v3.26.1
Financial Derivative Instruments
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
FINANCIAL DERIVATIVE INSTRUMENTS FINANCIAL DERIVATIVE INSTRUMENTS
Fuel Contracts

Airline operators are inherently dependent upon energy to operate and, therefore, are impacted by changes in jet fuel prices. Furthermore, jet fuel typically represents one of the largest operating expenses for airlines. The Company has historically aimed to reduce volatility in operating expenses through its fuel hedging program. However, based on higher fuel hedging premium costs over time and other factors, the Company discontinued its fuel hedging program and terminated its remaining portfolio of fuel hedging contracts, which were scheduled to settle through 2027, to effectively close its fuel hedging portfolio during 2025. The Company does not intend to add additional fuel derivatives.

The Company recorded expenses associated with fuel derivative contracts that settled during the three and six months ended June 30, 2025 and for amounts that remain in Accumulated Other Comprehensive Income ("AOCI") associated with previously terminated hedges during the three and six months ended June 30, 2026 and 2025. These expenses are reflected as a component of Aircraft fuel and related taxes expense within the unaudited Condensed Consolidated Statement of Comprehensive Income:
Location and amount reclassified from AOCI into income on cash flow hedging relationships
Three months endedSix months ended
Income Statement June 30,June 30,
(in millions)location2026202520262025
Fuel derivative contracts (gross)Aircraft fuel and related taxes$29 $36 $58 $73 

Derivatives designated and qualified in cash flow hedging relationships
 
Loss recognized in AOCI on derivatives, net of tax
 Three months endedSix months ended
 June 30,June 30,
(in millions)2026202520262025
Fuel derivative contracts$— $40 $— $69 

As of June 30, 2026, approximately $79 million remained in AOCI related to these previously closed positions, with approximately $58 million to be recognized in the remainder of 2026 and $21 million to be recognized in 2027. This balance in AOCI, which does not include any tax impact, will also be characterized as premium expense and similarly reclassified as an increase to Aircraft fuel and related taxes expense in future periods when the originally forecasted transactions occur (through the end of 2027) and is net of the impact of the cash proceeds from the hedge terminations. See Note 4 for additional information on AOCI.

All cash flows associated with purchasing and selling fuel derivatives (including terminations) are classified as Other operating cash flows in the unaudited Condensed Consolidated Statement of Cash Flows.

Interest Rate Derivatives

The Company holds interest rate swap agreements, which collectively qualify as a fair value hedge, related to its $750 million 5.25% unsecured notes due 2035. The primary objective for the Company's use of these agreements is to hedge against changes in the fair value of the debt instrument caused by changes in market interest rates, specifically SOFR, by converting the fixed rate interest of the debt to a floating rate. Under these agreements, the Company pays SOFR plus a margin on the notional amount of the debt and receives payments based on the fixed stated rate of the notes.

The fair values of the interest rate swap agreements, which are adjusted regularly, have been aggregated by counterparty for classification in the unaudited Condensed Consolidated Balance Sheet. The following table presents the location of the Company’s interest rate derivative instruments within the unaudited Condensed Consolidated Balance Sheet:

Derivatives designated as hedges
  
Liability derivatives
 Balance SheetFair value atFair value at
(in millions)location6/30/202612/31/2025
Interest rate derivative contractsOther noncurrent liabilities28 16 

The corresponding offsetting adjustment related to the liability (or asset) associated with the Company’s fair value hedges is to Long-term debt less current maturities.
Credit Risk and Collateral
The Company had no cash collateral posted or received as of June 30, 2026.