REVENUE FROM CONTRACTS WITH CUSTOMERS

9 Months Ended

Sep. 30, 2020

Revenue Recognition [Abstract]

REVENUE FROM CONTRACTS WITH CUSTOMERS

REVENUE

Ticket revenue is recorded as Passenger revenue, and represents the primary source of the Company's revenue. Also included in Passenger revenue are passenger ancillary revenues, such as bag fees, on-board food and beverage, ticket change fees, and certain revenue from the frequent flyer program. In the third quarter of 2020, the Company announced beginning on January 1, 2021 it would no longer collect change fees from those guests traveling on main cabin or first class fares. Mileage Plan other revenue includes brand and marketing revenue from the Company's co-branded credit card and other partners and certain interline frequent flyer revenue, net of commissions. Cargo and other revenue includes freight and mail revenue, and to a lesser extent, other ancillary revenue products such as lounge membership and certain commissions.

The Company disaggregates revenue by segment in Note 9. The details within the Company’s statements of operations, segment disclosures, and in this footnote depict the nature, amount, timing and uncertainty of revenue and how cash flows are affected by economic and other factors.

Passenger Ticket and Ancillary Services Revenue

Passenger revenue recognized in the condensed consolidated statements of operations (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Passenger ticket revenue, including ticket breakage and net of taxes and fees	$	459	$	1,868	$	1,894	$	5,099
Passenger ancillary revenue	49		157		196		428
Mileage Plan passenger revenue	64		186		272		511
Total Passenger revenue	$	572	$	2,211	$	2,362	$	6,038

Mileage Plan™ Loyalty Program

Mileage Plan™ revenue included in the condensed consolidated statements of operations (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Passenger revenue	$	64	$	186	$	272	$	511
Mileage Plan other revenue	84		118		266		346
Total Mileage Plan revenue	$	148	$	304	$	538	$	857

Cargo and Other

Cargo and other revenue included in the condensed consolidated statements of operations (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Cargo revenue	$	31	$	36	$	83	$	104
Other revenue	14		24		47		65
Total Cargo and other revenue	$	45	$	60	$	130	$	169

Air Traffic Liability and Deferred Revenue

Passenger ticket and ancillary services liabilities

The Company recognized Passenger revenue of $484 million and $582 million from the prior year-end air traffic liability balance for the nine months ended September 30, 2020 and 2019.

Given the reduction in demand for air travel stemming from the COVID-19 pandemic, advance bookings and associated cash receipts have been significantly depressed. The Company also experienced elevated cancellations beginning in March 2020, which led to cash refunds or the issuance of credits for future travel. Since March, the Company has issued cash refunds of approximately $475 million and credits for future travel of $850 million. At September 30, 2020, such credits, which are included in the air traffic liability balance, totaled $617 million, net of breakage. In April 2020, the Company announced updated expiration terms for these credits, extending to July 2021. At this time, the Company is unable to estimate how and when the air traffic liability will be recognized in earnings given ongoing uncertainty around the return in demand for air travel.

Mileage PlanTM assets and liabilities

The Company records a receivable for amounts due from the bank partner and from other partners as mileage credits are sold until the payments are collected. The Company had $45 million of such receivables as of September 30, 2020 and $105 million as of December 31, 2019. Consistent with the significant cancellation activity outlined above, the Company experienced incremental redeposits in the third quarter. Given the uncertainty around the return in demand for air travel, the Company is unable to determine how and when mileage credits will be recognized in earnings.

The table below presents a roll forward of the total frequent flyer liability (in millions):

	Nine Months Ended September 30,
	2020		2019
Total Deferred Revenue balance at January 1	$	1,990	$	1,874
Travel miles and companion certificate redemption - Passenger revenue	(272)		(511)
Miles redeemed on partner airlines - Other revenue	(21)		(84)
Increase in liability for mileage credits issued	486		692
Total Deferred Revenue balance at Sept 30	$	2,183	$	1,971