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

***Uncertain Tax Positions***

The Company has identified its federal tax return and its state tax returns in Alaska, Oregon and California as “major” tax jurisdictions\. A summary of the Company's jurisdictions and the periods that are subject to examination are as follows:

|                  |                        |
| ---------------- | ---------------------- |
| **Jurisdiction** | **Period**             |
| Federal          | 2007 to 2016  ^(a)(b)^ |
| Alaska           | 2012 to 2016           |
| California       | 2006 to 2016 ^(a)^     |
| Oregon           | 2003 to 2016 ^(a)^     |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| ^(a)^ | The 2007\-2012 Federal and California Virgin America tax returns are subject to examination only to the extent of net operating loss carryforwards from those years that were utilized in 2012 and later years\. The 2003, 2004, 2008\-2010 and 2011 Oregon tax returns are subject to examination only to the extent of net operating loss carryforwards from those years that were utilized in 2010 and later years\.  |

|       |                                                                                |
| ----- | ----------------------------------------------------------------------------------------- |
| ^(b)^ | Income tax years 2012 and 2013 are currently under exam by the Internal Revenue Service\. |

Changes in the liability for gross unrecognized tax benefits during 2017, 2016 and 2015 are as follows (in millions):

|                                                 |          |          |          |
| ----------------------------------------------- | -------- | -------- | -------- |
|                                                 | **2017** | **2016** | **2015** |
| Balance at January 1,                           | $40      | $32      | $3       |
| Additions related to prior years                | 16       | —        | 29       |
| Releases related to prior years                 | (2)      | —        | —        |
| Additions related to current year activity      | 2        | —        | —        |
| Additions from acquisitions                     | —        | 8        | —        |
| Releases due to settlements                     | (11)     | —        | —        |
| Releases due to lapse of statute of limitations | (2)      | —        | —        |
| Balance at December 31,                         | $43      | $40      | $32      |

As of December 31, 2017, the Company had $43 million of accrued tax contingencies, of which $36 million, if fully recognized, would decrease the effective tax rate\. As of December 31, 2017, 2016 and 2015, the Company has accrued interest and penalties, net of federal income tax benefit, of $5 million, $3 million, and zero\. In 2017, 2016, and 2015, the Company recognized an expense of $2 million, $3 million, and zero for interest and penalties, net of federal income tax benefit\. At December 31, 2017, the Company has unrecognized tax benefits recorded as a liability and some reducing deferred tax assets\. The Company added $3 million of reserves for uncertain tax positions in 2017, primarily due to changes in income sourcing for state income taxes\. These uncertain tax positions could change as a result of the Company's ongoing audits, settlement of issues, new audits and status of other taxpayer court cases\. The Company cannot predict the timing of these actions\. Due to the positions being taken in various jurisdictions, the amounts currently accrued are the Company's best estimate as of December 31, 2017\.

**NOTE 7\. EMPLOYEE BENEFIT PLANS**

Four qualified defined\-benefit plans, one non\-qualified defined\-benefit plan, and seven defined\-contribution retirement plans cover various employee groups of Alaska, Virgin America, McGee Air Services and Horizon\.

The defined\-benefit plans provide benefits based on an employee’s term of service and average compensation for a specified period of time before retirement\. The qualified defined\-benefit pension plans are closed to new entrants\.

Accounting standards require recognition of the overfunded or underfunded status of an entity’s defined\-benefit pension and other postretirement plan as an asset or liability in the consolidated financial statements and requires recognition of the funded status in AOCL\.

***Qualified Defined\-Benefit Pension Plans***

The Company’s four qualified defined\-benefit pension plans are funded as required by the Employee Retirement Income Security Act of 1974\. The defined\-benefit plan assets consist primarily of marketable equity and fixed\-income securities\. The work groups covered by qualified defined\-benefit pension plans include salaried employees, pilots, clerical, office, and

 82


Annual Report of Southwest Airlines Co\. for year 2018

These projects are being funded primarily using the Regional Airports Improvement Corporation (the "RAIC"), which is a quasi\-governmental special purpose entity that acts as a conduit borrower under syndicated credit facilities provided by groups of lenders\. Loans made under the separate credit facilities for the Terminal 1 Modernization Project and the Terminal 1\.5 Project are being used to fund the development of each of these projects, and the outstanding loans will be repaid with the proceeds of LAWA’s payments to purchase completed construction phases\. The Company has guaranteed the obligations of the RAIC under each of the credit facilities associated with the respective lease agreements\.

The Company’s liquidity could be impacted by these projects under certain circumstances; however, the Company does not expect this to occur based on its past experience with other projects\. These projects are not expected to have a significant impact on the Company’s capital resources or financial position\. Construction on the Terminal 1 Modernization Project began during 2014 and was substantially complete and operational during fourth quarter 2018\. Construction on the Terminal 1\.5 Project began during third quarter 2017 and is estimated to be completed during 2020\.

**CRITICAL ACCOUNTING POLICIES AND ESTIMATES**

The Company’s Consolidated Financial Statements have been prepared in accordance with GAAP\. The Company’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements\. The preparation of financial statements in accordance with GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying footnotes\. The Company’s estimates and assumptions are based on historical experience and changes in the business environment\. However, actual results may differ from estimates under different conditions, sometimes materially\. Critical accounting policies and estimates are defined as those that both (i) are most important to the portrayal of the Company’s financial condition and results and (ii) require management’s most subjective judgments\. The Company’s critical accounting policies and estimates are described below\. As a result of the Company's January 1, 2018 adoption of the New Revenue Standard and the New Hedging Standard, it has updated its discussions of critical accounting policies related to Revenue Recognition, Financial Derivative Instruments, Fair Value Measurements, and Loyalty Accounting\. Also, see Note 2 to the Consolidated Financial Statements for further information about the accounting implications of these ASUs\.

***Revenue Recognition***

Tickets sold for Passenger air travel are initially deferred as Air traffic liability\. Passenger revenue is recognized and Air traffic liability is reduced when the service is provided (i\.e\., when the flight takes place)\. Air traffic liability primarily represents tickets sold for future travel dates and funds that are past flight date and remain unused, as well as the Company’s liability associated with its loyalty program\. Air traffic liability fluctuates throughout the year based on seasonal travel patterns, fare sale activity, and activity associated with the Company’s loyalty program\. See Note 2 to the Consolidated Financial Statements for information about the New Revenue Standard and the Company's revenue recognition policies\.

For air travel on Southwest, the amount of tickets that will expire unused are estimated and recognized in Passenger revenue once the scheduled flight date has passed\. Estimating the amount of tickets that will expire unused involves some level of subjectivity and judgment\. The majority of Southwest’s tickets sold are nonrefundable, which is the primary source of unused tickets\. Southwest has a No Show policy that applies to fares that are not canceled or changed by a Customer at least ten minutes prior to a flight's scheduled departure\. See Note 5 to the Consolidated Financial Statements for further information\. According to Southwest’s current "Contract of Carriage," all refundable tickets that are sold but not flown on the travel date can be reused for another flight up to a year from the date of sale, or some tickets can be refunded\. This policy also applies to unused Customer funds that may be the result of an exchange downgrade, in which a Customer exchanges their ticket from a previously purchased flight for a lower priced ticket, with the price difference being effectively refunded through it being made available for use by the Customer towards travel up to twelve months from the date of original purchase\. Fully refundable tickets rarely expire unused\. Estimates of tickets that will expire unused are based on historical experience over many years\. Southwest has consistently applied this accounting method to estimate revenue from unused tickets at the date of scheduled travel\. Holding other factors constant, a 10 percent change in the Company’s estimate of the amount of tickets that will expire unused would

58


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

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

**ITEM 8\. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA\.**

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

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

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of United Continental Holdings, Inc\. (the "Company") as of December 31, 2018 and 2017, the related statements of consolidated operations, comprehensive income (loss), cash flows, and stockholders' equity for each of the three years in the period ended December 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the "consolidated financial statements")\. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U\.S\. generally accepted accounting principles\.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control\-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2019, expressed an unqualified opinion thereon\.

**Adoption of ASU No\. 2014\-09**

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2018, 2017 and 2016 due to the adoption of ASU No\. 2014\-09, *Revenue from Contracts with Customers (Topic 606)\.*

**Basis for Opinion**

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

We conducted our audits in accordance with the standards of the PCAOB\. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud\. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks\. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements\. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements\. We believe that our audits provide a reasonable basis for our opinion\.

/s/ Ernst & Young LLP

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

Chicago, Illinois

February 28, 2019

40


Annual Report of Southwest Airlines Co\. for year 2018

**15****\. SUPPLEMENTAL FINANCIAL INFORMATION**

|                          |                       |                       |
| ------------------------ | --------------------- | --------------------- |
| **(in millions)**        | **December 31, 2018** | **December 31, 2017** |
| Derivative contracts     | $95                   | $136                  |
| Intangible assets, net   | 400                   | 413                   |
| Capital lease receivable | 61                    | 76                    |
| Other                    | 164                   | 161                   |
| Other assets             | $720                  | $786                  |

|                              |                       |                       |
| ---------------------------- | --------------------- | --------------------- |
| **(in millions)**            | **December 31, 2018** | **December 31, 2017** |
| Accounts payable trade       | $263                  | $186                  |
| Salaries payable             | 216                   | 201                   |
| Taxes payable                | 220                   | 203                   |
| Aircraft maintenance payable | 69                    | 38                    |
| Fuel payable                 | 122                   | 123                   |
| Other payable                | 526                   | 569                   |
| Accounts payable             | $1,416                | $1,320                |

|                                              |                       |                       |
| -------------------------------------------- | --------------------- | --------------------- |
| **(in millions)**                            | **December 31, 2018** | **December 31, 2017** |
| Profitsharing and savings plans              | $580                  | $579                  |
| Aircraft and other lease related obligations | 37                    | 40                    |
| Permanently grounded aircraft liability      | —                     | 34                    |
| Vacation pay                                 | 403                   | 365                   |
| Health                                       | 107                   | 100                   |
| Workers compensation                         | 166                   | 172                   |
| Property and income taxes                    | 68                    | 57                    |
| Other                                        | 388                   | 353                   |
| Accrued liabilities                          | $1,749                | $1,700                |

|                                         |                       |                       |
| --------------------------------------- | --------------------- | --------------------- |
| **(in millions)**                       | **December 31, 2018** | **December 31, 2017** |
| Postretirement obligation               | $232                  | $275                  |
| Non\-current lease\-related obligations | 48                    | 85                    |
| Permanently grounded aircraft liability | —                     | 13                    |
| Other deferred compensation             | 247                   | 237                   |
| Derivative contracts                    | 12                    | 21                    |
| Other                                   | 111                   | 76                    |
| Other noncurrent liabilities            | $650                  | $707                  |

For further information on fuel derivative and interest rate derivative contracts, see Note 10\.

***Other Operating Expenses***

Other operating expenses consist of distribution costs, advertising expenses, personnel expenses, professional fees, and other operating costs, none of which individually exceed 10 percent of Operating expenses\.

114


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

Expendables Parts and Supplies\.  Inventories of expendable parts related to flight equipment, which cannot be economically repaired, reconditioned or reused after removal from the aircraft, are carried at moving average cost and charged to operations as consumed\. An allowance for obsolescence is provided over the remaining useful life of the related fleet\. We also provide allowances for parts identified as excess or obsolete to reduce the carrying costs to the lower of cost or net realizable value\. These parts are assumed to have an estimated residual value of   5%  of the original cost\.

Accounting for Refinery Related Buy/Sell Agreements

To the extent that we receive jet fuel for non\-jet fuel products exchanged under buy/sell agreements, we account for these transactions as nonmonetary exchanges\. We have recorded these nonmonetary exchanges at the carrying amount of the non\-jet fuel products transferred within aircraft fuel and related taxes on the income statement\.

Derivatives

Changes in fuel prices, interest rates and foreign currency exchange rates impact our results of operations\.  In an effort to manage our exposure to these risks, we may enter into derivative contracts and adjust our derivative portfolio as market conditions change\.  We recognize derivative contracts at fair value on our Consolidated Balance Sheets ("balance sheets")\.

The following table summarizes the risk hedged and the classification of related gains and losses on our income statement, by each type of derivative contract:

|                                     |                                                 |                                                          |
| ----------------------------------- | ----------------------------------------------- | -------------------------------------------------------- |
| **Derivative Type**                 |  **Hedged Risk**                                | **Classification of Gains and Losses**                   |
| Fuel hedge contracts                | Fluctuations in fuel prices                     | Aircraft fuel and related taxes                          |
| Interest rate contracts             | Increases in interest rates                     | Interest expense, net                                    |
| Foreign currency exchange contracts | Fluctuations in foreign currency exchange rates | Passenger revenue or non\-operating expense (See Note 5) |

The following table summarizes the accounting treatment of our derivative contracts:

|                                 |                                                                       |                                                                                |
| ------------------------------- | --------------------------------------------------------------------- | ------------------------------------------------------------------------------------- |
|                                 | **Impact of Unrealized Gains and Losses**                             | **Impact of Unrealized Gains and Losses**                                             |
| **Accounting Designation**      | **Effective Portion**                                                 | **Ineffective Portion**                                                               |
| Not designated as hedges        | Change in fair value ^(1)^  of hedge is recorded in earnings          | Change in fair value ^(1)^  of hedge is recorded in earnings                          |
| Designated as cash flow hedges  | Market adjustments are recorded in AOCI                               | Excess, if any, over effective portion of hedge is recorded in non\-operating expense |
| Designated as fair value hedges | Market adjustments are recorded in long\-term debt and finance leases | Excess, if any, over effective portion of hedge is recorded in non\-operating expense |

|        |                                                                                |
| ------ | ------------------------------------------------------------------------------------------------ |
| ^(1)^  | Including settled gains and losses as well as mark\-to\-market adjustments ("MTM adjustments")\. |

We perform, at least quarterly, an assessment of the effectiveness of our derivative contracts designated as hedges, including assessing the possibility of counterparty default\. If we determine that a derivative is no longer expected to be highly effective, we discontinue hedge accounting prospectively and recognize subsequent changes in the fair value of the hedge in earnings\. We believe our derivative contracts that continue to be designated as hedges, consisting of interest rate and foreign currency exchange contracts, will continue to be highly effective in offsetting changes in fair value or cash flow, respectively, attributable to the hedged risk\.

 Cash flows associated with purchasing and settling hedge contracts generally are classified as operating cash flows\. However, if a hedge contract includes a significant financing element at inception, cash flows associated with the hedge contract are recorded as financing cash flows\.

Hedge Margin\.  The hedge margin we receive from counterparties is recorded in cash, with the offsetting obligation in accounts payable\. The hedge margin we provide to counterparties is recorded in prepaid expenses and other\. We do not offset margin funded to counterparties or margin funded to us by counterparties against fair value amounts recorded for our hedge contracts\.

 61


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

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

|                          |          |
| ------------------------ | -------- |
| /s/ Walter Isaacson      | Director |
| Walter Isaacson          |          |
| /s/ James A\.C\. Kennedy | Director |
| James A\.C\. Kennedy     |          |
| /s/ Sito Pantoja         | Director |
| Sito Pantoja             |          |
| /s/ Edward M\. Philip    | Director |
| Edward M\. Philip        |          |
| /s/ Edward L\. Shapiro   | Director |
| Edward L\. Shapiro       |          |
| /s/ David J\. Vitale     | Director |
| David J\. Vitale         |          |
| /s/ James M\. Whitehurst | Director |
| James M\. Whitehurst     |          |

|       |                   |
| ----- | ----------------- |
| Date: | February 24, 2020 |

104


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

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

None\.

|                                       |
| ------------------------------------- |
| **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**

Except as noted below, there have been no changes in the Company’s internal controls over financial reporting during the quarter ended December 31, 2017, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting except as noted below\.

On December 14, 2016, the Company completed the acquisition of Virgin America\. In 2017 we integrated policies, processes, people, technology and operations for the combined company\. Our integration included internal controls over financial reporting\. As the integration continues and business processes evolve, management will continue to evaluate the existing internal controls over financial reporting for change\.

Also during 2017 the Company implemented internal controls to ensure it has adequately assessed the impact of the new accounting standard related to revenue recognition to prepare for adoption on January 1, 2018\. The modified and new controls have been designed to address risks associated with recognizing revenue under the new standard\.

There have been no other changes in the Company's internal controls over financial reporting during the quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting\.

 94


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

Definite\-Lived Intangible Assets

|                      |                                                |                                             |                                                |                                             |
| -------------------- | ---------------------------------------------- | ------------------------------------------- | ---------------------------------------------- | ------------------------------------------- |
|                      | **December 31, 2018**                          | **December 31, 2018**                       | **December 31, 2017**                          | **December 31, 2017**                       |
| **(in millions)**    | **Gross**

**Carrying**

**Value** |
**Accumulated**

**Amortization** | **Gross**

**Carrying**

**Value** |
**Accumulated**

**Amortization** |
| Marketing agreements | $730                                           | $

(687

)                      | $730                                           | $

(677

)                      |
| Contracts            | 193                                            | (122

)                               | 193                                            | (115

)                               |
| Other                | 53                                             | (53

)                                | 53                                             | (53

)                                |
| Total                | $976                                           | $

(862

)                      | $976                                           | $

(845

)                      |

Amortization expense was   $17 million  for each of the years ended  December 31, 2018 ,  2017  and  2016 \. We estimate that we will incur approximately   $15 million  of amortization expense annually from 2019 through 2023\.

NOTE 7 \. LONG\-TERM DEBT

The following table summarizes our long\-term debt:

|                                                           |              |              |              |                                                     |                                                     |                                                     |                  |                  |
| --------------------------------------------------------- | ------------ | ------------ | ------------ | --------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ---------------- | ---------------- |
|                                                           | **Maturity** | **Maturity** | **Maturity** | **Interest Rate(s)** ^(4)^

 **Per Annum at** | **Interest Rate(s)** ^(4)^

 **Per Annum at** | **Interest Rate(s)** ^(4)^

 **Per Annum at** | **December 31,** | **December 31,** |
| **(in millions)**                                         | **Dates**    | **Dates**    | **Dates**    | **December 31, 2018**                               | **December 31, 2018**                               | **December 31, 2018**                               | **2018**         | **2017**         |
| Pacific Facilities:                                       |              |              |              |                                                     |                                                     |                                                     |                  |                  |
| Pacific Term Loan B\-1                                    | n/a          | n/a          | n/a          | n/a                                                 |                                                     | n/a                                                 | $—               | $1,048           |
| Pacific Revolving Credit Facility                         | n/a          | n/a          | n/a          | n/a                                                 |                                                     | n/a                                                 | —                | —                |
| 2015 Credit Facilities:                                   |              |              |              |                                                     |                                                     |                                                     |                  |                  |
| Term Loan Facility                                        | n/a          | n/a          | n/a          | n/a                                                 |                                                     | n/a                                                 | —                | 490              |
| Revolving Credit Facility                                 | n/a          | n/a          | n/a          | n/a                                                 |                                                     | n/a                                                 | —                | —                |
| Financing arrangements secured by aircraft:               |              |              |
       |                                                     |                                                     |                                                     |                  |                  |
| Certificates ^(1)^                                        | 2019         | to           | 2027         | 3\.63%                                              | to                                                  | 8\.02%                                              | 1,837            | 2,380            |
| Notes ^(1)^                                               | 2019         | to           | 2025         | 2\.91%                                              | to                                                  | 6\.54%                                              | 1,787            | 1,961            |
| 2018 Unsecured notes                                      | 2021         | to           | 2028         | 3\.40%                                              | to                                                  | 4\.38%                                              | 1,600            | —                |
| 2018 Unsecured Revolving Credit Facility                  | 2021         | to           | 2023         | undrawn                                             | variable ^(3)^                                      | variable ^(3)^                                      | —                | —                |
| NYTDC Special Facilities Revenue Bonds, Series 2018 ^(1)^ | 2022         | to           | 2036         | 4\.00%                                              | to                                                  | 5\.00%                                              | 1,383            | —                |
| Other unsecured notes                                     | 2020         | to           | 2022         | 2\.60%                                              | to                                                  | 3\.63%                                              | 2,450            | 2,450            |
| Other financings ^(1)(2)^                                 | 2019         | to           | 2030         | 1\.81%                                              | to                                                  | 8\.75%                                              | 251              | 210              |
| Other revolving credit facilities                         | 2019         | to           | 2021         | undrawn                                             | variable ^(3)^                                      | variable ^(3)^                                      | —                | —                |
| Total secured and unsecured debt                          |              |              |              |                                                     |                                                     |                                                     | 9,308            | 8,539            |
| Unamortized premium (discount) and debt issue cost, net   |              |              |              |                                                     |                                                     |                                                     | 60               | (99

)     |
| Total debt                                                |              |              |              |                                                     |                                                     |                                                     | 9,368            | 8,440            |
| Less: current maturities                                  |              |              |              |                                                     |                                                     |                                                     | (1,409

)  | (2,145

)  |
| Total long\-term debt                                     |              |              |              |                                                     |                                                     |                                                     | $7,959           | $6,295           |

|       |                       |
| ----- | --------------------- |
| ^(1)^ | Due in installments\. |

|       |                                                                                |
| ----- | ---------------------------------------------------------------------------------------------------- |
| ^(2)^ | Primarily includes unsecured bonds and debt secured by certain accounts receivable and real estate\. |

|       |                                                                                |
| ----- | -------------------------------------------------------------------------------------------------------------------------- |
| ^(3)^ | Interest rate equal to LIBOR (generally subject to a floor) or another index rate, in each case plus a specified margin\.  |

|       |                                                                             |
| ----- | --------------------------------------------------------------------------- |
| ^(4)^ | Certain aircraft and other financings are comprised of variable rate debt\. |

2018 Aircraft\-Secured Loans

During the December 2018 quarter, we obtained   $621 million  in aggregate principal amount of loans secured by   10  aircraft\. These loans, which are included in secured aircraft notes in the table above, bear interest at a variable rate equal to LIBOR plus a specified margin and are due in installments from 2019 to 2023\.

 75


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

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

|               |                         |
| ------------- | ----------------------- |
| **ITEM 9B\.** | **OTHER INFORMATION\.** |

None\.

PART III

ITEM 10\. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE\.

Certain information required by this item with respect to UAL is incorporated by reference from UAL's definitive proxy statement for its  2020  Annual Meeting of Stockholders under the captions "Election of Directors" and "Corporate Governance\." Information regarding the executive officers of UAL is presented in Part I, Item 1 of this report\. There are no family relationships among the executive officers or the directors of UAL\. The executive officers are elected by UAL's Board of Directors each year and hold office until the next annual meeting of stockholders, until their successors are elected and qualified, or until their earlier death, resignation or removal\.

Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10\-K\.

Code of Ethics\.  The Company has a code of ethics, the "Code of Ethics and Business Conduct," for its directors, officers and employees\. The code serves as a "Code of Ethics" as defined by SEC regulations, and as a "Code of Conduct" under Nasdaq Listing Rule 5610\. The code is available on the Company's investor relations website at ir\.united\.com\. Waivers granted to certain officers from compliance with or future amendments to the code will be disclosed on the Company's investor relations website in accordance with Item 5\.05 of Form 8\-K\.

|               |                              |
| ------------- | ---------------------------- |
| **ITEM 11\.** | **EXECUTIVE COMPENSATION\.** |

Information required by this item with respect to UAL is incorporated by reference from UAL's definitive proxy statement for its  2020  Annual Meeting of Stockholders under the captions "Executive Compensation," "2019 Director Compensation" and "Corporate Governance—Compensation Committee Interlocks and Insider Participation\."

Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10\-K\.

|               |                                                                                |
| ------------- | ---------------------------------------------------------------------------------------------------- |
| **ITEM 12\.** | **SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS\.** |

Information required by this item with respect to UAL is incorporated by reference from UAL's definitive proxy statement for its  2020  Annual Meeting of Stockholders under the caption "Beneficial Ownership of Securities\."

Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10\-K\.

|                |                                                                                |
| -------------- | ------------------------------------------------------------------------------- |
| **ITEM 13\.**  | **CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE\.** |

Information required by this item with respect to UAL is incorporated by reference from UAL's definitive proxy statement for its  2020  Annual Meeting of Stockholders under the captions "Corporate Governance—Certain Relationships and Related Transactions," "Corporate Governance—Committees of the Board" and "Corporate Governance—Director Independence\."

Information required by this item with respect to United is omitted pursuant to General Instruction I(2)(c) of Form 10\-K\.

93


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

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

Other Revenue

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

**(Decrease)** | **% Increase**

**(Decrease)** |
| **(in millions)**                             | **2016**                    | **2015**                    | **Increase**

**(Decrease)** | **% Increase**

**(Decrease)** |
| Loyalty programs                              | $1,782                      | $1,584                      | $198                               | 12\.5 %                              |
| Administrative fees, club and on\-board sales | 1,205                       | 1,261                       | (56)                               | (4\.4)%                              |
| Ancillary businesses and refinery ^(1)^       | 1,129                       | 1,158                       | (29)                               | (2\.5)%                              |
| Baggage fees                                  | 881                         | 885                         | (4)                                | (0\.5)%                              |
| Other                                         | 197                         | 221                         | (24)                               | (10\.9)%                             |
| Total                                         | $5,194                      | $5,109                      | $85                                | 1\.7 %                               |

|       |                                                                                |
| ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| ^(1)^ | Ancillary businesses and refinery includes aircraft maintenance and staffing services we provide to third parties, our vacation wholesale operations and refinery sales to third parties\. These revenues are not related to the generation of a seat mile\. |

Other revenue increased $85 million, or 1\.7%, in 2016 primarily due to increased loyalty programs revenues from our co\-brand credit card partnership with American Express resulting from new credit card accounts\.

Operating Expense

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

**(Decrease)** | **% Increase**

**(Decrease)** |
| **(in millions)**                                  | **2016**                    | **2015**                    | **Increase**

**(Decrease)** | **% Increase**

**(Decrease)** |
| Salaries and related costs                         | $10,034                     | $8,776                      | $1,258                             | 14\.3 %                              |
| Aircraft fuel and related taxes                    | 5,133                       | 6,544                       | (1,411)                            | (21\.6)%                             |
| Regional carriers expense                          | 4,311                       | 4,241                       | 70                                 | 1\.7 %                               |
| Contracted services                                | 1,991                       | 1,848                       | 143                                | 7\.7 %                               |
| Depreciation and amortization                      | 1,902                       | 1,835                       | 67                                 | 3\.7 %                               |
| Aircraft maintenance materials and outside repairs | 1,823                       | 1,848                       | (25)                               | (1\.4)%                              |
| Passenger commissions and other selling expenses   | 1,710                       | 1,672                       | 38                                 | 2\.3 %                               |
| Landing fees and other rents                       | 1,490                       | 1,493                       | (3)                                | (0\.2)%                              |
| Profit sharing                                     | 1,115                       | 1,490                       | (375)                              | (25\.2)%                             |
| Passenger service                                  | 907                         | 872                         | 35                                 | 4\.0 %                               |
| Aircraft rent                                      | 285                         | 250                         | 35                                 | 14\.0 %                              |
| Other                                              | 1,986                       | 2,033                       | (47)                               | (2\.3)%                              |
| Total operating expense                            | $32,687                     | $32,902                     | $(215)                             | (0\.7)%                              |

Salaries and Related Costs\.  The increase in salaries and related costs was principally due to pay rate increases given to eligible employees, which includes an 18% pay rate increase for pilots resulting from a new pilot contract ratified in the December 2016 quarter that was retroactive to January 1, 2016\. Additionally, in the December 2015 quarter, base pay rates increased 14\.5% for eligible merit, ground and flight attendant employees in conjunction with changes in their profit sharing program\.

 33


Annual Report of Southwest Airlines Co\. for year 2017

to continue to meet such obligations utilizing cash and investments on hand, as well as cash generated from its ongoing operations\.

**Off\-Balance Sheet Arrangements, Contractual Obligations, and Contingent Liabilities and Commitments**

The Company has contractual obligations and commitments primarily with regard to future purchases of aircraft, payment of debt, and lease arrangements\. The Company revised its future firm order delivery schedule with Boeing

during fourth quarter 2017, to support future growth opportunities and fleet modernization\. During fourth quarter 2017, the Company exercised 40 737 MAX 8 options for 15 firm orders in 2019 and 25 firm orders in 2020\. The Company also deferred 23 737 MAX 7 firm orders from 2019 through 2021 to 12 firm orders in 2023 and 11 firm orders in 2024\. The Company also accelerated 23 737 MAX 8 firm orders from 2023 through 2024 to an additional 21 firm orders in 2021 and 2 firm orders in 2022\. Earlier in 2017, the Company also exercised five 737\-800 options for 2018, and substituted four 737\-800 options for two 737 MAX 8 options for both 2021 and 2022\. For aircraft commitments with Boeing, the Company is required to make cash deposits toward the purchase of aircraft in advance\. These deposits are classified as Deposits on flight equipment purchase contracts in the Consolidated Balance Sheet until the aircraft is delivered, at which time deposits previously made are deducted from the final purchase price of the aircraft and are reclassified as Flight equipment\. See Part 1, Item 2 for a complete table of the Company’s firm deliveries and options for Boeing 737\-700, 737\-800, 737 MAX 7, and 737 MAX 8 aircraft, and Note 4 to the Consolidated Financial Statements for the financial commitments related to these firm deliveries\.

The leasing of aircraft (including the sale and leaseback of aircraft) provides flexibility to the Company as a source of financing\. Although the Company is responsible for all maintenance, insurance, and expense associated with operating leased aircraft, and retains the risk of loss for these aircraft, it has not made guarantees to the lessors regarding the residual value (or market value) of the aircraft at the end of the lease terms\. As of December 31, 2017, the Company had 215 leased aircraft, including 78 B717s subleased to Delta and 15 Classic aircraft grounded in September 2017\. Of these leased aircraft, 144 are under operating leases, including 76 B717s subleased to Delta and 15 Classic aircraft\. See Note 7 to the Consolidated Financial Statements for further information on this transaction\. Assets and obligations under operating leases are not included in the Company’s Consolidated Balance Sheet\. Disclosure of the contractual obligations associated with the Company’s leased aircraft is included below\.

The Company is required to provide standby letters of credit to support certain obligations that arise in the ordinary course of business and may choose to provide letters of credit in place of posting cash collateral related to its fuel hedging positions\. Although the letters of credit are off\-balance sheet, the majority of the obligations to which they relate are reflected as liabilities in the Consolidated Balance Sheet\. Outstanding letters of credit totaled $167 million at December 31, 2017\.

57


Annual Report of Southwest Airlines Co\. for year 2019

|     |                                                                                |
| --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (g) | Calculated as operating revenues divided by available seat miles\. Also referred to as "operating unit revenues" or "RASM," this is a measure of operating revenue production based on the total available seat miles flown during a particular period\.  |

|     |                                                                                |
| --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (h) | Calculated as passenger revenue divided by available seat miles\. Also referred to as "passenger unit revenues," this is a measure of passenger revenue production based on the total available seat miles flown during a particular period\. |

|     |                                                                                |
| --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (i) | Calculated as operating expenses divided by available seat miles\. Also referred to as "unit costs" or "cost per available seat mile," this is the average cost to fly an aircraft seat (empty or full) one mile, which is a measure of cost efficiencies\. |

|     |                                                                                |
| --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| (j) | Year ended 2015 RASM excludes a $172 million one\-time special revenue adjustment in July 2015 as a result of the Company's amendment of its co\-branded credit card agreement with Chase Bank USA, N\.A\. and the resulting required change in accounting methodology\. Including the special revenue adjustment, RASM would have been 14\.11 cents for the year ended 2015\. |

39


Annual Report of Southwest Airlines Co\. for year 2019

Note Regarding Use of Non\-GAAP Financial Measures

The Company's Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP")\. These GAAP financial statements may include (i) unrealized noncash adjustments and reclassifications, which can be significant, as a result of accounting requirements and elections made under accounting pronouncements relating to derivative instruments and hedging and (ii) other charges and benefits the Company believes are unusual and/or infrequent in nature and thus may make comparisons to its prior or future performance difficult\.

As a result, the Company also provides financial information in this filing that was not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP\. The Company provides supplemental non\-GAAP financial information (also referred to as "excluding special items"), including results that it refers to as "economic," which the Company's management utilizes to evaluate its ongoing financial performance and the Company believes provides additional insight to investors as supplemental information to its GAAP results\. The non\-GAAP measures provided that relate to the Company’s performance on an economic fuel cost basis include Fuel and oil expense, non\-GAAP; Total operating expenses, non\-GAAP; Operating income, non\-GAAP; Net income, non\-GAAP; Net income per share, diluted, non\-GAAP; Operating expenses per ASM, non\-GAAP, excluding Fuel and oil expense and profitsharing; Adjusted operating income, non\-GAAP; and Income tax rate, non\-GAAP\. The Company's economic Fuel and oil expense results differ from GAAP results in that they only include the actual cash settlements from fuel hedge contracts \- all reflected within Fuel and oil expense in the period of settlement\. Thus, Fuel and oil expense on an economic basis has historically been utilized by the Company, as well as some of the other airlines that utilize fuel hedging, as it reflects the Company’s actual net cash outlays for fuel during the applicable period, inclusive of settled fuel derivative contracts\. Any net premium costs paid related to option contracts that are designated as hedges are reflected as a component of Fuel and oil expense, for both GAAP and non\-GAAP (including economic) purposes in the period of contract settlement\. The Company believes these economic results provide further insight on the impact of the Company's fuel hedges on its operating performance and liquidity since they exclude the unrealized, noncash adjustments and reclassifications that are recorded in GAAP results in accordance with accounting guidance relating to derivative instruments, and they reflect all cash settlements related to fuel derivative contracts within Fuel and oil expense\. This enables the Company's management, as well as investors and analysts, to consistently assess the Company's operating performance on a year\-over\-year or quarter\-over\-quarter basis after considering all efforts in place to manage fuel expense\. However, because these measures are not determined in accordance with GAAP, such measures are susceptible to varying calculations, and not all companies calculate the measures in the same manner\. As a result, the aforementioned measures, as presented, may not be directly comparable to similarly titled measures presented by other companies\.

Further information on (i) the Company's fuel hedging program, (ii) the requirements of accounting for derivative instruments, and (iii) the causes of hedge ineffectiveness and/or mark\-to\-market gains or losses from derivative instruments is included in Note  2  and Note  10  to the Consolidated Financial Statements\.

The Company’s GAAP results in the applicable periods may include other charges or benefits that are also deemed "special items," that the Company believes make its results difficult to compare to prior periods, anticipated future periods, or industry trends\. Financial measures identified as non\-GAAP (or as excluding special items) have been adjusted to exclude special items\. For the periods presented, in addition to the items discussed above, special items include:

|     |                                                                                |
| --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| 1\. | A gain recognized in first quarter 2018, associated with the sale of 39 Boeing 737\-300 ("Classic") aircraft and a number of spare engines to a third party\. These aircraft were previously retired as part of the Company's exit of its Classic fleet\. The gain was not anticipated, and the Company associates it with the grounding charge recorded in third quarter 2017; |

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| 2\. | Lease termination costs recorded as a result of the Company acquiring 13 of its Classic aircraft off operating leases as part of the Company’s strategic effort to remove its Classic aircraft from operations on or before September 29, 2017, in the most economically advantageous manner possible\. The Company had not budgeted for these early lease termination costs, as they were subject to negotiations being concluded with the third  |

50


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

In 2017, we generated $1\.6 billion in operating cash flows compared to $1\.4 billion in 2016\. The increase of $204 million was due to an increase in our net income\.

We typically generate positive cash flows from operations, and expect to use that cash flow to buy aircraft and capital equipment, to make debt payments, and to return capital to shareholders\. During 2016, we paused our share repurchase program as we prepared for the acquisition of Virgin America\. We resumed our share repurchase program in the second quarter of 2017 and continued the program in 2018\.

***Cash Used in Investing Activities***

Cash used in investing activities was $631 million during 2018, compared to $1\.1 billion in 2017\. Our capital expenditures were $960 million, or $66 millionlower than 2017, primarily due to the deferral of Mainline deliveries in 2018, offset by an increase in non\-aircraft spend related to the retrofit of our fleet and corporate real estate projects\. Cash used in investing activities was also impacted by net sales of marketable securities of $282 million in 2018 compared to net purchases in 2017 of $181 million\. The shift to net sales is primarily due to funds being utilized to prepay certain debt\. For further information regarding our future expected capital expenditures, please refer to the Contractual Obligations and Commitments section below\.

Cash used in investing activities was $1\.1 billion during 2017, compared to $2\.6 billion in 2016\. In 2016, we used $2 billion to acquire Virgin America, representing $2\.6 billion consideration paid, offset by $645 million of cash acquired\. This cash outlay was offset by increased capital expenditures in 2017, which were $1 billion in 2017, $348 million higher than in 2016, and was a result of the purchase of more aircraft in 2017\.

***Cash Used in Financing Activities***

Cash used in financing activities was $647 million during 2018, compared to cash used in financing activities of $592 million in 2017\. During the year, we made debt payments of $807 million, repurchased $50 million of our common stock and paid cash dividends of $158 million\. During the fourth quarter of 2018, we secured new debt financing from multiple lenders of $339 million which replaced certain debt previously retired\.

In 2017, we made debt payments of $397 million, repurchased $75 million of our common stock and made cash dividend payments of $148 million\. In 2016, we secured debt proceeds of $2 billion for the acquisition of Virgin America, made debt payments of $249 million, repurchased $193 million of our common stock and made cash dividend payments of $136 million\.

We plan to meet our future capital and operating commitments through our cash and investments on hand, internally generated cash from operations, along with additional debt financing if necessary\.

***Bank Lines of Credit***

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

**CONTRACTUAL OBLIGATIONS AND COMMITMENTS**

***Aircraft Purchase and Lease Commitments***

As of December 31, 2018, we have firm orders to purchase or lease 48 aircraft\. We also have cancelable purchase commitments for 30 Airbus A320neo aircraft with deliveries from 2022 through 2024\. We could incur a loss of pre\-delivery payments and credits as a cancellation fee\. We also have options to acquire up to 37 additional B737 aircraft with deliveries from 2021 through 2024 and 30 E175 aircraft with deliveries from 2021 to 2023\. In addition to the 32E175 aircraft currently operated by SkyWest in our regional fleet, we have options in future periods to add regional capacity by having SkyWest operate up to eight more E175 aircraft\.

We expect capital expenditures to be approximately $750 million in both 2019 and 2020\. We currently expect delivery of seven owned Mainline jet aircraft and four owned Regional jet aircraft in 2019\.

 49


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

You should not place undue reliance on our forward\-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control\.

Our forward\-looking statements are based on the information currently available to us and speak only as of the date on which this report was filed with the SEC\. We expressly disclaim any obligation to issue any updates or revisions to our forward\-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements\. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward\-looking statements, and such differences might be significant and materially adverse to our shareholders\. For a discussion of these and other risk factors in this Form 10\-K, see “Item 1A: Risk Factors\.” Please consider our forward\-looking statements in light of those risks as you read this report\.

 3


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

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

**Number** | **Description**                                                                                |
| 4\.21                         | [Trust Supplement No\. 2014\-1B, dated as of September 16, 2014, between American Airlines, Inc\. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4\.3 to American’s Current Report on Form 8\-K filed on September 17, 2014 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312514343482/d790263dex43.htm)                                                                                |
| 4\.22                         | [Intercreditor Agreement (2014\-1), dated as of September 16, 2014, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2014\-1A and as Trustee of the American Airlines Pass Through Trust 2014\-1B, Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4\.4 to American’s Current Report on Form 8\-K filed on September 17, 2014 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312514343482/d790263dex44.htm) |
| 4\.23                         | [Amendment No\. 1 to Intercreditor Agreement (2014\-1), dated as of June 24, 2015, among American Airlines, Inc\., Credit Agricole Corporate and Investment Bank, as Class A and Class B liquidity provider and Wilmington Trust Company, as subordination agent and trustee (incorporated by reference to Exhibit 10\.6 to AAG’s Quarterly Report on Form 10\-Q for the quarter ended June 30, 2015 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515261937/d945812dex106.htm)                                                                                |
| 4\.24                         | [Note Purchase Agreement, dated as of September 16, 2014, among American Airlines, Inc\., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4\.9 to American’s Current Report on Form 8\-K filed on September 17, 2014 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312514343482/d790263dex49.htm)                                                                                |
| 4\.25                         | [Form of Participation Agreement (Participation Agreement among American Airlines, Inc\., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (Exhibit B to Note Purchase Agreement) (incorporated by reference to Exhibit 4\.10 to American’s Current Report on Form 8\-K filed on September 17, 2014 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312514343482/d790263dex410.htm)                              |
| 4\.26                         | [Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc\., and Wilmington Trust Company, as Loan Trustee) (Exhibit C to Note Purchase Agreement) (incorporated by reference to Exhibit 4\.11 to American’s Current Report on Form 8\-K filed on September 17, 2014 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312514343482/d790263dex411.htm)                                                                                |
| 4\.27                         | [Revolving Credit Agreement (2014\-1A), dated as of September 16, 2014, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2014\-1A, as Borrower, and Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4\.14 to American’s Current Report on Form 8\-K filed on September 17, 2014 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312514343482/d790263dex414.htm)                                                                                |
| 4\.28                         | [Revolving Credit Agreement (2014\-1B), dated as of September 16, 2014, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2014\-1B, as Borrower, and Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4\.15 to American’s Current Report on Form 8\-K filed on September 17, 2014 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312514343482/d790263dex415.htm)                                                                                |
| 4\.29                         | [Indenture, dated as of September 25, 2014, among American Airlines Group Inc\., the Guarantors (as defined therein) and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4\.1 to AAG’s Current Report on Form 8\-K filed on September 26, 2014 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312514353554/d794803dex41.htm)                                                                                |
| 4\.30                         | [First Supplemental Indenture, dated as of December 30, 2015, among American Airlines Group Inc\., American Airlines, Inc\. and Wilmington Trust, National Association, as trustee, to the Indenture dated as of September 25, 2014 (incorporated by reference to Exhibit 4\.2 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/d110614dex42.htm)                                                                                |
| 4\.31                         | [Indenture, dated as of March 5, 2015, among American Airlines Group Inc\., the Guarantors (as defined therein) and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4\.1 to AAG’s Current Report on Form 8\-K filed on March 12, 2015 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515088934/d891899dex41.htm)                                                                                |
| 4\.32                         | [Form of 6\.125% Senior Notes due 2018 (incorporated by reference to Exhibit A to Exhibit 4\.2 to US Airways Group’s Current Report on Form 8\-K filed on May 24, 2013 (Commission File No\. 1\-8444))\.](http://www.sec.gov/Archives/edgar/data/701345/000119312513235868/d544095dex42.htm)                                                                                |
| 4\.33                         | [Form of 5\.50% Senior Notes due 2019 (incorporated by reference to Exhibit A to Exhibit 4\.1 to AAG’s Current Report on Form 8\-K filed on September 26, 2014 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312514353554/d794803dex41.htm)                                                                                |
| 4\.34                         | [Form of 4\.625% Senior Notes due 2020 (incorporated by reference to Exhibit A to Exhibit 4\.1 to AAG’s Current Report on Form 8\-K filed on March 12, 2015 (Commission File No\. 1\-8400))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312515088934/d891899dex41.htm)                                                                                |
| 4\.35                         | [First Supplemental Indenture, dated as of December 30, 2015, among American Airlines Group Inc\., American Airlines, Inc\. and Wilmington Trust, National Association, as trustee, to the Indenture dated as of March 5, 2015 (incorporated by reference to Exhibit 4\.3 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/d110614dex43.htm)                                                                                |

182


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

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

|                                                         |                                                    |                                                    |                                                    |                                                    |                                                    |                                                    |
| ------------------------------------------------------- | -------------------------------------------------- | -------------------------------------------------- | -------------------------------------------------- | -------------------------------------------------- | -------------------------------------------------- | -------------------------------------------------- |
| **Consolidated Balance Sheets as of December 31,**      | **Consolidated Balance Sheets as of December 31,** | **Consolidated Balance Sheets as of December 31,** | **Consolidated Balance Sheets as of December 31,** | **Consolidated Balance Sheets as of December 31,** | **Consolidated Balance Sheets as of December 31,** | **Consolidated Balance Sheets as of December 31,** |
|                                                         | **As Reported**                                    | **As Reported**                                    | **New Lease Standard Adjustments**                 | **New Lease Standard Adjustments**                 | **As Adjusted**                                    | **As Adjusted**                                    |
|                                                         | **2018**                                           | **2017**                                           | **2018**                                           | **2017**                                           | **2018**                                           | **2017**                                           |
| Current assets:                                         |                                                    |                                                    |                                                    |                                                    |                                                    |                                                    |
| Receivables, less allowance for doubtful accounts       | $1,346                                             | $1,340                                             | $80                                                | $126                                               | $1,426                                             | $1,466                                             |
| Prepaid expenses and other                              | 913                                                | 1,071                                              | (180)                                              | (208)                                              | 733                                                | 863                                                |
| Operating property and equipment:                       |                                                    |                                                    |
                                             |
                                             |
                                             |
                                             |
| Other property and equipment (owned)                    | 7,919                                              | 6,946                                              | (1,041)                                            | (922)                                              | 6,878                                              | 6,024                                              |
| Less\-Accumulated depreciation and amortization (owned) | (12,760)                                           | (11,159)                                           | 140                                                | 92                                                 | (12,620)                                           | (11,067)                                           |
| Flight equipment (finance leases) (a)                   | 1,029                                              | 1,151                                              | (37)                                               | (211)                                              | 992                                                | 940                                                |
| Less\-Accumulated amortization                          | (654)                                              | (777)                                              | 8                                                  | 169                                                | (646)                                              | (608)                                              |
| Operating lease assets                                  |                                                    |                                                    |
                                             |
                                             |                                                    |                                                    |
| Flight equipment                                        | —                                                  | —                                                  | 2,380                                              | 3,102                                              | 2,380                                              | 3,102                                              |
| Other property and equipment                            | —                                                  | —                                                  | 2,882                                              | 2,975                                              | 2,882                                              | 2,975                                              |
| Current liabilities:                                    |                                                    |                                                    |
                                             |
                                             |
                                             |
                                             |
| Current maturities of finance leases (a)                | 149                                                | 128                                                | (26)                                               | (50)                                               | 123                                                | 78                                                 |
| Current maturities of operating leases                  | —                                                  | —                                                  | 719                                                | 949                                                | 719                                                | 949                                                |
| Other                                                   | 619                                                | 576                                                | (66)                                               | (58)                                               | 553                                                | 518                                                |
| Long\-term obligations under finance leases (a)         | 1,134                                              | 996                                                | (910)                                              | (766)                                              | 224                                                | 230                                                |
| Long\-term obligations under operating leases           | —                                                  | —                                                  | 5,276                                              | 5,789                                              | 5,276                                              | 5,789                                              |
| Other liabilities and deferred credits:                 |                                                    |                                                    |
                                             |
                                             |                                                    |                                                    |
| Deferred income taxes                                   | 814                                                | 204                                                | 14                                                 | 16                                                 | 828                                                | 220                                                |
| Other                                                   | 1,832                                              | 1,832                                              | (822)                                              | (811)                                              | 1,010                                              | 1,021                                              |
| Stockholders' equity:                                   |                                                    |                                                    |
                                             |
                                             |
                                             |
                                             |
| Retained earnings                                       | 6,668                                              | 4,549                                              | 47                                                 | 54                                                 | 6,715                                              | 4,603                                              |

(a) Finance leases, under the New Lease Standard, are the equivalent of capital leases under Topic 840\.

The adoption of the New Lease Standard primarily resulted in the recording of assets and obligations of our operating leases on our consolidated balance sheets\. Certain amounts recorded for prepaid and accrued rent associated with historical operating leases were reclassified to the newly captioned Operating lease assets in the consolidated balance sheets\. Also, certain leases designated under Topic 840 as owned assets and capitalized finance leases will not be considered assets under the New Lease Standard and will be removed from the consolidated balance sheets, along with the related capital lease liability\.

62


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

as advertising, passenger communications, denied boarding compensation and tarmac delay response\.  Airlines are subject to enforcement actions that are brought by the DOT for alleged violations of consumer protection and other economic regulations\. We are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate\.

• FAA:  The FAA, through Federal Aviation Regulations (FARs), generally regulates all aspects of airline operations, including establishing personnel, maintenance and flight operation standards\. Domestic airlines are required to hold a valid air carrier operating certificate issued by the FAA\. Pursuant to these regulations, we have established, and the FAA has approved, our operations specifications and a maintenance program for each type of aircraft we operate\. Each maintenance program provides for the ongoing maintenance of the relevant aircraft type, ranging from frequent routine inspections to major overhauls\. Periodically, the FAA issues airworthiness directives (ADs) that must be incorporated into our aircraft maintenance program and operations\. All airlines are subject to enforcement actions that are brought by the FAA from time to time for alleged violations of FARs or ADs\. At this time, we are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate\.

• TSA:  Airlines serving the U\.S\. must operate a TSA\-approved Aircraft Operator Standard Security Program (AOSSP), and comply with TSA Security Directives (SDs) and regulations\. Under TSA authority, we are required to collect a September 11 Security Fee of $5\.60 per one\-way trip from passengers and remit that sum to the government to fund aviation security me asures\.  Airlines are subject to enforcement actions that are brought by the TSA for alleged violations of the AOSSP, SDs or security regulations\. We are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate\.

The Department of Justice and DOT have jurisdiction over airline antitrust matters\. The U\.S\. Postal Service has jurisdiction over certain aspects of the transportation of mail and related services\. Labor relations in the air transportation industry are regulated under the RLA\. To the extent we continue to fly to foreign countries and pursue alliances with international carriers, we may be subject to certain regulations of foreign agencies and international treaties\.

We are also subject to the oversight of the Occupational Safety and Health Administration (OSHA) concerning employee safety and health matters\. The OSHA and other federal agencies have been authorized to create and enforce regulations that have an impact on our operations\. In addition to these federal activities, various states have been delegated certain authorities under these federal statutes\. Many state and local governments have adopted employee safety and health laws and regulations\. We maintain our safety and health programs in order to meet or exceed these requirements\.

ENVIRONMENTAL

We are also subject to various laws and government regulations concerning environmental matters, both domestically and internationally\. Domestic regulations that have an impact to our operations include the Airport Noise and Capacity Act of 1990, the Clean Air Act, Resource Conservation and Recovery Act, Clean Water Act, Safe Drinking Water Act, the Comprehensive Environmental Response and Compensation Liability Act, the National Environmental Policy Act, Emergency Planning and Community Right\-to\-Know Act and the Toxic Substances Control Act\. Many state and local environmental regulations exceed these federal regulations\. In the future there may be incremental legislation aimed at reduction of carbon and other greenhouse gas emissions and environmental restoration\.

The Airport Noise and Capacity Act recognizes the rights of airport operators with noise problems to implement local noise abatement programs so long as they do not interfere unreasonably with interstate or foreign commerce or the national air transportation system\. Authorities in several cities have established aircraft noise reduction programs, including the imposition of nighttime curfews\. We believe we have sufficient scheduling flexibility to accommodate local noise restrictions\.

The impacts of carbon emissions generated by the airline industry and the impact of those emissions on climate change have faced increased scrutiny\. We committed to carbon neutral international growth starting in 2020 through our commitment to Carbon Offsetting and Reduction Scheme for International Aviation, a global, market\-based emissions offset program issued by the International Civil Aviation Organization\. This does not have a direct impact on domestic flights, however EPA is expected to finalize a rule in 2020 on aircraft emission standards which will align with the international agreements\.

Over the course of several years, we have transitioned to more fuel\-efficient aircraft fleets, added fuel\-efficient winglets, and flown efficient flight paths, keeping with our industry commitments towards emission reduction\. In 2016, Alaska Airlines flew the first commercial flight in the U\.S\. using a sustainable alternative jet fuel of a 20% blend made from forest residuals\. The fuel from that flight was produced by the Northwest Advanced Renewables Alliance (NARA), led by Washington State University\. Alaska Airlines has joined with others at Seattle Tacoma International Airport and San Francisco International

17


Annual Report of Southwest Airlines Co\. for year 2017

these cases with a proposed class of all persons who purchased domestic airline transportation services from July 1, 2011, to the date of the settlement\. The Company agreed to pay $15 million and to provide certain cooperation with the plaintiffs as set forth in the settlement agreement\. The Court granted preliminary approval of the settlement on January 3, 2018, and it is anticipated that the Court will establish a schedule for providing notice to the class, for class members to object or opt out, and for a final fairness hearing\. The Company denies all allegations of wrongdoing\.

In addition, on July 8, 2015, the Company was named as a defendant in a putative class action filed in the Federal Court in Canada alleging that the Company, Air Canada, American Airlines, Delta Air Lines, and United Airlines colluded to restrict capacity and maintain higher fares for Canadian residents traveling in the United States and for travel between the United States and Canada\. Similar lawsuits were filed in the Supreme Court of British Columbia on July 15, 2015, Court of Queen's Bench for Saskatchewan on August 4, 2015, Superior Court of the Province of Quebec on September 21, 2015, and Ontario Superior Court of Justice on October 6, 2015\. In December 2015, the Company entered into Tolling and Discontinuance agreements with putative class counsel in the Federal Court, British Columbia, and Ontario proceedings and a discontinuance agreement with putative class counsel in the Quebec proceeding\. The other defendants entered into an agreement with the same putative class counsel to stay the Federal Court, British Columbia, and Quebec proceedings and to proceed in Ontario\. On June 10, 2016, the Federal Court granted plaintiffs' motion to discontinue that action against the Company without prejudice and stayed the action against the other defendants\. On July 13, 2016, the plaintiff unilaterally discontinued the action against the Company in British Columbia\. On February 14, 2017, the Quebec Court granted the plaintiff’s motion to discontinue the Quebec proceeding against the Company and to stay that proceeding against the other defendants\. On March 10, 2017, the Ontario Court granted the plaintiff’s motion to discontinue that proceeding as to the Company\. On September 29, 2017, the Company and the other defendants entered into a tolling agreement suspending any limitations periods that may apply to possible claims among them for contribution and indemnity arising from the Canadian litigation\. The Saskatchewan claim has not been served on the Company, and the time for the Company to respond to that complaint has not yet begun to run\. The plaintiff in that case generally seeks damages (including punitive damages in certain cases), prejudgment interest, disgorgement of any benefits accrued by the defendants as a result of the allegations, injunctive relief, and attorneys' fees and other costs\. The Company denies all allegations of wrongdoing and intends to vigorously defend this civil case in Canada\. The Company does not currently serve Canada\.

The Company is from time to time subject to various legal proceedings and claims arising in the ordinary course of business, including, but not limited to, examinations by the Internal Revenue Service\.

The Company’s management does not expect that the outcome in any of its currently ongoing legal proceedings or the outcome of any proposed adjustments presented to date by the Internal Revenue Service, individually or collectively, will have a material adverse effect on the Company’s financial condition, results of operations, or cash flow\.

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| ------------- | ------------------------------ |
| **Item 4\.**  | ***Mine Safety Disclosures***  |

Not applicable\.

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