Fair Value Disclosures

9 Months Ended

Sep. 30, 2011

Fair Value Disclosures

Fair Value Disclosures

6. The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The Company's short-term investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. The Company's fuel derivative contracts, which include, among other things, heating oil, jet fuel, and WTI crude option and collar contracts, are valued using energy and commodity market data which is derived by combining raw inputs with quantitative models and processes to generate forward curves and volatilities. No changes in valuation techniques or inputs occurred during the nine months ended September 30, 2011.

Assets and liabilities measured at fair value on a recurring basis are summarized below:

(in millions)	Fair Value Measurements as of September 30, 2011
Description	Total		Level 1		Level 2		Level 3
Short-term investments1,2
Money market funds	$	1,071	$	1,071	$	—	$	—
Government agency investments		529		—		529		—
Repurchase investments		811		—		811		—
Corporate obligations		806		—		806		—
Bank notes / Certificates of deposit / Time deposits		775		—		775		—
		3,992		1,071		2,921		—
Restricted cash and short-term investments1		474		474		—		—
Fuel derivative contracts, net1		106		—		106		—
Total	$	4,572	$	1,545	$	3,027	$	—

¹ Unrealized gains or losses on short-term investments, restricted cash and short-term investments and derivatives qualifying for hedge accounting are recorded in Accumulated other comprehensive income (loss) (OCI) at each measurement date.

²  The majority of the Company's short-term investments mature in one year or less except for $569 million of Bank notes/Certificates of deposit/Time deposits, $529 million of U.S. Government agency investments and $702 million of Corporate obligations which have maturity dates exceeding one year.

No significant transfers between Level 1 and Level 2 occurred during the nine months ended September 30, 2011. The Company's policy regarding the recording of transfers between levels is to reflect any such transfers at the end of the reporting period.

The fair values of the Company's long-term debt were estimated using quoted market prices where available. For long-term debt not actively traded, fair values were estimated using discounted cash flow analyses, based on the Company's current estimated incremental borrowing rates for similar types of borrowing arrangements.

The carrying value and estimated fair values of the Company's long-term debt, including current maturities, were (in millions):

	September 30, 2011				December 31, 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
Secured variable and fixed rate indebtedness	$	4,577	$	3,923	$	5,114	$	4,562
Enhanced equipment trust certificates		1,985		1,935		2,002		2,127
6.0% - 8.5% special facility revenue bonds		1,627		1,604		1,641		1,657
7.50% senior secured notes		1,000		800		—		—
AAdvantage Miles advance purchase		890		906		890		903
6.25% senior convertible notes		460		263		460		526
9.0% - 10.20% debentures		214		188		214		207
7.88% - 10.55% notes		173		148		211		209
	$	10,926	$	9,767	$	10,532	$	10,191