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

**ITEM 7\. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

**Background**

Together with our wholly\-owned regional airline subsidiaries and third\-party regional carriers operating as American Eagle, we operate an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries through hubs and gateways in Charlotte, Chicago, Dallas/Fort Worth, London Heathrow, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D\.C\. In 2018, approximately 204 million passengers boarded our flights\.

**2018****Financial Overview**

*Fuel Costs and the U\.S\. Airline Industry*

While 2018 marked another profitable year for the U\.S\. airline industry, higher fuel costs significantly impacted industry results\. With respect to fuel costs, the price of Brent crude oil per barrel, which jet fuel prices tend to follow, was on average approximately 33%higher in 2018 as compared to 2017\. The average daily spot price for Brent crude oil during 2018 was $72 per barrel as compared to an average daily spot price of $54 per barrel during 2017\. On a daily basis, Brent crude oil prices fluctuated during 2018 between a high of $86 per barrel to a low of $50 per barrel, and closed the year on December 31, 2018 at $54 per barrel\. Brent crude oil prices were higher in the 2018 period due principally to reductions of global inventories driven by strong demand and continued production restraint led primarily by the Organization of Petroleum Exporting Countries (OPEC)\. U\.S\. sanctions against Iran, coupled with declining output from Venezuela further limited supply\. Concerns about slowing global growth and lower demand for oil surfaced in the fourth quarter of 2018 causing Brent crude oil prices to drop\. With respect to revenue, the network U\.S\. airlines reported positive unit revenue growth in 2018 driven by strong demand and higher yields as airlines attempted to pass along the cost of rising fuel prices\. The positive unit revenue growth in 2018 was led by international markets, primarily in the Atlantic market, with the domestic market also contributing to the growth\.

See Part I, Item 1A\. Risk Factors – *“**Downturns in economic conditions could adversely affect our business**,”**“**Our business is very dependent on the price and availability of aircraft fuel\. Continued periods of high volatility in fuel costs, increased fuel prices or significant disruptions in the supply of aircraft fuel could have a significant negative impact on our operating results and liquidity**”* and *“**Our business has been and will continue to be affected by many changing economic and other conditions beyond our control, including global events that affect travel behavior, and our results of operations could be volatile and fluctuate due to seasonality\.**”*

48


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

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

Plan Assets

The objectives of American’s investment policies are to: maintain sufficient income and liquidity to pay retirement benefits; produce a long\-term rate of return that meets or exceeds the assumed rate of return for plan assets; limit the volatility of asset performance and funded status; and diversify assets among asset classes and investment managers\.

Based on these investment objectives, a long\-term strategic asset allocation has been established\. This strategic allocation seeks to balance the potential benefit of improving the funded position with the potential risk that the funded position would decline\. The current strategic target asset allocation is as follows:

|                                 |                   |
| ------------------------------- | ----------------- |
| **Asset Class/Sub\-Class**      | **Allowed Range** |
| Equity                          | 45% \- 80%        |
| Public:                         |                   |
| U\.S\. Large                    | 15% \- 40%        |
| U\.S\. Small/Mid                | 2% \- 10%         |
| International                   | 10% \- 25%        |
| Emerging Markets                | 2% \- 15%         |
| Alternative Investments         | 5% \- 30%         |
| Fixed Income                    | 20% \- 55%        |
| Public:                         |                   |
| U\.S\. Long Duration            | 15% \- 45%        |
| High Yield and Emerging Markets | 0% \- 10%         |
| Private Income                  | 0% \- 10%         |
| Other                           | 0% \- 5%          |
| Cash Equivalents                | 0% \- 20%         |

Public equity as well as high yield and emerging market fixed income securities are used to provide diversification and are expected to generate higher returns over the long\-term than U\.S\. long duration bonds\. Public stocks are managed using a value investment approach in order to participate in the returns generated by stocks in the long\-term, while reducing year\-over\-year volatility\. U\.S\. long duration bonds are used to partially hedge the assets from declines in interest rates\. Alternative (private) investments are used to provide expected returns in excess of the public markets over the long\-term\. The pension plan’s master trust also participates in securities lending programs to generate additional income by loaning plan assets to borrowers on a fully collateralized basis\. These programs are subject to market risk\.

Investments in securities traded on recognized securities exchanges are valued at the last reported sales price on the last business day of the year\. Securities traded in the over\-the\-counter market are valued at the last bid price\. The money market fund is valued at fair value which represents the net asset value of the shares of such fund as of the close of business at the end of the period\. Investments in limited partnerships are carried at estimated net asset value as determined by and reported by the general partners of the partnerships and represent the proportionate share of the estimated fair value of the underlying assets of the limited partnerships\. Common/collective trusts are valued at net asset value based on the fair values of the underlying investments of the trusts as determined by the sponsor of the trusts\. The pension plan’s master trust also invests in a 103\-12 investment entity (the 103\-12 Investment Trust) which is designed to invest plan assets of more than one unrelated employer\. The 103\-12 Investment Trust is valued at net asset value which is determined by the issuer daily and is based on the aggregate fair value of trust assets less liabilities, divided by the number of units outstanding\. No changes in valuation techniques or inputs occurred during the year\.

145


Annual Report of Southwest Airlines Co\. for year 2018

Regarding Use of Non\-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non\-GAAP Financial Measures for additional detail regarding non\-GAAP financial measures\. Based on current trends and excluding Fuel and oil expense and profitsharing expense, the Company expects its first quarter 2019 unit costs to increase approximately six percent, compared with first quarter 2018's unit costs of 8\.65, which excluded Fuel and oil expense, profitsharing expense, and special items\.

Salaries, wages, and benefits expense for 2018increased by $344 million, or 4\.7 percent, compared with 2017\. Salaries, wages, and benefits expense per ASM for 2018increased1\.1 percent, compared with 2017\. On both a dollar and per ASM basis, the majority of the increases were the result of higher salaries expense, primarily driven by contractual wage rate increases\. These increases more than offset the impact in 2017 of the $1,000 per Employee bonus awarded as a result of Tax Reform, which totaled $70 million in the 2017 results\. Based on current cost trends and anticipated capacity, the Company expects first quarter 2019 Salaries, wages, and benefits expense per ASM, excluding profitsharing expense, to increase, compared with first quarter 2018\.

During 2018, the Company conducted negotiations with various unionized Employee groups\. The following table sets

forth the Company’s unionized Employee groups that are currently in negotiations on collective\-bargaining agreements:

|                                                                                |                                     |                                                                                |                                                                                |
| -------------------------------------------------------------------------------------------------- | ----------------------------------- | ----------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Employee Group**                                                                                | **Approximate Number of Employees** | **Representatives**                                                                 | **Amendable Date**                                                                                |
| Southwest Flight Attendants                                                                        | 15,200                              | Transportation Workers of America, AFL\-CIO, Local 556 ("TWU 556")                  | November 2018                                                                                |
| Southwest Customer Service Agents, Customer Representatives, and Source of Support Representatives | 7,400                               | International Association of Machinists and Aerospace Workers, AFL\-CIO ("IAM 142") | December 2018                                                                                |
| Southwest Material Specialists (formerly known as Stock Clerks)                                    | 300                                 | International Brotherhood of Teamsters, Local 19 ("IBT 19")                         | August 2013\. The Company reached a tentative agreement with IBT 19 in January 2019\. If ratified by the Company's Material Specialists, the contract will become amendable in 2024\.    |
| Southwest Mechanics                                                                                | 2,400                               | Aircraft Mechanics Fraternal Association ("AMFA")                                   | August 2012                                                                                |
| Southwest Flight Simulator Technicians                                                             | 50                                  | International Brotherhood of Teamsters ("IBT")                                      | May 2019\. The Company reached a tentative agreement with IBT in February 2019\. If ratified by the Company's Flight Simulator Technicians, the contract will become amendable in 2024\. |

Fuel and oil expense for 2018increased by $540 million, or 13\.2 percent, compared with 2017\. On a per ASM basis, Fuel and oil expense for 2018increased 9\.1 percent, compared with 2017\. On both a dollar and per ASM basis, the increases were attributable to higher market jet fuel prices, partially offset by the recognition of $168 million in net hedging gains in 2018 versus the recognition of $416 million in net hedging losses in 2017\. See Note Regarding Use of Non\-GAAP Financial Measures and the Reconciliation of Reported Amounts to Non\-GAAP Financial Measures for additional detail regarding non\-GAAP financial measures\. These totals include cash settlements realized from the settlement of fuel derivative contracts associated with the Company's economic fuel hedge totaling $154 million received from counterparties in 2018, compared with $572 million paid to counterparties in 2017\. However, these cash settlement totals exclude the impact from derivatives that did not qualify for hedge accounting for both periods, and gains and/or losses recognized from hedge ineffectiveness in 2017\. Those items are recorded as a component of Other (gains) losses, net\. See Note 10 to the Consolidated Financial Statements\. The Company's average economic jet fuel cost per gallon, which includes hedge settlements in both years, increased 6\.8 percent, year\-over\-year, to $2\.20 during 2018 from $2\.06 during 2017\. These figures include premium expense associated with the Company's fuel hedges, which on a per gallon basis equated to approximately $0\.06 and $0\.07 for 2018 and 2017, respectively\. The Company also slightly improved its fuel efficiency during 2018, compared with 2017, when measured on the basis of ASMs generated per gallon of fuel, driven primarily by the retirement of the Classic aircraft and the addition of the more fuel\-

42


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

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

**10\. Accumulated Other Comprehensive Income (Loss)**

The components of accumulated other comprehensive income (loss) (AOCI) are as follows (in millions):

|                                                            |                                                                                |                                           |                                                         |       |           |
| ---------------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------------------------- | ----- | --------- |
|                                                            | **Pension,
Retiree
Medical and
Other
Postretirement
Benefits** | **Unrealized Gain (Loss) on Investments** | **Income Tax
Benefit
(Provision)**  **^(1)^** |       | **Total** |
| Balance at December 31, 2015                               | $(3,842)                                                                                | $(10)                                     | $(880)                                                  |       | $(4,732)  |
| Other comprehensive income (loss) before reclassifications | (462)                                                                                | 10                                        | 166                                                     |       | (286)     |
| Amounts reclassified from AOCI                             | (102)                                                                                | —                                         | 37                                                      | ^(2)^ | (65)      |
| Net current\-period other comprehensive income (loss)      | (564)                                                                                | 10                                        | 203                                                     |       | (351)     |
| Balance at December 31, 2016                               | (4,406)                                                                                | —                                         | (677)                                                   |       | (5,083)   |
| Other comprehensive income (loss) before reclassifications | (30)                                                                                | (1)                                       | 15                                                      |       | (16)      |
| Amounts reclassified from AOCI                             | (87)                                                                                | —                                         | 32                                                      | ^(2)^ | (55)      |
| Net current\-period other comprehensive income (loss)      | (117)                                                                                | (1)                                       | 47                                                      |       | (71)      |
| Balance at December 31, 2017                               | $(4,523)                                                                                | $(1)                                      | $(630)                                                  |       | $(5,154)  |

|       |                                                                                |
| ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(1)^ | Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net income until the obligations are fully extinguished\. |

|       |                                                                                |
| ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(2)^ | Relates to pension, retiree medical and other postretirement benefits obligations and is recognized within the income tax provision on the consolidated statement of operations\. |

Reclassifications out of AOCI for the years ended December 31, 2017 and 2016 are as follows (in millions):

|                                                                             |                                   |                                   |                                                                                |
| --------------------------------------------------------------------------- | --------------------------------- | --------------------------------- | ----------------------------------------------------------------------------------------- |
|                                                                             | **Amount reclassified from AOCI** | **Amount reclassified from AOCI** | **Affected line items on the**

**consolidated statement of**

**operations** |
|                                                                             | **Year Ended December 31,**       | **Year Ended December 31,**       | **Affected line items on the**

**consolidated statement of**

**operations** |
| **AOCI Components**                                                         | **2017**                          | **2016**                          | **Affected line items on the**

**consolidated statement of**

**operations** |
| Amortization of pension, retiree medical and other postretirement benefits: |                                   |                                   |                                                                                |
| Prior service benefit                                                       | $(132)                            | $(134)                            | Salaries, wages and benefits                                                              |
| Actuarial loss                                                              | 77                                | 69                                | Salaries, wages and benefits                                                              |
| Total reclassifications for the period, net of tax                          | $(55)                             | $(65)                             |                                                                                |

Amounts allocated to OCI for income taxes as further described in Note 6 will remain in AOCI until we cease all related activities, such as termination of the pension plan\.

115


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

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

Collateral\-Related Covenants

Certain of our debt financing agreements (including our term loans, revolving credit facilities and spare engine EETCs) contain loan to value (LTV) ratio covenants and require us to appraise the related collateral annually\. Pursuant to such agreements, if the LTV ratio exceeds a specified threshold or if the value of the appraised collateral fails to meet a specified threshold, as the case may be, we are required, as applicable, to pledge additional qualifying collateral (which in some cases may include cash or investment securities), or pay down such financing, in whole or in part\.

Specifically, we are required to meet certain collateral coverage tests on an annual basis for our Credit Facilities, as described below:

|                                                         |                                                                                |                                                                                |                                                                       |                                                                                |
| ------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- |
|                                                         | **2013 Credit Facilities**                                                                                | **2014 Credit Facilities**                                                                                | **April 2016**

**Credit Facilities**                          | **December 2016**

**Credit Facilities**                                                                                |
| Frequency of Appraisals of

 Appraised Collateral | Annual                                                                                | Annual                                                                                | Annual                                                                | Annual                                                                                |
| LTV Requirement                                         | 1\.6x Collateral valuation to amount of debt outstanding (62\.5% LTV)                                                                                | 1\.6x Collateral valuation to amount of debt outstanding (62\.5% LTV)                                                                                | 1\.6x Collateral valuation to amount of debt outstanding (62\.5% LTV) | 1\.6x Collateral valuation to amount of debt outstanding (62\.5% LTV)                                                                                |
| LTV as of Last Measurement

 Date                 | 36\.2%                                                                                | 17\.7%                                                                                | 36\.2%                                                                | 53\.6%                                                                                |
| Collateral Description                                  | Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate all services between the U\.S\. and South America | Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate certain services between the U\.S\. and European Union (including London Heathrow) | Generally, certain spare parts                                        | Generally, certain Ronald Reagan Washington National Airport (DCA) slots, certain La Guardia Airport (LGA) slots, certain simulators and certain leasehold rights |

At  December 31, 2019 , we were in compliance with the applicable collateral coverage tests as of the most recent measurement dates\.

6\. Leases

We lease certain aircraft and engines, including aircraft under capacity purchase agreements\. As of  December 31, 2019 , we had   636  leased aircraft, with remaining terms ranging from less than   one year  to   12 years \.

At each airport where we conduct flight operations, we have agreements, generally with a governmental unit or authority, for the use of passenger, operations and baggage handling space as well as runways and taxiways\. These agreements, particularly in the U\.S\., often contain provisions for periodic adjustments to rates and charges applicable under such agreements\. These rates and charges also vary with our level of operations and the operations of the airport\. Because of the variable nature of these rates, these leases are not recorded on our balance sheet as a ROU asset or a lease liability\. Additionally, at our hub locations and in certain other cities we serve, we lease administrative offices, catering, cargo, training, maintenance and other facilities\.

91


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

NOTE 6\. INTANGIBLE ASSETS

Indefinite\-Lived Intangible Assets

|                                |                                |                                |                                |                                |  |  |  |
|:------------------------------ |:------------------------------ |:------------------------------ | ------------------------------:| ------------------------------:|:- |:- |:- |
|                                |                                |                                | Carrying Value at December 31, | Carrying Value at December 31, |  |  |  |
| (in millions)                  | (in millions)                  | (in millions)                  |                           2019 |                           2018 |
| International routes and slots | International routes and slots | International routes and slots |                        $ 2,583 |                        $ 2,583 |
| Airline alliances              | Airline alliances              | Airline alliances              |                          1,005 |                            661 |
| Delta tradename                | Delta tradename                | Delta tradename                |                            850 |                            850 |
| Domestic slots                 | Domestic slots                 | Domestic slots                 |                            622 |                            622 |
| Total                          | Total                          | Total                          |                        $ 5,060 |                        $ 4,716 |

International Routes and Slots\.  Our international routes and slots primarily relate to Pacific route authorities and slots at capacity\-constrained airports in Asia, and slots at London\-Heathrow airport\.

Airline Alliances\.  Our airline alliances intangible assets primarily relate to our commercial agreements with SkyTeam partners and LATAM\.

Domestic Slots\.  Our domestic slots relate to our slots at New York\-LaGuardia and Washington\-Reagan National airports\.

Definite\-Lived Intangible Assets

|                      |                      |                      |                                |                                     |  |  |  |                                |                                     |                   |                   |                   |  |  |  |
|:-------------------- |:-------------------- |:-------------------- | ------------------------------:| -----------------------------------:|:- |:- |:- | ------------------------------:| -----------------------------------:|:-----------------:|:-----------------:|:-----------------:|:- |:- |:- |
|                      |                      |                      |              December 31, 2019 |                   December 31, 2019 |  |  |  |                                |                   December 31, 2018 | December 31, 2018 | December 31, 2018 | December 31, 2018 |  |  |  |
| (in millions)        | (in millions)        | (in millions)        | Gross
Carrying
Value |
Accumulated
Amortization |  |  |  | Gross
Carrying
Value |
Accumulated
Amortization |
| Marketing agreements | Marketing agreements | Marketing agreements |                          $ 730 |                             $ (692) |  |  |  |                          $ 730 |                             $ (687) |
| Contracts            | Contracts            | Contracts            |                            193 |                               (128) |  |  |  |                            193 |                               (122) |
| Other                | Other                | Other                |                             53 |                                (53) |  |  |  |                             53 |                                (53) |
| Total                | Total                | Total                |                          $ 976 |                             $ (873) |  |  |  |                          $ 976 |                             $ (862) |

Amortization expense was $11 million for the year ended December 31, 2019 and $17 million  for each of the years ended December 31, 2018 and 2017\. Based on our definite\-lived intangible assets at December 31, 2019, we estimate that we will incur approximately $9 million of amortization expense annually from 2020 through 2024\.

73


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

EXHIBIT INDEX

Certain of the following exhibits have been filed with the Securities and Exchange Commission and are incorporated by reference from the documents below\. Certain others are filed with this Form 10\-K\. The exhibits are numbered in accordance with Item 601 of Regulation S\-K\.

|                     |                     |                                                                                |                                                                                |                                                                                |         |         |         |                           |                           |                           |                     |                     |                  |                  |                  |
|:-------------------:|:-------------------:|:------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------:|:------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------:|:------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------:|:-------:|:-------:|:-------:|:-------------------------:|:-------------------------:|:-------------------------:|:-------------------:|:-------------------:|:----------------:|:----------------:|:----------------:|
| Exhibit
Number | Exhibit
Number |                                                                                Exhibit
Description                                                                                |                                                                                Exhibit
Description                                                                                |                                                                                Exhibit
Description                                                                                |  Form   |  Form   |  Form   | Date of
First Filing | Date of
First Filing | Date of
First Filing | Exhibit
Number | Exhibit
Number | File
Number | File
Number | File
Number |
|        3\.1         |        3\.1         |                                                               [Amended and Restated Certificate of Incorporation of Registrant](http://www.sec.gov/Archives/edgar/data/766421/000076642117000049/alk10-q22017ex31.htm)                                                               |                                                               [Amended and Restated Certificate of Incorporation of Registrant](http://www.sec.gov/Archives/edgar/data/766421/000076642117000049/alk10-q22017ex31.htm)                                                               |                                                               [Amended and Restated Certificate of Incorporation of Registrant](http://www.sec.gov/Archives/edgar/data/766421/000076642117000049/alk10-q22017ex31.htm)                                                               |  10\-Q  |  10\-Q  |  10\-Q  |      August 3, 2017       |      August 3, 2017       |      August 3, 2017       |        3\.1         |        3\.1         |                  |                  |                  |
|       10\.1\#       |       10\.1\#       |                                          [Aircraft General Terms Agreement, dated June 15, 2005, between the Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000095012405004737/v11316exv10w1.txt)                                          |                                          [Aircraft General Terms Agreement, dated June 15, 2005, between the Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000095012405004737/v11316exv10w1.txt)                                          |                                          [Aircraft General Terms Agreement, dated June 15, 2005, between the Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000095012405004737/v11316exv10w1.txt)                                          |  10\-Q  |  10\-Q  |  10\-Q  |      August 5, 2005       |      August 5, 2005       |      August 5, 2005       |       10\.1         |       10\.1         |                  |                  |                  |
|       10\.2\#       |       10\.2\#       |                                            [Purchase Agreement No\. 2497, dated June 15, 2005, between the Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000095012405004737/v11316exv10w2.txt)                                            |                                            [Purchase Agreement No\. 2497, dated June 15, 2005, between the Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000095012405004737/v11316exv10w2.txt)                                            |                                            [Purchase Agreement No\. 2497, dated June 15, 2005, between the Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000095012405004737/v11316exv10w2.txt)                                            |  10\-Q  |  10\-Q  |  10\-Q  |      August 5, 2005       |      August 5, 2005       |      August 5, 2005       |       10\.2         |       10\.2         |                  |                  |                  |
|       10\.3\#       |       10\.3\#       |                                       [Supplemental Agreement No\. 23 to Purchase Agreement No\. 2497 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642111000065/exhibit101.htm)                                        |                                       [Supplemental Agreement No\. 23 to Purchase Agreement No\. 2497 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642111000065/exhibit101.htm)                                        |                                       [Supplemental Agreement No\. 23 to Purchase Agreement No\. 2497 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642111000065/exhibit101.htm)                                        | 10\-Q/A | 10\-Q/A | 10\-Q/A |      August 2, 2011       |      August 2, 2011       |      August 2, 2011       |       10\.1         |       10\.1         |                  |                  |                  |
|       10\.4\#       |       10\.4\#       |                                   [Supplemental Agreement No\. 29 to Purchase Agreement No\. 2497 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642113000010/alk10-k123112ex107.htm)                                    |                                   [Supplemental Agreement No\. 29 to Purchase Agreement No\. 2497 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642113000010/alk10-k123112ex107.htm)                                    |                                   [Supplemental Agreement No\. 29 to Purchase Agreement No\. 2497 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642113000010/alk10-k123112ex107.htm)                                    |  10\-K  |  10\-K  |  10\-K  |     February 14, 2013     |     February 14, 2013     |     February 14, 2013     |       10\.1         |       10\.1         |                  |                  |                  |
|       10\.5\#       |       10\.5\#       |                                                    [Purchase Agreement No\. 3866 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642113000010/alk10-k123112ex108.htm)                                                     |                                                    [Purchase Agreement No\. 3866 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642113000010/alk10-k123112ex108.htm)                                                     |                                                    [Purchase Agreement No\. 3866 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642113000010/alk10-k123112ex108.htm)                                                     |  10\-K  |  10\-K  |  10\-K  |     February 14, 2013     |     February 14, 2013     |     February 14, 2013     |       10\.2         |       10\.2         |                  |                  |                  |
|       10\.6\#       |       10\.6\#       |                                   [Supplemental Agreement No\. 39 to Purchase Agreement No\. 2497 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642115000024/boeingsupplemental.htm)                                    |                                   [Supplemental Agreement No\. 39 to Purchase Agreement No\. 2497 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642115000024/boeingsupplemental.htm)                                    |                                   [Supplemental Agreement No\. 39 to Purchase Agreement No\. 2497 between The Boeing Company and Alaska Airlines, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642115000024/boeingsupplemental.htm)                                    |  10\-Q  |  10\-Q  |  10\-Q  |        May 7, 2015        |        May 7, 2015        |        May 7, 2015        |       10\.1         |       10\.1         |                  |                  |                  |
|       10\.7\#       |       10\.7\#       |                                        [Purchase Agreement, dated April 11, 2016, between Embraer S\.A\. and Horizon Air Industries, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642116000077/exhibit101embraerpurchasea.htm)                                         |                                        [Purchase Agreement, dated April 11, 2016, between Embraer S\.A\. and Horizon Air Industries, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642116000077/exhibit101embraerpurchasea.htm)                                         |                                        [Purchase Agreement, dated April 11, 2016, between Embraer S\.A\. and Horizon Air Industries, Inc\.](http://www.sec.gov/Archives/edgar/data/766421/000076642116000077/exhibit101embraerpurchasea.htm)                                         |  10\-Q  |  10\-Q  |  10\-Q  |        May 9, 2016        |        May 9, 2016        |        May 9, 2016        |       10\.1         |       10\.1         |                  |                  |                  |
|       10\.8^        |       10\.8^        |                                      [A320 Aircraft Purchase Agreement, dated as of December 29, 2010, between Airbus S\.A\.S\. and Virgin America Inc\.](http://www.sec.gov/Archives/edgar/data/1614436/000119312514365735/d761206dex1015.htm)                                      |                                      [A320 Aircraft Purchase Agreement, dated as of December 29, 2010, between Airbus S\.A\.S\. and Virgin America Inc\.](http://www.sec.gov/Archives/edgar/data/1614436/000119312514365735/d761206dex1015.htm)                                      |                                      [A320 Aircraft Purchase Agreement, dated as of December 29, 2010, between Airbus S\.A\.S\. and Virgin America Inc\.](http://www.sec.gov/Archives/edgar/data/1614436/000119312514365735/d761206dex1015.htm)                                      | S\-1/A^ | S\-1/A^ | S\-1/A^ |      October 7, 2014      |      October 7, 2014      |      October 7, 2014      |       10\.15        |       10\.15        |                  |                  |                  |
|       10\.9\*       |       10\.9\*       |                                             [Alaska Air Group, Inc\. 2008 Performance Incentive Plan, Form of Nonqualified Stock Option Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex103.htm)                                              |                                             [Alaska Air Group, Inc\. 2008 Performance Incentive Plan, Form of Nonqualified Stock Option Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex103.htm)                                              |                                             [Alaska Air Group, Inc\. 2008 Performance Incentive Plan, Form of Nonqualified Stock Option Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex103.htm)                                              |  10\-Q  |  10\-Q  |  10\-Q  |      August 4, 2011       |      August 4, 2011       |      August 4, 2011       |       10\.3         |       10\.3         |                  |                  |                  |
|      10\.10\*       |      10\.10\*       |                                            [Alaska Air Group, Inc\. 2008 Performance Incentive Plan, Form of Performance Stock Unit Award Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex104.htm)                                            |                                            [Alaska Air Group, Inc\. 2008 Performance Incentive Plan, Form of Performance Stock Unit Award Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex104.htm)                                            |                                            [Alaska Air Group, Inc\. 2008 Performance Incentive Plan, Form of Performance Stock Unit Award Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex104.htm)                                            |  10\-Q  |  10\-Q  |  10\-Q  |      August 4, 2011       |      August 4, 2011       |      August 4, 2011       |       10\.4         |       10\.4         |                  |                  |                  |
|      10\.11\*       |      10\.11\*       |                                                    [Alaska Air Group, Inc\. 2008 Performance Incentive Plan, Amended for Stock\-Split](http://www.sec.gov/Archives/edgar/data/766421/000076642116000065/alk10-k123115ex1010.htm)                                                     |                                                    [Alaska Air Group, Inc\. 2008 Performance Incentive Plan, Amended for Stock\-Split](http://www.sec.gov/Archives/edgar/data/766421/000076642116000065/alk10-k123115ex1010.htm)                                                     |                                                    [Alaska Air Group, Inc\. 2008 Performance Incentive Plan, Amended for Stock\-Split](http://www.sec.gov/Archives/edgar/data/766421/000076642116000065/alk10-k123115ex1010.htm)                                                     |  10\-K  |  10\-K  |  10\-K  |     February 11, 2016     |     February 11, 2016     |     February 11, 2016     |       10\.10        |       10\.10        |                  |                  |                  |
|      10\.12\*       |      10\.12\*       |                                                                        [Alaska Air Group, Inc\. 2016 Performance Incentive Plan](http://www.sec.gov/Archives/edgar/data/766421/000076642116000081/ex101.htm)                                                                         |                                                                        [Alaska Air Group, Inc\. 2016 Performance Incentive Plan](http://www.sec.gov/Archives/edgar/data/766421/000076642116000081/ex101.htm)                                                                         |                                                                        [Alaska Air Group, Inc\. 2016 Performance Incentive Plan](http://www.sec.gov/Archives/edgar/data/766421/000076642116000081/ex101.htm)                                                                         |  8\-K   |  8\-K   |  8\-K   |       May 18, 2016        |       May 18, 2016        |       May 18, 2016        |       10\.1         |       10\.1         |                  |                  |                  |
|      10\.13\*       |      10\.13\*       |                                       [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Nonqualified Stock Option Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex101formofnonqualifiedsto.htm)                                        |                                       [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Nonqualified Stock Option Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex101formofnonqualifiedsto.htm)                                        |                                       [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Nonqualified Stock Option Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex101formofnonqualifiedsto.htm)                                        |  10\-Q  |  10\-Q  |  10\-Q  |      August 2, 2016       |      August 2, 2016       |      August 2, 2016       |       10\.1         |       10\.1         |                  |                  |                  |
|      10\.14\*       |      10\.14\*       |                                         [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Incentive Stock Option Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex102formofincentivestocko.htm)                                         |                                         [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Incentive Stock Option Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex102formofincentivestocko.htm)                                         |                                         [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Incentive Stock Option Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex102formofincentivestocko.htm)                                         |  10\-Q  |  10\-Q  |  10\-Q  |      August 2, 2016       |      August 2, 2016       |      August 2, 2016       |       10\.2         |       10\.2         |                  |                  |                  |
|      10\.15\*       |      10\.15\*       |                                      [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Performance Stock Unit Award Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex103forofperformancestock.htm)                                      |                                      [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Performance Stock Unit Award Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex103forofperformancestock.htm)                                      |                                      [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Performance Stock Unit Award Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex103forofperformancestock.htm)                                      |  10\-Q  |  10\-Q  |  10\-Q  |      August 2, 2016       |      August 2, 2016       |      August 2, 2016       |       10\.3         |       10\.3         |                  |                  |                  |
|      10\.16\*       |      10\.16\*       |                                            [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Stock Unit Award Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex104formofstockunitawarda.htm)                                            |                                            [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Stock Unit Award Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex104formofstockunitawarda.htm)                                            |                                            [Alaska Air Group, Inc\. 2016 Performance Incentive Plan, Form of Stock Unit Award Agreement](http://www.sec.gov/Archives/edgar/data/766421/000076642116000096/ex104formofstockunitawarda.htm)                                            |  10\-Q  |  10\-Q  |  10\-Q  |      August 2, 2016       |      August 2, 2016       |      August 2, 2016       |       10\.4         |       10\.4         |                  |                  |                  |
|      10\.17\*       |      10\.17\*       |                                  [Alaska Air Group, Inc\. 2010 Employee Stock Purchase Plan, as Amended for the Offering Period Commencing March 1, 2017](http://www.sec.gov/Archives/edgar/data/766421/000076642117000016/alk10-k123116ex1018.htm)                                  |                                  [Alaska Air Group, Inc\. 2010 Employee Stock Purchase Plan, as Amended for the Offering Period Commencing March 1, 2017](http://www.sec.gov/Archives/edgar/data/766421/000076642117000016/alk10-k123116ex1018.htm)                                  |                                  [Alaska Air Group, Inc\. 2010 Employee Stock Purchase Plan, as Amended for the Offering Period Commencing March 1, 2017](http://www.sec.gov/Archives/edgar/data/766421/000076642117000016/alk10-k123116ex1018.htm)                                  |  10\-K  |  10\-K  |  10\-K  |     February 28, 2017     |     February 28, 2017     |     February 28, 2017     |       10\.18        |       10\.18        |                  |                  |                  |
|      10\.18\*       |      10\.18\*       |                                                         [Alaska Air Group, Inc\. Stock Deferral Plan for Non\-Employee Directors](http://www.sec.gov/Archives/edgar/data/766421/000076642116000065/alk10-k123115ex1012.htm)                                                          |                                                         [Alaska Air Group, Inc\. Stock Deferral Plan for Non\-Employee Directors](http://www.sec.gov/Archives/edgar/data/766421/000076642116000065/alk10-k123115ex1012.htm)                                                          |                                                         [Alaska Air Group, Inc\. Stock Deferral Plan for Non\-Employee Directors](http://www.sec.gov/Archives/edgar/data/766421/000076642116000065/alk10-k123115ex1012.htm)                                                          |  10\-K  |  10\-K  |  10\-K  |     February 11, 2016     |     February 11, 2016     |     February 11, 2016     |       10\.12        |       10\.12        |                  |                  |                  |
|      10\.19\*       |      10\.19\*       |                                                          [Alaska Air Group, Inc\. Nonqualified Deferred Compensation Plan, as amended](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex101.htm)                                                          |                                                          [Alaska Air Group, Inc\. Nonqualified Deferred Compensation Plan, as amended](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex101.htm)                                                          |                                                          [Alaska Air Group, Inc\. Nonqualified Deferred Compensation Plan, as amended](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex101.htm)                                                          |  10\-Q  |  10\-Q  |  10\-Q  |      August 4, 2011       |      August 4, 2011       |      August 4, 2011       |       10\.1         |       10\.1         |                  |                  |                  |
|      10\.20\*       |      10\.20\*       |                                                                [1995 Elected Officers Supplementary Retirement Plan, as amended](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex102.htm)                                                                |                                                                [1995 Elected Officers Supplementary Retirement Plan, as amended](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex102.htm)                                                                |                                                                [1995 Elected Officers Supplementary Retirement Plan, as amended](http://www.sec.gov/Archives/edgar/data/766421/000076642111000069/alkq22011ex102.htm)                                                                |  10\-Q  |  10\-Q  |  10\-Q  |      August 4, 2011       |      August 4, 2011       |      August 4, 2011       |       10\.2         |       10\.2         |                  |                  |                  |
|      10\.21\*       |      10\.21\*       |                            [Form of Alaska Air Group, Inc\. Change of Control Agreement for named executive officers, as amended and restated October 16, 2014](http://www.sec.gov/Archives/edgar/data/766421/000076642116000065/alk10-k123115ex1015.htm)                            |                            [Form of Alaska Air Group, Inc\. Change of Control Agreement for named executive officers, as amended and restated October 16, 2014](http://www.sec.gov/Archives/edgar/data/766421/000076642116000065/alk10-k123115ex1015.htm)                            |                            [Form of Alaska Air Group, Inc\. Change of Control Agreement for named executive officers, as amended and restated October 16, 2014](http://www.sec.gov/Archives/edgar/data/766421/000076642116000065/alk10-k123115ex1015.htm)                            |  10\-K  |  10\-K  |  10\-K  |     February 11, 2016     |     February 11, 2016     |     February 11, 2016     |       10\.15        |       10\.15        |                  |                  |                  |
|      10\.22\*       |      10\.22\*       | [Alaska Air Group Performance Based Pay Plan, Amended and Restated January 16, 201](http://www.sec.gov/Archives/edgar/data/766421/000076642119000008/pbpplanamendedandrestate.htm)[9](http://www.sec.gov/Archives/edgar/data/766421/000076642119000008/pbpplanamendedandrestate.htm) | [Alaska Air Group Performance Based Pay Plan, Amended and Restated January 16, 201](http://www.sec.gov/Archives/edgar/data/766421/000076642119000008/pbpplanamendedandrestate.htm)[9](http://www.sec.gov/Archives/edgar/data/766421/000076642119000008/pbpplanamendedandrestate.htm) | [Alaska Air Group Performance Based Pay Plan, Amended and Restated January 16, 201](http://www.sec.gov/Archives/edgar/data/766421/000076642119000008/pbpplanamendedandrestate.htm)[9](http://www.sec.gov/Archives/edgar/data/766421/000076642119000008/pbpplanamendedandrestate.htm) |  10\-K  |  10\-K  |  10\-K  |     February 14, 2019     |     February 14, 2019     |     February 14, 2019     |       10\.26        |       10\.26        |                  |                  |                  |
|     10\.23\* †      |     10\.23\* †      |                                                      [Alaska Air Group Operational Performance Rewards Plan Description, adopted January 3, 2005; Amended November 7, 2019](https://www.example.com/oprplanamended11-07x19.htm)                                                      |                                                      [Alaska Air Group Operational Performance Rewards Plan Description, adopted January 3, 2005; Amended November 7, 2019](https://www.example.com/oprplanamended11-07x19.htm)                                                      |                                                      [Alaska Air Group Operational Performance Rewards Plan Description, adopted January 3, 2005; Amended November 7, 2019](https://www.example.com/oprplanamended11-07x19.htm)                                                      |         |         |         |                           |                           |                           |                     |                     |                  |                  |                  |
|     10\.24\* †      |     10\.24\* †      |                                                                      [Alaska Air Group, Inc\. Non\-Employee Director Form of Deferred Stock Unit Agreement](https://www.example.com/alkformagmt2016pipdsu.htm)                                                                       |                                                                      [Alaska Air Group, Inc\. Non\-Employee Director Form of Deferred Stock Unit Agreement](https://www.example.com/alkformagmt2016pipdsu.htm)                                                                       |                                                                      [Alaska Air Group, Inc\. Non\-Employee Director Form of Deferred Stock Unit Agreement](https://www.example.com/alkformagmt2016pipdsu.htm)                                                                       |         |         |         |                           |                           |                           |                     |                     |                  |                  |                  |
|         21†         |         21†         |                                                                                [Subsidiaries of Registrant](https://www.example.com/ngalk10-k123119ex21.htm)                                                                                |                                                                                [Subsidiaries of Registrant](https://www.example.com/ngalk10-k123119ex21.htm)                                                                                |                                                                                [Subsidiaries of Registrant](https://www.example.com/ngalk10-k123119ex21.htm)                                                                                |         |         |         |                           |                           |                           |                     |                     |                  |                  |                  |
|       23\.1†        |       23\.1†        |                                                                               [Consent of Independent Registered Public Accounting Firm (KPMG LLP)](https://www.example.com/ngalk10-k123119ex231.htm)                                                                                |                                                                               [Consent of Independent Registered Public Accounting Firm (KPMG LLP)](https://www.example.com/ngalk10-k123119ex231.htm)                                                                                |                                                                               [Consent of Independent Registered Public Accounting Firm (KPMG LLP)](https://www.example.com/ngalk10-k123119ex231.htm)                                                                                |         |         |         |                           |                           |                           |                     |                     |                  |                  |                  |
|       31\.1†        |       31\.1†        |                                                               [Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes\-Oxley Act of 2002](https://www.example.com/ngalk10-k123119ex311.htm)                                                                |                                                               [Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes\-Oxley Act of 2002](https://www.example.com/ngalk10-k123119ex311.htm)                                                                |                                                               [Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes\-Oxley Act of 2002](https://www.example.com/ngalk10-k123119ex311.htm)                                                                |         |         |         |                           |                           |                           |                     |                     |                  |                  |                  |
|       31\.2†        |       31\.2†        |                                                               [Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes\-Oxley Act of 2002](https://www.example.com/ngalk10-k123119ex312.htm)                                                                |                                                               [Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes\-Oxley Act of 2002](https://www.example.com/ngalk10-k123119ex312.htm)                                                                |                                                               [Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes\-Oxley Act of 2002](https://www.example.com/ngalk10-k123119ex312.htm)                                                                |         |         |         |                           |                           |                           |                     |                     |                  |                  |                  |

91


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

Part II

ITEM 5\. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND  ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is listed on the New York Stock Exchange ("NYSE") under the trading symbol DAL\.

Holders

As of January 31, 2020, there were approximately 2,300 holders of record of our common stock\.

Dividends

Our Board of Directors initiated a quarterly dividend program in the September 2013 quarter and has increased the quarterly dividend payment several times, most recently to $0\.4025 per share in the September 2019 quarter\. The Board expects to be able to continue to pay cash dividends for the foreseeable future, subject to applicable limitations under Delaware law and compliance with covenants in certain of our credit facilities\. Dividend payments are dependent upon our results of operations, financial condition, cash requirements, future prospects and other factors deemed relevant by the Board of Directors\.

Stock Performance Graph

The following graph compares the cumulative total returns during the period from December 31, 2014 to December 31, 2019 of our common stock to the Standard & Poor's 500 Stock Index and the NYSE ARCA Airline Index\. The comparison assumes $100 was invested on December 31, 2014 in each of our common stock and the indices and assumes that all dividends were reinvested\.

![dal\-20191231\_g2\.jpg](http://ir.delta.com/dal-20191231_g2.jpg)

25


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

Environmental Matters

Environmental Regulation

The airline industry is subject to various laws and government regulations concerning environmental matters in the U\.S\. and other countries\. U\.S\. federal laws that have a particular impact on our operations include the Airport Noise and Capacity Act of 1990, the Clean Air Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Safe Drinking Water Act and the Comprehensive Environmental Response, Compensation and Liability Act (Superfund Act)\. The U\.S\. Environmental Protection Agency (EPA) and other federal agencies have been authorized to promulgate regulations that have an impact on our operations\. In addition to these federal activities, various states have been delegated certain authorities under the aforementioned federal statutes\. Many state and local governments have adopted environmental laws and regulations which are similar to or stricter than federal requirements\.

Revised underground storage tank regulations issued by the EPA in 2015 have affected certain airport fuel hydrant systems, with modifications of such systems needed in order to comply with applicable portions of the revised regulations\. In addition, related to the EPA and state regulations pertaining to storm water management, several U\.S\. airport authorities are actively engaged in efforts to limit discharges of deicing fluid into the environment, often by requiring airlines to participate in the building or reconfiguring of airport deicing facilities\.

The environmental laws to which we are subject include those related to responsibility for potential soil and groundwater contamination\. We are conducting investigation and remediation activities to address soil and groundwater conditions at several sites, including airports and maintenance bases\. We presently anticipate that the ongoing costs of such activities will not have a material impact on our operations\. In addition, we have been named as a potentially responsible party (PRP) at certain Superfund sites\. Our alleged volumetric contributions at such sites are relatively small in comparison to total contributions of all PRPs\. Accordingly, we presently anticipate that any future payments of costs at such sites will not have a material impact on our operations\.

We employ an environmental management system that provides a systematic approach for compliance with environmental regulations and management of a broad range of issues including air emissions, hazardous waste disposal, underground tanks, and aircraft water quality\.

Aircraft Emissions and Climate Change Requirements

Many aspects of our operations are subject to a number of increasingly stringent environmental regulations and concerns about climate change and greenhouse gas (GHG) emissions, including carbon dioxide (CO ~2~ ) emissions\. In particular, the International Civil Aviation Organization (ICAO) is in the process of adopting rules that will require us to limit the CO ~2~  emissions of a significant majority of our international flights to a baseline level equal to our 2019\-2020 average emissions from such flights\. In 2016, ICAO passed a resolution adopting the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), an international, market\-based emissions offset program intended to achieve carbon\-neutral growth in the international aviation sector after 2020\. CORSIA is expected to be implemented in three phases: the Pilot Phase (from 2021 to 2023); the First Phase (from 2024 to 2027); and the Second Phase (from 2027 to 2035)\. American and the majority of other U\.S\. airlines currently report their CO ~2~  emissions to the FAA in accordance with CORSIA requirements\. It is expected that the FAA (with the support of Congress) will implement regulations to establish a carbon offset credit surrender mechanism and to provide for the oversight and compliance auditing of the CORSIA obligations of U\.S\. carriers, including American\.

To meet their obligations under CORSIA, airlines will have the option to increase the efficiency of their fleet, use sustainable or lower carbon aircraft fuel, or purchase carbon offset credits\. At this time, the costs of complying with our future obligations under CORSIA are uncertain and cannot be fully predicted\. For example, we will not directly control our CORSIA compliance costs during the CORSIA Pilot and First Phases because such phases include a sharing mechanism for the growth in emissions for the global aviation sector\. In addition, and with respect to all phases of CORSIA including after 2027, there is uncertainty with respect to the future supply, demand and price of sustainable or lower carbon aircraft fuel, carbon offset credits and technologies that could allow airlines to reduce their emissions of CO ~2~ \.

13


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

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

|        |                                                                                |
| ------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(10)^ | Impact of the 2017 Tax Act includes an  $823 million  non\-cash charge to income tax expense to reflect the impact of lower corporate income tax rates on our deferred tax asset and liabilities resulting from the 2017 Tax Act, which reduced the federal corporate income tax rate from 35% to 21%\. |

**3\. Earnings Per Common Share**

The following table sets forth the computation of basic and diluted earnings per common share (EPS) (in millions, except share and per share amounts):

|                                                                                |                             |                             |                             |
| -------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                                                                | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                                                                | **2018**                    | **2017**                    | **2016**                    |
| **Basic EPS:**                                                                                |                             |                             |                             |
| Net income                                                                                | $1,412                      | $1,282                      | $2,584                      |
| Weighted average common shares outstanding (in thousands)                                                                        | 464,236                     | 489,164                     | 552,308                     |
| Basic EPS                                                                                | $3\.04                      | $2\.62                      | $4\.68                      |
| **Diluted EPS:**                                                                                |                             |                             |                             |
| Net income for purposes of computing diluted EPS                                                                                | $1,412                      | $1,282                      | $2,584                      |
| Share computation for diluted EPS (in thousands):                                                                                |                             |                             |                             |
| Basic weighted average common shares outstanding                                                                                | 464,236                     | 489,164                     | 552,308                     |
| Dilutive effect of stock awards                                                                                | 1,424                       | 2,528                       | 3,791                       |
| Diluted weighted average common shares outstanding                                                                               | 465,660                     | 491,692                     | 556,099                     |
| Diluted EPS                                                                                | $3\.03                      | $2\.61                      | $4\.65                      |
| Restricted stock unit awards excluded from the calculation of diluted EPS because inclusion would be antidilutive (in thousands) | 1,266                       | 328                         | 1,429                       |

**4\. Share Repurchase Programs and Dividends**

In April 2018, we announced that our Board of Directors authorized a new $2\.0 billion share repurchase program that expires on December 31, 2020\. Since July 2014, our Board of Directors has approved seven share repurchase programs aggregating $13\.0 billion of authority\. As of December 31, 2018, there was $1\.7 billion remaining authority to repurchase shares under our new $2\.0 billion share repurchase program\. Share repurchases under our repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions\. Any such repurchases that may be made from time to time will be subject to market and economic conditions, applicable legal requirements and other relevant factors\. We are not obligated to repurchase any specific number of shares and our repurchase of AAG common stock may be limited, suspended or discontinued at any time at our discretion and without prior notice\.

In 2018, we repurchased 16\.6 million shares of AAG common stock for $800 million at a weighted average cost per share of $48\.15\. In 2017, we repurchased 33\.9 million shares of AAG common stock for $1\.6 billion at a weighted average cost per share of $45\.68\. In 2016, we repurchased 119\.8 million shares of AAG common stock for $4\.4 billion at a weighted average cost per share of $36\.86\. Since the inception of our share repurchase programs in July 2014 through December 31, 2018, we have repurchased278\.9 million shares of AAG common stock for $11\.3 billion at a weighted average cost per share of $40\.69\.

Our Board of Directors declared quarterly cash dividends of $0\.10 per share totaling $186 million, $198 million and $224 million for 2018, 2017 and 2016, respectively\.

98


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

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

***(q) Regional Expenses***

Expenses associated with American Eagle operations are classified as regional expenses on the consolidated statements of operations\. Regional expenses consist of the following (in millions):

|                                                               |                             |                             |                             |
| ------------------------------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                                               | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                                               | **2017**                    | **2016**                    | **2015**                    |
| Aircraft fuel and related taxes                               | $1,382                      | $1,109                      | $1,230                      |
| Salaries, wages and benefits                                  | 1,452                       | 1,333                       | 1,187                       |
| Capacity purchases from third\-party regional carriers  ^(1)^ | 1,581                       | 1,538                       | 1,651                       |
| Maintenance, materials and repairs                            | 281                         | 345                         | 323                         |
| Other rent and landing fees                                   | 625                         | 564                         | 504                         |
| Aircraft rent                                                 | 35                          | 36                          | 34                          |
| Selling expenses                                              | 361                         | 347                         | 333                         |
| Depreciation and amortization                                 | 315                         | 301                         | 252                         |
| Special items, net                                            | 22                          | 14                          | 29                          |
| Other                                                         | 492                         | 457                         | 440                         |
| Total regional expenses                                       | $6,546                      | $6,044                      | $5,983                      |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| ^(1)^ | For the years ended  December 31, 2017 ,  2016  and  2015 , the component of capacity purchase expenses representing the lease of aircraft for accounting purposes was approximately  $437 million ,  $405 million  and  $492 million , respectively\. |

***(r) Recent Accounting Pronouncements***

*Standards Effective for 2018 Reporting Periods*

Effective January 1, 2018, we are adopting the accounting pronouncements described below\. The adoption and related required disclosures will be reported in our first quarter 2018 Quarterly Report on Form 10\-Q\.

***ASU 2014\-09: Revenue from Contracts with Customers (Topic 606) (the New Revenue Standard)***

The New Revenue Standard applies to all companies that enter into contracts with customers to transfer goods or services\. We are adopting the New Revenue Standard using the full retrospective method, which results in the recast of each prior reporting period presented\.

The adoption of the New Revenue Standard will impact our accounting for outstanding mileage credits earned through travel by AAdvantage loyalty program members\. There is no change in accounting for sales of mileage credits to co\-branded card or other partners as those are currently reported in accordance with the New Revenue Standard\. Through December 31, 2017, we used the incremental cost method to account for the portion of our loyalty program liability related to mileage credits earned through travel, which were valued based on the estimated incremental cost of carrying one additional passenger (see (i) Loyalty Program above)\. The New Revenue Standard requires us to change our policy to the deferred revenue method and apply a relative selling price approach whereby a portion of each passenger ticket sale attributable to mileage credits earned is deferred and recognized in passenger revenue upon future mileage redemption\. The value of the earned mileage credits is materially greater under the deferred revenue method than the value attributed to these mileage credits under the incremental cost method\.

The New Revenue Standard will also require certain reclassifications, principally the reclassification of certain ancillary revenues previously classified and reported as other revenue to passenger revenue and as applicable to cargo revenue\. Additionally, the New Revenue Standard requires a gross presentation on the face of our statement of operations for certain revenues and expenses that had previously been presented on a net basis\.

See recast 2017 statement of operations and balance sheet data presented below for the expected effects of adoption\.

91


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

The following table summarizes the benefit payments that are scheduled to be paid in the years ending December 31:

|                   |                      |                                                      |
| ----------------- | -------------------- | ---------------------------------------------------- |
| **(in millions)** | **Pension Benefits** | **Other Postretirement and Postemployment Benefits** |
| 2019              | $1,187               | $295                                                 |
| 2020              | 1,197                | 302                                                  |
| 2021              | 1,218                | 303                                                  |
| 2022              | 1,238                | 301                                                  |
| 2023              | 1,252                | 298                                                  |
| 2024\-2028        | 6,380                | 1,418                                                |

Plan Assets

We have adopted and implemented investment policies for our defined benefit pension plans that incorporate strategic asset allocation mixes intended to best meet the plans' long\-term obligations, while maintaining an appropriate level of risk and liquidity\. These asset portfolios employ a diversified mix of investments, which are reviewed periodically\. Active management strategies are utilized where feasible in an effort to realize investment returns in excess of market indices\. Derivatives in the plans are primarily used to manage risk and gain asset class exposure while still maintaining liquidity\. As part of these strategies, the plans are required to hold cash collateral associated with certain derivatives\. Our investment strategies target a mix of   30 \-  50%  growth\-seeking assets,   25 \-  35%  income\-generating assets and   30 \-  40%  risk\-diversifying assets\. Risk diversifying assets include hedged mandates implementing long\-short, market neutral and relative value strategies that invest primarily in publicly\-traded equity, fixed income, foreign currency and commodity securities and are used to improve the impact of active management on the plans\.

Benefit Plan Assets Measured at Fair Value on a Recurring Basis

Benefit Plan Assets\.  Benefit plan assets relate to our defined benefit pension plans and certain of our postemployment benefit plans\. These investments are presented net of the related benefit obligation in pension, postretirement and related benefits on the balance sheets\. See  Note 3 , "Fair Value," for a description of the levels within the fair value hierarchy and associated valuation techniques used to measure fair value\. The following table shows our benefit plan assets by asset class\.

|                                                       |                       |                       |                       |                       |                       |                       |                         |
| ----------------------------------------------------- | --------------------- | --------------------- | --------------------- | --------------------- | --------------------- | --------------------- | ----------------------- |
|                                                       | **December 31, 2018** | **December 31, 2018** | **December 31, 2018** | **December 31, 2017** | **December 31, 2017** | **December 31, 2017** | **Valuation Technique** |
| **(in millions)**                                     | **Level 1**           | **Level 2**           | **Total**             | **Level 1**           | **Level 2**           | **Total**             | **Valuation Technique** |
| Equities and equity\-related instruments              | $400                  | $100                  | $500                  | $2,033                | $13                   | $2,046                | (a)                     |
| Delta common stock                                    | 675                   | —                     | 675                   | 801                   | —                     | 801                   | (a)                     |
| Cash equivalents                                      | 312                   | 708                   | 1,020                 | 735                   | 697                   | 1,432                 | (a)                     |
| Fixed income and fixed income\-related instruments    | 233                   | 2,157                 | 2,390                 | 17                    | 3,648                 | 3,665                 | (a)(b)                  |
| Benefit plan assets                                   | $1,620                | $2,965                | $4,585                | $3,586                | $4,358                | $7,944                |                         |
| Investments measured at net asset value ("NAV") ^(1)^ |                       |                       | 9,136                 |                       |                       | 7,378                 |                         |
| Total benefit plan assets                             |                       |                       | $13,721               |                       |                       | $15,322               |                         |

|       |                                                                                |
| ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(1)^ |  Investments that were measured at NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy\. |

Equities and Equity\-Related Instruments\.  These investments include common stock and equity\-related instruments\. Common stock is valued at the closing price reported on the active market on which the individual securities are traded\. Equity\-related instruments include investments in securities traded on exchanges, including listed futures and options, which are valued at the last reported sale prices on the last business day of the year or, if not available, the last reported bid prices\. Over\-the\-counter securities are valued at the bid prices or the average of the bid and ask prices on the last business day of the year from published sources or, if not available, from other sources considered reliable, generally broker quotes\.

Delta Common Stock\.  In both 2017 and 2016, we contributed   $350 million  of Delta common stock as a portion of the employer contribution to certain of our defined benefit pension plans\. The Delta common stock investment is managed by an independent fiduciary\.

 85


Annual Report of Southwest Airlines Co\. for year 2019

than it would be able to serve on its own, (ii) gain exposure in markets it does not otherwise serve, and (iii) increase the perceived frequency of its flights on certain routes\. More extensive route structures, as well as alliance and code\-sharing arrangements, not only provide additional route flexibility for participating airlines, they can also allow these airlines to offer their customers more opportunities to earn and redeem loyalty miles or points\. A capacity purchase agreement enables an airline to expand its route structure by paying another airline (e\.g\., a regional airline with smaller aircraft) to operate flights on its behalf in markets that it does not, or cannot, serve itself\. The Company continues to evaluate and implement initiatives to better enable itself to offer additional itineraries\.

Customer Service, Operational Reliability, and Amenities

Southwest also competes with other airlines with respect to customer service, operational reliability (such as ontime performance), and passenger amenities\. According to statistics published by the DOT, Southwest consistently ranks at or near the top among domestic carriers in Customer Satisfaction for having the lowest Customer complaint ratio\. However, carriers are increasingly focusing on operational reliability as an opportunity to win and retain Customers\. In addition, some airlines have more seating options and associated passenger amenities than Southwest, including first class, business class, and other premium seating and related amenities\. New and different types of aircraft flown by competitors could have operational attributes and passenger amenities that could be considered more attractive to certain consumers than those associated with the Company's existing fleet\.

Other Forms of Competition

The airline industry is subject to varying degrees of competition from other forms of transportation, including surface transportation by automobiles, buses, and trains\. Inconveniences and delays associated with air travel security measures can increase surface competition\. In addition, surface competition can be significant during economic downturns when consumers cut back on discretionary spending and fewer choose to fly, or when gasoline prices are lower, making surface transportation a less expensive option\. Because of the relatively high percentage of short\-haul travel provided by Southwest, it is particularly exposed to competition from surface transportation in these instances\. The airline industry is also subject to technology advancements that may limit the demand for air travel, including competition from alternatives to air travel such as videoconferencing and the Internet, which can increase in the event of travel inconveniences and economic downturns\. The Company is subject to the risk that air travel inconveniences and economic downturns may, in some cases, result in permanent changes to consumer behavior in favor of surface transportation and electronic communications\.

Seasonality

The Company's business is seasonal\. Generally, in most markets the Company serves, demand for air travel is greater during the summer months, and, therefore, revenues in the airline industry tend to be stronger in the second (April 1 \- June 30) and third (July 1 \- September 30) quarters of the year than in the first (January 1 \- March 31) and fourth (October 1 \- December 31) quarters of the year\. As a result, in many cases, the Company's results of operations reflect this seasonality\. Factors that could alter this seasonality include, among others, the price of fuel, general economic conditions, changes in consumer behavior, governmental action, extreme or severe weather and natural disasters, fears of terrorism or war, or changes in the competitive environment\. Therefore, the Company's quarterly operating results are not necessarily indicative of operating results for the entire year, and historical operating results in a quarterly or annual period are not necessarily indicative of future operating results\.

Employees

At December 31, 2019, the Company had approximately 60,800 active fulltime equivalent Employees, consisting of approximately 25,900 flight, 3,200 maintenance, 21,000 ground, Customer, and fleet service, and 10,700 management, technology, finance, marketing, and clerical personnel (associated with non\-operational departments)\. Approximately 83 percent of these Employees were represented by labor unions\. The Railway Labor Act establishes the right of airline employees to organize and bargain collectively\. Under the Railway Labor Act, collective\-bargaining agreements between an airline and a labor union generally do not expire, but instead become amendable as of an agreed date\. By the amendable date, if either party wishes to modify the terms of the agreement, it must notify the other party in the manner required by the Railway Labor Act and/or described in the agreement\. After receipt of the notice, the parties must meet for direct negotiations\. If no agreement is reached, either party may request the National Mediation Board to appoint a federal mediator\. If no agreement is reached in mediation, the National Mediation Board may determine

18