adjustments (“Accounting Adjustments”) in our Consolidated Financial Statements that are reflected in our results for the year ended December 31, 2006. These adjustments resulted in an aggregate net noncash charge approximating $310 million to our Consolidated Statement of Operations, consisting primarily of:

 

	·	A $112 million charge in landing fees and other rents. This adjustment is associated primarily with our airport facility leases at John F. Kennedy International Airport in New York. It resulted from historical differences associated with recording escalating rent expense based on actual rent payments instead of on a straight-line basis over the lease term as required by Statement of Financial Accounting Standards (“SFAS”) No. 13, “Accounting for Leases” (“SFAS 13”).

 

	·	A $108 million net charge related to the sale of mileage credits under our SkyMiles frequent flyer program. This includes an $83 million decrease in passenger revenues, a $106 million decrease in other, net operating revenues, and an $81 million decrease in other operating expenses. This net charge primarily resulted from the reconsideration of our position with respect to the timing of recognizing revenue associated with the sale of mileage credits that we expect will never be redeemed for travel.

 

	·	A $90 million charge in salaries and related costs to adjust our accrual for postemployment healthcare benefits. This adjustment is due to healthcare payments applied to this accrual over several years, which should have been expensed as incurred.

 

We believe the Accounting Adjustments, considered individually and in the aggregate, are not material to our Consolidated Financial Statements for each of the years ended December 31, 2006, 2005 and 2004. In making this assessment, we considered qualitative and quantitative factors, including the substantial net loss in each of these three years, the noncash nature of the Accounting Adjustments, our substantial shareowners’ deficit at the end of each of these three years and our status as a debtor-in-possession under Chapter 11 of the Bankruptcy Code.



Results of Operations — 2006 Compared to 2005

 

Net Loss

 

Our consolidated net loss was $6.2 billion in 2006 and $3.8 billion in 2005. The net loss for 2006 includes (1) a $6.2 billion charge to reorganization items, net (see “Reorganization Items, Net” below”), (2) $310 million of noncash charges associated with certain accounting adjustments (see “Accounting Adjustments” above) and (3) a $765 million income tax benefit (see “Income Tax Benefit” below). As discussed below, the net loss for 2005 includes an $888 million charge to restructuring, asset writedowns, pension settlements and related items, net and an $884 million charge to reorganization items, net.

 

Operating Revenue

 

Operating revenue totaled $17.2 billion for the year ended December 31, 2006, a $980 million, or 6%, increase compared to the year ended December 31, 2005. Passenger revenue increased 7% while capacity decreased 6%. The increase in passenger revenue is due to a rise of 10% and 13% in passenger mile yield and passenger revenue per available seat mile (“Passenger RASM”),