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

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

Long\-Term Investments

We have developed strategic relationships with certain airlines through equity investments and other forms of cooperation and support\. Strategic relationships improve our coordination with these airlines and enable our customers to seamlessly connect to more places while enjoying a consistent, high\-quality travel experience\.

Equity Method Investments

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| *•* | *Aeroméxico* \. During 2017, we completed a   $622 million  tender offer and executed derivative contracts for   $173 million  to obtain additional capital stock of Grupo Aeroméxico, increasing our ownership percentage to a non\-controlling   49%  equity stake in Grupo Aeroméxico \.  |

|     |                                                                                |
| --- | ----------------------------------------------------------------------------------------------------------------------------------------------- |
| *•* | *Virgin Atlantic* \. We have a non\-controlling   49%  equity stake in Virgin Atlantic Limited, the parent company of Virgin Atlantic Airways\. |

We account for these investments under the equity method of accounting and recognize our portion of their financial results in miscellaneous, net in our Consolidated Statements of Operations\.

Available\-for\-Sale Investments

|     |                                                                                |
| --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| *•* | *GOL\.*  We own   9%  of the outstanding capital stock of GOL's parent company through ownership of its preferred shares\. Driven by an improved outlook for the Brazilian economy and the financial performance of the company, the stock price of GOL's parent company has more than doubled since December 31, 2016 and exceeds the original cost of our investment\. This unrealized gain of   $56 million  is recorded in AOCI\. |

Additionally, GOL has a   $300 million  five \-year term loan facility with third parties, which we have guaranteed\. Our entire guaranty is secured by GOL's ownership interest in Smiles, GOL's publicly\-traded loyalty program\. Because GOL remains in compliance with the terms of its loan facility, we have not recorded a liability on our Consolidated Balance Sheets as of  December 31, 2017 \.

|   |                                                                                |
| - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | *China Eastern\.*  We have a   3%  equity interest in China Eastern\. Because the investment agreement with China Eastern restricts our sale or transfer of these shares through the September 2018 quarter, we had previously recorded this investment at cost\. As we are now within one year of the lapse of these restrictions, we began accounting for the investment during the September 2017 quarter as available\-for\-sale with changes in fair value recorded in AOCI\. As of December 31, 2017, the unrealized gain recorded in AOCI was   $106 million \. |

Cost Method Investments

|     |                                                                                |
| --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| *•* | *Air France\-KLM\.*  During 2017, we acquired   10%  of the outstanding shares of our joint venture partner, Air France\-KLM, for   $450 million \. Because our investment agreement restricts the sale or transfer of these shares for five years, we account for this investment at cost\. We are working to develop a combined long\-term joint venture with Air France\-KLM and Virgin Atlantic as part of our investment strategy\. |

|   |                                                                                |
| - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | *Republic Airways* \. During 2017, we acquired a   17%  ownership interest in Republic Airways Holdings Inc\. ("Republic"), in consideration for our unsecured claim in Republic’s bankruptcy case\. This ownership interest is accounted for at cost as Republic's shares are not actively traded on a public exchange and we do not have the ability to exercise significant influence over Republic\. |

 65


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

only for Boeing qualified mechanics, and excludes legacy Virgin America mechanics as they are not currently under a collective bargaining agreement\.

Horizon’s union contracts at December 31, 2018 were as follows:

|                                              |                                                              |                         |                      |
| -------------------------------------------- | ------------------------------------------------------------ | ----------------------- | -------------------- |
| **Union**                                    | **Employee Group**                                           | **Number of Employees** | **Contract Status**  |
| International Brotherhood of Teamsters (IBT) | Pilots                                                       | 852                     | Amendable 12/14/2024 |
| AFA                                          | Flight attendants                                            | 628                     | Amendable 7/18/2019  |
| IBT                                          | Mechanics and related classifications                        | 275                     | Amendable 12/16/2020 |
| Unifor                                       | Station personnel in
Vancouver and Victoria, BC, Canada | 38                      | Amendable 2/14/2019  |
| TWU                                          | Dispatchers                                                  | 22                      | Amendable 8/26/2018  |

McGee Air Services union contract at December 31, 2018 was as follows:

|           |                        |                         |                     |
| --------- | ---------------------- | ----------------------- | ------------------- |
| **Union** | **Employee Group**     | **Number of Employees** | **Contract Status** |
| IAM       | Fleet and ramp service | 1,573                   | Amendable 7/19/2023 |

**EXECUTIVE OFFICERS**

The executive officers of Alaska Air Group, Inc\. and its primary subsidiaries, Alaska Airlines, Inc\. and Horizon Air Industries, who have significant decision\-making responsibilities, their positions and their respective ages are as follows:

|                      |                                                                                |         |                                                                 |
| -------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | --------------------------------------------------------------- |
| **Name**             | **Position**                                                                                | **Age** | **Air Group**

**or Subsidiary**

**Officer Since** |
| Bradley D\. Tilden   | Chairman and Chief Executive Officer of Alaska Air Group, Inc\., Chairman of Alaska Airlines, Inc\., Chairman of Horizon Air Industries, Inc\.                                           | 58      | 1994                                                            |
| Brandon S\. Pedersen | Executive Vice President/Finance and Chief Financial Officer of Alaska Air Group, Inc\. and Alaska Airlines, Inc\., and Treasurer of Alaska Air Group, Inc\. and Alaska Airlines, Inc\.  | 52      | 2003                                                            |
| Kyle B\. Levine      | Vice President Legal, General Counsel and Corporate Secretary of Alaska Air Group, Inc\. and Alaska Airlines, Inc\. and Chief Ethics and Compliance Officer of Alaska Air Group, Inc\.   | 47      | 2016                                                            |
| Benito Minicucci     | President and Chief Operating Officer of Alaska Airlines, Inc\.                                                                                | 52      | 2004                                                            |
| Gary L\. Beck        | President and Chief Executive Officer of Horizon Air Industries, Inc\.                                                                                | 71      | 2018                                                            |
| Andrew R\. Harrison  | Executive Vice President and Chief Commercial Officer of Alaska Airlines, Inc\.                                                                                | 49      | 2008                                                            |
| Shane R\. Tackett    | Executive Vice President, Planning and Strategy of Alaska Airlines, Inc\.                                                                                | 40      | 2011                                                            |
| Andrea L\. Schneider | Vice President People of Alaska Airlines, Inc\.                                                                                | 53      | 1998                                                            |
| Diana Birkett\-Rakow | Vice President External Relations of Alaska Airlines, Inc\.                                                                                | 41      | 2017                                                            |

*Mr\. Tilden* joined Alaska Airlines in 1991, became Controller of Alaska Air Group and Alaska Airlines in 1994 and was named Vice President/Finance at Alaska Airlines in January 1999 and at Alaska Air Group in February 2000\. He was elected Alaska

 15


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

Airport Access

Operations at three major domestic airports and certain foreign airports served by us are regulated by governmental entities through allocations of "slots" or similar regulatory mechanisms\. Each slot represents the authorization to land at or take off from the particular airport during a specified time period\.

In the U\.S\., the FAA currently regulates the allocation of slots, slot exemptions, operating authorizations, or similar capacity allocation mechanisms at Reagan National in Washington, D\.C\. and LaGuardia and JFK in the New York City area\. Our operations at these airports generally require the allocation of slots or analogous regulatory authorizations\. Similarly, our operations at Tokyo's Haneda airport, London's Heathrow airport and other international airports are regulated by local slot coordinators pursuant to the International Air Transport Association's Worldwide Scheduling Guidelines and applicable local law\. We currently have sufficient slots or analogous authorizations to operate our existing flights, and we have generally been able to obtain the rights to expand our operations and to change our schedules\. There is no assurance, however, that we will be able to do so in the future because, among other reasons, such allocations are subject to changes in governmental policies\.

Environmental Matters

Our operations are subject to a number of international, federal, state and local laws and regulations governing protection of the environment, including regulation of greenhouse gases and other air emissions, noise reduction, water discharges, aircraft drinking water, storage and use of petroleum and other regulated substances, and the management and disposal of hazardous waste, substances and materials\.

Emissions \. Carbon emissions by the aviation industry and their impact on climate change have become a particular focus in the international community and within the U\.S\. For several years, the European Union has required its member states to implement regulations to include aviation in its Emissions Trading Scheme ("ETS")\. Under these regulations, any airline with flights originating or landing in the European Union is subject to the ETS and, beginning in 2012, was required to purchase emissions allowances if the airline exceeds the number of free allowances allocated to it under the ETS\. The ETS was amended to apply only to flights within the European Economic Area from 2013 through 2016\. In 2017, the EU extended the exemption for foreign flights through 2023 based on the International Civil Aviation Organization’s ("ICAO") adoption of a global market\-based program\.

In 2016, ICAO formally adopted a global, market\-based emissions offset program known as the Carbon Offsetting and Reduction Scheme for International Aviation ("CORSIA")\. This program establishes a medium\-term goal for the aviation industry of achieving carbon\-neutral growth in international aviation beginning in 2021, based on a 2019\-2020 baseline\. A pilot phase of the offset program will begin in 2021, followed by a first phase of the program beginning in 2024 and a second phase beginning in 2027\. Countries can voluntarily participate in the pilot and first phase, and the United States has agreed to participate in these voluntary phases\. Participation in the second phase is mandatory for certain countries, including the United States\. We submitted our CORSIA Emissions Monitoring Plan to the FAA in 2019 and are monitoring emissions for the 2019\-2020 baseline period\. In 2017, ICAO also adopted new aircraft certification standards to reduce carbon dioxide (CO~2~ ) emissions from aircraft\. The new aircraft certification standards apply to new aircraft types in 2020 and to new in\-production aircraft starting in 2023 but no later than 2028\. These standards will not apply to existing in\-service aircraft\. However, exemption from the certification requirement could affect how these aircraft are treated under other programs governing CO~2~  emissions\.

In 2016, the U\.S\. Environmental Protection Agency ("EPA") issued a final finding under the Clean Air Act that greenhouse gases threaten the public health and welfare, and further determined that aircraft cause or contribute to greenhouse gases\. The endangerment finding does not establish standards, but triggers an obligation for the EPA to regulate greenhouse gas emissions from aircraft\. The EPA has historically implemented air emissions control standards adopted by ICAO; however, the EPA has yet to issue regulations to regulate greenhouse gas emissions from aircraft pursuant to the 2016 endangerment finding\.

We may face additional regulation of aircraft emissions in the U\.S\. and abroad and become subject to further taxes, charges or additional requirements to obtain permits or purchase allowances or emission credits for greenhouse gas emissions in various jurisdictions\. Additional regulation could result in taxation, regulatory or permitting requirements from multiple jurisdictions for the same operations and significant costs for us and the airline industry\. In addition to direct costs, such regulation could result in increased fuel costs passed through from fuel suppliers affected by any such regulations\. We are monitoring and evaluating the potential impact of such legislative and regulatory developments\.

9


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

Aircraft Fuel

Currently, our fuel\-hedging portfolio consists of crude oil call options\. Call options effectively cap our pricing for the crude oil component of jet fuel, limiting our exposure to increasing fuel prices for about half of our planned fuel consumption\. With call options, we are hedged against volatile crude oil price increases, and, during a period of decline in crude oil prices, we only forfeit cash paid for hedge premiums\. We believe there is risk in not hedging against fuel price increases\. We estimate that a hypothetical 10% increase or decrease in the forward curve for crude oil prices as of December 31, 2019 would change the fair value of our crude oil hedge portfolio to approximately $3 million or $33 million\.

Our portfolio value of fuel hedge contracts was $11 million at December 31, 2019 compared to a portfolio value of $4 million at December 31, 2018\. We did not have any collateral held by counterparties to these agreements as of December 31, 2019\.

We continue to believe that our fuel hedge program is an important part of our strategy to reduce our exposure to volatile fuel prices\. We expect to enter into these types of contracts prospectively, although significant changes in market conditions could affect our decisions\. For more discussion, see Note 3 to our consolidated financial statements\.

Interest Rates

We have exposure to market risk associated with changes in interest rates related primarily to our debt obligations and short\-term investment portfolio\. Our debt obligations include variable\-rate instruments, which have exposure to changes in interest rates\. In order to mitigate the risk of interest rate fluctuations, we have a number of interest rate swaps that fix the interest rates on certain variable\-rate debt agreements\. A hypothetical 10% change in the average interest rates incurred on average variable\-rate debt held during 2019 would have correspondingly changed our net earnings and cash flows associated with these items by less than $5 million\. Our variable\-rate debt represents approximately 69% and 70% of our total long\-term debt as of December 31, 2019 and December 31, 2018\. Approximately $717 million of the Company's total variable\-rate notes payable were effectively fixed via interest rate swaps at December 31, 2019\.

Our exposure to interest rate variability is further mitigated through our variable\-rate investment portfolio\. We also have investments in marketable securities, which are exposed to market risk associated with changes in interest rates\. If short\-term interest rates were to average one point more than they did in 2019, interest income would increase by approximately $12 million\.

Our variable\-rate instruments, including long\-term debt, interest rate swaps, and credit facilities, all make reference to the London Interbank Offered Rate (LIBOR) as the interest rate benchmark\. It is expected that after 2021, LIBOR will be discontinued as a reference rate\. In the event of the discontinuance of LIBOR, we will need to transition our LIBOR\-based contracts to a mutually agreed\-upon alternate benchmark rate, which effectively places the Lenders and the Company in the same economic position that existed immediately prior to the discontinuation of LIBOR\. At this time, we do not anticipate that the discontinuance of LIBOR will materially impact our liquidity or financial position\.

|                                                                   |                                                                   |                                                                   |
| ----------------------------------------------------------------- | ----------------------------------------------------------------- | ----------------------------------------------------------------- |
| ITEM 8\. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | ITEM 8\. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | ITEM 8\. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |

SELECTED QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (unaudited)

|                                   |                                   |                                   |               |               |               |               |               |  |  |  |         |  |  |  |                |                |                |                |                |  |  |  |         |  |  |  |               |               |               |               |               |  |  |  |  |  |  |  |  |  |                |                |                |                |                |                |                |                |                |  |  |  |  |  |  |
|:--------------------------------- |:--------------------------------- |:--------------------------------- | -------------:|:-------------:|:-------------:|:-------------:| -------------:|:- |:- |:- | -------:|:- |:- |:- | --------------:|:--------------:|:--------------:|:--------------:| --------------:|:- |:- |:- | -------:|:- |:- |:- | -------------:|:-------------:|:-------------:|:-------------:| -------------:|:- |:- |:- |:- |:- |:- |:- |:- |:- |:--------------:|:--------------:|:--------------:|:--------------:|:--------------:|:--------------:|:--------------:|:--------------:|:--------------:|:- |:- |:- |:- |:- |:- |
|                                   |                                   |                                   | First Quarter | First Quarter | First Quarter | First Quarter | First Quarter |  |  |  |         |  |  |  | Second Quarter | Second Quarter | Second Quarter | Second Quarter | Second Quarter |  |  |  |         |  |  |  | Third Quarter | Third Quarter | Third Quarter | Third Quarter | Third Quarter |  |  |  |  |  |  |  |  |  | Fourth Quarter | Fourth Quarter | Fourth Quarter | Fourth Quarter | Fourth Quarter | Fourth Quarter | Fourth Quarter | Fourth Quarter | Fourth Quarter |  |  |  |  |  |  |
| *(in millions, except per share)* | *(in millions, except per share)* | *(in millions, except per share)* |          2019 |               |               |               |          2018 |  |  |  |    2019 |  |  |  |           2018 |                |                |                |           2019 |  |  |  |    2018 |  |  |  |          2019 |               |               |               |          2018 |
| Operating revenues                | Operating revenues                | Operating revenues                |       $1,876  |               |               |               |       $1,832  |  |  |  | $2,288  |  |  |  |        $2,156  |                |                |                |        $2,389  |  |  |  | $2,212  |  |  |  |       $2,228  |               |               |               |       $2,064  |
| Operating income                  | Operating income                  | Operating income                  |           25  |               |               |               |           29  |  |  |  |    364  |  |  |  |           271  |                |                |                |           422  |  |  |  |    297  |  |  |  |          252  |               |               |               |           46  |
| Net income                        | Net income                        | Net income                        |            4  |               |               |               |            4  |  |  |  |    262  |  |  |  |           193  |                |                |                |           322  |  |  |  |    217  |  |  |  |          181  |               |               |               |           23  |
| Basic earnings per share^(a)^     | Basic earnings per share^(a)^     | Basic earnings per share^(a)^     |        0\.03  |               |               |               |        0\.03  |  |  |  |  2\.12  |  |  |  |         1\.57  |                |                |                |         2\.61  |  |  |  |  1\.76  |  |  |  |        1\.47  |               |               |               |        0\.19  |
| Diluted earnings per share^(a)^   | Diluted earnings per share^(a)^   | Diluted earnings per share^(a)^   |        0\.03  |               |               |               |        0\.03  |  |  |  |  2\.11  |  |  |  |         1\.56  |                |                |                |         2\.60  |  |  |  |  1\.75  |  |  |  |        1\.46  |               |               |               |        0\.19  |

^(a)^ For earnings per share, the sum of the quarters may not equal the total for the full year due to rounding\.

47


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

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

DELTA AIR LINES, INC\.

Consolidated Statements of Cash Flows

|                                                                                |                                                                                |                                                                                |                                                                                |
| ---------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- |
|                                                                                | **Year Ended December 31,**                                                              | **Year Ended December 31,**                                                              | **Year Ended December 31,**                                                              |
| **(in millions)**                                                                        | **2017**                                                                                | **2016**                                                                                | **2015**                                                                                |
| **Cash Flows From Operating Activities:**                                                |                                                                                |                                                                                |                                                                                |
| Net income                                                                               | $3,577                                                                                | $4,373                                                                                | $4,526                                                                                |
| Adjustments to reconcile net income to net cash provided by operating activities:        |                                                                                |                                                                                |                                                                                |
| Depreciation and amortization                                                            | 2,235                                                                                | 1,902                                                                                | 1,835                                                                                |
| Hedge derivative contracts                                                               | (7

)                                                                              | (342

)                                                                            | (1,366

)                                                                          |
| Deferred income taxes                                                                    | 2,071                                                                                | 2,223                                                                                | 2,581                                                                                |
| Pension, postretirement and postemployment payments greater than expense                 | (3,302

)                                                                          | (717

)                                                                            | (1,013

)                                                                          |
| Equity investment earnings                                                               | (1

)                                                                              | (160

)                                                                            | (35

)                                                                             |
| Changes in certain assets and liabilities:                                               |                                                                                |                                                                                |                                                                                |
| Receivables                                                                              | (328

)                                                                            | (147

)                                                                            | (56

)                                                                             |
| Fuel inventory                                                                           | (397

)                                                                            | (140

)                                                                            | 155                                                                                |
| Hedge margin                                                                             | (5

)                                                                              | 81                                                                                | 806                                                                                |
| Prepaid expenses and other current assets                                                | (57

)                                                                             | (26

)                                                                             | (102

)                                                                            |
| Air traffic liability                                                                    | 262                                                                                | 123                                                                                | 207                                                                                |
| Frequent flyer deferred revenue                                                          | 192                                                                                | 45                                                                                | (301

)                                                                            |
| Profit sharing                                                                           | (51

)                                                                             | (383

)                                                                            | 734                                                                                |
| Accounts payable and accrued liabilities                                                 | 992                                                                                | 285                                                                                | (201

)                                                                            |
| Other, net                                                                               | (33

)                                                                             | 88                                                                                | 157                                                                                |
| Net cash provided by operating activities                                                | 5,148                                                                                | 7,205                                                                                | 7,927                                                                                |
| **Cash Flows From Investing Activities:**                                                |                                                                                |                                                                                |                                                                                |
| Property and equipment additions:                                                        |                                                                                |                                                                                |                                                                                |
| Flight equipment, including advance payments                                             | (2,704

)                                                                          | (2,617

)                                                                          | (2,223

)                                                                          |
| Ground property and equipment, including technology                                      | (1,187

)                                                                          | (774

)                                                                            | (722

)                                                                            |
| Purchase of equity investments                                                           | (1,245

)                                                                          | —                                                                                | (500

)                                                                            |
| Purchase of short\-term investments                                                      | (925

)                                                                            | (1,707

)                                                                          | (998

)                                                                            |
| Redemption of short\-term investments                                                    | 584                                                                                | 2,686                                                                                | 739                                                                                |
| Other, net                                                                               | 111                                                                                | 257                                                                                | (251

)                                                                            |
| Net cash used in investing activities                                                    | (5,366

)                                                                          | (2,155

)                                                                          | (3,955

)                                                                          |
| **Cash Flows From Financing Activities:**                                                |                                                                                |                                                                                |                                                                                |
| Payments on long\-term debt and capital lease obligations                                | (1,258

)                                                                          | (1,709

)                                                                          | (2,558

)                                                                          |
| Repurchase of common stock                                                               | (1,677

)                                                                          | (2,601

)                                                                          | (2,200

)                                                                          |
| Cash dividends                                                                           | (731

)                                                                            | (509

)                                                                            | (359

)                                                                            |
| Fuel card obligation                                                                     | 636                                                                                | 211                                                                                | (340

)                                                                            |
| Payments on hedge derivative contracts                                                   | (244

)                                                                            | (451

)                                                                            | (71

)                                                                             |
| Proceeds from hedge derivative contracts                                                 | 20                                                                                | 291                                                                                | 429                                                                                |
| Proceeds from long\-term obligations                                                     | 2,454                                                                                | 450                                                                                | 1,038                                                                                |
| Other, net                                                                               | 70                                                                                | 58                                                                                | (27

)                                                                             |
| Net cash used in financing activities                                                    | (730

)                                                                            | (4,260

)                                                                          | (4,088

)                                                                          |
| **Net (Decrease) Increase in Cash and Cash Equivalents**                                 | (948

)                                                                            | 790                                                                                | (116

)                                                                            |
| Cash and cash equivalents at beginning of period                                         | 2,762                                                                                | 1,972                                                                                | 2,088                                                                                |
| Cash and cash equivalents at end of period                                               | $1,814                                                                                | $2,762                                                                                | $1,972                                                                                |
| **Supplemental Disclosure of Cash Paid for Interest**                                    | $390                                                                                | $385                                                                                | $452                                                                                |
| **Non\-Cash Transactions:**                                                              |                                                                                |                                                                                |                                                                                |
| Treasury stock contributed to our qualified defined benefit pension plans                | $350                                                                                | $350                                                                                | $—                                                                                |
| Flight and ground equipment acquired under capital leases                                | $261                                                                                | $86                                                                                | $111                                                                                |
| The accompanying notes are an integral part of these Consolidated Financial Statements\. | The accompanying notes are an integral part of these Consolidated Financial Statements\. | The accompanying notes are an integral part of these Consolidated Financial Statements\. | The accompanying notes are an integral part of these Consolidated Financial Statements\. |

 53


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

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

**Number** | **Description**                                                                                |
| 10\.19                        | [First Amendment to Credit and Guaranty Agreement, dated as of October 31, 2016, amending the Credit and Guaranty Agreement, dated as of April 29, 2016, among American Airlines, Inc\. as borrower, American Airlines Group Inc\., as parent and guarantor, the lenders party thereto, Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10\.81 to AAG’s Annual Report on Form 10\-K for the year ended December 31, 2016 (Commission File No\. 1\-8400))\. ](http://www.sec.gov/Archives/edgar/data/4515/000119312517051216/d286458dex1081.htm)                      |
| 10\.20                        | [Second Amendment to the Credit and Guaranty Agreement, dated as of August 21, 2017, amending the Credit and Guaranty Agreement, dated as of April 29, 2016, among American Airlines, Inc\., American Airlines Group Inc\., the lenders from time to time party thereto, Barclays Bank PLC, as administrative agent, and certain other parties thereto (incorporated by reference to Exhibit 10\.15 to AAG’s Annual Report on Form 10\-K for the year ended December 31, 2017 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000000620118000009/ex101510k2017.htm) \* |
| 10\.21                        | [Third Amendment to Credit and Guaranty Agreement, dated as of November 1, 2017, amending the Credit and Guaranty Agreement, dated as of April 29, 2016, among American Airlines, Inc\. as borrower, American Airlines Group Inc\., as parent and guarantor, the lenders party thereto, Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10\.16 to AAG’s Annual Report on Form 10\-K for the year ended December 31, 2017 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000000620118000009/ex101610k2017.htm)                        |
| 10\.22                        | [Fourth Amendment to Credit and Guaranty Agreement, dated as of December 10, 2018, amending the Credit and Guaranty Agreement, dated as of April 29, 2016, among American Airlines, Inc\. as borrower, American Airlines Group Inc\., as parent and guarantor, the lenders party thereto, Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10\.20 to AAG’s Annual Report on Form 10\-K for the year ended December 31, 2018 (Commission File No\. 1\-8400))\.\*\*\*](http://www.sec.gov/Archives/edgar/data/4515/000000620119000009/ex102010k2018.htm)                |
| 10\.23                        | [Fifth Amendment to Credit and Guaranty Agreement, dated as of November 8, 2019, amending the Credit and Guaranty Agreement, dated as of April 29, 2016, among American Airlines, Inc\. as borrower, American Airlines Group Inc\., as parent and guarantor, the lenders party thereto, Barclays Bank PLC, as administrative agent\.\*\*](https://americanairlines.gcs-web.com/email-alerts/ex102310k2019.htm)                                                                                |
| 10\.24                        | [Purchase Agreement No\. 3219, dated as of October 15, 2008, between American Airlines, Inc\. and The Boeing Company (incorporated by reference to Exhibit 10\.29 to American’s Annual Report on Form 10\-K for the year ended December 31, 2008 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000000451509000008/ex1029.htm) \*                                                                                |
| 10\.25                        | [Supplemental Agreement No\. 2, dated as of July 21, 2010, to Purchase Agreement No\. 3219 between American Airlines, Inc\. and The Boeing Company (incorporated by reference to Exhibit 10\.2 to AMR’s Quarterly Report on Form 10\-Q for the quarter ended June 30, 2010 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/6201/000095012310066894/d73384exv10w2.htm) \*                                                                                |
| 10\.26                        | [Supplemental Agreement No\. 3, dated as of February 1, 2013, to Purchase Agreement No\. 3219 between American Airlines, Inc\., and The Boeing Company (incorporated by reference to Exhibit 10\.2 to AMR’s Quarterly Report on Form 10\-Q for the quarter ended March 31, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/6201/000000620113000040/d516424dex102.htm) \*                                                                                |
| 10\.27                        | [Supplemental Agreement No\. 4, dated as of June 9, 2014, to Purchase Agreement No\. 3219 between The Boeing Company and American Airlines, Inc\. dated as of October 15, 2008, relating to Boeing Model 787 Aircraft, as amended, restated, amended and restated, supplemented or otherwise modified (incorporated by reference to Exhibit 10\.6 to AAG’s Quarterly Report on Form 10\-Q for the quarter ended June 30, 2014 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000000620114000014/d759439dex106.htm) \*                                                 |
| 10\.28                        | [Supplemental Agreement No\. 5, dated as of January 20, 2015, to Purchase Agreement No\. 3219 between The Boeing Company and American Airlines, Inc\., dated as of October 15, 2008, relating to Boeing Model 787 Aircraft, as amended, restated, amended and restated, supplemented or otherwise modified (incorporated by reference to Exhibit 10\.2 to AAG’s Quarterly Report on Form 10\-Q for the quarter ended March 31, 2015 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515145178/d900175dex102.htm) \*                                           |
| 10\.29                        | [Supplemental Agreement No\. 6, dated as of April 21, 2015, to Purchase Agreement No\. 3219 between American Airlines, Inc\. and The Boeing Company, dated as of October 15, 2008, as amended, restated, amended and restated, supplemented or otherwise modified (incorporated by reference to Exhibit 10\.2 to AAG’s Quarterly Report on Form 10\-Q for the quarter ended June 30, 2015 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515261937/d945812dex102.htm) \*                                                                                |
| 10\.30                        | [Supplemental Agreement No\. 7, dated as of September 12, 2016, to Purchase Agreement No\. 3219 dated as of October 15, 2008, between American Airlines, Inc\. and The Boeing Company (incorporated by reference to Exhibit 10\.3 to AAG’s Quarterly Report on Form 10\-Q for the quarter ended September 30, 2016 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516742263/d247546dex103.htm) \*                                                                                |
| 10\.31                        | [Supplemental Agreement No\. 8, dated as of January 26, 2017, to Purchase Agreement No\. 3219 dated as of October 15, 2008, between American Airlines, Inc\. and The Boeing Company (incorporated by reference to Exhibit 10\.3 to AAG’s Quarterly Report on Form 10\-Q for the quarter ended March 31, 2017 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517140927/d358913dex103.htm) \*                                                                                |
| 10\.32                        | [Supplemental Agreement No\. 9, dated as of April 24, 2017, to Purchase Agreement No\. 3219 dated as of October 15, 2008, by and between American Airlines, Inc\. and The Boeing Company (incorporated by reference to Exhibit 10\.5 to AAG’s Quarterly Report on Form 10\-Q for the quarter ended June 30, 2017 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517239325/d416225dex105.htm) \*                                                                                |

179


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

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

**Number** | **Description**                                                                                |
| 10\.66                        | [Form of American Airlines Group Inc\. 2013 Incentive Award Plan Restricted Stock Unit (Stock\-Settled) Award Grant Notice and Award Agreement (incorporated by reference to Exhibit 10\.127 to AAG’s Annual Report on Form 10\-K for the year ended December 31, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000000620114000004/d682697dex10127.htm) †                                                   |
| 10\.67                        | [Form of American Airlines Group Inc\. 2013 Incentive Award Plan Restricted Stock Unit (Stock\-Settled) Award Grant Notice and Award Agreement for Director Grants (incorporated by reference to Exhibit 10\.129 to AAG’s Annual Report on Form 10\-K for the year ended December 31, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000000620114000004/d682697dex10129.htm) †                               |
| 10\.68                        | [Form of Indemnification Agreement (incorporated by reference to Exhibit 10\.9 to AAG’s Current Report on Form 8\-K filed on December 9, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513466973/d640718dex109.htm) †                                                                                |
| 10\.69                        | [US Airways Group 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10\.1 to US Airways Group’s Current Report on Form 8\-K filed on October 3, 2005 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000095014405010015/g97529exv10w1.txt) †                                                                                |
| 10\.70                        | [Form of Stock Appreciation Rights Award Agreement under US Airways Group’s 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10\.75 to US Airways Group’s Annual Report on Form 10\-K for the year ended December 31, 2005 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000095012406001200/p72019exv10w75.htm) †                                                                              |
| 10\.71                        | [US Airways Group, Inc\. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 4\.1 to US Airways Group’s Registration Statement on Form S\-8 filed on June 30, 2008 (Registration No\. 333\-152033))\.](http://www.sec.gov/Archives/edgar/data/701345/000095015308001188/p75713exv4w1.htm) †                                                                                |
| 10\.72                        | [Form of Stock Appreciation Right Award Agreement under the US Airways Group, Inc\. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10\.2 to US Airways Group’s Current Report on Form 8\-K filed August 7, 2008 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000117902208000125/sargrantagmt.htm) †                                                                                |
| 10\.73                        | [Form of Stock Appreciation Right (Cash\-Settled) Award Agreement under the US Airways Group, Inc\. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10\.8 to US Airways Group’s Quarterly Report on Form 10\-Q for the quarter ended March 31, 2009 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000136231009005707/c84102exv10w8.htm) †                                                     |
| 10\.74                        | [Form of Stock Appreciation Right (Stock\-Settled) Award Agreement under the US Airways Group, Inc\. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10\.9 to US Airways Group’s Quarterly Report on Form 10\-Q for the quarter ended March 31, 2009 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000136231009005707/c84102exv10w9.htm) †                                                    |
| 10\.75                        | [US Airways Group, Inc\. 2011 Incentive Award Plan (incorporated by reference to Exhibit 4\.1 to US Airways Group’s Registration Statement on Form S\-8 filed on July 1, 2011 (Registration No\. 333\-175323))\.](http://www.sec.gov/Archives/edgar/data/701345/000095012311063744/p18922exv4w1.htm) †                                                                                |
| 10\.76                        | [Form of Stock Appreciation Right (Cash\-Settled) Award Grant Notice and Stock Appreciation Right (Cash\-Settled) Award Agreement under the US Airways Group, Inc\. 2011 Incentive Award Plan (incorporated by reference to Exhibit 4\.3 to US Airways Group’s Registration Statement on Form S\-8 filed on July 1, 2011 (Registration No\. 333\-175323))\.](http://www.sec.gov/Archives/edgar/data/701345/000095012311063744/p18922exv4w3.htm) † |
| 10\.77                        | [Form of Stock Appreciation Right (Stock\-Settled) Award Grant Notice and Stock Appreciation Right Award Agreement under the US Airways Group, Inc\. 2011 Incentive Award Plan (incorporated by reference to Exhibit 4\.4 to US Airways Group’s Registration Statement on Form S\-8 filed on July 1, 2011 (Registration No\. 333\-175323))\.](http://www.sec.gov/Archives/edgar/data/701345/000095012311063744/p18922exv4w4.htm) †                |
| 10\.78                        | [2014 Short\-Term Incentive Program Under 2013 Incentive Award Plan (incorporated by reference to Exhibit 10\.8 to AAG’s Quarterly Report on Form 10\-Q for the quarter ended June 30, 2014 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000000620114000014/d759439dex108.htm) †                                                                                |
| 10\.79                        | [Form of Letter Agreement for Directors Travel Program (incorporated by reference to Exhibit 10\.106 to US Airways Group’s Annual Report on Form 10\-K for the year ended December 31, 2007 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000095015308000353/p75006exv10w106.htm) †                                                                                |
| 10\.80                        | [Amended and Restated Employment Agreement, dated as of November 28, 2007, among US Airways Group, US Airways, Inc\. and W\. Douglas Parker (incorporated by reference to Exhibit 10\.1 to US Airways Group’s Current Report on Form 8\-K filed on November 29, 2007 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000095015307002500/p74691exv10w1.htm) †                                                     |
| 10\.81                        | [Form of Letter Agreement, dated April 25, 2017, by and between American Airlines Group Inc\. and each of Robert D\. Isom, Jr\., Elise Eberwein, Stephen L\. Johnson and Derek J\. Kerr (incorporated by reference to Exhibit 10\.1 to AAG’s Current Report on Form 8\-K filed on May 1, 2017 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312517150428/d369665dex101.htm) †                              |
| 10\.82                        | [Proposed Final Judgment (incorporated by reference to Exhibit 10\.1 to AMR’s Current Report on Form 8\-K filed on November 13, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513439217/d627975dex101.htm)                                                                                |
| 10\.83                        | [Asset Preservation Order (incorporated by reference to Exhibit 10\.2 to AMR’s Current Report on Form 8\-K filed on November 13, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513439217/d627975dex102.htm)                                                                                |
| 10\.84                        | [Supplemental Stipulated Order (incorporated by reference to Exhibit 10\.3 to AMR’s Current Report on Form 8\-K filed on November 13, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513439217/d627975dex103.htm)                                                                                |
| 10\.85                        | [Joint Stipulation (incorporated by reference to Exhibit 10\.4 to AMR’s Current Report on Form 8\-K filed on November 13, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513439217/d627975dex104.htm)                                                                                |
| 10\.86                        | [DOT Agreement (incorporated by reference to Exhibit 10\.5 to AMR’s Current Report on Form 8\-K filed on November 13, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513439217/d627975dex105.htm)                                                                                |

195


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

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

a material adverse effect on the Company's business, operating results and financial condition\.

The Company's U\.S\. operations are subject to competition from traditional network carriers, national point\-to\-point carriers, and discount carriers, including low\-cost carriers and ultra\-low\-cost carriers\. Such carriers may have lower costs and provide service at lower fares to destinations also served by the Company\. The significant presence of low\-cost carriers and ultra\-low\-cost carriers, which engage in substantial price discounting, may diminish our ability to achieve sustained profitability on domestic and international routes\. Our ability to compete in the domestic market effectively depends, in part, on our ability to maintain a competitive cost structure\. If we cannot maintain our costs at a competitive level, then our business, operating results and financial condition could be materially and adversely affected\.

Our international operations are subject to competition from both foreign and domestic carriers\. Competition is significant from government subsidized competitors from certain Middle East countries\. These carriers have large numbers of international widebody aircraft on order and are increasing service to the U\.S\. from their hubs in the Middle East\. The government support provided to these carriers has allowed them to grow quickly, reinvest in their product, invest in other airlines and expand their global presence\. We also face competition from foreign carriers operating under "fifth freedom" rights permitted under international treaties that allow certain carriers to provide service to and from stopover points between their home country and ultimate destination, including points in the United States, in competition with service provided by us\.

Through alliance and other marketing and codesharing agreements with foreign carriers, U\.S\. carriers have increased their ability to sell international transportation, such as services to and beyond traditional global gateway cities\. Similarly, foreign carriers have obtained increased access to interior U\.S\. passenger traffic beyond traditional U\.S\. gateway cities through these relationships\. In addition, several JBAs among U\.S\. and foreign carriers have received grants of antitrust immunity allowing the participating carriers to coordinate schedules, pricing, sales and inventory\. If we are not able to continue participating in these types of alliance and other marketing and codesharing agreements in the future, our business, operating results and financial condition could be materially and adversely affected\.

High and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel could have a material adverse impact on the Company's strategic plans, operating results, financial condition and liquidity\.

Aircraft fuel is critical to the Company's operations and is one of our largest operating expenses\. During the year ended December 31, 2019, the Company's fuel expense was approximately  $9\.0 billion \. The timely and adequate supply of fuel to meet operational demand depends on the continued availability of reliable fuel supply sources, as well as related service and delivery infrastructure\. Although the Company has some ability to cover short\-term fuel supply and infrastructure disruptions at some major demand locations, it depends significantly on the continued performance of its vendors and service providers to maintain supply integrity\. Consequently, the Company can neither predict nor guarantee the continued timely availability of aircraft fuel throughout the Company's system\.

Aircraft fuel has historically been the Company's most volatile operating expense due to the highly unpredictable nature of market prices for fuel\. The Company generally sources fuel at prevailing market prices\. Market prices for aircraft fuel have historically fluctuated substantially in short periods of time and continue to be highly volatile due to a dependence on a multitude of unpredictable factors beyond the Company's control\. These factors include changes in global crude oil prices, the balance between aircraft fuel supply and demand, natural disasters, prevailing inventory levels and fuel production and transportation infrastructure\. Prices of fuel are also impacted by indirect factors, such as geopolitical events, economic growth indicators, fiscal/monetary policies, fuel tax policies, changes in regulations, environmental concerns and financial investments in energy markets\. Both actual changes in these factors, as well as changes in related market expectations, can potentially drive rapid changes in fuel prices in short periods of time\.

Given the highly competitive nature of the airline industry, the Company may not be able to increase its fares and fees sufficiently to offset the full impact of increases in fuel prices, especially if these increases are significant, rapid and sustained\. Further, any such fare or fee increase may not be sustainable, may reduce the general demand for air travel and may also eventually impact the Company's strategic growth and investment plans for the future\. In addition, decreases in fuel prices for an extended period of time may result in increased industry capacity, increased competitive actions for market share and lower fares or surcharges\. If fuel prices were to then subsequently rise quickly, there may be a lag between the rise in fuel prices and any improvement of the revenue environment\.

To protect against increases in the market prices of fuel, the Company may hedge a portion of its future fuel requirements\. The Company does not currently hedge its future fuel requirements\. However, to the extent the Company decides to start a hedging program, such hedging program may not be successful in mitigating higher fuel costs, and any price protection provided may be limited due to the choice of hedging instruments and market conditions, including breakdown of correlation between hedging instrument and market price of aircraft fuel and failure of hedge counterparties\. To the extent that the Company decides to hedge a portion of its future fuel requirements and uses hedge contracts that have the potential to create an obligation

11


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

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

Benefit Obligations, Fair Value of Plan Assets and Funded Status

|                                                  |                          |                           |                                                      |                                                      |
| ------------------------------------------------ | ------------------------ | ------------------------- | ---------------------------------------------------- | ---------------------------------------------------- |
|                                                  | **Pension Benefits**     | **Pension Benefits**      | **Other Postretirement and Postemployment Benefits** | **Other Postretirement and Postemployment Benefits** |
|                                                  | **December 31,**         | **December 31,**          | **December 31,**                                     | **December 31,**                                     |
| **(in millions)**                                | **2017**                 | **2016**                  | **2017**                                             | **2016**                                             |
| Benefit obligation at beginning of period        | $20,859                  | $20,611                   | $3,379                                               | $3,336                                               |
| Service cost                                     | —                        | —                         | 87                                                   | 68                                                   |
| Interest cost                                    | 853                      | 917                       | 138                                                  | 147                                                  |
| Actuarial loss (gain)                            | 1,068                    | 411                       | 183                                                  | 115                                                  |
| Benefits paid, including lump sums and annuities | (1,075

)          | (1,071

)           | (311

)                                        | (318

)                                        |
| Participant contributions                        | —                        | —                         | 28                                                   | 31                                                   |
| Settlements                                      | (9

)              | (9

)               | —                                                    | —                                                    |
| Benefit obligation at end of period ^(1)^        | $21,696                  | $20,859                   | $3,504                                               | $3,379                                               |
| Fair value of plan assets at beginning of period | $10,301                  | $9,374                    | $784                                                 | $884                                                 |
| Actual gain (loss) on plan assets                | 1,966                    | 687                       | 138                                                  | 51                                                   |
| Employer contributions                           | 3,561                    | 1,320                     | 254                                                  | 154                                                  |
| Participant contributions                        | —                        | —                         | 28                                                   | 31                                                   |
| Benefits paid, including lump sums and annuities | (1,075

)          | (1,071

)           | (338

)                                        | (336

)                                        |
| Settlements                                      | (9

)              | (9

)               | —                                                    | —                                                    |
| Fair value of plan assets at end of period       | $14,744                  | $10,301                   | $866                                                 | $784                                                 |
| Funded status at end of period                   | $

(6,952

) | $

(10,558

) | $

(2,638

)                             | $

(2,595

)                             |

|       |                                                                                |
| ----- | ----------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(1)^ | At the end of each year presented, our accumulated benefit obligations for our pension plans are equal to the benefit obligations shown above\. |

During 2017 and 2016, net actuarial losses increased our benefit obligation due to the decrease in discount rates\. These gains and losses are recorded in AOCI and reflected in the table below\.

A net actuarial loss of   $277 million  will be amortized from AOCI into net periodic benefit cost in  2018 \. Amounts are generally amortized from AOCI over the expected future lifetime of plan participants\.

Balance Sheet Position

|                                                      |                          |                           |                                                      |                                                      |
| ---------------------------------------------------- | ------------------------ | ------------------------- | ---------------------------------------------------- | ---------------------------------------------------- |
|                                                      | **Pension Benefits**     | **Pension Benefits**      | **Other Postretirement and Postemployment Benefits** | **Other Postretirement and Postemployment Benefits** |
|                                                      | **December 31,**         | **December 31,**          | **December 31,**                                     | **December 31,**                                     |
| **(in millions)**                                    | **2017**                 | **2016**                  | **2017**                                             | **2016**                                             |
| Current liabilities                                  | $

(32

)    | $

(30

)     | $

(121

)                               | $

(125

)                               |
| Noncurrent liabilities                               | (6,920

)          | (10,528

)          | (2,517

)                                      | (2,470

)                                      |
| Total liabilities                                    | $

(6,952

) | $

(10,558

) | $

(2,638

)                             | $

(2,595

)                             |
| Net actuarial loss                                   | $

(8,495

) | $

(8,515

)  | $

(651

)                               | $

(570

)                               |
| Prior service credit                                 | —                        | —                         | 56                                                   | 82                                                   |
| Total accumulated other comprehensive loss, pre\-tax | $

(8,495

) | $

(8,515

)  | $

(595

)                               | $

(488

)                               |

 74


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

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

The estimated amount of unrecognized actuarial net gain and prior service benefit for the retiree medical and other postretirement benefits plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year is $269 million\.

***Assumptions***

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

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

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

**Other Postretirement Benefits** |
|                                | **2018**             | **2017**             | **2018**                                                         | **2017**                                                         |
| Benefit obligations:           |                      |                      |                                                                  |                                                                  |
| Weighted average discount rate | 4\.40%               | 3\.80%               | 4\.30%                                                           | 3\.60%                                                           |

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

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

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

**Other Postretirement Benefits** |
|                                                                           | **2018**             | **2017**             | **2016**             | **2018**                                                         | **2017**                                                         | **2016**                                                         |
| Net periodic benefit cost:                                                |                      |                      |                      |                                                                  |                                                                  |                                                                  |
| Weighted average discount rate                                            | 3\.80%               | 4\.30%               | 4\.70%               | 3\.60%                                                           | 4\.10%                                                           | 4\.42%                                                           |
| Weighted average expected rate of return on plan assets                   | 8\.00%               | 8\.00%               | 8\.00%               | 8\.00%                                                           | 8\.00%                                                           | 8\.00%                                                           |
| Weighted average health care cost trend rate assumed for next year  ^(1)^ | N/A                  | N/A                  | N/A                  | 3\.91%                                                           | 4\.19%                                                           | 4\.25%                                                           |

|       |                                                                                |
| ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(1)^ | The weighted average health care cost trend rate at  December 31, 2018  is assumed to decline gradually to  3\.45%  by 2026 and remain level thereafter\. |

As of December 31, 2018, our estimate of the long\-term rate of return on plan assets was 8% based on the target asset allocation\. Expected returns on long duration bonds are based on yields to maturity of the bonds held at year\-end\. Expected returns on other assets are based on a combination of long\-term historical returns, actual returns on plan assets achieved over the last ten years, current and expected market conditions, and expected value to be generated through active management and securities lending programs\.

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

|                                                                   |                 |                 |
| ----------------------------------------------------------------- | --------------- | --------------- |
|                                                                   | **1% Increase** | **1% Decrease** |
| Increase (decrease) on 2018 service and interest cost             | $2              | $(2)            |
| Increase (decrease) on benefit obligation as of December 31, 2018 | 47              | (43)            |

***Minimum Contributions***

We are required to make minimum contributions to our defined benefit pension plans under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and various other laws for U\.S\. based plans as well as underfunding rules specific to countries where we maintain defined benefit plans\. Based on current funding assumptions, we have minimum required contributions of $786 million for 2019 including contributions to defined benefit plans for our wholly\-owned regional subsidiaries\. We expect to make supplemental contributions of $21 million to our U\.S\. based defined benefit pension plans in 2019\. Our funding obligations will depend on the performance of our investments held in trust by the pension plans, interest rates for determining liabilities, the amount of and timing of any supplemental contributions and our actuarial experience\.

114


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

NOTE 2 \.  REVENUE RECOGNITION

Passenger Revenue

Passenger revenue is primarily composed of passenger ticket sales, loyalty travel awards and travel\-related services performed in conjunction with a passenger’s flight\.

|                          |                             |                             |                             |
| ------------------------ | --------------------------- | --------------------------- | --------------------------- |
|                          | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| **(in millions)**        | **2018**                    | **2017**                    | **2016**                    |
| Ticket                   | $34,950                     | $32,467                     | $31,534                     |
| Loyalty travel awards    | 2,651                       | 2,403                       | 2,234                       |
| Travel\-related services | 2,154                       | 2,077                       | 2,046                       |
| Total passenger revenue  | $39,755                     | $36,947                     | $35,814                     |

Ticket

Passenger Tickets\.  We record sales of passenger tickets to be flown by us or that we sell on behalf of other airlines in air traffic liability\. Passenger revenue is recognized when we provide transportation or when ticket breakage occurs\. For tickets that we sell on behalf of other airlines, we reduce the air traffic liability when consideration is remitted to those airlines\. We periodically evaluate the estimated air traffic liability and record any adjustments in our income statement\. These adjustments relate primarily to refunds, exchanges, ticket breakage, transactions with other airlines and other items for which final settlement occurs in periods subsequent to the sale of the related tickets at amounts other than the original sales price\.

Approximately   $3\.5 billion  of the prior year air traffic liability related to passenger ticket sales (which excludes those tickets sold on behalf of other airlines) and was recognized in passenger revenue during each of the years ended  December 31, 2018  and  2017 \.

Ticket Breakage\.  We estimate the value of tickets that will expire unused and recognize revenue at the scheduled flight date\.

Regional Carriers \.  Our regional carriers include both our contract carrier agreements with third\-party regional carriers ("contract carriers") and Endeavor Air, Inc\., our wholly owned subsidiary\. Our contract carrier agreements are primarily structured as capacity purchase agreements where we purchase all or a portion of the contract carrier's capacity and are responsible for selling the seat inventory we purchase\. We record revenue related to our capacity purchase agreements in passenger revenue and the related expenses in regional carriers expense, excluding fuel\.

Loyalty Travel Awards

Loyalty travel awards revenue is related to the redemption of mileage credits for travel\. We recognize loyalty travel awards revenue in passenger revenue as mileage credits are redeemed and travel is provided\. See below for discussion of our loyalty program accounting policies\.

Travel\-Related Services

Travel\-related services are primarily composed of services  performed in conjunction with a passenger’s flight, including administrative fees (such as ticket change fees), baggage fees and on\-board sales\. We recognize revenue for these services when the related transportation service is provided\. Prior to the adoption of the new revenue recognition standard, the majority of these fees were classified in other revenue\.

 65


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

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

impact of regulatory, investigative and legal proceedings and legal compliance risks; the success of our investments in other airlines, including in other parts of the world; industry consolidation or changes in airline alliances; the ability of other air carriers with whom we have alliances or partnerships to provide the services contemplated by the respective arrangements with such carriers; costs associated with any modification or termination of our aircraft orders; disruptions in the availability of aircraft, parts or support from our suppliers; our ability to maintain satisfactory labor relations and the results of any collective bargaining agreement process with our union groups; any disruptions to operations due to any potential actions by our labor groups; labor costs; an outbreak of a disease that affects travel demand or travel behavior, such as the existing threat of COVID\-19; the impact of any management changes; extended interruptions or disruptions in service at major airports where we operate; U\.S\. or foreign governmental legislation, regulation and other actions (including Open Skies agreements, environmental regulations and the United Kingdom's withdrawal from the European Union); the seasonality of the airline industry; weather conditions; the costs and availability of aviation and other insurance; the costs and availability of financing; our ability to maintain adequate liquidity; our ability to comply with the terms of our various financing arrangements; our ability to realize the full value of our intangible assets and long\-lived assets; any impact to our reputation or brand image and other risks and uncertainties set forth under Part I, Item 1A\., Risk Factors, of this report, as well as other risks and uncertainties set forth from time to time in the reports we file with the SEC\.

37


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

CASM is summarized below:

|                                                   |                                                   |                                                   |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |  |  |  |  |  |  |  |  |  |  |  |  |
|:------------------------------------------------- |:------------------------------------------------- |:------------------------------------------------- | --------------------------------:| --------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:| --------------------------------:| --------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |
|                                                   |                                                   |                                                   | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                   |                                                   |                                                   |                             2019 |                             2019 |                                  |                                  |                                  |                             2018 |                             2018 |                                  |                                  |                                  |             % Change             |             % Change             |
| Consolidated:                                     | Consolidated:                                     | Consolidated:                                     |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |
| Total CASM                                        | Total CASM                                        | Total CASM                                        |                         11\.58 ¢ |                         11\.58 ¢ |                                  |                                  |                                  |                         11\.66 ¢ |                         11\.66 ¢ |                                  |                                  |                                  |             (0\.7)%              |             (0\.7)%              |
| Less the following components:                    | Less the following components:                    | Less the following components:                    |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |
| Aircraft fuel, including hedging gains and losses | Aircraft fuel, including hedging gains and losses | Aircraft fuel, including hedging gains and losses |                           2\.82  |                           2\.82  |                                  |                                  |                                  |                           2\.96  |                           2\.96  |                                  |                                  |                                  |             (4\.7)%              |             (4\.7)%              |
| Special items \- merger\-related costs            | Special items \- merger\-related costs            | Special items \- merger\-related costs            |                           0\.06  |                           0\.06  |                                  |                                  |                                  |                           0\.13  |                           0\.13  |                                  |                                  |                                  |             (53\.8)%             |             (53\.8)%             |
| Special items \- other^(a)^                       | Special items \- other^(a)^                       | Special items \- other^(a)^                       |                               —  |                               —  |                                  |                                  |                                  |                           0\.07  |                           0\.07  |                                  |                                  |                                  |               NM                 |               NM                 |
| CASM, excluding fuel and special items            | CASM, excluding fuel and special items            | CASM, excluding fuel and special items            |                          8\.70 ¢ |                          8\.70 ¢ |                                  |                                  |                                  |                          8\.50 ¢ |                          8\.50 ¢ |                                  |                                  |                                  |              2\.3%               |              2\.3%               |
| Mainline:                                         | Mainline:                                         | Mainline:                                         |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |
| Total CASM                                        | Total CASM                                        | Total CASM                                        |                         10\.73 ¢ |                         10\.73 ¢ |                                  |                                  |                                  |                         10\.78 ¢ |                         10\.78 ¢ |                                  |                                  |                                  |             (0\.5)%              |             (0\.5)%              |
| Less the following components:                    | Less the following components:                    | Less the following components:                    |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |
| Aircraft fuel, including hedging gains and losses | Aircraft fuel, including hedging gains and losses | Aircraft fuel, including hedging gains and losses |                           2\.65  |                           2\.65  |                                  |                                  |                                  |                           2\.83  |                           2\.83  |                                  |                                  |                                  |             (6\.4)%              |             (6\.4)%              |
| Special items \- merger\-related costs^(a)^       | Special items \- merger\-related costs^(a)^       | Special items \- merger\-related costs^(a)^       |                           0\.08  |                           0\.08  |                                  |                                  |                                  |                           0\.14  |                           0\.14  |                                  |                                  |                                  |             (42\.9)%             |             (42\.9)%             |
| Special items \- other^(a)^                       | Special items \- other^(a)^                       | Special items \- other^(a)^                       |                               —  |                               —  |                                  |                                  |                                  |                           0\.08  |                           0\.08  |                                  |                                  |                                  |               NM                 |               NM                 |
| CASM, excluding fuel and special items            | CASM, excluding fuel and special items            | CASM, excluding fuel and special items            |                          8\.00 ¢ |                          8\.00 ¢ |                                  |                                  |                                  |                          7\.73 ¢ |                          7\.73 ¢ |                                  |                                  |                                  |              3\.5%               |              3\.5%               |

(a) Special items \- other relates to the employee tax reform bonus awarded in January 2018 and a $20 million contract termination fee incurred in December 2018\.

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