Southwest Airlines 2014 Annual Report Download - page 127
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The following tables present the impact of derivative instruments and their location within the
Consolidated Statement of Income for the year ended December 31, 2014 and 2013:
Derivatives in cash flow hedging relationships
(Gain) loss recognized in
AOCI on derivatives
(effective portion)
(Gain) loss reclassified
from AOCI into income
(effective portion)(a)
(Gain) loss recognized in
income on derivatives
(ineffective portion)(b)
Year ended
December 31,
Year ended
December 31,
Year ended
December 31,
(in millions) 2014 2013 2014 2013 2014 2013
Fuel derivative
contracts $ 749 * $ 52 * $ 22 * $ 103 * $ 7 $ 10
Interest rate
derivatives 6 * (14) * 14 * 18 * (4) 1
Total $ 755 $ 38 $ 36 $ 121 $ 3 $ 11
*Net of tax
(a) Amounts related to fuel derivative contracts and interest rate derivatives are included in Fuel and oil and
Interest expense, respectively.
(b) Amounts are included in Other (gains) losses, net.
Derivatives not in cash flow hedging relationships
(Gain) loss
recognized in income on
derivatives
Year ended
December 31, Location of (gain) loss
recognized in income
on derivatives(in millions) 2014 2013
Fuel derivative contracts $ 244 $ (100) Other (gains) losses, net
The Company also recorded expense associated with premiums paid for fuel derivative
contracts that settled/expired during 2014, 2013, and 2012 of $62 million, $60 million, and $36
million, respectively. These amounts are excluded from the Company’s measurement of effectiveness
for related hedges and are included as a component of Other (gains) losses, net, in the Consolidated
Statement of Income.
The fair values of the derivative instruments, depending on the type of instrument, were
determined by the use of present value methods or option value models with assumptions about
commodity prices based on those observed in underlying markets or provided by third parties. Included
in the Company’s cumulative net unrealized losses from fuel hedges as of December 31, 2014,
recorded in AOCI, were approximately $219 million in unrealized losses, net of taxes, which are
expected to be realized in earnings during the twelve months subsequent to December 31, 2014.
119