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

We account for marketing agreements, including those with American Express, by allocating the consideration received to the individual products and services delivered\. We allocate the value based on the relative selling prices of those products and services, which generally consist of award travel, priority boarding, baggage fee waivers, lounge access and the use of our brand\. We determine our best estimate of the selling prices by using a discounted cash flow analysis using multiple inputs and assumptions, including: (1) the expected number of miles awarded and number of miles redeemed, (2) ETV for the award travel obligation adjusted for breakage, (3) published rates on our website for baggage fees, discounted access to Delta Sky Club lounges and other benefits while traveling on Delta, (4) brand value (using estimated royalties generated from the use of our brand) and (5) volume discounts provided to certain partners\.

Effective January 1, 2019, we amended our co\-brand agreement with American Express, and we also amended other agreements with American Express during the current year\. The new agreements increase the value we receive and extend the terms to 2029\. The products and services delivered are consistent with previous agreements, and we continue to allocate the consideration received based on the relative selling prices of those products and services\.

We defer the amount for award travel obligation as part of loyalty program deferred revenue and recognize loyalty travel awards in passenger revenue as the miles are used for travel\. Revenue allocated to services performed in conjunction with a passenger’s flight, such as baggage fee waivers, is recognized as travel\-related services in passenger revenue when the related service is performed\. Revenue allocated to access Delta Sky Club lounges is recognized as miscellaneous in other revenue as access is provided\. Revenue allocated to the remaining performance obligations, primarily brand value, is recorded as loyalty program in other revenue as miles are delivered\.

Goodwill and Indefinite\-Lived Intangible Assets

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

When we evaluate goodwill for impairment using a quantitative approach, we estimate the fair value of the reporting unit by considering both comparable public company multiples (a market approach) and projected discounted future cash flows (an income approach)\. When we perform a quantitative impairment assessment of our indefinite\-lived intangible assets, fair value is estimated based on (1) recent market transactions, where available, (2) the royalty method for the Delta tradename (which assumes hypothetical royalties generated from using our tradename) or (3) projected discounted future cash flows (an income approach)\.

Key Assumptions\.  The key assumptions in our impairment tests include: (1) forecasted revenues, expenses and cash flows, (2) terminal period revenue growth and cash flows, (3) an estimated weighted average cost of capital, (4) assumed discount rates depending on the asset and (5) a tax rate\. These assumptions are consistent with those that hypothetical market participants would use\. Because we are required to make estimates and assumptions when evaluating goodwill and indefinite\-lived intangible assets for impairment, actual transaction amounts may differ materially from these estimates\. In addition, when performing a qualitative valuation, we consider the amount by which the intangible assets' fair values exceeded their respective carrying values in the most recent fair value measurements calculated using a quantitative approach\.

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

We assessed each of the above assumptions in our most recent impairment analyses\. The combination of our most recently completed annual results and our projected revenues, expenses and cash flows more than offset any negative events and circumstances\.

42


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

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

to pay upon settlement if fuel prices decline significantly, such hedge contracts may limit the Company's ability to benefit fully from lower fuel prices in the future\. If fuel prices decline significantly from the levels existing at the time the Company enters into a hedge contract, the Company may be required to post collateral (margin) beyond certain thresholds\. There can be no assurance that the Company's hedging arrangements, if any, will provide any particular level of protection against rises in fuel prices or that its counterparties will be able to perform under the Company's hedging arrangements\. Additionally, deterioration in the Company's financial condition could negatively affect its ability to enter into new hedge contracts in the future\.

The Company relies heavily on technology and automated systems to operate its business and any significant failure or disruption of the technology or these systems could materially harm its business\.

The Company depends on automated systems and technology to operate its business, including, but not limited to, computerized airline reservation systems, demand prediction software, flight operations systems, revenue management systems, accounting systems, technical and business operations systems, telecommunication systems and commercial websites and applications, including www\.united\.com and the United Airlines app\. United's website and other automated systems must be able to accommodate a high volume of traffic, maintain secure information and deliver important flight and schedule information, as well as process critical financial transactions\. These systems could suffer substantial or repeated disruptions due to various events, some of which are beyond the Company's control, including natural disasters, power failures, terrorist attacks, equipment or software failures or cyber security attacks\. We have initiatives in place to prevent disruptions and disaster recovery plans, and we continue to invest in improvements to these initiatives and plans; however, these measures may not be adequate to prevent or mitigate disruptions\. Substantial or repeated systems failures or disruptions, including failures or disruptions related to the Company's complex integration of systems, could reduce the attractiveness of the Company's services versus those of its competitors, materially impair its ability to market its services and operate its flights, result in the unauthorized release of confidential or otherwise protected information, result in increased costs, lost revenue and the loss or compromise of important data, and may adversely affect the Company's business, operating results and financial condition\.

The Company's business relies extensively on third\-party service providers, including certain technology providers\. Failure of these parties to perform as expected, or interruptions in the Company's relationships with these providers or their provision of services to the Company, could have a material adverse effect on the Company's business, operating results and financial condition\.

The Company has engaged third\-party service providers to perform a large number of functions that are integral to its business, including regional operations, operation of customer service call centers, distribution and sale of airline seat inventory, provision of information technology infrastructure and services, transmitting or uploading of data, provision of aircraft maintenance and repairs, provision of various utilities, performance of aircraft fueling operations and catering services, among other vital functions and services\. The Company does not directly control these third\-party service providers, although generally it does enter into agreements that define expected service performance and compliance requirements, such as compliance with legal requirements, including anti\-corruption laws; however, there can be no assurance that our third\-party service providers will adhere to these requirements\.

Any of these third\-party service providers, however, may materially fail to meet its service performance commitments to the Company or may suffer disruptions to its systems that could impact its services\. For example, failures in certain third\-party technology or communications systems may cause flight delays or cancellations\. The failure of any of the Company's third\-party service providers to perform its service obligations adequately, or other interruptions of services, may reduce the Company's revenues and increase its expenses, prevent the Company from operating its flights and providing other services to its customers or result in adverse publicity or harm to our brand\. We may also be subject to consequences from any illegal conduct of our third\-party service providers, including for their failure to comply with anti\-corruption laws, such as the U\.S\. Foreign Corrupt Practices Act\. In addition, the Company's business and financial performance could be materially harmed if its customers believe that its services are unreliable or unsatisfactory\.

The Company may also have disagreements with such providers or such contracts may be terminated or may not be extended or renewed\. For example, the number of flight reservations booked through third\-party GDSs or online travel agents ("OTAs") may be adversely affected by disruptions in the business relationships between the Company and these suppliers\. Such disruptions, including a failure to agree upon acceptable contract terms when contracts expire or otherwise become subject to renegotiation, may cause the Company's flight information to be limited or unavailable for display by the affected GDS or OTA operator, significantly increase fees for both the Company and GDS/OTA users and impair the Company's relationships with its customers and travel agencies\. Any such disruptions or contract terminations may adversely impact our operations and financial results\.

If we are not able to negotiate or renew agreements with third\-party service providers, or if we renew existing agreements on less favorable terms, our operations and financial results may be adversely affected\.

12


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

**General**

This report is filed by American Airlines Group Inc\. (AAG) and its wholly\-owned subsidiary American Airlines, Inc\. (American)\. References in this Annual Report on Form 10\-K to “we,” “us,” “our,” the “Company” and similar terms refer to AAG and its consolidated subsidiaries\. “AMR” or “AMR Corporation” refers to the Company during the period of time prior to its emergence from Chapter 11 and its acquisition of US Airways Group, Inc\. (US Airways Group) on December 9, 2013 (the Merger)\. References to US Airways Group and US Airways, Inc\., a subsidiary of US Airways Group (US Airways), represent the entities during the period of time prior to the dissolution of those entities in connection with AAG’s internal corporate restructuring on December 30, 2015\. References in this report to “mainline” refer to the operations of American only and exclude regional operations\.

**Note Concerning Forward\-Looking Statements**

Certain of the statements contained in this report should be considered forward\-looking statements within the meaning of the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities Litigation Reform Act of 1995\. These forward\-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “would,” “continue,” “seek,” “target,” “guidance,” “outlook,” “if current trends continue,” “optimistic,” “forecast” and other similar words\. Such statements include, but are not limited to, statements about our plans, objectives, expectations, intentions, estimates and strategies for the future, and other statements that are not historical facts\. These forward\-looking statements are based on our current objectives, beliefs and expectations, and they are subject to significant risks and uncertainties that may cause actual results and financial position and timing of certain events to differ materially from the information in the forward\-looking statements\. These risks and uncertainties include, but are not limited to, those described below under Part I, Item 1A\. Risk Factors, Part II, Item 7\. Management’s Discussion and Analysis of Financial Condition and Results of Operations and other risks and uncertainties listed from time to time in our filings with the Securities and Exchange Commission (the SEC)\.

All of the forward\-looking statements are qualified in their entirety by reference to the factors discussed in Part I, Item 1A\. Risk Factors and elsewhere in this report\. There may be other factors of which we are not currently aware that may affect matters discussed in the forward\-looking statements and may also cause actual results to differ materially from those discussed\. We do not assume any obligation to publicly update or supplement any forward\-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting such statements other than as required by law\. Forward\-looking statements speak only as of the date of this report or as of the dates indicated in the statements\.

4


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

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

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

Interest Rates\.  Our net income is affected by fluctuations in interest rates (e\.g\. interest expense on variable rate debt and interest income earned on short\-term investments)\. The Company's policy is to manage interest rate risk through a combination of fixed and variable rate debt\. The following table summarizes information related to the Company's interest rate market risk at December 31 (in millions):

|                                                                                |          |          |
| --------------------------------------------------------------------------------------- | -------- | -------- |
|                                                                                | **2019** | **2018** |
| **Variable rate debt**                                                                  |          |          |
| Carrying value of variable rate debt at December 31                                     | $3,408   | $3,500   |
| Impact of 100 basis point increase on projected interest expense for the following year | 33       | 35       |
| **Fixed rate debt**                                                                     |          |          |
| Carrying value of fixed rate debt at December 31                                        | 11,144   | 9,945    |
| Fair value of fixed rate debt at December 31                                            | 11,736   | 9,901    |
| Impact of 100 basis point increase in market rates on fair value                        | (458)    | (378)    |

As announced in July 2017, LIBOR is expected to be phased out by the end of 2021\. Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR may adversely impact our interest rates and related interest expense\. As of December 31, 2019, the Company had  $3\.4 billion  in variable rate indebtedness\. See Part II, Item 7\. Management's Discussion and Analysis of Financial Condition and Results of Operations—Other Liquidity Matters, of this report, for more information on interest expense\.

A change in market interest rates would also impact interest income earned on our cash, cash equivalents and short\-term investments\. Assuming our cash, cash equivalents and short\-term investments remain at their average  2019  levels, a 100 basis point increase in interest rates would result in a corresponding increase in the Company's interest income of approximately $47 million during  2020 \.

Commodity Price Risk (Aircraft Fuel)\.  The price of aircraft fuel can significantly affect the Company's operations, results of operations, financial position and liquidity\.

Our operational and financial results can be significantly impacted by changes in the price and availability of aircraft fuel\. To provide adequate supplies of fuel, the Company routinely enters into purchase contracts that are customarily indexed to market prices for aircraft fuel, and the Company generally has some ability to cover short\-term fuel supply and infrastructure disruptions at some major demand locations\. The Company's current strategy is to not enter into transactions to hedge fuel price volatility, although the Company regularly reviews its policy based on market conditions and other factors\. The Company's  2020  forecasted fuel consumption is presently approximately 4\.5 billion gallons, and based on this forecast, a one\-dollar change in the price of a barrel of crude oil would change the Company's annual fuel expense by approximately $108 million\.

Foreign Currency\.  The Company generates revenues and incurs expenses in numerous foreign currencies\. Changes in foreign currency exchange rates impact the Company's results of operations through changes in the dollar value of foreign currency\-denominated operating revenues and expenses\. Some of the Company's more significant foreign currency exposures include the Canadian dollar, Chinese renminbi, European euro, British pound and Japanese yen\. The Company's current strategy is to not enter into transactions to hedge its foreign currency sales, although the Company regularly reviews its policy based on market conditions and other factors\.

The result of a uniform 1% strengthening in the value of the U\.S\. dollar from  December 31, 2019  levels relative to each of the currencies in which the Company has foreign currency exposure would result in a decrease in pre\-tax income of approximately $23 million for the year ending December 31,  2020 \. This sensitivity analysis was prepared based upon projected  2020  foreign currency\-denominated revenues and expenses as of  December 31, 2019 \.

38


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

ITEM 6\. SELECTED FINANCIAL DATA

The following tables are derived from our audited Consolidated Financial Statements and present selected financial and operating data as of and for the five years ended December 31, 2019\.

We adopted Accounting Standards Update No\. 2014\-09, “Revenue from Contracts with Customers (Topic 606)” using the full retrospective transition method in 2018 and recast results from 2016 and 2017 including interim periods therein\. Results from 2015 have not been recast for the adoption of this standard\.

Consolidated Summary of Operations

|                                   |                                   |                                   |                         |                         |                         |                         |                         |  |  |  |  |  |  |  |  |  |  |  |  |
|:--------------------------------- |:--------------------------------- |:--------------------------------- | -----------------------:| -----------------------:| -----------------------:| -----------------------:| -----------------------:|:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |
|                                   |                                   |                                   | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |  |  |  |  |  |  |  |  |  |  |  |  |
| (in millions, except share data)  | (in millions, except share data)  | (in millions, except share data)  |                    2019 |                    2018 |                    2017 |                    2016 |                    2015 |
| Operating revenue                 | Operating revenue                 | Operating revenue                 |                $47,007  |                $44,438  |                $41,138  |                $39,450  |                $40,704  |
| Operating expense                 | Operating expense                 | Operating expense                 |                 40,389  |                 39,174  |                 35,172  |                 32,454  |                 32,902  |
| Operating income                  | Operating income                  | Operating income                  |                  6,618  |                  5,264  |                  5,966  |                  6,996  |                  7,802  |
| Non\-operating expense, net       | Non\-operating expense, net       | Non\-operating expense, net       |                   (420) |                   (113) |                   (466) |                   (643) |                   (645) |
| Income before income taxes        | Income before income taxes        | Income before income taxes        |                  6,198  |                  5,151  |                  5,500  |                  6,353  |                  7,157  |
| Income tax provision              | Income tax provision              | Income tax provision              |                 (1,431) |                 (1,216) |                 (2,295) |                 (2,158) |                 (2,631) |
| Net income                        | Net income                        | Net income                        |                 $4,767  |                 $3,935  |                 $3,205  |                 $4,195  |                 $4,526  |
| Basic earnings per share          | Basic earnings per share          | Basic earnings per share          |                 $7\.32  |                 $5\.69  |                 $4\.45  |                 $5\.59  |                 $5\.68  |
| Diluted earnings per share        | Diluted earnings per share        | Diluted earnings per share        |                 $7\.30  |                 $5\.67  |                 $4\.43  |                 $5\.55  |                 $5\.63  |
| Cash dividends declared per share | Cash dividends declared per share | Cash dividends declared per share |                 $1\.51  |                 $1\.31  |                 $1\.02  |                 $0\.68  |                 $0\.45  |

Supplemental Information

The supplemental information below represents the adjustments used in our non\-GAAP financial measures\. See "Item 7\. Management's Discussion and Analysis of Financial Condition and Results of Operations" where our non\-GAAP financial measures are defined and reconciled\. Amounts presented below are stated before consideration of income taxes, except for the impact of the Tax Cuts and Jobs Act\.

|                                           |                                           |                                           |                         |                         |                         |                         |                         |  |  |  |  |  |  |  |  |  |  |  |  |
|:----------------------------------------- |:----------------------------------------- |:----------------------------------------- | -----------------------:| -----------------------:| -----------------------:| -----------------------:| -----------------------:|:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |
|                                           |                                           |                                           | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |  |  |  |  |  |  |  |  |  |  |  |  |
| (in millions)                             | (in millions)                             | (in millions)                             |                    2019 |                    2018 |                    2017 |                    2016 |                    2015 |
| MTM adjustments and settlements on hedges | MTM adjustments and settlements on hedges | MTM adjustments and settlements on hedges |                    $14  |                   $(53) |                   $259  |                   $450  |                 $1,301  |
| Restructuring and other                   | Restructuring and other                   | Restructuring and other                   |                      —  |                      —  |                      —  |                      —  |                    (35) |
| Equity investment MTM adjustments         | Equity investment MTM adjustments         | Equity investment MTM adjustments         |                    (14) |                     29  |                     (8) |                    115  |                     26  |
| MTM adjustments on investments            | MTM adjustments on investments            | MTM adjustments on investments            |                     13  |                    (14) |                      —  |                      —  |                      —  |
| Tax Cuts and Jobs Act                     | Tax Cuts and Jobs Act                     | Tax Cuts and Jobs Act                     |                      —  |                      —  |                   (394) |                      —  |                      —  |

Consolidated Balance Sheet Data

We adopted Accounting Standards Update No\. 2016\-02, "Leases (Topic 842)," using the modified retrospective approach in 2018\. Financial statements prior to 2018 were not recast for the adoption of this standard\.

|                                                        |                                                        |                                                        |              |              |              |              |              |  |  |  |  |  |  |  |  |  |  |  |  |
|:------------------------------------------------------ |:------------------------------------------------------ |:------------------------------------------------------ | ------------:| ------------:| ------------:| ------------:| ------------:|:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |
|                                                        |                                                        |                                                        | December 31, | December 31, | December 31, | December 31, | December 31, |  |  |  |  |  |  |  |  |  |  |  |  |
| (in millions)                                          | (in millions)                                          | (in millions)                                          |         2019 |         2018 |         2017 |         2016 |         2015 |
| Total assets                                           | Total assets                                           | Total assets                                           |     $64,532  |     $60,266  |     $53,671  |     $51,850  |     $53,134  |
| Debt and finance leases (including current maturities) | Debt and finance leases (including current maturities) | Debt and finance leases (including current maturities) |      11,160  |       9,771  |       8,834  |       7,332  |       8,329  |
| Stockholders' equity                                   | Stockholders' equity                                   | Stockholders' equity                                   |      15,358  |      13,687  |      12,530  |      11,277  |      10,850  |

27


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

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

**Number** | **Description**                                                                                |
| 4\.106                        | [Amended and Restated Intercreditor Agreement (2016\-2), dated as of July 8, 2016, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2016\-2AA, as Trustee of the American Airlines Pass Through Trust 2016\-2A and as Trustee of the American Airlines Pass Through Trust 2016\-2B, KfW IPEX\-Bank GmbH, 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\.3 to American’s Current Report on Form 8\-K filed on July 12, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516646353/d210431dex43.htm)      |
| 4\.107                        | [Amended and Restated Note Purchase Agreement, dated as of July 8, 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\.6 to American’s Current Report on Form 8\-K filed on July 12, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516646353/d210431dex46.htm)                                                                                |
| 4\.108                        | [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\.6 to American’s Current Report on Form 8\-K filed on July 12, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516646353/d210431dex46.htm)                                                                                |
| 4\.109                        | [Form of First Amendment to Participation Agreement (First Amendment to 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 D to Exhibit 4\.6 to American’s Current Report on Form 8\-K filed on July 12, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516646353/d210431dex46.htm)                                                                                |
| 4\.110                        | [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\.6 to American’s Current Report on Form 8\-K filed on July 12, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516646353/d210431dex46.htm)                                                                                |
| 4\.111                        | [Form of First Amendment to Indenture and Security Agreement (First Amendment to Indenture and Security Agreement between American Airlines, Inc\., and Wilmington Trust Company, as Loan Trustee) (included in Exhibit E to Exhibit 4\.6 to American’s Current Report on Form 8\-K filed on July 12, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516646353/d210431dex46.htm)                                                                                |
| 4\.112                        | [Form of Pass Through Trust Certificate, Series 2016\-2B (included in Exhibit A to Exhibit 4\.2 to American’s Current Report on Form 8\-K filed on July 12, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516646353/d210431dex42.htm)                                                                                |
| 4\.113                        | [Revolving Credit Agreement (2016\-2B), dated as of July 8, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016\-2B, as Borrower, and KfW IPEX Bank GmbH, as liquidity Provider (incorporated by reference to Exhibit 4\.12 to American’s Current Report on Form 8\-K filed on July 12, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516646353/d210431dex412.htm)                                                                                |
| 4\.114                        | [Trust Supplement No\. 2016\-3AA, dated as of October 3, 2016, 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 October 4, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516730454/d359659dex42.htm)                                                                                |
| 4\.115                        | [Trust Supplement No\. 2016\-3A, dated as of October 3, 2016, 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 October 4, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516730454/d359659dex43.htm)                                                                                |
| 4\.116                        | [Intercreditor Agreement (2016\-3), dated as of October 3, 2016, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2016\-3AA and as Trustee of the American Airlines Pass Through Trust 2016\-3A, KfW IPEX\-Bank GmbH, as Class AA Liquidity Provider and Class A Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4\.4 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/d359659dex44.htm)                                                                                |
| 4\.117                        | [Amended and Restated Intercreditor Agreement (2016\-3), dated as of October 4, 2017, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2016\-3AA, as Trustee of the American Airlines Pass Through Trust 2016\-3A and as Trustee of the American Airlines Pass Through Trust 2016\-3B, KfW IPEX\-Bank GmbH, 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\.3 to American’s Current Report on Form 8\-K filed on October 5, 2017 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517304687/d466899dex43.htm) |
| 4\.118                        | [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)                                                                                |

188


Annual Report of Southwest Airlines Co\. for year 2018

In fourth quarter 2004, the Company entered into four identical 13\-year floating\-rate financing arrangements, whereby it borrowed a total of $112 million from French banking partnerships\. The borrowings matured and were redeemed in full on June 30, 2018, utilizing available cash on hand\.

On February 28, 1997, the Company issued $100 million of senior unsecured 7\.375 percent debentures due March 1, 2027\. Interest is payable semi\-annually on March 1 and September 1\. The debentures may be redeemed, at the option of the Company, in whole at any time or in part from time to time, at a redemption price equal to the greater of the principal amount of the debentures plus accrued interest at the date of redemption or the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the date of redemption at the comparable treasury rate plus20 basis points, plus accrued interest at the date of redemption\.

The Company is required to provide standby letters of credit to support certain obligations that arise in the ordinary course of business\. Although the letters of credit are an off\-balance sheet item, the majority of the obligations to which they relate are reflected as liabilities in the Consolidated Balance Sheet\. Outstanding letters of credit totaled $170 million at December 31, 2018\.

The net book value of the assets pledged as collateral for the Company’s secured borrowings, primarily aircraft, was $1\.5 billion at December 31, 2018\. In addition, the Company has pledged a total of up to 74 of its Boeing 737\-700 and 24 of its Boeing 737\-800 aircraft at a net book value of $2\.1 billion, in the case that it has obligations related to its fuel derivative instruments with counterparties that exceed certain thresholds\. See Note 10 for further information on these collateral arrangements\.

As of December 31, 2018, aggregate annual principal maturities of debt and capital leases (not including amounts associated with interest rate swap agreements, interest on capital leases, amortization of capital lease incentives, and amortization of purchase accounting adjustments) for the five\-year period ending December 31, 2023, and thereafter, were $590 million in 2019, $821 million in 2020, $172 million in 2021, $477 million in 2022, $105 million in 2023, and $1\.1 billion thereafter\.

93


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

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

The amount of, and changes to, our uncertain tax positions were not material in any of the years presented\. We accrue interest and penalties related to unrecognized tax benefits in interest expense and operating expense, respectively\.

The 2017 Tax Act was enacted on December 22, 2017 and is the most comprehensive tax change in more than 30 years\. We completed our evaluation of the 2017 Tax Act and we reflected the impact of its effects, including the impact of a lower corporate income tax rate (21% vs\. 35%) on our deferred tax assets and liabilities and the one\-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred\. For the year ended December 31 2017, we recognized a special income tax provision of   $823 million  to reflect these impacts of the 2017 Tax Act\.

8\. Risk Management

Our economic prospects are heavily dependent upon two variables we cannot control: the health of the economy and the price of fuel\.

Due to the discretionary nature of business and leisure travel spending and the highly competitive nature of the airline industry, our revenues are heavily influenced by the condition of the U\.S\. economy and economies in other regions of the world\. Unfavorable conditions in these broader economies have resulted, and may result in the future, in decreased passenger demand for air travel, changes in booking practices and related reactions by our competitors, all of which in turn have had, and may have in the future, a negative effect on our business\. In addition, during challenging economic times, actions by our competitors to increase their revenues can have an adverse impact on our revenues\.

Our operating results are materially impacted by changes in the availability, price volatility and cost of aircraft fuel, which represents one of the largest single cost items in our business\. Aircraft fuel prices have in the past, and may in the future, experience substantial volatility\. Because of the amount of fuel needed to operate our business, even a relatively small increase or decrease in the price of aircraft fuel can have a material effect on our operating results and liquidity\.

These additional factors could impact our results of operations, financial performance and liquidity:

(a) Credit Risk

Most of our receivables relate to tickets sold to individual passengers through the use of major credit cards or to tickets sold by other airlines and used by passengers on American\. These receivables are short\-term, mostly settled within seven days after sale\. Bad debt losses, which have been minimal in the past, have been considered in establishing allowances for doubtful accounts\. We do not believe we are subject to any significant concentration of credit risk\.

(b) Interest Rate Risk

We have exposure to market risk associated with changes in interest rates related primarily to our variable\-rate debt obligations\. Interest rates on   $9\.6 billion  principal amount of long\-term debt as of  December 31, 2019  are subject to adjustment to reflect changes in floating interest rates\. The weighted average effective interest rate on our variable\-rate debt was   3\.6%  at  December 31, 2019 \. We currently do not have an interest rate hedge program to hedge our exposure to floating interest rates on our variable\-rate debt obligations\.

(c) Foreign Currency Risk

We are exposed to the effect of foreign exchange rate fluctuations on the U\.S\. dollar value of foreign currency\-denominated transactions\. Our largest exposure comes from the British pound, Euro, Canadian dollar and various Latin American currencies, primarily the Brazilian real\. We do not currently have a foreign currency hedge program\.

96


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

DELTA AIR LINES, INC\.

Consolidated Statements of Stockholders' Equity

|                                                                                |                  |                  |                                      |                             |                                                    |                    |                        |                 |
| -------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | ---------------- | ------------------------------------ | --------------------------- | -------------------------------------------------- | ------------------ | ---------------------- | --------------- |
|                                                                                | **Common Stock** | **Common Stock** | **Additional
Paid\-In Capital** |  **Retained
Earnings** | **Accumulated
Other
Comprehensive Loss** | **Treasury Stock** | **Treasury Stock**     |                 |
| **(in millions, except per share data)**                                                                                | **Shares**       | **Amount**       | **Additional
Paid\-In Capital** |  **Retained
Earnings** | **Accumulated
Other
Comprehensive Loss** | **Shares**         | **Amount**             | **Total**       |
| Balance at January 1, 2016                                                                                | 800              | $—               | $12,936                              | $5,562                      | $

(7,275

)                           | 21                 | $

(373

) | $10,850         |
| Net income                                                                                | —                | —                | —                                    | 4,195                       | —                                                  | —                  | —                      | 4,195           |
| Change in accounting principle                                                                                | —                | —                | —                                    | (735

)               | —                                                  | —                  | —                      | (735

)   |
| Dividends declared                                                                                | —                | —                | —                                    | (509

)               | —                                                  | —                  | —                      | (509

)   |
| Other comprehensive loss                                                                                | —                | —                | —                                    | —                           | (361

)                                      | —                  | —                      | (361

)   |
| Shares of common stock issued and compensation expense associated with equity awards (Treasury shares withheld for payment of taxes, $44\.27 ^(1)^  per share) | 2                | —                | 105                                  | —                           | —                                                  | 1                  | (40

)           | 65              |
| Stock options exercised                                                                                | 3                | —                | 32                                   | —                           | —                                                  | —                  | —                      | 32              |
| Treasury stock, net, contributed to our qualified defined benefit pension plans                                                                                | —                | —                | 204                                  | —                           | —                                                  | (8

)        | 139                    | 343             |
| Stock purchased and retired                                                                                | (60

)     | —                | (983

)                        | (1,618

)             | —                                                  | —                  | —                      | (2,601

) |
| Balance at December 31, 2016                                                                                | 745              | —                | 12,294                               | 6,895                       | (7,636

)                                    | 14                 | (274

)          | 11,279          |
| Net income                                                                                | —                | —                | —                                    | 3,205                       | —                                                  | —                  | —                      | 3,205           |
| Dividends declared                                                                                | —                | —                | —                                    | (731

)               | —                                                  | —                  | —                      | (731

)   |
| Other comprehensive income                                                                                | —                | —                | —                                    | —                           | 15                                                 | —                  | —                      | 15              |
| Shares of common stock issued and compensation expense associated with equity awards (Treasury shares withheld for payment of taxes, $48\.31 ^(1)^  per share) | 1                | —                | 107                                  | —                           | —                                                  | 1                  | (39

)           | 68              |
| Stock options exercised                                                                                | 2                | —                | 28                                   | —                           | —                                                  | —                  | —                      | 28              |
| Treasury stock, net, contributed to our qualified defined benefit pension plans                                                                                | —                | —                | 188                                  | —                           | —                                                  | (8

)        | 155                    | 343             |
| Stock purchased and retired                                                                                | (33

)     | —                | (564

)                        | (1,113

)             | —                                                  | —                  | —                      | (1,677

) |
| Balance at December 31, 2017                                                                                | 715              | —                | 12,053                               | 8,256                       | (7,621

)                                    | 7                  | (158

)          | 12,530          |
| Net income                                                                                | —                | —                | —                                    | 3,935                       | —                                                  | —                  | —                      | 3,935           |
| Change in accounting principle and other                                                                                | —                | —                | —                                    | (154

)               | (106

)                                      | —                  | —                      | (260

)   |
| Dividends declared                                                                                | —                | —                | —                                    | (909

)               | —                                                  | —                  | —                      | (909

)   |
| Other comprehensive loss                                                                                | —                | —                | —                                    | —                           | (98

)                                       | —                  | —                      | (98

)    |
| Shares of common stock issued and compensation expense associated with equity awards (Treasury shares withheld for payment of taxes, $54\.90 ^(1)^  per share) | 1                | —                | 91                                   | —                           | —                                                  | 1                  | (40

)           | 51              |
| Stock options exercised                                                                                | 1                | —                | 13                                   | —                           | —                                                  | —                  | —                      | 13              |
| Stock purchased and retired                                                                                | (29

)     | —                | (486

)                        | (1,089

)             | —                                                  | —                  | —                      | (1,575

) |
| Balance at December 31, 2018                                                                                | 688              | $—               | $11,671                              | $10,039                     | $

(7,825

)                           | 8                  | $

(198

) | $13,687         |

|       |                                    |
| ----- | ---------------------------------- |
| ^(1)^ | Weighted average price per share\. |

The accompanying notes are an integral part of these Consolidated Financial Statements\.

 57


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\.**

**CONSOLIDATED BALANCE SHEETS**

**(In millions, except shares)**

|                                                                                |                     |                     |
|:------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------:| -------------------:|
|                                                                                | **At December 31,** | **At December 31,** |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                |            **2017** |            **2016** |
| Current liabilities:                                                                                |                     |                     |
| Advance ticket sales                                                                                |             $3,876  |             $3,730  |
| Frequent flyer deferred revenue                                                                                |              2,176  |              2,135  |
| Accounts payable                                                                                |              2,196  |              2,139  |
| Accrued salaries and benefits                                                                                |              2,166  |              2,307  |
| Current maturities of long\-term debt                                                                                |              1,565  |                849  |
| Current maturities of capital leases                                                                                |                128  |                116  |
| Other                                                                                |                569  |              1,010  |
| Total current liabilities                                                                                |             12,676  |             12,286  |
| Long\-term debt                                                                                |             11,703  |              9,918  |
| Long\-term obligations under capital leases                                                                                |                996  |                822  |
| Other liabilities and deferred credits:                                                                                |                     |                     |
| Frequent flyer deferred revenue                                                                                |              2,565  |              2,748  |
| Postretirement benefit liability                                                                                |              1,602  |              1,581  |
| Pension liability                                                                                |              1,921  |              1,892  |
| Advanced purchase of miles                                                                                |                  —  |                430  |
| Deferred income taxes                                                                                |                225  |                  —  |
| Lease fair value adjustment, net                                                                                |                198  |                277  |
| Other                                                                                |              1,634  |              1,527  |
| Total other liabilities and deferred credits                                                                                |              8,145  |              8,455  |
| Commitments and contingencies                                                                                |                     |                     |
| Stockholders’ equity:                                                                                |                     |                     |
| Preferred stock                                                                                |                  —  |                  —  |
| Common stock at par, $0\.01 par value; authorized 1,000,000,000 shares; outstanding 286,973,195 and 314,612,744 shares at December 31, 2017 and 2016, respectively |                  3  |                  3  |
| Additional capital invested                                                                                |              6,098  |              6,569  |
| Retained earnings                                                                                |              4,621  |              3,427  |
| Stock held in treasury, at cost                                                                                |               (769) |               (511) |
| Accumulated other comprehensive loss                                                                                |             (1,147) |               (829) |
| Total stockholders’ equity                                                                                |              8,806  |              8,659  |
| Total liabilities and stockholders’ equity                                                                                |            $42,326  |            $40,140  |

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

52


Annual Report of Southwest Airlines Co\. for year 2017

endeavors to acquire jet fuel at the lowest possible cost and to reduce volatility in operating expenses through its fuel hedging program\. Although the Company may periodically enter into jet fuel derivatives for short\-term timeframes, because jet fuel is not widely traded on an organized futures exchange, there are limited opportunities to hedge directly in jet fuel for time horizons longer than approximately 24 months into the future\. However, the Company has found that financial derivative instruments in other commodities, such as West Texas Intermediate ("WTI") crude oil, Brent crude oil, and refined products, such as heating oil and unleaded gasoline, can be useful in decreasing its exposure to jet fuel price volatility\. The Company does not purchase or hold any financial derivative instruments for trading or speculative purposes\.

The Company has used financial derivative instruments for both short\-term and long\-term time frames, and primarily uses a mixture of purchased call options, collar structures (which include both a purchased call option and a sold put option), call spreads (which include a purchased call option and a sold call option), put spreads (which include a purchased put option and a sold put option), and fixed price swap agreements in its portfolio\. Although the use of collar structures and swap agreements can reduce the overall cost of hedging, these instruments carry more risk than purchased call options in that the Company could end up in a liability position when the collar structure or swap agreement settles\. With the use of purchased call options and call spreads, the Company cannot be in a liability position at settlement, but does not have coverage once market prices fall below the strike price of the purchased call option\.

For the purpose of evaluating its net cash spend for jet fuel and for forecasting its future estimated jet fuel expense, the Company evaluates its hedge volumes strictly from an "economic" standpoint and thus does not consider whether the hedges have qualified or will qualify for hedge accounting\. The Company defines its "economic" hedge as the net volume of fuel derivative contracts held, including the impact of positions that have been offset through sold positions, regardless of whether those contracts qualify for hedge accounting\. The level at which the Company is economically hedged for a particular period is also dependent on current market prices for that period, as well as the types of derivative instruments held and the strike prices of those instruments\. For example, the Company may enter into "out\-of\-the\-money" option contracts (including catastrophic protection), which may not generate intrinsic gains at settlement if market prices do not rise above the option strike price\. Therefore, even though the Company may have an economic hedge in place for a particular period, that hedge may not produce any hedging gains at settlement and may even produce hedging losses depending on market prices, the types of instruments held, and the strike prices of those instruments\.

For 2017, the Company had fuel derivative instruments in place for up to 63 percent of its fuel consumption\. As of December 31, 2017, the Company also had fuel derivative instruments in place to provide coverage at varying price levels, but up to a maximum of approximately 78 percent of its 2018 estimated fuel consumption, depending on where market prices settle\. The following table provides information about the Company’s volume of fuel hedging on an economic basis considering current market prices:

|                      |                               |                                                |
| -------------------- | ----------------------------- | ---------------------------------------------- |
|                      | **Maximum fuel hedged as of** |                                                |
|                      | **December 31, 2017**         | **Derivative underlying commodity type as of** |
| **Period (by year)** | **(gallons in millions) (a)** | **December 31, 2017**                          |
| 2018                 | 1,647                         | WTI crude and Brent crude oil                  |
| 2019                 | 1,377                         | WTI crude and Brent crude oil                  |
| 2020                 | 685                           | WTI crude oil                                  |
| Beyond 2020          | 315                           | WTI crude oil                                  |

(a) Due to the types of derivatives utilized by the Company and different price levels of those contracts, these volumes represent the maximum economic hedge in place and may vary significantly as market prices fluctuate\.

Upon proper qualification, the Company accounts for its fuel derivative instruments as cash flow hedges\. Generally, utilizing hedge accounting, all periodic changes in fair value of the derivatives designated as hedges that are considered to be effective are recorded in Accumulated other comprehensive income (loss) ("AOCI") until the underlying jet fuel is consumed\. See Note 12\. The Company’s results are subject to the possibility that periodic changes will not be

93


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

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

**Number** | **Description**                                                                                |
| 4\.80                         | [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) (incorporated by reference to Exhibit B to Exhibit 4\.6 to American’s Current Report on Form 8\-K filed on January 21, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516433815/d126794dex46.htm) |
| 4\.81                         | [Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc\., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4\.6 to American’s Current Report on Form 8\-K filed on January 21, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516433815/d126794dex46.htm)                                                                                |
| 4\.82                         | [Form of Pass Through Trust Certificate, Series 2016\-1AA (incorporated by reference to Exhibit A to Exhibit 4\.2 to American’s Current Report on Form 8\-K filed on January 21, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516433815/d126794dex42.htm)                                                                                |
| 4\.83                         | [Form of Pass Through Trust Certificate, Series 2016\-1A (incorporated by reference to Exhibit A to Exhibit 4\.3 to American’s Current Report on Form 8\-K filed on January 21, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516433815/d126794dex43.htm)                                                                                |
| 4\.84                         | [Form of Pass Through Trust Certificate, Series 2016\-1B (incorporated by reference to Exhibit A to Exhibit 4\.4 to American’s Current Report on Form 8\-K filed on January 21, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516433815/d126794dex44.htm)                                                                                |
| 4\.85                         | [Revolving Credit Agreement (2016\-1AA), dated as of January 19, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016\-1AA, as Borrower, and KfW IPEX\-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4\.12 to American’s Current Report on Form 8\-K filed on January 21, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516433815/d126794dex412.htm)                                                                                |
| 4\.86                         | [Revolving Credit Agreement (2016\-1A), dated as of January 19, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016\-1A, as Borrower, and KfW IPEX\-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4\.13 to American’s Current Report on Form 8\-K filed on January 21, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516433815/d126794dex413.htm)                                                                                |
| 4\.87                         | [Revolving Credit Agreement (2016\-1B), dated as of January 19, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016\-1B, 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 January 21, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516433815/d126794dex414.htm)                                                                                |
| 4\.88                         | [Trust Supplement No\. 2016\-2AA, dated as of May 16, 2016, 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 May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex42.htm)                                                                                |
| 4\.89                         | [Trust Supplement No\. 2016\-2A, dated as of May 16, 2016, 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 May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex43.htm)                                                                                |
| 4\.90                         | [Intercreditor Agreement (2016\-2), dated as of May 16, 2016, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2016\-2AA and as Trustee of the American Airlines Pass Through Trust 2016\-2A, KfW IPEX\-Bank GmbH, as Class AA Liquidity Provider and Class A Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4\.4 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex44.htm)              |
| 4\.91                         | [Note Purchase Agreement, dated as of May 16, 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 May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex49.htm)                                           |
| 4\.92                         | [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) (incorporated by reference to Exhibit B to Exhibit 4\.9 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex49.htm)     |
| 4\.93                         | [Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc\., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4\.9 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex49.htm)                                                                                |
| 4\.94                         | [Form of Pass Through Trust Certificate, Series 2016\-2AA (incorporated by reference to Exhibit A to Exhibit 4\.2 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex42.htm)                                                                                |
| 4\.95                         | [Form of Pass Through Trust Certificate, Series 2016\-2A (incorporated by reference to Exhibit A to Exhibit 4\.3 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex43.htm)                                                                                |

170


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

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

|            |                 |                                                                                |
| ----------:|:--------------- |:---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| \*^10\.205 | UAL
United | [Supplemental Agreement No\. 5 to Purchase Agreement No\. 3860, dated as of April 30, 2015 (filed as Exhibit 10\.8 to UAL’s Form  10\-Q for the quarter ended June 30, 2015, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312515261239/d941677dex108.htm)                                                                                |
| \*^10\.206 | UAL
United | [Supplemental Agreement No\. 6 to Purchase Agreement No\. 3860, dated as of December 31, 2015 (filed as Exhibit 10\.178 to UAL’s Form  10\-K for the year ended December 31, 2015, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312516468479/d13806dex10178.htm)                                                                                |
| \*^10\.207 | UAL
United | [Supplemental Agreement No\. 7 to Purchase Agreement No\. 3860, dated March 7, 2016, between The Boeing Company and United Airlines, Inc\. (filed as Exhibit 10\.5 to UAL’s Form  10\-Q for the quarter ended March 31, 2016, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312516550432/d116267dex105.htm)                                                                                |
| \*^10\.208 | UAL
United | [Letter Agreement to Purchase Agreement No\. 3860, dated May 5, 2016, between The Boeing Company and United Airlines, Inc\. (filed as Exhibit 10\.5 to UAL’s Form  10\-Q for the quarter ended June 30, 2016, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312516651221/d188420dex105.htm)                                                                                |
| \*^10\.209 | UAL
United | [Supplemental Agreement No\. 8, including exhibits and side letters, to Purchase Agreement No\. 3860, Dated June 15, 2017, between The Boeing Company and United Airlines, Inc\. (filed as Exhibit 10\.5 to UAL’s Form  10\-Q for the quarter ended June 30, 2017, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312517231250/d414345dex105.htm)                                                                                |
| \*^10\.210 | UAL
United | [Letter Agreement No\.   UAL\-LA\-1604287 to Purchase Agreement Nos\. 3776, 3784 and 3860, dated December 27, 2016, between The Boeing Company and United Airlines, Inc\. (filed as Exhibit 10\.194 to UAL’s Form  10\-K for the year ended December 31, 2016, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312517054129/d300268dex10194.htm)                                                                                |
| \*^10\.211 | UAL
United | [Amendment No\. 3, dated March 14, 2017, to Airbus A350\-900XWB Purchase Agreement, dated March 5, 2010, between Airbus S\.A\.S\. and United Airlines, Inc\. (filed as Exhibit 10\.1 to UAL’s Form  10\-Q for the quarter ended March 31, 2017, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312517127429/d334701dex101.htm)                                                                                |
| \*^10\.212 | UAL
United | [Amended and  Restated A350\-900 Purchase Agreement, dated September 1, 2017, including letter agreements related thereto, between Airbus S\.A\.S\. and United Airlines, Inc\. (filed as Exhibit 10\.1 to UAL’s Form  10\-Q for the quarter ended September 30, 2017, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312517313831/d437791dex101.htm)                                                                                |
|  \*10\.213 | UAL
United | [Credit and Guaranty Agreement, dated as of March 27, 2013, among Continental Airlines, Inc\. and United Air Lines, Inc\., as  co\-borrowers, United Continental Holdings, Inc\., as parent and a guarantor, the subsidiaries of United Continental Holdings, Inc\. other than the  co\-borrowers party thereto from time to time, as guarantors, the lenders party thereto from time to time, and JPMorgan Chase Bank, N\.A\., as administrative agent (filed as Exhibit 10\.1 to UAL’s Form  8\-K filed March 28, 2013, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000095015513000010/e62283952ex10_1.htm) |
|  \*10\.214 | UAL
United | [First Amendment to Credit and Guaranty Agreement, dated as of March 27, 2014 (filed as Exhibit 10\.1 to UAL’s Form  10\-Q for the quarter ended March 31, 2014, Commission file number  1\-6033, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/100517/000119312514157115/d695457dex101.htm)                                                                                |

129


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

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

American provides a valuation allowance for its deferred tax assets, which include the net operating losses (NOLs), when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized\. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income\. American considers all available positive and negative evidence and makes certain assumptions in evaluating the realizability of its deferred tax assets\. Many factors are considered that impact American’s assessment of future profitability, including conditions which are beyond its control, such as the health of the economy, the availability and price volatility of aircraft fuel and travel demand\.

The components of American’s deferred tax assets and liabilities were (in millions):

|                                                    |                  |                  |
| -------------------------------------------------- | ---------------- | ---------------- |
|                                                    | **December 31,** | **December 31,** |
|                                                    | **2019**         | **2018**         |
| Deferred tax assets:                               |                  |                  |
| Operating loss carryforwards                       | $2,115           | $2,420           |
| Leases                                             | 2,067            | 2,176            |
| Loyalty program liability                          | 1,755            | 1,770            |
| Pensions                                           | 1,219            | 1,421            |
| Postretirement benefits other than pensions        | 145              | 145              |
| Rent expense                                       | 126              | 136              |
| Alternative minimum tax (AMT) credit carryforwards | 118              | 231              |
| Reorganization items                               | 30               | 33               |
| Other                                              | 569              | 588              |
| Total deferred tax assets                          | 8,144            | 8,920            |
| Valuation allowance                                | (24

)     | (19

)     |
| Net deferred tax assets                            | 8,120            | 8,901            |
| Deferred tax liabilities:                          |                  |                  |
| Accelerated depreciation and amortization          | (5,153

)  | (5,243

)  |
| Leases                                             | (1,968

)  | (2,068

)  |
| Other                                              | (340

)    | (321

)    |
| Total deferred tax liabilities                     | (7,461

)  | (7,632

)  |
| Net deferred tax asset                             | $659             | $1,269           |

At  December 31, 2019 , American had approximately   $9\.2 billion  of federal NOLs carried over from prior taxable years (NOL Carryforwards) to reduce future federal taxable income, substantially all of which American expects to be available for use in 2020\. American is a member of AAG’s consolidated federal and certain state income tax returns\. The amount of federal NOL Carryforwards available in those returns is   $9\.1 billion , substantially all of which is expected to be available for use in 2020\. The federal NOL Carryforwards will expire beginning in 2023 if unused\. American also had approximately   $2\.9 billion  of NOL Carryforwards to reduce future state taxable income at  December 31, 2019 , which will expire in years 2020 through 2039 if unused\. American’s ability to deduct its NOL Carryforwards and to utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 where an “ownership change” has occurred\. Substantially all of American’s remaining federal NOL Carryforwards attributable to US Airways Group are subject to limitation under Section 382; however, American’s ability to utilize such NOL Carryforwards is not anticipated to be effectively constrained as a result of such limitation\. American elected to be covered by certain special rules for federal income tax purposes that permitted approximately   $9\.5 billion  (with   $7\.2 billion  of unlimited NOL still remaining at  December 31, 2019 ) of its federal NOL Carryforwards to be utilized without regard to the annual limitation generally imposed by Section 382\. Similar limitations may apply for state income tax purposes\. American’s ability to utilize any new NOL Carryforwards arising after the ownership changes is not affected by the annual limitation rules imposed by Section 382 unless another future ownership change occurs\. Under the Section 382 limitation, cumulative stock ownership changes among material stockholders exceeding 50% during a rolling three\-year period can potentially limit a company’s future use of NOLs and tax credits\.

At  December 31, 2019 , American had an AMT credit carryforward of approximately   $226 million  available for federal income tax purposes, which is presently expected to be fully refundable over the next several years as a result of the repeal of corporate AMT as part of the 2017 Tax Act\.

138


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

Supplemental Information

We sometimes use information ("non\-GAAP financial measures") that is derived from the Consolidated Financial Statements, but that is not presented in accordance with GAAP\. Under the U\.S\. Securities and Exchange Commission rules, non\-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results\. Reconciliations below may not calculate exactly due to rounding\.

TRASM, adjusted

The following table shows a reconciliation of TRASM (a GAAP measure) to TRASM, adjusted (a non\-GAAP financial measure)\. We adjust TRASM for the following items to determine TRASM, adjusted for the reasons described below

• Third\-party refinery sales\.  We adjust TRASM for refinery sales to third parties because these revenues are not related to our airline segment\. TRASM, adjusted therefore provides a more meaningful comparison of revenue from our airline operations to the rest of the airline industry\.

• DGS sale adjustment\.  Because we sold DGS in December 2018, we have excluded the impact of DGS from 2018 results for comparability\.

|                             |                             |                             |                         |                         |                         |                         |  |  |  |
|:--------------------------- |:--------------------------- |:--------------------------- | -----------------------:| -----------------------:| -----------------------:| -----------------------:|:- |:- |:- |
|                             |                             |                             | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |  |  |  |
|                             |                             |                             |                    2019 |                    2019 |                    2018 |                    2018 |
| TRASM (cents)               | TRASM (cents)               | TRASM (cents)               |                17\.07 ¢ |                17\.07 ¢ |                16\.87 ¢ |                16\.87 ¢ |
| Adjusted for:               | Adjusted for:               | Adjusted for:               |                         |                         |                         |                         |
| Third\-party refinery sales | Third\-party refinery sales | Third\-party refinery sales |                 (0\.04) |                 (0\.04) |                 (0\.21) |                 (0\.21) |
| DGS sale adjustment         | DGS sale adjustment         | DGS sale adjustment         |                      —  |                      —  |                 (0\.09) |                 (0\.09) |
| TRASM, adjusted             | TRASM, adjusted             | TRASM, adjusted             |                17\.03 ¢ |                17\.03 ¢ |                16\.57 ¢ |                16\.57 ¢ |

CASM\-Ex

The following table shows a reconciliation of CASM (a GAAP measure) to CASM\-Ex (a non\-GAAP financial measure)\. We adjust CASM for the following items to determine CASM\-Ex for the reasons described below:

• Aircraft fuel and related taxes\.  The volatility in fuel prices impacts the comparability of year\-over\-year financial performance\. The adjustment for aircraft fuel and related taxes allows investors to understand and analyze our non\-fuel costs and year\-over\-year financial performance\.

• Ancillary businesses and refinery\.  We adjust for expenses related to aircraft maintenance we provide to third parties, our vacation wholesale operations, our private jet operations as well as refinery cost of sales to third parties\. 2018 results also include staffing services performed by DGS\. Because these businesses are not related to the generation of a seat mile, we adjust for the costs related to these areas to provide a more meaningful comparison of the costs of our airline operations to the rest of the airline industry\.

• Profit sharing\.  We adjust for profit sharing because this adjustment allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry\.

|                                   |                                   |                                   |                         |                         |                         |                         |  |  |  |
|:--------------------------------- |:--------------------------------- |:--------------------------------- | -----------------------:| -----------------------:| -----------------------:| -----------------------:|:- |:- |:- |
|                                   |                                   |                                   | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |  |  |  |
|                                   |                                   |                                   |                    2019 |                    2019 |                    2018 |                    2018 |
| CASM (cents)                      | CASM (cents)                      | CASM (cents)                      |                14\.67 ¢ |                14\.67 ¢ |                14\.87 ¢ |                14\.87 ¢ |
| Adjusted for:                     | Adjusted for:                     | Adjusted for:                     |                         |                         |                         |                         |
| Aircraft fuel and related taxes   | Aircraft fuel and related taxes   | Aircraft fuel and related taxes   |                 (3\.10) |                 (3\.10) |                 (3\.43) |                 (3\.43) |
| Ancillary businesses and refinery | Ancillary businesses and refinery | Ancillary businesses and refinery |                 (0\.45) |                 (0\.45) |                 (0\.64) |                 (0\.64) |
| Profit sharing                    | Profit sharing                    | Profit sharing                    |                 (0\.60) |                 (0\.60) |                 (0\.49) |                 (0\.49) |
| CASM\-Ex                          | CASM\-Ex                          | CASM\-Ex                          |                10\.52 ¢ |                10\.52 ¢ |                10\.31 ¢ |                10\.31 ¢ |

46