Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market for that asset or liability. Guidance on fair value measurements and disclosures establishes a valuation hierarchy for disclosure of inputs used in measuring fair value defined as follows:

Level 1-Inputs are unadjusted quoted prices that are available in active markets for identical assets or liabilities.

Level 2-Inputs include quoted prices for similar assets and liabilities in active markets and quoted prices in non-active markets, inputs other than quoted prices that are observable, and inputs that are not directly observable, but are corroborated by observable market data.

Level 3-Inputs that are unobservable and are supported by little or no market activity and reflect the use of significant management judgment.

The classification of a financial asset or liability within the hierarchy is determined based on the least reliable level of input that is significant to the fair value measurement. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We also consider the counterparty and our own non-performance risk in our assessment of fair value.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

Foreign Currency Forward Contracts—The fair value of the foreign currency forward contracts is estimated based upon pricing models that utilize Level 2 inputs derived from or corroborated by observable market data such as currency spot and forward rates.

Interest Rate Swaps—The fair value of our interest rate swaps is estimated using a combined income and market-based valuation methodology based upon Level 2 inputs, including credit ratings and forward interest rate yield curves obtained from independent pricing services reflecting broker market quotes

The following tables present our (liabilities) assets that are required to be measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 (in thousands):


			Fair Value at Reporting Date Using
	March 31, 2020		Level 1		Level 2		Level 3
Derivatives ⁽¹⁾
Foreign currency forward contracts	$	(8,988)	$	—	$	(8,988)	$	—
Interest rate swap contracts	(30,190)		—		(30,190)		—
Total	$	(39,178)	$	—	$	(39,178)	$	—


			Fair Value at Reporting Date Using
	December 31, 2019		Level 1		Level 2		Level 3
Derivatives⁽¹⁾
Foreign currency forward contracts	$	1,953	$	—	$	1,953	$	—
Interest rate swap contracts	(14,938)		—		(14,938)		—
Total	$	(12,985)	$	—	$	(12,985)	$	—

⁽¹⁾See Note 7. Derivatives for further detail.

There were no transfers between Levels 1 and 2 within the fair value hierarchy for the three months ended March 31, 2020.

Other Financial Instruments

The carrying value of our financial instruments including cash and cash equivalents, and accounts receivable approximates their fair values. The fair values of our senior secured notes due 2023 and term loans under our Amended and Restated Credit Agreement are determined based on quoted market prices for a similar liability when traded as an asset in an active market, a Level 2 input.

The following table presents the fair value and carrying value of our senior notes and borrowings under our senior secured credit facilities as of March 31, 2020 and December 31, 2019 (in thousands):


	Fair Value at						Carrying Value at ⁽¹⁾
Financial Instrument	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Term Loan A	$	444,974	$	485,106	$	469,199	$	483,317
Term Loan B	1,564,065		1,856,100		1,834,306		1,838,741





Revolver, $400 million	375,000		—		375,000		—
5.375% Senior secured notes due 2023	485,499		543,536		530,000		530,000
5.25% Senior secured notes due 2023	460,358		514,670		500,000		500,000

⁽¹⁾Excludes net unamortized debt issuance costs.

Goodwill Quantitative Assessment

Due to the impacts of the COVID-19 pandemic on our current and projected future results of operations, we identified a triggering event requiring an interim quantitative assessment on our goodwill. The quantitative assessment is based on our current projections and is subject to various risks, uncertainties and estimates including: (1) forecasted revenues, expenses and cash flows, including future travel supplier capacity and load factors on those estimates and technology costs, (2) the duration and extent of the impact of the COVID-19 pandemic on our business and our customers, (3) current discount and long-term growth rates, (4) the reduction in our market capitalization, (5) current market transaction trends and (6) changes to the regulatory environment impacting our industry. We consider these to be Level 3 inputs in the fair value hierarchy, as they involve unobservable inputs for which there is little or no market data and thus require management to develop its own assumptions.

Based on our interim impairment assessment as of March 31, 2020, we have determined that our goodwill is not impaired; however, we estimate that Airline Solutions has a fair value that approximates its carrying value, subject to the risks noted above. If the factors associated with our estimate of the fair value of Airlines Solutions differ from actual results (for example, the period of time for our cash flows to recover from the COVID-19 pandemic), Airline Solutions goodwill totaling $372 million could be subject to impairment in the future, which would negatively impact our financial results but would not impact our cash flow. The impact of an impairment on our results of operations could be material.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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