INCOME TAXES

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements [Abstract]

INCOME TAXES

17. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax assets and liabilities at December 31, 2011 and 2010, are as follows:

(in millions)			2011		2010
DEFERRED TAX LIABILITIES:
	Accelerated depreciation		$	3,537	$	3,020
	Other			84		112
		Total deferred tax liabilities		3,621		3,132
DEFERRED TAX ASSETS:
	Fuel derivative instruments			155		194
	Deferred gains from sale and leaseback of aircraft			44		49
	Capital and operating leases			141		22
	Accrued employee benefits			267		226
	Share-based compensation			39		42
	State taxes			78		74
	Business partner income			207		129
	Net operating losses and credit carrybacks			212		3
	Other			175		114
		Total deferred tax assets		1,318		853
		Net deferred tax liability	$	2,303	$	2,279

The provision for income taxes is composed of the following:

(in millions)			2011		2010		2009
CURRENT:
	Federal		$	4	$	198	$	(24)
	State			13		19		(1)
		Total current		17		217		(25)
DEFERRED:
	Federal			122		61		79
	State			6		8		11
		Total deferred		128		69		90
			$	145	$	286	$	65

The effective tax rate on income before income taxes differed from the federal income tax statutory rate for the following reasons:

(in millions)		2011		2010		2009
Tax at statutory
	U.S. tax rates	$	114	$	261	$	58
Nondeductible items			13		8		5
State income taxes, net of federal benefit			13		18		6
Other, net			5		(1)		(4)
	Total income tax provision	$	145	$	286	$	65

During 2011, as a result of the AirTran acquisition, the Company recorded a liability for unrecognized tax benefits of approximately $5 million, the majority of which related to AirTran's prior years' tax positions. If recognized, the unrecognized tax benefits at December 31, 2011, would prospectively impact the Company's effective tax rate. The December 31, 2010unrecognized tax benefits of $4 million were settled with the IRS during the year ended December 31, 2011.

For the year ended December 31, 2011, the Company had net operating loss (“NOL”) carryforwards of approximately $548 million from its federal tax return. These NOL's are available to offset future taxable income. At a 35% federal statutory tax rate, these NOL's result in a deferred tax asset of $192 million, which represents the expected future tax benefit of the NOL's. These NOL's will expire from2017 to2031 if not utilized. No valuation allowance was necessary. See Note 2 for further information on NOL's acquired from AirTran. The only periods subject to examination for the Company's federal tax returnare the 2010 to 2012 tax years.