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DERIVATIVE INSTRUMENTS
 6 Months Ended
Jun. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS

Fuel Hedge Contracts

The Company’s operations are inherently dependent upon the price and availability of aircraft fuel. To manage economic risks associated with fluctuations in aircraft fuel prices, the Company periodically enters into call options for crude oil.

As of June 30, 2015, the Company had outstanding fuel hedge contracts covering 259 million gallons of crude oil that will be settled from July 2015 to December 2016. Refer to the contractual obligations and commitments section of Item 2 for further information.

Interest Rate Swap Agreements

The Company has interest rate swap agreements with a third party designed to hedge the volatility of the underlying variable interest rate in the Company's aircraft lease agreements for six Boeing 737-800 aircraft. The agreements stipulate that the Company pay a fixed interest rate over the term of the contract and receive a floating interest rate. All significant terms of the swap agreement match the terms of the lease agreements, including interest-rate index, rate reset dates, termination dates and underlying notional values. The agreements expire from February 2020 through March 2021 to coincide with the lease termination dates.

Fair Values of Derivative Instruments

Fair values of derivative instruments on the consolidated balance sheet (in millions):
 
June 30,
2015
 
December 31,
2014
Derivative Instruments Not Designated as Hedges
 
 
 
Fuel hedge contracts
 
 
 
Fuel hedge contracts, current assets
$
7

 
$
3

Fuel hedge contracts, noncurrent assets
3

 
4

 
 
 
 
Derivative Instruments Designated as Hedges
 
 
 
Interest rate swaps
 
 
 
Other accrued liabilities
(6
)
 
(6
)
Other liabilities
(13
)
 
(13
)
Losses in accumulated other comprehensive loss (AOCL)
(19
)
 
(19
)


The net cash received (paid) for new positions and settlements was ($4) million and $1 million during the three months ended June 30, 2015 and 2014, respectively. The net cash received (paid) for new positions and settlements was ($8) million and ($6) million during the six months ended June 30, 2015 and 2014, respectively.

Pretax effect of derivative instruments on earnings (in millions):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Derivative Instruments Not Designated as Hedges
 
 
 
 
 
 
 
Fuel hedge contracts:
 
 
 
 
 
 
 
Gains (losses) recognized in aircraft fuel expense
$
1

 
$
5

 
$
(4
)
 
$
(6
)
 
 
 
 
 
 
 
 
Derivative Instruments Designated as Hedges
 
 
 
 
 
 
 
Interest rate swaps:
 
 
 
 
 
 
 
Losses recognized in aircraft rent
(1
)
 
(1
)
 
(3
)
 
(3
)
Gains (losses) recognized in other comprehensive income (OCI)
1

 
(2
)
 
(3
)
 
(5
)

The Company expects $6 million to be reclassified from AOCL to aircraft rent within the next twelve months.

Credit Risk and Collateral

The Company maintains security agreements with a number of its counterparties which may require the Company to post collateral if the fair value of the selected derivative instruments fall below specified mark-to-market thresholds. The posted collateral does not offset the fair value of the derivative instruments and is included in "Prepaid expenses and other current assets" on the consolidated balance sheet. The Company posted collateral of $1 million and $3 million as of June 30, 2015 and December 31, 2014, respectively.