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

ITEM 2\. PROPERTIES

Flight Equipment

As part of our ongoing fleet transformation, during 2019 we took delivery of 79 mainline aircraft and nine CRJ\-900 aircraft, and removed 52 aircraft from our active mainline fleet\. Our operating aircraft fleet, commitments and options at December 31, 2019 are summarized in the following table:

|               |               |               |                    |                    |                    |                    |                    |                    |                    |                    |             |             |          |          |         |         |  |  |  |             |             |             |             |             |             |  |  |  |
|:------------- |:------------- |:------------- |:------------------:|:------------------:|:------------------:|:------------------:|:------------------:|:------------------:|:------------------:|:------------------:|:-----------:|:-----------:|:--------:|:--------:|:-------:|:-------:|:- |:- |:- |:-----------:|:-----------:|:-----------:|:-----------:|:-----------:|:-----------:|:- |:- |:- |
|               |               |               | Current Fleet^(1)^ | Current Fleet^(1)^ | Current Fleet^(1)^ | Current Fleet^(1)^ | Current Fleet^(1)^ | Current Fleet^(1)^ | Current Fleet^(1)^ | Current Fleet^(1)^ |             |             |          |          |         |         |  |  |  | Commitments | Commitments | Commitments | Commitments | Commitments | Commitments |  |  |  |
| Aircraft Type | Aircraft Type | Aircraft Type |       Owned        |       Owned        |   Finance Lease    |   Finance Lease    |  Operating Lease   |  Operating Lease   |       Total        |       Total        | Average Age | Average Age | Purchase | Purchase | Options | Options |
| B\-717\-200   | B\-717\-200   | B\-717\-200   |        13          |        13          |        22          |        22          |        56          |        56          |        91          |        91          |   18\.3     |   18\.3     |    —     |    —     |   —     |   —     |
| B\-737\-700   | B\-737\-700   | B\-737\-700   |        10          |        10          |         —          |         —          |         —          |         —          |        10          |        10          |   11\.0     |   11\.0     |    —     |    —     |   —     |   —     |
| B\-737\-800   | B\-737\-800   | B\-737\-800   |        73          |        73          |         4          |         4          |         —          |         —          |        77          |        77          |   18\.3     |   18\.3     |    —     |    —     |   —     |   —     |
| B\-737\-900ER | B\-737\-900ER | B\-737\-900ER |        88          |        88          |         —          |         —          |        42          |        42          |        130         |        130         |    3\.3     |    3\.3     |    —     |    —     |   —     |   —     |
| B\-757\-200   | B\-757\-200   | B\-757\-200   |        91          |        91          |         8          |         8          |         1          |         1          |        100         |        100         |   22\.4     |   22\.4     |    —     |    —     |   —     |   —     |
| B\-757\-300   | B\-757\-300   | B\-757\-300   |        16          |        16          |         —          |         —          |         —          |         —          |        16          |        16          |   16\.9     |   16\.9     |    —     |    —     |   —     |   —     |
| B\-767\-300ER | B\-767\-300ER | B\-767\-300ER |        56          |        56          |         —          |         —          |         —          |         —          |        56          |        56          |   23\.6     |   23\.6     |    —     |    —     |   —     |   —     |
| B\-767\-400ER | B\-767\-400ER | B\-767\-400ER |        21          |        21          |         —          |         —          |         —          |         —          |        21          |        21          |   19\.0     |   19\.0     |    —     |    —     |   —     |   —     |
| B\-777\-200ER | B\-777\-200ER | B\-777\-200ER |         8          |         8          |         —          |         —          |         —          |         —          |         8          |         8          |   20\.1     |   20\.1     |    —     |    —     |   —     |   —     |
| B\-777\-200LR | B\-777\-200LR | B\-777\-200LR |        10          |        10          |         —          |         —          |         —          |         —          |        10          |        10          |   10\.8     |   10\.8     |    —     |    —     |   —     |   —     |
| A220\-100     | A220\-100     | A220\-100     |        27          |        27          |         1          |         1          |         —          |         —          |        28          |        28          |    0\.6     |    0\.6     |   17     |   17     |   —     |   —     |
| A220\-300     | A220\-300     | A220\-300     |         —          |         —          |         —          |         —          |         —          |         —          |         —          |         —          |     —       |     —       |   50     |   50     |   50    |   50    |
| A319\-100     | A319\-100     | A319\-100     |        55          |        55          |         —          |         —          |         2          |         2          |        57          |        57          |   17\.9     |   17\.9     |    —     |    —     |   —     |   —     |
| A320\-200     | A320\-200     | A320\-200     |        58          |        58          |         —          |         —          |         4          |         4          |        62          |        62          |   24\.4     |   24\.4     |    —     |    —     |   —     |   —     |
| A321\-200     | A321\-200     | A321\-200     |        53          |        53          |        12          |        12          |        31          |        31          |        96          |        96          |    1\.7     |    1\.7     |   31     |   31     |   —     |   —     |
| A321\-200neo  | A321\-200neo  | A321\-200neo  |         —          |         —          |         —          |         —          |         —          |         —          |         —          |         —          |     —       |     —       |   100    |   100    |  100    |  100    |
| A330\-200     | A330\-200     | A330\-200     |        11          |        11          |         —          |         —          |         —          |         —          |        11          |        11          |   14\.8     |   14\.8     |    —     |    —     |   —     |   —     |
| A330\-300     | A330\-300     | A330\-300     |        28          |        28          |         —          |         —          |         3          |         3          |        31          |        31          |   11\.0     |   11\.0     |    —     |    —     |   —     |   —     |
| A330\-900neo  | A330\-900neo  | A330\-900neo  |         3          |         3          |         1          |         1          |         —          |         —          |         4          |         4          |    0\.5     |    0\.5     |   33     |   33     |   —     |   —     |
| A350\-900     | A350\-900     | A350\-900     |        13          |        13          |         —          |         —          |         —          |         —          |        13          |        13          |    1\.8     |    1\.8     |   16     |   16     |   —     |   —     |
| MD\-88        | MD\-88        | MD\-88        |        41          |        41          |         6          |         6          |         —          |         —          |        47          |        47          |   28\.7     |   28\.7     |    —     |    —     |   —     |   —     |
| MD\-90        | MD\-90        | MD\-90        |        30          |        30          |         —          |         —          |         —          |         —          |        30          |        30          |   22\.7     |   22\.7     |    —     |    —     |   —     |   —     |
| Total         | Total         | Total         |        705         |        705         |        54          |        54          |        139         |        139         |        898         |        898         |   14\.9     |   14\.9     |   247    |   247    |  150    |  150    |

^(1)^ Excludes certain aircraft we own, lease or have committed to purchase (including six CRJ\-900 aircraft) that are operated by regional carriers on our behalf shown in the table below\.

We have agreed to acquire four A350 aircraft from LATAM, which are included as purchase commitments in the table above\. In addition, we plan to assume ten of LATAM's A350 purchase commitments from Airbus, with deliveries through 2025\. For more information regarding our planned strategic alliance with LATAM, see Note 4 of the Notes to the Consolidated Financial Statements\.

22


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

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

|           |                 |                                                                                |
| --------- | --------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
|  ^10\.152 | UAL
United | [Supplemental Agreement No\. 12, including exhibits and side letters, to Purchase Agreement No\. 03776, dated as of December 12, 2018, between The Boeing Company and United Airlines, Inc\.](https://www.example.com/ual_12311810kex10152.htm)                                                                                |
|  ^10\.153 | UAL
United | [Letter Agreement No\. 6\-1162\-KKT\-080, dated July 12, 2012, among Boeing, United Continental Holdings, Inc\., United Air Lines, Inc\., and Continental Airlines, Inc\. (filed as Exhibit 10\.4 to UAL's Form 10\-Q for the quarter ended September 30, 2012, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312512435658/d408868dex104.htm)             |
|  ^10\.154 | UAL
United | [Purchase Agreement No\. 3860, dated September 27, 2012, between Boeing and United Air Lines, Inc\. (filed as Exhibit 10\.6 to UAL's Form 10\-Q for the quarter ended September 30, 2012, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312512435658/d408868dex106.htm)                                                                                |
|  ^10\.155 | UAL
United | [Supplemental Agreement No\. 1 to Purchase Agreement No\. 3860, dated June 17, 2013 (filed as Exhibit 10\.6 to UAL's Form 10\-Q for the quarter ended June 30, 2013, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312513302696/d552832dex106.htm)                                                                                |
|  ^10\.156 | UAL
United | [Supplemental Agreement No\. 2 to Purchase Agreement No\. 3860, dated December 16, 2013 (filed as Exhibit 10\.1 to UAL's Form 10\-Q for the quarter ended June 30, 2014, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312514278970/d732259dex101.htm)                                                                                |
|  ^10\.157 | UAL
United | [Supplemental Agreement No\. 3 to Purchase Agreement No\. 3860, dated as of July 22, 2014 (filed as Exhibit 10\.3 to UAL's Form 10\-Q for the quarter ended September 30, 2014, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312514380216/d787177dex103.htm)                                                                                |
|  ^10\.158 | UAL
United | [Supplemental Agreement No\. 4 to Purchase Agreement No\. 3860, dated as of January 14, 2015 (filed as Exhibit 10\.6 to UAL's Form 10\-Q for the quarter ended March 31, 2015, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312515144255/d891332dex106.htm)                                                                                |
|  ^10\.159 | UAL
United | [Supplemental Agreement No\. 5 to Purchase Agreement No\. 3860, dated as of April 30, 2015 (filed as Exhibit 10\.8 to UAL's Form 10\-Q for the quarter ended June 30, 2015, Commission file number 1\-10323, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312515261239/d941677dex108.htm)                                                                                |
|  ^10\.160 | UAL
United | [Supplemental Agreement No\. 6 to Purchase Agreement No\. 3860, dated as of December 31, 2015 (filed as Exhibit 10\.178 to UAL's Form 10\-K for the year ended December 31, 2015, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312516468479/d13806dex10178.htm)                                                                                |
|  ^10\.161 | UAL
United | [Supplemental Agreement No\. 7 to Purchase Agreement No\. 3860, dated March 7, 2016, between The Boeing Company and United Airlines, Inc\. (filed as Exhibit 10\.5 to UAL's Form 10\-Q for the quarter ended March 31, 2016, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312516550432/d116267dex105.htm)                                                |
|  ^10\.162 | UAL
United | [Letter Agreement to Purchase Agreement No\. 3860, dated May 5, 2016, between The Boeing Company and United Airlines, Inc\. (filed as Exhibit 10\.5 to UAL's Form 10\-Q for the quarter ended June 30, 2016, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312516651221/d188420dex105.htm)                                                                |
| ^10\.163  | UAL
United | [Supplemental Agreement No\. 8, including exhibits and side letters, to Purchase Agreement No\. 3860, Dated June 15, 2017, between The Boeing Company and United Airlines, Inc\. (filed as Exhibit 10\.5 to UAL's Form 10\-Q for the quarter ended June 30, 2017, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312517231250/d414345dex105.htm)           |
|  ^10\.164 | UAL
United | [Letter Agreement No\. UAL\-LA\-1604287 to Purchase Agreement Nos\. 3776, 3784 and 3860, dated December 27, 2016, between The Boeing Company and United Airlines, Inc\. (filed as Exhibit 10\.194 to UAL's Form 10\-K for the year ended December 31, 2016, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312517054129/d300268dex10194.htm)               |
|  ^10\.165 | UAL
United | [Supplemental Agreement No\. 9, including exhibits and side letters, to Purchase Agreement No\. 3860, dated as of May 31, 2018, between The Boeing Company and United Airlines, Inc\. (filed as Exhibit 10\.3 to UAL's Form 10\-Q for the quarter ended June 30, 2018, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000010051718000012/ual_06301810qex103.htm) |
|  ^10\.166 | UAL
United | [Supplemental Agreement No\. 10, including exhibits and side letters, to Purchase Agreement No\. 3860, dated as of November 1, 2018, between The Boeing Company and United Airlines, Inc\.](https://www.example.com/ual_12311810kex10166.htm)                                                                                |
|  ^10\.167 | UAL
United | [Supplemental Agreement No\. 11, including exhibits and side letters, to Purchase Agreement No\. 3860, dated as of December 12, 2018, between The Boeing Company and United Airlines, Inc\.](https://www.example.com/ual_12311810kex10167.htm)                                                                                |

107


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

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints W\. Douglas Parker and Derek J\. Kerr and each or any of them, his or her true and lawful attorneys and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to the registrants’ Annual Report on Form 10\-K for the fiscal year ended December 31, 2018, and to file the same with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each or any of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys and agents, and each of them, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof\.

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

|                         |                                                      |
| ----------------------- | ---------------------------------------------------- |
| Date: February 25, 2019 | /s/ W\. Douglas Parker                               |
|                         | W\. Douglas Parker                                   |
|                         | Chairman and Chief Executive Officer                 |
|                         | (Principal Executive Officer)                        |
| Date: February 25, 2019 | /s/ Derek J\. Kerr                                   |
|                         | Derek J\. Kerr                                       |
|                         | Executive Vice President and Chief Financial Officer |
|                         | (Principal Financial and Accounting Officer)         |
| Date: February 25, 2019 | /s/ James F\. Albaugh                                |
|                         | James F\. Albaugh, Director                          |
| Date: February 25, 2019 | /s/ Jeffrey D\. Benjamin                             |
|                         | Jeffrey D\. Benjamin, Director                       |
| Date: February 25, 2019 | /s/ John T\. Cahill                                  |
|                         | John T\. Cahill, Director                            |
| Date: February 25, 2019 | /s/ Michael J\. Embler                               |
|                         | Michael J\. Embler, Director                         |
| Date: February 25, 2019 | /s/ Matthew J\. Hart                                 |
|                         | Matthew J\. Hart, Director                           |
| Date: February 25, 2019 | /s/ Alberto Ibargüen                                 |
|                         | Alberto Ibargüen, Director                           |
| Date: February 25, 2019 | /s/ Richard C\. Kraemer                              |
|                         | Richard C\. Kraemer, Director                        |

201


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

NOTE 10 \. EMPLOYEE BENEFIT PLANS

We sponsor defined benefit and defined contribution pension plans, healthcare plans and disability and survivorship plans for eligible employees and retirees and their eligible family members\.

Defined Benefit Pension Plans\.  We sponsor defined benefit pension plans for eligible employees and retirees\. These plans are closed to new entrants and frozen for future benefit accruals\.  The Pension Protection Act of 2006 allows commercial airlines to elect alternative funding rules ("Alternative Funding Rules") for defined benefit plans that are frozen\. We elected the Alternative Funding Rules under which the unfunded liability for a frozen defined benefit plan may be amortized over a fixed 17\-year period and is calculated using an   8\.85%  discount rate\.  We have no minimum funding requirements in 2019, but we plan to voluntarily contribute approximately   $500 million  to these plans\.

Defined Contribution Pension Plans\.  We sponsor several defined contribution plans\. These plans generally cover different employee groups and employer contributions vary by plan\. The costs associated with our defined contribution pension plans were   $926 million ,   $875 million  and   $733 million  for the years ended December 31, 2018, 2017 and 2016, respectively\.

Postretirement Healthcare Plans\.  We sponsor healthcare plans that provide benefits to eligible retirees and their dependents who are under age   65 \. We have generally eliminated company\-paid post age   65  healthcare coverage, except for (1) subsidies available to a limited group of retirees and their dependents and (2) a group of retirees who retired prior to 1987\. Benefits under these plans are funded from current assets and employee contributions\. During 2018, we remeasured our postretirement obligation to reflect a curtailment of our postretirement healthcare plans\.

Postemployment Plans\.  We provide certain other welfare benefits to eligible former or inactive employees after employment but before retirement, primarily as part of the disability and survivorship plans\. Substantially all employees are eligible for benefits under these plans in the event of death and/or disability\.

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)**                                | **2018**                 | **2017**                 | **2018**                                             | **2017**                                             |
| Benefit obligation at beginning of period        | $21,696                  | $20,859                  | $3,504                                               | $3,379                                               |
| Service cost                                     | —                        | —                        | 85                                                   | 87                                                   |
| Interest cost                                    | 781                      | 853                      | 126                                                  | 138                                                  |
| Actuarial (gain) loss                            | (1,560

)          | 1,068                    | (142

)                                        | 183                                                  |
| Benefits paid, including lump sums and annuities | (1,093

)          | (1,075

)          | (306

)                                        | (311

)                                        |
| Participant contributions                        | —                        | —                        | 26                                                   | 28                                                   |
| Curtailment                                      | —                        | —                        | (68

)                                         | —                                                    |
| Settlements                                      | (15

)             | (9

)              | —                                                    | —                                                    |
| Benefit obligation at end of period ^(1)^        | $19,809                  | $21,696                  | $3,225                                               | $3,504                                               |
| Fair value of plan assets at beginning of period | $14,744                  | $10,301                  | $866                                                 | $784                                                 |
| Actual (loss) gain on plan assets                | (700

)            | 1,966                    | (72

)                                         | 138                                                  |
| Employer contributions                           | 523                      | 3,561                    | 152                                                  | 254                                                  |
| Participant contributions                        | —                        | —                        | 26                                                   | 28                                                   |
| Benefits paid, including lump sums and annuities | (1,093

)          | (1,075

)          | (335

)                                        | (338

)                                        |
| Settlements                                      | (15

)             | (9

)              | —                                                    | —                                                    |
| Fair value of plan assets at end of period       | $13,459                  | $14,744                  | $637                                                 | $866                                                 |
| Funded status at end of period                   | $

(6,350

) | $

(6,952

) | $

(2,588

)                             | $

(2,638

)                             |

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

 82


Annual Report of Southwest Airlines Co\. for year 2018

**Dallas Love Field**

For the rebuilding of the facilities at Dallas Love Field, the Company guaranteed principal, premium, and interest on $456 million in bonds issued by the Love Field Airport Modernization Corporation ("LFAMC") that were utilized to fund the majority of the project\. The amount of bonds outstanding as of December 31, 2018, was $416 million\. Repayment of the bonds is through the "Facilities Payments" described below\. Reimbursement of the Company for its payment of Facilities Payments is made through recurring ground rents, fees, and other revenues collected at the airport\.

Prior to the issuance of the bonds by the LFAMC, the Company entered into two separate funding agreements: (i) a "Facilities Agreement" pursuant to which the Company is obligated to make debt service payments on the principal and interest amounts associated with the bonds ("Facilities Payments"), less other sources of funds the City of Dallas may apply to the repayment of the bonds (including but not limited to passenger facility charges collected from passengers originating from the airport); and (ii) a "Revenue Credit Agreement" pursuant to which the City of Dallas reimburses the Company for the Facilities Payments made by the Company\.

A majority of the monies transferred from the City of Dallas to the Company under the Revenue Credit Agreement originate from a reimbursement account created in the "Use and Lease Agreement" between the City of Dallas and the Company\. The Use and Lease Agreement is a 20\-year agreement providing for, among other things, the Company’s lease of space at the Airport from the City of Dallas\. The remainder of such monies transferred from the City of Dallas to the Company under the Revenue Credit Agreement originates from (i) use and lease agreements with other airlines, (ii) various concession agreements, and (iii) other airport miscellaneous revenues\.

The Company’s liquidity could be impacted by this project to the extent there are timing differences between the Company’s payment of the Facilities Payments pursuant to the Facilities Agreement and the transfer of monies back to the Company pursuant to the Revenue Credit Agreement; however, the Company does not currently expect that to occur\. The project has not had a significant impact on the Company’s capital resources or financial position\.

**Fort Lauderdale\-Hollywood International Airport**

The Company committed to oversee and manage the design and construction of Fort Lauderdale\-Hollywood International Airport's Terminal 1 Modernization Project, including the design and construction of a new five\-gate Concourse A with an international processing facility, at a cost not to exceed $333 million\. Funding for the project has come directly from Broward County aviation sources, but flows through the Company in its capacity as manager of the project\. Construction of Concourse A was completed during second quarter 2017, and construction on Terminal 1 was substantially complete and operational as of the end of third quarter 2018\. In general, as work was being completed on the project by various contractors, invoices were submitted to Broward County for initial payment to the Company, which then made such payments to the contractors performing the work\. The project did not have a significant impact on the Company’s capital resources or financial position\.

**Los Angeles International Airport**

In March 2013, the Company executed a lease agreement (the "T1 Lease") with Los Angeles World Airports ("LAWA"), which owns and operates Los Angeles International Airport ("LAX")\. Under the T1 Lease, which was amended in June 2014 and September 2017, the Company oversaw and managed the design, development, financing, construction, and commissioning of the airport's Terminal 1 Modernization Project at a cost not to exceed $526 million (including proprietary renovations, or $510 million excluding proprietary renovations)\. In October 2017, the Company executed a separate lease agreement with LAWA (the "T1\.5 Lease")\. Under the T1\.5 Lease, the Company is overseeing and managing the design, development, financing, construction, and commissioning of a passenger processing facility between Terminal 1 and 2 (the "Terminal 1\.5 Project")\. The Terminal 1\.5 Project is expected to include ticketing, baggage claim, passenger screening, and a bus gate at a cost not to exceed $479 million for site improvements and non\-proprietary improvements\.

57


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

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

of the asset are capitalized and depreciated or amortized over the estimated useful life of the asset or the lease term, whichever is less\. The estimated useful lives for the principal property and equipment classifications are as follows:

|                                                     |                           |
| --------------------------------------------------- | ------------------------- |
| **Principal Property and Equipment Classification** | **Estimated Useful Life** |
| Aircraft, engines and related rotable parts         | 20 – 30 years             |
| Buildings and improvements                          | 5 – 30 years              |
| Furniture, fixtures and other equipment             | 3 – 10 years              |
| Capitalized software                                | 5 – 10 years              |

American assesses impairment on operating property and equipment when events and circumstances indicate that the assets may be impaired\. An asset or group of assets is considered impaired when the undiscounted cash flows estimated to be generated by the assets are less than the carrying amount of the assets and the net book value of the assets exceeds their estimated fair value\. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets\. Assets to be disposed of are reported at the lower of the carrying amount or fair value less the cost to sell\.

Total depreciation and amortization expense was $2\.4 billion, $2\.1 billion and $1\.8 billion for the years ended December 31, 2018, 2017 and 2016, respectively\.

***(g) Leases***

American determines if an arrangement is a lease at inception\. Operating leases are included in operating lease ROU assets, current operating lease liabilities and noncurrent operating lease liabilities in American’s consolidated balance sheet\. Finance leases are included in property and equipment, current maturities of long\-term debt and finance leases and long\-term debt and finance leases, net of current maturities, in American’s consolidated balance sheet\.

ROU assets represent American’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease\. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term\.

American uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments\. American gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates\.

American’s lease term includes options to extend the lease when it is reasonably certain that it will exercise that option\. Leases with a term of 12 months or less are not recorded on the balance sheet\. American’s lease agreements do not contain any residual value guarantees\.

Under certain of American’s capacity purchase agreements with third\-party regional carriers, American does not own the underlying aircraft\. However, since American controls the marketing, scheduling, ticketing, pricing and seat inventories of these aircraft and therefore control the asset, the aircraft is deemed to be leased for accounting purposes\. For these capacity purchase agreements, American accounts for the lease and non\-lease components separately\. The lease component consists of the aircraft and the non\-lease components consist of services, such as the crew and maintenance\. American allocates the consideration in the capacity purchase agreements to the lease and non\-lease components using their estimated relative standalone prices\. See Note 10(b) for additional information on its capacity purchase agreements\.

For real estate, American accounts for the lease and non\-lease components as a single lease component\.

***(h) Income Taxes***

Income taxes are accounted for under the asset and liability method\. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards\. Deferred tax assets and liabilities are recorded net as noncurrent deferred income taxes\.

American provides a valuation allowance for its deferred tax assets when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized\. The ultimate realization of deferred tax assets is dependent upon the

139


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

DELTA AIR LINES, INC\.

Consolidated Statements of Comprehensive Income

|                                          |                                          |                                          |                         |                         |                         |                         |                         |                         |                         |                         |                         |  |  |  |  |  |  |  |  |  |  |  |  |
|:---------------------------------------- |:---------------------------------------- |:---------------------------------------- | -----------------------:|:-----------------------:|:-----------------------:|:-----------------------:| -----------------------:|:-----------------------:|:-----------------------:|:-----------------------:| -----------------------:|:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |
|                                          |                                          |                                          | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |  |  |  |  |  |  |  |  |  |  |  |  |
| (in millions)                            | (in millions)                            | (in millions)                            |                    2019 |                         |                         |                         |                    2018 |                         |                         |                         |                    2017 |
| Net Income                               | Net Income                               | Net Income                               |                 $ 4,767 |                         |                         |                         |                 $ 3,935 |                         |                         |                         |                 $ 3,205 |
|  Other comprehensive (loss) income:      |  Other comprehensive (loss) income:      |  Other comprehensive (loss) income:      |                         |                         |                         |                         |                         |                         |                         |                         |                         |
| Net change in derivative contracts       | Net change in derivative contracts       | Net change in derivative contracts       |                       6 |                         |                         |                         |                      15 |                         |                         |                         |                    (29) |
| Net change in pension and other benefits | Net change in pension and other benefits | Net change in pension and other benefits |                   (170) |                         |                         |                         |                   (113) |                         |                         |                         |                    (98) |
| Net change in investments                | Net change in investments                | Net change in investments                |                       — |                         |                         |                         |                       — |                         |                         |                         |                     142 |
|  Total Other Comprehensive (Loss) Income |  Total Other Comprehensive (Loss) Income |  Total Other Comprehensive (Loss) Income |                   (164) |                         |                         |                         |                    (98) |                         |                         |                         |                      15 |
| Comprehensive Income                     | Comprehensive Income                     | Comprehensive Income                     |                 $ 4,603 |                         |                         |                         |                 $ 3,837 |                         |                         |                         |                 $ 3,220 |

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

55


Annual Report of Southwest Airlines Co\. for year 2019

Southwest Airlines Co\.

Consolidated Statement of Income

(in millions, except per share amounts)

|                                          |                             |                             |                             |
| ---------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                          | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|                                          | **2019**                    | **2018**                    | **2017**                    |
| **OPERATING REVENUES:**                  |                             |                             |                             |
| Passenger                                | $20,776                     | $20,455                     | $19,763                     |
| Freight                                  | 172                         | 175                         | 173                         |
| Other                                    | 1,480                       | 1,335                       | 1,210                       |
| Total operating revenues                 | 22,428                      | 21,965                      | 21,146                      |
| **OPERATING EXPENSES:**                  |                             |                             |                             |
| Salaries, wages, and benefits            | 8,293                       | 7,649                       | 7,305                       |
| Fuel and oil                             | 4,347                       | 4,616                       | 4,076                       |
| Maintenance materials and repairs        | 1,223                       | 1,107                       | 1,001                       |
| Landing fees and airport rentals         | 1,363                       | 1,334                       | 1,292                       |
| Depreciation and amortization            | 1,219                       | 1,201                       | 1,218                       |
| Other operating expenses                 | 3,026                       | 2,852                       | 2,847                       |
| Total operating expenses                 | 19,471                      | 18,759                      | 17,739                      |
| **OPERATING INCOME**                     | 2,957                       | 3,206                       | 3,407                       |
| **OTHER EXPENSES (INCOME):**             |                             |                             |                             |
| Interest expense                         | 118                         | 131                         | 114                         |
| Capitalized interest                     | (36

)                | (38

)                | (49

)                |
| Interest income                          | (90

)                | (69

)                | (35

)                |
| Other (gains) losses, net                | 8                           | 18                          | 112                         |
| Total other expenses (income)            | —                           | 42                          | 142                         |
| **INCOME BEFORE INCOME TAXES**           | 2,957                       | 3,164                       | 3,265                       |
| **PROVISION (BENEFIT) FOR INCOME TAXES** | 657                         | 699                         | (92

)                |
| **NET INCOME**                           | $2,300                      | $2,465                      | $3,357                      |
| **NET INCOME PER SHARE, BASIC**          | $4\.28                      | $4\.30                      | $5\.58                      |
| **NET INCOME PER SHARE, DILUTED**        | $4\.27                      | $4\.29                      | $5\.57                      |

See accompanying notes\.

65


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

General

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

Note Concerning Forward\-Looking Statements

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

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

4


Annual Report of Southwest Airlines Co\. for year 2018

The impacts of applying the New Revenue Standard, the New Retirement Standard, and the New Hedging Standard to the Company’s Consolidated Statement of Income for the years ended December 31, 2017 and 2016, are as follows (amounts may not recalculate due to rounding):

|                                             |                                  |                                  |                                  |                                  |                                  |
| ------------------------------------------- | -------------------------------- | -------------------------------- | -------------------------------- | -------------------------------- | -------------------------------- |
|                                             | **Year ended December 31, 2017** | **Year ended December 31, 2017** | **Year ended December 31, 2017** | **Year ended December 31, 2017** | **Year ended December 31, 2017** |
| **(in millions), except per share amounts** | **As Reported**                  | **New Revenue Standard**         | **New Retirement Standard**      | **New Hedging Standard**         | **As Recast**                    |
| Passenger revenue                           | $19,141                          | $622                             | $—                               | $—                               | $19,763                          |
| Other revenue                               | 1,857                            | (647)                            | —                                | —                                | 1,210                            |
| Salaries, wages, and benefits               | 7,319                            | —                                | (14)                             | —                                | 7,305                            |
| Fuel and oil expense                        | 3,940                            | —                                | —                                | 136                              | 4,076                            |
| Other operating expenses                    | 2,886                            | (39)                             | —                                | —                                | 2,847                            |
| Other (gains) losses, net                   | 234                              | —                                | 14                               | (136)                            | 112                              |
| Provision for income taxes                  | (237)                            | 145                              | —                                | —                                | (92)                             |
| Net income                                  | 3,488                            | (131)                            | —                                | —                                | 3,357                            |
| Net income per share, basic                 | 5\.80                            | (0\.22)                          | —                                | —                                | 5\.58                            |
| Net income per share, diluted               | 5\.79                            | (0\.22)                          | —                                | —                                | 5\.57                            |

|                                             |                                  |                                  |                                  |                                  |                                  |
| ------------------------------------------- | -------------------------------- | -------------------------------- | -------------------------------- | -------------------------------- | -------------------------------- |
|                                             | **Year ended December 31, 2016** | **Year ended December 31, 2016** | **Year ended December 31, 2016** | **Year ended December 31, 2016** | **Year ended December 31, 2016** |
| **(in millions), except per share amounts** | **As Reported**                  | **New Revenue Standard**         | **New Retirement Standard**      | **New Hedging Standard**         | **As Recast**                    |
| Passenger revenue                           | $18,594                          | $474                             | $—                               | $—                               | $19,068                          |
| Other revenue                               | 1,660                            | (610)                            | —                                | —                                | 1,050                            |
| Salaries, wages, and benefits               | 6,798                            | —                                | (12)                             | —                                | 6,786                            |
| Fuel and oil expense                        | 3,647                            | —                                | —                                | 154                              | 3,801                            |
| Other operating expenses                    | 2,743                            | (40)                             | —                                | —                                | 2,703                            |
| Other (gains) losses, net                   | 162                              | —                                | 12                               | (154)                            | 21                               |
| Provision for income taxes                  | 1,303                            | (36)                             | —                                | —                                | 1,267                            |
| Net income                                  | 2,244                            | (60)                             | —                                | —                                | 2,183                            |
| Net income per share, basic                 | 3\.58                            | (0\.10)                          | —                                | —                                | 3\.48                            |
| Net income per share, diluted               | 3\.55                            | (0\.10)                          | —                                | —                                | 3\.45                            |

82


Annual Report of Southwest Airlines Co\. for year 2018

ASC 606 requires the Company to allocate consideration received to performance obligations based on the relative fair value of those obligations\. The Company has a co\-branded credit card agreement (“Agreement”) with Chase Bank USA, N\.A\. (“Chase”), through which the Company sells loyalty points and certain marketing components, which consist of the use of Southwest Airlines’ brand and access to Rapid Rewards Member lists, licensing and advertising elements, and the use of the Company’s resource team\. The Company estimated the selling prices and volumes over the term of the Agreement in order to determine the allocation of proceeds to each of the two performance obligations identified in the Agreement, which have been characterized as a transportation component and a marketing component\. The allocations utilized are reviewed to determine if adjustment is necessary any time there is a modification to the Agreement\. The Company records Passenger revenue related to loyalty point redemptions for air travel when the travel is delivered, and the marketing elements are recognized as Other revenue when the performance obligations related to those services are satisfied, which is generally the same period consideration is received from Chase\.

The Company has elected the transition provision within ASC 606 to reflect the aggregate effect of historical modifications to the Agreement on January 1, 2018, when (i) identifying the satisfied and unsatisfied performance obligations, (ii) determining the transaction price, and (iii) allocating the transaction price to the satisfied and unsatisfied performance obligations\. When applying the full retrospective adoption provisions of ASC 606, the Company determined the transaction price for all satisfied and unsatisfied performance obligations in the Agreement and performed a single allocation of the transaction price to those performance obligations, based on the relative selling prices on January 1, 2016\. In applying this transition provision, the Company evaluated the historical modifications of the Agreement and did not identify any new performance obligations throughout the periods prior to adoption of the new standard\. The Company did not believe it was reasonably possible to quantitatively estimate the impact of applying this transition provision to contract modifications prior to January 1, 2016\.

As performance obligations to Customers are satisfied, the related revenue is recognized\. The events that result in revenue recognition that are associated with performance obligations identified as a part of the Rapid Rewards Program are as follows:

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| • | *Tickets and Rapid Rewards Points*  \- When a flight occurs, the related performance obligation is satisfied and the related value provided by the Customer, whether from purchased tickets or Rapid Rewards Points, is recognized as revenue\.  |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | *Loyalty points redeemed for goods and/or services other than travel*  \- Rapid Rewards Members have the option to redeem points for goods and services offered through a third party vendor, who acts as principal\. The performance obligation related to the purchase of these goods and services is satisfied when the good and/or service is delivered to the Customer\. |

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | *Marketing Royalties*  \- As part of its Agreement with Chase, Southwest provides certain deliverables, including use of the Southwest Airlines’ brand, access to Rapid Rewards Member lists, advertising elements, and the Company’s resource team\. These performance obligations are satisfied each month that the Agreement is active\. |

As of the years ended December 31, 2018 and 2017, the components of Air traffic liability, including contract liabilities based on tickets sold, unused funds available to the Customer, and loyalty points available for redemption, net of expected spoilage, within the Consolidated Balance Sheet were as follows:

|                                                                            |                       |                       |
| -------------------------------------------------------------------------- | --------------------- | --------------------- |
|                                                                            | **Balance as of**     | **Balance as of**     |
| **(in millions)**                                                          | **December 31, 2018** | **December 31, 2017** |
| Air traffic liability \- passenger travel and ancillary passenger services | $2,059                | $1,898                |
| Air traffic liability \- loyalty program                                   | 3,011                 | 2,667                 |
|  **Total Air traffic liability**                                           | $5,070                | $4,565                |

The balance in Air traffic liability – passenger travel and ancillary passenger services also includes unused funds that are available for use by Customers that are not currently associated with a ticket, but represent funds effectively refunded

88


Annual Report of Southwest Airlines Co\. for year 2017

**Note Regarding Use of Non\-GAAP Financial Measures**

The Company's Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP")\. These GAAP financial statements include (i) unrealized noncash adjustments and reclassifications, which can be significant, as a result of accounting requirements and elections made under accounting pronouncements relating to derivative instruments and hedging and (ii) other charges and benefits the Company believes are unusual and/or infrequent in nature and thus may make comparisons to its prior or future performance difficult\.

As a result, the Company also provides financial information in this filing that was not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP\. The Company provides supplemental non\-GAAP financial information (also referred to as "excluding special items"), including results that it refers to as "economic," which the Company's management utilizes to evaluate its ongoing financial performance and the Company believes provides additional insight to investors as supplemental information to its GAAP results\. The non\-GAAP measures provided that relate to the Company’s performance on an economic fuel cost basis include Fuel and oil expense, non\-GAAP; Total operating expenses, non\-GAAP; Operating income, non\-GAAP; Net income, non\-GAAP; and Net income per share, diluted, non\-GAAP\. The Company's economic Fuel and oil expense results differ from GAAP results in that they only include the actual cash settlements from fuel hedge contracts \- all reflected within Fuel and oil expense in the period of settlement\. Thus, Fuel and oil expense on an economic basis has historically been utilized by the Company, as well as some of the other airlines that utilize fuel hedging, as it reflects the Company’s actual net cash outlays for fuel during the applicable period, inclusive of settled fuel derivative contracts\. Any net premium costs paid related to option contracts are reflected as a component of Other (gains) losses, net, for both GAAP and non\-GAAP (including economic) purposes in the period of contract settlement\. The Company believes these economic results provide further insight on the impact of the Company's fuel hedges on its operating performance and liquidity since they exclude the unrealized, noncash adjustments and reclassifications that are recorded in GAAP results in accordance with accounting guidance relating to derivative instruments, and they reflect all cash settlements related to fuel derivative contracts within Fuel and oil expense\. This enables the Company's management, as well as investors and analysts, to consistently assess the Company's operating performance on a year\-over\-year or quarter\-over\-quarter basis after considering all efforts in place to manage fuel expense\. However, because these measures are not determined in accordance with GAAP, such measures are susceptible to varying calculations, and not all companies calculate the measures in the same manner\. As a result, the aforementioned measures, as presented, may not be directly comparable to similarly titled measures presented by other companies\.

Further information on (i) the Company's fuel hedging program, (ii) the requirements of accounting for derivative instruments, and (iii) the causes of hedge ineffectiveness and/or mark\-to\-market gains or losses from derivative instruments is included in Note 10 to the Consolidated Financial Statements\.

The Company’s GAAP results in the applicable periods include other charges or benefits that are also deemed "special items" that the Company believes make its results difficult to compare to prior periods, anticipated future periods, or industry trends\. Financial measures identified as non\-GAAP (or as excluding special items) have been adjusted to exclude special items\. Special items include:

|     |                                                                                |
| --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| 1\. | A one\-time $172 million Special revenue adjustment in July 2015 as a result of the Agreement with Chase and the resulting required change in accounting methodology\. This increase to revenue represented a nonrecurring required acceleration of revenues associated with the adoption of Accounting Standards Update 2009\-13; |

|     |                                                                                |
| --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| 2\. | Contract ratification bonuses recorded for certain workgroups\. As the bonuses would only be paid at ratification of the associated tentative agreement and would not represent an ongoing expense to the Company, management believes its results for the associated periods are more usefully compared if the impacts of ratification bonus amounts are excluded from results\. Generally, union contract agreements cover a specified three\- to five\- year period, although such contracts officially never expire, and the agreed upon terms remain in place until a revised agreement is reached, which can be several years following the amendable date; |

53


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

**NOTE 5\. FAIR VALUE MEASUREMENTS**

***Fair Value of Financial Instruments on a Recurring Basis***

As of December 31, 2018, the total cost basis for marketable securities was $1\.1 billion\. There were no significant differences between the cost basis and fair value of any individual class of marketable securities\.

Fair values of financial instruments on the consolidated balance sheet (in millions):

|                                         |                       |                       |                       |                       |                       |                       |
| --------------------------------------- | --------------------- | --------------------- | --------------------- | --------------------- | --------------------- | --------------------- |
|                                         | **December 31, 2018** | **December 31, 2018** | **December 31, 2018** | **December 31, 2017** | **December 31, 2017** | **December 31, 2017** |
|                                         | **Level 1**           | **Level 2**           | **Total**             | **Level 1**           | **Level 2**           | **Total**             |
| **Assets**                              |                       |                       |                       |                       |                       |                       |
| **Marketable securities**               |                       |                       |                       |                       |                       |                       |
| U\.S\. government and agency securities | $293                  | $—                    | $293                  | $328                  | $—                    | $328                  |
| Foreign government bonds                | —                     | 26                    | 26                    | —                     | 43                    | 43                    |
| Asset\-backed securities                | —                     | 190                   | 190                   | —                     | 209                   | 209                   |
| Mortgage\-backed securities             | —                     | 92                    | 92                    | —                     | 99                    | 99                    |
| Corporate notes and bonds               | —                     | 520                   | 520                   | —                     | 726                   | 726                   |
| Municipal securities                    | —                     | 10                    | 10                    | —                     | 22                    | 22                    |
| **Derivative instruments**              |                       |                       |                       |                       |                       |                       |
| Fuel hedge contracts—call options       | —                     | 4                     | 4                     | —                     | 22                    | 22                    |
| Interest rate swap agreements           | —                     | 10                    | 10                    | —                     | 9                     | 9                     |
| **Liabilities**                         |                       |                       |                       |                       |                       |                       |
| **Derivative instruments**              |                       |                       |                       |                       |                       |                       |
| Interest rate swap agreements           | —                     | (7)                   | (7)                   | —                     | (8)                   | (8)                   |

The Company uses the market and income approach to determine the fair value of marketable securities\. U\.S\. government securities are Level 1 as the fair value is based on quoted prices in active markets\. The remaining marketable securities instruments are Level 2 as the fair value is based on standard valuation models that calculate values from observable inputs such as quoted interest rates, yield curves, credit ratings of the security and other observable market information\.

The Company uses the market and income approaches to determine the fair value of derivative instruments\. The fair value for fuel hedge call options is determined utilizing an option pricing model that uses inputs that are readily available in active markets or can be derived from information available in active markets\. In addition, the fair value considers exposure to credit losses in the event of non\-performance by counterparties\. Interest rate swap agreements are Level 2 as the fair value of these contracts is determined based on the difference between the fixed interest rate in the agreements and the observable LIBOR\-based interest forward rates at period end, multiplied by the total notional value\.

***Activity and Maturities for Marketable Securities***

Unrealized losses from marketable securities are primarily attributable to changes in interest rates\. Management does not believe any remaining losses represent other\-than\-temporary impairments based on the Company's evaluation of available evidence as of December 31, 2018\.

Proceeds from sales of marketable securities were $1\.1 billion, $1\.4 billion and $962 million in 2018, 2017, and 2016\.

Maturities for marketable securities (in millions):

|                                       |                |                |
| ------------------------------------- | -------------- | -------------- |
| **December 31, 2018**                 | **Cost Basis** | **Fair Value** |
| Due in one year or less               | $138           | $138           |
| Due after one year through five years | 995            | 981            |
| Due after five years through 10 years | 12             | 12             |
| **Total**                             | $1,145         | $1,131         |

 75


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

|                                 |
| ------------------------------- |
| **ITEM 9B\. OTHER INFORMATION** |

None

**PART III**

|                                                                      |
| -------------------------------------------------------------------- |
| **ITEM 10\. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE** |

See “Executive Officers” under Item 1, “Our Business,” in Part I of this Form 10\-K for information on the executive officers of Air Group and its subsidiaries\. Except as provided herein, the remainder of the information required by this item is incorporated herein by reference from the definitive Proxy Statement for Air Group's 2019 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2018 (hereinafter referred to as our “2019 Proxy Statement”)\.

|                                      |
| ------------------------------------ |
| **ITEM 11\. EXECUTIVE COMPENSATION** |

The information required by this item is incorporated herein by reference from our 2019 Proxy Statement\.

|                                                                                |
| ------------------------------------------------------------------------------------------------------------- |
| **ITEM 12\. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS** |

**Securities Authorized for Issuance Under Equity Compensation Plans**

|                                                            |                                                                                |                                                                                |                                                                                |
| ---------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- |
|                                                            | **Number of securities to be issued upon exercise of outstanding options, warrants and rights** | **Weighted\-average exercise price of outstanding options, warrants and rights** | **Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))** |
| **Plan category**                                          | **(a)**                                                                                | **(b)**                                                                          | **(c)**                                                                                |
| Equity compensation plans approved by security holders     | 1,420,926 ^(1)^                                                                                | $57\.78 ^(2)^                                                                    | 9,851,918 ^(3)^                                                                                |
| Equity compensation plans not approved by security holders | —                                                                                | Not applicable                                                                   | —                                                                                |
| Total                                                      | 1,420,926                                                                                | $57\.78                                                                          | 9,851,918                                                                                |

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (1) | Of these shares, 293,910 and 277,632 were subject to options then outstanding under the 2008 Plan and 2016 Plan, respectively, 200,363 were subject to outstanding restricted, performance and deferred stock unit awards granted under the 2008 Plan and 649,021 were subject to outstanding restricted, performance and deferred stock unit awards granted under the 2016 Plan\. Outstanding performance awards are reflected in the table assuming that the target level of performance will be achieved\.  |

|     |                                                                                |
| --- | ------------------------------------------------------------------------------------------------------------------------------------------ |
| (2) | This number does not reflect the 849,384 shares that were subject to outstanding stock unit awards granted under the 2008 and 2016 Plans\. |

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (3) | Of the aggregate number of shares that remained available for future issuance, no shares were available under the 2008 Plan, 4,685,396 shares were available under the 2016 Plan and 5,166,522 shares were available under the ESPP\. Subject to certain express limits of the 2016 Plan, shares available for award purposes under the 2016 Plan generally may be used for any type of award authorized under that plan including options, stock appreciation rights, and other forms of awards granted or denominated in shares of our common stock including, without limitation, stock bonuses, restricted stock, restricted stock units and performance shares\. Full\-value shares issued under the 2016 Plan are counted against the share limit as 1\.7 shares for every one share issued\. This table does not give effect to that rule\. |

Other information required by this item is set forth under the heading “Beneficial Ownership of Securities” in our 2019 Proxy Statement and is incorporated by reference\.

 95


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

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

Frequent Flyer Program

Our SkyMiles ^®^  frequent flyer program ("SkyMiles program") is designed to retain and increase traveler loyalty by offering incentives to customers to increase travel on Delta\. The SkyMiles program allows program members to earn mileage credit for travel awards by flying on Delta, its regional carriers and other participating airlines\. Mileage credit may also be earned by using certain services offered by program participants, such as credit card companies, hotels and car rental agencies\. In addition, individuals may purchase mileage credits\. Miles do not expire, but are subject to the program rules\. We reserve the right to terminate the program with six months advance notice, and to change the program's terms and conditions at any time without notice\.

SkyMiles program mileage credits can be redeemed for air travel on Delta and participating airlines, for membership in our Delta Sky Clubs ^®^  and for other program participant awards\. Mileage credits are subject to certain transfer restrictions and travel awards on partner airlines are subject to capacity\-controlled seating\. We offer last\-seat availability for travel awards on our own flights (including most Delta Connection flights)\. In  2017 , program members redeemed more than 345 billion miles in the SkyMiles program for 14\.9 million award redemptions\. During this period, 7\.9% of revenue miles flown on Delta were from award travel\.

Fuel

Our results of operations are significantly impacted by changes in the price and availability of aircraft fuel\. The following table shows our aircraft fuel consumption and costs\.

|          |                                                          |                                          |                                           |                                                        |
| -------- | -------------------------------------------------------- | ---------------------------------------- | ----------------------------------------- | ------------------------------------------------------ |
| **Year** | **Gallons Consumed** **^(1)^**

**(in millions)** | **Cost** **^(1)(2)^**  **(in millions)** | **Average Price Per Gallon** **^(1)(2)^** | **Percentage of Total Operating Expense** **^(1)(2)^** |
| 2017     | 4,032                                                    | $6,756                                   | $1\.68                                    | 19\.2%                                                 |
| 2016     | 4,016                                                    | $5,985                                   | $1\.49                                    | 18\.3%                                                 |
| 2015     | 3,988                                                    | $7,579                                   | $1\.90                                    | 23\.0%                                                 |

|       |                                                                                |
| ----- | ----------------------------------------------------------------------------------------------- |
| ^(1)^ | Includes the operations of our regional carriers operating under capacity purchase agreements\. |

|       |                                                                           |
| ----- | ------------------------------------------------------------------------- |
| ^(2)^ | Includes the impact of fuel hedge activity and refinery segment results\. |

General

We purchase most of our aircraft fuel under contracts that establish the price based on various market indices and therefore do not provide material protection against price increases or assure the availability of our fuel supplies\. We also purchase aircraft fuel on the spot market, from off\-shore sources and under contracts that permit the refiners to set the price\.

Monroe Energy

Our wholly owned subsidiaries, Monroe Energy, LLC and MIPC, LLC (collectively, "Monroe") operate the Trainer refinery and related assets located near Philadelphia, Pennsylvania\. The facilities include pipelines and terminal assets that allow the refinery to supply jet fuel to our airline operations throughout the Northeastern U\.S\., including our New York hubs at LaGuardia and JFK\. These companies are distinct from us, operating under their own management teams and with their own boards of managers\. We own Monroe as part of our strategy to mitigate the cost of the refining margin reflected in the price of jet fuel, as well as to maintain sufficiency of supply to our New York operations\.

Refinery Operations\.  The facility is capable of refining approximately 200,000 barrels of crude oil per day\. In addition to jet fuel, the refinery's production consists of gasoline, diesel and other refined products ("non\-jet fuel products")\. Monroe sources domestic and foreign crude oil supply from a variety of providers\.

Strategic Agreements\.  Monroe exchanges the non\-jet fuel products the refinery produces with third parties for jet fuel consumed in our airline operations\.

Segments \. Because the products and services of Monroe's refinery operations are discrete from our airline services, segment results are prepared for our airline segment and our refinery segment\. Financial information on our segment reporting can be found in  Note 14  of the Notes to the Consolidated Financial Statements\.

 4


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

SIGNATURES

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

|                         |                         |                         |                         |                         |                         |  |  |  |       |       |       |                   |                   |                   |  |  |  |
| ----------------------- | ----------------------- | ----------------------- | ----------------------- | ----------------------- | ----------------------- | - | - | - | ----- | ----- | ----- | ----------------- | ----------------- | ----------------- | - | - | - |
| ALASKA AIR GROUP, INC\. | ALASKA AIR GROUP, INC\. | ALASKA AIR GROUP, INC\. | ALASKA AIR GROUP, INC\. | ALASKA AIR GROUP, INC\. | ALASKA AIR GROUP, INC\. |  |  |  |       |       |       |                   |                   |                   |  |  |  |
| By:                     | By:                     | By:                     | /s/ BRADLEY D\. TILDEN  | /s/ BRADLEY D\. TILDEN  | /s/ BRADLEY D\. TILDEN  |  |  |  | Date: | Date: | Date: | February 12, 2020 | February 12, 2020 | February 12, 2020 |
|                         |                         |                         | Bradley D\. Tilden      | Bradley D\. Tilden      | Bradley D\. Tilden      |  |  |  |       |       |       |                   |                   |                   |
|                         |                         |                         | Chief Executive Officer | Chief Executive Officer | Chief Executive Officer |  |  |  |       |       |       |                   |                   |                   |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on February 12, 2020 on behalf of the registrant and in the capacities indicated\.

89


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

The major components of our total mainline CASM and our mainline CASM excluding special items and fuel for the years ended December 31, 2017 and 2016 are as follows (amounts may not recalculate due to rounding):

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

**Increase**

**(Decrease)** |
|                                                 | **2017**                                  | **2016**                                  | **Percent**

**Increase**

**(Decrease)** |
|                                                 | **(In cents, except percentage changes)** | **(In cents, except percentage changes)** | **(In cents, except percentage changes)**             |
| Mainline CASM:                                  |                                           |                                           |                                                       |
| Aircraft fuel and related taxes                 | 2\.51                                     | 2\.10                                     | 19\.8                                                 |
| Salaries, wages and benefits                    | 4\.85                                     | 4\.51                                     | 7\.6                                                  |
| Maintenance, materials and repairs              | 0\.80                                     | 0\.76                                     | 5\.9                                                  |
| Other rent and landing fees                     | 0\.74                                     | 0\.73                                     | 1\.1                                                  |
| Aircraft rent                                   | 0\.49                                     | 0\.50                                     | (1\.3)                                                |
| Selling expenses                                | 0\.61                                     | 0\.55                                     | 10\.6                                                 |
| Depreciation and amortization                   | 0\.70                                     | 0\.63                                     | 10\.7                                                 |
| Special items, net                              | 0\.29                                     | 0\.29                                     | (0\.3)                                                |
| Other                                           | 1\.97                                     | 1\.87                                     | 5\.3                                                  |
| Total mainline CASM                             | 12\.96                                    | 11\.94                                    | 8\.6                                                  |
| Special items, net                              | (0\.29)                                   | (0\.29)                                   | (0\.3)                                                |
| Aircraft fuel and related taxes                 | (2\.51)                                   | (2\.10)                                   | 19\.8                                                 |
| Mainline CASM, excluding special items and fuel | 10\.16                                    | 9\.54                                     | 6\.4                                                  |

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

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Aircraft fuel and related taxes per ASM  increase d  19\.8%  primarily due to a  21\.4 %  increase  in the average price per gallon of fuel to  $1\.71  in  2017  from  $1\.41  in  2016 , offset in part by a  0\.5 % decrease in gallons of fuel consumed\. The decrease in fuel consumption was primarily driven by the operation of more fuel efficient aircraft during 2017 in connection with our fleet renewal program\. |

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Salaries, wages and benefits per ASM  increase d  7\.6%  primarily due to mid\-contract pay rate increases for pilots and flight attendants effective in the second quarter of 2017, as well as rate increases for maintenance and fleet service work groups, which became effective in the third quarter of 2016\. |

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Maintenance, materials and repairs per ASM  increase d  5\.9%  as compared to 2016 primarily due to a contract change that accelerated the timing of certain maintenance expenses incurred\. Certain flight equipment was transitioned to a new flight hour based contract (referred to as power by the hour) where expense is incurred and recognized based on actual hours flown\. Previously, this flight equipment was covered by a time and materials based contract where expense is incurred and recognized as maintenance is performed\.  |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Selling expenses per ASM  increase d  10\.6%  due primarily to higher commissions driven by the overall increase in revenues as well as an increase in flown premium tickets, which are subject to higher commissions\. |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Depreciation and amortization per ASM  increase d  10\.7%  primarily due to depreciation related to aircraft purchased in connection with our fleet renewal program\. In 2017, we took delivery of 57 new mainline aircraft\. |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Other operating expenses per ASM  increase d  5\.3%  primarily due to expenses associated with improving our product offerings, customer experience and operational reliability, such as food and beverage costs and costs associated with team member training\. |

52