Fair Value Measurements (Notes)

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

FAIR VALUE MEASUREMENTS

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

• Level 1. Observable inputs such as quoted prices in active markets;

• Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on the valuation techniques identified in the tables below. The valuation techniques are as follows:

(a) Market approach. Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities; and

(b) Income approach. Techniques to convert future amounts to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models).

Assets (Liabilities) Measured at Fair Value on a Recurring Basis⁽¹⁾ 

(in millions)	December 31, 2012			Level 1		Level 2			Level 3		Valuation Technique
Cash equivalents	$	2,176		$	2,176	$	—		$	—	(a)
Short-term investments	958			958		—			—		(a)
Restricted cash equivalents and investments	344			344		—			—		(a)
Long-term investments	208			100		27			81		(a)(b)
Hedge derivatives, net
Fuel hedge contracts	249			27		222			—		(a)(b)
Interest rate contracts	(66		)	—		(66		)	—		(a)(b)
Foreign currency exchange contracts	123			—		123			—		(a)

(in millions)	December 31, 2011			Level 1		Level 2			Level 3		Valuation Technique
Cash equivalents	$	2,357		$	2,357	$	—		$	—	(a)
Short-term investments	958			958		—			—		(a)
Restricted cash equivalents and investments	341			341		—			—		(a)
Long-term investments	188			55		24			109		(a)(b)
Hedge derivatives, net
Fuel hedge contracts	70			—		70			—		(a)(b)
Interest rate contracts	(91		)	—		(91		)	—		(a)(b)
Foreign currency exchange contracts	(89		)	—		(89		)	—		(a)

⁽¹⁾  See Note 11, “Employee Benefit Plans”, for fair value of benefit plan assets.

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

Long-term Investments. Our long-term investments, primarily consisting of equity investments in GOL and Aeroméxico and auction rate securities, are classified in other noncurrent assets. Our equity investments are traded on a public exchange and valued based on quoted market prices. 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 contracts are generally 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 hedge portfolio consists of call options; put options; combinations of two or more call options and put options; swap contracts; and futures contracts.The products underlying the hedge contracts include heating oil, crude oil, jet fuel and diesel fuel, as these commodities are highly correlated with the price of jet fuel that we consume. Option contracts are valued under an 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 12% to 35% depending on the maturity dates, underlying commodities and strike prices of the option contracts. Swap contracts are valued under an income approach using a discounted cash flow model based on data either readily observable or derived from public markets. Discount rates used in these valuations vary with the maturity dates of the respective contracts and are based on LIBOR. Futures contracts and options on futures contracts are traded on a public exchange and valued based on quoted market prices.

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

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

Assets Measured at Fair Value on a Nonrecurring Basis

	Significant Unobservable Inputs (Level 3)
(in millions)	December 31, 2012		December 31, 2011		Valuation Technique
Goodwill(1)	$	9,794	$	9,794	(a)(b)
Indefinite-lived intangible assets(1) (see Note 6)	4,373		4,375		(a)(b)

⁽¹⁾  See Note 1, “Goodwill and Other Intangible Assets”, for a description of how these assets are tested for impairment.