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Financial Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Volume of Fuel Hedging

The following table provides information about the Company’s volume of fuel hedging on an economic basis:

Maximum fuel hedged as of

September 30, 2020

Derivative underlying commodity type as of

Period (by year)

(gallons in millions) (a)

September 30, 2020

Remainder of 2020

325

WTI crude oil, Brent crude oil, and Heating oil

2021

1,283

WTI crude oil and Brent crude oil

2022

1,220

WTI crude oil and Brent crude oil

Beyond 2022

630

WTI crude oil and 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 and the Company's flight schedule fluctuates.

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						9/30/2020						12/31/2019						9/30/2020						12/31/2019
Derivatives designated as hedges (a)
Fuel derivative contracts (gross)						Prepaid expenses and other current assets						$	4					$	48					$	—					$	—
Fuel derivative contracts (gross)						Other assets						101						62						—						—
Interest rate derivative contracts						Other assets						—						2						—						—
Interest rate derivative contracts						Accrued liabilities						—						—						—						5
Interest rate derivative contracts						Other noncurrent liabilities						—						—						11						1
Total derivatives designated as hedges																		$	105					$	112					$	11					$	6
Derivatives not designated as hedges (a)
Fuel derivative contracts (gross)						Prepaid expenses and other current assets						$	2					$	—					$	—					$	—
Fuel derivative contracts (gross)						Other assets						2						—						—						—
Interest rate derivative contracts						Accrued liabilities						—						—						28						—
Total derivatives not designated as hedges												$	4					$	—					$	28					$	—
Total derivatives												$	109					$	112					$	39					$	6

(a) 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.

Schedule of Derivative Instruments Statements of Financial Performance and Financial Position, Location

The following table presents the amounts recorded on the unaudited Condensed Consolidated Balance Sheet related to fair value hedges:

Balance Sheet location of hedged item						Carrying amount of the hedged liabilities																		Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged liabilities (a)
						September 30,																		September 30,
(in millions)						2020						2019						2020						2019
Current maturities of long-term debt						$	500					$	300					$	—					$	2
Long-term debt less current maturities						—						501						18						18
						$	500					$	801					$	18					$	20

(a) At September 30, 2020 and 2019, these amounts include the cumulative amount of fair value hedging adjustments remaining for which hedge accounting has been discontinued, of $18 million and $19 million, respectively.

Cash Collateral Deposits Due To or From Third Parties

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						September 30,						December 31,
(in millions)						location						2020						2019
Cash collateral deposits held from counterparties for fuel contracts - current						Offset against Prepaid expenses and other current assets						$	1					$	10
Cash collateral deposits held from counterparties for fuel contracts - noncurrent						Offset against Other assets						26						15

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)
												September 30, 2020																														December 31, 2019
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						Gross amounts of recognized assets						Gross amounts offset in the Balance Sheet						Net amounts of assets presented in the Balance Sheet
Fuel derivative contracts						Prepaid expenses and other current assets						$	6					$	(1)					$	5					$	48					$	(10)					$	38
Fuel derivative contracts						Other assets						$	103					$	(26)					$	77		(a)			$	62					$	(15)					$	47		(a)
Interest rate derivative contracts						Other assets						$	—					$	—					$	—		(a)			$	2					$	—					$	2		(a)

(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 10.

Offsetting Liabilities

Offsetting of derivative liabilities
(in millions)
												(i)						(ii)						(iii) = (i) + (ii)						(i)						(ii)						(iii) = (i) + (ii)
												September 30, 2020																														December 31, 2019
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						Gross amounts of recognized liabilities						Gross amounts offset in the Balance Sheet						Net amounts of liabilities presented in the Balance Sheet
Fuel derivative contracts						Prepaid expenses and other current assets						$	1					$	(1)					$	—					$	10					$	(10)					$	—
Fuel derivative contracts						Other assets						$	26					$	(26)					$	—		(a)			$	15					$	(15)					$	—		(a)
Interest rate derivative contracts						Accrued liabilities						$	28					$	—					$	28		(a)			$	5					$	—					$	5		(a)
Interest rate derivative contracts						Other noncurrent liabilities						$	11					$	—					$	11					$	1					$	—					$	1

(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 10.

Schedule Of Derivative Instruments In Hedging Relationships Gain Loss In Statement Of Financial Performance

The following tables present the impact of derivative instruments and their location within the unaudited Condensed Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019:

Location and amount recognized in income on cash flow and fair value hedging relationships
						Three months ended September 30, 2020																														Three months ended September 30, 2019
(in millions)						Fuel and oil						Other (gains)/losses, net						Interest expense						Fuel and oil												Interest expense
Total						$	18					$	22					$	2					$	19											$	8
Loss on cash flow hedging relationships:
Commodity contracts:
Amount of loss reclassified from AOCI into income						18						22						—						19												—
Interest contracts:
Amount of loss reclassified from AOCI into income						—						—						—						—												2
Impact of fair value hedging relationships:
Interest contracts:
Hedged items						—						—						4						—												6
Derivatives designated as hedging instruments						—						—						(2)						—												—

Location and amount recognized in income on cash flow and fair value hedging relationships
						Nine months ended September 30, 2020																														Nine months ended September 30, 2019
(in millions)						Fuel and oil						Other (gains)/losses, net						Interest expense						Fuel and oil						Interest expense
Total						$	54					$	38					$	6					$	28					$	21
Loss on cash flow hedging relationships
Commodity contracts:
Amount of loss reclassified from AOCI into income						54						38						—						28						—
Interest contracts:
Amount of loss reclassified from AOCI into income						—						—						1						—						3
Impact of fair value hedging relationships:
Interest contracts:
Hedged items						—						—						11						—						17
Derivatives designated as hedging instruments						—						—						(6)						—						1

Derivatives in Cash Flow Hedging Relationships

Derivatives designated and qualified in cash flow hedging relationships
			(Gain) loss recognized in AOCI on derivatives, net of tax
			Three months ended
			September 30,
(in millions)			2020						2019
Fuel derivative contracts			$	17					$	95
Interest rate derivatives			(3)						17
Total			$	14					$	112

Derivatives designated and qualified in cash flow hedging relationships
			Loss recognized in AOCI on derivatives, net of tax
			Nine months ended
			September 30,
(in millions)			2020						2019
Fuel derivative contracts			$	91					$	83
Interest rate derivatives			30						43
Total			$	121					$	126

Derivatives Not in Cash Flow Hedging Relationships

Derivatives not designated as hedges
			(Gain) loss recognized in income on derivatives
												Three months ended																		Location of (gain) loss recognized in income on derivatives
			September 30,
(in millions)			2020						2019
Fuel derivative contracts			$	1					$	—					Other (gains) losses, net
Interest rate derivatives			(1)						—						Other (gains) losses, net
Total			$	—					$	—

Derivatives not designated as hedges
			Loss recognized in income on derivatives
												Nine months ended																		Location of loss recognized in income on derivatives
			September 30,
(in millions)			2020						2019
Fuel derivative contracts			$	2					$	—					Other (gains) losses, net
Interest rate derivatives			28						—						Other (gains) losses, net
Total			$	30					$	—

Premiums Paid for Fuel Derivative Contracts

The following tables present the impact of premiums paid for fuel derivative contracts and their location within the unaudited Condensed Consolidated Statement of Comprehensive Income (Loss) during the period the contract settles:

			Premium expense recognized in income on derivatives
												Three months ended																		Location of premium expense recognized in income on derivatives
			September 30,
(in millions)			2020						2019
Fuel derivative contracts designated as hedges			$	13					$	20					Fuel and oil
Fuel derivative contracts not designated as hedges			$	11					$	—					Other (gains) losses, net

			Premium expense recognized in income on derivatives
												Nine months ended																		Location of premium expense recognized in income on derivatives
			September 30,
(in millions)			2020						2019
Fuel derivative contracts designated as hedges			$	51					$	75					Fuel and oil
Fuel derivative contracts not designated as hedges			$	22					$	—					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 September 30, 2020, at which such postings are triggered:

Counterparty (CP)

(in millions)

A

B

C

D

E

F

Other (a)

Total

Fair value of fuel derivatives

$

24

$

14

$

28

$

12

$

11

$

10

$

10

$

109

Cash collateral held from CP

27

—

—

—

—

—

—

27

Letters of credit (LC)

—

—

—

—

—

—

—

—

Option to substitute LC for cash

N/A

N/A

(75) to (150) or >(550)(b)

(125) to (150) or >(550)(c)

(c)

N/A

If credit rating is investment grade, fair value of fuel derivative level at which:

Cash is provided to CP

>(100)

>(50)

(75) to (150) or >(550)(d)

(125) to (150) or >(550)(d)

>(40)

>(65)(d)

Cash is received from CP

>0(d)

>150(d)

>250(d)

>(125)(d)

>100(d)

>70(d)

Cash can be pledged to CP as collateral

(200) to (600)(e)

N/A

(150) to (550)(b)

(150) to (550)(b)

N/A

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)

(f)

(0) to (150) or >(550)

(0) to (150) or >(550)

(f)

(f)

Cash is received from CP

(f)

(f)

(f)

(f)

(f)

(f)

Cash can be pledged to CP as collateral

(200) to (600)

N/A

(150) to (550)

(150) to (550)

N/A

N/A

(a) Individual counterparties with fair value of fuel derivatives < $9 million.

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

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

(d) Thresholds may vary based on changes in credit ratings within investment grade.

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

(f) Cash collateral is provided at 100 percent of fair value of fuel derivative contracts.

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