Segments

12 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

Segments

SEGMENTS

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker and is used in resource allocation and performance assessments. Our chief operating decision maker is considered to be our executive leadership team. Our executive leadership team regularly reviews discrete information for our two operating segments, which are determined by the products and services provided: our airline segment and our refinery segment.

Airline Segment

Our airline segment is managed as a single business unit that provides scheduled air transportation for passengers and cargo throughout the U.S. and around the world and includes our loyalty program, as well as other ancillary airline services. This allows us to benefit from an integrated revenue pricing and route network. Our flight equipment forms one fleet, which is deployed through a single route scheduling system. When making resource allocation decisions, our chief operating decision maker evaluates flight profitability data, which considers fleet type and route economics, but gives no weight to the financial impact of the resource allocation decision on a geographic region or mainline/regional carrier basis. Our objective in making resource allocation decisions is to optimize our consolidated financial results.

Refinery Segment

Our Monroe subsidiary operates the Trainer oil refinery and related assets located near Philadelphia, Pennsylvania, as part of our strategy to mitigate the cost of the refining margin reflected in the price of jet fuel. Monroe's operations include pipelines and terminal assets that allow the refinery to supply jet fuel to our airline operations throughout the Northeastern U.S., including our New York hubs at LaGuardia and JFK.

Our refinery segment operates for the benefit of the airline segment by providing jet fuel to the airline segment from its own production and through jet fuel obtained through agreements with third parties. The refinery's production consists of jet fuel, as well as non-jet fuel products. We use several counterparties to exchange the non-jet fuel products produced by the refinery for jet fuel consumed in our airline operations. The gross fair value of the products exchanged under these agreements during the years ended December 31, 2021, 2020 and 2019 was $2.3 billion, $1.5 billion and $4.0 billion, respectively. The decline in exchange transactions compared to the year ended December 31, 2019 is primarily due to the decrease in demand for jet fuel from our airline operations as a result of the economic conditions caused by the COVID-19 pandemic.

Segment Reporting

Segment results are prepared based on our internal accounting methods described below, with reconciliations to consolidated amounts in accordance with GAAP. Our segments are not designed to measure operating income or loss directly related to the products and services included in each segment on a stand-alone basis.

Financial information by segment
(in millions)	Airline		Refinery		Intersegment Sales/Other			Consolidated
Year Ended December 31, 2021
Operating revenue:	$	26,670	$	6,054				$	29,899
Sales to airline segment					$	(492)	(1)
Exchanged products					(2,293)		(2)
Sales of refined products					(40)		(3)
Operating income (loss)(4)	1,888		(2)					1,886
Interest expense, net	1,272		7					1,279
Depreciation and amortization	1,998		95		(95)		(4)	1,998
Restructuring charges	(19)		—					(19)
Total assets, end of period	70,360		2,099					72,459
Net fair value obligations, end of period(5)	—		(497)					(497)
Capital expenditures	3,188		59					3,247
Year Ended December 31, 2020
Operating revenue:	$	15,945	$	3,143				$	17,095
Sales to airline segment					$	(214)	(1)
Exchanged products					(1,472)		(2)
Sales of refined products					(307)		(3)
Operating loss(4)	(12,253)		(216)					(12,469)
Interest expense, net	928		1					929
Depreciation and amortization	2,312		99		(99)		(4)	2,312
Restructuring charges	8,219		—					8,219
Total assets, end of period	70,548		1,448					71,996
Net fair value obligations, end of period(5)	—		(156)					(156)
Capital expenditures	1,879		20					1,899
Year Ended December 31, 2019
Operating revenue:	$	46,910	$	5,558				$	47,007
Sales to airline segment					$	(1,103)	(1)
Exchanged products					(3,963)		(2)
Sales of refined products					(395)		(3)
Operating income(4)	6,542		76					6,618
Interest expense (income), net	327		(26)					301
Depreciation and amortization	2,581		99		(99)		(4)	2,581
Total assets, end of period	62,793		1,739					64,532
Net fair value obligations, end of period(5)	—		(4)					(4)
Capital expenditures	4,880		56					4,936

(1)Represents transfers, valued on a market price basis, from the refinery to the airline segment for use in airline operations. We determine market price by reference to the market index for the primary delivery location, which is New York Harbor, for jet fuel from the refinery.

(2)Represents value of products delivered under our exchange agreements, as discussed above, determined on a market price basis.

(3)These sales were at or near cost; accordingly, the margin on these sales is de minimis.

(4)Refinery segment operating results, including depreciation and amortization, are included within aircraft fuel and related taxes in our income statement.

(5)The fair values of these obligations, which are related to renewable fuel compliance costs, are based on quoted market prices and other observable information and are classified as Level 2 in the fair value hierarchy. At December 31, 2021 we had a gross fair value obligation of $593 million recorded in current liabilities on the balance sheet and related assets of $96 million. Our obligation as of December 31, 2021 was calculated using the EPA's proposed Renewable Fuel Standard ("RFS") volume requirements for 2020 and 2021, which were issued in December 2021. The EPA has not finalized the compliance deadlines to retire our obligations for 2020 and 2021, but we expect those deadlines to be within one year of the effective date of the new RFS volume requirements. At December 31, 2020 we had a gross fair value obligation of $172 million and related assets of $16 million. At December 31, 2019 we had a gross fair value obligation of $58 million and related assets of $54 million. We expect to use the assets in settling a portion of our obligations.