net was $820 million for 2006, compared to $974 million for 2005. This change is substantially attributable to (1) a 16%, or $162 million, decrease in interest expense primarily due to a $206 million decrease associated with the accounting treatment of certain interest charges under our Chapter 11 proceedings in accordance with SOP 90-7 (see Note 2 of the Notes to the Consolidated Financial Statements), partially offset by a $97 million increase from a higher level of debt outstanding and higher interest rates and (2) a $19 million increase to miscellaneous, net, primarily related to the ineffective portion of our fuel hedge positions.

Reorganization Items, Net

Reorganization items, net totaled a $6.2 billion charge for 2006. For additional information about these items, see “Combined Results of Operations—2007 Compared to 2006.”

Reorganization items, net totaled an $884 million charge for 2005, primarily consisting of the following:

 

 

 

Income Tax Benefit

For 2006, we recorded an income tax benefit totaling $765 million. The amount primarily reflects a decrease to our deferred tax asset valuation allowances from the reversal of accrued pension liabilities associated with the Pilot Plan and pilot non-qualified plan obligations upon each plan’s termination.

For 2005, we recorded an income tax benefit totaling $41 million. The amount is primarily the result of a $1.6 billion adjustment to our deferred tax asset valuation allowance due to increases in the deferred tax asset related to our additional minimum pension liability and net operating loss carryforwards.

For additional information about the income tax valuation allowance, see Note 9 of the Notes to the Consolidated Financial Statements.

 Financial Condition and Liquidity

We expect to meet our cash needs for 2008 from cash flows from operations, cash and cash equivalents and short-term investments and financing arrangements. We also have an undrawn $1.0 billion revolving credit facility that is a part of our Exit Facilities. Our cash and cash equivalents and short-term investments were $2.8 billion at December 31, 2007, compared to $2.6 billion at December 31, 2006.

Significant Liquidity Events

Significant liquidity events during 2007 were as follows:

 

 

 

 

 

 

 

For additional information about these events, see Note 6 of the Notes to the Consolidated Financial Statements.

Combined Sources and Uses of Cash

Cash flows from operating activities

Cash provided by operating activities was $1.4 billion and $993 million in 2007 and 2006, respectively. Cash flows from operating activities in 2007 reflect $875 million in cash used under the Plan of Reorganization to satisfy bankruptcy-related obligations under our comprehensive agreement with ALPA and settlement agreement with the PBGC. Cash flows from operating activities during 2007 also reflect (1) the release of $804 million from restricted cash under the Amended Processing Agreement, (2) revenue and network productivity improvements, including right-sizing capacity to better meet customer demand and the continued restructuring of our route network to reduce less productive short haul domestic flights and