Financial Derivative Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table provides information about the Company’s volume of fuel hedging for the years 2016 through 2018 on an “economic” basis:



	Fuel hedged as of
	March 31, 2016	Derivative underlying commodity type as of
Period (by year)	(gallons in millions) (a)	March 31, 2016
Remainder of 2016	884	Brent crude oil and Gulf Coast jet fuel
2017	1,269	WTI crude and Brent crude oil
2018	731	Brent crude oil

(a) Due to the types of derivatives utilized by the Company and different price levels of those contracts, 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	3/31/2016		12/31/2015		3/31/2016		12/31/2015
Derivatives designated as hedges*
Fuel derivative contracts (gross)	Prepaid expenses and other current assets	$	1	$	2	$	—	$	—
Fuel derivative contracts (gross)	Other assets	6		2		26		—
Fuel derivative contracts (gross)	Accrued liabilities	74		107		548		526
Fuel derivative contracts (gross)	Other noncurrent liabilities	54		55		498		658
Interest rate derivative contracts	Other assets	16		2		—		—
Interest rate derivative contracts	Other noncurrent liabilities	—		—		46		49
Total derivatives designated as hedges		$	151	$	168	$	1,118	$	1,233
Derivatives not designated as hedges*
Fuel derivative contracts (gross)	Prepaid expenses and other current assets	$	29	$	39	$	19	$	26
Fuel derivative contracts (gross)	Other assets	39		5		—		—
Fuel derivative contracts (gross)	Accrued liabilities	920		1,395		1,390		1,854
Fuel derivative contracts (gross)	Other noncurrent liabilities	298		330		348		352
Total derivatives not designated as hedges		$	1,286	$	1,769	$	1,757	$	2,232
Total derivatives		$	1,437	$	1,937	$	2,875	$	3,465

* 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	March 31,		December 31,
(in millions)	location	2016		2015
Cash collateral deposits held from counterparties for fuel contracts - current	Offset against Prepaid expenses and other current assets	$	9	$	—
Cash collateral deposits held from counterparties for fuel contracts - noncurrent	Offset against Other assets	4		—
Cash collateral deposits provided to counterparties for fuel contracts - current	Offset against Accrued liabilities	586		235
Cash collateral deposits provided to counterparties for fuel contracts - noncurrent	Offset against Other noncurrent liabilities	494		600
Due to third parties for fuel contracts	Accounts payable	53		46

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)
		March 31, 2016							December 31, 2015
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 (a)		Gross amounts of recognized assets		Gross amounts offset in the Balance Sheet			Net amounts of assets presented in the Balance Sheet (a)
Fuel derivative contracts	Prepaid expenses and other current assets	$	30	$	(28	)	$	2	$	41	$	(26	)	$	15
Fuel derivative contracts	Other assets	$	45	$	(30	)	$	15	$	7	$	—		$	7
Fuel derivative contracts	Accrued liabilities	$	1,580	$	(1,580	)	$	—	$	1,737	$	(1,737	)	$	—
Fuel derivative contracts	Other noncurrent liabilities	$	846	$	(846	)	$	—	$	985	$	(985	)	$	—
Interest rate derivative contracts	Other assets	$	16	$	—		$	16	$	2	$	—		$	2

Offsetting Liabilities



Offsetting of derivative liabilities
(in millions)
		(i)		(ii)			(iii) = (i) + (ii)		(i)		(ii)			(iii) = (i) + (ii)
		March 31, 2016							December 31, 2015
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 (a)		Gross amounts of recognized liabilities		Gross amounts offset in the Balance Sheet			Net amounts of liabilities presented in the Balance Sheet (a)
Fuel derivative contracts	Prepaid expenses and other current assets	$	28	$	(28	)	$	—	$	26	$	(26	)	$	—
Fuel derivative contracts	Other assets	$	30	$	(30	)	$	—	$	—	$	—		$	—
Fuel derivative contracts	Accrued liabilities	$	1,938	$	(1,580	)	$	358	$	2,380	$	(1,737	)	$	643
Fuel derivative contracts	Other noncurrent liabilities	$	846	$	(846	)	$	—	$	1,010	$	(985	)	$	25
Interest rate derivative contracts	Other noncurrent liabilities	$	46	$	—		$	46	$	49	$	—		$	49

(a) The net amounts of derivative assets and liabilities are reconciled to the individual line item amounts presented in the unaudited Condensed Consolidated Balance Sheet in Note 5.

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 months ended March 31, 2016 and 2015:



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
	March 31,						March 31,						March 31,
(in millions)	2016			2015			2016			2015			2016		2015
Fuel derivative contracts	$	36	*	$	48	*	$	195	*	$	45	*	$	4	$	(13	)
Interest rate derivatives	5		*	4		*	2		*	3		*	—		(1		)
Total	$	41		$	52		$	197		$	48		$	4	$	(14	)

*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
	March 31,				recognized in income
(in millions)	2016		2015		on derivatives
Fuel derivative contracts	$	76	$	19	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 March 31, 2016, at which such postings are triggered:



	Counterparty (CP)
(in millions)	A			B			C			D			E			F		Other (a)		Total
Fair value of fuel derivatives	$	(565	)	$	(183	)	$	(118	)	$	(415	)	$	(145	)	$	15	$	3	$	(1,408	)
Cash collateral held from (by) CP	(544		)	(140		)	(12		)	(355		)	(31		)	15		—		(1,067		)
Aircraft collateral pledged to CP	—			—			—			—			—			—		—		—
Letters of credit (LC)	—			—			—			—			—			—		—		—
Option to substitute LC for aircraft	(200) to (600)(h)			(100) to (500)(d)			N/A			(150) to (550)(d)			(150) to (550)(d)			N/A
Option to substitute LC for cash	N/A			>(500)(e)			(225) to (275)(e)			(75) to (150) or >(550)(e)			(75) to (150) or >(550)(e)			(g)
If credit rating is investment grade, fair value of fuel derivative level at which:
Cash is provided to CP	(50) to (200) or >(600)			(50) to (100) or >(500)			>(125)			(75) to (150) or >(550)			(125) to (150) or >(550)			>(100)
Cash is received from CP	>50			>150			>175(c)			>250			>75			>0
Aircraft or cash can be pledged to CP as collateral	(200) to (600)(f)			(100) to (500)(d)			N/A			(150) to (550)(d)			(150) to (550)(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 (200) or >(600)			(0) to (100) or >(500)			(b)			(0) to (150) or >(550)			(0) to (150) or >(550)			(b)
Cash is received from CP	(b)			(b)			(b)			(b)			(b)			(b)
Aircraft or cash can be pledged to CP as collateral	(200) to (600)			(100) to (500)			N/A			(150) to (550)			(150) to (550)			N/A

(a) Individual counterparties with fair value of fuel derivatives <$5 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.

(e) The Company has the option of providing cash or letters of credit as collateral.

(f) The Company has the option of providing cash or pledging aircraft as collateral.

(g) The Company has the option to substitute letters of credit for 100 percent of cash collateral requirement.

(h) The Company has the option of providing letters of credit in addition to aircraft collateral if the appraised value of the aircraft does not meet the collateral requirements.