R | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Or | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Large accelerated filer | R | Accelerated filer | o | Non-accelerated filer | o | Smaller reporting company | o |
(Do not check if a smaller reporting company) |
Table of Contents | |
Page | |
(in millions, except share data) | March 31, 2013 | December 31, 2012 | |||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 2,636 | $ | 2,416 | |||
Short-term investments | 958 | 958 | |||||
Restricted cash, cash equivalents and short-term investments | 291 | 375 | |||||
Accounts receivable, net of an allowance for uncollectible accounts of $22 and $36 at March 31, 2013 and December 31, 2012, respectively | 1,994 | 1,693 | |||||
Fuel inventory | 624 | 619 | |||||
Expendable parts and supplies inventories, net of an allowance for obsolescence of $133 and $127 at March 31, 2013 and December 31, 2012, respectively | 371 | 404 | |||||
Deferred income taxes, net | 463 | 463 | |||||
Prepaid expenses and other | 1,304 | 1,344 | |||||
Total current assets | 8,641 | 8,272 | |||||
Property and Equipment, Net: | |||||||
Property and equipment, net of accumulated depreciation and amortization of $6,938 and $6,656 at March 31, 2013 and December 31, 2012, respectively | 20,793 | 20,713 | |||||
Other Assets: | |||||||
Goodwill | 9,794 | 9,794 | |||||
Identifiable intangibles, net of accumulated amortization of $685 and $670 at March 31, 2013 and December 31, 2012, respectively | 4,709 | 4,679 | |||||
Other noncurrent assets | 1,131 | 1,092 | |||||
Total other assets | 15,634 | 15,565 | |||||
Total assets | $ | 45,068 | $ | 44,550 | |||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
Current Liabilities: | |||||||
Current maturities of long-term debt and capital leases | $ | 1,593 | $ | 1,627 | |||
Air traffic liability | 4,920 | 3,696 | |||||
Accounts payable | 2,405 | 2,293 | |||||
Frequent flyer deferred revenue | 1,715 | 1,806 | |||||
Accrued salaries and related benefits | 1,223 | 1,680 | |||||
Taxes payable | 735 | 585 | |||||
Fuel card obligation | 604 | 455 | |||||
Other accrued liabilities | 873 | 1,128 | |||||
Total current liabilities | 14,068 | 13,270 | |||||
Noncurrent Liabilities: | |||||||
Long-term debt and capital leases | 10,721 | 11,082 | |||||
Pension, postretirement and related benefits | 15,865 | 16,005 | |||||
Frequent flyer deferred revenue | 2,616 | 2,628 | |||||
Deferred income taxes, net | 2,047 | 2,047 | |||||
Other noncurrent liabilities | 1,694 | 1,649 | |||||
Total noncurrent liabilities | 32,943 | 33,411 | |||||
Commitments and Contingencies | |||||||
Stockholders' Deficit: | |||||||
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 874,326,995 and 867,866,505 shares issued at March 31, 2013 and December 31, 2012, respectively | — | — | |||||
Additional paid-in capital | 14,120 | 14,069 | |||||
Accumulated deficit | (7,382 | ) | (7,389 | ) | |||
Accumulated other comprehensive loss | (8,426 | ) | (8,577 | ) | |||
Treasury stock, at cost, 17,905,962 and 16,464,472 shares at March 31, 2013 and December 31, 2012, respectively | (255 | ) | (234 | ) | |||
Total stockholders' deficit | (1,943 | ) | (2,131 | ) | |||
Total liabilities and stockholders' deficit | $ | 45,068 | $ | 44,550 | |||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
Three Months Ended March 31, | |||||||
(in millions, except per share data) | 2013 | 2012 | |||||
Operating Revenue: | |||||||
Passenger: | |||||||
Mainline | $ | 5,876 | $ | 5,662 | |||
Regional carriers | 1,457 | 1,564 | |||||
Total passenger revenue | 7,333 | 7,226 | |||||
Cargo | 238 | 244 | |||||
Other | 929 | 943 | |||||
Total operating revenue | 8,500 | 8,413 | |||||
Operating Expense: | |||||||
Aircraft fuel and related taxes | 2,289 | 2,233 | |||||
Salaries and related costs | 1,911 | 1,763 | |||||
Contract carrier arrangements | 1,399 | 1,375 | |||||
Aircraft maintenance materials and outside repairs | 491 | 561 | |||||
Depreciation and amortization | 405 | 386 | |||||
Contracted services | 401 | 378 | |||||
Passenger commissions and other selling expenses | 357 | 380 | |||||
Landing fees and other rents | 323 | 305 | |||||
Passenger service | 164 | 171 | |||||
Aircraft rent | 60 | 75 | |||||
Profit sharing | 20 | — | |||||
Restructuring and other items | 102 | (12 | ) | ||||
Other | 356 | 416 | |||||
Total operating expense | 8,278 | 8,031 | |||||
Operating Income | 222 | 382 | |||||
Other (Expense) Income: | |||||||
Interest expense, net | (178 | ) | (221 | ) | |||
Amortization of debt discount, net | (42 | ) | (51 | ) | |||
Miscellaneous, net | 1 | 17 | |||||
Total other expense, net | (219 | ) | (255 | ) | |||
Income Before Income Taxes | 3 | 127 | |||||
Income Tax Benefit (Provision) | 4 | (3 | ) | ||||
Net Income | $ | 7 | $ | 124 | |||
Basic Earnings Per Share | $ | 0.01 | $ | 0.15 | |||
Diluted Earnings Per Share | $ | 0.01 | $ | 0.15 | |||
Comprehensive Income | $ | 158 | $ | 372 | |||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
Three Months Ended March 31, | |||||||
(in millions) | 2013 | 2012 | |||||
Net Cash Provided by Operating Activities | $ | 1,004 | $ | 831 | |||
Cash Flows From Investing Activities: | |||||||
Property and equipment additions: | |||||||
Flight equipment, including advance payments | (527 | ) | (308 | ) | |||
Ground property and equipment, including technology | (120 | ) | (99 | ) | |||
Purchase of investments | (240 | ) | (240 | ) | |||
Redemption of investments | 286 | 266 | |||||
Other, net | (29 | ) | 32 | ||||
Net cash used in investing activities | (630 | ) | (349 | ) | |||
Cash Flows From Financing Activities: | |||||||
Payments on long-term debt and capital lease obligations | (299 | ) | (367 | ) | |||
Fuel card obligation | 149 | 171 | |||||
Other, net | (4 | ) | (32) | ||||
Net cash used in financing activities | (154 | ) | (228 | ) | |||
Net Increase in Cash and Cash Equivalents | 220 | 254 | |||||
Cash and cash equivalents at beginning of period | 2,416 | 2,657 | |||||
Cash and cash equivalents at end of period | $ | 2,636 | $ | 2,911 | |||
Non-Cash Transactions: | |||||||
SkyMiles used pursuant to advance purchase under American Express Agreements | $ | 83 | $ | 83 | |||
Build-to-suit leased facilities | 45 | 75 | |||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
Three Months Ended March 31, 2013 | ||||||||||||||
(in millions) | Airline | Refinery | Intersegment Sales/ Other | Consolidated | ||||||||||
Operating revenue: | $ | 8,500 | $ | 1,731 | $ | 8,500 | ||||||||
Sales to airline segment | $ | (292 | ) | (1) | ||||||||||
Exchanged products | (1,321 | ) | (2) | |||||||||||
Sales of by-products to third parties | (118 | ) | (3) | |||||||||||
Operating income (loss)(4) | 244 | (22 | ) | — | 222 | |||||||||
Interest expense, net | 178 | — | — | 178 | ||||||||||
Depreciation and amortization expense | 401 | 4 | — | 405 | ||||||||||
Total assets, end of period | 43,789 | 1,279 | — | 45,068 | ||||||||||
Capital expenditures | 641 | 6 | — | 647 |
(1) | Represents transfers, valued on a market price basis, from the refinery to the airline segment for use in airline operations. We determine market price by reference to the market index for the primary delivery location for jet fuel from the refinery, which is New York harbor. |
(2) | Represents value of products exchanged under our buy/sell agreements, as discussed above, determined on a market price basis. |
(3) | Represents sales of refinery by-products to third parties. Such products are generally sold at or near cost; accordingly, margin on such sales is de minimis. By-products are produced as a result of the refining of crude oil into gasoline, diesel and jet fuel. |
(4) | Includes allocation of refinery's inventory price risk to the airline segment. |
(in millions) | March 31, 2013 | Level 1 | Level 2 | Level 3 | ||||||||
Cash equivalents | $ | 2,126 | $ | 2,126 | $ | — | $ | — | ||||
Short-term investments | 958 | 958 | — | — | ||||||||
Restricted cash equivalents and investments | 290 | 290 | — | — | ||||||||
Long-term investments | 202 | 94 | 27 | 81 | ||||||||
Hedge derivatives, net | ||||||||||||
Fuel contracts | 257 | 61 | 196 | — | ||||||||
Interest rate contracts | (66 | ) | — | (66 | ) | — | ||||||
Foreign currency exchange contracts | 210 | — | 210 | — |
(in millions) | December 31, 2012 | Level 1 | Level 2 | Level 3 | ||||||||
Cash equivalents | $ | 2,176 | $ | 2,176 | $ | — | $ | — | ||||
Short-term investments | 958 | 958 | — | — | ||||||||
Restricted cash equivalents and investments | 344 | 344 | — | — | ||||||||
Long-term investments | 208 | 100 | 27 | 81 | ||||||||
Hedge derivatives, net | ||||||||||||
Fuel contracts | 249 | 27 | 222 | — | ||||||||
Interest rate contracts | (66 | ) | — | (66 | ) | — | ||||||
Foreign currency exchange contracts | 123 | — | 123 | — |
• | 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 9% to 25% 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. |
(in millions) | Notional Balance | Final Maturity Date | Prepaid Expenses and Other | Other Noncurrent Assets | Other Accrued Liabilities | Other Noncurrent Liabilities | Hedge Derivatives, Net | |||||||||||||
Designated as hedges | ||||||||||||||||||||
Interest rate contracts (cash flow hedges) | $ | 710 | U.S. dollars | May 2019 | $ | — | $ | — | $ | (21 | ) | $ | (44 | ) | $ | (65 | ) | |||
Interest rate contracts (fair value hedges) | $ | 455 | U.S. dollars | August 2022 | 5 | — | — | (6 | ) | (1 | ) | |||||||||
Foreign currency exchange contracts | 112,004 | Japanese yen | January 2016 | 113 | 97 | — | — | 210 | ||||||||||||
394 | Canadian dollars | |||||||||||||||||||
Not designated as hedges | ||||||||||||||||||||
Fuel contracts | 1,957 | gallons - heating oil, crude oil, jet fuel and diesel | June 2014 | 378 | 5 | (124 | ) | (2 | ) | 257 | ||||||||||
Total derivative contracts | $ | 496 | $ | 102 | $ | (145 | ) | $ | (52 | ) | $ | 401 |
(in millions) | Notional Balance | Final Maturity Date | Prepaid Expenses and Other | Other Noncurrent Assets | Other Accrued Liabilities | Other Noncurrent Liabilities | Hedge Derivatives, Net | |||||||||||||
Designated as hedges | ||||||||||||||||||||
Interest rate contracts (cash flow hedges) | $ | 740 | U.S. dollars | May 2019 | $ | — | $ | — | $ | (22 | ) | $ | (48 | ) | $ | (70 | ) | |||
Interest rate contracts (fair value hedges) | $ | 469 | U.S. dollars | August 2022 | — | 6 | (2 | ) | — | 4 | ||||||||||
Foreign currency exchange contracts | 119,277 | Japanese yen | December 2015 | 62 | 63 | (1 | ) | (1 | ) | 123 | ||||||||||
430 | Canadian dollars | |||||||||||||||||||
Not designated as hedges | ||||||||||||||||||||
Fuel contracts | 1,792 | gallons - heating oil, crude oil and jet fuel | December 2013 | 511 | — | (262 | ) | — | 249 | |||||||||||
Total derivative contracts | $ | 573 | $ | 69 | $ | (287 | ) | $ | (49 | ) | $ | 306 |
(in millions) | Prepaid Expenses and Other | Other Noncurrent Assets | Other Accrued Liabilities | Other Noncurrent Liabilities | Hedge Derivatives, Net | ||||||||||
March 31, 2013 | |||||||||||||||
Net derivative contracts | $ | 376 | $ | 101 | $ | (25 | ) | $ | (51 | ) | $ | 401 | |||
December 31, 2012 | |||||||||||||||
Net derivative contracts | $ | 320 | $ | 69 | $ | (34 | ) | $ | (49 | ) | $ | 306 |
Effective Portion Reclassified from AOCI to Earnings | Effective Portion Recognized in Other Comprehensive Income | ||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||
Foreign currency exchange contracts | $ | 21 | $ | (13 | ) | $ | 87 | $ | 123 |
(in millions) | March 31, 2013 | December 31, 2012 | ||||
Total debt at par value | $ | 12,267 | $ | 12,633 | ||
Unamortized discount, net | (490 | ) | (527 | ) | ||
Net carrying amount | $ | 11,777 | $ | 12,106 | ||
Fair value | $ | 12,600 | $ | 13,000 |
(in millions) | Total | ||
Nine months ending December 31, 2013 | $ | 865 | |
2014 | 1,525 | ||
2015 | 815 | ||
2016 | 810 | ||
2017 | 760 | ||
Thereafter | 3,240 | ||
Total | $ | 8,015 |
Three Months Ended March 31, | ||||||
(in millions) | 2013 | 2012 | ||||
Facilities, fleet and other | $ | 102 | $ | 27 | ||
Gain on slot exchange | — | (39 | ) | |||
Total restructuring and other items | $ | 102 | $ | (12 | ) |
(in millions) | Severance and Related Costs | Lease Restructuring | ||||
Balance as of December 31, 2012 | $ | 49 | $ | 77 | ||
Additional costs and expenses | — | 6 | ||||
Payments | (36 | ) | (3 | ) | ||
Other | — | (5 | ) | |||
Balance as of March 31, 2013 | $ | 13 | $ | 75 |
Pension Benefits | Other Postretirement and Postemployment Benefits | |||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | ||||||||
Three Months Ended March 31 | ||||||||||||
Service cost | $ | — | $ | — | $ | 12 | $ | 15 | ||||
Interest cost | 215 | 232 | 36 | 41 | ||||||||
Expected return on plan assets | (184 | ) | (176 | ) | (21 | ) | (19 | ) | ||||
Amortization of prior service benefit | — | — | (7 | ) | (3 | ) | ||||||
Recognized net actuarial loss | 56 | 36 | 6 | 6 | ||||||||
Settlements | 6 | — | — | — | ||||||||
Net periodic cost | $ | 93 | $ | 92 | $ | 26 | $ | 40 |
(in millions) | Pension and Other Benefits Liabilities | Derivative Contracts(1) | Deferred Tax Impact | Total | ||||||||
Balance at December 31, 2012 | $ | (5,147 | ) | $ | (286 | ) | $ | (3,144 | ) | $ | (8,577 | ) |
Changes in value | — | 114 | — | 114 | ||||||||
Reclassifications into earnings: | ||||||||||||
Actuarial losses(2) | 58 | — | — | 58 | ||||||||
Foreign currency exchange contracts(3) | — | (21 | ) | — | (21 | ) | ||||||
Total reclassification into earnings | 58 | (21 | ) | — | 37 | |||||||
Tax effect | (22 | ) | (35 | ) | 57 | — | ||||||
Balance at March 31, 2013 | $ | (5,111 | ) | $ | (228 | ) | $ | (3,087 | ) | $ | (8,426 | ) |
(in millions) | Pension and Other Benefits Liabilities | Derivative Contracts(1) | Deferred Tax Impact | Total | ||||||||
Balance at December 31, 2011 | $ | (3,899 | ) | $ | (413 | ) | $ | (2,454 | ) | $ | (6,766 | ) |
Changes in value | 91 | 116 | — | 207 | ||||||||
Reclassifications into earnings: | ||||||||||||
Actuarial losses(2) | 41 | — | — | 41 | ||||||||
Total reclassification into earnings | 41 | — | — | 41 | ||||||||
Tax effect | (47 | ) | (47 | ) | 94 | — | ||||||
Balance at March 31, 2012 | $ | (3,814 | ) | $ | (344 | ) | $ | (2,360 | ) | $ | (6,518 | ) |
(1) | Includes $321 million of deferred income tax expense that will remain in AOCI until all amounts in AOCI that relate to fuel derivatives which are designated as accounting hedges are recognized in the Consolidated Statement of Operations. |
(2) | Reclassified to salaries and related costs |
(3) | Reclassified to passenger revenue |
Three Months Ended March 31, | ||||||
(in millions, except per share data) | 2013 | 2012 | ||||
Net income | $ | 7 | $ | 124 | ||
Basic weighted average shares outstanding | 848 | 843 | ||||
Dilutive effect of share based awards | 7 | 4 | ||||
Diluted weighted average shares outstanding | 855 | 847 | ||||
Basic earnings per share | $ | 0.01 | $ | 0.15 | ||
Diluted earnings per share | $ | 0.01 | $ | 0.15 | ||
Antidilutive common stock equivalents excluded from diluted earnings per share | 16 | 21 |
Three Months Ended March 31, | |||||||||||
(in millions) | 2013 | 2012 | Increase (Decrease) | % Increase (Decrease) | |||||||
Passenger: | |||||||||||
Mainline | $ | 5,876 | $ | 5,662 | $ | 214 | 4 | % | |||
Regional carriers | 1,457 | 1,564 | (107 | ) | (7 | )% | |||||
Total passenger revenue | 7,333 | 7,226 | 107 | 1 | % | ||||||
Cargo | 238 | 244 | (6 | ) | (2 | )% | |||||
Other | 929 | 943 | (14 | ) | (1 | )% | |||||
Total operating revenue | $ | 8,500 | $ | 8,413 | $ | 87 | 1 | % |
Increase (Decrease) vs. Three Months Ended March 31, 2012 | |||||||||||||||
(in millions) | Three Months Ended March 31, 2013 | Passenger Revenue | RPMs(1) (Traffic) | ASMs(2) (Capacity) | Passenger Mile Yield | PRASM(3) | Load Factor | ||||||||
Domestic | $ | 3,402 | 6 | % | 2 | % | 1 | % | 5 | % | 5 | % | 0.3 | pts | |
Atlantic | 1,052 | (3 | )% | (7 | )% | (11 | )% | 4 | % | 8 | % | 3.0 | pts | ||
Pacific | 871 | 3 | % | 3 | % | (1 | )% | — | % | 4 | % | 3.3 | pts | ||
Latin America | 551 | 6 | % | 8 | % | 2 | % | (2 | )% | 3 | % | 4.7 | pts | ||
Total Mainline | 5,876 | 4 | % | 1 | % | (2 | )% | 3 | % | 5 | % | 1.9 | pts | ||
Regional carriers | 1,457 | (7 | )% | (10 | )% | (9 | )% | 3 | % | 2 | % | (1.2 | ) pts | ||
Total passenger revenue | $ | 7,333 | 1 | % | (1 | )% | (3 | )% | 2 | % | 4 | % | 1.5 | pts |
(1) | Revenue passenger miles (“RPMs”) |
(2) | Available seat miles (“ASMs”) |
(3) | Passenger revenue per ASM (“PRASM”) |
Three Months Ended March 31, | Increase (Decrease) | % Increase (Decrease) | |||||||||
(in millions) | 2013 | 2012 | |||||||||
Aircraft fuel and related taxes | $ | 2,289 | $ | 2,233 | $ | 56 | 3 | % | |||
Salaries and related costs | 1,911 | 1,763 | 148 | 8 | % | ||||||
Contract carrier arrangements | 1,399 | 1,375 | 24 | 2 | % | ||||||
Aircraft maintenance materials and outside repairs | 491 | 561 | (70 | ) | (12 | )% | |||||
Depreciation and amortization | 405 | 386 | 19 | 5 | % | ||||||
Contracted services | 401 | 378 | 23 | 6 | % | ||||||
Passenger commissions and other selling expenses | 357 | 380 | (23 | ) | (6 | )% | |||||
Landing fees and other rents | 323 | 305 | 18 | 6 | % | ||||||
Passenger service | 164 | 171 | (7 | ) | (4 | )% | |||||
Aircraft rent | 60 | 75 | (15 | ) | (20 | )% | |||||
Profit sharing | 20 | — | 20 | NM | |||||||
Restructuring and other items | 102 | (12 | ) | 114 | NM | ||||||
Other | 356 | 416 | (60 | ) | (14 | )% | |||||
Total operating expense | $ | 8,278 | $ | 8,031 | $ | 247 | 3 | % |
Three Months Ended March 31, | Increase (Decrease) | % Increase (Decrease) | |||||||||
(in millions, except per gallon data) | 2013 | 2012 | |||||||||
Aircraft fuel and related taxes(1) | $ | 2,289 | $ | 2,233 | $ | 56 | |||||
Aircraft fuel and related taxes included within contract carrier arrangements | 519 | 526 | (7 | ) | |||||||
Total fuel expense | $ | 2,808 | $ | 2,759 | $ | 49 | 2 | % | |||
Total fuel consumption (gallons) | 875 | 886 | (11 | ) | (1 | )% | |||||
Average price per gallon | $ | 3.21 | $ | 3.11 | $ | 0.10 | 3 | % |
(1) | Includes the impact of fuel hedge activity described further in the table below. |
Average Price Per Gallon | ||||||||||||||||||
Three Months Ended March 31, | Change | Three Months Ended March 31, | Change | |||||||||||||||
(in millions, except per gallon data) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||
Fuel purchase cost | $ | 2,863 | $ | 2,955 | $ | (92 | ) | $ | 3.28 | $ | 3.33 | $ | (0.05 | ) | ||||
Refinery segment impact | 22 | — | 22 | 0.02 | — | 0.02 | ||||||||||||
Fuel hedge (gains) losses | (77 | ) | (196 | ) | 119 | (0.09 | ) | (0.22 | ) | 0.13 | ||||||||
Total fuel expense | $ | 2,808 | $ | 2,759 | $ | 49 | $ | 3.21 | $ | 3.11 | $ | 0.10 | ||||||
MTM adjustments | 24 | 151 | (127 | ) | 0.03 | 0.17 | (0.14 | ) | ||||||||||
Total fuel expense, adjusted | $ | 2,832 | $ | 2,910 | $ | (78 | ) | $ | 3.24 | $ | 3.28 | $ | (0.04 | ) |
Three Months Ended March 31, | Favorable (Unfavorable) | ||||||||
(in millions) | 2013 | 2012 | |||||||
Interest expense, net | $ | (178 | ) | $ | (221 | ) | $ | 43 | |
Amortization of debt discount, net | (42 | ) | (51 | ) | 9 | ||||
Miscellaneous, net | 1 | 17 | (16 | ) | |||||
Total other expense, net | $ | (219 | ) | $ | (255 | ) | $ | 36 |
Three Months Ended March 31, | ||||||
(in millions) | 2013 | 2012 | ||||
International and state income tax provision | $ | (2 | ) | $ | (3 | ) |
Alternative minimum tax refunds | 6 | — | ||||
Income tax benefit (provision) | $ | 4 | $ | (3 | ) |
Three Months Ended March 31, | ||||||
Consolidated(1) | 2013 | 2012 | ||||
Revenue passenger miles (millions) | 43,078 | 43,351 | ||||
Available seat miles (millions) | 53,022 | 54,408 | ||||
Passenger mile yield | 17.02 | ¢ | 16.67 | ¢ | ||
Passenger revenue per available seat mile | 13.83 | ¢ | 13.28 | ¢ | ||
Operating cost per available seat mile (CASM) | 15.61 | ¢ | 14.76 | ¢ | ||
CASM-Ex(2) | 9.75 | ¢ | 9.28 | ¢ | ||
Passenger load factor | 81.2 | % | 79.7 | % | ||
Fuel gallons consumed (millions) | 875 | 886 | ||||
Average price per gallon(3) | $ | 3.21 | $ | 3.11 | ||
Average price per gallon, adjusted(2) | $ | 3.24 | $ | 3.28 | ||
Full-time equivalent employees, end of period | 73,430 | 78,761 |
(1) | Includes the operations of our contract carriers under capacity purchase agreements. Full-time equivalent employees exclude employees of contract carriers that we do not own. |
(2) | Non-GAAP financial measure as defined in "Supplemental Information" below. |
(3) | Includes the impact of fuel hedge activity. |
Current Fleet(1) | Commitments | ||||||||||||||||
Aircraft Type | Owned | Capital Lease | Operating Lease | Total | Average Age | Purchase(2)(3)(4) | Lease | Options | |||||||||
B-717-200 | — | — | — | — | — | — | 88 | — | |||||||||
B-737-700 | 10 | — | — | 10 | 4.2 | — | — | — | |||||||||
B-737-800 | 73 | — | — | 73 | 12.2 | — | — | — | |||||||||
B-737-900ER | — | — | — | — | — | 100 | — | 30 | |||||||||
B-747-400 | 4 | 9 | 3 | 16 | 19.4 | — | — | — | |||||||||
B-757-200 | 92 | 27 | 30 | 149 | 19.6 | — | — | — | |||||||||
B-757-300 | 16 | — | — | 16 | 10.1 | — | — | — | |||||||||
B-767-300 | 10 | 2 | 2 | 14 | 21.7 | — | — | — | |||||||||
B-767-300ER | 51 | 5 | 2 | 58 | 17.0 | — | — | 3 | |||||||||
B-767-400ER | 21 | — | — | 21 | 12.1 | — | — | 5 | |||||||||
B-777-200ER | 8 | — | — | 8 | 13.2 | — | — | — | |||||||||
B-777-200LR | 10 | — | — | 10 | 4.0 | — | — | 10 | |||||||||
B-787-8 | — | — | — | — | — | 18 | — | — | |||||||||
A319-100 | 54 | — | 2 | 56 | 11.1 | — | — | — | |||||||||
A320-200 | 49 | — | 19 | 68 | 18.0 | — | — | — | |||||||||
A330-200 | 11 | — | — | 11 | 8.0 | — | — | — | |||||||||
A330-300 | 21 | — | — | 21 | 7.6 | — | — | — | |||||||||
MD-88 | 71 | 46 | — | 117 | 22.7 | — | — | — | |||||||||
MD-90 | 46 | 8 | — | 54 | 16.0 | 2 | — | — | |||||||||
DC9-50 | 17 | — | — | 17 | 34.6 | — | — | — | |||||||||
CRJ-900 | — | — | — | — | — | 56 | — | 30 | |||||||||
Embraer 175 | — | — | — | — | — | — | — | 36 | |||||||||
Total | 564 | 97 | 58 | 719 | 17.0 | 176 | 88 | 114 |
(1) | Excludes certain aircraft we own or lease which are operated by third party contract carriers on our behalf shown in the table below. |
(2) | Excludes our orders for five A319-100 aircraft and two A320-200 aircraft because we have the right to cancel these orders. |
(3) | Includes 16 CRJ-900 aircraft which are currently being operated by third party contract carriers on our behalf that are included in the table below. |
(4) | Our purchase commitment for 18 B-787-8 aircraft provides for certain aircraft substitution rights. |
Fleet Type | ||||||||||||||
Carrier | CRJ-200 | CRJ-700 | CRJ-900 | ERJ-145 | Embraer 170 | Embraer 175 | Total | |||||||
Pinnacle Airlines, Inc. | 140 | — | 49 | — | — | — | 189 | |||||||
ExpressJet Airlines, Inc. | 81 | 41 | 23 | — | — | — | 145 | |||||||
SkyWest Airlines, Inc. | 51 | 19 | 29 | — | — | — | 99 | |||||||
Compass Airlines, Inc. | — | — | — | — | 6 | 36 | 42 | |||||||
Chautauqua Airlines, Inc. | — | — | — | 33 | — | — | 33 | |||||||
Shuttle America Corporation | — | — | — | — | 14 | 16 | 30 | |||||||
GoJet Airlines, LLC | — | 22 | — | — | — | — | 22 | |||||||
Total | 272 | 82 | 101 | 33 | 20 | 52 | 560 |
• | Aircraft fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over-year financial performance. Management believes the exclusion of aircraft fuel and related taxes (including our contract carriers under capacity purchase arrangements) allows investors to better understand and analyze our non-fuel costs and our year-over-year financial performance. |
• | Ancillary businesses. Ancillary businesses are not related to the generation of a seat mile. These businesses include aircraft maintenance and staffing services we provide to third parties and our vacation wholesale operations. |
• | Profit sharing. Management believes the exclusion of this item provides a more meaningful comparison of our results to the airline industry and prior years' results. |
• | Restructuring and other items. Management believes the exclusion of this item is helpful to investors to evaluate our recurring core operational performance in the period shown. |
• | MTM adjustments. MTM adjustments are based on market prices as of the end of the reporting period for contracts settling in future periods. Such market prices are not necessarily indicative of the actual future value of the underlying hedge in the contract settlement period. Therefore, we adjust fuel expense for these items to arrive at a more meaningful measure of fuel cost. |
Three Months Ended March 31, | ||||||
2013 | 2012 | |||||
CASM | 15.61 | ¢ | 14.76 | ¢ | ||
Items excluded: | ||||||
Aircraft fuel and related taxes | (5.33 | ) | (5.34 | ) | ||
Ancillary businesses | (0.35 | ) | (0.44 | ) | ||
Profit sharing | (0.04 | ) | — | |||
Restructuring and other items | (0.19 | ) | 0.02 | |||
MTM adjustments | 0.05 | 0.28 | ||||
CASM-Ex | 9.75 | ¢ | 9.28 | ¢ |
Nine Months ending December 31, 2013 | Fuel Hedge Margin Received from (Posted to) Counterparties | ||||||||||||
(in millions) | (Increase) Decrease to Unhedged Fuel Cost(1) | Hedge Gain (Loss)(2) | Net Impact | ||||||||||
+ 20% | $ | (1,740 | ) | $ | 240 | $ | (1,500 | ) | $ | 290 | |||
+ 10% | (870 | ) | 200 | (670 | ) | 240 | |||||||
- 10% | 870 | (60 | ) | 810 | 70 | ||||||||
- 20% | 1,740 | (200 | ) | 1,540 | (70 | ) |
(1) | Projections based upon the (increase) decrease to unhedged fuel cost as compared to the jet fuel price per gallon of $2.96, excluding transportation costs and taxes, at March 31, 2013 and estimated fuel consumption of 2.9 billion gallons for the nine months ended December 31, 2013. |
(2) | Projections based on average futures prices by contract settlement month compared to futures prices at March 31, 2013. |
Atlanta, Georgia | /s/ Ernst & Young LLP |
April 24, 2013 |
Period | Total Number of Shares Purchased(1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plan or Programs | ||||
January 2013 | 4,821 | $ | 11.95 | 4,821 | (1) | |||
February 2013 | 1,411,127 | $ | 14.17 | 1,411,127 | (1) | |||
March 2013 | 25,542 | $ | 16.19 | 25,542 | (1) | |||
Total | 1,441,490 | 1,441,490 |
(1) | Shares were withheld from employees to satisfy certain tax obligations due in connection with grants of stock under the Delta Air Lines, Inc. 2007 Performance Compensation Plan (the "2007 Plan"). The 2007 Plan provides for the withholding of shares to satisfy tax obligations. It does not specify a maximum number of shares that can be withheld for this purpose. |
10.1 | Model Award Agreement for the Delta Air Lines, Inc. 2013 Long Term Incentive Program |
10.2 | Model Award Agreement for the Delta Air Lines, Inc. Transition Award Program |
15 | Letter from Ernst & Young LLP regarding unaudited interim financial information |
31.1 | Certification by Delta's Chief Executive Officer with respect to Delta's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 |
31.2 | Certification by Delta's Senior Vice President and Chief Financial Officer with respect to Delta's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 |
32 | Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by Delta's Chief Executive Officer and Senior Vice President and Chief Financial Officer with respect to Delta's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
Delta Air Lines, Inc. | |
(Registrant) | |
/s/ Craig M. Meynard | |
Craig M. Meynard | |
Vice President and Chief Accounting Officer | |
(Principal Accounting Officer) | |
April 24, 2013 |
(i) | You acknowledge and agree the following: |
(A) | Delta competes in a worldwide air transportation market that includes passenger transportation and services, air cargo services, repair and maintenance of aircraft and staffing services for third parties, and vacation wholesale, refinery and private jet operations, and Delta's business plan is increasingly international in scope; |
(B) | the airlines listed below are particular competitors to Delta, and employment or consulting with any of the listed entities would create more harm to Delta than relative to your possible employment or consulting with other entities; and |
(C) | the restrictions imposed by this paragraph will not prevent you from earning a livelihood, given the large number of worldwide and domestic passenger and cargo air carriers not included in the list below. |
(ii) | During the term of your employment with Delta and for the [two/one]-year period following the termination of such employment, you will not on your own behalf or on behalf of any person, firm, partnership, association, corporation or business organization, entity or enterprise, whether as an employee, consultant, partner, or in any other capacity provide services that are the same or similar to the services of the type conducted, authorized, offered, or provided by you on the Grant Date (or within two years prior to your termination of employment), to any of the following entities, or the successors thereto, including any successor by merger or acquisition, which you hereby acknowledge are all competitors of Delta: AMR Corporation, American Airlines, Inc., Continental Airlines, Inc., Southwest Airlines Co., United Air Lines, Inc., United Continental Holdings, Inc., US Airways Group, Inc., US Airways, Inc., JetBlue Airways Corporation, AirTran Holdings, LLC, or AirTran Airways, Inc. This restriction will apply to the territory over which you have responsibility on the Grant Date (or had responsibility for at the time of your termination), which territory you acknowledge to be co-extensive with the cities encompassed by Delta's worldwide route structure, as it exists as of the Grant Date or the date of your termination, as appropriate. |
(i) | You acknowledge and agree the following: |
(A) | Delta competes in a worldwide air transportation market that includes passenger transportation and services, air cargo services, repair and maintenance of aircraft and staffing services |
(B) | the airlines listed below are particular competitors to Delta, and employment or consulting with any of the listed entities would create more harm to Delta than relative to your possible employment or consulting with other entities; and |
(C) | the restrictions imposed by this paragraph will not prevent you from earning a livelihood, given the large number of worldwide and domestic passenger and cargo air carriers not included in the list below. |
(ii) | During the term of your employment with Delta and for the [two/one]-year period following the termination of such employment, you will not on your own behalf or on behalf of any person, firm, partnership, association, corporation or business organization, entity or enterprise, whether as an employee, consultant, partner, or in any other capacity provide services that are the same or similar to the services of the type conducted, authorized, offered, or provided by you on the Grant Date (or within two years prior to your termination of employment), to any of the following entities, or the successors thereto, including any successor by merger or acquisition, which you hereby acknowledge are all competitors of Delta: AMR Corporation, American Airlines, Inc., Continental Airlines, Inc., Southwest Airlines Co., United Air Lines, Inc., United Continental Holdings, Inc., US Airways Group, Inc., US Airways, Inc., JetBlue Airways Corporation, AirTran Holdings, LLC, or AirTran Airways, Inc. This restriction will apply to the territory over which you have responsibility on the Grant Date (or had responsibility for at the time of your termination), which territory you acknowledge to be co-extensive with the cities encompassed by Delta's worldwide route structure, as it exists as of the Grant Date or the date of your termination, as appropriate. |
1. | I have reviewed this quarterly report on Form 10-Q of Delta Air Lines, Inc. (“Delta”) for the quarterly period ended March 31, 2013; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Delta as of, and for, the periods presented in this report; |
4. | Delta's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Delta and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Delta, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of Delta's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in Delta's internal control over financial reporting that occurred during Delta's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Delta's internal control over financial reporting; and |
5. | Delta's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Delta's auditors and the Audit Committee of Delta's Board of Directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Delta's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in Delta's internal control over financial reporting. |
April 24, 2013 | /s/ Richard H. Anderson |
Richard H. Anderson | |
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Delta Air Lines, Inc. (“Delta”) for the quarterly period ended March 31, 2013; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Delta as of, and for, the periods presented in this report; |
4. | Delta's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Delta and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Delta, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of Delta's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in Delta's internal control over financial reporting that occurred during Delta's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Delta's internal control over financial reporting; and |
5. | Delta's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Delta's auditors and the Audit Committee of Delta's Board of Directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Delta's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in Delta's internal control over financial reporting. |
April 24, 2013 | /s/ Paul A. Jacobson |
Paul A. Jacobson | |
Senior Vice President and Chief Financial Officer |
1. | such Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Delta. |
/s/ Richard H. Anderson | |
Richard H. Anderson | |
Chief Executive Officer | |
/s/ Paul A. Jacobson | |
Paul A. Jacobson | |
Senior Vice President and Chief Financial Officer | |
Restructuring and Other Items (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
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Mar. 31, 2012
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Restructuring Cost and Reserve [Line Items] | ||
Restructuring and Other Items | $ 102 | $ (12) |
Facilities and Fleet [Member]
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||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring and Other Items | 102 | 27 |
Gain on Slot Exchange [Member]
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Restructuring Cost and Reserve [Line Items] | ||
Restructuring and Other Items | $ 0 | $ (39) |
Earnings Per Share (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
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Earnings Per Share [Abstract] | ||
Net income | $ 7 | $ 124 |
Basic weighted average shares outstanding | 848 | 843 |
Dilutive effect of share based awards | 7 | 4 |
Diluted weighted average shares outstanding | 855 | 847 |
Basic earnings per share | $ 0.01 | $ 0.15 |
Diluted earnings per share | $ 0.01 | $ 0.15 |
Antidilutive common stock equivalents excluded from diluted earnings per share | 16 | 21 |
Derivatives (Narrative) (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 3 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2013
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Dec. 31, 2012
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Mar. 31, 2013
Fuel Contracts [Member]
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Mar. 31, 2012
Fuel Contracts [Member]
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Derivative [Line Items] | ||||
Derivative Instruments, Gain (Loss) Recognized in Income, Net | $ 77 | $ 196 | ||
Cash Flow Hedge Gain (Loss) to be Reclassified within Twelve Months | 113 | |||
Derivative, Collateral, Obligation to Return Cash | $ (69) | $ (62) |
Accumulated Other Comprehensive Loss (Tables)
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Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] |
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Employee Benefit Plans (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
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Mar. 31, 2012
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Pension Benefits [Member]
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Defined Benefit Plan Disclosure [Line Items] | ||
Service Cost | $ 0 | $ 0 |
Interest Cost | 215 | 232 |
Expected Return on Plan Assets | (184) | (176) |
Amortization of Prior Service Benefit | 0 | 0 |
Recognized net actuarial loss (gain) | 56 | 36 |
Settlements | 6 | 0 |
Net periodic cost | 93 | 92 |
Other Postretirement and Postemployment Benefits [Member]
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||
Defined Benefit Plan Disclosure [Line Items] | ||
Service Cost | 12 | 15 |
Interest Cost | 36 | 41 |
Expected Return on Plan Assets | (21) | (19) |
Amortization of Prior Service Benefit | (7) | (3) |
Recognized net actuarial loss (gain) | 6 | 6 |
Settlements | 0 | 0 |
Net periodic cost | $ 26 | $ 40 |
Derivatives (Notes)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives [Text Block] | DERIVATIVES Changes in aircraft fuel prices, interest rates and foreign currency exchange rates impact our results of operations. 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 Changes in aircraft fuel prices materially impact our results of operations. We actively manage our fuel price risk through a hedging program intended to reduce the financial impact on us from changes in the price of jet fuel. This fuel hedging program utilizes several different contract and commodity types. 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 may result in locking in gains or losses on hedge contracts prior to their settlement dates. We generally do not designate our fuel derivative contracts as accounting hedges.We record changes in the fair value of our fuel hedges in aircraft fuel and related taxes. These changes in fair value include settled gains and losses as well as mark to market adjustments ("MTM adjustments"). MTM adjustments are based on market prices as of the end of the reporting period for contracts settling in future periods. During the three months ended March 31, 2013 and 2012, we recorded $77 million and $196 million in fuel hedge gains, respectively. Hedge Position as of March 31, 2013
Hedge Position as of December 31, 2012
Offsetting Assets and Liabilities We have master netting arrangements with all of our counterparties giving us the right of setoff. We have elected not to offset the fair value positions recorded on our Consolidated Balance Sheets. The following table shows the potential net fair value positions had we elected to offset.
Hedge Gains (Losses) For the three months ended March 31, 2013 and 2012, gains (losses) related to our designated hedge contracts are as follows:
As of March 31, 2013, we have recorded $113 million of net gains on cash flow hedge contracts in accumulated other comprehensive loss, which are scheduled to settle and be reclassified in to earnings within 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 received net margin of $69 million and $62 million as of March 31, 2013 and December 31, 2012, respectively. Margin received is recorded in accounts payable and margin posted is recorded in prepaid expenses and other. |
'0O:F%V87-C '0O:F%V87-C '0O:F%V87-C