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

EXECUTIVE OFFICERS

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

|                      |                      |                      |  |  |  |                                                                                |                                                                                |                                                                                |  |  |  |     |     |  |  |  |                                                 |                                                 |                                                 |
|:-------------------- |:-------------------- |:-------------------- |:- |:- |:- |:----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------:|:- |:- |:- |:---:|:---:|:- |:- |:- |:-----------------------------------------------:|:-----------------------------------------------:|:-----------------------------------------------:|
| Name                 | Name                 | Name                 |  |  |  |                                                                                Position                                                                                |                                                                                Position                                                                                |                                                                                Position                                                                                |  |  |  | Age | Age |  |  |  | Air Group
or Subsidiary
Officer Since | Air Group
or Subsidiary
Officer Since | Air Group
or Subsidiary
Officer Since |
| Bradley D\. Tilden   | Bradley D\. Tilden   | Bradley D\. Tilden   |  |  |  |                         Chairman and Chief Executive Officer of Alaska Air Group, Inc\., Chairman of Alaska Airlines, Inc\., Chairman of Horizon Air Industries, Inc\.                         |                         Chairman and Chief Executive Officer of Alaska Air Group, Inc\., Chairman of Alaska Airlines, Inc\., Chairman of Horizon Air Industries, Inc\.                         |                         Chairman and Chief Executive Officer of Alaska Air Group, Inc\., Chairman of Alaska Airlines, Inc\., Chairman of Horizon Air Industries, Inc\.                         |  |  |  | 59  | 59  |  |  |  |                      1994                       |                      1994                       |                      1994                       |
| Brandon S\. Pedersen | Brandon S\. Pedersen | Brandon S\. Pedersen |  |  |  |    Executive Vice President/Finance and Chief Financial Officer of Alaska Air Group, Inc\. and Alaska Airlines, Inc\., and Treasurer of Alaska Air Group, Inc\. and Alaska Airlines, Inc\.     |    Executive Vice President/Finance and Chief Financial Officer of Alaska Air Group, Inc\. and Alaska Airlines, Inc\., and Treasurer of Alaska Air Group, Inc\. and Alaska Airlines, Inc\.     |    Executive Vice President/Finance and Chief Financial Officer of Alaska Air Group, Inc\. and Alaska Airlines, Inc\., and Treasurer of Alaska Air Group, Inc\. and Alaska Airlines, Inc\.     |  |  |  | 53  | 53  |  |  |  |                      2003                       |                      2003                       |                      2003                       |
| Kyle B\. Levine      | Kyle B\. Levine      | Kyle B\. Levine      |  |  |  | Senior Vice President Legal, General Counsel and Corporate Secretary of Alaska Air Group, Inc\. and Alaska Airlines, Inc\. and Chief Ethics and Compliance Officer of Alaska Air Group, Inc\.  | Senior Vice President Legal, General Counsel and Corporate Secretary of Alaska Air Group, Inc\. and Alaska Airlines, Inc\. and Chief Ethics and Compliance Officer of Alaska Air Group, Inc\.  | Senior Vice President Legal, General Counsel and Corporate Secretary of Alaska Air Group, Inc\. and Alaska Airlines, Inc\. and Chief Ethics and Compliance Officer of Alaska Air Group, Inc\.  |  |  |  | 48  | 48  |  |  |  |                      2016                       |                      2016                       |                      2016                       |
| Benito Minicucci     | Benito Minicucci     | Benito Minicucci     |  |  |  |                                                                              President of Alaska Airlines, Inc\.                                                                               |                                                                              President of Alaska Airlines, Inc\.                                                                               |                                                                              President of Alaska Airlines, Inc\.                                                                               |  |  |  | 53  | 53  |  |  |  |                      2004                       |                      2004                       |                      2004                       |
| Joseph A\. Sprague   | Joseph A\. Sprague   | Joseph A\. Sprague   |  |  |  |                                                                          President of Horizon Air Industries, Inc\.                                                                            |                                                                          President of Horizon Air Industries, Inc\.                                                                            |                                                                          President of Horizon Air Industries, Inc\.                                                                            |  |  |  | 51  | 51  |  |  |  |                      2019                       |                      2019                       |                      2019                       |
| Gary L\. Beck        | Gary L\. Beck        | Gary L\. Beck        |  |  |  |                                                         Executive Vice President and Chief Operating Officer of Alaska Airlines, Inc\.                                                         |                                                         Executive Vice President and Chief Operating Officer of Alaska Airlines, Inc\.                                                         |                                                         Executive Vice President and Chief Operating Officer of Alaska Airlines, Inc\.                                                         |  |  |  | 72  | 72  |  |  |  |                      2018                       |                      2018                       |                      2018                       |
| Andrew R\. Harrison  | Andrew R\. Harrison  | Andrew R\. Harrison  |  |  |  |                                                        Executive Vice President and Chief Commercial Officer of Alaska Airlines, Inc\.                                                         |                                                        Executive Vice President and Chief Commercial Officer of Alaska Airlines, Inc\.                                                         |                                                        Executive Vice President and Chief Commercial Officer of Alaska Airlines, Inc\.                                                         |  |  |  | 50  | 50  |  |  |  |                      2008                       |                      2008                       |                      2008                       |
| Shane R\. Tackett    | Shane R\. Tackett    | Shane R\. Tackett    |  |  |  |                                                           Executive Vice President, Planning and Strategy of Alaska Airlines, Inc\.                                                            |                                                           Executive Vice President, Planning and Strategy of Alaska Airlines, Inc\.                                                            |                                                           Executive Vice President, Planning and Strategy of Alaska Airlines, Inc\.                                                            |  |  |  | 41  | 41  |  |  |  |                      2011                       |                      2011                       |                      2011                       |
| Andrea L\. Schneider | Andrea L\. Schneider | Andrea L\. Schneider |  |  |  |                                                                     Senior Vice President People of Alaska Airlines, Inc\.                                                                     |                                                                     Senior Vice President People of Alaska Airlines, Inc\.                                                                     |                                                                     Senior Vice President People of Alaska Airlines, Inc\.                                                                     |  |  |  | 54  | 54  |  |  |  |                      1998                       |                      1998                       |                      1998                       |
| Diana Birkett\-Rakow | Diana Birkett\-Rakow | Diana Birkett\-Rakow |  |  |  |                                                                  Vice President External Relations of Alaska Airlines, Inc\.                                                                   |                                                                  Vice President External Relations of Alaska Airlines, Inc\.                                                                   |                                                                  Vice President External Relations of Alaska Airlines, Inc\.                                                                   |  |  |  | 42  | 42  |  |  |  |                      2017                       |                      2017                       |                      2017                       |

Mr\. Tilden  joined Alaska Airlines in 1991, became Controller of Alaska Air Group and Alaska Airlines in 1994 and was named Vice President/Finance at Alaska Airlines in January 1999 and at Alaska Air Group in February 2000\. He was elected Alaska Airlines Chief Financial Officer in February 2000, Executive Vice President/Finance and Chief Financial Officer of both companies in January 2002 and Executive Vice President/Finance and Planning of Alaska Airlines in April 2007\. Mr\. Tilden was named President of Alaska Airlines in December 2008 and, in May 2012, he was elected President and CEO of Alaska Air Group and Alaska Airlines and CEO of Horizon Air\. He leads Air Group’s Management Executive Committee and was elected to the Air Group Board in 2010 and became Chairman of the Board in January 2014\.

Mr\. Pedersen  joined Alaska Airlines in 2003 as Staff Vice President/Finance and Controller of Alaska Air Group and Alaska Airlines and was elected Vice President/Finance and Controller for both entities in 2006\. He was elected Chief Financial Officer of Alaska Air Group and Alaska Airlines in June 2010 and Executive Vice President/Finance and Chief Financial Officer of both entities in 2014\. Effective February 2019, he was elected Treasurer of Alaska Air Group and Alaska Airlines\. He was Chief Financial Officer of Virgin America Inc\. from December 2016 to July 2018, when Virgin America was merged into Alaska\. He is a member of Air Group's Management Executive Committee\. Mr\. Pedersen will retire effective March 2, 2020 and Mr\. Tackett will assume the role of Chief Financial Officer\.

Mr\. Levine  was elected Senior Vice President Legal and General Counsel of Alaska Air Group and Alaska Airlines in January 2020 and is a member of Air Group’s Management Executive Committee\. Mr\. Levine was previously Vice President Legal and General Counsel of Alaska Air Group and Alaska Airlines (January 2016 \- January 2020)\. He was elected Corporate Secretary of Alaska Air Group and Alaska Airlines in August 2017\. Mr\. Levine joined Alaska Airlines in February 2006 as a Senior Attorney\. He also served as Associate General Counsel and Managing Director Commercial Law and General Litigation from

15


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

Aircraft

At December 31, 2019, Alaska had operating leases for 10 Boeing 737, 61 Airbus, and Horizon had operating leases for seven Bombardier Q400 aircraft\. Remaining lease terms for these aircraft extend up to 12 years, some with options to extend, subject to negotiation at the end of the term\. As extension is not certain, and rates are highly likely to be renegotiated, the extended term is only capitalized when it is reasonably determinable\. While aircraft rent is primarily fixed, certain leases contain rental adjustments throughout the lease term which would be recognized as variable expense as incurred\. Variable lease expense for aircraft was $4 million for the twelve months ended December 31, 2019\.

Capacity purchase agreements with aircraft (CPA aircraft)

At December 31, 2019, Alaska had CPAs with two carriers, including the Company’s wholly\-owned subsidiary, Horizon\. Horizon sells 100% of its capacity under a CPA with Alaska\. Alaska also has a CPA with SkyWest covering 32 E175 aircraft to fly certain routes in the Lower 48 and Canada\. Under these agreements, Alaska pays the carriers an amount which is based on a determination of their cost of operating those flights and other factors intended to approximate market rates for those services\. As Horizon is a wholly\-owned subsidiary, intercompany leases between Alaska and Horizon have not been recognized under the standard\.

Remaining lease terms for CPA aircraft range from 7\.5 years to 11 years\. Financial arrangements of the CPAs include a fixed component, representing the costs to operate each aircraft and is capitalized under the new lease accounting standard\. CPAs also include variable rent based on actual levels of flying, which is expensed as incurred\. Variable lease expense for CPA aircraft for the twelve months ended December 31, 2019 was not material\.

Airport and terminal facilities

The Company leases ticket counters, gates, cargo and baggage space, ground equipment, office space and other support areas at numerous airports\. For this asset class, the Company has elected to combine lease and non\-lease components\. The majority of airport and terminal facility leases are not capitalized because they do not meet the definition of controlled assets under the standard, or because the lease payments are entirely variable\. For airports where leased assets are identified, and where the contract includes fixed lease payments, operating lease assets and lease liabilities have been recorded\. The Company is also commonly responsible for maintenance, insurance and other facility\-related expenses and services under these agreements\. These costs are recognized as variable expense in the period incurred\. Airport and terminal facilities variable lease expense was $322 million for the twelve months ended December 31, 2019\.

Starting in 2018, the Company leased 12 airport slots at LaGuardia Airport and eight airport slots at Reagan National Airport to a third party\. For these leases, the Company recorded $13 million of lease income during the twelve months ended December 31, 2019\.

Corporate real estate and other leases

Leased corporate real estate is primarily for office space in hub cities, data centers, land leases, and reservation centers\. For this asset class, the Company has elected to combine lease and non\-lease components under the standard\. Other leased assets are comprised of other ancillary contracts and items including leased flight simulators and spare engines\. Variable lease expense related to corporate real estate and other leases for the twelve months ended December 31, 2019 was $10 million\.

68


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

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

ITEM 2\. PROPERTIES

Flight Equipment

Our operating aircraft fleet, commitments and options at  December 31, 2017  are summarized in the following table:

|                   |                             |                             |                             |                             |                 |                 |                 |                 |
| ----------------- | --------------------------- | --------------------------- | --------------------------- | --------------------------- | --------------- | --------------- | --------------- | --------------- |
|                   | **Current Fleet** **^(1)^** | **Current Fleet** **^(1)^** | **Current Fleet** **^(1)^** | **Current Fleet** **^(1)^** |                 | **Commitments** | **Commitments** | **Commitments** |
| **Aircraft Type** | **Owned**                   | **Capital Lease**           | **Operating Lease**         | **Total**                   | **Average Age** | **Purchase**    | **Lease**       | **Options**     |
| B\-717\-200       | 3                           | 13                          | 75                          | 91                          | 16\.3           | —               | —               | —               |
| B\-737\-700       | 10                          | —                           | —                           | 10                          | 8\.9            | —               | —               | —               |
| B\-737\-800       | 73                          | 4                           | —                           | 77                          | 16\.3           | —               | —               | —               |
| B\-737\-900ER     | 52                          | —                           | 37                          | 89                          | 2\.3            | 41              | —               | —               |
| B\-757\-200       | 88                          | 9                           | 3                           | 100                         | 20\.4           | —               | —               | —               |
| B\-757\-300       | 16                          | —                           | —                           | 16                          | 14\.9           | —               | —               | —               |
| B\-767\-300       | 2                           | —                           | —                           | 2                           | 24\.5           | —               | —               | —               |
| B\-767\-300ER     | 55                          | 2                           | —                           | 57                          | 21\.7           | —               | —               | —               |
| B\-767\-400ER     | 21                          | —                           | —                           | 21                          | 17\.0           | —               | —               | —               |
| B\-777\-200ER     | 8                           | —                           | —                           | 8                           | 18\.1           | —               | —               | —               |
| B\-777\-200LR     | 10                          | —                           | —                           | 10                          | 8\.8            | —               | —               | —               |
| A319\-100         | 55                          | —                           | 2                           | 57                          | 15\.8           | —               | —               | —               |
| A320\-200         | 55                          | 3                           | 4                           | 62                          | 22\.4           | —               | —               | —               |
| A321\-200         | 14                          | —                           | 20                          | 34                          | 0\.8            | 93              | —               | —               |
| A321\-200neo      | —                           | —                           | —                           | —                           | —               | 100             | —               | 100             |
| A330\-200         | 11                          | —                           | —                           | 11                          | 12\.8           | —               | —               | —               |
| A330\-300         | 28                          | —                           | 3                           | 31                          | 9\.0            | —               | —               | —               |
| A330\-900neo      | —                           | —                           | —                           | —                           | —               | 25              | —               | —               |
| A350\-900         | 6                           | —                           | —                           | 6                           | 0\.2            | 19              | —               | —               |
| CS100             | —                           | —                           | —                           | —                           | —               | 75              | —               | 50              |
| MD\-88            | 92                          | 17                          | —                           | 109                         | 27\.5           | —               | —               | —               |
| MD\-90            | 65                          | —                           | —                           | 65                          | 20\.9           | —               | —               | —               |
| Total             | 664                         | 48                          | 144                         | 856                         | 16\.7           | 353             | —               | 150             |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------------- |
| ^(1)^ | Excludes certain aircraft we own or lease that are operated by regional carriers on our behalf shown in the table below\. |

The following table summarizes the aircraft fleet operated by our regional carriers on our behalf at  December 31, 2017 :

|                                  |                |                |                |                 |                 |           |
| -------------------------------- | -------------- | -------------- | -------------- | --------------- | --------------- | --------- |
|                                  | **Fleet Type** | **Fleet Type** | **Fleet Type** | **Fleet Type**  | **Fleet Type**  |           |
| **Carrier**                      | **CRJ\-200**   | **CRJ\-700**   | **CRJ\-900**   | **Embraer 170** | **Embraer 175** | **Total** |
| Endeavor Air, Inc\. ^(1)^        | 50             | —              | 93             | —               | —               | 143       |
| ExpressJet Airlines, Inc\. ^(2)^ | —              | 33             | 16             | —               | —               | 49        |
| SkyWest Airlines, Inc\.          | 86             | 27             | 36             | —               | 18              | 167       |
| Compass Airlines, LLC            | —              | —              | —              | —               | 36              | 36        |
| Republic Airline, Inc\.          | —              | —              | —              | 20              | 16              | 36        |
| GoJet Airlines, LLC              | —              | 22             | 7              | —               | —               | 29        |
| Total                            | 136            | 82             | 152            | 20              | 70              | 460       |

|       |                                                             |
| ----- | ----------------------------------------------------------- |
| ^(1)^ | Endeavor Air, Inc\. is a wholly owned subsidiary of Delta\. |

|       |                                                                                |
| ----- | -------------------------------------------------------------------------------------------------------------- |
| ^(2)^ | During 2017, we and ExpressJet Airlines, Inc\. agreed to early terminate our relationship by the end of 2018\. |

 20


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

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

|      |                                                                                |
| ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^c)^ | Includes approximately  74%  investments in corporate debt with a S&P rating lower than A and  26%  investments in corporate debt with a S&P rating A or higher\. Holdings include  86%  U\.S\. companies,  12%  international companies and  2%  emerging market companies\. |

|      |                                                                                |
| ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^d)^ | Includes approximately  61%  investments in U\.S\. domestic government securities and  39%  in emerging market government securities\. There are no significant foreign currency risks within this classification\. |

|      |                                                                                |
| ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^e)^ | Includes limited partnerships that invest primarily in U\.S\. ( 95% ) and European ( 5% ) buyout opportunities of a range of privately held companies\. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated\. It is estimated that the underlying assets of these funds will be gradually liquidated over the next  one  to  ten years \. Additionally, the pension plan’s master trust has future funding commitments of approximately  $456 million  over the next  ten years \. |

|      |                                                                                |
| ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| ^f)^ | Investment includes  73%  in an emerging market 103\-12 Investment Trust with investments in emerging country equity securities,  12%  in Canadian segregated balanced value, income growth and diversified pooled funds and  15%  in a common/collective trust investing in securities of smaller companies located outside the U\.S\., including developing markets\. 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\. |

Changes in fair value measurements of Level 3 investments during the year ended December 31, 2017, were as follows (in millions):

|                                                     |                                            |                                                  |
| --------------------------------------------------- | ------------------------------------------ | ------------------------------------------------ |
|                                                     | **Private Equity**

**Partnerships** | **Insurance Group**

**Annuity Contracts** |
| Beginning balance at December 31, 2016              | $21                                        | $2                                               |
| Actual loss on plan assets:                         |                                            |                                                  |
| Relating to assets still held at the reporting date | (4)                                        | —                                                |
| Purchases                                           | 1                                          | —                                                |
| Sales                                               | (1)                                        | —                                                |
| Transfers out                                       | (3)                                        | —                                                |
| Ending balance at December 31, 2017                 | $14                                        | $2                                               |

Changes in fair value measurements of Level 3 investments during the year ended December 31, 2016, were as follows (in millions):

|                                           |                                            |                                                  |
| ----------------------------------------- | ------------------------------------------ | ------------------------------------------------ |
|                                           | **Private Equity**

**Partnerships** | **Insurance Group**

**Annuity Contracts** |
| Beginning balance at December 31, 2015    | $16                                        | $2                                               |
| Actual return on plan assets:             |                                            |                                                  |
| Relating to assets sold during the period | 7                                          | —                                                |
| Purchases                                 | 7                                          | —                                                |
| Sales                                     | (9)                                        | —                                                |
| Ending balance at December 31, 2016       | $21                                        | $2                                               |

158


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

Assets (Liabilities) Measured at Fair Value on a Recurring Basis ^(1)^

|                                         |                       |                       |                       |                                    |
| --------------------------------------- | --------------------- | --------------------- | --------------------- | ---------------------------------- |
|                                         | **December 31, 2018** | **December 31, 2018** | **December 31, 2018** | **Valuation**

**Technique** |
| **(in millions)**                       | **Total**             | **Level 1**           | **Level 2**           | **Valuation**

**Technique** |
| Cash equivalents                        | $1,222                | $1,222                | $—                    | (a)                                |
| Restricted cash equivalents             | 1,183                 | 1,183                 | —                     | (a)                                |
| Short\-term investments                 |                       |                       |
                |
                             |
| U\.S\. government and agency securities | 50                    | 45                    | 5                     | (a)                                |
| Asset\- and mortgage\-backed securities | 36                    | —                     | 36                    | (a)                                |
| Corporate obligations                   | 90                    | —                     | 90                    | (a)                                |
| Other fixed income securities           | 27                    | —                     | 27                    | (a)                                |
| Long\-term investments                  | 1,084                 | 880                   | 204                   | (a)                                |
| Hedge derivatives, net                  |                       |                       |                       |                                    |
| Fuel hedge contracts                    | 15                    | 20                    | (5

)           | (a)(b)                             |
| Interest rate contracts                 | 1                     | —                     | 1                     | (a)                                |
| Foreign currency exchange contracts     | (3

)           | —                     | (3

)           | (a)                                |

|                                         |                       |                       |                       |                                    |
| --------------------------------------- | --------------------- | --------------------- | --------------------- | ---------------------------------- |
|                                         | **December 31, 2017** | **December 31, 2017** | **December 31, 2017** | **Valuation**

**Technique** |
| **(in millions)**                       | **Total**             | **Level 1**           | **Level 2**           | **Valuation**

**Technique** |
| Cash equivalents                        | $1,357                | $1,357                | $—                    | (a)                                |
| Restricted cash equivalents             | 38                    | 38                    | —                     | (a)                                |
| Short\-term investments                 |
                |                       |
                |
                             |
| U\.S\. government securities            | 93                    | 84                    | 9                     | (a)                                |
| Asset\- and mortgage\-backed securities | 173                   | —                     | 173                   | (a)                                |
| Corporate obligations                   | 467                   | —                     | 467                   | (a)                                |
| Other fixed income securities           | 92                    | —                     | 92                    | (a)                                |
| Long\-term investments                  | 513                   | 485                   | 28                    | (a)                                |
| Hedge derivatives, net                  |                       |                       |                       |                                    |
| Fuel hedge contracts                    | (66

)          | (43

)          | (23

)          | (a)(b)                             |
| Foreign currency exchange contracts     | (17

)          | —                     | (17

)          | (a)                                |

|       |                                                                                |
| ----- | -------------------------------------------------------------------------------- |
| ^(1)^ | See  Note 10 , "Employee Benefit Plans," for fair value of benefit plan assets\. |

Cash Equivalents and Restricted Cash Equivalents\.  Cash equivalents generally consist of money market funds\. Restricted cash equivalents generally consist of money market funds, time deposits, commercial paper and negotiable certificates of deposit, which primarily relate to proceeds from debt issued to finance a portion of the construction costs for the new terminal facilities at the LaGuardia Airport, certain self\-insurance obligations and other airport commitments\. The fair value of these investments is based on a market approach using prices generated by market transactions involving identical or comparable assets\.

Short\-Term Investments\.  The fair values of short\-term investments are based on a market approach using industry standard valuation techniques that incorporate observable inputs such as quoted market prices, interest rates, benchmark curves, credit ratings of the security and other observable information\.

Long\-Term Investments\.  Our long\-term investments that are measured at fair value primarily consist of equity investments which are valued based on market prices or other observable transactions and are recorded in other noncurrent assets on our balance sheet\. See  Note 4 , "Investments," for further information on our equity investments\.

Hedge Derivatives\.  A portion of our derivative contracts are negotiated over\-the\-counter with counterparties without going through a public exchange\. Accordingly, our fair value assessments give consideration to the risk of counterparty default (as well as our own credit risk)\. Such contracts are classified as Level 2 within the fair value hierarchy\. The remainder of our hedge contracts are comprised of futures contracts, which are traded on a public exchange\. These contracts are classified within Level 1 of the fair value hierarchy\.

 69


Annual Report of Southwest Airlines Co\. for year 2019

As a result, the costs incurred to fund the Terminal 1\.5 Project are included within ACFO and all amounts that have been or will be reimbursed will be included within Construction obligation on the accompanying Consolidated Balance Sheet\. Upon completion of the Terminal 1\.5 Project, the Company will perform an evaluation to determine the treatment of these associated assets and liabilities\.

Funding for the Terminal 1\.5 Project is primarily through the Regional Airports Improvement Corporation (the "RAIC"), which is a quasi\-governmental special purpose entity that acts as a conduit borrower under a syndicated credit facility provided by a group of lenders\. A loan made under the credit facility for the Terminal 1\.5 Project is being used to reimburse the Company for the site improvements and non\-proprietary improvements of the Terminal 1\.5 Project, and the outstanding loan will be repaid with the proceeds of LAWA’s payments to purchase completed construction phases\. The Company guaranteed the obligation of the RAIC under the credit facility associated with the T1\.5 Lease\. As of  December 31, 2019 , the Company's outstanding guaranteed obligation under the credit facility for the Terminal 1\.5 Project was   $176 million \.

Dallas Love Field

During  2008 , the City of Dallas approved the LFMP, a project to reconstruct Dallas Love Field with modern, convenient air travel facilities\. Pursuant to a Program Development Agreement with the City of Dallas and the Love Field Airport Modernization Corporation (or the "LFAMC," a Texas non\-profit "local government corporation" established by the City of Dallas to act on the City of Dallas' behalf to facilitate the development of the LFMP), the Company managed this project\. Major construction was effectively completed in 2014\. During second quarter 2017, the City of Dallas approved using the remaining bond funds for additional terminal construction projects, which were effectively completed in 2018\. As construction was completed prior to adoption of the New Lease Standard, the Company derecognized the LFMP Terminal related ACFO and Construction obligation within the Consolidated Balance Sheet as of January 1, 2019\.

Although the City of Dallas received commitments from various sources that helped to fund portions of the LFMP project, including the FAA, the Transportation Security Administration, and the City of Dallas' Aviation Fund, the majority of the funds used were from the issuance of bonds\. The Company guaranteed principal and interest payments on   $456 million  of such bonds issued by the LFAMC\. As of  December 31, 2019 ,   $407 million  of principal remained outstanding\. The net present value of the future principal and interest payments associated with the bonds was   $444 million  as of  December 31, 2019 , and was reflected as part of the Company's operating lease right\-of\-use assets and lease obligations in the Consolidated Balance Sheet\. See Notes 2 and 7 for further information\.

During 2015, the City of Dallas issued additional bonds for the construction of a new parking garage at Dallas Love Field, which was completed and operational in fourth quarter 2018\. As construction was completed prior to adoption of the New Lease Standard, the Company derecognized the LFMP Parking Garage related ACFO and Construction obligation within the Consolidated Balance Sheet as of January 1, 2019\. The Company has not guaranteed the principal or interest payments on these bonds\.

Construction costs recorded in ACFO for the Company's various projects as of  December 31, 2019 , and  December 31, 2018 , were as follows:

80


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

The following table presents the principal reasons for the difference between the effective tax rate and the U\.S\. federal statutory income tax rate:

|                                          |                                          |                                          |                         |                         |                         |                         |                         |                         |  |  |  |  |  |  |
|:---------------------------------------- |:---------------------------------------- |:---------------------------------------- | -----------------------:| -----------------------:| -----------------------:| -----------------------:| -----------------------:| -----------------------:|:- |:- |:- |:- |:- |:- |
|                                          |                                          |                                          | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |  |  |  |  |  |  |
|                                          |                                          |                                          |                    2019 |                    2019 |                    2018 |                    2018 |                    2017 |                    2017 |
| U\.S\. federal statutory income tax rate | U\.S\. federal statutory income tax rate | U\.S\. federal statutory income tax rate |                 21\.0 % |                 21\.0 % |                 21\.0 % |                 21\.0 % |                 35\.0 % |                 35\.0 % |
| State taxes, net of federal benefit      | State taxes, net of federal benefit      | State taxes, net of federal benefit      |                    2\.3 |                    2\.3 |                    2\.5 |                    2\.5 |                    1\.8 |                    1\.8 |
| Foreign tax rate differential            | Foreign tax rate differential            | Foreign tax rate differential            |                       — |                       — |                    0\.1 |                    0\.1 |                  (2\.2) |                  (2\.2) |
| Tax Cuts and Jobs Act adjustment         | Tax Cuts and Jobs Act adjustment         | Tax Cuts and Jobs Act adjustment         |                       — |                       — |                  (0\.5) |                  (0\.5) |                    7\.2 |                    7\.2 |
| Other                                    | Other                                    | Other                                    |                  (0\.2) |                  (0\.2) |                    0\.5 |                    0\.5 |                       — |                       — |
| Effective income tax rate                | Effective income tax rate                | Effective income tax rate                |                 23\.1 % |                 23\.1 % |                 23\.6 % |                 23\.6 % |                 41\.8 % |                 41\.8 % |

Following the enactment of the Tax Cuts and Jobs Act of 2017 ("2017 tax reform"), we recorded a provisional tax expense estimate of $395 million resulting in a 7\.2% increase in our effective tax rate during 2017\. The provisional estimate included recognition of tax expense related to certain of our undistributed foreign earnings and tax expense to decrease our federal net deferred tax asset to a 21% statutory tax rate\. During 2018 we recognized a $26 million benefit resulting in a 0\.5% reduction to our 2018 effective tax rate after finalizing the impact of the 2017 tax reform\.

At December 31, 2019, we had a basis difference in our investments in foreign subsidiaries of $212 million which is considered to be indefinitely reinvested\.

Deferred Taxes

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes\. The following table shows significant components of our deferred tax assets and liabilities:

|                                             |                                             |                                             |              |              |  |  |  |
|:------------------------------------------- |:------------------------------------------- |:------------------------------------------- | ------------:| ------------:|:- |:- |:- |
|                                             |                                             |                                             | December 31, | December 31, |  |  |  |
| (in millions)                               | (in millions)                               | (in millions)                               |         2019 |         2018 |
| Deferred tax assets:                        | Deferred tax assets:                        | Deferred tax assets:                        |              |              |
| Net operating loss carryforwards            | Net operating loss carryforwards            | Net operating loss carryforwards            |        $ 560 |        $ 674 |
| Pension, postretirement and other benefits  | Pension, postretirement and other benefits  | Pension, postretirement and other benefits  |        2,241 |        2,435 |
| Alternative minimum tax credit carryforward | Alternative minimum tax credit carryforward | Alternative minimum tax credit carryforward |           94 |          189 |
| Deferred revenue                            | Deferred revenue                            | Deferred revenue                            |        1,667 |        1,620 |
| Operating lease liabilities                 | Operating lease liabilities                 | Operating lease liabilities                 |        1,446 |        1,579 |
| Other                                       | Other                                       | Other                                       |          350 |          357 |
| Valuation allowance                         | Valuation allowance                         | Valuation allowance                         |         (58) |         (13) |
| Total deferred tax assets                   | Total deferred tax assets                   | Total deferred tax assets                   |      $ 6,300 |      $ 6,841 |
| Deferred tax liabilities:                   | Deferred tax liabilities:                   | Deferred tax liabilities:                   |              |              |
| Depreciation                                | Depreciation                                | Depreciation                                |      $ 5,190 |      $ 4,185 |
| Operating lease right\-of\-use assets       | Operating lease right\-of\-use assets       | Operating lease right\-of\-use assets       |        1,298 |        1,388 |
| Intangible assets                           | Intangible assets                           | Intangible assets                           |        1,049 |        1,052 |
| Other                                       | Other                                       | Other                                       |           99 |          137 |
| Total deferred tax liabilities              | Total deferred tax liabilities              | Total deferred tax liabilities              |      $ 7,636 |      $ 6,762 |
| Net deferred tax (liabilities) assets^(1)^  | Net deferred tax (liabilities) assets^(1)^  | Net deferred tax (liabilities) assets^(1)^  |    $ (1,336) |         $ 79 |

^(1)^ At December 31, 2019, the net deferred tax liabilities of $1\.3 billion included $120 million of net state deferred tax assets, which are recorded in other noncurrent assets, and $1\.5 billion of net federal deferred tax liabilities, which are recorded in deferred income taxes, net\. At December 31, 2018, the net deferred tax assets of $79 million included $242 million of net state deferred tax assets, which are recorded in other noncurrent assets, and $163 million of net federal deferred tax liabilities, which are recorded in deferred income taxes, net\.

At December 31, 2019, we had $94 million of federal alternative minimum tax credit carryforwards\. As a result of the Tax Cuts and Jobs Act of 2017, this credit becomes refundable to us if not used by 2021\. We have $1\.9 billion of federal pre\-tax net operating loss carryforwards, which will not begin to expire until 2027\.

90


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

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

|            |                 |                                                                                |
| ----------:|:--------------- |:-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
|  \*^10\.98 | UAL
United | [Supplemental Agreement No\. 6, including exhibits and side letters, to Purchase Agreement No\. 1951, dated July 30, 1998 (filed as Exhibit 10\.1 to Continental’s Form  10\-Q for the quarter ended September 30, 1998, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/0000319687-98-000014.txt)       |
|  \*^10\.99 | UAL
United | [Supplemental Agreement No\. 7, including side letters, to Purchase Agreement No\. 1951, dated November 12, 1998 (filed as Exhibit 10\.24(g) to Continental’s Form  10\-K for the year ended December 31, 1998, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/0000319687-99-000003.txt)                |
| \*^10\.100 | UAL
United | [Supplemental Agreement No\. 8, including side letters, to Purchase Agreement No\. 1951, dated December 7, 1998 (filed as Exhibit 10\.24(h) to Continental’s Form  10\-K for the year ended December 31, 1998, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/0000319687-99-000003.txt)                 |
| \*^10\.101 | UAL
United | [Letter Agreement No\.    6\-1162\-GOC\-131R1 to Purchase Agreement No\. 1951, dated March 26, 1998 (filed as Exhibit 10\.1 to Continental’s Form  10\-Q for the quarter ended March 31, 1998, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/0000319687-98-000004.txt)                                 |
| \*^10\.102 | UAL
United | [Supplemental Agreement No\. 9, including side letters, to Purchase Agreement No\. 1951, dated February 18, 1999 (filed as Exhibit 10\.4 to Continental’s Form  10\-Q for the quarter ended March 31, 1999, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/0000319687-99-000006.txt)                    |
| \*^10\.103 | UAL
United | [Supplemental Agreement No\. 10, including side letters, to Purchase Agreement No\. 1951, dated March 19, 1999 (filed as Exhibit 10\.4(a) to Continental’s Form  10\-Q for the quarter ended March 31, 1999, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/0000319687-99-000006.txt)                   |
| \*^10\.104 | UAL
United | [Supplemental Agreement No\. 11, including side letters, to Purchase Agreement No\. 1951, dated March 14, 1999 (filed as Exhibit 10\.7 to Continental’s Form  10\-Q for the quarter ended June 30, 1999, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968799000010/0000319687-99-000010.txt)    |
| \*^10\.105 | UAL
United | [Supplemental Agreement No\. 12, including side letters, to Purchase Agreement No\. 1951, dated July 2, 1999 (filed as Exhibit 10\.8 to Continental’s Form  10\-Q for the quarter ended September 30, 1999, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968799000012/0000319687-99-000012.txt) |
| \*^10\.106 | UAL
United | [Supplemental Agreement No\. 13 to Purchase Agreement No\. 1951, dated October 13, 1999 (filed as Exhibit 10\.25(n) to Continental’s Form  10\-K for the year ended December 31, 1999, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968700000007/0000319687-00-000007.txt)                      |
| \*^10\.107 | UAL
United | [Supplemental Agreement No\. 14 to Purchase Agreement No\. 1951, dated December 13, 1999 (filed as Exhibit 10\.25(o) to Continental’s Form  10\-K for the year ended December 31, 1999, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968700000007/0000319687-00-000007.txt)                     |
| \*^10\.108 | UAL
United | [Supplemental Agreement No\. 15, including side letters, to Purchase Agreement No\. 1951, dated January 13, 2000 (filed as Exhibit 10\.1 to Continental’s Form  10\-Q for the quarter ended March 31, 2000, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968700000010/0000319687-00-000010.txt) |
| \*^10\.109 | UAL
United | [Supplemental Agreement No\. 16, including side letters, to Purchase Agreement No\. 1951, dated March 17, 2000 (filed as Exhibit 10\.2 to Continental’s Form  10\-Q for the quarter ended March 31, 2000, Commission file number  1\-10323, and incorporated herein by reference) ](http://www.sec.gov/Archives/edgar/data/319687/000031968700000010/0000319687-00-000010.txt)   |

120


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

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

**Number** | **Description**                                                                                |
| 4\.50                         | [Note Purchase Agreement, dated as of September 24, 2015, among American Airlines, Inc\., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4\.6 to American’s Current Report on Form 8\-K filed on September 24, 2015 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515327525/d69559dex46.htm)                                                                                |
| 4\.51                         | [Form of Participation Agreement (Participation Agreement among American Airlines, Inc\., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit B to Exhibit 4\.6 to American’s Current Report on Form 8\-K filed on September 24, 2015 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515327525/d69559dex46.htm)                                                                                |
| 4\.52                         | [Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc\., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4\.6 to American’s Current Report on Form 8\-K filed on September 24, 2015 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515327525/d69559dex46.htm)                                                                                |
| 4\.53                         | [Form of Pass Through Trust Certificate, Series 2015\-2AA (incorporated by reference to Exhibit A to Exhibit 4\.2 to American’s Current Report on Form 8\-K filed on September 24, 2015 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515327525/d69559dex42.htm)                                                                                |
| 4\.54                         | [Form of Pass Through Trust Certificate, Series 2015\-2A (incorporated by reference to Exhibit A to Exhibit 4\.3 to American’s Current Report on Form 8\-K filed on September 24, 2015 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515327525/d69559dex43.htm)                                                                                |
| 4\.55                         | [Form of Pass Through Trust Certificate, Series 2015\-2B (incorporated by reference to Exhibit A to Exhibit 4\.4 to American’s Current Report on Form 8\-K filed on September 24, 2015 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515327525/d69559dex44.htm)                                                                                |
| 4\.56                         | [Revolving Credit Agreement (2015\-2AA), dated as of September 24, 2015, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2015\-2AA, as Borrower, and Commonwealth Bank of Australia, New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4\.12 to American’s Current Report on Form 8\-K filed on September 24, 2015 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515327525/d69559dex412.htm)                                                                                |
| 4\.57                         | [Revolving Credit Agreement (2015\-2A), dated as of September 24, 2015, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2015\-2A, as Borrower, and Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4\.13 to American’s Current Report on Form 8\-K filed on September 24, 2015 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515327525/d69559dex413.htm)                                                                                |
| 4\.58                         | [Revolving Credit Agreement (2015\-2B), dated as of September 24, 2015, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2015\-2B, as Borrower, and Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4\.14 to American’s Current Report on Form 8\-K filed on September 24, 2015 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515327525/d69559dex414.htm)                                                                                |
| 4\.59                         | [Note Purchase Agreement, dated as of April 24, 2013, among American Airlines, Inc\. (as successor in interest to US Airways, Inc\.) Wilmington Trust Company, as Pass Through Trustee, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4\.12 to US Airways Group’s Current Report on Form 8\-K filed on April 25, 2013 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000119312513171448/d526546dex412.htm)                                                                                |
| 4\.60                         | [Assumption Agreement, dated as of December 30, 2015, by American Airlines, Inc\. for the benefit of Wilmington Trust Company, as pass through trustee, subordination agent, and paying agent, and Wilmington Trust, National Association, as escrow agent, in each case, under the Note Purchase Agreement, dated as of April 24, 2013, among American Airlines, Inc\. (as successor in interest to US Airways, Inc\.), Wilmington Trust Company, Wilmington Trust, National Association and Wilmington Trust Company (incorporated by reference to Exhibit 10\.2 to AAG’s Current Report on Form 8\-K filed on December 31, 2015 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515418305/d110614dex102.htm) |
| 4\.61                         | [Form of Participation Agreement between American Airlines, Inc\. (as successor in interest to US Airways, Inc\.), as Owner, and Wilmington Trust Company, as Indenture Trustee, Subordination Agent and Pass Through Trustee (incorporated by reference to Exhibit 4\.13 to US Airways Group’s Current Report on Form 8\-K filed on April 25, 2013 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000119312513171448/d526546dex413.htm)                                                                                |
| 4\.62                         | [Form of Trust Indenture and Security Agreement among American Airlines, Inc\. (as successor in interest to US Airways, Inc\.), as Owner, Wilmington Trust, National Association, as Securities Intermediary, and Wilmington Trust Company, as Indenture Trustee (incorporated by reference to Exhibit 4\.14 to US Airways Group’s Current Report on Form 8\-K filed on April 25, 2013 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000119312513171448/d526546dex414.htm)                                                                                |
| 4\.63                         | [Form of Amendment No\. 1 to Participation Agreement between American Airlines, Inc\. (as successor in interest to US Airways, Inc\.), as Owner, and Wilmington Trust Company, as Indenture Trustee, Subordination Agent and Pass Through Trustee (Exhibit A to Note Purchase Agreement) (incorporated by reference to Exhibit 4\.8 to US Airways Group’s Current Report on Form 8\-K filed on June 6, 2013 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000119312513250235/d548366dex48.htm)                                                                                |

184


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

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

In certain transactions, including certain aircraft financing leases and loans, the lessors, lenders and/or other parties have rights to terminate the transaction based on changes in foreign tax law, illegality or certain other events or circumstances\. In such a case, American may be required to make a lump sum payment to terminate the relevant transaction\.

American has general indemnity clauses in many of its airport and other real estate leases where American as lessee indemnifies the lessor (and related parties) against liabilities related to American’s use of the leased property\. Generally, these indemnifications cover liabilities resulting from the negligence of the indemnified parties, but not liabilities resulting from the gross negligence or willful misconduct of the indemnified parties\. In addition, American provides environmental indemnities in many of these leases for contamination related to American’s use of the leased property\.

Under certain contracts with third parties, American indemnifies the third\-party against legal liability arising out of an action by the third\-party, or certain other parties\. The terms of these contracts vary and the potential exposure under these indemnities cannot be determined\. American has liability insurance protecting American for some of the obligations it has undertaken under these indemnities\.

American is required to make principal and interest payments for certain special facility revenue bonds issued by municipalities primarily to build or improve airport facilities and purchase equipment, which are leased to American\. The payment of principal and interest of certain special facility revenue bonds is guaranteed by American\. As of  December 31, 2019 , the remaining lease payments through 2035 guaranteeing the principal and interest on these bonds are   $589 million  and the current carrying amount of the associated operating lease liability in the accompanying consolidated balance sheet is   $321 million \.

As of  December 31, 2019 , American had issued guarantees covering AAG’s   $500 million  aggregate principal amount of   4\.625%  senior notes due  March 2020  and   $750 million  aggregate principal amount of   5\.000%  senior notes due  June 2022 \.

(g) Credit Card Processing Agreements

American has agreements with companies that process customer credit card transactions for the sale of air travel and other services\. American’s agreements allow these credit card processing companies, under certain conditions, to hold an amount of its cash (referred to as a holdback) equal to a portion of advance ticket sales that have been processed by that company, but for which American has not yet provided the air transportation\. Additional holdback requirements in the event of material adverse changes in American’s financial condition will reduce its liquidity in the form of unrestricted cash by the amount of the holdbacks\. These credit card processing companies are not currently entitled to maintain any holdbacks pursuant to these requirements\.

(h) Labor Negotiations

As of  December 31, 2019 , American employed approximately   104,200  active full\-time equivalent employees\. Approximately   84%  of employees are covered by collective bargaining agreements (CBAs) with various labor unions and approximately   25%  of employees are covered by CBAs that will become amendable within one year\. Agreements in principle were reached on January 30, 2020 for joint collective bargaining agreements (JCBAs) covering American’s maintenance, fleet service, stock clerks, maintenance control technicians and maintenance training instructors\. Those agreements are subject to membership ratification vote\. Additionally, the post\-Merger JCBAs covering American’s pilots and flight attendants became amendable in January 2020 and December 2019, respectively\. Negotiations continue for new agreements\.

11\. Supplemental Cash Flow Information

Supplemental disclosure of cash flow information and non\-cash investing and financing activities are as follows (in millions):

|                                               |                             |                             |                             |
| --------------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                               | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                               | **2019**                    | **2018**                    | **2017**                    |
| Non\-cash investing and financing activities: |                             |                             |                             |
| Settlement of bankruptcy obligations          | $7                          | $—                          | $15                         |
| Equity Investment                             | —                           | —                           | 120                         |
| Supplemental information:                     |                             |                             |                             |
| Interest paid, net                            | 1,025                       | 1,009                       | 942                         |
| Income taxes paid                             | 8                           | 16                          | 18                          |

154


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

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

based on its recent consortia participation\. The Company's contingent exposure could increase if the participation of other air carriers decreases\. The guarantees will expire when the tax\-exempt bonds are paid in full, which ranges from  2022  to  2051 \. The Company did not record a liability at the time these indirect guarantees were made\.

Regional Capacity Purchase\.  As of  December 31, 2019 , United had   325  call options to purchase regional jet aircraft being operated by certain of its regional carriers with contract dates extending until  2029 \. These call options are exercisable upon wrongful termination or breach of contract, among other conditions\.

Credit Card Processing Agreements\.  The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services\. Under certain of the Company's credit card processing agreements, the financial institutions in certain circumstances have the right to require that the Company maintain a reserve equal to a portion of advance ticket sales that has been processed by that financial institution, but for which the Company has not yet provided the air transportation\. Such financial institutions may require additional cash or other collateral reserves to be established or additional withholding of payments related to receivables collected if the Company does not maintain certain minimum levels of unrestricted cash, cash equivalents and short\-term investments (collectively, "Unrestricted Liquidity")\. The Company's current level of Unrestricted Liquidity is substantially in excess of these minimum levels\.

Labor Negotiations\.  As of  December 31, 2019 , United, including its subsidiaries, had approximately   96,000  employees\. Approximately   84%  of United's employees were represented by various U\.S\. labor organizations as of  December 31, 2019 \.

On February 1, 2019, the collective bargaining agreement with the Air Line Pilots Association ("ALPA"), the labor union representing United's pilots, became amendable\. The Company and ALPA are in negotiations for an amended agreement\. The Company and UNITE HERE, the labor union representing United's Catering Operations employees, started negotiations for a first collective bargaining agreement in March 2019\.

The collective bargaining agreement with the International Brotherhood of Teamsters (the "IBT") contains provisions that require the Company to align contract terms with other airlines' workgroups under certain conditions\. There were no triggering events in 2019 that invoked these provisions\.

85


Annual Report of Southwest Airlines Co\. for year 2017

**Item 8\.*****Financial Statements and Supplementary Data***

**Southwest Airlines Co\.**

**Consolidated Balance Sheet**

(in millions, except share data)

|                                                                                |                       |                       |
| -------------------------------------------------------------------------------------------------------------------- | --------------------- | --------------------- |
|                                                                                | **December 31, 2017** | **December 31, 2016** |
| **ASSETS**                                                                                |                       |                       |
| Current assets:                                                                                |                       |                       |
| Cash and cash equivalents                                                                                | $1,495                | $1,680                |
| Short\-term investments                                                                                | 1,778                 | 1,625                 |
| Accounts and other receivables                                                                                | 662                   | 546                   |
| Inventories of parts and supplies, at cost                                                                           | 420                   | 337                   |
| Prepaid expenses and other current assets                                                                            | 460                   | 310                   |
| Total current assets                                                                                | 4,815                 | 4,498                 |
| Property and equipment, at cost:                                                                                |                       |                       |
| Flight equipment                                                                                | 21,368                | 20,275                |
| Ground property and equipment                                                                                | 4,399                 | 3,779                 |
| Deposits on flight equipment purchase contracts                                                                      | 919                   | 1,190                 |
| Assets constructed for others                                                                                | 1,543                 | 1,220                 |
|                                                                                | 28,229                | 26,464                |
| Less allowance for depreciation and amortization                                                                     | 9,690                 | 9,420                 |
|                                                                                | 18,539                | 17,044                |
| Goodwill                                                                                | 970                   | 970                   |
| Other assets                                                                                | 786                   | 774                   |
|                                                                                | $25,110               | $23,286               |
| **LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                             |                       |                       |
| Current liabilities:                                                                                |                       |                       |
| Accounts payable                                                                                | $1,320                | $1,178                |
| Accrued liabilities                                                                                | 1,777                 | 1,985                 |
| Air traffic liability                                                                                | 3,460                 | 3,115                 |
| Current maturities of long\-term debt                                                                                | 348                   | 566                   |
| Total current liabilities                                                                                | 6,905                 | 6,844                 |
| Long\-term debt less current maturities                                                                              | 3,320                 | 2,821                 |
| Deferred income taxes                                                                                | 2,358                 | 3,374                 |
| Construction obligation                                                                                | 1,390                 | 1,078                 |
| Other noncurrent liabilities                                                                                | 707                   | 728                   |
| Stockholders' equity:                                                                                |                       |                       |
| Common stock, $1\.00 par value: 2,000,000,000 shares authorized;

 807,611,634 shares issued in 2017 and 2016 | 808                   | 808                   |
| Capital in excess of par value                                                                                | 1,451                 | 1,410                 |
| Retained earnings                                                                                | 14,621                | 11,418                |
| Accumulated other comprehensive income (loss)                                                                        | 12                    | (323)                 |
| Treasury stock, at cost: 219,060,856 and 192,450,855 shares

 in 2017 and 2016 respectively                    | (6,462)               | (4,872)               |
| Total stockholders' equity                                                                                | 10,430                | 8,441                 |
|                                                                                | $25,110               | $23,286               |

See accompanying notes\.

71


Annual Report of Southwest Airlines Co\. for year 2017

|                                                                                |                                                                             |                                                                             |
| --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------------------------------------------------- |
| **Fair value measurements using significant unobservable inputs (Level 3)**                                                                                | **Fair value measurements using significant unobservable inputs (Level 3)** | **Fair value measurements using significant unobservable inputs (Level 3)** |
|                                                                                | **Fuel**                                                                    |                                                                             |
| (in millions)                                                                                | **derivatives**                                                             |                                                                             |
| Balance at December 31, 2016                                                                                | $(258)                                                                      |                                                                             |
| Total losses (realized or unrealized)                                                                                |                                                                             |                                                                             |
| Included in earnings                                                                                | (125)                                                                       |                                                                             |
| Included in other comprehensive income                                                                                | (50)                                                                        |                                                                             |
| Purchases                                                                                | 142                                                                         | (a)                                                                         |
| Sales                                                                                | —                                                                           | (a)                                                                         |
| Settlements                                                                                | 539                                                                         |                                                                             |
| Balance at December 31, 2017                                                                                | $248                                                                        |                                                                             |
| The amount of total losses for the period

 included in earnings attributable to the

 change in unrealized gains or losses relating

 to assets still held at December 31, 2017 | $(42)                                                                       |                                                                             |

(a) The purchase and sale of fuel derivatives are recorded gross based on the structure of the derivative instrument and

 whether a contract with multiple derivatives is purchased as a single instrument or separate instruments\.

|                                                                                |                                                                             |                                                                             |                                                                             |                                                                             |
| -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------------------------------------------------- |
| **Fair value measurements using significant unobservable inputs (Level 3)**                                                                                | **Fair value measurements using significant unobservable inputs (Level 3)** | **Fair value measurements using significant unobservable inputs (Level 3)** | **Fair value measurements using significant unobservable inputs (Level 3)** | **Fair value measurements using significant unobservable inputs (Level 3)** |
|                                                                                | **Fuel**                                                                    |                                                                             | **Other**                                                                   |                                                                             |
| (in millions)                                                                                | **derivatives**                                                             |                                                                             | **securities**                                                              | **Total**                                                                   |
| Balance at December 31, 2015                                                                                | $(1,676)                                                                    |                                                                             | $27                                                                         | $(1,649)                                                                    |
| Total gains (losses) (realized or unrealized)                                                                                |                                                                             |                                                                             |                                                                             |                                                                             |
| Included in earnings                                                                                | 175                                                                         |                                                                             | (2)                                                                         | 173                                                                         |
| Included in other comprehensive income                                                                                | 201                                                                         |                                                                             | 8                                                                           | 209                                                                         |
| Purchases                                                                                | 221                                                                         | (a)                                                                         | —                                                                           | 221                                                                         |
| Sales                                                                                | (61)                                                                        | (a)                                                                         | (33)                                                                        | (94)                                                                        |
| Settlements                                                                                | 882                                                                         |                                                                             | —                                                                           | 882                                                                         |
| Balance at December 31, 2016                                                                                | $(258)                                                                      |
                                                                      | $—                                                                          | $(258)                                                                      |
| The amount of total gains for the period

 included in earnings attributable to the

 change in unrealized gains or losses relating

 to assets still held at December 31, 2016 | $93                                                                         |                                                                             | $—                                                                          | $93                                                                         |

(a) The purchase and sale of fuel derivatives are recorded gross based on the structure of the derivative instrument and

 whether a contract with multiple derivatives is purchased as a single instrument or separate instruments\.

The significant unobservable input used in the fair value measurement of the Company’s derivative option contracts is implied volatility\. Holding other inputs constant, an increase (decrease) in implied volatility would result in a higher (lower) fair value measurement, respectively, for the Company’s derivative option contracts\.

The following table presents a range of the unobservable inputs utilized in the fair value measurements of the Company’s fuel derivatives classified as Level 3 at December 31, 2017:

103


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

|                                       |
| ------------------------------------- |
| **ITEM 9A\. CONTROLS AND PROCEDURES** |

**EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES**

The Company’s management, with the participation of the Principal Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a\-15(e)) as of the end of the period covered by this report\. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report\.

**CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING**

There have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting during the quarter ended December 31, 2018\.

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Annual Report of Southwest Airlines Co\. for year 2019

The components of lease costs, included in the Consolidated Statement of Comprehensive Income, were as follows:

|                                      |                                                                              |                                  |
| ------------------------------------ | ---------------------------------------------------------------------------- | -------------------------------- |
| **(** **in millions** **)**          | **Statement of Comprehensive Income location**                               | **Year ended December 31, 2019** |
| Operating lease cost \- aircraft (a) | Other operating expenses                                                     | $182                             |
| Operating lease cost \- other        | Landing fees and airport rentals, and Other operating expenses

 | 89                               |
| Short\-term lease cost               | Other operating expenses                                                     | 4                                |
| Variable lease cost                  | Landing fees and airport rentals, and Other operating expenses

 | 1,377                            |
| Finance lease cost:                  |                                                                              |                                  |
| Amortization of lease liabilities    | Depreciation and amortization

                                  | 116                              |
| Interest on lease liabilities        | Interest expense                                                             | 26                               |
| Total net finance lease cost         |                                                                              | $142                             |

(a) Net of sublease income of   $97 million  for the  year ended December 31, 2019 \.

Supplemental cash flow information related to leases, included in the Consolidated Statement of Cash Flows, was as follows:

|                                                                          |                                  |
| ------------------------------------------------------------------------ | -------------------------------- |
| **(** **in millions** **)**                                              | **Year ended December 31, 2019** |
| Cash paid for amounts included in the measurement of lease liabilities:  |                                  |
| Operating cash flows for operating leases                                | $379                             |
| Operating cash flows for finance leases                                  | 26                               |
| Financing cash flows for finance leases                                  | 85                               |
| Right\-of\-use assets obtained in exchange for lease obligations:        |                                  |
| Operating leases                                                         | 230                              |
| Finance leases                                                           | 1                                |

As of  December 31, 2019 , maturities of lease liabilities were as follows:

|                              |                      |                    |
| ---------------------------- | -------------------- | ------------------ |
| **(** **in millions** **)**  | **Operating leases** | **Finance leases** |
| 2020                         | $392                 | $107               |
| 2021                         | 257                  | 102                |
| 2022                         | 141                  | 98                 |
| 2023                         | 113                  | 94                 |
| 2024                         | 92                   | 90                 |
| Thereafter                   | 661                  | 230                |
| Total lease payments         | $1,656               | $721               |
| Less imputed interest        | (325

)        | (94

)       |
| Total lease obligations      | 1,331                | 627                |
| Less current obligations     | (353

)        | (85

)       |
| Long\-term lease obligations | $978                 | $542               |

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