Special Items (Tables)

3 Months Ended

Mar. 31, 2021

Property, Plant and Equipment [Abstract]

Schedule of unusual or infrequent items, or both

The following is a listing of special items presented on our consolidated statements of operations for the three months ended March 31, 2021 and 2020 (in millions):


	Three Months Ended March 31,
	2021		2020
Special Items
Federal payroll support grant recognition(1)	$	(288)	$	—
CARES Act employee retention credit(2)	(1)		—
Fleet impairment(3)	—		202
Total	$	(289)	$	202

(1) As discussed in Note 3 to our condensed consolidated financial statements, we entered into a PSP Extension Agreement with the Treasury governing our participation in the federal Payroll Support Program for air carriers under the United States Consolidated Appropriations Act, 2021. In the first quarter of 2021, Treasury provided us with payroll support funding totaling $504 million, consisting of $383 million in grants and $121 million in unsecured term loans. The payroll support funds are to be used exclusively for the continuation of payment of crewmember wages, salaries and benefits. The carrying value of the payroll support extension grants is recorded within other liabilities and will be recognized as a contra-expense within special items on our consolidated statements of operations as the funds are utilized. We utilized $288 million of the payroll support extension grants for the three months ended March 31, 2021.

(2) The Employee Retention Credit ("ERC") under the CARES Act is a refundable tax credit which encourages business to keep employees on the payroll during the COVID-19 pandemic. Eligible employers can qualify for up to $5,000 of credit for each employee based on qualified wages paid after March 12, 2020 and before January 1, 2021. Qualified wages are the wages paid to an employee for the time that the employee is not providing services due to an economic hardship, specifically, either (1) a full or partial suspension of operations by order of a governmental authority due to COVID-19, or (2) a significant decline in gross receipts. Our policy is to recognize the ERC when it is filed with the Internal Revenue Services. We recognized $1 million of ERC as a contra-expense within special items on our consolidated statements of operations for the three months

ended March 31, 2021.

(3) Under the Property, Plant, and Equipment topic of the Codification, we are required to assess long-lived assets for impairment when events and circumstances indicate that the assets may be impaired. An impairment of long-lived assets exists when the sum of the estimated undiscounted future cash flows expected to be generated directly by the assets are less than the book value of the assets. Our long-lived assets include both owned and leased properties which are classified as property and equipment, and operating lease assets on our consolidated balance sheets, respectively.

Our operations were adversely impacted by the unprecedented decline in demand for travel caused by the COVID-19 pandemic. To determine if impairment exists in our fleet, we grouped our aircraft by fleet-type and estimated their future cash flows based on projections of capacity, aircraft age, maintenance requirements, and other relevant conditions. Based on the assessment, we determined the future cash flows from the operation our Embraer E190 fleet were lower than the carrying value. For those aircraft, including the ones that are under operating lease, and related spare parts in our Embraer E190 fleet, we recorded an impairment loss of $202 million for the three months ended March 31, 2020. These losses represent the difference between the book value of these assets and their fair value. We estimated the fair value of our Embraer E190 fleet using third party valuations and considered specific circumstances such as aircraft age, maintenance requirements and condition, and therefore classified as Level 3 in the fair value hierarchy. We evaluated the remaining fleet and determined the future cash flows of our Airbus A320 and Airbus A321 fleet exceeded their carrying value as of March 31, 2020.

No impairment loss was recorded for the three months ended March 31, 2021 as the book value of our fleet reflected their fair value as of March 31, 2021.

As the extent of the ongoing impact from the COVID-19 pandemic remains uncertain, we will update our assessment as new information becomes available.