Segments

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Segments

SEGMENTS

Refinery Operations

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 three months ended March 31, 2022 and 2021 was $809 million and $503 million, 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.

Financial information by segment
(in millions)	Airline		Refinery		Intersegment Sales/Other			Consolidated
Three Months Ended March 31, 2022
Operating revenue:	$	8,161	$	2,313				$	9,348
Sales to airline segment					$	(291)	(1)
Exchanged products					(809)		(2)
Sales of refined products					(26)		(3)
Operating (loss)/income	(836)		53		—			(783)
Interest expense, net	274		2		(2)			274
Depreciation and amortization	506		23		(23)		(4)	506
Total assets, end of period	71,392		2,382		(26)			73,748
Net fair value obligations, end of period	—		(430)		—			(430)
Capital expenditures	1,749		17		—			1,766
Three Months Ended March 31, 2021
Operating revenue:	$	3,610	$	1,047				$	4,150
Sales to airline segment					$	—	(1)
Exchanged products					(503)		(2)
Sales of refined products					(4)		(3)
Operating loss	(1,273)		(125)		—			(1,398)
Interest expense, net	361		1		(1)			361
Depreciation and amortization	492		24		(24)		(4)	492
Total assets, end of period	71,508		1,578		(3)			73,083
Net fair value obligations, end of period	—		(285)		—			(285)
Capital expenditures	425		13		—			438

(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)Refinery segment operating results, including depreciation and amortization, are included within aircraft fuel and related taxes in our income statement.

Fair Value ObligationsThe net fair value obligations presented in the table above are related to renewable fuel compliance costs and are based on quoted market prices and other observable information and are therefore classified as Level 2 in the fair value hierarchy. Our obligation as of March 31, 2022 was calculated using the U.S. Environmental Protection Agency's ("EPA") proposed Renewable Fuel Standard ("RFS") volume requirements, which were issued in December 2021. The EPA has not finalized the compliance deadlines to retire our obligations for 2020 and 2021, but we expect those deadlines to be within one year of the effective date of the new RFS volume requirements.