general, unsecured claim in connection with the agreement between Comair, Inc., our wholly owned subsidiary (“Comair”), and the Air Line Pilots Association (“ALPA”) to reduce Comair’s pilot labor costs.



 	•	 	Facility leases . A net $43 million gain, which primarily reflects (1) a $126 million net gain related to our settlement agreement with the Massachusetts Port Authority partially offset by (2) a net $80 million charge from an allowed general, unsecured claim in connection with the settlement relating to the restructuring of certain of our lease and other obligations at the Cincinnati Airport.

 

 

Income Tax Benefit (Provision)

We recorded an income tax benefit of $119 million for 2008 as a result of the impairment of our indefinite-lived intangible assets. The impairment of goodwill did not result in an income tax benefit as goodwill is not deductible for income tax purposes. We did not record an income tax benefit for the remainder of our loss for 2008, as it is fully reserved by a valuation allowance.

For 2007, we recorded an income tax provision totaling $207 million. We have recorded a full valuation allowance against our net deferred tax assets, excluding the effect of the deferred tax liabilities that are unable to be used as a source of income against these deferred tax assets, based on our belief that it is more likely than not that the asset will not be realized in the future. We will continue to assess the need for a full valuation allowance in future periods. In accordance with SOP 90-7, any reduction in the valuation allowance as a result of the recognition of deferred tax assets is adjusted through goodwill, followed by other indefinite-lived intangible assets until the net carrying cost of these assets is zero. Accordingly, during 2007, we reduced goodwill by $211 million with respect to the realization of pre-emergence deferred tax assets.

 Results of Operations—2007 Combined Compared to 2006

Fresh Start Adjustments

During the eight months ended December 31, 2007, Fresh Start Adjustments resulted in a $157 million increase to pre-tax income for the year ended December 31, 2007. The Fresh Start Adjustments consist of the following:

 

SkyMiles Frequent Flyer Program . We revalued our frequent flyer award liability to estimated fair value and changed our accounting policy from an incremental cost method to a deferred revenue method. Fair value represents the estimated price that third parties would require us to pay for them to assume the obligation of redeeming miles under the SkyMiles program. Fresh Start Adjustments for the SkyMiles program (including the change in accounting policy for that program) increased operating revenue by $188 million.

 

Fuel Hedging . Prior to the adoption of fresh start reporting on April 30, 2007, we recorded as a component of stockholders’ deficit in other comprehensive loss $46 million of deferred gains related to our fuel hedging program. This gain would have been recognized as an offset to fuel expense as the underlying fuel hedge contracts were settled. However, as required by fresh start reporting, accumulated other comprehensive loss prior to emergence from Chapter 11 was