LONG-TERM DEBT

The following table summarizes our long-term debt:



	Interest Rate(s) per Annum		December 31,
(in millions)	at December 31, 2011		2011			2010
Senior Secured Credit Facilities:
Term Loan Facility, due 2017	5.50%	variable ⁽¹⁾	$	1,368		$	—
Revolving Credit Facility, due 2016	undrawn	variable ⁽¹⁾	—			—
Senior Secured Exit Financing Facilities, due 2012 and 2014	n/a		—			1,450
Senior Secured Pacific Facilities:
Pacific Routes Term Facility, due 2016	4.25%	variable ⁽¹⁾	248			247
Pacific Routes Revolving Facility, due 2013	undrawn	variable ⁽¹⁾	—			—
Senior Secured Notes, due 2014	9.50%	fixed	600			675
Senior Second Lien Notes, due 2015	12.25%	fixed	306			397
Bank Revolving Credit Facilities, due 2012	undrawn	variable ⁽¹⁾	—			—
Other Secured Financing Arrangements:
Certificates, due in installments from 2012 to 2023	0.92% to 9.75%		4,677			5,310
Aircraft financings, due in installments from 2012 to 2025 ⁽²⁾	0.86% to 6.76%		4,570			5,170
Other secured financings, due in installments from 2012 to 2031⁽³⁾	2.25% to 6.12%		721			810
Total secured debt			12,490			14,059
American Express - Advance Purchase of SkyMiles ⁽⁴⁾			952			1,000
Other unsecured debt, due in installments from 2012 to 2035	3.00% to 9.07%		355			383
Total unsecured debt			1,307			1,383
Total secured and unsecured debt			13,797			15,442
Unamortized discount, net			(737		)	(935		)
Total debt			13,060			14,507
Less: current maturities			(1,827		)	(1,954		)
Total long-term debt			$	11,233		$	12,553


⁽¹⁾	Interest rate equal to LIBOR (subject to a floor) or another index rate, in each case plus a specified margin.


⁽²⁾	Secured by an aggregate of 269 aircraft.


⁽³⁾	Primarily includes manufacturer term loans secured by spare parts, spare engines and aircraft, and real estate loans.


⁽⁴⁾	For additional information about our debt associated with American Express, see Note 6.

Senior Secured Credit Facilities

In 2011, we entered into senior secured first-lien credit facilities (the “Senior Secured Credit Facilities”) to borrow up to $2.6 billion. The Senior Secured Credit Facilities consist of a $1.4 billion first-lien term loan facility (the “Term Loan Facility”) and a $1.2 billion first-lien revolving credit facility, up to $500 million of which may be used for the issuance of letters of credit (the “Revolving Credit Facility”).

Borrowings under the Term Loan Facility must be repaid annually in an amount equal to 1% of the original principal amount (to be paid in equal quarterly installments), with the balance due in April 2017. Borrowings under the Revolving Credit Facility are due in April 2016. At December 31, 2011, the Revolving Credit Facility was undrawn.

Our obligations under the Senior Secured Credit Facilities are guaranteed by substantially all of our domestic subsidiaries (the “Guarantors”). The Senior Secured Credit Facilities and the related guarantees are secured by liens on certain of our and the Guarantors' assets, including accounts receivable, inventory, flight equipment, ground property and equipment, certain non-Pacific international routes, domestic slots, real estate and certain investments (the “Collateral”).

The Senior Secured Credit Facilities contain events of default customary for similar financings, including cross-defaults to other material indebtedness and certain change of control events. The Senior Secured Credit Facilities also include events of default specific to our business, including the suspension of all or substantially all of our flights and operations for more than five consecutive days (other than as a result of a Federal Aviation Administration suspension due to extraordinary events similarly affecting other major U.S. air carriers). Upon the occurrence of an event of default, the outstanding obligations may be accelerated and become due and payable immediately. For a discussion of related financial covenants, see "Key Financial Covenants" below.

Senior Secured Exit Financing Facilities

In connection with entering into the Senior Secured Credit Facilities, we retired the outstanding loans under our $2.5 billion senior secured exit financing facilities and terminated those facilities as well as an existing undrawn $100 million revolving credit facility. These retired senior secured exit financing facilities consisted of:


•	$914 million first-lien revolving credit facility and an $86 million first-lien term loan due April 2012;


•	$600 million first-lien synthetic revolving facility due April 2012; and


•	$900 million second-lien term loan facility due April 2014.

Senior Secured Pacific Facilities

In 2009, we entered into a first-lien term loan facility in the aggregate principal amount of $250 million (the “Pacific Routes Term Facility”) and a first-lien revolving credit facility in the aggregate principal amount of $500 million (the “Pacific Routes Revolving Facility”), collectively the “Senior Secured Pacific Facilities.” The Senior Secured Pacific Facilities are guaranteed by the Guarantors and are secured by a first lien on our Pacific route authorities and certain related assets (the “Pacific Collateral”). Lenders under the Senior Secured Pacific Facilities and holders of the Senior Secured Notes (described below) have equal rights to payment and the Pacific Collateral.

During 2011, we refinanced and amended the Pacific Routes Term Facility to, among other things, (1) reduce the interest rate, (2) extend the maturity date from September 2013 to March 2016 and (3) modify certain negative covenants and default provisions to be substantially similar to those described above under “Senior Secured Credit Facilities.”

Borrowings under the Pacific Routes Term Facility must be repaid in an amount equal to 1% of the original principal amount of the term loans annually (to be paid in equal quarterly installments), with the balance due in March 2016. Borrowings under the Pacific Routes Revolving Facility are due in March 2013 and can be repaid and reborrowed without penalty. As of December 31, 2011, the Pacific Routes Revolving Facility was undrawn.

The Senior Secured Pacific Facilities contain mandatory prepayment provisions that require us in certain instances to prepay obligations under the Senior Secured Pacific Facilities in connection with dispositions of collateral. For a discussion of related financial covenants, see "Key Financial Covenants" below.

Senior Secured Notes

In 2009, we issued $750 million principal amount of Senior Secured Notes that mature in September 2014. We may redeem some or all of these notes at specified redemption prices. If we sell certain of our assets or if we experience specific kinds of changes in control, we must offer to repurchase the Senior Secured Notes. During 2011, we voluntarily redeemed $75 million principal amount of Senior Secured Notes. We also voluntarily redeemed $75 million principal amount of Senior Secured Notes in 2010.

The Senior Secured Notes are guaranteed by the Guarantors and are secured by the Pacific Collateral. Holders of the Senior Secured Notes and lenders under the Senior Secured Pacific Facilities (discussed above) have equal rights to payment and collateral.

The Senior Secured Notes contain events of default customary for similar financings, including cross-defaults to other material indebtedness. Upon the occurrence of an event of default, the outstanding obligations may be accelerated and become due and payable immediately. For a discussion of related financial covenants, see "Key Financial Covenants" below.

Senior Second Lien Notes

In conjunction with the issuance of the Senior Secured Notes, we issued $600 million principal amount of Senior Second Lien Notes that mature in March 2015. We may redeem some or all of the Senior Second Lien Notes on or after March 15, 2012 at specified redemption prices. If we sell certain of our assets or if we experience specific kinds of changes in control, we must offer to repurchase the Senior Second Lien Notes. During 2010, we repurchased in a cash tender offer $171 million principal amount of Senior Second Lien Notes.

Our obligations under the Senior Second Lien Notes are guaranteed by the Guarantors, and our obligations and the related guarantees are secured on a junior basis by security interests in the Pacific Collateral. The Senior Second Lien Notes include default provisions that are substantially similar to the ones described under “Senior Secured Notes due 2014” above. For a discussion of related financial covenants, see "Key Financial Covenants" below.

Key Financial Covenants

Our secured debt instruments discussed above include affirmative, negative and financial covenants that restrict our ability to, among other things, make investments, sell or otherwise dispose of collateral if we are not in compliance with the collateral coverage ratio tests described below, pay dividends or repurchase stock. We were in compliance with all covenants in our financing agreements at December 31, 2011. The financial covenants require us to maintain the minimum levels shown in the table below:



	Senior Secured Credit Facilities	Senior Secured Pacific Facilities	Senior Secured Notes	Senior Second Lien Notes
Minimum Fixed Charge Coverage Ratio⁽¹⁾	1.20:1	1.20:1	n/a	n/a
Minimum Unrestricted Liquidity
Unrestricted cash and permitted investments	$1.0 billion	n/a	n/a	n/a
Unrestricted cash, permitted investments, and undrawn revolving credit facilities	$2.0 billion	$2.0 billion	n/a	n/a
Minimum Collateral Coverage Ratio⁽²⁾	1.67:1⁽³⁾	1.60:1	1.60:1	1.00:1


⁽¹⁾	Defined as the ratio of (a) earnings before interest, taxes, depreciation, amortization and aircraft rent, and other adjustments to net income to (b) the sum of gross cash interest expense (including the interest portion of our capitalized lease obligations) and cash aircraft rent expense, for the 12-month period ending as of the last day of each fiscal quarter.


⁽²⁾	Defined as the ratio of (a) certain of the collateral that meets specified eligibility standards to (b) the sum of the aggregate outstanding obligations and certain other obligations.


⁽³⁾	Excluding the non-Pacific international routes from the collateral for purposes of the calculation, the required minimum collateral coverage ratio is 0.75:1

Minimum Collateral Coverage Ratio. Under the Senior Secured Credit Facilities and the Senior Secured Pacific Facilities, if the collateral coverage ratios are not maintained, we must either provide additional collateral to secure our obligations, or we must repay the loans under the facilities by an amount necessary to maintain compliance with the collateral coverage ratios. Under the Senior Secured Notes and Senior Second Lien Notes, if the collateral coverage ratios are not maintained, we must generally pay additional interest on the notes at the rate of 2% per annum until the collateral coverage ratio equals at least the minimum. The value of the collateral that has been pledged in each facility may change over time, which may be reflected in appraisals of collateral required by our credit agreements and indentures. These changes could result from factors that are not under our control. A decline in the value of collateral could result in a situation where we may not be able to maintain the collateral coverage ratio.

Availability Under Revolving Credit Facilities

The table below shows our availability under revolving credit facilities as of December 31, 2011:



(in millions)	December 31, 2011
Revolving Credit Facility, due 2016	$	1,225
Pacific Routes Revolving Facility, due 2013	500
Bank Revolving Credit Facility, due 2012	100
Total availability under revolving credit facilities	$	1,825

Other Secured Financing Arrangements

During 2011, we retired $502 million of existing debt under our other secured financing arrangements prior to scheduled maturity. During 2010, we (1) repurchased in cash tender offers $129 million of Pass-Through Trust Certificates, (2) achieved $160 million of debt relief through vendor negotiations and (3) prepaid or repurchased $403 million of other existing debt.

In 2010, we also restructured $820 million of existing debt, including changes in applicable interest rates and other payment terms. To account for debt restructurings, we compare the net present value of future cash flows for each new debt instrument to the remaining cash flows of the existing debt. If there is at least a 10% change in cash flows, we treat the restructuring as a debt extinguishment. We record losses on extinguishment of debt for the difference between the fair value of the new debt and the carrying value of the existing debt. The carrying value of the existing debt includes any unamortized discounts or premiums, unamortized issuance costs, and any premiums paid to retire the existing debt.

Certificates. Pass-Through Trust Certificates and Enhanced Equipment Trust Certificates (“EETC”) (collectively, the “Certificates”) are secured by 262 aircraft. During the three years ended December 31, 2011, we received proceeds from offerings of EETC as shown in the table below.



(In millions, unless otherwise stated)	Proceeds Received								Fixed Interest Rate	Offering Completion Date	Final Maturity Date	Collateral
(In millions, unless otherwise stated)	2011		2010		2009		Total Principal		Fixed Interest Rate	Offering Completion Date	Final Maturity Date	Collateral
2011-1A	$	293	$	—	$	—	$	293	5.300%	April 2011	April 2019	26 aircraft
2011-1B	102		—		—		102		7.125%	August 2011	October 2014	26 aircraft	⁽¹⁾
2010-2A	204		270		—		474		4.950%	November 2010	May 2019	28 aircraft
2010-2B	135		—		—		135		6.750%	February 2011	November 2015	28 aircraft	⁽¹⁾
2010-1A	—		450		—		450		6.200%	July 2010	July 2018	24 aircraft
2010-1B	100		—		—		100		6.375%	February 2011	January 2016	24 aircraft	⁽¹⁾
2009-1A	—		288		281		569		7.750%	November 2009	December 2019	27 aircraft
2009-1B	—		59		61		120		9.750%	November 2009	December 2016	27 aircraft	⁽¹⁾
Total	$	834	$	1,067	$	342	$	2,243


⁽¹⁾	Each of the B tranches are secured by the same aircraft that secure related A tranches.

As of December 31, 2010, $204 million held in escrow under the 2010-2A EETC was not recorded on the balance sheet as we had no right to these funds until the equipment notes securing the certificates were issued. We assessed whether the pass through trusts were variable interest entities required to be consolidated. Because our only obligation with respect to the trusts is to make interest and principal payments on the equipment notes held by the trusts and because we have no current rights to the escrowed funds, we concluded we do not have a variable interest in the related trusts. Accordingly, we did not consolidate them. As of December 31, 2011, no amounts remained in escrow.

Unamortized Discount, Net

Our unamortized discount, net results from fair value adjustments recorded in 2008 to reduce the carrying value of our long-term debt due to purchase accounting and an advance purchase of SkyMiles by American Express (see Note 6). As described in the table below, we amortize these adjustments over the remaining maturities of the respective debt to amortization of debt discount, net on our Consolidated Statements of Operations. During the years ended December 31, 2011, 2010 and 2009, we recorded $68 million, $391 million and $83 million in losses, respectively, from the early extinguishment of debt, which primarily related to the write-off of debt discounts.

Future Maturities

The following table summarizes scheduled maturities of our debt, including current maturities, at December 31, 2011:



Years Ending December 31, (in millions)	Total Secured and Unsecured Debt		Amortization of Debt Discount, net
2012	$	1,925	$	(199	)
2013	1,558		(157		)
2014	2,286		(104		)
2015	1,347		(75		)
2016	1,240		(66		)
Thereafter	5,441		(136		)
Total	$	13,797	$	(737	)	$	13,060

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:



	December 31,
(in millions)	2011			2010
Total debt at par value	$	13,797		$	15,442
Unamortized discount, net	(737		)	(935		)
Net carrying amount	$	13,060		$	14,507
Fair value	$	13,600		$	15,400