LONG-TERM DEBT

The following table summarizes our long-term debt:



	Maturity			Interest Rate(s) Per Annum at			December 31,
(in millions)	Dates			December 31, 2012			2012			2011
2012 Pacific Facilities:
Pacific Term Loan B-1⁽²⁾	October 2018			5.25%	variable⁽¹⁾		$	1,100		$	—
Pacific Term Loan B-2⁽²⁾	April 2016			4.25%	variable⁽¹⁾		400			—
Pacific Revolving Facility ($450)	October 2017			undrawn	variable⁽¹⁾		—			—
2011 Credit Facilities:
Term Loan Facility⁽²⁾	April 2017			5.50%	variable⁽¹⁾		1,354			1,368
Revolving Credit Facility ($1,225)	April 2016			undrawn	variable⁽¹⁾		—			—
2009 Pacific Facilities and Other Debt:
Pacific Routes Term Facility	March 2016			4.25%	variable⁽¹⁾		—			248
Pacific Routes Revolving Facility ($500)	March 2013			undrawn	variable⁽¹⁾		—			—
Senior Secured Notes	September 2014			9.50%	fixed		—			600
Senior Second Lien Notes	March 2015			12.25%	fixed		—			306
Other Secured Financing Arrangements:
Certificates⁽²⁾⁽³⁾	2013	to	2023	1.06%	to	9.75%	4,314			4,677
Aircraft financings⁽²⁾⁽³⁾	2013	to	2025	0.81%	to	6.76%	3,964			4,570
Other financings⁽²⁾⁽⁴⁾	2013	to	2031	2.44%	to	6.12%	707			721
Bank Revolving Credit Facility	September 2015			undrawn	variable⁽¹⁾		—			—
Total secured debt							11,839			12,490
American Express - Advance Purchase of Restricted SkyMiles⁽⁵⁾							619			952
Other unsecured debt⁽²⁾	2013	to	2035	3.00%	to	9.00%	175			355
Total unsecured debt							794			1,307
Total secured and unsecured debt							12,633			13,797
Unamortized discount, net							(527		)	(737		)
Total debt							12,106			13,060
Less: current maturities							(1,507		)	(1,827		)
Total long-term debt							$	10,599		$	11,233


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


⁽²⁾	Due in installments


⁽³⁾	Secured by aircraft.


⁽⁴⁾	Primarily includes loans secured by spare parts, spare engines and aircraft and real estate.


⁽⁵⁾	For additional information about our debt associated with American Express, see Note 7.

2012 Pacific Facilities

In October 2012, we entered into senior secured credit facilities (the "2012 Pacific Facilities") to borrow up to $2.0 billion. The 2012 Pacific Facilities consist of two first lien term loan facilities (the "2012 Pacific Term Loans") and a $450 million revolving credit facility (the "Pacific Revolving Facility"). In connection with entering into the 2012 Pacific Facilities, we retired $1.2 billion principal amount of outstanding debt and terminated an existing undrawn $500 million revolving credit facility. These transactions are summarized in the table below:



(in millions)	Proceeds Received		Principal Retired
2012 Pacific Facilities:
Pacific Term Loan B-1	$	1,100	$	—
Pacific Term Loan B-2	400		—
Pacific Revolving Facility ($450)	—		—
2009 Pacific Facilities and Other Debt:
Pacific Routes Term Facility	—		246
Pacific Routes Revolving Facility ($500)	—		—
Senior Secured Notes	—		600
Senior Second Lien Notes	—		306
Total	$	1,500	$	1,152

2012 Pacific Facilities. Borrowings under the 2012 Pacific Term Loans must be repaid annually in an amount equal to 1% per year of the original principal amount of the respective loans (to be paid in equal quarterly installments). The remaining unamortized principal amounts under the 2012 Pacific Term Loans are due on their final maturity dates. As of December 31, 2012, the 2012 Pacific Revolving Facility was undrawn.

2009 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 "2009 Pacific Facilities"). During 2011, we refinanced and amended the Pacific Routes Term Facility which, among other things, reduced the interest rate and extended the maturity date from September 2013 to March 2016. We retired the remaining $246 million principal amount of the Pacific Routes Term Facility and terminated the existing undrawn $500 million Pacific Routes Revolving Facility in connection with entering into the 2012 Pacific Facilities.

Senior Secured Notes. In 2009, we issued $750 million principal amount of senior secured notes (the "Senior Secured Notes") that were to mature in 2014. Some or all of these notes were redeemable at specified redemption prices. During 2010 and 2011, we voluntarily redeemed $150 million principal amount. We retired the remaining $600 million principal amount in connection with entering into the 2012 Pacific Facilities.

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 were to mature in March 2015. During 2010 and 2011, we repurchased $294 million of these notes and we retired the remaining $306 million principal amount in connection with entering into the 2012 Pacific Facilities.

Our obligations under the 2012 Pacific Facilities are guaranteed by substantially all of our domestic subsidiaries (the "Guarantors") and secured by a first lien on our Pacific route authorities and certain related assets (the "Pacific Collateral"). The covenants under the 2012 Pacific Facilities are the same as the covenants that were in place for the 2009 Pacific Facilities. Prior to their retirement, the 2009 Pacific Facilities, Senior Secured Notes and Senior Secured Lien Notes were all guaranteed by the Guarantors and secured by the Pacific Collateral. For a discussion of related financial covenants, see "Key Financial Covenants" below.

2011 Credit Facilities

In 2011, we entered into senior secured first-lien credit facilities (the “2011 Credit Facilities”) to borrow up to $2.6 billion. The 2011 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 2017. Borrowings under the Revolving Credit Facility are due in 2016. As of December 31, 2012 and 2011, the Revolving Credit Facility was undrawn.

Our obligations under the 2011 Credit Facilities are guaranteed by the Guarantors. The 2011 Credit Facilities and the related guarantees are secured by liens on certain of our and the Guarantors' assets, including accounts receivable, flight equipment, ground property and equipment, certain aircraft, spare engines and parts, certain non-Pacific international routes, domestic slots, real estate and certain investments (the “Collateral”).

The 2011 Credit Facilities contain events of default customary for similar financings, including cross-defaults to other material indebtedness and certain change of control events. The 2011 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.

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, 2012.



	2012 Pacific Facilities	2011 Credit Facilities
Minimum Fixed Charge Coverage Ratio⁽¹⁾	1.20:1	1.20:1
Minimum Unrestricted Liquidity
Unrestricted cash and permitted investments	n/a	$1.0 billion
Unrestricted cash, permitted investments and undrawn revolving credit facilities	$2.0 billion	$2.0 billion
Minimum Collateral Coverage Ratio⁽²⁾	1.60:1	1.67:1⁽³⁾


⁽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. If the respective collateral coverage ratios are not maintained, we must either provide additional collateral to secure our obligations or repay the loans under the facilities by an amount necessary to maintain compliance with the collateral coverage ratios. 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 availability under revolving credit facilities, all of which were undrawn, as of December 31, 2012:



(in millions)
Revolving Credit Facility	$	1,225
Pacific Revolving Credit Facility	450
Bank Revolving Credit Facility	150
Total availability under revolving credit facilities	$	1,825

Other Secured Financing Arrangements

During 2011 and 2010, we retired $502 million and $532 million of existing debt under our other secured financing arrangements prior to scheduled maturity. In 2010, we also restructured $820 million of existing debt, including changes in applicable interest rates and other payment terms. To account for these debt restructurings, we compared the net present value of future cash flows for each new debt instrument to the remaining cash flows of the existing debt. If there was at least a 10% change in cash flows, we treated the restructuring as a debt extinguishment. We recorded 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 included 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”) shown in the table below are secured by 264 aircraft.



(In millions, unless otherwise stated)	Proceeds Received						Outstanding at December 31, 2012		Fixed Interest Rate	Final Maturity Date
(In millions, unless otherwise stated)	2012		2011		2010		Outstanding at December 31, 2012		Fixed Interest Rate	Final Maturity Date
2012-1A EETC	$	354	$	—	$	—	$	354	4.750%	May 2020
2012-1B EETC	126		—		—		126		6.875%	May 2019
2011-1A EETC	—		293		—		253		5.300%	April 2019
2011-1B EETC	—		102		—		102		7.125%	October 2014
2010-2A EETC	—		204		270		412		4.950%	May 2019
2010-2B EETC	—		135		—		135		6.750%	November 2015
2010-1A EETC	—		—		450		383		6.200%	July 2018
2010-1B EETC	—		100		—		100		6.375%	January 2016
Certificates Issued Prior to 2010	—		—		347		2,449
Total	$	480	$	834	$	1,067	$	4,314

Unamortized Discount, Net

Our unamortized discount, net results primarily from fair value adjustments to reduce the carrying value of our long-term debt due to purchase accounting and an advance purchase of restricted SkyMiles by American Express (see Note 7). 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, 2012, 2011 and 2010, we recorded $118 million, $68 million and $391 million, respectively, in losses from the early extinguishment of debt, which included the write-off of debt discounts.

Future Maturities

The following table summarizes scheduled maturities of our debt, including current maturities, at December 31, 2012:



Years Ending December 31, (in millions)	Total Secured and Unsecured Debt		Amortization of Debt Discount, net
2013	$	1,600	$	(148	)
2014	1,706		(98		)
2015	1,062		(72		)
2016	1,427		(65		)
2017	2,144		(54		)
Thereafter	4,694		(90		)
Total	$	12,633	$	(527	)	$	12,106

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 and is classified primarily as Level 2 within the fair value hierarchy.



	December 31,
(in millions)	2012			2011
Total debt at par value	$	12,633		$	13,797
Unamortized discount, net	(527		)	(737		)
Net carrying amount	$	12,106		$	13,060
Fair value	$	13,000		$	13,600