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

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**UNITED CONTINENTAL HOLDINGS, INC\.**

**CONSOLIDATED BALANCE SHEETS**

**(In millions, except shares)**

|                                                                                |                     |                     |
|:------------------------------------------------------------------------------------------------ | -------------------:| -------------------:|
|                                                                                | **At December 31,** | **At December 31,** |
| **ASSETS**                                                                                |           **2017**  |           **2016**  |
| Current assets:                                                                                |                     |                     |
| Cash and cash equivalents                                                                        |             $1,482  |             $2,179  |
| Short\-term investments                                                                          |              2,316  |              2,249  |
| Receivables, less allowance for doubtful accounts (2017—$7; 2016—$10)                            |              1,340  |              1,176  |
| Aircraft fuel, spare parts and supplies, less obsolescence allowance  <br>(2017—$354; 2016—$295) |                924  |                873  |
| Prepaid expenses and other                                                                       |              1,051  |                832  |
| Total current assets                                                                             |              7,113  |              7,309  |
| Operating property and equipment:                                                                |                     |                     |
| Owned—                                                                                |                     |                     |
| Flight equipment                                                                                |             28,692  |             25,873  |
| Other property and equipment                                                                     |              6,946  |              5,652  |
| Total owned property and equipment                                                               |             35,638  |             31,525  |
| Less—Accumulated depreciation and amortization                                                   |            (11,159) |             (9,975) |
| Total owned property and equipment, net                                                          |             24,479  |             21,550  |
| Purchase deposits for flight equipment                                                           |              1,344  |              1,059  |
| Capital leases—                                                                                |                     |                     |
| Flight equipment                                                                                |              1,151  |              1,319  |
| Other property and equipment                                                                     |                 11  |                331  |
| Total capital leases                                                                             |              1,162  |              1,650  |
| Less—Accumulated amortization                                                                    |               (777) |               (941) |
| Total capital leases, net                                                                        |                385  |                709  |
| Total operating property and equipment, net                                                      |             26,208  |             23,318  |
| Other assets:                                                                                |                     |                     |
| Goodwill                                                                                |              4,523  |              4,523  |
| Intangibles, less accumulated amortization (2017—$1,313; 2016—$1,234)                            |              3,539  |              3,632  |
| Deferred income taxes                                                                            |                  —  |                655  |
| Restricted cash                                                                                |                 91  |                124  |
| Investments in affiliates and other, net                                                         |                852  |                579  |
| Total other assets                                                                               |              9,005  |              9,513  |
| Total assets                                                                                |            $42,326  |            $40,140  |

51


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

Regulatory Matters

The DOT and the Federal Aviation Administration (the "FAA") exercise regulatory authority over air transportation in the U\.S\. The DOT has authority to issue certificates of public convenience and necessity required for airlines to provide domestic air transportation\. An air carrier that the DOT finds fit to operate is given authority to operate domestic and international air transportation (including the carriage of passengers and cargo)\. Except for constraints imposed by regulations regarding "Essential Air Services," which are applicable to certain small communities, airlines may terminate service to a city without restriction\.

The DOT has jurisdiction over certain economic and consumer protection matters, such as unfair or deceptive practices and methods of competition, advertising, denied boarding compensation, baggage liability and disabled passenger transportation\. The DOT also has authority to review certain joint venture agreements between domestic and international carriers\. The DOT engages in regulation of economic matters such as transactions involving allocation of "slots" or similar regulatory mechanisms which limit the rights of carriers to conduct operations at airports where such mechanisms are in place\. The FAA has primary responsibility for matters relating to the safety of air carrier flight operations, including airline operating certificates, control of navigable air space, flight personnel, aircraft certification and maintenance and other matters affecting air safety\.

Authority to operate international routes and international codesharing arrangements is regulated by the DOT and by the governments of the foreign countries involved\. International certificate authorities are also subject to the approval of the U\.S\. President for conformance with national defense and foreign policy objectives\.

The Transportation Security Administration and the U\.S\. Customs and Border Protection, each a division of the Department of Homeland Security, are responsible for certain civil aviation security matters, including passenger and baggage screening at U\.S\. airports and international passenger prescreening prior to entry into or departure from the U\.S\.

Airlines are also subject to various other federal, state, local and foreign laws and regulations\. For example, the U\.S\. Department of Justice has jurisdiction over airline competition matters\. The U\.S\. Postal Service has authority over certain aspects of the transportation of mail\. Labor relations in the airline industry, as discussed below, are generally governed by the Railway Labor Act with oversight by the National Mediation Board\. Environmental matters are regulated by various federal, state, local and foreign governmental entities\. Privacy of passenger and employee data is regulated by domestic and foreign laws and regulations\.

Fares and Rates

Airlines set ticket prices in all domestic and most international city pairs with minimal governmental regulation, and the industry is characterized by significant price competition\. Certain international fares and rates are subject to the jurisdiction of the DOT and the governments of the foreign countries involved\. Many of our tickets are sold by travel agents, and fares are subject to commissions, overrides and discounts paid to travel agents, brokers and wholesalers\.

Route Authority

Our flight operations are authorized by certificates of public convenience and necessity and also by exemptions and limited\-entry frequency awards issued by the DOT\. The requisite approvals of other governments for international operations are controlled by bilateral agreements (and a multilateral agreement in the case of the U\.S\. and the European Union) with, or permits or approvals issued by, foreign countries\. Because international air transportation is governed by bilateral or other agreements between the U\.S\. and the foreign country or countries involved, changes in U\.S\. or foreign government aviation policies could result in the alteration or termination of such agreements, diminish the value of our international route authorities or otherwise affect our international operations\. Bilateral agreements between the U\.S\. and various foreign countries served by us are subject to renegotiation from time to time\. The U\.S\. government has negotiated "Open Skies" agreements with many countries, which allow unrestricted access between the U\.S\. and the foreign markets\.

Certain of our international route authorities are subject to periodic renewal requirements\. We request extension of these authorities when and as appropriate\. While the DOT usually renews temporary authorities on routes where the authorized carrier is providing a reasonable level of service, there is no assurance this practice will continue in general or with respect to a specific renewal\. Dormant route authorities may not be renewed in some cases, especially where another U\.S\. carrier indicates a willingness to provide service\.

8


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

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

The estimated amount of unrecognized actuarial net gain and prior service benefit for the retiree medical and other postretirement benefits plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year is $258 million\.

***Assumptions***

The following actuarial assumptions were used to determine our benefit obligations and net periodic benefit cost for the periods presented:

|                                |                      |                      |                                                                  |                                                                  |
| ------------------------------ | -------------------- | -------------------- | ---------------------------------------------------------------- | ---------------------------------------------------------------- |
|                                | **Pension Benefits** | **Pension Benefits** | **Retiree Medical and**

**Other Postretirement Benefits** | **Retiree Medical and**

**Other Postretirement Benefits** |
|                                | **2017**             | **2016**             | **2017**                                                         | **2016**                                                         |
| Benefit obligations:           |                      |                      |                                                                  |                                                                  |
| Weighted average discount rate | 3\.80%               | 4\.30%               | 3\.60%                                                           | 4\.10%                                                           |

|                                                                           |                      |                      |                      |                                                                  |                                                                  |                                                                  |
| ------------------------------------------------------------------------- | -------------------- | -------------------- | -------------------- | ---------------------------------------------------------------- | ---------------------------------------------------------------- | ---------------------------------------------------------------- |
|                                                                           | **Pension Benefits** | **Pension Benefits** | **Pension Benefits** | **Retiree Medical and**

**Other Postretirement Benefits** | **Retiree Medical and**

**Other Postretirement Benefits** | **Retiree Medical and**

**Other Postretirement Benefits** |
|                                                                           | **2017**             | **2016**             | **2015**             | **2017**                                                         | **2016**                                                         | **2015**                                                         |
| Net periodic benefit cost:                                                |                      |                      |                      |                                                                  |                                                                  |                                                                  |
| Weighted average discount rate                                            | 4\.30%               | 4\.70%               | 4\.30%               | 4\.10%                                                           | 4\.42%                                                           | 4\.00%                                                           |
| Weighted average expected rate of return on plan assets                   | 8\.00%               | 8\.00%               | 8\.00%               | 8\.00%                                                           | 8\.00%                                                           | 8\.00%                                                           |
| Weighted average health care cost trend rate assumed for next year  ^(1)^ | N/A                  | N/A                  | N/A                  | 4\.19%                                                           | 4\.25%                                                           | 5\.21%                                                           |

|       |                                                                                |
| ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(1)^ | The weighted average health care cost trend rate at  December 31, 2017  is assumed to decline gradually to  3\.76%  by 2025 and remain level thereafter\. |

As of December 31, 2017, our estimate of the long\-term rate of return on plan assets was 8% based on the target asset allocation\. Expected returns on long duration bonds are based on yields to maturity of the bonds held at year\-end\. Expected returns on other assets are based on a combination of long\-term historical returns, actual returns on plan assets achieved over the last ten years, current and expected market conditions, and expected value to be generated through active management, currency overlay and securities lending programs\.

A one percentage point change in the assumed health care cost trend rates would have the following effects on our retiree medical and other postretirement benefits plans (in millions):

|                                                                   |                 |                 |
| ----------------------------------------------------------------- | --------------- | --------------- |
|                                                                   | **1% Increase** | **1% Decrease** |
| Increase (decrease) on 2017 service and interest cost             | $2              | $(2)            |
| Increase (decrease) on benefit obligation as of December 31, 2017 | 54              | (51)            |

***Minimum Contributions***

We are required to make minimum contributions to our defined benefit pension plans under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and various other laws for U\.S\. based plans as well as under funding rules specific to countries where we maintain defined benefit plans\. Based on current funding assumptions, we have minimum required contributions of $42 million for 2018 including contributions to defined benefit plans for our wholly\-owned regional subsidiaries\. We expect to make supplemental contributions of $425 million to our U\.S\. based defined benefit pension plans in 2018\. The minimum funding obligation for our U\.S\. based defined benefit pension plans was subject to temporary favorable rules that expired at the end of 2017\. Our pension funding obligations are likely to increase materially beginning in 2019, when we will be required to make contributions relating to the 2018 fiscal year\. The amount of these obligations will depend on the performance of our investments held in trust by the pension plans, interest rates for determining liabilities, the amount of and timing of any supplemental contributions and our actuarial experience\.

109


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

|                                                                                |                                  |                          |                                         |
| -------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ------------------------ | --------------------------------------- |
| **Union**                                                                                | **Class or Craft**               | **Employees**  **^(1)^** | **Contract**

**Amendable Date**  |
| **Mainline:**  **^(2)^**                                                                                |                                  |                          |                                         |
| Allied Pilots Association (APA)                                                                                | Pilots                           | 13,200                   | 2020                                    |
| Association of Professional Flight Attendants (APFA)                                                                                | Flight Attendants                | 24,900                   | 2019                                    |
| Airline Customer Service Employee Association –Communications Workers of America and International Brotherhood of Teamsters (CWA\-IBT) | Passenger Service                | 16,000                   | 2020                                    |
| Transport Workers Union and International Association of Machinists & Aerospace Workers (TWU\-IAM Association)                         | Mechanics and Related            | 12,400                   | 2018                                    |
| TWU\-IAM Association                                                                                | Fleet Service                    | 16,700                   | 2018                                    |
| TWU\-IAM Association                                                                                | Stock Clerks                     | 1,900                    | 2018                                    |
| TWU\-IAM Association                                                                                | Flight Simulator Engineers       | 150                      | 2021                                    |
| TWU\-IAM Association                                                                                | Maintenance Control Technicians  | 200                      | 2018                                    |
| TWU\-IAM Association                                                                                | Maintenance Training Instructors | 50                       | 2018                                    |
| TWU (Transport Workers Union)                                                                                | Dispatchers                      | 450                      | 2021                                    |
| TWU                                                                                | Flight Crew Training Instructors | 300                      | 2021                                    |
| **Envoy:**  **^(3)^**                                                                                |                                  |                          |                                         |
| Air Line Pilots Associations (ALPA)                                                                                | Pilots                           | 2,200                    | 2024                                    |
| Association of Flight Attendants\-CWA (AFA)                                                                                | Flight Attendants                | 1,300                    | 2020                                    |
| TWU                                                                                | Ground School Instructors        | 10                       | 2019                                    |
| TWU                                                                                | Mechanics and Related            | 1,300                    | 2020                                    |
| TWU                                                                                | Stock Clerks                     | 150                      | 2020                                    |
| TWU                                                                                | Fleet Service Clerks             | 3,500                    | 2019                                    |
| TWU                                                                                | Dispatchers                      | 60                       | 2019                                    |
| Communications Workers of America (CWA)                                                                                | Passenger Service                | 4,300                    | Initial Contract

in Negotiation |
| **Piedmont:**  **^(3)^**                                                                                |                                  |                          |                                         |
| ALPA                                                                                | Pilots                           | 550                      | 2024                                    |
| AFA                                                                                | Flight Attendants                | 300                      | 2019                                    |
| International Brotherhood of Teamsters (IBT)                                                                                | Mechanics                        | 350                      | 2021                                    |
| IBT                                                                                | Stock Clerks                     | 50                       | 2021                                    |
| CWA                                                                                | Fleet and Passenger Service      | 3,400                    | 2017                                    |
| IBT                                                                                | Dispatchers                      | 20                       | 2019                                    |
| ALPA                                                                                | Flight Crew Training Instructors | 40                       | 2024                                    |
| **PSA:**  **^(3)^**                                                                                |                                  |                          |                                         |
| ALPA                                                                                | Pilots                           | 1,500                    | 2023                                    |
| AFA                                                                                | Flight Attendants                | 1,000                    | 2017                                    |
| International Association of Machinists & Aerospace Workers (IAM)                                                                      | Mechanics                        | 350                      | 2016                                    |
| TWU                                                                                | Dispatchers                      | 50                       | 2022                                    |

|       |                                                                                |
| ----- | ---------------------------------------------------------------------------------------- |
| ^(1)^ | Approximate number of active full\-time equivalent employees as of  December 31, 2017 \. |

9


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

**ITEM 8B\. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OF AMERICAN AIRLINES, INC\.**

**Report of Independent Registered Public Accounting Firm**

To the Stockholder and Board of Directors

American Airlines, Inc\.:

*Opinion on the Consolidated Financial Statements*

We have audited the accompanying consolidated balance sheets of American Airlines, Inc\. and subsidiaries (American) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income, cash flows, and stockholder’s equity for each of the years in the three\-year period ended December 31, 2017, and the related notes (collectively, the consolidated financial statements)\. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of American as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three\-year period ended December 31, 2017, in conformity with U\.S\. generally accepted accounting principles\.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), American’s internal control over financial reporting as of December 31, 2017, based on criteria established in *Internal Control – Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 21, 2018 expressed an unqualified opinion on the effectiveness of American’s internal control over financial reporting\.

*Basis for Opinion*

These consolidated financial statements are the responsibility of American’s management\. Our responsibility is to express an opinion on these consolidated financial statements based on our audits\. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to American in accordance with the U\.S\. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB\.

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

/s/ KPMG LLP

We have served as American’s auditor since 2014\.

Dallas, Texas

February 21, 2018

125


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

variable interest rates\. To the extent the interest rates applicable to our floating rate debt increase, our interest expense will increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be adversely affected\.

On July 27, 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021\. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021\. The U\.S\. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is considering replacing U\.S\. dollar LIBOR with a newly created index, calculated based on repurchase agreements backed by treasury securities\. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere\. See also the discussion of interest rate risk in Part II, Item 7A\. Quantitative and Qualitative Disclosures About Market Risk –*“Interest\.”*

These obligations also impact our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business, and could materially adversely affect our liquidity, results of operations and financial condition\.

***We will need to obtain sufficient financing or other capital to operate successfully\.***

Our business plan contemplates continued significant investments related to modernizing our fleet, improving the experience of our customers and updating our facilities\. Significant capital resources will be required to execute this plan\. We estimate that, based on our commitments as of December 31, 2018, our planned aggregate expenditures for aircraft purchase commitments and certain engines on a consolidated basis for calendar years 2019\-2023 would be approximately $8\.4 billion\. Accordingly, we will need substantial financing or other capital resources to finance such aircraft and engines\. If we are unable to arrange financing for such aircraft and engines at customary advance rates and on terms and conditions acceptable to us, we may need to use cash from operations or cash on hand to purchase such aircraft and engines or may seek to negotiate deferrals for such aircraft and engines with the applicable aircraft and engine manufacturers\. Depending on numerous factors applicable at the time we seek capital, many of which are out of our control, such as the state of the domestic and global economies, the capital and credit markets’ view of our prospects and the airline industry in general, and the general availability of debt and equity capital, the financing or other capital resources that we will need may not be available to us, or may be available only on onerous terms and conditions\. There can be no assurance that we will be successful in obtaining financing or other needed sources of capital to operate successfully\. An inability to obtain necessary financing on acceptable terms would have a material adverse impact on our business, results of operations and financial condition\.

***We have significant pension and other postretirement benefit funding obligations, which may adversely affect our liquidity, results of operations and financial condition\.***

Our pension funding obligations are significant\. The amount of these obligations will depend on the performance of investments held in trust by the pension plans, interest rates for determining liabilities and actuarial experience\. The minimum funding obligation applicable to our pension plans was subject to favorable temporary funding rules that expired at the end of 2017 and, as a result, our minimum pension funding obligations will increase materially beginning in 2019\. In addition, we may have significant obligations for other postretirement benefits, retiree medical and other postretirement benefits\.

***If our financial condition worsens, provisions in our credit card processing and other commercial agreements may adversely affect our liquidity\.***

We have agreements with companies that process customer credit card transactions for the sale of air travel and other services\. These agreements allow these credit card processing companies, under certain conditions (including, with respect to certain agreements, the failure of American to maintain certain levels of liquidity), to hold an amount of our cash (a holdback) equal to some or all of the advance ticket sales that have been processed by that credit card processor, but for which we have not yet provided the air transportation\. These credit card processing companies are not currently entitled to maintain any holdbacks pursuant to these requirements\. These holdback requirements can be modified at the discretion of the credit card processing companies upon the occurrence of specific events, including material adverse changes in our financial condition\. An increase in the current holdbacks, up to and including 100% of relevant advanced ticket sales, would materially reduce our liquidity\. Likewise, other of our commercial agreements contain provisions that allow other entities to impose less\-favorable terms, including the acceleration of amounts due, in the event of material adverse changes in our financial condition\.

20


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

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| \*        | \*        | \*        | Indicates management contract or compensatory plan or arrangement\.                                                                                | Indicates management contract or compensatory plan or arrangement\.                                                                                | Indicates management contract or compensatory plan or arrangement\.                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |
| \#        | \#        | \#        | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. |  |  |  |  |  |  |  |  |  |  |  |  |
| ^         | ^         | ^         | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                | Filed by Virgin America Inc\., File Number 333\-197660                                                                                |  |  |  |  |  |  |  |  |  |  |  |  |

92


Annual Report of Southwest Airlines Co\. for year 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on February 7, 2018, on behalf of the registrant and in the capacities indicated\.

|                            |                                                                                |
| -------------------------- | --------------------------------------------------------------------------------------------- |
| **Signature**              | **Title**                                                                                |
| /s/ GARY C\. KELLY         | Chairman of the Board & Chief Executive Officer (Principal Executive Officer)                 |
| **Gary C\. Kelly**         |                                                                                |
| /s/ TAMMY ROMO             | Executive Vice President & Chief Financial Officer (Principal Financial & Accounting Officer) |
| **Tammy Romo**             |                                                                                |
| /s/ RON RICKS              | Vice Chairman of the Board                                                                    |
| **Ron Ricks**              |                                                                                |
| /s/ DAVID W\. BIEGLER      | Director                                                                                |
| **David W\. Biegler**      |                                                                                |
| /s/ J\. VERONICA BIGGINS   | Director                                                                                |
| **J\. Veronica Biggins**   |                                                                                |
| /s/ DOUGLAS H\. BROOKS     | Director                                                                                |
| **Douglas H\. Brooks**     |                                                                                |
| /s/ WILLIAM H\. CUNNINGHAM | Director                                                                                |
| **William H\. Cunningham** |                                                                                |
| /s/ JOHN G\. DENISON       | Director                                                                                |
| **John G\. Denison**       |                                                                                |
| /s/ THOMAS W\. GILLIGAN    | Director                                                                                |
| **Thomas W\. Gilligan**    |                                                                                |
| /s/ GRACE D\. LIEBLEIN     | Director                                                                                |
| **Grace D\. Lieblein**     |                                                                                |
| /s/ NANCY B\. LOEFFLER     | Director                                                                                |
| **Nancy B\. Loeffler**     |                                                                                |
| /s/ JOHN T\. MONTFORD      | Director                                                                                |
| **John T\. Montford**      |                                                                                |

124


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

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

(k) Revenue Recognition

Revenue

The following are the significant categories comprising American’s reported operating revenues (in millions):

|                                       |                             |                             |                             |
| ------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                       | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                       | **2019**                    | **2018**                    | **2017**                    |
| Passenger revenue:                    |                             |                             |                             |
| Passenger travel                      | $38,831                     | $37,457                     | $36,152                     |
| Loyalty revenue \- travel  ^(1)^      | 3,179                       | 3,219                       | 2,979                       |
| Total passenger revenue               | 42,010                      | 40,676                      | 39,131                      |
| Cargo                                 | 863                         | 1,013                       | 890                         |
| Other:                                |                             |                             |                             |
| Loyalty revenue \- marketing services | 2,361                       | 2,352                       | 2,124                       |
| Other revenue                         | 527                         | 489                         | 465                         |
| Total other revenue                   | 2,888                       | 2,841                       | 2,589                       |
| Total operating revenues              | $45,761                     | $44,530                     | $42,610                     |

|       |                                                                                |
| ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(1)^ | Loyalty revenue included in passenger revenue is principally comprised of mileage credit redemptions earned through travel or from co\-branded credit card and other partners\. See “ *Loyalty Revenue”*  below for further discussion on these mileage credits\. |

The following is American’s total passenger revenue by geographic region (in millions):

|                         |                             |                             |                             |
| ----------------------- | --------------------------- | --------------------------- | --------------------------- |
|                         | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                         | **2019**                    | **2018**                    | **2017**                    |
| Domestic                | $30,881                     | $29,573                     | $28,749                     |
| Latin America           | 5,047                       | 5,125                       | 4,840                       |
| Atlantic                | 4,624                       | 4,376                       | 4,028                       |
| Pacific                 | 1,458                       | 1,602                       | 1,514                       |
| Total passenger revenue | $42,010                     | $40,676                     | $39,131                     |

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

Passenger Revenue

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

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

126


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

ITEM 8\. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                |                                                                    |
| --------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ |
|                                                                                | Page                                                               |
| [Report of Independent Registered Public Accounting Firm](http://ir.delta.com/.#s69BD3F0E837257CF9AF7C5B69EFA0385)                                              |
[ 52](http://ir.delta.com/.#s69BD3F0E837257CF9AF7C5B69EFA0385) |
| [Consolidated Balance Sheets \- December 31, 2018 and 2017](http://ir.delta.com/.#sD11FEE4059B050ADAEA7667A08B964C2)                                            |
[ 53](http://ir.delta.com/.#sD11FEE4059B050ADAEA7667A08B964C2) |
| [Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016](http://ir.delta.com/.#s04095BABD52359E8A64161BF1E3B83D6)           |
[ 54](http://ir.delta.com/.#s04095BABD52359E8A64161BF1E3B83D6) |
| [Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and 2016](http://ir.delta.com/.#s1352EC39BD1F57F9BF100B998B5BA38E) |
[ 55](http://ir.delta.com/.#s1352EC39BD1F57F9BF100B998B5BA38E) |
| [Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016](http://ir.delta.com/.#s7853F989C4AD56808B4DA3972397C721)           |
[ 56](http://ir.delta.com/.#s7853F989C4AD56808B4DA3972397C721) |
| [Consolidated Statements of Stockholders' Equity for the years ended December 31, 2018, 2017 and 2016](http://ir.delta.com/.#s36850955D34953F38C0FDD3B66695463) |
[ 57](http://ir.delta.com/.#s36850955D34953F38C0FDD3B66695463) |
| [Notes to the Consolidated Financial Statements](http://ir.delta.com/.#s7A724D16EB4F5373A79A03DA80D7E01A)                                                       |
[ 58](http://ir.delta.com/.#s7A724D16EB4F5373A79A03DA80D7E01A) |
| [Note 1 \- Summary of Significant Accounting Policies](http://ir.delta.com/.#s5AE5368E8D0E5D1CBF66B4E067513C4F)                                                 |
[ 58](http://ir.delta.com/.#s5AE5368E8D0E5D1CBF66B4E067513C4F) |
| [Note 2 \- Revenue Recognition](http://ir.delta.com/.#s76bc80c50bcc430691dbd3d52fae558d)                                                                        |
[ 65](http://ir.delta.com/.#s76bc80c50bcc430691dbd3d52fae558d) |
| [Note 3 \- Fair Value Measurements](http://ir.delta.com/.#s8AD4252095AF551D97A05B72E4AEDB7F)                                                                    |
[ 68](http://ir.delta.com/.#s8AD4252095AF551D97A05B72E4AEDB7F) |
| [Note 4 \- Investments](http://ir.delta.com/.#sEFB1C6569B3051A489A5CFEF3760B0A5)                                                                                |
[ 70](http://ir.delta.com/.#sEFB1C6569B3051A489A5CFEF3760B0A5) |
| [Note 5 \- Derivatives and Risk Management](http://ir.delta.com/.#s037C0108F0495CD5850801392A1E5BB4)                                                            |
[ 72](http://ir.delta.com/.#s037C0108F0495CD5850801392A1E5BB4) |
| [Note 6 \- Intangible Assets](http://ir.delta.com/.#sD1A890B77980550990C23086312684BA)                                                                          |
[ 74](http://ir.delta.com/.#sD1A890B77980550990C23086312684BA) |
| [Note 7 \- Long\-Term Debt](http://ir.delta.com/.#s2898FF2CB90B59D78BD59AB9FA251F4F)                                                                            |
[ 75](http://ir.delta.com/.#s2898FF2CB90B59D78BD59AB9FA251F4F) |
| [Note 8 \- Leases](http://ir.delta.com/.#s6999A7F06FDD54D9AA7383E43A1A0897)                                                                                |
[ 77](http://ir.delta.com/.#s6999A7F06FDD54D9AA7383E43A1A0897) |
| [Note 9 \- Airport Redevelopment](http://ir.delta.com/.#s00D3867C3A7057E8823BF79729ED312A)                                                                      |
[ 80](http://ir.delta.com/.#s00D3867C3A7057E8823BF79729ED312A) |
| [Note 10 \- Employee Benefit Plans](http://ir.delta.com/.#sB3B3B334560B5CAAB32D461DF50FA60A)                                                                    |
[ 82](http://ir.delta.com/.#sB3B3B334560B5CAAB32D461DF50FA60A) |
| [Note 11 \- Commitments and Contingencies](http://ir.delta.com/.#sD1260FDD0BD15EB89F86B4F328FB0669)                                                             |
[ 87](http://ir.delta.com/.#sD1260FDD0BD15EB89F86B4F328FB0669) |
| [Note 12 \- Income Taxes](http://ir.delta.com/.#s41EA66224DBE5861A62D7B47116D2124)                                                                              |
[ 90](http://ir.delta.com/.#s41EA66224DBE5861A62D7B47116D2124) |
| [Note 13 \- Equity and Equity Compensation](http://ir.delta.com/.#s06F2008B00155AA2BD96797EDA90A8A1)                                                            |
[ 92](http://ir.delta.com/.#s06F2008B00155AA2BD96797EDA90A8A1) |
| [Note 14 \- Accumulated Other Comprehensive Loss](http://ir.delta.com/.#s4759ACD9C5E65877988796850EBE51E7)                                                      |
[ 93](http://ir.delta.com/.#s4759ACD9C5E65877988796850EBE51E7) |
| [Note 15 \- Segments and Geographic Information](http://ir.delta.com/.#sEF8845DEC87853DBB893F4E2B584A88C)                                                       |
[ 94](http://ir.delta.com/.#sEF8845DEC87853DBB893F4E2B584A88C) |
| [Note 16 \- Restructuring and Other](http://ir.delta.com/.#s401F72D3ADE154999846EFD622159398)                                                                   |
[ 96](http://ir.delta.com/.#s401F72D3ADE154999846EFD622159398) |
| [Note 17 \- Earnings Per Share](http://ir.delta.com/.#sD522B17DCBE8521EAF2A7473C0DC4E06)                                                                        |
[ 96](http://ir.delta.com/.#sD522B17DCBE8521EAF2A7473C0DC4E06) |
| [Note 18 \- Quarterly Financial Data (Unaudited)](http://ir.delta.com/.#s2656E5F19B1B5088ACD590919783D0ED)                                                      |
[ 97](http://ir.delta.com/.#s2656E5F19B1B5088ACD590919783D0ED) |

 51


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

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

*Cargo Revenue*

Cargo revenue is recognized when American provides the transportation\.

*Other Revenue*

Other revenue includes revenue associated with marketing services provided to American’s business partners as part of its loyalty program, baggage fees, ticketing change fees, airport clubs and inflight services\. The accounting and recognition for the loyalty program marketing services are discussed in Note 1(i) above\. Baggage fees, ticketing change fees, airport clubs and inflight service revenues are recognized when American provides the service\.

Effective January 1, 2018, American is adopting ASU 2014\-09: Revenue from Contracts with Customers (Topic 606)\. See Recent Accounting Pronouncements in Note 1(r) below for further discussion\.

***(k) Maintenance, Materials and Repairs***

Maintenance and repair costs for owned and leased flight equipment are charged to operating expense as incurred, except costs incurred for maintenance and repair under flight hour maintenance contract agreements, which are accrued based on contractual terms when an obligation exists\.

***(l) Selling Expenses***

Selling expenses include credit card fees, commissions, computerized reservations systems fees and advertising\. Advertising costs are expensed as incurred\. Advertising expense was $135 million, $116 million and $110 million for the years ended December 31, 2017, 2016 and 2015, respectively\.

***(m) Share\-based Compensation***

American accounts for its share\-based compensation expense based on the fair value of the stock award at the time of grant, which is recognized ratably over the vesting period of the stock award\. Certain awards have performance conditions that must be achieved prior to vesting and are expensed based on the expected achievement at each reporting period\. The fair value of stock appreciation rights is estimated using a Black\-Scholes option pricing model\. The fair value of restricted stock units is based on the market price of the underlying shares of common stock on the date of grant\. See Note 12 for further discussion of share\-based compensation\.

***(n) Deferred Gains and Credits, Net***

Included within deferred gains and credits, net are amounts deferred and amortized into future periods associated with the adjustment of leases to fair value in connection with the application of acquisition accounting, deferred gains on the sale\-leaseback of aircraft and certain vendor incentives\. American periodically receives vendor incentives in connection with acquisition of aircraft and engines\. These credits are deferred until aircraft and engines are delivered and then applied as a reduction to the cost of the related equipment\.

***(o) Foreign Currency Gains and Losses***

Foreign currency gains and losses are recorded as part of other nonoperating expense, net in American’s consolidated statements of operations\. Foreign currency losses for 2017 were $4 million\. Foreign currency gains were $1 million for 2016\. For 2015, foreign currency losses were $751 million and included a $592 million nonoperating special charge to write off all of the value of Venezuelan bolivars held by American due to continued lack of repatriations and deterioration of economic conditions in Venezuela\.

***(p) Other Operating Expenses***

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

135


Annual Report of United Continental Holdings, Inc\. and United Airlines, Inc\. for year 2018

[Table of Contents](https://www.example.com#sCFFD9DA26B5659A3A528A4B51B718F87)

expected performance achievement for the performance\-based awards\. See Note 5 of this report for additional information on UAL's share\-based compensation plans\.

|     |                                                                                |
| --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| (p) | **Ticket Taxes—** Certain governmental taxes are imposed on the Company's ticket sales through a fee included in ticket prices\. The Company collects these fees and remits them to the appropriate government agency\. These fees are recorded on a net basis and, as a result, are excluded from revenue\. |

|     |                                                                                |
| --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (q) | **Retirement of Leased Aircraft—** The Company accrues for estimated lease costs over the remaining term of the lease at the present value of future minimum lease payments, net of estimated sublease rentals (if any), in the period that aircraft are permanently removed from service\. When reasonably estimable and probable, the Company estimates maintenance lease return condition obligations for items such as minimum aircraft and engine conditions specified in leases and accrues these amounts over the lease term while the aircraft are operating, and any remaining unrecognized estimated obligations are accrued in the period that an aircraft is removed from service\. |

|     |                                                                                |
| --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (r) | **Uncertain Income Tax Positions—** The Company has recorded reserves for income taxes and associated interest that may become payable in future years\. Although management believes that its positions taken on income tax matters are reasonable, the Company nevertheless has established tax and interest reserves in recognition that various taxing authorities may challenge certain of the positions taken by the Company, potentially resulting in additional liabilities for taxes and interest\. The Company's uncertain tax position reserves are reviewed periodically and are adjusted as events occur that affect its estimates, such as the availability of new information, the lapsing of applicable statutes of limitation, the conclusion of tax audits, the measurement of additional estimated liability, the identification of new tax matters, the release of administrative tax guidance affecting its estimates of tax liabilities, or the rendering of relevant court decisions\. The Company records penalties and interest relating to uncertain tax positions as part of income tax expense in its consolidated statements of operations\. See Note 7 of this report for additional information on UAL's uncertain tax positions\. |

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (s) | **Labor Costs—** The Company records expenses associated with amendable labor agreements when the amounts are probable and estimable\. These include costs associated with lump sum cash payments that would be made in conjunction with the ratification of labor agreements\. To the extent these upfront costs are in lieu of future pay increases, they would be capitalized and amortized over the term of the labor agreements\. If not, these amounts would be expensed\. |

|      |                                                                                |
| ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (t)  | **Third\-Party Business—** The Company has third\-party business revenue that includes fuel sales, catering, ground handling, maintenance services and frequent flyer award non\-air redemptions\. Third\-party business revenue is recorded in Other operating revenue\. The Company also incurs third\-party business expenses, such as maintenance, ground handling and catering services for third parties, fuel sales and non\-air mileage redemptions\. The third\-party business expenses are recorded in Other operating expenses, except for non\-air mileage redemption\. Non\-air mileage redemption expenses are recorded to Other operating revenue\.  |

|      |                                                                                |
| ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (u)  | **Recently Issued Accounting Standards—**  The Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 606,  *Revenue from Contracts with Customers*  (the "New Revenue Standard"), effective January 1, 2018 using the full\-retrospective method\. Topic 606 prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services\. For the Company, the most significant impact of the standard was the reclassification of certain ancillary fees from other operating revenue into passenger revenue on the statement of consolidated operations\. These ancillary fees are directly related to passenger travel, such as ticket change fees and baggage fees, and are no longer considered distinct performance obligations separate from the passenger travel component\. In addition, the ticket change fees, which were previously recognized when received, are now recognized when transportation is provided\. Adoption of the standard had no impact on the Company's consolidated cash flows statements\. |

The Company adopted Accounting Standards Update No\. 2017\-07, *Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost* (the "New Retirement Standard"), effective January 1, 2018 using the full\-retrospective method\. The New Retirement Standard requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period\. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, are to be presented outside of any subtotal of operating income\. The Company elected to apply the practical expedient and use the amounts disclosed in Note 8 to the financial statements included in Part II, Item 8 of the Company's Annual Report on Form 10\-K for the fiscal year ended December 31, 2017 as the estimation basis for applying the retrospective presentation requirements of the standard\.

59


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

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

In October 2017, American created one additional pass\-through trust which issued approximately $221 million aggregate principal amount of Series 2017\-2 Class B EETCs (the 2017\-2 Class B EETCs) in connection with the financing of the 2017\-2 Aircraft\. A portion of the net proceeds received from the sale of the Series 2017\-2 Class B EETCs was used on the date of issuance of the 2017\-2 Class B EETCs to acquire Series B equipment notes issued by American in connection with the financing of certain 2017\-2 Aircraft, and the balance of such proceeds is being held in escrow for the benefit of the holders of the 2017\-2 Class B EETCs until such time as American issues additional Series B equipment notes to the pass\-through trust, which will purchase such additional equipment notes with a portion of the escrowed funds\. These escrowed funds are not guaranteed by American and are not reported as debt on American’s consolidated balance sheet because the proceeds held by the depository are not American’s assets\.

As of December 31, 2017, approximately $735 million of the escrowed proceeds from the 2017\-2 EETCs have been used to purchase equipment notes issued by American\. Interest and principal payments on equipment notes issued in connection with the 2017\-2 EETCs are payable semi\-annually in April and October of each year, with interest payments beginning in April 2018 and principal payments beginning in October 2018\. These equipment notes are secured by liens on the aircraft financed with the proceeds of the 2017\-2 EETCs\.

Certain information regarding the 2017\-2 EETC equipment notes and the remaining escrowed proceeds of the 2017\-2 EETCs, as of December 31, 2017, is set forth in the table below\.

|                               |                   |                   |                   |
| ----------------------------- | ----------------- | ----------------- | ----------------- |
|                               | **2017\-2 EETCs** | **2017\-2 EETCs** | **2017\-2 EETCs** |
|                               | **Series AA**     | **Series A**      | **Series B**      |
| Aggregate principal issued    | $545 million      | $252 million      | $221 million      |
| Remaining escrowed proceeds   | $152 million      | $70 million       | $61 million       |
| Fixed interest rate per annum | 3\.35%            | 3\.60%            | 3\.70%            |
| Maturity date                 | October 2029      | October 2029      | October 2025      |

***(c) Equipment Loans and Other Notes Payable Issued in 2017***

In 2017, American entered into agreements under which it borrowed $1\.0 billion in connection with the financing of certain aircraft\. Debt incurred under these agreements matures in 2027 through 2029 and bears interest at fixed and variable rates of LIBOR plus an applicable margin averaging 3\.08% at December 31, 2017\.

***Guarantees***

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\.

***Collateral\-Related Covenants***

Certain of American’s debt financing agreements contain loan to value (LTV) ratio covenants and require American to annually appraise the related collateral\. Pursuant to such agreements, if the LTV ratio exceeds a specified threshold, American is required, as applicable, to pledge additional qualifying collateral (which in some cases may include cash collateral), or pay down such financing, in whole or in part\.

144


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

SkyTeam \. In addition to our marketing alliance agreements with individual foreign airlines, we are a member of the SkyTeam global airline alliance\. The other members of SkyTeam are Aeroflot, Aerolíneas Argentinas, Aeroméxico, Air Europa, Air France, Alitalia, China Airlines, China Eastern, CSA Czech Airlines, Garuda Indonesia, Kenya Airways, KLM, Korean Air, Middle East Airlines, Saudi Arabian Airlines, Tarom, Vietnam Airlines and Xiamen Airlines\. Through alliance arrangements with other SkyTeam carriers, Delta is able to link its network with the route networks of the other member airlines, providing opportunities to increase connecting traffic while offering enhanced customer service through reciprocal codesharing and loyalty program participation, airport lounge access and cargo operations\.

Regional Carriers

We have air service agreements with domestic regional air carriers that feed traffic to our route system by serving passengers primarily in small and medium\-sized cities in the domestic market\. These arrangements enable us to better match capacity with demand in these markets\. Approximately 15% of our passenger revenue in 2019 was related to flying by regional air carriers\.

Through our regional carrier program, Delta Connection^®^ , we have contractual arrangements with regional carriers to operate aircraft using our "DL" designator code\. We currently have contractual arrangements with:

• Compass Airlines, LLC ("Compass") and GoJet Airlines, LLC ("GoJet"), both subsidiaries of Trans States Holdings, Inc\. ("Trans States");

• Endeavor Air, Inc\., a wholly owned subsidiary of ours;

• Republic Airline, Inc\. ("Republic"), a subsidiary of Republic Airways Holdings, Inc\.; and

• SkyWest Airlines, Inc\., a subsidiary of SkyWest, Inc\.

We have agreed with each of Compass and GoJet not to renew our existing arrangements and end our relationship with each by the end of 2020\.

Our contractual agreements with regional carriers primarily are capacity purchase arrangements, under which we control the scheduling, pricing, reservations, ticketing and seat inventories for the regional carriers' flights operating under our "DL" designator code\. We are entitled to all ticket, cargo, mail, in\-flight and ancillary revenues associated with these flights\. We pay those airlines an amount, as defined in the applicable agreement, which is based on a determination of their cost of operating those flights and other factors intended to approximate market rates for those services\. These capacity purchase agreements are long\-term agreements, usually with initial terms of at least ten years, which grant us the option to extend the initial term\. Certain of these agreements provide us the right to terminate the entire agreement, or in some cases remove some of the aircraft from the scope of the agreement, for convenience at certain future dates\.

SkyWest Airlines operates some flights for us under a revenue proration agreement\. This proration agreement establishes a fixed dollar or percentage division of revenues for tickets sold to passengers traveling on connecting flight itineraries\.

Global Impact

As we connect people with communities, experiences and each other, we are committed to doing our part to build a better world\. Giving back to the communities where we live, work and serve is part of our culture, and we have pledged to give one percent of our annual net income back to communities across the globe\. As a purpose\-driven and values\-led company, we are committed to reducing our environmental impact\. We were among the leaders in the industry to offer comprehensive onboard recycling to our passengers and are working to reduce our use of single\-use plastics\. The chief focus of reducing our impact on the environment is jet fuel, which is the primary contributor to our carbon footprint\. We continue to focus on increasing fuel efficiency as we replace older aircraft with more fuel\-efficient jets and improve the efficiency of our existing aircraft through operational efforts\.

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