NOTE 6 - FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

The table below presents disclosures about the financial assets and financial liabilities measured at fair value on a recurring basis in the Company’s financial statements (in millions):


	September 30, 2015								December 31, 2014
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	UAL
Cash and cash equivalents	$	3,427	$	3,427	$	—	$	—	$	2,002	$	2,002	$	—	$	—
Short-term investments:
Asset-backed securities		673		—		673		—		901		—		901		—
Corporate debt		908		—		908		—		876		—		876		—
Certificates of deposit placed through an account registry service (“CDARS”)		301		—		301		—		256		—		256		—
Auction rate securities		16		—		—		16		26		—		—		26
U.S. government and agency notes		49		—		49		—		68		—		68		—
Other fixed income securities		225		—		225		—		255		—		255		—
Enhanced equipment trust certificates (“EETC”)		26		—		—		26		28		—		—		28
Fuel derivatives liability, net		(312)		—		(312)		—		(717)		—		(717)		—
Foreign currency derivatives asset, net		2		—		2		—		2		—		2		—
Restricted cash		208		208		—		—		320		320		—		—

	United
Cash and cash equivalents	$	3,421	$	3,421	$	—	$	—	$	1,996	$	1,996	$	—	$	—
Short-term investments:
Asset-backed securities		673		—		673		—		901		—		901		—
Corporate debt		908		—		908		—		876		—		876		—
CDARS		301		—		301		—		256		—		256		—
Auction rate securities		16		—		—		16		26		—		—		26
U.S. government and agency notes		49		—		49		—		68		—		68		—
Other fixed income securities		225		—		225		—		255		—		255		—
EETC		26		—		—		26		28		—		—		28
Fuel derivatives liability, net		(312)		—		(312)		—		(717)		—		(717)		—
Foreign currency derivatives asset, net		2		—		2		—		2		—		2		—
Restricted cash		208		208		—		—		320		320		—		—
Convertible debt derivative asset		—		—		—		—		712		—		—		712
Convertible debt derivative option liability		—		—		—		—		(511)		—		—		(511)

United’s debt-related derivatives presented in the tables above related to (a) supplemental indentures that provided that United’s convertible debt was convertible into shares of UAL common stock upon the terms and conditions specified in the indentures, and (b) the embedded conversion options in United’s convertible debt that were required to be separated and accounted for as though they were free-standing derivatives as a result of the United debt becoming convertible into the common stock of a different reporting entity. The derivatives described above related to the 4.5% Convertible Notes. Gains (losses) on these derivatives were recorded in Nonoperating income (expense): Miscellaneous, net in United’s statements of consolidated operations. These derivatives along with their gains (losses) were reported in United’s separate financial statements and were eliminated in consolidation for UAL. In January 2015, the holders of substantially all of the remaining $202 million principal amount of the 4.5% Convertible Notes exercised their conversion option resulting in the issuance of 11 million shares of UAL common stock. The derivative assets and liabilities associated with the 4.5% Convertible Notes were settled in connection with the retirement of the related convertible debt, and the final accounting did not materially impact UAL’s or United’s statements of consolidated operations.

Available-for-sale investment maturities - The short-term investments shown in the table above are classified as available-for-sale. As of September 30, 2015, asset-backed securities have remaining maturities of less than one year to approximately 40 years, corporate debt securities have remaining maturities of less than one year to approximately seven years and CDARS have maturities of less than one year. U.S. government and other securities have maturities of less than one year to approximately three years. The EETC securities mature in 2019.

Derivative instruments and investments presented in the tables above have the same fair value as their carrying value. The table below presents the carrying values and estimated fair values of financial instruments not presented in the tables above (in millions):


	Fair Value of Debt by Fair Value Hierarchy Level
	September 30, 2015										December 31, 2014
	Carrying Amount		Fair Value								Carrying Amount		Fair Value
			Total		Level 1		Level 2		Level 3				Total		Level 1		Level 2		Level 3
UAL debt	$	11,222	$	11,575	$	—	$	8,437	$	3,138	$	11,434	$	12,386	$	—	$	8,568	$	3,818
United debt		11,222		11,575		—		8,437		3,138		11,433		12,386		—		8,568		3,818

Fair value of the financial instruments included in the tables above was determined as follows:


Description		Fair Value Methodology
Cash and cash equivalents		The carrying amounts approximate fair value because of the short-term maturity of these assets.

Short-term investments and Restricted cash		Fair value is based on (a) the trading prices of the investment or similar instruments, (b) an income approach, which uses valuation techniques to convert future amounts into a single present amount based on current market expectations about those future amounts when observable trading prices are not available, (c) internally-developed models of the expected future cash flows related to the securities, or (d) broker quotes obtained by third-party valuation services.

Fuel derivatives		Derivative contracts are privately negotiated contracts and are not exchange traded. Fair value measurements are estimated with option pricing models that employ observable inputs. Inputs to the valuation models include contractual terms, market prices, yield curves, fuel price curves and measures of volatility, among others.

Foreign currency derivatives		Fair value is determined with a formula utilizing observable inputs. Significant inputs to the valuation models include contractual terms, risk-free interest rates and forward exchange rates.

Debt		Fair values were based on either market prices or the discounted amount of future cash flows using our current incremental rate of borrowing for similar liabilities.