17, 2017 (Commission File No\. 1\-02691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517011067/d319419dex45.htm)                                                    |
| 4\.145                        | [Deposit Agreement (Class AA), dated as of January 13, 2017, between Wilmington Trust, National Association, as Escrow Agent, and Citibank, N\.A\., as Depositary (incorporated by reference to Exhibit 4\.6 to American’s Current Report on Form 8\-K filed on January 17, 2017 (Commission File No\. 1\-02691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517011067/d319419dex46.htm)                                                                                |
| 4\.146                        | [Deposit Agreement (Class A), dated as of January 13, 2017, between Wilmington Trust, National Association, as Escrow Agent, and Citibank, N\.A\., as Depositary (incorporated by reference to Exhibit 4\.7 to American’s Current Report on Form 8\-K filed on January 17, 2017 (Commission File No\. 1\-02691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517011067/d319419dex47.htm)                                                                                |
| 4\.147                        | [Deposit Agreement (Class B), dated as of January 13, 2017, between Wilmington Trust, National Association, as Escrow Agent, and Citibank, N\.A\., as Depositary (incorporated by reference to Exhibit 4\.8 to American’s Current Report on Form 8\-K filed on January 17, 2017 (Commission File No\. 1\-02691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517011067/d319419dex48.htm)                                                                                |
| 4\.148                        | [Escrow and Paying Agent Agreement (Class AA), dated as of January 13, 2017, among Wilmington Trust, National Association, as Escrow Agent, Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc\. and Deutsche Bank Securities Inc\., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2017\-1AA, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4\.9 to American’s Current Report on Form 8\-K filed on January 17, 2017 (Commission File No\. 1\-02691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517011067/d319419dex49.htm) |

186


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

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

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

(a) Basis of Presentation

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

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

(b) Recent Accounting Pronouncements

ASU 2016\-02: Leases (Topic 842) (the New Lease Standard)

The New Lease Standard requires lessees to recognize a lease liability and a right\-of\-use (ROU) asset on the balance sheet for operating leases\. Accounting for finance leases is substantially unchanged\. The New Lease Standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years\. Early adoption is permitted\.

In the fourth quarter of 2018, we elected to early adopt the New Lease Standard as of January 1, 2018 using a modified retrospective transition, with the cumulative\-effect adjustment to the opening balance of retained earnings as of the effective date (the effective date method)\. Under the effective date method, financial results reported in periods prior to 2018 are unchanged\. We also elected the package of practical expedients, which among other things, does not require reassessment of lease classification\.

The adoption of the New Lease Standard had a significant impact on our consolidated balance sheet due to the recognition of approximately   $10 billion  of lease liabilities with corresponding right\-of\-use assets for operating leases\.

Additionally, we recognized a   $197 million  cumulative effect adjustment credit, net of tax, to retained earnings\. The adjustment to retained earnings was driven principally by sale\-leaseback transactions including the recognition of unamortized deferred aircraft sale\-leaseback gains\. Prior to the adoption of the New Lease Standard, gains on sale\-leaseback transactions were generally deferred and recognized in the income statement over the lease term\. Under the New Lease Standard, gains on sale\-leaseback transactions (subject to adjustment for off\-market terms) are recognized immediately\.

ASU 2018\-02: Income Statement  –  Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

This ASU provides the option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings due to the U\.S\. federal corporate income tax rate change as a result of H\.R\. 1, the 2017 Tax Cuts and Jobs Act (the 2017 Tax Act)\. The amount of the reclassification is the difference between the amount initially charged or credited directly to other comprehensive income at the previous U\.S\. federal corporate income tax rate that remains in accumulated other comprehensive income and the amount that would have been charged or credited directly to other comprehensive income using the newly enacted U\.S\. federal corporate income tax rate, excluding the effect of any valuation allowance previously charged to income from continuing operations\. This standard is effective for interim and annual reporting periods beginning after December 15, 2018\. In the first quarter of 2019, we adopted this standard retrospectively as of December 22, 2017, the date the 2017 Tax Act was enacted, which resulted in the recast of prior reporting periods\. As a result of the adoption, we reclassified   $622 million  of stranded tax effects principally related to our pension plans from accumulated other comprehensive loss to retained earnings\.

77


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

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

**UNITED CONTINENTAL HOLDINGS, INC\.**

**STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)**

**(In millions)**

|                                                           |                             |                             |                             |
|:--------------------------------------------------------- | ---------------------------:| ---------------------------:| ---------------------------:|
|                                                           | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                                           |                   **2017**  |                   **2016**  |                   **2015**  |
| Net income                                                |                     $2,131  |                     $2,263  |                     $7,340  |
| Other comprehensive income (loss), net change related to: |                             |                             |                             |
| Employee benefit plans, net of taxes                      |                       (195) |                       (313) |                         70  |
| Fuel derivative financial instruments, net of taxes       |                          1  |                        316  |                        182  |
| Investments and other, net of taxes                       |                         (6) |                         (1) |                         (4) |
| Total other comprehensive income (loss), net              |                       (200) |                          2  |                        248  |
| Total comprehensive income, net                           |                     $1,931  |                     $2,265  |                     $7,588  |

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements\.

50


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

CRITICAL ACCOUNTING ESTIMATES

The discussion and analysis of our financial position and results of operations in this MD&A are based upon our consolidated financial statements\. The preparation of these financial statements requires us to make estimates and judgments that affect our financial position and results of operations\. See Note 1 to the consolidated financial statements for a description of our significant accounting policies\.

Critical accounting estimates are defined as those that reflect significant management judgment and uncertainties and that potentially may lead to materially different results under varying assumptions and conditions\. Management has identified the following critical accounting estimates and has discussed the development, selection and disclosure of these policies with our audit committee\.

FREQUENT FLYER PROGRAMS

Alaska's Mileage Plan™ loyalty program awards mileage credits to members who fly on our airlines and our airline partners, referred to as flown miles\. We also sell services, including miles for transportation, Companion Fare™ certificates, bag fee waivers, and access to our brand and customer lists to major banks that offer Alaska co\-brand credit cards\. To a lesser extent, miles for transportation are also sold to other non\-airline partners, such as hotels, and car rental agencies\. The outstanding miles may be redeemed for travel on our airlines or eligible airline partners, and for non\-airline products such as hotels\. As long as the Mileage Plan™ is in existence, we have an obligation to provide future travel\.

Mileage credits and the various other services we sell under our loyalty program represent performance obligations that are part of a multiple deliverable revenue arrangement\. Accounting guidance requires that we use a relative standalone selling price allocation to allocate consideration received to the material performance obligations in these contracts\. Our relative standalone selling price allocation models are refreshed when contracts originate or are materially modified\. We also update our model annually based on observed volumes\.

At December 31, 2019, we had approximately 262 billion miles outstanding, resulting in an aggregate deferred revenue balance of $2\.0 billion\. The deferred revenue resulting from our relative selling price allocations requires significant management judgment\. There are uncertainties inherent in these estimates\. Therefore, different assumptions could affect the amount and/or timing of revenue recognition or expenses\. The most significant assumptions are described below\.

1\. The rate at which we defer sales proceeds related to services sold:

We estimate the standalone selling price for each performance obligation, including mileage credits, by considering multiple inputs and methods, including but not limited to, the estimated selling price of comparable travel, discounted cash flows, brand value, published selling prices, number of miles awarded, and the number of miles redeemed\. We estimate the selling prices and volumes over the terms of the agreements in order to determine the allocation of proceeds to each of the multiple deliverables\.

2\. The number of miles that will not be redeemed for travel (breakage):

We estimate how many miles will be used per award\. For example, our members may redeem mileage credits for award travel to various locations or choose between a highly restricted award and an unrestricted award\. Our estimates are based on the current requirements in our Mileage Plan program™ and historical award redemption patterns\.

We regularly review significant Mileage Plan™ assumptions and change our assumptions if facts and circumstances indicate that a change is necessary\. Any such change in assumptions could have a significant effect on our financial position and results of operations\.

|                                                                     |                                                                     |                                                                     |
| ------------------------------------------------------------------- | ------------------------------------------------------------------- | ------------------------------------------------------------------- |
| ITEM 7A\. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK | ITEM 7A\. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK | ITEM 7A\. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |

We have interest\-rate risk on our variable\-rate debt obligations and our available\-for\-sale marketable investment portfolio, and commodity\-price risk in jet fuel required to operate our aircraft fleet\. We purchase the majority of our jet fuel at prevailing market prices and seek to manage market risk through execution of our hedging strategy and other means\. We have market\-sensitive instruments in the form of fixed\-rate debt instruments and financial derivative instruments used to hedge our exposure to jet fuel price increases and interest\-rate increases\. We do not purchase or hold any derivative financial instruments for trading purposes\.

46


Annual Report of Southwest Airlines Co\. for year 2019

inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate\.

/s/ Ernst & Young LLP

Dallas, Texas

February 3, 2020

113


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

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

December 31, 2017, the remaining lease payments through 2035 guaranteeing the principal and interest on these bonds are $589 million, which are accounted for as operating leases\.

As of December 31, 2017, American had issued guarantees covering AAG’s $500 million aggregate principal amount of 6\.125% senior notes due 2018, $750 million aggregate principal amount of 5\.50% senior notes due 2019 and $500 million aggregate principal amount of 4\.625% senior notes due 2020\.

***(g) Credit Card Processing Agreements***

American has agreements with companies that process customer credit card transactions for the sale of air travel and other services\. American’s agreements allow these processing companies, under certain conditions, to hold an amount of its cash (referred to as a holdback) equal to a portion of advance ticket sales that have been processed by that company, but for which American has not yet provided the air transportation\. Additional holdback requirements in the event of material adverse changes in American’s financial condition will reduce its liquidity in the form of unrestricted cash by the amount of the holdbacks\. American is not currently required to maintain any holdbacks pursuant to these requirements\.

***(h) Labor Negotiations***

As of December 31, 2017, American employed approximately 103,100 active full\-time equivalent employees\. Approximately 84% of employees are covered by collective bargaining agreements with various labor unions\. Negotiations for joint collective bargaining agreements covering American’s maintenance, fleet service, stock clerks, maintenance control technicians and maintenance training instructors employees are continuing\. There is no assurance that a successful or timely resolution of these labor negotiations will be achieved\.

***(i) Other***

As a result of the terrorist attacks of September 11, 2001 and the subsequent liability protections provided for by the Air Transportation Safety and System Stabilization Act (the Stabilization Act), American recorded a liability for these terrorist attacks claims equal to the related insurance receivable due to American\. The Stabilization Act provides that, notwithstanding any other provision of law, liability for all claims, whether compensatory or punitive, arising from these terrorist attacks, against any air carrier shall not exceed the liability coverage maintained by the air carrier\. As of December 31, 2017, claims relating to this matter have been substantially resolved and the remaining liability and the amount of the offsetting receivable are not material\.

**10\. Supplemental Cash Flow Information**

Supplemental disclosure of cash flow information and non\-cash investing and financing activities are as follows (in millions):

|                                               |                             |                             |                             |
| --------------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                               | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                               | **2017**                    | **2016**                    | **2015**                    |
| Non\-cash investing and financing activities: |                             |                             |                             |
| Equity investment                             | $120                        | $—                          | $—                          |
| Settlement of bankruptcy obligations          | 15                          | 3                           | 63                          |
| Capital lease obligations                     | —                           | —                           | 5                           |
| Supplemental information:                     |                             |                             |                             |
| Interest paid, net                            | 942                         | 867                         | 787                         |
| Income taxes paid                             | 18                          | 14                          | 19                          |

**11\. Operating Segments and Related Disclosures**

American is managed as a single business unit that provides air transportation for passengers and cargo\. This allows it to benefit from an integrated revenue pricing and route network that includes American and AAG’s wholly\-owned and third\-party regional carriers that fly under capacity purchase agreements operating as American Eagle\. The flight equipment of all these carriers is combined to form one fleet that is deployed through a single route scheduling system\. Financial information and annual operational plans and forecasts are prepared and reviewed by the chief

165


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

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

UNITED AIRLINES HOLDINGS, INC\.

STATEMENTS OF CONSOLIDATED OPERATIONS

(In millions, except per share amounts)

|                                                    |                             |                             |                             |
| -------------------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                                    | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                                    | **2019**                    | **2018 (a)**                | **2017 (a)**                |
| Operating revenue:                                 |                             |                             |                             |
| Passenger revenue                                  | $39,625                     | $37,706                     | $34,460                     |
| Cargo                                              | 1,179                       | 1,237                       | 1,114                       |
| Other operating revenue                            | 2,455                       | 2,360                       | 2,210                       |
| Total operating revenue                            | 43,259                      | 41,303                      | 37,784                      |
| Operating expense:                                 |                             |                             |                             |
| Salaries and related costs                         | 12,071                      | 11,458                      | 10,941                      |
| Aircraft fuel                                      | 8,953                       | 9,307                       | 6,913                       |
| Regional capacity purchase                         | 2,849                       | 2,649                       | 2,268                       |
| Landing fees and other rent                        | 2,543                       | 2,449                       | 2,310                       |
| Depreciation and amortization                      | 2,288                       | 2,165                       | 2,096                       |
| Aircraft maintenance materials and outside repairs | 1,794                       | 1,767                       | 1,856                       |
| Distribution expenses                              | 1,651                       | 1,558                       | 1,435                       |
| Aircraft rent                                      | 288                         | 433                         | 621                         |
| Special charges                                    | 246                         | 487                         | 176                         |
| Other operating expenses                           | 6,275                       | 5,801                       | 5,550                       |
| Total operating expense                            | 38,958                      | 38,074                      | 34,166                      |
| Operating income                                   | 4,301                       | 3,229                       | 3,618                       |
| Nonoperating income (expense):                     |                             |                             |                             |
| Interest expense                                   | (731

)               | (670

)               | (626

)               |
| Interest capitalized                               | 85                          | 65                          | 74                          |
| Interest income                                    | 133                         | 101                         | 57                          |
| Unrealized gains (losses) on investments, net      | 153                         | (5

)                 | —                           |
| Miscellaneous, net                                 | (27

)                | (72

)                | (100

)               |
| Total nonoperating expense, net                    | (387

)               | (581

)               | (595

)               |
| Income before income taxes                         | 3,914                       | 2,648                       | 3,023                       |
| Income tax expense                                 | 905                         | 526                         | 880                         |
| Net income                                         | $3,009                      | $2,122                      | $2,143                      |
| Earnings per share, basic                          | $11\.63                     | $7\.70                      | $7\.08                      |
| Earnings per share, diluted                        | $11\.58                     | $7\.67                      | $7\.06                      |

(a) Amounts adjusted due to the adoption of Accounting Standards Update No\. 2016\-02,  Leases (Topic 842) \. See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information\.

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements\.

43


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

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

**3\. Earnings Per Common Share**

The following table sets forth the computation of basic and diluted earnings per common share (EPS) (in millions, except share and per share amounts):

|                                                                                |                             |                             |                             |
| -------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                                                                | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                                                                | **2017**                    | **2016**                    | **2015**                    |
| **Basic EPS:**                                                                                |                             |                             |                             |
| Net income                                                                                | $1,919                      | $2,676                      | $7,610                      |
| Weighted average common shares outstanding (in thousands)                                                                        | 489,164                     | 552,308                     | 668,393                     |
| Basic EPS                                                                                | $3\.92                      | $4\.85                      | $11\.39                     |
| **Diluted EPS:**                                                                                |                             |                             |                             |
| Net income for purposes of computing diluted EPS                                                                                | $1,919                      | $2,676                      | $7,610                      |
| Share computation for diluted EPS (in thousands):                                                                                |                             |                             |                             |
| Basic weighted average common shares outstanding                                                                                | 489,164                     | 552,308                     | 668,393                     |
| Dilutive effect of stock awards                                                                                | 2,528                       | 3,791                       | 18,962                      |
| Diluted weighted average common shares outstanding                                                                               | 491,692                     | 556,099                     | 687,355                     |
| Diluted EPS                                                                                | $3\.90                      | $4\.81                      | $11\.07                     |
| Restricted stock unit awards excluded from the calculation of diluted EPS because inclusion would be antidilutive (in thousands) | 328                         | 1,429                       | 764                         |

**4\. Share Repurchase Programs and Dividends**

Since July 2014, our Board of Directors has approved six share repurchase programs aggregating $11\.0 billion of authority\. As of December 31, 2017, $450 million remained unused under a repurchase program that expires on December 31, 2018\. Share repurchases under our repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions\. Any such repurchases will be made from time to time subject to market and economic conditions, applicable legal requirements and other relevant factors\. We are not obligated to repurchase any specific number of shares and our repurchase of common stock may be limited, suspended or discontinued at any time at our discretion\.

During the year ended December 31, 2017, we repurchased 33\.9 million shares of AAG common stock for $1\.6 billion at a weighted average cost per share of $45\.68\. During the year ended December 31, 2016, we repurchased 119\.8 million shares of AAG common stock for $4\.4 billion at a weighted average cost per share of $36\.86\. During the year ended December 31, 2015, we repurchased 85\.1 million shares of AAG common stock for $3\.6 billion at a weighted average cost per share of $42\.09\. Since the inception of the share repurchase programs in July 2014 through December 31, 2017, we have repurchased 262\.3 million shares of AAG common stock for $10\.6 billion at a weighted average cost per share of $40\.22\.

Our Board of Directors declared quarterly cash dividends of $0\.10 per share totaling $198 million, $224 million and $269 million in 2017, 2016 and 2015, 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 at any time at our discretion\.

95


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

**MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a\-15(f)\. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO Framework)\. Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2017\.

We intend to review and evaluate the design and effectiveness of our disclosure controls and procedures and internal control over financial reporting on an ongoing basis and to improve these controls and procedures over time and to correct any deficiencies that we may discover in the future\. While we believe the present design of our disclosure controls and procedures and internal control over financial reporting are effective, future events affecting our business may cause us to modify our controls and procedures\.

The Company's independent registered public accounting firm has issued an attestation report regarding its assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2017\.

 95


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

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 12th day of February, 2020\.

|  |  |  |                        |                        |                        |                         |                         |                         |  |  |  |  |  |  |
| - | - | - | ---------------------- | ---------------------- | ---------------------- | ----------------------- | ----------------------- | ----------------------- | - | - | - | - | - | - |
|  |  |  | DELTA AIR LINES, INC\. | DELTA AIR LINES, INC\. | DELTA AIR LINES, INC\. | DELTA AIR LINES, INC\.  | DELTA AIR LINES, INC\.  | DELTA AIR LINES, INC\.  |  |  |  |  |  |  |
|  |  |  | By:                    | By:                    | By:                    | /s/ Edward H\. Bastian  | /s/ Edward H\. Bastian  | /s/ Edward H\. Bastian  |  |  |  |
|  |  |  |                        |                        |                        | Edward H\. Bastian      | Edward H\. Bastian      | Edward H\. Bastian      |  |  |  |
|  |  |  |                        |                        |                        | Chief Executive Officer | Chief Executive Officer | Chief Executive Officer |  |  |  |

103


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

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

The following table presents repurchases of UAL common stock made in the fourth quarter of  2019 :

|               |                                              |                                         |                                                                                |                                                                                |
| ------------- | -------------------------------------------- | --------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- |
| **Period**    | **Total number of shares purchased (a) (b)** | **Average price paid per share (b)(c)** | **Total number of shares purchased as part of publicly announced plans or programs (a)** | **Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) (a)** |
| October 2019  | 1,071,915                                    | $87\.65                                 | 1,071,915                                                                                | $3,231                                                                                |
| November 2019 | 430,400                                      | 92\.70                                  | 430,400                                                                                | 3,191                                                                                |
| December 2019 | 922,600                                      | 88\.72                                  | 922,600                                                                                | 3,109                                                                                |
| Total         | 2,424,915                                    |                                         | 2,424,915                                                                                |                                                                                |

(a) In  2019 , UAL repurchased approximately  19\.2 million  shares of UAL common stock for  $1\.6 billion \. In December 2017, UAL's Board of Directors authorized a $3\.0 billion share repurchase program to acquire UAL's common stock\. In July 2019, UAL's Board of Directors authorized a new $3\.0 billion share repurchase program to acquire UAL's common stock, in addition to any amounts remaining under the prior program\. As of  December 31, 2019 , the Company had approximately  $3\.1 billion  remaining to purchase shares under its repurchase programs\. UAL may repurchase shares through the open market, privately negotiated transactions, block trades or accelerated share repurchase transactions from time to time in accordance with applicable securities laws\.

(b) The table does not include shares withheld from employees to satisfy certain tax obligations due upon the vesting of restricted stock\. The United Continental Holdings, Inc\. 2017 Incentive Compensation Plan and the United Continental Holdings, Inc\. 2008 Incentive Compensation Plan, each provide for the withholding of shares to satisfy tax obligations due upon the vesting of restricted stock\. However, these plans do not specify a maximum number of shares that may be withheld for this purpose\. A total of 1,930 shares were withheld under the plans in the fourth quarter of  2019  at an average price of $89\.67 per share\. These shares of common stock withheld to satisfy tax withholding obligations may be deemed to be "issuer purchases" of shares that are required to be disclosed pursuant to this Item\.

(c) Average price paid per share is calculated on a settlement basis and excludes commission\.

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

UAL's consolidated financial statements and statistical data are provided in the tables below:

|                                                                    |                             |                             |                             |                             |                             |
| ------------------------------------------------------------------ | --------------------------- | --------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                                                    | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                                                    | **2019**                    | **2018**  **(a)**           | **2017**  **(a)**           | **2016**                    | **2015**                    |
| **Income Statement Data (in millions, except per share amounts):** |                             |                             |                             |                             |                             |
| Operating revenue                                                  | $43,259                     | $41,303                     | $37,784                     | $36,558                     | $37,864                     |
| Operating expense                                                  | 38,958                      | 38,074                      | 34,166                      | 32,214                      | 32,698                      |
| Operating income                                                   | 4,301                       | 3,229                       | 3,618                       | 4,344                       | 5,166                       |
| Net income                                                         | 3,009                       | 2,122                       | 2,143                       | 2,234                       | 7,340                       |
| Basic earnings per share                                           | 11\.63                      | 7\.70                       | 7\.08                       | 6\.77                       | 19\.52                      |
| Diluted earnings per share                                         | 11\.58                      | 7\.67                       | 7\.06                       | 6\.76                       | 19\.47                      |
| **Balance Sheet Data at December 31 (in millions):**               |                             |                             |                             |                             |                             |
| Unrestricted cash, cash equivalents and short\-term investments    | $4,944                      | $3,950                      | $3,798                      | $4,428                      | $5,196                      |
| Total assets                                                       | 52,611                      | 49,024                      | 47,469                      | 40,208                      | 40,861                      |
| Debt and finance lease obligations  (b)                            | 14,818                      | 13,792                      | 13,576                      | 11,705                      | 11,759                      |

(a) Amounts adjusted due to the adoption of Accounting Standard Update No\. 2016\-02,  Leases  (Topic 842)\.  See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information\.

(b) Finance leases, under Topic 842, are the equivalent of capital leases under Financial Accounting Standards Board Accounting Standards Codification Topic 840,  Leases \.

26


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

Financing Activities

Debt and Finance Leases\.  During 2018, we issued $1\.6 billion in aggregate principal amount of unsecured notes, consisting of $600 million of 3\.4% Notes due 2021, $500 million of 3\.8% Notes due 2023 and $500 million of 4\.375% Notes due 2028 (collectively, the "Notes")\. We used the net proceeds from the offering of the Notes to repay borrowings outstanding under our secured Pacific term loan B\-1 facility and 2015 term loan facility and for general corporate purposes\.

Concurrent with the unsecured debt offering, we entered into a  $2\.65 billion  unsecured revolving credit facility, up to  $500 million  of which may be used for the issuance of letters of credit (the “Revolving Credit Facility”)\. The Revolving Credit Facility was undrawn at the time we entered into it and as of  December 31, 2018 \. The Revolving Credit Facility replaced the undrawn secured Pacific revolving credit facility and the 2015 revolving credit facility, both of which were terminated in conjunction with the repayment of the term loans described above\.

The Revolving Credit Facility is split evenly into a  $1\.325 billion  three\-year facility and a  $1\.325 billion  five\-year facility\. Borrowings on both facilities bear interest at a variable rate equal to LIBOR, or another index rate, in each case plus a specified margin\.

Also during 2018, the New York Transportation Development Corporation ("NYTDC") issued Special Facilities Revenue Bonds, Series 2018 (the "2018 Bonds") in the aggregate principal amount of $1\.4 billion\. We entered into loan agreements with the NYTDC to use the proceeds from the 2018 Bonds to finance a portion of the construction costs for the new terminal facilities at the LaGuardia Airport\. The proceeds from the 2018 Bonds are recorded in cash restricted for airport construction on the Consolidated Balance Sheet ("balance sheet")\.

During the December 2018 quarter, we obtained  $621 million  in aggregate principal amount of loans secured by  10  aircraft\. These loans bear interest at a variable rate equal to London interbank offered rates ("LIBOR") plus a specified margin and are due in installments from 2019 to 2023\.

Despite the recent debt issuances, since December 31, 2009, we have reduced our principal amount of debt and finance leases by  $8\.3 billion \. This level of debt reduction, combined with more favorable interest rates on our remaining debt, reduced our 2018 net interest expense by more than $500 million compared to 2009\. The principal amount of debt and finance leases was  $9\.7 billion  at  December 31, 2018 \.

During 2018, the three major credit rating agencies reaffirmed our investment\-grade ratings:

|                   |                    |             |
| ----------------- | ------------------ | ----------- |
| **Rating Agency** | **Current Rating** | **Outlook** |
| Fitch             | BBB\-              | Stable      |
| Moody's           | Baa3               | Stable      |
| Standard & Poor's | BBB\-              | Stable      |

Capital Returns to Shareholders\.  Since first implementing our quarterly dividend in 2013, we have annually increased the dividend per share and paid $2\.9 billion in total dividends, including  $909 million  in 2018\. Through dividends and share repurchases, we have returned $12\.3 billion to shareholders since 2013, while reducing outstanding shares by approximately 21% compared to the beginning of 2013\. During 2018 alone, we repurchased and retired 29 million  shares at a cost of  $1\.6 billion \.

On February 7, 2019, the Board of Directors approved and we will pay a quarterly dividend of $0\.35 per share to shareholders of record as of March 1, 2019\.

Fuel Hedge Restructuring\.  During 2016, we entered into transactions to defer settlement of a portion of our hedge portfolio until 2017\. These deferral transactions, excluding market movements from the date of inception, provided approximately $300 million in cash receipts during the second half of 2016 and required approximately $300 million in cash payments in 2017\.

During 2016, we early terminated certain of our outstanding deferral transactions and made cash payments of $170 million, including normal settlements\. As a result, during the year ended December 31, 2017, we reported  $20 million in cash receipts and $244 million in cash payments associated with these transactions\. During the year ended December 31, 2018 we reported $19 million in cash payments associated with these transactions\.

 40


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

ITEM 6\. SELECTED CONSOLIDATED FINANCIAL DATA

We adopted three new accounting standards as of January 1, 2018: Accounting Standards Update (ASU) 2016\-02: Leases (Topic 842) (the New Lease Standard), ASU 2014\-09: Revenue from Contracts with Customers (the New Revenue Standard) and ASU 2017\-07: Compensation \- Retirement Benefits (the New Retirement Standard)\. The 2017 and 2016 financial information presented within Item 6\. Selected Consolidated Financial Data has been recast to reflect the impact of the adoption of the New Revenue Standard and the New Retirement Standard\. The New Lease Standard did not require the recast of prior periods\. See Note 1(b) to AAG’s and American’s Consolidated Financial Statements in Part II, Items 8A and 8B, respectively, of AAG’s and American’s Annual Report on Form 10\-K for the year ended  December 31, 2018  (the 2018 Form 10\-K), for further information on the impacts of these new accounting standards\.

Selected Consolidated Financial Data of AAG

The selected consolidated financial data presented below under the captions “Consolidated Statements of Operations data” and “Consolidated Balance Sheet data” for the years ended  December 31, 2019 ,  2018 ,  2017 ,  2016  and  2015  are derived from AAG’s audited consolidated financial statements\.

|                                                                     |                                                       |                                                       |                                                       |                                                       |                                                       |
| ------------------------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------------------- |
|                                                                     | **Year Ended December 31,**                           | **Year Ended December 31,**                           | **Year Ended December 31,**                           | **Year Ended December 31,**                           | **Year Ended December 31,**                           |
|                                                                     | **2019**                                              | **2018**                                              | **2017**                                              | **2016**                                              | **2015**                                              |
|                                                                     | **(In millions, except share and per share amounts)** | **(In millions, except share and per share amounts)** | **(In millions, except share and per share amounts)** | **(In millions, except share and per share amounts)** | **(In millions, except share and per share amounts)** |
| **Consolidated Statements of Operations data:**                     |                                                       |                                                       |                                                       |                                                       |                                                       |
| Total operating revenues                                            | $45,768                                               | $44,541                                               | $42,622                                               | $40,142                                               | $40,990                                               |
| Total operating expenses                                            | 42,703                                                | 41,885                                                | 38,391                                                | 35,082                                                | 34,786                                                |
| Operating income                                                    | 3,065                                                 | 2,656                                                 | 4,231                                                 | 5,060                                                 | 6,204                                                 |
| Net income                                                          | 1,686                                                 | 1,412                                                 | 1,282                                                 | 2,584                                                 | 7,610                                                 |
| Earnings per common share:                                          |                                                       |                                                       |                                                       |                                                       |                                                       |
| Basic                                                               | $3\.80                                                | $3\.04                                                | $2\.62                                                | $4\.68                                                | $11\.39                                               |
| Diluted                                                             | 3\.79                                                 | 3\.03                                                 | 2\.61                                                 | 4\.65                                                 | 11\.07                                                |
| Shares used for computation (in thousands):                         |                                                       |                                                       |                                                       |                                                       |                                                       |
| Basic                                                               | 443,363                                               | 464,236                                               | 489,164                                               | 552,308                                               | 668,393                                               |
| Diluted                                                             | 444,269                                               | 465,660                                               | 491,692                                               | 556,099                                               | 687,355                                               |
| Cash dividends declared per common share                            | $0\.40                                                | $0\.40                                                | $0\.40                                                | $0\.40                                                | $0\.40                                                |
| **Consolidated Balance Sheet data**

**(at end of period):** |                                                       |                                                       |                                                       |                                                       |                                                       |
| Total assets                                                        | $59,995                                               | $60,580                                               | $52,785                                               | $53,610                                               | $48,415                                               |
| Debt and finance leases                                             | 24,315                                                | 24,473                                                | 25,065                                                | 24,344                                                | 20,561                                                |
| Pension and postretirement obligations  ^(1)^                       | 6,081                                                 | 6,937                                                 | 7,596                                                 | 7,946                                                 | 7,566                                                 |
| Operating lease liabilities                                         | 9,129                                                 | 9,556                                                 | —                                                     | —                                                     | —                                                     |
| Stockholders’ equity (deficit)                                      | (118)                                                 | (169)                                                 | (780)                                                 | (286)                                                 | 5,635                                                 |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| ^(1)^ | Substantially all defined benefit pension plans were frozen effective November 1, 2012\. See Note 10 to AAG's Consolidated Financial Statements in Part II, Item 8A for further information on pension and postretirement benefits\. |

Reconciliation of GAAP to Non\-GAAP Financial Measures

We sometimes use financial measures that are derived from the consolidated financial statements but that are not presented in accordance with accounting principles generally accepted in the United States (GAAP) to understand and evaluate our current operating performance and to allow for period\-to\-period comparisons\. We believe these non\-GAAP financial measures may also provide useful information to investors and others\. These non\-GAAP measures may not be comparable to similarly titled non\-GAAP measures of other companies, and should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP\. We are providing a reconciliation of reported non\-GAAP financial measures to their comparable financial measures on a GAAP basis\.

45


Annual Report of Southwest Airlines Co\. for year 2019

In estimating the lives and expected residual values of its aircraft, the Company primarily has relied upon actual experience with the same or similar aircraft types, current and projected future market information provided by independent third parties, and recommendations from Boeing\. Flight equipment estimated useful lives are based on the number of "cycles" flown (one take\-off and landing) as well as the aircraft age\. The Company has made a conversion of cycles into years based on both historical and anticipated future utilization of the aircraft\. Subsequent revisions to these estimates could be caused by changes to aircraft maintenance programs, changes in utilization of the aircraft (actual cycles during a given period of time), governmental regulations on aging aircraft, and changing market prices of new and used aircraft of the same or similar types\. The Company evaluates its estimates and assumptions each reporting period and, when warranted, adjusts these estimates and assumptions\. Generally, these adjustments are accounted for on a prospective basis through depreciation and amortization expense\. See Note  1  to the Consolidated Financial Statements for further information\.

The Company believes it is unlikely that materially different estimates for expected lives, expected residual values, and impairment evaluations would be made or reported based on other reasonable assumptions or conditions suggested by actual historical experience and other data available at the time estimates were made\.

Fair Value Measurements and Financial Derivative Instruments

The Company utilizes unobservable (Level 3) inputs in determining the fair value of certain assets and liabilities\. At  December 31, 2019 , these consisted of its fuel derivative option contracts, which were an asset of  $110 million \. The Company utilizes financial derivative instruments primarily to manage its risk associated with changing jet fuel prices\. See "Quantitative and Qualitative Disclosures about Market Risk" for more information on these risk management activities,  Note 10  to the Consolidated Financial Statements for more information on the Company’s fuel hedging program and financial derivative instruments, and Note  11  to the Consolidated Financial Statements for more information about fair value measurements\.

All derivatives are required to be reflected at fair value and recorded on the Consolidated Balance Sheet\. At  December 31, 2019 , the Company was a party to over  250  separate financial derivative instruments related to its fuel hedging program for future periods\. Changes in the fair values of these instruments can vary dramatically based on changes in the underlying commodity prices\. For example, during  2019 , market "spot" prices for Brent crude oil peaked at a high of approximately $ 75  per barrel and hit a low price of approximately $ 55  per barrel\. During  2018 , market spot prices ranged from a high of approximately  $86  per barrel to a low of approximately  $50  per barrel\. Market price changes can be driven by factors such as supply and demand, inventory levels, weather events, refinery capacity, political agendas, the value of the U\.S\. dollar, geopolitical events, and general economic conditions, among other items\. The financial derivative instruments utilized by the Company primarily are a combination of collars, purchased call options, call spreads, put spreads, and fixed price swap agreements\.

The Company enters into financial derivative instruments with third party institutions in "over\-the\-counter" markets\. Since the majority of the Company’s financial derivative instruments are not traded on a market exchange, the Company estimates their fair values\. Depending on the type of instrument, the values are determined by the use of present value methods or standard option value models with assumptions about commodity prices based on those observed in underlying markets\.

The Company determines the fair value of fuel derivative option contracts utilizing an option pricing model based on inputs that are either readily available in public markets, can be derived from information available in publicly quoted markets, or are quoted by its counterparties\. In situations where the Company obtains inputs via quotes from its counterparties, it verifies the reasonableness of these quotes via similar quotes from another counterparty as of each date for which financial statements are prepared\. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of derivative contracts it holds\. Due to the fact that certain inputs used in determining the estimated fair value of its option contracts are considered unobservable (primarily implied volatility), the Company has categorized these option contracts as Level 3\. Although implied volatility is not directly observable, it is derived primarily from changes in market prices,

57