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57
1. Summary of Accounting Policies (Continued)
Advertising Costs The Company expenses on a straight-line basis the costs of advertising as incurred
throughout the year. Advertising expense was $154 million, $144 million and $146 million for the years ended
December 31, 2006, 2005 and 2004, respectively.
2. Restructuring Charges
As a result of the revenue environment, high fuel prices and the Company’s restructuring activities, the Company
has recorded a number of charges during the last few years. The following table summarizes the components of
these charges and the remaining accruals for future lease payments, aircraft lease return and other costs,
facilities closure costs and employee severance and benefit costs (in millions):
Aircraft
Charges
Facility
Exit Costs
Employee
Charges
Other
Total
Remaining accrual at
January 1, 2004
$ 197
$ 56
$ 26
$ -
$ 279
Restructuring charges 21 - 42 - 63
Adjustments (20) (21) (11) - (52)
Non-cash charges (21) - - - (21)
Payments (48) (9) (21) - (78)
Remaining accrual at
December 31, 2004
129
26
36
-
191
Restructuring charges 155 19 - (37) 137
Adjustments - (2) - - (2)
Non-cash charges (119) - - 37 (82)
Payments (13) (7) (36) - (56)
Remaining accrual at
December 31, 2005
152
36
-
-
188
Adjustments (3) (16) - - (19)
Payments (21) (1) - - (22)
Remaining accrual at
December 31, 2006
$ 128
$ 19
$ -
$ -
$ 147
Cash outlays related to the accruals for aircraft charges and facility exit costs will occur through 2017 and 2018,
respectively.
Other
On September 22, 2001, President Bush signed into law the Air Transportation Safety and System Stabilization
Act (the Stabilization Act). The Stabilization Act provides that, notwithstanding any other provision of law, liability
for all claims, whether compensatory or punitive, arising from the terrorist attacks of September 11, 2001 (the
Terrorist Attacks), against any air carrier shall not exceed the liability coverage maintained by the air carrier.
Based upon estimates provided by the Company’s insurance providers, the Company recorded a liability of
approximately $2.3 billion for claims arising from the Terrorist Attacks, after considering the liability protections
provided for by the Stabilization Act. The balance, recorded in the accompanying consolidated balance sheet,
was $1.8 billion and $1.9 billion at December 31, 2006 and 2005, respectively. The Company has also recorded a
liability of approximately $397 million related to flight 587, which crashed on November 12, 2001. The Company
has recorded a receivable for all of these amounts, which the Company expects to recover from its insurance
carriers as claims are resolved. These insurance receivables and liabilities are classified as Other assets and
Other liabilities and deferred credits, respectively, on the accompanying consolidated balance sheets, and are
based on reserves established by the Company’s insurance carriers. These estimates may be revised as
additional information becomes available concerning the expected claims.