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Financial Instruments and Fair Value Measurements
3 Months Ended
Mar. 31, 2018
Financial Instruments and Fair Value Measurements

NOTE 7 - FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

The table below presents disclosures about the financial assets and liabilities measured at fair value on a recurring basis in UAL’s financial statements (in millions):

 

     March 31, 2018      December 31, 2017  
     Total      Level 1      Level 2      Level 3      Total      Level 1      Level 2      Level 3  

Cash and cash equivalents

    $     2,404        $     2,404        $ —       $ —       $     1,482        $     1,482        $ —        $ —   

Short-term investments:

                       

Corporate debt

     945         —         945         —         958         —         958         —   

Asset-backed securities

     606         —         606         —         753         —         753         —   

U.S. government and agency notes

     110         —         110         —         113         —         113         —   

Certificates of deposit placed through an

account registry service (“CDARS”)

     53         —         53         —         120         —         120         —   

Other fixed-income securities

     172         —         172         —         188         —         188         —   

Other investments measured at net asset

value (“NAV”)

     185         —         —         —         184         —         —         —   
Restricted cash      106         106         —         —         109         109         —         —   

Long-term investments:

                       

Equity securities

     144         144         —         —         99         99         —         —   

Enhanced equipment trust certificates (“EETC”)

     19         —         —         19         22         —         —         22   

Available-for-sale investment maturities - The short-term investments shown in the table above are classified as available-for-sale, with the exception of investments measured at NAV. As of March 31, 2018, asset-backed securities have remaining maturities of less than one year to approximately 17 years, corporate debt securities have remaining maturities of less than one year to approximately three years and CDARS have maturities of less than one year. U.S. government and other securities have maturities of less than one year to approximately three years. The EETC securities mature in 2019.

Restricted cash - Restricted cash primarily includes collateral for letters of credit and collateral associated with obligations for facility leases and workers’ compensation.

Equity securities - Equity securities represent United’s investment in Azul. The Company recognizes changes in Azul’s fair market value in Miscellaneous, net in its statements of consolidated operations.

Investments presented in the table above have the same fair value as their carrying value. The table below presents the carrying values and estimated fair values of financial instruments not presented in the tables above (in millions):

 

    Fair Value of Debt by Fair Value Hierarchy Level  
    March 31, 2018     December 31, 2017  
    Carrying
Amount
    Fair Value     Carrying
Amount
    Fair Value  
          Total     Level 1     Level 2     Level 3           Total     Level 1     Level 2     Level 3  

Long-term debt

   $  13,821       $  14,068       $ —       $  10,377       $  3,691       $  13,268       $  13,787       $ —       $  10,115       $  3,672   

 

Fair value of the financial instruments included in the tables above was determined as follows:

 

Description

    

Fair Value Methodology

Cash and cash equivalents      The carrying amounts approximate fair value because of the short-term maturity of these assets.

Short-term investments,

Equity securities, EETC and

Restricted cash

     Fair value is based on (a) the trading prices of the investment or similar instruments, (b) an income approach, which uses valuation techniques to convert future amounts into a single present amount based on current market expectations about those future amounts when observable trading prices are not available, or (c) broker quotes obtained by third-party valuation services.
Other investments measured at NAV      In accordance with the relevant accounting standards, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position. The investments measured using NAV are shares of mutual funds that invest in fixed-income instruments including bonds, debt securities, and other similar instruments issued by various U.S. and non-U.S. public- or private-sector entities. The Company can redeem its shares at any time at NAV subject to a three-day settlement period.
Long-term debt      Fair values were based on either market prices or the discounted amount of future cash flows using our current incremental rate of borrowing for similar liabilities.