Segments and Geographic Information

12 Months Ended

Dec. 31, 2017

SEGMENTS AND GEOGRAPHIC INFORMATION

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 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.

Airline Segment

Our airline segment is managed as a single business unit that provides scheduled air transportation for passengers and cargo throughout the U.S. and around the world and other ancillary airline services. 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.

Refinery Segment

In June 2012, our wholly owned subsidiaries, Monroe Energy, LLC, and MIPC, LLC (collectively, "Monroe"), acquired the Trainer oil refinery and related assets located near Philadelphia, Pennsylvania, as part of our strategy to mitigate the cost of the refining margin reflected in the price of jet fuel. 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.

Our refinery segment operates for the benefit of the airline segment by providing jet fuel to the airline segment from its own production and through jet fuel obtained through agreements with third parties. 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, 2017, 2016 and 2015 was $3.2 billion, $2.7 billion and $3.1 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, 2017
Operating revenue:	$	40,742	$	5,039						$	41,244
Sales to airline segment						$	(886	)	⁽¹⁾
Exchanged products						(3,240		)	⁽²⁾
Sales of refined products						(411		)	⁽³⁾
Operating income	6,004		110							6,114
Interest expense (income), net	403		(7		)					396
Depreciation and amortization	2,188		47							2,235
Total assets, end of period	51,165		2,127							53,292
Capital expenditures	3,743		148							3,891
Year Ended December 31, 2016
Operating revenue:	$	39,406	$	3,843						$	39,639
Sales to airline segment						$	(695	)	⁽¹⁾
Exchanged products						(2,658		)	⁽²⁾
Sales of refined products						(257		)	⁽³⁾
Operating income (loss)⁽⁴⁾	7,077		(125		)					6,952
Interest expense, net	386		2							388
Depreciation and amortization	1,862		40							1,902
Total assets, end of period	49,930		1,331							51,261
Capital expenditures	3,270		121							3,391
Year Ended December 31, 2015
Operating revenue:	$	40,398	$	4,741						$	40,704
Sales to airline segment						$	(990	)	⁽¹⁾
Exchanged products						(3,108		)	⁽²⁾
Sales of refined products						(337		)	⁽³⁾
Operating income⁽⁴⁾	7,512		290							7,802
Interest expense, net	481		—							481
Depreciation and amortization	1,805		30							1,835
Total assets, end of period	51,785		1,349							53,134
Capital expenditures	2,853		92							2,945


⁽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 exchange agreements, as discussed above, determined on a market price basis.


⁽³⁾	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 and refinery segments with respect to the refinery's inventory price risk.

Geographic Information

Operating revenue for the airline segment is recognized in a specific geographic region based on the origin, flight path and destination of each flight segment. The majority of the revenues of the refinery, consisting of fuel sales to the airline, have been eliminated in the Consolidated Financial Statements. The remaining operating revenue for the refinery segment is included in the domestic region.

Our operating revenue by geographic region (as defined by the U.S. Department of Transportation) is summarized in the following table:



	Year Ended December 31,
(in millions)	2017		2016		2015
Domestic	$	29,556	$	28,108	$	27,884
Atlantic	6,044		5,919		6,505
Pacific	2,730		2,939		3,503
Latin America	2,914		2,673		2,812
Total	$	41,244	$	39,639	$	40,704

Our tangible assets consist primarily of flight equipment, which is mobile across geographic markets. Accordingly, assets are not allocated to specific geographic regions.