Derivatives and Risk Management
 12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Risk Management 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 may enter into derivative contracts and adjust our derivative portfolio as market conditions change. We recognize derivative contracts at fair value on our balance sheets.

Fuel Price Risk

Our derivative contracts to hedge the financial risk from changing fuel prices are primarily related to Monroe’s inventory. During the years ended December 31, 2019, 2018 and 2017, fuel hedges did not have a significant impact in our income statement.

Interest Rate Risk

Our exposure to market risk from adverse changes in interest rates is primarily associated with our debt obligations. Market risk associated with our fixed and variable rate debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates.
In an effort to manage our exposure to the risk associated with our variable rate debt, we periodically enter into interest rate swaps. We designate interest rate contracts used to convert the interest rate exposure on a portion of our debt portfolio from a floating rate to a fixed rate as cash flow hedges, while those contracts converting our interest rate exposure from a fixed rate to a floating rate are designated as fair value hedges.

We also have exposure to market risk from adverse changes in interest rates associated with our cash and cash equivalents and benefit plan obligations. Market risk associated with our cash and cash equivalents relates to the potential decline in interest income from a decrease in interest rates. Pension, postretirement, postemployment and worker's compensation obligation risk relates to the potential increase in our future obligations and expenses from a decrease in interest rates used to discount these obligations.

Foreign Currency Exchange Rate Risk

We are subject to foreign currency exchange rate risk because we have revenue, expense and equity investments denominated in foreign currencies. 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.

In November 2019, we entered into a three and a half-year U.S. dollar-South Korean won ("KRW") cross currency swap with a notional value of 177 billion KRW. This swap is intended to mitigate foreign currency volatility resulting from our KRW-denominated investment in Hanjin-KAL. During the year ended December 31, 2019, we recorded an unrealized loss on this swap of $3 million, which is reflected in gain/(loss) on investments, net within non-operating expense.

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, we recognized gains of $18 million in miscellaneous in our income statement within non-operating expense. 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 years ended December 31, 2019 and 2018, we recorded an unrealized gain of $13 million and an unrealized loss of $4 million, respectively, on this swap which is reflected in gain/(loss) on investments, net within non-operating expense.

Hedge Position as of December 31, 2019
(in millions)VolumeFinal Maturity DatePrepaid Expenses and OtherOther Noncurrent AssetsOther Accrued LiabilitiesOther Noncurrent LiabilitiesHedge Derivatives, net
Designated as hedges
Interest rate contracts (fair value hedges)1,872U.S. dollars  April 2028$12  $53  $(4) $—  $61  
Not designated as hedges
Foreign currency exchange contract397Euros  December 20209  —  —  —  9  
Foreign currency exchange contract177,045South Korean won  April 20231  —  —  (4) (3) 
Fuel hedge contracts243gallons - crude oil and refined products  July 202016  —  (15) —  1  
Total derivative contracts  $38  $53  $(19) $(4) $68  
Hedge Position as of December 31, 2018
(in millions)VolumeFinal Maturity DatePrepaid Expenses and OtherOther Noncurrent AssetsOther Accrued LiabilitiesOther Noncurrent LiabilitiesHedge Derivatives, net
Designated as hedges
Interest rate contracts (fair value hedges)1,893U.S. dollars  April 2028$—  $8  $(7) $—  $1  
Foreign currency exchange contracts6,934Japanese yen  November 20191  —  —  —  1  
Not designated as hedges
Foreign currency exchange contract397Euros  December 202013  —  —  (17) (4) 
Fuel hedge contracts219gallons - crude oil and refined products  December 201930  —  (15) —  15  
Total derivative contracts$44  $8  $(22) $(17) $13  


Balance Sheet Location of Hedged Item in Fair Value Hedges
Carrying Amount of Hedge InstrumentsCumulative Amount of Fair Value Hedge Adjustments
(in millions)December 31, 2019December 31, 2018December 31, 2019December 31, 2018
Current maturities of debt and finance leases$(19) $(11) $8  $7  
Debt and finance leases(1,783) (1,870) 53  (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 balance sheets. The following table shows the net fair value of our counterparty positions had we elected to offset.
(in millions)Prepaid Expenses and OtherOther Noncurrent AssetsOther Accrued LiabilitiesOther Noncurrent LiabilitiesHedge Derivatives, Net
December 31, 2019
Net derivative contracts$24  $53  $(5) $(4) $68  
December 31, 2018
Net derivative contracts$35  $—  $(13) $(9) $13  
Designated Hedge Gains (Losses)

Gains (losses) related to our designated hedge contracts during the years ended December 31, 2019, 2018 and 2017 are as follows:
Gain (Loss) Reclassified from AOCI to EarningsGain (Loss) Recognized in Other Comprehensive Income (Loss)
(in millions)201920182017201920182017
Foreign currency exchange contracts (1)
$1  $(3) $10  $—  $1  $(43) 
(1)Earnings on our designated foreign currency exchange contracts are recorded in passenger revenue in the income statement. These hedge contracts settled during the year ended December 31, 2019.

Not Designated Hedge Gains (Losses)

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

Location of Gain (Loss) Recognized in IncomeGain (Loss) Recognized in Income
Year Ended December 31,
(in millions)201920182017
Foreign currency exchange contractsGain/(loss) on investments, net$10  $(4) $—  
Fuel hedge contractsAircraft fuel and related taxes(41) 52  (81) 
Total$(31) $48  $(81) 

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 and limit our exposure to any one counterparty.

Our hedge contracts often contain margin funding requirements. The margin funding requirements may cause us to post margin to counterparties or may cause counterparties to post margin to us as market prices in the underlying hedged items change. Due to the fair value position of our hedge contracts, we posted margin of $34 million as of December 31, 2019 and held margin of $9 million as of December 31, 2018.

Our accounts receivable are generated largely from the sale of passenger airline tickets and cargo transportation services, the majority of which are processed through major credit card companies. We also have receivables from the sale of miles under our loyalty program to participating airlines and non-airline businesses such as credit card companies, hotels, car rental agencies and ridesharing companies. The credit risk associated with our receivables is minimal.

Self-Insurance Risk

We self-insure a portion of our losses from claims related to workers' compensation, environmental issues, property damage, medical insurance for employees and general liability. Losses are accrued based on an estimate of the aggregate liability for claims incurred, using independent actuarial reviews based on standard industry practices and our historical experience.