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Derivatives (Notes)
 6 Months Ended
Jun. 30, 2014
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 from changes in the price of jet fuel. We utilize several different contract and commodity types in this program and frequently test their economic effectiveness against our financial targets. We rebalance the hedge portfolio 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 June 30, 2014 and 2013, we recorded $97 million in fuel hedge gains and $78 million in fuel hedge losses, respectively. During the six months ended June 30, 2014 and 2013, we recorded $175 million in fuel hedge gains and $1 million in fuel hedge losses, respectively.

Hedge Position as of June 30, 2014
(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)
$
234

U.S. dollars
May 2019
$
—

$
—

$
(8
)
$
(12
)
$
(20
)
Interest rate contracts (fair value hedges)
$
430

U.S. dollars
August 2022
—

—

(2
)
(11
)
(13
)
Foreign currency exchange contracts
111,262

Japanese yen
January 2017
109

44

(2
)
(5
)
146

448

Canadian dollars
 
 
 
 
 
Not designated as hedges
 
 
 
 
 
 
 
 
Fuel hedge contracts
4,229

gallons - crude oil, diesel and jet fuel
December 2015
411

14

(165
)
(5
)
255

Total derivative contracts
 
 
$
520

$
58

$
(177
)
$
(33
)
$
368


Hedge Position as of December 31, 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)
$
477

U.S. dollars
May 2019
$
—

$
—

$
(17
)
$
(26
)
$
(43
)
Interest rate contracts (fair value hedges)
$
445

U.S. dollars
August 2022
—

—

(2
)
(22
)
(24
)
Foreign currency exchange contracts
120,915

Japanese yen
August 2016
157

100

—

—

257

438

Canadian dollars
 
 
 
 
 
Not designated as hedges
 
 
 
 
 
 
 
 
Fuel hedge contracts
5,318

gallons - crude oil, diesel and jet fuel
March 2015
428

29

(127
)
(16
)
314

Total derivative contracts
 
 
$
585

$
129

$
(146
)
$
(64
)
$
504



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
June 30, 2014
 
 
 
 
 
Net derivative contracts
$
355

$
52

$
(11
)
$
(28
)
$
368

December 31, 2013
 
 
 
 
 
Net derivative contracts
$
456

$
116

$
(19
)
$
(49
)
$
504



Designated Hedge Gains (Losses)

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)
2014
2013
 
2014
2013
Three Months Ended June 30,
 
 
 
 
 
Interest rates contracts
$
(19
)
$
—

 
$
21

$
15

Foreign currency exchange contracts
28

24

 
(60
)
54

Total designated
$
9

$
24


$
(39
)
$
69

Six Months Ended June 30,
 
 
 
 
 
Interest rates contracts
$
(19
)
$
—

 
$
23

$
21

Foreign currency exchange contracts
71

45

 
(111
)
141

Total designated
$
52

$
45


$
(88
)
$
162



As of June 30, 2014, we have recorded $107 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 evaluate counterparties based on several criteria including 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 $5 million and $65 million as of June 30, 2014 and December 31, 2013, respectively. Margin received is recorded in accounts payable and margin posted is recorded in prepaid expenses and other.