Annual Report of Southwest Airlines Co\. for year 2018

|          |                                                                                |
| -------- | ----------------------------------------------------------------------------------------------------------------------------------------- |
| 21       | [Subsidiaries of the Company\.](https://www.example.com/luv-12312018xex21.htm)                                                            |
| 23       | [Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm\.](https://www.example.com/luv-12312018xex23.htm)            |
| 31\.1    | [Rule 13a\-14(a) Certification of Chief Executive Officer\.](https://www.example.com/luv-12312018xex311.htm)                              |
| 31\.2    | [Rule 13a\-14(a) Certification of Chief Financial Officer\.](https://www.example.com/luv-12312018xex312.htm)                              |
| 32       | [Section 1350 Certification of Chief Executive Officer and Chief Financial Officer\. ](https://www.example.com/luv-12312018xex32.htm) (3) |
| 101\.INS | XBRL Instance Document                                                                                |
| 101\.SCH | XBRL Taxonomy Extension Schema Document                                                                                |
| 101\.CAL | XBRL Taxonomy Extension Calculation Linkbase Document                                                                                |
| 101\.DEF | XBRL Taxonomy Extension Definition Linkbase Document                                                                                |
| 101\.LAB | XBRL Extension Labels Linkbase Document                                                                                |
| 101\.PRE | XBRL Taxonomy Extension Presentation Linkbase Document                                                                                |

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (1) | Pursuant to 17 CFR 240\.24b\-2, confidential information has been omitted and has been filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission\. |

|     |                                                           |
| --- | --------------------------------------------------------- |
| (2) | Management contract or compensatory plan or arrangement\. |

|     |                                                                                |
| --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (3) | This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S\-K\. |

A copy of each exhibit may be obtained at a price of 15 cents per page, $10\.00 minimum order, by writing to: Investor Relations, Southwest Airlines Co\., P\.O\. Box 36611, Dallas, Texas 75235\-1611\.

**Item 16\.** ***10\-K Summary***

None\.

128


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

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

|                                                                        |                                   |                                   |
| ---------------------------------------------------------------------- | --------------------------------- | --------------------------------- |
|                                                                        | **Pension Benefits**              | **Pension Benefits**              |
|                                                                        | **December 31, 2018**             | **December 31, 2017**             |
| Amounts recognized in the consolidated balance sheets consist of:      |                                   |                                   |
| Noncurrent asset                                                       | $13                               | $9                                |
| Current liability                                                      | (6)                               | (8)                               |
| Noncurrent liability                                                   | (1,576)                           | (1,921)                           |
| Total liability                                                        | $(1,569)                          | $(1,920)                          |
| Amounts recognized in accumulated other comprehensive loss consist of: |                                   |                                   |
| Net actuarial loss                                                     | $(1,382)                          | $(1,610)                          |
| Prior service cost                                                     | (5)                               | (1)                               |
| Total accumulated other comprehensive loss                             | $(1,387)                          | $(1,611)                          |
|                                                                        | **Other Postretirement Benefits** | **Other Postretirement Benefits** |
|                                                                        | **Year Ended December 31, 2018**  | **Year Ended December 31, 2017**  |
| Change in benefit obligation:                                          |                                   |                                   |
| Benefit obligation at beginning of year                                | $1,710                            | $1,687                            |
| Service cost                                                           | 12                                | 13                                |
| Interest cost                                                          | 61                                | 66                                |
| Plan participants' contributions                                       | 68                                | 68                                |
| Benefits paid                                                          | (181)                             | (178)                             |
| Actuarial loss (gain)                                                  | (285)                             | 40                                |
| Other                                                                  | 6                                 | 14                                |
| Benefit obligation at end of year                                      | $1,391                            | $1,710                            |
| Change in plan assets:                                                 |                                   |                                   |
| Fair value of plan assets at beginning of year                         | $54                               | $55                               |
| Actual return on plan assets                                           | 1                                 | 1                                 |
| Employer contributions                                                 | 111                               | 108                               |
| Plan participants' contributions                                       | 68                                | 68                                |
| Benefits paid                                                          | (181)                             | (178)                             |
| Fair value of plan assets at end of year                               | 53                                | 54                                |
| Funded status—Net amount recognized                                    | $(1,338)                          | $(1,656)                          |

|                                                                          |                                   |                                   |
| ------------------------------------------------------------------------ | --------------------------------- | --------------------------------- |
|                                                                          | **Other Postretirement Benefits** | **Other Postretirement Benefits** |
|                                                                          | **December 31, 2018**             | **December 31, 2017**             |
| Amounts recognized in the consolidated balance sheets consist of:        |                                   |                                   |
| Current liability                                                        | $(43)                             | $(54)                             |
| Noncurrent liability                                                     | (1,295)                           | (1,602)                           |
| Total liability                                                          | $(1,338)                          | $(1,656)                          |
| Amounts recognized in accumulated other comprehensive income consist of: |                                   |                                   |
| Net actuarial gain                                                       | $554                              | $301                              |
| Prior service credit                                                     | 170                               | 208                               |
| Total accumulated other comprehensive income                             | $724                              | $509                              |

71


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

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

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 Consolidated Balance Sheets\. See  Note 2  of the Notes to the Consolidated Financial Statements 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, 2017** | **December 31, 2017** | **December 31, 2017** | **December 31, 2016** | **December 31, 2016** | **December 31, 2016** | **Valuation Technique** |
| **(in millions)**                                     | **Level 1**           | **Level 2**           | **Total**             | **Level 1**           | **Level 2**           | **Total**             | **Valuation Technique** |
| Equities and equity\-related instruments              | $2,033                | $13                   | $2,046                | $2,021                | $14                   | $2,035                | (a)                     |
| Delta common stock                                    | 801                   | —                     | 801                   | 386                   | —                     | 386                   | (a)                     |
| Cash equivalents                                      | 735                   | 697                   | 1,432                 | 228                   | 1,240                 | 1,468                 | (a)                     |
| Fixed income and fixed income\-related instruments    | 17                    | 3,648                 | 3,665                 | 8                     | 1,190                 | 1,198                 | (a)(b)                  |
| Benefit plan assets                                   | $3,586                | $4,358                | $7,944                | $2,643                | $2,444                | $5,087                |                         |
| Investments measured at net asset value ("NAV") ^(1)^ |                       |                       | $7,378                |                       |                       | $5,724                |                         |
| Total benefit plan assets                             |                       |                       | $15,322               |                       |                       | $10,811               |                         |

|       |                                                                                |
| ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(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\.  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 each of 2017 and 2016, we contributed   $350 million  of Delta common stock as a portion of the employer contribution to certain of its defined benefit pension plans\. The Delta common stock investment is managed by an independent fiduciary\.

Cash Equivalents\.  These investments primarily consist of high\-quality, short\-term obligations that are a part of institutional money market mutual funds that are calculated using current market quotations or an appropriate substitute that reflects current market conditions\.

Fixed Income and Fixed Income\-Related Instruments\.  Investments include corporate bonds, government bonds, collateralized mortgage obligations and other asset\-backed securities\. These investments are generally valued at the bid price or the average of the bid and ask price\. Prices are based on pricing models, quoted prices of securities with similar characteristics, or broker quotes\. Fixed income\-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\.

 77


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

**PART I**

**ITEM 1\. BUSINESS**

**Overview**

American Airlines Group Inc\. (AAG), a Delaware corporation, is a holding company and its principal, wholly\-owned subsidiaries are American Airlines, Inc\. (American), Envoy Aviation Group Inc\. (Envoy), PSA Airlines, Inc\. (PSA) and Piedmont Airlines, Inc\. (Piedmont)\. AAG was formed in 1982 under the name AMR Corporation (AMR) as the parent company of American, which was founded in 1934\.

AAG’s and American’s principal executive offices are located at 4333 Amon Carter Boulevard, Fort Worth, Texas 76155 and their telephone number is 817\-963\-1234\.

**Airline Operations**

Our primary business activity is the operation of a major network carrier, providing scheduled air transportation for passengers and cargo\.

Together with our wholly\-owned regional airline subsidiaries and third\-party regional carriers operating as American Eagle, our airline operates 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\. During 2018, we launched new seasonal nonstop service to Budapest, Hungary and Prague, Czech Republic from Philadelphia International Airport (PHL), to Venice, Italy from Chicago O’Hare International Airport (ORD) and to Reykjavik\-Keflavik, Iceland from Dallas/Fort Worth International Airport (DFW), further expanding our global footprint\. We also announced new seasonal nonstop service beginning in summer 2019 between PHL and Dubrovnik, Croatia, Berlin, Germany and Bologna, Italy\.

As of December 31, 2018, we operated 956 mainline aircraft supported by our regional airline subsidiaries and third\-party regional carriers, which operated an additional 595 regional aircraft\. See Part I, Item 2\. Properties for further discussion on our mainline and regional aircraft and “*Regional*” below for further discussion on our regional operations\.

American is a founding member of the **one**world^®^ alliance, whose members serve more than 1,000 destinations with approximately 14,250 daily flights to over 150 countries\. See below for further discussion on the **one**world alliance and other agreements with domestic and international airlines\.

See Part II, Item 7\. Management’s Discussion and Analysis of Financial Condition and Results of Operations –*“**2018**Financial Overview**,” “AAG’s Results of Operations”* and *“American’s Results of Operations”* for further discussion of AAG’s and American’s operating results and operating performance\. Also, see Note 14 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 12 to American’s Consolidated Financial Statements in Part II, Item 8B for information regarding operating segments and see Note 1(k) to AAG’s and American’s Consolidated Financial Statements in Part II, Items 8A and 8B, respectively, for passenger revenue by geographic region\.

***Regional***

Our regional carriers provide scheduled air transportation under the brand name “American Eagle\.” The American Eagle carriers include our wholly\-owned regional carriers Envoy, PSA and Piedmont, as well as third\-party regional carriers including Republic Airline Inc\. (Republic), Mesa Airlines, Inc\. (Mesa), Compass Airlines, LLC (Compass) and SkyWest Airlines, Inc\. (SkyWest)\. In addition, Air Wisconsin Corporation (Air Wisconsin), Trans States Airlines, Inc\. (Trans States) and ExpressJet Airlines, Inc\. (ExpressJet) operated regional jet aircraft for us during 2018; however these arrangements ended in February 2018, December 2018 and January 2019, respectively\. Our regional carriers are an integral component of our operating network\. We rely heavily on feeder traffic to our hubs from low\-density markets that are not economical for us to serve with larger, mainline aircraft\. In addition, regional carriers offer complementary service in our existing mainline markets\. During 2018, approximately 56 million passengers boarded our regional carriers’ planes, approximately 44% of whom connected to or from our mainline flights\. Of these passengers, approximately 31 million were enplaned by our wholly\-owned regional carriers and approximately 25 million were enplaned by third\-party regional carriers\. All American Eagle carriers use logos, service marks, aircraft paint schemes and uniforms similar to our mainline operations\.

Substantially all of our regional carrier arrangements are in the form of capacity purchase agreements\. The capacity purchase agreements provide that all revenues, including passenger, in\-flight, ancillary, mail and freight revenues, go to us\. We control marketing, scheduling, ticketing, pricing and seat inventories\. In return, we agree to pay predetermined fees to

5


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

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

|              |                   |
| ------------ | ----------------- |
| **ITEM 2\.** | **PROPERTIES\.**  |

**Fleet**

Including aircraft operated by United's regional carriers, United's fleet consisted of 1,329 aircraft as of December 31, 2018, the details of which are presented in the tables below:

|                            |                                       |           |            |                                          |                                                      |                                                      |                                     |
| -------------------------- | ------------------------------------- | --------- | ---------- | ---------------------------------------- | ---------------------------------------------------- | ---------------------------------------------------- | ----------------------------------- |
| **Aircraft Type**          | **Total**                             | **Owned** | **Leased** |                                          | **Seats in Standard Configuration**                  | **Seats in Standard Configuration**                  |  **Average Age (In Years)**         |
| **Mainline:**              |                                       |           |            |                                          |                                                      |                                                      |                                     |
| 777\-300ER                 | 18                                    | 18        | —          |                                          | 350\-366                                             | 350\-366                                             | 1\.5                                |
| 777\-200ER                 | 55                                    | 46        | 9          |                                          | 269\-274                                             | 269\-274                                             | 18\.8                               |
| 777\-200                   | 19                                    | 19        | —          |                                          | 364                                                  | 364                                                  | 21\.5                               |
| 787\-10                    | 3                                     | 3         | —          |                                          | 318                                                  | 318                                                  | 0\.1                                |
| 787\-9                     | 25                                    | 25        | —          |                                          | 252                                                  | 252                                                  | 2\.8                                |
| 787\-8                     | 12                                    | 12        | —          |                                          | 219                                                  | 219                                                  | 5\.5                                |
| 767\-400ER                 | 16                                    | 14        | 2          |                                          | 242                                                  | 242                                                  | 17\.3                               |
| 767\-300ER                 | 38                                    | 25        | 13         |                                          | 167\-214                                             | 167\-214                                             | 22\.9                               |
| 757\-300                   | 21                                    | 9         | 12         |                                          | 213\-234                                             | 213\-234                                             | 16\.3                               |
| 757\-200                   | 56                                    | 50        | 6          |                                          | 142\-169                                             | 142\-169                                             | 22\.8                               |
| 737 MAX 9                  | 9                                     | 9         | —          |                                          | 179                                                  | 179                                                  | 0\.4                                |
| 737\-900ER                 | 136                                   | 136       | —          |                                          | 179                                                  | 179                                                  | 6\.0                                |
| 737\-900                   | 12                                    | 8         | 4          |                                          | 179                                                  | 179                                                  | 17\.3                               |
| 737\-800                   | 141                                   | 90        | 51         |                                          | 166                                                  | 166                                                  | 14\.8                               |
| 737\-700                   | 40                                    | 25        | 15         |                                          | 126                                                  | 126                                                  | 19\.8                               |
| A320\-200                  | 99                                    | 70        | 29         |                                          | 150                                                  | 150                                                  | 20\.3                               |
| A319\-100                  | 70                                    | 55        | 15         |                                          | 128                                                  | 128                                                  | 17\.6                               |
| Total mainline             | 770                                   | 614       | 156        |                                          |                                                      |                                                      | 15\.1                               |
| **Aircraft Type**          | **Capacity Purchase Agreement Total** | **Owned** | **Leased** | **Owned or Leased by Regional Carrier**  | **Regional Carrier Operator and Number of Aircraft** | **Regional Carrier Operator and Number of Aircraft** | **Seats in Standard Configuration** |
| **Regional:**              |                                       |           |            |                                          |                                                      |                                                      |                                     |
| Embraer E175               | 153                                   | 54        | —          | 99                                       | SkyWest:

Mesa:

Republic:               | 65

60

28                               | 76                                  |
| Embraer 170                | 38                                    | —         | —          | 38                                       | Republic:                                            | 38                                                   | 70                                  |
| CRJ700                     | 64                                    | —         | —          | 64                                       | SkyWest:

GoJet:

Mesa:                  | 19

25

20                               | 70                                  |
| CRJ200                     | 128                                   | —         | —          | 128                                      | SkyWest:

Air Wisconsin:

ExpressJet:    | 60

56

12                               | 50                                  |
| Embraer ERJ 145 (XR/LR/ER) | 176                                   | 82        | 90         | 4                                        | ExpressJet:

Trans States:

CommutAir:  | 105

40

31                              | 50                                  |
| Total regional             | 559                                   | 136       | 90         | 333                                      |                                                      |                                                      |                                     |
| Total                      | 1,329                                 | 750       | 246        | 333                                      |                                                      |                                                      |                                     |

In addition to the aircraft presented in the tables above, United owned the following aircraft listed below as of December 31, 2018:

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | One Boeing 737 MAX 9 and one Airbus 319\-100, which were delivered in December 2018 but were awaiting operating certificates as of December 31, 2018; |

|   |                                                                    |
| - | ------------------------------------------------------------------ |
| • | One Boeing 767\-200, which is being subleased to another airline;  |

|   |                                                       |
| - | ----------------------------------------------------- |
| • | Nine Boeing 747s, which are permanently grounded; and |

|   |                                                          |
| - | -------------------------------------------------------- |
| • | Three Embraer ERJ 145s, which are temporarily grounded\. |

19


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

In 2018, we posted our 15th consecutive annual profit on an adjusted basis\. Our pretax income was $585 million, compared to $1\.2 billion in 2017\. Our 2018 pretax income on an adjusted basis (a non\-GAAP financial measure) was $739 million, a decrease of 42% from 2017\. Adjusted pretax income for 2018 excludes $87 million of merger\-related costs associated with our acquisition of Virgin America, $45 million of other one\-time special charges, and $22 million of mark\-to\-market fuel hedge adjustments\.

The decrease in adjusted pretax income was driven largely by an increase in operating expenses, excluding fuel and special items, of $430 million, and an increase in fuel expense of $489 million due to significantly higher fuel prices\. The increased costs were partially offset by an improvement in operating revenues of $370 million\.

Revenue growth of $370 million was driven by continued network expansion and aircraft added to our fleet since prior year, allowing us to grow capacity about 5%\. The regional business grew more quickly as we took delivery of 25 new E175 regional jets and grew capacity by 20%\. As we look to 2019, we are slowing our capacity growth to 2% as we focus on strengthening our performance across the network and expanding margins\.

See “Results of Operations” below for further discussion of changes in revenues and operating expenses and our reconciliation of non\-GAAP measures to the most directly comparable GAAP measure\.

***2018 Accomplishments and Highlights***

***Recognition and Awards \- Alaska***

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------- |
| • | Ranked "Highest in Customer Satisfaction Among Traditional Carriers" in 2018 by J\.D\. Power for the 11 ^th^  year in a row\. |

|   |                                                                                |
| - | ---------------------------------------------------------------------------------------- |
| • | Named "Best U\.S\. Airline" by Condé Nast Traveler in their 2018 Readers Choice Awards\. |

|   |                                                                                |
| - | --------------------------------------------------------------------------------------------------------------------- |
| • | Mileage Plan™ ranked first in U\.S\. News & World Report's list of Best Travel Rewards Programs for the fourth time\. |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------- |
| • | Ranked among the best U\.S\. airlines by Consumer Reports for economy flights and overall satisfaction by passengers\.  |

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------- |
| • | Ranked No\. 1 for performance and quality in the Airline Quality Rating study for the second year in a row\.  |

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Won the "Best Rewards Program" for Mileage Plan™ for carriers in the Americas region in the annual FlyerTalk Award for the second year in a row\. |

|   |                                                                                |
| - | -------------------------------------------------------------------------------- |
| • | Top\-ranked airline in America for the second year in a row by The Points Guy\.  |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Received 17th Diamond Award of Excellence from the Federal Aviation Administration, recognizing both Alaska's and Horizon's aircraft technicians for their commitment to training\. |

|   |                                                                                |
| - | ---------------------------------------------------------------------------------------------------------------------- |
| • | Ranked as one of only two U\.S\. airlines in the Top 20 safest airlines in the world for 2018 by AirlineRatings\.com\. |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------- |
| • | Rated "Best Airline Staff in North America" and "Best Regional Airline in North America" by Skytrax\. |

|   |                                                                                |
| - | -------------------------------------------------------------------------------------- |
| • | Won the 2018 APEX Passenger Choice Award for Best Food and Beverage in the Americas\.  |

|   |                                                                                |
| - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Ranked as the top U\.S\. airline in the Dow Jones Sustainability Index (DJSI) for the second consecutive year, receiving top scores for “corporate governance” and “efficiency\.” |

***Our People and Communities***

|   |                                                                                |
| - | ------------------------------------------------------------------------------------ |
| • | Ranked among Forbes' 2018 "America's Best Employers" for the fourth year in a row\.  |

|   |                                                       |
| - | ----------------------------------------------------- |
| • | Awarded  $147 million  in incentive pay for  2018 \.  |

|   |                                                                            |
| - | -------------------------------------------------------------------------- |
| • | Reached joint agreements for all work groups except aircraft technicians\. |

|   |                                                                                |
| - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Launched Flight Path, a work shop for every Air Group employee that includes a mix of presentations, open\-and\-honest dialogue and interactive activities focused on Alaska's culture and future\.  |

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Donated over  $17 million  and contributed more than  44,000  volunteer hours to support nonprofits in our local communities, focusing on youth and education, medical (research/transportation) and community outreach\. |

 32


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

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

Executive Officers of the Registrant

Edward H\. Bastian, Age 60 :  Chief Executive Officer of Delta since May 2016; President of Delta (September 2007 \- May 2016); President of Delta and Chief Executive Officer Northwest Airlines, Inc\. (October 2008 \- December 2009); President and Chief Financial Officer of Delta (September 2007 \- October 2008); Executive Vice President and Chief Financial Officer of Delta (July 2005 \- September 2007); Chief Financial Officer of Acuity Brands (June 2005 \- July 2005); Senior Vice President \- Finance and Controller of Delta (2000 \- April 2005); Vice President and Controller of Delta (1998 \- 2000)\.

Peter W\. Carter, Age 54 :  Executive Vice President \- Chief Legal Officer of Delta since July 2015; Partner of Dorsey & Whitney LLP (1999 \- 2015), including co\-chair of Securities Litigation and Enforcement practice group, chair of Policy Committee and chair of trial department\.

Glen W\. Hauenstein, Age 57 :  President of Delta since May 2016; Executive Vice President \- Chief Revenue Officer of Delta (August 2013 \- May 2016); Executive Vice President \- Network Planning and Revenue Management of Delta (April 2006 \- July 2013); Executive Vice President and Chief of Network and Revenue Management of Delta (August 2005 \- April 2006); Vice General Director \- Chief Commercial Officer and Chief Operating Officer of Alitalia (2003 \- 2005); Senior Vice President\- Network of Continental Airlines (2003); Senior Vice President \- Scheduling of Continental Airlines (2001 \- 2003); Vice President Scheduling of Continental Airlines (1998 \- 2001)\.

Paul A\. Jacobson, Age 46:  Executive Vice President \- Chief Financial Officer of Delta since August 2013; Senior Vice President and Chief Financial Officer of Delta (March 2012 \- July 2013); Senior Vice President and Treasurer of Delta (December 2007 \- March 2012); Vice President and Treasurer of Delta (August 2005 \- December 2007)\.

Rahul Samant, Age 51:  Executive Vice President \- Chief Information Officer of Delta since January 2018; Senior Vice President and Chief Information Officer of Delta (February 2016 \- December 2017); Senior Vice President and Chief Digital Officer of American International Group, Inc\. (January 2015 \- February 2016); Senior Vice President and Global Head, Application Development and Management of American International Group, Inc\. (September 2012 \- December 2014); Managing Director of Bank of America (1999 \- September 2012)\.

Steven M\. Sear, Age 52 :  President, International and Executive Vice President \- Global Sales of Delta since February 2016; Senior Vice President \- Global Sales of Delta (December 2011 \- February 2016); Vice President \- Global Sales of Delta (October 2008 \- December 2011); Vice President \- Sales & Customer Care of Northwest Airlines (June 2005 \- October 2008)\.

Joanne D\. Smith, Age 59:  Executive Vice President and Chief Human Resources Officer of Delta since October 2014; Senior Vice President \- In\-Flight Service of Delta (March 2007 \- September 2014); Vice President \- Marketing of Delta (November 2005 \- February 2007); President of Song (January 2005 \- October 2005); Vice President \- Marketing and Customer Service of Song (November 2002 \- December 2004)\.

W\. Gil West, Age 57:  Senior Executive Vice President and Chief Operating Officer of Delta since February 2016; Executive Vice President and Chief Operating Officer of Delta (March 2014 \- February 2016); Senior Vice President \- Airport Customer Service and Technical Operations of Delta (February 2012 \- February 2014); Senior Vice President \- Airport Customer Service of Delta (March 2008 \- January 2012); President and Chief Executive Officer of Laidlaw Transit Services (2006 \- 2007)\.

Additional Information

We make available free of charge on our website our Annual Report on Form 10\-K, our Quarterly Reports on Form 10\-Q, our Current Reports on Form 8\-K and amendments to those reports as soon as reasonably practicable after these reports are filed with or furnished to the Securities and Exchange Commission\. Information on our website is not incorporated into this Form 10\-K or our other securities filings and is not a part of those filings\.

 11


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

Refinery Segment

The refinery primarily produces gasoline, diesel and jet fuel\. Monroe exchanges the non\-jet fuel products the refinery produces with third parties for jet fuel consumed in our airline operations\. The jet fuel produced and procured through exchanging gasoline and diesel fuel produced by the refinery provides approximately 200,000 barrels per day, or approximately 75% of our consumption, for use in our airline operations\. We believe that the jet fuel supply resulting from the refinery's operation contributes to reducing the market price of jet fuel and thus lowers our cost of jet fuel compared to what it otherwise would be\.

During the December 2018 quarter, the refinery completed a planned maintenance event ("turnaround") and did not produce any refined products for approximately 60 days\. The turnaround was in accordance with the long\-term maintenance plan for the facility to allow for the safe completion of major repairs and upgrades\.

The refinery recorded operating revenues of $5\.6 billion in 2019, compared to $5\.5 billion in 2018\. Operating revenues in 2019 were primarily composed of $4\.0 billion of non\-jet fuel products exchanged with third parties to procure jet fuel, $1\.1 billion of sales of jet fuel to the airline segment and $395 million of non\-jet fuel product sales\. Refinery revenues increased compared to the prior year due to higher throughput and yields offset by lower costs of crude oil leading to lower pricing for associated refined products\.

The refinery recorded operating income of $76 million and $58 million in 2019 and 2018, respectively\. The refinery's operating income in 2019 was higher primarily due to the 60 day cessation of operations during the turnaround in the December 2018 quarter and favorable market conditions year over year\.

A refinery is subject to annual EPA requirements to blend renewable fuels into the gasoline and on\-road diesel fuel it produces\. Alternatively, a refinery may purchase renewable energy credits, called RINs, from third parties in the secondary market\. The refinery operated by Monroe purchases the majority of its RINs requirement in the secondary market\. Observable RINs prices stabilized in 2019 after significant fluctuations in previous years, with Monroe incurring $58 million in RINs compliance costs during the current year\.

For more information regarding the refinery's results, see Note 15 of the Notes to the Consolidated Financial Statements\.

36


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

[Table of Contents](https://www.example.com#s702BA6B769767C2AC4683A1218F84707)

**PART I**

|                           |
| ------------------------- |
| **ITEM 1\. OUR BUSINESS** |

Air Group operates three airlines, Alaska, Virgin America and Horizon\. McGee Air Services, an aviation services provider, is a wholly\-owned subsidiary of Alaska\. Together with regional partner airlines, we fly to 118 destinations with 1,200 daily departures through an expansive network across the United States, Mexico, Canada, and Costa Rica\. With global airline partners, we provide our guests with a network of more than 900 destinations worldwide\. During 2017, we carried an all\-time high 44 million guests and earned consolidated net income of $1\.0 billion, which represents a 27% increase over net income of $814 million in 2016\. Our adjusted net income was $823 million, which excludes special items and merger\-related costs of $118 million, and a $280 million benefit from new tax laws enacted in 2017\.

Our mission is "creating an airline people love\." The "ing" is to recognize that we are never done; we are continually working to improve\. We believe our success depends on our ability to provide safe air transportation, develop relationships with guests by providing exceptional customer service and low fares, and maintain a low cost structure to compete effectively\. It is important to us that we achieve our objective as a socially responsible company that values not just performance, but people, the communities we serve, and environment\.

In 2017 we focused much of our energy on integrating Virgin America\. We achieved several milestones, including merging most back office functions, kicking off station co\-locations and launching technology that enables our front\-line employees to be agile between Alaska and Virgin America applications\. In January 2018, Alaska and Virgin America obtained a single operating certificate from the Federal Aviation Administration (FAA), our most significant integration milestone to date\. These accomplishments will ease our transition to a single Passenger Service System (PSS) in the Spring of 2018, which will help us unlock many of the revenue synergies expected from the acquisition\. We remain on track to complete all of our integration milestones on schedule, and continue to be optimistic about the value of our combined company\.

With the integration well underway, we remain committed to our strategic focus to become the go\-to airline for people on the West Coast\. The acquisition of Virgin America positioned us as the fifth largest airline in the U\.S\., with an unparalleled ability to serve West Coast travelers\. To do so, we believe we need to meet our guest's evolving needs through innovation in our onboard offerings and provide unique destinations with better schedules, while retaining the best of both the Alaska and Virgin America brand experiences\. We have begun to implement this strategy in a number of ways, including merging our loyalty programs, allowing us to bring the award winning benefits of our Mileage Plan™ program to Virgin America's loyal customer base; rolling out Free Movies and Free Chat to Virgin America's entire fleet; and kicking off the first of several cabin enhancements of Alaska's Boeing aircraft with expressive mood lighting\.

While aircraft and technology enable us to provide air transportation, we recognize this is fundamentally a people business\. Our employees maintain and strengthen our relationships with guests, and our success depends on our employees working together to successfully execute our strategy\. In 2017, Alaska was once again named one of America's Best Employers by Forbes Magazine for the third year in a row\. We know that engaged employees provide excellent service\. In that vein, in 2017, Alaska ranked highest in J\.D\. Power and Associates annual survey of customer satisfaction among traditional network carriers for the tenth year in a row\. Virgin America was also recognized for excellent service by Conde Nast Traveler and Travel \+ Leisure magazine also for the tenth year in a row\. Customer service matters, and we believe the combination of Alaska and Virgin America will only enhance the experience for our guests\.

Operationally, Alaska held the No\. 1 spot in the Wall Street Journal's "Middle Seat" scorecard for U\.S\. airlines for four consecutive years and the No\. 2 spot for 2017\. Although we were not the leader in on\-time performance in 2017, we led the industry for on\-time performance among major airlines for the previous seven years\. We are focused on becoming the industry leader in operational performance once again as we fully integrate Alaska and Virgin America operations and we are off to a great start in 2018\. For achieving safety, customer service, operational and financial goals, we rewarded our employees with $135 million for their service in 2017\.

In support of the communities that we serve, we strive to be an industry leader in environmental and community stewardship\. Our combined fleet is one of the youngest, most fuel\-efficient fleets in North America and we look forward to further enhancements in this area\. As a result of our environmental and corporate sustainability leadership, we ranked higher than any other North American airline in this year's Dow Jones Sustainability Index\. We are also proud of our community stewardship \- Air Group donated $14 million to over 1,300 charitable organizations, and our employees volunteered more than 32,000 hours of community service, focused on youth and education, medical research, and transportation and community outreach in 2017\.

 4


Annual Report of Southwest Airlines Co\. for year 2019

Issuer Repurchases

|                                                     |                                           |                                           |                                           |                                           |                                           |
| --------------------------------------------------- | ----------------------------------------- | ----------------------------------------- | ----------------------------------------- | ----------------------------------------- | ----------------------------------------- |
| Issuer Purchases of Equity Securities (1)           | Issuer Purchases of Equity Securities (1) | Issuer Purchases of Equity Securities (1) | Issuer Purchases of Equity Securities (1) | Issuer Purchases of Equity Securities (1) | Issuer Purchases of Equity Securities (1) |
|                                                     | **(a)**                                   | **(b)**                                   |                                           | **(c)**                                   | **(d)**                                   |
|                                                     |                                           |                                           |                                           | **Total number of**                       | **Maximum dollar**                        |
|                                                     |                                           |                                           |                                           | **shares purchased**                      | **value of shares that**                  |
|                                                     | **Total number**                          | **Average**                               |                                           | **as part of publicly**                   | **may yet be purchased**                  |
|                                                     | **of shares**                             | **price paid**                            |                                           | **announced plans**                       | **under the plans**                       |
| **Period**                                          | **purchased**                             | **per share**                             |                                           | **or programs**                           | **or programs**                           |
| October 1, 2019 through

 October 31, 2019   | 2,019,792                                 | $—                                        | (2)                                       | 2,019,792                                 | $1,900,051,674                            |
| November 1, 2019 through

 November 30, 2019 | —                                         | $—                                        | (3)                                       | —                                         | $1,350,051,674                            |
| December 1, 2019 through

 December 31, 2019 | 7,276,275                                 | $—                                        | (3)                                       | 7,276,275                                 | $1,350,051,674                            |
| Total                                               | 9,296,067                                 |                                           |                                           | 9,296,067                                 |                                           |

|     |                                                                                |
| --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (1) | On  May 16, 2018 , the Company's Board of Directors authorized the repurchase of up to  $2\.0 billion  of the Company's common stock\. On  May 15, 2019 , the Company’s Board of Directors authorized the repurchase of up to  $2\.0 billion  of the Company’s common stock in a new share repurchase authorization, upon the completion of the May 2018 share repurchase authorization\. Repurchases are made in accordance with applicable securities laws in open market or private, including accelerated, repurchase transactions from time to time, depending on market conditions, and may be discontinued at any time\. |

|     |                                                                                |
| --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (2) | Under an accelerated share repurchase program entered into by the Company with a third party financial institution in third quarter 2019 (the “Third Quarter 2019 ASR Program”), the Company paid  $500 million  and received an initial delivery of  7,471,534  shares during August 2019, representing an estimated  75 percent  of the shares to be purchased by the Company under the Third Quarter 2019 ASR Program based on a volume\-weighted average price of  $50\.1905  per share of the Company’s common stock on the NYSE during a calculation period between  July 30, 2019  and  August 20, 2019 \. Final settlement of the Third Quarter 2019 ASR Program occurred in October 2019 and was determined based generally on a discount to the volume\-weighted average price per share of the Company's common stock during a calculation period completed in October 2019\. Upon settlement, the third party financial institution delivered  2,019,792  additional shares of the Company’s common stock to the Company\. In total, the average purchase price per share for the  9,491,326  shares repurchased under the Third Quarter 2019 ASR Program, upon completion of the Third Quarter 2019 ASR Program in October 2019, was  $52\.6797 \. |

|     |                                                                                |
| --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (3) | Under an accelerated share repurchase program entered into by the Company with a third party financial institution in fourth quarter 2019 (the "Fourth Quarter 2019 ASR Program"), the Company paid  $550 million  and received an initial delivery of  7,276,275  shares during December 2019, representing an estimated  75 percent  of the shares to be purchased by the Company under the Fourth Quarter 2019 ASR Program based on a volume\-weighted average price of  $56\.6911  per share of the Company’s common stock on the NYSE during a calculation period between November 13, 2019 and December 11, 2019\. The third party financial institution delivered an additional  1,835,017  shares to the Company in further partial settlements of the Fourth Quarter 2019 ASR Program in January 2020, which was determined based generally on a discount to the volume\-weighted average price per share of the Company's common stock during calculation periods completed in January 2020\. The specific number of shares that the Company ultimately will repurchase under the Fourth Quarter 2019 ASR Program will be determined based generally on a discount to the volume\-weighted average price per share of the Company’s common stock during a calculation period to be completed no later than February 13, 2020\. At settlement, under certain circumstances, the third party financial institution may be required to deliver additional shares of common stock to the Company, or under certain circumstances, the Company may be required to deliver shares of its common stock or may elect to make a cash payment to the third party financial institution\. |

37


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

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

**UNITED CONTINENTAL HOLDINGS, INC\.**

**STATEMENTS OF CONSOLIDATED OPERATIONS**

**(In millions, except per share amounts)**

|                                                    |                             |                             |                             |
| -------------------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                                    | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                                    | **2018**                    | **2017 (a)**                | **2016 (a)**                |
| Operating revenue:                                 |                             |                             |                             |
| Passenger revenue                                  | $37,706                     | $34,460                     | $33,429                     |
| Cargo                                              | 1,237                       | 1,114                       | 934                         |
| Other operating revenue                            | 2,360                       | 2,210                       | 2,195                       |
| Total operating revenue                            | 41,303                      | 37,784                      | 36,558                      |
| Operating expense:                                 |                             |                             |                             |
| Salaries and related costs                         | 11,458                      | 10,941                      | 10,176                      |
| Aircraft fuel                                      | 9,307                       | 6,913                       | 5,813                       |
| Regional capacity purchase                         | 2,601                       | 2,232                       | 2,197                       |
| Landing fees and other rent                        | 2,359                       | 2,240                       | 2,165                       |
| Depreciation and amortization                      | 2,240                       | 2,149                       | 1,977                       |
| Aircraft maintenance materials and outside repairs | 1,767                       | 1,856                       | 1,749                       |
| Distribution expenses                              | 1,558                       | 1,435                       | 1,395                       |
| Aircraft rent                                      | 433                         | 621                         | 680                         |
| Special charges                                    | 487                         | 176                         | 745                         |
| Other operating expenses                           | 5,801                       | 5,550                       | 5,317                       |
| Total operating expense                            | 38,011                      | 34,113                      | 32,214                      |
| Operating income                                   | 3,292                       | 3,671                       | 4,344                       |
| Nonoperating income (expense):                     |                             |                             |                             |
| Interest expense                                   | (729)                       | (671)                       | (674)                       |
| Interest capitalized                               | 70                          | 84                          | 72                          |
| Interest income                                    | 101                         | 57                          | 42                          |
| Miscellaneous, net                                 | (76)                        | (101)                       | (11)                        |
| Total nonoperating expense, net                    | (634)                       | (631)                       | (571)                       |
| Income before income taxes                         | 2,658                       | 3,040                       | 3,773                       |
| Income tax expense                                 | 529                         | 896                         | 1,539                       |
| Net income                                         | $2,129                      | $2,144                      | $2,234                      |
| Earnings per share, basic                          | $7\.73                      | $7\.08                      | $6\.77                      |
| Earnings per share, diluted                        | $7\.70                      | $7\.06                      | $6\.76                      |

(a) Amounts adjusted due to the adoption of Accounting Standards Update No\. 2014\-09, *Revenue from Contracts with Customers (Topic 606)* andAccounting Standards Update No\. 2017\-07, *Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost\.* See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information\.

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements\.

42


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

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

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Stockholder and the Board of Directors of

United Airlines, Inc\.

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of United Airlines, Inc\. (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income (loss), cash flows, and stockholder’s equity, for each of the three years in the period ended December 31, 2017, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”)\. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U\.S\. generally accepted accounting principles\.

**Basis for Opinion**

These financial statements are the responsibility of the Company’s management\. Our responsibility is to express an opinion on the Company’s financial statements based on our audits\. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U\.S\. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB\.

We conducted our audits in accordance with the standards of the PCAOB\. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud\. The Company is not required to have, nor were we engaged to perform an audit of the Company’s internal control over financial reporting\. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting\. Accordingly, we express no such opinion\.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks\. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements\. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements\. We believe that our audits provide a reasonable basis for our opinion\.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2009\.

Chicago, Illinois

February 22, 2018

48


Annual Report of Southwest Airlines Co\. for year 2019

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis at  December 31, 2019 , and  December 31, 2018 :

|                                         |                       |                                                                                |                                                               |                                                           |
| --------------------------------------- | --------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------------------- | --------------------------------------------------------- |
|                                         |                       | **Fair value measurements at reporting date using:**                           | **Fair value measurements at reporting date using:**          | **Fair value measurements at reporting date using:**      |
|                                         |                       | **Quoted prices in**

**active markets**

**for identical assets** | **Significant**

**other observable**

**inputs** | **Significant**

**unobservable**

**inputs** |
| **Description**                         | **December 31, 2019** | **(Level 1)**                                                                  | **(Level 2)**                                                 | **(Level 3)**                                             |
| **Assets**                              | (in millions)         | (in millions)                                                                  | (in millions)                                                 | (in millions)                                             |
| Cash equivalents                        |                       |                                                                                |                                                               |                                                           |
| Cash equivalents (a)                    | $1,999                | $1,999                                                                         | $—                                                            | $—                                                        |
| Commercial paper                        | 535                   | —                                                                              | 535                                                           | —                                                         |
| Certificates of deposit                 | 14                    | —                                                                              | 14                                                            | —                                                         |
| Short\-term investments:                |                       |                                                                                |                                                               |                                                           |
| Treasury bills                          | 1,196                 | 1,196                                                                          | —                                                             | —                                                         |
| Certificates of deposit                 | 268                   | —                                                                              | 268                                                           | —                                                         |
| Time deposits                           | 60                    | —                                                                              | 60                                                            | —                                                         |
| Interest rate derivatives (see Note 10) | 2                     | —                                                                              | 2                                                             | —                                                         |
| Fuel derivatives:                       |                       |                                                                                |                                                               |                                                           |
| Option contracts (b)                    | 110                   | —                                                                              | —                                                             | 110                                                       |
| Other available\-for\-sale securities   | 197                   | 197                                                                            | —                                                             | —                                                         |
| **Total assets**                        | $4,381                | $3,392                                                                         | $879                                                          | $110                                                      |
| **Liabilities**                         |                       |                                                                                |                                                               |                                                           |
| Interest rate derivatives (see Note 10) | $

(6

)  | $—                                                                             | $

(6

)                                          | $—                                                        |

(a) Cash equivalents are primarily composed of money market investments\.

(b) In the Consolidated Balance Sheet amounts are presented as an asset\. See  Note 10 \.

100


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

***Results of Operations –*** ***2017*** ***Compared to*** ***2016***

Pre\-tax income and net income were $3\.1 billion and $1\.9 billion in 2017, respectively\. This compares to 2016 pre\-tax income and net income of $4\.3 billion and $2\.7 billion, respectively\. Excluding the effects of pre\-tax net special items, pre\-tax income was $3\.8 billion and $5\.1 billion in 2017 and 2016, respectively\. For reconciliation of pre\-tax income excluding special items to their comparable measures on a GAAP basis, see Part II, Item 6\. Selected Consolidated Financial Data –*“Reconciliation of GAAP to Non\-GAAP Financial Measures*\.*”*

The year\-over\-year declines in our pre\-tax income on both a GAAP basis and excluding pre\-tax special items were principally driven by higher fuel costs and wage rates\.

*Operating Revenues*

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

**(Decrease)**           | **Percent**

**Increase**

**(Decrease)** |
|                          | **2017**                                     | **2016**                                     | **Increase**

**(Decrease)**           | **Percent**

**Increase**

**(Decrease)** |
|                          | **(In millions, except percentage changes)** | **(In millions, except percentage changes)** | **(In millions, except percentage changes)** | **(In millions, except percentage changes)**          |
| Mainline passenger       | $29,238                                      | $27,909                                      | $1,329                                       | 4\.8                                                  |
| Regional passenger       | 6,895                                        | 6,670                                        | 225                                          | 3\.4                                                  |
| Cargo                    | 800                                          | 700                                          | 100                                          | 14\.3                                                 |
| Other                    | 5,274                                        | 4,901                                        | 373                                          | 7\.6                                                  |
| Total operating revenues | $42,207                                      | $40,180                                      | $2,027                                       | 5\.0                                                  |

This table presents our total passenger revenues and the year\-over\-year change in certain operating statistics:

|                          |                                  |                                                                |                                                                |                                                                |                                                                |                                                                |                                                                |
| ------------------------ | -------------------------------- | -------------------------------------------------------------- | -------------------------------------------------------------- | -------------------------------------------------------------- | -------------------------------------------------------------- | -------------------------------------------------------------- | -------------------------------------------------------------- |
|                          |                                  | **Increase (Decrease)
vs\. Year Ended December 31, 2016** | **Increase (Decrease)
vs\. Year Ended December 31, 2016** | **Increase (Decrease)
vs\. Year Ended December 31, 2016** | **Increase (Decrease)
vs\. Year Ended December 31, 2016** | **Increase (Decrease)
vs\. Year Ended December 31, 2016** | **Increase (Decrease)
vs\. Year Ended December 31, 2016** |
|                          | **Year Ended December 31, 2017** | **Passenger**

**Revenue**                               | **RPMs**                                                       | **ASMs**                                                       | **Load**

**Factor**                                     | **Passenger**

**Yield**                                 | **PRASM**                                                      |
|                          | **(In millions)**                |                                                                |                                                                |                                                                |                                                                |                                                                |                                                                |
| Mainline passenger       | $29,238                          | 4\.8%                                                          | 1\.2%                                                          | 0\.9%                                                          | 0\.3pts                                                        | 3\.5%                                                          | 3\.9%                                                          |
| Regional passenger       | 6,895                            | 3\.4%                                                          | 2\.2%                                                          | 3\.2%                                                          | (0\.7)pts                                                      | 1\.2%                                                          | 0\.2%                                                          |
| Total passenger revenues | $36,133                          | 4\.5%                                                          | 1\.3%                                                          | 1\.1%                                                          | 0\.2pts                                                        | 3\.2%                                                          | 3\.3%                                                          |

Total passenger revenues increased $1\.6 billion, or 4\.5%, in 2017 from 2016 primarily due to a 3\.2% year\-over\-year increase in consolidated passenger yields driven by strong demand\. Domestic consolidated yields increased 3\.5% and international yields rose 3\.2%, due principally to improved performance in Latin America\.

Cargo revenue increased $100 million, or 14\.3%, in 2017 from 2016 primarily driven by an increase in freight volume\.

Other revenue primarily includes revenue associated with our loyalty program, baggage fees, ticketing change fees, airport clubs and inflight services\. Other revenue increased $373 million, or 7\.6%, in 2017 from 2016 primarily driven by higher revenues associated with our loyalty program\. In 2017 and 2016, loyalty program revenue was $2\.4 billion and $2\.1 billion, respectively\. Of this, $2\.2 billion and $1\.9 billion related to the marketing component of mileage sales and other marketing related payments, respectively\.

Total operating revenues in 2017increased $2\.0 billion, or 5\.0%, from 2016 driven principally by a 4\.5% increase in total passenger revenues as described above\. Our TRASM was 15\.27 cents in 2017, a 3\.9% increase as compared to 14\.70 cents in 2016\.

50


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

**ITEM 9\. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

None\.

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

**Management’s Evaluation of Disclosure Controls and Procedures**

The term “disclosure controls and procedures” is defined in Rules 13a\-15(e) and 15d\-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)\. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate to allow timely decisions regarding required disclosure\. An evaluation of the effectiveness of AAG’s and American’s disclosure controls and procedures as of December 31, 2018 was performed under the supervision and with the participation of AAG’s and American’s management, including AAG’s and American’s CEO and CFO\. Based on that evaluation, AAG’s and American’s management, including AAG’s and American’s CEO and CFO, concluded that AAG’s and American’s disclosure controls and procedures were effective as of December 31, 2018 at the reasonable assurance level\.

**Changes in Internal Control over Financial Reporting**

On December 9, 2013, AAG acquired US Airways Group and its subsidiaries\. We are still in the process of integrating certain processes, technology and operations for the post\-Merger combined company, and we will continue to evaluate the impact of any related changes to our internal control over financial reporting\. In connection with the adoption on January 1, 2018 of the New Revenue Standard and the adoption in the fourth quarter of 2018, of the New Lease Standard as of January 1, 2018, we modified certain processes and implemented internal controls related to our loyalty program and leases, respectively\. The operating effectiveness of these changes was evaluated as part of our December 31, 2018 annual assessment of internal control over financial reporting\. Except as described above, for the three months ended December 31, 2018, there have been no changes in AAG’s or American’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, AAG’s and American’s internal control over financial reporting\.

**Limitation on the Effectiveness of Controls**

We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected\. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and, as noted above, the CEO and CFO of AAG and American believe that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2018\.

**Management’s Annual Report on Internal Control over Financial Reporting**

Management of AAG and American is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a\-15(f) and 15d\-15(f) under the Exchange Act\. AAG’s and American’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP\. AAG’s and American’s internal control over financial reporting includes policies and procedures that:

|   |                                                                                |
| - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of AAG or American, respectively; |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of AAG or American are being made only in accordance with authorizations of management and directors of AAG or American, respectively; and |

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of AAG’s or American’s assets that could have a material effect on the financial statements\. |

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements\. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate\.

174


Annual Report of Southwest Airlines Co\. for year 2017

Under ATSA, substantially all security officers at airports are federal employees, and significant other elements of airline and airport security are overseen and performed by federal employees, including federal security managers, federal law enforcement officers, and federal air marshals\. TSA personnel and TSA\-mandated security procedures can affect the Company's operations, costs, and Customer experience\. For example, as part of its security measures, the TSA regulates the types of liquid items that can be carried onboard aircraft\. In addition, as part of its Secure Flight program, the TSA requires airlines to collect a passenger's full name (as it appears on a government\-issued ID), date of birth, gender, and Redress Number (if applicable)\. Airlines must transmit this information to Secure Flight, which uses the information to perform matching against terrorist watch lists\. After matching passenger information against the watch lists, Secure Flight transmits the matching results back to airlines\. This serves to identify individuals for enhanced security screening and to prevent individuals on watch lists from boarding an aircraft\. It also helps prevent the misidentification of passengers who have names similar to individuals on watch lists\. The TSA has also implemented enhanced security procedures as part of its enhanced, multi\-layer approach to airport security, including physical pat down procedures, at security checkpoints\. Such enhanced security procedures have raised privacy concerns by some air travelers, and have caused delays at screening checkpoints\.

The Company, in conjunction with the TSA, participates in TSA PreCheck™, a pre\-screening initiative that allows a select group of low risk passengers to move through security checkpoints with greater efficiency and ease when traveling\. Eligible passengers may use dedicated screening lanes at certain airports the Company serves for screening benefits, which include leaving on shoes, light outerwear, and belts, as well as leaving laptops and permitted liquids in carryon bags\. A similar CBP\-administered program, Global Entry®, allows expedited clearance for pre\-approved, low\-risk international travelers upon arrival in the United States\.

The Company also participates in the TSA Known Crewmember® program, which is a risk\-based screening system that enables TSA security officers to positively verify the identity and employment status of flight\-crew members\. The program expedites flight crew member access to sterile areas of airports\.

The Company works collaboratively with foreign national governments and airports to provide risk\-based security measures at international departure locations\.

In 2017, the Department of Homeland Security granted the Company designation coverage under the Support Anti\-Terrorism by Fostering Effective Technologies Act of 2002 (the "SAFETY Act") for a five year term\. The designation is based on certain safety and security procedures put in place by the Company to date related to the protection of its Employees, Customers, and assets from terrorists and other criminal activities\. The designation coverage affords the Company certain limitations of liability for claims arising out of an "act of terrorism," as defined under the SAFETY Act\.

The Company has also made significant investments to address the effect of security regulations, including investments in facilities, equipment, and technology to process Customers, checked baggage, and cargo efficiently; however, the Company is not able to predict the impact, if any, that various security measures or the lack of TSA resources at certain airports will have on Passenger revenues and the Company’s costs, either in the short\-term or the long\-term\.

**Environmental Regulation**

The Company is subject to various federal laws and regulations relating to the protection of the environment, including 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, as well as state and local laws and regulations\. These laws and regulations govern aircraft drinking water, emissions, storm water discharges from operations, and the disposal of materials such as jet fuel, chemicals, hazardous waste, and aircraft deicing fluid\.

Additionally, in conjunction with airport authorities, other airlines, and state and local environmental regulatory agencies, the Company, as a normal course of business, undertakes voluntary investigation or remediation of soil or groundwater contamination at various airport sites\. The Company does not believe that any environmental liability associated with these airport sites will have a material adverse effect on the Company's operations, costs, or profitability, nor has it experienced any such liability in the past that has had a material adverse effect on its operations, costs, or profitability\.

Further regulatory developments pertaining to the control of engine exhaust emissions from ground support equipment could increase operating costs in the airline industry\. The Company does not believe, however, that pending

14


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

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

UNITED AIRLINES HOLDINGS, INC\.

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(In millions)

|                                                     |                             |                             |                             |
| --------------------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                                     | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                                     | **2019**                    | **2018 (a)**                | **2017 (a)**                |
| Net income                                          | $3,009                      | $2,122                      | $2,143                      |
| Other comprehensive income (loss), net of tax:      |                             |                             |                             |
| Employee benefit plans                              | 80                          | 342                         | (195

)               |
| Investments and other                               | 5                           | (4

)                 | (5

)                 |
| Total other comprehensive income (loss), net of tax | 85                          | 338                         | (200

)               |
| Total comprehensive income, net                     | $3,094                      | $2,460                      | $1,943                      |

(a) Amounts adjusted due to the adoption of Accounting Standards Update No\. 2016\-02,  Leases (Topic 842) \. See Note 1 to the financial statements contained in Part II, Item 8 of this report for additional information\.

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these statements\.

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