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

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

|       |                                                                                |
| ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(f)^ | Investment includes  45%  in an emerging market 103\-12 Investment Trust with investments in emerging country equity securities,  37%  in a collective interest trust investing primarily in short\-term securities,  12%  in Canadian segregated balanced value, income growth and diversified pooled funds and  6%  in a common/collective trust investing in securities of smaller companies located outside the U\.S\., including developing markets\. For some trusts, requests for withdrawals must meet specific requirements with advance notice of redemption preferred\. |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| ^(g)^ | Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy\. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements\. |

|                                                                                |                                                                                |                                                                              |                                                                                |                                                     |
| -------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------------------- |
|                                                                                | **Fair Value Measurements as of December 31, 2017**                                                   | **Fair Value Measurements as of December 31, 2017**                          | **Fair Value Measurements as of December 31, 2017**                            | **Fair Value Measurements as of December 31, 2017** |
| **Asset Category**                                                                           | **Quoted Prices in**

**Active Markets**

**for Identical Assets**

**(Level 1)** | **Significant**

**Observable**

**Inputs**

**(Level 2)** | **Significant**

**Unobservable**

**Inputs**

**(Level 3)** | **Total**                                           |
| Cash and cash equivalents                                                                    | $28                                                                                | $—                                                                           | $—                                                                             | $28                                                 |
| Equity securities:                                                                           |                                                                                |                                                                              |                                                                                |                                                     |
| International markets  ^(a) (b)^                                                             | 3,837                                                                                | —                                                                            | —                                                                              | 3,837                                               |
| Large\-cap companies  ^(b)^                                                                  | 2,451                                                                                | —                                                                            | —                                                                              | 2,451                                               |
| Mid\-cap companies  ^(b)^                                                                    | 744                                                                                | —                                                                            | —                                                                              | 744                                                 |
| Small\-cap companies  ^(b)^                                                                  | 125                                                                                | —                                                                            | —                                                                              | 125                                                 |
| Fixed income:                                                                                |                                                                                |                                                                              |                                                                                |                                                     |
| Corporate bonds  ^(c)^                                                                       | —                                                                                | 2,344                                                                        | —                                                                              | 2,344                                               |
| Government securities  ^(d)^                                                                 | —                                                                                | 238                                                                          | —                                                                              | 238                                                 |
| U\.S\. municipal securities                                                                  | —                                                                                | 39                                                                           | —                                                                              | 39                                                  |
| Alternative instruments:                                                                     |                                                                                |                                                                              |                                                                                |                                                     |
| Private market partnerships  ^(e)^                                                           | —                                                                                | —                                                                            | 14                                                                             | 14                                                  |
| Private market partnerships measured at net asset value  ^(e) (g)^                           | —                                                                                | —                                                                            | —                                                                              | 879                                                 |
| Common/collective trusts  ^(f)^                                                              | —                                                                                | 315                                                                          | —                                                                              | 315                                                 |
| Common/collective trusts and 103\-12 Investment Trust measured at net asset value  ^(f) (g)^ | —                                                                                | —                                                                            | —                                                                              | 283                                                 |
| Insurance group annuity contracts                                                            | —                                                                                | —                                                                            | 2                                                                              | 2                                                   |
| Dividend and interest receivable                                                             | 44                                                                                | —                                                                            | —                                                                              | 44                                                  |
| Due to/from brokers for sale of securities – net                                             | 3                                                                                | —                                                                            | —                                                                              | 3                                                   |
| Other liabilities – net                                                                      | (6)                                                                                | —                                                                            | —                                                                              | (6)                                                 |
| Total                                                                                | $7,226                                                                                | $2,936                                                                       | $16                                                                            | $11,340                                             |

|       |                                                                                |
| ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(a)^ | Holdings are diversified as follows:  17%  United Kingdom,  11%  Japan,  9%  France,  6%  Switzerland,  16%  emerging markets and the remaining  41%  with no concentration greater than 5% in any one country\. |

|       |                                                                              |
| ----- | ---------------------------------------------------------------------------- |
| ^(b)^ | There are no significant concentrations of holdings by company or industry\. |

|       |                                                                                |
| ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(c)^ | Includes approximately  76%  investments in corporate debt with a S&P rating lower than A and  24%  investments in corporate debt with a S&P rating A or higher\. Holdings include  85%  U\.S\. companies,  12%  international companies and  3%  emerging market companies\. |

|       |                                                                                |
| ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(d)^ | Includes approximately  27%  investments in U\.S\. domestic government securities,  43%  in emerging market government securities and  30%  in international government securities\. There are no significant foreign currency risks within this classification\. |

163


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

10\-K 1 d471340d10k\.htm FORM 10\-K

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

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

**FORM 10\-K**

|     |                                                                                |
| --- | ----------------------------------------------------------------------------------------- |
| ☒   | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |

**For the fiscal year ended December 31, 2017**

**OR**

|     |                                                                                |
| --- | --------------------------------------------------------------------------------------------- |
| ☐   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |

**For the transition period from to**

![LOGO](https://www.example.com/g471340g68z78.jpg)

|                                |                                                                                |                                |                                                |
|:------------------------------:|:-----------------------------------------------------------------------------------------------------------------------------------------------------------------:|:------------------------------:|:----------------------------------------------:|
| **Commission** **File Number** | **Exact Name of Registrant as** **Specified in its Charter, Principal
Executive** **Office Address, Zip Code and** **Telephone Number, Including Area Code** | **State of** **Incorporation** | **I\.R\.S\. Employer** **Identification No\.** |
|           001\-06033           |                       **United Continental Holdings, Inc\.
233 South Wacker Drive
Chicago, Illinois 60606
(872)  825\-4000**                       |            Delaware            |                  36\-2675207                   |
|           001\-10323           |                             **United Airlines, Inc\.
233 South Wacker Drive
Chicago, Illinois 60606
(872)  825\-4000**                             |            Delaware            |                  74\-2099724                   |

**Securities registered pursuant to Section 12(b) of the Act:**

|                                    |                                 |                                               |
|:---------------------------------- |:-------------------------------:|:---------------------------------------------:|
|                                    |     **Title of Each Class**     | **Name of Each Exchange on Which Registered** |
| United Continental Holdings, Inc\. |  Common Stock, $0\.01 par value |            New York Stock Exchange            |
| United Airlines, Inc\.             |               None              |                      None                     |

**Securities registered pursuant to Section 12(g) of the Act:**

|                                     |      |
|:----------------------------------- | ----:|
|  United Continental Holdings, Inc\. | None |
|  United Airlines, Inc\.             | None |

Indicate by check mark if the registrant is a well\-known seasoned issuer, as defined in Rule 405 of the Securities Act\.

|                                    |            |
|:---------------------------------- | ----------:|
| United Continental Holdings, Inc\. | Yes ☒ No ☐ |
| United Airlines, Inc\.             | Yes ☒ No ☐ |

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act

|                                    |            |
|:---------------------------------- | ----------:|
| United Continental Holdings, Inc\. | Yes ☐ No ☒ |
| United Airlines, Inc\.             | Yes ☐ No ☒ |

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days\.

|                                    |            |
|:---------------------------------- | ----------:|
| United Continental Holdings, Inc\. | Yes ☒ No ☐ |
| United Airlines, Inc\.             | Yes ☒ No ☐ |

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S\-T (§232\.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)\.

|                                    |            |
|:---------------------------------- | ----------:|
| United Continental Holdings, Inc\. | Yes ☒ No ☐ |
| United Airlines, Inc\.             | Yes ☒ No ☐ |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S\-K (§229\.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10\-K or any amendment to this Form 10\-K\.

|                                     |   |
|:----------------------------------- | -:|
| United Continental Holdings, Inc\.  | ☒ |
| United Airlines, Inc\.              | ☒ |

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non\-accelerated filer, a smaller reporting company, or an emerging growth company\. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b\-2 of the Exchange Act\. (Check one):

|                                         |                           |                     |                          |                             |                           |
|:--------------------------------------- |:------------------------- |:------------------- |:------------------------ | ---------------------------:| -------------------------:|
| United Continental
Holdings, Inc\. | Large accelerated filer ☒ | Accelerated filer ☐ | Non\-accelerated filer ☐ | Smaller reporting company ☐ | Emerging growth company ☐ |
| United Airlines, Inc\.                  | Large accelerated filer ☐ | Accelerated filer ☐ | Non\-accelerated filer ☒ | Smaller reporting company ☐ | Emerging growth company ☐ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act\.

|                                     |   |
|:----------------------------------- | -:|
| United Continental Holdings, Inc\.  | ☐ |
| United Airlines, Inc\.              | ☐ |

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b\-2 of the Act)\.

|                                    |            |
|:---------------------------------- | ----------:|
| United Continental Holdings, Inc\. | Yes ☐ No ☒ |
| United Airlines, Inc\.             | Yes ☐ No ☒ |

The aggregate market value of common stock held by non\-affiliates of United Continental Holdings, Inc\. was $21,673,390,018 as of June 30, 2017, based on the closing price of $75\.25 on the New York Stock Exchange reported for that date\. There is no market for United Airlines, Inc\. common stock\.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of February 14, 2018\.

|                                    |                                                                                |
| ---------------------------------- | -------------------------------------------------------------------------------------------------- |
| United Continental Holdings, Inc\. | 284,700,547 shares of common stock ($0\.01 par value)                                              |
| United Airlines, Inc\.             | 1,000 shares of common stock ($0\.01 par value) (100% owned by United Continental Holdings, Inc\.) |

This combined Form 10\-K is separately filed by United Continental Holdings, Inc\. and United Airlines, Inc\.

**OMISSION OF CERTAIN INFORMATION**

United Airlines, Inc\. meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10\-K and is therefore filing this form with the reduced disclosure format allowed under that General Instruction\.

**DOCUMENTS INCORPORATED BY REFERENCE**

Information required by Items 10, 11, 12 and 13 of Part III of this Form 10\-K is incorporated by reference for United Continental Holdings, Inc\. from its definitive proxy statement for its 2018 Annual Meeting of Stockholders\.


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

Available Information

Use of Websites to Disclose Information

Our website is located at  www\.aa\.com \. We have made and expect in the future to make public disclosures to investors and the general public of information regarding AAG and its subsidiaries by means of the investor relations section of our website as well as through the use of our social media sites, including Facebook and Twitter\. In order to receive notifications regarding new postings to our website, investors are encouraged to enroll on our website to receive automatic email alerts (see  https://americanairlines\.gcs\-web\.com/email\-alerts ), “follow” American (@AmericanAir) on Twitter and “like” American on our Facebook page ( www\.facebook\.com/AmericanAirlines )\. None of the information or contents of our website or social media postings is incorporated into this Annual Report on Form 10\-K\.

Availability of SEC Reports

A copy of this Annual Report on Form 10\-K, Quarterly Reports on Form 10\-Q, Current Reports on Form 8\-K and amendments to those reports are available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC\. The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at  www\.sec\.gov \.

15


Annual Report of Southwest Airlines Co\. for year 2017

**12****\. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)**

Comprehensive income includes changes in the fair value of certain financial derivative instruments that qualify for hedge accounting, unrealized gains and losses on certain investments, and actuarial gains/losses arising from the Company’s postretirement benefit obligation\. A rollforward of the amounts included in AOCI, net of taxes, is shown below for 2017 and 2016:

|                              |                      |                               |                                |           |                         |                                                        |
| ---------------------------- | -------------------- | ----------------------------- | ------------------------------ | --------- | ----------------------- | ------------------------------------------------------ |
| **(in millions)**            | **Fuel derivatives** | **Interest rate derivatives** | **Defined benefit plan items** | **Other** | **Deferred tax impact** | **Accumulated other  <br>comprehensive income (loss)** |
| Balance at December 31, 2015 | $(1,666)             | $(30)                         | $22                            | $6        | $617                    | $(1,051)                                               |
| Changes in fair value        | 194                  | (3)                           | (36)                           | 14        | (63)                    | 106                                                    |
| Reclassification to earnings | 973                  | 15                            | —                              | —         | (366)                   | 622                                                    |
| Balance at December 31, 2016 | $(499)               | $(18)                         | $(14)                          | $20       | $188                    | $(323)                                                 |
| Changes in fair value        | (50)                 | —                             | 5                              | 13        | 11                      | (21)                                                   |
| Reclassification to earnings | 552                  | 11                            | —                              | —         | (207)                   | 356                                                    |
| Balance at December 31, 2017 | $3                   | $(7)                          | $(9)                           | $33       | $(8)                    | $12                                                    |

The following table illustrates the significant amounts reclassified out of each component of AOCI for the year endedDecember 31, 2017:

|                                                         |                                     |                                                                              |
| ------------------------------------------------------- | ----------------------------------- | ---------------------------------------------------------------------------- |
| **Year ended December 31, 2017**                        | **Year ended December 31, 2017**    | **Year ended December 31, 2017**                                             |
| **(in millions)**                                       | **Amounts reclassified from AOCI**  | **Affected line item in the Consolidated Statement of Comprehensive Income** |
| **AOCI components**                                     | **Amounts reclassified from AOCI**  | **Affected line item in the Consolidated Statement of Comprehensive Income** |
| Unrealized loss on fuel derivative instruments          | $552                                | Fuel and oil expense                                                         |
|                                                         | 203                                 | Less: Tax expense                                                            |
|                                                         | $349                                | Net of tax                                                                   |
| Unrealized loss on interest rate derivative instruments | $11                                 | Interest expense                                                             |
|                                                         | 4                                   | Less: Tax expense                                                            |
|                                                         | $7                                  | Net of tax                                                                   |
| Total reclassifications for the period                  | $356                                | Net of tax                                                                   |

**13****\. EMPLOYEE RETIREMENT PLANS**

***Defined Contribution Plans***

Southwest has defined contribution plans covering substantially all of its Employees\. Contributions under all defined contribution plans are primarily based on Employee compensation and performance of the Company\. The Company sponsors Employee savings plans under section 401(k) of the Internal Revenue Code of 1986, as amended\. The Southwest Airlines Co\. 401(k) Plan includes Company matching contributions and the Southwest Airlines Pilots Retirement Saving Plan has non\-elective Company contributions\. In addition, the Southwest Airlines Co\. ProfitSharing Plan (ProfitSharing Plan) is a defined contribution plan to which the Company may contribute a percentage of its eligible pre\-tax profits, as defined, on an annual basis\. No Employee contributions to the ProfitSharing Plan are allowed\.

Amounts associated with the Company's defined contribution plans expensed in 2017, 2016, and 2015, reflected as a component of Salaries, wages, and benefits, were $1\.0 billion, $937 million, and $945 million, respectively\.

105


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

**NOTE 2\. ACQUISITION OF VIRGIN AMERICA INC\.**

***Virgin America***

On December 14, 2016, the Company acquired 100% of the outstanding common shares and voting interest of Virgin America for $57 per share, or total cash consideration of $2\.6 billion\.

***Fair values of the assets acquired and the liabilities assumed***

The transaction was accounted for as a business combination using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date\. The fair values of the assets acquired and liabilities assumed were determined using the market, income and cost approaches\. There were no significant fair value adjustments made during the twelve months ended December 31, 2017\.

Fair values of the assets acquired and the liabilities assumed as of the acquisition date, December 14, 2016, at December 31, 2017 and December 31, 2016 were as follows (in millions):

|                                           |                       |                       |
| ----------------------------------------- | --------------------- | --------------------- |
|                                           | **December 31, 2017** | **December 31, 2016** |
| Cash and cash equivalents                 | $645                  | $645                  |
| Receivables                               | 53                    | 44                    |
| Prepaid expenses and other current assets | 18                    | 16                    |
| Property and equipment                    | 571                   | 560                   |
| Intangible assets                         | 141                   | 143                   |
| Goodwill                                  | 1,943                 | 1,934                 |
| Other assets                              | 89                    | 84                    |
| **Total assets**                          | 3,460                 | 3,426                 |
| Accounts payable                          | 22                    | 22                    |
| Accrued wages, vacation and payroll taxes | 54                    | 51                    |
| Air traffic liabilities                   | 172                   | 172                   |
| Other accrued liabilities                 | 198                   | 196                   |
| Current portion of long\-term debt        | 125                   | 125                   |
| Long\-term debt, net of current portion   | 360                   | 360                   |
| Deferred income taxes                     | (300)                 | (304)                 |
| Deferred revenue                          | 126                   | 126                   |
| Other liabilities                         | 107                   | 82                    |
| **Total liabilities**                     | 864                   | 830                   |
| **Total purchase price**                  | **$2,596**            | **$2,596**            |

***Intangible Assets***

Of the $141 million of acquired intangible assets, $89 million represents airport slots\. Airport slots are rights to take\-off or land at a slot\-controlled airport during a specific time period and are a means by which the FAA manages airspace/airport congestion\. The Company acquired slots at three such airports—John F\. Kennedy International, LaGuardia and Ronald Reagan Washington National\. These slots either have no expiration dates or are expected to be renewed indefinitely in line with the FAA's past practice\. They require no maintenance and do not have an established residual value\. As the demand for air travel at these airports has remained very strong, the Company expects to use these slots in perpetuity and has determined these airport slots to be indefinite\-lived intangible assets\. They will not be amortized but rather tested for impairment annually, or more frequently when events and circumstances indicate that impairment may exist\.

Of the remaining $52 million, $37 million represents customer relationships, subject to amortization on a straight\-line basis over the estimated economic life of seven years, $1 million represents credit card agreements amortized on a straight\-line basis over

 74


Annual Report of Southwest Airlines Co\. for year 2019

The Company expects the federal government to continue to closely examine cyber\-security and data privacy in 2020\. This could include the DOT looking at new requirements, guidance, or best practices for the industry, as well as the introduction of new legislation in Congress\.

International Regulation

All international air service is subject to certain U\.S\. federal requirements and approvals, as well as the regulatory requirements of the appropriate authorities of the foreign countries involved\. The Company has obtained the necessary economic authority from the DOT, as well as approvals required by the FAA and applicable foreign government entities, to conduct operations, under certain circumstances, to points outside of the continental United States currently served by the Company\. Certain international authorities and approvals held by the Company are subject to periodic renewal requirements\. The Company requests extensions of such authorities and approvals when and as appropriate\. To the extent the Company seeks to serve additional foreign destinations in the future, or to renew its authority to serve certain routes, it may be required to obtain necessary authority from the DOT and/or approvals from the FAA, as well as any applicable foreign government entity\.

Certain international markets are governed by bilateral air transportation agreements between the United States and foreign countries\. Changes in U\.S\. or foreign government aviation policies could result in the alteration or termination of such agreements, diminish the value of the Company's existing international authorities, present barriers to renewing existing or securing new authorities, or otherwise affect the Company's international operations\. In particular, there is still a degree of uncertainty about the future of scheduled commercial flight operations between the  United States and Cuba as a result of changes in diplomatic relations between the two governments, as well as travel and trade restrictions implemented by the U\.S\. government\. There are also capacity limitations at certain airports in Mexico and the Caribbean, which could impact future service levels\. In general, bilateral agreements between the United States and foreign countries the Company currently serves, or may serve in the future, may be subject to renegotiation or reinterpretation from time to time\. While the U\.S\. government has negotiated "open skies" agreements with many countries, which allow for unrestricted access between the United States and respective foreign destinations, agreements with other countries may restrict the Company's entry into those destinations and/or its related growth opportunities\.

The CBP is the federal agency of the U\.S\. Department of Homeland Security charged with facilitating international trade, collecting import duties, and enforcing U\.S\. regulations with respect to trade, customs, and immigration\. As the Company expands its international flight offerings, CBP and its requirements and resources will also become increasingly important considerations to the Company\. For instance, with the exception of flights from a small number of foreign "preclearance" locations, arriving international flights may only land at CBP\-designated airports, and CBP officers must be present and in sufficient numbers at those airports to effectively process and inspect arriving international passengers, baggage, and cargo\. Thus, CBP personnel and CBP\-mandated procedures can affect the Company's operations, costs, and Customer experience\. The Company has made, and expects to continue to make, significant investments in facilities, equipment, and technologies at certain airports in order to improve the Customer experience and to assist CBP with its inspection and processing duties; however, the Company is not able to predict the impact, if any, that various CBP measures or the lack of CBP resources will have on Company revenues and costs, either in the short\-term or the long\-term\.

Insurance

The Company carries insurance of types customary in the airline industry and in amounts the Company deems adequate to protect the Company and its property and to comply both with federal regulations and certain of the Company's credit and lease agreements\. The policies principally provide coverage for public and passenger liability, property damage, cargo and baggage liability, loss or damage to aircraft, engines, and spare parts, and workers’ compensation\. In addition, the Company carries a cyber\-security insurance policy with regards to data protection and business interruption associated with both security breaches from malicious parties and from certain system failures\.

Although the Company has been able to purchase aviation, property, liability, and professional insurance via the commercial insurance marketplace, available commercial insurance could be more expensive in the future and/or have material differences in coverage than insurance that has historically been provided and may not be adequate to protect the Company's risk of loss from future events, including acts of terrorism\. Further, available cyber\-security insurance with regards to data protection and business interruption could be more expensive in the future and/or have material differences in coverage than insurance that has historically been provided and may not be adequate to protect the

16


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

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

We have market risk exposure related to fuel prices, interest rates and foreign currency exchange rates\. Market risk is the potential negative impact of adverse changes in these prices or rates on our Consolidated Financial Statements\. In an effort to manage our exposure to these risks, we may enter into derivative contracts and may adjust our derivative portfolio as market conditions change\. We expect adjustments to the fair value of financial instruments to result in ongoing volatility in earnings and stockholders' equity\.

The following sensitivity analyses do not consider the effects of a change in demand for air travel, the economy as a whole or actions we may take to seek to mitigate our exposure to a particular risk\. For these and other reasons, the actual results of changes in these prices or rates may differ materially from the following hypothetical results\.

Fuel Price Risk

Changes in fuel prices materially impact our results of operations\. A one cent increase in the cost of jet fuel would result in approximately $40 million of additional annual fuel expense\.  Our derivative contracts to hedge the financial risk from changing fuel prices are primarily related to Monroe’s refining margins\.

Interest Rate Risk

Our exposure to market risk from adverse changes in interest rates is primarily associated with our long\-term debt obligations\. Market risk associated with our fixed and variable rate long\-term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates\.

At  December 31, 2018 , we had $5\.7 billion of fixed\-rate long\-term debt and $3\.7 billion of variable\-rate long\-term debt\. An increase of 100 basis points in average annual interest rates would have decreased the estimated fair value of our fixed\-rate long\-term debt by $240 million at  December 31, 2018  and would have increased the annual interest expense on our variable\-rate long\-term debt by $37 million\.

Foreign Currency Exchange Risk

We are subject to foreign currency exchange rate risk because we have revenue and expense denominated in foreign currencies\. To manage exchange rate risk, we execute both our international revenue and expense transactions in the same foreign currency to the extent practicable\.  From time to time, we may also enter into foreign currency option and forward contracts\.  At  December 31, 2018 , we had open foreign currency forward contracts totaling a $1 million asset position\. We estimate that a 10% depreciation or appreciation in the price of the Japanese yen in relation to the U\.S\. dollar would change the projected cash settlement value of our open hedge contracts by a $6 million gain or $7 million loss, respectively, for the year ending December 31, 2019\.

 50


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

Loyalty Program

Our SkyMiles loyalty program generates customer loyalty by rewarding customers with incentives to travel on Delta\. This program allows customers to earn mileage credits ("miles") by flying on Delta, Delta Connection and other airlines that participate in the loyalty program\. When traveling, customers earn redeemable miles based on the passenger's loyalty program status and ticket price\. Customers can also earn miles through participating companies such as credit card companies, hotels, car rental agencies and ridesharing companies\. To facilitate transactions with participating companies, we sell miles to non\-airline businesses, customers and other airlines\. Miles are redeemable by customers in future periods for air travel on Delta and other participating airlines, membership in our Sky Club and other program awards\.

To reflect the miles earned, the loyalty program includes two types of transactions that are considered revenue arrangements with multiple performance obligations: (1) miles earned with travel and (2) miles sold to participating companies\.

Passenger Ticket Sales Earning Miles\.  Passenger ticket sales earning miles under our loyalty program provide customers with (1) miles earned and (2) air transportation, which are considered performance obligations\. We value each performance obligation on a standalone basis\. To value the miles earned, we consider the quantitative value a passenger receives by redeeming miles for a ticket rather than paying cash, which is referred to as equivalent ticket value ("ETV")\. Our estimate of ETV is adjusted for miles that are not likely to be redeemed ("breakage")\. We use statistical models to estimate breakage based on historical redemption patterns\. A change in assumptions as to the actual redemption activity for miles or the estimated fair value of miles expected to be redeemed could have a material impact on our revenue in the year in which the change occurs and in future years\. We recognize breakage proportionally during the period in which the remaining miles are actually redeemed\.

We defer revenue for the miles when earned and recognize loyalty travel awards in passenger revenue as the miles are redeemed and transportation is provided\. We record the air transportation portion of the passenger ticket sales in air traffic liability and recognize passenger revenue when we provide transportation or if the ticket goes unused\.

Sale of Miles\.  Customers may earn miles based on their spending with participating companies such as credit card companies, hotels, car rental agencies and ridesharing companies with which we have marketing agreements to sell miles\. Our contracts to sell miles under these marketing agreements have multiple performance obligations\. Payments are typically due monthly based on the volume of miles sold during the period, and the terms of our marketing contracts are from  one to  eleven years\. During the years ended December 31, 2019, 2018 and 2017, total cash sales from marketing agreements were $4\.2 billion, $3\.5 billion and $3\.2 billion, respectively, which are allocated to travel and other performance obligations, as discussed below\.

Our most significant contract to sell miles relates to our co\-brand credit card relationship with American Express\. Our agreements with American Express provide for joint marketing, grant certain benefits to Delta\-American Express co\-branded credit card holders ("cardholders") and American Express Membership Rewards program participants, and allow American Express to market its services or products using our customer database\. Cardholders earn miles for making purchases using co\-branded cards, and certain cardholders may also check their first bag for free, are granted discounted access to Delta Sky Club lounges and receive priority boarding and other benefits while traveling on Delta\. Additionally, participants in the American Express Membership Rewards program may exchange their points for miles under the loyalty program\. We sell miles at agreed\-upon rates to American Express which are then provided to their customers under the co\-brand credit card program and the Membership Rewards program\.

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

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

64


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

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

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are those that require significant judgments and estimates\. Accordingly, the actual results may differ materially from these estimates\. For a discussion of these and other accounting policies, see  Note 1  of the Notes to the Consolidated Financial Statements\.

Frequent Flyer Program

Our SkyMiles program offers incentives to travel on Delta\. This program allows customers to earn mileage credits by flying on Delta, Delta Connection and airlines that participate in the SkyMiles program, as well as through participating companies such as credit card companies, hotels and car rental agencies\. We sell mileage credits to non\-airline businesses, customers and other airlines\. Effective January 1, 2015, the SkyMiles program was modified from a model in which customers earn redeemable mileage credits based on distance traveled to a model based on ticket price\. This award change did not affect the way we account for the program\.

The SkyMiles program includes two types of transactions that are considered revenue arrangements with multiple deliverables\. As discussed below, these are (1) passenger ticket sales earning mileage credits and (2) the sale of mileage credits to participating companies with which we have marketing agreements\. Mileage credits are a separate unit of accounting as they can be redeemed by customers in future periods for air travel on Delta and participating airlines, membership in our Sky Club and other program awards\.

Passenger Ticket Sales Earning Mileage Credits\.  Passenger ticket sales earning mileage credits under our SkyMiles program provide customers with (1) mileage credits earned and (2) air transportation\. We value each deliverable on a standalone basis\. Our estimate of the selling price of a mileage credit is based on an analysis of our sales of mileage credits to other airlines and customers, which is re\-evaluated at least annually\. We use established ticket prices to determine the estimated selling price of air transportation\. We allocate the total amount collected from passenger ticket sales between the deliverables based on their relative selling prices\.

We defer revenue for the mileage credits related to passenger ticket sales when the credits are earned and recognize it as passenger revenue when miles are redeemed and services are provided\. We record the air transportation portion of the passenger ticket sales in air traffic liability and recognize these amounts in passenger revenue when we provide transportation or when the ticket expires unused\. A hypothetical 10% increase in our estimate of the standalone selling price of a mileage credit would decrease passenger revenue by approximately $50 million, as a result of an increase in the amount of revenue deferred from the mileage component of passenger ticket sales\.

Sale of Mileage Credits\.  Customers may earn mileage credits through participating companies such as credit card companies, hotels and car rental agencies with which we have marketing agreements to sell mileage credits\. Our contracts to sell mileage credits under these marketing agreements have multiple deliverables, as defined below\.

Our most significant contract to sell mileage credits relates to our co\-brand credit card relationship with American Express\.  In December 2014, we amended our marketing agreements with American Express, which increased the value we receive under the agreements through 2022\. The amended agreements became effective January 1, 2015\. We account for the agreements consistent with the accounting method that allocates the consideration received to the individual products and services delivered based on their relative selling prices\.  We determined our best estimate of the selling prices by considering discounted cash flow analysis using multiple inputs and assumptions, including: (1) the expected number of miles awarded and number of miles redeemed, (2) the rate at which we sell mileage credits to other airlines, (3) published rates on our website for baggage fees, discounted access to Delta Sky Club lounges and other benefits while traveling on Delta and (4) brand value\. The increased value received under the amended agreements increases the amount of deferred revenue for the travel component and increases the value of the other deliverables, which are recognized in other revenue as they are provided\.

We recognize revenue as we deliver each sales element\. We defer the travel deliverable (mileage credits) as part of frequent flyer deferred revenue and recognize passenger revenue as the mileage credits are used for travel\. The revenue allocated to the remaining deliverables is recorded in other revenue\. We recognize the revenue for these services as they are performed\.

 40


Annual Report of Southwest Airlines Co\. for year 2018

|                                                         |                                                                                |                                                                                |                                                                                |                                                                                |
| ------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- |
|                                                         | **Estimated economic fuel price per gallon, including taxes and fuel hedging premiums (e)** | **Estimated economic fuel price per gallon, including taxes and fuel hedging premiums (e)** | **Estimated economic fuel price per gallon, including taxes and fuel hedging premiums (e)** | **Estimated economic fuel price per gallon, including taxes and fuel hedging premiums (e)** |
| **Average Brent Crude Oil**

**price per barrel** | **First Quarter 2019 (c)**                                                                  | **First Quarter 2019 (c)**                                                                  | **Full Year 2019 (d)**                                                                      | **Full Year 2019 (d)**                                                                      |
| $50                                                     | $1\.75 \- $1\.80                                                                            | $1\.75 \- $1\.80                                                                            | $1\.65 \- $1\.75                                                                            | $1\.65 \- $1\.75                                                                            |
| $55                                                     | $1\.85 \- $1\.90                                                                            | $1\.85 \- $1\.90                                                                            | $1\.80 \- $1\.90                                                                            | $1\.80 \- $1\.90                                                                            |
| **Current Market (a)**                                  | **$2\.00 \- $2\.05**                                                                        | **$2\.00 \- $2\.05**                                                                        | **$2\.00 \- $2\.10**                                                                        | **$2\.00 \- $2\.10**                                                                        |
| $70                                                     | $2\.15 \- $2\.20                                                                            | $2\.15 \- $2\.20                                                                            | $2\.20 \- $2\.30                                                                            | $2\.20 \- $2\.30                                                                            |
| $80                                                     | $2\.25 \- $2\.30                                                                            | $2\.25 \- $2\.30                                                                            | $2\.35 \- $2\.45                                                                            | $2\.35 \- $2\.45                                                                            |
| $90                                                     | $2\.30 \- $2\.35                                                                            | $2\.30 \- $2\.35                                                                            | $2\.50 \- $2\.60                                                                            | $2\.50 \- $2\.60                                                                            |
| Estimated fuel hedging premium expense per gallon (b)   | $0\.06                                                                                | $0\.06                                                                                | $0\.04                                                                                | $0\.04                                                                                |

(a) Brent crude oil average market prices as of January 18, 2019, were approximately $62\.01 and $62\.40 per barrel for first quarter 2019 and full year 2019, respectively\.

(b) Fuel hedging premium expense per gallon is included in the Company's estimated economic fuel price per gallon estimates above\.

(c) Based on the Company's existing fuel derivative contracts and market prices as of January 18, 2019, first quarter 2019 GAAP and economic fuel costs are estimated to be in the $2\.00 to $2\.05 per gallon range, including fuel hedging premium expense of approximately $28 million, or $\.06 per gallon, and an estimated $\.02 per gallon in favorable cash settlements from fuel derivative contracts\. See Note Regarding Use of Non\-GAAP Financial Measures\.

(d) Based on the Company's existing fuel derivative contracts and market prices as of January 18, 2019, annual 2019 GAAP and economic fuel costs are estimated to be in the $2\.00 to $2\.10 per gallon range, including fuel hedging premium expense of approximately $95 million, or $\.04 per gallon, and an estimated $\.01 per gallon in favorable cash settlements from fuel derivative contracts\. See Note Regarding Use of Non\-GAAP Financial Measures\.

(e) The Company's current hedge positions contain a combination of instruments based in West Texas Intermediate and Brent crude oil; however, the economic fuel price per gallon sensitivities provided assume the relationship between Brent crude oil and refined products based on market prices as of January 18, 2019\.

Maintenance materials and repairs expense for 2018increased by $106 million, or 10\.6 percent, compared with 2017\. On a per ASM basis, Maintenance materials and repairs expense for 2018increased 6\.2 percent, compared with 2017\. On both a dollar and per ASM basis, the majority of the increases were due to the timing of regular airframe maintenance checks\. The remainder of the increases were due to engine maintenance and repairs\. The Company currently expects Maintenance materials and repairs expense per ASM for first quarter 2019 to increase, compared with first quarter 2018\.

Landing fees and airport rentals expense for 2018increased by $42 million, or 3\.3 percent, compared with 2017\. On a per ASM basis, Landing fees and airport rentals expense for 2018decreased 1\.2 percent, compared with 2017, as the dollar increases were more than offset by the 3\.9 percent increase in capacity\. On a dollar basis, the majority of the increase was due to an increase in rental rates at various stations throughout the network\. The Company currently expects Landing fees and airport rentals expense per ASM for first quarter 2019 to increase, compared with first quarter 2018\.

Depreciation and amortization expense for 2018decreased by $17 million, or 1\.4 percent, compared with 2017\. On a per ASM basis, Depreciation and amortization expense decreased 5\.1 percent, compared with 2017\. On both a dollar and per ASM basis, the majority of the decreases were associated with the reduction in depreciation expense associated with the accelerated retirement of the Company's Classic fleet in third quarter 2017, as this exceeded the additional depreciation associated with purchases of new owned aircraft and pre\-owned aircraft on capital leases\. The Company currently expects Depreciation and amortization expense per ASM for first quarter 2019 to increase, compared with first quarter 2018\.

Other operating expenses for 2018increased by $5 million, or 0\.2 percent, compared with 2017\. On a per ASM basis, Other operating expenses for 2018decreased 3\.8 percent, compared with 2017, as the dollar increases were more than offset by the 3\.9 percent increase in capacity\. Other operating expenses in 2017 included charges totaling $96 million,

44


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

OPERATING STATISTICS SUMMARY (unaudited)

Alaska Air Group, Inc\.

Below are operating statistics we use to measure performance\. Certain historical information has been adjusted to reflect the adoption of new accounting standards\. We often refer to unit revenues and adjusted unit costs, which are non\-GAAP measures\.

|                                                          |                                                          |                                                          |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|:-------------------------------------------------------- |:-------------------------------------------------------- |:-------------------------------------------------------- |:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:--------------------------------:|:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |
|                                                          |                                                          |                                                          | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                          |                                                          |                                                          |               2019               |               2019               |                                  |                                  |                                  |               2018               |               2018               |                                  |                                  |                                  |              Change              |              Change              |                                  |                                  |                                  |               2017               |               2017               |                                  |                                  |                                  |              Change              |              Change              |
| Consolidated Operating Statistics:^(a)^                  | Consolidated Operating Statistics:^(a)^                  | Consolidated Operating Statistics:^(a)^                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |
| Revenue passengers (000)                                 | Revenue passengers (000)                                 | Revenue passengers (000)                                 |             46,733               |             46,733               |                                  |                                  |                                  |             45,802               |             45,802               |                                  |                                  |                                  |              2\.0%               |              2\.0%               |                                  |                                  |                                  |             44,005               |             44,005               |                                  |                                  |                                  |              4\.1%               |              4\.1%               |
| RPMs (000,000) "traffic"                                 | RPMs (000,000) "traffic"                                 | RPMs (000,000) "traffic"                                 |             56,040               |             56,040               |                                  |                                  |                                  |             54,673               |             54,673               |                                  |                                  |                                  |              2\.5%               |              2\.5%               |                                  |                                  |                                  |             52,338               |             52,338               |                                  |                                  |                                  |              4\.5%               |              4\.5%               |
| ASMs (000,000) "capacity"                                | ASMs (000,000) "capacity"                                | ASMs (000,000) "capacity"                                |             66,654               |             66,654               |                                  |                                  |                                  |             65,335               |             65,335               |                                  |                                  |                                  |              2\.0%               |              2\.0%               |                                  |                                  |                                  |             62,072               |             62,072               |                                  |                                  |                                  |              5\.3%               |              5\.3%               |
| Load factor                                              | Load factor                                              | Load factor                                              |              84\.1               |              84\.1               |                                  |                                  |                                  |             83\.7%               |             83\.7%               |                                  |                                  |                                  |            0\.4 pts              |            0\.4 pts              |                                  |                                  |                                  |             84\.3%               |             84\.3%               |                                  |                                  |                                  |            (0\.6) pts            |            (0\.6) pts            |
| Yield^(d)^                                               | Yield^(d)^                                               | Yield^(d)^                                               |             14\.45¢              |             14\.45¢              |                                  |                                  |                                  |             13\.96¢              |             13\.96¢              |                                  |                                  |                                  |              3\.5%               |              3\.5%               |                                  |                                  |                                  |             13\.95¢              |             13\.95¢              |                                  |                                  |                                  |              0\.1%               |              0\.1%               |
| RASM^(d)^                                                | RASM^(d)^                                                | RASM^(d)^                                                |             13\.17¢              |             13\.17¢              |                                  |                                  |                                  |             12\.65¢              |             12\.65¢              |                                  |                                  |                                  |              4\.2%               |              4\.2%               |                                  |                                  |                                  |             12\.72¢              |             12\.72¢              |                                  |                                  |                                  |             (0\.6)%              |             (0\.6)%              |
| CASM excluding fuel and special items^(b)(d)^            | CASM excluding fuel and special items^(b)(d)^            | CASM excluding fuel and special items^(b)(d)^            |             8\.70¢               |             8\.70¢               |                                  |                                  |                                  |             8\.50¢               |             8\.50¢               |                                  |                                  |                                  |              2\.3%               |              2\.3%               |                                  |                                  |                                  |             8\.25¢               |             8\.25¢               |                                  |                                  |                                  |              3\.0%               |              3\.0%               |
| Economic fuel cost per gallon^(b)^                       | Economic fuel cost per gallon^(b)^                       | Economic fuel cost per gallon^(b)^                       |             $2\.19               |             $2\.19               |                                  |                                  |                                  |             $2\.28               |             $2\.28               |                                  |                                  |                                  |             (3\.9)%              |             (3\.9)%              |                                  |                                  |                                  |             $1\.82               |             $1\.82               |                                  |                                  |                                  |             25\.3%               |             25\.3%               |
| Fuel gallons (000,000)                                   | Fuel gallons (000,000)                                   | Fuel gallons (000,000)                                   |               862                |               862                |                                  |                                  |                                  |               839                |               839                |                                  |                                  |                                  |              2\.7%               |              2\.7%               |                                  |                                  |                                  |               797                |               797                |                                  |                                  |                                  |              5\.3%               |              5\.3%               |
| ASM's per gallon                                         | ASM's per gallon                                         | ASM's per gallon                                         |              77\.3               |              77\.3               |                                  |                                  |                                  |              77\.9               |              77\.9               |                                  |                                  |                                  |             (0\.8)%              |             (0\.8)%              |                                  |                                  |                                  |              77\.9               |              77\.9               |                                  |                                  |                                  |               —%                 |               —%                 |
| Average number of full\-time equivalent employees (FTEs) | Average number of full\-time equivalent employees (FTEs) | Average number of full\-time equivalent employees (FTEs) |             22,126               |             22,126               |                                  |                                  |                                  |             21,641               |             21,641               |                                  |                                  |                                  |              2\.2%               |              2\.2%               |                                  |                                  |                                  |             20,183               |             20,183               |                                  |                                  |                                  |              7\.2%               |              7\.2%               |
| Employee productivity (PAX/FTEs/months)                  | Employee productivity (PAX/FTEs/months)                  | Employee productivity (PAX/FTEs/months)                  |             176\.0               |             176\.0               |                                  |                                  |                                  |             176\.4               |             176\.4               |                                  |                                  |                                  |             (0\.2)%              |             (0\.2)%              |                                  |                                  |                                  |             181\.7               |             181\.7               |                                  |                                  |                                  |             (2\.9)%              |             (2\.9)%              |
| Mainline Operating Statistics:                           | Mainline Operating Statistics:                           | Mainline Operating Statistics:                           |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |
| Revenue passengers (000)                                 | Revenue passengers (000)                                 | Revenue passengers (000)                                 |             35,530               |             35,530               |                                  |                                  |                                  |             35,603               |             35,603               |                                  |                                  |                                  |             (0\.2)%              |             (0\.2)%              |                                  |                                  |                                  |             34,510               |             34,510               |                                  |                                  |                                  |              3\.2%               |              3\.2%               |
| RPMs (000,000) "traffic"                                 | RPMs (000,000) "traffic"                                 | RPMs (000,000) "traffic"                                 |             50,413               |             50,413               |                                  |                                  |                                  |             49,781               |             49,781               |                                  |                                  |                                  |              1\.3%               |              1\.3%               |                                  |                                  |                                  |             48,236               |             48,236               |                                  |                                  |                                  |              3\.2%               |              3\.2%               |
| ASMs (000,000) "capacity"                                | ASMs (000,000) "capacity"                                | ASMs (000,000) "capacity"                                |             59,711               |             59,711               |                                  |                                  |                                  |             59,187               |             59,187               |                                  |                                  |                                  |              0\.9%               |              0\.9%               |                                  |                                  |                                  |             56,945               |             56,945               |                                  |                                  |                                  |              3\.9%               |              3\.9%               |
| Load factor                                              | Load factor                                              | Load factor                                              |              84\.4               |              84\.4               |                                  |                                  |                                  |             84\.1%               |             84\.1%               |                                  |                                  |                                  |            0\.3 pts              |            0\.3 pts              |                                  |                                  |                                  |             84\.7%               |             84\.7%               |                                  |                                  |                                  |            (0\.6) pts            |            (0\.6) pts            |
| Yield^(d)^                                               | Yield^(d)^                                               | Yield^(d)^                                               |             13\.39¢              |             13\.39¢              |                                  |                                  |                                  |             13\.01¢              |             13\.01¢              |                                  |                                  |                                  |              2\.9%               |              2\.9%               |                                  |                                  |                                  |             13\.02¢              |             13\.02¢              |                                  |                                  |                                  |             (0\.1)%              |             (0\.1)%              |
| RASM^(d)^                                                | RASM^(d)^                                                | RASM^(d)^                                                |             12\.36¢              |             12\.36¢              |                                  |                                  |                                  |             11\.93¢              |             11\.93¢              |                                  |                                  |                                  |              3\.6%               |              3\.6%               |                                  |                                  |                                  |             12\.00¢              |             12\.00¢              |                                  |                                  |                                  |             (0\.6)%              |             (0\.6)%              |
| CASM excluding fuel and special items^(b)(d)^            | CASM excluding fuel and special items^(b)(d)^            | CASM excluding fuel and special items^(b)(d)^            |             8\.00¢               |             8\.00¢               |                                  |                                  |                                  |             7\.73¢               |             7\.73¢               |                                  |                                  |                                  |              3\.5%               |              3\.5%               |                                  |                                  |                                  |             7\.50¢               |             7\.50¢               |                                  |                                  |                                  |              3\.1%               |              3\.1%               |
| Economic fuel cost per gallon^(b)^                       | Economic fuel cost per gallon^(b)^                       | Economic fuel cost per gallon^(b)^                       |             $2\.17               |             $2\.17               |                                  |                                  |                                  |             $2\.27               |             $2\.27               |                                  |                                  |                                  |             (4\.4)%              |             (4\.4)%              |                                  |                                  |                                  |             $1\.82               |             $1\.82               |                                  |                                  |                                  |             24\.7%               |             24\.7%               |
| Fuel gallons (000,000)                                   | Fuel gallons (000,000)                                   | Fuel gallons (000,000)                                   |               731                |               731                |                                  |                                  |                                  |               727                |               727                |                                  |                                  |                                  |              0\.6%               |              0\.6%               |                                  |                                  |                                  |               706                |               706                |                                  |                                  |                                  |              3\.0%               |              3\.0%               |
| ASM's per gallon                                         | ASM's per gallon                                         | ASM's per gallon                                         |              81\.7               |              81\.7               |                                  |                                  |                                  |              81\.4               |              81\.4               |                                  |                                  |                                  |              0\.4%               |              0\.4%               |                                  |                                  |                                  |              80\.7               |              80\.7               |                                  |                                  |                                  |              0\.9%               |              0\.9%               |
| Average number of FTEs                                   | Average number of FTEs                                   | Average number of FTEs                                   |             16,642               |             16,642               |                                  |                                  |                                  |             16,353               |             16,353               |                                  |                                  |                                  |              1\.8%               |              1\.8%               |                                  |                                  |                                  |             15,653               |             15,653               |                                  |                                  |                                  |              4\.5%               |              4\.5%               |
| Aircraft utilization                                     | Aircraft utilization                                     | Aircraft utilization                                     |              10\.9               |              10\.9               |                                  |                                  |                                  |              11\.2               |              11\.2               |                                  |                                  |                                  |             (2\.7)%              |             (2\.7)%              |                                  |                                  |                                  |              11\.2               |              11\.2               |                                  |                                  |                                  |               —%                 |               —%                 |
| Average aircraft stage length                            | Average aircraft stage length                            | Average aircraft stage length                            |              1,299               |              1,299               |                                  |                                  |                                  |              1,298               |              1,298               |                                  |                                  |                                  |              0\.1%               |              0\.1%               |                                  |                                  |                                  |              1,301               |              1,301               |                                  |                                  |                                  |             (0\.2)%              |             (0\.2)%              |
| Mainline operating fleet at period\-end                  | Mainline operating fleet at period\-end                  | Mainline operating fleet at period\-end                  |             237 a/c              |             237 a/c              |                                  |                                  |                                  |             233 a/c              |             233 a/c              |                                  |                                  |                                  |              4 a/c               |              4 a/c               |                                  |                                  |                                  |             221 a/c              |             221 a/c              |                                  |                                  |                                  |             12 a/c               |             12 a/c               |
| Regional Operating Statistics:^(c)^                      | Regional Operating Statistics:^(c)^                      | Regional Operating Statistics:^(c)^                      |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |                                  |
| Revenue passengers (000)                                 | Revenue passengers (000)                                 | Revenue passengers (000)                                 |             11,203               |             11,203               |                                  |                                  |                                  |             10,199               |             10,199               |                                  |                                  |                                  |              9\.8%               |              9\.8%               |                                  |                                  |                                  |              9,495               |              9,495               |                                  |                                  |                                  |              7\.4%               |              7\.4%               |
| RPMs (000,000) "traffic"                                 | RPMs (000,000) "traffic"                                 | RPMs (000,000) "traffic"                                 |              5,627               |              5,627               |                                  |                                  |                                  |              4,892               |              4,892               |                                  |                                  |                                  |             15\.0%               |             15\.0%               |                                  |                                  |                                  |              4,101               |              4,101               |                                  |                                  |                                  |             19\.3%               |             19\.3%               |
| ASMs (000,000) "capacity"                                | ASMs (000,000) "capacity"                                | ASMs (000,000) "capacity"                                |              6,943               |              6,943               |                                  |                                  |                                  |              6,148               |              6,148               |                                  |                                  |                                  |             12\.9%               |             12\.9%               |                                  |                                  |                                  |              5,127               |              5,127               |                                  |                                  |                                  |             19\.9%               |             19\.9%               |
| Load factor                                              | Load factor                                              | Load factor                                              |              81\.0               |              81\.0               |                                  |                                  |                                  |             79\.6%               |             79\.6%               |                                  |                                  |                                  |            1\.4 pts              |            1\.4 pts              |                                  |                                  |                                  |             80\.0%               |             80\.0%               |                                  |                                  |                                  |            (0\.4) pts            |            (0\.4) pts            |
| Yield^(d)^                                               | Yield^(d)^                                               | Yield^(d)^                                               |             23\.90¢              |             23\.90¢              |                                  |                                  |                                  |             23\.66¢              |             23\.66¢              |                                  |                                  |                                  |              1\.0%               |              1\.0%               |                                  |                                  |                                  |             24\.96¢              |             24\.96¢              |                                  |                                  |                                  |             (5\.2)%              |             (5\.2)%              |

^(a)^ Except for FTEs, data includes information related to third\-party regional capacity purchase flying arrangements\.

^(b)^ See reconciliation of this non\-GAAP measure to the most directly related GAAP measure in the accompanying pages\.

^(c)^ Data presented includes information related to flights operated by Horizon and third\-party carriers\.

^(d)^ Information for 2017 has been adjusted to reflect the adoption of new accounting standards\.

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