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

|                           |                                                                                |
| ------------------------- | -------------------------------------------------------------------------------------------------- |
| /s/ BRADLEY D\. TILDEN    | Chairman and Chief Executive Officer

(Principal Executive Officer)                         |
| **Bradley D\. Tilden**    | Chairman and Chief Executive Officer

(Principal Executive Officer)                         |
| /s/ BRANDON S\. PEDERSEN  | Executive Vice President/Finance and Chief Financial Officer

(Principal Financial Officer) |
| **Brandon S\. Pedersen**  | Executive Vice President/Finance and Chief Financial Officer

(Principal Financial Officer) |
| /s/ CHRISTOPHER M\. BERRY | Vice President Finance and Controller

(Principal Accounting Officer)                       |
| **Christopher M\. Berry** | Vice President Finance and Controller

(Principal Accounting Officer)                       |
| /s/ PATRICIA M\. BEDIENT  | Director                                                                                |
| **Patricia M\. Bedient**  |                                                                                |
| /s/ JAMES A\. BEER        | Director                                                                                |
| **James A\. Beer**        |                                                                                |
| /s/ MARION C\. BLAKEY     | Director                                                                                |
| **Marion C\. Blakey**     |                                                                                |
| /s/ PHYLLIS J\. CAMPBELL  | Director                                                                                |
| **Phyllis J\. Campbell**  |                                                                                |
| /s/ RAYMOND L\. CONNER    | Director                                                                                |
| **Raymond L\. Conner**    |                                                                                |
| /s/ DHIREN R\. FONSECA    | Director                                                                                |
| **Dhiren R\. Fonseca**    |                                                                                |
| /s/ SUSAN J\. LI          | Director                                                                                |
| **Susan J\. Li**          |                                                                                |
| /s/ HELVI K\. SANDVIK     | Director                                                                                |
| **Helvi K\. Sandvik**     |                                                                                |
| /s/ J\. KENNETH THOMPSON  | Director                                                                                |
| **J\. Kenneth Thompson**  |                                                                                |
| /s/ ERIC K\. YEAMAN       | Director                                                                                |
| **Eric K\. Yeaman**       |                                                                                |

 98


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

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

As of December 31, 2017, UAL and United were in compliance with their respective debt covenants\. The collateral, covenants and cross default provisions of the Company’s principal debt instruments that contain such provisions are summarized in the table below:

|                                                                                |                                                                                |
| --------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Debt Instrument**                                                                                | **Collateral, Covenants and Cross Default Provisions**                                                                                |
| Various equipment notes and other notes payable                                                                 | Secured by certain aircraft\. The indentures contain events of default that are customary for aircraft financing, including in certain cases cross default to other related aircraft\.                                                                                |
| Credit Agreement                                                                                | Secured by certain of United’s international route authorities, specified  take\-off and landing slots at certain airports and certain other assets\.

The 2017 Credit Agreement requires the Company to maintain at least $2\.0 billion of unrestricted liquidity at all times, which includes unrestricted cash, short\-term investments and any undrawn amounts under any revolving credit facility, and to maintain a minimum ratio of appraised value of collateral to the outstanding obligations under the 2017 Credit Agreement of 1\.6 to 1\.0 at all times\. The 2017 Credit Agreement contains covenants that, among other things, restrict the ability of UAL and its restricted subsidiaries (as defined in the 2017 Credit Agreement) to incur additional indebtedness and to pay dividends on or repurchase stock, although the Company currently has ample ability under these restrictions to repurchase stock under the Company’s share repurchase program\.  The 2017 Credit Agreement contains events of default customary for this type of financing, including a cross default and cross acceleration provision to certain other material indebtedness of the Company\. |
| 6\.375% Senior Notes due 2018  6% Senior Notes due 2020  4\.25% Senior Notes due 2022  5% Senior Notes due 2024 | The indentures for these notes contain covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries (as defined in the indentures) to incur additional indebtedness and pay dividends on or repurchase stock, although the Company currently has ample ability under these restrictions to repurchase stock under the Company’s share repurchase program\.                                                                                |

**NOTE 11 \- LEASES AND CAPACITY PURCHASE AGREEMENTS**

United leases aircraft, airport passenger terminal space, aircraft hangars and related maintenance facilities, cargo terminals, other airport facilities, other commercial real estate, office and computer equipment and vehicles\.

90


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

**Ownership Restrictions**

AAG’s Certificate of Incorporation and Bylaws provide that, consistent with the requirements of Subtitle VII of Title 49 of the United States Code, as amended (the Aviation Act), any persons or entities who are not a “citizen of the United States” (as defined under the Aviation Act and administrative interpretations issued by the DOT, its predecessors and successors, from time to time), including any agent, trustee or representative of such persons or entities (a non\-citizen), shall not, in the aggregate, own (beneficially or of record) and/or control more than (a) 24\.9% of the aggregate votes of all of our outstanding equity securities or (b) 49\.0% of our outstanding equity securities\. Our Certificate of Incorporation and Bylaws further specify that it is the duty of each stockholder who is a non\-citizen to register his, her or its equity securities on our foreign stock record and provide for remedies applicable to stockholders that exceed the voting and ownership caps described above\.

In addition, to reduce the risk of a potential adverse effect on our ability to use our NOL Carryforwards and certain other tax attributes for federal income tax purposes, our Certificate of Incorporation contains certain restrictions on the acquisition and disposition of our common stock by substantial stockholders (generally holders of more than 4\.75%)\.

See Part I, Item 1A\. Risk Factors – *“AAG’s Certificate of Incorporation and Bylaws include provisions that limit voting and acquisition and disposition of our equity interests\.”* Also see AAG’s Certification of Incorporation and Bylaws, which are filed as Exhibits 3\.1 and 3\.2 hereto, for the full text of the foregoing restrictions\.

40


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

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

In the year ended December 31, 2018, 2017 and 2016, the Company recognized, in Other operating revenue, $2\.0 billion, $1\.8 billion and $1\.7 billion, respectively, related to the marketing, advertising, non\-travel miles redeemed (net of related costs) and other travel\-related benefits of the mileage revenue associated with our various partner agreements including, but not limited to, our Chase co\-brand agreement\. The portion related to the MileagePlus miles awarded of the total amounts received is deferred and presented in the table above as an increase to the frequent flyer liability\.

|     |                                                                                |
| --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (d) | **Cash and Cash Equivalents and Restricted Cash—**  Highly liquid investments with a maturity of three months or less on their acquisition date are classified as cash and cash equivalents\. |

Restricted cash primarily includes cash collateral for letters of credit and collateral associated with obligations for facility leases and other insurance\-related obligations\. Restricted cash is classified as short\-term or long\-term in the consolidated balance sheets based on the expected timing of return of the assets to the Company\.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statements of consolidated cash flows (in millions):

|                                                                                |                                                                                |                                                                                |                     |                     |                     |                     |                     |                     |
| -------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ------------------- |
|                                                                                |                                                                                |                                                                                | **UAL**             | **UAL**             | **UAL**             | **United**          | **United**          | **United**          |
|                                                                                |                                                                                |                                                                                | **At December 31,** | **At December 31,** | **At December 31,** | **At December 31,** | **At December 31,** | **At December 31,** |
|                                                                                |                                                                                |                                                                                | **2018**            | **2017**            | **2016**            | **2018**            | **2017**            | **2016**            |
| Current assets:                                                                                | Current assets:                                                                                | Current assets:                                                                                |                     |                     |                     |                     |                     |                     |
| Cash and cash equivalents                                                                          | Cash and cash equivalents                                                                          | Cash and cash equivalents                                                                          | $1,694              | $1,482              | $2,179              | $1,688              | $1,476              | $2,173              |
| Restricted cash included in Prepaid expenses and other                                             | Restricted cash included in Prepaid expenses and other                                             | Restricted cash included in Prepaid expenses and other                                             | —                   | 18                  | —                   | —                   | 18                  | —                   |
| Other assets:                                                                                | Other assets:                                                                                | Other assets:                                                                                |                     |                     |                     |                     |                     |                     |
| Restricted cash                                                                                | Restricted cash                                                                                | Restricted cash                                                                                | 105                 | 91                  | 124                 | 105                 | 91                  | 124                 |
| Total cash, cash equivalents and restricted cash shown in the statement of consolidated cash flows | Total cash, cash equivalents and restricted cash shown in the statement of consolidated cash flows | Total cash, cash equivalents and restricted cash shown in the statement of consolidated cash flows | $1,799              | $1,591              | $2,303              | $1,793              | $1,585              | $2,297              |

|      |                                                                                |
| ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| (e)  | **Short\-term Investments—** Debt investments are classified as available\-for\-sale and are stated at fair value\. Realized gains and losses on sales of these investments are reflected in Miscellaneous, net in the consolidated statements of operations\. Unrealized gains and losses on available\-for\-sale securities are reflected as a component of accumulated other comprehensive income (loss)\. Equity investments with readily determinable fair values are measured at fair value\. Equity investments without readily determinable fair values are measured using the equity method, or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative)\. Changes in fair value are recorded in Miscellaneous, net in the consolidated statements of operations\. |

|     |                                                                                |
| --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (f) | **Accounts Receivable\.**  Accounts receivable primarily consist of amounts due from credit card companies, non\-airline partners, and cargo transportation customers\. We provide an allowance for uncollectible accounts equal to the estimated losses expected to be incurred based on historical write\-offs and other specific analyses\. Bad debt expense and write\-offs were not material for the year ended December 31,  2018  and  2017 \. |

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (g) | **Aircraft Fuel, Spare Parts and Supplies—** The Company accounts for aircraft fuel, spare parts and supplies at average cost and provides an obsolescence allowance for aircraft spare parts with an assumed residual value of  10%  of original cost\. |

|     |                                                                                |
| --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (h) | **Property and Equipment—** The Company records additions to owned operating property and equipment at cost when acquired\. Property under capital leases and the related obligation for future lease payments are recorded at an amount equal to the initial present value of those lease payments\. Modifications that enhance the operating performance or extend the useful lives of airframes or engines are capitalized as property and equipment\. It is the Company's policy to record compensation from delays in delivery of aircraft as a reduction of the cost of the related aircraft\. |

Depreciation and amortization of owned depreciable assets is based on the straight\-line method over the assets' estimated useful lives\. Leasehold improvements are amortized over the remaining term of the lease, including estimated facility renewal options when renewal is reasonably assured at key airports, or the estimated useful life of the related asset, whichever is less\. Properties under capital leases are amortized on the straight\-line method over the life of the lease or, in the case of certain aircraft, over their estimated useful lives, whichever is shorter\. Amortization

57


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

![chart\-cad0e2f0c5015363845a05\.jpg](https://americanairlines.gcs-web.com/email-alerts/chart-cad0e2f0c5015363845a05.jpg)

|                                     |               |                |                |                |                |                |
| ----------------------------------- | ------------- | -------------- | -------------- | -------------- | -------------- | -------------- |
|                                     | **12/9/2013** | **12/31/2013** | **12/31/2014** | **12/31/2015** | **12/31/2016** | **12/31/2017** |
| American Airlines Group Inc\. (AAL) | $100          | $103           | $219           | $175           | $194           | $219           |
| NYSE ARCA Airline Index (XAL)       | 100           | 102            | 152            | 127            | 162            | 170            |
| S&P 500 Index (GSPC)                | 100           | 102            | 114            | 113            | 124            | 148            |

**Purchases of Equity Securities by the Issuer and Affiliated Purchasers**

During the year ended December 31, 2017, we repurchased 33\.9 million shares of AAG common stock for $1\.6 billion at a weighted average cost per share of $45\.68\. During the year ended December 31, 2016, we repurchased 119\.8 million shares of AAG common stock for $4\.4 billion at a weighted average cost per share of $36\.86\. Since the inception of our share repurchase programs in July 2014 through December 31, 2017, we have repurchased 262\.3 million shares of AAG common stock for $10\.6 billion at a weighted average cost per share of $40\.22\.

The following table displays information with respect to our purchases of shares of AAG common stock during the three months ended December 31, 2017:

|               |                                                 |                                             |                                                                                |                                                                                |
| ------------- | ----------------------------------------------- | ------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- |
| **Period**    | **Total number of**

**shares purchased** | **Average price**

**paid per share** | **Total number of shares**

**purchased as part of**

**publicly announced**

**plan or program** | **Maximum remaining dollar value of shares**

**that may be purchased under**

**the plan or program**

**(in millions)** |
| October 2017  | 2,497,462                                       | $50\.37                                     | 2,497,462                                                                                | $551                                                                                |
| November 2017 | 1,236,546                                       | $47\.59                                     | 1,236,546                                                                                | $492                                                                                |
| December 2017 | 834,577                                         | $50\.96                                     | 834,577                                                                                | $450                                                                                |

Share repurchases under our repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions\. Any such repurchases will be made from time to time subject to market and economic conditions, applicable legal requirements and other relevant factors\. We are not obligated to repurchase any specific number of shares and our repurchase of common stock may be limited, suspended or discontinued at any time at our discretion\.

39


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

Deferred tax (assets) and liabilities comprise the following (in millions):

|                                       |           |          |
| ------------------------------------- | --------- | -------- |
|                                       | **2017**  | **2016** |
| Excess of tax over book depreciation  | **$964**  | $1,282   |
| Intangibles—net                       | **14**    | 39       |
| Other—net                             | **43**    | 26       |
| Gross deferred tax liabilities        | **1,021** | 1,347    |
| Mileage Plan™                         | **(208)** | (310)    |
| Inventory obsolescence                | **(16)**  | (23)     |
| Deferred gains                        | **(5)**   | (8)      |
| Employee benefits                     | **(154)** | (196)    |
| Acquired net operating losses         | **(127)** | (289)    |
| Other—net                             | **(57)**  | (62)     |
| Gross deferred tax assets             | **(567)** | (888)    |
| Valuation allowance                   | **—**     | 4        |
| Net deferred tax (assets) liabilities | **$454**  | $463     |

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law\. The Tax Cuts and Jobs Act changed many aspects of the U\.S\. corporate income taxation, including but not limited to, a reduction in the corporate income tax rate from 35% to 21% and accelerated depreciation that will allow for full expensing of qualified property\. ASC 740 requires a company to record the effects of a tax law change in the period of enactment\.

The Company evaluated the impact of the Tax Cuts and Jobs Act and other law changes and recorded a discrete adjustment in our 2017 income tax expense of $280 million\. The Company will continue to evaluate the impact of the new law and future guidance as issued\.

At December 31, 2017, the Company had federal NOLs of approximately $525 million that expire beginning in 2029 and continuing through 2036, and state NOLs of approximately $254 million that expire beginning in 2028 and continuing through 2035\.

Virgin America experienced multiple “ownership changes” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), the most recent being its acquisition by the Company\. Section 382 of the Code imposes an annual limitation on the utilization of pre\-ownership change NOLs\. Any unused annual limitation may, subject to certain limits, be carried over to later years\. The combined Company’s ability to use the NOLs will also depend on the amount of taxable income generated in future periods\.

Valuation allowances are provided to reduce the related deferred income tax assets to an amount which will, more likely than not, be realized\. As a result of the Company’s assessment of the realization of deferred income tax assets, the Company concluded that it is more likely than not that all of its federal and state deferred income tax assets will be realized and thus no valuation allowance is necessary\. The change from 2016 to 2017 was due to the reversal of the valuation allowance related to state NOL carryforwards\. The Company reassesses the need for a valuation allowance each reporting period\.

 80


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

***The airline industry is heavily taxed\.***

The airline industry is subject to extensive government fees and taxation that negatively impact our revenue and profitability\. The U\.S\. airline industry is one of the most heavily taxed of all industries\. These fees and taxes have grown significantly in the past decade for domestic flights, and various U\.S\. fees and taxes also are assessed on international flights\. For example, as permitted by federal legislation, most major U\.S\. airports impose a passenger facility charge per passenger on us\. In addition, the governments of foreign countries in which we operate impose on U\.S\. airlines, including us, various fees and taxes, and these assessments have been increasing in number and amount in recent years\. Moreover, we are obligated to collect a federal excise tax, commonly referred to as the “ticket tax,” on domestic and international air transportation\. We collect the excise tax, along with certain other U\.S\. and foreign taxes and user fees on air transportation (such as passenger security fees), and pass along the collected amounts to the appropriate governmental agencies\. Although these taxes and fees are not operating expenses, they represent an additional cost to our customers\. There are continuing efforts in Congress and in other countries to raise different portions of the various taxes, fees, and charges imposed on airlines and their passengers, and we may not be able to recover all of these charges from our customers\. Increases in such taxes, fees and charges could negatively impact our business, results of operations and financial condition\.

Under DOT regulations, all governmental taxes and fees must be included in the prices we quote or advertise to our customers\. Due to the competitive revenue environment, many increases in these fees and taxes have been absorbed by the airline industry rather than being passed on to the customer\. Further increases in fees and taxes may reduce demand for air travel, and thus our revenues\.

***Recent U\.S\. tax legislation may adversely affect our financial condition, results of operations and cash flows\.***

Recently enacted U\.S\. tax legislation has significantly changed the U\.S\. federal income taxation of U\.S\. corporations, including by reducing the U\.S\. corporate income tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, adopting elements of a territorial tax system, revising the rules governing net operating losses (NOLs) and the rules governing foreign tax credits and introducing new anti\-base erosion provisions\. Many of these changes are effective immediately, without any transition periods or grandfathering for existing transactions\. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementation regulations by the Treasury and Internal Revenue Service, any of which could materially affect the impacts of the legislation\. In addition, it is unclear how these U\.S\. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities\. See Note 6 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 4 to American’s Consolidated Financial Statements in Part II, Item 8B for additional information on income taxes\.

While some of the changes made by the tax legislation may adversely affect us in one or more reporting periods and prospectively, other changes may be beneficial on a going forward basis\. We continue to work with our tax advisors to determine the full impact of this legislation on us\.

***Changes to our business model that are designed to increase revenues may not be successful and may cause operational difficulties or decreased demand\.***

We have recently instituted, and intend to institute in the future, changes to our business model to increase revenues and offset costs\. These measures include premium economy service, basic economy service and other low\-cost fares, enhancements to our AAdvantage loyalty program, charging separately for services that had previously been included within the price of a ticket and increasing other pre\-existing fees\. We may introduce additional initiatives in the future; however, as time goes on, we expect that it will be more difficult to identify and implement additional initiatives\. We cannot assure you that these measures or any future initiatives will be successful in increasing our revenues\. Additionally, the implementation of these initiatives may create logistical challenges that could harm the operational performance of our airline\. Also, any new and increased fees might reduce the demand for air travel on our airline or across the industry in general, particularly if weakened economic conditions make our customers more sensitive to increased travel costs or provide a significant competitive advantage to other carriers that determine not to institute similar charges\.

***The loss of key personnel upon whom we depend to operate our business or the inability to attract additional qualified personnel could adversely affect our business\.***

We believe that our future success will depend in large part on our ability to retain or attract highly qualified management, technical and other personnel\. We may not be successful in retaining key personnel or in attracting other highly qualified personnel\. Any inability to retain or attract significant numbers of qualified management and other personnel would have a material adverse effect on our business, results of operations and financial condition\.

24


Annual Report of Southwest Airlines Co\. for year 2018

**Item 2\.** ***Properties***

**Aircraft**

Southwest operated a total of 750 Boeing 737 aircraft as of December 31, 2018, of which 51 and 72 were under operating and capital leases, respectively\. The following table details information on the 750 aircraft as of December 31, 2018:

|           |           |                                             |                                   |                                 |                              |
| --------- | --------- | ------------------------------------------- | --------------------------------- | ------------------------------- | ---------------------------- |
| **Type**  | **Seats** | **Average**

**Age**

**(Yrs)** | **Number of**

**Aircraft** | **Number**

**Owned (a)** | **Number**

**Leased** |
| 737\-700  | 143       | 15                                          | 512                               | 396                             | 116                          |
| 737\-800  | 175       | 3                                           | 207                               | 200                             | 7                            |
| 737 MAX 8 | 175       | 1                                           | 31                                | 31                              | —                            |
| Totals    |           | 11                                          | 750                               | 627                             | 123                          |

|     |                                                                                |
| --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (a) | As discussed further in Note  6  to the Consolidated Financial Statements, 169 of the Company's aircraft were pledged as collateral as of  December 31, 2018 , for secured borrowings and/or in the case that the Company has obligations related to its fuel derivative instruments with counterparties that exceed certain thresholds\. |

As of December 31, 2018, the Company had firm deliveries and options for Boeing 737 MAX 7 and 737 MAX 8 aircraft as follows:

|      |                            |                            |                        |                        |                       |     |           |
| ---- | -------------------------- | -------------------------- | ---------------------- | ---------------------- | --------------------- | --- | --------- |
|      | **The Boeing Company**     | **The Boeing Company**     | **The Boeing Company** | **The Boeing Company** |                       |     |           |
|      | **MAX 7
Firm Orders** | **MAX 8
Firm Orders** |                        | **MAX 8 Options**      | **Additional MAX 8s** |     | **Total** |
| 2019 | 7                          | 21                         |                        | —                      | 16                    |     | 44        |
| 2020 | —                          | 35                         |                        | —                      | 3                     |     | 38        |
| 2021 | —                          | 44                         |                        | —                      | —                     |     | 44        |
| 2022 | —                          | 27                         |                        | 14                     | —                     |     | 41        |
| 2023 | 12                         | 22                         |                        | 23                     | —                     |     | 57        |
| 2024 | 11                         | 30                         |                        | 23                     | —                     |     | 64        |
| 2025 | —                          | 40                         |                        | 36                     | —                     |     | 76        |
| 2026 | —                          | —                          |                        | 19                     | —                     |     | 19        |
|      | 30                         | 219                        | (a)                    | 115                    | 19                    | (b) | 383       |

(a) The Company has flexibility to substitute 737 MAX 7 in lieu of 737 MAX 8 firm orders beginning in 2019\.

(b) To be acquired in leases from various third parties\.

**Ground Facilities and Services**

Southwest either leases or pays a usage fee for terminal passenger service facilities at each of the airports it serves, to which various leasehold improvements have been made\. The Company leases the land and/or structures on a long\-term basis for its aircraft maintenance centers (located at Dallas Love Field, Houston Hobby, Phoenix Sky Harbor, Chicago Midway, Hartsfield\-Jackson Atlanta International Airport, and Orlando International Airport) and its main corporate headquarters building, also located near Dallas Love Field\. The Company also leases a warehouse and engine repair facility in Atlanta\. In 2018, the Company announced its intent to build a new aircraft maintenance facility, scheduled to be completed in 2021, subject to FAA approvals, at Baltimore\-Washington International Airport\.

The Company has commitments associated with various airport improvement projects, including ongoing construction at Los Angeles International Airport\. These projects include the construction of new facilities and the rebuilding or modernization of existing facilities\. Additional information regarding these projects is provided below under "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and in Note 4 to the Consolidated Financial Statements\.

29


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

***Income Taxes***

Income taxes are accounted for under the asset and liability method\. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards\. Deferred tax assets and liabilities are recorded net as noncurrent deferred income taxes\.

We provide a valuation allowance for our deferred tax assets when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized\. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income\. We consider all available positive and negative evidence and make certain assumptions in evaluating the realizability of our deferred tax assets\. Many factors are considered that impact our assessment of future profitability, including conditions which are beyond our control, such as the health of the economy, the level and volatility of fuel prices and travel demand\.

In connection with the preparation of our financial statements at the end of 2015, we determined that after considering all positive and negative evidence, including the completion of certain critical Merger integration milestones as well as our financial performance, it was more likely than not that substantially all of our deferred income tax assets, which include our NOLs, would be realized\. Accordingly, we reversed $3\.0 billion of the valuation allowance as of December 31, 2015, which resulted in a special non\-cash tax benefit recorded in the consolidated statement of operations for 2015\.

***Recent Accounting Pronouncements***

*Standards Effective for 2018 Reporting Periods*

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

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

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

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

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

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

***ASU 2017\-07: Compensation \- Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (the New Retirement Standard)***

The New Retirement Standard requires all components of our net periodic benefit cost (income), with the exception of service cost, previously reported within operating expenses as salaries, wages and benefits, to be reclassified and reported within nonoperating income (expense)\. The New Retirement Standard is required to be applied retrospectively, which results in the recast of each prior reporting period presented\. The adoption of the New Retirement Standard has no impact on pre\-tax income or net income reported\. See recast 2017 statement of operations data presented below for the expected effects of adoption\.

76


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

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

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

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

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting during the quarter ended December 31, 2019\.

84


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

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

(d) Off\-Balance Sheet Arrangements

Aircraft and Engines

American currently operates   382  owned aircraft and   69  leased aircraft, and owns   79  spare aircraft engines, which in each case were financed with EETCs issued by pass\-through trusts\. These trusts are off\-balance sheet entities, the primary purpose of which is to finance the acquisition of flight equipment or to permit issuance of debt backed by existing flight equipment\. In the case of aircraft EETCs, rather than finance each aircraft separately when such aircraft is purchased, delivered or refinanced, these trusts allow American to raise the financing for a number of aircraft at one time and, if applicable, place such funds in escrow pending a future purchase, delivery or refinancing of the relevant aircraft\. Similarly, in the case of the spare engine EETCs, the trust allows American to use its existing pool of spare engines to raise financing under a single facility\. The trusts have also been structured to provide for certain credit enhancements, such as liquidity facilities to cover certain interest payments, that reduce the risks to the purchasers of the trust certificates and, as a result, reduce the cost of aircraft financing to American\.

Each trust covers a set number of aircraft or spare engines scheduled to be delivered, financed or refinanced upon the issuance of the EETC or within a specific period of time thereafter\. At the time of each covered aircraft or spare engine financing, the relevant trust used the proceeds of the issuance of the EETC (which may have been available at the time of issuance thereof or held in escrow until financing of the applicable aircraft following its delivery) to purchase equipment notes relating to the financed aircraft or engines\. The equipment notes are issued, at American’s election, in connection with a mortgage financing of the aircraft or spare engines or, in certain cases, by a separate owner trust in connection with a leveraged lease financing of the aircraft\. In the case of a leveraged lease financing, the owner trust then leases the aircraft to American\. In both cases, the equipment notes are secured by a security interest in the aircraft or engines, as applicable\. The pass\-through trust certificates are not direct obligations of, nor are they guaranteed by, AAG or American\. However, in the case of mortgage financings, the equipment notes issued to the trusts are direct obligations of American and, in certain instances, have been guaranteed by AAG\. As of  December 31, 2019 ,   $11\.9 billion  associated with these mortgage financings is reflected as debt in the accompanying consolidated balance sheet\.

With respect to leveraged leases, American evaluated whether the leases had characteristics of a variable interest entity\. American concluded the leasing entities met the criteria for variable interest entities; however, American concluded it is not the primary beneficiary under these leasing arrangements and accounts for the majority of its EETC leveraged lease financings as operating leases\. American’s total future payments to the trusts of each of the relevant EETCs under these leveraged lease financings are   $177 million  as of  December 31, 2019 , which are reflected in the operating lease obligations in Note 6\.

Letters of Credit and Other

We provide financial assurance, such as letters of credit, surety bonds or restricted cash and investments, primarily to support projected workers’ compensation obligations and airport commitments\. As of  December 31, 2019 , we had   $572 million  of letters of credit and surety bonds securing various obligations\. The letters of credit and surety bonds that are subject to expiration will expire on various dates through  2022 \.

(e) Legal Proceedings

Chapter 11 Cases \. On November 29, 2011, AMR, American, and certain of AMR’s other direct and indirect domestic subsidiaries (the Debtors) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court)\. On October 21, 2013, the Bankruptcy Court entered an order approving and confirming the Debtors’ fourth amended joint plan of reorganization (as amended, the Plan)\. On the Effective Date, December 9, 2013, the Debtors consummated their reorganization pursuant to the Plan and completed the Merger\.

Pursuant to rulings of the Bankruptcy Court, the Plan established the Disputed Claims Reserve to hold shares of AAG common stock reserved for issuance to disputed claimholders at the Effective Date that ultimately become holders of allowed claims\. The shares of AAG common stock issued to the Disputed Claims Reserve were originally issued on December 13, 2013 and have at all times since been included in the number of shares issued and outstanding as reported from time to time in our quarterly and annual reports, including for purposes of calculating earnings per common share\. As disputed claims are resolved, the claimants receive distributions of shares from the Disputed Claims Reserve\. However, we are not required to distribute additional shares above the limits contemplated by the Plan, even if the shares remaining for distribution in the Disputed Claims Reserve are not sufficient to fully pay any additional allowed unsecured claims\. To the extent that any of the reserved shares remain undistributed upon resolution of all remaining disputed claims, such shares will not be returned to us but rather will be distributed to former AMR stockholders and former convertible noteholders treated as stockholders

109


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

*Nonoperating Results*

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

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

**Increase**

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

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

**Increase**

**(Decrease)** |
|                                 | **(In millions, except percentage changes)** | **(In millions, except percentage changes)** | **(In millions, except percentage changes)** | **(In millions, except percentage changes)**          |
| Interest income                 | $94                                          | $63                                          | $31                                          | 47\.8                                                 |
| Interest expense, net           | (1,053)                                      | (991)                                        | (62)                                         | 6\.2                                                  |
| Other, net                      | (15)                                         | (57)                                         | 42                                           | (73\.4)                                               |
| Total nonoperating expense, net | $(974)                                       | $(985)                                       | $11                                          | (1\.0)                                                |

Our short\-term investments in each period consisted of highly liquid investments that provided relatively nominal returns\. Interest income increased $31 million, or 47\.8%, principally due to a 50 basis point increase in average yields in 2017 as compared to 2016\.

Interest expense, net increased $62 million, or 6\.2%, in 2017 primarily due to higher outstanding debt as a result of aircraft financings associated with our fleet renewal program\.

Other nonoperating expense, net in 2017 and 2016 included $22 million and $49 million, respectively, of net special charges associated with debt refinancings and extinguishments\.

*Income Taxes*

In 2017 and 2016, we recorded an income tax provision of $1\.2 billion and $1\.6 billion, respectively, at an effective rate of approximately 38%\. This tax provision was substantially non\-cash due to utilization of our NOLs\. Substantially all of our income before income taxes is attributable to the United States\. At December 31, 2017, we had approximately $10\.0 billion of federal NOLs and $3\.4 billion of state NOLs, substantially all of which we expect to be available in 2018 to reduce future federal and state taxable income\.

As a result of the 2017 Tax Act, we recorded a special, non\-cash tax benefit of $7 million in 2017 to reflect the impact of lower corporate income tax rates on our deferred tax assets and liabilities\. For 2018, we presently expect to recognize a provision for income taxes at an effective rate of approximately 24% due to the reduction in the corporate tax rate\.

See Note 6 to AAG’s Consolidated Financial Statements in Part II, Item 8A for additional information on income taxes\.

***Results of Operations –*** ***2016*** ***Compared to*** ***2015***

We realized net income of $2\.7 billion in 2016\. This compares to $7\.6 billion of net income in 2015, which included a special $3\.0 billion non\-cash tax benefit as we reversed the valuation allowance on our deferred tax assets, which include our federal and state NOLs\. As a result of the reversal of the valuation allowance, we recorded a $1\.6 billion provision for income taxes in 2016, which is substantially non\-cash due to the utilization of NOLs\. Accordingly, amounts reported in 2016 for income tax provision and net income are not comparable to 2015\.

We realized pre\-tax income of $4\.3 billion and $4\.6 billion in 2016 and 2015, respectively\. Excluding the effects of pre\-tax net special items, pre\-tax income was $5\.1 billion and $6\.3 billion in 2016 and 2015, respectively\. For reconciliation of pre\-tax and net income excluding special items to their comparable measures on a GAAP basis, see Part II, Item 6\. Selected Consolidated Financial Data –*“Reconciliation of GAAP to Non\-GAAP Financial Measures*\.*”*

Our 2016 pre\-tax results on both a GAAP basis and excluding pre\-tax net special items were impacted by a decline in revenues due to lower yields\. Salaries, wages and benefits costs were higher in 2016, driven by our new labor contracts and the addition of an employee profit sharing program; however, these increases were substantially offset by a year\-over\-year decline in fuel costs\.

54


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

***Contractual Obligations***

The following table provides a summary of our obligations as of December 31, 2018\. For agreements with variable terms, amounts included reflect our minimum obligations\.

|                                         |          |          |          |          |          |            |           |
| --------------------------------------- | -------- | -------- | -------- | -------- | -------- | ---------- | --------- |
| *(in millions)*                         | **2019** | **2020** | **2021** | **2022** | **2023** | **Beyond** | **Total** |
| Current and long\-term debt obligations | $488     | $305     | $263     | $216     | $262     | $579       | $2,113    |
| Aircraft leases ^(a)^                   | 350      | 320      | 286      | 262      | 208      | 847        | 2,273     |
| Facility lease commitments ^(b)^        | 133      | 124      | 113      | 94       | 26       | 122        | 612       |
| Aircraft maintenance deposits ^(c)^     | 61       | 65       | 59       | 48       | 24       | 8          | 265       |
| Aircraft commitments  ^(d)^             | 495      | 517      | 556      | 307      | 108      | 33         | 2,016     |
| Interest obligations ^(e)^              | 70       | 56       | 44       | 35       | 27       | 44         | 276       |
| Other obligations ^(f)^                 | 145      | 152      | 173      | 181      | 186      | 1,079      | 1,916     |
| Total                                   | $1,742   | $1,539   | $1,494   | $1,143   | $841     | $2,712     | $9,471    |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| ^(a)^ | Aircraft lease commitments generally include aircraft operating leases, including E175 aircraft operated by SkyWest under a capacity purchase agreement\. Upon our transition to the new leasing standard, aircraft leases will be capitalized as a right\-to\-use asset on our balance sheet\.  |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| ^(b)^ | Facility lease commitments generally include airport property and hangar leases, office space, and other equipment leases\. Upon our transition to the new leasing standard, certain of these leases will be capitalized as a right\-to\-use asset on our balance sheet\. |

|       |                                                                                |
| ----- | --------------------------------------------------------------------------------------------------------------------------------- |
| ^(c)^ | Aircraft maintenance deposits relate to leased Airbus aircraft, and the power\-by\-the\-hour agreement for the B737\-800 fleet\.  |

|       |                                                                                |
| ----- | -------------------------------------------------------------------------------------- |
| ^(d)^ | Represents non\-cancelable contractual payment commitments for aircraft and engines\.  |

|       |                                                                                |
| ----- | --------------------------------------------------------------------------------------------------------------------- |
| ^(e)^ | For variable\-rate debt, future obligations are shown above using interest rates forecast as of  December 31, 2018 \. |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------ |
| ^(f)^ | Primarily comprised of non\-aircraft lease costs associated with capacity purchase agreements\.  |

***Defined Benefit Pensions***

The table above excludes contributions to our various pension plans, for which there are no minimum required contributions given the funded status of the plans\. The unfunded liability for our qualified defined\-benefit pension plans was $367 million at December 31, 2018, compared to a $304 million unfunded position at December 31, 2017\. This results in an 84% funded status on a projected benefit obligation basis compared to 87% funded as of December 31, 2017\. There were no contributions in 2018 to the plans\.

***Credit Card Agreements***

We have agreements with a number of credit card companies to process the sale of tickets and other services\. Under these agreements, there are material adverse change clauses that, if triggered, could result in the credit card companies holding back a reserve from our credit card receivables\. Under one such agreement, we could be required to maintain a reserve if our credit rating is downgraded to or below a rating specified by the agreement or our cash and marketable securities balance fell below $500 million\. Under another such agreement, we could be required to maintain a reserve if our cash and marketable securities balance fell below $500 million\. We are not currently required to maintain any reserve under these agreements, but if we were, our financial position and liquidity could be materially harmed\.

***Deferred Income Taxes***

For federal income tax purposes, the majority of our assets are fully depreciated over a seven\-year life using an accelerated depreciation method or bonus depreciation, if available\. For financial reporting purposes, the majority of our assets are depreciated over 15 to 25 years to an estimated salvage value using the straight\-line basis\. This difference has created a significant deferred tax liability\. At some point in the future the depreciation basis will reverse, potentially resulting in an increase in income taxes paid\.

While it is possible that we could have material cash obligations for this deferred liability at some point in the future, we cannot estimate the timing of long\-term cash flows with reasonable accuracy\. Taxable income and cash taxes payable in the short\-term are impacted by many items, including the amount of book income generated (which can be volatile depending on revenue and fuel prices), usage of net operating losses, whether bonus depreciation provisions are available, any future tax reform efforts at the federal level, as well as other legislative changes that are beyond our control\.

In 2018, we had no net tax payments and had an effective tax rate of 25\.3%\. We believe that we will have the liquidity available to make our future tax payments\.

 51


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

EETCs\.  As of  December 31, 2019 , United had  $9\.6 billion  principal amount of equipment notes outstanding issued under EETC financings\. Generally, the structure of these EETC financings consists of pass\-through trusts created by United to issue pass\-through certificates, which represent fractional undivided interests in the respective pass\-through trusts and are not obligations of United\. The proceeds of the issuance of the pass\-through certificates are used to purchase equipment notes which are issued by United and secured by its aircraft\. The payment obligations under the equipment notes are those of United\. Proceeds received from the sale of pass\-through certificates are initially held by a depositary in escrow for the benefit of the certificate holders until United issues equipment notes to the trust, which purchases such notes with a portion of the escrowed funds\. These escrowed funds are not guaranteed by United and are not reported as debt on United's consolidated balance sheet because the proceeds held by the depositary are not United's assets\. The total amount of EETC funds held in escrow was  $328 million  as of  December 31, 2019 \. See Note 10 to the financial statements included in Part II, Item 8 of this report for additional information\.

Fuel Consortia\.  United participates in numerous fuel consortia with other air carriers at major airports to reduce the costs of fuel distribution and storage\. Interline agreements govern the rights and responsibilities of the consortia members and provide for the allocation of the overall costs to operate the consortia based on usage\. The consortia (and in limited cases, the participating carriers) have entered into long\-term agreements to lease certain airport fuel storage and distribution facilities that are typically financed through tax\-exempt bonds, either special facilities lease revenue bonds or general airport revenue bonds, issued by various local municipalities\. In general, each consortium lease agreement requires the consortium to make lease payments in amounts sufficient to pay the maturing principal and interest payments on the bonds\. As of December 31, 2019, approximately  $1\.9 billion  principal amount of such bonds were secured by significant fuel facility leases in which United participates, as to which United and each of the signatory airlines has provided indirect guarantees of the debt\. As of December 31, 2019, the Company's contingent exposure was approximately  $175 million  principal amount of such bonds based on its recent consortia participation\. The Company's contingent exposure could increase if the participation of other air carriers decreases\. The guarantees will expire when the tax\-exempt bonds are paid in full, which ranges from  2022  to  2051 \. The Company did not record a liability at the time these indirect guarantees were made\.

Increased Cost Provisions\.  In United's financing transactions that include loans in which United is the borrower, United typically agrees to reimburse lenders for any reduced returns with respect to the loans due to any change in capital requirements and, in the case of loans with respect to which the interest rate is based on LIBOR, for certain other increased costs that the lenders incur in carrying these loans as a result of any change in law, subject, in most cases, to obligations of the lenders to take certain limited steps to mitigate the requirement for, or the amount of, such increased costs\. At December 31, 2019, the Company had  $3\.4 billion  of floating rate debt with remaining terms of up to  11 years  that are subject to these increased cost provisions\. In several financing transactions involving loans or leases from non\-U\.S\. entities, with remaining terms of up to  11 years  and an aggregate balance of  $3\.2 billion , the Company bears the risk of any change in tax laws that would subject loan or lease payments thereunder to non\-U\.S\. entities to withholding taxes, subject to customary exclusions\.

Critical Accounting Policies

Critical accounting policies are defined as those that are affected by significant judgments and uncertainties which potentially could result in materially different accounting under different assumptions and conditions\. The Company has prepared the financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which requires management to make estimates and assumptions that affect the reported amounts in the financial statements\. Actual results could differ from those estimates under different assumptions or conditions\. The Company has identified the following critical accounting policies that impact the preparation of the financial statements\.

Frequent Flyer Accounting\.  United's MileagePlus loyalty program builds customer loyalty by offering awards, benefits and services to program participants\. Members in this program earn miles for travel on United, United Express, Star Alliance members and certain other airlines that participate in the program\. Members can also earn miles by purchasing goods and services from our network of non\-airline partners\. We have contracts to sell miles to these partners with the terms extending from  one  to  nine  years\.  These partners include domestic and international credit card issuers, retail merchants, hotels, car rental companies and our participating airline partners\. Miles can be redeemed for free (other than taxes and government\-imposed fees), discounted or upgraded air travel and non\-travel awards\.

Miles Earned in Conjunction with Travel\.  When frequent flyers earn miles for flights, the Company recognizes a portion of the ticket sales as revenue when the travel occurs and defers a portion of the ticket sale representing the value of the related miles as a separate performance obligation\. The Company determines the estimated selling price of travel and miles as if each element is sold on a separate basis\. The total consideration from each ticket sale is then allocated to each of these elements, individually, on a pro\-rata basis\. At the time of travel, the Company records the portion allocated to the miles to Frequent flyer deferred revenue on the Company's consolidated balance sheet and subsequently recognizes it into revenue when miles are redeemed for air travel and non\-air travel awards\.

34


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

**Exhibits**

Exhibits required to be filed by Item 601 of Regulation S\-K: Where the amount of securities authorized to be issued under any of our long\-term debt agreements does not exceed 10 percent of our assets, pursuant to paragraph (b)(4) of Item 601 of Regulation S\-K, in lieu of filing such as an exhibit, we hereby agree to furnish to the Commission upon request a copy of any agreement with respect to such long\-term debt\.

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

**Number** | **Description**                                                                                |
| 2\.1                          | [Confirmation Order and Plan (incorporated by reference to Exhibit 2\.1 to AMR’s Current Report on Form 8\-K filed on October 23, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513408263/d605556dex21.htm)                                                                                |
| 2\.2                          | [Agreement and Plan of Merger, dated as of February 13, 2013, among AMR Corporation, AMR Merger Sub, Inc\. and US Airways Group, Inc\. (incorporated by reference to Exhibit 2\.1 to US Airways Group’s Current Report on Form 8\-K/A filed on February 14, 2013 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513060746/d487000dex21.htm) \#                                                                                |
| 2\.3                          | [Amendment to Agreement and Plan of Merger, dated as of May 15, 2013, among AMR Corporation, AMR Merger Sub, Inc\. and US Airways Group, Inc\. (incorporated by reference to Exhibit 2\.1 to US Airways Group’s Current Report on Form 8\-K filed on May 16, 2013 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/6201/000119312513224465/d539647dex21.htm)                                                                                |
| 2\.4                          | [Second Amendment to Agreement and Plan of Merger, dated as of June 7, 2013, among AMR Corporation, AMR Merger Sub, Inc\. and US Airways Group, Inc\. (incorporated by reference to Exhibit 2\.1 to US Airways Group’s Current Report on Form 8\-K filed on June 12, 2013 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513256170/d555547dex21.htm)                                                                                |
| 2\.5                          | [Third Amendment to Agreement and Plan of Merger, dated as of September 20, 2013, among AMR Corporation, AMR Merger Sub, Inc\. and US Airways Group, Inc\. (incorporated by reference to Exhibit 2\.1 to US Airways Group’s Current Report on Form 8\-K filed on September 23, 2013 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513374023/d601604dex21.htm)                                                                                |
| 2\.6                          | [Agreement and Plan of Merger, dated as of December 28, 2015, between American Airlines, Inc\. and US Airways, Inc\. (incorporated by reference to Exhibit 2\.1 to AAG’s Current Report on Form 8\-K filed on December 31, 2015 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515418305/d110614dex21.htm)                                                                                |
| 3\.1                          | [Restated Certificate of Incorporation of American Airlines Group Inc\., including the Certificate of Designations, Powers, Preferences and Rights of the American Airlines Group Inc\. Series A Convertible Preferred Stock attached as Annex I thereto (incorporated by reference to Exhibit 3\.1 to AAG’s Current Report on Form 8\-K filed on December 9, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513466973/d640718dex31.htm)                                                                                |
| 3\.2                          | [Second Amended and Restated Bylaws of American Airlines Group Inc\. (incorporated by reference to Exhibit 3\.1 to AAG’s Current Report on Form 8\-K filed on January 30, 2017 (Commission File No\. 001\-08400))\.](http://www.sec.gov/Archives/edgar/data/6201/000119312517023738/d320402dex32.htm)                                                                                |
| 3\.3                          | [Amended and Restated Certificate of Incorporation of American Airlines, Inc\. (incorporated by reference to Exhibit 3\.3 to AAG’s Annual Report on Form 10\-K for the year ended December 31, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000000620114000004/d682697dex33.htm)                                                                                |
| 3\.4                          | [Amended and Restated Bylaws of American Airlines, Inc\. (incorporated by reference to Exhibit 3\.4 to AAG’s Annual Report on Form 10\-K for the year ended December 31, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000000620114000004/d682697dex34.htm)                                                                                |
| 4\.1                          | [Pass Through Trust Agreement, dated as of March 12, 2013, between American Airlines, Inc\. and Wilmington Trust Company (incorporated by reference to Exhibit 4\.1 to AMR’s Current Report on Form 8\-K filed on March 12, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/6201/000119312513103330/d501326dex41.htm)                                                                                |
| 4\.2                          | [Trust Supplement No\. 2013\-2B, dated as of November 27, 2013, among American Airlines, Inc\. and Wilmington Trust Company, as Class B Trustee, to the Pass Through Trust Agreement, dated as of March 12, 2013 (incorporated by reference to Exhibit 4\.2 to AMR’s Current Report on Form 8\-K filed on November 27, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513456230/d634326dex42.htm)                                                                                |
| 4\.3                          | [Form of Pass Through Trust Certificate, Series 2013\-2B (included in Exhibit A to Exhibit 4\.2) (incorporated by reference to Exhibit 4\.3 to AMR’s Current Report on Form 8\-K filed on November 27, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513456230/d634326dex42.htm)                                                                                |
| 4\.4                          | [Revolving Credit Agreement (2013\-2B), dated as of November 27, 2013, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for Trustee of American Airlines Pass Through Trust 2013\-2B and as Borrower, and Morgan Stanley Bank, N\.A\., as Class B Liquidity Provider (incorporated by reference to Exhibit 4\.5 to AMR’s Current Report on Form 8\-K filed on November 27, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513456230/d634326dex45.htm)                                                                                |
| 4\.5                          | [Participation Agreement (N907AN), dated as of September 9, 2013, among American Airlines, Inc\., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements in effect as of the date thereof, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein (incorporated by reference to Exhibit 4\.6 to AMR’s Current Report on Form 8\-K filed on November 27, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513456230/d634326dex46.htm) |
| 4\.6                          | [Indenture and Security Agreement (N907AN), dated as of September 9, 2013, between American Airlines, Inc\. and Wilmington Trust Company, as Loan Trustee (incorporated by reference to Exhibit 4\.7 to AMR’s Current Report on Form 8\-K filed on November 27, 2013 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312513456230/d634326dex47.htm)                                                                                |

176


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

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

|                                                                                |
| ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
|  operating, financing, or investing activities in our consolidated cash flows statements\. Adoption of Topic 606 is expected to impact our reported results as shown in the table below:  |

**Statements of Consolidated Operations for the Years Ended December 31,**

|                              |                 |                 |                |                |                                                         |                                                         |
|:---------------------------- | ---------------:| ---------------:| --------------:| --------------:| -------------------------------------------------------:| -------------------------------------------------------:|
|                              | **As Reported** | **As Reported** | **Adjustment** | **Adjustment** | **As Adjusted**
**for Adoption of
Topic 606** | **As Adjusted**
**for Adoption of
Topic 606** |
|                              |        **2017** |        **2016** |       **2017** |       **2016** |                                                **2017** |                                                **2016** |
| Operating revenue:           |                 |                 |                |                |                                                         |                                                         |
| Passenger—Mainline           |        $26,552  |        $25,414  |        $1,707  |        $1,615  |                                                $28,259  |                                                $27,029  |
| Passenger—Regional           |          5,852  |          6,043  |           349  |           357  |                                                  6,201  |                                                  6,400  |
| Total passenger revenue      |         32,404  |         31,457  |         2,056  |         1,972  |                                                 34,460  |                                                 33,429  |
| Cargo                        |          1,035  |            876  |            79  |            58  |                                                  1,114  |                                                    934  |
| Other operating revenue      |          4,297  |          4,223  |        (2,087) |        (2,028) |                                                  2,210  |                                                  2,195  |
| Total operating revenue      |         37,736  |         36,556  |            48  |             2  |                                                 37,784  |                                                 36,558  |
| Operating expenses           |         34,238  |         32,218  |           (21) |           (12) |                                                 34,217  |                                                 32,206  |
| Operating income             |          3,498  |          4,338  |            69  |            14  |                                                  3,567  |                                                  4,352  |
| Nonoperating expense, net    |           (499) |           (519) |           (28) |           (60) |                                                   (527) |                                                   (579) |
| Income before income taxes   |          2,999  |          3,819  |            41  |           (46) |                                                  3,040  |                                                  3,773  |
| Income tax expense (benefit) |            868  |          1,556  |            28  |           (17) |                                                    896  |                                                  1,539  |
| Net income                   |         $2,131  |         $2,263  |           $13  |          $(29) |                                                 $2,144  |                                                 $2,234  |
| Earnings per share, basic    |         $7\.04  |         $6\.86  |        $0\.04  |       $(0\.09) |                                                 $7\.08  |                                                 $6\.77  |
| Earnings per share, diluted  |         $7\.02  |         $6\.85  |        $0\.04  |       $(0\.09) |                                                 $7\.06  |                                                 $6\.76  |

**Consolidated Balance Sheets as of December 31,**

|                                         |                 |                 |                |                |                                                         |                                                         |
|:--------------------------------------- | ---------------:| ---------------:| --------------:| --------------:| -------------------------------------------------------:| -------------------------------------------------------:|
|                                         | **As Reported** | **As Reported** | **Adjustment** | **Adjustment** | **As Adjusted**
**for Adoption of
Topic 606** | **As Adjusted**
**for Adoption of
Topic 606** |
|                                         |        **2017** |        **2016** |       **2017** |       **2016** |                                                **2017** |                                                **2016** |
| Current assets:                         |                 |                 |                |                |                                                         |                                                         |
| Prepaid expenses and other              |         $1,051  |           $832  |           $20  |            $20 |                                                 $1,071  |                                                   $852  |
| Other assets:                           |                 |                 |                |                |                                                         |                                                         |
| Deferred income taxes                   |              —  |            655  |             —  |             48 |                                                      —  |                                                    703  |
| Current liabilities:                    |                 |                 |                |                |                                                         |                                                         |
| Advance ticket sales                    |          3,876  |          3,730  |            64  |             65 |                                                  3,940  |                                                  3,795  |
| Frequent flyer deferred revenue         |          2,176  |          2,135  |            16  |             14 |                                                  2,192  |                                                  2,149  |
| Other                                   |            569  |          1,010  |             7  |             79 |                                                    576  |                                                  1,089  |
| Other liabilities and deferred credits: |                 |                 |                |                |                                                         |                                                         |
| Frequent flyer deferred revenue         |          2,565  |          2,748  |            26  |             (8 |                                                  2,591  |                                                  2,740  |
| Advanced purchase of miles              |              —  |            430  |             —  |              3 |                                                      —  |                                                    433  |
| Deferred income taxes                   |            225  |              —  |           (21) |             —  |                                                    204  |                                                      —  |
| Stockholders’ equity:                   |                 |                 |                |                |                                                         |                                                         |
| Retained earnings                       |          4,621  |          3,427  |           (72) |            (85 |                                                  4,549  |                                                  3,342  |

67


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

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

Plans with Accumulated Benefit Obligations Exceeding Fair Value of Plan Assets

|                                               |                      |                      |                                                                   |                                                                   |
| --------------------------------------------- | -------------------- | -------------------- | ----------------------------------------------------------------- | ----------------------------------------------------------------- |
|                                               | **Pension Benefits** | **Pension Benefits** | **Retiree Medical and**

**Other Postretirement Benefits** | **Retiree Medical and**

**Other Postretirement Benefits** |
|                                               | **2019**             | **2018**             | **2019**                                                          | **2018**                                                          |
|                                               | **(In millions)**    | **(In millions)**    | **(In millions)**                                                 | **(In millions)**                                                 |
| Projected benefit obligation                  | $18,327              | $16,351              | $—                                                                | $—                                                                |
| Accumulated benefit obligation (ABO)          | 18,315               | 16,341               | —                                                                 | —                                                                 |
| Accumulated postretirement benefit obligation | —                    | —                    | 824                                                               | 837                                                               |
| Fair value of plan assets                     | 12,862               | 10,023               | 204                                                               | 225                                                               |
| ABO less fair value of plan assets            | 5,453                | 6,318                | —                                                                 | —                                                                 |

Net Periodic Benefit Cost (Income)

|                                    |                      |                       |                      |                                                                  |                                                                  |                                                                  |
| ---------------------------------- | -------------------- | --------------------- | -------------------- | ---------------------------------------------------------------- | ---------------------------------------------------------------- | ---------------------------------------------------------------- |
|                                    | **Pension Benefits** | **Pension Benefits**  | **Pension Benefits** | **Retiree Medical and**

**Other Postretirement Benefits** | **Retiree Medical and**

**Other Postretirement Benefits** | **Retiree Medical and**

**Other Postretirement Benefits** |
|                                    | **2019**             | **2018**              | **2017**             | **2019**                                                         | **2018**                                                         | **2017**                                                         |
|                                    | **(In millions)**    | **(In millions)**     | **(In millions)**    | **(In millions)**                                                | **(In millions)**                                                | **(In millions)**                                                |
| Defined benefit plans:             |                      |                       |                      |                                                                  |                                                                  |                                                                  |
| Service cost                       | $2                   | $3                    | $2                   | $3                                                               | $5                                                               | $4                                                               |
| Interest cost                      | 703                  | 674                   | 721                  | 33                                                               | 35                                                               | 39                                                               |
| Expected return on assets          | (815

)        | (905

)         | (790

)        | (15

)                                                     | (24

)                                                     | (21

)                                                     |
| Settlements                        | —                    | —                     | 1                    | —                                                                | —                                                                | —                                                                |
| Amortization of:                   |                      |                       |                      |                                                                  |                                                                  |                                                                  |
| Prior service cost (benefit)       | 28                   | 28                    | 28                   | (236

)                                                    | (236

)                                                    | (237

)                                                    |
| Unrecognized net loss (gain)       | 150                  | 141                   | 144                  | (31

)                                                     | (21

)                                                     | (23

)                                                     |
| Net periodic benefit cost (income) | $68                  | $

(59

) | $106                 | $

(246

)                                           | $

(241

)                                           | $

(238

)                                           |

The components of net periodic benefit cost (income) other than the service cost component are included in nonoperating other income, net in our consolidated statements of operations\.

The estimated amount of unrecognized actuarial net loss and prior service cost for the defined benefit pension plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year is   $194 million \.

The estimated amount of unrecognized actuarial net gain and prior service benefit for the retiree medical and other postretirement benefits plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year is   $167 million \.

100