Financial Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table provides information about the Company’s volume of fuel hedging for the years 2014 through 2018 on an “economic” basis considering current market prices:



	Fuel hedged as of
	June 30, 2014	Derivative underlying commodity type as of
Period (by year)	(gallons in millions) (a)	June 30, 2014
Remainder of 2014	365	WTI crude, Brent crude oil, and Gulf Coast jet fuel
2015	1,165	Brent crude oil, Heating oil, and Gulf Coast jet fuel
2016	1,089	Brent crude oil and Heating oil
2017	820	WTI crude and Brent crude oil
2018	98	Brent crude oil

(a) The Company determined gallons hedged based on market prices and forward curves as of June 30, 2014. Due to the types of derivatives utilized by the Company, these volumes represent the maximum economic hedge in place and may vary significantly as market prices fluctuate.

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The following table presents the location of all assets and liabilities associated with the Company’s derivative instruments within the unaudited Condensed Consolidated Balance Sheet:



		Asset derivatives				Liability derivatives
	Balance Sheet	Fair value at		Fair value at		Fair value at		Fair value at
(in millions)	location	6/30/2014		12/31/2013		6/30/2014		12/31/2013
Derivatives designated as hedges*
Fuel derivative contracts (gross)	Prepaid expenses and other current assets	$	125	$	74	$	1	$	—
Fuel derivative contracts (gross)	Other assets	385		209		3		1
Interest rate derivative contracts	Other assets	17		20		—		—
Interest rate derivative contracts	Other noncurrent liabilities	—		—		72		77
Total derivatives designated as hedges		$	527	$	303	$	76	$	78
Derivatives not designated as hedges*
Fuel derivative contracts (gross)	Prepaid expenses and other current assets	$	181	$	175	$	216	$	182
Fuel derivative contracts (gross)	Other assets	61		16		107		99
Fuel derivative contracts (gross)	Accrued liabilities	—		9		—		21
Total derivatives not designated as hedges		$	242	$	200	$	323	$	302
Total derivatives		$	769	$	503	$	399	$	380

* Represents the position of each trade before consideration of offsetting positions with each counterparty and does not include the impact of cash collateral deposits provided to or received from counterparties. See discussion of credit risk and collateral following in this Note.

Cash Collateral Deposits Due To Or From Third Parties and Net Unrealized Losses

In addition, the Company had the following amounts associated with fuel derivative instruments and hedging activities in its unaudited Condensed Consolidated Balance Sheet:



	Balance Sheet	June 30,		December 31,
(in millions)	location	2014		2013
Cash collateral deposits held from counterparties for fuel contracts - current	Offset against Prepaid expenses and other current assets	$	23	$	—
Cash collateral deposits held from counterparties for fuel contracts - noncurrent	Offset against Other assets	82		—
Cash collateral deposits provided to counterparties for interest rate contracts - noncurrent	Offset against Other noncurrent liabilities	32		32
Due to third parties for fuel contracts	Accounts payable	2		—
Receivable from third parties for fuel contracts - current	Accounts and other receivables	34		57
Deferred premium gain for fuel contracts - noncurrent	Other noncurrent liabilities	12		2

Offsetting Assets

The Company has the following recognized financial assets and financial liabilities resulting from those transactions that meet the scope of the disclosure requirements as necessitated by applicable accounting guidance for balance sheet offsetting:



Offsetting of derivative assets
(in millions)
		(i)		(ii)			(iii) = (i) + (ii)			(i)		(ii)			(iii) = (i) + (ii)
		June 30, 2014								December 31, 2013
Description	Balance Sheet location	Gross amounts of recognized assets		Gross amounts offset in the Balance Sheet			Net amounts of assets presented in the Balance Sheet			Gross amounts of recognized assets		Gross amounts offset in the Balance Sheet			Net amounts of assets presented in the Balance Sheet
Fuel derivative contracts	Prepaid expenses and other current assets	$	306	$	(240	)	$	66		$	249	$	(182	)	$	67
Fuel derivative contracts	Other assets	$	446	$	(192	)	$	254	(a)	$	225	$	(100	)	$	125	(a)
Fuel derivative contracts	Accrued liabilities	$	—	$	—		$	—	(a)	$	9	$	(9	)	$	—	(a)
Interest rate derivative contracts	Other assets	$	17	$	—		$	17	(a)	$	20	$	—		$	20	(a)

Offsetting Liabilities



Offsetting of derivative liabilities
(in millions)
		(i)		(ii)			(iii) = (i) + (ii)			(i)		(ii)			(iii) = (i) + (ii)
		June 30, 2014								December 31, 2013
Description	Balance Sheet location	Gross amounts of recognized liabilities		Gross amounts offset in the Balance Sheet			Net amounts of liabilities presented in the Balance Sheet			Gross amounts of recognized liabilities		Gross amounts offset in the Balance Sheet			Net amounts of liabilities presented in the Balance Sheet
Fuel derivative contracts	Prepaid expenses and other current assets	$	240	$	(240	)	$	—		$	182	$	(182	)	$	—
Fuel derivative contracts	Other assets	$	192	$	(192	)	$	—	(a)	$	100	$	(100	)	$	—	(a)
Fuel derivative contracts	Accrued liabilities	$	—	$	—		$	—	(a)	$	21	$	(9	)	$	12	(a)
Interest rate derivative contracts	Other noncurrent liabilities	$	72	$	(32	)	$	40	(a)	$	77	$	(32	)	$	45	(a)

Derivatives in Cash Flow Hedging Relationships

The following tables present the impact of derivative instruments and their location within the unaudited Condensed Consolidated Statement of Comprehensive Income for the three and six months ended June 30, 2014 and 2013:



Derivatives in cash flow hedging relationships
	(Gain) loss recognized in AOCI on derivatives (effective portion)								(Gain) loss reclassified from AOCI into income (effective portion) (a)							(Gain) loss recognized in income on derivatives (ineffective portion) (b)
	Three months ended								Three months ended							Three months ended
	June 30,								June 30,							June 30,
(in millions)	2014				2013				2014				2013			2014			2013
Fuel derivative contracts	$	(122	)	*	$	189		*	$	(1	)	*	$	37	*	$	(28	)	$	3
Interest rate derivatives	3			*	(11		)	*	3			*	4		*	—			(1		)
Total	$	(119	)		$	178			$	2			$	41		$	(28	)	$	2

*Net of tax

(a) Amounts related to fuel derivative contracts and interest rate derivatives are included in Fuel and oil and Interest expense, respectively.

(b) Amounts are included in Other (gains) losses, net.



Derivatives in cash flow hedging relationships
	(Gain) loss recognized in AOCI on derivatives (effective portion)								(Gain) loss reclassified from AOCI into income (effective portion)(a)							(Gain) loss recognized in income on derivatives (ineffective portion)(b)
	Six months ended								Six months ended							Six months ended
	June 30,								June 30,							June 30,
(in millions)	2014				2013				2014				2013			2014			2013
Fuel derivative contracts	$	(110	)	*	$	218		*	$	(1	)	*	$	63	*	$	(41	)	$	12
Interest rate derivatives	5			*	(14		)	*	7			*	9		*	(1		)	(1		)
Total	$	(105	)		$	204			$	6			$	72		$	(42	)	$	11

*Net of tax

(a) Amounts related to fuel derivative contracts and interest rate derivatives are included in Fuel and oil and Interest expense, respectively.

(b) Amounts are included in Other (gains) losses, net.

Derivatives Not in Cash Flow Hedging Relationships



Derivatives not in cash flow hedging relationships
	(Gain) loss
	recognized in income on
	derivatives
	Three months ended				Location of (gain) loss
	June 30,				recognized in income
(in millions)	2014		2013		on derivatives
Fuel derivative contracts	$	16	$	32	Other (gains) losses, net



Derivatives not in cash flow hedging relationships
	(Gain) loss
	recognized in income on
	derivatives
	Six months ended						Location of (gain) loss
	June 30,						recognized in income
(in millions)	2014			2013			on derivatives
Fuel derivative contracts	$	(40	)	$	(28	)	Other (gains) losses, net

Fair Values of Fuel Derivatives, Amounts Posted as Collateral, and Collateral Posting Threshold Amounts

The following table provides the fair values of fuel derivatives, amounts posted as collateral, and applicable collateral posting threshold amounts as of June 30, 2014, at which such postings are triggered:

Counterparty (CP)

(in millions)

Other (a)

Total

Fair value of fuel derivatives

148

425

Cash collateral held from (by) CP

105

—

105

Aircraft collateral pledged to CP

—

Letters of credit (LC)

—

Option to substitute LC for aircraft

(250) to (650) (d)

(100) to (500) (d)

N/A

(250) to (650) (d)

N/A

Option to substitute LC for cash

N/A

>(500)

(100) to (150) (e)

(50) to (250) or >(650) (d)

N/A

If credit rating is investment

grade, fair value of fuel

derivative level at which:

Cash is provided to CP

(50) to (250) or >(650)

(50) to (100) or >(500)

>(50)

(50) to (250) or >(650)

>(50)

Cash is received from CP

>50

>150

>175 (c)

>200

>30

Aircraft or cash can be pledged to

CP as collateral

(250) to (650) (d)

(100) to (500) (d)

N/A

(250) to (650) (d)

N/A

If credit rating is non-investment

grade, fair value of fuel derivative

level at which:

Cash is provided to CP

(0) to (250) or >(650)

(0) to (100) or >(500)

(b)

(0) to (250) or >(650)

(b)

Cash is received from CP

(b)

Aircraft or cash can be pledged to

CP as collateral

(250) to (650)

(100) to (500)

N/A

(250) to (650)

N/A

(a) Individual counterparties with fair value of fuel derivatives <$20 million.

(b) Cash collateral is provided at 100 percent of fair value of fuel derivative contracts.

(d) The Company has the option of providing cash, letters of credit, or pledging aircraft as collateral. No letters of credit or aircraft were pledged as collateral with such counterparties as of June 30, 2014.

(e) The Company has the option of providing cash or letters of credit as collateral. No cash or letters of credit were pledged as collateral with such counterparties as of June 30, 2014.