Fair Value Measurements (Notes)

9 Months Ended

Sep. 30, 2011

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 2. FAIR VALUE MEASUREMENTS

Assets (Liabilities) Measured at Fair Value on a Recurring Basis

(in millions)	September 30, 2011			Level 1		Level 2			Level 3
Cash equivalents	$	2,082		$	2,082	$	—		$	—
Short-term investments	958			958		—			—
Restricted cash equivalents and short-term investments	441			441		—			—
Long-term investments	134			—		25			109
Hedge derivatives, net
Fuel hedge contracts	(119		)	—		(119		)	—
Interest rate contracts	(119		)	—		(119		)	—
Foreign currency exchange contracts	(92		)	—		(92		)	—

(in millions)	December 31, 2010			Level 1		Level 2			Level 3
Cash equivalents	$	2,696		$	2,696	$	—		$	—
Short-term investments	718			718		—			—
Restricted cash equivalents and short-term investments	440			440		—			—
Long-term investments	144			—		25			119
Hedge derivatives, net
Fuel hedge contracts	351			—		351			—
Interest rate contracts	(74		)	—		(74		)	—
Foreign currency exchange contracts	(96		)	—		(96		)	—

Cash Equivalents, Short-term Investments and Restricted Cash Equivalents and Short-term Investments. Cash equivalents and short-term investments generally consist of money market funds and treasury bills. Restricted cash equivalents and short-term investments are primarily held to meet certain projected self-insurance obligations and generally consist of money market funds and time deposits. A portion of our restricted cash equivalents and short-term investments are recorded in other noncurrent assets. Cash equivalents, short-term investments and restricted cash equivalents and short-term investmentsare recorded at cost, which approximates fair value. Fair value is based on the market approach using prices and other relevant information generated by market transactions involving identical or comparable assets.

Long-term Investments. Long-term investments are comprised primarily of student loan backed and insured auction rate securities, which are recorded at fair value. At September 30, 2011 and December 31, 2010, the fair value of our auction rate securities was $109 million and $119 million, respectively. The cost of these investments was $133 million and $143 million, respectively. These investments are classified as long-term in other noncurrent assets.

Because auction rate securities are not actively traded, fair values were estimated by discounting the cash flows expected to be received over the remaining maturities of the underlying securities. We based the valuations on our assessment of observable yields on instruments bearing comparable risks and considered the creditworthiness of the underlying debt issuer. Changes in market conditions could result in further adjustments to the fair value of these securities.

Hedge Derivatives. Our derivative instruments are primarily comprised of contracts that are privately negotiated with counterparties without going through a public exchange. Accordingly, our fair value assessments give consideration to the risk of counterparty default (as well as our own credit risk).

• Fuel Derivatives. Our fuel derivative instruments generally consist of (1) single and multi-structured option contracts, (2) swap contracts and (3) futures contracts. Heating oil, crude oil and jet fuel are the underlying commodities for these instruments. Option contracts are valued under the income approach using option pricing models based on data either readily observable in public markets, derived from public markets or provided by counterparties who regularly trade in public markets. Volatilities used in these valuations ranged from 16% to 52% depending on the maturity dates, underlying commodities and strike prices of the option contracts. Swap and futures contracts are valued under the income approach using a discounted cash flow model based on data either readily observable or derived from public markets. Discount factors used in these valuations ranged from 0.995 to 0.999 based on interest rates applicable to the maturity dates of the swap and futures contracts.

• Interest Rate Derivatives. Our interest rate derivative instruments consist of swap contracts and are valued primarily based on data readily observable in public markets.

• Foreign Currency Derivatives. Our foreign currency derivative instruments consist of Japanese yen and Canadian dollar forward contracts and are valued based on data readily observable in public markets.

For additional information regarding the composition and classification of our derivative instruments on the Consolidated Balance Sheets, see Note 3.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

In the September 2010 quarter, we recorded a $146 million impairment charge primarily related to our decision to substantially reduce the fleet of Comair over the two years ending December 31, 2012 by retiring older, less-efficient CRJ-100/200 50-seat aircraft. In evaluating these aircraft for impairment, we estimated their fair value by utilizing a market approach considering (1) published market data generally accepted in the airline industry, (2) recent market transactions, where available, (3) the current and projected supply of and demand for these aircraft and (4) the condition and age of the aircraft. Based on our fair value assessments, these aircraft have an aggregate estimated fair value of $97 million and are classified in Level 3 of the three-tier fair value hierarchy.

Fair Value of Debt

Market risk associated with our fixed and variable rate long-term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates. In the table below, the aggregate fair value of debt was based primarily on reported market values, recently completed market transactions and estimates based on interest rates, maturities, credit risk and underlying collateral.

(in millions)	September 30, 2011			December 31, 2010
Total debt at par value	$	14,543		$	15,442
Unamortized discount, net	(793		)	(935		)
Net carrying amount	$	13,750		$	14,507
Fair value	$	14,200		$	15,400