Southwest Airlines 2012 Annual Report Download - page 59

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of the Company’s fuel hedging program and inclusive of accounting for derivatives and hedging, the Company
recognized net losses totaling $157 million in 2012 in Fuel and oil expense relating to fuel derivative instruments
versus net losses of $64 million recognized in Fuel and oil expense in 2011. These totals are inclusive of cash
settlements realized from the expiration/settlement of fuel derivatives, which were $125 million paid to
counterparties in 2012 versus $63 million paid to counterparties for 2011. These totals exclude gains and/or
losses recognized from hedge ineffectiveness and from derivatives that do not qualify for hedge accounting,
which impacts are recorded as a component of Other (gains) losses, net. See Note 10 to the Consolidated
Financial Statements.
As of January 18, 2013, on an economic basis, the Company had derivative contracts in place related to
expected future fuel consumption at the following levels:
Average percent of estimated fuel consumption
Period
covered by fuel derivative contracts at
varying WTI/Brent crude oil-equivalent price levels
2013 ...... less than 15%
2014 ...... approx. 50%
2015 ...... approx. 30%
2016 ...... approx. 20%
2017 ...... approx. 10%
As a result of applying hedge accounting in prior periods, the Company continues to have amounts “frozen”
in Accumulated other comprehensive income (loss) (“AOCI”), and these amounts will be recognized in the
Company’s Consolidated Statement of Income in future periods when the underlying fuel derivative contracts
settle. The following table displays the Company’s estimated fair value of remaining fuel derivative contracts
(not considering the impact of the cash collateral provided to or received from counterparties— See Note 10 to
the Consolidated Financial Statements for further information) as well as the amount of deferred gains/losses in
AOCI at December 31, 2012, and the expected future periods in which these items are expected to settle and/or
be recognized in earnings (in millions):
Year
Fair value
(liability) of fuel
derivative contracts
at December 31, 2012
Amount of gains
(losses) deferred
in AOCI at December 31,
2012 (net of tax)
2013 .......... $ (2) $ (92)
2014 .......... 105 44
2015 .......... 60 (26)
2016 .......... 55 10
2017 .......... 1 —
Total ......... $ 219 $ (64)
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