a net loss of $1.2 billion. These results reflect significant weakness in the airline revenue environment due to the global recession and $1.4 billion in fuel hedge losses. Our net loss for the year also includes a $407 million charge for merger-related items, a $321 million non-cash income tax benefit and an $83 million non-cash loss on the extinguishment of debt.

     Total operating revenue declined $6.2 billion, or 18%, in 2009 on a 6% decrease in system capacity, or available seat mile (“ASMs”), compared with 2008 on a combined basis. Passenger revenue accounted for $5.9 billion of the decrease. Passenger revenue per ASM (“PRASM”) declined 14% on a 14% decrease in passenger mile yield. The decrease in passenger mile yield reflects (1) significantly reduced demand, particularly in international markets, (2) a reduction in business demand, (3) competitive pricing pressures and (4) lower fuel surcharges due to the year-over-year decline on fuel prices.

     Volatile fuel prices continue to represent a significant risk to our business and the airline industry as a whole. While our fuel cost per gallon declined 35% in 2009 compared to 2008 on a combined basis, contributing to $5.4 billion in lower fuel expense excluding the mark-to-market adjustments related to fuel hedges settling in future periods, crude oil prices have risen 78% from December 31, 2008 to December 31, 2009.

     We have focused on maintaining a competitive cost structure through disciplined spending, productivity initiatives and accelerating Merger synergies. Our consolidated operating cost per ASM (“CASM”), excluding special items (as defined in “Supplemental Information” below) and fuel expense, increased 4% on a 6% lower capacity in 2009 compared to 2008 on a combined basis. The increase primarily reflects an increase in pension expense from a decrease in value in pension trust assets due to declines in the financial markets during 2008.



     At December 31, 2009, we had $4.7 billion in cash, cash equivalents and short-term investments, and $685 million in undrawn revolving credit facilities. In 2009, we completed $3.2 billion in financing transactions. For additional information regarding these financing transactions, see Note 6 of the Notes to the Consolidated Financial Statements.

Business Overview

      Recent Initiatives. We believe that our global network, hub structure and alliances with other airlines enables us to offer customers a service which results in a competitive advantage over other domestic and international airlines. In 2009, we implemented a joint venture with Air France-KLM that further strengthens our transatlantic network, expanded our alliance agreement with Alaska Airlines and Horizon Air to enhance our West coast presence, and received U.S. Department of Transportation approval for a codesharing agreement with Virgin Blue, which will expand our network between the U.S. and Australia and the South Pacific.

     Expanding our presence in New York City through increased corporate sales, improved facilities and increased and new service from New York is a key component of our network strategy. For example, we continue to make investments