XML 114 R10.htm IDEA: XBRL DOCUMENT v2.4.1.9
Segments
12 Months Ended
Dec. 31, 2014
Segment Reporting [Abstract]  
Segments
SEGMENTS

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, and is used in resource allocation and performance assessments. Our chief operating decision maker is considered to be our executive leadership team. Our executive leadership team regularly reviews discrete information for our two operating segments, which are determined by the products and services provided: our airline segment and our refinery segment.
Our airline segment is managed as a single business unit that provides scheduled air transportation for passengers and cargo throughout the United States and around the world and other ancillary airline services, including maintenance and repair services for third parties. This allows us to benefit from an integrated revenue pricing and route network. Our flight equipment forms one fleet, which is deployed through a single route scheduling system. When making resource allocation decisions, our chief operating decision maker evaluates flight profitability data, which considers aircraft type and route economics, but gives no weight to the financial impact of the resource allocation decision on an individual carrier basis. Our objective in making resource allocation decisions is to optimize our consolidated financial results.

Our refinery segment provides jet fuel to the airline segment from its own production and through jet fuel obtained through agreements with third parties. Our refinery segment operates for the benefit of the airline segment.

Refinery Operations

Fuel expense is our single largest expense. In June 2012, we purchased an oil refinery as part of our strategy to mitigate the increasing cost of the refining margin we pay. At that time, global demand for jet fuel and related products had increased while jet fuel refining capacity had decreased in the U.S. (particularly in the Northeast), resulting in increases in the refining margin reflected in the prices we paid for jet fuel. Our wholly-owned subsidiaries, Monroe Energy, LLC, and MIPC, LLC (collectively, “Monroe”), acquired the Trainer refinery and related assets located near Philadelphia, Pennsylvania, from Phillips 66, which had shut down operations at the refinery. Monroe invested $180 million to acquire the refinery. Monroe received a $30 million grant from the Commonwealth of Pennsylvania. The acquisition included pipelines and terminal assets that allow the refinery to supply jet fuel to our airline operations throughout the Northeastern U.S., including our New York hubs at LaGuardia and JFK.

We accounted for the refinery acquisition as a business combination. The refinery, pipelines and terminal assets acquired were recorded at $180 million in property and equipment, net based on their respective fair values on the closing date of the transaction.

The refinery's production consists of jet fuel, as well as non-jet fuel products. We use several counterparties to exchange the non-jet fuel products produced by the refinery for jet fuel consumed in our airline operations. The gross fair value of the products exchanged under these agreements during the years ended December 31, 2014, 2013 and 2012 was $5.1 billion, $5.4 billion and $1.1 billion, respectively.

Segment Reporting

Segment results are prepared based on our internal accounting methods described below, with reconciliations to consolidated amounts in accordance with GAAP. Our segments are not designed to measure operating income or loss directly related to the products and services included in each segment on a stand-alone basis.
(in millions)
Airline
Refinery
 
Intersegment Sales/Other
 
Consolidated
Year Ended December 31, 2014
 
 
 
 
 
 
Operating revenue:
$
40,217

$
6,959

 
 
 
$
40,362

Sales to airline segment
 
 
 
$
(1,313
)
(1) 
 
Exchanged products
 
 
 
(5,104
)
(2) 
 
Sales of refined products to third parties
 
 
 
(397
)
(3) 
 
Operating income(4)
2,110

96

 
 
 
2,206

Interest expense, net
650


 
 
 
650

Depreciation and amortization
1,745

26

 
 
 
1,771

Total assets, end of period
53,012

1,109

 
 
 
54,121

Capital expenditures
2,184

65

 
 
 
2,249

Year Ended December 31, 2013
 
 
 
 
 
 
Operating revenue:
$
37,773

$
7,003

 
 
 
$
37,773

Sales to airline segment
 
 
 
$
(1,156
)
(1) 
 
Exchanged products
 
 
 
(5,352
)
(2) 
 
Sales of refined products to third parties
 
 
 
(495
)
(3) 
 
Operating income (loss)(4)
3,516

(116
)
 
 
 
3,400

Interest expense, net
852


 
 
 
852

Depreciation and amortization
1,641

17

 
 
 
1,658

Total assets, end of period
51,080

1,172

 
 
 
52,252

Capital expenditures
2,516

52

 
 
 
2,568

Year Ended December 31, 2012
 
 
 
 
 
 
Operating revenue:
$
36,670

$
1,347

 
 
 
$
36,670

Sales to airline segment
 
 
 
$
(213
)
(1) 
 
Exchanged products
 
 
 
(1,121
)
(2) 
 
Sales of refined products to third parties
 
 
 
(13
)
(3) 
 
Operating income (loss)(4)
2,238

(63
)
 
 
 
2,175

Interest expense, net
1,005


 
 
 
1,005

Depreciation and amortization
1,561

4

 
 
 
1,565

Total assets, end of period
43,386

1,164

 
 
 
44,550

Capital expenditures
1,637

331

 
 
 
1,968


(1) 
Represents transfers, valued on a market price basis, from the refinery to the airline segment for use in airline operations. We determine market price by reference to the market index for the primary delivery location, which is New York Harbor, for jet fuel from the refinery.
(2) 
Represents value of products delivered under our strategic agreements, as discussed above, determined on a market price basis.
(3) 
Represents sales of refined products to third parties. These sales were at or near cost; accordingly, the margin on these sales is de minimis.
(4) 
Includes the impact of pricing arrangements between the airline segment and refinery segment with respect to the refinery's inventory price risk.