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Derivatives (Notes)
 9 Months Ended
Sep. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives [Text Block]
DERIVATIVES

Changes in aircraft fuel prices, interest rates and foreign currency exchange rates impact our results of operations. In an effort to manage our exposure to these risks, we enter into derivative contracts and adjust our derivative portfolio as market conditions change.

Aircraft Fuel Price Risk

Changes in aircraft fuel prices materially impact our results of operations. We actively manage our fuel price risk through a hedging program intended to reduce the financial impact on us from changes in the price of jet fuel. This fuel hedging program utilizes several different contract and commodity types. The economic effectiveness of this hedge portfolio is frequently tested against our financial targets. The hedge portfolio is rebalanced from time to time according to market conditions, which may result in locking in gains or losses on hedge contracts prior to their settlement dates.

We generally do not designate our fuel derivative contracts as accounting hedges.We record changes in the fair value of our fuel hedges in aircraft fuel and related taxes. These changes in fair value include settled gains and losses as well as mark to market adjustments ("MTM adjustments"). MTM adjustments are based on market prices as of the end of the reporting period for contracts settling in future periods. During the three months ended September 30, 2013 and 2012, we recorded $337 million and $414 million in fuel hedge gains, respectively. During the nine months ended September 30, 2013 and 2012, we recorded $336 million in fuel hedge gains and $106 million in fuel hedge losses, respectively.

Hedge Position as of September 30, 2013
(in millions)
Notional Balance
Final Maturity Date
Prepaid Expenses and Other
Other Noncurrent Assets
Other Accrued Liabilities
Other Noncurrent Liabilities
Hedge Derivatives, Net
Designated as hedges
 
 
 
 
 
 
 
 
Interest rate contracts (cash flow hedges)
$
588

U.S. dollars
May 2019
$
—

$
—

$
(18
)
$
(30
)
$
(48
)
Interest rate contracts (fair value hedges)
$
445

U.S. dollars
August 2022
5

—

—

(23
)
(18
)
Foreign currency exchange contracts
128,713

Japanese yen
August 2016
118

76

—

(1
)
193

508

Canadian dollars
 
 
 
 
 
Not designated as hedges
 
 
 
 
 
 
 
 
Fuel contracts
4,110

gallons - crude oil, diesel and jet fuel
December 2014
487

10

(160
)
(4
)
333

Total derivative contracts
 
 
$
610

$
86

$
(178
)
$
(58
)
$
460


Hedge Position as of December 31, 2012
(in millions)
Notional Balance
Final Maturity Date
Prepaid Expenses and Other
Other Noncurrent Assets
Other Accrued Liabilities
Other Noncurrent Liabilities
Hedge Derivatives, Net
Designated as hedges
 
 
 
 
 
 
 
 
Interest rate contracts (cash flow hedges)
$
740

U.S. dollars
May 2019
$
—

$
—

$
(22
)
$
(48
)
$
(70
)
Interest rate contracts (fair value hedges)
$
469

U.S. dollars
August 2022
—

6

(2
)
—

4

Foreign currency exchange contracts
119,277

Japanese yen
December 2015
62

63

(1
)
(1
)
123

430

Canadian dollars
 
 
 
 
 
Not designated as hedges
 
 
 
 
 
 
 
 
Fuel contracts
1,792

gallons - heating oil, crude oil and jet fuel
December 2013
511

—

(262
)
—

249

Total derivative contracts
 
 
$
573

$
69

$
(287
)
$
(49
)
$
306


Offsetting Assets and Liabilities

We have master netting arrangements with all of our counterparties giving us the right of setoff. We have elected not to offset the fair value positions recorded on our Consolidated Balance Sheets. The following table shows the potential net fair value positions had we elected to offset.
(in millions)
Prepaid Expenses and Other
Other Noncurrent Assets
Other Accrued Liabilities
Other Noncurrent Liabilities
Hedge Derivatives, Net
September 30, 2013
 
 
 
 
 
Net derivative contracts
$
457

$
84

$
(28
)
$
(53
)
$
460

December 31, 2012
 
 
 
 
 
Net derivative contracts
$
320

$
69

$
(34
)
$
(49
)
$
306



Designated Hedge Gains (Losses)
For the three and nine months ended September 30, 2013 and 2012, gains (losses) related to our designated hedge contracts are as follows:
 
Effective Portion Reclassified from AOCI to Earnings
 
Effective Portion Recognized in Other Comprehensive Income
(in millions)
2013
2012
 
2013
2012
Three Months Ended September 30,
 
 
 
 
 
Foreign currency exchange contracts
$
55

$
(8
)
 
$
(70
)
$
(27
)
Nine Months Ended September 30,
 
 
 
 
 
Foreign currency exchange contracts
$
100

$
(21
)
 
$
70

$
56



As of September 30, 2013, we have recorded $118 million of net gains on cash flow hedge contracts in accumulated other comprehensive loss, which are scheduled to settle and be reclassified into earnings within the next 12 months.

Credit Risk

To manage credit risk associated with our aircraft fuel price, interest rate and foreign currency hedging programs, we select counterparties based on their credit ratings and limit our exposure to any one counterparty.

Our hedge contracts contain margin funding requirements. The margin funding requirements may cause us to post margin to counterparties or may cause counterparties to post margin to us as market prices in the underlying hedged items change. Due to the fair value position of our hedge contracts, we received net margin of $75 million and $62 million as of September 30, 2013 and December 31, 2012, respectively. Margin received is recorded in accounts payable and margin posted is recorded in prepaid expenses and other.