UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2018~~March 31, 2019



Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-5424

DELTA AIR LINES, INC.

(Exact name of registrant as specified in its charter)

~~State of Incorporation: Delaware~~

~~I.R.S. Employer Identification No.: 58-0218548~~

~~Post Office Box 20706, Atlanta, Georgia 30320-6001~~

~~Telephone:~~



Delaware	58-0218548
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Post Office Box 20706
Atlanta, Georgia	30320-6001
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (404) 715-2600



Title of each class	Name of each exchange on which registered	Ticker Symbol
Common Stock, par value $0.0001 per share	New York Stock Exchange	DAL

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	þ	Accelerated filer	o	Non-accelerated filer	o	~~(Do not check if a smaller reporting company)~~
Smaller reporting company			o	Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

Number of shares outstanding by each class of common stock, as of ~~September 30, 2018:~~March 31, 2019:

Common Stock, $0.0001 par value - ~~685,618,701~~654,996,477 shares outstanding

This document is also available through our website at http://ir.delta.com/.

Unless otherwise indicated, the terms "Delta," "we," "us" and "our" refer to Delta Air Lines, Inc. and its subsidiaries.

FORWARD-LOOKING STATEMENTS

Statements in this Form 10-Q (or otherwise made by us or on our behalf) that are not historical facts, including statements about our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. Known material risk factors applicable to Delta are described in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017~~2018 ("Form 10-K") ~~and "Item 1A. Risk Factors" of Part II of the Form 10-Q for the quarter ended March 31, 2018,~~, other than risks that could apply to any issuer or offering. All forward-looking statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

Delta Air Lines, Inc.

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Delta Air Lines, Inc. (the Company) as of ~~September 30, 2018,~~March 31, 2019, the related condensed consolidated statements of operations and comprehensive income, cash flows, and stockholders' equity for the three-month ~~and nine-month~~ periods ended ~~September 30, 2018~~March 31, 2019 and ~~2017, and the condensed consolidated statements of cash flows for the nine-month periods ended September 30,~~ 2018 ~~and~~ ~~2017~~, and the related notes (collectively referred to as the "condensed consolidated interim financial statements"). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of Delta Air Lines, Inc. as of December 31, ~~2017,~~2018, the related consolidated statements of operations, comprehensive income, cash flows, and stockholders' equity for the year then ended, and the related notes (not presented herein); and in our report dated February ~~23, 2018,~~15, 2019, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, ~~2017,~~2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



	/s/ Ernst & Young LLP
Atlanta, Georgia
~~October 11, 2018~~April 10, 2019

DELTA AIR LINES, INC.

Consolidated Balance Sheets

(Unaudited)


(in millions, except share data)	September 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
ASSETS
Current Assets:
Cash and cash equivalents	$	1,380		$	1,814		$	1,910		$	1,565
Short-term investments	478			825
Accounts receivable, net of an allowance for uncollectible accounts of $12 at September 30, 2018 and December 31, 2017	2,517			2,377
Accounts receivable, net of an allowance for uncollectible accounts of $14 and $12 at March 31, 2019 and December 31, 2018, respectively							3,154			2,314
Fuel inventory	715			916			601			592
Expendable parts and supplies inventories, net of an allowance for obsolescence of $125 and $113 at September 30, 2018 and December 31, 2017, respectively	455			413
Expendable parts and supplies inventories, net of an allowance for obsolescence of $97 and $102 at March 31, 2019 and December 31, 2018, respectively							470			463
Prepaid expenses and other	1,181			1,499			1,061			1,406
Total current assets	6,726			7,844			7,196			6,340
Property and Equipment, Net:
Property and equipment, net of accumulated depreciation and amortization of $15,552 and $14,097 at September 30, 2018 and December 31, 2017, respectively	28,565			26,563
Other Assets:

Noncurrent Assets:
Property and equipment, net of accumulated depreciation and amortization of $16,401 and $15,823 at March 31, 2019 and December 31, 2018, respectively							29,139			28,335
Operating lease right-of-use assets							6,036			5,994
Goodwill	9,794			9,794			9,781			9,781
Identifiable intangibles, net of accumulated amortization of $857 and $845 at September 30, 2018 and December 31, 2017, respectively	4,835			4,847
Identifiable intangibles, net of accumulated amortization of $865 and $862 at March 31, 2019 and December 31, 2018, respectively							4,827			4,830
Cash restricted for airport construction	1,214			—			1,018			1,136
Deferred income taxes, net	432			1,354
Other noncurrent assets	3,437			3,309			3,844			3,850
Total other assets	19,712			19,304
Total noncurrent assets							54,645			53,926
Total assets	$	55,003		$	53,711		$	61,841		$	60,266
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt and capital leases	$	1,176		$	2,242
Current maturities of long-term debt and finance leases							$	3,055		$	1,518
Current maturities of operating leases							941			955
Air traffic liability	5,535			4,364			6,600			4,661
Accounts payable	3,265			3,674			3,214			2,976
Accrued salaries and related benefits	2,852			3,022			2,037			3,287
Frequent flyer deferred revenue	2,935			2,762
Loyalty program deferred revenue							3,013			2,989
Fuel card obligation	1,066			1,067			1,066			1,075
Other accrued liabilities	1,329			1,868			1,397			1,117
Total current liabilities	18,158			18,999			21,323			18,578

Noncurrent Liabilities:
Long-term debt and capital leases	8,115			6,592
Long-term debt and finance leases							7,710			8,253
Pension, postretirement and related benefits	8,902			9,810			9,086			9,163
Frequent flyer deferred revenue	3,607			3,559
Loyalty program deferred revenue							3,611			3,652
Noncurrent operating leases							5,805			5,801
Other noncurrent liabilities	2,517			2,221			1,395			1,132
Total noncurrent liabilities	23,141			22,182			27,607			28,001

Commitments and Contingencies

Stockholders' Equity:
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 693,799,424 and 714,674,160 shares issued at September 30, 2018 and December 31, 2017, respectively	—			—
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 663,896,862 and 688,136,306 shares issued at March 31, 2019 and December 31, 2018, respectively							—			—
Additional paid-in capital	11,740			12,053			11,254			11,671
Retained earnings	9,696			8,256			9,656			10,039
Accumulated other comprehensive loss	(7,535		)	(7,621		)	(7,766		)	(7,825		)
Treasury stock, at cost, 8,180,723 and 7,476,181 shares at September 30, 2018 and December 31, 2017, respectively	(197		)	(158		)
Treasury stock, at cost, 8,900,385 and 8,191,831 shares at March 31, 2019 and December 31, 2018, respectively							(233		)	(198		)
Total stockholders' equity	13,704			12,530			12,911			13,687
Total liabilities and stockholders' equity	$	55,003		$	53,711		$	61,841		$	60,266

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

DELTA AIR LINES, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in millions, except per share data)	2018			2017			2018			2017			2019			2018
Operating Revenue:
Passenger	$	10,796		$	9,979		$	30,107		$	27,925		$	9,254		$	8,765
Cargo	226			191			651			542			192			202
Other	931			891			2,938			2,443			1,026			1,001
Total operating revenue	11,953			11,061			33,696			30,910			10,472			9,968

Operating Expense:
Salaries and related costs	2,753			2,619			8,004			7,525			2,639			2,584
Aircraft fuel and related taxes	2,498			1,785			6,693			4,954			1,978			1,856
Regional carriers expense, excluding fuel	903			887			2,643			2,589			893			838
Contracted services													632			544
Depreciation and amortization	580			571			1,780			1,639			615			603
Contracted services	562			543			1,646			1,572
Aircraft maintenance materials and outside repairs													476			435
Passenger commissions and other selling expenses	535			499			1,473			1,371			427			427
Landing fees and other rents													419			389
Ancillary businesses and refinery	410			387			1,396			975			351			493
Aircraft maintenance materials and outside repairs	371			390			1,233			1,214
Landing fees and other rents	421			392			1,201			1,126
Passenger service													271			263
Profit sharing	395			314			978			803			220			188
Passenger service	329			331			892			849
Aircraft rent	99			89			291			258			102			94
Other	455			431			1,305			1,230			429			410
Total operating expense	10,311			9,238			29,535			26,105			9,452			9,124

Operating Income	1,642			1,823			4,161			4,805			1,020			844

Non-Operating Income/(Expense):
Non-Operating Expense:
Interest expense, net	(84		)	(100		)	(274		)	(297		)	(83		)	(92		)
Unrealized gain/(loss) on investments, net	50			—			(171		)	—
Unrealized gain on investments, net													100			18
Miscellaneous, net	66			53			48			(51		)	(91		)	(38		)
Total non-operating income/(expense), net	32			(47		)	(397		)	(348		)
Total non-operating expense, net													(74		)	(112		)

Income Before Income Taxes	1,674			1,776			3,764			4,457			946			732

Income Tax Provision	(362		)	(617		)	(880		)	(1,550		)	(216		)	(175		)

Net Income	$	1,312		$	1,159		$	2,884		$	2,907		$	730		$	557

Basic Earnings Per Share	$	1.91		$	1.62		$	4.15		$	4.01		$	1.10		$	0.79
Diluted Earnings Per Share	$	1.91		$	1.61		$	4.14		$	4.00		$	1.09		$	0.79
Cash Dividends Declared Per Share	$	0.35		$	0.31		$	0.96		$	0.71		$	0.35		$	0.31

Comprehensive Income	$	1,383		$	1,233		$	2,970		$	3,067		$	789		$	603

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

DELTA AIR LINES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2018			2017			2019			2018
Net Cash Provided by Operating Activities	$	5,650		$	3,132		$	1,951		$	1,372

Cash Flows from Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments	(2,833		)	(1,905		)	(1,059		)	(991		)
Ground property and equipment, including technology	(980		)	(826		)	(301		)	(274		)
Purchase of equity investments	—			(795		)
Purchase of short-term investments	(145		)	(868		)	—			(63		)
Redemption of short-term investments	490			395			206			363
Other, net	87			38			49			38
Net cash used in investing activities	(3,381		)	(3,961		)	(1,105		)	(927		)

Cash Flows from Financing Activities:
Payments on long-term debt and capital lease obligations	(2,741		)	(819		)
Payments on long-term debt and finance lease obligations							(1,285		)	(244		)
Repurchase of common stock	(1,250		)	(1,350		)	(1,325		)	(325		)
Cash dividends	(670		)	(516		)	(233		)	(217		)
Fuel card obligation	(1		)	341
Proceeds from short-term obligations							1,750			—
Proceeds from long-term obligations	3,124			2,004			500			—
Other, net	64			(140		)	(16		)	(30		)
Net cash used in financing activities	(1,474		)	(480		)	(609		)	(816		)

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	795			(1,309		)	237			(371		)
Cash, cash equivalents and restricted cash at beginning of period	1,853			2,826			2,748			1,853
Cash, cash equivalents and restricted cash at end of period	$	2,648		$	1,517		$	2,985		$	1,482

Non-Cash Transactions:
Treasury stock contributed to our qualified defined benefit pension plans	$	—		$	350
Flight and ground equipment acquired under capital leases	93			249
Flight and ground equipment acquired under operating leases							$	274		$	361
Flight and ground equipment acquired under finance leases							3			26



The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total of the same such amounts shown above:
	September 30,						March 31,
(in millions)	2018			2017			2019			2018
Current assets:
Cash and cash equivalents	$	1,380		$	1,478		$	1,910		$	1,447
Restricted cash included in prepaid expenses and other	54			39			57			35
Other assets:
Noncurrent assets:
Cash restricted for airport construction	1,214			—			1,018			—
Total cash, cash equivalents and restricted cash	$	2,648		$	1,517		$	2,985		$	1,482

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

DELTA AIR LINES, INC.

Consolidated Statements of Stockholders' Equity

(Unaudited)



	Common Stock				Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock
(in millions, except per share data)	Shares		Amount		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Shares	Amount			Total
Balance at December 31, 2018	688		$	—	$	11,671		$	10,039		$	(7,825	)	8	$	(198	)	$	13,687
Net income	—		��		—			730			—			—	—			730
Dividends declared	—		—		—			(232		)	—			—	—			(232		)
Other comprehensive income	—		—		—			—			59			—	—			59
Shares of common stock issued and compensation expense associated with equity awards (Treasury shares withheld for payment of taxes, $49.75⁽¹⁾ per share)	2		—		27			—			—			1	(35		)	(8		)
Stock options exercised	—		—		—			—			—			—	—			—
Stock purchased and retired	(26	)	—		(444		)	(881		)	—			—	—			(1,325		)
Balance at March 31, 2019	664		$	—	$	11,254		$	9,656		$	(7,766	)	9	$	(233	)	$	12,911



	Common Stock				Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock
(in millions, except per share data)	Shares		Amount		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Shares	Amount			Total
Balance at December 31, 2017	715		$	—	$	12,053		$	8,256		$	(7,621	)	7	$	(158	)	$	12,530
Net income	—		—		—			557			—			—	—			557
Change in accounting principle and other	—		—		—			(139		)	(106		)	—	—			(245		)
Dividends declared	—		—		—			(216		)	—			—	—			(216		)
Other comprehensive income	—		—		—			—			46			—	—			46
Shares of common stock issued and compensation expense associated with equity awards (Treasury shares withheld for payment of taxes, $55.08⁽¹⁾ per share)	1		—		10			—			—			1	(36		)	(26		)
Stock options exercised	1		—		1			—			—			—	—			1
Stock purchased and retired	(6	)	—		(97		)	(228		)	—			—	—			(325		)
Balance at March 31, 2018	711		$	—	$	11,967		$	8,230		$	(7,681	)	8	$	(194	)	$	12,322


⁽¹⁾	Weighted average price per share.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

DELTA AIR LINES, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Delta Air Lines, Inc. and our wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. As a result, this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Form 10-K for the year ended December 31, ~~2017.~~2018.

Management believes the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including normal recurring items, considered necessary for a fair statement of results for the interim periods presented.

Due to seasonal variations in the demand for air travel, the volatility of aircraft fuel prices and other factors, operating results for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 are not necessarily indicative of operating results for the entire year.

We ~~have recast~~reclassified certain prior period financial statements to conform with the adoption of the revenue recognition and retirement benefits standards described below. In addition, we have reclassified regional carriers fuel expense from regional carriers expense to aircraft fuel and related taxes, and consolidated ancillary businesses and refinery expenses into one financial statement line item, in addition to making other classification changesamounts to conform to the current ~~year~~period presentation.

Unless otherwise noted, all amounts disclosed are stated before consideration of income taxes.

Recent Accounting Standards

~~Standards Effective in Future Years~~

~~Leases.~~Comprehensive Income. In ~~2016,~~February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)." This ASU and subsequently issued amendments will require leases with durations greater than 12 months to be recognized on the balance sheet and is effective for interim and annual reporting periods beginning after December 15, 2018.

In July 2018, the FASB issued ASU No. 2018-11, "Targeted Improvements - Leases (Topic 842)." This update provides an optional transition method that allows entities to elect to apply the standard prospectively at its effective date, versus recasting the prior periods presented. If elected, an entity would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

We have not completed our assessment, including our evaluation of transition method and whether to early adopt, but the adoption of ASU 2016-02 will have a material impact on our Consolidated Balance Sheets. However, we do not expect the adoption to have a material impact on the recognition, measurement or presentation of lease expenses within the Condensed Consolidated Statements of Operations and Comprehensive Income ("income statement") or the Condensed Consolidated Statements of Cash Flows ("cash flows statement"). Information about our undiscounted future lease payments and the timing of those payments is in Note 7, "Lease Obligations," in our Form 10-K.

~~Comprehensive Income. In February 2018, the FASB issued ASU~~ No. 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220)." This standard provides an option to reclassify stranded tax effects within accumulated other comprehensive income/(loss) ("AOCI") to retained earnings due to the U.S. federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. We have not completed our assessment, but the adoption of the standard may impact tax amounts stranded in AOCI related to our pension plans. We will adopt this standard effective January 1, 2019.

~~Recently Adopted Standards~~

~~Revenue from Contracts with Customers.~~ In 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." Under this ASU and subsequently issued amendments, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. We adopted this standard using the full retrospective transition method effective January 1, 2018 and recast prior year results as shown below.

While the adoption of the new standard did not have a significant effect on earnings, approximately $2 billion of certain annual revenues that were previously classified in other revenue have been reclassified to passenger revenue. These revenues include baggage fees, administrative charges and other travel-related fees, which are deemed part of the single performance obligation of providing passenger transportation.

In addition, the adoption of the new standard increased the rate used to account for frequent flyer miles. We previously analyzed our standalone sales of mileage credits to other airlines and customers to establish the accounting value for frequent flyer miles. Considering the guidance in the new standard, we changed our valuation of a mileage credit to an analysis of the award redemption value. The new valuation considers the quantitative value a passenger receives by redeeming miles for a ticket rather than paying cash. This change increased our frequent flyer liability at December 31, 2017 by $2.2 billion. The mileage deferral and redemption rates are approximately the same; therefore, assuming stable volume, there would not be a significant change in revenue recognized from the program in a given period.

The adoption of the new standard also reduced our air traffic liability at December 31, 2017 by $524 million. This change primarily results from estimating the tickets that will expire unused and recognizing revenue at the scheduled flight date rather than when the unused tickets expire.

~~See Note 2, "Revenue Recognition," for more information.~~

~~Statement of Cash Flows.~~ In 2016, the FASB issued ASU Nos. 2016-15 and 2016-18 related to the classification of certain cash receipts and cash payments, and the presentation of restricted cash within an entity's cash flows statement, respectively. We adopted these standards effective January 1, 2018.

~~Financial Instruments.~~ In 2016, the FASB issued ASU No. 2016-01, "Financial Instruments—Overall (Subtopic 825-10)." This standard makes several changes, including the elimination of the available-for-sale classification of equity investments, and requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. In February 2018, the FASB issued ASU No. 2018-03, "Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10)" to clarify certain aspects of ASU No. 2016-01. We adopted these standards effective January 1, 2018.

Our investments in GOL Linhas Aéreas Inteligentes, the parent company of VRG Linhas Aéreas (operating as GOL), and China Eastern were accounted for as available-for-sale with changes in fair value recognized in other comprehensive income. At the time of adoption, we reclassified an unrealized gain of $162 million related to these investments from AOCI to retained earnings.

Our investment in Air France-KLM was accounted for at cost during 2017 as our investment agreement restricts the sale or transfer of these shares for five years. Upon adopting ASU Nos. 2016-01 and 2018-03, we recognized a $148 million gain in unrealized gain/(loss) on investments in our income statement related to the value of Air France-KLM's stock compared to our investment basis at December 31, 2017. Consistent with our investments in GOL and China Eastern, this investment is now accounted for at fair value with changes in fair value recognized in net income.

~~Retirement Benefits.~~ In 2017, the FASB issued ASU No. 2017-07, "Compensation—Retirement Benefits (Topic 715)." This standard requires an entity to report the service cost component in the same line item as other compensation costs. The other components of net (benefit) cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. We adopted this standard effective January 1, ~~2018.~~ The components of the net (benefit) cost are shown in Note 7, "Employee Benefit Plans." As a result of the adoption, for the three and nine months ended September 30, 2017, we reclassified expense of $12 million and $36 million, respectively, from operating expense into non-operating income/(expense) in our income statement.

~~Impact of Recently Adopted Standards~~

~~We recast certain prior period amounts to conform~~2019 with the ~~adoption~~election not to reclassify $1.2 billion of ~~the revenue recognition and retirement benefits standards, as shown in the tables below.~~stranded tax effects related to our pension plans from AOCI to retained earnings.

Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017

(in millions, except per share data)
As Previously Reported Adjustments Current Presentation As Previously Reported Adjustments Current Presentation
Income statement:
Passenger revenue $ 9,399
$ 580
$ 9,979
$ 26,318
$ 1,607
$ 27,925
Cargo revenue 187
4
191
530
12
542
Other revenue 1,474
(583 ) 891
4,151
(1,708 ) 2,443
Total operating revenue 11,060
1
11,061
30,999
(89 ) 30,910
Operating expense 9,221
17
9,238
26,079
26
26,105
Non-operating expense (34 ) (13 ) (47 ) (309 ) (39 ) (348 )
Income tax provision (627 ) 10
(617 ) (1,606 ) 56
(1,550 )
Net income 1,178
(19 ) 1,159
3,005
(98 ) 2,907
Diluted earnings per share $ 1.64
$ (0.03 ) $ 1.61
$ 4.13
$ (0.13 ) $ 4.00

December 31, 2017

(in millions)
As Previously Reported Adjustments Current Presentation
Balance sheet:
Deferred income taxes, net $ 935
$ 419
$ 1,354
Air traffic liability 4,888
(524 ) 4,364
Frequent flyer deferred revenue (current and noncurrent) 4,118
2,203
6,321
Other accrued and other noncurrent liabilities 3,969
120
4,089
Retained earnings 9,636
(1,380 ) 8,256

NOTE 2. REVENUE RECOGNITION

Passenger Revenue

Passenger revenue is primarily composed of passenger ticket sales, loyalty travel awards and travel-related services performed in conjunction with a passenger’s flight.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(in millions)	2018		2017		2018		2017		2019		2018
Ticket	$	9,553	$	8,812	$	26,514	$	24,523	$	7,988	$	7,653
Loyalty travel awards	678		622		1,976		1,826		692		618
Travel-related services	565		545		1,617		1,576		574		494
Total passenger revenue	$	10,796	$	9,979	$	30,107	$	27,925	$	9,254	$	8,765

~~Ticket~~

~~Passenger tickets.~~ We record sales of passenger tickets to be flown by us or that we sell on behalf of other airlines in air traffic liability. Passenger revenue is recognized when we provide transportation or when ticket breakage occurs. For tickets that we sell on behalf of other airlines, we reduce the air traffic liability when consideration is remitted to those airlines. We periodically evaluate the estimated air traffic liability and record any adjustments in our income statement. These adjustments relate primarily to refunds, exchanges, ticket breakage, transactions with other airlines and other items for which final settlement occurs in periods subsequent to the sale of the related tickets at amounts other than the original sales price.

We recognized approximately ~~$3.5~~$2.7 billion in passenger revenue during ~~each of~~ the ~~nine~~three months ended ~~September 30, 2018 and 2017~~March 31, 2019 that was recorded in our air traffic liability ~~balances~~balance at December 31, ~~2017 and 2016, respectively.~~2018. We expect the remaining balance of the December 31, ~~2017~~2018 liability to be recognized by the end of ~~2018.~~2019.

~~Ticket breakage.~~ ~~We estimate the value of tickets that will expire unused and recognize revenue at the scheduled flight date.~~

Other Revenue



	Three Months Ended March 31,
(in millions)	2019		2018
Loyalty program	$	474	$	347
Ancillary businesses and refinery	369		521
Miscellaneous	183		133
Total other revenue	$	1,026	$	1,001

~~Regional carriers~~. Our regional carriers include both our contract carrier agreements with third-party regional carriers ("contract carriers") and Endeavor Air, Inc., our wholly owned subsidiary. Our contract carrier agreements are primarily structured as capacity purchase agreements where we purchase all or a portion of the contract carrier's capacity and are responsible for selling the seat inventory we purchase. We record revenue related to our capacity purchase agreements in passenger revenue and the related expenses in regional carriers expense, excluding fuel.

Loyalty ~~Travel Awards~~

Loyalty travel awards revenue is related to the redemption of mileage credits for travel. We recognize loyalty travel awards revenue in passenger revenue as mileage credits are redeemed and travel is provided. See below for discussion of our frequent flyer program accounting policies.

~~Travel-Related Services~~

~~Travel-related services are primarily composed of services~~performed in conjunction with a passenger’s flight, including administrative fees (such as ticket change fees), baggage fees and on-board sales. We recognize revenue for these services when the related transportation service is provided. Prior to the adoption of the new standard, the majority of these fees were classified in other revenue.

~~Frequent Flyer~~ Program

Our ~~frequent flyer~~SkyMiles loyalty program ~~(the "SkyMiles program")~~ generates customer loyalty by rewarding customers with incentives to travel on Delta. This program allows customers to earn mileage credits by flying on Delta, Delta Connection and other airlines that participate in the ~~SkyMiles~~loyalty program. When traveling, customers earn redeemable mileage credits based on the passenger's loyalty program status and ~~travel fare paid.~~ticket price. Customers can also earn mileage credits through participating companies such as credit card companies, hotels and car rental agencies. To facilitate transactions with participating companies, we sell mileage credits to non-airline businesses, customers and other airlines. Mileage credits are redeemable by customers in future periods for air travel on Delta and other participating airlines, membership in our Sky Club and other program awards.

To reflect the mileage credits earned, the SkyMiles program includes two types of transactions that are considered revenue arrangements with multiple performance obligations: (1) mileage credit earned with travel and (2) mileage credit sold to participating companies.

~~Passenger Ticket Sales Earning Mileage Credits.~~ Passenger ticket sales earning mileage credits under our SkyMiles program provide customers with (1) mileage credits earned and (2) air transportation. We value each performance obligation on a standalone basis. To value the mileage credits earned, we consider the quantitative value a passenger receives by redeeming miles for a ticket rather than paying cash which is referred to as equivalent ticket value ("ETV"). Our estimate of ETV is adjusted for mileage credits that are not likely to be redeemed ("breakage"). Management uses statistical models to estimate breakage based on historical redemption patterns. A change in assumptions as to the actual redemption activity for mileage credits or the estimated fair value of mileage credits expected to be redeemed could have a material impact on our revenue in the year in which the change occurs and in future years. We recognize breakage proportionally during the period in which the remaining mileage credits are actually redeemed.

~~Sale of Mileage Credits.~~ During the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ total cash sales from marketing agreements related to our loyalty program were ~~$2.6 billion~~$980 million and ~~$2.3 billion,~~$841 million, respectively, which are allocated to travel and other performance ~~obligations, as discussed below.~~ Customers may earn mileage credits based on their spending with participating companies such as credit card companies, hotels and car rental agencies with which we have marketing agreements to sell mileage credits. Our contracts to sell mileage credits under these marketing agreements have multiple performance obligations. ~~Payments are typically due monthly based on the volume of miles sold during the period, and the terms of our marketing contracts are generally from one to eight years.~~ During the nine months ended September 30, 2018 and 2017, total cash sales from marketing agreements were $2.6 billion and $2.3 billion, respectively, which are allocated to travel and other performance obligations, as discussed below.

Our most significant contract to sell mileage credits relates to our co-brand credit card relationship with American Express. Our agreements with American Express provide for joint marketing, grant certain benefits to Delta-American Express co-branded credit card holders ("cardholders") and American Express Membership Rewards program participants, and allow American Express to market its services or products using our customer database. Cardholders earn mileage credits for making purchases using co-branded cards, and certain cardholders may also check their first bag for free, are granted discounted access to Delta Sky Club lounges and receive priority boarding and other benefits while traveling on Delta. Additionally, participants in the American Express Membership Rewards program may exchange their points for mileage credits under the ~~SkyMiles~~loyalty program. We sell mileage credits at agreed-upon rates to American Express which are then provided to their customers under the co-brand credit card program and the Membership Rewards program.

We account for marketing agreements, including those with American Express, consistent with the accounting method that allocates the consideration received to the individual products and services delivered. We allocate the value based on the relative selling prices of those products and services, which generally consist of award travel, priority boarding, baggage fee waivers, lounge access and the use of our brand. We determined our best estimate of the selling prices by considering a discounted cash flow analysis using multiple inputs and assumptions, including: (1) the expected number of miles awarded and number of miles redeemed, (2) ~~ETV~~equivalent ticket value ("ETV") for the award travel obligation, (3) published rates on our website for baggage fees, discounted access to Delta Sky Club lounges and other benefits while traveling on Delta and (4) brand value.

We defer the amount for award travel obligation as part of ~~frequent flyer~~loyalty program deferred revenue and recognize loyalty travel awards in passenger revenue as the mileage credits are used for travel. Revenue allocated to services performed in conjunction with a passenger’s flight, such as baggage fee waivers, is recognized as travel-related services in passenger revenue when the related service is performed. Revenue allocated to access Delta Sky Club lounges is recognized as miscellaneous in other revenue as access is provided. Revenue allocated to the remaining performance obligations, primarily brand value, is recorded as loyalty program in other revenue over time as miles are delivered.

Current Activity of the ~~Frequent Flyer~~Loyalty Program. Mileage credits are combined in one homogeneous pool and are not separately identifiable. As such, the revenue is comprised of miles that were part of the ~~frequent flyer~~loyalty deferred revenue balance at the beginning of the period as well as miles that were issued during the period.

The table below presents the activity of the current and noncurrent ~~frequent flyer~~loyalty liability and includes miles earned through travel and miles sold to participating companies, which are primarily through marketing agreements.


(in millions)	2018			2017			2019			2018
Balance at January 1	$	6,321		$	5,922		$	6,641		$	6,321
Mileage credits earned	2,322			2,193			720			731
Travel mileage credits redeemed	(1,976		)	(1,826		)	(692		)	(618		)
Non-travel mileage credits redeemed	(125		)	(114		)	(45		)	(40		)
Balance at September 30	$	6,542		$	6,175
Balance at March 31							$	6,624		$	6,394

The timing of mileage redemptions can vary widely; however, the majority of new miles are redeemed within two years.

~~Passenger~~ Revenue by Geographic Region

~~Passenger~~Operating revenue for the airline segment is recognized in a specific geographic region based on the origin, flight path and destination of each flight segment. The majority of the revenues of the refinery, consisting of fuel sales to the airline, have been eliminated in the Condensed Consolidated Financial Statements. The remaining operating revenue for the refinery segment is included in the domestic region. Our passenger and operating revenue by geographic region (as defined by the U.S. Department of Transportation) is summarized in the following table:


									Passenger Revenue				Operating Revenue
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,				Three Months Ended March 31,
(in millions)	2018		2017		2018		2017		2019		2018		2019		2018
Domestic	$	7,395	$	6,775	$	21,093	$	19,521	$	6,713	$	6,282	$	7,487	$	7,111
Atlantic	1,996		1,802		4,837		4,297		1,103		1,070		1,316		1,253
Latin America	675		693		2,228		2,226		855		830		964		917
Pacific	730		709		1,949		1,881		583		583		705		687
Total passenger revenue	$	10,796	$	9,979	$	30,107	$	27,925
Total									$	9,254	$	8,765	$	10,472	$	9,968

~~Cargo Revenue~~

~~Cargo revenue is recognized when we provide the transportation.~~

~~Other Revenue~~

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2018 2017 2018 2017
Ancillary businesses and refinery $ 433
$ 419
$ 1,475
$ 1,050
Loyalty program 369
317
1,075
939
Miscellaneous 129
155
388
454
Total other revenue $ 931
$ 891
$ 2,938
$ 2,443

~~Ancillary Businesses and Refinery.~~ Ancillary businesses and refinery includes aircraft maintenance and staffing services we provide to third parties, our vacation wholesale operations, our private jet operations and refinery production sales to third parties. Third-party refinery production sales are at or near cost; accordingly, the margin on these sales is de minimis. See Note 10, "Segments," for more information on revenue recognition within our refinery segment.

~~Loyalty Program.~~ Loyalty program revenues relate to brand usage and other performance obligations embedded in mileage credits sold, including redemption of mileage credits for non-travel awards. These revenues are included within the total cash sales from marketing agreements, discussed above.

~~Miscellaneous.~~ ~~Miscellaneous revenue is primarily composed of lounge access and codeshare revenues.~~

~~Accounts Receivable~~

Accounts receivable primarily consist of amounts due from credit card companies from the sale of passenger tickets, ancillary businesses and refinery sales, and other companies for the purchase of mileage credits under the SkyMiles program. We provide an allowance for uncollectible accounts equal to the estimated losses expected to be incurred based on historical chargebacks, write-offs, bankruptcies and other specific analyses. Bad debt expense was not material in any period presented.

~~Passenger Taxes and Fees~~

We are required to charge certain taxes and fees on our passenger tickets, including U.S. federal transportation taxes, federal security charges, airport passenger facility charges and foreign arrival and departure taxes. These taxes and fees are assessments on the customer for which we act as a collection agent. Because we are not entitled to retain these taxes and fees, we do not include such amounts in passenger revenue. We record a liability when the amounts are collected and reduce the liability when payments are made to the applicable government agency or operating carrier (i.e., for codeshare-related fees).

NOTE 3. FAIR VALUE MEASUREMENTS

Assets (Liabilities) Measured at Fair Value on a Recurring Basis


(in millions)	September 30, 2018			Level 1			Level 2			March 31, 2019		Level 1		Level 2
Cash equivalents	$	982		$	982		$	—		$	1,508	$	1,508	$	—
Short-term investments
U.S. government and agency securities	50			45			5
Asset- and mortgage-backed securities	91			—			91
Corporate obligations	258			—			258
Other fixed income securities	79			—			79
Restricted cash equivalents	1,268			1,268			—			1,075		1,075		—
Long-term investments	809			781			28			1,174		970		204
Hedge derivatives, net
Fuel hedge contracts	(29		)	(19		)	(10		)	7		1		6
Interest rate contracts	(38		)	—			(38		)	24		—		24
Foreign currency exchange contracts	(9		)	—			(9		)	8		—		8


(in millions)	December 31, 2017			Level 1			Level 2			December 31, 2018			Level 1		Level 2
Cash equivalents	$	1,357		$	1,357		$	—		$	1,222		$	1,222	$	—
Restricted cash equivalents										1,183			1,183		—
Short-term investments
U.S. government and agency securities	93			84			9			50			45		5
Asset- and mortgage-backed securities	173			—			173			36			—		36
Corporate obligations	467			—			467			90			—		90
Other fixed income securities	92			—			92			27			—		27
Restricted cash equivalents	38			38			—
Long-term investments	513			485			28			1,084			880		204
Hedge derivatives, net
Fuel hedge contracts	(66		)	(43		)	(23		)	15			20		(5		)
Interest rate contracts										1			—		1
Foreign currency exchange contracts	(17		)	—			(17		)	(3		)	—		(3		)

Cash Equivalents and Restricted Cash Equivalents. Cash equivalents generally consist of money market funds. Restricted cash equivalents generally consist of money market funds, ~~and~~ time deposits, commercial paper and negotiable certificates of deposit, which primarily relate to proceeds from debt issued to finance a portion of the construction costs for the new terminal facilities at the LaGuardia ~~Airport, certain self-insurance obligations and other airport commitments.~~Airport. The fair value of these cash equivalents is based on a market approach using prices ~~and other relevant information~~ generated by market transactions involving identical or comparable assets.

Short-Term Investments. The fair values of our short-term investments ~~are~~were based on a market approach using industry standard valuation techniques that ~~incorporate~~incorporated observable inputs such as quoted market prices, interest rates, benchmark curves, credit ratings of the security or other observable information and were recorded in prepaid expenses and other ~~observable information.~~on the Consolidated Balance Sheet ("balance sheet").

Long-Term Investments. Our long-term investments that are measured at fair value primarily consist of equity investments, ~~in the parent company of GOL, China Eastern and, as of January 1, 2018, Air France-KLM. Our equity investments~~which are valued based on market prices or other observable transactions and are ~~classified~~recorded in other noncurrent ~~assets.~~assets on our balance sheet. See Note 4, "Investments," for further information on our equity investments.

Hedge Derivatives. A portion of our derivative contracts are negotiated over-the-counter with counterparties without going through a public exchange. Accordingly, our fair value assessments give consideration to the risk of counterparty default (as well as our own credit risk). Such contracts are classified as Level 2 within the fair value hierarchy. The remainder of our hedge contracts are comprised of futures contracts, which are traded on a public exchange. These contracts are classified within Level 1 of the fair value hierarchy.

•

Fuel Contracts. Our fuel hedge portfolio consists of options, swaps and futures. ~~The hedge contracts include crude oil~~Option and ~~refined products, as these commodities are highly correlated with the price of fuel that we consume. Option~~swap contracts are valued under an income ~~approach~~approaches using option pricing models and discounted cash flow models, respectively, based on data either readily observable in public markets, derived from public markets or provided by counterparties who regularly trade in public markets. Volatilities used in these valuations ranged from 18% to 32% depending on the maturity dates, underlying commodities and strike prices of the option contracts. Swap contracts are valued under an income approach using a discounted cash flow model based on data either readily observable or provided by counterparties who regularly trade in public markets. Discount rates used in these valuations vary based on maturity dates utilizing the London Interbank Offered Rate ("LIBOR"). Futures contracts and options on futures contracts are traded on a public exchange and valued based on quoted market prices.


•	Interest Rate Contracts. Our interest rate derivatives are swap contracts, ~~and they~~which are valued based on data readily observable in public markets.


•	Foreign Currency Exchange Contracts. Our foreign currency derivatives consist of Japanese yen and Euro forward contracts and are valued based on data readily observable in public markets.

NOTE 4. INVESTMENTS

~~Short-Term Investments~~

The estimated fair values of short-term investments, which approximate cost at September 30, 2018, are shown below by contractual maturity. Actual maturities may differ from contractual maturities because issuers of the securities may have the right to retire our investments without prepayment penalties.

(in millions) Total
Due in one year or less $ 226
Due after one year through three years 228
Due after three years through five years 6
Due after five years 18
Total $ 478

Long-Term Investments

We have developed strategic relationships with a number of airlines and airline services companies through equity investments and other forms of cooperation and support. ~~Strategic~~Our equity investments reinforce our commitment to strategic relationships, which improve our coordination with these ~~airlines~~companies and enable our customers to seamlessly connect to more destinations while enjoying a consistent, high-quality travel experience.

During the three months ended March 31, 2019, we recorded a gain on our strategic investments of $100 million, which was recorded in unrealized gain on investments in our Condensed Consolidated Statements of Operations and Comprehensive Income ("income statement") under non-operating expense. This gain was driven by changes in stock prices and foreign currency fluctuations.

Equity Method Investments

We account for our investments in Aeroméxico, Virgin Atlantic andthe parent company of DAL Global Services, LLC ("DGS") under the equity method of accounting. Our portion of Aeroméxico's and Virgin Atlantic's financial results are recorded in miscellaneous in our income statement under non-operating expense, and our portion of DGS's financial results are recorded in contracted services in our income statement as this entity is integral to the operations of our business. If an equity method investment experiences a loss in fair value that is determined to be other than temporary, we will reduce our basis in the investment to fair value and record the loss in unrealized gain/(loss) on investments.

•

Aeroméxico. ~~We have a~~Our non-controlling ~~49% equity stake~~investment in Grupo Aeroméxico, the parent company of Aeromé~~xico.~~xico, is accounted for under the equity method because Grupo Aeroméxico's corporate bylaws (as authorized by the Mexican Foreign Investment Commission) limit our voting interest to 49%. However, due to Aeroméxico's share repurchase program, our equity stake in Grupo Aeroméxico has increased to 51%. The investment is recorded at $864 million as of March 31, 2019.


•	Virgin Atlantic. We have a non-controlling 49% equity stake in Virgin Atlantic Limited, the parent company of Virgin Atlantic ~~Airways.~~Airways, which is recorded at $356 million as of March 31, 2019.


•	DGS. We have a non-controlling 49% equity stake in the parent company of DGS, which is recorded at $111 million as of March 31, 2019. The parent company of DGS is a subsidiary of Argenbright Holdings, LLC that provides aviation-related, ground support equipment maintenance and professional security services.

Fair Value Investments

We account for ~~these~~the following investments ~~under the equity method of accounting and recognize our portion of their financial results~~at fair value with adjustments to fair value recognized in ~~miscellaneous~~unrealized gain on investments within non-operating expense in our income ~~statement under non-operating income/(expense).~~

~~Fair Value Investments~~statement.


•	Air France-KLM. We own 9% of the outstanding shares of Air ~~France-KLM. In addition, we have a joint venture with Air~~ France-KLM, ~~and have developed a combined long-term joint venture with Air France-KLM and Virgin Atlantic, subject to required regulatory approvals.~~which are recorded at $422 million as of March 31, 2019.


•	GOL. We own 9% of the outstanding capital stock of ~~GOL's~~GOL Linhas Aéreas Inteligentes, the parent company of VRG Linhas Aéreas (operating as GOL), through ~~our investment in~~ownership of its preferred shares. Our ownership stake is recorded at $217 million as of March 31, 2019.

Additionally, GOL has a $300 million five-year term loan facility with third parties, which we have guaranteed. Our ~~entire~~ guaranty is secured by GOL's ownership interest in Smiles, GOL's publicly traded loyalty program. Because GOL remains in compliance with the terms of its loan facility, we have not recorded a liability on our ~~Consolidated Balance Sheet~~balance sheet as of ~~September 30, 2018.~~March 31, 2019.


•	China Eastern. We own a 3% equity interest in China ~~Eastern.~~Eastern, which is recorded at $331 million as of March 31, 2019.


•	Alclear Holdings, LLC ("CLEAR"). We own a 7% equity interest in CLEAR.

~~We account for these investments at fair value with adjustments to fair value recognized in unrealized gain/(loss) on investments in our income statement under non-operating income/(expense).~~


•	Republic Airways. We own a 17% equity interest in Republic Airways Holdings Inc.

NOTE 5. DERIVATIVES AND RISK MANAGEMENT

Changes in fuel prices, interest rates and foreign currency exchange rates impact our results of operations. In an effort to manage our exposure to these risks, we enter into derivative contracts and adjust our derivative portfolio as market conditions change. We recognize derivative contracts at fair value on our balance sheet.

Fuel Price Risk

~~Changes in fuel prices materially impact our results of operations.~~ Our derivative contracts to hedge the financial risk from changing fuel prices are primarily related to Monroe’s refining margins.

~~During~~Interest Rate Risk

Our exposure to market risk from adverse changes in interest rates is primarily associated with our long-term debt obligations. Market risk associated with our fixed and variable rate long-term debt relates to the ~~three~~potential reduction in fair value and nine months ended September 30, 2018, we recorded fuel hedge gains of $7 million and fuel hedge losses of $85 million, respectively. During the three and nine months ended September 30, 2017, we recorded fuel hedge losses of $100 million and $3 million, respectively.negative impact to future earnings, respectively, from an increase in interest rates.

Foreign Currency Exchange Risk

We are subject to foreign currency exchange rate risk because we have revenue and expense denominated in foreign currencies with our primary exposures being the Japanese yen and the Euro. To manage exchange rate risk, we execute both our international revenue and expense transactions in the same foreign currency to the extent practicable. From time to time, we may also enter into foreign currency option and forward contracts. Our Japanese yen foreign currency exchange contracts are designated as cash flow hedges with ~~the effective portion of the~~ gains or losses on the derivatives recorded in passenger revenue in the income statement in the same period in which the hedged transaction affects earnings.

In January 2018, we entered into a three-year U.S. dollar-Euro cross currency swap with a notional value of €375 million. This swap was intended to mitigate foreign currency volatility resulting from our Euro-denominated investment in Air France-KLM. In response to favorable changes in interest rates and the U.S. dollar-Euro exchange rate, we settled the cross currency swap in August 2018. Upon settlement, realized gains of $12 million and $18 million were reflected in miscellaneous under non-operating income/(expense) during the three and nine months ended September 30, 2018, respectively. Subsequently, we entered into a new U.S. dollar-Euro cross currency swap with a notional value of €397 million and a maturity date in December 2020. During the three months ended September 30, 2018, we recorded an unrealized loss on this new swap of $12 million, which is reflected in unrealized gain/(loss) on investments under non-operating income/(expense).

~~Interest Rate Risk~~

In April 2018, we entered into interest rate swaps which are designated as fair value hedges. These swaps range from three to ten years and have a total notional value of $1.6 billion. The objective of the swaps is to manage toward a higher percentage of net floating rate debt by swapping payments of fixed rate interest on the unsecured notes that we issued in the June 2018 quarter for payments of floating rate interest. The gains/losses on the swaps are recorded within interest expense in the income statement and offset the gain/losses in the related debt obligations due to interest rate fluctuations.

Hedge Position as of ~~September 30, 2018~~March 31, 2019


(in millions)	Volume		Final Maturity Date	Prepaid Expenses and Other		Other Noncurrent Assets		Other Accrued Liabilities			Other Noncurrent Liabilities			Hedge Derivatives, net			Volume		Final Maturity Date	Prepaid Expenses and Other		Other Noncurrent Assets		Other Accrued Liabilities			Other Noncurrent Liabilities			Hedge Derivatives, net
Designated as hedges
Interest rate contracts (fair value hedges)	1,893	U.S. dollars	April 2028	$	1	$	—	$	(3	)	$	(36	)	$	(38	)	1,883	U.S. dollars	April 2028	$	1	$	28	$	(2	)	$	(3	)	$	24
Foreign currency exchange contracts	9,863	Japanese yen	November 2019	3		—		—			—			3			4,328	Japanese yen	November 2019	1		—		—			—			1
Not designated as hedges
Foreign currency exchange contract	397	Euros	December 2020	10		—		—			(22		)	(12		)
Foreign currency exchange contracts																	397	Euros	December 2020	10		—		—			(3		)	7
Fuel hedge contracts	215	gallons - crude oil and refined products	December 2019	45		15		(73		)	(16		)	(29		)	195	gallons - crude oil and refined products	December 2019	51		—		(44		)	—			7
Total derivative contracts	Total derivative contracts			$	59	$	15	$	(76	)	$	(74	)	$	(76	)	Total derivative contracts			$	63	$	28	$	(46	)	$	(6	)	$	39

Hedge Position as of December 31, ~~2017~~2018


(in millions)	Volume		Final Maturity Date	Prepaid Expenses and Other		Other Noncurrent Assets		Other Accrued Liabilities			Other Noncurrent Liabilities			Hedge Derivatives, net			Volume		Final Maturity Date	Prepaid Expenses and Other			Other Noncurrent Assets			Other Accrued Liabilities			Other Noncurrent Liabilities			Hedge Derivatives, net
Designated as hedges
Foreign currency exchange contracts	23,512	Japanese yen	November 2019	$	1	$	1	$	(13	)	$	(6	)	$	(17	)
																	1,893	U.S. dollars	April 2028	$	—		$	8		$	(7	)	$	—		$	1
Foreign currency exchange contracts	490	Canadian dollars	May 2020	$	1	$	1	$	(13	)	$	(6	)	$	(17	)	6,934	Japanese yen	November 2019	1			—			—			—			1

Foreign currency exchange contracts																	397	Euros	December 2020	13			—			—			(17		)	(4		)
Fuel hedge contracts	249	gallons - crude oil and refined products	May 2019														638		8			(694		)	(18		)	(66		)	219		gallons - crude oil and refined products	December 2019	30	—	(15	)	—	15
Total derivative contracts	Total derivative contracts			$	639	$	9	$	(707	)	$	(24	)	$	(83	)	Total derivative contracts			$	44		$	8		$	(22	)	$	(17	)	$	13

Balance Sheet Location of Hedged Item in Fair Value Hedges



	Carrying Amount of Hedge Instruments						Cumulative Amount of Fair Value Hedge Adjustments
(in millions)	March 31, 2019			December 31, 2018			March 31, 2019			December 31, 2018
Current maturities of long-term debt and finance leases	$	(16	)	$	(11	)	$	1		$	7
Long-term debt and finance leases	$	(1,878	)	$	(1,870	)	$	(25	)	$	(8	)

Offsetting Assets and Liabilities

We have master netting arrangements with our counterparties giving us the right to offset hedge assets and liabilities. However, we have elected not to offset the fair value positions recorded on our ~~Consolidated Balance Sheets.~~balance sheets. The following table shows the net fair value positions by counterparty had we elected to offset.


(in millions)	Prepaid Expenses and Other		Other Noncurrent Assets		Other Accrued Liabilities			Other Noncurrent Liabilities			Hedge Derivatives, net			Prepaid Expenses and Other		Other Noncurrent Assets		Other Accrued Liabilities			Other Noncurrent Liabilities			Hedge Derivatives, net
September 30, 2018
March 31, 2019
Net derivative contracts	$	14	$	—	$	(31	)	$	(59	)	$	(76	)	$	21	$	28	$	(5	)	$	(5	)	$	39
December 31, 2017
December 31, 2018
Net derivative contracts	$	—	$	1	$	(68	)	$	(16	)	$	(83	)	$	35	$	—	$	(13	)	$	(9	)	$	13

Designated Hedge Gains (Losses)

Gains (losses) related to our foreign currency exchange contracts are as follows:


	Effective Portion Reclassified from AOCI to Earnings					Effective Portion Recognized in Other Comprehensive Income					Gains/(Losses) Reclassified from AOCI to Earnings⁽¹⁾					Gains/(Losses) Recognized in Other Comprehensive Income
(in millions)	2018			2017		2018		2017			2019		2018			2019		2018
Three Months Ended September 30,
Three Months Ended March 31,
Foreign currency exchange contracts	$	(1	)	$	—	$	4	$	(15	)	$	—	$	(4	)	$	1	$	1
Nine Months Ended September 30,
Foreign currency exchange contracts	$	(4	)	$	11	$	3	$	(48	)


⁽¹⁾	Earnings on our foreign currency exchange contracts are recorded in passenger revenue in the income statement.

Not Designated Hedge Gains (Losses)

Gains (losses) related to our cross currency swap and fuel contracts are as follows:



	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Income
(in millions)		2019			2018
Three Months Ended March 31,
Foreign currency exchange contracts	Unrealized gain on investments, net	$	11		$	(16	)
Fuel hedge contracts	Aircraft fuel and related taxes	(54		)	2
Total		$	(43	)	$	(14	)

Credit Risk

To manage credit risk associated with our fuel price, interest rate and foreign currency hedging programs, we evaluate counterparties based on several criteria including their credit ratings.

NOTE 6. ~~LONG-TERM~~ DEBT

The following table summarizes our ~~long-term~~ debt:

Maturity
Interest Rate(s)⁽⁵⁾ Per Annum at
September 30, December 31,
(in millions) Dates September 30, 2018 2018 2017
Pacific Facilities:
Pacific Term Loan B-1 n/a n/a n/a $ —
$ 1,048
Pacific Revolving Credit Facility n/a n/a n/a —
—
2015 Credit Facilities:
Term Loan Facility n/a n/a n/a —
490
Revolving Credit Facility n/a n/a n/a —
—
Financing arrangements secured by aircraft:
Certificates⁽¹⁾
2018 to 2027 3.63% to 8.02% 2,010
2,380
Notes⁽¹⁾
2018 to 2026 2.75% to 6.54% 1,281
1,961
2018 Unsecured Notes 2021 to 2028 3.40% to 4.38% 1,600
—
2018 Unsecured Revolving Credit Facility 2021 to 2023 undrawn
variable⁽⁴⁾
—
—
NYTDC Special Facilities Revenue Bonds, Series 2018⁽¹⁾
2022 to 2036 4.00% to 5.00% 1,383
—
Other unsecured notes 2020 to 2022 2.60% to 3.63% 2,450
2,450
Other financings⁽¹⁾⁽²⁾
2019 to 2030 1.81% to 8.75% 140
210
Other revolving credit facilities⁽³⁾
2019 to 2021 undrawn
variable⁽⁴⁾
—
—
Total secured and unsecured debt 8,864
8,539
Unamortized premium (discount) and debt issue cost, net 17
(99 )
Total debt 8,881
8,440
Less: current maturities (1,080 ) (2,145 )
Total long-term debt $ 7,801
$ 6,295



	Maturity			Interest Rate(s)⁽¹⁾ Per Annum at			March 31,			December 31,
(in millions)	Dates			March 31, 2019			2019			2018
2019 Unsecured Term Loan	February 2020			3.39%	variable		$	700		$	—
Financing arrangements secured by aircraft:
Certificates⁽²⁾	2019	to	2027	3.20%	to	8.02%	2,276			1,837
Notes⁽²⁾	2019	to	2025	2.91%	to	6.46%	1,646			1,787
NYTDC Special Facilities Revenue Bonds, Series 2018⁽²⁾	2022	to	2036	4.00%	to	5.00%	1,383			1,383
Unsecured notes	2020	to	2028	2.60%	to	4.38%	4,050			4,050
Other financings⁽²⁾⁽³⁾	2019	to	2030	3.49%	to	8.75%	252			251
2018 Unsecured Revolving Credit Facility	2021	to	2023	undrawn	variable		—			—
Other revolving credit facilities	2019	to	2021	undrawn	variable		—			—
Total secured and unsecured debt							10,307			9,308
Unamortized premium and debt issue cost, net							82			60
Total debt							10,389			9,368
Less: current maturities							(2,954		)	(1,409		)
Total long-term debt							$	7,435		$	7,959


⁽¹⁾	~~Due in installments.~~


⁽²⁾	~~Primarily includes unsecured bonds~~Certain aircraft and ~~debt secured by certain accounts receivable and real estate.~~


⁽³⁾	Asother financings are comprised of ~~September 30, 2018, we have $537 million available under these revolving credit facilities, all of which~~variable rate debt. All variable rates are ~~undrawn.~~


⁽⁴⁾	~~Interest rate~~ equal to LIBOR (generally subject to a floor) or another index rate, in each case plus a specified margin.


⁽⁵⁾⁽²⁾	~~Certain aircraft~~Due in installments.


⁽³⁾	Primarily includes unsecured bonds and ~~other financings are comprised of variable rate debt.~~debt secured by certain accounts receivable and real estate.

~~2018~~2019 Unsecured ~~Notes~~Term Loan

During the June 2018 quarter, we issued $1.6 billion in aggregate principal amount of unsecured notes, consisting of $600 million of 3.4% Notes due 2021, $500 million of 3.8% Notes due 2023 and $500 million of 4.375% Notes due 2028 (collectively, the "Notes"). Concurrently with issuing the Notes, we entered into interest rate derivatives that swapped payments of fixed rate interest for payments of floating rate interest, which reduced our effective interest rate to one-month LIBOR plus 1.17%. See Note 5, "Derivatives," for more information about the interest rate swaps.

The Notes are equal in right of payment with our other unsubordinated indebtedness and senior in right of payment to our future subordinated debt. The Notes are subject to covenants that, among other things, limit our ability to incur liens securing indebtedness for borrowed money or capital leases and engage in mergers and consolidations or transfer all or substantially all of our assets, in each case subject to certain exceptions. The Notes are also subject to customary event of default provisions, including cross-defaults to other material indebtedness.

If we experience certain changes of control, followed by a ratings decline of any series of Notes by two of the ratings agencies to a rating below investment grade, we must offer to repurchase such series.

We used the net proceeds from the offering of the Notes to repay borrowings outstanding under our secured Pacific term loan B-1 facility and 2015 term loan facility and for general corporate purposes.

~~2018 Unsecured Revolving Credit Facility~~

~~During the June 2018 quarter,~~In February 2019, we entered into a ~~$2.65~~$1 billion term loan issued by two lenders and subsequently repaid $300 million in March 2019. This loan, which is unsecured, revolving credit facility, up to $500 million of which may be used for the issuance of letters of credit (the “Revolving Credit Facility”). The Revolving Credit Facility was undrawn at the time we entered into it and remains undrawn. The Revolving Credit Facility replaced the undrawn secured Pacific Revolving Credit Facility and the 2015 Revolving Credit Facility, both of which were terminated in conjunction with the repayment of the term loans described above.

~~The Revolving Credit Facility is split evenly into a $1.325 billion three-year facility and a $1.325 billion five-year facility. Borrowings on both facilities bear~~bears interest at a variable rate equal to LIBOR ~~or another index rate, in each case~~ plus a specified ~~margin.~~margin and is due in February 2020. We used the net proceeds of the term loan to accelerate planned 2019 repurchases under our share repurchase program.

~~NYTDC Special Facilities Revenue Bonds~~2019-1 EETC

~~During the June 2018 quarter, the New York Transportation Development Corporation~~In March 2019, we completed a $500 million offering of Pass Through Certificates, Series 2019-1 ("~~NYTDC"~~2019-1 EETC") ~~issued Special Facilities Revenue Bonds, Series 2018 (the "2018 Bonds") in the aggregate principal~~through a pass through trust. This amount of $1.4 billion. We entered into loan agreements with the NYTDC to use the proceeds from the 2018 Bonds to finance a portion of the construction costs for the new terminal facilities at the LaGuardia Airport. The proceeds from the 2018 Bonds are recorded in cash restricted for airport construction on the Consolidated Balance Sheet. Additional information about the construction project at the LaGuardia Airport is included in ~~Note 8, "Airport Development,"~~Certificates in ~~our Form 10-K.~~the table above. The details of the 2019-1 EETC, which is secured by 14 aircraft, are shown in the table below:

~~We are required to pay debt service on the 2018 Bonds through payments under loan agreements with NYTDC, and we have guaranteed the 2018 Bonds.~~



(in millions)	Total Principal		Fixed Interest Rate	Issuance Date	Final Maturity Date
2019-1 Class AA Certificates	$	425	3.204%	March 2019	April 2024
2019-1 Class A Certificates	75		3.404%	March 2019	April 2024
Total	$	500

Availability Under Revolving Credit Facilities

The table below shows availability under revolving credit facilities, all of which were undrawn, as of March 31, 2019:



(in millions)
2018 Unsecured Revolving Credit Facility	$	2,650
Other revolving credit facilities	389
Total availability under revolving credit facilities	$	3,039

In February 2019, we drew $750 million from our 2018 Unsecured Revolving Credit Facility for general corporate purposes, which was fully repaid in March 2019.

Fair Value of Debt

Market risk associated with our fixed- and variable-rate long-term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates. The fair value of debt, shown below, is principally based on reported market values, recently completed market transactions and estimates based on interest rates, maturities, credit risk and underlying collateral. Long-term debt is primarily classified as Level 2 within the fair value hierarchy.

(in millions) September 30,
2018 December 31,
2017
Total debt at par value $ 8,864
$ 8,539
Unamortized premium (discount) and debt issue cost, net

17
(99 )
Net carrying amount $ 8,881
$ 8,440

Fair value $ 9,000
$ 8,700



(in millions)	March 31, 2019		December 31, 2018
Total debt at par value	$	10,307	$	9,308
Unamortized premium and debt issue cost, net	82		60
Net carrying amount	$	10,389	$	9,368

Fair value	$	10,600	$	9,400

Covenants

We were in compliance with the covenants in our financings at ~~September 30, 2018.~~March 31, 2019.

NOTE 7. EMPLOYEE BENEFIT PLANS

The following table shows the components of net periodic (benefit) cost:


	Pension Benefits						Other Postretirement and Postemployment Benefits						Pension Benefits						Other Postretirement and Postemployment Benefits
(in millions)	2018			2017			2018			2017			2019			2018			2019			2018
Three Months Ended September 30,
Three Months Ended March 31,
Service cost	$	—		$	—		$	21		$	22		$	—		$	—		$	21		$	21
Interest cost	195			213			32			35			208			195			34			32
Expected return on plan assets	(329		)	(286		)	(17		)	(17		)	(297		)	(329		)	(12		)	(17		)
Amortization of prior service credit	—			—			(7		)	(7		)	—			—			(2		)	(7		)
Recognized net actuarial loss	66			66			10			8			73			66			9			10
Settlements	—			—			—			—
Net (benefit) cost	$	(68	)	$	(7	)	$	39		$	41

Nine Months Ended September 30,
Service cost	$	—		$	—		$	64		$	66
Interest cost	586			639			95			105
Expected return on plan assets	(988		)	(858		)	(50		)	(51		)
Amortization of prior service credit	—			—			(20		)	(21		)
Recognized net actuarial loss	199			198			27			24
Settlements	4			—			—			—
Net (benefit) cost	$	(199	)	$	(21	)	$	116		$	123
Net periodic (benefit) cost													$	(16	)	$	(68	)	$	50		$	39

Service cost is recorded in salaries and related costs in the income statement while all other components are recorded within miscellaneous under non-operating ~~income/(expense).~~expense.

NOTE 8. COMMITMENTS AND CONTINGENCIES

Aircraft Purchase ~~and Lease~~ Commitments

Our future aircraft purchase commitments, which enable our fleet transformation and goal of replacing 25% of our mainline fleet by 2023, totaled ~~approximately $15.5~~$15.1 billion at ~~September 30, 2018:~~March 31, 2019:


(in millions)	Total		Total
Three months ending December 31, 2018	$	640
2019	3,330
Nine months ending December 31, 2019			$	2,110
2020	3,420		3,140
2021	3,920		3,260
2022	2,440		2,790
2023			1,850
Thereafter	1,770		1,940
Total	$	15,520	$	15,090

Our future aircraft purchase commitments included the following aircraft at ~~September 30, 2018:~~March 31, 2019:



Aircraft Type	Purchase Commitments
A220-100 ~~(formerly called CS100)~~	7531
A220-300	50
A321-200	6453
A321-200neo	100
A330-900neo	2535
A350-900	1412
B-737-900ER	269
CRJ-900	1912
Total	~~323~~302

In June 2018, we signed an agreement with Bombardier Commercial Aircraft to purchase 20 CRJ-900 aircraft. These aircraft will be operated by SkyWest Airlines, Inc., and will replace older dual-class aircraft that they own or lease. The new aircraft will be delivered through 2020.

Legal Contingencies

We are involved in various legal proceedings related to employment practices, environmental issues, antitrust matters and other matters concerning our business. We record liabilities for losses from legal proceedings when we determine that it is probable that the outcome in a legal proceeding will be unfavorable and the amount of loss can be reasonably estimated. Although the outcome of the legal proceedings in which we are involved cannot be predicted with certainty, we believe that the resolution of ~~these~~current matters will not have a material adverse effect on our Condensed Consolidated Financial Statements.

Other Contingencies

General Indemnifications

We are the lessee under many commercial real estate leases. It is common in these transactions for us, as the lessee, to agree to indemnify the lessor and the lessor's related parties for tort, environmental and other liabilities that arise out of or relate to our use or occupancy of the leased premises. This type of indemnity would typically make us responsible to indemnified parties for liabilities arising out of the conduct of, among others, contractors, licensees and invitees at, or in connection with, the use or occupancy of the leased premises. This indemnity often extends to related liabilities arising from the negligence of the indemnified parties but usually excludes any liabilities caused by either their sole or gross negligence or their willful misconduct.

Our aircraft and other equipment lease and financing agreements typically contain provisions requiring us, as the lessee or obligor, to indemnify the other parties to those agreements, including certain of those parties' related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or other equipment.

We believe that our insurance would cover most of our exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft and other equipment lease and financing agreements described above. While our insurance does not typically cover environmental liabilities, we have insurance policies in place as required by applicable environmental laws.

Some of our aircraft and other financing transactions include provisions that require us to make payments to preserve an expected economic return to the lenders if that economic return is diminished due to specified changes in law or regulations. In some of these financing transactions, we also bear the risk of changes in tax laws that would subject payments to non-U.S. lenders to withholding taxes.

We cannot reasonably estimate our potential future payments under the indemnities and related provisions described above because we cannot predict (1) when and under what circumstances these provisions may be triggered and (2) the amount that would be payable if the provisions were triggered because the amounts would be based on facts and circumstances existing at such time.

Other

We have certain contracts for goods and services that require us to pay a penalty, acquire inventory specific to us or purchase contract-specific equipment, as defined by each respective contract, if we terminate the contract without cause prior to its expiration date. Because these obligations are contingent on our termination of the contract without cause prior to its expiration date, no obligation would exist unless such a termination occurs.

NOTE 9. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables show the components of accumulated other comprehensive loss:

(in millions)
Pension and Other Benefits Liabilities⁽³⁾
Derivative Contracts and Other Available-for-Sale Investments Total
Balance at January 1, 2018 (net of tax effect of $1,400) $ (7,812 ) $ 85
$ 106
$ (7,621 )
Changes in value (net of tax effect of $6) 13
7
—
20
Reclassifications into retained earnings (net of tax effect of $61)⁽¹⁾
—
—
(106 ) (106 )
Reclassifications into earnings (net of tax effect of $51)⁽²⁾
164
8
—
172
Balance at September 30, 2018 (net of tax effect of $1,404) $ (7,635 ) $ 100
$ —
$ (7,535 )



(in millions)	Pension and Other Benefit Liabilities⁽³⁾			Derivative Contracts and Other			Available-for-Sale Investments		Total
Balance at January 1, 2019 (net of tax effect of $1,492)	$	(7,925	)	$	100		$	—	$	(7,825	)
Changes in value (net of tax effect of $1)	—			(2		)	—		(2		)
Reclassifications into earnings (net of tax effect of $19)⁽¹⁾	60			1			—		61
Balance at March 31, 2019 (net of tax effect of $1,474)	$	(7,865	)	$	99		$	—	$	(7,766	)

Balance at January 1, 2017 (net of tax effect of $1,458) $ (7,714 ) $ 114
$ (36 ) $ (7,636 )
Changes in value (net of tax effect of $4) —
(23 ) 76
53
Reclassifications into earnings (net of tax effect of $63)⁽²⁾
122
(7 ) (8 ) 107
Balance at September 30, 2017 (net of tax effect of $1,391) $ (7,592 ) $ 84
$ 32
$ (7,476 )




Balance at January 1, 2018 (net of tax effect of $1,400)	$	(7,812	)	$	85		$	106		$	(7,621	)
Changes in value (net of tax effect of $2)	—			(7		)	—			(7		)
Reclassifications into retained earnings (net of tax effect of $61)⁽²⁾	—			—			(106		)	(106		)
Reclassifications into earnings (net of tax effect of $15)⁽¹⁾	51			2			—			53
Balance at March 31, 2018 (net of tax effect of $1,448)	$	(7,761	)	$	80		$	—		$	(7,681	)


⁽¹⁾	The reclassification into retained earnings relates to our investments in GOL, China Eastern and other available-for-sale investments, and the related conversion to accounting for changes in fair value of these investments from AOCI to the income statement. See Note 1, "Summary of Significant Accounting Policies," for more information.


⁽²⁾	Amounts reclassified from AOCI for pension and other ~~benefits~~benefit liabilities and for derivative contracts designated as foreign currency cash flow hedges are recorded in miscellaneous and in passenger revenue, respectively, in the income statement.

⁽²⁾

The reclassification into retained earnings ~~for investments~~ relates to our ~~investment~~investments in ~~Grupo Aeroméxico~~GOL, China Eastern and other previously designated available-for-sale investments, and the related conversion to accounting ~~under~~for changes in fair value of these investments from AOCI to the ~~equity method. The reclassification of the unrealized gain was recorded to non-operating income/(expense) in our~~ income statement.


⁽³⁾	Includes ~~$700~~$688 million of deferred income tax expense primarily related to pension and other benefit obligations that will not be recognized in net income until these obligations are fully extinguished. We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to continuing operations.

NOTE 10. SEGMENTS

Refinery Operations

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 three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 was ~~$1.1 billion and $3.1 billion, respectively, compared to $910~~$732 million and ~~$2.4 billion, respectively, for the three and nine months ended September 30, 2017.~~$876 million, respectively.

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.


(in millions)	Airline		Refinery			Intersegment Sales/Other				Consolidated		Airline		Refinery			Intersegment Sales/Other				Consolidated
Three Months Ended September 30, 2018
Three Months Ended March 31, 2019
Operating revenue:												$	10,424	$	1,283						$	10,472
Sales to airline segment																	$	(271	)	⁽¹⁾
Exchanged products																	(732		)	⁽²⁾
Sales of refined products																	(232		)	⁽³⁾
Operating income (loss)												1,054		(34		)	—				1,020
Interest expense (income), net												92		(9		)	—				83
Depreciation and amortization												592		23			—				615
Total assets, end of period												60,343		1,498			—				61,841
Capital expenditures												1,350		10			—				1,360

Three Months Ended March 31, 2018
Operating revenue:	$	11,845	$	1,609						$	11,953	$	9,755	$	1,491						$	9,968
Sales to airline segment						$	(328	)	⁽¹⁾								$	(262	)	⁽¹⁾
Exchanged products						(1,110		)	⁽²⁾								(876		)	⁽²⁾
Sales of refined products						(63		)	⁽³⁾								(140		)	⁽³⁾
Operating income	1,630		12			—				1,642		800		44			—				844
Interest expense (income), net	94		(10		)	—				84		97		(5		)	—				92
Depreciation and amortization	564		16			—				580		588		15			—				603
Total assets, end of period	53,103		1,900			—				55,003		56,929		2,039			—				58,968
Capital expenditures	928		39			—				967		1,250		15			—				1,265

Three Months Ended September 30, 2017
Operating revenue:	$	10,932	$	1,357						$	11,061
Sales to airline segment						$	(239	)	⁽¹⁾
Exchanged products						(910		)	⁽²⁾
Sales of refined products						(79		)	⁽³⁾
Operating income	1,786		37			—				1,823
Interest expense, net	100		—			—				100
Depreciation and amortization	560		11			—				571
Total assets, end of period	50,639		1,936			—				52,575
Capital expenditures	901		40			—				941


⁽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.~~

(in millions) Airline Refinery Intersegment Sales/Other Consolidated
Nine Months Ended September 30, 2018
Operating revenue: $ 33,159
$ 4,767
$ 33,696
Sales to airline segment $ (866 )
⁽¹⁾

Exchanged products (3,081 )
⁽²⁾

Sales of refined products (283 )
⁽³⁾

Operating income 4,060
101
—
4,161
Interest expense (income), net 297
(23 ) —
274
Depreciation and amortization 1,732
48
—
1,780
Capital expenditures 3,746
67
—
3,813

Nine Months Ended September 30, 2017
Operating revenue: $ 30,653
$ 3,624
$ 30,910
Sales to airline segment $ (622 )
⁽¹⁾

Exchanged products (2,399 )
⁽²⁾

Sales of refined products (346 )
⁽³⁾

Operating income 4,718
87
—
4,805
Interest expense, net 297
—
—
297
Depreciation and amortization 1,607
32
—
1,639
Capital expenditures 2,605
126
—
2,731


⁽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.

~~NOTE 11. RESTRUCTURING~~

~~The following table shows the balances and activity for restructuring charges:~~

(in millions) Lease Restructuring
Liability as of January 1, 2018 $ 237
Payments (54 )
Additional expenses and other 1
Liability as of September 30, 2018 $ 184

Restructuring charges primarily include remaining lease payments for permanently grounded aircraft related to domestic and Pacific fleet restructurings. The domestic fleet restructuring involves replacing a portion of our 50-seat regional fleet with more efficient and customer preferred aircraft and replacing older, less cost effective B-757-200 aircraft with B-737-900ER aircraft. The Pacific fleet restructuring resulted in the 2017 retirement of the B-747-400 fleet, which is being replaced with smaller-gauge, widebody aircraft to better match capacity with demand.

NOTE ~~12.~~11. EARNINGS PER SHARE

We calculate basic earnings per share by dividing net income by the weighted average number of common shares outstanding, excluding restricted shares. We calculate diluted earnings per share by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of outstanding share-based awards, including stock options and restricted stock awards. Antidilutive common stock equivalents excluded from the diluted earnings per share calculation are not material. The following table shows the computation of basic and diluted earnings per share:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(in millions, except per share data)	2018		2017		2018		2017		2019		2018
Net income	$	1,312	$	1,159	$	2,884	$	2,907	$	730	$	557

Basic weighted average shares outstanding	686		716		695		724		665		704
Dilutive effect of share-based awards	2		3		2		3		2		2
Diluted weighted average shares outstanding	688		719		697		727		667		706

Basic earnings per share	$	1.91	$	1.62	$	4.15	$	4.01	$	1.10	$	0.79
Diluted earnings per share	$	1.91	$	1.61	$	4.14	$	4.00	$	1.09	$	0.79

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~September 2018~~March 2019 Quarter Financial Highlights

Our pre-tax income for the ~~September 2018~~March 2019 quarter was ~~$1.7 billion,~~$946 million, representing a ~~$102~~$214 million ~~decrease~~increase compared to the corresponding prior year quarter primarily resulting from improvements across our business, including a 7.8% percent increase in premium product ticket revenue, and our amended agreements with American Express. These increases were partially offset by higher fuel ~~expense, offset in large part by increased passenger revenue.~~expense. Pre-tax income, adjusted ~~for special items~~ (a non-GAAP financial measure) was ~~$1.6 billion, a decrease~~$832 million, an increase of ~~$94~~$149 million compared to the corresponding prior year period. ~~Special items~~Adjustments for the ~~September 2018~~March 2019 quarter were primarily related to ~~$50 million of net~~ unrealized gains on our equity investments.

Revenue. Compared to the ~~September 2017~~March 2018 quarter, our operating revenue increased ~~$892~~$504 million, or ~~8.1%~~5.1%, ~~on 3.9%~~primarily from growth in all components of passenger revenue with premium product ticket revenue driving nearly half of the improvement, and an increase in other revenue from our amended agreements with American Express. The improvement in operating revenue, partially offset by 5.0% higher capacity, ~~which was accompanied by strong demand and fare increases implemented~~generated a 0.1% increase in ~~response to higher fuel prices. Total~~total revenue per available seat mile ("TRASM") ~~increased 4.0%~~ and a 2.4% increase in TRASM, adjusted (a non-GAAP financial measure) ~~increased 4.3%~~ compared to the September 2017 quarter, led by (1) unit revenue growth in three of our four geographic regions, (2) broad-based strength in both leisure and business demand and (3) foreign currency favorability in the Atlantic and Pacific regions. TRASM growth was partially offset by nearly a half point of negative impact from Hurricane Florence in September 2018.March 2018 quarter.

Operating Expense. Total operating expense increased ~~$1.1 billion,~~$328 million, or ~~11.6%, and our~~3.6%. Our consolidated operating cost per available seat mile ("CASM") ~~increased 7.4%~~decreased 1.4% to ~~14.15~~15.14 cents compared to the ~~September 2017~~March 2018 quarter, primarily due to strong cost controls and higher capacity, which were partially offset by higher fuel expense. The increase in fuel expense primarily resulted from ~~an approximately 36% increase in the market price per gallon of fuel combined with~~ a 2%3% increase in consumption ~~compared to the September 2017 quarter.~~

and reduced profitability at our refinery. Non-fuel unit costs ("CASM-Ex" a non-GAAP financial measure) ~~of 9.62~~decreased 0.2% to 11.06 cents ~~was unchanged~~ compared to the ~~September 2017~~March 2018 quarter.

Non-Operating ~~Income/(Expense).~~Results. Total non-operating ~~income~~expense was ~~$32~~$74 million in the ~~September~~March 2019 quarter, $38 million lower than the March 2018 ~~quarter compared to expense of $47 million in the September 2017~~ quarter, primarily due to ~~$50 million of net~~an increase in unrealized gains on our equity investments, ~~and~~partially offset by lower ~~interest expense. In 2017, before we adopted the new financial instruments standard, we recorded unrealized gains/(losses) on our equity investments in AOCI.~~pension income.

The non-GAAP financial measures for pre-tax income, adjusted, ~~for special items,~~ TRASM, adjusted, and CASM-Ex, used above, are defined and reconciled in "Supplemental Information" below.

Results of Operations - Three Months Ended ~~September 30, 2018~~March 31, 2019 and ~~2017~~2018

Operating Revenue


	Three Months Ended September 30,						Increase (Decrease)			% Increase (Decrease)		Three Months Ended March 31,						Increase (Decrease)			% Increase (Decrease)
(in millions)	2018			2017			Increase (Decrease)			% Increase (Decrease)		2019			2018			Increase (Decrease)			% Increase (Decrease)
Ticket - Main cabin	$	5,873		$	5,724		$	149		2.6	%	$	4,721		$	4,622		$	99		2.1	%
Ticket - Business cabin and premium products	3,680			3,088			592			19.2	%	3,267			3,031			236			7.8	%
Loyalty travel awards	678			622			56			9.0	%	692			618			74			12.0	%
Travel-related services	565			545			20			3.7	%	574			494			80			16.2	%
Total passenger revenue	$	10,796		$	9,979		$	817		8.2	%	$	9,254		$	8,765		$	489		5.6	%
Cargo	226			191			35			18.5	%	192			202			(10		)	(4.9	)%
Other	931			891			40			4.4	%	1,026			1,001			25			2.5	%
Total operating revenue	$	11,953		$	11,061		$	892		8.1	%	$	10,472		$	9,968		$	504		5.1	%

TRASM (cents)		16.40	¢		15.77	¢		0.63	¢	4.0	%		16.78	¢		16.77	¢		0.01	¢	0.1	%
Third-party refinery sales⁽¹⁾	(0.15		)	(0.18		)	0.03			NM		(0.08		)	(0.36		)	0.28			NM
DGS sale adjustment⁽¹⁾												—			(0.10		)	0.10			NM
TRASM, adjusted (cents)		16.25	¢		15.58	¢		0.67	¢	4.3	%		16.70	¢		16.31	¢		0.39	¢	2.4	%


⁽¹⁾	For additional information on ~~adjusting for third-party refinery sales,~~adjustments to TRASM, see "Supplemental Information" below.

Ticket and Loyalty Travel Awards Revenue

Ticket, including both main cabin and business cabin and premium products, and loyalty travel awards revenue increased ~~$741~~$335 million and ~~$56~~$74 million, respectively, compared to the ~~September 2017~~March 2018 quarter, consistent with the discussion of passenger revenue by geographic region ~~discussion~~ below. Business cabin and premium products ticket revenue includes revenues from fare products other than main cabin, including Delta One, Delta Premium Select, First Class and Comfort+. The growth in ~~this~~ ticket revenue primarily results from an increased number of premium seats resulting from new aircraft deliveries, the continued expansion of our Branded Fares ~~product~~products and strength in business demand.

Passenger Revenue by Geographic Region


			Increase (Decrease) vs. Three Months Ended September 30, 2017															Increase (Decrease) vs. Three Months Ended March 31, 2018
(in millions)	Three Months Ended September 30, 2018		Passenger Revenue		RPMs(Traffic)		ASMs(Capacity)		Passenger Mile Yield		PRASM		Load Factor			Three Months Ended March 31, 2019		Passenger Revenue		RPMs(Traffic)		ASMs(Capacity)		Passenger Mile Yield		PRASM		Load Factor
Domestic	$	7,395	9.2	%	5.7	%	5.6	%	3.2	%	3.3	%	0.1		pts	$	6,713	6.9	%	5.9	%	5.9	%	0.9	%	0.9	%	0.1		pts
Atlantic	1,996		10.7	%	3.5	%	2.7	%	7.0	%	7.8	%	0.7		pts	1,103		3.0	%	5.5	%	5.8	%	(2.3	)%	(2.6	)%	(0.2	)	pts
Latin America	675		(2.6	)%	(1.8	)%	0.3	%	(0.8	)%	(2.9	)%	(1.9	)	pts	855		3.0	%	0.1	%	0.5	%	2.9	%	2.4	%	(0.3	)	pts
Pacific	730		3.0	%	(3.1	)%	(1.7	)%	6.3	%	4.8	%	(1.3	)	pts	583		—	%	1.6	%	2.9	%	(1.5	)%	(2.8	)%	(1.1	)	pts
Total	$	10,796	8.2	%	3.8	%	3.9	%	4.2	%	4.2	%	—		pts	$	9,254	5.6	%	4.8	%	5.0	%	0.8	%	0.6	%	(0.2	)	pts

Passenger revenue increased ~~$817~~$489 million, or ~~8.2%~~5.6%, compared to the ~~September 2017~~March 2018 quarter. Passenger revenue per available seat mile ("PRASM") increased 0.6%, and passenger mile yield ~~both~~ increased ~~4.2%~~0.8% on ~~3.9%~~5.0% higher capacity. Load factor ~~was flat to~~decreased 0.2 pts from the prior year quarter ~~at 86.9%~~to 82.7%.

~~Despite nearly half a point of negative impact from Hurricane Florence in September 2018, unit revenues~~Unit revenue of the domestic region increased ~~3.3%~~0.9%, resulting from our commercial initiatives, including ~~Branded Fares,~~our premium products, and strong demand and fare increases implemented throughout 2018 in response to higher fuel prices. Our domestic operations have generated six consecutive quarters of year-over-year unit revenue growth, including business yield growth throughout 2018. During the September 2018 quarter, we signed a definitive agreement with WestJet that, after regulatory approval, will create a transborder joint venture, providing enhanced offerings and more choice for customers.demand.

Passenger ~~revenues~~revenue related to our international regions increased ~~6.1%~~2.3% year-over-year on capacity increases in all regions, which were partially offset by the ~~Atlantic and Latin America regions. During the quarter, we continued to expand our Branded Fares product and generated unit revenue increases in the Atlantic and Pacific regions.~~negative impact of foreign currency fluctuations.

In the Atlantic, unit ~~revenues increased~~revenue decreased due to ~~strengthening yields from business cabin traffic, efforts to recapture~~foreign currency fluctuations between the ~~cost of higher fuel~~U.S. dollar and the ~~benefit provided by foreign currency fluctuations. Yield growth was particularly strong~~Euro and British pound and increased capacity in the region as we ~~continue~~invested in new routes to ~~leverage~~ our ~~alliance partners' hub positions~~hubs in ~~Europe's leading~~Amsterdam and Paris. Growth in premium product demand partially mitigated the unit revenue decrease.

Unit revenue increased in Latin America for the second consecutive quarter as a result of yield growth, mainly in Mexico and the Caribbean. Our joint cooperation agreement with Aeroméxico continues to generate revenue growth in both the beach and business markets of ~~London, Amsterdam and Paris.~~Mexico, while the Caribbean continues to rebound from the 2017 hurricanes.

Unit ~~revenues~~revenue decreased in ~~Latin America~~the Pacific region primarily due to foreign currency fluctuations and macroeconomic challenges, particularly in Brazil and Argentina. These declines have been partially mitigated by recovery in Caribbean markets following hurricane damage during the September 2017 quarter and results generated by our joint cooperation agreement with Aeroméxico. Since this agreement's inception in May 2017, we have combined with Aeroméxico to launch nine new routes between the United States and Mexico, including Detroit to Querétaro in the September 2018 quarter. The joint agreement provides our customers with improved connectivity, more convenient schedules and increasingly seamless service between the two carriers.

Unit revenues increased in the Pacific region due to yield strength across all markets, particularly Japan and Korea, in addition to the benefit provided by foreign currency fluctuations. We launched achallenging fare environments. Our joint venture with Korean Air continues to provide benefits as Korea was the strongest performing market in ~~May 2018 which provides more opportunities for our customers to reach destinations throughout Asia and enabled us to generate double-digit unit revenue growth in Korea~~the region during the ~~September 2018~~ quarter.

Other Revenue


	Three Months Ended September 30,				Increase (Decrease)			% Increase (Decrease)		Three Months Ended March 31,				Increase (Decrease)			% Increase (Decrease)
(in millions)	2018		2017		Increase (Decrease)			% Increase (Decrease)		2019		2018		Increase (Decrease)			% Increase (Decrease)
Loyalty program										$	474	$	347	$	127		36.6	%
Ancillary businesses and refinery	$	433	$	419	$	14		3.3	%	369		521		(152		)	(29.2	)%
Loyalty program	369		317		52			16.4	%
Miscellaneous	129		155		(26		)	(16.8	)%	183		133		50			37.6	%
Total other revenue	$	931	$	891	$	40		4.4	%	$	1,026	$	1,001	$	25		2.5	%

Loyalty Program. Loyalty program revenues relate to brand usage by third parties and other performance obligations embedded in mileage credits sold, including redemption of mileage credits for non-travel awards.

Effective January 1, 2019, we amended our co-brand agreement with American Express, and we also amended other agreements with American Express during the March quarter. The new agreements increase the value we receive and extend the terms to 2029. Under the agreements, we sell mileage credits to American Express and allow American Express to market its services or products using our brand and customer database. The products and services sold with the mileage credits (such as award travel, priority boarding, baggage fee waivers, lounge access and the use of our brand) are consistent with previous agreements. We continue to use the accounting method that allocates the consideration received based on the relative selling prices of those products and services.

With the amended agreements, the relative value of the brand component has increased, resulting in an additional $130 million primarily within other revenue during the March 2019 quarter. Including this amount, we expect the amended agreements to generate incremental revenues of approximately $500 million during 2019.

Ancillary Businesses and Refinery. Ancillary businesses and refinery includes aircraft maintenance ~~and staffing~~ services we provide to third parties, our vacation wholesale operations, our private jet operations and refinery sales to third parties.

~~Loyalty Program.~~ ~~Loyalty program~~ Refinery sales to third parties, which are at or near cost, decreased $164 million compared to the March 2018 quarter. March 2018 quarter results also included $60 million of revenue from DGS, which was sold in December 2018 and is no longer reflected in ancillary businesses and refinery. These decreases were partially offset by growth in our Maintenance, Repair and Overhaul ("MRO") revenues, ~~relate~~which increased $64 million to ~~brand usage and other performance obligations embedded in mileage credits sold, including redemption of mileage credits for non-travel awards.~~$228 million during the March 2019 quarter.

Miscellaneous. Miscellaneous revenue is primarily composed of lounge access and codeshare revenues.

Operating Expense


	Three Months Ended September 30,				Increase (Decrease)			% Increase (Decrease)		Three Months Ended March 31,				Increase (Decrease)			% Increase (Decrease)
(in millions)	2018		2017							2019		2018
Salaries and related costs	$	2,753	$	2,619	$	134		5.1	%	$	2,639	$	2,584	$	55		2.1	%
Aircraft fuel and related taxes	2,498		1,785		713			39.9	%	1,978		1,856		122			6.6	%
Regional carriers expense, excluding fuel	903		887		16			1.8	%	893		838		55			6.6	%
Contracted services										632		544		88			16.2	%
Depreciation and amortization	580		571		9			1.6	%	615		603		12			2.0	%
Contracted services	562		543		19			3.5	%
Aircraft maintenance materials and outside repairs										476		435		41			9.4	%
Passenger commissions and other selling expenses	535		499		36			7.2	%	427		427		—			—	%
Landing fees and other rents										419		389		30			7.7	%
Ancillary businesses and refinery	410		387		23			5.9	%	351		493		(142		)	(28.8	)%
Aircraft maintenance materials and outside repairs	371		390		(19		)	(4.9	)%
Landing fees and other rents	421		392		29			7.4	%
Passenger service										271		263		8			3.0	%
Profit sharing	395		314		81			25.8	%	220		188		32			17.0	%
Passenger service	329		331		(2		)	(0.6	)%
Aircraft rent	99		89		10			11.2	%	102		94		8			8.5	%
Other	455		431		24			5.6	%	429		410		19			4.6	%
Total operating expense	$	10,311	$	9,238	$	1,073		11.6	%	$	9,452	$	9,124	$	328		3.6	%

Aircraft Fuel and Related Taxes. Fuel expense increased ~~$713~~$122 million compared to the prior year quarter ~~from~~primarily due to a 3% increase in consumption and reduced profitability at our refinery, which were partially offset by an approximately ~~36% increase~~2% decrease in the market price per gallon of ~~fuel and a 2% increase in consumption.~~fuel.

The table below shows the impact of hedging and the refinery on fuel expense and average price per gallon, adjusted (non-GAAP financial measures):


										Average Price Per Gallon																		Average Price Per Gallon
	Three Months Ended September 30,						Change			Three Months Ended September 30,						Change			Three Months Ended March 31,						Change			Three Months Ended March 31,						Change
(in millions, except per gallon data)	2018			2017			Change			2018			2017			Change			2019			2018			Change			2019			2018			Change
Fuel purchase cost⁽¹⁾	$	2,526		$	1,822		$	704		$	2.23		$	1.64		$	0.59		$	1,936		$	1,927		$	9		$	2.01		$	2.06		$	(0.05	)
Airline segment fuel hedge impact	(16		)	—			(16		)	(0.01		)	—			(0.01		)
Fuel hedge impact																			8			(27		)	35			0.01			(0.03		)	0.04
Refinery segment impact	(12		)	(37		)	25			(0.01		)	(0.03		)	0.02			34			(44		)	78			0.04			(0.05		)	0.09
Total fuel expense	$	2,498		$	1,785		$	713		$	2.21		$	1.61		$	0.60		$	1,978		$	1,856		$	122		$	2.06		$	1.98		$	0.08
MTM adjustments and settlements⁽²⁾	16			74			(58		)	0.01			0.07			(0.06		)	(8		)	27			(35		)	(0.01		)	0.03			(0.04		)
Total fuel expense, adjusted	$	2,514		$	1,859		$	655		$	2.22		$	1.68		$	0.54		$	1,970		$	1,883		$	87		$	2.05		$	2.01		$	0.04


⁽¹⁾	Market price for jet fuel at airport locations, including related taxes and transportation costs.


⁽²⁾	Mark-to-market ("MTM") adjustments and settlements include the effects of the derivative transactions disclosed in Note 5 of the Notes to the Condensed Consolidated Financial Statements. For ~~additional information and~~ the reason ~~for adjusting~~ fuel expense is adjusted for MTM adjustments and settlements, see "Supplemental Information" below.

~~Profit Sharing.~~ Contracted Services. The increase in ~~profit sharing is~~contracted services expense predominantly relates to services performed by DGS that were recorded in salaries and related costs prior to the ~~alignment~~sale of our profit sharing programs under a single formula, which was implemented October 1, 2017. Under this formula, our profit sharing program pays 10% to all eligible employees for the first $2.5 billion of annual profit and 20% of annual profit above $2.5 billion. Prior to October 1, 2017, the profit sharing program for merit, ground and flight attendant employees paid 10% of annual profit (as defined by the terms of the program) and, if we exceeded our prior-year results, the program paid 20% of the year-over-year increasethat business in ~~profit to eligible employees.~~December 2018.

~~Results~~Aircraft Maintenance Materials and Outside Repairs. Aircraft maintenance materials and outside repairs consist of ~~Operations - Nine Months Ended September 30, 2018 and 2017~~

~~Operating Revenue~~

Nine Months Ended September 30, Increase (Decrease) % Increase (Decrease)
(in millions) 2018 2017
Ticket - Main cabin $ 16,158
$ 15,914
$ 244
1.5 %
Ticket - Business cabin and premium products 10,356
8,609
1,747
20.3 %
Loyalty travel awards 1,976
1,826
150
8.2 %
Travel-related services 1,617
1,576
41
2.6 %
Total passenger revenue $ 30,107
$ 27,925
$ 2,182
7.8 %
Cargo 651
542
109
20.0 %
Other 2,938
2,443
495
20.3 %
Total operating revenue $ 33,696
$ 30,910
$ 2,786
9.0 %

TRASM (cents)
16.78 ¢
15.91 ¢
0.87 ¢ 5.5 %
Third-party refinery sales⁽¹⁾
(0.27 ) (0.13 ) (0.14 ) NM
TRASM, adjusted (cents)
16.51 ¢
15.78 ¢
0.73 ¢ 4.6 %


⁽¹⁾	~~For additional information on adjusting for third-party refinery sales, see "Supplemental Information" below.~~

~~Ticket and Loyalty Travel Awards Revenue~~

Ticket, including both main cabin and business cabin and premium products, and loyalty travel awards revenue increased $2.0 billion and $150 million, respectively, compared to the nine months ended September 30, 2017, consistentcosts associated with the geographic region discussion below. Business cabin and premium products ticket revenue includes revenues from fare products other than main cabin, including Delta One, Delta Premium Select, First Class and Comfort+. The growthmaintenance of aircraft used in ~~this ticket revenue primarily results from the continued expansion of~~ our ~~Branded Fares product and strength in business demand.~~

~~Passenger Revenue by Geographic Region~~

Increase (Decrease)
vs. Nine Months Ended September 30, 2017
(in millions) Nine Months Ended September 30, 2018 Passenger Revenue
RPMs(Traffic)
ASMs(Capacity)
Passenger Mile Yield PRASM Load Factor
Domestic $ 21,093
8.1 % 4.9 % 5.2 % 3.0 % 2.7 % (0.3 ) pts
Atlantic 4,837
12.5 % 3.6 % 2.6 % 8.7 % 9.6 % 0.8
pts
Latin America 2,228
0.1 % (2.6 )% (1.4 )% 2.8 % 1.5 % (1.1 ) pts
Pacific 1,949
3.7 % (2.0 )% (2.3 )% 5.7 % 6.1 % 0.3
pts
Total $ 30,107
7.8 % 3.3 % 3.4 % 4.4 % 4.3 % (0.1 ) pts

Passenger revenue increased $2.2 billion, or 7.8%, compared to the nine months ended September 30, 2017. PRASM increased 4.3% and passenger mile yield increased 4.4% on 3.4% higher capacity. Load factor was slightly lower than the prior year period at 85.6%.

Unit revenues of the domestic region increased 2.7%, resulting from our commercial initiatives, including Branded Fares, strong demand and fare increases implemented in response to higher fuel prices. Our domestic operations have generated six consecutive quarters of year-over-year unit revenue growth, including business yield growth throughout 2018. During the September 2018 quarter, we signed a definitive agreement with WestJet that, after regulatory approval, will create a transborder joint venture, providing enhanced offerings and more choice for customers.

Passenger revenue related to our international regions increased 7.3% year-over-year including growth in all three regions, despite reduced capacity in the Pacific and Latin America. During the nine months ended September 30, 2018, we continued to expand our Branded Fares product and generated unit revenue increases in all three regions.

In the Atlantic, unit revenues increased due to strengthening yields from business cabin traffic and the benefit provided by foreign currency fluctuations. Yield growth was particularly strong as we continue to leverage our alliance partners' hub positions in Europe's leading business markets of London, Amsterdam and Paris. During 2018, we initiated service on our flagship A350-900 with Delta One suites and the Delta Premium Select cabin from Detroit to Amsterdam. We also launched several new routes, including Los Angeles to Paris and Amsterdam, Indianapolis to Paris and Atlanta to Lisbon.

~~Unit revenues increased in Latin America principally as a result of yield growth, particularly in Central America and the Caribbean.~~operations. The increase ~~was partially offset by challenges~~ in ~~the Mexico market from travel advisories~~aircraft maintenance materials and ~~increased industry capacity impacting demand~~outside repairs expense primarily relates to beach destinations. These challenges have been mitigated through our joint cooperation agreement with Aeroméxico, which marked its first anniversary during 2018. Over that time, we have combined with Aeroméxicoan increase in maintenance activity in order to ~~launch nine new routes between the United States and Mexico, providing our customers with improved connectivity, more convenient schedules and increasingly seamless~~enhance service ~~between the two carriers.~~

Unit revenues increased in the Pacific region due to yield strength, particularly Japan and Korea. In May 2018, we launched a joint venture with Korean Air which provides more opportunities for our customers to reach destinations throughout Asia. During 2018, we have also introduced our flagship A350-900 on routes from Los Angeles to Shanghai, Detroit to Beijing and Shanghai and Atlanta to Seoul-Incheon, which has improved the customer experience and driven unit revenue increases.

~~Other Revenue~~reliability of certain aircraft.

Nine Months Ended September 30, Increase (Decrease) % Increase (Decrease)
(in millions) 2018 2017
Ancillary businesses and refinery $ 1,475
$ 1,050
$ 425
40.5 %
Loyalty program 1,075
939
136
14.5 %
Miscellaneous 388
454
(66 ) (14.5 )%
Total other revenue $ 2,938
$ 2,443
$ 495
20.3 %

Ancillary Businesses and Refinery. Ancillary businesses and refinery includes expenses associated with aircraft maintenance ~~and staffing~~ services we provide to third parties, our vacation wholesale operations, our private jet operations and refinery sales to third parties. Refinery sales to third parties, which are at or near cost, ~~increased $280~~decreased $164 millioncompared to the ~~nine months ended September 30, 2017, primarily resulting from higher sales volume.~~

~~Loyalty Program.~~ ~~Loyalty program revenues relate~~March 2018 quarter. In addition, costs related to ~~brand usage~~services performed by DGS on behalf of third parties were recorded in ancillary businesses and ~~other performance obligations embedded~~refinery prior to the sale of that business in ~~mileage credits sold, including redemption of mileage credits for non-travel awards.~~December 2018.

~~Miscellaneous.~~ ~~Miscellaneous revenue is primarily composed of lounge access and codeshare revenues.~~

~~Operating Expense~~

Nine Months Ended September 30, Increase (Decrease) % Increase (Decrease)
(in millions) 2018 2017
Salaries and related costs $ 8,004
$ 7,525
$ 479
6.4 %
Aircraft fuel and related taxes 6,693
4,954
1,739
35.1 %
Regional carriers expense, excluding fuel 2,643
2,589
54
2.1 %
Depreciation and amortization 1,780
1,639
141
8.6 %
Contracted services 1,646
1,572
74
4.7 %
Passenger commissions and other selling expenses 1,473
1,371
102
7.4 %
Ancillary businesses and refinery 1,396
975
421
43.2 %
Aircraft maintenance materials and outside repairs 1,233
1,214
19
1.6 %
Landing fees and other rents 1,201
1,126
75
6.7 %
Profit sharing 978
803
175
21.8 %
Passenger service 892
849
43
5.1 %
Aircraft rent 291
258
33
12.8 %
Other 1,305
1,230
75
6.1 %
Total operating expense $ 29,535
$ 26,105
$ 3,430
13.1 %

~~Salaries and Related Costs. The increase in salaries and related costs is primarily due to increases for eligible merit, ground and flight attendant employees implemented in the June 2017 quarter.~~

~~Aircraft Fuel and Related Taxes.~~ ~~Fuel expense increased $1.7 billion compared to the prior year due to a 32% increase in the market price per gallon of fuel and a 2% increase in consumption.~~

~~The table below shows the impact of hedging and the refinery on fuel expense and average price per gallon, adjusted (non-GAAP financial measures):~~

Average Price Per Gallon
Nine Months Ended September 30, Change Nine Months Ended September 30, Change
(in millions, except per gallon data) 2018 2017 2018 2017
Fuel purchase cost⁽¹⁾
$ 6,814
$ 5,029
$ 1,785
$ 2.17
$ 1.64
$ 0.53
Airline segment fuel hedge impact (20 ) 12
(32 ) (0.01 ) —
(0.01 )
Refinery segment impact (101 ) (87 ) (14 ) (0.03 ) (0.03 ) —
Total fuel expense $ 6,693
$ 4,954
$ 1,739
$ 2.13
$ 1.61
$ 0.52
MTM adjustments and settlements⁽²⁾
20
210
(190 ) 0.01
0.07
(0.06 )
Total fuel expense, adjusted $ 6,713
$ 5,164
$ 1,549
$ 2.14
$ 1.68
$ 0.46


⁽¹⁾	~~Market price for jet fuel at airport locations, including related taxes and transportation costs.~~


⁽²⁾	MTM adjustments and settlements include the effects of the derivative transactions disclosed in Note 5 of the Notes to the Condensed Consolidated Financial Statements. For additional information and the reason for adjusting fuel expense, see "Supplemental Information" below.

~~Depreciation and Amortization.~~ The increase in depreciation and amortization primarily results from more new aircraft deliveries than the prior year, including B-737-900ER, A321-200 and A350-900 aircraft, and fleet modifications. In addition, as part of our fleet evolution, during 2017 and continuing through 2018, we began accelerating depreciation on MD-88 aircraft due to the planned retirement of the fleet. As we take delivery of the aircraft discussed above, we continue to evaluate our current fleet compared to network requirements.

~~Ancillary Businesses and Refinery.~~ Ancillary businesses and refinery includes expenses associated with aircraft maintenance and staffing services we provide to third parties, our vacation wholesale operations, our private jet operations and refinery sales to third parties. Expenses related to refinery sales to third parties, which are at or near cost, increased~~$280 million compared to the nine months ended September 30, 2017, primarily resulting from higher sales volume.~~

~~Profit Sharing.~~ The increase in profit sharing is related to the alignment of our profit sharing programs under a single formula, which was implemented October 1, 2017. Under this formula, our profit sharing program pays 10% to all eligible employees for the first $2.5 billion of annual profit and 20% of annual profit above $2.5 billion. Prior to October 1, 2017, the profit sharing program for merit, ground and flight attendant employees paid 10% of annual profit (as defined by the terms of the program) and, if we exceeded our prior-year results, the program paid 20% of the year-over-year increase in profit to eligible employees.


Non-Operating Results	Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
(in millions)	2018			2017			Favorable (Unfavorable)		2018			2017			Favorable (Unfavorable)			2019			2018			Favorable (Unfavorable)
Interest expense, net	$	(84	)	$	(100	)	$	16	$	(274	)	$	(297	)	$	23		$	(83	)	$	(92	)	$	9
Unrealized gain/(loss) on investments, net	50			—			50		(171		)	—			(171		)
Unrealized gain on investments, net																		100			18			82
Miscellaneous, net	66			53			13		48			(51		)	99			(91		)	(38		)	(53		)
Total non-operating income/(expense), net	$	32		$	(47	)	$	79	$	(397	)	$	(348	)	$	(49	)
Total non-operating expense, net																		$	(74	)	$	(112	)	$	38

Interest expense decreased compared to the prior year ~~periods~~period as a result of lower interest rates on our debt, despite an increase in total debt.

Unrealized ~~gain/(loss)~~gain on investments reflects the unrealized gains ~~and losses~~ on our equity investments in GOL, China Eastern and Air France-KLM. ~~In 2017, before we adopted the new financial instruments standard, we recorded unrealized gains and losses on available-for-sale investments in AOCI.~~

Miscellaneous is primarily composed of ~~pension-related benefits/costs, charitable contributions, foreign exchange gains/losses and~~ our proportionate share of earnings from our equity investments in Virgin Atlantic and Grupo Aeromé~~xico.~~xico, pension-related benefits/costs, charitable contributions and foreign exchange gains/losses. Our equity investment earnings and foreign exchange gains/losses vary and impact the comparability of miscellaneous from period to period. ~~The favorable variance compared to the prior year periods primarily results from the current year net pension benefit compared to net pension cost in the prior year.~~

Income Taxes

We project that our annual effective tax rate for ~~2018~~2019 will be ~~approximately~~between 23% and 24%. In certain interim periods, we may have adjustments to our net deferred tax assets as a result of changes in prior year estimates and tax laws enacted during the period, which will impact the effective tax rate for that interim period.

Refinery Segment

The refinery primarily produces gasoline, diesel and jet fuel. Monroe exchanges the non-jet fuel products the refinery produces with third parties for jet fuel consumed in our airline operations. The jet fuel produced and procured through exchanging gasoline and diesel fuel produced by the refinery provides approximately 200,000 barrels per day for use in our airline operations. We believe that the jet fuel supply resulting from the refinery's operation contributes to reducing the market price of jet fuel and thus ~~lowered~~lowers our cost of jet fuel compared to what it otherwise would ~~have been.~~be.

The refinery recorded operating ~~revenues~~revenue of ~~$1.6 billion and $4.8~~$1.3 billion in the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, compared to ~~$1.4 billion and $3.6~~$1.5 billion in the three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2018. Operating ~~revenues~~revenue in the three ~~and nine~~ months ended ~~September 30, 2018 were~~March 31, 2019 was primarily composed of ~~$1.1 billionand$3.1 billion~~$732 million of non-jet fuel products exchanged with third parties to procure jet fuel, ~~and $328 million and $866~~$271 million of sales of jet fuel to the airline segment ~~respectively.~~and $232 million of non-jet fuel product sales. Refinery revenues ~~increased~~decreased compared to the prior year period due to ~~higher~~lower costs of crude oil leading to ~~higher~~lower pricing for associated refined products and ~~higher~~lower refinery run rates.

The refinery recorded an operating ~~income~~loss of ~~$12 million and $101~~$34 million in the three ~~and nine~~ months ended ~~September 30, 2018, respectively,~~March 31, 2019 compared to~~$37 millionand $87~~ operating income of $44 million in three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2018.

A refinery is subject to annual U.S. Environmental Protection Agency requirements to blend renewable fuels into the gasoline and on-road diesel fuel it produces. Alternatively, a refinery may purchase renewable energy credits, called Renewable Identification Numbers ("RINs"), from third parties in the secondary market. The refinery purchases the majority of its RINs requirement in the secondary market. We recognized $9 million and $54 million of expense related to the RINs requirement in the September 2018 and 2017 quarters, respectively. In the nine months ended September 30, 2018 we recognized a $32 million gain, resulting from an approximately 70% decline in observable RINs prices. In the nine months ended September 30, 2017 we recognized $116 million of expense related to the RINs requirement.

At the end of September 2018, the refinery began a planned turnaround, which is expected to be completed within 50 to 60 days. This turnaround is in accordance with the long term maintenance plan for the facility to allow for the safe completion of major repairs and upgrades. During this time, the refinery will not produce any refined products.

For more information regarding the refinery's results, see Note 10 of the Notes to the Condensed Consolidated Financial Statements.

Operating Statistics


	Three Months Ended September 30,						% Increase (Decrease)		Nine Months Ended September 30,						% Increase (Decrease)		Three Months Ended March 31,						% Increase (Decrease)
Consolidated⁽¹⁾	2018			2017			% Increase (Decrease)		2018			2017			% Increase (Decrease)		2019			2018			% Increase (Decrease)
Revenue passenger miles (in millions)	63,320			61,006			3.8	%	172,002			166,533			3.3	%	51,617			49,276			4.8		%
Available seat miles (in millions)	72,875			70,167			3.9	%	200,842			194,265			3.4	%	62,416			59,453			5.0		%
Passenger mile yield		17.05	¢		16.36	¢	4.2	%		17.50	¢		16.77	¢	4.4	%		17.93	¢		17.79	¢	0.8		%
PRASM		14.81	¢		14.22	¢	4.2	%		14.99	¢		14.37	¢	4.3	%		14.83	¢		14.74	¢	0.6		%
TRASM		16.40	¢		15.77	¢	4.0	%		16.78	¢		15.91	¢	5.5	%		16.78	¢		16.77	¢	0.1		%
TRASM, adjusted⁽²⁾		16.25	¢		15.58	¢	4.3	%		16.51	¢		15.78	¢	4.6	%		16.70	¢		16.31	¢	2.4		%
CASM		14.15	¢		13.17	¢	7.4	%		14.71	¢		13.44	¢	9.4	%		15.14	¢		15.35	¢	(1.4	)	%
CASM-Ex⁽²⁾		9.62	¢		9.62	¢	—	%		10.19	¢		9.97	¢	2.2	%		11.06	¢		11.08	¢	(0.2	)	%
Passenger load factor	86.9		%	86.9		%	—		85.6		%	85.7		%	(0.1	) pts	82.7		%	82.9		%	(0.2	)	pts
Fuel gallons consumed (in millions)	1,135			1,108			2.4	%	3,137			3,073			2.1	%	962			936			2.8		%
Average price per fuel gallon⁽³⁾	$	2.21		$	1.61		37.3	%	$	2.13		$	1.61		32.3	%	$	2.06		$	1.98		4.0		%
Average price per fuel gallon, adjusted⁽³⁾⁽⁴⁾	$	2.22		$	1.68		32.1	%	$	2.14		$	1.68		27.3	%	$	2.05		$	2.01		1.8		%


⁽¹⁾	Includes the operations of our regional carriers under capacity purchase agreements.


⁽²⁾	Non-GAAP financial measure defined and reconciled to TRASM and CASM, respectively, in "Supplemental Information" below.


⁽³⁾	Includes the impact of fuel hedge activity and refinery segment results.


⁽⁴⁾	Non-GAAP financial measure defined and reconciled to average fuel price per gallon in "Results of Operations" for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018.

Fleet Information

As part of our fleet transformation, during the quarter we took delivery of 25 mainline aircraft and 3 CRJ-900 aircraft, and removed 11aircraft from our active fleet. Our operating aircraft fleet and commitments at ~~September 30, 2018~~March 31, 2019 are summarized in the following table:


	Current Fleet⁽¹⁾					Commitments⁽¹⁾		Current Fleet⁽¹⁾					Commitments
Aircraft Type	Owned	Capital Lease	Operating Lease	Total	Average Age	Purchase	Options	Owned	Finance Lease	Operating Lease	Total	Average Age	Purchase	Options
B-717-200	3	15	73	91	17.1	—	—	3	16	72	91	17.5	—	—
B-737-700	10	—	—	10	9.7	—	—	10	—	—	10	10.2	—	—
B-737-800	73	4	—	77	17.0	—	—	73	4	—	77	17.5	—	—
B-737-900ER	65	—	39	104	2.7	26	—	80	—	41	121	2.8	9	—
B-757-200	89	9	2	100	21.1	—	—	91	7	2	100	21.6	—	—
B-757-300	16	—	—	16	15.6	—	—	16	—	—	16	16.1	—	—
B-767-300	2	—	—	2	25.3	—	—	2	—	—	2	25.7	—	—
B-767-300ER	55	1	—	56	22.3	—	—	55	1	—	56	22.8	—	—
B-767-400ER	21	—	—	21	17.8	—	—	21	—	—	21	18.2	—	—
B-777-200ER	8	—	—	8	18.8	—	—	8	—	—	8	19.3	—	—
B-777-200LR	10	—	—	10	9.5	—	—	10	—	—	10	10.0	—	—
A220-100 (formerly called CS100)	—	—	—	—	—	75	50
A220-100								9	—	—	9	0.2	31	50
A220-300								—	—	—	—	—	50	—
A319-100	55	—	2	57	16.6	—	—	55	—	2	57	17.1	—	—
A320-200	55	3	4	62	23.1	—	—	55	3	4	62	23.6	—	—
A321-200	35	—	28	63	1.0	64	—	43	—	31	74	1.3	53	—
A321-200neo	—	—	—	—	—	100	100	—	—	—	—	—	100	100
A330-200	11	—	—	11	13.5	—	—	11	—	—	11	14.0	—	—
A330-300	28	—	3	31	9.7	—	—	28	—	3	31	10.2	—	—
A330-900neo	—	—	—	—	—	25	—	—	—	—	—	—	35	—
A350-900	11	—	—	11	0.7	14	—	13	—	—	13	1.1	12	—
MD-88	80	13	—	93	28.0	—	—	67	12	—	79	28.3	—	—
MD-90	49	—	—	49	21.6	—	—	37	—	—	37	22.0	—	—
Total	676	45	151	872	16.2	304	150	687	43	155	885	15.6	290	150


⁽¹⁾	Excludes certain aircraft we own, lease or have committed to purchase (including 12 CRJ-900 aircraft) that are operated by regional carriers on our behalf shown in the table below.

The following table summarizes the aircraft fleet operated by regional carriers on our behalf at ~~September 30, 2018:~~March 31, 2019:


	Fleet Type						Fleet Type
Carrier	CRJ-200	CRJ-700	CRJ-900⁽³⁾	Embraer 170	Embraer 175	Total	CRJ-200	CRJ-700	CRJ-900	Embraer 170	Embraer 175	Total
Endeavor Air, Inc.⁽¹⁾	42	3	109	—	—	154	42	3	109	—	—	154
ExpressJet Airlines, Inc.⁽²⁾	—	12	—	—	—	12
SkyWest Airlines, Inc.	86	25	37	—	37	185	77	18	44	—	49	188
Compass Airlines, Inc.	—	—	—	—	36	36	—	—	—	—	36	36
Republic Airline, Inc.	—	—	—	22	16	38
Republic Airways, Inc.							—	—	—	21	16	37
GoJet Airlines, LLC	—	22	7	—	—	29	—	22	7	—	—	29
Total	128	62	153	22	89	454	119	43	160	21	101	444


⁽¹⁾	Endeavor Air, Inc. is a wholly owned subsidiary of Delta.


⁽²⁾	~~Our relationship with ExpressJet Airlines, Inc. will conclude by the end of November 2018.~~


⁽³⁾	In June 2018, we signed an agreement with Bombardier Commercial Aircraft to purchase 20 CRJ-900 aircraft, which are not included in the table above other than the first aircraft, which was delivered in September 2018. These aircraft will be operated by SkyWest Airlines, Inc., and will replace older dual-class aircraft that they own or lease. The new aircraft will be delivered through 2020.

Financial Condition and Liquidity

We expect to meet our cash needs for the next 12 months with cash flows from operations, cash and cash equivalents, ~~short-term investments~~restricted cash equivalents and financing arrangements. As of ~~September 30, 2018~~March 31, 2019, we had ~~nearly $5.1~~$4.9 billion in unrestricted liquidity, consisting of $1.9 billion in cash and cash equivalents and ~~short-term investments and $3.2~~$3.0 billion in ~~undrawn~~available revolving credit facilities. During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, we used existing cash, cash received from financings and cash generated from ~~operating activities~~operations to fund capital expenditures of ~~$3.8~~$1.4 billion and return ~~$1.9~~$1.6 billion to shareholders.

Sources of Liquidity

Operating Activities

~~Cash flows from operating activities continue to provide our primary source of liquidity.~~ We generated positive cash flows from operations of ~~$5.7~~$2.0 billion and ~~$3.1~~$1.4 billion in the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively. ~~We had lower operating cash flows during 2017 primarily due to incremental pension plan contributions, as discussed below.~~ We expect to continue generating positive cash flows from operations during the remainder of ~~2018.~~2019.

Our operating cash flows are impacted by the following factors:

Seasonality of Advance Ticket Sales. We sell tickets for air travel in advance of the customer's travel date. When we receive a cash payment at the time of sale, we record the cash received on advance sales as deferred revenue in air traffic liability. The air traffic liability increases during the winter and spring as advanced ticket sales grow prior to the summer peak travel season and decreases during the summer and fall months.

Fuel. Fuel expense represented approximately ~~23%~~21% of our total operating expenses for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations.

Pension Contributions. We have no minimum funding requirements in ~~2018.~~2019. However, we voluntarily contributed $250 million to our qualified defined benefit pension plans during April 2019, and we plan to voluntarily contribute an additional $250 million in July 2019. During the three months ended March 31, 2018, we contributed $500 million to our qualified defined benefit pension plans during the first three months of 2018. Using the net proceeds from an unsecured debt offering in 2017 and existing cash, we contributed $3.2 billion to our qualified defined benefit pension plans during the first half of 2017. We also contributed shares of our common stock from treasury with a value of $350 million during the March 2017 quarter.plans.

Profit Sharing. Our broad-based employee profit sharing program provides that for each year in which we have an annual pre-tax profit, as defined by the terms of the program, we will pay a specified portion of that profit to employees. In determining the amount of profit sharing, the program defines profit as pre-tax profit adjusted for profit sharing and certain other items.

Effective October 1, 2017, we aligned our profit sharing plans under a single formula. Under this formula, our profit sharing program pays 10% to all eligible employees for the first $2.5 billion of annual profit and 20% of annual profit above $2.5 billion. Prior to October 1, 2017, the profit sharing program for merit, ground and flight attendant employees paid 10% of annual profit (as defined by the terms of the program) and, if we exceeded our prior-year results, the program paid 20% of the year-over-year increase in profit to eligible employees. During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, we accrued ~~$978~~$220 million in profit sharing expense based on the year-to-date performance and current expectations for ~~2018~~2019 profit.

We paid ~~$1.1~~$1.3 billion in profit sharing in February ~~2018~~2019 related to our ~~2017~~2018 pre-tax profit in recognition of our employees' contributions toward meeting our financial goals.

Investing Activities

Capital Expenditures. Our capital expenditures were ~~$3.8~~$1.4 billion and ~~$2.7~~$1.3 billion for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively. Our capital expenditures during the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 were primarily related to the purchases of A350-900, A321-200, B-737-900ER, ~~A321-200, A350-900~~A220-100 and CRJ-900 aircraft, advanced deposit payments on future aircraft order commitments and ~~seat density projects for~~enhancing the cabins on our domestic fleet.

We have committed to future aircraft purchases ~~that will require significant capital investment~~ and have obtained, but are under no obligation to use, long-term financing commitments for a substantial portion of the purchase price of ~~a significant number of these~~certain aircraft. Our expected ~~2018~~2019 investments of $~~4.9~~4.7 billion will be primarily for (1) aircraft, including deliveries of A321-200s, A220-100s, B-737-900ERs, ~~A321-200s,~~A330-900neos, A350-900s ~~A220-100s~~ and CRJ-900s, along with advance deposit payments for these and A321-200neos and ~~A330-900neos,~~A220-300s as well as (2) aircraft modifications, the majority of which relate to ~~increasing the seat density and~~ enhancing the cabins on our domestic fleet.

Los Angeles International Airport ("LAX") Construction. During 2016, we executed a modified lease agreement with the City of Los Angeles ~~World Airports~~ ("~~LAWA"~~the City"), which owns and operates LAX, and announced plans to modernize, upgrade and connect Terminals 2 and 3 at LAX ~~over the next seven years. Based on~~by 2023. Under the lease agreement, we ~~are designing and managing the construction of the initial investment of $350 million to renovate gate areas, support space~~have relocated certain airlines and other ~~amenities for passengers, upgrade the baggage handling systems in the terminals and facilitate the relocation of those airlines~~tenants located in Terminals 2 and 3 to Terminals 5 and 6 and ~~Tom Bradley International Terminal ("TBIT"). The relocation was completed~~undertaken various initial projects to enable operations from Terminals 2 and 3 during the ~~June 2017 quarter.~~project. We ~~will also design~~are now designing and ~~manage~~constructing the ~~construction of an expansion of the project, which is expected to cost an additional $1.5 billion, of which $1.3 billion has been approved by LAWA. The expanded project will include (1)~~ redevelopment of Terminal 3 and enhancement of Terminal 2, ~~(2)~~which also includes rebuild of the ticketing and arrival halls and security checkpoint, ~~(3)~~ construction of core infrastructure ~~for~~to support the City's planned airport people mover, ~~(4)~~ ramp improvements and ~~(5)~~ construction of a secure connector to the north side of ~~TBIT.~~the Tom Bradley International Terminal.

Under the lease agreement and subsequent project component approvals by the City's Board of Airport Commissioners, the City has appropriated to date approximately $1.6 billion to purchase completed project assets. The lease allows for a maximum reimbursement by the City of $1.8 billion. Costs we incur in excess of such a maximum will not be reimbursed by the City.

A substantial majority of the project costs will be funded through the Regional Airports Improvement Corporation ("RAIC"), a California public benefit corporation, using an $800 million revolving credit facility provided by a group of lenders. The credit facility was executed during ~~2017.~~2017, and we have guaranteed the obligations of the RAIC under the credit facility. Loans made under the credit facility will be repaid with the proceeds from ~~LAWA’s~~the City’s purchase of completed project assets. ~~We have guaranteed the obligations of the RAIC under the credit facility.~~ Using funding provided by ~~the credit agreement and/or~~ cash flows from operations and/or the credit facility, we expect to spend approximately $230 million on this project during ~~2018,~~2019, of which ~~$177~~$49 million was incurred in the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019.

New York-LaGuardia Redevelopment. As part of the terminal redevelopment project at LaGuardia Airport, we are partnering with the Port Authority of New York and New Jersey (the “Port Authority”) to replace Terminals C and D with a new state-of-the-art terminal facility consisting of 37 gates across four concourses connected to a central headhouse. The terminal will feature a new, larger Delta Sky Club, wider concourses, more gate seating and 30 percent more concessions space than the existing terminals. The facility will also offer direct access between the parking garage and terminal and improved roadways and drop-off/pick-up areas. The design of the new terminal will integrate sustainable technologies and improvements in energy efficiency. Construction will be phased to limit passenger inconvenience and is expected to be completed by 2026.

In connection with the redevelopment, during 2017, we entered into an amended and restated terminal lease with the Port Authority with a term through 2050. Pursuant to the lease agreement we will (1) fund (through debt issuance and existing cash) and undertake the design, management and construction of the terminal and certain off-premises supporting facilities, (2) receive a Port Authority contribution of $600 million to facilitate construction of the terminal and other supporting infrastructure, (3) be responsible for all operations and maintenance during the term of the lease and (4) have preferential rights to all gates in the terminal subject to Port Authority requirements with respect to accommodation of designated carriers. We currently expect our ~~costs for the~~net project cost to be approximately $3.3 billion and we bear the risks of project construction, including ~~if the project’s actual costs exceed the projected costs.~~any potential cost over-runs. Using funding provided by cash flows from operations and/or financing arrangements, we expect to spend approximately ~~$330~~$530 million on this project during ~~2018,~~2019, of which ~~$207~~$134 million was incurred in the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019.

Financing Activities

Debt and ~~Capital~~Finance Leases. During the June 2018 quarter, we issued $1.6 billion in aggregate principal amount of unsecured notes, consisting of $600 million of 3.4% Notes due 2021, $500 million of 3.8% Notes due 2023 and $500 million of 4.375% Notes due 2028. We used the net proceeds from the offering of the Notes to repay borrowings outstanding under our secured Pacific term loan B-1 facility and 2015 term loan facility and for general corporate purposes.

~~Concurrent with the unsecured debt offering,~~In February 2019, we entered into a ~~$2.65~~$1 billion term loan issued by two lenders and subsequently repaid $300 million in March 2019. This loan, which is unsecured, revolving credit facility, up to $500 million of which may be used for the issuance of letters of credit (the “Revolving Credit Facility”). The Revolving Credit Facility was undrawn at the time we entered into it and remains undrawn. The Revolving Credit Facility replaced the undrawn secured Pacific revolving credit facility and the 2015 revolving credit facility, both of which were terminated in conjunction with the repayment of the term loans described above.

~~Also during the June 2018 quarter, the New York Transportation Development Corporation~~In March 2019, we completed a $500 million offering of Pass Through Certificates, Series 2019-1 ("~~NYTDC"~~2019-1 EETC") ~~issued Special Facilities Revenue Bonds, Series 2018 (the "2018 Bonds") in the aggregate principal amount of $1.4 billion. We entered into loan agreements with the NYTDC to use the~~through a pass through trust. The net proceeds ~~from the 2018 Bonds to finance a portion~~ of the ~~construction costs~~offering are being used for ~~the new terminal facilities at the LaGuardia Airport. The proceeds from the 2018 Bonds are recorded in cash restricted for airport construction on the Consolidated Balance Sheet.~~general corporate purposes, including to refinance debt maturing during 2019.

~~Despite the recent debt issuances, since December 31, 2009, we have reduced our principal amount of debt and capital leases by $8.8 billion.~~ The principal amount of debt and ~~capital~~finance leases was ~~$9.3~~$10.7 billion at ~~September 30, 2018.~~March 31, 2019.

Capital Return to Shareholders. During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, we repurchased and retired 2326 million shares of our common stock at a cost of $1.3 billion.

In the ~~September 2018~~March 2019 quarter, the Board of Directors approved and we paid a quarterly dividend of $0.35 per share, for total cash dividends of ~~$241~~$233 million.

Undrawn Lines of Credit

We have ~~$3.2~~$3.0 billion available in undrawn revolving lines of credit. These credit facilities include covenants customary for financing of this type. If we are not in compliance with these covenants, we may be required to repay amounts borrowed under the credit facilities or we may not be able to draw on them. ~~We currently have a substantial amount of unencumbered assets available to pledge as collateral.~~

Covenants

We were in compliance with the covenants in our financings at ~~September 30, 2018.~~March 31, 2019.

Critical Accounting Policies and Estimates

Except as set forth below, for information regarding our Critical Accounting Policies and Estimates, see the "Critical Accounting Policies and Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K.

~~Frequent Flyer~~Loyalty Program

At September 30, 2018, the aggregate deferred revenue balance associated with the SkyMiles program was $6.5 billion. A hypothetical 10% change in the number of outstanding miles estimated to be redeemed would result in an approximately $200 million impact on annual revenue recognized.

We defer revenue for the mileage credits when earned and recognize loyalty travel awards in passenger revenue as the miles are redeemed and services are provided. We record the air transportation portion of the passenger ticket sales in air traffic liability and recognize passenger revenue when we provide transportation or if the ticket goes unused. A hypothetical 10% increase in our estimate of the ETV of a mileage credit would decrease annual passenger revenue by approximately $100 million, as a result of an increase in the amount of revenue deferred from the mileage component of passenger ticket sales.

~~Sale of Mileage Credits.~~ Customers may earn mileage credits based on their spending with participating companies such as credit card companies, hotels and car rental agencies with which we have marketing agreements to sell mileage credits. Our contracts to sell mileage credits under these marketing agreements have multiple performance obligations. Payments are typically due monthly based on the volume of miles sold during the period, and the terms of our marketing contracts are generally from one to eight years. During the nine months ended September 30, 2018 and 2017, total cash sales from marketing agreements were $2.6 billion and $2.3 billion, respectively, which are allocated to travel and other performance obligations, as discussed below.

We account for marketing agreements, including those with American Express, consistent with the accounting method that allocates the consideration received to the individual products and services delivered. We allocate the value based on the relative selling prices of those products and services, which generally consist of award travel, priority boarding, baggage fee waivers, lounge access and the use of our brand. We determined our best estimate of the selling prices by considering a discounted cash flow analysis using multiple inputs and assumptions, including: (1) the expected number of miles awarded and number of miles redeemed, (2) ETV for the award travel obligation, (3) published rates on our website for baggage fees, discounted access to Delta Sky Club lounges and other benefits while traveling on Delta and (4) brand value.

Recent Accounting Standards

Comprehensive Income. In February 2018, the FASB issued ASU No. 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220)." This standard provides an option to reclassify stranded tax effects within AOCI to retained earnings due to the U.S. federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017. This standard is effective for interim and annual reporting periods beginning after December 15, ~~2018, and early adoption is permitted.~~2018. We ~~have not completed our assessment, but the adoption of the standard may impact tax amounts stranded in AOCI related to our pension plans. We will adopt~~adopted this standard effective January 1, ~~2019.~~2019 with the election not to reclassify $1.2 billion of stranded tax effects related to our pension plans from AOCI to retained earnings.

Supplemental Information

We sometimes use information ("non-GAAP financial measures") that is derived from the Condensed Consolidated Financial Statements, but that is not presented in accordance with GAAP. Under the U.S. Securities and Exchange Commission rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Reconciliations below may not calculate exactly due to rounding.

Pre-tax income, adjusted

The following table shows a reconciliation of pre-tax income (a GAAP measure) to pre-tax income, adjusted ~~for special items~~ (a non-GAAP financial measure). We adjust pre-tax income for mark-to-market ("MTM") adjustments and settlements on fuel hedge contracts, the MTM adjustments recorded by our equity method investees, Virgin Atlantic and Aeroméxico, and unrealized gains/losses on our investments in GOL, China Eastern and Air France-KLM, to determine pre-tax income, ~~adjusted for special items.~~adjusted.


•	MTM adjustments and settlements. MTM adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period. Settlements represent cash received or paid on hedge contracts settled during the period.

~~Equity investment MTM adjustments.~~ ~~We record our proportionate share of earnings/loss from our equity investments in Virgin Atlantic and Aeroméxico in non-operating income/(expense).~~


•	Equity investment MTM adjustments. We record our proportionate share of earnings/loss from our equity investments in Virgin Atlantic and Aeroméxico in non-operating expense. We adjust for our equity method investees' hedge portfolio MTM adjustments to allow investors to better understand and analyze our core operational performance in the periods shown.

~~Unrealized gain/loss on investments.~~ ~~We record the unrealized gains/losses on our investments in GOL, China Eastern and Air France-KLM in non-operating income/(expense).~~


•	Unrealized gain/loss on investments. We record the unrealized gains/losses on our equity investments accounted for at fair value in non-operating expense. Adjusting for these gains/losses allows investors to better understand and analyze our core operational performance in the periods shown.


•	DGS sale adjustment. Because we sold DGS in December 2018, we have excluded the impact of DGS from historical results for better comparability.


	Three Months Ended September 30,						Three Months Ended March 31,
(in millions)	2018			2017			2019			2018
Pre-tax income	$	1,674		$	1,776		$	946		$	732
Adjusted for:
MTM adjustments and settlements	(16		)	(74		)	8			(27		)
Equity investment MTM adjustments	(7		)	(7		)	(21		)	3
Unrealized gain/loss on investments	(50		)	—			(100		)	(18		)
Pre-tax income, adjusted for special items	$	1,601		$	1,696
DGS sale adjustment							—			(7		)
Pre-tax income, adjusted							$	832		$	683

TRASM, adjusted

The following table shows a reconciliation of TRASM (a GAAP measure) to TRASM, adjusted (a non-GAAP financial measure).


•	Third-party refinery sales. We adjust TRASM for refinery sales to third parties to determine TRASM, adjusted because these revenues are not related to our airline segment. TRASM, adjusted therefore provides a more meaningful comparison of revenue from our airline operations to the rest of the airline industry.


•	DGS sale adjustment. We adjust for the DGS sale for the same reason described above under the heading pre-tax income, adjusted.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
TRASM		16.40	¢		15.77	¢		16.78	¢		15.91	¢		16.78	¢		16.77	¢
Adjusted for:
Third-party refinery sales	(0.15		)	(0.18		)	(0.27		)	(0.13		)	(0.08		)	(0.36		)
DGS sale adjustment													—			(0.10		)
TRASM, adjusted		16.25	¢		15.58	¢		16.51	¢		15.78	¢		16.70	¢		16.31	¢

CASM-Ex

The following table shows a reconciliation of CASM (a GAAP measure) to CASM-Ex (a non-GAAP financial measure). We adjust CASM for the following items to determine CASM-Ex, for the reasons described below:


•	Aircraft fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over-year financial performance. The adjustment for aircraft fuel and related taxes allows investors to better understand and analyze our non-fuel costs and year-over-year financial performance.

•

Ancillary businesses and refinery. These expenses include aircraft maintenance ~~and staffing services~~ we provide to third parties, our vacation wholesale operations and refinery cost of sales to third parties. 2018 results also include staffing services performed by DGS. Because these businesses are not related to the generation of a seat mile, we adjust for the costs related to these ~~sales~~areas to provide a more meaningful comparison of the costs of our airline operations to the rest of the airline industry.


•	Profit sharing. We adjust for profit sharing because this adjustment allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
CASM		14.15	¢		13.17	¢		14.71	¢		13.44	¢		15.14	¢		15.35	¢
Adjusted for:
Aircraft fuel and related taxes	(3.43		)	(2.54		)	(3.33		)	(2.55		)	(3.17		)	(3.12		)
Ancillary businesses and refinery	(0.56		)	(0.56		)	(0.70		)	(0.50		)	(0.56		)	(0.83		)
Profit sharing	(0.54		)	(0.45		)	(0.49		)	(0.41		)	(0.35		)	(0.32		)
CASM-Ex		9.62	¢		9.62	¢		10.19	¢		9.97	¢		11.06	¢		11.08	¢

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from the information provided in "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in our Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Our management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation of our disclosure controls and procedures, which have been designed to permit us to effectively identify and timely disclose important information. Our management, including our Chief Executive Officer and Chief Financial Officer, concluded that the controls and procedures were effective as of ~~September 30, 2018~~March 31, 2019 to ensure that material information was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the three months ended ~~September 30, 2018,~~March 31, 2019, we did not make any changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

"Item 3. Legal Proceedings" of our Form 10-K includes a discussion of our legal proceedings. ~~Except as presented below, there~~There have been no material changes from the legal proceedings described in our Form 10-K. The legal proceeding described below has been described previously, including in our Form 10-K. The matter is described in this Form 10-Q to include developments in the case since we filed our Form 10-K.

~~First Bag Fee Antitrust Litigation~~

In May-July 2009, a number of purported class action antitrust lawsuits were filed against Delta and AirTran Airways ("AirTran"), alleging that Delta and AirTran engaged in collusive behavior in violation of Section 1 of the Sherman Act in November 2008 based upon certain public statements made in October 2008 by AirTran's CEO at an analyst conference concerning fees for the first checked bag, Delta’s imposition of a fee for the first checked bag on November 4, 2008 and AirTran's imposition of a similar fee on November 12, 2008. The plaintiffs sought to assert claims on behalf of an alleged class consisting of passengers who paid the first bag fee after December 5, 2008 and seek injunctive relief and unspecified treble damages. All of these cases were consolidated for pre-trial proceedings in the Northern District of Georgia. On March 29, 2017, the District Court granted the defendants' motions for summary judgment. On March 9, 2018, the U.S. Court of Appeals for the Eleventh Circuit affirmed this final judgment. On June 8, 2018, the Eleventh Circuit denied the plaintiffs' petition for rehearing en banc. ~~The time period for the plaintiffs to file a petition for a writ of certiorari at the U.S. Supreme Court has not yet expired.~~

ITEM 1A. RISK FACTORS

“Item 1A. Risk Factors” of our Form 10-K ~~and of our Form 10-Q for the quarterly period ended March 31, 2018, include~~includes a discussion of our risk factors. There have been no material changes from the risk factors described in our Form ~~10-K and the referenced Form 10-Q.~~10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents information with respect to purchases of common stock we made during the ~~September 2018~~March 2019 quarter. The total number of shares purchased includes shares repurchased pursuant to our $5 billion share repurchase program, which was publicly announced on May 11, 2017 and will terminate no later than December 31, 2020. Some purchases made in the ~~September 2018~~March 2019 quarter were made pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934.

In addition, the table includes shares withheld from employees to satisfy certain tax obligations due in connection with grants of stock under the Delta Air Lines, Inc. Performance Compensation Plan (the "Plan"). The Plan provides for the withholding of shares to satisfy tax obligations. It does not specify a maximum number of shares that can be withheld for this purpose. The shares of common stock withheld to satisfy tax withholding obligations may be deemed to be "issuer purchases" of shares that are required to be disclosed pursuant to this Item.

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value (in millions) of Shares That May
Yet be Purchased Under the
Plan or Programs
July 2018 1,541,612
$ 51.62
1,541,612
$ 3,675
August 2018 2,386,634
$ 55.69
2,386,634
$ 3,525
September 2018 1,966,962
$ 57.92
1,966,962
$ 3,425
Total 5,895,208
5,895,208



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value (in millions) of Shares That May Yet be Purchased Under the Plan or Programs
January 2019	984,749	$	47.84	984,749		$	3,050
February 2019	20,504,030	$	50.97	20,504,030		$	2,050
March 2019	5,430,869	$	49.49	5,430,869		$	1,775
Total	26,919,648			26,919,648

ITEM 6. EXHIBITS

(a) Exhibits


10.1	Model Award Agreement for the Delta Air Lines, Inc. 2019 Long-Term Incentive Plan


15	Letter from Ernst & Young LLP regarding unaudited interim financial information


31.1	Certification by Delta's Chief Executive Officer with respect to Delta's Quarterly Report on Form 10-Q for the quarterly period ended ~~September 30, 2018~~March 31, 2019


31.2	Certification by Delta's Executive Vice President and Chief Financial Officer with respect to Delta's Quarterly Report on Form 10-Q for the quarterly period ended ~~September 30, 2018~~March 31, 2019


32	Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by Delta's Chief Executive Officer and Executive Vice President and Chief Financial Officer with respect to Delta's Quarterly Report on Form 10-Q for the quarterly period ended ~~September 30, 2018~~March 31, 2019


101.INS	XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.


101.SCH	XBRL Taxonomy Extension Schema Document


101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document


101.DEF	XBRL Taxonomy Extension Definition Linkbase Document


101.LAB	XBRL Taxonomy Extension Labels Linkbase Document


101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	Delta Air Lines, Inc.
	(Registrant)

	/s/ Craig M. Meynard
	Craig M. Meynard
	Vice President and Chief Accounting Officer
	(Principal Accounting Officer)
~~October 11, 2018~~April 10, 2019

4437



Table of Contents

	Page
Forward Looking Statements	1
Report of Independent Registered Public Accounting Firm	2

Part I. Financial Information
Item 1. Financial Statements	3
Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations and Comprehensive Income	4
Condensed Consolidated Statements of Cash Flows	5
Consolidated Statements of Stockholders' Equity	6
Notes to the Condensed Consolidated Financial Statements	67
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	2421
Item 3. Quantitative and Qualitative Disclosures About Market Risk	4134
Item 4. Controls and Procedures	4134

Part II. Other Information
Item 1. Legal Proceedings	4134
Item 1A. Risk Factors	4134
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4235
Item 6. Exhibits	4336

Signature	4437



	Three Months Ended September 30, 2017									Nine Months Ended September 30, 2017
(in millions, except per share data)	As Previously Reported			Adjustments			Current Presentation			As Previously Reported			Adjustments			Current Presentation
Income statement:
Passenger revenue	$	9,399		$	580		$	9,979		$	26,318		$	1,607		$	27,925
Cargo revenue	187			4			191			530			12			542
Other revenue	1,474			(583		)	891			4,151			(1,708		)	2,443
Total operating revenue	11,060			1			11,061			30,999			(89		)	30,910
Operating expense	9,221			17			9,238			26,079			26			26,105
Non-operating expense	(34		)	(13		)	(47		)	(309		)	(39		)	(348		)
Income tax provision	(627		)	10			(617		)	(1,606		)	56			(1,550		)
Net income	1,178			(19		)	1,159			3,005			(98		)	2,907
Diluted earnings per share	$	1.64		$	(0.03	)	$	1.61		$	4.13		$	(0.13	)	$	4.00



(in millions)	Total
Due in one year or less	$	226
Due after one year through three years	228
Due after three years through five years	6
Due after five years	18
Total	$	478



	Maturity			Interest Rate(s)⁽⁵⁾ Per Annum at			September 30,			December 31,
(in millions)	Dates			September 30, 2018			2018			2017
Pacific Facilities:
Pacific Term Loan B-1	n/a			n/a		n/a	$	—		$	1,048
Pacific Revolving Credit Facility	n/a			n/a		n/a	—			—
2015 Credit Facilities:
Term Loan Facility	n/a			n/a		n/a	—			490
Revolving Credit Facility	n/a			n/a		n/a	—			—
Financing arrangements secured by aircraft:
Certificates⁽¹⁾	2018	to	2027	3.63%	to	8.02%	2,010			2,380
Notes⁽¹⁾	2018	to	2026	2.75%	to	6.54%	1,281			1,961
2018 Unsecured Notes	2021	to	2028	3.40%	to	4.38%	1,600			—
2018 Unsecured Revolving Credit Facility	2021	to	2023	undrawn	variable⁽⁴⁾		—			—
NYTDC Special Facilities Revenue Bonds, Series 2018⁽¹⁾	2022	to	2036	4.00%	to	5.00%	1,383			—
Other unsecured notes	2020	to	2022	2.60%	to	3.63%	2,450			2,450
Other financings⁽¹⁾⁽²⁾	2019	to	2030	1.81%	to	8.75%	140			210
Other revolving credit facilities⁽³⁾	2019	to	2021	undrawn	variable⁽⁴⁾		—			—
Total secured and unsecured debt							8,864			8,539
Unamortized premium (discount) and debt issue cost, net							17			(99		)
Total debt							8,881			8,440
Less: current maturities							(1,080		)	(2,145		)
Total long-term debt							$	7,801		$	6,295



(in millions)	Pension and Other Benefits Liabilities⁽³⁾			Derivative Contracts and Other		Available-for-Sale Investments			Total
Balance at January 1, 2018 (net of tax effect of $1,400)	$	(7,812	)	$	85	$	106		$	(7,621	)
Changes in value (net of tax effect of $6)	13			7		—			20
Reclassifications into retained earnings (net of tax effect of $61)⁽¹⁾	—			—		(106		)	(106		)
Reclassifications into earnings (net of tax effect of $51)⁽²⁾	164			8		—			172
Balance at September 30, 2018 (net of tax effect of $1,404)	$	(7,635	)	$	100	$	—		$	(7,535	)




Balance at January 1, 2017 (net of tax effect of $1,458)	$	(7,714	)	$	114		$	(36	)	$	(7,636	)
Changes in value (net of tax effect of $4)	—			(23		)	76			53
Reclassifications into earnings (net of tax effect of $63)⁽²⁾	122			(7		)	(8		)	107
Balance at September 30, 2017 (net of tax effect of $1,391)	$	(7,592	)	$	84		$	32		$	(7,476	)



(in millions)	Lease Restructuring
Liability as of January 1, 2018	$	237
Payments	(54		)
Additional expenses and other	1
Liability as of September 30, 2018	$	184



			Increase (Decrease) vs. Nine Months Ended September 30, 2017
(in millions)	Nine Months Ended September 30, 2018		Passenger Revenue		RPMs(Traffic)		ASMs(Capacity)		Passenger Mile Yield		PRASM		Load Factor
Domestic	$	21,093	8.1	%	4.9	%	5.2	%	3.0	%	2.7	%	(0.3	)	pts
Atlantic	4,837		12.5	%	3.6	%	2.6	%	8.7	%	9.6	%	0.8		pts
Latin America	2,228		0.1	%	(2.6	)%	(1.4	)%	2.8	%	1.5	%	(1.1	)	pts
Pacific	1,949		3.7	%	(2.0	)%	(2.3	)%	5.7	%	6.1	%	0.3		pts
Total	$	30,107	7.8	%	3.3	%	3.4	%	4.4	%	4.3	%	(0.1	)	pts