• | Level 1. Observable inputs such as quoted prices in active markets; |
• | Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
• | Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
(a) | Market approach. Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities; and |
(b) | Income approach. Techniques to convert future amounts to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models). |
(in millions) | December 31, 2013 | Level 1 | Level 2 | Level 3 | Valuation Technique | ||||||||
Cash equivalents | $ | 2,487 | $ | 2,487 | $ | — | $ | — | (a) | ||||
Short-term investments | 959 | 959 | — | — | (a) | ||||||||
Restricted cash equivalents and investments | 118 | 118 | — | — | (a) | ||||||||
Long-term investments | 109 | 80 | 29 | — | (a)(b) | ||||||||
Hedge derivatives, net | |||||||||||||
Fuel hedge contracts | 314 | 16 | 298 | — | (a)(b) | ||||||||
Interest rate contracts | (67 | ) | — | (67 | ) | — | (a)(b) | ||||||
Foreign currency exchange contracts | 257 | — | 257 | — | (a) |
(in millions) | December 31, 2012 | Level 1 | Level 2 | Level 3 | Valuation Technique | ||||||||
Cash equivalents | $ | 2,176 | $ | 2,176 | $ | — | $ | — | (a) | ||||
Short-term investments | 958 | 958 | — | — | (a) | ||||||||
Restricted cash equivalents and investments | 344 | 344 | — | — | (a) | ||||||||
Long-term investments | 208 | 100 | 27 | 81 | (a)(b) | ||||||||
Hedge derivatives, net | |||||||||||||
Fuel hedge contracts | 249 | 27 | 222 | — | (a)(b) | ||||||||
Interest rate contracts | (66 | ) | — | (66 | ) | — | (a)(b) | ||||||
Foreign currency exchange contracts | 123 | — | 123 | — | (a) |
(1) | See Note 11, “Employee Benefit Plans”, for fair value of benefit plan assets. |
• | Fuel Derivatives. Our fuel hedge portfolio consists of call options; put options; combinations of two or more call options and put options; swap contracts; and futures contracts. The products underlying the hedge contracts include crude oil, diesel fuel and jet fuel as these commodities are highly correlated with the price of jet fuel that we consume. Option contracts are valued under an income approach using option pricing models 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 9% to 25% 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 derived from public markets. Discount rates used in these valuations vary with the maturity dates of the respective contracts and are based on LIBOR. Futures contracts and options on futures contracts are traded on a public exchange and valued based on quoted market prices. |
• | Interest Rate Derivatives. Our interest rate derivatives consist primarily of swap contracts and are valued primarily based on data readily observable in public markets. |
• | Foreign Currency Derivatives. Our foreign currency derivatives consist of Japanese yen and Canadian dollar forward contracts and are valued based on data readily observable in public markets. |