The release of the allowance primarily resulted in a net tax benefit of $8.0 billion that was recorded in income tax benefit (provision) in our Consolidated Statement of Operations. Beginning in 2014, we expect to record income tax expense with an effective rate of approximately 38%. At December 31, 2013 , we had $15.3 billion of U.S. federal pre-tax net operating loss carryforwards. Accordingly, we believe we will not pay any cash federal income taxes during the next several years. Our U.S. federal pre-tax net operating loss carryforwards do not begin to expire until 2023 . See Note 12 of the Notes to the Consolidated Financial Statements for more information.  

 

During 2012 and 2011, we did not record an income tax provision for U.S. federal income tax purposes since our deferred tax assets were fully reserved by a valuation allowance. During 2011, we recorded an income tax benefit of $85 million, primarily related to the recognition of alternative minimum tax refunds.  

 



Financial Condition and Liquidity  

 

We expect to meet our cash needs for the next 12 months from cash flows from operations, cash and cash equivalents, short-term investments and financing arrangements. As of December 31, 2013 , we had $5.7 billion in unrestricted liquidity, consisting of $3.8 billion in cash and cash equivalents and short-term investments and $1.9 billion in undrawn revolving credit facilities.  

 

Sources of Liquidity  

Operating Cash Flow  

 

Cash flows from operating activities continue to provide our primary source of liquidity. We generated positive cash flows from operations of $4.5 billion in 2013 , $2.5 billion in 2012 and $2.8 billion in 2011 . We also expect to generate positive cash flows from operations in 2014.  

 

Our operating cash flows can be impacted by the following factors:  

 

Seasonality of Advance Ticket Sales . We sell tickets for air travel in advance of the customer's travel date, and receive cash payment at the time of sale. As a result, we record the cash received on advance sales as deferred revenue in Air Traffic Liability. The Air Traffic Liability increases during the spring as we have increased sales in advance of the summer peak travel season. Our cash balances are typically higher at the beginning of the summer and at a low point during the winter.  

 

Fuel and Fuel Hedge Margins . The cost of jet fuel is our most significant expense, representing approximately 33% of our total operating expenses for 2013 . The market price for jet fuel is highly volatile and can vary significantly from period to period. This price volatility affects our cash flows from operations, impacting comparability from period to period.  

 

We have jet fuel inventories at various airport locations, which are used in our airline operations. Also, we acquired the Trainer oil refinery in 2012, which, as part of refinery operations, has refined oil product inventories. Jet fuel and refined oil product inventories are recorded as Fuel Inventory. Fuel Inventory increased during 2012 as a result of the start up of refinery operations in the September quarter and the transition of our fuel supply program. The increase in Fuel