Financial Instruments And Risk Management

3 Months Ended

Mar. 31, 2012

Financial Instruments And Risk Management [Abstract]

Financial Instruments And Risk Management

10.        Financial Instruments and Risk Management

As part of the Company's risk management program, it uses a variety of financial instruments, primarily heating oil, jet fuel, and WTI crude option and collar contracts, as cash flow hedges to mitigate commodity price risk. The Company does not hold or issue derivative financial instruments for trading purposes. As of March 31, 2012, the Company had fuel derivative contracts outstanding covering 18 million barrels of jet fuel that will be settled over the next 12 months. A deterioration of the Company's liquidity position and its Chapter 11 filing may negatively affect the Company's ability to hedge fuel in the future.

For the three months ended March 31, 2012 and 2011, the Company recognized a decrease of approximately $29 million and $101 million, respectively, in fuel expense on the accompanying consolidated statements of operations related to its fuel hedging agreements, including the ineffective portion of the hedges. The net fair value of the Company's fuel hedging agreements at March 31, 2012 and December 31, 2011, representing the amount the Company would receive upon termination of the agreements (net of settled contract assets), totaled $104 million and $80 million, respectively.

The impact of cash flow hedges on the Company's Condensed Consolidated Financial Statements is depicted below (in millions):

Fair Value of Aircraft Fuel Derivative Instruments (all cash flow hedges)

Asset Derivatives as of						Liability Derivatives as of
March 31, 2012			December 31, 2011			March 31, 2012			December 31, 2011
Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Fuel derivative contracts	$	124	Fuel derivative contracts	$	97	Accrued liabilities	$	—	Accrued liabilities	$	2

Effect of Aircraft Fuel Derivative Instruments on Statements of Operations (all cash flow hedges)

Amount of Gain (Loss) Recognized in OCI on Derivative1 for the quarter ended March 31,			Location of Gain (Loss) Reclassified from Accumulated OCI into Income 1	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income 1 for the quarter ended March 31,				Location of Gain (Loss) Recognized in Income on Derivative 2	Amount of Gain (Loss) Recognized in Income on Derivative 2 for the quarter ended March 31,
2012	2011			2012		2011			2012		2011
$         48	$	475	Aircraft Fuel	$	26	$	98	Aircraft Fuel	$	3	$	3

¹  Effective portion of gain (loss)

²  Ineffective portion of gain (loss)

The Company is also exposed to credit losses in the event of non-performance by counterparties to these financial instruments, and although no assurances can be given, the Company does not expect any of the counterparties to fail to meet its obligations. The credit exposure related to these financial instruments is represented by the fair value of contracts with a positive fair value at the reporting date, reduced by the effects of master netting agreements. To manage credit risks, the Company selects counterparties based on credit ratings, limits its exposure to a single counterparty under defined guidelines, and monitors the market position of the program and its relative market position with each counterparty. The Company also maintains industry-standard security agreements with a number of its counterparties which may require the Company or the counterparty to post collateral if the value of selected instruments exceed specified mark-to-market thresholds or upon certain changes in credit ratings.

As of March 31, 2012, the Company had received collateral of $9 million which is included in short-term investments.