NOTE 10 - SPECIAL ITEMS

For the three months ended March 31, special items consisted of the following (in millions):


	Three Months Ended March 31,
Operating:	2017		2016
Severance and benefit costs	$	37	$	8
Labor agreement costs		—		100
Cleveland airport lease restructuring		—		74
(Gains) losses on sale of assets and other special charges		14		8

Special charges		51		190
Nonoperating:
Foreign currency loss		—		8

Special items before income taxes		51		198
Income tax benefit related to special items		(18)		(72)

Total special items, net of tax	$	33	$	126

During the three months ended March 31, 2017, the Company recorded $21 million ($14 million net of taxes) of severance and benefit costs primarily related to a voluntary early-out program for its technicians and related employees represented by the International Brotherhood of Teamsters. In the first quarter of 2017, approximately 1,000 technicians and related employees elected to voluntarily separate from the Company and will receive a severance payment, with a maximum value of $100,000 per participant, based on years of service, with retirement dates through early 2019. The Company also recorded $16 million ($10 million net of taxes) of severance related to its management reorganization initiative.

During the three months ended March 31, 2016, the Company recorded $8 million ($5 million net of taxes) of severance and benefit costs primarily related to a voluntary early-out program for its flight attendants.

In April 2016, the fleet service, passenger service, storekeeper and other employees represented by the International Association of Machinists and Aerospace Workers (the “IAM”) ratified seven new contracts with the Company which extended the contracts through 2021. During the three months ended March 31, 2016, the Company recorded $100 million ($64 million net of taxes) of special charges primarily for bonus payments in conjunction with the IAM agreements.

During the three months ended March 31, 2016, the City of Cleveland agreed to amend the Company’s lease, which runs through 2029, associated with certain excess airport terminal space (principally Terminal D) and related facilities at Hopkins International Airport. The Company recorded an accrual for remaining payments under the lease for facilities that the Company no longer uses and will continue to incur costs under the lease without economic benefit to the Company. This liability was measured and recorded at its fair value when the Company ceased its right to use such facilities leased to it pursuant to the lease. The Company recorded a net charge of $74 million ($47 million net of taxes) related to the amended lease.

During the three months ended March 31, 2017 and 2016, the Company recorded gains and losses on sale of assets and other special charges of $14 million ($9 million net of taxes) and $8 million ($5 million net of taxes) respectively.

During the three months ended March 31, 2016, the Company recorded $8 million ($5 million net of taxes) of losses due to exchange rate changes in Venezuela applicable to funds held in local currency.

Accruals

The accrual balance for severance and benefits was $28 million as of March 31, 2017, compared to $29 million as of March 31, 2016. The severance-related accrual as of March 31, 2017 is expected to be mostly paid through 2017. The accrual balance for future lease payments on permanently grounded aircraft was $40 million as of March 31, 2017, compared to $49 million as of March 31, 2016. The grounded aircraft related accrual as of March 31, 2017 is expected to be mostly paid through 2025. The following is a reconciliation of severance and permanently grounded aircraft accrual activity for the period:


	Severance and Benefits		Permanently Grounded Aircraft
Balance at December 31, 2016	$	14	$	41
Accrual		37		—
Payments		(23)		(1)

Balance at March 31, 2017	$	28	$	40