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Derivatives
 3 Months Ended
Mar. 31, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
DERIVATIVES

Our results of operations are impacted by changes in aircraft fuel prices, interest rates and foreign currency exchange rates. In an effort to manage our exposure to these risks, we enter into derivative contracts and adjust our derivative portfolio as market conditions change.

Aircraft Fuel Price Risk

Our results of operations are materially impacted by changes in aircraft fuel prices. We actively manage our fuel price risk through a hedging program intended to generate a positive cash position to defray the cost of jet fuel purchases, while preserving participation in downward price movements of jet fuel to the extent possible. This fuel hedging program utilizes several different contract and commodity types, which are used together to create a risk mitigating hedge portfolio. The economic effectiveness of this hedge portfolio is frequently tested against our financial targets. The hedge portfolio is rebalanced from time to time according to market conditions, which results in locking in gains or losses on hedge contracts prior to their settlement dates.

Effective June 2011, we stopped designating new fuel derivative contracts as accounting hedges and discontinued hedge accounting for our then existing fuel derivative contracts that previously had been designated as accounting hedges. As a result, we record market adjustments for changes in fair value to earnings in aircraft fuel and related taxes. Prior to this change in accounting designation, gains or losses on these contracts were deferred in AOCI until contract settlement. We anticipate that all amounts relating to our fuel derivative contracts in AOCI will be recognized by the end of 2012.

The following table shows the impact of fuel hedge gains (losses) for both designated and undesignated contracts on aircraft fuel and related taxes:
 
Three Months Ended March 31,
(in millions)
2012
2011
Market adjustments for changes in fair value
$
183

$
47

Effective portion reclassified from AOCI to earnings
13

60

Gain recorded in aircraft fuel and related taxes
$
196

$
107



Hedge Position

The following tables reflect the estimated fair value asset (liability) positions, notional balances and maturity dates of our hedge contracts:

As of March 31, 2012:
(in millions)
Notional Balance
Final Maturity Date
Prepaid Expenses and Other Assets
Other Noncurrent Assets
Other Accrued Liabilities
Other Noncurrent Liabilities
Hedge Derivatives, net
Designated as hedges
 
 
 
 
 
 
 
 
Interest rate contracts (cash flow hedges)
$
952

U.S. dollars
May 2019
$
—

$
—

$
(27
)
$
(51
)
$
(78
)
Interest rate contracts (fair value hedges)
$
485

U.S. dollars
August 2022
5

—

—

(18
)
(13
)
Foreign currency exchange contracts
110,802

Japanese yen
November 2014
18

23

(6
)
(1
)
34

322

Canadian dollars
 
 
 
 
 
Not designated as hedges
 
 
 
 
 
 
 
 
Fuel hedge contracts
2,430

gallons - heating oil, crude oil, jet fuel and diesel
September 2013
426

—

(221
)
(15
)
190

Total derivative contracts
 
 
$
449

$
23

$
(254
)
$
(85
)
$
133


As of December 31, 2011:
(in millions)
Notional Balance
Final Maturity Date
Prepaid Expenses and Other Assets
Other Noncurrent Assets
Other Accrued Liabilities
Other Noncurrent Liabilities
Hedge Derivatives, net
Designated as hedges
 
 
 
 
 
 
 
 
Interest rate contracts (cash flow hedges)
$
989

U.S. dollars
May 2019
$
—

$
—

$
(27
)
$
(57
)
$
(84
)
Interest rate contracts (fair value hedges)
$
500

U.S. dollars
August 2022
—

—

—

(7
)
(7
)
Foreign currency exchange contracts
126,993

Japanese yen
April 2014
7

5

(58
)
(43
)
(89
)
313

Canadian dollars
 
 
 
 
 
Not designated as hedges
 
 
 
 
 
 
 
 
Fuel hedge contracts
1,225

gallons - heating oil, crude oil, jet fuel and diesel
December 2012
570

—

(500
)
—

70

Total derivative contracts
 
 
$
577

$
5

$
(585
)
$
(107
)
$
(110
)


Hedge Gains (Losses)

Gains (losses) related to our designated hedge contracts, including those previously designated as accounting hedges, are as follows:
 
Effective Portion Reclassified from AOCI to Earnings
 
Effective Portion Recognized in Other Comprehensive Income (Loss)
 
Three Months Ended March 31,
(in millions)
2012
2011
 
2012
2011
Fuel hedge contracts
$
13

$
60

 
$
(13
)
$
88

Interest rate contracts
—

—

 
6

18

Foreign currency exchange contracts
(13
)
(11
)
 
123

59

Total designated
$
—

$
49

 
$
116

$
165


 
As of March 31, 2012, we recorded in AOCI $13 million of net gains on hedge contracts scheduled to settle in the next 12 months.

Credit Risk

To manage credit risk associated with our aircraft fuel price, interest rate and foreign currency hedging programs, we select counterparties based on their credit ratings and limit our exposure to any one counterparty.

Our hedge contracts contain margin funding requirements. The margin funding requirements may cause us to post margin to counterparties or may cause counterparties to post margin to us as market prices in the underlying hedged items change. Due to the fair value position of our hedge contracts, we paid $100 million of margin to counterparties and received $34 million from counterparties as of March 31, 2012. As of December 31, 2011, we paid $30 million of margin to counterparties.