MS-29. Revenue Disclosure and Unearned Revenue American Airlines disclosed the following in its Form 10-Q for the first quarter ended March 3 1, 2019.

On March 13, 2019, the Federal Aviation Administration (FAA) grounded all U.S.-registered Boeing 737 MAX aircraft. Our fleet currently includes 24 Boeing 737 MAX aircraft with an additional 76 aircraft on order. As a result, we canceled approximately 1,200 flights in the first quarter of 2019.

In aggregate, we estimate that these grounded aircraft and associated flight cancellations decreased our first quarter 2019 pre-tax income by approximately $80 million.

We have removed al l Boeing 737 MAX flying from our flight schedule through August 19, 2019, which is approximately 115 flights per day. These flights represent approximately 2% of our total capacity each day this summer. Although these aircraft represent a small portion of our total fleet, its financial impact is disproportionate as most of the revenue from the cancellations is lost while the vast majority of the costs remain in place. In total, we currently estimate the Boeing 737 MAX cancellations, which are assumed to extend through August 19, 2019, to decrease our 2019 pre-tax income by approximately $350 million.

a. Why does American Airlines disclose this information?

b. What would be the effect on deferred revenue on the March 31, 2019, balance sheet (relative to the prior year-end December 3 1, 2018) because of these night cancellations?