measure. We use this measure because management believes the exclusion of special items is helpful to investors to evaluate our recurring operational performance.  

  	  	  	  	  	  	  	  	  

Glossary of Defined Terms  

      ASM —Available Seat Mile. A measure of capacity. ASMs equal the total number of seats available for transporting passengers during a reporting period multiplied by the total number of miles flown during that period.  

      CASM —(Operating) Cost per Available Seat Mile. The amount of operating cost incurred per ASM during a reporting period.  

      Passenger Load Factor —A measure of utilized available seating capacity calculated by dividing RPMs by ASMs for a reporting period.  

      Passenger Mile Yield or Yield —The amount of passenger revenue earned per RPM during a reporting period.  

      PRASM — Passenger Revenue per ASM. The amount of passenger revenue earned per ASM during a reporting period. PRASM is also referred to as “unit revenue.”  

      RPM —Revenue Passenger Mile. One revenue-paying passenger transported one mile. RPMs equal the number of revenue passengers during a reporting period multiplied by the number of miles flown by those passengers during that period. RPMs are also referred to as “traffic.” 



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  

     We have significant market risk exposure related to aircraft fuel prices, interest rates and foreign currency exchange rates. Market risk is the potential negative impact of adverse changes in these prices or rates on our Consolidated Financial Statements. In an effort to manage our exposure to these risks, we periodically enter into derivative transactions pursuant to stated policies. We expect adjustments to the fair value of financial instruments to result in ongoing volatility in earnings and stockholders’ equity.  

     The following sensitivity analysis does not consider the effects of a change in demand for air travel, the economy as a whole or actions we may take to seek to mitigate our exposure to a particular risk. For these and other reasons, the actual results of changes in these prices or rates may differ materially from the following hypothetical results.  

Fuel Price Risk  

     Our results of operations are materially impacted by changes in aircraft fuel prices. In an effort to manage our exposure to this risk, we periodically enter into derivative instruments designated as cash flow hedges, which are comprised of crude oil, heating oil and jet fuel call option, collar and swap contracts, to hedge a portion of our projected aircraft fuel requirements, including those of our Contract Carriers under capacity purchase agreements.  

     

     For 2010, aircraft fuel and related taxes, including our Contract Carriers under capacity purchase agreements, accounted for $8.9 billion, or 30%, of our total operating expense, including $89 million of net fuel hedge costs. The following table shows the projected impact to aircraft fuel expense and fuel hedge margin for 2011 based on the impact of our open fuel hedge contracts at January 31, 2011, assuming the following per barrel prices of crude oil:  



Interest