NOTE 10 - SPECIAL CHARGES

For the three months ended March 31, special charges consisted of the following (in millions):


	Three Months Ended March 31,
Operating:	2016		2015
Labor agreement costs	$	100	$	—
Cleveland airport lease restructuring		74		—
Severance and benefit costs		8		50
(Gains) losses on sale of assets and other special charges		8		14

Special charges		190		64
Nonoperating and income taxes:
Loss on extinguishment of debt and other		8		6
Income tax benefit related to special charges		(72)		—

Total special charges, net of tax	$	126	$	70

The fleet service, passenger service, storekeeper and other employees represented by the IAM ratified seven new contracts with the Company which extended the contracts through 2021. The Company recorded a $100 million ($64 million net of taxes) special charge for bonus payments to be made in conjunction with the ratification of these contracts.

During the three months ended March 31, 2016, the City of Cleveland agreed to amend the lease, which runs through 2029, associated with certain excess airport terminal space (principally Terminal D) and related facilities at Hopkins International Airport (“Cleveland”). The Company recorded an accrual for remaining payments under the lease for facilities that the Company no longer uses and will continue to incur costs under the lease without economic benefit to the Company. This liability was measured and recorded at its fair value when the Company ceased its right to use such facilities leased to it pursuant to the lease. The Company reduced its flight operations at Cleveland in 2014 and had been evaluating its options for the excess space. The Company recorded a net charge of $74 million ($47 million net of taxes) related to the amended lease.

During the three months ended March 31, 2016 and 2015, the Company recorded $8 million ($5 million net of taxes) and $50 million, respectively, of severance and benefit costs primarily related to a voluntary early-out program for its flight attendants. In 2014, more than 2,500 flight attendants elected to voluntarily separate from the Company and will receive a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through the end of 2016.

During the three months ended March 31, 2016, the Company recorded $8 million of losses due to exchange rate changes in Venezuela applicable to funds held in local currency.

During the three months ended March 31, 2015, the Company recorded $18 million of integration-related charges, $5 million of other charges, and approximately $9 million of gains on the sale of assets.

During the three months ended March 31, 2015, the Company recorded $6 million of losses as part of Nonoperating income (expense): Miscellaneous, net due to the write-off of the debt discount related to the redemption of the 2026 Notes and 2028 Notes.

In April 2016, the Federal Aviation Administration (“FAA”) announced that it will designate Newark Liberty International Airport (“Newark”) as a Level 2 schedule-facilitated airport under the International Air Transport Association Worldwide Slot Guidelines effective October 30, 2016. Newark is currently designated as a Level 3 slot-controlled airport. The Company is evaluating the impact, if any, of the change in designation on its $412 million intangible asset related to its Newark slots. Further, the Newark slots serve as part of the collateral for the term loans under the Credit Agreement and under the security agreements related to the Second Amended and Restated Co-Branded Card Marketing Services Agreement with Chase Bank USA, N.A. The Company is evaluating the impact of the FAA’s action on the Newark slot collateral for the term loans and to the extent necessary, the Company will substitute other collateral.

Accruals

The accrual balance for severance and benefits was $29 million as of March 31, 2016, compared to $96 million as of March 31, 2015. The severance-related accrual as of March 31, 2016 is expected to be mostly paid through 2016. The following is a reconciliation of severance accrual activity for the period:


	Severance and Benefits
Balance at December 31, 2015	$	27
Accrual		8
Payments		(6)

Balance at March 31, 2016	$	29