Revenue Recognition
As of December 31, 2025 and 2024, the Company’s air traffic liability balance was $361 million and $303 million, respectively, which includes amounts classified as other long-term liabilities on the Company’s consolidated balance sheets. During the year ended December 31, 2025, substantially all of the air traffic liability as of December 31, 2024 was recognized as passenger revenue within the Company’s consolidated statements of operations. Of the air traffic liability balances as of December 31, 2025 and 2024, $75 million and $56 million, respectively, was related to unearned membership fees.
During the years ended December 31, 2025, 2024 and 2023, the Company recognized $79 million, $37 million and $44 million of revenue related to expected and actual expiration of customer rights to book future travel, respectively, in passenger revenues within the Company’s consolidated statements of operations.
Operating revenues are comprised of passenger revenues, which includes fare and non-fare passenger revenues, and other revenues. Disaggregated operating revenues are as follows (in millions): | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Passenger revenues: | | | | | |
| Fare | $ | 1,481 | | | $ | 1,435 | | | $ | 1,277 | |
| Non-fare passenger revenues: | | | | | |
| Service fees | 947 | | | 1,005 | | | 943 | |
| Baggage | 746 | | | 862 | | | 880 | |
| Seat selection | 297 | | | 264 | | | 281 | |
| Other | 127 | | | 117 | | | 128 | |
| Total non-fare passenger revenue | 2,117 | | | 2,248 | | | 2,232 | |
| Total passenger revenues | 3,598 | | | 3,683 | | | 3,509 | |
| Other revenues | 126 | | | 92 | | | 80 | |
| Total operating revenues | $ | 3,724 | | | $ | 3,775 | | | $ | 3,589 | |
The Company is managed as a single business unit that provides air transportation for passengers. Operating revenues by principal geographic region, as defined by the U.S. Department of Transportation (the “DOT”), are as follows (in millions): | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Domestic | $ | 3,547 | | | $ | 3,565 | | | $ | 3,315 | |
| Latin America | 177 | | | 210 | | | 274 | |
| Total operating revenues | $ | 3,724 | | | $ | 3,775 | | | $ | 3,589 | |
The Company attributes operating revenues by geographic region based upon the origin and destination of each passenger flight segment. The Company’s tangible assets consist primarily of flight equipment, which are mobile across geographic markets. Accordingly, assets are not allocated to specific geographic regions.
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.