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Fair Value Measurements (Tables)
 3 Months Ended
Mar. 31, 2014
Fair Value Disclosures [Abstract]  
Assets and liabilities measured at fair value on a recurring basis
The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2014, and December 31, 2013:

 
 
 
 
Fair value measurements at reporting date using:
 
 
 
 
Quoted prices in
active markets
for identical assets
 
Significant
other observable
inputs
 
Significant
unobservable
inputs
Description
 
March 31, 2014
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
(in millions)
Cash equivalents
 
 
 
 
 
 
 
 
Cash equivalents (a)
 
$
1,381

 
$
1,381

 
$
—

 
$
—

Commercial paper
 
280

 
—

 
280

 
—

Certificates of deposit
 
10

 
—

 
10

 
—

Eurodollar time deposits
 
70

 
—

 
70

 
—

Short-term investments:
 
 
 
 
 
 
 
 
Treasury bills
 
1,520

 
1,520

 
—

 
—

Certificates of deposit
 
237

 
—

 
237

 
—

Noncurrent investments (b)
 
 
 
 
 
 
 
 
Auction rate securities
 
32

 
—

 
—

 
32

Interest rate derivatives
 
18

 
—

 
18

 
—

Fuel derivatives:
 
 
 
 
 
 
 
 
Swap contracts (c)
 
20

 
—

 
20

 
—

Option contracts (c)
 
426

 
—

 
—

 
426

Other available-for-sale securities
 
61

 
56

 
—

 
5

Total assets
 
$
4,055

 
$
2,957

 
$
635

 
$
463

Liabilities
 
 
 
 
 
 
 
 
Fuel derivatives:
 
 
 
 
 
 
 
 
Swap contracts (c)
 
$
(8
)
 
$
—

 
$
(8
)
 
$
—

Option contracts (c)
 
(220
)
 
—

 
—

 
(220
)
Interest rate derivatives
 
(73
)
 
—

 
(73
)
 
—

Deferred compensation
 
(150
)
 
(150
)
 
—

 
—

Total liabilities
 
$
(451
)
 
$
(150
)
 
$
(81
)
 
$
(220
)

(a) Cash equivalents are primarily composed of money market investments.
(b) Noncurrent investments are included in Other assets in the unaudited Condensed Consolidated Balance Sheet.
(c) In the unaudited Condensed Consolidated Balance Sheet amounts are presented as a net asset.

 
 
 
 
Fair value measurements at reporting date using:
 
 
 
 
Quoted prices in
active markets
for identical assets
 
Significant
other observable
inputs
 
Significant
unobservable
inputs
Description
 
December 31, 2013
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
(in millions)
Cash equivalents
 
 
 
 
 
 
 
 
Cash equivalents (a)
 
$
992

 
$
992

 
$
—

 
$
—

Commercial paper
 
280

 
—

 
280

 
—

Certificates of deposit
 
23

 
—

 
23

 
—

Eurodollar time deposits
 
60

 
—

 
60

 
—

Short-term investments:
 
 
 
 
 
 
 
 
Treasury bills
 
1,570

 
1,570

 
—

 
—

Certificates of deposit
 
227

 
—

 
227

 
—

Noncurrent investments (b)
 
 
 
 
 
 
 
 
Auction rate securities
 
39

 
—

 
—

 
39

Interest rate derivatives
 
20

 
—

 
20

 
—

Fuel derivatives:
 
 
 
 
 
 
 
 
Swap contracts (c)
 
16

 
—

 
16

 
—

Option contracts (c)
 
458

 
—

 
—

 
458

Option contracts (d)
 
9

 
—

 
—

 
9

Other available-for-sale securities
 
63

 
58

 
—

 
5

Total assets
 
$
3,757

 
$
2,620

 
$
626

 
$
511

Liabilities
 
 
 
 
 
 
 
 
Fuel derivatives:
 
 
 
 
 
 
 
 
Swap contracts (c)
 
$
(8
)
 
$
—

 
$
(8
)
 
$
—

Option contracts (c)
 
(274
)
 
—

 
—

 
(274
)
Option contracts (d)
 
(21
)
 
—

 
—

 
(21
)
Interest rate derivatives
 
(77
)
 
—

 
(77
)
 
—

Deferred Compensation
 
(158
)
 
(158
)
 
—

 
—

Total liabilities
 
$
(538
)
 
$
(158
)
 
$
(85
)
 
$
(295
)

(a) Cash equivalents are primarily composed of money market investments.
(b) Noncurrent investments are included in Other assets in the unaudited Condensed Consolidated Balance Sheet.
(c) In the unaudited Condensed Consolidated Balance Sheet amounts are presented as a net asset.
(d) In the unaudited Condensed Consolidated Balance Sheet amounts are presented as a net liability
Fair Value Assets And Liabilities Measured On Recurring Basis Unobservable Input Reconciliation
The following tables present the Company’s activity for items measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2014:

 
Fair value measurements using significant
unobservable inputs (Level 3)
 
Fuel
 
Auction rate
 
Other
 
 
(in millions)
derivatives
 
securities
 
securities
 
Total
Balance at December 31, 2013
$
172

 
$
39

 
$
5

 
$
216

Total gains or (losses) (realized or unrealized)
 

 
 

 
 

 
 

Included in earnings
69

 
—

 
—

 
69

Included in other comprehensive income
(22
)
 
2

 
—

 
(20
)
Purchases
21

(a)
—

 
—

 
21

Sales
(27
)
(a)
(9
)
 
—

 
(36
)
Settlements
(7
)
 
—

 
—

 
(7
)
Balance at March 31, 2014
$
206

 
$
32

(b)
$
5

 
$
243

The amount of total gains for the period
  included in earnings attributable to the
  change in unrealized gains or losses relating
  to assets still held at March 31, 2014
$
67

 
$
—

 
$
—

 
$
67

(a) The purchase and sale of fuel derivatives are recorded gross based on the structure of the derivative instrument and
whether a contract with multiple derivatives is purchased as a single instrument or separate instruments.
(b) Included in Other assets in the unaudited Condensed Consolidated Balance Sheet.
Fair Value Valuation Techniques
The following table presents a range of the unobservable inputs utilized in the fair value measurements of the Company’s assets and liabilities classified as Level 3 at March 31, 2014:

Quantitative information about Level 3 fair value measurements
 
Valuation technique
Unobservable input
Period (by year)
Range
Fuel derivatives
Option model
Implied volatility
Second quarter 2014
9-21%
 
 
 
Third quarter 2014
14-23%
 
 
 
Fourth quarter 2014
13-24%
 
 
 
2015
13-22%
 
 
 
2016
13-19%
 
 
 
2017
13-17%
Auction rate securities
Discounted cash flow
Time to principal recovery
 
8 years
 
 
Illiquidity premium
 
3%
 
 
Counterparty credit spread
 
1-3%
Fair value, by Balance Sheet Grouping
(in millions)
 Carrying value
 
Estimated fair value
 
Fair value level hierarchy
5.25% Notes due 2014
$
355

 
$
361

 
Level 2
5.75% Notes due 2016
318

 
349

 
Level 2
5.25% Convertible Senior Notes due 2016
114

 
206

 
Level 2
5.125% Notes due 2017
321

 
347

 
Level 2
Fixed-rate 717 Aircraft Notes payable through 2017 - 10.38%
50

 
50

 
Level 2
French Credit Agreements due 2018 - 1.05%
46

 
46

 
Level 3
Fixed-rate 737 Aircraft Notes payable through 2018 - 7.02%
28

 
29

 
Level 3
Term Loan Agreement due 2019 - 6.315%
203

 
206

 
Level 3
Term Loan Agreement due 2019 - 6.84%
79

 
84

 
Level 3
Term Loan Agreement due 2020 - 5.223%
403

 
380

 
Level 3
Floating-rate 737 Aircraft Notes payable through 2020
329

 
324

 
Level 3
Pass Through Certificates due 2022 - 6.24%
363

 
420

 
Level 2
7.375% Debentures due 2027
136

 
162

 
Level 2