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

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

**Number** | **Description**                                                                                |
| 4\.92                         | [Revolving Credit Agreement (2016\-1AA), dated as of January 19, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016\-1AA, as Borrower, and KfW IPEX\-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4\.12 to American’s Current Report on Form 8\-K filed on January 21, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516433815/d126794dex412.htm)                                                                                |
| 4\.93                         | [Revolving Credit Agreement (2016\-1A), dated as of January 19, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016\-1A, as Borrower, and KfW IPEX\-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4\.13 to American’s Current Report on Form 8\-K filed on January 21, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516433815/d126794dex413.htm)                                                                                |
| 4\.94                         | [Revolving Credit Agreement (2016\-1B), dated as of January 19, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016\-1B, as Borrower, and KfW IPEX\-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4\.14 to American’s Current Report on Form 8\-K filed on January 21, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516433815/d126794dex414.htm)                                                                                |
| 4\.95                         | [Trust Supplement No\. 2016\-2AA, dated as of May 16, 2016, 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\.2 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex42.htm)                                                                                |
| 4\.96                         | [Trust Supplement No\. 2016\-2A, dated as of May 16, 2016, 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 May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex43.htm)                                                                                |
| 4\.97                         | [Intercreditor Agreement (2016\-2), dated as of May 16, 2016, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2016\-2AA and as Trustee of the American Airlines Pass Through Trust 2016\-2A, KfW IPEX\-Bank GmbH, as Class AA Liquidity Provider and Class A 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 May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex44.htm)          |
| 4\.98                         | [Note Purchase Agreement, dated as of May 16, 2016, 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 May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex49.htm)                                       |
| 4\.99                         | [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) (incorporated by reference to Exhibit B to Exhibit 4\.9 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex49.htm) |
| 4\.100                        | [Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc\., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4\.9 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex49.htm)                                                                                |
| 4\.101                        | [Form of Pass Through Trust Certificate, Series 2016\-2AA (incorporated by reference to Exhibit A to Exhibit 4\.2 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex42.htm)                                                                                |
| 4\.102                        | [Form of Pass Through Trust Certificate, Series 2016\-2A (incorporated by reference to Exhibit A to Exhibit 4\.3 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex43.htm)                                                                                |
| 4\.103                        | [Revolving Credit Agreement (2016\-2AA), dated as of May 16, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016\-2AA, as Borrower, and KfW IPEX\-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4\.14 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex414.htm)                                                                                |
| 4\.104                        | [Revolving Credit Agreement (2016\-2A), dated as of May 16, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016\-2A, as Borrower, and KfW IPEX\-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4\.15 to American’s Current Report on Form 8\-K filed on May 17, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516592083/d177635dex415.htm)                                                                                |
| 4\.105                        | [Trust Supplement No\. 2016\-2B, dated as of July 8, 2016, 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\.2 to American’s Current Report on Form 8\-K filed on July 12, 2016 (Commission File No\. 1\-2691))\.](http://www.sec.gov/Archives/edgar/data/4515/000119312516646353/d210431dex42.htm)                                                                                |

187


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

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

The following table provides information related to UAL's share\-based compensation plan cost for the years ended December 31 (in millions):

|                    |          |          |          |
| ------------------ | -------- | -------- | -------- |
|                    | **2019** | **2018** | **2017** |
| Compensation cost: |          |          |          |
| RSUs               | $98      | $98      | $63      |
| Restricted stock   | 1        | 2        | 8        |
| Stock options      | 1        | 1        | 2        |
| Total              | $100     | $101     | $73      |

The table below summarizes UAL's unearned compensation and weighted\-average remaining period to recognize costs for all outstanding share\-based awards that are probable of being achieved as of December 31,  2019  (in millions, except as noted):

|               |                           |                                                                          |
| ------------- | ------------------------- | ------------------------------------------------------------------------ |
|               | **Unearned Compensation** | **Weighted\-Average**

**Remaining Period**

**(in years)** |
| RSUs          | $66                       | 2\.0                                                                     |
| Stock options | 11                        | 5\.3                                                                     |
| Total         | $77                       |                                                                          |

RSUs and Restricted Stock\.  As of  December 31, 2019 , UAL had recorded a liability of   $44 million  related to its cash\-settled RSUs\. UAL paid   $41 million ,   $28 million  and   $50 million  related to its cash\-settled RSUs during  2019 ,  2018  and  2017 , respectively\.

The table below summarizes UAL's RSUs and restricted stock activity for the years ended December 31 (shares in millions):

|                                  |                      |                    |                                                          |                                  |                                                          |
| -------------------------------- | -------------------- | ------------------ | -------------------------------------------------------- | -------------------------------- | -------------------------------------------------------- |
|                                  | **Liability Awards** | **Equity Awards**  | **Equity Awards**                                        | **Equity Awards**                | **Equity Awards**                                        |
|                                  | **RSUs**             |

**RSUs** | **Weighted\-**

**Average**

**Grant Price** | **Restricted**

**Stock** | **Weighted\-**

**Average**

**Grant Price** |
| Outstanding at December 31, 2016 | 2\.1                 | 0\.8               | $51\.67                                                  | 0\.5                             | $52\.00                                                  |
| Granted                          | 0\.6                 | 1\.0               | 71\.68                                                   | —                                | —                                                        |
| Vested                           | (0\.7

)       | (0\.3

)     | 51\.81                                                   | (0\.2

)                   | 51\.60                                                   |
| Forfeited                        | (0\.2

)       | (0\.1

)     | 57\.49                                                   | —                                | —                                                        |
| Outstanding at December 31, 2017 | 1\.8                 | 1\.4               | 63\.99                                                   | 0\.3                             | 52\.30                                                   |
| Granted                          | 0\.7                 | 1\.1               | 67\.74                                                   | —                                | —                                                        |
| Vested                           | (0\.5

)       | (0\.5

)     | 63\.02                                                   | (0\.2

)                   | 53\.24                                                   |
| Forfeited                        | (0\.1

)       | (0\.2

)     | 67\.34                                                   | —                                | —                                                        |
| Outstanding at December 31, 2018 | 1\.9                 | 1\.8               | 66\.29                                                   | 0\.1                             | 51\.17                                                   |
| Granted                          | 0\.1                 | 1\.1               | 86\.72                                                   | —                                | —                                                        |
| Vested                           | (0\.5

)       | (0\.8

)     | 64\.85                                                   | (0\.1

)                   | 51\.17                                                   |
| Forfeited                        | (0\.9

)       | (0\.1

)     | 76\.48                                                   | —                                | —                                                        |
| Outstanding at December 31, 2019 | 0\.6                 | 2\.0               | 78\.03                                                   | —                                | —                                                        |

The fair value of RSUs and restricted stock that vested in  2019 ,  2018  and  2017  was   $99 million ,   $70 million  and   $76 million , respectively\. The fair value of the restricted stock and the stock\-settled RSUs was based upon the UAL common stock price on the date of grant\. The fair value of the cash\-settled RSUs was based on the UAL common stock price as of the last day preceding the settlement date\.

Stock Options\.  In  2019 , UAL granted an award of approximately   307,000  premium\-priced stock options with an exercise price that was   25%  higher than the closing price of UAL's common stock on the date of grant, representing an exercise price of   $110\.21 \. UAL did not grant any stock option awards during 2018\. In 2017, UAL granted approximately   36,000  stock options with an exercise price equal to the fair market value of UAL's common stock on the date of grant, representing an exercise price of   $77\.56  and a weighted\-average grant date fair value of approximately   $0\.7 million \. Expense related to each portion of an option grant is recognized on a straight\-line basis over the specific vesting period for those options\.

64


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

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

UNITED AIRLINES HOLDINGS, INC\.

STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY

(In millions)

|                                                               |                             |                             |                                            |                          |                                             |                                                              |                 |
| ------------------------------------------------------------- | --------------------------- | --------------------------- | ------------------------------------------ | ------------------------ | ------------------------------------------- | ------------------------------------------------------------ | --------------- |
|                                                               | **Common**

**Stock** | **Common**

**Stock** | **Additional**

**Capital Invested** | **Treasury Stock**       | **Retained Earnings (Accumulated Deficit)** | **Accumulated**

**Other Comprehensive Income (Loss)** | **Total**       |
|                                                               | **Shares**                  | **Amount**                  | **Additional**

**Capital Invested** | **Treasury Stock**       | **Retained Earnings (Accumulated Deficit)** | **Accumulated**

**Other Comprehensive Income (Loss)** | **Total**       |
| Balance at December 31, 2016                                  | 314\.6                      | $3                          | $6,569                                     | $

(511

)   | $3,342                                      | $

(829

)                                       | $8,574          |
| Net income (a)                                                | —                           | —                           | —                                          | —                        | 2,143                                       | —                                                            | 2,143           |
| Other comprehensive loss                                      | —                           | —                           | —                                          | —                        | —                                           | (200

)                                                | (200

)   |
| Stock\-settled share\-based compensation                      | —                           | —                           | 56                                         | —                        | —                                           | —                                                            | 56              |
| Proceeds from exercise of stock options                       | —                           | —                           | 2                                          | —                        | —                                           | —                                                            | 2               |
| Repurchases of common stock                                   | (27\.8

)             | —                           | —                                          | (1,844

)          | —                                           | —                                                            | (1,844

) |
| Treasury stock retired                                        | —                           | —                           | (508

)                              | 1,576                    | (1,068

)                             | —                                                            | —               |
| Net treasury stock issued for share\-based awards             | 0\.2                        | —                           | (21

)                               | 10                       | (1

)                                 | —                                                            | (12

)    |
| Excess tax benefits from share\-based awards                  | —                           | —                           | —                                          | —                        | 14                                          | —                                                            | 14              |
| Reclassification of stranded tax effects                      | —                           | —                           | —                                          | —                        | 118                                         | (118

)                                                | —               |
| Other (a)                                                     | —                           | —                           | —                                          | —                        | 55                                          | —                                                            | 55              |
| Balance at December 31, 2017                                  | 287\.0                      | 3                           | 6,098                                      | (769

)            | 4,603                                       | (1,147

)                                              | 8,788           |
|  Net income (a)                                               | —                           | —                           | —                                          | —                        | 2,122                                       | —                                                            | 2,122           |
| Other comprehensive income                                    | —                           | —                           | —                                          | —                        | —                                           | 338                                                          | 338             |
| Stock\-settled share\-based compensation                      | —                           | —                           | 60                                         | —                        | —                                           | —                                                            | 60              |
| Repurchases of common stock                                   | (17\.5

)             | —                           | —                                          | (1,250

)          | —                                           | —                                                            | (1,250

) |
| Net treasury stock issued for share\-based awards             | 0\.4                        | —                           | (38

)                               | 26                       | (4

)                                 | —                                                            | (16

)    |
| Adoption of accounting standard related to equity investments | —                           | —                           | —                                          | —                        | (6

)                                 | 6                                                            | —               |
| Balance at December 31, 2018                                  | 269\.9                      | 3                           | 6,120                                      | (1,993

)          | 6,715                                       | (803

)                                                | 10,042          |
|  Net income                                                   | —                           | —                           | —                                          | —                        | 3,009                                       | —                                                            | 3,009           |
| Other comprehensive income                                    | —                           | —                           | —                                          | —                        | —                                           | 85                                                           | 85              |
| Stock\-settled share\-based compensation                      | —                           | —                           | 66                                         | —                        | —                                           | —                                                            | 66              |
| Repurchases of common stock                                   | (19\.2

)             | —                           | —                                          | (1,641

)          | —                                           | —                                                            | (1,641

) |
| Net treasury stock issued for share\-based awards             | 0\.5                        | —                           | (57

)                               | 35                       | (8

)                                 | —                                                            | (30

)    |
| Balance at December 31, 2019                                  | 251\.2                      | $3                          | $6,129                                     | $

(3,599

) | $9,716                                      | $

(718

)                                       | $11,531         |

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

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

48


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

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

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

Fleet\.  As of  December 31, 2019 , United's mainline and regional fleets consisted of the following:

|                   |           |           |            |                                     |                             |
| ----------------- | --------- | --------- | ---------- | ----------------------------------- | --------------------------- |
| **Aircraft Type** | **Total** | **Owned** | **Leased** | **Seats in Standard Configuration** |  **Average Age (In Years)** |
| **Mainline:**     |           |           |            |                                     |                             |
| 777\-300ER        | 20        | 20        | —          | 350                                 | 2\.2                        |
| 777\-200ER        | 55        | 51        | 4          | 267\-276                            | 19\.8                       |
| 777\-200          | 19        | 19        | —          | 364                                 | 22\.5                       |
| 787\-10           | 11        | 11        | —          | 318                                 | 0\.7                        |
| 787\-9            | 25        | 25        | —          | 252                                 | 3\.8                        |
| 787\-8            | 12        | 12        | —          | 219                                 | 6\.5                        |
| 767\-400ER        | 16        | 14        | 2          | 240                                 | 18\.3                       |
| 767\-300ER        | 38        | 25        | 13         | 167\-214                            | 23\.9                       |
| 757\-300          | 21        | 9         | 12         | 234                                 | 17\.3                       |
| 757\-200          | 53        | 48        | 5          | 142\-176                            | 23\.5                       |
| 737\-900ER        | 136       | 136       | —          | 179                                 | 7\.0                        |
| 737\-900          | 12        | 8         | 4          | 179                                 | 18\.3                       |
| 737\-800          | 141       | 95        | 46         | 166                                 | 15\.8                       |
| 737\-700          | 41        | 29        | 12         | 126                                 | 20\.8                       |
| A320\-200         | 97        | 76        | 21         | 150                                 | 21\.3                       |
| A319\-100         | 80        | 57        | 23         | 126\-128                            | 18\.1                       |
| Total mainline    | 777       | 635       | 142        |                                     | 15\.6                       |

In addition to the aircraft presented in the table above, United owned or leased the following mainline aircraft as of  December 31, 2019 :

|   |                                                                                |
| - | ------------------------------------------------------------------------------------- |
| • | Fourteen Boeing 737 MAX 9s, which are temporarily grounded pursuant to the FAA Order; |

|   |                                                        |
| - | ------------------------------------------------------ |
| • | Four Boeing 747\-400s, which are permanently grounded; |

|   |                                                         |
| - | ------------------------------------------------------- |
| • | Three Airbus A320s, which are temporarily grounded; and |

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

|                            |           |           |                                          |                                                           |                                                      |                                     |
| -------------------------- | --------- | --------- | ---------------------------------------- | --------------------------------------------------------- | ---------------------------------------------------- | ----------------------------------- |
| **Aircraft Type**          | **Total** | **Owned** | **Owned or Leased by Regional Carrier**  | **Regional Carrier Operator and Number of Aircraft**      | **Regional Carrier Operator and Number of Aircraft** | **Seats in Standard Configuration** |
| **Regional:**              |           |           |                                          |                                                           |                                                      |                                     |
| Embraer E175/E175LL        | 170       | 71        | 99                                       | SkyWest:

Mesa:

Republic:

ExpressJet: | 65

60

28

17                     | 70\-76                              |
| Embraer 170                | 38        | —         | 38                                       | Republic:                                                 | 38                                                   | 70                                  |
| CRJ700                     | 47        | —         | 47                                       | Mesa:

SkyWest:

GoJet:                       | 20

19

8                                | 70                                  |
| CRJ550                     | 18        | —         | 18                                       | GoJet:                                                    | 18                                                   | 50                                  |
| CRJ200                     | 133       | —         | 133                                      | SkyWest:

Air Wisconsin:                            | 70

63                                         | 50                                  |
| Embraer ERJ 145 (XR/LR/ER) | 175       | 168       | 7                                        | ExpressJet:

Trans States:

CommutAir:       | 95

43

37                               | 50                                  |
| Total regional             | 581       | 239       | 342                                      |                                                           |                                                      |                                     |

In addition to the aircraft presented in the table above, United owned the following regional aircraft as of  December 31, 2019 :

|   |                                                                         |
| - | ----------------------------------------------------------------------- |
| • | Eight Embraer E175LLs, which were delivered but not yet in service; and |

|   |                                                          |
| - | -------------------------------------------------------- |
| • | Three Embraer ERJ145s, which are temporarily grounded\.  |

23


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

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

of capital lease assets is included in depreciation and amortization expense\. The estimated useful lives of property and equipment are as follows:

|                                    |                                      |
| ---------------------------------- | ------------------------------------ |
|                                    | **Estimated Useful Life (in years)** |
| Aircraft and related rotable parts | 25 to 30                             |
| Aircraft seats                     | 10 to 15                             |
| Buildings                          | 25 to 45                             |
| Other property and equipment       | 3 to 15                              |
| Computer software                  | 5 to 15                              |
| Building improvements              | 1 to 40                              |

As of December 31, 2018 and 2017, the Company had a carrying value of computer software of $359 million and $345 million, respectively\. For the years ended December 31, 2018, 2017 and 2016, the Company's depreciation expense related to computer software was $122 million, $117 million and $108 million, respectively\. Aircraft and aircraft spare parts were assumed to have residual values of approximately 10% of original cost, and other categories of property and equipment were assumed to have no residual value\.

|     |                                                                                |
| --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (i) | **Maintenance and Repairs—** The cost of maintenance and repairs, including the cost of minor replacements, is charged to expense as incurred, except for costs incurred under our power\-by\-the\-hour ("PBTH") engine maintenance agreements\. PBTH contracts transfer certain risk to third\-party service providers and fix the amount we pay per flight hour or per cycle to the service provider in exchange for maintenance and repairs under a predefined maintenance program\. Under PBTH agreements, the Company recognizes expense at a level rate per engine hour, unless the level of service effort and the related payments during the period are substantially consistent, in which case the Company recognizes expense based on the amounts paid\. |

|     |                                                                                |
| --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (j) | **Lease Fair Value Adjustments—** Lease fair value adjustments, which arose from recording operating leases at fair value under fresh start or business combination accounting, are amortized on a straight\-line basis over the related lease term\. |

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (k) | **Regional Capacity Purchase—** Payments made to regional carriers under capacity purchase agreements ("CPAs") are reported in Regional capacity purchase in our consolidated statements of operations\. |

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (l) | **Advertising—** Advertising costs, which are included in Other operating expenses, are expensed as incurred\. Advertising expenses were  $211 million ,  $217 million  and  $220 million  for the years ended December 31,  2018 ,  2017  and  2016  respectively\. |

|     |                                                                                |
| --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (m) | **Intangibles—** The Company has finite\-lived and indefinite\-lived intangible assets, including goodwill\. Finite\-lived intangible assets are amortized over their estimated useful lives\. Goodwill and indefinite\-lived intangible assets are not amortized but are reviewed for impairment annually or more frequently if events or circumstances indicate that the asset may be impaired\. Goodwill and indefinite\-lived assets are reviewed for impairment on an annual basis as of October 1, or on an interim basis whenever a triggering event occurs\. See Note 2 of this report for additional information related to intangibles\. |

|     |                                                                                |
| --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (n) | **Long\-Lived Asset Impairments—** The Company evaluates the carrying value of long\-lived assets subject to amortization whenever events or changes in circumstances indicate that an impairment may exist\. For purposes of this testing, the Company has generally identified the aircraft fleet type as the lowest level of identifiable cash flows\.  An impairment charge is recognized when the asset's carrying value exceeds its net undiscounted future cash flows and its fair market value\. The amount of the charge is the difference between the asset's carrying value and fair market value\.  See Note 14 of this report for additional information related to asset impairments\. |

|     |                                                                                |
| --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (o) | **Share\-Based Compensation—** The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award\. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the award, usually the vesting period\. Obligations for cash\-settled restricted stock units ("RSUs") are remeasured at fair value throughout the requisite service period at the close of the reporting period based upon UAL's stock price\. In addition to the service requirement, certain RSUs have performance metrics that must be achieved prior to vesting\. These awards are accrued based on the expected level of achievement at each reporting period\. An adjustment is recorded each reporting period to adjust compensation expense based on both UAL's stock price and the then current level of  |

58


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

|                         |                              |
| ----------------------- | ---------------------------- |
| Date: February 19, 2020 | /s/ Susan D\. Kronick        |
|                         | Susan D\. Kronick, Director  |
| Date: February 19, 2020 | /s/ Martin H\. Nesbitt       |
|                         | Martin H\. Nesbitt, Director |
| Date: February 19, 2020 | /s/ Denise M\. O’Leary       |
|                         | Denise M\. O’Leary, Director |
| Date: February 19, 2020 | /s/ Ray M\. Robinson         |
|                         | Ray M\. Robinson, Director   |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of American Airlines, Inc\. and in the capacities and on the dates noted:

|                         |                                                      |
| ----------------------- | ---------------------------------------------------- |
| Date: February 19, 2020 | /s/ W\. Douglas Parker                               |
|                         | W\. Douglas Parker                                   |
|                         | Chairman and Chief Executive Officer                 |
|                         | (Principal Executive Officer)                        |
| Date: February 19, 2020 | /s/ Derek J\. Kerr                                   |
|                         | Derek J\. Kerr                                       |
|                         | Executive Vice President and Chief Financial Officer |
|                         | (Principal Financial and Accounting Officer)         |
| Date: February 19, 2020 | /s/ Stephen L\. Johnson                              |
|                         | Stephen L\. Johnson, Director                        |
| Date: February 19, 2020 | /s/ Robert D\. Isom                                  |
|                         | Robert D\. Isom, Director                            |

187


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

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

***AUDIT FEES***

For 2017 and 2016, audit fees consist primarily of the audit and quarterly reviews of the consolidated financial statements and the audit of the effectiveness of internal control over financial reporting of United Continental Holdings, Inc\. and its wholly\-owned subsidiaries\. Audit fees also include the audit of the consolidated financial statements of United, employee benefit plan audits, attestation services required by statute or regulation, comfort letters, consents, assistance with and review of documents filed with the SEC, and accounting and financial reporting consultations and research work necessary to comply with generally accepted auditing standards\.

***AUDIT RELATED FEES***

For 2017 and 2016, fees for audit related services consisted of professional services related to due diligence and consultations related to the adoption of new accounting standards\.

***TAX FEES***

Tax fees for 2017 and 2016 relate to professional services provided for research and consultations regarding tax accounting and tax compliance matters, review of U\.S\. and international tax impacts of certain transactions and assistance in assembling data to prepare for and respond to governmental reviews of past tax filings, exclusive of tax services rendered in connection with the audit\.

***ALL OTHER FEES***

Fees for all other services billed in 2017 and 2016 consist of subscriptions to Ernst & Young LLP’s on\-line accounting research tool\.

**PART IV**

|                |                                                   |
| -------------- | ------------------------------------------------- |
|  **ITEM 15\.** | **EXHIBITS AND FINANCIAL STATEMENT SCHEDULES\.**  |

|        |                                                                                |
| ------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
| (a)(1) | *Financial Statements*\. The financial statements required by this item are listed in Part II, Item 8, *Financial Statements and Supplementary Data* herein\.                  |
| (2)    | *Financial Statement Schedules\.* The financial statement schedule required by this item is listed below and included in this report after the signature page hereto\.         |
|        | Schedule  II\-Valuation and Qualifying Accounts for the years ended December 31, 2017, 2016 and 2015\.                                                                         |
|        | All other schedules are omitted because they are not applicable, not required or the required information is shown in the consolidated financial statements or notes thereto\. |
| (b)    | *Exhibits\.* The exhibits required by this item are provided in the Exhibit Index\.                                                                                |

108


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

|                                                                                |                                                                                |                                                                                |                                                                                |                                                                                |
| --------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- |
| **Provisional impact of new accounting standards to the 2017 Statement of Operations:** | **Provisional impact of new accounting standards to the 2017 Statement of Operations:** | **Provisional impact of new accounting standards to the 2017 Statement of Operations:** | **Provisional impact of new accounting standards to the 2017 Statement of Operations:** | **Provisional impact of new accounting standards to the 2017 Statement of Operations:** |
|                                                                                | **FY 2017**                                                                             | **Adjustments \-**                                                                      | **Adjustments \-**                                                                      | **FY 2017**                                                                             |
|                                                                                | **As Reported**                                                                         | **Revenue Recognition**                                                                 | **Retirement Benefits**                                                                 | **As Recast**                                                                           |
| Passenger Revenue                                                                       | $6,818                                                                                | $487                                                                                | $—                                                                                | $7,305                                                                                |
| Other Revenue                                                                           | 1,115                                                                                | (528)                                                                                | —                                                                                | 587                                                                                |
| Total Operating Revenue                                                                 | 7,933                                                                                | (41)                                                                                | —                                                                                | 7,892                                                                                |
| Operating Expense                                                                       | 6,673                                                                                | 13                                                                                | 7                                                                                | 6,693                                                                                |
| Nonoperating Income (Expense)                                                           | (53)                                                                                | —                                                                                | 7                                                                                | (46)                                                                                |
| Income Before Income Tax                                                                | $1,207                                                                                | $(54)                                                                                | $—                                                                                | $1,153                                                                                |

|                                                                         |
| ----------------------------------------------------------------------- |
| **ITEM 7A\. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK** |

We have interest\-rate risk on our variable\-rate debt obligations and our available\-for\-sale marketable investment portfolio, and commodity\-price risk in jet fuel required to operate our aircraft fleet\. We purchase the majority of our jet fuel at prevailing market prices and seek to manage market risk through execution of our hedging strategy and other means\. We have market\-sensitive instruments in the form of fixed\-rate debt instruments and financial derivative instruments used to hedge our exposure to jet\-fuel price increases and interest\-rate increases\. We do not purchase or hold any derivative financial instruments for trading purposes\.

**Aircraft Fuel**

Currently, our fuel\-hedging portfolio consists of crude oil call options\. Call options effectively cap our pricing for the crude oil, limiting our exposure to increasing fuel prices for about half of our planned fuel consumption\. With call options, we are hedged against volatile crude oil price increases, and, during a period of decline in crude oil prices, we only forfeit cash previously paid for hedge premiums\. We believe there is risk in not hedging against the possibility of fuel price increases\. We estimate that a 10% increase or decrease in the forward curve for crude oil prices as of December 31, 2017 would change the fair value of our crude oil hedge portfolio to approximately $55 million or $6 million, respectively\.

Our portfolio value of fuel hedge contracts was $22 million at December 31, 2017 compared to a portfolio value of $20 million at December 31, 2016\. We do not have any collateral held by counterparties to these agreements as of December 31, 2017\.

We continue to believe that our fuel hedge program is an important part of our strategy to reduce our exposure to volatile fuel prices\. We expect to continue to enter into these types of contracts prospectively, although significant changes in market conditions could affect our decisions\. For more discussion, see Note 3 to our consolidated financial statements\.

**Interest Rates**

We have exposure to market risk associated with changes in interest rates related primarily to our debt obligations and short\-term investment portfolio\. Our debt obligations include variable\-rate instruments, which have exposure to changes in interest rates\. In order to mitigate the risk of interest rate fluctuations, we have a number of interest rate swaps that fix the interest rates on certain variable\-rate debt agreements\. A hypothetical 10% change in the average interest rates incurred on average variable\-rate debt held during 2017 would have correspondingly changed our net earnings and cash flows associated with these items by less than $4 million\. Our variable\-rate debt represents approximately 63% and 61% of our total long\-term debt as of December 31, 2017 and December 31, 2016, respectively\.

Our exposure to interest rate variability is further mitigated through our variable\-rate investment portfolio\. We also have investments in marketable securities, which are exposed to market risk associated with changes in interest rates\. If short\-term interest rates were to average 1 point more than they did in 2017, interest income would increase by approximately $16 million\.

|                                                                       |
| --------------------------------------------------------------------- |
| **ITEM 8\. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA** |

 59


Annual Report of Southwest Airlines Co\. for year 2019

is used to assess the asset’s implied fair value and the amount of the impairment\. Under a quantitative approach, the implied fair value of the Company's identifiable assets and liabilities is calculated based on key assumptions\. If the Company assets' carrying value exceeds the fair value calculated using the quantitative approach, an impairment charge is recorded for the difference in fair value and carrying value\.

The following table is a summary of the Company’s intangible assets, which are included as a component of Other assets in the Company's Consolidated Balance Sheet, as of  December 31, 2019  and  2018 :

|                                             |                                              |                                      |                                         |                                  |                                  |
| ------------------------------------------- | -------------------------------------------- | ------------------------------------ | --------------------------------------- | -------------------------------- | -------------------------------- |
|                                             |                                              | **Year ended December 31, 2019**     | **Year ended December 31, 2019**        | **Year ended December 31, 2018** | **Year ended December 31, 2018** |
| **(in millions)**                           | **Weighted\-average useful life (in years)** | **Gross carrying**

**amount** | **Accumulated**

**amortization** | **Gross carrying amount**        | **Accumulated Amortization**     |
| Customer relationships/marketing agreements | 12                                           | $14                                  | $13                                     | $27                              | $25                              |
| Owned domestic slots (a)                    | Indefinite                                   | 295                                  | n/a                                     | 295                              | n/a                              |
| Gate leasehold rights (b)                   | —                                            | —                                    | —                                       | 180                              | 78                               |
| Total                                       | 12                                           | $309                                 | $13                                     | $502                             | $103                             |

(a) Intangible assets primarily consist of acquired rights to certain airport owned takeoff and landing slots (a "slot" is the right of an air carrier, pursuant to regulations of the Federal Aviation Administration ("FAA"), to operate a takeoff or landing at a specific time at certain airports) at certain domestic slot\-controlled airports, and certain intangible assets acquired\.

(b) Airport gate leasehold rights are classified as right\-of\-use assets upon adoption of the New Lease Standard\. See Note 7\.

The Company's definite lived intangible assets are amortized on a straight\-line basis over the useful life of the asset\. The aggregate amortization expense for  2019 ,  2018 , and  2017  was   $15 million ,   $16 million , and   $13 million , respectively\. Estimated aggregate amortization expense for the five succeeding years and thereafter is immaterial\.

Revenue Recognition

Tickets sold are initially deferred as Air traffic liability\. Passenger revenue is recognized and Air traffic liability is reduced when transportation is provided\. Air traffic liability primarily represents tickets sold for future travel dates, funds that are past flight date and remain unused, but are expected to be used in the future, and the Company’s liability for loyalty benefits that are expected to be redeemed in the future\. The majority of the Company’s tickets sold are nonrefundable\. 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\. Nonrefundable tickets that are sold but not flown on the travel date, and are canceled in accordance with the No Show policy, can be applied to future travel\. Refundable tickets that are sold but not flown on the travel date can also be applied to future travel\. A small percentage of tickets (or partial tickets) expire unused\. The Company estimates the amount of tickets that expire unused and recognizes such amounts in Passenger revenue once the scheduled flight date has lapsed in proportion to the pattern of flights taken by the Customer\. Based on the Company's revenue recognition policy, revenue is recorded at the flight date for a Customer who does not change his/her itinerary and loses his/her funds as the Company has then fulfilled its performance obligation\. Amounts collected from passengers for ancillary services are also recognized when the service is provided, which is typically the flight date\.

Initial spoilage estimates for both tickets and funds available for future use are routinely adjusted and ultimately finalized once the tickets expire, which is typically twelve months after the original purchase date\. Spoilage estimates are based on the Company's Customers' historical travel behavior as well as assumptions about the Customers' future travel behavior\. Assumptions used to generate spoilage estimates can be impacted by several factors including, but not limited to: fare increases, fare sales, changes to the Company's ticketing policies, changes to the Company’s refund, exchange and unused funds policies, seat availability, and economic factors\. See Note  5  for further information\.

Approximately   $615 million , approximately   $566 million , and approximately   $489 million  of the Company's Operating revenues in  2019 ,  2018 , and  2017 , respectively, were attributable to foreign operations\. The remainder of the Company's

72


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

Mileage Plan™ Loyalty Program

Loyalty mileage credits

The Company’s Mileage Plan™ loyalty program provides frequent flyer travel awards to program members based upon accumulated loyalty mileage credits\. Mileage credits are earned through travel, purchases using the Mileage Plan™ co\-branded credit card and purchases from other participating partners\. The program has a 24 month expiration period for unused mileage credits from the month of last account activity\. The Company offers redemption of mileage credits through free, discounted or upgraded air travel on flights operated by Alaska and its regional partners or on one of its 17 airline partners, as well as redemption at partner hotels\.

The Company uses a relative standalone selling price to allocate consideration to material performance obligations in contracts with customers that include loyalty mileage credits\. As directly observable selling prices for mileage credits are not available, the Company determines the standalone selling price of mileage credits primarily using actual ticket purchase prices for similar tickets flown, adjusted for the likelihood of redemption, or breakage\. In determining similar tickets flown, the Company considers current market prices, class of service, type of award, and other factors\. For mileage credits accumulated through travel on partner airlines, the Company uses actual consideration received from the partners\.

Revenue related to air transportation is deferred in the amount of the relative standalone selling price allocated to the loyalty mileage credits as they are issued\. The Company satisfies its performance obligation when the mileage credits are redeemed and the related air transportation is delivered\.

The Company estimates breakage for the portion of loyalty mileage credits not expected to be redeemed using a statistical analysis of historical data, including actual mileage credits expiring, slow\-moving and low\-credit accounts, among other factors\. The breakage rate for the twelve months ended December 31, 2019 and 2018 was 17\.4%\. The Company reviews the breakage rate used on an annual basis\.

Co\-brand credit card agreements and other

In addition to mileage credits, the co\-brand credit card agreements, referred to herein as the Agreements, also include performance obligations for waived bag fees, Companion Fare™ offers to purchase an additional ticket at a discount, marketing, and the use of intellectual property including the brand (unlimited access to the use of the Company’s brand and frequent flyer member lists), which is the predominant element in the Agreement\. The co\-brand card bank partners are the customer for some elements, including the brand and marketing, while the Mileage Plan™ member is the customer for other elements such as mileage credits, bag waivers, and companion fares\.

At the inception of the Agreement, management estimated the selling price of each of the performance obligations\. The objective was to determine the price at which a sale would be transacted if the product or service was sold on a stand\-alone basis\. The Company determined its best estimate of selling price for each element by considering multiple inputs and methods including, but not limited to, the estimated selling price of comparable travel, discounted cash flows, brand value, published selling prices, number of miles awarded and number of miles redeemed\. The Company estimated the selling prices and volumes over the term of the Agreement in order to determine the allocation of proceeds to each of the multiple deliverables\. The estimates of the standalone selling prices of each element do not change subsequent to the original valuation of the contract unless the contract is materially modified, but the allocation between elements may change based upon the actual and updated projected volumes of each element delivered during the term of the contract\.

Consideration received from the banks is variable and is primarily from consumer spend on the card, among other items\. The Company allocates consideration to each of the performance obligations, including mileage credits, waived bag fees, companion fares, and brand and marketing, using their relative standalone selling price\. Because the performance obligation related to providing use of intellectual property including the brand is satisfied over time, it is recognized in Mileage Plan^TM^  other revenue in the period that those elements are sold\. The Company records passenger revenue related to the air transportation and certificates for discounted companion travel when the transportation is delivered\.

In contracts with non\-bank partners, the Company has identified two performance obligations in most cases \- travel and brand\. The travel performance obligation is deferred until the transportation is provided in the amount of the estimated standalone selling price of the ticket, less breakage, and the brand performance obligation is recognized using the residual method as commission revenue when the brand element is sold\. Mileage credit sales recorded under the residual approach are immaterial to the overall program\.

61


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

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

|                |                                                                                |
| -------------- | -------------------------------------------------------------------------------- |
|  **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 2018 Annual Meeting of Stockholders\.

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

|                |                                               |
| -------------- | --------------------------------------------- |
|  **ITEM 14\.** | **PRINCIPAL ACCOUNTANT FEES AND SERVICES\.**  |

The Audit Committee of the UAL Board of Directors has adopted a policy on pre\-approval of services of the Company’s independent registered public accounting firm\. As a wholly\-owned subsidiary of UAL, United’s audit services are determined by UAL\. The policy provides that the Audit Committee shall pre\-approve all audit and non\-audit services to be provided to UAL and its subsidiaries and affiliates by its independent auditors\. The process by which this is carried out is as follows:

For recurring services, the Audit Committee reviews and pre\-approves the independent registered public accounting firm’s annual audit services in conjunction with the annual appointment of the outside auditors\. The reviewed materials include a description of the services along with related fees\. The Audit Committee also reviews and pre\-approves other classes of recurring services along with fee thresholds for pre\-approved services\. In the event that the additional services are required prior to the next scheduled Audit Committee meeting, pre\-approvals of additional services follow the process described below\.

Any requests for audit, audit related, tax and other services not contemplated with the recurring services approval described above must be submitted to the Audit Committee for specific pre\-approval and cannot commence until such approval has been granted\. Normally, pre\-approval is provided at regularly scheduled meetings\. However, the authority to grant specific pre\-approval between meetings, as necessary, has been delegated to the Chair of the Audit Committee\. The Chair must update the Audit Committee at the next regularly scheduled meeting of any services that were granted specific pre\-approval\.

On a periodic basis, the Audit Committee reviews the status of services and fees incurred year\-to\-date and a list of newly pre\-approved services since its last regularly scheduled meeting\. The Audit Committee has considered whether the 2017 and 2016 non\-audit services provided by Ernst & Young LLP, the Company’s independent registered public accounting firm, are compatible with maintaining auditor independence\.

All of the services in 2017 and 2016 under the Audit Fees, Audit Related Fees, Tax Fees and All Other Fees categories below have been approved by the Audit Committee pursuant to paragraph (c)(7) of Rule 2\-01 of Regulation S\-X of the Exchange Act\.

The aggregate fees billed for professional services rendered by the Company’s independent auditors in 2017 and 2016 are as follows (in thousands):

|                                             |            |            |
|:------------------------------------------- | ----------:| ----------:|
| **Service**                                 |  **2017**  |  **2016**  |
| Audit Fees                                  |    $4,548  |    $3,751  |
| Audit Related Fees                          |       565  |       215  |
| Tax Fees                                    |       584  |     1,252  |
| All Other Fees                              |         2  |         2  |
|                                             |   $ 5,699  |   $ 5,220  |
| Note: UAL and United amounts are the same\. |            |            |

107


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

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

**PART IV**

**ITEM 15\. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES\.**

|     |                                                                                |
| --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| (a) | List of documents filed as part of this report:                                                                                |
| (1) | *Financial Statements* \. The financial statements required by this item are listed in Part II, Item 8,  *Financial Statements and Supplementary Data*  herein\.        |
| (2) | *Financial Statement Schedules\.*  The financial statement schedule required by this item is listed below and included in this report after the signature page hereto\. |

 Schedule II\-Valuation and Qualifying Accounts for the years ended December 31, 2018, 2017 and 2016\.

|     |                                                                                |
| --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |
|     | All other schedules are omitted because they are not applicable, not required or the required information is shown in the consolidated financial statements or notes thereto\. |
| (b) | *Exhibits\.*  The exhibits required by this item are provided in the Exhibit Index\.                                                                                |

**ITEM 16\. FORM 10\-K SUMMARY\.**

None\.

**EXHIBIT INDEX**

|                  |                   |                                                                                |
| ---------------- | ----------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Exhibit No\.** | **Registrant**    | **Exhibit**                                                                                |
|                  |                   | **Articles of Incorporation and Bylaws**                                                                                |
| 3\.1             | UAL               | [Amended and Restated Certificate of Incorporation of United Continental Holdings, Inc\. (filed as Exhibit 3\.1 to UAL's Form 8\-K filed October 1, 2010, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312510222185/dex31.htm)                                                                                |
| 3\.2             | UAL               | [Amended and Restated Bylaws of United Continental Holdings, Inc\. (filed as Exhibit 3\.1 to UAL's Form 10\-Q for the quarter ended March 31, 2016, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312516550432/d116267dex31.htm)                                                                                |
| 3\.3             | United            | [Amended and Restated Certificate of Incorporation of United Airlines, Inc\. (filed as Exhibit 3\.1 to UAL's Form 8\-K filed April 3, 2013, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312513140583/d514659dex31.htm)                                                                                |
| 3\.4             | United            | [Amended and Restated By\-laws of United Airlines, Inc\. (filed as Exhibit 3\.2 to UAL's Form 8\-K filed April 3, 2013, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312513140583/d514659dex32.htm)                                                                                |
|                  |                   | **Instruments Defining Rights of Security Holders, Including Indentures**                                                                                |
| 4\.1             | UAL

United | [Amended and Restated Indenture, dated as of January 11, 2013, by and among United Continental Holdings, Inc\. as Issuer, United Air Lines, Inc\. as Guarantor, and the Bank of New York Mellon Trust Company, N\.A\. as Trustee, providing for issuance of 6% Notes due 2028, 6% Notes due 2026 and 8% Notes due 2024 (filed as Exhibit 4\.6 to UAL's Form 10\-K for the year ended December 31, 2012, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312513074391/d436512dex46.htm) |
| 4\.2             | UAL

United | [First Supplemental Indenture, dated as of April 1, 2013, by and among United Continental Holdings, Inc\., United Airlines, Inc\. and The Bank of New York Mellon Trust Company, N\.A\., as trustee, to the Amended and Restated Indenture, dated as of January 11, 2013 (filed as Exhibit 4\.1 to UAL's Form 8\-K filed April 3, 2013, Commission file number 1\-6033, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/100517/000119312513140583/d514659dex41.htm)                                                                 |

96


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

Availability Under Revolving Credit Facilities

The table below shows availability under revolving credit facilities, all of which were undrawn, as of December 31, 2019:

|                                                      |                                                      |                                                      |         |
|:---------------------------------------------------- |:---------------------------------------------------- |:---------------------------------------------------- | -------:|
| (in millions)                                        | (in millions)                                        | (in millions)                                        |         |
| 2018 Unsecured Revolving Credit Facility             | 2018 Unsecured Revolving Credit Facility             | 2018 Unsecured Revolving Credit Facility             | $ 2,650 |
| Other revolving credit facilities                    | Other revolving credit facilities                    | Other revolving credit facilities                    |     459 |
| Total availability under revolving credit facilities | Total availability under revolving credit facilities | Total availability under revolving credit facilities | $ 3,109 |

Future Maturities

The following table summarizes scheduled maturities of our debt for the years succeeding December 31, 2019:

|                     |                     |                     |            |  |  |  |                                                                         |  |  |  |          |
|:------------------- |:------------------- |:------------------- | ----------:|:- |:- |:- | -----------------------------------------------------------------------:|:- |:- |:- | --------:|
|
(in millions) |
(in millions) |
(in millions) | Total Debt |  |  |  | Amortization of
Debt Premium and Debt Issuance Cost, net and other |  |  |  |          |
| 2020                | 2020                | 2020                |    $ 2,060 |  |  |  |                                                                    $ 13 |  |  |  |          |
| 2021                | 2021                | 2021                |      1,094 |  |  |  |                                                                      15 |  |  |  |          |
| 2022                | 2022                | 2022                |      1,708 |  |  |  |                                                                      16 |  |  |  |          |
| 2023                | 2023                | 2023                |        932 |  |  |  |                                                                      11 |  |  |  |          |
| 2024                | 2024                | 2024                |      1,508 |  |  |  |                                                                      10 |  |  |  |          |
| Thereafter          | Thereafter          | Thereafter          |      2,689 |  |  |  |                                                                      50 |  |  |  |          |
| Total               | Total               | Total               |    $ 9,991 |  |  |  |                                                                   $ 115 |  |  |  | $ 10,106 |

Fair Value of Debt

Market risk associated with our fixed\- and variable\-rate debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates\. The fair value of debt, shown below, is principally based on reported market values, recently completed market transactions and estimates based on interest rates, maturities, credit risk and underlying collateral\. Debt is primarily classified as Level 2 within the fair value hierarchy\.

|                     |                     |                     |              |              |  |  |  |
|:------------------- |:------------------- |:------------------- | ------------:| ------------:|:- |:- |:- |
|                     |                     |                     | December 31, | December 31, |  |  |  |
| (in millions)       | (in millions)       | (in millions)       |         2019 |         2018 |
| Net carrying amount | Net carrying amount | Net carrying amount |     $ 10,106 |      $ 9,368 |
| Fair value          | Fair value          | Fair value          |     $ 10,400 |      $ 9,400 |

NOTE 8\. LEASES

During 2018, we adopted ASU No\. 2016\-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet\. We adopted the standard using the modified retrospective approach with an effective date of January 1, 2018\. Prior year financial statements were not recast under the new standard\. We elected the package of transition provisions available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs\.

For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the term\. Many of our leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate\. We do not separate lease and nonlease components of contracts, except for regional aircraft and information technology ("IT") assets as discussed below\.

75


Annual Report of Southwest Airlines Co\. for year 2018

**Southwest Airlines Co\.**

**Consolidated Statement of Income**

(in millions, except per share amounts)

|                                          |                             |                             |                             |
| ---------------------------------------- | --------------------------- | --------------------------- | --------------------------- |
|                                          | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|                                          | **2018**                    | **2017**                    | **2016**                    |
|                                          |                             | **As Recast**               | **As Recast**               |
| **OPERATING REVENUES:**                  |                             |                             |                             |
| Passenger                                | $20,455                     | $19,763                     | $19,068                     |
| Freight                                  | 175                         | 173                         | 171                         |
| Other                                    | 1,335                       | 1,210                       | 1,050                       |
| Total operating revenues                 | 21,965                      | 21,146                      | 20,289                      |
| **OPERATING EXPENSES:**                  |                             |                             |                             |
| Salaries, wages, and benefits            | 7,649                       | 7,305                       | 6,786                       |
| Fuel and oil                             | 4,616                       | 4,076                       | 3,801                       |
| Maintenance materials and repairs        | 1,107                       | 1,001                       | 1,045                       |
| Landing fees and airport rentals         | 1,334                       | 1,292                       | 1,211                       |
| Depreciation and amortization            | 1,201                       | 1,218                       | 1,221                       |
| Other operating expenses                 | 2,852                       | 2,847                       | 2,703                       |
| Total operating expenses                 | 18,759                      | 17,739                      | 16,767                      |
| **OPERATING INCOME**                     | 3,206                       | 3,407                       | 3,522                       |
| **OTHER EXPENSES (INCOME):**             |                             |                             |                             |
| Interest expense                         | 131                         | 114                         | 122                         |
| Capitalized interest                     | (38)                        | (49)                        | (47)                        |
| Interest income                          | (69)                        | (35)                        | (24)                        |
| Other (gains) losses, net                | 18                          | 112                         | 21                          |
| Total other expenses (income)            | 42                          | 142                         | 72                          |
| **INCOME BEFORE INCOME TAXES**           | 3,164                       | 3,265                       | 3,450                       |
| **PROVISION (BENEFIT) FOR INCOME TAXES** | 699                         | (92)                        | 1,267                       |
| **NET INCOME**                           | $2,465                      | $3,357                      | $2,183                      |

See accompanying notes\.

68


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

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

Civil Reserve Air Fleet Program

We participate in the Civil Reserve Air Fleet program (the "CRAF Program"), which permits the U\.S\. military to use the aircraft and crew resources of participating U\.S\. airlines during airlift emergencies, national emergencies or times of war\. We have agreed to make available under the CRAF Program a portion of our international aircraft during the contract period ending September 30, 2018\. The CRAF Program has only been activated twice since it was created in 1951\.

Employee Matters

Railway Labor Act

Our relations with labor unions representing our airline employees in the U\.S\. are governed by the Railway Labor Act\. Under the Railway Labor Act, a labor union seeking to represent an unrepresented craft or class of employees is required to file with the National Mediation Board (the "NMB") an application alleging a representation dispute, along with authorization cards signed by at least 50% of the employees in that craft or class\. The NMB then investigates the dispute and, if it finds the labor union has obtained a sufficient number of authorization cards, conducts an election to determine whether to certify the labor union as the collective bargaining representative of that craft or class\. A labor union will be certified as the representative of the employees in a craft or class if more than 50% of votes cast are for that union\. A certified labor union would commence negotiations toward a collective bargaining agreement with the employer\.

Under the Railway Labor Act, a collective bargaining agreement between an airline and a labor union does not expire, but instead becomes amendable as of a stated date\. Either party may request that the NMB appoint a federal mediator to participate in the negotiations for a new or amended agreement\. If no agreement is reached in mediation, the NMB may determine, at any time, that an impasse exists and offer binding arbitration\. If either party rejects binding arbitration, a 30\-day "cooling off" period begins\. At the end of this 30\-day period, the parties may engage in “self help,” unless the U\.S\. President appoints a Presidential Emergency Board ("PEB") to investigate and report on the dispute\. The appointment of a PEB maintains the "status quo" for an additional 60 days\. If the parties do not reach agreement during this period, the parties may then engage in self help\. Self help includes, among other things, a strike by the union or the imposition of proposed changes to the collective bargaining agreement by the airline\. Congress and the President have the authority to prevent self help by enacting legislation that, among other things, imposes a settlement on the parties\.

Collective Bargaining

As of  December 31, 2017 , we had approximately  87,000  full\-time equivalent employees, approximately  19%  of whom were represented by unions\. The following table shows our domestic airline employee groups that are represented by unions\.

|                                            |                                                        |           |                                                                     |
| ------------------------------------------ | ------------------------------------------------------ | --------- | ------------------------------------------------------------------- |
| **Employee Group**                         | **Approximate Number of Active Employees Represented** | **Union** | **Date on which Collective Bargaining Agreement Becomes Amendable** |
| Delta Pilots                               | 13,234                                                 | ALPA      | December 31, 2019                                                   |
| Delta Flight Superintendents (Dispatchers) | 420                                                    | PAFCA     | March 31, 2018                                                      |
| Endeavor Air Pilots                        | 1,805                                                  | ALPA      | January 1, 2024                                                     |
| Endeavor Air Flight Attendants             | 1,160                                                  | AFA       | December 31, 2018                                                   |
| Endeavor Air Dispatchers                   | 55                                                     | PAFCA     | December 31, 2018                                                   |

In addition,  192  refinery employees of Monroe are represented by the United Steel Workers under an agreement that expires on February 28, 2019\. This agreement is governed by the National Labor Relations Act  ("NLRA") , which generally allows either party to engage in self help upon the expiration of the agreement\.

Labor unions periodically engage in organizing efforts to represent various groups of our employees, including at our operating subsidiaries, that are not represented for collective bargaining purposes\.

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