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

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

|              |                                                                                |
| ------------ | ------------------------------------------------------------------------------------------- |
| **ITEM 7\.** | **MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS\.** |

Overview

United Airlines Holdings, Inc\. (together with its consolidated subsidiaries, "UAL" or the "Company") is a holding company and its principal, wholly\-owned subsidiary is United Airlines, Inc\. (together with its consolidated subsidiaries, "United")\. As UAL consolidates United for financial statement purposes, disclosures that relate to activities of United also apply to UAL, unless otherwise noted\. United's operating revenues and operating expenses comprise nearly 100% of UAL's revenues and operating expenses\. In addition, United comprises approximately the entire balance of UAL's assets, liabilities and operating cash flows\. When appropriate, UAL and United are named specifically for their individual contractual obligations and related disclosures and any significant differences between the operations and results of UAL and United are separately disclosed and explained\. We sometimes use the words "we," "our," "us," and the "Company" in this report for disclosures that relate to all of UAL and United\.

2019  Highlights

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| • | 2019  net income was  $3\.0 billion , or  $11\.58  diluted earnings per share, as compared to  $2\.1 billion , or  $7\.67  diluted earnings per share, in  2018 \. |

|   |                                                                                |
| - | -------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | Revenue for  2019  increased  $1\.9 billion  over  2018  due to a  3\.5%  growth in ASMs and a PRASM increase of  1\.5%  in  2019  compared to  2018 \.  |

|   |                                                                                |
| - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | In  2019 , UAL repurchased approximately  19\.2 million  of its common stock for  $1\.6 billion \. As of  December 31, 2019 , the Company had approximately  $3\.1 billion  remaining to purchase shares under its share repurchase programs\. |

|   |                                                                                |
| - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| • | UAL ended  2019  with  $6\.9 billion  in unrestricted liquidity, which consisted of unrestricted cash, cash equivalents, short\-term investments and available capacity under the revolving credit facility of its Amended and Restated Credit and Guaranty Agreement (as amended, the "Credit Agreement")\. |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | RPMs for  2019  increased  4\.0%  as compared to  2018 , and ASMs increased  3\.5%  from the prior year, resulting in a load factor of  84\.0%  in  2019  versus 83\.6% in  2018 \. |

|   |                                                                                |
| - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | For  2019  and  2018 , the Company recorded U\.S\. Department of Transportation on\-time arrival rates of 77\.9% and 79\.8%, respectively, and mainline completion factors of 99\.2%\. |

Results of Operations

The following discussion provides an analysis of our results of operations and reasons for material changes therein for  2019  as compared to  2018 \. See "Results of Operations" in Part II, Item 7\. Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 2018 Annual Report on Form 10\-K, filed with the SEC on February 28, 2019 (the " 2018  Annual Report"), for analysis of the 2018 results as compared to 2017\.

Operating Revenue\.  The table below illustrates the year\-over\-year percentage change in the Company's operating revenues for the years ended December 31 (in millions, except percentage changes):

|                         |          |          |                         |              |
| ----------------------- | -------- | -------- | ----------------------- | ------------ |
|                         | **2019** | **2018** | **Increase (Decrease)** | **% Change** |
| Passenger revenue       | $39,625  | $37,706  | $1,919                  | 5\.1         |
| Cargo                   | 1,179    | 1,237    | (58)                    | (4\.7)       |
| Other operating revenue | 2,455    | 2,360    | 95                      | 4\.0         |
| Total operating revenue | $43,259  | $41,303  | $1,956                  | 4\.7         |

28


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

Depreciation and Amortization\.  The increase in depreciation and amortization primarily results from $79 million of accelerated depreciation due to the decision to early retire our MD\-90 fleet by the end of 2022, new aircraft deliveries, fleet modifications and technology enhancements\. As we take delivery of new aircraft, we continue to evaluate our current fleet compared to network requirements\. See Note 11 of the Notes to the Consolidated Financial Statements for additional information on the planned early retirement of our MD\-90 fleet\.

In addition to investing in our fleet, we have also increased our technology investments in an effort to enhance interactions with our customers and allow us to deliver more personalized service, further enhancing the customer experience and strengthening our brand and competitive position\. During 2019, we delivered several capabilities that enable our front\-line employees to personalize their interactions with our customers, added self\-service features on the FlyDelta app, including automatic international check\-in, integrated security wait times and the ability to pre\-select meals in Delta One and domestic First Class\. In addition, we expanded facial recognition biometric boarding for international travelers in the Atlanta, Minneapolis\-St\. Paul and Salt Lake City airports\. These increased capital expenditures have led to a corresponding increase in depreciation and amortization\.

Aircraft Maintenance Materials and Outside Repairs\.  Aircraft maintenance materials and outside repairs consist of costs associated with the maintenance of aircraft used in our operations\. The increase primarily relates to a higher volume of scheduled engine overhauls on certain aircraft during the second half of 2019\.

Profit Sharing\.  Profit sharing expense increased $342 million to $1\.6 billion, marking the sixth consecutive year that Delta employees will receive over $1 billion in recognition of their contributions to the company's performance\. The increase in profit sharing is related to higher profit during the year\. Our profit sharing program pays 10% to all eligible employees for the first $2\.5 billion of annual profit and 20% of annual profit above $2\.5 billion\.

Ancillary Businesses and Refinery\.  Ancillary businesses and refinery includes expenses associated with aircraft maintenance services we provide to third parties, our vacation wholesale operations, our private jet operations and refinery sales to third parties\. Expenses related to refinery sales to third parties, which are at or near cost, decreased  $451 million compared to the prior year\. In addition, approximately $200 million of costs related to services performed by DGS on behalf of third parties were recorded in ancillary businesses and refinery prior to the sale of that business in December 2018\. These decreases were partially offset by growth in our MRO business, as discussed above\.

In January 2020, we combined Delta Private Jets, our wholly owned subsidiary which provides private jet operations, with Wheels Up\. Upon closing, we received a 27% equity stake in Wheels Up\. Delta Private Jets will no longer be consolidated and annual costs of approximately $200 million, which have historically been incurred ratably through the year, will no longer be reflected in ancillary businesses and refinery expense\.

34


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

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

**United Continental Holdings, Inc\. Management Report on Internal Control Over Financial Reporting**

February 28, 2019

To the Stockholders of United Continental Holdings, Inc\.

Chicago, Illinois

The management of United Continental Holdings, Inc\. ("UAL") is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a\-15(f)\. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles\. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements\. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate\.

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the design and operating effectiveness of our internal control over financial reporting as of December 31, 2018\. In making this assessment, management used the framework set forth in Internal Control—Integrated Framework (2013 Framework)issued by the Committee of the Sponsoring Organizations of the Treadway Commission\. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was effective as of December 31, 2018\.

Our independent registered public accounting firm, Ernst & Young LLP, who audited UAL's consolidated financial statements included in this Form 10\-K, has issued a report on UAL's internal control over financial reporting, which is included herein\.

**United Airlines, Inc\. Management Report on Internal Control Over Financial Reporting**

February 28, 2019

To the Stockholder of United Airlines, Inc\.

Chicago, Illinois

The management of United Airlines, Inc\. ("United") is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a\-15(f)\. United's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles\. Because of its inherent limitations, United's internal control over financial reporting may not prevent or detect misstatements\. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate\.

Under the supervision and with the participation of management, including United's Chief Executive Officer and Chief Financial Officer, United conducted an evaluation of the design and operating effectiveness of its internal control over financial reporting as of December 31, 2018\. In making this assessment, management used the framework set forth in Internal Control—Integrated Framework (2013 Framework) issued by the Committee of the Sponsoring Organizations of the Treadway Commission\. Based on this evaluation, United's Chief Executive Officer and Chief Financial Officer concluded that its internal control over financial reporting was effective as of December 31, 2018\.

This annual report does not include an attestation report of United's registered public accounting firm regarding internal control over financial reporting\. Management's report was not subject to attestation by United's registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit United to provide only management's report in this annual report\.

92


Annual Report of Southwest Airlines Co\. for year 2018

In addition, the Company also had the following amounts associated with fuel derivative instruments and hedging activities in its Consolidated Balance Sheet:

|                                                                                |                                                          |                  |                  |
| --------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ---------------- | ---------------- |
|                                                                                | **Balance Sheet**                                        | **December 31,** | **December 31,** |
| **(in millions)**                                                                             | **location**                                             | **2018**         | **2017**         |
| Cash collateral deposits held from counterparties for fuel contracts \- current

 | Offset against Prepaid expenses and other current assets | $—               | $15              |
| Due to third parties for fuel contracts                                                       | Accounts payable                                         | —                | 29               |
| Receivable from third parties for fuel contracts                                              | Accounts and other receivables                           | 2                | —                |

All of the Company's fuel derivative instruments and interest rate swaps are subject to agreements that follow the netting guidance in the applicable accounting standards for derivatives and hedging\. The types of derivative instruments the Company has determined are subject to netting requirements in the accompanying Consolidated Balance Sheet are those in which the Company pays or receives cash for transactions with the same counterparty and in the same currency via one net payment or receipt\. For cash collateral held by the Company or provided to counterparties, the Company nets such amounts against the fair value of the Company's derivative portfolio by each counterparty\. The Company has elected to utilize netting for both its fuel derivative instruments and interest rate swap agreements and also classifies such amounts as either current or noncurrent, based on the net fair value position with each of the Company's counterparties in the Consolidated Balance Sheet\.

The Company's application of its netting policy associated with cash collateral differs depending on whether its derivative instruments are in a net asset position or a net liability position\. If its fuel derivative instruments are in a net asset position with a counterparty, cash collateral amounts held are first netted against current outstanding derivative asset amounts associated with that counterparty until that balance is zero, and then any remainder is applied against the fair value of noncurrent outstanding derivative instruments\. If the Company's fuel derivative instruments are in a net liability position with the counterparty, cash collateral amounts provided are first netted against noncurrent outstanding derivative amounts associated with that counterparty until that balance is zero, and then any remainder is applied against the fair value of current outstanding derivative instruments\.

The Company has the following recognized financial assets and financial liabilities resulting from those transactions that meet the scope of the disclosure requirements as necessitated by applicable accounting guidance for balance sheet offsetting:

|                                     |                                           |                                        |                                               |                                                          |                                     |                                        |                                               |                                                          |     |
| ----------------------------------- | ----------------------------------------- | -------------------------------------- | --------------------------------------------- | -------------------------------------------------------- | ----------------------------------- | -------------------------------------- | --------------------------------------------- | -------------------------------------------------------- | --- |
| **Offsetting of derivative assets** | **Offsetting of derivative assets**       | **Offsetting of derivative assets**    | **Offsetting of derivative assets**           | **Offsetting of derivative assets**                      | **Offsetting of derivative assets** | **Offsetting of derivative assets**    | **Offsetting of derivative assets**           | **Offsetting of derivative assets**                      |     |
| (in millions)                       | (in millions)                             | (in millions)                          | (in millions)                                 | (in millions)                                            | (in millions)                       | (in millions)                          | (in millions)                                 | (in millions)                                            |     |
|                                     |                                           | (i)                                    | (ii)                                          | (iii) = (i) \+ (ii)                                      |                                     | (i)                                    | (ii)                                          | (iii) = (i) \+ (ii)                                      |     |
|                                     |                                           | **December 31, 2018**                  | **December 31, 2018**                         | **December 31, 2018**                                    |                                     | **December 31, 2017**                  | **December 31, 2017**                         | **December 31, 2017**                                    |     |
| **Description**                     | **Balance Sheet location**                | **Gross amounts of recognized assets** | **Gross amounts offset in the Balance Sheet** | **Net amounts of assets presented in the Balance Sheet** |                                     | **Gross amounts of recognized assets** | **Gross amounts offset in the Balance Sheet** | **Net amounts of assets presented in the Balance Sheet** |     |
| Fuel derivative contracts           | Prepaid expenses and other current assets | $43                                    | $—                                            | $43                                                      |                                     | $147                                   | $(50)                                         | $97                                                      |     |
| Fuel derivative contracts           | Other assets                              | $95                                    | $—                                            | $95                                                      | (a)                                 | $136                                   | $—                                            | $136                                                     | (a) |

(a) The net amounts of derivative assets and liabilities are reconciled to the individual line item amounts presented in the Consolidated Balance Sheet in Note 15\.

100


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

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

***Benefit Plan Assets Measured at Fair Value on a Recurring Basis***

The fair value of our pension plan assets at December 31, 2018 and 2017, by asset category, are as follows (in millions):

|                                                                                |                                                                                |                                                                              |                                                                                |                                                     |
| -------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------------------- |
|                                                                                | **Fair Value Measurements as of December 31, 2018**                                                            | **Fair Value Measurements as of December 31, 2018**                          | **Fair Value Measurements as of December 31, 2018**                            | **Fair Value Measurements as of December 31, 2018** |
| **Asset Category**                                                                           | **Quoted Prices in**

**Active Markets**

**for Identical**

**Assets**

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

**Observable**

**Inputs**

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

**Unobservable**

**Inputs**

**(Level 3)** | **Total**                                           |
| Cash and cash equivalents                                                                    | $23                                                                                | $—                                                                           | $—                                                                             | $23                                                 |
| Equity securities:                                                                           |                                                                                |                                                                              |                                                                                |                                                     |
| International markets  ^(a)^  ^(b)^                                                          | 3,181                                                                                | —                                                                            | —                                                                              | 3,181                                               |
| Large\-cap companies  ^(b)^                                                                  | 2,021                                                                                | —                                                                            | —                                                                              | 2,021                                               |
| Mid\-cap companies  ^(b)^                                                                    | 583                                                                                | —                                                                            | —                                                                              | 583                                                 |
| Small\-cap companies  ^(b)^                                                                  | 122                                                                                | —                                                                            | —                                                                              | 122                                                 |
| Mutual funds  ^(c)^                                                                          | 52                                                                                | —                                                                            | —                                                                              | 52                                                  |
| Fixed income:                                                                                |                                                                                |                                                                              |                                                                                |                                                     |
| Corporate debt  ^(d)^                                                                        | —                                                                                | 2,116                                                                        | —                                                                              | 2,116                                               |
| Government securities  ^(e)^                                                                 | —                                                                                | 228                                                                          | —                                                                              | 228                                                 |
| U\.S\. municipal securities                                                                  | —                                                                                | 40                                                                           | —                                                                              | 40                                                  |
| Alternative instruments:                                                                     |                                                                                |                                                                              |                                                                                |                                                     |
| Private market partnerships  ^(f)^                                                           | —                                                                                | —                                                                            | 7                                                                              | 7                                                   |
| Private market partnerships measured at net asset value  ^(f) (h)^                           | —                                                                                | —                                                                            | —                                                                              | 1,188                                               |
| Common/collective trusts  ^(g)^                                                              | —                                                                                | 218                                                                          | —                                                                              | 218                                                 |
| Common/collective trusts and 103\-12 Investment Trust measured at net asset value  ^(g) (h)^ | —                                                                                | —                                                                            | —                                                                              | 227                                                 |
| Insurance group annuity contracts                                                            | —                                                                                | —                                                                            | 2                                                                              | 2                                                   |
| Dividend and interest receivable                                                             | 47                                                                                | —                                                                            | —                                                                              | 47                                                  |
| Due to/from brokers for sale of securities – net                                             | 5                                                                                | —                                                                            | —                                                                              | 5                                                   |
| Other liabilities – net                                                                      | (7)                                                                                | —                                                                            | —                                                                              | (7)                                                 |
| Total                                                                                | $6,027                                                                                | $2,602                                                                       | $9                                                                             | $10,053                                             |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| ^(a)^ | Holdings are diversified as follows:  17%  United Kingdom,  10%  Japan,  8%  France,  7%  Switzerland,  6%  Ireland,  17%  emerging markets and the remaining  35%  with no concentration greater than 5% in any one country\. |

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

|       |                                                                                |
| ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(c)^ | Investment includes mutual funds invested  37%  in equity securities of large\-cap, mid\-cap and small\-cap U\.S\. companies,  38%  in U\.S\. treasuries and corporate bonds and  25%  in equity securities of international companies\. |

|       |                                                                                |
| ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(d)^ | Includes approximately  77%  investments in corporate debt with a S&P rating lower than A and  23%  investments in corporate debt with a S&P rating A or higher\. Holdings include  85%  U\.S\. companies,  12%  international companies and  3%  emerging market companies\. |

|       |                                                                                |
| ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(e)^ | Includes approximately  32%  investments in U\.S\. domestic government securities,  37%  in emerging market government securities and  31%  in international government securities\. There are no significant foreign currency risks within this classification\. |

|       |                                                                                |
| ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(f)^ | Includes limited partnerships that invest primarily in U\.S\. ( 94% ) and European ( 6% ) buyout opportunities of a range of privately held companies\. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated\. It is estimated that the underlying assets of these funds will be gradually liquidated over the next  one  to  ten years \. Additionally, the pension plan’s master trust has future funding commitments of approximately  $1\.0 billion  over the next  ten years \. |

116


Annual Report of Southwest Airlines Co\. for year 2019

Equity Compensation Plan Information

|                                                            |                                                                                |     |                                                                                |     |                                                                                |     |
| ---------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --- | -------------------------------------------------------------------------------------------------------------------------------------------- | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --- |
| **Plan Category**                                          | **Number of Securities**

**to be Issued Upon**

**Exercise of**

**Outstanding**

**Options,**

**Warrants, and**

**Rights**

**(a)** |     | **Weighted\-Average**

**Exercise Price of**

**Outstanding Options,**

**Warrants, and**

**Rights**

**(b)** |     | **Number of Securities Remaining Available for**

**Future Issuance Under**

**Equity Compensation**

**Plans (Excluding**

**Securities Reflected**

**in Column (a))**

**(c)** |     |
| Equity Compensation Plans Approved by Security Holders     | 1,545,172                                                                                | (1) | $—                                                                                | (2) | 27,426,634                                                                                | (3) |
| Equity Compensation Plans not Approved by Security Holders | 1,800                                                                                |     | $9\.00                                                                                |     | —                                                                                |     |
| Total                                                      | 1,546,972                                                                                |     | $—                                                                                | (2) | 27,426,634                                                                                |     |

|     |                                                                             |
| --- | --------------------------------------------------------------------------- |
| (1) | Restricted share units settleable in shares of the Company’s common stock\. |

|     |                                                                                |
| --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| (2) | Restricted share units discussed in footnote (1) above do not have a weighted average exercise price because the restricted share units do not have an exercise price upon vesting\. |

|      |                                                                                |
| ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (3)  | Of these shares, (i)  7,348,212  shares remained available for issuance under the Company’s tax\-qualified employee stock purchase plan; and (ii)  20,078,422  shares remained available for issuance under the Company’s 2007 Equity Incentive Plan in connection with the exercise of stock options and stock appreciation rights, the settlement of awards of restricted stock, restricted stock units, and phantom shares, and the grant of unrestricted shares of common stock; however, no more than  1,152,529  shares remain available for grant in connection with awards of unrestricted shares of common stock, stock\-settled phantom shares, and awards to non\-Employee members of the Board\. These shares are in addition to the shares reserved for issuance pursuant to outstanding awards included in column (a)\. |

See  Note 9  to the Consolidated Financial Statements for information regarding the material features of the above plans\. Each of the above plans provides that the number of shares with respect to which options may be granted, the number of shares of common stock subject to an outstanding option, and the number of restricted share units granted shall be proportionately adjusted in the event of a subdivision or consolidation of shares or the payment of a stock dividend on common stock, and the purchase price per share of outstanding options shall be proportionately revised\.

Item 13\.  Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 will be set forth under the heading “Certain Relationships and Related Transactions, and Director Independence” in the Proxy Statement for the Company’s  2020  Annual Meeting of Shareholders and is incorporated herein by reference\.

Item 14\.  Principal Accounting Fees and Services

The information required by this Item 14 will be set forth under the heading “Relationship with Independent Auditors” in the Proxy Statement for the Company’s  2020  Annual Meeting of Shareholders and is incorporated herein by reference\.

118


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

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

Reclassifications out of AOCI for the years ended December 31, 2018 and 2017 are as follows (in millions):

|                                                                             |                                    |                                    |                                                                                |
| --------------------------------------------------------------------------- | ---------------------------------- | ---------------------------------- | ------------------------------------------------------------------------------ |
|                                                                             | **Amounts reclassified from AOCI** | **Amounts reclassified from AOCI** | **Affected line items on the
consolidated statements of
operations** |
|                                                                             | **Year Ended December 31,**        | **Year Ended December 31,**        | **Affected line items on the
consolidated statements of
operations** |
| **AOCI Components**                                                         | **2018**                           | **2017**                           | **Affected line items on the
consolidated statements of
operations** |
| Amortization of pension, retiree medical and other postretirement benefits: |                                    |                                    |                                                                                |
| Prior service benefit                                                       | $(161)                             | $(132)                             | Nonoperating other income, net                                                 |
| Actuarial loss                                                              | 92                                 | 77                                 | Nonoperating other income, net                                                 |
| Total reclassifications for the period, net of tax                          | $(69)                              | $(55)                              |                                                                                |

Amounts allocated to other comprehensive income (OCI) for income taxes as further described in Note 5 will remain in AOCI until American ceases all related activities, such as termination of the pension plan\.

**10\. Commitments, Contingencies and Guarantees**

***(a) Aircraft, Engine and Other Purchase Commitments***

Under all of American’s aircraft and engine purchase agreements, its total future commitments as of December 31, 2018 are expected to be as follows (approximately, in millions):

|                                                              |          |          |          |          |          |                         |           |
| ------------------------------------------------------------ | -------- | -------- | -------- | -------- | -------- | ----------------------- | --------- |
|                                                              | **2019** | **2020** | **2021** | **2022** | **2023** | **2024 and Thereafter** | **Total** |
| Payments for aircraft commitments and certain engines  ^(1)^ | $2,906   | $1,683   | $994     | $1,378   | $1,450   | $6,047                  | $14,458   |

|       |                                                                                |
| ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(1)^ | These amounts are net of purchase deposits currently held by the manufacturers and include all commitments for regional aircraft\. American has granted a security interest in certain of its purchase deposits with Boeing\. American’s purchase deposits held by all manufacturers totaled  $1\.3 billion  as of  December 31, 2018 \. |

Additionally, American has purchase commitments related to jet fuel, construction projects and information technology support as follows (approximately): $1\.9 billion in 2019, $1\.1 billion in 2020, $1\.0 billion in 2021, $32 million in 2022 and $7 million in 2023\.

***(b) Capacity Purchase Agreements with Third\-Party Regional Carriers***

American has capacity purchase agreements with third\-party regional carriers\. The capacity purchase agreements provide that all revenues, including passenger, in\-flight, ancillary, mail and freight revenues, go to American\. In return, American agrees to pay predetermined fees to these airlines for operating an agreed\-upon number of aircraft, without regard to the number of passengers on board\. In addition, these agreements provide that American either reimburses or pays 100% of certain variable costs, such as airport landing fees, fuel and passenger liability insurance\. American controls marketing, scheduling, ticketing, pricing and seat inventories\.

As of December 31, 2018, American’s capacity purchase agreements with third\-party regional carriers had expiration dates ranging from 2019 to 2027, with rights of American to extend the respective terms of certain agreements\. See Part I, Item 2\. Properties for unaudited information on the aircraft operated by third\-party regional carriers under such capacity purchase agreements\.

166


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

10\-K 1 a10k123117\.htm 10\-K

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D\.C\. 20549**

|                |                |                |
| -------------- | -------------- | -------------- |
| **FORM 10\-K** | **FORM 10\-K** | **FORM 10\-K** |

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

**For the Fiscal Year Ended** **December 31, 2017**

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

**For the Transition Period From to**

Commission file number 1\-8400

|                                                                                |                                                                                |                                                                                |
| --------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- |
| **American Airlines Group Inc\.**
(Exact name of registrant as specified in its charter) | **American Airlines Group Inc\.**
(Exact name of registrant as specified in its charter) | **American Airlines Group Inc\.**
(Exact name of registrant as specified in its charter) |

|                                                                           |                                                      |
| ------------------------------------------------------------------------- | ---------------------------------------------------- |
| **Delaware**                                                              | **75\-1825172**                                      |
| *(State or other jurisdiction of*

*incorporation or organization)* | *(I\.R\.S\. Employer*

*Identification No\.)*  |
| **4333 Amon Carter Blvd\., Fort Worth, Texas 76155**                      | **(817) 963\-1234**                                  |
| *(Address of principal executive offices, including zip code)*            | *Registrant’s telephone number, including area code* |

*(Former name, former address and former fiscal year, if changed since last report)*

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

|                                          |                                          |
| ---------------------------------------- | ---------------------------------------- |
|                                          | **Name of Exchange on Which Registered** |
| Common Stock, $0\.01 par value per share | NASDAQ                                   |

**Securities registered pursuant to Section 12(g) of the Act: None**

Commission file number 1\-2691

|                                                                                |                                                                                |                                                                                |
| ---------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- |
| **American Airlines, Inc\.**
(Exact name of registrant as specified in its charter) | **American Airlines, Inc\.**
(Exact name of registrant as specified in its charter) | **American Airlines, Inc\.**
(Exact name of registrant as specified in its charter) |

|                                                                           |                                                      |
| ------------------------------------------------------------------------- | ---------------------------------------------------- |
| **Delaware**                                                              | **13\-1502798**                                      |
| *(State or other jurisdiction of*

*incorporation or organization)* | *(I\.R\.S\. Employer*

*Identification No\.)*  |
| **4333 Amon Carter Blvd\., Fort Worth, Texas 76155**                      | **(817) 963\-1234**                                  |
| *(Address of principal executive offices, including zip code)*            | *Registrant’s telephone number, including area code* |

**Securities registered pursuant to Section 12(b) of the Act: None**

**Securities registered pursuant to Section 12(g) of the Act: None**

**\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**

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

|                               |     |   |    |   |
| ----------------------------- | --- | - | -- | - |
| American Airlines Group Inc\. | Yes | ☒ | No | ☐ |
| American Airlines, Inc\.      | Yes | ☒ | No | ☐ |


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

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of United Airlines Holdings, Inc\.

Opinion on Internal Control over Financial Reporting

We have audited United Airlines Holdings, Inc\.'s (the "Company") internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control\-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the "COSO criteria")\. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria\.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated financial statements as of and for the year ended December 31, 2019 of the Company and our report dated  February 24, 2020  expressed an unqualified opinion thereon\.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting in Item 9A\. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit\. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U\.S\. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB\.

We conducted our audit in accordance with the standards of the PCAOB\. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects\.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances\. We believe that our audit provides a reasonable basis for our opinion\.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles\. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements\.

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

/s/ Ernst & Young LLP

Chicago, Illinois

February 24, 2020

91


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

**ALASKA AIR GROUP, INC\.**

**ANNUAL REPORT ON FORM 10\-K FOR THE YEAR ENDED** **DECEMBER 31, 2017**

**TABLE OF CONTENTS**

|                                                                        |                                                                                |                                                                      |
| ---------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------- |
| [PART I](https://www.example.com#s0CE508D00E9A24F6A1713A1219276966)    |                                                                                |
[ 4](https://www.example.com#s0CE508D00E9A24F6A1713A1219276966)  |
| [ITEM 1\.](https://www.example.com#s5646D4EA5E0763F386073A121946324C)  | [OUR BUSINESS](https://www.example.com#s5646D4EA5E0763F386073A121946324C)                                                                                |
[ 4](https://www.example.com#s5646D4EA5E0763F386073A121946324C)  |
| [ITEM 1A\.](https://www.example.com#s4520FACDB428E286EACA3A121C81E178) | [RISK FACTORS](https://www.example.com#s4520FACDB428E286EACA3A121C81E178)                                                                                |
[ 20](https://www.example.com#s4520FACDB428E286EACA3A121C81E178) |
| [ITEM 1B\.](https://www.example.com#s7406FBD065220AEDBB083A121CBF6DA8) | [UNRESOLVED STAFF COMMENTS](https://www.example.com#s7406FBD065220AEDBB083A121CBF6DA8)                                                                                |
[ 27](https://www.example.com#s7406FBD065220AEDBB083A121CBF6DA8) |
| [ITEM 2\.](https://www.example.com#sCA154733EB6ECDBDBCD63A121CDF3F58)  | [PROPERTIES](https://www.example.com#sCA154733EB6ECDBDBCD63A121CDF3F58)                                                                                |
[ 27](https://www.example.com#sCA154733EB6ECDBDBCD63A121CDF3F58) |
| [ITEM 3\.](https://www.example.com#s5375CD3C0F2FBC064F073A121D5B78AE)  | [LEGAL PROCEEDINGS](https://www.example.com#s5375CD3C0F2FBC064F073A121D5B78AE)                                                                                |
[ 28](https://www.example.com#s5375CD3C0F2FBC064F073A121D5B78AE) |
| [ITEM 4\.](https://www.example.com#s341CB29EC9C615707EA53A121D8A1E36)  | [MINE SAFETY DISCLOSURES](https://www.example.com#s341CB29EC9C615707EA53A121D8A1E36)                                                                                |
[ 28](https://www.example.com#s341CB29EC9C615707EA53A121D8A1E36) |
| [PART II](https://www.example.com#sCBA70ADA9C17342B641A3A121DB9D293)   |                                                                                |
[ 28](https://www.example.com#sCBA70ADA9C17342B641A3A121DB9D293) |
| [ITEM 5\.](https://www.example.com#s73B8D3E1EA909859B23A3A121DD87BC8)  | [MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES](https://www.example.com#s73B8D3E1EA909859B23A3A121DD87BC8) |
[ 28](https://www.example.com#s73B8D3E1EA909859B23A3A121DD87BC8) |
| [ITEM 6\.](https://www.example.com#sED73BA38D31630CDA10D3A121E84B46B)  | [SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA](https://www.example.com#sED73BA38D31630CDA10D3A121E84B46B)                                                                |
[ 31](https://www.example.com#sED73BA38D31630CDA10D3A121E84B46B) |
| [ITEM 7\.](https://www.example.com#s9E44BE501BB85E6A38A73A121EC20467)  | [MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](https://www.example.com#s9E44BE501BB85E6A38A73A121EC20467)                             |
[ 33](https://www.example.com#s9E44BE501BB85E6A38A73A121EC20467) |
| [ITEM 7A\.](https://www.example.com#s3A2E0EE6622D6E9442413A1220482E88) | [QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK](https://www.example.com#s3A2E0EE6622D6E9442413A1220482E88)                                                         |
[ 59](https://www.example.com#s3A2E0EE6622D6E9442413A1220482E88) |
| [ITEM 8\.](https://www.example.com#s4A38DC3C72787A8F70F93A1220C55222)  | [CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](https://www.example.com#s4A38DC3C72787A8F70F93A1220C55222)                                                          |
[ 59](https://www.example.com#s4A38DC3C72787A8F70F93A1220C55222) |
| [ITEM 9\.](https://www.example.com#s98E4870D15644C1CCA673A122547D6A2)  | [CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](https://www.example.com#s98E4870D15644C1CCA673A122547D6A2)                              |
[ 94](https://www.example.com#s98E4870D15644C1CCA673A122547D6A2) |
| [ITEM 9A\.](https://www.example.com#s51C34D4EB9E00B9924B23A1225479536) | [CONTROLS AND PROCEDURES](https://www.example.com#s51C34D4EB9E00B9924B23A1225479536)                                                                                |
[ 94](https://www.example.com#s51C34D4EB9E00B9924B23A1225479536) |
| [ITEM 9B\.](https://www.example.com#s5F582E8520273204EB0E3A122631C086) | [OTHER INFORMATION](https://www.example.com#s5F582E8520273204EB0E3A122631C086)                                                                                |
[ 97](https://www.example.com#s5F582E8520273204EB0E3A122631C086) |
| [PART III](https://www.example.com#s56D936CCE0A91EBF3E4B3A122651AB1F)  |                                                                                |
[ 97](https://www.example.com#s56D936CCE0A91EBF3E4B3A122651AB1F) |
| [ITEM 10\.](https://www.example.com#sB55C464BD98DE56F4DC73A12267F50B0) | [DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](https://www.example.com#sB55C464BD98DE56F4DC73A12267F50B0)                                                            |
[ 97](https://www.example.com#sB55C464BD98DE56F4DC73A12267F50B0) |
| [ITEM 11\.](https://www.example.com#s9AC9562F53AA7D49DF2D3A12269F0D51) | [EXECUTIVE COMPENSATION](https://www.example.com#s9AC9562F53AA7D49DF2D3A12269F0D51)                                                                                |
[ 97](https://www.example.com#s9AC9562F53AA7D49DF2D3A12269F0D51) |
| [ITEM 12\.](https://www.example.com#sF80016817ACB8782E5123A120E9C07B8) | [SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS](https://www.example.com#sF80016817ACB8782E5123A120E9C07B8)                   |
[ 97](https://www.example.com#sF80016817ACB8782E5123A120E9C07B8) |
| [ITEM 13\.](https://www.example.com#sEC71C8BAD896DEAB22863A1226EDC702) | [CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](https://www.example.com#sEC71C8BAD896DEAB22863A1226EDC702)                                         |
[ 98](https://www.example.com#sEC71C8BAD896DEAB22863A1226EDC702) |
| [ITEM 14\.](https://www.example.com#s129772137F72C6BB38723A12272B17F2) | [PRINCIPAL ACCOUNTANT FEES AND SERVICES ](https://www.example.com#s129772137F72C6BB38723A12272B17F2)                                                                           |
[ 98](https://www.example.com#s129772137F72C6BB38723A12272B17F2) |
| [PART IV](https://www.example.com#s9AEA440CE118AEECBAB13A12274A0A27)   |                                                                                |
[ 98](https://www.example.com#s9AEA440CE118AEECBAB13A12274A0A27) |
| [ITEM 15\.](https://www.example.com#s37B0155EFB3FE2942C713A1227791E4C) | [EXHIBITS](https://www.example.com#s37B0155EFB3FE2942C713A1227791E4C)                                                                                |
[ 98](https://www.example.com#s37B0155EFB3FE2942C713A1227791E4C) |
|                                                                        | [SIGNATURES](https://www.example.com#sB351A5A502B7D87789043A1227988B75)                                                                                |
[ 99](https://www.example.com#sB351A5A502B7D87789043A1227988B75) |

**As used in this Form 10\-K, the terms “Air Group,” the "Company," “our,” “we” and "us," refer to Alaska Air Group, Inc\. and its subsidiaries, unless the context indicates otherwise\. Alaska Airlines, Inc\., Virgin America Inc\. and Horizon Air Industries, Inc\. are referred to as “Alaska,” "Virgin America" and “Horizon,” respectively, and together as our “airlines\.”**

**CAUTIONARY NOTE REGARDING FORWARD\-LOOKING STATEMENTS**

In addition to historical information, this Form 10\-K contains forward\-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995\. Forward\-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters\. You can generally identify forward\-looking statements as statements containing the words “believe,” “expect,” “will,” “anticipate,” “intend,” “estimate,” “project,” “assume” or other similar expressions, although not all forward\-looking statements contain these identifying words\. Forward\-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or the Company’s present expectations\.

 2


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

Low\-cost carriers (including so\-called ultra\-low\-cost carriers) have a profound impact on industry revenues\. Using the advantage of low unit costs, these carriers offer lower fares in order to shift demand from larger, more established airlines, and represent significant competitors, particularly for customers who fly infrequently and are price sensitive and tend not to be loyal to any one particular carrier\. While historically these carriers have provided competition in domestic markets, we have recently experienced new competition from low\-cost carriers on international routes\. A number of these low\-cost carriers have announced growth strategies including commitments to acquire significant numbers of new aircraft for delivery in the next few years\. These low\-cost carriers are attempting to continue to increase their market share through growth and, potentially, consolidation, and are expected to continue to have an impact on our revenues and overall performance\. We and several other large network carriers have implemented “Basic Economy” fares designed to more effectively compete against low\-cost carriers, but we cannot predict whether these initiatives will be successful or the competitive reaction of the low\-cost carriers\. Competition is also increasing from low\-cost airlines executing international long\-haul expansion strategies, including, for example, Icelandair, Norwegian Air Shuttle and Wow Air\. The actions of existing or future low\-cost carriers, including those described above, could have a material adverse effect on our operations and financial performance\.

We provide air travel internationally, directly as well as through joint business, alliance, codeshare and similar arrangements to which we are a party\. While our network is comprehensive, compared to some of our key global competitors, we generally have somewhat greater relative exposure to certain regions (for example, Latin America) and somewhat lower relative exposures to others (for example, China and parts of Asia)\. Our financial performance relative to our key competitors will therefore be influenced significantly by macro\-economic conditions in particular regions around the world and the relative exposure of our network to the markets in those regions\.

In providing international air transportation, we compete to provide scheduled passenger and cargo service between the U\.S\. and various overseas locations with U\.S\. airlines, foreign investor\-owned airlines and foreign state\-owned or state\-affiliated airlines\. Competition is increasing from foreign state\-owned and state\-affiliated airlines in the Gulf region, including Emirates, Etihad Airways and Qatar Airways\. These carriers have large numbers of international widebody aircraft in service and on order and are increasing service to the U\.S\. from locations both in and outside the Middle East\. Service to and from locations outside of the Middle East is provided by some of these carriers under so\-called “fifth freedom” rights permitted under international treaties which allow service to and from stopover points between an airline’s home country and the ultimate destination\. Such flights, such as a stopover in Europe on flights to the United States, allow the carrier to sell tickets for travel between the stopover point and the United States in competition with service provided by us\. Additionally, these carriers have made significant investments in a number of airlines located outside of the Middle East, such as Air Italy, providing these affiliated airlines with capital and aircraft to permit increases in service that compete with us\. We believe these state\-owned and state\-affiliated carriers in the Gulf region, including their affiliated carriers, benefit from significant government subsidies, which have allowed them to grow quickly, reinvest in their product and expand their global presence\. Competition is also increasing from low\-cost airlines executing international long\-haul expansion strategies, including, for example, Icelandair, Norwegian Air Shuttle and Wow Air\.

Our international service exposes us to foreign economies and the potential for reduced demand, such as we have recently experienced in Venezuela, when any foreign country we serve suffers adverse local economic conditions\. In addition, open skies agreements with an increasing number of countries around the world provide international airlines with open access to U\.S\. markets, potentially subjecting us to increased competition on our international routes\. See also *“Our business is subject to extensive government regulation, which may result in increases in our costs, disruptions to our operations, limits on our operating flexibility, reductions in the demand for air travel, and competitive disadvantages\.”*

Certain airline alliances, joint ventures and joint businesses have been, or may in the future be, granted immunity from antitrust regulations by governmental authorities for specific areas of cooperation, such as joint pricing decisions\. To the extent alliances formed by our competitors can undertake activities that are not available to us, our ability to effectively compete may be hindered\. Our ability to attract and retain customers is dependent upon, among other things, our ability to offer our customers convenient access to desired markets\. Our business could be adversely affected if we are unable to maintain or obtain alliance and marketing relationships with other air carriers in desired markets\.

American has established a transatlantic JBA with British Airways, Iberia and Finnair, and separately, a transpacific JBA with Japan Airlines, each of which has been granted antitrust immunity\. In October 2017, American and its transatlantic partners executed an amended and restated JBA which, among other things, extends the term of the agreement\. An application is pending with the DOT to add Aer Lingus, which is now owned by the parent company of British Airways and Iberia, to the transatlantic JBA\. This relationship benefits from a grant of antitrust immunity from the DOT and was reviewed by the EC in July 2010\. In connection with this review, we provided certain commitments to the EC regarding, among other things, the availability of take\-off and landing slots at LHR or LGW airports\. The commitments accepted by the EC are binding for 10 years with the possibility of renewal by the EC\. However, in light of Brexit and the related possibility that the EC would no

17


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

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

**UNITED AIRLINES, INC\.**

**STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)**

**(In millions)**

|                                                           |                             |                             |                             |
|:--------------------------------------------------------- | ---------------------------:| ---------------------------:| ---------------------------:|
|                                                           | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|                                                           |                   **2017**  |                   **2016**  |                   **2015**  |
| Net income                                                |                     $2,149  |                     $2,264  |                     $7,301  |
| Other comprehensive income (loss), net change related to: |                             |                             |                             |
| Employee benefit plans, net of taxes                      |                       (195) |                       (313) |                         70  |
| Fuel derivative financial instruments, net of taxes       |                          1  |                        316  |                        182  |
| Investments and other, net of taxes                       |                         (6) |                         (1) |                         (4) |
| Total other comprehensive income (loss), net              |                       (200) |                          2  |                        248  |
| Total comprehensive income, net                           |                     $1,949  |                     $2,266  |                     $7,549  |

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

56


Annual Report of Southwest Airlines Co\. for year 2019

an impasse exists and offer binding arbitration to the parties\. If either party rejects binding arbitration, a 30\-day "cooling off" period begins\. At the end of this 30\-day period, the parties may engage in "self\-help," unless a Presidential Emergency Board is established to investigate and report on the dispute\. The appointment of a Presidential Emergency Board maintains the "status quo" for an additional period of time\. If the parties do not reach agreement during this period, the parties may then engage in "self\-help\." "Self\-help" includes, among other things, a strike by the union or the airline’s imposition of any or all of its proposed amendments and the hiring of new employees to replace any striking workers\.

The following table sets forth the Company's Employee groups subject to collective bargaining and the status of their respective collective\-bargaining agreements as of December 31, 2019:

|                                                                                |                                     |                                                                                |                          |
| -------------------------------------------------------------------------------------------------- | ----------------------------------- | ----------------------------------------------------------------------------------- | ------------------------ |
| **Employee Group**                                                                                | **Approximate Number of Employees** | **Representatives**                                                                 | **Status of Agreement**  |
| Southwest Pilots                                                                                | 9,300                               | Southwest Airlines Pilots' Association ("SWAPA")                                    | Amendable September 2020 |
| Southwest Flight Attendants                                                                        | 16,000                              | Transportation Workers of America, AFL\-CIO, Local 556 ("TWU 556")                  | In negotiations          |
| Southwest Ramp, Operations, Provisioning, Freight Agents                                           | 13,800                              | Transportation Workers of America, AFL\-CIO, Local 555 ("TWU 555")                  | Amendable February 2021  |
| Southwest Customer Service Agents, Customer Representatives, and Source of Support Representatives | 7,200                               | International Association of Machinists and Aerospace Workers, AFL\-CIO ("IAM 142") | In negotiations          |
| Southwest Material Specialists (formerly known as Stock Clerks)                                    | 300                                 | International Brotherhood of Teamsters, Local 19 ("IBT 19")                         | Amendable April 2024     |
| Southwest Mechanics                                                                                | 2,600                               | Aircraft Mechanics Fraternal Association ("AMFA")                                   | Amendable August 2024    |
| Southwest Aircraft Appearance Technicians                                                          | 200                                 | AMFA                                                                                | Amendable November 2020  |
| Southwest Facilities Maintenance Technicians                                                       | 40                                  | AMFA                                                                                | Amendable November 2022  |
| Southwest Dispatchers                                                                              | 400                                 | Transportation Workers of America, AFL\-CIO, Local 550 ("TWU 550")                  | In negotiations          |
| Southwest Flight Simulator Technicians                                                             | 50                                  | International Brotherhood of Teamsters ("IBT")                                      | Amendable May 2024       |
| Southwest Flight Crew Training Instructors                                                         | 130                                 | Transportation Workers of America, AFL\-CIO, Local 557 ("TWU 557")                  | In negotiations          |
| Southwest Meteorologists                                                                           | 10                                  | TWU 550                                                                             | In negotiations          |

Additional Information About the Company

The Company was incorporated in Texas in 1967\. The following documents are available free of charge through the Company's website, www\.southwest\.com: the Company’s annual report on Form 10\-K, quarterly reports on Form 10\-Q, current reports on Form 8\-K, and any amendments to those reports that are filed with or furnished to the Securities and Exchange Commission ("SEC") pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934\. These materials are made available through the Company's website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC\. In addition to its reports filed or furnished with the SEC, the Company publicly discloses material information from time to time in its press releases, at annual meetings of Shareholders, in publicly accessible conferences and Investor presentations, and through its website (principally in its Press Room and Investor Relations pages)\. References to the Company's website in this Form 10\-K are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Form 10\-K\.

19


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

Future impairment of goodwill or other long\-lived assets could be recorded in results of operations as a result of changes in assumptions, estimates, or circumstances, some of which are beyond our control\. There can be no assurance that a material impairment charge of goodwill or tangible or intangible assets will be avoided\. The value of our aircraft could be impacted in future periods by changes in supply and demand for these aircraft\. Such changes in supply and demand for certain aircraft types could result from grounding of aircraft by us or other airlines\. An impairment charge could have a material adverse effect on our business, results of operations and financial condition\.

The price of AAG common stock has been and may in the future be volatile\.

The market price of AAG common stock has fluctuated in the past, and may fluctuate substantially in the future, due to a variety of factors, many of which are beyond our control, including:

|   |                                                          |
| - | -------------------------------------------------------- |
| • | macro\-economic conditions, including the price of fuel; |

|   |                                                                                |
| - | ----------------------------------------------------------------------------------- |
| • | changes in market values of airline companies as well as general market conditions; |

|   |                                                                                |
| - | --------------------------------------------------------------------------------------------------------- |
| • | our operating and financial results failing to meet the expectations of securities analysts or investors; |

|   |                                                                           |
| - | ------------------------------------------------------------------------- |
| • | changes in financial estimates or recommendations by securities analysts; |

|   |                                                                         |
| - | ----------------------------------------------------------------------- |
| • | changes in our level of outstanding indebtedness and other obligations; |

|   |                                |
| - | ------------------------------ |
| • | changes in our credit ratings; |

|   |                                                  |
| - | ------------------------------------------------ |
| • | material announcements by us or our competitors; |

|   |                                                                                |
| - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | expectations regarding our capital deployment program, including any existing or potential future share repurchase programs and any future dividend payments that may be declared by our Board of Directors, or any determination to cease repurchasing stock or paying dividends; |

|   |                                                                     |
| - | ------------------------------------------------------------------- |
| • | new regulatory pronouncements and changes in regulatory guidelines; |

|   |                                                     |
| - | --------------------------------------------------- |
| • | general and industry\-specific economic conditions; |

|   |                               |
| - | ----------------------------- |
| • | changes in our key personnel; |

|   |                                                                                |
| - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| • | public sales of a substantial number of shares of AAG common stock or issuances of AAG common stock upon the exercise or conversion of restricted stock unit awards, stock appreciation rights, or other securities that may be issued from time to time; |

|   |                                                                                |
| - | ---------------------------------------------------------------------------------------------- |
| • | increases or decreases in reported holdings by insiders or other significant stockholders; and |

|   |                                  |
| - | -------------------------------- |
| • | fluctuations in trading volume\. |

We cannot guarantee that we will continue to repurchase our common stock or pay dividends on our common stock or that our capital deployment program will enhance long\-term stockholder value\. Our capital deployment program could increase the volatility of the price of our common stock and diminish our cash reserves\.

Since July 2014, as part of our capital deployment program, our Board of Directors has approved seven share repurchase programs aggregating  $13\.0 billion  of authority\. As of  December 31, 2019 , there was  $565 million  of remaining authority to repurchase shares under our current $2\.0 billion share repurchase program\. Share repurchases under our repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions\. These share repurchase programs do not obligate us to acquire any specific number of shares or to repurchase any specific number of shares for any fixed period, and may be suspended at any time at our discretion and without prior notice\. The timing and amount of repurchases, if any, will be subject to market and economic conditions, applicable legal requirements and other relevant factors\. Our repurchase of AAG common stock may be limited, suspended or discontinued at any time at our discretion and without prior notice\.

34


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

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

European operations more specifically, and no assurance can be given that our operating results, financial condition and prospects would not be adversely impacted by the result\.

The Company's operating results fluctuate due to seasonality and other factors associated with the airline industry, many of which are beyond the Company's control\.

Due to greater demand for air travel during the spring and summer months, revenues in the airline industry in the second and third quarters of the year are generally stronger than revenues in the first and fourth quarters of the year, which are periods of lower travel demand\. The Company's operating results generally reflect this seasonality, but have also been impacted by numerous other factors that are not necessarily seasonal, including, among others, extreme or severe weather, outbreaks of disease or pandemics, ATC congestion, geological events, political instability, terrorism, natural disasters, changes in the competitive environment due to industry consolidation, tax obligations, general economic conditions and other factors\. As a result, the Company's quarterly operating results are not necessarily indicative of operating results for an entire year and historical operating results in a quarterly or annual period are not necessarily indicative of future operating results\.

Increases in insurance costs or inadequate insurance coverage may materially and adversely impact our business, operating results and financial condition\.

The Company could be exposed to significant liability or loss if its property or operations were to be affected by a natural catastrophe or other event, including aircraft accidents\. The Company maintains insurance policies, including, but not limited to, terrorism, aviation hull and liability, workers' compensation and property and business interruption insurance, but we are not fully insured against all potential hazards and risks incident to our business\. If the Company is unable to obtain sufficient insurance with acceptable terms, the costs of such insurance increase materially, or if the coverage obtained is insufficient relative to actual liability or losses that the Company experiences, whether due to insurance market conditions, policy limitations and exclusions or otherwise, our operating results and financial condition could be materially and adversely affected\.

The Company has a significant amount of financial leverage from fixed obligations, and insufficient liquidity may have a material adverse effect on the Company's financial condition and business\.

The Company has a significant amount of financial leverage from fixed obligations, including aircraft lease and debt financings, leases of airport property and other facilities, and other material cash obligations\. In addition, the Company has substantial noncancelable commitments for capital expenditures, including for the acquisition of new aircraft and related spare engines\.

Although the Company's cash flows from operations and its available capital, including the proceeds from financing transactions, have been sufficient to meet these obligations and commitments to date, the Company's future liquidity could be negatively affected by the risk factors discussed in this report\. If the Company's liquidity is materially diminished, the Company might not be able to timely pay its leases and debts or comply with certain operating and financial covenants under its financing and credit card processing agreements or with other material provisions of its contractual obligations\.

The Company's substantial level of indebtedness and non\-investment grade credit rating, as well as market conditions and the availability of assets as collateral for loans or other indebtedness, may make it difficult for the Company to raise additional capital if needed to meet its liquidity needs on acceptable terms, or at all\.

In addition, as of  December 31, 2019 , the Company had  $3\.4 billion  in variable rate indebtedness, all or a portion of which uses London interbank offered rates ("LIBOR") as a benchmark for establishing applicable rates\. As announced in July 2017, LIBOR is expected to be phased out by the end of 2021\. Although many of our LIBOR\-based obligations provide for alternative methods of calculating the interest rate payable if LIBOR is not reported, the extent and manner of any future changes with respect to methods of calculating LIBOR or replacing LIBOR with another benchmark are unknown and impossible to predict at this time and, as such, may result in interest rates that are materially higher than current interest rates\. If interest rates applicable to the Company's variable interest indebtedness increase, the Company's interest expense will also increase, which could make it difficult for the Company to make interest payments and fund other fixed costs and, in turn, adversely impact our cash flow available for general corporate purposes\.

See Part II, Item 7\. Management's Discussion and Analysis of Financial Condition and Results of Operations, of this report for additional information regarding the Company's liquidity\.

21