funding requirements may cause us to post margin to counterparties or may cause counterparties to post margin to us as market prices in the underlying hedged items change.  If fuel prices change significantly from the levels existing at the time we enter into fuel hedge contracts, we may be required to post a significant amount of margin. We may adjust our hedge portfolio from time to time in response to margin posting requirements.  

 

For the year ended December 31, 2012 , aircraft fuel and related taxes, including our contract carriers under capacity purchase agreements, accounted for $12.3 billion , or 36% , of our total operating expense. We recognized $66 million of net fuel hedge losses during the year ended December 31, 2012 .  

 

The following table shows the projected cash impact to fuel cost assuming 10% and 20% increases or decreases in fuel prices. The hedge gain (loss) reflects the change in the projected cash settlement value of our open fuel hedge contracts at December 31, 2012, based on their contract settlement dates, assuming the same 10% and 20% changes.   

Interest Rate Risk  

 

Our exposure to market risk from adverse changes in interest rates is primarily associated with our long-term debt obligations. Market risk associated with our fixed and variable rate long-term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates.  

 

At December 31, 2012, we had $5.9 billion of fixed-rate long-term debt and $6.7 billion of variable-rate long-term debt. An increase of 100 basis points in average annual interest rates would have decreased the estimated fair value of our fixed-rate long-term debt by $260 million at 

December 31, 2012, and would have increased the annual interest expense on our variable-rate long-term debt by $40 million, exclusive of the impact of our interest rate hedge contracts.  



Foreign Currency Exchange Risk  

 

We are subject to foreign currency exchange rate risk because we have revenue and expense denominated in foreign currencies with our primary exposures being the Japanese yen and Canadian dollar. To manage exchange rate risk, we execute both our international revenue and expense transactions in the same foreign currency to the extent practicable. From time to time, we may also enter into foreign currency option and forward contracts. At December 31, 2012, we had open foreign currency forward contracts totaling a $123 million asset position. We estimate that a 10% increase or decrease in the price of the Japanese yen and Canadian dollar in relation to the U.S. dollar would change the projected cash settlement value of our open hedge contracts by a $90 million gain or $110 million loss, respectively, for the year ending December 31, 2013.