Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

7.        Fair Value Measurements

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, primarily call options, collars (consisting of a purchased call option and a sold put option) and call spreads (consisting of a purchased call option and a sold call option), 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. Heating oil, jet fuel and crude oil are the primary underlying commodities in the hedge portfolio. No changes in valuation techniques or inputs occurred during the three months ended March 31, 2012.

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

		00000000		00000000		00000000		00000000
(in millions)	Fair Value Measurements as of March 31, 2012
Description	Total		Level 1		Level 2		Level 3
Short-term investments 1, 2
Money market funds	$	895	$	895	$	—	$	—
Government agency investments		584		—		584		—
Repurchase investments		128		—		128		—
Corporate obligations		2,277		—		2,277		—
Bank notes / Certificates of deposit / Time deposits		560		—		560		—
		4,444		895		3,549		—
Restricted cash and short-term investments 1		771		771		—		—
Fuel derivative contracts, net 1		124		—		124		—
Total	$	5,339	$	1,666	$	3,673	$	—

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 Company's short-term investments mature in one year or less except for $50 million of Bank notes/Certificates of deposit/Time deposits, $584 million of U.S. Government agency investments and $412 million of Corporate obligations which have maturity dates exceeding one year.

No significant transfers between Level 1 and Level 2 occurred during the three months ended March 31, 2012. The Company's policy regarding the recording of transfers between levels is to reflect any such transfers at the end of the reporting period.

As of March 31, 2012, the Company had no exposure to European sovereign debt.

The fair values of the Company's long-term debt classified as Level 1 were estimated using quoted market prices. The fair values of the Company's long-term debt classified as Level 2 were estimated using discounted cash flow analyses, based on the Company's current estimated incremental borrowing rates for similar types of borrowing arrangements.  

All of the Company's long term debt not classified as subject to compromise is classified as Level 1, with the exception of the AAdvantage Miles advance purchase and $2.1 billion of the fair value of the Secured variable and fixed rate indebtedness.

The carrying value and estimated fair values of the Company's long-term debt, including current maturities, not classified as subject to compromise, were (in millions):

		00000000		00000000		00000000		00000000
	March 31, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Secured variable and fixed rate indebtedness	$	2,958	$	2,791	$	2,952	$	2,647
Enhanced equipment trust certificates		1,891		1,969		1,942		1,927
6.0%—8.5% special facility revenue bonds		1,437		1,390		1,436		1,230
7.50% senior secured notes		1,000		879		1,000		711
AAdvantage Miles advance purchase		882		884		890		902
6.25% senior convertible notes		—		—		—		—
9.0%—10.20% debentures		—		—		—		—
7.88%—10.55% notes		—		—		—		—
	$	8,168	$	7,913	$	8,220	$	7,417

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

		00000000		00000000		00000000		00000000
	March 31, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Secured variable and fixed rate indebtedness	$	1,212	$	1,013	$	1,456	$	1,123
Enhanced equipment trust certificates		—		—		—		—
6.0%—8.5% special facility revenue bonds		186		83		186		37
7.50% senior secured notes		—		—		—		—
AAdvantage Miles advance purchase		—		—		—		—
6.25% senior convertible notes		460		215		460		101
9.0%—10.20% debentures		214		83		214		46
7.88%—10.55% notes		166		22		166		34
	$	2,238	$	1,416	$	2,482	$	1,341

All of the Company's long term debt classified as subject to compromise is classified as Level 1, with the exception of the AAdvantage Miles advance purchase and the Secured variable and fixed rate indebtedness.