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Fair Value Measurements (Tables)
 6 Months Ended
Jun. 30, 2018
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 June 30, 2018, and December 31, 2017:

 
 
 
 
Fair value measurements at reporting date using:
 
 
 
 
Quoted prices in
active markets
for identical assets
 
Significant
other observable
inputs
 
Significant
unobservable
inputs
Description
 
June 30, 2018
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
(in millions)
Cash equivalents
 
 
 
 
 
 
 
 
Cash equivalents (a)
 
$
1,595

 
$
1,595

 
$
—

 
$
—

Commercial paper
 
479

 
—

 
479

 
—

Certificates of deposit
 
15

 
—

 
15

 
—

Time deposits
 
25

 
—

 
25

 
—

Short-term investments:
 
 
 
 
 
 
 
 
Treasury bills
 
1,340

 
1,340

 
—

 
—

Certificates of deposit
 
232

 
—

 
232

 
—

Fuel derivatives:
 
 
 
 
 
 
 
 
Option contracts (b)
 
601

 
—

 
—

 
601

Other available-for-sale securities
 
128

 
128

 
—

 
—

Total assets
 
$
4,415

 
$
3,063

 
$
751

 
$
601

Liabilities
 
 
 
 
 
 
 
 
Fuel derivatives:
 
 
 
 
 
 
 
 
Option contracts (b)
 
(5
)
 
—

 
—

 
(5
)
Interest rate derivatives (see Note 3)
 
(24
)
 
—

 
(24
)
 
—

Total liabilities
 
$
(29
)
 
$
—

 
$
(24
)
 
$
(5
)
(a) Cash equivalents are primarily composed of money market investments.
(b) In the unaudited Condensed Consolidated Balance Sheet amounts are presented as a net asset. See Note 3.


 
 
 
 
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, 2017
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
(in millions)
Cash equivalents
 
 
 
 
 
 
 
 
Cash equivalents (a)
 
$
1,133

 
$
1,133

 
$
—

 
$
—

Commercial paper
 
350

 
—

 
350

 
—

Certificates of deposit
 
12

 
—

 
12

 
—

Short-term investments:
 
 
 
 
 
 
 
 
Treasury bills
 
1,491

 
1,491

 
—

 
—

Certificates of deposit
 
287

 
—

 
287

 
—

Fuel derivatives:
 
 
 
 
 
 
 
 
Option contracts (b)
 
283

 
—

 
—

 
283

Other available-for-sale securities
 
107

 
107

 
—

 
—

Total assets
 
$
3,663

 
$
2,731

 
$
649

 
$
283

Liabilities
 
 
 
 
 
 
 
 
Fuel derivatives:
 
 
 
 
 
 
 
 
Option contracts (b)
 
(35
)
 
—

 
—

 
(35
)
Interest rate derivatives (see Note 3)
 
(22
)
 
—

 
(22
)
 
—

Total liabilities
 
$
(57
)
 
$
—

 
$
(22
)
 
$
(35
)
(a) Cash equivalents are primarily composed of money market investments.
(b) In the unaudited Condensed Consolidated Balance Sheet amounts are presented as a net asset. See Note 3.
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 and six months ended June 30, 2018:

Fair value measurements using significant unobservable inputs (Level 3)
(in millions)
Fuel derivatives
 
Balance at March 31, 2018
$
340

 
Total gains (realized or unrealized) included in other comprehensive income
298

 
Purchases
9

(a)
Sales
(2
)
(a)
Settlements
(49
)
 
Balance at June 30, 2018
$
596

 
(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.
Fair value measurements using significant unobservable inputs (Level 3)
(in millions)
Fuel derivatives
 
Balance at December 31, 2017
$
248

 
Total gains (realized or unrealized) included in other comprehensive income
399

 
Purchases
27

(a)
Sales
(2
)
(a)
Settlements
(76
)
 
Balance at June 30, 2018
$
596

 
(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.
Fair Value Valuation Techniques
The following table presents a range of the unobservable inputs utilized in the fair value measurements of the Company’s fuel derivatives classified as Level 3 at June 30, 2018:

Quantitative information about Level 3 fair value measurements
 
 
Valuation technique
 
Unobservable input
 
Period (by year)
 
Range
Fuel derivatives
 
Option model
 
Implied volatility
 
Third quarter 2018
 
15-30%
 
 
 
 
 
 
Fourth quarter 2018
 
22-31%
 
 
 
 
 
 
2019
 
22-28%
 
 
 
 
 
 
2020
 
21-26%
 
 
 
 
 
 
2021
 
20-22%
 
 
 
 
 
 
2022
 
19-20%
Fair value, by Balance Sheet Grouping
The carrying amounts and estimated fair values of the Company’s long-term debt (including current maturities), as well as the applicable fair value hierarchy tier, at June 30, 2018, are presented in the table below. The fair values of the Company’s publicly held long-term debt are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets; therefore, the Company has categorized these agreements as Level 2. Debt under five of the Company’s debt agreements is not publicly held. The Company has determined the estimated fair value of this debt to be Level 3, as certain inputs used to determine the fair value of these agreements are unobservable. The Company utilizes indicative pricing from counterparties and a discounted cash flow method to estimate the fair value of the Level 3 items.

(in millions)
 Carrying value
 
Estimated fair value
 
Fair value level hierarchy
2.75% Notes due 2019
$
298

 
$
297

 
Level 2
Term Loan Agreement payable through 2019 - 6.315%
44

 
45

 
Level 3
Term Loan Agreement payable through 2019 - 4.84%
15

 
15

 
Level 3
2.65% Notes due 2020
486

 
480

 
Level 2
Term Loan Agreement payable through 2020 - 5.223%
212

 
212

 
Level 3
737 Aircraft Notes payable through 2020
121

 
121

 
Level 3
2.75% Notes due 2022
300

 
292

 
Level 2
Pass Through Certificates due 2022 - 6.24%
273

 
289

 
Level 2
Term Loan Agreement payable through 2026 - 3.62%
206

 
206

 
Level 3
3.00% Notes due 2026
300

 
277

 
Level 2
3.45% Notes due 2027
300

 
284

 
Level 2
7.375% Debentures due 2027
126

 
148

 
Level 2