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Fair Value Measurements (Tables)
 9 Months Ended
Sep. 30, 2014
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 September 30, 2014, and December 31, 2013:

 
 
 
 
Fair value measurements at reporting date using:
 
 
 
 
Quoted prices in
active markets
for identical assets
 
Significant
other observable
inputs
 
Significant
unobservable
inputs
Description
 
September 30, 2014
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
(in millions)
Cash equivalents
 
 
 
 
 
 
 
 
Cash equivalents (a)
 
$
1,417

 
$
1,417

 
$
—

 
$
—

Commercial paper
 
220

 
—

 
220

 
—

Certificates of deposit
 
21

 
—

 
21

 
—

Eurodollar time deposits
 
174

 
—

 
174

 
—

Short-term investments:
 
 
 
 
 
 
 
 
Treasury bills
 
1,500

 
1,500

 
—

 
—

Certificates of deposit
 
228

 
—

 
228

 
—

Noncurrent investments (b)
 
 
 
 
 
 
 
 
Auction rate securities
 
28

 
—

 
—

 
28

Interest rate derivatives
 
14

 
—

 
14

 
—

Fuel derivatives:
 
 
 
 
 
 
 
 
Swap contracts (c)
 
11

 
—

 
11

 
—

Swap contracts (d)
 
1

 
—

 
1

 
—

Option contracts (c)
 
172

 
—

 
—

 
172

Option contracts (d)
 
39

 
—

 
—

 
39

Other available-for-sale securities
 
67

 
62

 
—

 
5

Total assets
 
$
3,892

 
$
2,979

 
$
669

 
$
244

Liabilities
 
 
 
 
 
 
 
 
Fuel derivatives:
 
 
 
 
 
 
 
 
Swap contracts (c)
 
$
(2
)
 
$
—

 
$
(2
)
 
$
—

Swap contracts (d)
 
(8
)
 
—

 
(8
)
 
—

Option contracts (c)
 
(97
)
 
—

 
—

 
(97
)
Option contracts (d)
 
(63
)
 
—

 
—

 
(63
)
Interest rate derivatives
 
(61
)
 
—

 
(61
)
 
—

Deferred compensation
 
(162
)
 
(162
)
 
—

 
—

Total liabilities
 
$
(393
)
 
$
(162
)
 
$
(71
)
 
$
(160
)

(a) Cash equivalents are primarily composed of money market investments.
(b) Noncurrent investments are included in Other assets in the unaudited Condensed Consolidated Balance Sheet.
(c) In the unaudited Condensed Consolidated Balance Sheet amounts are presented as a net asset.
(d) In the unaudited Condensed Consolidated Balance Sheet amounts are presented as a net liability.

 
 
 
 
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, 2013
 
(Level 1)
 
(Level 2)
 
(Level 3)
Assets
 
(in millions)
Cash equivalents
 
 
 
 
 
 
 
 
Cash equivalents (a)
 
$
992

 
$
992

 
$
—

 
$
—

Commercial paper
 
280

 
—

 
280

 
—

Certificates of deposit
 
23

 
—

 
23

 
—

Eurodollar time deposits
 
60

 
—

 
60

 
—

Short-term investments:
 
 
 
 
 
 
 
 
Treasury bills
 
1,570

 
1,570

 
—

 
—

Certificates of deposit
 
227

 
—

 
227

 
—

Noncurrent investments (b)
 
 
 
 
 
 
 
 
Auction rate securities
 
39

 
—

 
—

 
39

Interest rate derivatives
 
20

 
—

 
20

 
—

Fuel derivatives:
 
 
 
 
 
 
 
 
Swap contracts (c)
 
16

 
—

 
16

 
—

Option contracts (c)
 
458

 
—

 
—

 
458

Option contracts (d)
 
9

 
—

 
—

 
9

Other available-for-sale securities
 
63

 
58

 
—

 
5

Total assets
 
$
3,757

 
$
2,620

 
$
626

 
$
511

Liabilities
 
 
 
 
 
 
 
 
Fuel derivatives:
 
 
 
 
 
 
 
 
Swap contracts (c)
 
$
(8
)
 
$
—

 
$
(8
)
 
$
—

Option contracts (c)
 
(274
)
 
—

 
—

 
(274
)
Option contracts (d)
 
(21
)
 
—

 
—

 
(21
)
Interest rate derivatives
 
(77
)
 
—

 
(77
)
 
—

Deferred Compensation
 
(158
)
 
(158
)
 
—

 
—

Total liabilities
 
$
(538
)
 
$
(158
)
 
$
(85
)
 
$
(295
)

(a) Cash equivalents are primarily composed of money market investments.
(b) Noncurrent investments are included in Other assets in the unaudited Condensed Consolidated Balance Sheet.
(c) In the unaudited Condensed Consolidated Balance Sheet amounts are presented as a net asset.
(d) In the unaudited Condensed Consolidated Balance Sheet amounts are presented as a net liability
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 nine months ended September 30, 2014:


 
Fair value measurements using significant
unobservable inputs (Level 3)
 
Fuel
 
Auction rate
 
Other
 
 
(in millions)
derivatives
 
securities
 
securities
 
Total
Balance at June 30, 2014
$
406

 
$
32

 
$
5

 
$
443

Total losses (realized or unrealized)
 

 
 

 
 

 
 

Included in earnings
(82
)
 
—

 
—

 
(82
)
Included in other comprehensive income
(291
)
 
2

 
—

 
(289
)
Purchases
77

(a)
—

 
—

 
77

Sales
(54
)
(a)
(6
)
 
—

 
(60
)
Settlements
(5
)
 
—

 
—

 
(5
)
Balance at September 30, 2014
$
51

 
$
28

(b)
$
5

 
$
84

The amount of total losses for the period
  included in earnings attributable to the
  change in unrealized gains or losses relating
  to assets still held at September 30, 2014
$
(86
)
 
$
—

 
$
—

 
$
(86
)
(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.
(b) Included in Other assets in the unaudited Condensed Consolidated Balance Sheet.

 
Fair value measurements using significant
unobservable inputs (Level 3)
 
Fuel
 
Auction rate
 
Other
 
 
(in millions)
derivatives
 
securities
 
securities
 
Total
Balance at December 31, 2013
$
172

 
$
39

 
$
5

 
$
216

Total gains (losses) (realized or unrealized)
 
 
 

 
 

 
 

Included in earnings
23

 
—

 
—

 
23

Included in other comprehensive income
(147
)
 
4

 
—

 
(143
)
Purchases
177

(a)
—

 
—

 
177

Sales
(154
)
(a)
(15
)
 
—

 
(169
)
Settlements
(20
)
 
—

 
—

 
(20
)
Balance at September 30, 2014
$
51

 
$
28

(b)
$
5

 
$
84

The amount of total gains for the period
  included in earnings attributable to the
  change in unrealized gains or losses relating
  to assets still held at September 30, 2014
$
5

 
$
—

 
$
—

 
$
5

(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.
(b) Included in Other assets in the unaudited Condensed Consolidated Balance Sheet.
Fair Value Valuation Techniques
The following table presents a range of the unobservable inputs utilized in the fair value measurements of the Company’s assets and liabilities classified as Level 3 at September 30, 2014:

Quantitative information about Level 3 fair value measurements
 
Valuation technique
Unobservable input
Period (by year)
Range
Fuel derivatives
Option model
Implied volatility
Fourth quarter 2014
11-23%
 
 
 
2015
14-24%
 
 
 
2016
13-21%
 
 
 
2017
11-16%
 
 
 
2018
9-15%
Auction rate securities
Discounted cash flow
Time to principal recovery
 
8 years
 
 
Illiquidity premium
 
3%
 
 
Counterparty credit spread
 
1-2%
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 September 30, 2014, 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. Six of the Company’s debt agreements are 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
5.25% Notes due 2014
$
350

 
$
350

 
Level 2
5.75% Notes due 2016
314

 
342

 
Level 2
5.25% Convertible Senior Notes due 2016
114

 
267

 
Level 2
5.125% Notes due 2017
317

 
340

 
Level 2
Fixed-rate 717 Aircraft Notes payable through 2017 - 10.38%
7

 
8

 
Level 2
French Credit Agreements due 2018 - 1.03%
41

 
41

 
Level 3
Fixed-rate 737 Aircraft Notes payable through 2018 - 7.02%
25

 
26

 
Level 3
Term Loan Agreement due 2019 - 6.315%
186

 
195

 
Level 3
Term Loan Agreement due 2019 - 6.84%
73

 
79

 
Level 3
Term Loan Agreement due 2020 - 5.223%
382

 
378

 
Level 3
Floating-rate 737 Aircraft Notes payable through 2020
309

 
302

 
Level 3
Pass Through Certificates due 2022 - 6.24%
355

 
423

 
Level 2
7.375% Debentures due 2027
135

 
162

 
Level 2