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

Bank Lines of Credit

We have three credit facilities with availability totaling $516 million, including one $250 million credit facility, one $150 million credit facility, and one $116 million credit facility\. We have secured letters of credit against the $116 million facility, but have no plans to borrow using either of the two remaining facilities\.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

Aircraft Purchase and Lease Commitments

As of December 31, 2019, we have firm orders to purchase 35 aircraft\. We also have cancelable purchase commitments for 30 Airbus A320neo aircraft with deliveries from 2023 through 2025\. We could incur a loss of pre\-delivery payments and credits as a cancellation fee\. We also have options to acquire up to 37 additional 737 MAX aircraft with deliveries from 2021 through 2024 and 30 E175 aircraft with deliveries from 2021 to 2023\. In addition to the 32 E175 aircraft currently operated by SkyWest in our regional fleet, we have options in future periods to add regional capacity by having SkyWest operate up to eight more E175 aircraft\.

We expect capital expenditures to be approximately $750 million in 2020, pending 737 MAX deliveries and any decision made for future aircraft orders\. We have included in the table below the three undelivered aircraft from 2019 in our 2020 delivery schedule\. The total of ten deliveries is subject to change based on the ongoing FAA grounding of the aircraft\.

The following table summarizes our contractual fleet count by year, as of February 12, 2020:

|                                   |                                   |                                   |                    |                    |                    |                    |                    |                    |                    |  |  |  |              |              |  |  |  |                             |                             |                             |                             |                             |                             |                             |                             |                             |                             |                             |                             |                             |                             |                             |                             |                             |                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|:--------------------------------- |:--------------------------------- |:--------------------------------- | ------------------:| ------------------:|:------------------:|:------------------:|:------------------:| ------------------:| ------------------:|:- |:- |:- | ------------:| ------------:|:- |:- |:- | ---------------------------:| ---------------------------:|:--------------------------- |:--------------------------- |:--------------------------- | ---------------------------:| ---------------------------:|:--------------------------- |:--------------------------- |:--------------------------- | ---------------------------:| ---------------------------:|:--------------------------- |:--------------------------- |:--------------------------- |:--------------------------- |:--------------------------- |:--------------------------- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |
|                                   |                                   |                                   | Actual Fleet Count | Actual Fleet Count | Actual Fleet Count | Actual Fleet Count | Actual Fleet Count | Actual Fleet Count | Actual Fleet Count |  |  |  |              |              |  |  |  | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ | Contractual Deliveries^(a)^ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Aircraft                          | Aircraft                          | Aircraft                          |       Dec 31, 2018 |       Dec 31, 2018 |                    |                    |                    |       Dec 31, 2019 |       Dec 31, 2019 |  |  |  | 2020 Changes | 2020 Changes |  |  |  |                Dec 31, 2020 |                Dec 31, 2020 |                             |                             |                             |                2021 Changes |                2021 Changes |                             |                             |                             |                Dec 31, 2021 |                Dec 31, 2021 |
| B737 Freighters                   | B737 Freighters                   | B737 Freighters                   |                 3  |                 3  |                    |                    |                    |                 3  |                 3  |  |  |  |           —  |           —  |  |  |  |                          3  |                          3  |                             |                             |                             |                          —  |                          —  |                             |                             |                             |                          3  |                          3  |
| B737 Passenger Aircraft^(c)^      | B737 Passenger Aircraft^(c)^      | B737 Passenger Aircraft^(c)^      |               159  |               159  |                    |                    |                    |               163  |               163  |  |  |  |          10  |          10  |  |  |  |                        173  |                        173  |                             |                             |                             |                          7  |                          7  |                             |                             |                             |                        180  |                        180  |
| Airbus Passenger Aircraft         | Airbus Passenger Aircraft         | Airbus Passenger Aircraft         |                71  |                71  |                    |                    |                    |                71  |                71  |  |  |  |          (1) |          (1) |  |  |  |                         70  |                         70  |                             |                             |                             |                         (9) |                         (9) |                             |                             |                             |                         61  |                         61  |
| Total Mainline Fleet              | Total Mainline Fleet              | Total Mainline Fleet              |               233  |               233  |                    |                    |                    |               237  |               237  |  |  |  |           9  |           9  |  |  |  |                        246  |                        246  |                             |                             |                             |                         (2) |                         (2) |                             |                             |                             |                        244  |                        244  |
| Q400 operated by Horizon^(b)^     | Q400 operated by Horizon^(b)^     | Q400 operated by Horizon^(b)^     |                39  |                39  |                    |                    |                    |                33  |                33  |  |  |  |          (1) |          (1) |  |  |  |                         32  |                         32  |                             |                             |                             |                          —  |                          —  |                             |                             |                             |                         32  |                         32  |
| E175 operated by Horizon^(b)^     | E175 operated by Horizon^(b)^     | E175 operated by Horizon^(b)^     |                26  |                26  |                    |                    |                    |                30  |                30  |  |  |  |              |              |  |  |  |                         30  |                         30  |                             |                             |                             |                          —  |                          —  |                             |                             |                             |                         30  |                         30  |
| E175 operated by third party^(b)^ | E175 operated by third party^(b)^ | E175 operated by third party^(b)^ |                32  |                32  |                    |                    |                    |                32  |                32  |  |  |  |           —  |           —  |  |  |  |                         32  |                         32  |                             |                             |                             |                          —  |                          —  |                             |                             |                             |                         32  |                         32  |
| Total Regional Fleet              | Total Regional Fleet              | Total Regional Fleet              |                97  |                97  |                    |                    |                    |                95  |                95  |  |  |  |          (1) |          (1) |  |  |  |                         94  |                         94  |                             |                             |                             |                          —  |                          —  |                             |                             |                             |                         94  |                         94  |
| Total                             | Total                             | Total                             |               330  |               330  |                    |                    |                    |               332  |               332  |  |  |  |           8  |           8  |  |  |  |                        340  |                        340  |                             |                             |                             |                         (2) |                         (2) |                             |                             |                             |                        338  |                        338  |

^(a)^ The expected fleet counts at December 31, 2020 and 2021 reflect contractual lease returns, and is subject to change pending our long\-term fleet decisions and strategies for future acquisition of aircraft\.

^(b)^ Aircraft are either owned or leased by Horizon or operated under capacity purchase agreement with a third party\.

^(c)^ All three of our Boeing 737 MAX9 aircraft that were originally scheduled for delivery in 2019 have been shifted to 2020 in light of the MAX grounding\.

For future firm orders and option exercises, we may finance the aircraft through cash from operations, long\-term debt, or lease arrangements\.

43


Annual Report of Southwest Airlines Co\. for year 2018

**PART IV**

**Item 15\.** ***Exhibits and Financial Statement Schedules***

(a) 1\. *Financial Statements:*

The financial statements included in Item 8\. Financial Statements and Supplementary Data above are filed as part of this annual report\.

2\. *Financial Statement Schedules:*

There are no financial statement schedules filed as part of this annual report, since the required information is included in the Consolidated Financial Statements, including the notes thereto, or the circumstances requiring inclusion of such schedules are not present\.

3\. Exhibits:

|       |                                                                                |
| ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| 3\.1  | [Restated Certificate of Formation of the Company, effective May 18, 2012 (incorporated by reference to Exhibit 3\.1 to the Company’s Quarterly Report on Form 10\-Q for the quarter ended June 30, 2012 (File No\. 1\-7259))\.](http://www.sec.gov/Archives/edgar/data/92380/000009238012000089/ex3_1.htm)                                                                                |
| 3\.2  | [Second Amended and Restated Bylaws of the Company, effective November 17, 2016 (incorporated by reference to Exhibit 3\.1 to the Company’s Current Report on Form 8\-K filed November 21, 2016 (File No\. 1\-7259))\.](http://www.sec.gov/Archives/edgar/data/92380/000119312516773178/d282581dex31.htm)                                                                                |
| 4\.1  | [Specimen certificate representing common stock of the Company (incorporated by reference to Exhibit 4\.2 to the Company’s Annual Report on Form 10\-K for the year ended December 31, 1994 (File No\. 1\-7259))\.](http://www.sec.gov/Archives/edgar/data/92380/0000930661-95-000050.txt)                                                                                |
| 4\.2  | [Indenture dated as of February 14, 2005, between the Company and The Bank of New York Trust Company, N\.A\., Trustee (incorporated by reference to Exhibit 4\.2 to the Company’s Current Report on Form 8\-K filed February 14, 2005 (File No\. 1\-7259))\.](http://www.sec.gov/Archives/edgar/data/92380/000129993305000651/exhibit3.htm)                                                                                |
| 4\.3  | [Indenture dated as of September 17, 2004, between the Company and Wells Fargo Bank, N\.A\., Trustee (incorporated by reference to Exhibit 4\.1 to the Company’s Registration Statement on Form S\-3 filed October 30, 2002 (File No\. 333\-100861))\.](http://www.sec.gov/Archives/edgar/data/92380/000095013402013127/d00530exv4w1.txt)                                                                                |
| 4\.4  | [Indenture dated as of February 25, 1997, between the Company and U\.S\. Trust Company of Texas, N\.A\. (incorporated by reference to Exhibit 4\.12 to the Company’s Annual Report on Form 10\-K for the year ended December 31, 1996 (File No\. 1\-7259))\.](http://www.sec.gov/Archives/edgar/data/92380/0000950134-97-002019.txt)                                                                                |
|       | The Company is not filing any other instruments evidencing any indebtedness because the total amount of securities authorized under any single such instrument does not exceed 10 percent of its total consolidated assets\. Copies of such instruments will be furnished to the Securities and Exchange Commission upon request\.                                                                                |
| 10\.1 | Purchase Agreement No\. 1810, dated January 19, 1994, between The Boeing Company and the Company (incorporated by reference to Exhibit 10\.4 to the Company’s Annual Report on Form 10\-K for the year ended December 31, 1993 (File No\. 1\-7259)); [Supplemental Agreement No\. 1 (incorporated by reference to Exhibit 10\.3 to the Company’s Annual Report on Form 10\-K for the year ended December 31, 1996 (File No\. 1\-7259))](http://www.sec.gov/Archives/edgar/data/92380/0000092380-97-000010.txt) ; [Supplemental Agreements Nos\. 2, 3, and 4 (incorporated by reference to Exhibit 10\.2 to the Company’s Annual Report on Form 10\-K for the year ended December 31, 1997 (File No\. 1\-7259))](http://www.sec.gov/Archives/edgar/data/92380/0000950134-98-002150.txt) ; [Supplemental Agreements Nos\. 5, 6, and 7 (incorporated by reference to Exhibit 10\.1 to the Company’s Annual Report on Form 10\-K for the year ended December 31, 1998 (File No\. 1\-7259))](http://www.sec.gov/Archives/edgar/data/92380/0000950134-99-002046.txt) ; [Supplemental Agreements Nos\. 8, 9, and 10 (incorporated by reference to Exhibit 10\.1 to the Company’s Annual Report on Form 10\-K for the year ended December 31, 1999 (File No\. 1\-7259))](http://www.sec.gov/Archives/edgar/data/92380/000095013400002530/0000950134-00-002530.txt) ;

 |

123


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

DELTA AIR LINES, INC\.

Consolidated Balance Sheets

|                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |  |  |  |  |  |  |  |  |  |  |  |  |
|:----------------------------------------------------------------------------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------:|:----------------------------------------------------------------------------------------:|:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |:- |
|                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                       December 31,                                       |                                       December 31,                                       |                                       December 31,                                       |                                       December 31,                                       |                                       December 31,                                       |  |  |  |  |  |  |
|                                                              (in millions, except share data)                                                              |                                                              (in millions, except share data)                                                              |                                                              (in millions, except share data)                                                              |                                                                                |                                                                                |                                                                                |                                           2019                                           |                                                                                |                                                                                |                                                                                |                                           2018                                           |
|                                                                           ASSETS                                                                           |                                                                           ASSETS                                                                           |                                                                           ASSETS                                                                           |                                          ASSETS                                          |                                          ASSETS                                          |                                          ASSETS                                          |                                          ASSETS                                          |                                          ASSETS                                          |                                          ASSETS                                          |                                          ASSETS                                          |                                          ASSETS                                          |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                      Current Assets:                                                                       |                                                                      Current Assets:                                                                       |                                                                      Current Assets:                                                                       |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |
|                                                                 Cash and cash equivalents                                                                  |                                                                 Cash and cash equivalents                                                                  |                                                                 Cash and cash equivalents                                                                  |                                                                                |                                                                                |                                                                                |                                         $ 2,882                                          |                                                                                |                                                                                |                                                                                |                                         $ 1,565                                          |
|               Accounts receivable, net of an allowance for uncollectible accounts of $13 and $12 at December 31, 2019 and 2018, respectively               |               Accounts receivable, net of an allowance for uncollectible accounts of $13 and $12 at December 31, 2019 and 2018, respectively               |               Accounts receivable, net of an allowance for uncollectible accounts of $13 and $12 at December 31, 2019 and 2018, respectively               |                                                                                |                                                                                |                                                                                |                                          2,854                                           |                                                                                |                                                                                |                                                                                |                                          2,314                                           |
|                                                                       Fuel inventory                                                                       |                                                                       Fuel inventory                                                                       |                                                                       Fuel inventory                                                                       |                                                                                |                                                                                |                                                                                |                                           730                                            |                                                                                |                                                                                |                                                                                |                                           592                                            |
|        Expendable parts and supplies inventories, net of an allowance for obsolescence of $82 and $102 at December 31, 2019 and 2018, respectively         |        Expendable parts and supplies inventories, net of an allowance for obsolescence of $82 and $102 at December 31, 2019 and 2018, respectively         |        Expendable parts and supplies inventories, net of an allowance for obsolescence of $82 and $102 at December 31, 2019 and 2018, respectively         |                                                                                |                                                                                |                                                                                |                                           521                                            |                                                                                |                                                                                |                                                                                |                                           463                                            |
|                                                                 Prepaid expenses and other                                                                 |                                                                 Prepaid expenses and other                                                                 |                                                                 Prepaid expenses and other                                                                 |                                                                                |                                                                                |                                                                                |                                          1,262                                           |                                                                                |                                                                                |                                                                                |                                          1,406                                           |
|                                                                    Total current assets                                                                    |                                                                    Total current assets                                                                    |                                                                    Total current assets                                                                    |                                                                                |                                                                                |                                                                                |                                          8,249                                           |                                                                                |                                                                                |                                                                                |                                          6,340                                           |
|                                                                     Noncurrent Assets:                                                                     |                                                                     Noncurrent Assets:                                                                     |                                                                     Noncurrent Assets:                                                                     |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |
|        Property and equipment, net of accumulated depreciation and amortization of $17,027 and $15,823 at December 31, 2019 and 2018, respectively         |        Property and equipment, net of accumulated depreciation and amortization of $17,027 and $15,823 at December 31, 2019 and 2018, respectively         |        Property and equipment, net of accumulated depreciation and amortization of $17,027 and $15,823 at December 31, 2019 and 2018, respectively         |                                                                                |                                                                                |                                                                                |                                          31,310                                          |                                                                                |                                                                                |                                                                                |                                          28,335                                          |
|                                                           Operating lease right\-of\-use assets                                                            |                                                           Operating lease right\-of\-use assets                                                            |                                                           Operating lease right\-of\-use assets                                                            |                                                                                |                                                                                |                                                                                |                                          5,627                                           |                                                                                |                                                                                |                                                                                |                                          5,994                                           |
|                                                                          Goodwill                                                                          |                                                                          Goodwill                                                                          |                                                                          Goodwill                                                                          |                                                                                |                                                                                |                                                                                |                                          9,781                                           |                                                                                |                                                                                |                                                                                |                                          9,781                                           |
|                   Identifiable intangibles, net of accumulated amortization of $873 and $862 at December 31, 2019 and 2018, respectively                   |                   Identifiable intangibles, net of accumulated amortization of $873 and $862 at December 31, 2019 and 2018, respectively                   |                   Identifiable intangibles, net of accumulated amortization of $873 and $862 at December 31, 2019 and 2018, respectively                   |                                                                                |                                                                                |                                                                                |                                          5,163                                           |                                                                                |                                                                                |                                                                                |                                          4,830                                           |
|                                                          Cash restricted for airport construction                                                          |                                                          Cash restricted for airport construction                                                          |                                                          Cash restricted for airport construction                                                          |                                                                                |                                                                                |                                                                                |                                           636                                            |                                                                                |                                                                                |                                                                                |                                          1,136                                           |
|                                                                  Other noncurrent assets                                                                   |                                                                  Other noncurrent assets                                                                   |                                                                  Other noncurrent assets                                                                   |                                                                                |                                                                                |                                                                                |                                          3,766                                           |                                                                                |                                                                                |                                                                                |                                          3,850                                           |
|                                                                  Total noncurrent assets                                                                   |                                                                  Total noncurrent assets                                                                   |                                                                  Total noncurrent assets                                                                   |                                                                                |                                                                                |                                                                                |                                          56,283                                          |                                                                                |                                                                                |                                                                                |                                          53,926                                          |
|                                                                        Total assets                                                                        |                                                                        Total assets                                                                        |                                                                        Total assets                                                                        |                                                                                |                                                                                |                                                                                |                                         $ 64,532                                         |                                                                                |                                                                                |                                                                                |                                         $ 60,266                                         |
|                                                            LIABILITIES AND STOCKHOLDERS' EQUITY                                                            |                                                            LIABILITIES AND STOCKHOLDERS' EQUITY                                                            |                                                            LIABILITIES AND STOCKHOLDERS' EQUITY                                                            |                           LIABILITIES AND STOCKHOLDERS' EQUITY                           |                           LIABILITIES AND STOCKHOLDERS' EQUITY                           |                           LIABILITIES AND STOCKHOLDERS' EQUITY                           |                           LIABILITIES AND STOCKHOLDERS' EQUITY                           |                           LIABILITIES AND STOCKHOLDERS' EQUITY                           |                           LIABILITIES AND STOCKHOLDERS' EQUITY                           |                           LIABILITIES AND STOCKHOLDERS' EQUITY                           |                           LIABILITIES AND STOCKHOLDERS' EQUITY                           |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                    Current Liabilities:                                                                    |                                                                    Current Liabilities:                                                                    |                                                                    Current Liabilities:                                                                    |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |
|                                                       Current maturities of debt and finance leases                                                        |                                                       Current maturities of debt and finance leases                                                        |                                                       Current maturities of debt and finance leases                                                        |                                                                                |                                                                                |                                                                                |                                         $ 2,287                                          |                                                                                |                                                                                |                                                                                |                                         $ 1,518                                          |
|                                                           Current maturities of operating leases                                                           |                                                           Current maturities of operating leases                                                           |                                                           Current maturities of operating leases                                                           |                                                                                |                                                                                |                                                                                |                                           801                                            |                                                                                |                                                                                |                                                                                |                                           955                                            |
|                                                                   Air traffic liability                                                                    |                                                                   Air traffic liability                                                                    |                                                                   Air traffic liability                                                                    |                                                                                |                                                                                |                                                                                |                                          5,116                                           |                                                                                |                                                                                |                                                                                |                                          4,661                                           |
|                                                                      Accounts payable                                                                      |                                                                      Accounts payable                                                                      |                                                                      Accounts payable                                                                      |                                                                                |                                                                                |                                                                                |                                          3,266                                           |                                                                                |                                                                                |                                                                                |                                          2,976                                           |
|                                                           Accrued salaries and related benefits                                                            |                                                           Accrued salaries and related benefits                                                            |                                                           Accrued salaries and related benefits                                                            |                                                                                |                                                                                |                                                                                |                                          3,701                                           |                                                                                |                                                                                |                                                                                |                                          3,287                                           |
|                                                              Loyalty program deferred revenue                                                              |                                                              Loyalty program deferred revenue                                                              |                                                              Loyalty program deferred revenue                                                              |                                                                                |                                                                                |                                                                                |                                          3,219                                           |                                                                                |                                                                                |                                                                                |                                          2,989                                           |
|                                                                    Fuel card obligation                                                                    |                                                                    Fuel card obligation                                                                    |                                                                    Fuel card obligation                                                                    |                                                                                |                                                                                |                                                                                |                                           736                                            |                                                                                |                                                                                |                                                                                |                                          1,075                                           |
|                                                                 Other accrued liabilities                                                                  |                                                                 Other accrued liabilities                                                                  |                                                                 Other accrued liabilities                                                                  |                                                                                |                                                                                |                                                                                |                                          1,078                                           |                                                                                |                                                                                |                                                                                |                                          1,117                                           |
|                                                                 Total current liabilities                                                                  |                                                                 Total current liabilities                                                                  |                                                                 Total current liabilities                                                                  |                                                                                |                                                                                |                                                                                |                                          20,204                                          |                                                                                |                                                                                |                                                                                |                                          18,578                                          |
|                                                                  Noncurrent Liabilities:                                                                   |                                                                  Noncurrent Liabilities:                                                                   |                                                                  Noncurrent Liabilities:                                                                   |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |
|                                                                  Debt and finance leases                                                                   |                                                                  Debt and finance leases                                                                   |                                                                  Debt and finance leases                                                                   |                                                                                |                                                                                |                                                                                |                                          8,873                                           |                                                                                |                                                                                |                                                                                |                                          8,253                                           |
|                                                        Pension, postretirement and related benefits                                                        |                                                        Pension, postretirement and related benefits                                                        |                                                        Pension, postretirement and related benefits                                                        |                                                                                |                                                                                |                                                                                |                                          8,452                                           |                                                                                |                                                                                |                                                                                |                                          9,163                                           |
|                                                              Loyalty program deferred revenue                                                              |                                                              Loyalty program deferred revenue                                                              |                                                              Loyalty program deferred revenue                                                              |                                                                                |                                                                                |                                                                                |                                          3,509                                           |                                                                                |                                                                                |                                                                                |                                          3,652                                           |
|                                                                Noncurrent operating leases                                                                 |                                                                Noncurrent operating leases                                                                 |                                                                Noncurrent operating leases                                                                 |                                                                                |                                                                                |                                                                                |                                          5,294                                           |                                                                                |                                                                                |                                                                                |                                          5,801                                           |
|                                                                 Deferred income taxes, net                                                                 |                                                                 Deferred income taxes, net                                                                 |                                                                 Deferred income taxes, net                                                                 |                                                                                |                                                                                |                                                                                |                                          1,456                                           |                                                                                |                                                                                |                                                                                |                                           163                                            |
|                                                                Other noncurrent liabilities                                                                |                                                                Other noncurrent liabilities                                                                |                                                                Other noncurrent liabilities                                                                |                                                                                |                                                                                |                                                                                |                                          1,386                                           |                                                                                |                                                                                |                                                                                |                                           969                                            |
|                                                                Total noncurrent liabilities                                                                |                                                                Total noncurrent liabilities                                                                |                                                                Total noncurrent liabilities                                                                |                                                                                |                                                                                |                                                                                |                                          28,970                                          |                                                                                |                                                                                |                                                                                |                                          28,001                                          |
|                                                               Commitments and Contingencies                                                                |                                                               Commitments and Contingencies                                                                |                                                               Commitments and Contingencies                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |
|                                                                   Stockholders' Equity:                                                                    |                                                                   Stockholders' Equity:                                                                    |                                                                   Stockholders' Equity:                                                                    |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |
| Common stock at $0\.0001 par value; 1,500,000,000 shares authorized, 651,731,443 and 688,136,306 shares issued at December 31, 2019 and 2018, respectively | Common stock at $0\.0001 par value; 1,500,000,000 shares authorized, 651,731,443 and 688,136,306 shares issued at December 31, 2019 and 2018, respectively | Common stock at $0\.0001 par value; 1,500,000,000 shares authorized, 651,731,443 and 688,136,306 shares issued at December 31, 2019 and 2018, respectively |                                                                                |                                                                                |                                                                                |                                            —                                             |                                                                                |                                                                                |                                                                                |                                            —                                             |
|                                                                Additional paid\-in capital                                                                 |                                                                Additional paid\-in capital                                                                 |                                                                Additional paid\-in capital                                                                 |                                                                                |                                                                                |                                                                                |                                          11,129                                          |                                                                                |                                                                                |                                                                                |                                          11,671                                          |
|                                                                     Retained earnings                                                                      |                                                                     Retained earnings                                                                      |                                                                     Retained earnings                                                                      |                                                                                |                                                                                |                                                                                |                                          12,454                                          |                                                                                |                                                                                |                                                                                |                                          10,039                                          |
|                                                            Accumulated other comprehensive loss                                                            |                                                            Accumulated other comprehensive loss                                                            |                                                            Accumulated other comprehensive loss                                                            |                                                                                |                                                                                |                                                                                |                                         (7,989)                                          |                                                                                |                                                                                |                                                                                |                                         (7,825)                                          |
|                            Treasury stock, at cost, 8,959,730 and 8,191,831 shares at December 31, 2019 and 2018, respectively                             |                            Treasury stock, at cost, 8,959,730 and 8,191,831 shares at December 31, 2019 and 2018, respectively                             |                            Treasury stock, at cost, 8,959,730 and 8,191,831 shares at December 31, 2019 and 2018, respectively                             |                                                                                |                                                                                |                                                                                |                                          (236)                                           |                                                                                |                                                                                |                                                                                |                                          (198)                                           |
|                                                                 Total stockholders' equity                                                                 |                                                                 Total stockholders' equity                                                                 |                                                                 Total stockholders' equity                                                                 |                                                                                |                                                                                |                                                                                |                                          15,358                                          |                                                                                |                                                                                |                                                                                |                                          13,687                                          |
|                                                         Total liabilities and stockholders' equity                                                         |                                                         Total liabilities and stockholders' equity                                                         |                                                         Total liabilities and stockholders' equity                                                         |                                                                                |                                                                                |                                                                                |                                         $ 64,532                                         |                                                                                |                                                                                |                                                                                |                                         $ 60,266                                         |
|                                  The accompanying notes are an integral part of these Consolidated Financial Statements\.                                  |                                  The accompanying notes are an integral part of these Consolidated Financial Statements\.                                  |                                  The accompanying notes are an integral part of these Consolidated Financial Statements\.                                  | The accompanying notes are an integral part of these Consolidated Financial Statements\. | The accompanying notes are an integral part of these Consolidated Financial Statements\. | The accompanying notes are an integral part of these Consolidated Financial Statements\. | The accompanying notes are an integral part of these Consolidated Financial Statements\. | The accompanying notes are an integral part of these Consolidated Financial Statements\. | The accompanying notes are an integral part of these Consolidated Financial Statements\. | The accompanying notes are an integral part of these Consolidated Financial Statements\. | The accompanying notes are an integral part of these Consolidated Financial Statements\. |  |  |  |  |  |  |  |  |  |  |  |  |

53


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

Long\-Lived Assets

The following table summarizes our property and equipment:

|                                                       |                                                |                  |                  |
| ----------------------------------------------------- | ---------------------------------------------- | ---------------- | ---------------- |
|                                                       |                                                | **December 31,** | **December 31,** |
| **(in millions, except for estimated useful life)**   | **Estimated Useful Life**                      | **2018**         | **2017**         |
| Flight equipment                                      | 20\-34 years                                   | $33,898          | $30,688          |
| Ground property and equipment                         | 3\-40 years                                    | 8,028            | 7,665            |
| Flight and ground equipment under finance leases      | Shorter of lease term or estimated useful life | 1,055            | 1,147            |
| Advance payments for equipment                        |                                                | 1,177            | 1,160            |
| Less: accumulated depreciation and amortization ^(1)^ |                                                | (15,823

) | (14,097

) |
| Total property and equipment, net                     |                                                | $28,335          | $26,563          |

|       |                                                                                |
| ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(1)^ | Includes accumulated amortization for flight and ground equipment under finance leases in the amount of   $566 million  and   $668 million  at  December 31, 2018  and  2017 , respectively\. |

We record property and equipment at cost and depreciate or amortize these assets on a straight\-line basis to their estimated residual values over their estimated useful lives\. The estimated useful life for leasehold improvements is the shorter of lease term or estimated useful life\. Depreciation and amortization expense related to our property and equipment was   $2\.3 billion ,   $2\.2 billion  and   $1\.9 billion  for each of the years ended  December 31, 2018 ,  2017  and  2016 , respectively\. Residual values for owned aircraft, engines, spare parts and simulators are generally   5%  to   10%  of cost\.

We capitalize certain internal and external costs incurred to develop and implement software and amortize those costs over an estimated useful life of  three  to  10  years\. Included in the depreciation and amortization expense discussed above, we recorded   $205 million ,   $187 million  and   $158 million  for amortization of capitalized software for the years ended  December 31, 2018 ,  2017  and  2016 , respectively\. The net book value of these assets, which are included in ground property and equipment above, totaled   $819 million  and   $659 million  at  December 31, 2018  and  2017 , respectively\.

We review flight equipment and other long\-lived assets used in operations for impairment losses when events and circumstances indicate the assets may be impaired\. Factors which could be indicators of impairment include, but are not limited to, (1) a decision to permanently remove flight equipment or other long\-lived assets from operations, (2) significant changes in the estimated useful life, (3) significant changes in projected cash flows, (4) permanent and significant declines in fleet fair values and (5) changes to the regulatory environment\. For long\-lived assets held for sale, we discontinue depreciation and record impairment losses when the carrying amount of these assets is greater than the fair value less the cost to sell\.

To determine whether impairments exist for aircraft used in operations, we group assets at the fleet\-type level or at the contract level for aircraft operated by regional carriers (i\.e\., the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity, passenger mile yield, fuel costs, labor costs and other relevant factors\. If an asset group is impaired, the impairment loss recognized is the amount by which the asset group's carrying amount exceeds its estimated fair value\. We estimate aircraft fair values using published sources, appraisals and bids received from third parties, as available\.

Goodwill and Other Intangible Assets

Our goodwill and identifiable intangible assets relate to the airline segment\.  We apply a fair value\-based impairment test to the carrying value of goodwill and indefinite\-lived intangible assets on an annual basis (as of October 1) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis\. We assess the value of our goodwill and indefinite\-lived assets under either a qualitative or quantitative approach\. Under a qualitative approach, we consider various market factors, including the key assumptions listed below\. We analyze these factors to determine if events and circumstances have affected the fair value of goodwill and indefinite\-lived intangible assets\. If we determine that it is more likely than not that the asset may be impaired, we use the quantitative approach to assess the asset's fair value and the amount of the impairment\. Under a quantitative approach, we calculate the fair value of the asset using the key assumptions listed below\.

 62


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

ITEM 6\. SELECTED FINANCIAL DATA

The following tables are derived from our audited Consolidated Financial Statements and present selected financial and operating data as of and for the five years ended  December 31, 2018 \.

We adopted Accounting Standards Update No\. 2014\-09, “Revenue from Contracts with Customers (Topic 606)” using the full retrospective transition method and recast results from 2016 and 2017 including interim periods therein\. Results from periods prior to 2016 have not been recast for the adoption of this standard\.

Consolidated Summary of Operations

|                                      |                             |                             |                             |                             |                             |
| ------------------------------------ | --------------------------- | --------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                      | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| **(in millions, except share data)** | **2018**                    | **2017**                    | **2016**                    | **2015**                    | **2014**                    |
| Operating revenue                    | $44,438                     | $41,138                     | $39,450                     | $40,704                     | $40,362                     |
| Operating expense                    | 39,174                      | 35,172                      | 32,454                      | 32,902                      | 38,156                      |
| Operating income                     | 5,264                       | 5,966                       | 6,996                       | 7,802                       | 2,206                       |
| Non\-operating expense, net          | (113)                       | (466)                       | (643)                       | (645)                       | (1,134)                     |
| Income before income taxes           | 5,151                       | 5,500                       | 6,353                       | 7,157                       | 1,072                       |
| Income tax (provision) benefit       | (1,216)                     | (2,295)                     | (2,158)                     | (2,631)                     | (413)                       |
| Net income                           | $3,935                      | $3,205                      | $4,195                      | $4,526                      | $659                        |
| Basic earnings per share             | $5\.69                      | $4\.45                      | $5\.59                      | $5\.68                      | $0\.79                      |
| Diluted earnings per share           | $5\.67                      | $4\.43                      | $5\.55                      | $5\.63                      | $0\.78                      |
| Cash dividends declared per share    | $1\.31                      | $1\.02                      | $0\.68                      | $0\.45                      | $0\.30                      |

Supplemental Information

The supplemental information below represents the adjustments used in our non\-GAAP financial measures\. See "Item 7\. Management's Discussion and Analysis of Financial Condition and Results of Operations" where our non\-GAAP financial measures are defined and reconciled\. Amounts presented below are stated before consideration of income taxes, except for the impact of the Tax Cuts and Jobs Act\.

|                                       |                             |                             |                             |                             |                             |
| ------------------------------------- | --------------------------- | --------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                       | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| **(in millions)**                     | **2018**                    | **2017**                    | **2016**                    | **2015**                    | **2014**                    |
| MTM adjustments and settlements       | $(53)                       | $259                        | $450                        | $1,301                      | $(2,346)                    |
| Restructuring and other               | —                           | —                           | —                           | (35)                        | (716)                       |
| Loss on extinguishment of debt        | —                           | —                           | —                           | —                           | (268)                       |
| Equity investment MTM adjustments     | 29                          | (8)                         | 115                         | 26                          | (134)                       |
| Unrealized (gain)/loss on investments | (14)                        | —                           | —                           | —                           | —                           |
| Tax Cuts and Jobs Act                 | —                           | (394)                       | —                           | —                           | —                           |

Consolidated Balance Sheet Data

|                                                                   |                  |                  |                  |                  |                  |
| ----------------------------------------------------------------- | ---------------- | ---------------- | ---------------- | ---------------- | ---------------- |
|                                                                   | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| **(in millions)**                                                 | **2018**         | **2017**         | **2016**         | **2015**         | **2014**         |
| Total assets                                                      | $60,266          | $53,671          | $51,850          | $53,134          | $54,005          |
| Long\-term debt and finance leases (including current maturities) | 9,771            | 8,834            | 7,332            | 8,329            | 9,661            |
| Stockholders' equity                                              | 13,687           | 12,530           | 11,277           | 10,850           | 8,813            |

 25


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

***Other Operating Expenses***

Other operating expenses increased$195 million, or 53%, compared to 2016\. On a Combined Comparative basis, other operating expenses increased$109 million, or 24%, primarily due to higher costs associated with crew costs such as hotels and per diems, training, higher IT costs, an increase in scrapped parts inventory, and higher property taxes\.

***Special Items—Merger\-Related Costs***

We recorded special items of $116 million for merger\-related costs associated with our acquisition of Virgin America in 2017, compared to $117 million in 2016, which reflects the results of Virgin America from December 14, 2016 through December 31, 2016, and $138 million on a Combined Comparative basis in 2016\. Costs incurred in 2017 consisted primarily of severance and retention costs, and IT integration costs\.

***Consolidated Nonoperating Income (Expense)***

During 2017, we recorded nonoperating expense of $49 million, compared to nonoperating income of $10 million in 2016\. On a Combined Comparative basis, nonoperating expense increased by $40 million, primarily due to interest expense incurred in 2017 on the debt issued in 2016 to finance the acquisition of Virgin America\.

***ADDITIONAL SEGMENT INFORMATION***

Refer to **Note 13** of the consolidated financial statements for a detailed description of each segment\. Below is a summary of each segments' profitability\.

***Mainline***

Mainline adjusted pretax profit was $1\.2 billion in 2017 compared to $1\.3 billion in 2016\. On a Combined Comparative basis, Mainline adjusted pretax profit decreased by $267 million\. The table below provides the reconciliation of the impact of Virgin America on the comparative results for our Mainline segment, excluding merger\-related costs and mark\-to\-market fuel\-hedge accounting charges:

|                                            |                                      |                                      |                                      |                                      |              |
| ------------------------------------------ | ------------------------------------ | ------------------------------------ | ------------------------------------ | ------------------------------------ | ------------ |
|                                            | **Twelve Months Ended December 31,** | **Twelve Months Ended December 31,** | **Twelve Months Ended December 31,** | **Twelve Months Ended December 31,** | **Change**   |
|                                            | **Air Group**                        | **Air Group**                        | **Virgin America**                   | **Combined**                         | **Combined** |
| ***(in millions)***                        | **2017**  **^(b)^**                  | **2016** **^(b)^**                   | **2016** **^(c)^**                   | **2016** **^(a)^**                   | **$**        |
| **Mainline**                               |                                      |                                      |                                      |                                      |              |
| Operating revenues                         | $6,832                               | $4,908                               | $1,564                               | $6,472                               | $360         |
| Non\-fuel, non\-special operating expenses | 4,271                                | 2,919                                | 1,028                                | 3,947                                | 324          |
| Economic fuel                              | 1,282                                | 719                                  | 293                                  | 1,012                                | 270          |
| Operating income                           | 1,279                                | 1,270                                | 243                                  | 1,513                                | (234)        |
| Nonoperating income (expense)              | (35)                                 | 17                                   | (19)                                 | (2)                                  | (33)         |
| Pretax profit                              | $1,244                               | $1,287                               | $224                                 | $1,511                               | $(267)       |

^(a), (b), (c)^ See footnotes on the Combined Comparative Operating Statistics table above\.

The $267 million decrease in Combined Comparative pretax profit was driven by a $270 million increase in Mainline fuel expense, a $324 million increase in Mainline non\-fuel operating expenses, and a $33 million increase in nonoperating expense\. These increases were partially offset by a $360 million increase in Mainline passenger revenue\. Higher raw fuel prices and an increase in gallons consumed to support additional flying, drove the increase in Mainline fuel expense\. Non\-fuel operating expenses increased due to higher wages to support our growth, and higher operating expenses as described above\. Nonoperating expense increased primarily due to increased interest expense\. Mainline revenue increased due to higher capacity from new routes\.

***Regional***

Our Regional operations contributed a pretax profit of $34 million in 2017 compared to $124 million in 2016\. The $90 million decrease in pretax profit was driven by an $83 million higher non\-fuel operating expense due in large part to increased capacity, and higher raw fuel costs, partially offset by a $40 million increase in revenue\.

 47