Fair Value Disclosures

6 Months Ended

Jun. 30, 2011

The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The Company's short-term investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. The Company's fuel derivative contracts, which consist primarily of heating oil option and collar contracts, are valued using energy and commodity market data which is derived by combining raw inputs with quantitative models and processes to generate forward curves and volatilities. No changes in valuation techniques or inputs occurred during the six months ended June 30, 2011.

Assets and liabilities measured at fair value on a recurring basis are summarized below:


(in millions)	Fair Value Measurements as of June 30, 2011
Description	Total		Level 1		Level 2		Level 3

Short-term investments ^{1, 2}
Money market funds	$	207	$	207	$	—	$	—
Government agency investments		554		—		554		—
Repurchase investments		1,621		—		1,621		—
Corporate obligations		799		—		799		—
Bank notes / Certificates of deposit / Time deposits		1,677		—		1,677		—

		4,858		207		4,651		—

Restricted cash and short-term investments ¹		457		457		—		—
Fuel derivative contracts, net¹		362		—		362		—


Total	$	5,677	$	664	$	5,013	$	—

¹	Unrealized gains or losses on short-term investments, restricted cash and short-term investments and derivatives qualifying for hedge accounting are recorded in Accumulated other comprehensive income (loss) (OCI) at each measurement date.

²	The majority of the Company's short-term investments mature in one year or less except for $721 million of Bank notes/Certificates of deposit/Time deposits, $554 million of U.S. Government agency investments and $427 million of Corporate obligations which have maturity dates exceeding one year.

No significant transfers between Level 1 and Level 2 occurred during the six months ended June 30, 2011. The Company's policy regarding the recording of transfers between levels is to reflect any such transfers at the end of the reporting period.

The fair values of the Company's long-term debt were estimated using quoted market prices where available. For long-term debt not actively traded, fair values were estimated using discounted cash flow analyses, based on the Company's current estimated incremental borrowing rates for similar types of borrowing arrangements.

The carrying value and estimated fair values of the Company's long-term debt, including current maturities, were (in millions):


	June 30, 2011				December 31, 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
Secured variable and fixed rate indebtedness	$	4,844	$	4,581	$	5,114	$	4,562
Enhanced equipment trust certificates		1,946		2,013		2,002		2,127
6.0% - 8.5% special facility revenue bonds		1,642		1,650		1,641		1,657
7.50% senior secured notes		1,000		983		—		—
AAdvantage Miles advance purchase		890		907		890		903
6.25% senior convertible notes		460		446		460		526
9.0% - 10.20% debentures		214		206		214		207
7.88% - 10.55% notes		173		169		211		209


	$	11,169	$	10,955	$	10,532	$	10,191

- Definition

This element represents the disclosure related to the fair value measurement of assets and liabilities which includes [financial] instruments measured at fair value that are classified in stockholders' equity. Such assets and liabilities may be measured on a recurring or nonrecurring basis. The disclosures which may be required or desired include: (1) for assets and liabilities measured on a recurring basis, disclosure may include: (a) the fair value measurements at the reporting date; (b) the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3); (c) for fair value measurements using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (ii) purchases, sales, issuances, and settlements (net); (iii) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs); (d) the amount of the total gains or losses for the period in subparagraph (c) (i) above included in earnings (or changes in net assets) that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date and a description of where those unrealized gains or losses are reported in the statement of income (or activities); (e) the valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques, if any, during the period and (2) for assets and liabilities that are measured at fair value on a nonrecurring basis (for example, impaired assets) disclosure may include, in addition to (a) above: (a) the reasons for the fair value measurements recorded; (b) the same as (b) above; (c) for fair value measurements using significant unobservable inputs (Level 3), a description of the inputs and the information used to develop the inputs; and (d) the valuation technique(s) used to measure fair value and a discussion of changes, if any, in the valuation technique(s) used to measure similar assets and/or liabilities in prior periods.

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