Tab le of our joint business partners that flows through LHR in the United Kingdom. Among other things, Brexit will likely require a transition arrangement or new air services agreement involving the U.S. and United Kingdom, and the United Kingdom and EU, to permit our current air services (including those involving our joint business and code share partners) to continue as we currently conduct them. Moreover, the exit of the United Kingdom from the EU could adversely affect European or worldwide economic or market conditions and could contribute to further instability in global financial markets. In addition, the exit of the United Kingdom from the EU has created uncertainty as to the future trade relationship between the EU and the United Kingdom, including as to air traffic services. The exit of the United Kingdom could also lead to legal and regulatory uncertainty and potentially divergent treaties, laws and regulations as the United Kingdom determines which EU treaties, laws and regulations to replace or replicate, including those governingContents

aviation, labor, environmental, data protection/privacy, competition and other matters applicable to the provision of air transportation services by us or our alliance, joint business or codeshare partners. The impact on our business of any treaties, laws and regulations that replace the existing EU counterparts cannot be predicted. Any of these effects, and others we cannot anticipate, could materially adversely affect our business, results of operations and financial condition.

We are subject to many forms of environmental and noise regulation and may incur substantial costs as a result.

We are subject to a number of increasingly stringent federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment and noise reduction, including those relating to emissions to the air, discharges to surface and subsurface waters, safe drinking water, and the management of hazardous substances, oils and waste materials. Compliance with environmental laws and regulations can require significant expenditures, and violations can lead to significant fines and penalties.

We are also subject to other environmental laws and regulations, including those that require us to investigate and remediate soil or groundwater to meet certain remediation standards. Under federal law, generators of waste materials, and current and former owners or operators of facilities, can be subject to liability for investigation and remediation costs at locations that have been identified as requiring response actions. Liability under these laws may be strict, joint and several, meaning that we could be liable for the costs of cleaning up environmental contamination regardless of fault or the amount of waste directly attributable to us. We have liability for investigation and remediation costs at various sites, although such costs currently are not expected to have a material adverse effect on our business.

We have various leases and agreements with respect to real property, tanks and pipelines with airports and other operators. Under these leases and agreements, we have agreed to indemnify the lessor or operator against environmental liabilities associated with the real property or operations described under the agreement, even in ~~some~~certain cases ~~even if~~where we are not the party responsible for the initial event that caused the environmental damage. We also participate in leases with other airlines in fuel consortiums and fuel committees at airports, ~~where~~and such indemnities are generally joint and several among the participating airlines.

Governmental authorities in several U.S. and foreign cities are also considering, or have already implemented, aircraft noise reduction programs, including the imposition of nighttime curfews and limitations on daytime take offs and landings. We have been able to accommodate local noise restrictions imposed to date, but our operations could be adversely affected if locally-imposed regulations become more restrictive or widespread.

We ~~are subject to risks associated with climate change, including increased regulation to reduce emissions of greenhouse gases.~~

There is increasing global regulatory focus on climate change and GHG emissions. For example, in October 2016, ICAO passed a resolution adopting the ICAO CORSIA, which is a global, market-based emissions offset program to encourage carbon-neutral growth beyond 2020. The CORSIA was supported by the board of Airlines for America (the principal U.S. airline trade association) and IATA (the principal international airline trade association), and by American and many other U.S. and foreign airlines. The CORSIA will increase operating costs for American and most other airlines, including other U.S. airlines that operate internationally, but the implementation of a global program, as compared to regional emission reduction schemes, should ensure that these costs will be more predictable and more evenly applied to American and its competitors since there will be a common global regulatory regime. The CORSIA is expected to be implemented in phases, beginning in 2021. Certain details still need to be developed and the impact of the CORSIA cannot be fully predicted. While we do not anticipate any significant emissions allowance expenditures in 2018, compliance with the CORSIA or similar emissions-related requirements could significantly increase our operating costs beyond 2018. Further, the potential impact of the CORSIA or other emissions-related requirements on our costs will ultimately depend on a limited number of ~~factors, including baseline emissions, the price of emission allowances or offsets~~suppliers for aircraft, aircraft engines and ~~the~~parts.

We depend on a limited number of ~~future flights subject to such emissions-related requirements. These costs have not been completely defined~~suppliers for aircraft, aircraft engines and ~~could fluctuate.~~

~~In addition, in December 2015, at the 21st Conference~~many aircraft and engine parts. For example, as of the ~~Parties~~end of 2020 all of our mainline aircraft were manufactured by either Airbus or Boeing and all of our regional aircraft were manufactured by either Bombardier or Embraer. Further, our supplier base continues to consolidate as evidenced by the recent acquisition of Rockwell Collins by United Technologies, the recent transactions involving Airbus and Bombardier and Bombardier and Mitsubishi. Due to the ~~United Nations Framework Convention on Climate Change,~~limited number of these suppliers, we are vulnerable to any problems associated with the performance of their obligation to supply key aircraft, parts and engines, including design defects, mechanical problems, contractual performance by suppliers, adverse perception by the public that would result in customer avoidance of any of our aircraft or any action by the FAA or any other regulatory authority resulting in an inability to operate our aircraft, even temporarily. For instance, in March 2019, the FAA ordered the grounding of all Boeing 737 MAX Family aircraft, which remained in place for over ~~190 countries, including~~a year and was not lifted in the United States reached an agreement (the Paris Agreement) to reduce GHG emissions. While the United States has since announced that it will withdraw from the Paris Agreement and there is no express reference to aviation in that agreement, to the extent countries implement that agreement or impose other climate change regulations, either with respect to the aviation industry or with respect to related industries such as the aviation fuel industry, it could have an adverse direct or indirect effect on our business.

In 2018, the EPA is expected to finalize a rule implementing aircraft engine GHG emission standards. It is anticipated that the EPA rule will closely align with recent ICAO carbon dioxide emission standards.until November 2020. The ~~new standards, which were supported~~

~~by the airline industry and manufacturers, would apply to new type aircraft certified beginning in 2020, and would be phased in for newly manufactured existing aircraft type designs starting in 2023.~~

~~In addition, several states have adopted or are considering initiatives to regulate emissions~~limited number of GHGs, primarily through the planned development of GHG emissions inventories and/or regional GHG cap and trade programs. Depending on the scope of such regulation, certain of our facilities and operations, or the operations of ourthese suppliers may ~~be subject~~also result in reduced competition and potentially higher prices than if the supplier base was less concentrated.

Delays in scheduled aircraft deliveries or other loss of anticipated fleet capacity, and failure of new aircraft to ~~additional operating and other permit requirements, likely resulting in increased operating costs.~~

These regulatory efforts, both internationally and in the U.S. at the federal and state levels, are still developing, and we cannot yet determine what the final regulatory programs or their impact will be in the U.S., the EU or in other areas in which we do business. However, such climate change-related regulatory activity in the futureperform as expected, may adversely affect our business and financial results by requiring us to reduce our emissions, purchase allowances or otherwise pay for our emissions. Such activity may also impact us indirectly by increasing our operating costs, including fuel costs.

~~We face challenges in integrating our computer, communications and other technology systems.~~

Among the principal risks of integrating our businesses and operations are the risks relating to integrating various computer, communications and other technology systems that will be necessary to operate US Airways and American as a single airline and to achieve cost synergies by eliminating redundancies in the businesses. While we have to date successfully integrated several of our systems, including our customer reservations system and our pilot and fleet scheduling system, we still have to complete several additional important system integration projects. The integration of these systems in a number of prior airline mergers has taken longer, been more disruptive and cost more than originally forecast. The implementation process to integrate these various systems will involve a number of risks that could adversely impact our business, results of operations and financial condition. New systems will replace multiple legacy systems and the related implementation will be a complex and time-consuming project involving substantial expenditures for implementation consultants, system hardware, software and implementation activities, as well as the transformation

The success of ~~business and financial processes.~~

We cannot assure you that our security measures, change control procedures or disaster recovery plans will be adequate to prevent disruptions or delays in connection with systems integration or replacement. Disruptions in or changes to these systems could result in a disruption to our business depends on, among other things, effectively managing the number and ~~the loss~~types of ~~important data. Any~~aircraft we operate. If, for any reason, we are unable to accept or secure deliveries of ~~the foregoing~~new aircraft on contractually scheduled delivery dates, this could ~~result in a material adverse effect~~have negative impacts on our business, results of operations and financial condition. Our failure to integrate newly purchased aircraft into our fleet as planned might require us to seek extensions of the terms for some leased aircraft or otherwise delay the exit of certain aircraft from our fleet. Such unanticipated extensions or delays may require us to operate existing aircraft beyond the point at which it is economically optimal to retire them, resulting in increased maintenance costs, or reductions to our schedule, thereby reducing revenues. If new aircraft orders are not filled on a timely basis, we could face higher financing and operating costs than planned. In addition, if the aircraft we receive do not meet expected performance or quality standards, including with respect to fuel efficiency, safety and reliability, we could face higher financing and operating costs than planned and our business, results of operations and financial condition could be adversely impacted. For instance, in March 2019, the FAA grounded all Boeing 737 MAX Family aircraft, including the 24 aircraft in our fleet at the time of the grounding, and which caused us to be unable to take delivery of the Boeing 737 MAX Family aircraft we had on order from Boeing.

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We rely heavily on technology and automated systems to operate our business, and any failure of these technologies or systems could harm our business, results of operations and financial condition.

We are highly dependent on existing and emerging technology and automated systems to operate our business. These technologies and systems include our computerized airline reservation system, flight operations systems, financial planning, management and accounting systems, telecommunications systems, website, maintenance systems and check-in kiosks. In order for our operations to work efficiently, our website and reservation system must be able to accommodate a high volume of traffic, maintain secure information and deliver flight information, as well as issue electronic tickets and process critical financial information in a timely manner. Substantially all of our tickets are issued to passengers as electronic tickets. We depend on our reservation system, which is hosted and maintained under a long-term contract by a third-party service provider, to be able to issue, track and accept these electronic tickets. If our technologies or automated systems are not functioning or if our third-party service providers were to fail to adequately provide technical support, system maintenance or timely software upgrades for any one of our key existing systems, we could experience service disruptions or delays, which could harm our business and result in the loss of important data, increase our expenses and decrease our revenues. In the event that one or more of our primary technology or systems vendors goes into bankruptcy, ceases operations or fails to perform as promised, replacement services may not be readily available on a timely basis, at competitive rates or at all, and any transition time to a new system may be significant.

Our technologies and automated systems cannot be completely protected against events that are beyond our control, including natural disasters, power failures, terrorist attacks, cyber-attacks, data theft, equipment and software failures, computer viruses or telecommunications failures. Substantial or sustained system failures could cause service delays or failures and result in our customers purchasing tickets from other airlines. We cannot assure ~~you~~ that our security measures, change control procedures or disaster recovery plans are adequate to prevent disruptions or delays. Disruption in or changes to these technologies or systems could result in a disruption to our business and the loss of important data. Any of the foregoing could result in a material adverse effect on our business, results of operations and financial condition.

~~We are at risk of losses~~Evolving data security and ~~adverse publicity stemming from~~privacy requirements could increase our costs, and any public incident involving our company, our people or our brand, including any accident or other public incident involving our personnel or aircraft, or the personnel or aircraft of our regional, codeshare or joint business operators.

~~In a modern world where news can be captured and travel rapidly, we are at risk of adverse publicity stemming from any public incident involving our company, our people or our brand. Such an~~significant data security incident could ~~involve the alleged behavior of any of~~disrupt our more than 100,000 employees. Further, if our personnel or one of our aircraft, or personnel of, or an aircraft that is operated under our brand by, one of our regional operators or an airline with which we have a marketing alliance, joint business or codeshare relationship, were to be involved in a public incident, accident or catastrophe, we could be exposed to significant reputational harm and potential legal liability. The insurance we carry may be inapplicable or inadequate to cover any such incident, accident or catastrophe. In the event that our insurance is inapplicable or not adequate, we may be forced to bear substantial losses from an incident or accident. In addition, any such incident, accident or catastrophe involving our personnel or one of our aircraft (or personnel and aircraft of our regional operators and our codeshare partners) could create an adverse public perception, which couldoperations, harm our reputation, ~~result in air travelers being reluctant~~expose us to ~~fly on our aircraft or those of our regional operators or codeshare partners,~~legal risks and otherwise materially adversely ~~impact~~affect our business, results of operations and financial condition.

~~Delays~~Our business requires the secure processing and storage of sensitive information relating to our customers, employees, business partners and others. However, like any global enterprise operating in ~~scheduled aircraft deliveries~~today’s digital business environment, we are subject to threats to the security of our networks and data, including threats potentially involving criminal hackers, hacktivists, state-sponsored actors, corporate espionage, employee malfeasance, and human or technological error. These threats continue to increase as the frequency, intensity and sophistication of attempted attacks and intrusions increase around the world. We have been the target of cybersecurity attacks in the past and expect that we will continue to be in the future.

Furthermore, in response to these threats there has been heightened legislative and regulatory focus on data privacy and cybersecurity in the U.S., the EU and elsewhere, particularly with respect to critical infrastructure providers, including those in the transportation sector. As a result, we must comply with a proliferating and fast-evolving set of legal requirements in this area, including substantive cybersecurity standards as well as requirements for notifying regulators and affected individuals in the event of a data security incident. This regulatory environment is increasingly challenging and may present material obligations and risks to our business, including significantly expanded compliance burdens, costs and enforcement risks. For example, in May 2018, the EU’s new General Data Protection Regulation, commonly referred to as GDPR, came into effect, which imposes a host of new data privacy and security requirements, imposing significant costs on us and carrying substantial penalties for non-compliance.

In addition, many of our commercial partners, including credit card companies, have imposed data security standards that we must meet. In particular, we are required by the Payment Card Industry Security Standards Council, founded by the credit card companies, to comply with their highest level of data security standards. While we continue our efforts to meet these standards, new and revised standards may be imposed that may be difficult for us to meet and could increase our costs.

A significant cybersecurity incident could result in a range of potentially material negative consequences for us, including unauthorized access to, disclosure, modification, misuse, loss or destruction of company systems or data; theft of sensitive, regulated or confidential data, such as personal identifying information or our intellectual property; the loss of functionality of critical systems through ransomware, denial of service or other ~~loss~~attacks; a deterioration in our relationships with business partners and other third parties; and business delays, service or system disruptions, damage to equipment and injury to persons or property. The methods used to obtain unauthorized access, disable or degrade service or

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sabotage systems are constantly evolving and ~~failure~~may be difficult to anticipate or to detect for long periods of ~~new aircraft~~time. The constantly changing nature of the threats means that we may not be able to prevent all data security breaches or misuse of data. Similarly, we depend on the ability of our key commercial partners, including our regional carriers, distribution partners and technology vendors, to conduct their businesses in a manner that complies with applicable security standards and assures their ability to perform on a timely basis. A security failure, including a failure to meet relevant payment security standards, breach or other significant cybersecurity incident affecting one of our partners could result in potentially material negative consequences for us.

In addition, the costs and operational consequences of defending against, preparing for, responding to and remediating an incident of cybersecurity breach may be substantial. As cybersecurity threats become more frequent, intense and sophisticated, costs of proactive defense measures are increasing. Further, we could be exposed to litigation, regulatory enforcement or other legal action as ~~expected, may~~a result of an incident, carrying the potential for damages, fines, sanctions or other penalties, as well as injunctive relief and enforcement actions requiring costly compliance measures. A significant number of recent privacy and data security incidents, including those involving other large airlines, have resulted in very substantial adverse financial consequences to those companies. A cybersecurity incident could also impact our brand, harm our reputation and adversely impact our relationship with our customers, employees and stockholders. Accordingly, failure to appropriately address these issues could result in material financial and other liabilities and cause significant reputational harm to our company.

We rely on third-party distribution channels and must manage effectively the costs, rights and functionality of these channels.

We rely on third-party distribution channels, including those provided by or through global distribution systems (GDSs) (e.g., Amadeus, Sabre and Travelport), conventional travel agents, travel management companies and online travel agents (OTAs) (e.g., Expedia, including its booking sites Orbitz and Travelocity, and Booking Holdings, including its booking sites Kayak and Priceline), to distribute a significant portion of our airline tickets, and we expect in the future to continue to rely on these channels. We are also dependent upon the ability and willingness of these distribution channels to expand their ability to distribute and collect revenues for ancillary products (e.g., fees for selective seating). These distribution channels are more expensive and at present have less functionality in respect of ancillary product offerings than those we operate ourselves, such as our website at www.aa.com. Certain of these distribution channels also effectively restrict the manner in which we distribute our products generally. To remain competitive, we will need to manage successfully our distribution costs and rights, increase our distribution flexibility and improve the functionality of our distribution channels, while maintaining an industry-competitive cost structure. Further, as distribution technology changes we will need to continue to update our technology by acquiring new technology from third parties, building the functionality ourselves, or a combination, which in any event will likely entail significant technological and commercial risk and involve potentially material investments. These imperatives may affect our relationships with conventional travel agents, travel management companies, GDSs and OTAs, including if consolidation of conventional travel agents, travel management companies, GDSs or OTAs continues, or should any of these parties seek to acquire other technology providers thereby potentially limiting our technology alternatives. Any inability to manage our third-party distribution costs, rights and functionality at a competitive level or any material diminishment or disruption in the distribution of our tickets could have a material adverse effect on our business, results of operations and financial condition.

If we are unable to obtain and maintain adequate facilities and infrastructure throughout our system and, at some airports, adequate slots, we may be unable to operate our existing flight schedule and to expand or change our route network in the future, which may have a material adverse impact on our operations.

In order to operate our existing and proposed flight schedule and, where desirable, add service along new or existing routes, we must be able to maintain and/or obtain adequate gates, check-in counters, operations areas, operations control facilities and administrative support space. As airports around the world become more congested, it may not be possible for us to ensure that our plans for new service can be implemented in a commercially viable manner, given operating constraints at airports throughout our network, including those imposed by inadequate facilities at desirable airports.

In light of constraints on existing facilities, there is presently a significant amount of capital spending underway at major airports in the United States, including large projects underway at a number of airports where we have significant operations, such as ORD, LAX, LGA and DCA. This spending is expected to result in increased costs to airlines and the traveling public that use those facilities as the airports seek to recover their investments through increased rental, landing and other facility costs. In some circumstances, such costs could be imposed by the relevant airport authority without our approval. Accordingly, our operating costs are expected to increase significantly at many airports at which we operate,

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including a number of our hubs and gateways, as a result of capital spending projects currently underway and additional projects that we expect to commence over the next several years.

In addition, operations at three major domestic airports, certain smaller domestic airports and many foreign airports we serve are regulated by governmental entities through allocations of slots or similar regulatory mechanisms that limit the rights of carriers to conduct operations at those airports. Each slot represents the authorization to land at or take off from the particular airport during a specified time period and may have other operational restrictions as well. In the U.S., the DOT and the FAA currently regulate the allocation of slots or slot exemptions at DCA and two New York City airports: JFK and LGA. Our operations at these airports generally require the allocation of slots or similar regulatory authority. In addition to slot restrictions, operations at DCA and LGA are also limited based on a so-called “perimeter rule” which generally limits the stage length of the flights that can be operated from those airports to 1,250 and 1,500 miles, respectively. Similarly, our operations at LHR, international airports in Beijing, Frankfurt, Paris, Tokyo and other airports outside the U.S. are regulated by local slot authorities pursuant to the International Airline Trade Association Worldwide Scheduling Guidelines and/or applicable local law. Termination of slot controls at some or all of the foregoing airports could affect our operational performance and competitive position. We currently have sufficient slots or analogous authorizations to operate our existing flights and we have generally, but not always, been able to obtain the rights to expand our operations and to change our schedules. However, there is no assurance that we will be able to obtain sufficient slots or analogous authorizations in the future or as to the cost of acquiring such rights because, among other reasons, such allocations are often sought after by other airlines and are subject to changes in governmental policies. Due to the dramatic reduction in air travel resulting from the COVID-19 pandemic, we are in many instances relying on exemptions granted by applicable authorities from the requirement that we continuously use certain slots, gates and routes or risk having such operating rights revoked, and we cannot predict whether such exemptions will continue to be granted or whether we ultimately could be at risk of losing valuable operating rights. We cannot provide any assurance that regulatory changes resulting in changes in the application of slot controls or the allocation of or any reallocation of existing slots, the continued enforcement or termination of a perimeter rule or similar regulatory regime will not have a material adverse impact on our operations.

Our ability to provide service can also be impaired at airports, such as LAX and ORD where the airport gate and other facilities are currently inadequate to accommodate all of the service that we would like to provide, or airports such as Dallas Love Field Airport where we have no access to gates at all.

Any limitation on our ability to acquire or maintain adequate gates, ticketing facilities, operations areas, operations control facilities, slots (where applicable), or office space could have a material adverse effect on our business, results of operations and financial condition.

~~The success~~Interruptions or disruptions in service at one of our business depends on, among other things, effectively managing the number and types of aircraft we operate. In many cases, the aircraft we intend to operate are not yet in our fleet, but we have contractual commitments to purchase or lease them. If for any reason we are unable to accept or secure deliveries of new aircraft on contractually scheduled delivery dates, thiskey facilities could have a ~~negative~~material adverse impact on our operations.

We operate principally through our hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C. and partner gateways including in London Heathrow (among others). Substantially all of our flights either originate at or fly into one of these locations. A significant interruption or disruption in service at one of our hubs, gateways or other airports where we have a significant presence, resulting from ATC delays, weather conditions, natural disasters, growth constraints, performance by third-party service providers (such as electric utility or telecommunications providers), failure of computer systems, disruptions at airport facilities or other key facilities used by us to manage our operations (such as occurred in the United Kingdom at LGW on December 20, 2018 and LHR on January 8, 2019 due to unauthorized drone activity), labor relations, power supplies, fuel supplies, terrorist activities, or otherwise could result in the cancellation or delay of a significant portion of our flights and, as a result, could have a severe impact on our business, results of operations and financial condition. ~~Our failure to integrate newly purchased aircraft into our fleet as planned might require us to seek extensions~~We have limited control, particularly in the short term, over the operation, quality or maintenance of many of the ~~terms for some leased aircraft~~services on which our operations depend and over whether vendors of such services will improve or otherwise delay the exit of certain aircraft from our fleet. Such unanticipated extensions or delays may require us to operate existing aircraft beyond the point at which it is economically optimal to retire them, resulting in increased maintenance costs. If new aircraft orders are not filled on a timely basis, we could face higher operating costs than planned. In addition, if the aircraft we receive do not meet expected performance or quality standards, including with respect to fuel efficiency and reliability, our business, results of operations and financial condition could be adversely impacted.

~~We depend on a limited number of suppliers for aircraft, aircraft engines and parts.~~

~~We depend on a limited number of suppliers for aircraft, aircraft engines and many aircraft and engine parts. These suppliers~~ continue to consolidate as evidenced by the pending United Technologies acquisition of Rockwell Collins, the pending transaction involving Airbus and Bombardier and the public reports of a possible transaction involving Boeing and Embraer. Dueprovide services that are essential to the limited number of these suppliers, we are vulnerable to any problems associated with the performance of their obligation to supply key aircraft, parts and engines, including design defects, mechanical problems, contractual performance by suppliers, or adverse perception by the public that would result in customer avoidance or in actions by the FAA resulting in an inability to operate our ~~aircraft.~~

Our business has been and will continue to be affected by many changing economic and other conditions beyond our control, including global events that affect travel behavior, and our results of operations could be volatile and fluctuate due to seasonality.

~~Our business, results of operations and financial condition have been and will continue to be affected by many changing economic and other conditions beyond our control, including, among others:~~

actual or potential changes in international, national, regional and local economic, business and financial conditions, including recession, inflation, higher interest rates, wars, terrorist attacks and political instability;

~~changes in consumer preferences, perceptions, spending patterns and demographic trends;~~

~~changes in the competitive environment due to industry consolidation, changes in airline alliance affiliations, and other factors;~~

~~actual or potential disruptions to the ATC systems;~~

~~increases in costs of safety, security, and environmental measures;~~

~~outbreaks of diseases that affect travel behavior; and~~

~~weather and natural disasters.~~

In particular, an outbreak of a contagious disease such as the Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu, Zika virus or any other similar illness, if it were to become associated with air travel or persist for an extended period, could materially affect the airline industry and us by reducing revenues and adversely impacting our operations and passengers’ travel behavior. As a result of these or other conditions beyond our control, our results of operations could be volatile and subject to rapid and unexpected change. In addition, due to generally weaker demand for air travel during the winter, our revenues in the first and fourth quarters of the year could be weaker than revenues in the second and third quarters of the year.business.

A higher than normal number of pilot retirements, more stringent duty time regulations, increased flight hour ~~requirements~~requirement for commercial airline pilots, reductions in the number of military pilots entering the commercial workforce, increased training requirements and other factors have caused a shortage of pilots that could materially adversely affect our business.

We currently have a higher than normal number of pilots eligible for retirement. Large numbers of pilots in the industry are approaching the FAA’s mandatory retirement age of 65. ~~Further,~~Our pilots and other employees are subject to rigorous certification standards, and our pilots and other crew members must adhere to flight time and rest requirements.

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Commencing in ~~July~~ 2013, the ~~FAA issued regulations that~~minimum flight hour requirement to achieve a commercial pilot’s license in the United States increased from 250 to 1,500 hours, thereby significantly increasing the ~~flight hours~~time and cost commitment required for pilots working for airlines certificated under Part 121 of the Federal Aviation Regulations. In addition, on January 4, 2014, more stringent pilot flight and duty time requirements under Part 117 of the Federal Aviation Regulations took effect. These and other factors, including reductions into become licensed to fly commercial aircraft. Additionally, the number of military pilots being trained by the U.S. armed forces and available as commercial pilots upon their retirement from military service has been decreasing. These and other factors have contributed to a shortage of qualified, entry-level pilots and increased compensation costs, particularly for our regional subsidiaries and our other regional partners who are being required by market conditions to pay significantly increased wages and large signing bonuses to their pilots in an attempt to achieve desired staffing levels. The foregoing factors have also led to increased competition from large, mainline carriers attempting to meet their hiring needs. We believe that this industry-wide pilot shortage is becoming an increasing problem for airlines in the United States. Our regional partners have recently been unable to hire adequate numbers of pilots to meet their needs, resulting in a reduction in the number of flights offered, disruptions, increased costs of operations, financial difficulties and other adverse effects, and these circumstances may become more severe in the future and thereby cause a material adverse effect on our business.

Increases in insurance costs or reductions in insurance coverage may adversely impact our operations and financial results.

The terrorist attacks of September 11, 2001 led to a significant increase in insurance premiums and a decrease in the insurance coverage available to commercial air carriers. Accordingly, our insurance costs increased significantly, and our ability to continue to obtain insurance even at current prices remains uncertain. If we are unable to maintain adequate insurance coverage, our business could be materially and adversely affected. Additionally, severe disruptions in the domestic and global financial markets could adversely impact the claims paying ability of some insurers. Future downgrades in the ratings of enough insurers could adversely impact both the availability of appropriate insurance coverage and its cost. Because of competitive pressures in our industry, our ability to pass along additional insurance costs to passengers is limited. As a result, further increases in insurance costs or reductions in available insurance coverage could have an adverse impact on our financial results.

~~We may be a party to litigation in the normal course of business or otherwise, which could affect our financial position and liquidity.~~The airline industry is heavily taxed.

From time to time, we are a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of our business or otherwise. We are currently involved in various legal proceedings and claims that have not yet been fully resolved, and additional claims may arise in the future. Legal proceedings can be complex and take many months, or even years, to reach resolution, with the final outcome depending on a number of variables, some of which are not within our control. LitigationThe airline industry is subject to ~~significant uncertainty~~extensive government fees and ~~may be expensive, time-consuming,~~taxation that negatively impact our revenue and ~~disruptive to our operations. Although we will vigorously defend ourselves~~profitability. The U.S. airline industry is one of the most heavily taxed of all industries. These fees and taxes have grown significantly in ~~such legal proceedings, their ultimate resolution~~the past decade for domestic flights, and ~~potential financial~~various U.S. fees and ~~other impacts~~taxes also are assessed on ~~us are uncertain.~~international flights. For ~~these and other reasons, we may choose to settle legal proceedings and claims, regardless of their actual merit. If~~example, as permitted by federal legislation, most major U.S. airports impose a legal proceeding is resolved against us, it could result in significant compensatory damages, and in certain circumstances punitive or trebled damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief imposedper-passenger facility charge on us. If our existing insurance does not cover the amount or types of damages awarded, or if other resolution or actions taken as a result of the legal proceeding were to restrain our ability to operate or market our services, our consolidated financial position, results of operations or cash flows could be materially adversely affected. In addition, legal proceedings, and any adverse resolution thereof, can result in adverse publicity and damage to our reputation, which could adversely impact our business. Additional information regarding certain legal mattersthe governments of foreign countries in which we operate impose on U.S. airlines, including us, various fees and taxes, and these assessments have been increasing in number and amount in recent years. Moreover, we are ~~involved can be found in Part I, Item 3. Legal Proceedings.~~

~~Our ability~~obligated to ~~utilize our NOL Carryforwards may be limited.~~

~~Under~~collect a federal excise tax, commonly referred to as the Internal Revenue Code of 1986, as amended (the Code), a corporation is generally allowed a deduction for NOLs carried over from prior taxable years (NOL Carryforwards). As of December 31, 2017, we had available NOL Carryforwards of approximately $10.0 billion for regular federal income“ticket tax, ~~purposes that will expire, if unused, beginning in 2022,~~” on domestic and ~~approximately $3.4 billion for state income~~international air transportation. We collect the excise tax, ~~purposes that will expire, if unused, between 2018 and 2037. Our NOL Carryforwards are subject to adjustment on audit by the Internal Revenue Service and the respective state taxing authorities.~~

~~A corporation’s ability to deduct its federal NOL Carryforwards and to utilize~~along with certain other ~~available tax attributes can be substantially constrained under~~U.S. and foreign taxes and user fees on air transportation (such as passenger security fees), and pass along the ~~general annual limitation rules of Section 382~~collected amounts to the appropriate governmental agencies. Although these taxes and fees are not our operating expenses, they represent an additional cost to our customers. There are continuing efforts in Congress and in other countries to raise different portions of the Code (Section 382) if it undergoes an “ownership change” as defined in Section 382 (generally where cumulative stock ownership changes among material stockholders exceed 50 percent during a rolling three-year period). We experienced an ownership change in connection with our emergence fromvarious taxes, fees, and charges imposed on airlines and their passengers, including the ~~Chapter 11 Cases~~passenger facility charge, and US Airways Group experienced an ownership change in connection with the Merger. The general limitation rules for a debtor in a bankruptcy case are liberalized where the ownership change occurs upon emergence from bankruptcy. We electedwe may not be able to be covered by certain special rules for federal income tax purposes that permitted approximately $9.0 billion (with $8.4 billion of unlimited NOL still remaining at December 31, 2017) of our federal NOL Carryforwards to be utilized without regard to the annual limitation generally imposed by Section 382. If the special rules are determined not to apply, our ability to utilize such federal NOL Carryforwards may be subject to limitation. Substantiallyrecover all of these charges from our ~~remaining federal NOL Carryforwards (attributable to US Airways Group~~customers. Increases in such taxes, fees and its subsidiaries) are subject to limitation under Section 382 as a result of the Merger; however, our ability to utilize such NOL Carryforwards is not anticipated to be effectively constrained as a result of such limitation. Similar limitations may apply for state income tax purposes.

Notwithstanding the foregoing, an ownership change subsequent to our emergence from the Chapter 11 Cases may severely limit or effectively eliminate our ability to utilize our NOL Carryforwards and other tax attributes. To reduce the risk of a potential adverse effect on our ability to utilize our NOL Carryforwards, our Restated Certificate of Incorporation (Certificate of Incorporation) contains transfer restrictions applicable to certain substantial stockholders. These restrictions may adversely affect the ability of certain holders of AAG common stock to dispose of or acquire shares of AAG common stock. Although the purpose of these transfer restrictions is to prevent an ownership change from occurring, no assurance can be given that an ownership change will not occur even with these restrictions in place.

Our ability to use our NOL Carryforwards also will depend on the amount of taxable income generated in future periods. The NOL Carryforwards may expire before we can generate sufficient taxable income to use them.

We have a significant amount of goodwill, which is assessed for impairment at least annually. In addition, we may never realize the full value of our intangible assets or long-lived assets, causing us to record material impairment charges.

Goodwill and indefinite-lived intangible assets are not amortized, but are assessed for impairment at least annually, or more frequently if conditions indicate that an impairment may have occurred. In accordance with applicable accounting standards, we first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. In addition, we are required to assess certain of our other long-lived assets for impairment if conditions indicate that an impairment may have occurred.

~~Future impairment of goodwill or other long-lived assets~~charges could be recorded in results of operations as a result of changes in assumptions, estimates, or circumstances, some of which are beyond our control. There can be no assurance that a material impairment charge of goodwill or tangible or intangible assets will be avoided. The value of our aircraft could be impacted in future periods by changes in supply and demand for these aircraft. Such changes in supply and demand for certain aircraft types could result from grounding of aircraft by us or other airlines. An impairment charge could have a material adverse effect onnegatively impact our business, results of operations and financial condition. The CARES Act provided for a temporary tax holiday from collecting and remitting certain government ticket taxes for tickets purchased between March 28, 2020 and December 31, 2020.

Under DOT regulations, all governmental taxes and fees must be included in the prices we quote or advertise to our customers. Due to the competitive revenue environment, many increases in these fees and taxes have been absorbed by the airline industry rather than being passed on to the customer. Further increases in fees and taxes may reduce demand for air travel, and thus our revenues.

Risks Related to Ownership of AAG Common Stock and Convertible Notes

The price of AAG common stock has ~~recently~~ been and may in the future be volatile.

The market price of AAG common stock has fluctuated substantially in the past, and may fluctuate substantially in the future, due to a variety of factors, many of which are beyond our control, including:

~~AAG’s~~•the effects of the COVID-19 pandemic on our business or the U.S. and global economies;

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•macro-economic conditions, including the price of fuel;

•changes in market values of airline companies as well as general market conditions;

•our operating and financial results failing to meet the expectations of securities analysts or investors;

•changes in financial estimates or recommendations by securities analysts;

•changes in our level of outstanding indebtedness and other obligations;

•changes in our credit ratings;

•material announcements by us or our competitors;

~~movements in fuel prices;~~

•expectations regarding our capital deployment program, including any existing or potential future share repurchase programs and any future dividend payments that may be declared by our Board of Directors, or any determination to cease repurchasing stock or paying ~~dividends;~~dividends (which we have suspended for an indefinite period in accordance with the applicable requirements under the CARES Act and the PSP Extension Law);

•new regulatory pronouncements and changes in regulatory guidelines;

•general and industry-specific economic conditions;

•changes in our key personnel;

distributions of shares of AAG common stock pursuant to the Plan, including distributions from the disputed claims reserve established under the plan of reorganization upon the resolution of the underlying claims;

•public or private sales of a substantial number of shares of AAG common stock or issuances of AAG common stock upon the exercise or conversion of ~~convertible securities, options, warrants,~~ restricted stock unit awards, stock appreciation rights, or ~~similar rights;~~other securities that may be issued from time to time, including warrants we have or will issue in connection with our receipt of funds under the CARES Act and the PSP Extension Law;

•increases or decreases in reported holdings by insiders or other significant stockholders;

•fluctuations in trading volume; and

~~changes~~•technical factors in the public trading market ~~values~~for our stock that may produce price movements that may or may not comport with macro, industry or company-specific fundamentals, including, without limitation, the sentiment of retail investors (including as may be expressed on financial trading and other social media sites), the amount and status of short interest in our securities, access to margin debt, trading in options and other derivatives on our common stock and any related hedging and other technical trading factors.

The closing price of our common stock on Nasdaq varied from $9.04 to $30.47 during 2020 and $15.00 to $18.10 during 2021 year-to-date through February 12, 2021. At times during this period, fluctuations in our stock price have been rapid, imposing risks on investors due to the possibility of significant, short-term price volatility. While we believe that this wide range of trading prices is broadly indicative of the changing prospects for a large airline ~~companies as well as general~~facing the challenges imposed by the COVID-19 pandemic, we also believe, based in part on the commentary of market ~~conditions.~~analysts, that the trading price of our common stock has at times been influenced by the technical trading factors discussed in the last bullet above. On some occasions, market analysts have explained fluctuations in our stock price by reference to purported “short squeeze” activity. A “short squeeze” is a technical market condition that occurs when the price of a stock increases substantially, forcing market participants who had taken a position that its price would fall (i.e., who had sold the stock “short”), to buy it, which in turn may create significant, short-term demand for the stock not for fundamental reasons, but rather due to the need for such market participants to acquire the stock in order to forestall the risk of even greater losses. A “short squeeze” condition in the market for a stock can lead to short-term conditions involving very high volatility and trading that may or may not track fundamental valuation models.

We have ceased making repurchases of our common stock and paying dividends on our common stock as required by the CARES Act and the PSP Extension Law. Following the end of those restrictions, if we do decide to make repurchases of or pay dividends on our common stock, we cannot guarantee that we will continue to ~~repurchase our common stock or pay dividends on our common stock~~do so or that our capital deployment program will enhance long-term stockholder value. ~~Our capital deployment program could increase the volatility~~

In connection with our receipt of ~~the price~~financial assistance under PSP1 and PSP2, we agreed not to repurchase shares of ~~our~~AAG common stock through at least March 31, 2022. In addition, we have entered into the Treasury Loan Agreement and, ~~diminish our cash reserves.~~

~~Since July 2014,~~

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as ~~part~~a result, we are further prohibited from repurchasing shares of ~~our capital deployment program, our Board of Directors has approved six~~AAG common stock through the date that is one year after the secured loan provided under the Treasury Loan Agreement is fully repaid. If we determine to make any share ~~repurchase programs aggregating $11.0 billion of authority. As of December 31, 2017, $450 million remained unused under a repurchase program that expires on December 31, 2018. Share~~repurchases in the future, such repurchases under our repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. These share repurchase programs do not obligate us to acquire any specific number of shares or to repurchase any specific number of shares for any fixed period, and may be suspended again at any time at our ~~discretion.~~discretion and without prior notice. The timing and amount of repurchases, if any, will be subject to market and economic conditions, applicable legal requirements, such as the requirements of the CARES Act, the PSP Extension Law and other relevant factors. Our repurchase of AAG common stock may be limited, suspended or discontinued at any time at our discretion and without prior notice.

~~Although~~In connection with our ~~Board~~receipt of ~~Directors commenced declaring quarterly cash~~financial assistance under PSP1 and PSP2, we agreed not to pay dividends on AAG common stock through at least March 31, 2022. In addition, we have entered into the Treasury Loan Agreement, and as a result, we are further prohibited from paying dividends on AAG common stock through the date that is one year after the secured loan provided under the Treasury Loan Agreement is fully repaid. If we determine to make any dividends in ~~July 2014 as part of our capital deployment program, any~~the future, such dividends that may be declared and paid from time to time will be subject to market and economic conditions, applicable legal requirements and other relevant factors. We are not obligated to continue a dividend for any fixed period, and the payment of dividends may be suspended or discontinued again at any time at our ~~discretion.~~discretion and without prior notice. We will continue to retain future earnings to develop our business, as opportunities arise, and evaluate on a quarterly basis the amount and timing of future dividends based on our operating results, financial condition, capital requirements and general business conditions. The amount and timing of any future dividends may vary, and the payment of any dividend does not assure that we will ~~be able to~~ pay dividends in the future.

In addition, any future repurchases of AAG common stock or payment of dividends, or any determination to cease repurchasing stock or paying dividends, could affect our stock price and increase its volatility. The existence of a share repurchase program and any future dividends could cause our stock price to be higher than it would otherwise be and could potentially reduce the market liquidity for our stock. Additionally, any future repurchases of AAG common stock or payment of dividends will diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. Further, our repurchase of AAG common stock may fluctuate such that our cash flow may be insufficient to fully cover our share repurchases. Although our share repurchase programs are intended to enhance long-term stockholder value, there is no assurance that itthey will do ~~so because the market price~~so.

AAG’s Certificate of Incorporation and Bylaws include provisions that limit voting and acquisition and disposition of our equity interests.

Our Certificate of Incorporation and Bylaws include significant provisions that limit voting and ownership and disposition of our equity interests, as described in Part II, Item 5. Market for American Airlines Group’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities - “Ownership Restrictions” and AAG’s Description of the Registrants’ Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, which is filed as Exhibit 4.1 hereto. These restrictions may adversely affect the ability of certain holders of AAG common stock ~~may decline below~~and our other equity interests to vote such interests and adversely affect the ~~levels at which we repurchased~~ability of persons to acquire shares of AAG common stock and ~~short-term stock price fluctuations could reduce the program’s effectiveness.~~

our other equity interests.

Certain provisions of AAG’s Certificate of Incorporation and Bylaws make it difficult for stockholders to change the composition of our Board of Directors and may discourage takeover attempts that some of our stockholders might consider beneficial.

Certain provisions of our Certificate of Incorporation and ~~Second Amended and Restated~~ Bylaws, ~~(Bylaws)~~as currently in effect, may have the effect of delaying or preventing changes in control if our Board of Directors determines that such changes in control are not in our best interest and the best interest of our stockholders. These provisions include, among other things, the following:

•advance notice procedures for stockholder proposals to be considered at stockholders’ meetings;

•the ability of our Board of Directors to fill vacancies on the board;

•a prohibition against stockholders taking action by written consent;

•stockholders are restricted from calling a ~~prohibition against stockholders calling~~ special ~~meetings of stockholders (although our Board of Directors has approved, subject to stockholder approval at the annual~~ meeting ~~amendments to our Certificate of Incorporation and Bylaws that contemplate the ability of holders of~~unless they hold at least 20% of our outstanding shares ~~to call a special meeting, subject to~~and follow the procedures ~~to be~~ provided for in the amended ~~Bylaws);~~Bylaws;

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•a requirement that holders of at least 80% of the voting power of the shares entitled to vote in the election of directors approve any amendment of our Bylaws submitted to stockholders for approval; and

•super-majority voting requirements to modify or amend specified provisions of our Certificate of Incorporation.

These provisions are not intended to prevent a takeover, but are intended to protect and maximize the value of the interests of our stockholders. While these provisions have the effect of encouraging persons seeking to acquire control of our company to negotiate with our Board of Directors, they could enable our Board of Directors to prevent a transaction that some, or a majority, of our stockholders might believe to be in their best interest and, in that case, may prevent or discourage attempts to remove and replace incumbent directors. In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which prohibits business combinations with interested stockholders. Interested stockholders do not include stockholders whose acquisition of our securities is approved by the Board of Directors prior to the investment under Section 203.

~~AAG’s Certificate~~The issuance or sale of ~~Incorporation and Bylaws include provisions that limit voting and acquisition and disposition~~shares of our ~~equity interests.~~

Our Certificate of Incorporation and Bylaws include certain provisions that limit voting and ownership and disposition of our equity interests. These restrictions may adversely affect the ability of certain holders of AAG common stock, ~~and our other equity interests to vote such interests and adversely affect the ability of persons~~rights to acquire shares of ~~AAG~~our common stock, or warrants issued to Treasury under the CARES Act, the PSP Extension Law, PSP1, PSP2 and in connection with the loan under the CARES Act, could depress the trading price of our common stock and the Convertible Notes.

We may conduct future offerings of material amounts of our common stock, preferred stock or other ~~equity interests.~~securities that are convertible into or exercisable for our common stock to finance our operations, to fund acquisitions, or for any other purposes at any time and from time to time (including as compensation to the U.S. Government for the proceeds received pursuant to PSP1, PSP2 and the secured loan provided under the Treasury Loan Agreement). If these additional shares or securities are issued or sold, or if it is perceived that they will be sold, into the public market or otherwise, the price of our common stock and Convertible Notes could decline substantially. If we issue additional shares of our common stock or rights to acquire shares of our common stock, if any of our existing stockholders sells a substantial amount of our common stock, or if the market perceives that such issuances or sales may occur, then the trading price of our common stock and Convertible Notes could decline substantially.

ITEM 1B. UNRESOLVED STAFF COMMENTS

We had no unresolved Securities and Exchange Commission staff comments that were issued 180 days or more preceding December 31, ~~2017.~~2020.

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ITEM 2. PROPERTIES

Flight Equipment and Fleet Renewal

As of December 31, ~~2017,~~2020, American operated a mainline fleet of 948 aircraft. In 2017, we continued our extensive fleet renewal program, which has provided us with the youngest fleet of the major U.S. network carriers. During 2017, American took delivery of 57 new mainline855 aircraft and ~~retired 39 mainline aircraft. We are supported by our wholly-owned and third-party regional carriers that fly under capacity purchase agreements operating as American Eagle. As of December 31, 2017,~~ American Eagle operated ~~597~~544 regional aircraft. During ~~2017,~~2020, American accepted delivery of 30 and 17 mainline and regional aircraft, respectively, and retired 95 and 63 mainline and regional aircraft, respectively. Additionally, during 2020, American temporarily parked 22 and 15 mainline and regional aircraft, respectively. To better align our network with lower passenger demand due to the impact of the COVID-19 pandemic on our business, during 2020, we ~~reduced our~~accelerated the retirement of Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets as well as certain regional ~~fleet by a net of nine~~ aircraft, including certain Embraer 140 and Bombardier CRJ200 aircraft. These retirements remove complexity from our operation and bring forward cost savings and efficiencies associated with operating fewer aircraft types. See Note 1(g) to each of AAG’s and American’s Consolidated Financial Statements in Part II, Items 8A and 8B, respectively, for further information on the ~~addition of 63 regional aircraft and retirement of 72 regional aircraft.~~accounting for our fleet retirements.

Mainline

As of December 31, ~~2017,~~2020, American’s mainline fleet consisted of the following aircraft:


	Average Seating Capacity	Average Age (Years)	Owned	Leased	Total
Airbus A319	128	16.7	21	112	133
Airbus A320	150	19.7	10	38	48
Airbus A321	179	8.4	164	54	218
Airbus A321neo	196	0.8	9	19	28


Boeing 737-800 (1)	168	10.3	111	171	282
Boeing 737-8 MAX (2)	172	1.7	9	25	34


Boeing 777-200ER	273	20.0	44	3	47
Boeing 777-300ER	304	6.8	18	2	20
Boeing 787-8	234	4.5	20	3	23
Boeing 787-9	285	3.2	17	5	22

Total		10.8	423	432	855

(1)Excluded from the total operating aircraft count above are21owned and one leased Boeing 737-800 that are being held in temporary storage.

(2)On November 18, 2020, a directive from the FAA cleared the U.S.-registered Boeing 737 MAX Family aircraft to return to service following its grounding in March 2019. We resumed scheduled service on December 29, 2020 and gradually phased more Boeing 737 MAX Family aircraft into service throughout January 2021 and beyond.

Average Seating
Capacity

Average
Age
(Years)
�� Owned Leased Total
Airbus A319 128
13.8
21
104
125
Airbus A320 150
16.7
10
38
48
Airbus A321 178
5.4
165
54
219
Airbus A330-200 251
6.0
15
—
15
Airbus A330-300 291
17.4
4
5
9
Boeing 737-800 160
8.1
132
172
304
Boeing 737-8 MAX 172
0.1
4
—
4
Boeing 757-200 180
18.1
31
3
34
Boeing 767-300ER 209
19.1
24
—
24
Boeing 777-200ER 269
17.0
44
3
47
Boeing 777-300ER 310
3.8
18
2
20
Boeing 787-8 226
2.1
20
—
20
Boeing 787-9 285
0.7
14
—
14
Embraer 190 99
10.2
20
—
20
McDonnell Douglas MD-80 140
21.3
13
32
45
Total 10.1
535
413
948

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Regional

As of December 31, ~~2017,~~2020, the fleet of our wholly-owned and third-party regional carriers operating as American Eagle consisted of the following aircraft:

Average Seating
Capacity
Owned Leased
Owned or
Leased by
Regional
Carrier
Total
Operating Regional
Carrier

Number of
Aircraft
Operated ⁽¹⁾
Bombardier CRJ 200 50
12
23
33
68
PSA 35

Air Wisconsin ⁽²⁾
23
SkyWest 10
Total 68

Bombardier CRJ 700 66
54
7
49
110
SkyWest 37
PSA 34
Envoy 27
ExpressJet 12
Total 110

Bombardier CRJ 900 77
54
—
64
118
Mesa 64
PSA 54
Total 118

De Havilland Dash 8-100 37
3
—
—
3
Piedmont 3

De Havilland Dash 8-300 48
—
11
—
11
Piedmont 11

Embraer E175 76
64
—
84
148
Republic 84
Envoy 44
Compass 20
Total 148

Embraer ERJ 140 44
21
—
—
21
Envoy 21

Embraer ERJ 145 50
118
—
—
118
Envoy 68
Piedmont 35
Trans States 15
Total 118
Total 326
41
230
597
597


	Average Seating Capacity	Owned	Leased	Owned or Leased by Third Party Regional Carrier	Total	Operating Regional Carrier	Number of Aircraft Operated


Bombardier CRJ 700	65	54	7	65	126	SkyWest	65
						PSA	61
						Total	126

Bombardier CRJ 900	77	69	—	54	123	PSA	69
						Mesa	54
						Total	123

Embraer 175 (1)	76	91	—	82	173	Envoy	91
						Republic	82
						Total	173

Embraer 140 (1)	44	8	—	—	8	Envoy	8

Embraer 145 (1)	50	114	—	—	114	Piedmont	57
						Envoy	57
						Total	114
Total		336	7	201	544		544


⁽¹⁾ (1)Excluded from the total operating aircraft count above are 27 regional aircraft that are being held in temporary storage as follows:18owned Embraer 140s, seven owned Embraer 175s and two owned Embraer 145s.	Excluded from the total operating aircraft count above are 38 owned Embraer ERJ 140s that are being held in temporary storage and two Embraer E170s that were operated by Republic under a short-term contract.


⁽²⁾	~~Air Wisconsin previously operated regional jet aircraft for us; however, this arrangement ended in February 2018.~~

See Note 1112 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 910 to American’s Consolidated Financial Statements in Part II, Item 8B for additional information on our capacity purchase agreements with third-party regional carriers.

Aircraft and Engine Purchase Commitments

As of December 31, ~~2017,~~2020, we had definitive purchase agreements ~~with Airbus, Boeing and Embraer~~ for the acquisition of the following ~~mainline and regional aircraft:~~aircraft (1):

2018 2019 2020 2021 2022
2023 and
Thereafter
Total
Airbus
A320neo Family —
25
25
25
20
5
100
A350 XWB —
—
2
5
5
10
22
Boeing
737 MAX Family 16
20
19
21
20
—
96
787 Family 6
2
—
—
—
—
8
Embraer
E175 ⁽¹⁾
5
5
—
—
—
—
10
Total 27
52
46
51
45
15
236


	2021	2022	2023	2024	2025	2026 and Thereafter	Total
Airbus
A320neo Family (2)	16	26	5	18	22	5	92
Boeing
737 MAX Family (3)	9	10	7	—	20	20	66
787 Family	19	—	6	6	8	5	44




Total	44	36	18	24	50	30	202

(1)Delivery schedule represents our best estimate as of the date of this report. Actual delivery dates are subject to change based on various potential factors including production delays by the manufacturer and, where applicable, our decision to exercise rights to defer certain deliveries.

⁽¹⁾

(2)In October 2019, the Office of the U.S. Trade Representative announced a 10% tariff on new Airbus aircraft imported from Europe. Effective March 18, 2020, this tariff rate increased to 15%, and effective January 12, 2021, the scope of the 15% tariff was expanded to include certain imported aircraft parts in addition to aircraft. We continue to endeavor to mitigate the effect of these tariffs on our Airbus deliveries. See Part I, Item 1A. Risk Factors - “We operate a global business with international operations that are subject to economic and political instability and have been, and in the future may continue to be, adversely affected by numerous events, circumstances or government actions beyond our

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control.” Additionally, as of February 16, 2021, we had accepted delivery of one of the 16 Airbus A320neo Family aircraft presently scheduled for delivery in 2021.

(3)On March 13, 2019, a directive from the FAA grounded all U.S.-registered Boeing 737 MAX Family aircraft and, as a result, all deliveries of Boeing 737 MAX Family aircraft were suspended. Since the time of the FAA recertification of the Boeing 737 MAX Family aircraft on November 18, 2020, deliveries have resumed and we had accepted delivery of 10 Boeing 737 MAX Family aircraft during the period between the date of recertification and December 31, 2020. Additionally, as of February 16, 2021, we had accepted delivery of six of the nine Boeing 737 MAX Family aircraft presently scheduled for delivery in 2021.

~~These aircraft may be operated by wholly-owned regional subsidiaries which would operate the aircraft under capacity purchase arrangements.~~

We also have agreements for 3729 spare engines to be delivered in ~~2018~~2021 and beyond.

~~As of December 31, 2017, we had~~We currently have financing commitments in place for ~~all of the~~43 aircraft ~~currently on order and~~ scheduled to be delivered ~~through April 2018. We do not have financing commitments for the following~~in 2021: 19 Boeing 787 Family aircraft, ~~currently on order~~16 Airbus A320neo Family aircraft and ~~scheduled to be delivered through the end of 2018: 11~~eight Boeing 737 MAX Family aircraft. Our ability to draw on the financing commitments we have in place is subject to (1) the satisfaction of various terms and conditions, including in some cases, on our acquisition of the aircraft ~~five Boeing 787 Family aircraft~~by a certain date and ~~five Embraer E175 regional aircraft. In addition, we~~(2) the performance by the counterparty providing such financing commitments of its obligations thereunder. We do not have financing commitments in place for ~~substantially all~~one of the Boeing 737 MAX Family aircraft ~~currently on order and~~ scheduled to be delivered in ~~2019 and beyond.~~2021, however, we do have rights to defer this Boeing 737 MAX Family aircraft from 2021 to 2023. In addition, we also have rights to defer to 2023-2024 the 10 Boeing 737 MAX Family aircraft currently scheduled to be delivered in 2022. See Part I, Item 1A. Risk Factors –“We will need to obtain sufficient financing or other capital to operate successfully” for additional discussion.

~~Other Information~~

For information concerning the estimated useful lives and residual values for owned aircraft and terms for leased aircraft, see Note 1 and Note 11 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 1 and Note 9 to American’s Consolidated Financial Statements in Part II, Item 8B.

Ground Properties

At each airport where we conduct flight operations, we ~~lease~~have agreements, generally with a governmental unit or authority, for the use of passenger, operations and baggage handling space ~~generally from~~as well as runways and taxiways. These agreements, particularly in the airport operator, and in some cases on a subleased basis from other airlines. Our agreements with airports also provide for the non-exclusive use of runways, taxiways and other improvements and facilities; landing fees under these agreements typically are based on the number of landings and weight of aircraft. These leases and use agreements generallyU.S., often contain provisions for periodic adjustments ~~of lease~~to rates ~~landing fees~~ and ~~other~~ charges applicable under ~~that type of agreement. Additionally, our main operational facilities are associated~~such agreements. These rates and charges also vary with our ~~hubs. At these~~level of operations and the operations of the airport. Additionally, at our hub locations and in certain other cities we serve, we ~~maintain~~lease administrative offices, catering, cargo, training, maintenance and other ~~facilities, in each case as necessary to support our operations in the particular city.~~facilities.

~~We own our corporate headquarters buildings in Fort Worth, Texas.~~ We lease or have built on leased property our headquarters and training facilities in Fort Worth, Texas, our principal overhaul and maintenance base in Tulsa, Oklahoma, our regional reservation offices, and administrative offices throughout the U.S. and abroad. ~~Construction continues on a new, five-building headquarters on the corporate campus in Fort Worth, Texas, which is scheduled for completion and move-in in phases over the second half of 2019.~~

~~For information concerning the estimated lives for owned ground properties and terms for lease properties, see~~

ITEM 3. LEGAL PROCEEDINGS

See Note ~~1 and Note 11~~12 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note ~~1 and Note 9~~10 to American’s Consolidated Financial Statements in Part II, Item ~~8B.~~

8B for information on legal proceedings.

~~ITEM 3. LEGAL PROCEEDINGS~~

~~Chapter 11 Cases.~~ On November 29, 2011, AMR, American, and certain of AMR’s other direct and indirect domestic subsidiaries (the Debtors) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). On October 21, 2013, the Bankruptcy Court entered an order approving and confirming the Debtors’ fourth amended joint plan of reorganization (as amended, the Plan). On the Effective Date, December 9, 2013, the Debtors consummated their reorganization pursuant to the Plan and completed the Merger.

Pursuant to rulings of the Bankruptcy Court, the Plan established the Disputed Claims Reserve to hold shares of AAG common stock reserved for issuance to disputed claimholders at the Effective Date that ultimately become holders of allowed claims. As of December 31, 2017, there were approximately 24.5 million shares of AAG common stock remaining in the Disputed Claims Reserve. As disputed claims are resolved, the claimants will receive distributions of shares from the Disputed Claims Reserve on the same basis as if such distributions had been made on or about the Effective Date. However, we are not required to distribute additional shares above the limits contemplated by the Plan, even if the shares remaining for distribution are not sufficient to fully pay any additional allowed unsecured claims. To the extent that any of the reserved shares remain undistributed upon resolution of all remaining disputed claims, such shares will not be returned to us but rather will be distributed to former AMR stockholders.

There is also pending in the Bankruptcy Court an adversary proceeding relating to an action brought by American to seek a determination that certain non-pension, postemployment benefits are not vested benefits and thus may be modified or terminated without liability to American. On April 18, 2014, the Bankruptcy Court granted American’s motion for summary judgment with respect to certain non-union employees, concluding that their benefits were not vested and could be terminated. The summary judgment motion was denied with respect to all other retirees. The Bankruptcy Court has not yet scheduled a trial on the merits concerning whether those retirees’ benefits are vested, and American cannot predict whether it will receive relief from obligations to provide benefits to any of those retirees. Our financial statements presently reflect these retirement programs without giving effect to any modification or termination of benefits that may ultimately be implemented based upon the outcome of this proceeding.

~~DOJ Antitrust Civil Investigative Demand.~~ In June 2015, we received a Civil Investigative Demand (CID) from the DOJ as part of an investigation into whether there have been illegal agreements or coordination of air passenger capacity. The CID seeks documents and other information from us, and other airlines have announced that they have received similar requests. We are cooperating fully with the DOJ investigation.

~~Private Party Antitrust Action~~. Subsequent to announcement of the delivery of CIDs by the DOJ, we, along with Delta Air Lines, Inc., Southwest Airlines Co., United Airlines, Inc. and, in the case of litigation filed in Canada, Air Canada, have been named as defendants in approximately 100 putative class action lawsuits alleging unlawful agreements with respect to air passenger capacity, although Southwest has entered into a settlement with the plaintiffs that is pending approval by the court. The U.S. lawsuits have been consolidated in the Federal District Court for the District of Columbia. On October 28, 2016, the Court denied a motion by the airline defendants to dismiss all claims in the class actions. These lawsuits are in their relatively early stages and we intend to defend these matters vigorously.

~~Private Party Antitrust Action Related to the Merger~~. On July 2, 2013, a lawsuit captioned Carolyn Fjord, et al., v. US Airways Group, Inc., et al., was filed in the United States District Court for the Northern District of California. The complaint named as defendants US Airways Group and US Airways, alleged that the effect of the Merger may be to create a monopoly in violation of Section 7 of the Clayton Antitrust Act, and sought injunctive relief and/or divestiture. On August 6, 2013, the plaintiffs re-filed their complaint in the Bankruptcy Court, adding AMR and American as defendants. On November 27, 2013, the Bankruptcy Court denied plaintiffs’ motion to preliminarily enjoin the Merger. On May 12, 2017, defendants filed a motion for summary judgment. On June 23, 2017, plaintiffs filed an opposition to defendants’ motion and cross-motion for summary judgment. Briefing of the parties’ respective motions concluded on September 1, 2017; a hearing date has not yet been set. We believe this lawsuit is without merit and intend to vigorously defend against the allegations.

~~DOJ Investigation Related to the United States Postal Service~~. In April 2015, the DOJ informed us of an inquiry regarding American’s 2009 and 2011 contracts with the United States Postal Service for the international transportation of mail by air. In October 2015, we received a CID from the DOJ seeking certain information relating to these contracts and the DOJ has also sought information concerning certain of the airlines that transport mail on a codeshare basis. The DOJ has indicated it is investigating potential violations of the False Claims Act or other statutes. We are cooperating fully with the DOJ with regard to its investigation.

~~General~~. In addition to the specifically identified legal proceedings, we and our subsidiaries are also engaged in other legal proceedings from time to time. Legal proceedings can be complex and take many months, or even years, to reach resolution, with the final outcome depending on a number of variables, some of which are not within our control. Therefore, although we will vigorously defend ourselves in each of the actions described above and such other legal proceedings, their ultimate resolution and potential financial and other impacts on us are uncertain but could be material. See Part I, Item 1A. Risk Factors –“~~We may be a party to litigation in the normal course of business or otherwise, which could affect our financial position and liquidity” for additional discussion.~~

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II


~~ITEM 5.~~	~~MARKET FOR AMERICAN AIRLINES GROUP’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES~~

ITEM 5. MARKET FOR AMERICAN AIRLINES GROUP’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Stock Exchange Listing

Our common stock is listed on ~~the NASDAQ~~The Nasdaq Global Select Market ~~(NASDAQ)~~ under the trading symbol “AAL.” There is no trading market for the common stock of American, which is a wholly-owned subsidiary of AAG.

As of February ~~16, 2018,~~12, 2021, the closing price of our common stock was ~~$51.58~~$17.27 and there were ~~10,921~~12,527 holders of record. However, because many of the shares of our common stock are held by brokers and other institutions on behalf of stockholders, we believe there are substantially more beneficial holders of our common stock than record holders.

Information on securities authorized for issuance under our equity compensation plans will be set forth in our Proxy Statement for the ~~2018~~2021 Annual Meeting of Stockholders of American Airlines Group Inc. (the Proxy Statement) under the caption “Equity Compensation Plan Information” and is incorporated by reference into this Annual Report on Form 10-K.

~~Market Prices and~~ Dividends ofon Common Stock

~~The following table sets forth, for the periods indicated, the high and low sale prices of our common stock on NASDAQ and cash dividends declared by our Board of Directors:~~

Common Stock Prices
Year Ended
December 31
Period High Low
Cash Dividends
Declared (Per share)
2017 First Quarter $ 50.00
$ 39.21
$ 0.10
Second Quarter 51.95
40.82
0.10
Third Quarter 54.48
42.61
0.10
Fourth Quarter 53.74
45.27
0.10
2016 First Quarter 43.78
34.76
0.10
Second Quarter 41.76
24.85
0.10
Third Quarter 39.52
27.12
0.10
Fourth Quarter 50.64
36.33
0.10

~~In January 2018, we announced that our Board of Directors declared a $0.10 per share dividend for stockholders of record on February 6, 2018, and payable on February 20, 2018.~~

The total cash payment for dividends during the years ended December 31, ~~2017~~2020 and ~~2016~~2019 was ~~$198~~$43 million and ~~$224~~$178 million, respectively. ~~Any~~In connection with our receipt of financial assistance under PSP1 and PSP2, we agreed not to pay dividends on AAG common stock through at least March 31, 2022. In addition, we have entered into the Treasury Loan Agreement, and as a result, we are further prohibited from paying dividends on AAG common stock through the date that is one year after the secured loan provided under the Treasury Loan Agreement is fully repaid. If we determine to make any dividends in the future, such dividends that may be declared and paid from time to time will be subject to market and economic conditions, applicable legal requirements and other relevant factors. We are not obligated to continue a dividend for any fixed period, and the payment of dividends may be suspended or discontinued again at any time at our ~~discretion.~~discretion and without prior notice.

Stock Performance Graph

The following stock performance graph and related information shall not be deemed “soliciting material” or “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing.

The following stock performance graph compares ~~our~~the cumulative total stockholder returns during the period from December 31, 2015 to December 31, 2020 of our common stock to ~~the Standard and Poor’s (S&P) 500 Stock Index and~~ the New York Stock Exchange (NYSE) ARCA Airline Index ~~from December 9, 2013 (the first trading day of our common stock, AAL) through December 31, 2017.~~and the Standard and Poor’s Financial Services, LLC (S&P) 500 Stock Index. The comparison assumes $100 was invested on December ~~9, 2013~~31, 2015 in our common stock and in each of the foregoing indices and assumes that all dividends were reinvested. The stock performance shown on the following graph represents historical stock performance and is not necessarily indicative of future stock price performance.

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12/9/2013 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017
American Airlines Group Inc. (AAL) $ 100
$ 103
$ 219
$ 175
$ 194
$ 219
NYSE ARCA Airline Index (XAL) 100
102
152
127
162
170
S&P 500 Index (GSPC) 100
102
114
113
124
148


	12/31/2015		12/31/2016		12/31/2017		12/31/2018		12/31/2019		12/31/2020
American Airlines Group Inc. (AAL)	$	100	$	111	$	125	$	78	$	71	$	39
NYSE ARCA Airline Index (XAL)	100		128		134		104		126		95
S&P 500 Index (GSPC)	100		110		131		123		158		184

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

~~During the year ended~~Since July 2014, as part of our capital deployment program, our Board of Directors had approved seven share repurchase programs aggregating $13.0 billion of authority. The $420 million of remaining authority to repurchase shares under our most recent $2.0 billion share repurchase program expired on December 31, ~~2017,~~2020. In connection with our receipt of financial assistance under PSP1 and PSP2, we agreed not to repurchase shares of AAG common stock through at least March 31, 2022. In addition, we have entered into the Treasury Loan Agreement and, as a result, we are further prohibited from repurchasing shares of AAG common stock through the date that is one year after the secured loan provided under the Treasury Loan Agreement is fully repaid.

In 2020, we repurchased ~~33.9~~6.4 million shares of AAG common stock for ~~$1.6~~$145 million at a weighted average cost per share of $22.77, all of which were purchased in the first quarter of 2020. In 2019, we repurchased 33.8 million shares of AAG common stock for $1.1 billion at a weighted average cost per share of ~~$45.68. During~~$32.09.

If we determine to make any share repurchases in the year ended December 31, 2016, we repurchased 119.8 million shares of AAG common stock for $4.4 billion at a weighted average cost per share of $36.86. Since the inception of our share repurchase programs in July 2014 through December 31, 2017, we have repurchased 262.3 million shares of AAG common stock for $10.6 billion at a weighted average cost per share of $40.22.

~~The following table displays information with respect to our purchases of shares of AAG common stock during the three months ended December 31, 2017:~~

Period
Total number of
shares purchased

Average price
paid per share

Total number of shares
purchased as part of
publicly announced
plan or program

Maximum remaining dollar value of shares
that may be purchased under
the plan or program
(in millions)
October 2017 2,497,462
$50.37 2,497,462
$551
November 2017 1,236,546
$47.59 1,236,546
$492
December 2017 834,577
$50.96 834,577
$450

~~Share~~future, such repurchases under our repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. ~~Any such~~These share repurchase programs do not obligate us to acquire any specific number of shares or to repurchase any specific number of shares for any fixed period, and may be suspended again at any time at our discretion and without prior notice. The timing and amount of repurchases, if any, will be ~~made from time to time~~ subject to market and economic conditions, applicable legal requirements, such as the requirements of the CARES Act, the PSP Extension Law and other relevant factors. ~~We are not obligated to~~Our repurchase ~~any specific number~~ of ~~shares and our repurchase of~~AAG common stock may be limited, suspended or discontinued at any time at our ~~discretion.~~discretion and without prior notice.

See Part I, Item 1A. Risk Factors – “We have ceased making repurchases of our common stock and paying dividends on our common stock as required by the CARES Act and the PSP Extension Law. Following the end of those restrictions, if we do decide to make repurchases of or pay dividends on our common stock, we cannot guarantee that we will continue to do so or that our capital deployment program will enhance long-term stockholder value.”

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Ownership Restrictions

AAG’s Certificate of Incorporation and Bylaws provide that, consistent with the requirements of Subtitle VII of Title 49 of the United States Code, as amended (the Aviation Act), any persons or entities who are not a “citizen of the United States” (as defined under the Aviation Act and administrative interpretations issued by the DOT, its predecessors and successors, from time to time), including any agent, trustee or representative of such persons or entities (a non-citizen), shall not, in the aggregate, own (beneficially or of record) and/or control more than (a) 24.9% of the aggregate votes of all of our outstanding equity securities or (b) 49.0% of our outstanding equity securities. Our Certificate of Incorporation and Bylaws further specify that it is the duty of each stockholder who is a non-citizen to register his, her or its equity securities on our foreign stock record and provide for remedies applicable to stockholders that exceed the voting and ownership caps described above.

In addition, to reduce the risk of a potential adverse effect on our ability to use our NOL Carryforwards and certain other tax attributes for federal income tax purposes, our Certificate of Incorporation contains certain restrictions on the acquisition and disposition of our common stock by substantial stockholders (generally holders of more than 4.75%). This provision is currently scheduled to expire by its terms in December 2021.

See Part I, Item 1A. Risk Factors – “AAG’s Certificate of Incorporation and Bylaws include provisions that limit voting and acquisition and disposition of our equity interests.” Also see AAG’s Certification of Incorporation and Bylaws, which are filed as Exhibits 3.1, 3.2 and ~~3.2~~3.3 hereto, for the full text of the foregoing ~~restrictions.~~

restrictions and AAG’s Description of the Registrants’ Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, which is filed as Exhibit 4.1 hereto, for a more detailed description.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

We adopted three new accounting standards as of January 1, 2018: Accounting Standards Update (ASU) 2016-02: Leases (Topic 842) (the New Lease Standard), ASU 2014-09: Revenue from Contracts with Customers (the New Revenue Standard) and ASU 2017-07: Compensation - Retirement Benefits (the New Retirement Standard). The 2017 and 2016 financial information presented within this Item 6. Selected Consolidated Financial Data has been recast to reflect the impact of the adoption of the New Revenue Standard and the New Retirement Standard. The New Lease Standard did not require the recast of prior periods. See Note 1(b) to each of AAG’s and American’s Consolidated Financial Statements in Part II, Items 8A and 8B, respectively, of AAG’s and American’s Annual Report on Form 10-K for the year ended December 31, 2018, for further information on the impacts of these new accounting standards.

Selected Consolidated Financial Data of AAG

The selected consolidated financial data presented below under the captions “Consolidated Statements of Operations data” and “Consolidated Balance Sheet data” for the years ended and as of December 31, 2020, 2019, 2018, 2017 ~~2016, 2015, 2014~~ and ~~2013~~2016, are derived from AAG’s audited consolidated financial statements. On December 9, 2013, a subsidiary of AMR merged with and into US Airways Group, which survived as a wholly-owned subsidiary of AAG. Therefore, AAG’s consolidated financial data provided in the tables below includes the results of US Airways Group beginning on December 9, 2013, the effective date of the Merger. In addition, AAG emerged from bankruptcy on December 9, 2013. Accordingly, AAG’s consolidated financial information for periods prior to December 9, 2013 is not directly comparable to consolidated financial information for periods subsequent to December 9, 2013.

Year Ended December 31,
2017 2016 2015 2014 2013
(In millions, except share and per share data)
Consolidated Statements of Operations data:
Total operating revenues $ 42,207
$ 40,180
$ 40,990
$ 42,650
$ 26,743
Total operating expenses 38,149
34,896
34,786
38,401
25,344
Operating income 4,058
5,284
6,204
4,249
1,399
Bankruptcy reorganization items, net —
—
—
—
(2,655 )
Net income (loss) 1,919
2,676
7,610
2,882
(1,834 )
Earnings (loss) per common share: ⁽¹⁾

Basic $ 3.92
$ 4.85
$ 11.39
$ 4.02
$ (6.54 )
Diluted 3.90
4.81
11.07
3.93
(6.54 )
Shares used for computation (in thousands): ⁽¹⁾

Basic 489,164
552,308
668,393
717,456
280,213
Diluted 491,692
556,099
687,355
734,016
280,213
Cash dividends declared per common share $ 0.40
$ 0.40
$ 0.40
$ 0.20
$ —

Consolidated Balance Sheet data
(at end of period):

Total assets $ 51,396
$ 51,274
$ 48,415
$ 43,225
$ 41,741
Long-term debt and capital leases, net of current maturities 22,511
22,489
18,330
16,043
15,212
Pension and postretirement benefits ⁽²⁾
7,497
7,842
7,450
7,562
5,828
Stockholders’ equity (deficit) 3,926
3,785
5,635
2,021
(2,731 )


	Year Ended December 31,
	2020		2019		2018		2017		2016
	(In millions, except share and per share amounts)
Consolidated Statements of Operations data:
Total operating revenues	$	17,337	$	45,768	$	44,541	$	42,622	$	40,142
Total operating expenses	27,758		42,703		41,885		38,391		35,082
Operating income (loss)	(10,421)		3,065		2,656		4,231		5,060
Net income (loss)	(8,885)		1,686		1,412		1,282		2,584
Earnings (loss) per common share:
Basic	$	(18.36)	$	3.80	$	3.04	$	2.62	$	4.68
Diluted	(18.36)		3.79		3.03		2.61		4.65
Shares used for computation (in thousands):
Basic	483,888		443,363		464,236		489,164		552,308
Diluted	483,888		444,269		465,660		491,692		556,099
Cash dividends declared per common share	$	0.10	$	0.40	$	0.40	$	0.40	$	0.40

Consolidated Balance Sheet data (at end of period):
Total assets	$	62,008	$	59,995	$	60,580	$	52,785	$	53,610
Debt and finance leases	32,593		24,315		24,473		25,065		24,344
Pension and postretirement obligations (1)	7,131		6,081		6,937		7,596		7,946
Operating lease liabilities	8,428		9,129		9,556		—		—
Stockholders’ deficit	(6,867)		(118)		(169)		(780)		(286)

⁽¹⁾

Former holders of AMR common stock as of December 9, 2013, the effective date of the plan of reorganization, may in the future receive additional distributions of AAG common stock dependent upon the ultimate distribution of shares of AAG common stock to holders of disputed claims. Thus, the shares and related earnings per share calculations prior to December 9, 2013 may change in the future to reflect these distributions.


⁽²⁾	Substantially all defined benefit pension plans were frozen effective November 1, 2012. See Note 9 to AAG’s consolidated financial statements in Part II, Item 8A for further information on pension and postretirement benefits.

(1)Substantially all defined benefit pension plans were frozen effective November 1, 2012. See Note 10 to AAG's Consolidated Financial Statements in Part II, Item 8A for further information on pension and postretirement benefits.

Reconciliation of GAAP to Non-GAAP Financial Measures

We sometimes use financial measures that are derived from the consolidated financial statements but that are not presented in accordance with ~~GAAP~~accounting principles generally accepted in the U.S. (GAAP) to understand and evaluate our current operating performance and to allow for period-to-period comparisons. We believe these non-GAAP financial measures may also provide useful information to investors and others. These non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies, and should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. We are providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.

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The following table presents the components of our total net special items and the reconciliation of pre-tax income (loss) and net income (loss) (GAAP measures) to pre-tax income (loss) excluding net special items and net income (loss) excluding net special items (non-GAAP measures). Management uses pre-tax income (loss) excluding net special items and net income (loss) excluding net special items to evaluate our current operating performance and to allow for period-to-period comparisons. As net special items may vary from period-to-period in nature and amount, the adjustment to exclude net special items allows management an additional tool to ~~better~~ understand our core operating performance.

Year Ended December 31,
2017 2016 2015
(In millions)
Components of Total Special Items, Net: ⁽¹⁾

Merger integration costs ⁽²⁾
$ 273
$ 514
$ 826
Fleet restructuring costs ⁽³⁾
232
177
210
Employee 2017 Tax Act bonus expense ⁽⁴⁾
123
—
—
Labor contract expenses ⁽⁵⁾
46
—
—
Mark-to-market adjustments for bankruptcy obligations 27
25
(53 )
Other operating charges (credits), net 11
(7 ) 68
Mainline operating special items, net 712
709
1,051
Regional operating special items, net 22
14
29
Operating special items, net 734
723
1,080
Debt refinancing and extinguishment charges 22
49
24
Venezuela foreign currency losses —
—
592
Other nonoperating charges (credits), net —
—
(22 )
Nonoperating special items, net 22
49
594
Pre-tax special items, net 756
772
1,674
Impact of the 2017 Tax Act on deferred tax assets and liabilities (7 ) —
—
Release of deferred tax valuation allowance —
—
(3,040 )
Other tax charges —
—
25
Income tax special items, net (7 ) —
(3,015 )
Total special items, net $ 749
$ 772
$ (1,341 )

Reconciliation of Pre-Tax Income Excluding Special Items:
Pre-tax income – GAAP $ 3,084
$ 4,299
$ 4,616
Adjusted for: Pre-tax special items, net 756
772
1,674
Pre-tax income excluding special items $ 3,840
$ 5,071
$ 6,290

Reconciliation of Net Income Excluding Special Items:
Net income – GAAP $ 1,919
$ 2,676
$ 7,610
Adjusted for: Total special items, net 749
772
(1,341 )
Adjusted for: Net tax effect of special items ⁽⁶⁾
(269 ) (275 ) —
Net income excluding special items $ 2,399
$ 3,173
$ 6,269


	Year Ended December 31,
	2020		2019
	(In millions)
Components of Total Special Items, Net: (1)
PSP1 Financial Assistance (2)	$	(3,710)	$	—
Fleet impairment (3)	1,484		213
Severance expenses (4)	1,408		11
Labor contract expenses (5)	228		—
Mark-to-market adjustments on bankruptcy obligations, net (6)	(49)		(11)
Fleet restructuring expenses (7)	—		271
Merger integration expenses (8)	—		191
Litigation reserve adjustments	—		(53)
Other operating special items, net	(18)		13
Mainline operating special items, net	(657)		635

PSP1 Financial Assistance (2)	(444)		—
Fleet impairment (3)	117		—
Severance expenses (4)	18		—
Other operating special items, net	—		6
Regional operating special items, net	(309)		6
Operating special items, net	(966)		641

Mark-to-market adjustments on equity and other investments, net (9)	135		(5)
Debt refinancing, extinguishment and other, net	35		8

Nonoperating special items, net	170		3
Pre-tax special items, net	(796)		644
Total special items, net	$	(796)	$	644

Reconciliation of Pre-Tax Income (Loss) Excluding Net Special Items:
Pre-tax income (loss) – GAAP	$	(11,453)	$	2,256
Adjusted for: Pre-tax special items, net	(796)		644
Pre-tax income (loss) excluding net special items	$	(12,249)	$	2,900

Reconciliation of Net Income (Loss) Excluding Net Special Items:
Net income (loss) – GAAP	$	(8,885)	$	1,686
Adjusted for: Total special items, net	(796)		644
Adjusted for: Net tax effect of net special items	170		(151)
Net income (loss) excluding net special items	$	(9,511)	$	2,179

⁽¹⁾

(1)See Note 2 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information on net special items.

(2)PSP1 Financial Assistance represents recognition of financial assistance received from Treasury pursuant to the PSP1 Agreement. See Note 1(b) to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information.

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(3)The 2020 fleet impairment resulted from our decision to retire certain aircraft earlier than planned driven by the severe decline in air travel due to the COVID-19 pandemic. Aircraft retired include Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300, Embraer 190, certain Embraer 140 and Bombardier CRJ200 aircraft. This included a $1.5 billion non-cash write-down of mainline and regional aircraft and spare parts and $109 million in cash charges primarily for impairment of right-of-use (ROU) assets and lease return costs. See Note 1(g) to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information related to these charges.

The 2019 fleet impairment principally included a non-cash write-down of aircraft related to the retirement of our Embraer 190 fleet.

(4)The 2020 severance expenses included salary and medical costs primarily associated with certain team members who opted in to voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic. Cash payments related to these charges for the year ended December 31, 2020 were approximately $365 million.

The 2019 severance expenses primarily included costs associated with reductions of management and support staff team members.

(5)Labor contract expenses primarily related to one-time charges resulting from the ratification of a new contract with the TWU-IAM Association for our maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.

(6)Bankruptcy obligations that will be settled in shares of AAG common stock are marked-to-market based on AAG’s stock price.

(7)Fleet restructuring expenses principally included accelerated depreciation and rent expense for aircraft and related equipment expected to be retired earlier than planned.

(8)Merger integration expenses included costs associated with integration projects, principally our technical operations, flight attendant, human resources and payroll systems.

(9)Mark-to-market adjustments on equity and other investments, net primarily related to net unrealized gains and losses associated with our equity investment in China Southern Airlines and certain treasury rate lock derivative instruments.

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~~See Note 2 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information on special items.~~

⁽²⁾

Merger integration expenses included costs related to information technology, professional fees, re-branding of aircraft and airport facilities and training. Additionally in 2016, Merger integration expenses also included costs related to alignment of labor union contracts, the launch of re-branded uniforms, relocation and severance, and in 2015, also included share-based compensation related to awards granted in connection with the Merger that fully vested in December 2015.


⁽³⁾	Fleet restructuring expenses, driven in part by the Merger, principally included the acceleration of depreciation, impairments, remaining lease payments and lease return costs for aircraft and related equipment grounded or expected to be grounded earlier than planned.


⁽⁴⁾	Employee bonus expense included costs related to the $1,000 cash bonus and associated payroll taxes granted to mainline employees as of December 31, 2017 in recognition of H.R. 1, the 2017 Tax Cuts and Jobs Act (the 2017 Tax Act).


⁽⁵⁾	Labor contract expenses primarily included one-time charges to adjust the vacation accruals for pilots and flight attendants as a result of the mid-contract pay rate adjustments effective in the second quarter of 2017.


⁽⁶⁾	In 2015, there was no net tax effect associated with special items. During 2015, our net deferred tax asset, which includes our NOLs, was subject to a full valuation allowance. Accordingly, our NOLs offset our taxable income and resulted in the release of a corresponding portion of valuation allowance, which offset the tax provision dollar for dollar.

Additionally, the table below presents the reconciliation of ~~mainline~~total operating ~~costs~~expenses (GAAP measure) to ~~mainline~~total operating costs excluding net special items and fuel (non-GAAP measure). Management uses ~~mainline~~total operating costs excluding net special items and aircraft fuel to evaluate our current operating performance and for period-to-period comparisons. The price of fuel, over which we have no control, impacts the comparability of period-to-period financial performance. The adjustment to exclude aircraft fuel and net special items allows management an additional tool to ~~better~~ understand and analyze our non-fuel costs and core operating performance. Amounts may not recalculate due to rounding.

Year Ended December 31,
2017 2016 2015
Reconciliation of Mainline Operating Costs per Available Seat Mile (CASM) Excluding Special Items and Fuel:
(In millions)
Total operating expenses – GAAP $ 38,149
$ 34,896
$ 34,786
Less regional expenses:
Fuel and related taxes (1,382 ) (1,109 ) (1,230 )
Other (5,164 ) (4,935 ) (4,753 )
Total mainline operating expenses 31,603
28,852
28,803
Adjusted for: Special items, net ⁽¹⁾
(712 ) (709 ) (1,051 )
Adjusted for: Aircraft fuel and related taxes (6,128 ) (5,071 ) (6,226 )
Mainline operating expenses excluding special items and fuel $ 24,763
$ 23,072
$ 21,526
(In millions)
Available Seat Miles (ASM) 243,806
241,734
239,375
(In cents)
Mainline CASM 12.96
11.94
12.03
Adjusted for: Special items, net per ASM (0.29 ) (0.29 ) (0.44 )
Adjusted for: Aircraft fuel and related taxes per ASM (2.51 ) (2.10 ) (2.60 )
Mainline CASM excluding special items and fuel 10.16
9.54
8.99


	Year Ended December 31,
	2020		2019
Reconciliation of Total Operating Costs per Available Seat Mile (CASM) Excluding Net Special Items and Fuel:
(In millions)
Total operating expenses – GAAP	$	27,758	$	42,703
Operating net special items (1):
Mainline operating special items, net	657		(635)
Regional operating special items, net	309		(6)
Fuel:
Aircraft fuel and related taxes – mainline	(2,581)		(7,526)
Aircraft fuel and related taxes – regional	(821)		(1,869)
Total operating expenses, excluding net special items and fuel	$	25,322	$	32,667
(In millions)
Total Available Seat Miles (ASM)	143,167		285,088
(In cents)
Total operating CASM	19.39		14.98
Operating net special items per ASM (1):
Mainline operating special items, net	0.46		(0.22)
Regional operating special items, net	0.22		—
Fuel per ASM:
Aircraft fuel and related taxes – mainline	(1.80)		(2.64)
Aircraft fuel and related taxes – regional	(0.57)		(0.66)
Total operating CASM, excluding net special items and fuel	17.69		11.46


⁽¹⁾	~~See Note 2 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information on special items.~~

(1)See Note 2 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information on net special items.

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Selected Consolidated Financial Data of American

The selected consolidated financial data presented below under the captions “Consolidated Statements of Operations data” and “Consolidated Balance Sheet data” for the years ended and as of December 31, 2020, 2019, 2018, 2017 ~~2016, 2015, 2014~~ and ~~2013~~2016 are derived from American’s audited consolidated financial statements. On December 30, 2015, US Airways merged with and into American, with American as the surviving corporation. For financial reporting purposes, this transaction constituted a transfer of assets between entities under common control and is reflected in American’s consolidated financial statements as though the transaction had occurred on December 9, 2013, when a subsidiary of AMR merged with and into US Airways Group, which represents the earliest date that American and US Airways were under common control. Therefore, American’s consolidated financial data provided in the tables below includes the results of US Airways beginning on December 9, 2013. In addition, American emerged from bankruptcy on December 9, 2013. Accordingly, American’s consolidated financial information for periods prior to December 9, 2013 is not directly comparable to consolidated financial information for periods subsequent to December 9, 2013.

Year Ended December 31,
2017 2016 2015 2014 2013
(In millions)
Consolidated Statements of Operations data:
Total operating revenues $ 42,195
$ 40,163
$ 40,938
$ 42,676
$ 26,701
Total operating expenses 38,163
34,859
34,749
38,410
25,341
Operating income 4,032
5,304
6,189
4,266
1,360
Bankruptcy reorganization items, net —
—
—
—
(2,640 )
Net income (loss) 1,922
2,781
8,120
2,948
(1,717 )

Consolidated Balance Sheet data
(at end of period):

Total assets $ 60,012
$ 58,092
$ 50,439
$ 42,787
$ 41,699
Long-term debt and capital leases, net of current maturities 21,236
20,718
16,592
14,804
14,718
Pension and postretirement benefits ⁽¹⁾
7,452
7,800
7,410
7,522
5,802
Stockholder’s equity (deficit) 14,594
12,649
9,698
1,406
(4,398 )


	Year Ended December 31,
	2020		2019		2018		2017		2016
	(In millions)
Consolidated Statements of Operations data:
Total operating revenues	$	17,335	$	45,761	$	44,530	$	42,610	$	40,125
Total operating expenses	27,559		42,714		41,807		38,405		35,045
Operating income (loss)	(10,224)		3,047		2,723		4,205		5,080
Net income (loss)	(8,450)		1,972		1,658		1,285		2,689

Consolidated Balance Sheet data (at end of period):
Total assets	$	69,215	$	71,890	$	70,878	$	61,401	$	60,428
Debt and finance leases	28,982		23,042		23,197		23,294		22,577
Pension and postretirement obligations (1)	7,089		6,037		6,893		7,550		7,904
Operating lease liabilities	8,380		9,083		9,496		—		—
Stockholder’s equity	4,348		13,422		11,770		9,888		8,578


⁽¹⁾	Substantially all defined benefit pension plans were frozen effective November 1, 2012. See Note 7 to American’s consolidated financial statements in Part II, Item 8B for further information on pension and postretirement benefits.

(1)Substantially all defined benefit pension plans were frozen effective November 1, 2012. See Note 8 to American's Consolidated Financial Statements in Part II, Item 8B for further information on pension and postretirement benefits.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Background~~2020 Financial Overview

~~Together with~~Impact of Coronavirus (COVID-19)

COVID-19 has been declared a global health pandemic by the World Health Organization. COVID-19 has surfaced in nearly all regions of the world, which has driven the implementation of significant, government-imposed measures to prevent or reduce its spread, including travel restrictions, testing regimes, closing of borders, “stay at home” orders and business closures. As a result, we have experienced an unprecedented decline in the demand for air travel, which has resulted in a material deterioration in our ~~wholly-owned regional airline subsidiaries~~revenues. While our business performed largely as expected in January and ~~third-party regional carriers~~February of 2020, a severe reduction in air travel starting in March 2020 resulted in our total operating revenues decreasing approximately 62% in 2020 as ~~American Eagle,~~compared to 2019. While the length and severity of the reduction in demand due to the COVID-19 pandemic is uncertain, we ~~operate an average~~expect our results of ~~nearly 6,700 flights per day~~operations for 2021 to ~~nearly 350 destinations in more than 50 countries.~~ be severely impacted.

We have ~~hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix~~taken aggressive actions to mitigate the effects of the COVID-19 pandemic on our business including deep capacity reductions, structural changes to our fleet, cost reductions, and ~~Washington, D.C. In 2017, approximately 200 million passengers boarded~~steps to preserve cash and improve our ~~flights.~~overall liquidity position. We remain extremely focused on taking all self-help measures available to manage our business during this unprecedented time, consistent with the terms of the financial assistance we have received from the U.S. Government under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (PSP Extension Law).

~~Strategic Objectives~~Capacity Reductions

We ~~are focused~~have significantly reduced our capacity (as measured by available seat miles), with 2020 flying decreasing by 50% year-over-year. Domestic capacity in 2020 was down 41% year-over-year while international capacity was down 68% year-over-year.

We also reset our international capacity and network for 2021 in response to the severe decline in demand. We have exited 19 international routes from six hubs. These changes will allow us to operate more efficiently when demand returns.

We currently expect our first quarter 2021 system capacity to decrease by 45% as compared to the first quarter of 2019. The demand environment continues to be uncertain as COVID-19 cases have continued to fluctuate in jurisdictions to which we fly and travel restrictions have generally remained in place. Due to this uncertainty, we will continue to adjust our future capacity to match observed booking trends for future travel and make further adjustments to our capacity as needed.

Fleet

To better align our network with lower passenger demand, we accelerated the retirement of Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets as well as certain regional aircraft, including certain Embraer 140 and Bombardier CRJ200 aircraft. These retirements remove complexity from our operation and bring forward cost savings and efficiencies associated with operating fewer aircraft types. See Note 1(g) to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information on ~~four long-term strategic objectives: Create a World-Class Customer Experience, Make Culture a Competitive Advantage, Ensure Long-Term Financial Strength and Think Forward, Lead Forward.~~

~~Create a World-Class Customer Experience~~

~~We began 2017 by being named~~ ~~Air Transport World’s~~ ~~Airline~~the accounting for our fleet retirements. Due to the inherent uncertainties of the ~~Year in recognition of~~current operating environment, we will continue to evaluate our ~~successful integration~~current fleet and ~~the significant investments~~may decide to permanently retire additional aircraft. In addition, we ~~made in our product and people. Also in 2017, we:~~

~~Recorded our best on-time departure and arrival performance since 2003, and our best baggage handling performance since the DOT began reporting this information in 1994.~~

~~Operated the youngest fleet among the major U.S. network carriers and invested $4.1 billion in new aircraft~~.

~~Introduced new streaming-capable, satellite-based internet access on our Boeing 737 MAX aircraft, which will be rolled out across most of our domestic mainline fleet.~~

~~Introduced Basic Economy, a product to compete with ultra low-cost carriers, which is now offered nationwide and to leisure markets in Mexico and most of the Caribbean.~~

~~Commenced our roll out of Premium Economy, which offers a wider seat, more legroom, an amenity kit and enhanced meal choices on international flights.~~

~~Expanded~~have placed a number of ~~our lounges by opening Flagship First Dining, a new exclusive experience for customers in First Class on international~~Boeing 737-800 and ~~A321T transcontinental flights, which we now offer in our Miami, Los Angeles and New York-JFK lounges~~.

certain regional aircraft into temporary storage.

~~Make Culture a Competitive Advantage~~Cost Reductions

We ~~are creating an environment~~moved quickly to better align our costs with our reduced schedule. In aggregate, we estimate that ~~cares for frontline~~we reduced our 2020 operating and capital expenditures by more than $17 billion. These savings were achieved primarily through capacity reductions. In addition, we implemented a series of actions, including the accelerated fleet retirements discussed above as well as reductions in maintenance expense and $700 million in non-aircraft capital expenditures through less fleet modification work, the elimination of ground service equipment purchases and pausing non-critical facility investments and information technology projects. We also suspended all non-essential hiring, paused non-contractual pay rate increases, reduced executive and board of director compensation, implemented voluntary leave and early retirement programs and decreased our management and support staff team, including officers, by approximately 30%. In total, more than 20,000 team members ~~provides competitive pay~~have opted for an early retirement or long-term partially paid leave. Additionally, we have made reductions in marketing, contractor, event and ~~equips our~~training expenses as well as consolidated space at airport facilities.

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Due to the effects of the COVID-19 pandemic, we involuntarily furloughed certain team members starting October 1, 2020, and subsequently recalled the team members covered by the PSP2 financial assistance effective December 1, 2020 (see Note 18 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information).

On February 5, 2021, we informed approximately 13,000 U.S.-based team members of the possibility of a workforce reduction at their work location. We expect that any workforce reductions will take effect on or after April 1, 2021. In connection with this notification, we announced the ~~right tools to support our customers. During 2017, we:~~reopening of the voluntary early out and long-term leave of absence programs for team members of certain represented workgroups. Eligible team members must opt in by February 26, 2021 for the early out program and March 12, 2021 for the voluntary leave program.

Liquidity

~~Kept team member pay competitive through initiatives such as~~As of December 31, 2020, we had $14.3 billion in total available liquidity, consisting of $6.9 billion in unrestricted cash and short-term investments, $7.0 billion in an undrawn term loan facility under the CARES Act and a ~~mid-contract salary increase for pilots and flight attendants and continued step increases from a mid-contract pay increase for mechanics and fleet service workers~~.

~~Invested more than $300~~total of $446 million in ~~facilities~~undrawn short-term revolving and ~~equipment, including renovations~~other facilities.

During 2020, we completed the following financing transactions (see Note 5 to ~~team member spaces, mobile devices~~AAG’s Consolidated Financial Statements in Part II, Item 8A for ~~pilots~~further information):

•refinanced the $1.2 billion 2014 Term Loan Facility at a lower interest rate and ~~flight attendants,~~extended the maturity from 2021 to 2027;

•issued $500 million in aggregate principal amount of 3.75% unsecured senior notes due 2025;

•raised $1.0 billion from the senior secured delayed draw term loan credit facility (Delayed Draw Term Loan Credit Facility);

•borrowed $750 million under the 2013 Revolving Facility, $1.6 billion under the 2014 Revolving Facility and $450 million under the ~~ongoing One Campus One Team initiative~~April 2016 Revolving Facility;

•issued $1.0 billion in aggregate principal amount of 6.50% convertible senior notes due 2025;

•issued 85.2 million shares of AAG common stock at ~~our global support center in Fort Worth, Texas.~~

~~Provided customer service instruction~~a price of $13.50 per share and 44.3 million shares of AAG common stock at a price of $12.975 per share pursuant to ~~approximately 35,000 team members through “Elevate the Everyday Experience” training and launched training for leaders that emphasizes supporting team members who directly serve customers.~~

~~Announced that work on our CFM56-5B engines, which power much of our Airbus narrowbody fleet, will move in-house to our maintenance facility located in Tulsa, Oklahoma beginning later in 2018.~~

Shared the benefits of the recent Tax Cuts and Jobs Act by issuing $1,000 payments to all non-officer team members at American and its wholly-owned regional carriers. While we do not yet pay federal cash income taxes, we believe the new tax law will reduce our future tax bill and allow more investments in equipment and facilities.

~~Ensure Long-Term Financial Strength~~

~~We are focused on capturing efficiencies created by our merger, delivering on our earnings potential and creating value for our stockholders. During 2017, we:~~

~~Returned $1.7 billion to our stockholders~~, ~~including quarterly dividend payments of $198 million and the repurchase of $1.6 billion~~two underwritten public offerings of common stock ~~or 33.9~~for aggregate net proceeds of $1.7 billion;

•issued $2.5 billion in aggregate principal amount of 11.75% senior secured notes due 2025 and used the proceeds thereof, in part, to repay the $1.0 billion Delayed Draw Term Loan Credit Facility that we borrowed in March 2020;

•issued approximately $360 million ~~shares. Since~~in special facility revenue bonds, of which $47 million was used to fund the redemption of certain outstanding bonds;

•entered into a $7.5 billion secured term loan facility with the U.S. Department of Treasury (Treasury) (the Treasury Loan Agreement), of which we borrowed $550 million;

•issued $1.2 billion in aggregate principal amount of two series of 10.75% senior secured notes due 2026 secured by various collateral;

•issued 68.6 million shares of AAG common stock at an average price of $12.87 per share pursuant to an at-the-market offering for net proceeds of $869 million (see Note 18 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information);

•raised $665 million principally from aircraft sale-leaseback transactions as well as $351 million from asset sales primarily related to previously parked aircraft; and

•received approximately $600 million of proceeds from enhanced equipment trust certificates (EETCs) and other aircraft and flight equipment financings, of which $17 million was used to repay existing indebtedness.

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In addition to the foregoing financings, we received an aggregate of $6.0 billion in financial assistance through PSP1 established under the CARES Act, all of which was received by the end of September 2020. In connection with our receipt of this financial assistance, AAG issued a promissory note (the PSP1 Promissory Note) to Treasury for $1.8 billion in aggregate principal amount and warrants to purchase up to an aggregate of approximately 14.1 million shares (the PSP1 Warrant Shares) of AAG common stock. See Note 1(b) to AAG’s Consolidated Financial Statements in Part II, Item 8A for further discussion on PSP1.

In January 2021, we received $1.5 billion (of an expected total of at least $3.0 billion) in financial assistance through PSP2 established under the PSP Extension Law. In connection with our receipt of this financial assistance, AAG issued a promissory note (the PSP2 Promissory Note) to Treasury for an initial principal sum of approximately $433 million and warrants to purchase up to an aggregate of approximately 2.8 million shares (the PSP2 Warrant Shares) of AAG common stock. See Note 18 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further discussion on PSP2.

Also, we are permitted to, and have, deferred payment of the employer portion of Social Security taxes through the end of 2020 (with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022). This deferral provided approximately $350 million in additional liquidity during 2020. Additionally, we have suspended our capital return program, ~~commenced in mid-2014, we have returned $11.4 billion to stockholders,~~ including ~~$835 million in quarterly dividend payments and $10.6 billion in~~ share repurchases ~~or 262.3 million shares. In January 2018, we announced~~and the payment of future dividends for at least the period that ~~our Board of Directors declared a $0.10 per share dividend for stockholders of record on February 6, 2018,~~the restrictions imposed by the CARES Act and ~~payable on February 20, 2018.~~

~~Completed several transactions that provided efficient financing. See discussion within “Liquidity” below for more information.~~

~~Announced revenue and cost initiatives to improve~~ the ~~customer experience, drive revenue improvements and deliver cost efficiencies.~~

~~Think Forward, Lead Forward~~PSP Extension Law are applicable.

We ~~are committed~~continue to ~~re-establishing ourselves as~~evaluate future financing opportunities and work with third-party appraisers on valuations of our remaining unencumbered assets.

A significant portion of our debt financing agreements contain covenants requiring us to maintain an ~~industry leader by creating an action-oriented culture that moves quickly~~aggregate of at least $2.0 billion of unrestricted cash and cash equivalents and amounts available to ~~bring products~~be drawn under revolving credit facilities and/or contain loan to ~~market, embraces technological change and quickly seizes upon new opportunities for our network~~value, collateral coverage and/or debt service coverage ratio covenants.

Given the above actions and our ~~product. During 2017, we:~~

~~Acquired 2.7%~~current assumptions about the future impact of the ~~outstanding shares of China Southern Airlines, the largest airline in China~~.

~~Executed a new Trans-Atlantic joint business agreement that extends the term of our prior Trans-Atlantic joint business agreement~~.

~~Announced a commitment for more than $1.6 billion for improvements of LAX Terminals 4 and 5, setting the stage for us to receive additional gate space and strengthen our Pacific gateway.~~

~~Built a five-gate expansion at ORD Terminal 3,~~COVID-19 pandemic on travel demand, which ~~is expected to open in April 2018.~~

~~2017 Financial Overview~~

~~The U.S. Airline Industry~~

~~The industry remained profitable in 2017. Despite an improving economy and strong demand environment, year-over-year revenue results by carrier were varied. This was in part~~could be materially different due to ~~competitive pricing actions and~~ the ~~effects~~inherent uncertainties of ~~competitive capacity growth in certain markets,~~the current operating environment, we expect to meet our cash obligations as well as remain in compliance with the ~~three major hurricanes that negatively impacted commercial flights~~debt covenants in ~~Texas, Florida,~~our existing financing agreements for the Caribbean islands and Puerto Rico. With respect to fuel costs, the price of Brent crude oil per barrel, which jet fuel prices tend to follow, was on average approximately 23% higher in 2017 as compared to 2016. The average daily spot price for Brent crude oil during 2017 was $54 per barrel as compared to an average daily spot price of $44 per barrel during 2016. On a daily basis, Brent crude oil prices fluctuated during 2017 between a high of $67 per barrel to a low of $44 per barrel, and closed the year on December 31, 2017 at $67 per barrel. Brent crude oil prices were higher in 2017 due principally to reductions of global inventories driven by strong demand and continued production restraint. Jet fuel prices during 2017 were also impacted by hurricane disruptions and increased refinery costs.

~~See Part I, Item 1A. Risk Factors –~~ ~~“Downturns in economic conditions could adversely affect our business,”~~“Our business is very dependent on the price and availability of aircraft fuel. Continued periods of high volatility in fuel costs, increased fuel prices or significant disruptions in the supply of aircraft fuel could have a significant negative impactnext 12 months based on our ~~operating results~~current level of unrestricted cash and ~~liquidity”~~short-term investments, our anticipated access to liquidity (including via proceeds from financings and ~~“Our business has been~~funds from government assistance obtained pursuant to the CARES Act and ~~will continue~~the PSP Extension Law) and projected cash flows from operations.

See Note 5 to ~~be affected by many changing economic and other conditions beyond~~AAG’s Consolidated Financial Statements in Part II, Item 8A for additional information on our ~~control, including global events that affect travel behavior, and our results~~debt obligations.

Table of ~~operations could be volatile and fluctuate due to seasonality.”~~Contents

AAG’s ~~2017~~2020 Results

The selected financial data presented below is derived from AAG’s audited consolidated financial statements included in Part II, Item 8A of this report and should be read in conjunction with those financial statements and the related notes thereto.

Year Ended
December 31,

Increase
(Decrease)

Percent
Increase
(Decrease)
2017 2016
(In millions, except percentage changes)
Mainline and regional passenger revenues $ 36,133
$ 34,579
$ 1,554
4.5
Other operating revenues 5,274
4,901
373
7.6
Total operating revenues 42,207
40,180
2,027
5.0
Mainline and regional aircraft fuel and related taxes 7,510
6,180
1,330
21.5
Salaries, wages and benefits 11,816
10,890
926
8.5
Total operating expenses 38,149
34,896
3,253
9.3
Operating income 4,058
5,284
(1,226 ) (23.2 )
Pre-tax income 3,084
4,299
(1,215 ) (28.3 )
Income tax provision 1,165
1,623
(458 ) (28.2 )
Net income 1,919
2,676
(757 ) (28.3 )

Pre-tax income – GAAP $ 3,084
$ 4,299
$ (1,215 ) (28.3 )
Adjusted for: Pre-tax special items ⁽¹⁾
756
772
(16 ) (2.1 )
Pre-tax income excluding special items $ 3,840
$ 5,071
$ (1,231 ) (24.3 )


	Year Ended December 31,				Increase (Decrease)		Percent Increase (Decrease)
	2020		2019
	(In millions, except percentage changes)
Passenger revenue	$	14,518	$	42,010	$	(27,492)	(65.4)
Cargo revenue	769		863		(94)		(10.8)
Other operating revenue	2,050		2,895		(845)		(29.2)
Total operating revenues	17,337		45,768		(28,431)		(62.1)
Mainline and regional aircraft fuel and related taxes	3,402		9,395		(5,993)		(63.8)
Salaries, wages and benefits	10,960		12,609		(1,649)		(13.1)
Total operating expenses	27,758		42,703		(14,945)		(35.0)
Operating income (loss)	(10,421)		3,065		(13,486)		nm (2)
Pre-tax income (loss)	(11,453)		2,256		(13,709)		nm
Income tax provision (benefit)	(2,568)		570		(3,138)		nm
Net income (loss)	(8,885)		1,686		(10,571)		nm

Pre-tax income (loss) – GAAP	$	(11,453)	$	2,256	$	(13,709)	nm
Adjusted for: Pre-tax net special items (1)	(796)		644		(1,440)		nm
Pre-tax income (loss) excluding net special items	$	(12,249)	$	2,900	$	(15,149)	nm

(1)See Part II, Item 6. Selected Consolidated Financial Data – “Reconciliation of GAAP to Non-GAAP Financial Measures” and Note 2 to AAG’s Consolidated Financial Statements in Part II, Item 8A for details on the components of net special items.


⁽¹⁾ (2)Not meaningful or greater than 100% change.	~~See Part II, Item 6. Selected Consolidated Financial Data –~~ ~~“Reconciliation of GAAP to Non-GAAP Financial Measures”~~ ~~and Note 2 to AAG’s Consolidated Financial Statements in Part II, Item 8A for details on the components of special items.~~

Pre-Tax Income (Loss) and Net Income (Loss)

Pre-tax ~~income~~loss and net ~~income~~loss were ~~$3.1~~$11.5 billion and ~~$1.9~~$8.9 billion, respectively, in ~~2017, respectively.~~2020. This compares to ~~2016~~2019 pre-tax income and net income of ~~$4.3~~$2.3 billion and ~~$2.7~~$1.7 billion, respectively. The year-over-year decrease in our pre-tax income was principally driven by lower revenues as a result of a severe decline in passenger demand and government travel restrictions related to the outbreak and spread of COVID-19. This decline in revenues was offset in part by a decrease in expenses due to our reduced schedule and cost reduction actions described above. Additionally, we recognized $796 million of net special credits in 2020 driven principally by the PSP1 financial assistance (the PSP1 Financial Assistance), offset in part by severance expenses and fleet impairment charges. See Notes 1 and 2 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information on the PSP1 Financial Assistance and net special items, respectively.

Excluding the effects of pre-tax net special items, ~~we recognized~~pre-tax loss was $12.2 billion in 2020 and pre-tax income ~~of $3.8~~was $2.9 billion in ~~2017 as compared to $5.1 billion in 2016.~~2019. The year-over-year ~~declines~~decrease in our pre-tax income ~~on both a GAAP basis and~~ excluding pre-tax net special items ~~were~~was principally driven by ~~higher fuel costs~~lower revenues and ~~wage rates. Fuel costs increased driven by a 21.4% increase in the average price per gallon of fuel. Wage rates were higher primarily~~decreased expenses due to ~~mid-contract pay increases for pilots~~our reduced schedule and ~~flight attendants effective in the second quarter of 2017,~~cost reduction actions as ~~well as increases for maintenance and fleet service work groups, which became effective in the third quarter of 2016. These increases were offset in part by higher revenues.~~described above.

Revenue

In ~~2017,~~2020, we reported total operating revenues of ~~$42.2~~$17.3 billion, ~~an increase~~a decrease of ~~$2.0~~$28.4 billion, or ~~5.0%~~62.1%, as compared to ~~2016. Mainline and regional passenger revenues were $36.1~~2019. Passenger revenue was $14.5 billion, ~~an increase~~a decrease of ~~$1.6~~$27.5 billion, or ~~4.5%~~65.4%, as compared to ~~2016.~~2019. The ~~increase~~decrease in ~~mainline and regional~~ passenger ~~revenues~~revenue in 2020 was due to a ~~3.2% year-over-year increase~~severe decline in ~~consolidated yields driven by strong demand. Domestic consolidated yields increased 3.5%~~passenger demand and ~~international yields rose 3.2%~~government travel restrictions related to the COVID-19 pandemic, resulting in a 61.9% decrease in revenue passenger miles (RPMs) and a 20.5 point decrease in passenger load factor.

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In 2020, cargo revenue was $769 million, a decrease of $94 million, or 10.8%, ~~due principally~~as compared to ~~improved performance in Latin America.~~

~~Additionally, other revenues increased $373 million~~2019, primarily due to ~~higher revenues~~a 44.4% decrease in cargo ton miles reflecting declines in freight volumes, principally as a result of international schedule reductions, which was offset in part by a 60.5% increase in yield as a result of rate increases.

Other operating revenue decreased $845 million, or 29.2%, in 2020 as compared to 2019, driven primarily by lower revenue associated with our loyalty ~~program. Our mainline~~program and ~~regional~~airport clubs.

Our total revenue per available seat mile (TRASM) was ~~15.27~~12.11 cents in ~~2017,~~2020, a ~~3.9% increase~~24.6% decrease as compared to ~~14.70~~16.05 cents in ~~2016.~~2019.

Fuel

Our mainline and regional fuel expense totaled ~~$7.5~~$3.4 billion in ~~2017,~~2020, which was ~~$1.3~~$6.0 billion, or ~~21.5%~~63.8%, ~~higher as~~lower compared to ~~2016.~~2019. This ~~increase~~decrease was primarily driven by a ~~21.4% increase~~49.4% decrease in gallons of fuel consumed as a result of lower capacity and a 28.5% decrease in the average price per gallon of aircraft fuel including related taxes to ~~$1.73~~$1.48 in ~~2017~~2020 from ~~$1.42~~$2.07 in ~~2016.~~

2019.

As of December 31, ~~2017,~~2020, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption. ~~As such, and assuming we do not enter into any future transactions to hedge our fuel consumption, we will continue to be fully exposed to fluctuations in fuel prices.~~ Our current policy is not to enter into transactions to hedge our fuel consumption, although we review that policy from time to time based on market conditions and other factors. We do not currently view the market opportunities to hedge fuel prices as attractive because, among other things, our future fuel needs remain unclear due to uncertainties regarding air travel demand and any hedging would potentially require significant capital or collateral to be placed at risk. As such, and assuming we do not enter into any future transactions to hedge our fuel consumption, we will continue to be fully exposed to fluctuations in fuel prices.

Other Costs

We remain committed to actively managing our cost structure, which we believe is necessary in an industry whose economic prospects are heavily dependent upon two variables we cannot control: ~~the health of the economy~~general economic conditions and the price of fuel. In particular, the COVID-19 pandemic has resulted in a very rapid deterioration in general economic conditions, particularly as applicable to the travel industry.

Our ~~2017 mainline CASM~~2020 total cost per available seat mile (CASM) was ~~12.96~~19.39 cents, an increase of ~~8.6%~~29.4%, from ~~11.94~~14.98 cents in ~~2016.~~2019. Lower than planned capacity in 2020 due to decreased passenger demand and government travel restrictions related to the COVID-19 pandemic drove the increase in our CASM, offset in part by the PSP1 Financial Assistance recognized in 2020.

Our 2020 CASM excluding net special items and fuel was 17.69 cents, an increase of 54.4%, from 11.46 cents in 2019. The increase was primarily driven by ~~higher fuel costs and higher wage rates due to the mid-contract pay increases described above.~~

~~Our 2017 mainline CASM excluding special items and fuel was 10.16 cents, an increase of 6.4%, from 9.54 cents~~lower capacity in ~~2016, which was also driven by higher wage rates~~2020 as described above.

For a reconciliation of ~~mainline~~total operatingCASM to total operating CASM excluding net special items and fuel, see Part II, Item 6. Selected Consolidated Financial Data – “Reconciliation of GAAP to Non-GAAP Financial Measures.”

~~Income Taxes~~

Table of December 31, 2017, we had approximately $10.0 billion of federal NOLs and $3.4 billion of state NOLs, substantially all of which we expect to be available in 2018 to reduce future federal and state taxable income. While we currently do not pay federal cash income taxes, we believe the December 2017 enactment of the 2017 Tax Act represents a significant benefit for us and our stockholders. Commencing in 2018, our effective tax rate has been reduced from approximately 38% to approximately 24%, which will significantly reduce our federal tax liability when we do become a cash tax payer. In addition, we presently expect to receive cash tax refunds of approximately $170 million in both 2019 and 2020 due to the repeal of the corporate Alternative Minimum Tax (AMT).Contents

~~Liquidity~~

As of December 31, 2017, we had approximately $7.6 billion in total available liquidity, consisting of $5.1 billion in unrestricted cash and short-term investments and $2.5 billion in undrawn revolving credit facilities. We also had restricted cash and short-term investments of $318 million. As described above, ~~in connection with our strategic objective “Ensure Long-Term Financial Strength~~,~~” we completed several transactions during 2017 to ensure our long-term competitiveness. During 2017, we:~~

~~Repriced $4.9 billion of our term loans at lower rates and extended and increased our revolving credit facilities.~~

Continued to take advantage of historically low interest rates to finance new aircraft deliveries under our fleet renewal program. We issued an aggregate principal amount of $2.0 billion in Enhanced Equipment Trust Certificate (EETC) equipment notes at an average fixed interest rate of 3.74%, as well as $1.0 billion in other equipment notes, which primarily bear interest at variable rates based on LIBOR plus a margin, averaging 3.08% at December 31, 2017.

~~Raised approximately $853 million in net proceeds from aircraft sale-leaseback transactions.~~

See Note 5 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 3 to American’s Consolidated Financial Statements in Part II, Item 8B for additional information on our debt obligations.

AAG’s Results of Operations

As discussed above, our results of operations for 2020 were significantly impacted by the COVID-19 pandemic. As a result, the comparison of our 2020 operating statistics and financial results to 2019 are largely not meaningful. Refer to the "2020 Financial Overview" above for discussion of our 2020 financial results and the impact of the COVID-19 pandemic on our business.

For a comparison of the 2019 to 2018 reporting periods, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – “AAG’s Results of Operations – 2019 Compared to 2018” of our 2019 Form 10-K.

Operating Statistics

The table below sets forth selected operating data for the years ended December 31, ~~2017, 2016~~2020 and ~~2015.~~2019.

Year Ended December 31, Increase (Decrease) 2017-2016 Increase (Decrease) 2016-2015
2017 2016 2015
Mainline
Revenue passenger miles (millions) ^(a)
201,351
199,014
199,467
1.2% (0.2)%
Available seat miles (millions) ^(b)
243,806
241,734
239,375
0.9% 1.0%
Passenger load factor (percent) ^(c)
82.6
82.3
83.3
0.3pts (1.0)pts
Yield (cents) ^(d)
14.52
14.02
14.56
3.5% (3.7)%
Passenger revenue per available seat mile (cents) ^(e)
11.99
11.55
12.13
3.9% (4.8)%
Operating cost per available seat mile (cents) ^(f)
12.96
11.94
12.03
8.6% (0.8)%
Aircraft at end of period 948
930
946
1.9% (1.7)%
Fuel consumption (gallons in millions) 3,579
3,596
3,611
(0.5)% (0.4)%
Average aircraft fuel price including related taxes (dollars per gallon) 1.71
1.41
1.72
21.4% (18.2)%
Full-time equivalent employees at end of period 103,100
101,500
98,900
1.6% 2.6%

Total Mainline and Regional
Revenue passenger miles (millions) ^(a)
226,346
223,477
223,010
1.3% 0.2%
Available seat miles (millions) ^(b)
276,493
273,410
268,736
1.1% 1.7%
Passenger load factor (percent) ^(c)
81.9
81.7
83.0
0.2pts (1.3)pts
Yield (cents) ^(d)
15.96
15.47
15.92
3.2% (2.8)%
Passenger revenue per available seat mile (cents) ^(e)
13.07
12.65
13.21
3.3% (4.3)%
Total revenue per available seat mile (cents) ^(g)
15.27
14.70
15.25
3.9% (3.7)%
Aircraft at end of period 1,545
1,536
1,533
0.6% 0.2%
Fuel consumption (gallons in millions) 4,352
4,347
4,323
0.1% 0.5%
Average aircraft fuel price including related taxes (dollars per gallon) 1.73
1.42
1.72
21.4% (17.6)%
Full-time equivalent employees at end of period ^(h)
126,600
122,300
118,500
3.5% 3.2%


	Year Ended December 31,		Increase (Decrease)
	2020	2019
Revenue passenger miles (millions) (a)	91,825	241,252	(61.9)%
Available seat miles (millions) (b)	143,167	285,088	(49.8)%
Passenger load factor (percent) (c)	64.1	84.6	(20.5)pts
Yield (cents) (d)	15.81	17.41	(9.2)%
Passenger revenue per available seat mile (cents) (e)	10.14	14.74	(31.2)%
Total revenue per available seat mile (cents) (f)	12.11	16.05	(24.6)%
Aircraft at end of period (g)	1,399	1,547	(9.6)%
Fuel consumption (gallons in millions)	2,297	4,537	(49.4)%
Average aircraft fuel price including related taxes (dollars per gallon)	1.48	2.07	(28.5)%
Full-time equivalent employees at end of period	102,700	133,700	(23.2)%
Operating cost per available seat mile (cents) (h)	19.39	14.98	29.4%


^(a)	~~Revenue passenger mile (RPM) – A basic measure of sales volume. One RPM represents one passenger flown one mile.~~


^(b)	~~Available seat mile (ASM) – A basic measure of production. One ASM represents one seat flown one mile.~~


^(c)	~~Passenger load factor – The percentage of available seats that are filled with revenue passengers.~~


^(d)	~~Yield – A measure of airline revenue derived by dividing passenger revenue by RPMs.~~


^(e)	~~Passenger revenue per available seat mile (PRASM) – Passenger revenues divided by ASMs.~~


^(f)	~~Operating cost per available seat mile (CASM) – Operating expenses divided by ASMs.~~


^(g)	~~Total revenue per available seat mile (TRASM) – Total revenues divided by total mainline and regional ASMs.~~


^(h)	~~Regional full-time equivalent employees only include our wholly-owned regional airline subsidiaries, Envoy, Piedmont and PSA.~~

(a)Revenue passenger mile (RPM) – A basic measure of sales volume. One RPM represents one passenger flown one mile.

(b)Available seat mile (ASM) – A basic measure of production. One ASM represents one seat flown one mile.

~~Results~~(c)Passenger load factor – The percentage of ~~Operations~~available seats that are filled with revenue passengers.

(d)Yield – ~~2017 Compared to 2016~~A measure of airline revenue derived by dividing passenger revenue by RPMs.

~~Pre-tax income~~(e)Passenger revenue per available seat mile (PRASM) – Passenger revenue divided by ASMs.

(f)Total revenue per available seat mile (TRASM) – Total revenues divided by ASMs.

(g)Includes aircraft owned and ~~net income were $3.1 billion~~leased by American as well as aircraft operated by third-party regional carriers under capacity purchase agreements. Excludes 22 mainline and ~~$1.9 billion~~27 regional aircraft that are in ~~2017, respectively. This compares to 2016 pre-tax income~~temporary storage as follows: 22 Boeing 737-800, 18 Embraer 140, seven Embraer 175 and ~~net income~~two Embraer 145.

(h)Operating cost per available seat mile (CASM) – Operating expenses divided by ASMs.

Table of $4.3 billion and $2.7 billion, respectively. Excluding the effects of pre-tax net special items, pre-tax income was $3.8 billion and $5.1 billion in 2017 and 2016, respectively. For reconciliation of pre-tax income excluding special items to their comparable measures on a GAAP basis, see Part II, Item 6. Selected Consolidated Financial Data –~~“Reconciliation of GAAP to Non-GAAP Financial Measures~~.”Contents

~~The year-over-year declines in our pre-tax income on both a GAAP basis and excluding pre-tax special items were principally driven by higher fuel costs and wage rates.~~

Operating Revenues


									Year Ended December 31,				Decrease		Percent Decrease
	Year Ended December 31,				Increase (Decrease)		Percent Increase (Decrease)		2020		2019
	2017		2016						(In millions, except percentage changes)
	(In millions, except percentage changes)
Mainline passenger	$	29,238	$	27,909	$	1,329	4.8
Regional passenger	6,895		6,670		225		3.4
Passenger								Passenger	$	14,518	$	42,010	$	(27,492)	(65.4)
Cargo	800		700		100		14.3	Cargo	769		863		(94)		(10.8)
Other	5,274		4,901		373		7.6	Other	2,050		2,895		(845)		(29.2)
Total operating revenues	$	42,207	$	40,180	$	2,027	5.0	Total operating revenues	$	17,337	$	45,768	$	(28,431)	(62.1)

This table presents our ~~total~~ passenger ~~revenues~~revenue and the year-over-year change in certain operating statistics:

Increase (Decrease)
vs. Year Ended December 31, 2016
Year Ended December 31, 2017
Passenger
Revenue
RPMs ASMs
Load
Factor

Passenger
Yield
PRASM
(In millions)
Mainline passenger $ 29,238
4.8% 1.2% 0.9% 0.3pts 3.5% 3.9%
Regional passenger 6,895
3.4% 2.2% 3.2% (0.7)pts 1.2% 0.2%
Total passenger revenues $ 36,133
4.5% 1.3% 1.1% 0.2pts 3.2% 3.3%

Total passenger revenues increased $1.6 billion, or 4.5%, in 2017 from 2016 primarily due to a 3.2% year-over-year increase in consolidated passenger yields driven by strong demand. Domestic consolidated yields increased 3.5% and international yields rose 3.2%, due principally to improved performance in Latin America.

~~Cargo revenue increased $100 million, or 14.3%, in 2017 from 2016 primarily driven by an increase in freight volume.~~

Other revenue primarily includes revenue associated with our loyalty program, baggage fees, ticketing change fees, airport clubs and inflight services. Other revenue increased $373 million, or 7.6%, in 2017 from 2016 primarily driven by higher revenues associated with our loyalty program. In 2017 and 2016, loyalty program revenue was $2.4 billion and $2.1 billion, respectively. Of this, $2.2 billion and $1.9 billion related to the marketing component of mileage sales and other marketing related payments, respectively.

Decrease
vs. Year Ended December 31, 2019

Year Ended December 31, 2020

Passenger
Revenue

RPMs

ASMs

Load
Factor

Passenger
Yield

PRASM

(In millions)

Passenger revenue

14,518

(65.4)%

(61.9)%

(49.8)%

(20.5)pts

(9.2)%

(31.2)%

Total operating revenues in ~~2017 increased $2.0~~2020 decreased $28.4 billion, or ~~5.0%~~62.1%, from ~~2016 driven principally by a 4.5% increase in total passenger revenues as described above. Our TRASM was 15.27 cents in 2017, a 3.9% increase as compared to 14.70 cents in 2016.~~

~~Mainline Operating Expenses~~

Year Ended December 31, Increase
(Decrease) Percent
Increase
(Decrease)
2017 2016
(In millions, except percentage changes)
Aircraft fuel and related taxes $ 6,128
$ 5,071
$ 1,057
20.8
Salaries, wages and benefits 11,816
10,890
926
8.5
Maintenance, materials and repairs 1,959
1,834
125
6.8
Other rent and landing fees 1,806
1,772
34
1.9
Aircraft rent 1,197
1,203
(6 ) (0.4 )
Selling expenses 1,477
1,323
154
11.6
Depreciation and amortization 1,702
1,525
177
11.6
Special items, net 712
709
3
0.5
Other 4,806
4,525
281
6.2
Total mainline operating expenses $ 31,603
$ 28,852
$ 2,751
9.5

Mainline operating expenses increased $2.8 billion, or 9.5%, in 2017 from 2016. The increase in operating expenses was primarily driven by higher fuel costs and wage rates. See detailed explanations below relating to changes in mainline CASM.

~~Mainline CASM~~

We sometimes use financial measures that are derived from the consolidated financial statements but that are not presented in accordance with GAAP to understand and evaluate our current operating performance to allow for period-to-period comparisons. We believe these non-GAAP financial measures may also provide useful information to investors and others. These non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies, and should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. We are providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.

The table below presents the reconciliation of mainline operating expenses (GAAP measure) to mainline operating costs excluding special items and fuel (non-GAAP measure). Management uses mainline operating costs excluding special items and fuel to evaluate our current operating performance and for period-to-period comparisons. The price of fuel, over which we have no control, impacts the comparability of period-to-period financial performance. The adjustment to exclude aircraft fuel and special items allows management an additional tool to better understand and analyze our non-fuel costs and core operating performance.

The major components of our total mainline CASM and our mainline CASM excluding special items and fuel for the years ended December 31, 2017 and 2016 are as follows (amounts may not recalculate due to rounding):

Year Ended December 31,
Percent
Increase
(Decrease)
2017 2016
(In cents, except percentage changes)
Mainline CASM:
Aircraft fuel and related taxes 2.51
2.10
19.8
Salaries, wages and benefits 4.85
4.51
7.6
Maintenance, materials and repairs 0.80
0.76
5.9
Other rent and landing fees 0.74
0.73
1.1
Aircraft rent 0.49
0.50
(1.3 )
Selling expenses 0.61
0.55
10.6
Depreciation and amortization 0.70
0.63
10.7
Special items, net 0.29
0.29
(0.3 )
Other 1.97
1.87
5.3
Total mainline CASM 12.96
11.94
8.6
Special items, net (0.29 ) (0.29 ) (0.3 )
Aircraft fuel and related taxes (2.51 ) (2.10 ) 19.8
Mainline CASM, excluding special items and fuel 10.16
9.54
6.4

~~Significant changes in the components of mainline CASM are as follows:~~

~~Aircraft fuel and related taxes per ASM increased 19.8%~~2019, primarily due to a ~~21.4% increase~~severe decline in passenger demand and government travel restrictions related to the COVID-19 pandemic.

Operating Expenses


	Year Ended December 31,				Increase (Decrease)		Percent Increase (Decrease)
	2020		2019
	(In millions, except percentage changes)
Aircraft fuel and related taxes	$	2,581	$	7,526	$	(4,945)	(65.7)
Salaries, wages and benefits	10,960		12,609		(1,649)		(13.1)
Maintenance, materials and repairs	1,583		2,380		(797)		(33.5)
Other rent and landing fees	1,536		2,055		(519)		(25.3)
Aircraft rent	1,341		1,326		15		1.1
Selling expenses	513		1,602		(1,089)		(68.0)
Depreciation and amortization	2,040		1,982		58		3.0
Mainline operating special items, net	(657)		635		(1,292)		nm
Other	2,969		5,087		(2,118)		(41.6)
Regional expenses:
Aircraft fuel and related taxes	821		1,869		(1,048)		(56.1)
Other	4,071		5,632		(1,561)		(27.7)
Total operating expenses	$	27,758	$	42,703	$	(14,945)	(35.0)

Total operating expenses decreased $14.9 billion, or 35.0%, in 2020 from 2019 due to our reduced schedule and cost reduction actions as described in the average price per gallon of fuel to $1.71 in 2017 from $1.41 in 2016, offset in part by a 0.5% decrease in gallons of fuel consumed. The decrease in fuel consumption was primarily driven by the operation of more fuel efficient aircraft during 2017 in connection with our fleet renewal program.

Salaries, wages and benefits per ASM increased 7.6% primarily due to mid-contract pay rate increases for pilots and flight attendants effective in the second quarter of 2017, as well as rate increases for maintenance and fleet service work groups, which became effective in the third quarter of 2016.

Maintenance, materials and repairs per ASM increased 5.9% as compared to 2016 primarily due to a contract change that accelerated the timing of certain maintenance expenses incurred. Certain flight equipment was transitioned to a new flight hour based contract (referred to as power by the hour) where expense is incurred and recognized based on actual hours flown. Previously, this flight equipment was covered by a time and materials based contract where expense is incurred and recognized as maintenance is performed.

Selling expenses per ASM increased 10.6% due primarily to higher commissions driven by the overall increase in revenues as well as an increase in flown premium tickets, which are subject to higher commissions."2020 Financial Overview" above.

Depreciation and amortization ~~per ASM~~ increased ~~10.7% primarily due to depreciation related to aircraft purchased in connection with our fleet renewal program. In 2017, we took delivery of 57 new mainline aircraft.~~

Other operating expenses per ASM increased 5.3% primarily due to expenses associated with improving our product offerings, customer experience and operational reliability, such as food and beverage costs and costs associated with team member training.

~~Operating Special Items, Net~~

Year Ended December 31,
2017 2016
(In millions)
Merger integration expenses ⁽¹⁾
$ 273
$ 514
Fleet restructuring expenses ⁽²⁾
232
177
Employee 2017 Tax Act bonus expense ⁽³⁾
123
—
Labor contract expenses ⁽⁴⁾
46
—
Mark-to-market adjustments for bankruptcy obligations 27
25
Other operating charges (credits), net 11
(7 )
Total mainline operating special items, net 712
709
Regional operating special items, net 22
14
Total operating special items, net $ 734
$ 723


⁽¹⁾	Merger integration expenses included costs related to information technology, professional fees, re-branding of aircraft and airport facilities and training, and in 2016, also included costs related to alignment of labor union contracts and the launch of re-branded uniforms, both of which drove the $241 million year-over-year decrease in these expenses.


⁽²⁾	Fleet restructuring expenses, driven in part by the Merger, principally included the acceleration of depreciation and impairments for aircraft and related equipment grounded or expected to be grounded earlier than planned.


⁽³⁾	~~Employee bonus expense included costs related to the $1,000 cash bonus and associated payroll taxes granted to mainline employees as of December 31, 2017 in recognition of the 2017 Tax Act.~~


⁽⁴⁾	Labor contract expenses primarily included one-time charges to adjust the vacation accruals for pilots and flight attendants as a result of the mid-contract pay rate adjustments effective in the second quarter of 2017.

~~Regional Operating Expenses~~

Year Ended December 31, Increase
(Decrease) Percent
Increase
(Decrease)
2017 2016
(In millions, except percentage changes)
Aircraft fuel and related taxes $ 1,382
$ 1,109
$ 273
24.6
Other 5,164
4,935
229
4.6
Total regional operating expenses $ 6,546
$ 6,044
$ 502
8.3

~~Regional operating expenses increased $502~~$58 million, or ~~8.3%~~3.0%, in ~~2017~~2020 from ~~2016. The year-over-year increase was~~2019 due in part to ~~a $273 million, or 24.6%, increase~~accelerated depreciation for certain aircraft and related equipment expected to be retired earlier than planned. Depreciation associated with facility improvements also contributed to the increase.

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Operating Special Items, Net


	Year Ended December 31,
	2020		2019
	(In millions)
PSP1 Financial Assistance (1)	$	(3,710)	$	—
Fleet impairment (2)	1,484		213
Severance expenses (3)	1,408		11
Labor contract expenses (4)	228		—
Mark-to-market adjustments on bankruptcy obligations, net (5)	(49)		(11)
Fleet restructuring expenses (6)	—		271
Merger integration expenses (7)	—		191
Litigation reserve adjustments	—		(53)
Other operating special items, net	(18)		13
Mainline operating special items, net	(657)		635

PSP1 Financial Assistance (1)	(444)		—
Fleet impairment (2)	117		—
Severance expenses (3)	18		—
Other operating special items, net	—		6
Regional operating special items, net	(309)		6
Operating special items, net	$	(966)	$	641

(1)PSP1 Financial Assistance represents recognition of financial assistance received from Treasury pursuant to the PSP1 Agreement. See Note 1(b) to AAG’s Consolidated Financial Statements in ~~fuel costs.~~ Part II, Item 8A for further information.

(2)The ~~average price per gallon of fuel increased 21.2%~~2020 fleet impairment resulted from our decision to ~~$1.79 in 2017 from $1.48 in 2016, on a 2.8% increase in consumption. Additionally, other regional operating expenses increased $229 million, or 4.6%, primarily~~retire certain aircraft earlier than planned driven by the severe decline in air travel due to the COVID-19 pandemic. Aircraft retired include Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300, Embraer 190, certain Embraer 140 and Bombardier CRJ200 aircraft. This included a ~~3.2% increase~~$1.5 billion non-cash write-down of mainline and regional aircraft and spare parts and $109 million in ~~capacity, principally from our wholly-owned regional carriers.~~cash charges primarily for impairment of right-of-use (ROU) assets and lease return costs. See Note ~~1(q)~~1(g) to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information related to these charges.

The 2019 fleet impairment principally included a non-cash write-down of aircraft related to the retirement of our Embraer 190 fleet.

(3)The 2020 severance expenses included salary and medical costs primarily associated with certain team members who opted in to voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic. Cash payments related to these charges for the year ended December 31, 2020 were approximately $365 million.

The 2019 severance expenses primarily included costs associated with reductions of management and support staff team members.

(4)Labor contract expenses primarily related to one-time charges resulting from the ratification of a new contract with the TWU-IAM Association for our maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.

(5)Bankruptcy obligations that will be settled in shares of AAG common stock are marked-to-market based on ~~regional expenses.~~AAG’s stock price.

(6)Fleet restructuring expenses principally included accelerated depreciation and rent expense for aircraft and related equipment expected to be retired earlier than planned.

Table of Contents

(7)Merger integration expenses included costs associated with integration projects, principally our technical operations, flight attendant, human resources and payroll systems.

Nonoperating Results


	Year Ended December 31,						Increase (Decrease)			Percent Increase (Decrease)			Year Ended December 31,				Increase (Decrease)		Percent Increase (Decrease)
	2017			2016									2020		2019
	(In millions, except percentage changes)												(In millions, except percentage changes)
Interest income	$	94		$	63		$	31		47.8		Interest income	$	41	$	127	$	(86)	(67.7)
Interest expense, net	(1,053		)	(991		)	(62		)	6.2		Interest expense, net	(1,227)		(1,095)		(132)		12.0
Other, net	(15		)	(57		)	42			(73.4	)
Other income, net												Other income, net	154		159		(5)		(3.2)
Total nonoperating expense, net	$	(974	)	$	(985	)	$	11		(1.0	)	Total nonoperating expense, net	$	(1,032)	$	(809)	$	(223)	27.5

~~Our short-term investments in each period consisted of highly liquid investments that provided relatively nominal returns.~~ Interest income ~~increased $31 million, or 47.8%, principally due to a 50 basis point increase~~decreased in ~~average yields in 2017 as~~2020 compared to ~~2016.~~

2019 primarily as a result of lower returns on our short-term investments. Interest expense, net increased ~~$62 million, or 6.2%,~~ in ~~2017~~2020 compared to 2019 primarily due to ~~higher outstanding~~the issuance of debt ~~as a result~~and lower capitalized interest offset in part by lower interest expense on our variable-rate debt.

In 2020, other nonoperating income, net included $329 million of ~~aircraft financings associated with our fleet renewal program.~~

~~Other nonoperating expense, net~~non-service related pension and other postretirement benefit plan income. This income was offset in ~~2017 and 2016 included $22~~part by $170 million ~~and $49 million, respectively,~~ of net special charges principally for mark-to-market unrealized losses associated with ~~debt refinancings~~our equity investment in China Southern Airlines and ~~extinguishments.~~certain treasury rate lock derivative instruments and $24 million of net foreign currency losses, primarily associated with losses from Latin American currencies.

In 2019, other nonoperating income, net principally included $183 million of non-service related pension and other postretirement benefit plan income. This income was offset in part by $32 million of net foreign currency losses, primarily associated with losses from Latin American currencies.

The increase in non-service related pension and other postretirement benefit plan income in 2020 as compared to 2019 is principally due to an increase in the expected return on pension plan assets.

Income Taxes

In ~~2017 and 2016,~~2020, we recorded an income tax ~~provision~~benefit of ~~$1.2~~$2.6 billion ~~and $1.6 billion, respectively,~~ at an effective rate of approximately ~~38%~~22%. ~~This tax provision was substantially non-cash due to utilization of our NOLs.~~ Substantially all of our income or loss before income taxes is attributable to the United States. At December 31, ~~2017,~~2020, we had approximately ~~$10.0~~$16.5 billion of federal NOLs ~~and $3.4 billion of state NOLs, substantially all of which we expect to be~~ available ~~in 2018~~ to reduce future federal taxable income, of which $8.5 billion will expire beginning in 2023 if unused and $8.0 billion can be carried forward indefinitely. We also had approximately $5.0 billion of NOL Carryforwards to reduce future state taxable ~~income.~~income at December 31, 2020, which will expire in taxable years 2020 through 2040 if unused.

~~As a result of the 2017 Tax Act,~~In 2019, we recorded ~~a special, non-cash tax benefit of $7 million in 2017 to reflect the impact of lower corporate~~an income tax ~~rates on our deferred tax assets and liabilities. For 2018, we presently expect to recognize a~~ provision ~~for income taxes~~of $570 million at an effective rate of approximately ~~24% due to the reduction in the corporate tax rate.~~25%, which was substantially non-cash.

See Note 67 to AAG’s Consolidated Financial Statements in Part II, Item 8A for additional information on income taxes.

American’s Results of Operations

As discussed above, American’s results of operations for 2020 were significantly impacted by the COVID-19 pandemic. As a result, the comparison of American’s 2020 financial results to 2019 are largely not meaningful. Refer to the "2020 Financial Overview" above for discussion of American’s 2020 financial results and the impact of the COVID-19 pandemic on American’s business.

For a comparison of the 2019 to 2018 reporting periods, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – ~~2016~~“American’s Results of Operations – 2019 Compared to ~~2015~~2018” of American’s 2019 Form 10-K.

~~We realized net income~~

Table of $2.7 billion in 2016. This compares to $7.6 billion of net income in 2015, which included a special $3.0 billion non-cash tax benefit as we reversed the valuation allowance on our deferred tax assets, which include our federal and state NOLs. As a result of the reversal of the valuation allowance, we recorded a $1.6 billion provision for income taxes in 2016, which is substantially non-cash due to the utilization of NOLs. Accordingly, amounts reported in 2016 for income tax provision and net income are not comparable to 2015.Contents

We realized pre-tax income of $4.3 billion and $4.6 billion in 2016 and 2015, respectively. Excluding the effects of pre-tax net special items, pre-tax income was $5.1 billion and $6.3 billion in 2016 and 2015, respectively. For reconciliation of pre-tax and net income excluding special items to their comparable measures on a GAAP basis, see Part II, Item 6. Selected Consolidated Financial Data –~~“Reconciliation of GAAP to Non-GAAP Financial Measures~~.”

Our 2016 pre-tax results on both a GAAP basis and excluding pre-tax net special items were impacted by a decline in revenues due to lower yields. Salaries, wages and benefits costs were higher in 2016, driven by our new labor contracts and the addition of an employee profit sharing program; however, these increases were substantially offset by a year-over-year decline in fuel costs.

Operating Revenues

Year Ended December 31,
Increase
(Decrease)

Percent
Increase
(Decrease)
2016 2015
(In millions, except percentage changes)
Mainline passenger $ 27,909
$ 29,037
$ (1,128 ) (3.9 )
Regional passenger 6,670
6,475
195
3.0
Cargo 700
760
(60 ) (7.9 )
Other 4,901
4,718
183
3.9
Total operating revenues $ 40,180
$ 40,990
$ (810 ) (2.0 )

~~This table presents our total passenger revenues and the year-over-year change in certain operating statistics:~~

Increase (Decrease)
vs. Year Ended December 31, 2015
Year Ended
December 31, 2016 Passenger
Revenue RPMs ASMs Load
Factor Passenger
Yield PRASM
(In millions)
Mainline passenger $ 27,909
(3.9)% (0.2)% 1.0% (1.0)pts (3.7)% (4.8)%
Regional passenger 6,670
3.0% 3.9% 7.9% (3.0)pts (0.9)% (4.5)%
Total passenger revenues $ 34,579
(2.6)% 0.2% 1.7% (1.3)pts (2.8)% (4.3)%

Total passenger revenues declined $933 million, or 2.6%, in 2016 from 2015 driven by a 2.8% decrease in consolidated passenger yields due to competitive capacity growth, macroeconomic softness outside of the United States and foreign currency weakness.

~~Cargo revenue decreased $60 million, or 7.9%, in 2016 from 2015 driven primarily by a decrease in domestic and international freight yields.~~

Other revenue primarily includes revenue associated with our loyalty program, baggage fees, ticketing change fees, airport clubs and inflight services. Other revenue increased $183 million, or 3.9%, in 2016 from 2015 driven by higher revenues associated with our loyalty program. In 2016 and 2015, loyalty program revenue was $2.1 billion and $1.9 billion, respectively. Of this, $1.9 billion and $1.7 billion related to the marketing component of mileage sales and other marketing related payments, respectively.


	Year Ended December 31,				Decrease		Percent Decrease
	2020		2019
	(In millions, except percentage changes)
Passenger	$	14,518	$	42,010	$	(27,492)	(65.4)
Cargo	769		863		(94)		(10.8)
Other	2,048		2,888		(840)		(29.1)
Total operating revenues	$	17,335	$	45,761	$	(28,426)	(62.1)

Total operating revenues in ~~2016~~2020 decreased ~~$810 million,~~$28.4 billion, or ~~2.0%~~62.1%, from ~~2015 driven by lower passenger revenues offset in part by higher other revenue as described above. Our TRASM was 14.70 cents in 2016, a 3.7% decrease as compared to 15.25 cents in 2015.~~

~~Mainline Operating Expenses~~

Year Ended December 31,
Increase
(Decrease)

Percent
Increase
(Decrease)
2016 2015
(In millions, except percentage changes)
Aircraft fuel and related taxes $ 5,071
$ 6,226
$ (1,155 ) (18.5 )
Salaries, wages and benefits 10,890
9,524
1,366
14.4
Maintenance, materials and repairs 1,834
1,889
(55 ) (2.9 )
Other rent and landing fees 1,772
1,731
41
2.4
Aircraft rent 1,203
1,250
(47 ) (3.8 )
Selling expenses 1,323
1,394
(71 ) (5.0 )
Depreciation and amortization 1,525
1,364
161
11.8
Special items, net 709
1,051
(342 ) (32.6 )
Other 4,525
4,374
151
3.4
Total mainline operating expenses $ 28,852
$ 28,803
$ 49
0.2

Mainline operating expenses increased $49 million, or 0.2%, in 2016 from 2015. The increase in operating expenses was primarily driven by higher wage rates resulting from new labor contracts and the addition of an employee profit sharing program; however, these costs were substantially offset by a year-over-year decline in fuel costs. See detailed explanations below relating to changes in mainline CASM.

~~Mainline CASM~~

The major components of our total mainline CASM and our mainline CASM excluding special items and fuel for the years ended December 31, 2016 and 2015 are as follows (amounts may not recalculate due to rounding):

Year Ended December 31,
Percent
Increase
(Decrease)
2016 2015
(In cents, except percentage changes)
Mainline CASM:
Aircraft fuel and related taxes 2.10
2.60
(19.3 )
Salaries, wages and benefits 4.51
3.98
13.2
Maintenance, materials and repairs 0.76
0.79
(3.9 )
Other rent and landing fees 0.73
0.72
1.4
Aircraft rent 0.50
0.52
(4.7 )
Selling expenses 0.55
0.58
(6.0 )
Depreciation and amortization 0.63
0.57
10.7
Special items, net 0.29
0.44
(33.2 )
Other 1.87
1.83
2.4
Total mainline CASM 11.94
12.03
(0.8 )
Special items, net (0.29 ) (0.44 ) (33.2 )
Aircraft fuel and related taxes (2.10 ) (2.60 ) (19.3 )
Mainline CASM, excluding special items and fuel 9.54
8.99
6.1

~~Significant changes in the components of mainline CASM are as follows:~~

~~Aircraft fuel and related taxes per ASM decreased 19.3%~~2019, primarily due to ~~an 18.2% decrease~~a severe decline in passenger demand and government travel restrictions related to the COVID-19 pandemic.

Operating Expenses


	Year Ended December 31,				Increase (Decrease)		Percent Increase (Decrease)
	2020		2019
	(In millions, except percentage changes)
Aircraft fuel and related taxes	$	2,581	$	7,526	$	(4,945)	(65.7)
Salaries, wages and benefits	10,955		12,600		(1,645)		(13.1)
Maintenance, materials and repairs	1,583		2,380		(797)		(33.5)
Other rent and landing fees	1,536		2,055		(519)		(25.3)
Aircraft rent	1,341		1,326		15		1.1
Selling expenses	513		1,602		(1,089)		(68.0)
Depreciation and amortization	2,040		1,982		58		3.0
Mainline operating special items, net	(657)		635		(1,292)		nm
Other	2,991		5,090		(2,099)		(41.3)
Regional expenses:
Aircraft fuel and related taxes	821		1,869		(1,048)		(56.1)
Other	3,855		5,649		(1,794)		(31.8)
Total operating expenses	$	27,559	$	42,714	$	(15,155)	(35.5)

Total operating expenses decreased $15.2 billion, or 35.5%, in 2020 from 2019 due to American's reduced schedule and cost reduction actions as described in the ~~average price per gallon of fuel to $1.41 in 2016 from $1.72 in 2015.~~

~~Salaries, wages and benefits per ASM increased 13.2% primarily due to increased costs associated with new labor contracts and the addition of an employee profit sharing program.~~

~~Selling expenses per ASM decreased 6.0% primarily due to lower credit card and booking fees.~~"2020 Financial Overview" above.

Depreciation and amortization ~~per ASM~~ increased ~~10.7% primarily due to depreciation related to aircraft purchased in connection with our fleet renewal program. In 2016, we took delivery of 55 new mainline aircraft.~~

~~Operating Special Items, Net~~

Year Ended December 31,
2016 2015
(In millions)
Merger integration expenses ⁽¹⁾
$ 514
$ 826
Fleet restructuring expenses ⁽²⁾
177
210
Mark-to-market adjustments for bankruptcy obligations 25
(53 )
Other operating charges (credits), net (7 ) 68
Total mainline operating special items, net 709
1,051
Regional operating special items, net 14
29
Total operating special items, net $ 723
$ 1,080


⁽¹⁾	Merger integration expenses included costs related to information technology, re-branding of aircraft, airport facilities and uniforms, alignment of labor union contracts, professional fees, severance, relocation and training, and, in 2015, also included share-based compensation related to awards granted in connection with the Merger that fully vested in December 2015.


⁽²⁾	Fleet restructuring expenses, driven in part by the Merger, principally included the acceleration of depreciation, impairments, remaining lease payments and lease return costs for aircraft and related equipment grounded or expected to be grounded earlier than planned.

~~Regional Operating Expenses~~

Year Ended December 31, Increase
(Decrease) Percent
Increase
(Decrease)
2016 2015
(In millions, except percentage changes)
Aircraft fuel and related taxes $ 1,109
$ 1,230
$ (121 ) (9.8 )
Other 4,935
4,753
182
3.8
Total regional operating expenses $ 6,044
$ 5,983
$ 61
1.0

~~Regional operating expenses increased $61~~$58 million, or ~~1.0%~~3.0%, in ~~2016 as compared to 2015. The year-over-year increase was~~2020 from 2019 due in part to ~~a $182 million, or 3.8%, increase in other regional operating expenses. The increase in other regional operating expenses was primarily driven by an increase in capacity, principally~~accelerated depreciation for certain aircraft and related equipment expected to be retired earlier than planned. Depreciation associated with facility improvements also contributed to the increase.

Table of Contents

Operating Special Items, Net


	Year Ended December 31,
	2020		2019
	(In millions)
PSP1 Financial Assistance (1)	$	(3,710)	$	—
Fleet impairment (2)	1,484		213
Severance expenses (3)	1,408		11
Labor contract expenses (4)	228		—
Mark-to-market adjustments on bankruptcy obligations, net (5)	(49)		(11)
Fleet restructuring expenses (6)	—		271
Merger integration expenses (7)	—		191
Litigation reserve adjustments	—		(53)
Other operating special items, net	(18)		13
Mainline operating special items, net	(657)		635

PSP1 Financial Assistance (1)	(444)		—
Fleet impairment (2)	106		—
Regional operating special items, net	(338)		—
Operating special items, net	$	(995)	$	635

(1)PSP1 Financial Assistance represents recognition of financial assistance received from ~~our wholly-owned regional carriers. Offsetting this increase was a $121 million, or 9.8%, decrease in fuel costs. The decrease in fuel costs was driven primarily by a 14.5% decline in~~Treasury pursuant to the ~~average price per gallon of fuel to $1.48 in 2016 from $1.73 in 2015, offset in part by a 5.5% increase in consumption.~~PSP1 Agreement. See Note ~~1(q)~~1(b) to ~~AAG’s~~American’s Consolidated Financial Statements in Part II, Item 8A8B for further ~~information on regional expenses.~~information.

~~Nonoperating Results~~

Year Ended December 31,
Increase
(Decrease)

Percent
Increase
(Decrease)
2016 2015
(In millions, except percentage changes)
Interest income $ 63
$ 39
24
60.9
Interest expense, net (991 ) (880 ) (111 ) 12.6
Other, net (57 ) (747 ) 690
(92.4 )
Total nonoperating expense, net $ (985 ) $ (1,588 ) $ 603
(38.1 )

~~Our short-term investments in each period consisted of highly liquid investments that provided nominal returns. Interest income increased $24 million, or 60.9%, principally due~~(2)The 2020 fleet impairment resulted from American's decision to ~~a 50 basis point increase in average yields in 2016 as compared to 2015.~~

~~Interest expense, net increased in 2016 primarily due to higher outstanding debt as a result of~~retire certain aircraft ~~financings associated with our fleet renewal program.~~

~~In 2016, other nonoperating expense, net primarily included $49 million of net special charges associated with debt refinancings and extinguishments.~~

In 2015, other nonoperating expense, net primarily included a $592 million special charge to write off all of the value of Venezuelan bolivars held by us due to continued lack of repatriations and deterioration of economic conditions in Venezuela. We also incurred $159 million of net foreign currency losses. The foreign currency losses in 2015 were driven primarily by the strengthening of the U.S. dollar relative to other currencies, principally in Latin American and European markets.

~~Income Taxes~~

In 2016, we recorded an income tax provision of $1.6 billion at an effective rate of approximately 38%, which was substantially non-cash due to our utilization of NOLs. Substantially all of our income before income taxes was attributable to the United States.

~~In 2015, we reversed $3.0 billion of the valuation allowance on our deferred tax assets, which resulted in a special non-cash tax benefit recorded in our consolidated statement of operations.~~

~~See Note 6 to AAG’s Consolidated Financial Statements in Part II, Item 8A for additional information on income taxes.~~

~~American’s Results of Operations~~

~~Results of Operations – 2017 Compared to 2016~~

~~American realized pre-tax income of $3.2 billion and net income of $1.9 billion in 2017. This compares to 2016 pre-tax income of $4.4 billion and net income of $2.8 billion.~~

~~The year-over-year decline in American’s pre-tax income was principally driven by higher fuel costs and wage rates.~~

~~Operating Revenues~~

Year Ended December 31,
Increase
(Decrease)

Percent
Increase
(Decrease)
2017 2016
(In millions, except percentage changes)
Mainline passenger $ 29,238
$ 27,909
$ 1,329
4.8
Regional passenger 6,895
6,670
225
3.4
Cargo 800
700
100
14.3
Other 5,262
4,884
378
7.7
Total operating revenues $ 42,195
$ 40,163
$ 2,032
5.1

~~Total passenger revenues increased $1.6 billion, or 4.5%, in 2017 from 2016 primarily due to a year-over-year increase in consolidated passenger yields driven by strong demand.~~

~~Cargo revenue increased $100 million, or 14.3%, in 2017 from 2016 primarily driven by an increase in freight volume.~~

Other revenue primarily includes revenue associated with American’s loyalty program, baggage fees, ticketing change fees, airport clubs and inflight services. Other revenue increased $378 million, or 7.7%, in 2017 from 2016 primarily driven by higher revenues associated with American’s loyalty program. In 2017 and 2016, loyalty program revenue was $2.4 billion and $2.1 billion, respectively. Of this, $2.2 billion and $1.9 billion related to the marketing component of mileage sales and other marketing related payments, respectively.

~~Total operating revenues in 2017 increased $2.0 billion, or 5.1%, from 2016 driven principally by a 4.5% increase in total passenger revenues as described above.~~

~~Mainline Operating Expenses~~

Year Ended
December 31,

Increase
(Decrease)

Percent
Increase
(Decrease)
2017 2016
(In millions, except percentage changes)
Aircraft fuel and related taxes $ 6,128
$ 5,071
$ 1,057
20.8
Salaries, wages and benefits 11,804
10,881
923
8.5
Maintenance, materials and repairs 1,959
1,834
125
6.8
Other rent and landing fees 1,806
1,772
34
1.9
Aircraft rent 1,197
1,203
(6 ) (0.4 )
Selling expenses 1,477
1,323
154
11.6
Depreciation and amortization 1,702
1,525
177
11.6
Special items, net 712
709
3
0.5
Other 4,806
4,532
274
6.1
Total mainline operating expenses $ 31,591
$ 28,850
$ 2,741
9.5

~~Mainline operating expenses increased $2.7 billion, or 9.5%, in 2017 from 2016. The increase in operating expenses was primarily driven by higher fuel costs and wage rates.~~

~~Significant changes in the components of mainline operating expenses are as follows:~~

Aircraft fuel and related taxes increased 20.8% primarily due to a 21.4% increase in the average price per gallon of fuel to $1.71 in 2017 from $1.41 in 2016, offset in part by a 0.5% decrease in gallons of fuel consumed. The decrease in fuel consumption was primarilyearlier than planned driven by the ~~operation of more fuel efficient aircraft during 2017~~severe decline in ~~connection with American’s fleet renewal program.~~

~~Salaries, wages and benefits increased 8.5% primarily~~air travel due to ~~mid-contract pay rate increases~~the COVID-19 pandemic. Aircraft retired include Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300, Embraer 190, certain Embraer 140 and Bombardier CRJ200 aircraft. This included a $1.5 billion non-cash write-down of mainline and regional aircraft and spare parts and $109 million in cash charges primarily for ~~pilots~~impairment of ROU assets and ~~flight attendants effective in the second quarter of 2017, as well as rate increases for maintenance and fleet service work groups, which became effective in the third quarter of 2016.~~

Maintenance, materials and repairs increased 6.8% as compared to 2016 primarily due to a contract change that accelerated the timing of certain maintenance expenses incurred. Certain flight equipment was transitioned to a new flight hour based contract (referred to as power by the hour) where expense is incurred and recognized based on actual hours flown. Previously, this flight equipment was covered by a time and materials based contract where expense is incurred and recognized as maintenance is performed.

Selling expenses increased 11.6% due primarily to higher commissions driven by the overall increase in revenues as well as an increase in flown premium tickets, which are subject to higher commissions.

Depreciation and amortization increased 11.6% primarily due to depreciation related to aircraft purchased in connection with American’s fleet renewal program. In 2017, American took delivery of 57 new mainline aircraft.

Other operating expenses increased 6.1% primarily due to expenses associated with improving our product offerings, customer experience and operational reliability, such as food and beverage costs and costs associated with team member training.

~~Operating Special Items, Net~~

Year Ended December 31,
2017 2016
(In millions)
Merger integration expenses ⁽¹⁾
$ 273
$ 514
Fleet restructuring expenses ⁽²⁾
232
177
Employee 2017 Tax Act bonus expense ⁽³⁾
123
—
Labor contract expenses ⁽⁴⁾
46
—
Mark-to-market adjustments for bankruptcy obligations 27
25
Other operating charges (credits), net 11
(7 )
Total mainline operating special items, net 712
709
Regional operating special items, net 3
13
Total operating special items, net $ 715
$ 722


⁽¹⁾	Merger integration expenses included costs related to information technology, professional fees, re-branding of aircraft and airport facilities and training, and in 2016, also included costs related to alignment of labor union contracts and the launch of re-branded uniforms, both of which drove the $241 million year-over-year decrease in these expenses.


⁽²⁾	Fleet restructuring expenses, driven in part by the Merger, principally included the acceleration of depreciation and impairments for aircraft and related equipment grounded or expected to be grounded earlier than planned.


⁽³⁾	~~Employee bonus expense included costs related to the $1,000 cash bonus and associated payroll taxes granted to mainline employees as of December 31, 2017 in recognition of the 2017 Tax Act.~~


⁽⁴⁾	Labor contract expenses primarily included one-time charges to adjust the vacation accruals for pilots and flight attendants as a result of the mid-contract pay rate adjustments effective in the second quarter of 2017.

~~Regional Operating Expenses~~

Year Ended
December 31, Increase
(Decrease) Percent
Increase
(Decrease)
2017 2016
(In millions, except percentage changes)
Aircraft fuel and related taxes $ 1,382
$ 1,109
$ 273
24.6
Other 5,190
4,900
290
5.9
Total regional operating expenses $ 6,572
$ 6,009
$ 563
9.4

~~Regional operating expenses increased $563 million, or 9.4%, in 2017 from 2016. The year-over-year increase was due in part to a $273 million, or 24.6%, increase in fuel~~lease return costs. The average price per gallon of fuel increased 21.2% to $1.79 in 2017 from $1.48 in 2016, on a 2.8% increase in consumption. Additionally, other regional operating expenses increased $290 million, or 5.9%, primarily driven by increased capacity. See Note ~~1(q)~~1(g) to American’s Consolidated Financial Statements in Part II, Item 8B for further information related to these charges.

The 2019 fleet impairment principally included a non-cash write-down of aircraft related to the retirement of American’s Embraer 190 fleet.

(3)The 2020 severance expenses included salary and medical costs primarily associated with certain team members who opted in to voluntary early retirement programs offered as a result of reductions to American's operation due to the COVID-19 pandemic. Cash payments related to these charges for the year ended December 31, 2020 were approximately $365 million.

The 2019 severance expenses primarily included costs associated with reductions of management and support staff team members.

(4)Labor contract expenses primarily related to one-time charges resulting from the ratification of a new contract with the TWU-IAM Association for American's maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.

(5)Bankruptcy obligations that will be settled in shares of AAG common stock are marked-to-market based on ~~regional expenses.~~AAG’s stock price.

(6)Fleet restructuring expenses principally included accelerated depreciation and rent expense for aircraft and related equipment expected to be retired earlier than planned.

(7)Merger integration expenses included costs associated with integration projects, principally American’s technical operations, flight attendant, human resources and payroll systems.

Table of Contents

Nonoperating Results

Year Ended
December 31,

Increase
(Decrease)

Percent
Increase
(Decrease)
2017 2016
(In millions, except percentage changes)
Interest income $ 215
$ 104
$ 111

nm¹

Interest expense, net (988 ) (906 ) (82 ) 9.1
Other, net (15 ) (59 ) 44
(74.5 )
Total nonoperating expense, net $ (788 ) $ (861 ) $ 73
(8.4 )


	Year Ended December 31,				Increase (Decrease)		Percent Increase (Decrease)
	2020		2019
	(In millions, except percentage changes)
Interest income	$	337	$	515	$	(178)	(34.7)
Interest expense, net	(1,171)		(1,109)		(62)		5.6
Other income, net	155		152		3		2.3
Total nonoperating expense, net	$	(679)	$	(442)	$	(237)	53.7


⁽¹⁾	~~Not meaningful.~~

~~American’s~~Interest income decreased in 2020 compared to 2019 primarily as a result of lower returns on American's short-term investments ~~in each period consisted of highly liquid investments that provided relatively nominal returns. Interest income increased $111 million due to higher~~and lower interest-bearing related party receivables from ~~American’s~~American's parent company, ~~AAG, as well as a 50 basis point increase in average yields in 2017 as compared to 2016.~~

AAG. Interest expense, net increased ~~$82 million, or 9.1%,~~ in ~~2017~~2020 compared to 2019 primarily due to ~~higher outstanding~~the issuance of debt ~~as a result~~and lower capitalized interest offset in part by lower interest expense on American's variable-rate debt.

In 2020, other nonoperating income, net included $329 million of ~~aircraft financings associated with American’s fleet renewal program.~~

~~Other nonoperating expense, net~~non-service related pension and other postretirement benefit plan income. This income was offset in ~~2017 and 2016 included $22~~part by $170 million ~~and $49 million, respectively,~~ of net special charges principally for mark-to-market unrealized losses associated with ~~debt refinancings~~American’s equity investment in China Southern Airlines and ~~extinguishments.~~certain treasury rate lock derivative instruments and $24 million of net foreign currency losses, primarily associated with losses from Latin American currencies.

The increase in non-service related pension and other postretirement benefit plan income in 2020 as compared to 2019 is principally due to an increase in the expected return on pension plan assets.

Income Taxes

American is ~~part~~a member of ~~the AAG~~AAG’s consolidated federal and certain state income tax ~~return.~~returns.

In ~~2017 and 2016,~~2020, American recorded an income tax ~~provision~~benefit of ~~$1.3~~$2.5 billion ~~and $1.7 billion, respectively,~~ at an effective rate of approximately ~~41% and 37%, respectively. This tax provision was substantially non-cash due to utilization of American’s NOLs.~~22%. Substantially all of American’s income or loss before income taxes is attributable to the United States. At December 31, ~~2017,~~2020, American had approximately ~~$10.6~~$16.5 billion of federal NOLs ~~and $3.2 billion of state NOLs, substantially all of which American expects to be~~ available ~~in 2018~~ to reduce future federal taxable income, of which $8.9 billion will expire beginning in 2023 if unused and $7.6 billion can be carried forward indefinitely. American also had approximately $5.0 billion of NOL Carryforwards to reduce future state taxable ~~income.~~income at December 31, 2020, which will expire in taxable years 2020 through 2040 if unused.

~~As a result of the 2017 Tax Act,~~In 2019, American recorded ~~a special, non-cash~~an income tax provision of ~~$93~~$633 million ~~in 2017 to reflect the impact of lower corporate income tax rates on its deferred tax assets and liabilities. For 2018, American presently expects to recognize a provision for income taxes~~ at an effective rate of approximately 24% ~~due to the reduction in the corporate tax rate.~~, which was substantially non-cash.

See Note 45 to American’s Consolidated Financial Statements in Part II, Item 8B for additional information on income taxes.

~~Results of Operations – 2016 Compared to 2015~~

American realized net income of $2.8 billion in 2016. This compares to $8.1 billion of net income in 2015, which included a special $3.5 billion non-cash tax benefit as American reversed the valuation allowance on its deferred tax assets, which include its federal and state NOLs. As a result of the reversal of the valuation allowance, American recorded a $1.7 billion provision for income taxes in 2016, which is substantially non-cash due to the utilization of NOLs. Accordingly, amounts reported in 2016 for income tax provision and net income are not comparable to 2015.

American realized pre-tax income of $4.4 billion and $4.7 billion in 2016 and 2015 respectively. American’s 2016 pre-tax income was impacted by a decline in revenues due to lower yields. Salaries, wages and benefits costs were higher in 2016, driven by American’s new labor contracts and the addition of an employee profit sharing program; however, these increases were substantially offset by a year-over-year decline in fuel costs.

~~Operating Revenues~~

Year Ended
December 31,

Increase
(Decrease)

Percent
Increase
(Decrease)
2016 2015
(In millions, except percentage changes)
Mainline passenger $ 27,909
$ 29,037
$ (1,128 ) (3.9 )
Regional passenger 6,670
6,475
195
3.0
Cargo 700
760
(60 ) (7.9 )
Other 4,884
4,666
218
4.7
Total operating revenues $ 40,163
$ 40,938
$ (775 ) (1.9 )

~~Total passenger revenues declined $933 million, or 2.6%, in 2016 from 2015 driven by a decrease in consolidated passenger yields due to competitive capacity growth, macroeconomic softness outside~~Table of ~~the United States and foreign currency weakness.~~

~~Cargo revenue decreased $60 million, or 7.9%, in 2016 from 2015 driven primarily by a decrease in domestic and international freight yields.~~

Other revenue primarily includes revenue associated with American’s loyalty program, baggage fees, ticketing change fees, airport clubs and inflight services. Other revenue increased $218 million, or 4.7%, in 2016 from 2015 driven by higher revenues associated with American’s loyalty program. In 2016 and 2015, loyalty program revenue was $2.1 billion and $1.9 billion, respectively. Of this, $1.9 billion and $1.7 billion related to the marketing component of mileage sales and other marketing related payments, respectively.

~~Total operating revenues in 2016 decreased $775 million, or 1.9%, from 2015 driven by lower passenger revenues offset in part by higher other revenue as described above.~~

~~Mainline Operating Expenses~~

Contents

Year Ended
December 31,

Increase
(Decrease)

Percent
Increase
(Decrease)
2016 2015
(In millions, except percentage changes)
Aircraft fuel and related taxes $ 5,071
$ 6,226
$ (1,155 ) (18.5 )
Salaries, wages and benefits 10,881
9,514
1,367
14.4
Maintenance, materials and repairs 1,834
1,889
(55 ) (2.9 )
Other rent and landing fees 1,772
1,731
41
2.4
Aircraft rent 1,203
1,250
(47 ) (3.8 )
Selling expenses 1,323
1,394
(71 ) (5.0 )
Depreciation and amortization 1,525
1,364
161
11.8
Special items, net 709
1,051
(342 ) (32.6 )
Other 4,532
4,378
154
3.5
Total mainline operating expenses $ 28,850
$ 28,797
$ 53
0.2

Mainline operating expenses increased $53 million, or 0.2%, in 2016 from 2015. The increase in operating expenses was primarily driven by higher wage rates resulting from new labor contracts and the addition of an employee profit sharing program; however, these costs were substantially offset by a year-over-year decline in fuel costs.

~~Significant changes in the components of mainline operating expenses are as follows:~~

~~Aircraft fuel and related taxes decreased 18.5% primarily due to an 18.2% decrease in the average price per gallon of fuel to $1.41 in 2016 from $1.72 in 2015.~~

~~Salaries, wages and benefits increased 14.4% primarily due to increased costs associated with new labor contracts and the addition of an employee profit sharing program.~~

~~Selling expenses decreased 5.0% primarily due to lower credit card and booking fees.~~

Depreciation and amortization increased 11.8% primarily due to depreciation related to aircraft purchased in connection with American’s fleet renewal program. In 2016, American took delivery of 55 new mainline aircraft.

~~Operating Special Items, Net~~

Year Ended December 31,
2016 2015
(In millions)
Merger integration expenses ⁽¹⁾
$ 514
$ 826
Fleet restructuring expenses ⁽²⁾
177
210
Mark-to-market adjustments for bankruptcy obligations 25
(53 )
Other operating charges (credits), net (7 ) 68
Total mainline operating special items, net 709
1,051
Regional operating special items, net 13
18
Total operating special items, net $ 722
$ 1,069


⁽¹⁾	Merger integration expenses included costs related to information technology, re-branding of aircraft, airport facilities and uniforms, alignment of labor union contracts, professional fees, severance, relocation and training, and, in 2015, also included share-based compensation related to awards granted in connection with the Merger that fully vested in December 2015.


⁽²⁾	Fleet restructuring expenses, driven in part by the Merger, principally included the acceleration of depreciation, impairments, remaining lease payments and lease return costs for aircraft and related equipment grounded or expected to be grounded earlier than planned.

~~Regional Operating Expenses~~

Year Ended
December 31, Increase
(Decrease) Percent
Increase
(Decrease)
2016 2015
(In millions, except percentage changes)
Aircraft fuel and related taxes $ 1,109
$ 1,230
$ (121 ) (9.8 )
Other 4,900
4,722
178
3.8
Total regional operating expenses $ 6,009
$ 5,952
$ 57
1.0

Regional operating expenses increased $57 million, or 1.0%, in 2016 as compared to 2015. The year-over-year increase was due in part to a $178 million, or 3.8%, increase in other regional operating expenses. The increase in other regional operating expenses was primarily driven by an increase in capacity. Offsetting this increase was a $121 million, or 9.8%, decrease in fuel costs. The decrease in fuel costs was driven primarily by a 14.5% decline in the average price per gallon of fuel to $1.48 in 2016 from $1.73 in 2015, offset in part by a 5.5% increase in consumption. See Note 1(q) to American’s Consolidated Financial Statements in Part II, Item 8B for further information on regional expenses.

~~Nonoperating Results~~

Year Ended
December 31,

Increase
(Decrease)

Percent
Increase
(Decrease)
2016 2015
(In millions, except percentage changes)
Interest income $ 104
$ 49
$ 55
nm
Interest expense, net (906 ) (796 ) (110 ) 13.8
Other, net (59 ) (774 ) 715
(92.4)
Total nonoperating expense, net $ (861 ) $ (1,521 ) $ 660
(43.4)

American’s short-term investments in each period consisted of highly liquid investments that provided nominal returns. Interest income increased $55 million due to higher interest-bearing related party receivables from American’s parent company, AAG, as well as a 50 basis point increase in average yields in 2016 as compared to 2015.

~~Interest expense, net increased in 2016 primarily due to higher outstanding debt as a result of aircraft financings associated with American’s fleet renewal program.~~

~~In 2016, other nonoperating expense, net primarily included $49 million of net special charges associated with debt refinancings and extinguishments.~~

In 2015, other nonoperating expense, net primarily included a $592 million special charge to write off all of the value of Venezuelan bolivars held by American due to continued lack of repatriations and deterioration of economic conditions in Venezuela. American also incurred $159 million of net foreign currency losses. The foreign currency losses in 2015 were driven primarily by the strengthening of the U.S. dollar relative to other currencies, principally in Latin American and European markets.

~~Income Taxes~~

~~American is part of the AAG consolidated income tax return.~~

In 2016, American recorded an income tax provision of $1.7 billion at an effective rate of approximately 37%, which was substantially non-cash due to American’s utilization of NOLs. Substantially all of American’s income before income taxes was attributable to the United States.

In 2015, American reversed $3.5 billion of the valuation allowance on its deferred tax assets, which resulted in a special non-cash tax benefit recorded in American’s consolidated statement of operations.

~~See Note 4 to American’s Consolidated Financial Statements in Part II, Item 8B for additional information on income taxes.~~

Liquidity and Capital Resources

Liquidity

~~As of~~At December 31, ~~2017,~~2020, AAG had ~~approximately $7.6~~$14.3 billion in total available liquidity and ~~$318~~$609 million in restricted cash and short-term investments. Additional detail ofregarding our available liquidity is provided in the table below (in millions):


	AAG				American
	December 31,				December 31,
	2020		2019		2020		2019
Cash	$	245	$	280	$	231	$	267
Short-term investments	6,619		3,546		6,617		3,543
Undrawn facilities	7,396		3,243		7,396		3,243
Total available liquidity	$	14,260	$	7,069	$	14,244	$	7,053

AAG American
December 31, December 31,
2017 2016 2017 2016
Cash $ 295
$ 322
$ 287
$ 310
Short-term investments 4,771
6,037
4,768
6,034
Undrawn revolving credit facilities 2,500
2,425
2,500
2,425
Total available liquidity $ 7,566
$ 8,784
$ 7,555
$ 8,769

Given the actions we have taken in response to the COVID-19 pandemic and our assumptions about its future impact on travel demand, which could be materially different due to the current inherent uncertainties of the current operating environment, we expect to meet our cash obligations as well as remain in compliance with the debt covenants in our existing financing agreements for the next 12 months based on our current level of unrestricted cash and short-term investments, our anticipated access to liquidity (including via proceeds from financings and funds from government assistance obtained pursuant to the CARES Act and the PSP Extension Law) and projected cash flows from operations.

Share Repurchase Programs and Cash Dividends

Since July 2014, our Board of Directors has approved six share repurchase programs aggregating $11.0 billion of authority. As of December 31, 2017, $450 million remained unused under a repurchase program that expires on December 31, 2018. Share repurchases under our repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. Any such repurchases will be made from time to time subject to market and economic conditions, applicable legal requirements and other relevant factors. We are not obligated to repurchase any specific number of shares and our repurchase of common stock may be limited, suspended or discontinued at any time at our discretion.

~~During the year ended December 31, 2017,~~In 2020, we repurchased ~~33.9~~6.4 million shares of AAG common stock for ~~$1.6 billion~~$145 million at a weighted average cost per share of ~~$45.68. Since~~$22.77, all of which were purchased in the ~~inception~~first quarter of ~~our share repurchase programs in July 2014 through December 31, 2017, we have repurchased 262.3 million shares of AAG common stock for $10.6 billion at a weighted average cost per share of $40.22.~~2020.

~~Cash Dividends~~

~~Our Board of Directors declared the following cash dividends during 2017:~~

Period Per share For stockholders of record as of Payable on
Total
(millions)
First Quarter $ 0.10
February 13, 2017 February 27, 2017 $ 51
Second Quarter 0.10
May 16, 2017 May 30, 2017 50
Third Quarter 0.10
August 14, 2017 August 28, 2017 49
Fourth Quarter 0.10
November 13, 2017 November 27, 2017 48
Total $ 0.40
$ 198

In January ~~2018, we announced that~~2020, our Board of Directors declared a cash dividend of $0.10 per share ~~dividend~~ for stockholders of record as of February 5, 2020 and paid on February ~~6, 2018, and payable on February 20, 2018.~~19, 2020, totaling $43 million.

~~Any future dividends that may be declared and paid from time to time will be subject to market and economic conditions, applicable legal requirements and other relevant factors.~~ We ~~are not obligated to continue a dividend for any fixed period,~~have suspended our capital return program, including share repurchases and the payment of ~~dividends may be suspended at any time at our discretion.~~

~~Sources and Uses of Cash~~

~~AAG~~

~~2017 Compared to 2016~~

~~Operating Activities~~

Our net cash provided by operating activities was $4.7 billion and $6.5 billion in 2017 and 2016, respectively, a year-over-year decrease of $1.8 billion. This decrease in operating cash flows from 2017 to 2016 was primarily due to lower profitability in 2017 driven by higher fuel costs and wage rates, which were offset in part by higher revenues.

~~Investing Activities~~

~~Our net cash used in investing activities was $3.6 billion and $5.7 billion in 2017 and 2016, respectively.~~

Our principal investing activities in 2017 included expenditures of $6.0 billion for property and equipment, including 20 Airbus A321 aircraft, 20 Boeing 737-800 aircraft, 16 Embraer E175 aircraft, 13 Boeing 787 Family aircraft and four Boeing 737-8 MAX aircraft. We also made a $203 million equity investment in China Southern Airlines. These cash outflows were offset in part by $1.3 billion in net sales of short-term investments, $947 million of net proceeds from the sale of property and equipment, primarily representing cash proceeds from aircraft sale-leaseback transactions, and a $319 million decrease in restricted cash and short-term investments.

Our principal investing activities in 2016 included expenditures of $5.7 billion for property and equipment, including 25 Airbus A321 aircraft, 24 Embraer E175 aircraft, 20 Boeing 737-800 aircraft, 18 Bombardier CRJ 900 aircraft, eight Boeing 787 aircraft and two Boeing 777 aircraft.

~~Financing Activities~~

~~Our net cash used in financing activities was $1.1 billion and $894 million in 2017 and 2016, respectively.~~

~~Our principal financing activities in 2017 included net proceeds of $3.1 billion from the issuance of debt, including the issuance of $2.0 billion of EETCs and $1.0 billion borrowed in~~future dividends. In connection with our receipt of financial assistance under PSP1 and PSP2, we agreed not to repurchase shares of or make dividend payments in respect of AAG common stock through at least March 31, 2022. In addition, we have entered into the ~~financing~~Treasury Loan Agreement, and, as a result, we are further prohibited from repurchasing shares of ~~certain aircraft. These cash inflows were offset in part by $2.3 billion in debt repayments, $1.6 billion in share repurchases~~AAG common stock and ~~$198 million in dividend payments.~~

~~Our principal financing activities in 2016 included net proceeds of $7.7 billion from~~paying dividends on AAG common stock through the ~~issuance of debt, including~~date that is one year after the ~~issuance of $2.8 billion of EETCs, $2.3 billion~~secured loan provided under the ~~April 2016 and December 2016 Term~~Treasury Loan Facilities and $1.8 billion borrowed in connection with the financing of certain aircraft. These cash inflows were offset in part by $4.5 billion in share repurchases, $3.8 billion in debt repayments, including the repayment of $588 million and $970 million in remaining principal of the 2013 Citicorp Credit Facility Tranche B-2 and Tranche B-1 term loans, respectively, and $224 million in dividend payments.Agreement is fully repaid.

~~2016 Compared to 2015~~

~~Operating Activities~~

Our net cash provided by operating activities was $6.5 billion and $6.2 billion in 2016 and 2015, respectively. While AAG’s profitability was lower in 2016 as compared to 2015, cash provided by operating activities increased $275 million driven by certain payments received related to our co-branded credit card agreements that became effective in the third quarter of 2016.

~~Investing Activities~~

~~Our net cash used in investing activities was $5.7 billion and $5.6 billion in 2016 and 2015, respectively.~~

Our principal investing activities in 2015 included expenditures of $6.2 billion for property and equipment, including 38 Airbus A320 family aircraft, 24 Embraer E175 aircraft, 20 Bombardier CRJ 900 aircraft, 17 Boeing 737-800 aircraft, 13 Boeing 787 aircraft and two Boeing 777 aircraft and the purchase of five Boeing 757 aircraft previously being leased. ~~These cash outflows were offset in part by $391 million in net sales of short-term investments.~~

~~Financing Activities~~

~~Our net cash used in financing activities was $894 million and $1.3 billion in 2016 and 2015, respectively.~~

Our principal financing activities in 2016 included net proceeds of $7.7 billion from the issuance of debt, including the issuance of $2.8 billion of EETCs, $2.3 billion provided under the April 2016 and December 2016 Term Loan Facilities and $1.8 billion borrowed in connection with the financing of certain aircraft. These cash inflows were offset in part by $4.5 billion in share repurchases, $3.8 billion in debt repayments, including the repayment of $588 million and $970 million in remaining principal of the 2013 Citicorp Credit Facility Tranche B-2 and Tranche B-1 term loans, respectively, and $224 million in dividend payments.

Our principal financing activities in 2015 included net proceeds of $5.0 billion from the issuance of debt, including the issuance of $2.3 billion of EETCs, $500 million of 4.625% senior notes and $1.9 billion borrowed in connection with the financing of certain aircraft. These cash inflows were offset in part by $3.8 billion in share repurchases, $2.2 billion in debt repayments, including the $400 million repayment of the AAdvantage loan with Citibank, and $278 million in dividend payments.

~~American~~

~~2017 Compared to 2016~~

~~Operating Activities~~

American’s net cash provided by operating activities was $2.9 billion and $1.8 billion in 2017 and 2016, respectively, a year-over-year increase of $1.1 billion. AAG has the ability to move funds freely between its subsidiaries to support its cash requirements. The increase in operating cash flows from 2017 to 2016 was primarily due to a decrease in intercompany cash transfers from American to AAG. This increase in operating cash flows was offset in part by lower profitability in 2017 driven by higher fuel costs and wage rates, which were offset in part by higher revenues.

~~Investing Activities~~

~~American’s net cash used in investing activities was $3.6 billion and $5.6 billion in 2017 and 2016, respectively.~~

American’s principal investing activities in 2017 included expenditures of $5.9 billion for property and equipment, including 20 Airbus A321 aircraft, 20 Boeing 737-800 aircraft, 16 Embraer E175 aircraft, 13 Boeing 787 Family aircraft and four Boeing 737-8 MAX aircraft. American also made a $203 million equity investment in China Southern Airlines. These cash outflows were offset in part by $1.3 billion in net sales of short-term investments, $922 million of net proceeds from the sale of property and equipment, primarily representing cash proceeds from aircraft sale-leaseback transactions, and a $319 million decrease in restricted cash and short-term investments.

American’s principal investing activities in 2016 included expenditures of $5.7 billion for property and equipment, including 25 Airbus A321 aircraft, 24 Embraer E175 aircraft, 20 Boeing 737-800 aircraft, 18 Bombardier CRJ 900 aircraft, eight Boeing 787 aircraft and two Boeing 777 aircraft.

~~Financing Activities~~

~~American’s net cash provided by financing activities was $668 million and $3.8 billion in 2017 and 2016, respectively.~~

American’s principal financing activities in 2017 included net proceeds of $3.1 billion from the issuance of debt, including the issuance of $2.0 billion of EETCs and $1.0 billion borrowed in connection with the financing of certain aircraft. These cash inflows were offset in part by $2.3 billion in debt repayments.

American’s principal financing activities in 2016 included net proceeds of $7.7 billion from the issuance of debt, including the issuance of $2.8 billion of EETCs, $2.3 billion provided under the April 2016 and December 2016 Term Loan Facilities and $1.8 billion borrowed in connection with the financing of certain aircraft. These cash inflows were offset in part by $3.8 billion in debt repayments, including the repayment of $588 million and $970 million in remaining principal of the 2013 Citicorp Credit Facility Tranche B-2 and Tranche B-1 term loans, respectively.

~~2016 Compared to 2015~~

~~Operating Activities~~

American’s net cash provided by operating activities was $1.8 billion and $2.6 billion in 2016 and 2015, respectively, a year-over-year decrease of $837 million. AAG has the ability to move funds freely between its subsidiaries to support its cash requirements. The decline in American’s operating cash flows from 2016 to 2015 was primarily due to intercompany transfers of cash from American to AAG in order to fund higher share repurchases in 2016. Additionally, in 2015, American’s operating cash flows included the proceeds from the $500 million issuance of AAG’s 4.625% senior notes, which also contributed to the year-over-year decline in operating cash flows. These declines were offset in part by certain payments received related to American’s co-branded credit card agreements that became effective in the third quarter of 2016.

~~Investing Activities~~

~~American’s net cash used in investing activities was $5.6 billion in each of 2016 and 2015.~~

American’s principal investing activities in 2015 included expenditures of $6.1 billion for property and equipment, including 38 Airbus A320 family aircraft, 24 Embraer E175 aircraft, 20 Bombardier CRJ 900 aircraft, 17 Boeing 737-800 aircraft, 13

Boeing 787 aircraft and two Boeing 777 aircraft and the purchase of five Boeing 757 aircraft previously being leased. These cash outflows were offset in part by $391 million in net sales of short-term investments.

~~Financing Activities~~

~~American’s net cash provided by financing activities was $3.8 billion and $2.4 billion in 2016 and 2015, respectively~~.

American’s principal financing activities in 2015 included net proceeds of $4.5 billion from the issuance of debt, including the issuance of $2.3 billion of EETCs and $1.9 billion borrowed in connection with the financing of certain aircraft. These cash inflows were offset in part by $2.2 billion in debt repayments, including the $400 million repayment of the AAdvantage loan with Citibank.

~~Collateral-Related~~Certain Covenants

Certain of our debt financing agreements (including our secured notes, term loans, revolving credit facilities and spare engine EETCs) contain loan to value (LTV) or collateral coverage ratio covenants and require us to appraise the related collateral ~~annually.~~annually or semiannually. Pursuant to such agreements, if the ~~loan to value~~LTV or collateral coverage ratio exceeds a specified threshold or if the value of the appraised collateral fails to meet a specified threshold, as the case may be, we are required, as applicable, to pledge additional qualifying collateral (which in some cases may include cash ~~collateral)~~or investment securities), or pay down such financing, in whole or in ~~part.~~part, or the interest rate for the financing under such agreements will be increased. As of ~~December 31, 2017,~~the most recent applicable measurement dates, we were in compliance with each of the foregoing collateral coverage ~~tests for the 2013 Credit Facilities, the 2014 Credit Facilities, the April 2016 Credit Facilities~~tests. Additionally, a significant portion of our debt financing agreements contain covenants requiring us to maintain an aggregate of at least $2.0 billion of unrestricted cash and ~~the December 2016 Credit Facilities as~~cash equivalents and amounts available to be drawn under revolving credit facilities, and our Treasury Term Loan Facility contains a debt service coverage ratio, pursuant to which failure to comply with a certain threshold may result in mandatory prepayment of the ~~most recent measurement dates.~~Treasury Term Loan Facility. For further information regarding our ~~collateral-related~~debt covenants, see Note 5 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 3 to American’s Consolidated Financial Statements in Part II, Item 8B.

~~Credit Ratings~~

~~The following table details AAG and American’s credit ratings as of December 31, 2017:~~



	~~Current Rating~~
~~S&P Local Issuer Credit Rating~~	~~BB-~~
~~Fitch Issuer Default Credit Rating~~	~~BB-~~
~~Moody’s Corporate Family Rating~~ ⁽¹⁾	~~Ba3~~

Table of Contents

Sources and Uses of Cash


⁽¹⁾	~~This rating is for AAG only. The credit agency does not rate this category for American.~~

AFor a comparison of the 2019 and 2018 reporting periods, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Sources and Uses of Cash” of our 2019 Form 10-K.

AAG

Operating Activities

Our net cash used in operating activities was $6.5 billion in 2020 as compared to net cash provided by operating activities of $3.8 billion in 2019. The $10.4 billion year-over-year decrease in operating cash flows was primarily due to a net loss in 2020. The net loss was driven by lower revenues as a result of a severe decline in passenger demand and government travel restrictions related to the outbreak and spread of COVID-19, offset in part by a decrease in expenses due to our ~~credit ratings could cause our borrowing~~reduced schedule and cost reduction actions. Additionally, we received cash proceeds of $4.2 billion in 2020 associated with the PSP1 Financial Assistance. In 2020, we also recorded a $1.4 billion special charge for salary and medical costs primarily associated with certain team members who opted in to ~~increase, which would increase our interest expense~~voluntary early retirement programs. Approximately $365 million of this charge has been paid to team members in 2020. We expect cash payments under these programs of approximately $600 million in 2021 with the remaining payments in 2022 and ~~could affect our~~beyond.

Investing Activities

Our net ~~income,~~cash used in investing activities was $4.3 billion and our credit ratings could adversely affect our ability to obtain additional financing. If our financial performance or industry conditions worsen, we may face future downgrades, which could negatively impact our borrowing costs$2.2 billion in 2020 and 2019, respectively.

Our principal investing activities in 2020 included $3.1 billion in net purchases of short-term investments, expenditures of $2.0 billion for property and equipment, including 16 Airbus A321neo aircraft, eight Embraer 175 aircraft, three Bombardier CRJ900 aircraft and the ~~prices~~harmonization of ~~our equity or~~interior configurations across the mainline fleet as well as a $308 million increase in restricted short-term investments primarily related to cash proceeds from special facility revenue bonds. These cash outflows were offset in part by $665 million of proceeds primarily from aircraft sale-leaseback transactions, $351 million of proceeds from the sale of property and equipment and $90 million of proceeds from a vendor.

Our principal investing activities in 2019 included expenditures of $4.3 billion for property and equipment, including 21 Embraer 175 aircraft, 12 Bombardier CRJ900 aircraft, 12 Airbus A321neo aircraft, four Boeing 737 MAX Family aircraft and two Boeing 787 Family aircraft. These cash outflows were offset in part by $960 million in net sales of short-term investments, $850 million of proceeds primarily from aircraft sale-leaseback transactions and $250 million in proceeds from a vendor.

Financing Activities

Our net cash provided by financing activities was $11.0 billion in 2020 as compared to net cash used in financing activities of $1.6 billion in 2019.

Our principal financing activities in 2020 included $11.8 billion in proceeds from the issuance of debt ~~securities. In addition, any downgrade~~and $3.0 billion in proceeds from the issuance of ~~our credit ratings may indicate~~equity. These proceeds principally include $2.8 billion borrowed under the 2014 Revolving Facility, the 2013 Revolving Facility and the April 2016 Revolving Facility, $2.5 billion in aggregate principal amount of 11.75% senior secured notes, $1.8 billion in aggregate principal amount under the PSP1 Promissory Note, $1.2 billion in aggregate principal amount of two series of 10.75% senior secured notes due 2026, $1.0 billion in aggregate principal amount of AAG’s 6.50% convertible senior notes, $1.0 billion under the Delayed Draw Term Loan Credit Facility, $600 million in connection with the issuance of equipment notes related to EETCs and the financing of certain aircraft, $550 million under the Treasury Term Loan Facility, $500 million in aggregate principal amount of 3.75% unsecured senior notes due 2025 and the $360 million issuance of special facility revenue bonds as well as $1.7 billion of net proceeds from two underwritten public offerings of common stock and $869 million of net proceeds from an at-the-market offering of common stock. These cash inflows were offset in part by$3.5 billion in debt repayments, consisting of approximately $2.5 billion in scheduled debt repayments, including repayment of $500 million of 4.625% senior notes, and the prepayment of the $1.0 billion Delayed Draw Term Loan Credit Facility, as well as $216 million in share repurchases and dividend payments (which occurred in the first quarter of 2020).

Table of Contents

Our principal financing activities in 2019 included $4.2 billion in debt repayments, consisting of $2.9 billion in scheduled debt repayments and the prepayment of $1.3 billion of secured loans. We also had $1.1 billion in share repurchases and $178 million in dividend payments. These cash outflows were offset in part by $4.0 billion in proceeds from the issuance of debt, consisting of $3.2 billion in connection with the issuance of equipment notes related to EETCs and the financing of certain aircraft and other flight equipment, as well as the issuance of $750 million aggregate principal amount of 5.000% senior notes.

American

Operating Activities

American’s net cash used in operating activities was $1.4 billion in 2020 as compared to net cash provided by operating activities of $2.4 billion in 2019. The $3.9 billion year-over-year decrease in operating cash flows was primarily due to a net loss in 2020, offset in part by intercompany cash receipts from AAG's financing transactions. The net loss was driven by lower revenues as a result of a severe decline in ~~our business~~passenger demand and government travel restrictions related to the outbreak and spread of COVID-19, offset in ~~our ability~~part by a decrease in expenses due to ~~satisfy our obligations~~American's reduced schedule and cost reduction actions. Additionally, American received cash proceeds of $3.7 billion in 2020 associated with the PSP1 Financial Assistance. In 2020, American also recorded a $1.4 billion special charge for salary and medical costs primarily associated with certain team members who opted in to voluntary early retirement programs. Approximately $365 million of this charge has been paid to team members in 2020. American expects cash payments under ~~our indebtedness.~~these programs of approximately $600 million in 2021 with the remaining payments in 2022 and beyond.

Investing Activities

American’s net cash used in investing activities was $4.3 billion and $2.1 billion in 2020 and 2019, respectively.

American’s principal investing activities in 2020 included $3.1 billion in net purchases of short-term investments, expenditures of $1.9 billion for property and equipment, including 16 Airbus A321neo aircraft, eight Embraer 175 aircraft, three Bombardier CRJ900 aircraft and the harmonization of interior configurations across the mainline fleet as well as a $308 million increase in restricted short-term investments primarily related to cash proceeds from special facility revenue bonds. These cash outflows were offset in part by $665 million of proceeds primarily from aircraft sale-leaseback transactions, $351 million of proceeds from the sale of property and equipment and $90 million of proceeds from a vendor.

American’s principal investing activities in 2019 included expenditures of $4.2 billion for property and equipment, including 21 Embraer 175 aircraft, 12 Bombardier CRJ900 aircraft, 12 Airbus A321neo aircraft, four Boeing 737 MAX Family aircraft and two Boeing 787 Family aircraft. These cash outflows were offset in part by $960 million in net sales of short-term investments, $850 million of proceeds primarily from aircraft sale-leaseback transactions and $250 million in proceeds from a vendor.

Financing Activities

American’s net cash provided by financing activities was $5.8 billion in 2020 as compared to net cash used in financing activities of $282 million in 2019.

American’s principal financing activities in 2020 included $9.0 billion in proceeds from the issuance of debt, including $2.8 billion borrowed under the 2014 Revolving Facility, the 2013 Revolving Facility and the April 2016 Revolving Facility, $2.5 billion in aggregate principal amount of 11.75% senior secured notes, $1.2 billion in aggregate principal amount of two series of 10.75% senior secured notes due 2026, $1.0 billion under the Delayed Draw Term Loan Credit Facility, $600 million in connection with the issuance of equipment notes related to EETCs and the financing of certain aircraft, $550 million under the Treasury Term Loan Facility and the $360 million issuance of special facility revenue bonds. These cash inflows were offset in part by $3.0 billion in debt repayments, consisting of approximately $2.0 billion in scheduled debt repayments and the prepayment of the $1.0 billion Delayed Draw Term Loan Credit Facility.

American’s principal financing activities in 2019 included $3.4 billion in debt repayments, consisting of $2.1 billion in scheduled debt repayments and the prepayment of $1.3 billion of secured loans. These cash outflows were offset in part by $3.2 billion in proceeds from the issuance of debt for equipment notes related to EETCs and the financing of certain aircraft and other flight equipment.

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Commitments

For further information regarding our commitments, see the Notes to AAG’s Consolidated Financial Statements in Part II, Item 8A and the Notes to American’s Consolidated Financial Statements in Part II, Item 8B at the referenced footnotes below.



	AAG	American
Long-term debt and debt covenants	Note 5	Note 3
Leases	Note 6	Note 4
Employee benefit plans	Note 910	Note 78
Commitments, contingencies and guarantees	Note 1112	Note 910

Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development arrangements with us.

We have no off-balance sheet arrangements of the types described in the first three categories above that we believe may have a material current or future effect on financial condition, liquidity or results of operations. Certain guarantees that we do not expect to have a material current or future effect on our financial condition, liquidity or results of operations are disclosed in Note 11 to AAG’s Consolidated Financial Statements included in Part II, Item 8A and Note 9 to American’s Consolidated Financial Statements in Part II, Item 8B.

Pass-Through Trusts

~~We have financed certain~~American currently operates 350 owned aircraft and 24 leased aircraft, and owns 62 spare aircraft engines, which in each case were financed with EETCs issued by pass-through trusts. These trusts are off-balance sheet entities, the primary purpose of which is to finance the acquisition of flight equipment or to permit issuance of debt backed by existing flight equipment. ~~Rather~~In the case of aircraft EETCs, rather than finance each aircraft separately when such aircraft is purchased, delivered or refinanced, these trusts allow American to raise the financing for a number of aircraft at one time and, if applicable, place such funds in escrow pending a future purchase, delivery or refinancing of the relevant aircraft. Similarly, in the case of the spare engine EETCs, the trusts allow American to use its existing pool of spare engines to raise financing under a single facility. The trusts have also been structured to provide for certain credit enhancements, such as liquidity facilities to cover certain interest payments, that reduce the risks to the purchasers of the trust certificates and, as a result, reduce the cost of aircraft financing to American.

Each trust covers a set number of aircraft or spare engines scheduled to be delivered, financed or refinanced upon the issuance of the EETC or within a specific period of time thereafter. At the time of each covered aircraft or spare engine financing, the relevant trust used the proceeds of the issuance of the EETC (which may have been available at the time of issuance thereof or held in escrow until financing of the applicable aircraft following its delivery) to purchase equipment notes relating to the financed ~~aircraft.~~aircraft or engines. The equipment notes are issued, at American’s election, in connection with a mortgage financing of the aircraft or spare engines or, in certain cases, by a separate owner trust in connection with a leveraged lease financing of the aircraft. In the case of a leveraged lease financing, the owner trust then leases the aircraft to American. In both cases, the equipment notes are secured by a security interest in the ~~aircraft.~~aircraft or engines, as applicable. The pass-through trust certificates are not direct obligations of, nor are they guaranteed by, AAG or American. However, in the case of mortgage financings, the equipment notes issued to the trusts are direct obligations of American and, in certain instances, have been guaranteed by AAG. As of December 31, ~~2017, $11.9~~2020, $11.0 billion associated with these mortgage financings is reflected as debt in the accompanying consolidated balance sheet.

With respect to leveraged leases, American evaluated whether the leases had characteristics of a variable interest entity. American concluded the leasing entities met the criteria for variable interest entities. American generally is not the primary beneficiary of the leasing entities if the lease terms are consistent with market terms at the inception of the lease and do not include a residual value guarantee, fixed-price purchase option or similar feature that obligates American to absorb decreases in value or entitles American to participate in increases in the value of the aircraft. American does not provide residual value guarantees to the bondholders or equity participants in the trusts. Some leases have a fair market value or a fixed price purchase option that allows American to purchase the aircraft at or near the end of the lease term. However, the option price approximates an estimate of the aircraft’s fair value at the option date. Under this feature, American does not participate in any increases in the value of the aircraft.entities; however, American concluded it is not the primary beneficiary under these ~~arrangements. Therefore, American~~leasing arrangements and accounts for the majority of its EETC leveraged lease financings as operating leases. American’s total future ~~obligations~~payments to the trusts of each of the relevant EETCs under these leveraged lease financings are ~~$572~~$78 million as of December 31, ~~2017.~~2020, which are reflected in the operating lease obligations in Note 6 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 4 to American’s Consolidated Financial Statements in Part II, Item 8B.

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Letters of Credit and Other

We provide financial assurance, such as letters of credit, surety bonds or restricted cash and investments, primarily to ~~primarily~~ support projected workers’ compensation obligations and airport commitments. As of December 31, ~~2017,~~2020, we had ~~$448~~$476 million of letters of credit and surety bonds securing various obligations, of which ~~$88~~$110 million is collateralized with our restricted cash. The letters of credit and surety bonds that are subject to expiration will expire on various dates through ~~2022.~~

2024.

Contractual Obligations

The following table provides details of our future cash contractual obligations as of December 31, ~~2017. The~~2020 (in millions). Except to the extent set forth in the applicable accompanying footnotes, the table does not include commitments that are contingent on events or other factors that are uncertain or unknown at this time.

Payments Due by Period
2018 2019 2020 2021 2022 2023 and Thereafter Total
American ^(a)

Debt and capital lease obligations ^{(b) (d)}
(See Note 3)
$ 2,098
$ 2,118
$ 3,563
$ 2,854
$ 1,286
$ 11,602
$ 23,521
Interest obligations ^(c) ^(d)
966
904
788
658
535
1,409
5,260
Aircraft and engine purchase
commitments ^(e) (See Note 9)
1,826
2,730
2,730
2,858
2,138
1,482
13,764
Operating lease commitments ^(f)
(See Note 9)
2,178
1,966
1,776
1,331
1,155
3,253
11,659
Regional capacity purchase agreements ^(g) (See Note 9)
1,457
1,311
1,063
866
699
2,073
7,469
Minimum pension obligations ^(h)
(See Note 7)
464
890
484
495
581
1,476
4,390
Retiree medical and other postretirement benefits (See Note 7) 96
92
80
75
70
314
727
Other purchase obligations ⁽ⁱ⁾(See Note 9)
2,036
1,405
894
956
9
2
5,302
Total American Contractual Obligations $ 11,121
$ 11,416
$ 11,378
$ 10,093
$ 6,473
$ 21,611
$ 72,092

AAG Parent and Other AAG Subsidiaries ^(a)

Debt and capital lease obligations ^(b)
(See Note 5)
$ 500
$ 750
$ 506
$ 2
$ 2
$ 20
$ 1,780
Interest obligations ^(c)
82
67
14
2
2
6
173
Minimum pension obligations ^(h)
(See Note 9)
3
4
3
3
4
15
32
Operating lease commitments 17
8
8
8
4
13
58
Total AAG Contractual Obligations $ 11,723
$ 12,245
$ 11,909
$ 10,108
$ 6,485
$ 21,665
$ 74,135


	Payments Due by Period
	2021		2022		2023		2024		2025		2026 and Thereafter		Total
American (a)
Long-term debt:
Principal amount (b), (d) (See Note 3)	$	2,749	$	1,672	$	4,162	$	4,401	$	6,421	$	9,326	$	28,731
Interest obligations (c), (d)	1,161		1,065		997		900		767		800		5,690
Finance lease obligations (See Note 4)	131		136		114		120		85		89		675
Aircraft and engine purchase commitments (e) (See Note 10(a))	527		1,661		1,592		2,377		3,381		1,742		11,280
Operating lease commitments (See Note 4)	2,036		1,932		1,743		1,352		975		4,194		12,232
Regional capacity purchase agreements (f) (See Note 10(b))	1,120		1,666		1,685		1,663		1,511		3,646		11,291
Minimum pension obligations (g) (See Note 8)	694		553		552		580		264		31		2,674
Retiree medical and other postretirement benefits (See Note 8)	75		71		68		66		63		269		612
Other purchase obligations (h) (See Note 10(a))	2,278		1,282		1,184		242		163		1,047		6,196
Total American Contractual Obligations	$	10,771	$	10,038	$	12,097	$	11,701	$	13,630	$	21,144	$	79,381

AAG Parent and Other AAG Subsidiaries (a)
Long-term debt:
Principal amount (b) (See Note 5)	$	2	$	752	$	2	$	2	$	1,503	$	1,778	$	4,039
Interest obligations (c)	142		122		103		102		109		274		852
Operating lease commitments (See Note 6)	14		13		11		8		4		16		66
Minimum pension obligations (g) (See Note 10)	3		3		3		3		3		5		20
Total AAG Contractual Obligations	$	10,932	$	10,928	$	12,216	$	11,816	$	15,249	$	23,217	$	84,358


^(a)	~~For additional information, see the Notes to AAG’s and American’s Consolidated Financial Statements in Part II, Items 8A and 8B referenced in the table above.~~


^(b)	~~Amounts represent contractual amounts due. Excludes $227 million and $236 million of unamortized debt discount, premium and issuance costs as of December 31, 2017 for American and AAG, respectively.~~


^(c)	~~For variable-rate debt, future interest obligations are estimated using the current forward rates at December 31, 2017.~~


^(d)	Includes $11.9 billion of future principal payments and $2.7 billion of future interest payments, respectively, as of December 31, 2017, related to EETCs associated with mortgage financings for the purchase of certain aircraft.


^(e)	~~See Part I, Item 2. Properties –~~ ~~“Aircraft and Engine Purchase Commitments”~~ ~~for additional information about the firm commitment aircraft delivery schedule.~~


^(f)	~~Includes $572 million of future minimum lease payments related to EETC leveraged lease financings of certain aircraft as of December 31, 2017.~~


^(g)	Represents minimum payments under capacity purchase agreements with third-party regional carriers. These commitments are estimates of costs based on assumed minimum levels of flying under the capacity purchase agreements and our actual payments could differ materially.

(a)For additional information, see the Notes to AAG’s and American’s Consolidated Financial Statements in Part II, Items 8A and 8B, respectively, referenced in the table above.

(b)Amounts represent contractual amounts due. Excludes $321 million and $428 million of unamortized debt discount, premium and issuance costs as of December 31, 2020 for American and AAG Parent, respectively.

(c)For variable-rate debt, future interest obligations are estimated using the current forward rates at December 31, 2020.

(d)Includes $11.0 billion of future principal payments and $1.9 billion of future interest payments as of December 31, 2020, related to EETCs associated with mortgage financings of certain aircraft and spare engines.

(e)See Part I, Item 2. Properties – “Aircraft and Engine Purchase Commitments” for additional information about the firm commitment aircraft delivery schedule, in particular the footnotes to the table thereunder as to potential changes to such delivery schedule. Due to uncertainty surrounding the timing of delivery of certain aircraft, the amounts in the

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table represent our current best estimate; however, the actual delivery schedule may differ from the table above, potentially materially. Additionally, the amounts in the table exclude 19 Boeing 787-8 aircraft to be delivered in 2021 for which we have obtained committed lease financing. This financing is reflected in the operating lease commitments line above.

(f)Represents minimum payments under capacity purchase agreements with third-party regional carriers. These commitments are estimates of costs based on assumed minimum levels of flying under the capacity purchase agreements and our actual payments could differ materially. Rental payments under operating leases for certain aircraft flown under these capacity purchase agreements are reflected in the operating lease commitments line above.

(g)Includes minimum pension contributions based on actuarially determined estimates as of December 31, 2020 and is based on estimated payments through 2030. Pursuant to the CARES Act passed in March 2020, minimum required pension contributions to be made in the calendar year 2020 can be deferred to January 1, 2021, with interest accruing from the original due date to the new payment date. In January 2021, we made $241 million of required pension contributions, including the $130 million minimum contributions required for 2020.

(h)Includes purchase commitments for aircraft fuel, flight equipment maintenance, construction projects and information technology support.

^(h)

Includes minimum pension contributions based on actuarially determined estimates and is based on estimated payments through 2027. The total expected pension contribution of $467 million in 2018 assumes a supplemental contribution of $425 million in addition to the $42 million minimum required contribution.


⁽ⁱ⁾	~~Includes purchase commitments for jet fuel, facility construction projects and information technology support.~~

Capital Raising Activity and Other Possible Actions

In light of the cash needs imposed by the current operating losses due to reduced demand in response to the COVID-19 pandemic as well as our significant financial commitments related to, among other things, new ~~aircraft,~~flight equipment, the servicing and amortization of existing debt and equipment leasing arrangements, and ~~future~~ pension funding obligations, we and our subsidiaries will regularly consider, and enter into negotiations related to, capital raising and liability management activity, which may include the entry into leasing transactions and future issuances of, and transactions designed to manage the timing and amount of, secured or unsecured debt obligations or additional equity securities in public or private offerings or otherwise. The cash available from operations (if any) and these sources, however, may not be sufficient to cover our cash ~~contractual~~ obligations because economic factors may reduce the amount of cash generated by operations or increase costs. For instance, an economic downturn or general global instability caused by military actions, terrorism, disease outbreaks or(in particular the ongoing global outbreak of COVID-19), natural disasters or other causes could reduce the demand for air travel, which would reduce the amount of cash generated by operations. See Part I, Item 1A. Risk Factors – "The outbreak and global spread of COVID-19 has resulted in a severe decline in demand for air travel which has adversely impacted our business, operating results, financial condition and liquidity. The duration and severity of the COVID-19 pandemic, and similar public health threats that we may face in the future, could result in additional adverse effects on our business, operating results, financial condition and liquidity" for additional discussion. An increase in costs, either due to an increase in borrowing costs caused by a reduction in credit ratings or a general increase in interest rates, or due to an increase in the cost of fuel, maintenance, or aircraft, aircraft engines or parts, could decrease the amount of cash available to cover cash contractual obligations. Moreover, certain of our financing arrangements contain significant minimum cash balance or similar liquidity requirements. As a result, we cannot use all of our available cash to fund operations, capital expenditures and cash obligations without violating these requirements. See Note 5 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 3 to American’s Consolidated Financial Statements in Part II, Item 8B for information regarding our financing arrangements.

In the past, we have from time to time refinanced, redeemed or repurchased our debt and taken other steps to reduce or otherwise manage the aggregate amount and cost of our debt, or lease and other obligations or otherwise improve our balance sheet. Going forward, depending on market conditions, our cash position and other considerations, we may continue to take such actions.

Our Board of Directors has from time to time authorized programs to repurchase shares of our common stock, one of which is currently in effect, and may authorize additional share repurchase programs in the future.

OTHER INFORMATION

Basis of Presentation

See Note 1 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 1 to American’s Consolidated Financial Statements in Part II, Item 8B for information regarding the basis of presentation.

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Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. We believe our estimates and assumptions are reasonable; however, actual results could differ from those estimates. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and could potentially result in materially different results under different assumptions and conditions. We have identified the following critical accounting policies that impact the preparation of our consolidated financial statements. See the ~~“Basis~~“Basis of Presentation and Summary of Significant Accounting ~~Policies”~~Policies” included in Note 1 to each of AAG’s and American’s Consolidated Financial Statements in Part II, Item 8A and ~~Note 1 to American’s Consolidated Financial Statements in Part II, Item~~ 8B, respectively, for additional discussion of the application of these estimates and other accounting policies.

Passenger Revenue

~~Passenger~~We recognize all revenues generated from transportation on American and our regional flights operated under the brand name American Eagle, including associated baggage fees and other inflight services, as passenger revenue ~~is recognized~~ when transportation is provided. Ticket and other related sales for transportation that has not yet been provided are initially deferred and recorded as air traffic liability on ~~the~~our consolidated balance sheets. The air traffic liability principally represents tickets sold for future travel ~~dates~~on American and partner airlines, as well as estimated future refunds and exchanges of tickets sold for past travel dates. The balance in the air traffic liability fluctuates throughout the year based on seasonal travel patterns. Our air traffic liability was $4.0 billion and $3.9 billion as of December 31, 2017 and 2016, respectively.travel.

and the amount of revenue to be recognized. These estimates are generally based on the analysis of our historical data. We ~~and other airline industry participants~~ have consistently applied this accounting method to estimate revenue from ~~forfeited~~unused tickets at the date of travel. Estimated future refunds and exchanges included in the air traffic liability are routinely evaluated based on subsequent activity to validate the accuracy of our estimates. Any adjustments resulting from periodic evaluations of the estimated air traffic liability are included in passenger revenue during the period in which the evaluations are completed. While the contract duration of passenger tickets is generally one year, in response to the COVID-19 pandemic, we extended the contract duration for certain tickets to December 31, 2021, principally those with travel scheduled from March 1, 2020 through December 31, 2020. Additionally, we have eliminated change fees for most domestic and international tickets. As of December 31, 2020, the air traffic liability included approximately $2.6 billion of travel credits related to these unused tickets for travel prior to December 31, 2020. Accordingly, any revenue associated with these tickets will be recognized within the next 12 months. Given this change in contract duration and uncertainty surrounding the future demand for air travel, our estimates of revenue that will be recognized from the air traffic liability for future flown or unused tickets as well as our estimates of refunds may be subject to variability and differ from historical experience.

Various taxes and fees assessed on the sale of tickets to end customers are collected by us as an agent and remitted to taxing authorities. These taxes and fees have been presented on a net basis in the accompanying consolidated statements of operations and recorded as a liability until remitted to the appropriate taxing authority. The CARES Act provided for a temporary tax holiday from collecting and remitting certain government ticket taxes for tickets purchased between March 28, 2020 and December 31, 2020.

Loyalty ~~Program~~Revenue

We currently operate the loyalty program, AAdvantage. This program awards mileage credits to passengers who fly on American, any oneworld airline or other partner airlines, or by using the services of other program participants, such as the Citi and Barclaycard US co-branded credit cards, and certain hotels and car rental companies. Mileage credits can be redeemed for travel on American orand other participating partner ~~airlines.~~airlines, as well as other non-air travel awards such as hotels and rental cars. For mileage credits earned by AAdvantage loyalty program members, we apply the deferred revenue method. In response to the COVID-19 pandemic, we suspended the expiration of mileage credits through June 30, 2021 and eliminated mileage reinstatement fees for canceled award tickets.

~~Through December 31, 2017,~~Mileage credits earned through travel

For mileage credits earned through travel, we ~~used~~apply a relative selling price approach whereby the ~~incremental cost method to account for~~total amount collected from each passenger ticket sale is allocated between the air transportation and the mileage credits earned. The portion of ~~our loyalty program liability incurred when AAdvantage members earn~~each passenger ticket sale attributable to mileage credits ~~by flying on American, any~~ ~~oneworld airline or other partner airlines. We have an obligation to provide future travel~~earned is initially deferred and then recognized in passenger revenue when ~~these~~ mileage credits are redeemed and ~~therefore have recorded a liability for mileage credits outstanding.~~transportation is provided. The estimated selling price of

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mileage credits is ~~valued based on the estimated incremental cost~~determined using an equivalent ticket value approach, which uses historical data, including award redemption patterns by geographic region and class of ~~carrying one additional passenger. The estimated incremental cost primarily includes unit costs incurred for fuel, food and insurance~~service, as well as ~~fees incurred when travel awards are redeemed on partner airlines. In calculating the liability, we estimate how many mileage credits will never be redeemed~~similar fares as those used to settle award redemptions. The estimated selling price of miles is adjusted for ~~travel and exclude those mileage credits from the~~an estimate of the ~~liability. Estimates are also made for the number of~~ miles that will ~~be used per award redemption and the number of travel awards that will~~not be redeemed ~~on partner airlines. These costs and estimates are~~using statistical models based on historical redemption patterns to develop an estimate of the likelihood of future redemption. Given the inherent uncertainty of the current operating environment due to the COVID-19 pandemic, we will continue to monitor redemption patterns and may adjust our ~~historical program experience as well as consideration of enacted program changes, as applicable. Changes~~estimates in the ~~liability resulting from members earning additional mileage credits or changes in estimates are recorded~~future. For the year ended December 31, 2020, a hypothetical 10% increase in the ~~consolidated statements~~estimated selling price of ~~operations~~miles would have decreased revenues by approximately $40 million as a ~~part~~result of additional amounts deferred from passenger ~~revenue.~~ticket sales to be recognized in future periods.

~~As of December 31, 2017~~Mileage credits sold to co-branded credit cards and 2016, the liability for outstanding mileage credits accounted for under the incremental cost method was $677 million and $669 million, respectively, and is included on the consolidated balance sheets within loyalty program liability.

A change to certain estimates used in the calculation of incremental cost could have a material impact on the liability. A one percentage point increase or decrease in the percentage of travel awards redeemed on partner airlines would have an approximate $38 million impact on the liability as of December 31, 2017. A 10% increase or decrease in the assumed price per gallon of fuel would have an approximate $11 million impact on the liability as of December 31, 2017.other partners

We ~~also~~ sell ~~loyalty program~~ mileage credits to participating airline partners and non-airline business partners, ~~such as the Citi and Barclaycard US~~including our co-branded credit ~~cards.~~card partners, under contracts with terms extending generally for one to seven years. Consideration received from the sale of mileage credits is variable and payment terms typically are within 30 days subsequent to the month of mileage sale. Sales of mileage credits to non-airline business partners isare comprised of two components, transportation and marketing. We account for mileage sales under our agreements with non-airline business partners in accordance with Accounting Standards Update (ASU) 2009-13, “Revenue Recognition (Topic 605) –Multiple-Deliverable Revenue Arrangements.” In accordance with ASU 2009-13, we allocate the consideration received from ~~the sale~~these sales of mileage credits based on the relative selling price of each product or service delivered.

~~As a result of~~Our most significant partner agreements are our co-branded credit card ~~program~~ agreements with Citi and Barclaycard ~~US that we entered into in 2016, we~~US. We identified the following revenue elements in these co-branded credit card agreements: the transportation component; and the use of intellectual property, including the American brand ~~including~~and access to loyalty program member lists, which is the predominant element in the agreements, as well as advertising ~~and other travel related benefits~~ (collectively, the marketing component). Accordingly, we recognize the marketing component in other revenue in the period of the mileage sale following the sales-based royalty method.

The transportation component represents the estimated selling price of future travel awards and is determined using ~~historical transaction information, including information related~~the same equivalent ticket value approach described above. The portion of each mileage credit sold attributable to ~~customer redemption patterns. The~~ transportation ~~component~~ is initially deferred and then recognized in passenger revenue when mileage credits are redeemed and transportation is provided.

For the portion of our outstanding mileage credits that we estimate will not be redeemed, we recognize the associated value proportionally as the remaining mileage credits are redeemed. Our estimates use statistical models based on ~~its relative selling price and is amortized into passenger revenue on~~historical redemption patterns to develop an estimate of the likelihood of future redemption. For the year ended December 31, 2020, a ~~straight-line basis over the period~~hypothetical 10% increase in ~~which the mileage credits are~~our estimate of miles not expected to be redeemed ~~for travel. As of December 31, 2017 and 2016, we had $2.1 billion in deferred revenue from the sale of mileage credits recorded within loyalty program liability on our consolidated balance sheets.~~

A change to certain estimates used in the allocation of consideration received from the sale of mileage credits could have a material impact on the liability. A 10% increase or decrease in the relative selling price of the transportation component would have ~~an approximate $87 million impact on the liability as of December 31, 2017.~~

~~The services under the marketing component are provided periodically, but no less than monthly. Accordingly, the marketing component is considered earned and recognized in other~~increased revenues ~~in the period of the mileage sale. For the years ended December 31, 2017, 2016 and 2015, the marketing component of mileage sales and other marketing related payments included in other revenues was~~by approximately ~~$2.2 billion, $1.9 billion and $1.7 billion, respectively.~~

~~Effective January 1, 2018, we are adopting ASU 2014-09: Revenue from Contracts with Customers (Topic 606). See Recent Accounting Pronouncements below for further discussion.~~$35 million.

Long-lived Assets

Long-lived assets consist of owned flight and ground equipment, ~~as well as other fixed~~ROU assets and ~~finite-lived~~definite-lived intangible assets such as certain domestic airport slots and gate leasehold rights, customer relationships and marketing ~~agreements, tradenames and airport gate leasehold rights.~~agreements. In addition to the original cost, the recorded value of our fixed assets is impacted by a number of estimates made, including estimated useful lives, salvage values and our determination as to whether aircraft are temporarily or permanently grounded. Finite-lived intangible assets are originally recorded at their acquired fair values and are subsequently amortized over their estimated useful lives. See Note 1 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 1 to American’s Consolidated Financial Statements in Part II, Item 8B for further information.

We assess impairment on long-lived assets used in operations when events and circumstances indicate that the assets may be impaired. An asset or group of assets is considered impaired when the undiscounted cash flows estimated to be generated by the assets are less than the carrying amount of the assets and the net book value of the assets exceeds their estimated fair value. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Estimates of fair value represent management’s best estimate based on appraisals, industry trends and reference to market rates and transactions.

The majority of ~~American’s~~our aircraft fleet types are depreciated over 25-30 years. It is possible that the ultimate useful lives of our aircraft will be significantly different than the current estimate due to unforeseen events in the future that impact our fleet ~~plan,~~plan. Definite-lived intangible assets are originally recorded at their acquired fair values and are subsequently amortized over their estimated useful lives.

Accounting Standards Codification (ASC) 360 – Property, Plant and Equipment (ASC 360) requires long-lived assets to be assessed for impairment when events and circumstances indicate that the assets may be impaired. An impairment of a long-lived asset or group of long-lived assets exists only when the sum of the estimated undiscounted cash flows expected to be generated directly by the assets are less than the carrying value of the assets. We group assets principally by fleet-type when estimating future cash flows, which is generally the lowest level for which identifiable cash flows exist. Estimates of future cash flows are based on historical results adjusted to reflect management’s best estimate of future market and operating conditions, including ~~positive or negative developments~~our current fleet plan. If such assets are impaired, the impairment charge recognized is the amount by which the carrying value of the assets exceeds their fair value. Fair value reflects management’s best estimate including inputs from published pricing guides and bids from third parties as well as contracted sales agreements when applicable.

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In 2020, our operations, liquidity and stock price were significantly impacted by decreased passenger demand and government travel restrictions due to the COVID-19 pandemic. Additionally, we decided to retire certain mainline aircraft earlier than planned, including Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 aircraft as well as regional aircraft, including certain Embraer 140 and Bombardier CRJ200 aircraft. As a result of these events and circumstances, we performed impairment tests for our long-lived assets in the ~~areas described~~first three quarters of 2020.

As a result of the impairment tests performed on our long-lived assets, we determined the sum of the estimated undiscounted future cash flows exceeded the carrying value for our long-lived assets except for the aircraft being retired earlier than planned as discussed above. For ~~example,~~those aircraft and certain related spare parts, we recorded impairment charges reflecting the difference between the carrying values of these assets and their fair values of $1.5 billion for the year ended December 31, 2020. Due to the inherent uncertainties of the current operating ~~the~~environment, we will continue to evaluate our current fleet (including aircraft ~~for a longer period will result~~ in ~~higher maintenance, fuel~~temporary storage) and ~~other operating costs than if we replaced the~~may decide to permanently retire additional aircraft.

Goodwill and Indefinite-lived Assets

Goodwill represents the ~~excess of the~~ purchase price ~~over~~in excess of the fair value of the net assets acquired and liabilities ~~assumed. Goodwill is not amortized but assessed for impairment annually on October 1~~^st ~~or more frequently if events or circumstances indicate that goodwill may be impaired.~~assumed in connection with the merger with US Airways Group. We have one ~~consolidated~~ reporting unit.

Indefinite-lived intangible assets other than goodwill ~~include~~consist of certain domestic airport slots ~~at our hubs~~ and international slots and route authorities. ~~Indefinite-lived~~ASC 350 – Intangibles – Goodwill and Other (ASC 350) requires goodwill and indefinite-lived intangible assets ~~are not amortized but instead are~~to be assessed for impairment annually ~~on October 1~~^st or more frequently if events or circumstances indicate that the ~~asset~~fair values of goodwill and indefinite-lived intangible assets may be ~~impaired.~~lower than their carrying values. Our annual assessment date is October 1.

Goodwill and indefinite-lived intangible assets are assessed for impairment by initially performing a qualitative assessment. Under the qualitative approach, we analyze the following factors, among others, to determine if events ~~and~~or circumstances have affected the fair value of goodwill and indefinite-lived intangible assets: (1) negative trends in our market capitalization, (2) an increase in fuel prices, (3) declining per mile passenger yields, (4) lower passenger demand as a result of a weakened U.S. and global economy and (5) changes to the regulatory environment. If we determine that it is more likely than not that our goodwill or indefinite-lived intangible assets may be impaired, we use a quantitative approach to assess the asset’s fair value and the amount of the impairment, if any.

~~Based upon~~In addition to our annual impairment assessment, ~~there were no impairments of~~we performed interim impairment tests in 2020 on our goodwill and indefinite-lived intangible assets as a result of the events and circumstances previously discussed due to the impact of the COVID-19 pandemic on our business. For goodwill, we performed a quantitative analysis by using a market approach. Under the market approach, the fair value of the reporting unit was determined based on quoted market prices for equity and the fair value of debt as described in ~~2017.~~Note 9 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 7 to American’s Consolidated Financial Statements in Part II, Item 8B. The fair value exceeded the carrying value of the reporting unit, and our $4.1 billion of goodwill was not impaired.

We performed qualitative impairment tests on our $1.8 billion of indefinite-lived intangible assets and determined there was no material impairment.

As discussed above, due to the inherent uncertainties of the current operating environment, we will continue to evaluate our goodwill and indefinite-lived intangible assets for events or circumstances that indicate that their fair values may be lower than their carrying values.

Pensions and Retiree Medical and Other Postretirement Benefits

We recognize the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of our pension and retiree medical and other postretirement benefits plans in the consolidated balance sheets with a corresponding adjustment to accumulated other comprehensive income (loss).

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Our pension and retiree medical and other postretirement benefits costs and liabilities are calculated using various actuarial assumptions and methodologies. We use certain assumptions including, but not limited to, the selection of the: (1) discount ~~rate;~~rate and (2) expected return on plan ~~assets; (3) expected health care cost trend rate and (4) the estimated age of pilot retirement~~assets (as discussed below). These assumptions as of December 31 were:


	2020		2019
Pension weighted average discount rate (1)	2.7	%	3.4	%
Retiree medical and other postretirement benefits weighted average discount rate (1)	2.4	%	3.3	%
Expected rate of return on plan assets (2)	8.0	%	8.0	%

2017 2016
Pension weighted average discount rate ⁽¹⁾
3.80 % 4.30 %
Retiree medical and other postretirement benefits weighted average discount rate ⁽¹⁾
3.60 % 4.10 %
Expected rate of return on plan assets ⁽²⁾
8.00 % 8.00 %
Weighted average health care cost trend rate assumed for next year ⁽³⁾:

Initial 4.19 % 4.25 %
Ultimate (2025) 3.76 % 3.77 %
Pilot Retirement Age 62
62

(1)When establishing our discount rate to measure our obligations, we match high quality corporate bonds available in the marketplace whose cash flows approximate our projected benefit disbursements. Lowering the discount rate by 50 basis points as of December 31, 2020 would increase our pension and retiree medical and other postretirement benefits obligations by approximately $1.4 billion and $45 million, respectively, decrease estimated 2021 pension expense by approximately $15 million and increase estimated 2021 retiree medical and other postretirement benefits expense by less than $1 million.

⁽¹⁾

(2)The expected rate of return on plan assets is based upon an evaluation of our historical trends and experience, taking into account current and expected market conditions and our target asset allocation of 30% fixed income securities, 24% U.S. stocks, 22% alternative (private) investments, 16% developed international stocks and 8% emerging market stocks. The expected rate of return on plan assets component of our net periodic benefit cost is calculated based on the fair value of plan assets and our target asset allocation. Lowering the expected long-term rate of return on plan assets by 50 basis points as of December 31, 2020 would increase estimated 2021 pension expense and retiree medical and other postretirement benefits expense by approximately $70 million and $1 million, respectively.

When establishing our discount rate to measure our obligations, we match high quality corporate bonds available in the marketplace whose cash flows approximate our projected benefit disbursements. Lowering the discount rate by 50 basis points as of December 31, 2017 would increase our pension and retiree medical and other postretirement benefits obligations by approximately $1.3 billion and $46 million, respectively, and increase both estimated 2018 pension expense and estimated 2018 retiree medical and other postretirement benefits expense by less than $1 million.

⁽²⁾

The expected rate of return on plan assets is based upon an evaluation of our historical trends and experience, taking into account current and expected market conditions and our target asset allocation of 30% U.S. stocks, 22% developed international stocks, 20% long duration corporate and U.S. government/agency bonds, 20% alternative (private) investments and 8% emerging market stocks. The expected rate of return on plan assets component of our net periodic benefit cost is calculated based on the fair value of plan assets and our target asset allocation. Lowering the expected long-term rate of return on plan assets by 50 basis points as of December 31, 2017 would increase estimated 2018 pension expense and retiree medical and other postretirement benefits expense by approximately $57 million and $1 million, respectively.


⁽³⁾	The assumed health care cost trend rate is based upon an evaluation of our historical trends and experience, taking into account current and expected market conditions. Increasing the assumed health care cost trend rate by 100 basis points would increase estimated 2018 retiree medical and other postretirement benefits expense by $5 million.

During ~~2017,~~2020, we reviewed and revised certain economic and demographic assumptions including the pension and retiree medical and other postretirement benefits discount rates and health care cost ~~and~~ trend rates. The net effect of changing these assumptions for the pension plans resulted in an increase of ~~$1.2~~$1.7 billion in the projected benefit obligation at December 31, ~~2017.~~2020. The net effect of changing these assumptions for retiree medical and other postretirement benefits plans resulted in an increase of ~~$45~~$80 million in the ~~projected~~accumulated postretirement benefit obligation at December 31, ~~2017.~~2020. We also revised our mortality assumptions to incorporate the new ~~mortality~~ improvement scale issued by the Society of Actuaries. This resulted in a decrease in ~~the projected benefit obligations of~~ our pension and retiree medical and other postretirement ~~benefits plans of $114~~benefit obligations by $140 million and $8$1 million, respectively.

See Note 910 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 78 to American’s Consolidated Financial Statements in Part II, Item 8B for additional information regarding our employee benefit plans.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are recorded net as noncurrent deferred income taxes.

Our ability to use our NOL Carryforwards depends on the amount of taxable income generated in future periods. We provide a valuation allowance for our deferred tax assets when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized. ~~The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.~~ We consider all available positive and negative evidence and make certain assumptions in evaluating the realizability of our deferred tax assets. Many factors are considered that impact our assessment of future profitability, including conditions which are beyond our control, such as the health of the economy, the ~~level~~availability and price volatility of aircraft fuel ~~prices~~ and travel demand.

~~In connection with the preparation of our financial statements at the end of 2015, we determined that after considering all positive and negative evidence, including the completion of~~We presently have a $34 million valuation allowance on certain ~~critical Merger integration milestones as well as our financial performance, it was more likely than not that substantially all of our~~net deferred ~~income~~ tax assets ~~which include our NOLs, would~~related to state NOL Carryforwards. There can be ~~realized. Accordingly, we reversed $3.0 billion of the~~no assurance that an additional valuation allowance ason our net deferred tax assets will not be required. Such valuation allowance could be material.

Table of ~~December 31, 2015, which resulted in a special non-cash tax benefit recorded in the consolidated statement of operations for 2015.~~Contents

Recent Accounting Pronouncements

~~Standards Effective~~ASU 2016-13: Measurement of Credit Losses on Financial Instruments

This ASU requires the use of an expected loss model for ~~2018 Reporting Periods~~

~~Effective January 1, 2018, we are adopting the accounting pronouncements described below. The adoption~~certain types of financial instruments and ~~related required disclosures~~requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade receivables, loans and held-to-maturity debt securities, an estimate of lifetime expected credit losses is required. For available-for-sale debt securities, an allowance for credit losses will be ~~reported in our first quarter 2018 Quarterly Report on Form 10-Q.~~

~~ASU 2014-09: Revenue from Contracts with Customers (Topic 606) (the New Revenue Standard)~~

The New Revenue Standard applies to all companies that enter into contracts with customers to transfer goods or services. We are adopting the New Revenue Standard using the full retrospective method, which results in the recast of each prior reporting period presented.

The adoption of the New Revenue Standard will impact our accounting for outstanding mileage credits earned through travel by AAdvantage loyalty program members. There is no change in accounting for sales of mileage credits to co-branded card or other partners as those are currently reported in accordance with the New Revenue Standard. Through December 31, 2017, we used the incremental cost method to account for the portion of our loyalty program liability related to mileage credits earned through travel, which were valued based on the estimated incremental cost of carrying one additional passenger (see Loyalty Program above). The New Revenue Standard requires us to change our policyrequired rather than a reduction to the deferred revenue method and apply a relative selling price approach whereby a portion of each passenger ticket sale attributable to mileage credits earned is deferred and recognized in passenger revenue upon future mileage redemption. Thecarrying value of the ~~earned mileage credits is materially greater under the deferred revenue method than the value attributed to these mileage credits under the incremental cost method.~~

The New Revenue Standard will also require certain reclassifications, principally the reclassification of certain ancillary revenues previously classified and reported as other revenue to passenger revenue and as applicable to cargo revenue. Additionally, the New Revenue Standard requires a gross presentation on the face of our statement of operations for certain revenues and expenses that had previously been presented on a net basis.

~~See recast 2017 statement of operations and balance sheet data presented below for the expected effects of adoption.~~

~~ASU 2017-07: Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (the New Retirement Standard)~~

The New Retirement Standard requires all components of our net periodic benefit cost (income), with the exception of service cost, previously reported within operating expenses as salaries, wages and benefits, to be reclassified and reported within nonoperating income (expense). The New Retirement Standard is required to be applied retrospectively, which results in the recast of each prior reporting period presented. The adoption of the New Retirement Standard has no impact on pre-tax income or net income reported. See recast 2017 statement of operations data presented below for the expected effects of adoption.

~~ASU 2016-01: Financial Instruments - Overall (Subtopic 825-10)~~

This ASU makes several modifications to Subtopic 825-10, including the elimination of the available-for-sale classification of equity investments, and it requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. Thisasset. We adopted this accounting standard ~~is applied~~ prospectively as of ~~the beginning of the year of adoption. The adoption of this standard is~~January 1, 2020, and it did not ~~expected to~~ have a material impact on our consolidated financial statements.

ASU ~~2016-18: Statement of Cash Flows (Topic 230): Restricted Cash~~

~~This ASU requires that the change in total cash, cash at beginning of period~~2020-06: Accounting for Convertible Instruments and cash at end of period on the statement of cash flows include restricted cash and restricted cash equivalents and also requires companies who report cash and restricted cash separately on the balance sheet to reconcile those amounts to the statement of cash flows. This standard is required to be applied retrospectively, which results in the recast of each prior reporting period statement of cash flows presented. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

~~Impacts to 2017 Results~~

~~The expected effects of adoption of the New Revenue Standard and New Retirement Standard to our statement of operations for the twelve months ended December 31, 2017 are as follows:~~

New Revenue Standard New Retirement Standard
As Reported Deferred Revenue Method Reclassifications Reclassifications As Recast
Operating revenues:
    Passenger $ 36,133
$ 311
$ 2,687
$ —
$ 39,131
    Cargo 800
—
90
—
890
    Other 5,274
—
(2,673 ) —
2,601
    Total operating revenues 42,207
311
104
—
42,622
    Total operating expenses 38,149
—
104
138
38,391
Operating income 4,058
311
—
(138 ) 4,231
    Total nonoperating expense, net (974 ) —
—
138
(836 )
Income before income taxes 3,084
311
—
—
3,395
Income tax provision ⁽¹⁾
1,165
948
—
—
2,113
Net income $ 1,919
$ (637 ) $ —
$ —
$ 1,282
Diluted earnings per common share $ 3.90
$ 2.61


⁽¹⁾	The adjustment to the 2017 income tax provision includes an $830 million special charge to reduce our deferred tax asset associated with loyalty program liabilities as a result of the 2017 Tax Act enacted in December 2017 that reduced the federal corporate income tax rate from 35% to 21%.

~~The expected effects of adoption of the New Revenue Standard to our December 31, 2017 balance sheet are as follows:~~

As Reported New Revenue Standard As Recast
Deferred tax asset $ 427
$ 1,389
$ 1,816
Air traffic liability 3,978
64
4,042
Current loyalty program liability 2,791
384
3,175
Noncurrent loyalty program liability —
5,647
5,647
Total stockholders’ equity (deficit) 3,926
(4,706 ) (780 )

~~Standards Effective for 2019 Reporting Periods~~

~~ASU 2016-02: Leases (Topic 842)~~Contracts In An Entity's Own Equity (the New ~~Lease~~Convertible Debt Standard)

The New ~~Lease~~Convertible Debt Standard ~~requires lessees to recognize~~simplifies the accounting for certain convertible instruments by removing the separation models for convertible debt with a ~~lease~~cash conversion feature and for convertible instruments with a beneficial conversion feature. As a result, more convertible debt instruments will be reported as a single liability ~~and a right-of-use asset on~~instrument with no separate accounting for embedded conversion features. Additionally, the ~~balance sheet and aligns many~~New Convertible Debt Standard amends the diluted earnings per share calculation for convertible instruments by requiring the use of the ~~underlying principles of the new lessor model with those in~~if-converted method. The treasury stock method is no longer available. Entities may adopt the New ~~Revenue Standard. The New Lease~~Convertible Debt Standard using either a full or modified retrospective approach, and it is effective for ~~fiscal years~~interim and annual reporting periods beginning after December 15, ~~2018, including interim periods within those fiscal years.~~2021. Early adoption is ~~permitted.~~permitted for interim and annual reporting periods beginning after December 15, 2020. The New Convertible Debt Standard is applicable to our 6.50% convertible senior notes due 2025. We ~~expect we will adopt~~early adopted the New ~~Lease~~Convertible Debt Standard ~~effective~~as of January 1, ~~2019. Entities are required to adopt~~2021 using the ~~New Lease Standard using a~~ modified retrospective ~~approach, which results in~~method to recognize our 6.50% convertible senior notes as a single liability instrument. As of January 1, 2021, we recorded a $415 million ($320 million net of tax) reduction to additional paid-in capital to remove the recast of each prior reporting period presented, for all leases existing at or commencing after the date of initial application with an option to use certain practical expedients. We are currently evaluating how the adoptionequity component of the ~~New Lease Standard will impact~~6.50% convertible senior notes from our ~~consolidated financial statements. Interpretations are on-going~~balance sheet and ~~could have~~ a ~~material impact~~$19 million cumulative effect adjustment credit, net of tax, to retained deficit related to non-cash debt discount amortization recognized in periods prior to adoption resulting in a corresponding reduction of $389 million to the debt discount associated with the 6.50% convertible senior notes. See Note 5(h) to AAG’s Consolidated Financial Statements in Part II, Item 8A for additional information on our implementation. Currently, we expect that the adoption of the New Lease Standard will have a material impact on our consolidated balance sheet due to the recognition of right-of-use assets and lease liabilities principally for certain leases currently accounted for as operating leases.6.50% convertible senior notes.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The risk inherent in our market risk sensitive instruments and positions is the potential loss arising from adverse changes in the price of fuel, foreign currency exchange rates and interest rates as discussed below. The sensitivity analyses presented do not consider the effects that such adverse changes may have on overall economic activity, nor do they consider additional actions we may take to mitigate our exposure to such changes. Therefore, actual results may differ. See Note 78 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 56 to American’s Consolidated Financial Statements in Part II, Item 8B for additional discussion regarding risk management matters.

Aircraft Fuel

Our operating results are materially impacted by changes in the availability, price volatility and cost of aircraft fuel, which represents one of the largest single cost items in our business. Because of the amount of fuel needed to operate our ~~airlines,~~business, even a relatively small increase or decrease in the price of aircraft fuel can have a material effect on our ~~costs~~operating results and liquidity. ~~Jet~~Market prices for aircraft fuel ~~market prices have fluctuated substantially over the past several years~~can be volatile, with market spot prices ranging from a low of approximately ~~$0.80~~$0.37 per gallon to a high of approximately ~~$2.00~~$2.35 per gallon during the period from January 1, ~~2015~~2018 to December 31, ~~2017.~~2020.

As of December 31, ~~2017,~~2020, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption. We do not currently view the market opportunities to hedge fuel prices as attractive because, among other things, our future fuel needs remain unclear due to uncertainties regarding air travel demand and any hedging would potentially require significant capital or collateral to be placed at risk. As such, and assuming we do not enter into any future transactions to hedge our fuel consumption, we will continue to be fully exposed to fluctuations in fuel prices. Our current policy is not to enter into transactions to hedge our fuel consumption, although we review that policy from time to time based on market conditions and other factors. Based on our ~~2018~~2021 forecasted ~~mainline and regional~~ fuel consumption, we estimate that a one cent per gallon increase in ~~aviation~~the price of aircraft fuel ~~price~~ would increase our ~~2018~~2021 annual fuel expense by ~~$45~~$38 million.

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Foreign Currency

We are exposed to the effect of foreign exchange rate fluctuations on the U.S. dollar value of foreign currency-denominated ~~operating revenues and expenses.~~transactions. Our largest exposure comes from the British pound sterling, Euro, Canadian dollar and various Latin American currencies, primarily the Brazilian real. We do not currently have a foreign currency hedge program. AWe estimate a uniform 10% strengthening in the value of the U.S. dollar from ~~2017~~2020 levels relative to each of the currencies in which we have foreign currency exposure would have resulted in a decrease in ~~operating~~pre-tax income of approximately ~~$203~~$56 million for the year ended December 31, ~~2017.~~2020.

Generally, fluctuations in foreign currencies, including devaluations, cannot be predicted by us and can significantly affect the value of our assets located outside the United States. These conditions, as well as any further delays, devaluations or imposition of more stringent repatriation restrictions, may materially adversely affect our business, results of operations and financial condition. See Part I, Item 1A. Risk Factors –“We operate a global business with international operations that are subject to economic and political instability and have been, and in the future may continue to be, adversely affected by numerous events, circumstances or government actions beyond our control” for additional discussion of this and other currency risks.

Interest

Our earnings and cash flow are ~~also~~ affected by changes in interest rates due to the impact those changes have on our interest expense from ~~variable rate~~variable-rate debt instruments and our interest income from short-term, interest-bearing investments.

Our largest exposure with respect to ~~variable rate~~variable-rate debt comes from changes in LIBOR. We had ~~variable rate~~variable-rate debt instruments representing approximately 40% of our total long-term debt at December 31, ~~2017.~~2020. We currently do not have an interest rate hedge ~~program.~~program to hedge our exposure to floating interest rates on our variable-rate debt obligations. If annual interest rates increase 100 basis points, based on our December 31, ~~2017~~2020 variable-rate debt and short-term investments balances, annual interest expense on ~~variable rate~~variable-rate debt would increase by approximately ~~$95~~$130 million and annual interest income on short-term investments would increase by approximately ~~$51~~$70 million. Additionally, the fair value of fixed-rate debt would have decreased by approximately ~~$691~~$590 million for AAG and ~~$664~~$450 million for American.

On July 27, 2017, the U.K. Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The discontinuation date for submission and publication of rates for certain tenors of USD LIBOR (1-month, 3-month, 6-month, and 12-month) is currently under consultation by the ICE Benchmark Administration (the administrator of LIBOR) and may be extended until June 30, 2023. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become acceptable alternatives to LIBOR, or what effect these changes in views or alternatives may have on financial markets for LIBOR-linked financial instruments. While the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, has chosen SOFR as the recommended risk-free reference rate for the U.S. (calculated based on repurchase agreements backed by treasury securities), we cannot currently predict the extent to which this index will gain widespread acceptance as a replacement for LIBOR. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere.

We may in the future pursue amendments to our LIBOR-based debt transactions to provide for a transaction mechanism or other reference rate in anticipation of LIBOR’s discontinuation, but we may not be able to reach agreement with our lenders on any such amendments. As of December 31, 2020, we had $12.8 billion of borrowings based on LIBOR. The replacement of LIBOR with a comparable or successor rate could cause the amount of interest payable on our long-term debt to be different or higher than expected.

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ITEM 8A. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OF AMERICAN AIRLINES GROUP INC.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

American Airlines Group Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of American Airlines Group Inc. and subsidiaries (the Company) as of December 31, ~~2017~~2020 and ~~2016,~~2019, the related consolidated statements of operations, comprehensive income (loss), cash flows, and stockholders’ equity (deficit) for each of the years in the three-year period ended December 31, ~~2017,~~2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017~~2020 and ~~2016,~~2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, ~~2017,~~2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February ~~21, 2018~~17, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Estimate of mileage credits not expected to be redeemed

As discussed in Note 1(l) to the consolidated financial statements, the Company’s loyalty program awards mileage credits to passengers for flights on the Company’s airline, flights on partner airlines, or for using the services of other program participants. The Company accounts for such mileage credits earned using the deferred revenue method, which includes an estimate for mileage credits not expected to be redeemed. The Company’s loyalty program liability was $9.2 billion as of December 31, 2020 and the associated passenger revenue for mileage credits redeemed for travel was $1.1 billion for the year ended December 31, 2020.

We identified the assessment of the estimated number of mileage credits not expected to be redeemed as a critical audit matter. A high degree of auditor judgment was required to evaluate the applicability of historical data used to develop the estimate.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s loyalty program accounting process, including controls related to the estimation of mileage credits not expected to be redeemed. We assessed the Company’s methodology used to evaluate this estimate and determined it was consistent with historical periods. We developed an independent expectation of mileage credits not expected to be redeemed, which included consideration of industry and historical information. We compared the results of our independent expectation to the Company’s recorded amount of loyalty program liability and the associated passenger revenue.

Sufficiency of audit evidence over realizability of operating loss carryforwards

As discussed in Notes 1(i) and 7 to the consolidated financial statements, the Company had $4.0 billion of operating loss carryforwards, which are recorded as deferred tax assets at December 31, 2020. Deferred tax assets are recognized related to operating loss carryforwards that will reduce future taxable income. The Company provides a valuation allowance for deferred tax assets when it is more likely than not that some portion, or all the deferred tax assets, will not be realized. In evaluating the need for a valuation allowance, management considers the weighting of all available positive and negative evidence, which includes, among other things, the nature, frequency and severity of current and cumulative taxable income or losses, as well as future projections of profitability.

We identified the evaluation of the sufficiency of audit evidence over the realizability of operating loss carryforwards as a critical audit matter. Evaluating the sufficiency of audit evidence required subjective auditor judgment, and the involvement of tax professionals in order to assess the nature and extent of procedures performed in assessing the realizability of the operating loss carryforwards.

The following are the primary procedures we performed to address this critical audit matter. We performed risk assessment procedures and applied auditor judgment to determine the nature and extent of procedures to be performed over the income tax accounts and disclosures. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s deferred tax asset valuation allowance process, including controls related to the realizability of operating loss carryforwards. We evaluated positive and negative evidence used in assessing whether the deferred tax assets were more-likely-than-not to be realized in the future, including evaluating the nature, frequency and severity of current and cumulative taxable income or losses, as well as future projections of profitability. We evaluated the reasonableness of management’s future projections of profitability considering (i) historical profitability of the Company, (ii) consistency with industry data and economic trends, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. We involved tax professionals who assisted in the evaluation of the nature, frequency and severity of current and cumulative taxable income or losses. Further, we assessed the sufficiency of audit evidence obtained over the realizability of the operating loss carryforwards by evaluating the cumulative results of the audit procedures, qualitative aspects of the Company’s accounting practices, and potential bias in the accounting estimate.

/s/ KPMG LLP

We have served as the Company’s auditor since 2014.

Dallas, Texas

February ~~21, 2018~~

17, 2021

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AMERICAN AIRLINES GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except ~~shares~~share and per share amounts)


	Year Ended December 31,										Year Ended December 31,
	2017			2016			2015				2020		2019		2018
Operating revenues:										Operating revenues:
Mainline passenger	$	29,238		$	27,909		$	29,037
Regional passenger	6,895			6,670			6,475
Passenger										Passenger	$	14,518	$	42,010	$	40,676
Cargo	800			700			760			Cargo	769		863		1,013
Other	5,274			4,901			4,718			Other	2,050		2,895		2,852
Total operating revenues	42,207			40,180			40,990			Total operating revenues	17,337		45,768		44,541
Operating expenses:										Operating expenses:
Aircraft fuel and related taxes	6,128			5,071			6,226			Aircraft fuel and related taxes	2,581		7,526		8,053
Salaries, wages and benefits	11,816			10,890			9,524			Salaries, wages and benefits	10,960		12,609		12,251
Regional expenses	6,546			6,044			5,983			Regional expenses	4,892		7,501		7,133
Maintenance, materials and repairs	1,959			1,834			1,889			Maintenance, materials and repairs	1,583		2,380		2,050
Other rent and landing fees	1,806			1,772			1,731			Other rent and landing fees	1,536		2,055		1,900
Aircraft rent	1,197			1,203			1,250			Aircraft rent	1,341		1,326		1,264
Selling expenses	1,477			1,323			1,394			Selling expenses	513		1,602		1,520
Depreciation and amortization	1,702			1,525			1,364			Depreciation and amortization	2,040		1,982		1,839
Special items, net	712			709			1,051			Special items, net	(657)		635		787
Other	4,806			4,525			4,374			Other	2,969		5,087		5,088
Total operating expenses	38,149			34,896			34,786			Total operating expenses	27,758		42,703		41,885
Operating income	4,058			5,284			6,204
Operating income (loss)										Operating income (loss)	(10,421)		3,065		2,656
Nonoperating income (expense):										Nonoperating income (expense):
Interest income	94			63			39			Interest income	41		127		118
Interest expense, net	(1,053		)	(991		)	(880		)	Interest expense, net	(1,227)		(1,095)		(1,056)
Other, net	(15		)	(57		)	(747		)
Other income, net										Other income, net	154		159		166
Total nonoperating expense, net	(974		)	(985		)	(1,588		)	Total nonoperating expense, net	(1,032)		(809)		(772)
Income before income taxes	3,084			4,299			4,616
Income (loss) before income taxes										Income (loss) before income taxes	(11,453)		2,256		1,884
Income tax provision (benefit)	1,165			1,623			(2,994		)	Income tax provision (benefit)	(2,568)		570		472
Net income	$	1,919		$	2,676		$	7,610
Net income (loss)										Net income (loss)	$	(8,885)	$	1,686	$	1,412

Earnings per common share:
Earnings (loss) per common share:										Earnings (loss) per common share:
Basic	$	3.92		$	4.85		$	11.39		Basic	$	(18.36)	$	3.80	$	3.04
Diluted	$	3.90		$	4.81		$	11.07		Diluted	$	(18.36)	$	3.79	$	3.03
Weighted average shares outstanding (in thousands):										Weighted average shares outstanding (in thousands):
Basic	489,164			552,308			668,393			Basic	483,888		443,363		464,236
Diluted	491,692			556,099			687,355			Diluted	483,888		444,269		465,660
Cash dividends declared per common share	$	0.40		$	0.40		$	0.40		Cash dividends declared per common share	$	0.10	$	0.40	$	0.40

See accompanying notes to consolidated financial statements.

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AMERICAN AIRLINES GROUP INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

Year Ended December 31,
2017 2016 2015
Net income $ 1,919
$ 2,676
$ 7,610
Other comprehensive income (loss), net of tax:
Pension, retiree medical and other postretirement benefits:
Amortization of actuarial loss and prior service cost (55 ) (65 ) (108 )
Current year change (15 ) (293 ) (51 )
Investments and derivative financial instruments (1 ) 7
(14 )
Total other comprehensive loss, net of tax (71 ) (351 ) (173 )
Total comprehensive income $ 1,848
$ 2,325
$ 7,437


	Year Ended December 31,
	2020		2019		2018
Net income (loss)	$	(8,885)	$	1,686	$	1,412
Other comprehensive income (loss), net of tax:
Pension, retiree medical and other postretirement benefits	(772)		(438)		(117)


Investments	0		3		(3)
Total other comprehensive loss, net of tax	(772)		(435)		(120)
Total comprehensive income (loss)	$	(9,657)	$	1,251	$	1,292

See accompanying notes to consolidated financial statements.

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AMERICAN AIRLINES GROUP INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except ~~shares~~share and par value)


	December 31,							December 31,
	2017			2016				2020		2019
ASSETS							ASSETS
Current assets							Current assets
Cash	$	295		$	322		Cash	$	245	$	280
Short-term investments	4,771			6,037			Short-term investments	6,619		3,546
Restricted cash and short-term investments	318			638			Restricted cash and short-term investments	609		158
Accounts receivable, net	1,752			1,594			Accounts receivable, net	1,342		1,750
Aircraft fuel, spare parts and supplies, net	1,359			1,094			Aircraft fuel, spare parts and supplies, net	1,614		1,851
Prepaid expenses and other	651			639			Prepaid expenses and other	666		621
Total current assets	9,146			10,324			Total current assets	11,095		8,206
Operating property and equipment							Operating property and equipment
Flight equipment	40,318			37,028			Flight equipment	37,816		42,537
Ground property and equipment	8,267			7,116			Ground property and equipment	9,194		9,443
Equipment purchase deposits	1,217			1,209			Equipment purchase deposits	1,446		1,674
Total property and equipment, at cost	49,802			45,353			Total property and equipment, at cost	48,456		53,654
Less accumulated depreciation and amortization	(15,646		)	(14,194		)	Less accumulated depreciation and amortization	(16,757)		(18,659)
Total property and equipment, net	34,156			31,159			Total property and equipment, net	31,699		34,995
Operating lease right-of-use assets							Operating lease right-of-use assets	8,039		8,737
Other assets							Other assets
Goodwill	4,091			4,091			Goodwill	4,091		4,091
Intangibles, net of accumulated amortization of $622 and $578, respectively	2,203			2,173
Intangibles, net of accumulated amortization of $745 and $704, respectively							Intangibles, net of accumulated amortization of $745 and $704, respectively	2,029		2,084
Deferred tax asset	427			1,498			Deferred tax asset	3,239		645
Other assets	1,373			2,029			Other assets	1,816		1,237
Total other assets	8,094			9,791			Total other assets	11,175		8,057
Total assets	$	51,396		$	51,274		Total assets	$	62,008	$	59,995

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)							LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities							Current liabilities
Current maturities of long-term debt and capital leases	$	2,554		$	1,855
Current maturities of long-term debt and finance leases							Current maturities of long-term debt and finance leases	$	2,797	$	2,861
Accounts payable	1,688			1,592			Accounts payable	1,196		2,062
Accrued salaries and wages	1,672			1,516			Accrued salaries and wages	1,716		1,541
Air traffic liability	3,978			3,912			Air traffic liability	4,757		4,808
Loyalty program liability	2,791			2,789			Loyalty program liability	2,033		3,193
Operating lease liabilities							Operating lease liabilities	1,651		1,708
Other accrued liabilities	2,281			2,208			Other accrued liabilities	2,419		2,138
Total current liabilities	14,964			13,872			Total current liabilities	16,569		18,311
Noncurrent liabilities							Noncurrent liabilities
Long-term debt and capital leases, net of current maturities	22,511			22,489
Long-term debt and finance leases, net of current maturities							Long-term debt and finance leases, net of current maturities	29,796		21,454
Pension and postretirement benefits	7,497			7,842			Pension and postretirement benefits	7,069		6,052
Loyalty program liability							Loyalty program liability	7,162		5,422
Operating lease liabilities							Operating lease liabilities	6,777		7,421
Other liabilities	2,498			3,286			Other liabilities	1,502		1,453
Total noncurrent liabilities	32,506			33,617			Total noncurrent liabilities	52,306		41,802
Commitments and contingencies (Note 11)
Stockholders’ equity
Common stock, $0.01 par value; 1,750,000,000 shares authorized, 475,507,887 shares issued and outstanding at December 31, 2017; 507,294,153 shares issued and outstanding at December 31, 2016	5			5
Commitments and contingencies (Note 12)							Commitments and contingencies (Note 12)
Stockholders' equity (deficit)							Stockholders' equity (deficit)
Common stock, $0.01 par value; 1,750,000,000 shares authorized, 621,479,522 shares issued and outstanding at December 31, 2020; 428,202,506 shares issued and outstanding at December 31, 2019							Common stock, $0.01 par value; 1,750,000,000 shares authorized, 621,479,522 shares issued and outstanding at December 31, 2020; 428,202,506 shares issued and outstanding at December 31, 2019	6		4
Additional paid-in capital	5,714			7,223			Additional paid-in capital	6,894		3,945
Accumulated other comprehensive loss	(5,154		)	(5,083		)	Accumulated other comprehensive loss	(7,103)		(6,331)
Retained earnings	3,361			1,640
Total stockholders’ equity	3,926			3,785
Total liabilities and stockholders’ equity	$	51,396		$	51,274
Retained earnings (deficit)							Retained earnings (deficit)	(6,664)		2,264
Total stockholders' deficit							Total stockholders' deficit	(6,867)		(118)
Total liabilities and stockholders’ equity (deficit)							Total liabilities and stockholders’ equity (deficit)	$	62,008	$	59,995

See accompanying notes to consolidated financial statements.

Table of Contents

AMERICAN AIRLINES GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)


	Year Ended December 31,
	2020		2019		2018
Cash flows from operating activities:
Net income (loss)	$	(8,885)	$	1,686	$	1,412
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	2,370		2,318		2,159
Net gains from sale of property and equipment and sale-leaseback transactions	(95)		(112)		(59)
Special items, net non-cash	1,599		376		458
Pension and postretirement	(319)		(178)		(300)
Deferred income tax provision (benefit)	(2,568)		560		440
Share-based compensation	91		94		86
Other, net	47		(62)		(97)
Changes in operating assets and liabilities:
Decrease in accounts receivable	538		73		222
Increase in other assets	(38)		(373)		(390)
Increase (decrease) in accounts payable and accrued liabilities	(626)		327		(147)
Increase (decrease) in air traffic liability	(51)		469		297
Increase (decrease) in loyalty program liability	580		76		(283)
Contributions to pension plans	(9)		(1,230)		(475)
Increase (decrease) in other liabilities	823		(209)		210
Net cash provided by (used in) operating activities	(6,543)		3,815		3,533
Cash flows from investing activities:
Capital expenditures and aircraft purchase deposits	(1,958)		(4,268)		(3,745)
Proceeds from sale-leaseback transactions	665		850		1,096
Proceeds from sale of property and equipment	351		54		111
Purchases of short-term investments	(5,873)		(3,184)		(3,412)
Sales of short-term investments	2,803		4,144		3,705
Proceeds from vendor	90		250		0
Decrease (increase) in restricted short-term investments	(308)		(3)		72
Proceeds from sale of investments	41		0		207


Other investing activities	(153)		(86)		(7)
Net cash used in investing activities	(4,342)		(2,243)		(1,973)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	11,780		3,960		2,354
Payments on long-term debt and finance leases	(3,535)		(4,190)		(2,941)
Proceeds from issuance of equity	2,970		0		0
Deferred financing costs	(93)		(61)		(59)
Treasury stock repurchases and shares withheld for taxes pursuant to employee stock plans	(173)		(1,097)		(837)
Dividend payments	(43)		(178)		(186)
Other financing activities	88		(2)		(3)
Net cash provided by (used in) financing activities	10,994		(1,568)		(1,672)
Net increase (decrease) in cash and restricted cash	109		4		(112)
Cash and restricted cash at beginning of year	290		286		398
Cash and restricted cash at end of year (a)	$	399	$	290	$	286

December 31,
2017 2016 2015
Cash flows from operating activities:
Net income $ 1,919
$ 2,676
$ 7,610
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 2,017
1,818
1,609
Deferred income tax provision (benefit) 1,141
1,611
(3,014 )
Debt discount and lease amortization (114 ) (119 ) (122 )
Special items, non-cash 272
270
273
Pension and postretirement (132 ) (68 ) (193 )
Share-based compensation 90
100
284
Other, net (39 ) (18 ) (12 )
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (190 ) (160 ) 352
Increase in other assets (433 ) (184 ) (27 )
Increase in accounts payable and accrued liabilities 299
307
173
Increase (decrease) in air traffic liability 66
164
(505 )
Increase (decrease) in loyalty program liability 2
264
(295 )
Contributions to pension plans (286 ) (32 ) (6 )
Increase (decrease) in other liabilities 132
(105 ) 122
Net cash provided by operating activities 4,744
6,524
6,249
Cash flows from investing activities:
Capital expenditures and aircraft purchase deposits (5,971 ) (5,731 ) (6,151 )
Proceeds from sale of property and equipment and sale-leaseback transactions 947
125
35
Purchases of short-term investments (4,633 ) (6,241 ) (8,126 )
Sales of short-term investments 5,915
6,092
8,517
Decrease in restricted cash and short-term investments 319
57
79
Purchase of equity investment (203 ) —
—
Proceeds from sale of an investment —
—
52
Net cash used in investing activities (3,626 ) (5,698 ) (5,594 )
Cash flows from financing activities:
Proceeds from issuance of long-term debt 3,058
7,701
5,009
Payments on long-term debt and capital leases (2,332 ) (3,827 ) (2,153 )
Deferred financing costs (85 ) (77 ) (87 )
Treasury stock repurchases (1,615 ) (4,500 ) (3,846 )
Dividend payments (198 ) (224 ) (278 )
Other financing activities 27
33
96
Net cash used in financing activities (1,145 ) (894 ) (1,259 )
Net decrease in cash (27 ) (68 ) (604 )
Cash at beginning of year 322
390
994
Cash at end of year $ 295
$ 322
$ 390

(a) The following table provides a reconciliation of cash and restricted cash to amounts reported within the consolidated balance sheets:


Cash	$	245	$	280	$	275
Restricted cash included in restricted cash and short-term investments	154		10		11
Total cash and restricted cash	$	399	$	290	$	286

See accompanying notes to consolidated financial statements.

Table of Contents

AMERICAN AIRLINES GROUP INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In millions, except share amounts)

Common
Stock

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Income (Loss)

Retained
Earnings
(Deficit)
Total
Balance at December 31, 2014 $ 7
$ 15,135
$ (4,559 ) $ (8,562 ) $ 2,021
Net income —
—
—
7,610
7,610
Changes in pension, retiree medical and other postretirement benefits liability —
—
(159 ) —
(159 )
Net changes in fair value of derivative financial instruments —
—
(9 ) —
(9 )
Cash tax withholding on shares issued —
(306 ) —
—
(306 )
Purchase and retirement of 85,141,691 shares of AAG common stock (1 ) (3,585 ) —
—
(3,586 )
Dividends declared on common stock ($0.40 per share) —
—
—
(278 ) (278 )
Issuance of 12,289,537 shares of common stock pursuant to employee stock plans —
—
—
—
—
Settlement of single-dip unsecured claims held in distributed claims reserve —
63
—
—
63
Share-based compensation expense —
284
—
—
284
Change in unrealized loss on investments —
—
(5 ) —
(5 )
Balance at December 31, 2015 6
11,591
(4,732 ) (1,230 ) 5,635
Net income —
—
—
2,676
2,676
Changes in pension, retiree medical and other postretirement benefits liability —
—
(564 ) —
(564 )
Non-cash tax benefit —
—
203
—
203
Cash tax withholding on shares issued —
(56 ) —
—
(56 )
Purchase and retirement of 119,823,621 shares of AAG common stock (1 ) (4,415 ) —
—
(4,416 )
Dividends declared on common stock ($0.40 per share) —
—
—
(224 ) (224 )
Issuance of 2,506,067 shares of common stock pursuant to employee stock plans —
—
—
—
—
Settlement of single-dip unsecured claims held in distributed claims reserve —
3
—
—
3
Share-based compensation expense —
100
—
—
100
Impact of adoption of Accounting Standards Update (ASU) 2016-09 related to share-based compensation (See Note 14) —
—
—
418
418
Change in unrealized loss on investments —
—
10
—
10
Balance at December 31, 2016 5
7,223
(5,083 ) 1,640
3,785
Net income —
—
—
1,919
1,919
Changes in pension, retiree medical and other postretirement benefits liability —
—
(117 ) —
(117 )
Non-cash tax benefit —
—
47
—
47
Cash tax withholding on shares issued —
(51 ) —
—
(51 )
Purchase and retirement of 33,953,127 shares of AAG common stock —
(1,563 ) —
—
(1,563 )
Dividends declared on common stock ($0.40 per share) —
—
—
(198 ) (198 )
Issuance of 2,166,861 shares of common stock pursuant to employee stock plans —
—
—
—
—
Settlement of single-dip unsecured claims held in distributed claims reserve —
15
—
—
15
Share-based compensation expense —
90
—
—
90
Change in unrealized loss on investments —
—
(1 ) —
(1 )
Balance at December 31, 2017 $ 5
$ 5,714
$ (5,154 ) $ 3,361
$ 3,926


	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings (Deficit)		Total
Balance at December 31, 2017	$	5	$	5,714	$	(5,776)	$	(723)	$	(780)
Net income	—		—		—		1,412		1,412
Other comprehensive loss, net	—		—		(120)		—		(120)
Issuance of 1,709,140 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes	—		(37)		—		—		(37)
Purchase and retirement of 16,606,157 shares of AAG common stock	0		(799)		—		—		(799)
Dividends declared on AAG common stock ($0.40 per share)	—		—		—		(188)		(188)
Share-based compensation expense	—		86		—		—		86
Impact of adoption of Accounting Standards Update (ASU) 2016-01 related to financial instruments	—		—		—		60		60
Impact of adoption of ASU 2016-02 related to leases	—		—		—		197		197
Balance at December 31, 2018	5		4,964		(5,896)		758		(169)
Net income	—		—		—		1,686		1,686
Other comprehensive loss, net	—		—		(435)		—		(435)
Issuance of 1,682,202 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes	—		(25)		—		—		(25)
Purchase and retirement of 34,090,566 shares of AAG common stock	(1)		(1,095)		—		—		(1,096)
Dividends declared on AAG common stock ($0.40 per share)	—		—		—		(180)		(180)
Settlement of single-dip unsecured claims held in Disputed Claims Reserve	—		7		—		—		7
Share-based compensation expense	—		94		—		—		94
Balance at December 31, 2019	4		3,945		(6,331)		2,264		(118)
Net loss	—		—		—		(8,885)		(8,885)
Other comprehensive loss, net	—		—		(772)		—		(772)
Issuance of PSP1 Warrants (see Note 1(b))	—		63		—		—		63
Issuance of Treasury Loan Warrants (see Note 1(b))	—		25		—		—		25
Issuance of 1,603,554 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes	—		(15)		—		—		(15)
Issuance of 129,490,000 shares of AAG common stock pursuant to public stock offerings, net of offering costs	1		1,686		—		—		1,687
Issuance of 68,561,487 shares of AAG common stock pursuant to an at-the-market offering, net of offering costs	1		868		—		—		869

Equity component of convertible debt issued, net of tax and offering costs	—		320		—		—		320
Purchase and retirement of 6,378,025 shares of AAG common stock	0		(145)		—		—		(145)
Dividends declared on AAG common stock ($0.10 per share)	—		—		—		(43)		(43)
Settlement of single-dip unsecured claims held in Disputed Claims Reserve	—		56		—		—		56
Share-based compensation expense	—		91		—		—		91
Balance at December 31, 2020	$	6	$	6,894	$	(7,103)	$	(6,664)	$	(6,867)

See accompanying notes to consolidated financial statements.

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

1. Basis of Presentation and Summary of Significant Accounting Policies

(a) Basis of Presentation

American Airlines Group Inc. (we, us, our and similar terms, or AAG), a Delaware corporation, is a holding company whose primary business activity is the operation of a major network air carrier, providing scheduled air transportation for passengers and cargo through its mainline operating subsidiary, American Airlines, Inc. (American) and its wholly-owned regional airline subsidiaries, Envoy Aviation Group Inc. ~~(Envoy)~~, PSA Airlines, Inc. and Piedmont Airlines, Inc. ~~(Piedmont) and PSA Airlines, Inc. (PSA)~~ that operate under the brand American Eagle. On December 9, 2013, a subsidiary of AMR Corporation (AMR) merged with and into US Airways Group, Inc. (US Airways Group), a Delaware corporation, which survived as a wholly-owned subsidiary of AAG, and AAG emerged from Chapter 11 (the Merger). Upon closing of the Merger and emergence from Chapter 11, AMR changed its name to American Airlines Group Inc. On December 30, 2015, in order to simplify AAG’s internal corporate structure, US Airways Group merged with and into AAG, with AAG as the surviving corporation. Immediately thereafter, US Airways, Inc. (US Airways), a wholly-owned subsidiary of US Airways Group, merged with and into American, with American as the surviving corporation. All significant intercompany transactions have been eliminated.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States (GAAP) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The most significant areas of judgment relate to passenger revenue recognition, impairment of goodwill, impairment of long-lived and intangible assets, the loyalty program, ~~valuation allowance for deferred tax assets,~~ as well as pension and retiree medical and other postretirement benefits.

(b) Impact of Coronavirus (COVID-19)

COVID-19 has been declared a global health pandemic by the World Health Organization. COVID-19 has surfaced in nearly all regions of the world, which has driven the implementation of significant, government-imposed measures to prevent or reduce its spread, including travel restrictions, testing regimes, closing of borders, “stay at home” orders and business closures. As a result, we have experienced an unprecedented decline in the demand for air travel, which has resulted in a material deterioration in our revenues. While our business performed largely as expected in January and February of 2020, a severe reduction in air travel starting in March 2020 resulted in our total operating revenues decreasing approximately 62% in 2020 as compared to 2019. While the length and severity of the reduction in demand due to the COVID-19 pandemic is uncertain, our business, operations and financial condition in 2020 were severely impacted.

We have taken aggressive actions to mitigate the effects of the COVID-19 pandemic on our business including deep capacity reductions, structural changes to our fleet, cost reductions, and steps to preserve cash and improve our overall liquidity position. We remain extremely focused on taking all self-help measures available to manage our business during this unprecedented time, consistent with the terms of the financial assistance we have received from the U.S. Government under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Capacity Reductions

We have significantly reduced our capacity (as measured by available seat miles), with 2020 flying decreasing by 50% year-over-year. Domestic capacity in 2020 was down 41% year-over-year while international capacity was down 68% year-over-year. The demand environment continues to be uncertain as COVID-19 cases have continued to fluctuate in jurisdictions to which we fly and travel restrictions have generally remained in place. Due to this uncertainty, we will continue to adjust our future capacity to match observed booking trends for future travel and make further adjustments to our capacity as needed.

Fleet

To better align our network with lower passenger demand, we accelerated the retirement of Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets as well as certain regional aircraft, including certain Embraer 140 and Bombardier CRJ200 aircraft. These retirements remove complexity from our operation and bring forward cost savings and efficiencies associated with operating fewer aircraft types. See Note 1(g) below for further information on the accounting for our fleet retirements. Due to the inherent uncertainties of the current operating environment, we will continue to evaluate our current fleet and may decide to permanently retire additional aircraft. In addition, we have placed a number of Boeing 737-800 and certain regional aircraft into temporary storage.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

Cost Reductions

We moved quickly to better align our costs with our reduced schedule. In aggregate, we estimate that we reduced our 2020 operating and capital expenditures by more than $17 billion. These savings were achieved primarily through capacity reductions. In addition, we implemented a series of actions, including the accelerated fleet retirements discussed above as well as reductions in maintenance expense and $700 million in non-aircraft capital expenditures through less fleet modification work, the elimination of ground service equipment purchases and pausing non-critical facility investments and information technology projects. We also suspended all non-essential hiring, paused non-contractual pay rate increases, reduced executive and board of director compensation, implemented voluntary leave and early retirement programs and decreased our management and support staff team, including officers, by approximately 30%. In total, more than 20,000 team members have opted for an early retirement or long-term partially paid leave. Additionally, we have made reductions in marketing, contractor, event and training expenses as well as consolidated space at airport facilities.

Due to the effects of the COVID-19 pandemic, we involuntarily furloughed certain team members starting October 1, 2020, and subsequently recalled the team members effective December 1, 2020 covered by the financial assistance provided pursuant to the payroll support program (PSP2) established under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (PSP Extension Law) (see Note 18 for further information).

Liquidity

As of December 31, 2020, we had $14.3 billion in total available liquidity, consisting of $6.9 billion in unrestricted cash and short-term investments, $7.0 billion in an undrawn term loan facility under the CARES Act and a total of $446 million in undrawn short-term revolving and other facilities.

During 2020, we completed the following financing transactions (see Note 5 for further information):

•refinanced the $1.2 billion 2014 Term Loan Facility at a lower interest rate and extended the maturity from 2021 to 2027;

•issued $500 million in aggregate principal amount of 3.75% unsecured senior notes due 2025;

•raised $1.0 billion from the senior secured delayed draw term loan credit facility (Delayed Draw Term Loan Credit Facility);

•borrowed $750 million under the 2013 Revolving Facility, $1.6 billion under the 2014 Revolving Facility and $450 million under the April 2016 Revolving Facility;

•issued $1.0 billion in aggregate principal amount of 6.50% convertible senior notes due 2025;

•issued 85.2 million shares of AAG common stock at a price of $13.50 per share and 44.3 million shares of AAG common stock at a price of $12.975 per share pursuant to two underwritten public offerings of common stock for aggregate net proceeds of $1.7 billion;

•issued approximately $360 million in special facility revenue bonds, of which $47 million was used to fund the redemption of certain outstanding bonds;

•entered into a $7.5 billion secured term loan facility with the U.S. Department of Treasury (Treasury), of which we borrowed $550 million (see below for additional information on the Treasury Loan Agreement);

•issued $1.2 billion in aggregate principal amount of two series of 10.75% senior secured notes due 2026 secured by various collateral;

•issued 68.6 million shares of AAG common stock at an average price of $12.87 per share pursuant to an at-the-market offering for net proceeds of $869 million (see Note 18 for further information);

•raised $665 million principally from aircraft sale-leaseback transactions as well as $351 million from asset sales primarily related to previously parked aircraft; and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

In addition to the foregoing financings, we received an aggregate of $6.0 billion in financial assistance through the payroll support program (PSP1) established under the CARES Act, all of which was received by the end of September 2020. In connection with our receipt of this financial assistance, AAG issued a promissory note (the PSP1 Promissory Note) to Treasury for $1.8 billion in aggregate principal amount and warrants to purchase up to an aggregate of approximately 14.1 million shares (the PSP1 Warrant Shares) of AAG common stock. See below for further discussion on PSP1.

In January 2021, we received $1.5 billion (of an expected total of at least $3.0 billion) in financial assistance through PSP2. In connection with our receipt of this financial assistance, AAG issued a promissory note (the PSP2 Promissory Note) to Treasury for an initial principal sum of approximately $433 million and warrants to purchase up to an aggregate of approximately 2.8 million shares (the PSP2 Warrant Shares) of AAG common stock. See Note 18 for further discussion on PSP2.

We continue to evaluate future financing opportunities and work with third-party appraisers on valuations of our remaining unencumbered assets.

A significant portion of our debt financing agreements contain covenants requiring us to maintain an aggregate of at least $2.0 billion of unrestricted cash and cash equivalents and amounts available to be drawn under revolving credit facilities and/or contain loan to value, collateral coverage and/or debt service coverage ratio covenants.

Given the above actions and our current assumptions about the future impact of the COVID-19 pandemic on travel demand, which could be materially different due to the inherent uncertainties of the current operating environment, we expect to meet our cash obligations as well as remain in compliance with the debt covenants in our existing financing agreements for the next 12 months based on our current level of unrestricted cash and short-term investments, our anticipated access to liquidity (including via proceeds from financings and funds from government assistance obtained pursuant to the CARES Act and the PSP Extension Law) and projected cash flows from operations.

PSP1

On April 20, 2020 (the PSP1 Closing Date), American, Envoy Air Inc. (Envoy), Piedmont Airlines, Inc. (Piedmont) and PSA Airlines, Inc. (PSA and together with American, Envoy and Piedmont, the Subsidiaries), entered into a Payroll Support Program Agreement (the PSP1 Agreement) with Treasury, with respect to PSP1 provided pursuant to the CARES Act. In connection with our entry into the PSP1 Agreement, on the PSP1 Closing Date, AAG also entered into a warrant agreement (the PSP1 Warrant Agreement) with Treasury and issued the PSP1 Promissory Note to Treasury, with the Subsidiaries as guarantors (the Guarantors).

PSP1 Agreement

In connection with PSP1, we are required to comply with the relevant provisions of the CARES Act, including the requirement that funds provided pursuant to the PSP1 Agreement be used exclusively for the continuation of payment of eligible employee wages, salaries and benefits, the requirement against involuntary furloughs and reductions in employee pay rates and benefits, which expired on September 30, 2020, the requirement that certain levels of commercial air service be maintained and the provisions that prohibit the repurchase of AAG common stock, and the payment of common stock dividends through at least September 30, 2021, as well as those that restrict the payment of certain executive compensation until March 24, 2022. The PSP1 Agreement also imposes substantial reporting obligations on us. These provisions were subsequently extended upon our entry into PSP2. See Note 18 for further discussion on PSP2. In addition, we have entered into the Treasury Loan Agreement (as defined below) and, as a result, the stock repurchase, dividend and executive compensation restrictions imposed by the Treasury Loan Agreement will remain in place through the date that is one year after the secured loan provided under the Treasury Loan Agreement is fully repaid. See below for additional information on the Treasury Loan Agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

Pursuant to the PSP1 Agreement, Treasury provided us financial assistance in an aggregate of approximately $6.0 billion. As partial compensation to the U.S. Government for the provision of financial assistance under PSP1, AAG issued the PSP1 Promissory Note in an aggregate principal amount of approximately $1.8 billion and issued warrants (each a PSP1 Warrant and, collectively, the PSP1 Warrants) to Treasury to purchase up to an aggregate of approximately 14.1 million PSP1 Warrant Shares. See Note 5 for further information on the PSP1 Promissory Note and below for more information on the PSP1 Warrant Agreement and the PSP1 Warrants.

For accounting purposes, the $6.0 billion of aggregate financial assistance we received pursuant to the PSP1 Agreement is allocated to the PSP1 Promissory Note, the PSP1 Warrants and other PSP1 financial assistance (the PSP1 Financial Assistance). The aggregate principal amount of approximately $1.8 billion of the PSP1 Promissory Note was recorded as unsecured long-term debt, and the total fair value of the PSP1 Warrants of $63 million, estimated using a Black-Scholes option pricing model, was recorded in stockholders' equity in the consolidated balance sheet. The remaining amount of approximately $4.2 billion of PSP1 Financial Assistance was recognized as a credit to special items, net in the consolidated statement of operations in the second and third quarters of 2020, the period over which the continuation of payment of eligible employee wages, salaries and benefits was required.

PSP1 Warrant Agreement and PSP1 Warrants

As partial compensation to the U.S. Government for the provision of financial assistance under the PSP1 Agreement, and pursuant to the PSP1 Warrant Agreement, AAG agreed to issue warrants to Treasury to purchase up to an aggregate of approximately 14.1 million PSP1 Warrant Shares of AAG common stock. The exercise price of the PSP1 Warrant Shares is $12.51 per share (which was the closing price of AAG common stock on The Nasdaq Global Select Market on April 9, 2020) subject to certain anti-dilution provisions provided for in the PSP1 Warrants.

Pursuant to the PSP1 Warrant Agreement, on each of the PSP1 Closing Date, May 29, 2020, June 30, 2020, July 30, 2020 and September 30, 2020, AAG issued to Treasury a PSP1 Warrant to purchase up to an aggregate of approximately 6.7 million shares, 2.8 million shares, 2.8 million shares, 1.4 million shares and 0.4 million shares, respectively, of AAG common stock based on the terms described herein.

The PSP1 Warrants do not have any voting rights and are freely transferrable, with registration rights. Each PSP1 Warrant expires on the fifth anniversary of the date of issuance of such PSP1 Warrant. The PSP1 Warrants will be exercisable either through net share settlement or cash, at our option. The PSP1 Warrants were issued solely as compensation to the U.S. Government related to entry into the PSP1 Agreement. No separate proceeds (apart from the financial assistance described above) were received upon issuance of the PSP1 Warrants or will be received upon exercise thereof.

Treasury Loan Agreement

On September 25, 2020 (the Treasury Loan Closing Date), AAG and American entered into a Loan and Guarantee Agreement (the Treasury Loan Agreement) with Treasury, which provided for a secured term loan facility (the Treasury Term Loan Facility) that permitted American to borrow up to $5.5 billion. Subsequently, on October 21, 2020, AAG and American entered into an amendment to the Treasury Loan Agreement, which increased the borrowing amount to up to $7.5 billion. The Treasury Loan Agreement will involve the issuance of additional warrants to purchase up to an aggregate of approximately 60.0 million shares of AAG common stock, assuming the Treasury Term Loan Facility is fully drawn. As of December 31, 2020, American had borrowed $550 million under the Treasury Term Loan Facility, which is scheduled to mature on June 30, 2025, and issued warrants to Treasury to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock. See Note 5 for further information on the Treasury Loan Agreement and below for more information on the Treasury Loan Warrant Agreement and Treasury Loan Warrants.

Treasury Loan Warrant Agreement and Warrants

In connection with the Treasury Loan Agreement, AAG also entered into a warrant agreement (the Treasury Loan Warrant Agreement) with Treasury. Pursuant to the Treasury Loan Warrant Agreement, AAG agreed to issue warrants (each a Treasury Loan Warrant and, collectively, the Treasury Loan Warrants) to Treasury to purchase up to an aggregate of approximately 60.0 million shares (the Treasury Loan Warrant Shares) of AAG's common stock based on the $7.5 billion commitment amount under the Treasury Term Loan Facility. The exercise price of the Treasury Loan Warrant Shares is $12.51 per share, subject to certain anti-dilution provisions provided for in the Treasury Loan Warrant Agreement. For accounting purposes, the fair value for the Treasury Loan Warrant Shares is estimated using a Black-Scholes option pricing model and recorded in stockholders' equity with an offsetting debt discount to the Treasury Term Loan Facility in the consolidated balance sheet.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

Pursuant to the Treasury Loan Warrant Agreement, on the Treasury Loan Closing Date, AAG issued to Treasury a Treasury Loan Warrant to purchase up to an aggregate of approximately 4.4 million Treasury Loan Warrant Shares based on the terms described herein. On the date of each additional borrowing under the Treasury Loan Agreement, AAG will issue to Treasury an additional Treasury Loan Warrant for a number of Treasury Loan Warrant Shares equal to 10% of such borrowing, divided by $12.51, the exercise price of such shares.

The Treasury Loan Warrants do not have any voting rights and are freely transferrable, with registration rights. Each Treasury Loan Warrant expires on the fifth anniversary of the date of issuance of such Treasury Loan Warrant. The Treasury Loan Warrants will be exercisable either through net share settlement or cash, at AAG's option. The Treasury Loan Warrants were issued solely as compensation to the U.S. Government related to entry into the Treasury Loan Agreement. No separate proceeds were received upon issuance of the Treasury Loan Warrants or will be received upon exercise thereof.

ASU 2016-13: Measurement of Credit Losses on Financial Instruments

This ASU requires the use of an expected loss model for certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade receivables, loans and held-to-maturity debt securities, an estimate of lifetime expected credit losses is required. For available-for-sale debt securities, an allowance for credit losses will be required rather than a reduction to the carrying value of the asset. We adopted this accounting standard prospectively as of January 1, 2020, and it did not have a material impact on our consolidated financial statements.

ASU 2020-06: Accounting for Convertible Instruments and Contracts In An Entity's Own Equity (the New Convertible Debt Standard)

The New Convertible Debt Standard simplifies the accounting for certain convertible instruments by removing the separation models for convertible debt with a cash conversion feature and for convertible instruments with a beneficial conversion feature. As a result, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, the New Convertible Debt Standard amends the diluted earnings per share calculation for convertible instruments by requiring the use of the if-converted method. The treasury stock method is no longer available. Entities may adopt the New Convertible Debt Standard using either a full or modified retrospective approach, and it is effective for interim and annual reporting periods beginning after December 15, 2021. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2020. The New Convertible Debt Standard is applicable to our 6.50% convertible senior notes due 2025. We early adopted the New Convertible Debt Standard as of January 1, 2021 using the modified retrospective method to recognize our 6.50% convertible senior notes as a single liability instrument. As of January 1, 2021, we recorded a $415 million ($320 million net of tax) reduction to additional paid-in capital to remove the equity component of the 6.50% convertible senior notes from our balance sheet and a $19 million cumulative effect adjustment credit, net of tax, to retained deficit related to non-cash debt discount amortization recognized in periods prior to adoption resulting in a corresponding reduction of $389 million to the debt discount associated with the 6.50% convertible senior notes. See Note 5(h) for additional information on our 6.50% convertible senior notes.

(d) Short-term Investments

Short-term investments are classified as available-for-sale and stated at fair value. Realized gains and losses are recorded in nonoperating expense on ~~the~~our consolidated ~~statement~~statements of operations. Unrealized gains and losses are recorded in accumulated other comprehensive loss on ~~the~~our consolidated balance sheets. For investments in an unrealized loss position, we determine whether a credit loss exists by considering information about the collectability of the instrument, current market conditions and reasonable and supportable forecasts of economic conditions. There have been no credit losses.

~~(c)~~(e) Restricted Cash and Short-term Investments

We have restricted cash and short-term investments related primarily to money market funds to be used to finance a substantial portion of the cost of the renovation and expansion of Terminal 8 at JFK and collateral held to support workers’ compensation obligations.

~~(d)~~

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(f) Aircraft Fuel, Spare Parts and Supplies, Net

Aircraft fuel is recorded on a first-in, first-out basis. Spare parts and supplies are recorded at average costs less an allowance for obsolescence. These items are expensed when used.

~~(e)~~(g) Operating Property and Equipment

Operating property and equipment is recorded at cost and depreciated or amortized to residual values over the asset’s estimated useful life or the lease term, whichever is less, using the straight-line method. Residual values for aircraft, engines and related rotable parts are generally 5% to 10% of original cost. Costs of major improvements that enhance the usefulness of the asset are capitalized and depreciated or amortized over the estimated useful life of the asset or the lease term, whichever is less. The estimated useful lives for the principal property and equipment classifications are as follows:



Principal Property and Equipment Classification			Estimated Useful Life
Aircraft, engines and related rotable parts			20 – 30 years
Buildings and improvements			5 – 30 years
Furniture, fixtures and other equipment			3 – 10 years
Capitalized software			5 – 10 years

Total depreciation and amortization expense was $2.4 billion, $2.6 billion and $2.4 billion for the years ended December 31, 2020, 2019 and 2018, respectively.

We assess impairment onof operating property and equipment when events and circumstances indicate that the assets may be impaired. An impairment of an asset or group of assets ~~is considered impaired~~exists only when the sum of the estimated undiscounted cash flows expected to be generated directly by the assets are less than the carrying value of the assets. We group assets principally by fleet-type when estimating future cash flows, which is generally the lowest level for which identifiable cash flows exist. Estimates of future cash flows are based on historical results adjusted to reflect management’s best estimate of future market and operating conditions, including our current fleet plan. If such assets are impaired, the impairment charge recognized is the amount by which the carrying value of the assets exceed their fair value. Fair value reflects management’s best estimate including inputs from published pricing guides and bids from third parties as well as contracted sales agreements when applicable.

In 2020, our operations, liquidity and stock price were significantly impacted by decreased passenger demand and government travel restrictions due to the COVID-19 pandemic. Additionally, we decided to retire certain mainline aircraft earlier than planned, including Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 aircraft as well as certain regional aircraft, including certain Embraer 140 and Bombardier CRJ200 aircraft. As a result of these events and circumstances, we performed impairment tests for our long-lived assets in the first three quarters of 2020.

As a result of the impairment tests performed, we determined the sum of the estimated undiscounted future cash flows exceeded the carrying value except for the aircraft being retired earlier than planned as discussed above. For those aircraft and certain related spare parts, we recorded $1.5 billion in non-cash special impairment charges reflecting the difference between the carrying values of these assets and their fair values for the year ended December 31, 2020. At December 31, 2020, prepaid expense and other on the consolidated balance sheet included $164 million of these retired aircraft that are expected to be sold in the next year, and other assets on the consolidated balance sheet included $401 million of nonoperating retired aircraft. Due to the inherent uncertainties of the current operating environment, we will continue to evaluate our current fleet (including aircraft in temporary storage) and may decide to permanently retire additional aircraft.

(h) Leases

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (ROU) assets, current operating lease liabilities and noncurrent operating lease liabilities in our consolidated balance sheet. Finance leases are included in property and equipment, current maturities of long-term debt and finance leases and long-term debt and finance leases, net of current maturities, in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

We use our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. We give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.

Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet. Our lease agreements do not contain any residual value guarantees.

Under certain of our capacity purchase agreements with third-party regional carriers, we do not own the underlying aircraft. However, since we control the marketing, scheduling, ticketing, pricing and seat inventories of these aircraft and therefore control the asset, the aircraft is deemed to be ~~generated by~~leased for accounting purposes. For these capacity purchase agreements, we account for the ~~assets are less than the carrying amount~~lease and non-lease components separately. The lease component consists of the ~~assets~~aircraft and the ~~net book value~~non-lease components consist of services, such as the ~~assets exceeds~~crew and maintenance. We allocate the consideration in the capacity purchase agreements to the lease and non-lease components using their estimated fair value. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less the cost to sell.relative standalone prices. See Note 12(b) for additional information on our capacity purchase agreements.

~~Total depreciation and amortization expense was $2.2 billion, $1.9 billion and $1.7 billion~~For real estate, we account for the ~~years ended December 31, 2017, 2016~~lease and ~~2015, respectively.~~non-lease components as a single lease component.

~~(f)~~(i) Income Taxes

We provide a valuation allowance for our deferred tax assets when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. We consider all available positive and negative evidence and make certain assumptions in evaluating the realizability of our deferred tax assets. Many factors are considered that impact our assessment of future profitability, including conditions which are beyond our control, such as the health of the economy, the ~~level~~availability and price volatility of aircraft fuel ~~prices~~ and travel demand.

~~(g)~~(j) Goodwill

Goodwill represents the ~~excess of the~~ purchase price ~~over~~in excess of the fair value of the net assets acquired and liabilities ~~assumed. Goodwill is not amortized but assessed~~assumed in connection with the merger with US Airways Group. We have 1 reporting unit. We assess goodwill for impairment annually ~~on October 1~~^st or more frequently if events or circumstances indicate that the fair value of goodwill may be ~~impaired. We have one consolidated reporting unit.~~lower than the carrying value. Our annual assessment date is October 1.

Goodwill is assessed for impairment by initially performing a qualitative assessment. If we determine that it is more likely than not that our goodwill may be impaired, we use a quantitative approach to assess the asset’s fair value and the amount of the impairment, if any.

In addition to our annual impairment assessment, we performed interim impairment tests in 2020 on our goodwill as a result of the events and ~~if necessary, then comparing~~circumstances previously discussed due to the impact of the COVID-19 pandemic on our business. We performed a quantitative analysis by using a market approach. Under the market approach, the fair value of the reporting unit ~~to its carrying value, including goodwill. If~~was determined based on quoted market prices for equity and the fair value of debt as described in Note 9. The fair value exceeded the carrying value of the reporting unit, ~~is less than the carrying value, a second step is performed to determine the implied fair value of goodwill. If the implied fair value of~~and our goodwill ~~is lower than its carrying value, an impairment charge equal to the difference is recorded. Based upon our annual assessment, there~~ was ~~no goodwill impairment in 2017.~~not impaired. The carrying value of ~~the~~our goodwill on our consolidated balance sheets was $4.1 billion as of December 31, ~~2017~~2020 and ~~2016.~~2019.

~~(h)~~As discussed above, due to the inherent uncertainties of the current operating environment, we will continue to evaluate our goodwill for events and circumstances that indicate that the fair value of the reporting unit may be lower than the carrying value.

(k) Other Intangibles, Net

Intangible assets consist primarily of certain domestic airport slots and gate leasehold rights, customer relationships, marketing agreements, international slots and route authorities ~~airport gate leasehold rights~~ and tradenames.

~~Finite-Lived~~

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Definite-Lived Intangible Assets

~~Finite-lived~~Definite-lived intangible assets are originally recorded at their acquired fair values, subsequently amortized over their respective estimated useful lives and ~~reviewed~~are assessed for impairment whenever events ~~or changes in~~and circumstances indicate that the ~~carrying value~~assets may ~~not~~ be ~~recoverable.~~impaired.

The following table provides information relating to our amortizable intangible assets as of December 31, ~~2017~~2020 and ~~2016~~2019 (in millions):

December 31,
2017 2016
Domestic airport slots $ 365
$ 365
Customer relationships 300
300
Marketing agreements 105
105
Tradenames 35
35
Airport gate leasehold rights 137
137
Accumulated amortization (622 ) (578 )
Total $ 320
$ 364

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~


	December 31,
	2020		2019
Domestic airport slots	$	365	$	365
Customer relationships	300		300
Marketing agreements	105		105
Tradenames	35		35
Airport gate leasehold rights	137		137
Accumulated amortization	(745)		(704)
Total	$	197	$	238

Certain domestic airport slots and airport gate leasehold rights are amortized on a straight-line basis over 25 years. The customer relationships and marketing agreements were identified as intangible assets subject to amortization and are amortized on a straight-line basis over approximately nine years and 30 years, respectively. Tradenames are fully amortized.

We recorded amortization expense related to these intangible assets of ~~$44~~$41 million ~~$76 million and $55 million~~ for each of the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015, respectively.~~2018. We expect to record annual amortization expense for these intangible assets as follows (in millions):

2018 $ 41
2019 41
2020 41
2021 41
2022 41
2023 and thereafter 115
Total $ 320


2021	$	41
2022	41
2023	7
2024	7
2025	7
2026 and thereafter	94
Total	$	197

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets include certain domestic airport slots ~~at our hubs~~ and international slots and route authorities. ~~Indefinite-lived~~We assess indefinite-lived intangible assets ~~are not amortized but instead are assessed~~ for impairment annually ~~on October 1~~^st or more frequently if events or circumstances indicate that the ~~asset may be impaired. As of December 31, 2017 and 2016, we had $1.9 billion and $1.8 billion, respectively,~~fair values of indefinite-lived intangible assets ~~on our consolidated balance sheets.~~may be lower than their carrying values. Our annual assessment date is October 1.

Indefinite-lived intangible assets are assessed for impairment by initially performing a qualitative ~~assessment to~~assessment. If we determine ~~whether we believe~~that it is more likely than not that ~~an asset has been impaired. If~~our indefinite-lived intangible assets may be impaired, we ~~believe impairment has occurred, we then evaluate for impairment by comparing~~use a quantitative approach to assess the ~~estimated~~asset’s fair value and the amount of the impairment, if any.

In addition to our annual impairment assessment, we performed interim impairment tests in 2020 on our indefinite-lived intangible assets as a result of the events and circumstances previously discussed due to the ~~carrying value. An~~impact of the COVID-19 pandemic on our business. We performed qualitative impairment ~~charge is recognized if the asset’s estimated fair value is less than its carrying value. Based upon~~tests on our ~~annual assessment,~~indefinite-lived intangible assets and determined there was no material impairment. We had $1.8 billion of indefinite-lived intangible ~~asset impairment in 2017.~~

~~(i) Loyalty Program~~

~~We currently operate the loyalty program, AAdvantage. This program awards mileage credits to passengers who fly~~assets on ~~American, any~~ ~~oneworld airline or other partner airlines, or by using the services~~our consolidated balance sheets at each of other program participants, such as the Citi and Barclaycard US co-branded credit cards, hotels and car rental companies. Mileage credits can be redeemed for travel on American or other participating partner airlines.

~~Through~~ December 31, ~~2017, we used~~2020 and 2019.

As discussed above, due to the ~~incremental cost method to account for the portion of our loyalty program liability incurred when AAdvantage members earn mileage credits by flying on American, any~~ ~~oneworld airline or other partner airlines. We have an obligation to provide future travel when these mileage credits are redeemed and therefore have recorded a liability for mileage credits outstanding.~~

The incremental cost liability includes all mileage credits, even mileage credits for members whose account balances have not yet reached the minimum level required to redeem an award. Mileage credits are subject to expiration. The liability for outstanding mileage credits is valued based on the estimated incremental cost of carrying one additional passenger. The estimated incremental cost primarily includes unit costs incurred for fuel, food and insurance as well as fees incurred when travel awards are redeemed on partner airlines. In calculating the liability, we estimate how many mileage credits will never be redeemed for travel and exclude those mileage credits from the estimateinherent uncertainties of the ~~liability. Estimates are also made~~current operating environment, we will continue to evaluate our indefinite-lived intangible assets for events and circumstances that indicate that their fair values may be lower than the number of miles that will be used per award redemption and the number of travel awards that will be redeemed on partner airlines. These costs and estimates are based on our historical program experience as well as consideration of enacted program changes, as applicable. Changes in the liability resulting from members earning additional mileage credits or changes in estimates are recorded in the consolidated statements of operations as a part of passenger revenue.carrying values.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

(l) Revenue Recognition

~~As of December 31, 2017 and 2016,~~Revenue

The following are the ~~liability for outstanding mileage credits accounted for under the incremental cost method was $677 million and $669 million, respectively, and~~significant categories comprising our reported operating revenues (in millions):


	Year Ended December 31,
	2020		2019		2018
Passenger revenue:
Passenger travel	$	13,456	$	38,831	$	37,457
Loyalty revenue - travel (1)	1,062		3,179		3,219
Total passenger revenue	14,518		42,010		40,676
Cargo	769		863		1,013
Other:
Loyalty revenue - marketing services	1,825		2,361		2,352
Other revenue	225		534		500
Total other revenue	2,050		2,895		2,852
Total operating revenues	$	17,337	$	45,768	$	44,541

(1)Loyalty revenue included in passenger revenue is ~~included on the consolidated balance sheets within loyalty program liability.~~

~~We also sell loyalty program mileage credits to participating airline partners and non-airline business partners, such as the Citi and Barclaycard US co-branded credit cards. Sales~~principally comprised of mileage credits to non-airline business partners is comprised of two components, transportation and marketing. We account for mileage sales under our agreements with non-airline business partners in accordance with ASU 2009-13, “Revenue Recognition (Topic 605) – Multiple-Deliverable Revenue Arrangements.” In accordance with ASU 2009-13, we allocate the consideration receivedcredit redemptions, which were earned from ~~the sale of mileage credits based on the relative selling price of each product~~travel or ~~service delivered.~~

~~As a result of our~~ co-branded credit card program agreements with Citi and Barclaycard US that we entered into in 2016, we identified the following revenue elements in these co-branded credit card agreements: the transportation component; and the use of the American brand including access to loyalty program member lists, advertising and other ~~travel related benefits (collectively, the marketing component).~~

The transportation component represents the estimated selling price of future travel awards and is determined using historical transaction information, including information related to customer redemption patterns. The transportation component is deferred based on its relative selling price and is amortized into passenger revenue on a straight-line basis over the period in which the mileage credits are expected to be redeemed for travel. As of December 31, 2017 and 2016, we had $2.1 billion in deferred revenue from the sale of mileage credits recorded within loyalty program liability on our consolidated balance sheets.

The services under the marketing component are provided periodically, but no less than monthly. Accordingly, the marketing component is considered earned and recognized in other revenues in the period of the mileage sale. For the years ended December 31, 2017, 2016 and 2015, the marketing component of mileage sales and other marketing related payments included in other revenues was approximately $2.2 billion, $1.9 billion and $1.7 billion, respectively.

~~Effective January 1, 2018, we are adopting ASU 2014-09:~~partners. See “Loyalty Revenue ~~from Contracts with Customers (Topic 606). See Recent Accounting Pronouncements in Note 1(r)~~” below for further ~~discussion.~~discussion on these mileage credits.

~~(j) Revenue~~The following is our total passenger revenue by geographic region (in millions):


	Year Ended December 31,
	2020		2019		2018
Domestic	$	11,765	$	30,881	$	29,573
Latin America	1,852		5,047		5,125
Atlantic	654		4,624		4,376
Pacific	247		1,458		1,602
Total passenger revenue	$	14,518	$	42,010	$	40,676

We attribute passenger revenue by geographic region based upon the origin and destination of each flight segment.

Passenger Revenue

The majority of tickets sold are nonrefundable. A small percentage of tickets, some of which are partially used tickets, expire unused. Due to complex pricing structures, refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized in passenger revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are generally based on the analysis of our historical data. We ~~and other airline industry participants~~ have consistently applied this accounting method to estimate revenue from ~~forfeited~~unused tickets at the date of travel. Estimated future refunds and exchanges included in the air traffic liability are routinely evaluated based on subsequent activity to validate the accuracy of our estimates. Any adjustments resulting from periodic evaluations of the estimated air traffic liability are included in passenger revenue during the period in which the evaluations are completed.

Regional carriers provide scheduled air transportation under the brand name American Eagle. We classify revenues generated from transportation on these carriers as regional passenger revenues. Liabilities related to tickets sold by us for travel on these air carriers is also included in our air traffic liability and are subsequently recognized as revenue in the same manner as described above.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

~~Passenger Taxes and Fees~~

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provided for a temporary tax holiday from collecting and remitting certain government ticket taxes for tickets purchased between March 28, 2020 and December 31, 2020.

Loyalty Revenue

We currently operate the loyalty program, AAdvantage. This program awards mileage credits to passengers who fly on American, any oneworld airline or other partner airlines, or by using the services of other program participants, such as the Citi and Barclaycard US co-branded credit cards, and certain hotels and car rental companies. Mileage credits can be redeemed for travel on American and other participating partner airlines, as well as other non-air travel awards such as hotels and rental cars. For mileage credits earned by AAdvantage loyalty program members, we apply the deferred revenue method. In response to the COVID-19 pandemic, we suspended the expiration of mileage credits through June 30, 2021 and eliminated mileage reinstatement fees for canceled award tickets.

Mileage credits earned through travel

For mileage credits earned through travel, we apply a relative selling price approach whereby the total amount collected from each passenger ticket sale is allocated between the air transportation and the mileage credits earned. The portion of each passenger ticket sale attributable to mileage credits earned is initially deferred and then recognized in passenger revenue when mileage credits are redeemed and transportation is provided. The estimated selling price of mileage credits is determined using an equivalent ticket value approach, which uses historical data, including award redemption patterns by geographic region and class of service, as well as similar fares as those used to settle award redemptions. The estimated selling price of miles is adjusted for an estimate of the miles that will not be redeemed using statistical models based on historical redemption patterns to develop an estimate of the likelihood of future redemption. Given the inherent uncertainty of the current operating environment due to the COVID-19 pandemic, we will continue to monitor redemption patterns and may adjust our estimates in the future.

Mileage credits sold to co-branded credit cards and other partners

We sell mileage credits to participating airline partners and non-airline business partners, including our co-branded credit card partners, under contracts with terms extending generally for one to seven years. Consideration received from the sale of mileage credits is variable and payment terms typically are within 30 days subsequent to the month of mileage sale. Sales of mileage credits to non-airline business partners are comprised of 2 components, transportation and marketing. We allocate the consideration received from these sales of mileage credits based on the relative selling price of each product or service delivered.

Our most significant partner agreements are our co-branded credit card agreements with Citi and Barclaycard US. We identified the following revenue elements in these co-branded credit card agreements: the transportation component; and the use of intellectual property, including the American brand and access to loyalty program member lists, which is the predominant element in the agreements, as well as advertising (collectively, the marketing component). Accordingly, we recognize the marketing component in other revenue in the period of the mileage sale following the sales-based royalty method.

The transportation component represents the estimated selling price of future travel awards and is determined using the same equivalent ticket value approach described above. The portion of each mileage credit sold attributable to transportation is initially deferred and then recognized in passenger revenue when mileage credits are redeemed and transportation is provided.

For the portion of our outstanding mileage credits that we estimate will not be redeemed, we recognize the associated value proportionally as the remaining mileage credits are redeemed. Our estimates use statistical models based on historical redemption patterns to develop an estimate of the likelihood of future redemption.

Cargo Revenue

Cargo revenue is recognized when we provide the transportation.

Other Revenue

Other revenue includes revenue associated with ~~marketing services provided to our business partners as part of~~ our loyalty program, ~~baggage fees, ticketing change fees, airport clubs~~which is comprised principally of the marketing component of mileage sales to co-branded credit card and ~~inflight services.~~other partners and other marketing related payments. Loyalty revenue included in other revenue was $1.8 billion for the year ended December 31, 2020 and $2.4 billion for both 2019 and 2018. The accounting and recognition for the loyalty program marketing services are discussed above in ~~Note 1(i) above. Baggage~~“Loyalty

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Revenue.” The remaining amounts included within other revenue relate to airport clubs, advertising and vacation-related services.

Contract Balances

Our significant contract liabilities are comprised of (1) outstanding loyalty program mileage credits that may be redeemed for future travel and other non-air travel awards, reported as loyalty program liability on our consolidated balance sheets and (2) ticket sales for transportation that has not yet been provided, reported as air traffic liability on our consolidated balance sheets.


	December 31,
	2020		2019
	(in millions)
Loyalty program liability	$	9,195	$	8,615
Air traffic liability	4,757		4,808
Total	$	13,952	$	13,423

The balance of the loyalty program liability fluctuates based on seasonal patterns, which impact the volume of mileage credits issued through travel or sold to co-branded credit card and other partners (deferral of revenue) and mileage credits redeemed (recognition of revenue). Changes in loyalty program liability are as follows (in millions):


Balance at December 31, 2019	$	8,615
Deferral of revenue	1,812
Recognition of revenue (1)	(1,232)
Balance at December 31, 2020 (2)	$	9,195

(1)Principally relates to revenue recognized from the redemption of mileage credits for both air and non-air travel awards. Mileage credits are combined in one homogenous pool and are not separately identifiable. As such, the revenue is comprised of miles that were part of the loyalty program deferred revenue balance at the beginning of the period, as well as miles that were issued during the period.

(2)Mileage credits can be redeemed at any time and generally do not expire as long as that AAdvantage member has any type of qualifying activity at least every 18 months. As previously discussed, in response to the COVID-19 pandemic, we suspended the expiration of mileage credits through June 30, 2021 and eliminated mileage reinstatement fees ~~ticketing~~for canceled award tickets. As of December 31, 2020, our current loyalty program liability was $2.0 billion and represents our current estimate of revenue expected to be recognized in the next 12 months based on historical as well as projected trends, with the balance reflected in long-term loyalty program liability expected to be recognized as revenue in periods thereafter. Given the inherent uncertainty of the current operating environment due to the COVID-19 pandemic, we will continue to monitor redemption patterns and may adjust our estimates in the future.

The air traffic liability principally represents tickets sold for future travel on American and partner airlines, as well as estimated future refunds and exchanges of tickets sold for past travel. The balance in our air traffic liability also fluctuates with seasonal travel patterns. The contract duration of passenger tickets is generally one year. Accordingly, any revenue associated with tickets sold for future travel will be recognized within 12 months. For 2020, $2.8 billion of revenue was recognized in passenger revenue that was included in our air traffic liability at December 31, 2019. In response to the COVID-19 pandemic, we extended the contract duration for certain tickets to December 31, 2021, principally those with travel scheduled from March 1, 2020 through December 31, 2020. Additionally, we have eliminated change fees ~~airport clubs~~for most domestic and ~~inflight service revenues~~international tickets. As of December 31, 2020, the air traffic liability included approximately $2.6 billion of travel credits related to these unused tickets for travel prior to December 31, 2020. Accordingly, any revenue associated with these tickets will be recognized within the next 12 months. Given this change in contract duration and uncertainty surrounding the future demand for air travel, our estimates of revenue that will be recognized from the air traffic liability for future flown or unused tickets as well as our estimates of refunds may be subject to variability and differ from historical experience.

Our ticket contract receivables relate to ticket sales to individual passengers primarily through the use of major credit cards and are ~~recognized~~reflected as accounts receivable, net on the accompanying consolidated balance sheets. These receivables are short-term, mostly settled within seven days after sale. All accounts receivable are reported net of an allowance for

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credit losses, which have been minimal in the past. We consider past and future financial and qualitative factors when ~~we provide~~establishing the ~~service.~~allowance for credit losses.

~~Effective January 1, 2018, we are adopting ASU 2014-09: Revenue from Contracts with Customers (Topic 606). See Recent Accounting Pronouncements in Note 1(r) below for further discussion.~~

~~(k)~~(m) Maintenance, Materials and Repairs

Maintenance and repair costs for owned and leased flight equipment are charged to operating expense as incurred, except costs incurred for maintenance and repair under flight hour maintenance contract agreements, which are accrued based on contractual terms when an obligation exists.

~~(l)~~(n) Selling Expenses

Selling expenses include credit card fees, commissions, computerized reservations systems fees and advertising. Selling expenses associated with passenger revenue are expensed when the transportation or service is provided. Advertising costs are expensed as incurred. Advertising expense was ~~$135~~$50 million, ~~$116~~$129 million and ~~$110~~$128 million for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively.

~~(m)~~(o) Share-based Compensation

We account for our share-based compensation expense based on the fair value of the stock award at the time of grant, which is recognized ratably over the vesting period of the stock award. ~~Certain~~The majority of our stock awards ~~have performance conditions that must be achieved prior to vesting~~are time vested restricted stock units, and ~~are expensed based on~~ the ~~expected achievement at each reporting period. The~~ fair value of ~~stock appreciation rights is estimated using a Black-Scholes option pricing model. The fair value of restricted stock units~~such awards is based on the market price of the underlying shares of AAG common stock on the date of grant. See Note 1415 for further discussion of share-based compensation.

~~(n) Deferred Gains and Credits, Net~~

Included within deferred gains and credits, net are amounts deferred and amortized into future periods associated with the adjustment of leases to fair value in connection with the application of acquisition accounting, deferred gains on the sale-leaseback of aircraft and certain vendor incentives. We periodically receive vendor incentives in connection with acquisition of aircraft and engines. These credits are deferred until aircraft and engines are delivered and then applied as a reduction to the cost of the related equipment.

~~(o)~~(p) Foreign Currency Gains and Losses

Foreign currency gains and losses are recorded as part of other income, net within total nonoperating expense, net in our consolidated statements of operations. ~~Foreign currency losses for 2017 were $4 million. Foreign currency gains were $1 million for 2016.~~ For ~~2015,~~the years ended December 31, 2020, 2019 and 2018, respectively, foreign currency losses were ~~$751~~$24 million, $32 million and included a $592 million nonoperating special charge to write off all of the value of Venezuelan bolivars held by us due to continued lack of repatriations and deterioration of economic conditions in Venezuela.$55 million.

~~(p)~~(q) Other Operating Expenses

Other operating expenses includes costs associated with ground and cargo handling, crew travel, aircraft food and catering, aircraft cleaning, passenger accommodation, airport security, international navigation fees and certain general and administrative expenses.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

~~(q)~~(r) Regional Expenses

Expenses associated with American Eagle operations are classified as regional expenses on ~~the~~our consolidated statements of operations. Regional expenses consist of the following (in millions):

Year Ended December 31,
2017 2016 2015
Aircraft fuel and related taxes $ 1,382
$ 1,109
$ 1,230
Salaries, wages and benefits 1,452
1,333
1,187
Capacity purchases from third-party regional carriers ⁽¹⁾
1,581
1,538
1,651
Maintenance, materials and repairs 281
345
323
Other rent and landing fees 625
564
504
Aircraft rent 35
36
34
Selling expenses 361
347
333
Depreciation and amortization 315
301
252
Special items, net 22
14
29
Other 492
457
440
Total regional expenses $ 6,546
$ 6,044
$ 5,983


	Year Ended December 31,
	2020		2019		2018
Aircraft fuel and related taxes	$	821	$	1,869	$	1,843
Salaries, wages and benefits	1,591		1,781		1,591
Capacity purchases from third-party regional carriers (1)	1,054		1,398		1,431
Maintenance, materials and repairs	314		403		340
Other rent and landing fees	496		651		610
Aircraft rent	13		29		32
Selling expenses	153		402		369
Depreciation and amortization	325		336		318
Special items, net	(309)		6		6
Other	434		626		593
Total regional expenses	$	4,892	$	7,501	$	7,133


⁽¹⁾	~~For the years ended December 31, 2017, 2016~~ (1)In 2020, 2019, and ~~2015, the component of capacity purchase expenses representing the lease of aircraft for accounting purposes was approximately $437 million, $405 million and $492 million, respectively.~~

~~(r) Recent Accounting Pronouncements~~

~~Standards Effective for 2018 Reporting Periods~~

~~Effective January 1,~~ 2018, we ~~are adopting~~recognized $438 million, $590 million and $565 million, respectively, of expense under our capacity purchase agreement with Republic Airways Inc. (Republic). We hold a 25% equity interest in Republic Airways Holdings Inc. (Republic Holdings), the ~~accounting pronouncements described below. The adoption and related required disclosures will be reported in our first quarter 2018 Quarterly Report on Form 10-Q.~~

~~ASU 2014-09: Revenue from Contracts with Customers (Topic 606) (the New Revenue Standard)~~

The adoption of the New Revenue Standard will impact our accounting for outstanding mileage credits earned through travel by AAdvantage loyalty program members. There is no change in accounting for sales of mileage credits to co-branded card or other partners as those are currently reported in accordance with the New Revenue Standard. Through December 31, 2017, we used the incremental cost method to account for the portion of our loyalty program liability related to mileage credits earned through travel, which were valued based on the estimated incremental cost of carrying one additional passenger (see (i) Loyalty Program above). The New Revenue Standard requires us to change our policy to the deferred revenue method and apply a relative selling price approach whereby a portion of each passenger ticket sale attributable to mileage credits earned is deferred and recognized in passenger revenue upon future mileage redemption. The value of the earned mileage credits is materially greater under the deferred revenue method than the value attributed to these mileage credits under the incremental cost method.

~~See recast 2017 statement of operations and balance sheet data presented below for the expected effects of adoption.~~Republic.

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~~ASU 2017-07: Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (the New Retirement Standard)~~

~~ASU 2016-01: Financial Instruments - Overall (Subtopic 825-10)~~

This ASU makes several modifications to Subtopic 825-10, including the elimination of the available-for-sale classification of equity investments, and it requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. This standard is applied prospectively as of the beginning of the year of adoption. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

~~ASU 2016-18: Statement of Cash Flows (Topic 230): Restricted Cash~~

This ASU requires that the change in total cash, cash at beginning of period and cash at end of period on the statement of cash flows include restricted cash and restricted cash equivalents and also requires companies who report cash and restricted cash separately on the balance sheet to reconcile those amounts to the statement of cash flows. This standard is required to be applied retrospectively, which results in the recast of each prior reporting period statement of cash flows presented. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

~~Impacts to 2017 Results~~

~~The expected effects of adoption of the New Revenue Standard and New Retirement Standard to our statement of operations for the twelve months ended December 31, 2017 are as follows:~~


⁽¹⁾	The adjustment to the 2017 income tax provision includes an $830 million special charge to reduce our deferred tax asset associated with loyalty program liabilities as a result of H.R. 1, the 2017 Tax Cuts and Jobs Act (the 2017 Tax Act), enacted in December 2017 that reduced the federal corporate income tax rate from 35% to 21%.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

~~The expected effects of adoption of the New Revenue Standard to our December 31, 2017 balance sheet are as follows:~~

~~Standards Effective for 2019 Reporting Periods~~

~~ASU 2016-02: Leases (Topic 842) (the New Lease Standard)~~

The New Lease Standard requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the New Revenue Standard. The New Lease Standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We expect we will adopt the New Lease Standard effective January 1, 2019. Entities are required to adopt the New Lease Standard using a modified retrospective approach, which results in the recast of each prior reporting period presented, for all leases existing at or commencing after the date of initial application with an option to use certain practical expedients. We are currently evaluating how the adoption of the New Lease Standard will impact our consolidated financial statements. Interpretations are on-going and could have a material impact on our implementation. Currently, we expect that the adoption of the New Lease Standard will have a material impact on our consolidated balance sheet due to the recognition of right-of-use assets and lease liabilities principally for certain leases currently accounted for as operating leases.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

2. Special Items, Net

Special items, net on ~~the~~our consolidated statements of operations consisted of the following (in millions):

Year Ended December 31,
2017 2016 2015
Merger integration expenses ⁽¹⁾
$ 273
$ 514
$ 826
Fleet restructuring expenses ⁽²⁾
232
177
210
Employee 2017 Tax Act bonus expense ⁽³⁾
123
—
—
Labor contract expenses ⁽⁴⁾
46
—
—
Mark-to-market adjustments for bankruptcy obligations 27
25
(53 )
Other operating charges (credits), net 11
(7 ) 68
Mainline operating special items, net 712
709
1,051
Regional operating special items, net 22
14
29
Operating special items, net 734
723
1,080

Debt refinancing and extinguishment charges 22
49
24
Venezuela foreign currency losses —
—
592
Other nonoperating charges (credits), net —
—
(22 )
Nonoperating special items, net 22
49
594

Impact of the 2017 Tax Act on deferred tax assets and liabilities (7 ) —
—
Release of deferred tax valuation allowance —
—
(3,040 )
Other tax charges —
—
25
Income tax special items, net (7 ) —
(3,015 )


	Year Ended December 31,
	2020		2019		2018
PSP1 Financial Assistance (1)	$	(3,710)	$	0	$	0
Fleet impairment (2)	1,484		213		0
Severance expenses (3)	1,408		11		58
Labor contract expenses (4)	228		0		13
Mark-to-market adjustments on bankruptcy obligations, net (5)	(49)		(11)		(76)
Fleet restructuring expenses (6)	0		271		422
Merger integration expenses (7)	0		191		268
Litigation reserve adjustments	0		(53)		45
Intangible asset impairment (8)	0		0		26
Other operating special items, net	(18)		13		31
Mainline operating special items, net	(657)		635		787

PSP1 Financial Assistance (1)	(444)		0		0
Fleet impairment (2)	117		0		0
Severance expenses (3)	18		0		0
Other operating special items, net	0		6		6
Regional operating special items, net	(309)		6		6
Operating special items, net	(966)		641		793

Mark-to-market adjustments on equity and other investments, net (9)	135		(5)		104
Debt refinancing, extinguishment and other, net	35		8		9


Nonoperating special items, net	170		3		113

Income tax special items (10)	0		0		18

(1)PSP1 Financial Assistance represents recognition of financial assistance received from Treasury pursuant to the PSP1 Agreement. See Note 1(b) for further information.

⁽¹⁾

(2)The 2020 fleet impairment resulted from our decision to retire certain aircraft earlier than planned driven by the severe decline in air travel due to the COVID-19 pandemic. Aircraft retired include Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300, Embraer 190, certain Embraer 140 and Bombardier CRJ200 aircraft. This included a $1.5 billion non-cash write-down of mainline and regional aircraft and spare parts and $109 million in cash charges primarily for impairment of ROU assets and lease return costs. See Note 1(g) for further information related to these charges.

The 2019 fleet impairment principally included a non-cash write-down of aircraft related to the retirement of our Embraer 190 fleet.

The 2019 and 2018 severance expenses primarily included costs associated with reductions of management and support staff team members.

Merger integration expenses included costs related to information technology, professional fees, re-branding of aircraft and airport facilities and training, and in 2016, also included costs related to alignment of labor union contracts, the launch of re-branded uniforms, relocation and severance, and in 2015, also included share-based compensation related to awards granted in connection with the Merger that fully vested in December 2015.


⁽²⁾	Fleet restructuring expenses, driven in part by the Merger, principally included the acceleration of depreciation, impairments, remaining lease payments and lease return costs for aircraft and related equipment grounded or expected to be grounded earlier than planned.


⁽³⁾	~~Employee bonus expense included costs related to the $1,000 cash bonus and associated payroll taxes granted to mainline employees as of December 31, 2017 in recognition of the 2017 Tax Act.~~


⁽⁴⁾	Labor contract expenses primarily included one-time charges to adjust the vacation accruals for pilots and flight attendants as a result of the mid-contract pay rate adjustments effective in the second quarter of 2017.

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(4)The 2020 labor contract expenses primarily related to one-time charges resulting from the ratification of a new contract with the Transport Workers Union and International Association of Machinists & Aerospace Workers (TWU-IAM Association) for our maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.

(5)Bankruptcy obligations that will be settled in shares of AAG common stock are marked-to-market based on AAG’s stock price.

(6)Fleet restructuring expenses principally included accelerated depreciation and rent expense for aircraft and related equipment expected to be retired earlier than planned.

(7)Merger integration expenses included costs associated with integration projects, principally our technical operations, flight attendant, human resources and payroll systems.

(8)Intangible asset impairment included a non-cash charge to write-off our Brazil route authority as a result of the U.S.-Brazil open skies agreement.

(9)Mark-to-market adjustments on equity and other investments, net primarily related to net unrealized gains and losses associated with our equity investment in China Southern Airlines Company Limited (China Southern Airlines) and certain treasury rate lock derivative instruments.

(10)Income tax special items included an $18 million charge related to an international income tax matter.

3. Earnings (Loss) Per Common Share

The following table sets forth the computation of basic and diluted earnings (loss) per common share (EPS) (in millions, except share and per share amounts):


	Year Ended December 31,
	2020		2019		2018
Basic EPS:
Net income (loss)	$	(8,885)	$	1,686	$	1,412
Weighted average common shares outstanding (in thousands)	483,888		443,363		464,236
Basic EPS	$	(18.36)	$	3.80	$	3.04

Diluted EPS:
Net income (loss) for purposes of computing diluted EPS	$	(8,885)	$	1,686	$	1,412
Share computation for diluted EPS (in thousands):
Basic weighted average common shares outstanding	483,888		443,363		464,236
Dilutive effect of stock awards	0		906		1,424
Diluted weighted average common shares outstanding	483,888		444,269		465,660
Diluted EPS	$	(18.36)	$	3.79	$	3.03

Securities that could potentially dilute EPS in the future, and which were excluded from the calculation of diluted EPS because inclusion of such shares would be antidilutive, are as follows (in thousands):


	Year Ended December 31,
	2020	2019	2018
6.50% convertible senior notes	31,882	0	0
Restricted stock unit awards	4,584	2,520	1,266
PSP1 Warrants	349	0	0
Treasury Loan Warrants	107	0	0

109

Year Ended December 31,
2017 2016 2015
Basic EPS:
Net income $ 1,919
$ 2,676
$ 7,610
Weighted average common shares outstanding (in thousands) 489,164
552,308
668,393
Basic EPS $ 3.92
$ 4.85
$ 11.39

Diluted EPS:
Net income for purposes of computing diluted EPS $ 1,919
$ 2,676
$ 7,610
Share computation for diluted EPS (in thousands):
Basic weighted average common shares outstanding 489,164
552,308
668,393
Dilutive effect of stock awards 2,528
3,791
18,962
Diluted weighted average common shares outstanding 491,692
556,099
687,355
Diluted EPS $ 3.90
$ 4.81
$ 11.07

Restricted stock unit awards excluded from the calculation of diluted EPS because inclusion would be antidilutive (in thousands) 328
1,429
764

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

4. Share Repurchase Programs and Dividends

Since July 2014, as part of our capital deployment program, our Board of Directors ~~has~~had approved ~~six~~7 share repurchase programs aggregating ~~$11.0~~$13.0 billion of authority. AsThe $420 million of ~~December 31, 2017, $450 million remained unused~~remaining authority to repurchase shares under aour most recent $2.0 billion share repurchase program ~~that expires~~expired on December 31, ~~2018. Share repurchases~~2020. In connection with our receipt of financial assistance under our repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. Any such repurchases will be made from time to time subject to marketPSP1 and ~~economic conditions, applicable legal requirements and other relevant factors. We are~~PSP2, we agreed not ~~obligated~~ to repurchase ~~any specific number~~shares of ~~shares and our repurchase~~or make dividend payments in respect of AAG common stock ~~may be limited, suspended or discontinued~~through at ~~any time at our discretion.~~least March 31, 2022. In addition, we have entered into the Treasury Loan Agreement, and, as a result, we are further prohibited from repurchasing shares of AAG common stock and paying dividends on AAG common stock through the date that is one year after the secured loan provided under the Treasury Loan Agreement is fully repaid.

~~During the year ended December 31, 2017,~~In 2020, we repurchased ~~33.9~~6.4 million shares of AAG common stock for ~~$1.6~~$145 million at a weighted average cost per share of $22.77, all of which were purchased in the first quarter of 2020. In 2019, we repurchased 33.8 million shares of AAG common stock for $1.1 billion at a weighted average cost per share of ~~$45.68. During the year ended December 31, 2016,~~$32.09. In 2018, we repurchased ~~119.8~~16.6 million shares of AAG common stock for ~~$4.4 billion~~$800 million at a weighted average cost per share of $36.86. During the year ended December 31, 2015, we repurchased 85.1 million shares of AAG common stock for $3.6 billion at a weighted average cost per share of $42.09. Since the inception of the share repurchase programs in July 2014 through December 31, 2017, we have repurchased 262.3 million shares of AAG common stock for $10.6 billion at a weighted average cost per share of $40.22.$48.15.

Our Board of Directors declared quarterly cash dividends of $0.10 per share totaling ~~$198~~$43 million, ~~$224~~$178 million and ~~$269~~$186 million ~~in 2017, 2016~~for 2020, 2019 and ~~2015,~~2018, respectively.

Any future dividends that may be declared and paid from time to time will be subject to market and economic conditions, applicable legal requirements and other relevant factors. We are not obligated to continue a dividend for any fixed period, and the payment

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Table of ~~dividends may be suspended at any time at our discretion.~~

Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

5. Debt

Long-term debt ~~and capital lease obligations~~ included ~~in the~~on our consolidated balance sheets consisted of (in millions):


	December 31,
	2020		2019
Secured
2013 Term Loan Facility, variable interest rate of 1.90%, installments through 2025 (a)	$	1,788	$	1,807
2013 Revolving Facility, variable interest rate of 2.15%, due 2024 (a)	750		0
2014 Term Loan Facility, variable interest rate of 1.90%, installments through 2027 (a)	1,220		1,202
2014 Revolving Facility, variable interest rate of 2.15%, due 2024 (a)	1,643		0
April 2016 Term Loan Facility, variable interest rate of 2.15%, installments through 2023 (a)	960		970
April 2016 Revolving Facility, variable interest rate of 2.15%, due 2024 (a)	450		0
December 2016 Term Loan Facility, variable interest rate of 2.16%, installments through 2023 (a)	1,200		1,213
11.75% senior secured notes, interest only payments until due in July 2025 (b)	2,500		0
10.75% senior secured IP notes, interest only payments until due in February 2026 (b)	1,000		0
10.75% senior secured LGA/DCA notes, interest only payments until due in February 2026 (b)	200		0
Treasury Term Loan Facility, variable interest rate of 3.73%, interest only payments until due June 2025 (c)	550		0
Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 3.00% to 8.39%, averaging 3.98%, maturing from 2021 to 2032 (d)	11,013		11,933
Equipment loans and other notes payable, fixed and variable interest rates ranging from 1.32% to 5.83%, averaging 1.88%, maturing from 2021 to 2032 (e)	4,417		4,727
Special facility revenue bonds, fixed interest rates ranging from 5.00% to 8.00%, maturing from 2021 to 2036 (f)	1,064		754

	28,755		22,606
Unsecured
PSP1 Promissory Note (g)	1,765		0
6.50% convertible senior notes, interest only payments until due in July 2025 (h)	1,000		0
5.000% senior notes, interest only payments until due in June 2022 (i)	750		750
3.75% senior notes, interest only payments until due in March 2025 (i)	500		0
4.625% senior notes	0		500
	4,015		1,250
Total long-term debt	32,770		23,856
Less: Total unamortized debt discount, premium and issuance costs	749		211
Less: Current maturities	2,697		2,749
Long-term debt, net of current maturities	$	29,324	$	20,896

December 31,
2017 2016
Secured
2013 Credit Facilities, variable interest rate of 3.55%, installments through 2020 ^(a)
$ 1,825
$ 1,843
2014 Credit Facilities, variable interest rate of 3.43%, installments through 2021 ^(a)
728
735
April 2016 Credit Facilities, variable interest rate of 3.57%, installments through 2023 ^(a)
990
1,000
December 2016 Credit Facilities, variable interest rate of 3.48%, installments through 2023 ^(a)
1,238
1,250
Aircraft enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 3.00% to 9.75%, averaging 4.30%, maturing from 2018 to 2029 ^(b)
11,881
10,912
Equipment loans and other notes payable, fixed and variable interest rates ranging from 2.34% to 8.48%, averaging 3.29%, maturing from 2018 to 2029 ^(c)
5,259
5,343
Special facility revenue bonds, fixed interest rates ranging from 5.00% to 8.00%, maturing from 2018 to 2035 857
891
Other secured obligations, fixed interest rates ranging from 3.81% to 12.24%, maturing from 2018 to 2028 773
849
23,551
22,823
Unsecured
5.50% senior notes, interest only payments until due in 2019 ^(d)
750
750
6.125% senior notes, interest only payments until due in 2018 ^(d)
500
500
4.625% senior notes, interest only payments until due in 2020 ^(d)
500
500
1,750
1,750
Total long-term debt and capital lease obligations 25,301
24,573
Less: Total unamortized debt discount, premium and issuance costs 236
229
Less: Current maturities 2,554
1,855
Long-term debt and capital lease obligations, net of current maturities $ 22,511
$ 22,489

~~The table below shows~~As of December 31, 2020, the maximum availability under ~~revolving credit~~our Treasury Term Loan Facility and other facilities ~~all of which were undrawn,~~is as ~~of December 31, 2017~~follows (in millions):





Treasury Term Loan Facility	$	6,950
Short-term Revolving and Other Facilities	446
Total	$	7,396

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

2013 Revolving Facility $ 1,200
2014 Revolving Facility 1,000
April 2016 Revolving Facility 300
Total $ 2,500
Pursuant to the Treasury Loan Agreement, at December 31, 2020, American had a $7.5 billion Treasury Term Loan Facility of which it has drawn $550 million. In addition, American has an undrawn $400 million short-term revolving credit facility it entered into in December 2019, which was set to expire at the end of December 2020 but which has been extended through the beginning of July 2021. American also currently has approximately $46 million of available borrowing base under a cargo receivables facility that was entered into in December 2020. The December 2016 Credit Facilities provide for a revolving credit facility that may be established thereunder in the future.

Secured financings are collateralized by assets, consisting primarily of aircraft, engines, simulators, aircraft spare parts, airport gate leasehold rights, route authorities, airport slots and airport slots. At December 31, 2017, we were operating 33 aircraft under capital leases. Leases can generally be renewed at rates based on fair market value at the end of the lease term for a number of additional years.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

certain pre-delivery payments, as well as certain intellectual property and loyalty program assets.

At December 31, ~~2017,~~2020, the maturities of long-term debt ~~and capital lease obligations~~ are as follows (in millions):

2018 $ 2,598
2019 2,868
2020 4,069
2021 2,856
2022 1,288
2023 and thereafter 11,622
Total $ 25,301


2021	$	2,751
2022	2,424
2023	4,164
2024	4,403
2025	7,924
2026 and thereafter	11,104
Total	$	32,770

(a) 2013, 2014, April 2016 and December 2016 Credit Facilities

2013 Credit Facilities

In ~~March 2017,~~November 2019, American and AAG entered into the ~~Second~~Sixth Amendment to ~~the~~ Amended and Restated Credit and Guaranty Agreement, amending the Amended and Restated Credit and Guaranty Agreement dated as of May 21, 2015 ~~(which amended and restated the Credit and Guaranty Agreement dated as of June 27, 2013), as~~(as previously amended, by the ~~First Amendment to Amended and Restated~~2013 Credit ~~and Guaranty Agreement dated as of October 26, 2015, pursuant to which AAG refinanced~~Agreement; the ~~$1.8 billion~~revolving credit facility established thereunder, the 2013 Revolving Facility; the term loan facility ~~due June 2020~~ established thereunder, ~~(the~~the 2013 Term Loan Facility; and the 2013 Revolving Facility together with the 2013 Term Loan Facility, ~~and, together with the $1.4 billion revolving credit facility established under such agreement (the 2013 Revolving Facility),~~ the 2013 Credit Facilities), which reduced the total aggregate commitments under the 2013 Revolving Facility to ~~reduce~~$750 million from $1.0 billion. In addition, certain lenders party to the 2013 Credit Agreement extended the maturity date of their commitments under the 2013 Revolving Facility to October 2024 from October 2023.

In April 2020, American borrowed $750 million under the 2013 Revolving Facility. The 2013 Revolving Facility bears interest at LIBOR plus a margin ~~from 2.50% to~~of 2.00% and has a final maturity date of October 2024. Following the ~~base rate margin from 1.50% to 1.00%.~~April draw, American had 0 remaining borrowing capacity available under the 2013 Revolving Facility.

2014 Credit Facilities

In ~~August 2017,~~November 2019, American and AAG entered into the ~~Third~~Seventh Amendment to the Amended and Restated Credit and Guaranty Agreement pursuant to which the maturity date of the 2013 Revolving Facility was extended to October 2022, the LIBOR margin thereon was reduced from 3.00% to 2.25%, and the maximum principal amount of such facility was reduced to $1.2 billion.

~~2014 Credit Facilities~~

~~In June 2017, American and AAG entered into the Third Amendment to the~~ Amended and Restated Credit and Guaranty Agreement, amending the Amended and Restated Credit and Guaranty Agreement dated as of April 20, 2015 ~~(which amended and restated the Credit and Guaranty Agreement dated as of October 10, 2014), as~~(as previously amended, by the ~~First Amendment to Amended and Restated~~2014 Credit ~~and Guaranty Agreement dated as of October 26, 2015 and~~Agreement; the ~~Second Amendment to Amended and Restated Credit and Guaranty Agreement dated as of September 22, 2016, pursuant to which AAG refinanced~~revolving credit facility established thereunder, the ~~$735 million~~2014 Revolving Facility; the term loan facility ~~due October 2021~~ established thereunder, ~~(the~~the 2014 Term Loan Facility; and the 2014 Revolving Facility together with the 2014 Term Loan Facility, ~~and, together with the $1.025 billion revolving credit facility established under such agreement (the 2014 Revolving Facility),~~ the 2014 Credit Facilities), which increased the total aggregate commitments under the 2014 Revolving Facility to ~~reduce~~$1.6 billion from $1.5 billion. In addition, certain lenders party to the ~~LIBOR margin~~2014 Credit Agreement extended the maturity date of their commitments under the 2014 Revolving Facility to October 2024 from ~~2.50% to 2.00% and the base rate margin from 1.50% to 1.00%.~~October 2023.

In ~~August 2017,~~January 2020, American and AAG entered into the ~~Fourth~~Eighth Amendment to the ~~Amended and Restated~~2014 Credit ~~and Guaranty~~ Agreement, pursuant to which American refinanced the 2014 Term Loan Facility, increasing the total aggregate principal amount outstanding to $1.2 billion, reducing the LIBOR margin from 2.00% to 1.75%, with a LIBOR floor of 0%, and reducing the base rate margin from 1.00% to 0.75%. In addition, the maturity date offor the 2014 ~~Revolving~~Term Loan Facility was extended to January 2027 from October ~~2022,~~2021.

In April and May 2020, American borrowed, in aggregate, $1.6 billion under the 2014 Revolving Facility. The 2014 Revolving Facility bears interest at LIBOR plus a margin ~~thereon was reduced from 3.00% to 2.25%,~~of 2.00% and has a final maturity date of October 2024. Following the ~~maximum principal amount~~April and May draws, American had 0 remaining borrowing capacity available under the 2014 Revolving Facility.

112

Table of ~~such facility was reduced to $1.0 billion.~~Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

April 2016 Credit Facilities

In ~~August 2017,~~November 2019, American and AAG entered into the ~~Second~~Fifth Amendment to ~~the~~ Credit and Guaranty Agreement, amending the Credit and Guaranty Agreement dated as of April 29, 2016 ~~(the~~(as previously amended, the April 2016 Credit Agreement; the revolving credit facility established thereunder, the April 2016 Revolving Facility; the term loan facility established thereunder, the 2016 Term Loan Facility; and the April 2016 Revolving Facility together with the 2016 Term Loan Facility, the April 2016 Credit Facilities), ~~as previously amended by~~which increased the ~~First Amendment to~~total aggregate commitments under the ~~Credit and Guaranty Agreement, dated as of October 31, 2016, pursuant to which a new $300 million revolving credit facility (the~~ April 2016 Revolving ~~Facility) was established with~~Facility to $450 million from $300 million. In addition, certain lenders party to the April 2016 Credit Agreement extended the maturity date of their commitments under the April 2016 Revolving Facility to October 2024 from October 2023.

In April 2020, American borrowed $450 million under the April 2016 Revolving Facility. The April 2016 Revolving Facility bears interest at LIBOR plus a margin of 2.00% and has a final maturity date of October ~~2022 and a LIBOR margin of 2.25%.~~

~~In November 2017,~~2024. Following the April draw, American ~~and AAG entered into the Third Amendment to the Credit and Guaranty Agreement, amending~~had 0 remaining borrowing capacity available under the April 2016 Credit Facilities, pursuant to which AAG refinanced the $990 million term loan facility due April 2023 established thereunder (the April 2016 Term Loan Facility), to reduce the LIBOR margin from 2.50% to 2.00% and the base rate margin from 1.50% to 1.00%.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

Revolving Facility.

December 2016 Credit Facilities

In ~~November 2017,~~December 2016, American and AAG entered into ~~the First Amendment to the Amended and Restated Credit and Guaranty Agreement, amending~~ the Amended and Restated Credit and Guaranty Agreement, dated as of December 15, 2016 ~~pursuant to which AAG refinanced~~(as amended, the ~~$1.25 billion~~December 2016 Credit Agreement; the term loan facility ~~due December 2023~~ established thereunder, ~~(the~~the December 2016 Term Loan ~~Facility), to reduce~~Facility; and together with the ~~LIBOR margin from 2.50% to 2.00% and~~revolving credit facility that may be established thereunder in the ~~base rate margin from 1.50% to 1.00%~~future, the December 2016 Credit Facilities).

Certain details of our 2013 Credit Facilities, 2014 Credit Facilities, April 2016 Credit Facilities and December 2016 Credit Facilities (collectively referred to as the Credit Facilities) are shown in the table below as of December 31, ~~2017:~~2020:


	2013 Credit Facilities		2014 Credit Facilities		April 2016 Credit Facilities		December 2016 Credit Facilities		2013 Credit Facilities		2014 Credit Facilities		April 2016 Credit Facilities		December 2016 Credit Facilities
	2013 Term Loan	2013 Revolving Facility	2014 Term Loan	2014 Revolving Facility	April 2016 Term Loan	April 2016 Revolving Facility	December 2016 Term Loan		2013 Term Loan	2013 Revolving Facility	2014 Term Loan	2014 Revolving Facility	April 2016 Term Loan	April 2016 Revolving Facility	December 2016 Term Loan
Aggregate principal issued or credit facility availability (in millions)	$1,900	$1,200	$750	$1,000	$1,000	$300	$1,250	Aggregate principal issued or credit facility availability (in millions)	$1,919	$750	$1,280	$1,643	$1,000	$450	$1,250
Principal outstanding or drawn (in millions)	$1,825	$—	$728	$—	$990	$—	$1,238	Principal outstanding or drawn (in millions)	$1,788	$750	$1,220	$1,643	$960	$450	$1,200
Maturity date	June 2020	October 2022	October 2021	October 2022	April 2023	October 2022	December 2023	Maturity date	June 2025	October 2024	January 2027	October 2024	April 2023	October 2024	December 2023
LIBOR margin	2.00%	2.25%	2.00%	2.25%	2.00%	2.25%	2.00%	LIBOR margin	1.75%	2.00%	1.75%	2.00%	2.00%	2.00%	2.00%

The ~~Term Loans~~term loans under each of the Credit Facilities are repayable in annual installments in an amount equal to 1.00% of the aggregate principal amount issued, with any unpaid balance due on the respective maturity dates. Voluntary prepayments may be made by American at any time.

The 2013 Revolving Facility, 2014 Revolving Facility and April 2016 Revolving ~~Facilities~~Facility provide that American may from time to time borrow, repay and reborrow loans thereunder. The 2013 Revolving Facility and 2014 Revolving ~~Facilities~~Facility have the ability to issue letters of credit thereunder in an aggregate amount outstanding at any time up to ~~$150~~$100 million and ~~$300~~$200 million,, respectively. The 2013 Revolving Facility, 2014 Revolving Facility and April 2016 Revolving ~~Facilities~~Facility are each subject to an undrawn annual fee of ~~0.75%~~0.63%. As of December 31, 2017, there were no borrowings or letters of credit outstanding under the 2013, 2014 or April 2016 Revolving Facilities. The December 2016 Credit Facilities provide for a revolving credit facility that may be established in the future.

Subject to certain limitations and exceptions, the Credit Facilities are secured by collateral, including certain spare parts, ~~certain~~ slots, ~~certain~~ route authorities, ~~certain~~ simulators and ~~certain~~ leasehold rights. American has the ability to make future modifications to the collateral pledged, subject to certain restrictions. American’s obligations under the Credit Facilities are guaranteed by AAG. American is required to maintain a certain minimum ratio of appraised value of the collateral to the outstanding loans as further described below in “~~Collateral-Related~~Certain Covenants.”

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

2016 Credit Facilities. The Credit Facilities also include covenants that, among other things, require AAG to maintain ~~a minimum~~an aggregate ~~liquidity (as defined in the Credit Facilities)~~ of ~~not less than~~at least $2.0 billion of unrestricted cash and cash equivalents and amounts available to be drawn under revolving credit facilities and limit the ability of AAG and its restricted subsidiaries to pay dividends and make certain other payments, make certain investments, incur additional indebtedness, incur liens on the collateral, dispose of the collateral, enter into certain affiliate transactions and engage in certain business activities, in each case subject to certain exceptions.

Delayed Draw Term Loan Credit Facility

In March 2020, American and AAG entered into a Credit and Guaranty Agreement which provided for a $1.0 billion senior secured delayed draw term loan credit facility (the Delayed Draw Term Loan Credit Facility), which was scheduled to be due and payable in a single installment on the maturity date in March 2021. In connection with the issuance of the 11.75% senior secured notes due 2025, as described below, the Delayed Draw Term Loan Credit Facility was repaid and the Delayed Draw Term Loan Credit Facility and all of the security documents and other loan documents related thereto were terminated as of June 30, 2020.

(b) Senior Secured Notes

11.75% Senior Secured Notes

In June 2020, American issued $2.5 billion aggregate principal amount of 11.75% senior secured notes due 2025 (the 11.75% Senior Secured Notes) at a price equal to 99% of their aggregate principal amount. The 11.75% Senior Secured Notes bear interest at a rate of 11.75% per annum (subject to increase if the collateral coverage ratio described below is not met). Interest on the 11.75% Senior Secured Notes is payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2021. The 11.75% Senior Secured Notes will mature on July 15, 2025. The obligations of American under the 11.75% Senior Secured Notes are fully and unconditionally guaranteed on a senior unsecured basis by AAG. The proceeds from the 11.75% Senior Secured Notes were used to repay and terminate the Delayed Draw Term Loan Credit Facility (and to terminate all security documents and all other loan documents related thereto) with the remaining amount for general corporate purposes and to enhance our liquidity position.

The 11.75% Senior Secured Notes were issued pursuant to an indenture, dated as of June 30, 2020 (the 11.75% Senior Secured Notes Indenture), by and among American, AAG and Wilmington Trust, National Association, as trustee (the 11.75% Senior Secured Notes Trustee). The 11.75% Senior Secured Notes are American’s senior secured obligations. Subject to certain limitations and exceptions, the 11.75% Senior Secured Notes are secured on a first-lien basis by security interests in certain assets, rights and properties utilized by American in providing its scheduled air carrier services to and from certain airports in the United States and certain airports in Australia, Canada, the Caribbean, Central America, China, Hong Kong, Japan, Mexico, South Korea, and Switzerland (collectively, the First Lien 11.75% Senior Secured Notes Collateral). American’s obligations with respect to the 11.75% Senior Secured Notes are also secured on a second-lien basis by security interests in certain assets, rights and properties utilized by American in providing its scheduled air carrier services to and from certain airports in the United States and certain airports in the European Union and the United Kingdom (collectively, the Second Lien 11.75% Senior Secured Notes Collateral and together with the First Lien 11.75% Senior Secured Notes Collateral, the 11.75% Senior Secured Notes Collateral). American may be required to pledge additional collateral in the future under the terms of the 11.75% Senior Secured Notes, and in certain circumstances may elect to pledge additional collateral as a replacement for existing collateral. The Second Lien 11.75% Senior Secured Notes Collateral also secures the 2014 Credit Facilities on a first-lien basis.

American may redeem the 11.75% Senior Secured Notes, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the 11.75% Senior Secured Notes being redeemed plus a make whole premium, together with accrued and unpaid interest thereon, if any, to (but not including) the redemption date.

In the event of a specified change of control, each holder of 11.75% Senior Secured Notes may require American to repurchase its 11.75% Senior Secured Notes in whole or in part at a repurchase price of 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to (but not including) the repurchase date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

American is required to deliver an appraisal of the First Lien 11.75% Senior Secured Notes Collateral and officer’s certificate on a semi-annual basis demonstrating the calculation of a collateral coverage ratio in relation to the First Lien 11.75% Senior Secured Notes Collateral as of the end of each semi-annual period based on such appraisal. If American fails to deliver the officer’s certificate in a timely manner or the collateral coverage ratio is less than 1.6 to 1.0 as of the end of the semi-annual period, then, subject to an opportunity to cure the deficiency in the collateral coverage ratio, American will be required to pay special interest in an additional amount equal to 2.0% per annum of the outstanding principal amount of the 11.75% Senior Secured Notes until the collateral coverage ratio is established to be at least 1.6 to 1.0.

The 11.75% Senior Secured Notes Indenture contains covenants that, among other things, restrict the ability of AAG and the ability of its restricted subsidiaries (including American) to: (i) pay dividends, redeem or repurchase stock or make other distributions or restricted payments, (ii) incur liens on the 11.75% Senior Secured Notes Collateral and dispose of or release the 11.75% Senior Secured Notes Collateral, (iii) repay subordinated indebtedness, (iv) make certain loans and investments, (v) incur indebtedness or issue preferred stock, (vi) merge, consolidate or sell assets, (vii) undergo certain change of control transactions, and (viii) designate subsidiaries as unrestricted. These covenants are subject to a number of important exceptions and qualifications set forth in the 11.75% Senior Secured Notes Indenture.

Upon the occurrence of any event of default (other than certain bankruptcy or insolvency or reorganization events affecting AAG or certain of its subsidiaries, including American), the 11.75% Senior Secured Notes may be declared to be due and payable immediately. Upon the occurrence of certain bankruptcy, insolvency or reorganization events affecting American or certain of its subsidiaries (including American), all outstanding 11.75% Senior Secured Notes will become due and payable immediately without further action or notice on the part of the 11.75% Senior Secured Notes Trustee or any holder of the 11.75% Senior Secured Notes.

10.75% Senior Secured Notes

On September 25, 2020 (the 10.75% Senior Secured Notes Closing Date), American issued $1.0 billion in initial principal amount of senior secured IP notes (the IP Notes) and $200 million in initial principal amount of senior secured LGA/DCA notes (the LGA/DCA Notes and together with the IP Notes, the 10.75% Senior Secured Notes). The obligations of American under the 10.75% Senior Secured Notes are fully and unconditionally guaranteed (the 10.75% Senior Secured Notes Guarantees) on a senior unsecured basis by AAG. The 10.75% Senior Secured Notes bear interest at a rate of 10.75% per annum in cash. For any interest period on or prior to September 1, 2022, American may, at its election, pay interest at a rate of 12.00% per annum payable one-half in cash and one-half in kind. Interest on the 10.75% Senior Secured Notes is payable semiannually in arrears on September 1 and March 1 of each year, beginning on March 1, 2021. The 10.75% Senior Secured Notes will mature on February 15, 2026.

The proceeds from the 10.75% Senior Secured Notes were used to pay transaction-related fees and expenses and for general corporate purposes.

The 10.75% Senior Secured Notes were each issued pursuant to a separate indenture, dated as of September 25, 2020 (individually, the IP Notes Indenture and the LGA/DCA Notes Indenture and collectively, the 10.75% Senior Secured Notes Indentures), by and among American, AAG and Wilmington Trust, National Association, as trustee and as collateral trustee (the 10.75% Senior Secured Notes Trustee). The IP Notes are secured by a first lien security interest on certain intellectual property of American, including the “American Airlines” trademark and the “aa.com” domain name in the United States and certain foreign jurisdictions (the IP Collateral), and a second lien on certain slots related to American’s operations at New York LaGuardia and Ronald Reagan Washington National airports and certain other assets (the LGA/DCA Collateral and together with the IP Collateral, the 10.75% Senior Secured Notes Collateral). Subject to certain conditions, American will be permitted to incur up to $4.0 billion of additional pari passu debt and unlimited second lien debt secured by the IP Collateral securing the IP Notes. The LGA/DCA Notes are secured by a first lien security interest in the LGA/DCA Collateral. American may be required to pledge additional collateral in the future under the terms of the 10.75% Senior Secured Notes, and in certain circumstances may elect to pledge additional collateral including as a replacement for existing collateral. The LGA/DCA Collateral also secures on a first-lien basis the December 2016 Credit Facilities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

Secured Notes redeemed, together with accrued and unpaid interest thereon, if any. After the fifth anniversary of the 10.75% Senior Secured Notes Closing Date, American may redeem all or any part of the 10.75% Senior Secured Notes, at its option, at par, together with accrued and unpaid interest thereon, if any.

In the event of a specified change of control, each holder of 10.75% Senior Secured Notes may require American to repurchase its 10.75% Senior Secured Notes, in whole or in part, at a repurchase price of 101% of the aggregate principal amount of the 10.75% Senior Secured Notes so repurchased, plus accrued and unpaid interest thereon, if any, to (but not including) the repurchase date.

The 10.75% Senior Secured Notes Indentures contain covenants that, among other things, restrict the ability of AAG and the ability of its restricted subsidiaries (including American) to: (i) pay dividends, redeem or repurchase stock or make other distributions or restricted payments, (ii) incur liens on the 10.75% Senior Secured Notes Collateral and dispose of or release the 10.75% Senior Secured Notes Collateral, (iii) repay subordinated indebtedness, (iv) make certain loans and investments, (v) incur indebtedness or issue preferred stock, (vi) merge, consolidate or sell assets, and (vii) designate subsidiaries as unrestricted. In addition, the 10.75% Senior Secured Notes Indentures include covenants that require AAG to maintain (a) an aggregate of at least $2.0 billion of unrestricted cash and cash equivalents and amounts available to be drawn under revolving credit facilities and (b) ~~EETCs~~a certain minimum ratio of appraised value of the collateral to outstanding debt secured thereby on a first lien basis as further described below in “Certain Covenants.” These covenants are subject to a number of important exceptions and qualifications set forth in the 10.75% Senior Secured Notes Indentures.

~~2016-3 EETCs~~Upon the occurrence of any event of default (other than certain bankruptcy or insolvency or reorganization events affecting AAG or certain of its subsidiaries, including American), the 10.75% Senior Secured Notes may be declared to be due and payable immediately. Upon the occurrence of certain bankruptcy, insolvency or reorganization events affecting AAG or certain of its subsidiaries (including American), all outstanding 10.75% Senior Secured Notes will become due and payable immediately without further action or notice on the part of the 10.75% Senior Secured Notes Trustee or any holder of the 10.75% Senior Secured Notes.

~~During~~(c) Treasury Loan Agreement

On September 25, 2020, American and AAG entered into a Loan and Guarantee Agreement (the Treasury Loan Agreement) with Treasury, which provided for a secured term loan facility (the Treasury Term Loan Facility) that permitted American to borrow up to $5.5 billion. Subsequently, on October 21, 2020, American and AAG entered into an amendment to the Treasury Loan Agreement, which increased the borrowing amount to up to $7.5 billion.

As of December 31, 2020, American had borrowed $550 million under the Treasury Term Loan Facility and may, at its option, borrow additional amounts in up to 2 subsequent borrowings until March 26, 2021. Subsequently, on January 15, 2021, American and AAG entered into an amendment to the Treasury Loan Agreement, which extended this deadline to May 28, 2021. The proceeds from the Treasury Term Loan Facility were, and will be, used for certain general corporate purposes and operating expenses in accordance with the terms and conditions of the Treasury Loan Agreement and the applicable provisions of the CARES Act.

The Treasury Term Loan Facility bears interest at a variable rate per annum equal to (a)(i) the LIBOR rate divided by (ii) one minus the Eurodollar Reserve Percentage plus (b) 3.50%. Accrued interest on the loans will be payable in arrears on the first ~~quarter~~business day following the 14th day of ~~2017,~~each March, June, September and December, beginning with September 15, 2021, and on June 30, 2025 (the Treasury Term Loan Maturity Date). As of December 31, 2020, the applicable interest rate for the $550 million loan drawn under the Treasury Term Loan Facility was 3.73% per annum through September 15, 2021, at which time the interest rate will reset.

All advances under the Treasury Term Loan Facility will be in the form of term loans, all ~~remaining net~~of which will mature and be due and payable in a single installment on the Treasury Term Loan Maturity Date. American may, at any time and from time to time, voluntarily prepay amounts outstanding under the Treasury Loan Agreement, in whole or in part, without penalty or premium. Amounts prepaid may not be reborrowed. Mandatory prepayments of loans under the Treasury Term Loan Facility are required, without penalty or premium, to the extent necessary to comply with American's covenants regarding the expiry of certain agreements constituting Treasury Collateral (as defined below), the debt service coverage ratio, certain dispositions of Treasury Collateral, certain debt issuances secured by liens on the Treasury Collateral and certain indemnity, termination, liquidated damages or insurance payments related to the Treasury Collateral, in addition to the occurrence of a change in control of AAG.

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American's obligations under the Treasury Loan Agreement are secured by a first priority security interest on American's rights under U.S. co-branded credit card agreements and certain other loyalty program partner participation agreements (including rights to receive cash flows thereunder), documents, deposit accounts, securities accounts, books and records and intellectual property related to American's AAdvantage loyalty program and all proceeds, accessions, rents or profits related to the foregoing (collectively, the Treasury Collateral). American is permitted under the Treasury Loan Agreement to add certain types of assets to the Treasury Collateral and, subject to certain conditions, release Treasury Collateral, in each case from time to time at its discretion.

The Treasury Loan Agreement requires American, under certain circumstances, including within 10 business days prior to the last business day of March and September of each year, beginning March 2021, to appraise the value of the Treasury Collateral and recalculate the collateral coverage ratio. If the calculated collateral coverage ratio is less than 1.6 to 1.0, American will be required either to provide additional Treasury Collateral (which may include cash collateral) to secure its obligations under the Treasury Loan Agreement or repay the term loans under the Treasury Term Loan Facility, in such amounts that the recalculated collateral coverage ratio, after giving effect to any such additional Treasury Collateral or repayment, is at least 1.6 to 1.0.

The Treasury Loan Agreement also requires American to calculate the debt service coverage ratio on a quarterly basis. If the calculated debt service coverage ratio is less than 1.75 to 1.00, then AAG and its subsidiaries will be required to place an amount equal to at least 50% of certain revenues received from the AAdvantage loyalty program (the Loyalty Program Revenues) into a blocked account to be held for the benefit of the lenders who may choose to use such funds to prepay the outstanding term loans until the debt service coverage ratio is recalculated to be greater than or equal to 1.75 to 1.00. If the calculated debt service coverage ratio is less than or equal to 1.50 to 1.00, but greater than 1.25 to 1.00, then all amounts previously deposited into the blocked account will be used to prepay outstanding term loans and an amount equal to at least 50% of all future Loyalty Program Revenues will be transferred into the payment account and used to prepay outstanding term loans until the debt service coverage ratio is recalculated to be greater than 1.50 to 1.00. If the calculated debt service coverage ratio is less than or equal to 1.25 to 1.00, then all amounts previously deposited into the blocked account will be used to prepay outstanding term loans and an amount equal to at least 75% of all future Loyalty Program Revenues will be transferred into the payment account and used to prepay outstanding term loans until the debt service coverage ratio is recalculated to be greater than 1.25 to 1.00.

The Treasury Loan Agreement also includes affirmative, negative and financial covenants that, among other things, limit AAG's ability to pay dividends, repurchase common stock of AAG or make certain other payments, make certain investments, incur liens on the Treasury Collateral, dispose of the Treasury Collateral, amend material AAdvantage loyalty program agreements, enter into certain affiliate transactions and engage in certain business activities, in each case subject to certain exceptions. In addition, under the Treasury Loan Agreement, AAG must maintain a minimum aggregate liquidity of $2.0 billion.

The Treasury Loan Agreement requires AAG and American to comply with the relevant provisions of the CARES Act and the Treasury Loan Agreement, including, but not limited to, the provisions that prohibit the repurchase of AAG’s common stock, the payment of common stock dividends and those that restrict the payment of certain executive compensation, in each case, through the date that is 12 months after the date on which all amounts of loan outstanding under the Treasury Term Loan Facility have been repaid in full.

The Treasury Loan Agreement contains events of default, including cross-default with respect to acceleration or failure to pay at maturity other material indebtedness. Upon the occurrence of an event of default and subject to certain grace periods, the outstanding obligations under the Treasury Loan Agreement may be accelerated and become due and payable immediately.

(d) EETCs

2019-1 Aircraft EETCs

In August 2019, American created three pass-through trusts which issued approximately $1.1 billion aggregate face amount of Series ~~2016-3~~2019-1 Class AA, Class A and Class AB EETCs (the ~~2016-3~~2019-1 Aircraft EETCs), in connection with the ~~amount~~financing of ~~$109~~35 aircraft (the 2019-1 Aircraft). In 2019, $804 million ~~were~~of the proceeds had been used to purchase equipment notes issued by American in connection with the financing of ~~two~~28 aircraft under the 2019-1 Aircraft EETCs, of which $608 million was used to repay existing indebtedness. In 2020, the remaining $293 million of the ~~25 aircraft financed under the 2016-3 EETCs (such 25 aircraft, the 2016-3 Aircraft).~~

In October 2017, American created one additional pass-through trust which issued approximately $193 million aggregate principal amount of Series 2016-3 Class B EETCs (the 2016-3 Class B EETCs) in connection with the financing of the 2016-3 Aircraft. The proceeds received from the sale of the 2016-3 Class B EETCs were used on the date of issuance of the 2016-3 Class B EETCs to acquire Series B equipment notes issued by American in connection with the financing of the 2016-3 Aircraft.

Interest and principal payments on equipment notes issued in connection with the 2016-3 EETCs are payable semi-annually in April and October of each year, with interest payments that began in April 2017 and principal payments that began in October 2017 for the Class AA and Class A EETCs and interest and principal payments beginning in April 2018 for the Class B EETCs. These equipment notes are secured by liens on the 2016-3 Aircraft.

~~Certain information regarding the 2016-3 EETC equipment notes, as of December 31, 2017, is set forth in the table below.~~

2016-3 EETCs
Series AA Series A Series B
Aggregate principal issued $558 million $256 million $193 million
Fixed interest rate per annum 3.00% 3.25% 3.75%
Maturity date October 2028 October 2028 October 2025

~~2017-1 EETCs~~

In January 2017, American created three pass-through trusts which issued approximately $983 million aggregate principal amount of Series 2017-1 Class AA, Class A and Class B EETCs (the 2017-1 EETCs) in connection with the financing of 24 aircraft delivered to American through May 2017 (the 2017-1 Aircraft).

~~Certain information regarding the 2017-1 EETC equipment notes, as of December 31, 2017, is set forth in the table below.~~which

117

2017-1 EETCs
Series AA Series A Series B
Aggregate principal issued $537 million $248 million $198 million
Fixed interest rate per annum 3.65% 4.00% 4.95%
Maturity date February 2029 February 2029 February 2025

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

~~2017-2~~principal payments began or are scheduled to begin (i) in the case of equipment notes with respect to any 2019-1 Aircraft owned by American at the time of issuance of the 2019-1 Aircraft EETCs,

~~In August 2017, American created two pass-through trusts which issued approximately $797 million aggregate principal amount~~ in February 2020 and (ii) in the case of ~~Series 2017-2 Class AA~~equipment notes with respect to the Embraer 175 aircraft and ~~Class A EETCs (the 2017-2 EETCs) in connection with~~ the ~~financing of 30~~Airbus A321neo aircraft ~~previously delivered to American or~~ scheduled to be delivered ~~to American through April 2018 (the 2017-2 Aircraft). A portion of~~after the net proceeds received from the sale of the 2017-2 EETCs has been used to acquire Series AA and A equipment notes issued by American to the pass-through trusts and the balance of such proceeds is being held in escrow for the benefit of the holders of the 2017-2 EETCs until such time as American issues additional Series AA and A equipment notes to the pass-through trusts, which trusts will purchase such additional equipment notes with the escrowed funds. These escrowed funds are not guaranteed by American and are not reported as debt on our consolidated balance sheet because the proceeds held by the depository are not American’s assets.

In October 2017, American created one additional pass-through trust which issued approximately $221 million aggregate principal amount of Series 2017-2 Class B EETCs (the 2017-2 Class B EETCs) in connection with the financing of the 2017-2 Aircraft. A portion of the net proceeds received from the sale of the Series 2017-2 Class B EETCs was used on the date of issuance of the ~~2017-2 Class B~~2019-1 Aircraft EETCs, ~~to acquire Series B equipment notes issued by American~~ in ~~connection with the financing of certain 2017-2 Aircraft,~~August 2020 and the balance of such proceeds is being held in escrow for the benefit of the holders of the 2017-2 Class B EETCs until such time as American issues additional Series B equipment notes to the pass-through trust, which will purchase such additional equipment notes with a portion of the escrowed funds. These escrowed funds are not guaranteed by American and are not reported as debt on our consolidated balance sheet because the proceeds held by the depository are not American’s assets.

As of December 31, 2017, approximately $735 million of the escrowed proceeds from the 2017-2 EETCs have been used to purchase equipment notes issued by American. Interest and principal payments on equipment notes issued in connection with the 2017-2 EETCs are payable semi-annually in April and October of each year, with interest payments beginning in April 2018 and principal payments beginning in October 2018. These equipment notes are secured by liens on the aircraft financed with the proceeds of the 2017-2 EETCs.August 2021, respectively.

Certain information regarding the ~~2017-2~~2019-1 Aircraft EETC equipment notes, ~~and the remaining escrowed proceeds of the 2017-2 EETCs,~~ as of December 31, ~~2017,~~2020, is set forth in the table below.

2019-1 Aircraft EETCs

Series AA

Series A

Series B

Aggregate principal issued

$579 million

$289 million

$229 million

Fixed interest rate per annum

3.15%

3.50%

3.85%

Maturity date

February 2032

February 2028

2017-2 EETCs
Series AA Series A Series B
Aggregate principal issued $545 million $252 million $221 million
Remaining escrowed proceeds $152 million $70 million $61 million
Fixed interest rate per annum 3.35% 3.60% 3.70%
Maturity date October 2029 October 2029 October 2025

~~(c)~~(e) Equipment Loans and Other Notes Payable Issued in ~~2017~~2020

In ~~2017,~~2020, American entered into agreements under which it borrowed ~~$1.0 billion~~$307 million in connection with the financing or refinancing, as the case may be, of certain ~~aircraft.~~aircraft and other flight equipment, of which $17 million was used to repay existing indebtedness. Debt incurred under these agreements matures in ~~2027~~2029 through ~~2029~~2032 and bears interest at ~~fixed and~~ variable rates (comprised of LIBOR plus an applicable ~~margin~~margin) averaging ~~3.08%~~2.28% at December 31, ~~2017.~~2020.

~~(d)~~(f) Special Facility Revenue Bonds Issued in 2020

In January 2020, American and British Airways announced the start of construction on a $344 million investment to upgrade New York's John F. Kennedy International Airport (JFK) Terminal 8.

In June 2020, the New York Transportation Development Corporation (NYTDC) issued approximately $360 million of special facility revenue bonds (the 2020 JFK Bonds) on behalf of American. A portion of the net proceeds from the 2020 JFK Bonds have been or will be used to fund costs of issuance of the 2020 JFK Bonds, to fund a substantial portion of the cost of the renovation and expansion of a passenger terminal facility (the Terminal) leased and utilized by American at JFK and to fund the August 2020 maturity of the outstanding bonds issued by NYTDC on behalf of American in 2016 (the 2016 JFK Bonds).

American is required to pay debt service on the 2020 JFK Bonds through payments under a loan agreement with NYTDC (as amended), and American and AAG guarantee the 2020 JFK Bonds. American continues to pay debt service on the outstanding 2016 JFK Bonds and American and AAG continue to guarantee the 2016 JFK Bonds. American’s and AAG’s obligations under these guarantees are secured by a leasehold mortgage on American’s lease of the Terminal and related property from the Port Authority of New York and New Jersey.

(g) PSP1 Promissory Note

In April 2020, as partial compensation to the U.S. Government for the provision of financial assistance under the PSP1 Agreement, AAG issued the PSP1 Promissory Note to Treasury, which provides for our unconditional promise to pay to Treasury 30% of the total amount of financial assistance disbursed under the PSP1 Agreement, and the guarantee of our obligations by the Subsidiaries. The total financial assistance we received pursuant to the PSP1 Agreement is approximately $6.0 billion. As of December 31, 2020, the principal amount of the PSP1 Promissory Note was approximately $1.8 billion.

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The PSP1 Promissory Note bears interest on the outstanding principal amount at a rate equal to 1.00% per annum until the fifth anniversary of the PSP1 Closing Date and 2.00% plus an interest rate based on the secured overnight financing rate per annum or other benchmark replacement rate consistent with customary market conventions (but not to be less than 0.00%) thereafter until the tenth anniversary of the PSP1 Closing Date (the PSP1 Maturity Date), and interest accrued thereon will be payable in arrears on the last business day of March and September of each year, which began on September 30, 2020. The aggregate principal amount outstanding under the PSP1 Promissory Note, together with all accrued and unpaid interest thereon and all other amounts payable under the PSP1 Promissory Note, will be due and payable on the PSP1 Maturity Date.

We may, at any time and from time to time, voluntarily prepay amounts outstanding under the PSP1 Promissory Note, in whole or in part, without penalty or premium. Within 30 days of the occurrence of certain change of control triggering events, we are required to prepay the aggregate outstanding principal amount of the PSP1 Promissory Note at such time, together with any accrued interest or other amounts owing under the PSP1 Promissory Note at such time.

The PSP1 Promissory Note is our senior unsecured obligation and each guarantee of the PSP1 Promissory Note is the senior unsecured obligation of each of the Subsidiaries, respectively.

The PSP1 Promissory Note contains events of default, including cross-default with respect to acceleration or failure to pay at maturity other material indebtedness. Upon the occurrence of an event of default and subject to certain grace periods, the outstanding obligations under the PSP1 Promissory Note may, and in certain circumstances will automatically, be accelerated and become due and payable immediately.

(h) 6.50% Convertible Senior Notes

In June 2020, AAG completed the public offering of $1.0 billion aggregate principal amount of AAG’s 6.50% convertible senior notes due 2025 (the Convertible Notes). The Convertible Notes are fully and unconditionally guaranteed by American on a senior unsecured basis (the Convertible Notes Guarantee). The net proceeds to us from the Convertible Notes were approximately $970 million, after deducting the underwriters’ discounts and commissions and our estimated offering expenses. The net proceeds from the Convertible Notes are being used for general corporate purposes and to enhance our liquidity position. The Convertible Notes were priced to investors in the offering at 100% of their principal amount.

The Convertible Notes were issued pursuant to an indenture, dated as of June 25, 2020 (the Base Indenture), between AAG and Wilmington Trust, National Association as trustee (the Convertible Notes Trustee), as supplemented by that certain first supplemental indenture, dated as of June 25, 2020, among AAG, American and the Convertible Notes Trustee (the Convertible Notes Supplemental Indenture and, together with the Base Indenture, the Convertible Notes Indenture). The Convertible Notes bear interest at a rate of 6.50% per annum. Interest on the Convertible Notes is payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2021. The Convertible Notes will mature on July 1, 2025, unless earlier converted or redeemed or repurchased by us.

Upon conversion, AAG will pay or deliver, as the case may be, cash, shares of AAG common stock or a combination of cash and shares of AAG common stock, at AAG’s election. The initial conversion rate is 61.7284 shares of AAG common stock per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $16.20 per share of AAG common stock). The conversion rate is subject to adjustment in some events as described in the Convertible Notes Indenture.

Holders may convert their Convertible Notes at their option only in the following circumstances: (1) during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on September 30, 2020, if the last reported sale price per share of AAG common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the measurement period) in which the trading price per $1,000 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of AAG common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on AAG common stock; (4) if AAG calls such Convertible Notes for redemption; and (5) at any time from, and including, April 1, 2025 until the close of business on the scheduled trading day immediately before the maturity date of the Convertible Notes.

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In addition, following certain corporate events that occur prior to the maturity date or upon AAG’s issuance of a notice of redemption, AAG will increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such corporate event or during the related redemption period in certain circumstances by a specified number of shares of AAG common stock as described in the Convertible Notes Indenture.

AAG will not have the right to redeem the Convertible Notes prior to July 5, 2023. On or after July 5, 2023 and on or before the 20th scheduled trading day immediately before the maturity date, AAG may redeem the Convertible Notes, in whole or in part, if the last reported sale price of AAG common stock has been at least 130% of the conversion price then in effect on (1) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date AAG sends the related redemption notice; and (2) the trading day immediately before the date AAG sends such notice. In the case of any optional redemption, AAG will redeem the Convertible Notes at a redemption price equal to 100% of the principal amount of such Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If AAG undergoes a fundamental change described in the Convertible Notes Indenture prior to the maturity date of the Convertible Notes, except as described in the Convertible Notes Indenture, holders of the Convertible Notes may require AAG to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Convertible Notes Indenture provides for customary terms and covenants, including that upon certain events of default, either the Convertible Notes Trustee or the holders of not less than 25% in aggregate principal amount of the Convertible Notes then outstanding may declare the unpaid principal amount of the Convertible Notes and accrued and unpaid interest, if any, thereon immediately due and payable. In the case of certain events of bankruptcy, insolvency or reorganization, the principal amount of the Convertible Notes together with accrued and unpaid interest thereon, if any, will automatically become and be immediately due and payable.

As the Convertible Notes can be settled in cash upon conversion, for accounting purposes, the Convertible Notes were bifurcated into a debt component that was recorded at fair value and an equity component. The following table details the debt and equity components recognized related to the Convertible Notes as of December 31, 2020 (in millions):


	December 31, 2020
Principal amount of 6.50% convertible senior notes	$	1,000
Unamortized debt discount	(417)
Net carrying amount of 6.50% convertible senior notes	583
Additional paid-in capital	415

The effective interest rate on the liability component approximates 20%. We recognized $61 million of interest expense in 2020 including $28 million of non-cash amortization of the debt discount and $33 million of contractual coupon interest. The remaining period over which the unamortized debt discount will be recognized as non-cash interest expense is five years as follows: $63 million in 2021, $77 million in 2022, $95 million in 2023, $116 million in 2024 and $66 million in 2025. As previously discussed in Note 1(c), as of January 1, 2021, we early adopted the New Convertible Debt Standard. Accordingly, our unamortized debt discount as of January 1, 2021 was reduced by $389 million and the adjusted non-cash interest expense to be recognized over the next five years is as follows: $5 million in 2021, $6 million in 2022, $6 million in 2023, $7 million in 2024 and $4 million in 2025.

At December 31, 2020, the if-converted value of the Convertible Notes did not exceed the principal amount.

(i) Unsecured Senior Notes

5.000% Senior Notes

In May 2019, AAG issued $750 million aggregate principal amount of 5.000% senior notes due 2022 (the 5.000% Senior Notes). The 5.000% Senior Notes bear interest at a rate of 5.000% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, which began on December 1, 2019. The 5.000% Senior Notes mature in June 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

3.75% Senior Notes

In February 2020, AAG issued $500 million aggregate principal amount of 3.75% senior notes due 2025 (the 3.75% Senior Notes). The 3.75% Senior Notes bear interest at a rate of 3.75% per annum, payable semiannually in arrears in March and September of each year, which began in September 2020. The 3.75% Senior Notes mature in March 2025.

The details of our ~~6.125%~~, ~~5.50%~~5.000% and ~~4.625% senior notes~~3.75% Senior Notes are shown in the table below as of December 31, ~~2017:~~2020:

6.125% Senior Notes 5.50% Senior Notes 4.625% Senior Notes
Aggregate principal issued and outstanding $500 million $750 million $500 million
Maturity date June 2018 October 2019 March 2020
Fixed interest rate per annum 6.125% 5.50% 4.625%
Interest payments Semi-annually in arrears in June and December Semi-annually in arrears in April and October Semi-annually in arrears in March and September

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~


	5.000% Senior Notes	3.75% Senior Notes
Aggregate principal issued and outstanding	$750 million	$500 million
Maturity date	June 2022	March 2025
Fixed interest rate per annum	5.000%	3.75%
Interest payments	Semi-annually in arrears in June and December	Semi-annually in arrears in March and September

The ~~6.125%, 5.50%~~5.000% and ~~4.625% senior notes~~3.75% Senior Notes are senior unsecured obligations of AAG. ~~The senior notes~~These Senior Notes are fully and unconditionally guaranteed by American. The indentures for ~~the senior notes~~these Senior Notes contain covenants and events of default generally customary for similar financings. In addition, if we experience specific kinds of changes of control, we must offer to repurchase ~~the senior notes~~these Senior Notes in whole or in part at a price of 101% of the principal amount plus accrued and unpaid interest thereon, if any, to (but not including) the repurchase date. Upon the occurrence of certain events of default, ~~the senior notes~~these Senior Notes may be accelerated and become due and payable.

Guarantees

As of December 31, ~~2017,~~2020, AAG had issued guarantees covering approximately ~~$810 million of American’s special facility revenue bonds (and interest thereon) and $8.5~~$15.0 billion of American’s secured debt (and interest thereon), including the Credit Facilities and certain EETC ~~financings.~~financings and $1.0 billion of American’s special facility revenue bonds (and interest thereon).

~~Collateral-Related~~Certain Covenants

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

Specifically, we are required to meet certain collateral coverage tests ~~on an annual basis~~ for ~~four credit facilities,~~our Credit Facilities, 10.75% Senior Secured Notes, 11.75% Senior Secured Notes and Treasury Loan Agreement, as described below:

2013 Credit Facilities

2014 Credit Facilities

April 2016

Credit Facilities

December 2016

Credit Facilities

2013 Credit
Facilities

2014 Credit
Facilities

April 2016
Credit Facilities

December 2016
Credit Facilities

10.75% Senior Secured Notes

11.75% Senior Secured Notes

Treasury Loan Agreement

Frequency of Appraisals

of Appraised Collateral

Annual

Frequency of Appraisals of Appraised Collateral

Annual

Semi-Annual

LTV Requirement

1.6x Collateral valuation to amount of debt outstanding (62.5% LTV)

LTV Requirement

1.6x Collateral valuation to amount of debt outstanding (62.5% LTV)

LTV as of Last Measurement Date

33.9%

23.1%

42.7%

59.0%

LTV as of Last Measurement Date

53.1%

44.3%

48.0%

61.2%

35.2%

De Minimis

Collateral Description

Generally, certain slots, route authorities, and airport gate leasehold rights used by American to operate all services between the U.S. and South America

Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate certain services between the U.S. and London Heathrow

Generally, certain spare parts

Generally, certain Ronald Reagan Washington National Airport (DCA) slots, certain La Guardia Airport (LGA) slots, certain simulators and certain leasehold rights

Collateral Description

Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate all services between the U.S. and South America

Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate certain services between the U.S. and European Union (including London Heathrow)

Generally, certain spare parts

Generally, certain Ronald Reagan Washington National Airport (DCA) slots, certain La Guardia Airport (LGA) slots, certain simulators and certain leasehold rights

Generally, certain DCA slots, certain LGA slots, certain simulators and certain leasehold rights and, in the case of the IP Notes, certain intellectual property of American

Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate certain services between the U.S. and the Caribbean, Central America and various other countries

Generally, certain rights under U.S. co-branded credit card agreements and certain other loyalty program agreements and intellectual property related to AAdvantage

At December 31, ~~2017,~~2020, we were in compliance with the applicable collateral coverage tests as of the most recent measurement dates.

6. Leases

We lease certain aircraft and engines, including aircraft under capacity purchase agreements. As of December 31, 2020, we had 641 leased aircraft, with remaining terms ranging from less than one year to 12 years.

At each airport where we conduct flight operations, we have agreements, generally with a governmental unit or authority, for the use of passenger, operations and baggage handling space as well as runways and taxiways. These agreements, particularly in the U.S., often contain provisions for periodic adjustments to rates and charges applicable under such agreements. These rates and charges also vary with our level of operations and the operations of the airport. Because of the variable nature of these rates, these leases are not recorded on our balance sheet as a ROU asset or a lease liability. Additionally, at our hub locations and in certain other cities we serve, we lease administrative offices, catering, cargo, training, maintenance and other facilities.

The components of lease expense were as follows (in millions):


	Year Ended December 31,
	2020		2019		2018
Operating lease cost	$	1,957	$	2,027	$	1,907
Finance lease cost:
Amortization of assets	92		79		78
Interest on lease liabilities	38		43		48
Variable lease cost	1,801		2,558		2,353
Total net lease cost	$	3,888	$	4,707	$	4,386

Included in the table above is $172 million, $236 million and $226 million of operating lease cost under our capacity purchase agreement with Republic for the years ended December 31, 2020, 2019 and 2018, respectively. We hold a 25% equity interest in Republic Holdings, the parent company of Republic.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

Additionally, not included in the table above, we recognized $109 million in cash special charges in 2020 related to the impairment of ROU assets and lease return costs resulting from our decision to retire certain leased aircraft earlier than planned driven by the severe decline in air travel due to the COVID-19 pandemic.

6.Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):


	December 31,
	2020			2019
Operating leases:
Operating lease ROU assets	$	8,039		$	8,737

Current operating lease liabilities	$	1,651		$	1,708
Noncurrent operating lease liabilities	6,777			7,421
Total operating lease liabilities	$	8,428		$	9,129

Finance leases:
Property and equipment, at cost	$	1,021		$	954
Accumulated amortization	(539)			(447)
Property and equipment, net	$	482		$	507

Current finance lease liabilities	$	100		$	112
Noncurrent finance lease liabilities	472			558
Total finance lease liabilities	$	572		$	670

Weighted average remaining lease term (in years):
Operating leases	7.4			7.4
Finance leases	5.4			6.2

Weighted average discount rate:
Operating leases	5.6		%	4.7		%
Finance leases	6.3		%	6.2		%

Supplemental cash flow and other information related to leases was as follows (in millions):


	Year Ended December 31,
	2020		2019		2018
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,028	$	2,013	$	1,931
Operating cash flows from finance leases	39		43		48
Financing cash flows from finance leases	114		83		78

Non-cash transactions:
ROU assets acquired through operating leases	917		1,145		1,292
Operating lease conversion to finance lease	5		41		0
Property and equipment acquired through finance leases	11		20		0

Gain on sale leaseback transactions, net	107		107		59

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

Maturities of lease liabilities were as follows (in millions):


	December 31, 2020
	Operating Leases		Finance Leases
2021	$	1,946	$	131
2022	1,777		136
2023	1,586		114
2024	1,192		120
2025	812		85
2026 and thereafter	3,307		89
Total lease payments	10,620		675
Less: Imputed interest	(2,192)		(103)
Total lease obligations	8,428		572
Less: Current obligations	(1,651)		(100)
Long-term lease obligations	$	6,777	$	472

As of December 31, 2020, we have additional operating lease commitments that have not yet commenced of approximately $1.7 billion for 19 Boeing 787-8 aircraft to be delivered in 2021 with lease terms of 10 years.

7. Income Taxes

The significant components of the income tax provision (benefit) were (in millions):


	Year Ended December 31,
	2020		2019		2018
Current income tax provision (benefit):
State and Local	$	0	$	2	$	3
Foreign	0		8		29
Current income tax provision (benefit)	0		10		32
Deferred income tax provision (benefit):
Federal	(2,335)		498		390
State and Local	(233)		62		50
Deferred income tax provision (benefit)	(2,568)		560		440
Total income tax provision (benefit)	$	(2,568)	$	570	$	472

Year Ended December 31,
2017 2016 2015
Current income tax provision:
Federal $ —
$ —
$ —
State and Local 24
12
20
Current income tax provision 24
12
20
Deferred income tax provision (benefit):
Federal 1,085
1,508
(2,884 )
State and Local 56
103
(130 )
Deferred income tax provision (benefit) 1,141
1,611
(3,014 )
Total income tax provision (benefit) $ 1,165
$ 1,623
$ (2,994 )

The income tax provision (benefit) differed from amounts computed at the statutory federal income tax rate as follows (in millions):


	Year Ended December 31,
	2020		2019		2018
Statutory income tax provision (benefit)	$	(2,405)	$	474	$	396
State income tax provision (benefit), net of federal tax effect	(183)		47		44
Book expenses not deductible for tax purposes	22		31		12
Foreign income taxes, net of federal tax effect	0		8		23
Change in valuation allowance	0		4		(6)

Other, net	(2)		6		3
Income tax provision (benefit)	$	(2,568)	$	570	$	472

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Year Ended December 31,
2017 2016 2015
Statutory income tax provision $ 1,079
$ 1,505
$ 1,616
State income tax provision, net of federal tax effect 61
63
72
Book expenses not deductible for tax purposes 33
34
57
Bankruptcy administration expenses 1
1
3
2017 Tax Act (7 ) —
—
Change in valuation allowance (3 ) 7
(4,742 )
Other, net 1
13
—
Income tax provision (benefit) $ 1,165
$ 1,623
$ (2,994 )
The components of our deferred tax assets and liabilities were (in millions):


	December 31,
	2020		2019
Deferred tax assets:
Operating loss carryforwards and other credits	$	4,027	$	2,103
Loyalty program liability	1,977		1,755
Leases	1,913		2,077
Pensions	1,405		1,229
Postretirement benefits other than pensions	203		145
Rent expense	96		126
Reorganization items	28		30
Alternative minimum tax (AMT) credit carryforwards	0		90
Other	847		613
Total deferred tax assets	10,496		8,168
Valuation allowance	(34)		(34)
Net deferred tax assets	10,462		8,134
Deferred tax liabilities:
Accelerated depreciation and amortization	(5,028)		(5,196)
Leases	(1,818)		(1,979)
Other	(386)		(343)
Total deferred tax liabilities	(7,232)		(7,518)
Net deferred tax asset	$	3,230	$	616

At December 31, 2020, we had approximately $16.5 billion of federal net operating losses (NOLs) available to reduce future federal taxable income, of which $8.5 billion will expire beginning in 2023 if unused and $8.0 billion can be carried forward indefinitely (NOL Carryforwards). We also had approximately $5.0 billion of NOL Carryforwards to reduce future state taxable income at December 31, 2020, which will expire in taxable years 2020 through 2040 if unused.

Our ability to use our NOL Carryforwards depends on the amount of taxable income generated in future periods. We provide a valuation allowance for our deferred tax assets, which include our ~~net operating losses (NOLs),~~NOLs, when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized. ~~The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.~~ We consider all available positive and negative evidence and make certain assumptions in evaluating the realizability of our deferred tax assets. Many factors are considered that impact our assessment of future profitability, including conditions which are beyond our control, such as the health of the economy, the ~~level~~availability and price volatility of aircraft fuel ~~prices~~ and travel demand.

In connection with the preparation of our financial statements at the end of 2015, we determined that after considering all positive and negative evidence, including the completion of certain critical Merger integration milestones as well as our financial performance, it was more likely than not that substantially all of our deferred income tax assets, which include our NOLs, would be realized. Accordingly, during the year ended December 31, 2015, we reversed $3.0 billion of the We presently have a $34 million valuation allowance ~~which resulted in a special non-cash tax benefit recorded in the consolidated statement of operations.~~

In addition to the changes in the valuation allowance from operations described above, the valuation allowance was also impacted by the changes in the components of accumulated other comprehensive income (loss), described in Note 10. The total increase to the valuation allowance was $7 million in 2017, $10 million of which is included in the 2017 Tax Act amount in the table above. In 2016, the total increase to the valuation allowance was $7 million and in 2015, the total decrease to the valuation allowance was $4.8 billion.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

~~The components of our~~on certain net deferred tax assets ~~and liabilities were (in millions):~~related to state NOL Carryforwards. There can be no assurance that an additional valuation allowance on our net deferred tax assets will not be required. Such valuation allowance could be material.

December 31,
2017 2016
Deferred tax assets:
Operating loss carryforwards $ 2,281
$ 3,853
Pensions 1,559
2,610
Loyalty program liability 420
485
Alternative minimum tax (AMT) credit carryforwards 344
344
Postretirement benefits other than pensions 170
291
Rent expense 160
256
Gains from lease transactions 107
213
Reorganization items 35
53
Other 678
972
Total deferred tax assets 5,754
9,077
Valuation allowance (36 ) (29 )
Net deferred tax assets 5,718
9,048

Deferred tax liabilities:
Accelerated depreciation and amortization (5,045 ) (7,216 )
Other (279 ) (345 )
Total deferred tax liabilities (5,324 ) (7,561 )
Net deferred tax asset $ 394
$ 1,487

At December 31, 2017, we had approximately $10.0 billion of federal NOLs carried over from prior taxable years (NOL Carryforwards) to reduce future federal taxable income, substantially all of which we expect to be available for use in 2018. The federal NOL Carryforwards will expire beginning in 2022 if unused. We also had approximately $3.4 billion of NOL Carryforwards to reduce future state taxable income at December 31, 2017, which will expire in years 2018 through 2037 if unused. Our ability to deduct our NOL Carryforwards and to utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 where an “ownership change” has occurred. Substantially all of our remaining federal NOL Carryforwards attributable to US Airways Group are subject to limitation under Section 382; however, our ability to utilize such NOL Carryforwards is not anticipated to be effectively constrained as a result of such limitation. We elected to be covered by certain special rules for federal income tax purposes that permitted approximately $9.0 billion (with $8.4 billion of unlimited NOL still remaining at December 31, 2017) of our federal NOL Carryforwards to be utilized without regard to the annual limitation generally imposed by Section 382. Similar limitations may apply for state income tax purposes. Our ability to utilize any new NOL Carryforwards arising after the ownership changes is not affected by the annual limitation rules imposed by Section 382 unless another ~~future~~ ownership change occurs. Under the Section 382 limitation, cumulative stock ownership changes among material stockholders exceeding 50% during a rolling three-year period can potentially limit ~~a company’s~~our future use of NOLs and tax credits. ~~See Part I, Item 1A. Risk Factors~~ ~~– “Our ability to utilize our NOL Carryforwards may be limited”~~ ~~for unaudited additional discussion of this risk.~~

At December 31, ~~2017,~~2019, we had an AMT credit carryforward of approximately ~~$339~~$170 million available for federal income tax purposes, which ~~is now expected to be~~was fully refunded in ~~2019 and~~ 2020 as a result of the ~~repeal of corporate AMT.~~CARES Act.

In ~~2017,~~2020, we recorded an income tax ~~provision~~benefit of ~~$1.2~~$2.6 billion, with an effective rate of approximately ~~38%~~22%, which was substantially ~~non-cash as we utilized our NOLs described above.~~non-cash. Substantially all of our income before income taxes is attributable to the United States.

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We file our tax returns as prescribed by the tax laws of the jurisdictions in which we operate. Our ~~2014~~2017 through ~~2016~~2019 tax years are still subject to examination by the Internal Revenue Service. Various state and foreign jurisdiction tax years remain open to examination and we are under examination, in administrative appeals, or engaged in tax litigation in certain jurisdictions. We believe that the effect of any assessments will not be material to our consolidated financial statements.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

The amount of, and changes to, our uncertain tax positions were not material in any of the years presented. We accrue interest and penalties related to unrecognized tax benefits in interest expense and operating expense, respectively.

The 2017 Tax Act was enacted on December 22, 2017. The 2017 Tax Act is the most comprehensive tax change in more than 30 years. As of December 31, 2017, we have not completed our evaluation of the 2017 Tax Act; however, to the extent possible, we have made a reasonable estimate of its effects, including the impact of lower corporate income tax rates (21% vs. 35%) on our deferred tax assets and liabilities and the one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred. For the year ended December 31, 2017, we recognized a special income tax benefit of $7 million to reflect these impacts of the 2017 Tax Act.

The 2017 Tax Act is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementation regulations by the Treasury and Internal Revenue Service. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. Accordingly, we have not yet been able to make a reasonable estimate of the impact of certain items and continue to account for those items based on the tax laws in effect prior to the 2017 Tax Act.

~~As further interpretations, clarifications and amendments to the 2017 Tax Act are made, our future financial statements could be materially impacted.~~

7.8. Risk Management

Our economic prospects are heavily dependent upon two variables we cannot control: ~~the health of the economy~~general economic conditions and the price of fuel.

Due to the discretionary nature of business and leisure travel spending and the highly competitive nature of the airline industry, our revenues are heavily influenced by the condition of the U.S. economy and economies in other regions of the world. Unfavorable conditions in these broader economies have resulted, and may result in the future, in decreased passenger demand for air travel, changes in booking practices and related reactions by our competitors, all of which in turn have had, and may have in the future, a strong negative effect on our business. In particular, the ongoing COVID-19 pandemic and associated decline in economic activity and increase in unemployment levels are expected to have a severe and prolonged effect on the global economy generally and, in turn, is expected to depress demand for air travel into the foreseeable future. Due to the uncertainty surrounding the duration and severity of this pandemic, we can provide no assurance as to when and at what pace demand for air travel will return to pre-COVID-19 pandemic levels, if at all. Accordingly, we cannot predict the ultimate impact of the COVID-19 pandemic on our business, financial condition and results of operations. In addition, during challenging economic times, actions by our competitors to increase their revenues can have an adverse impact on our revenues.

Our operating results are materially impacted by changes in the availability, price volatility and cost of aircraft fuel, which represents one of the largest single cost items in our business. ~~Jet~~Aircraft fuel ~~market~~ prices have ~~fluctuated substantially over~~in the past, ~~several years~~ and ~~prices continue to be highly volatile.~~may in the future, experience substantial volatility. Because of the amount of fuel needed to operate our business, even a relatively small increase or decrease in the price of aircraft fuel can have a material effect on our operating results and liquidity.

These additional factors could impact our results of operations, financial performance and liquidity:

(a) Credit Risk

~~Most of~~Our accounts receivable relate primarily to our ~~receivables relate~~contracts with airline and non-airline business partners, including our co-branded credit card partners, and to tickets sold to individual passengers primarily through the use of major credit ~~cards or to tickets sold by other airlines and used by passengers on American. These receivables~~cards. Receivables from our business partners are typically settled within 30 days. Receivables from ticket sales are short-term, mostly settled within seven days after sale. ~~Bad debt~~All accounts receivable are reported net of an allowance for credit losses, which have been minimal in the past. We consider past ~~have been considered in~~and future financial and qualitative factors when establishing ~~allowances~~the allowance for ~~doubtful accounts.~~credit losses. We do not believe we are subject to any significant concentration of credit risk.

(b) Interest Rate Risk

We have exposure to market risk associated with changes in interest rates related primarily to our ~~variable rate~~LIBOR variable-rate debt obligations. Interest rates on ~~$9.6~~$12.8 billion principal amount of long-term debt as of December 31, ~~2017~~2020 are subject to adjustment to reflect changes in floating interest rates. The weighted average effective interest rate on our ~~variable rate~~variable-rate debt was ~~3.4%~~2.0% at December 31, ~~2017.~~2020. We currently do not ~~currently~~ have an interest rate hedge ~~program.~~program to hedge our exposure to floating interest rates on our variable-rate debt obligations.

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have on financial markets for LIBOR-linked financial instruments. The replacement of LIBOR with a comparable or successor rate could cause the amount of interest payable on our long-term debt to be different or higher than expected.

We are exposed to the effect of foreign exchange rate fluctuations on the U.S. dollar value of foreign currency-denominated ~~operating revenues and expenses.~~transactions. Our largest exposure comes from the British pound sterling, Euro, Canadian dollar and various Latin American currencies, primarily the Brazilian real. We do not currently have a foreign currency hedge program. ~~See Part I, Item 1A. Risk Factors –~~ ~~“We operate a global business with international operations that are subject to economic and politicalinstability and have been, and in the future may continue to be, adversely affected by numerous events, circumstances or government actions beyond our control”~~ ~~for unaudited additional discussion of this risk.~~

8.9. Fair Value Measurements and Other Investments

Assets Measured at Fair Value on a Recurring Basis

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability (i.e. an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. Accounting standards include disclosure requirements around fair values used for certain financial instruments and establish a fair value hierarchy. The hierarchy prioritizes valuation inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of three levels:

•Level 1 – Observable inputs such as quoted prices in active markets;

•Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

•Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

When available, we use quoted market prices to determine the fair value of our financial assets. If quoted market prices are not available, we measure fair value using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates and currency rates.

We utilize the market approach to measure the fair value ~~for~~of our financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. Our short-term investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No changes in valuation techniques or inputs occurred during the year ended December 31, ~~2017.~~2020.

Assets measured at fair value on a recurring basis are summarized below (in millions):


										Fair Value Measurements as of December 31, 2020
	Fair Value Measurements as of December 31, 2017									Total		Level 1		Level 2		Level 3
	Total		Level 1		Level 2		Level 3
Short-term investments ^{(1) (2)}:
Short-term investments (1), (2):									Short-term investments (1), (2):
Money market funds	$	188	$	188	$	—	$	—	Money market funds	$	247	$	247	$	0	$	0
Corporate obligations	1,620		—		1,620		—		Corporate obligations	3,449		0		3,449		0
Bank notes/certificates of deposit/time deposits	2,663		—		2,663		—		Bank notes/certificates of deposit/time deposits	2,168		0		2,168		0
Repurchase agreements	300		—		300		—		Repurchase agreements	755		0		755		0
	4,771		188		4,583		—			6,619		247		6,372		0
Restricted cash and short-term investments ⁽¹⁾	318		108		210		—
Restricted cash and short-term investments (1), (3)									Restricted cash and short-term investments (1), (3)	609		448		161		0
Long-term investments (4)									Long-term investments (4)	161		161		0		0
Total	$	5,089	$	296	$	4,793	$	—	Total	$	7,389	$	856	$	6,533	$	0

127


⁽¹⁾	~~Unrealized gains or losses on short-term investments and restricted cash and short-term investments are recorded in accumulated other comprehensive income (loss) at each measurement date.~~


⁽²⁾	All short-term investments are classified as available-for-sale and stated at fair value. Our short-term investments mature in one year or less except for $700 million of bank notes/certificates of deposit/time deposits and $341 million of corporate obligations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

Fair Value Measurements as of December 31, 2016
Total Level 1 Level 2 Level 3
Short-term investments ⁽¹⁾ ⁽²⁾:

Money market funds $ 589
$ 589
$ —
$ —
Corporate obligations 2,550
—
2,550
—
Bank notes/certificates of deposit/time deposits 2,898
—
2,898
—
6,037
589
5,448
—
Restricted cash and short-term investments ⁽¹⁾
638
638
—
—
Total $ 6,675
$ 1,227
$ 5,448
$ —


	Fair Value Measurements as of December 31, 2019
	Total		Level 1		Level 2		Level 3
Short-term investments (1):
Money market funds	$	333	$	333	$	0	$	0
Bank notes/certificates of deposit/time deposits	2,107		0		2,107		0
Corporate obligations	1,021		0		1,021		0
Repurchase agreements	85		0		85		0
	3,546		333		3,213		0
Restricted cash and short-term investments (1)	158		10		148		0
Long-term investments (4)	204		204		0		0
Total	$	3,908	$	547	$	3,361	$	0

⁽¹⁾

(1)All short-term investments are classified as available-for-sale and stated at fair value. Unrealized gains and losses are recorded in accumulated other comprehensive loss at each reporting period. There were no credit losses.

(2)Our short-term investments as of December 31, 2020 mature in one year or less except for $235 million of bank notes/certificates of deposit/time deposits.

(3)Restricted cash and short-term investments primarily include money market funds to be used to finance a substantial portion of the cost of the renovation and expansion of Terminal 8 at JFK and collateral held to support workers' compensation obligations.

(4)Long-term investments primarily include our equity investment in China Southern Airlines, in which we presently own a 1.8% equity interest, and are classified in other assets on the consolidated balance sheets.

~~Unrealized gains or losses on short-term investments and restricted cash and short-term investments are recorded in accumulated other comprehensive income (loss) at each measurement date.~~


⁽²⁾	All short-term investments are classified as available-for-sale and stated at fair value. Our short-term investments mature in one year or less except for $385 million of bank notes/certificates of deposit/time deposits and $230 million of corporate obligations.

Fair Value of Debt

The fair value of our long-term debt was estimated using quoted market prices or discounted cash flow analyses, based on our current estimated incremental borrowing rates for similar types of borrowing arrangements. If our long-term debt was measured at fair value, it would have been classified as Level 2 except for $2.3 billion which would have been classified as Level 3 in the fair value hierarchy.

The carrying value and estimated fair value of our long-term debt, including current maturities, were as follows (in millions):

December 31, 2017 December 31, 2016

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value
Long-term debt, including current maturities $ 25,065
$ 25,848
$ 24,344
$ 24,983


	December 31, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	32,021	$	30,454	$	23,645	$	24,508

Other Investments

We have an approximate 25% ownership interest in Republic ~~Airways~~ Holdings, ~~Inc. (Republic),~~ which we received in ~~the second quarter of~~ 2017 in consideration for our unsecured claim in ~~Republic’s~~the Republic Holdings bankruptcy case. This ownership interest is accounted for under the equity method and our portion of ~~Republic’s~~Republic Holdings’ financial results is recognized within other, net on the consolidated statements of ~~operations. In 2017, we recognized $544 million of regional expense from our capacity purchase agreement with Republic.~~

~~Additionally, in~~operations and the third quarter of 2017, we acquired 2.7% of the outstanding shares of China Southern Airlines Company Limited for $203 million. Since our subscription agreement restricts the sale or transfer of these shares for three years, we account for this investment ~~under the cost method.~~

~~These investments are~~is reflected within other assets on our consolidated balance sheets.

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10. Employee Benefit Plans

We sponsor defined benefit and defined contribution pension plans for eligible employees. The defined benefit pension plans provide benefits for participating employees based on years of service and average compensation for a specified period of time before retirement. Effective November 1, 2012, substantially all of our defined benefit pension plans were frozen and we began providing enhanced benefits under our defined contribution pension plans for certain employee groups. We use a December 31 measurement date for all of our defined benefit pension plans. We also provide certain retiree medical and other postretirement benefits, including health care and life insurance benefits, to retired employees. Effective November 1, 2012, we modified our retiree medical and other postretirement benefits plans to eliminate the company subsidy for employees who retire on or after November 1, 2012. As a result of modifications to our retiree medical and other postretirement benefits plans in 2012, we recognized a negative plan

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

amendment of $1.9 billion, which iswas included as a component of prior service benefit in ~~OCI~~accumulated other comprehensive income (loss) (AOCI) and ~~will be~~was amortized over the future service life of the active plan participants for whom the benefit was ~~eliminated, or approximately eight years.~~eliminated. As of December 31, ~~2017, $631~~2020, this prior service benefit was fully amortized.

Effective January 1, 2021, health coverage under our retiree medical benefit program that is currently provided to certain retirees age 65 and over who retired prior to November 1, 2012, transitioned from a self-insured plan to a fully-insured Medicare Advantage plan. Benefits coverage has not been reduced and cost shared has not changed as a result of this transition. Due to this transition, as of December 31, 2020, we recognized a negative plan amendment of $313 million to reduce our benefit obligation, which was included as a component of prior service ~~benefit remains to~~cost in accumulated other comprehensive loss and will be ~~amortized.~~amortized over the average remaining life expectancy of all retirees, or approximately 13.3 years.

Benefit Obligations, Fair Value of Plan Assets and Funded Status

The following tables provide a reconciliation of the changes in the pension and retiree medical and other postretirement benefits obligations, fair value of plan assets and a statement of funded status as of December 31, ~~2017~~2020 and ~~2016:~~2019:


	Pension Benefits				Retiree Medical and Other Postretirement Benefits
	2020		2019		2020		2019

	(In millions)
Benefit obligation at beginning of period	$	18,358	$	16,378	$	824	$	837
Service cost	2		2		8		3
Interest cost	615		703		30		33
Actuarial loss (1), (2)	1,613		1,965		46		20
Special termination benefits (3)	0		0		410		0
Plan amendments (4)	0		0		(195)		0
Settlements	(36)		(2)		0		0
Benefit payments	(740)		(689)		(77)		(74)
Other	0		1		0		5
Benefit obligation at end of period	$	19,812	$	18,358	$	1,046	$	824

Pension Benefits
Retiree Medical and
Other Postretirement Benefits
2017 2016 2017 2016
(In millions)
Benefit obligation at beginning of period $ 17,238
$ 16,395
$ 991
$ 1,131
Service cost 2
2
4
3
Interest cost 721
749
39
47
Actuarial (gain) loss ^{(1) (2)}
1,016
729
49
(105 )
Plan amendments —
—
—
7
Settlements (4 ) (2 ) —
—
Benefit payments (726 ) (635 ) (80 ) (92 )
Other 28
—
8
—
Benefit obligation at end of period $ 18,275
$ 17,238
$ 1,011
$ 991


Fair value of plan assets at beginning of period	$	10,017		$	9,707		$	266		$	253		Fair value of plan assets at beginning of period	$	12,897	$	10,053	$	204	$	225
Actual return on plan assets	1,797			915			37			22			Actual return on plan assets	1,427		2,305		13		41
Employer contributions ⁽³⁾	286			32			72			83
Employer contributions (5)													Employer contributions (5)	9		1,230		30		12
Settlements	(4		)	(2		)	—			—			Settlements	(36)		(2)		0		0
Benefit payments	(726		)	(635		)	(80		)	(92		)	Benefit payments	(740)		(689)		(77)		(74)
Other	25			—			—			—
Fair value of plan assets at end of period	$	11,395		$	10,017		$	295		$	266		Fair value of plan assets at end of period	$	13,557	$	12,897	$	170	$	204
Funded status at end of period	$	(6,880	)	$	(7,221	)	$	(716	)	$	(725	)	Funded status at end of period	$	(6,255)	$	(5,461)	$	(876)	$	(620)

(1)The 2020 and 2019 pension actuarial loss primarily relates to the change in our weighted average discount rate assumption and, additionally, in 2019, the change to our mortality assumption.


⁽¹⁾	~~The December 31, 2017 and 2016 pension actuarial loss primarily relates to weighted average discount rate assumption changes and changes to our mortality assumptions.~~


⁽²⁾	The December 31, 2017 retiree medical and other postretirement benefits actuarial (gain) loss primarily relates to plan experience adjustments, weighted average discount rate assumption changes and changes to our mortality assumptions and as of December 31, 2016, also includes medical trend and cost assumption changes.


⁽³⁾	~~During 2017, we contributed $286 million to our defined benefit pension plans, including supplemental contributions of $261 million in addition to a $25 million minimum required cash contribution.~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

(2)The 2020 retiree medical and other postretirement benefits actuarial loss primarily relates to the change in our weighted average discount rate assumption.

The 2019 retiree medical and other postretirement benefits actuarial loss primarily relates to changes in our weighted average discount rate assumption and plan experience adjustments.

(3)During the third quarter of 2020, we remeasured our retiree medical and other postretirement benefits to account for enhanced healthcare benefits provided to eligible team members who opted in to voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic. During the third quarter of 2020, we recognized a $410 million special charge for these enhanced healthcare benefits and increased our postretirement benefits obligation by $410 million.

(4)Principally relates to the transition of our retiree medical benefit program from a self-insured plan to a fully-insured Medicare Advantage plan as discussed above.

(5)Pursuant to the CARES Act, minimum required contributions to be made in the calendar year 2020 can be deferred to January 1, 2021, with interest accruing from the original due date to the new payment date. During 2019, we contributed $1.2 billion to our defined benefit pension plans, including a $786 million minimum required contribution and supplemental contributions of $444 million.

Balance Sheet Position


	Pension Benefits				Retiree Medical and Other Postretirement Benefits
	2020		2019		2020		2019

	(In millions)
As of December 31,
Current liability	$	7	$	5	$	55	$	24
Noncurrent liability	6,248		5,456		821		596
Total liabilities	$	6,255	$	5,461	$	876	$	620

Pension Benefits
Retiree Medical and
Other Postretirement Benefits
2017 2016 2017 2016
(In millions)
As of December 31,
Current liability $ 10
$ 7
$ 89
$ 97
Noncurrent liability 6,870
7,214
627
628
Total liabilities $ 6,880
$ 7,221
$ 716
$ 725


Net actuarial loss (gain)	$	6,700	$	5,680	$	(358)	$	(426)
Prior service cost (benefit)	75		104		(181)		(120)
Total accumulated other comprehensive loss (income), pre-tax	$	6,775	$	5,784	$	(539)	$	(546)

Plans with Projected Benefit Obligations Exceeding Fair Value of Plan Assets

Net actuarial loss (gain) $ 5,351
$ 5,484
$ (388 ) $ (430 )
Prior service cost (benefit) 160
188
(600 ) (837 )
Total accumulated other comprehensive loss (income), pre-tax $ 5,511
$ 5,672
$ (988 ) $ (1,267 )


	Pension Benefits
	2020		2019

	(In millions)
Projected benefit obligation	$	19,812	$	18,327
Fair value of plan assets	13,557		12,862

Plans with Accumulated Benefit Obligations Exceeding Fair Value of Plan Assets

Pension Benefits
Retiree Medical and
Other Postretirement Benefits
2017 2016 2017 2016
(In millions)
Projected benefit obligation $ 18,245
$ 17,209
$ —
$ —
Accumulated benefit obligation (ABO) 18,235
17,197
—
—
Accumulated postretirement benefit obligation —
—
1,011
990
Fair value of plan assets 11,364
9,986
295
266
ABO less fair value of plan assets 6,871
7,211
—
—

~~Net Periodic Benefit Cost (Income)~~


	Pension Benefits				Retiree Medical and Other Postretirement Benefits
	2020		2019		2020		2019

	(In millions)
Accumulated benefit obligation (ABO)	$	19,799	$	18,315	$	—	$	—
Accumulated postretirement benefit obligation	—		—		1,046		824
Fair value of plan assets	13,557		12,862		170		204

130

Pension Benefits
Retiree Medical and
Other Postretirement Benefits
2017 2016 2015 2017 2016 2015
(In millions)
Defined benefit plans:
Service cost $ 2
$ 2
$ 2
$ 4
$ 3
$ 3
Interest cost 721
749
737
39
47
50
Expected return on assets (790 ) (750 ) (851 ) (21 ) (20 ) (19 )
Settlements 1
—
1
—
—
—
Amortization of:
Prior service cost (benefit) 28
28
28
(237 ) (240 ) (243 )
Unrecognized net loss (gain) 144
126
112
(23 ) (17 ) (9 )
Net periodic benefit cost (income) 106
155
29
(238 ) (227 ) (218 )
Defined contribution plan cost 851
766
662
N/A
N/A
N/A
Total cost (income) $ 957
$ 921
$ 691
$ (238 ) $ (227 ) $ (218 )

Table of Contents

The estimated amount of unrecognized actuarial net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year is $172 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

Net Periodic Benefit Cost (Income)


	Pension Benefits						Retiree Medical and Other Postretirement Benefits
	2020		2019		2018		2020		2019		2018

	(In millions)
Defined benefit plans:
Service cost	$	2	$	2	$	3	$	8	$	3	$	5
Interest cost	615		703		674		30		33		35
Expected return on assets	(1,010)		(815)		(905)		(11)		(15)		(24)
Special termination benefits	0		0		0		410		0		0
Settlements	12		0		0		0		0		0
Amortization of:
Prior service cost (benefit)	30		28		28		(135)		(236)		(236)
Unrecognized net loss (gain)	164		150		141		(24)		(31)		(21)
Net periodic benefit cost (income)	$	(187)	$	68	$	(59)	$	278	$	(246)	$	(241)

The ~~estimated amount~~service cost component of ~~unrecognized actuarial net gain and prior service benefit for the retiree medical and other postretirement benefits plans that will be amortized from accumulated other comprehensive income (loss) into~~ net periodic benefit cost ~~over~~(income) is included in operating expenses, the ~~next fiscal year~~cost for the special termination benefits is ~~$258 million.~~included in special items, net and the other components of net periodic benefit cost (income) are included in nonoperating other income (expense), net in our consolidated statements of operations.

Assumptions

The following actuarial assumptions were used to determine our benefit obligations and net periodic benefit cost (income) for the periods presented:


	Pension Benefits		Retiree Medical and Other Postretirement Benefits
	2020	2019	2020	2019
Benefit obligations:
Weighted average discount rate	2.7%	3.4%	2.4%	3.3%

Pension Benefits
Retiree Medical and
Other Postretirement Benefits
2017 2016 2017 2016
Benefit obligations:
Weighted average discount rate 3.80% 4.30% 3.60% 4.10%

Pension Benefits
Retiree Medical and
Other Postretirement Benefits
2017 2016 2015 2017 2016 2015
Net periodic benefit cost:
Weighted average discount rate 4.30% 4.70% 4.30% 4.10% 4.42% 4.00%
Weighted average expected rate of return on plan assets 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Weighted average health care cost trend rate assumed for next year ⁽¹⁾
N/A N/A N/A 4.19% 4.25% 5.21%


	Pension Benefits			Retiree Medical and Other Postretirement Benefits
	2020	2019	2018	2020	2019	2018
Net periodic benefit cost (income):
Weighted average discount rate	3.4%	4.4%	3.8%	3.2%	4.3%	3.6%
Weighted average expected rate of return on plan assets	8.0%	8.0%	8.0%	8.0%	8.0%	8.0%
Weighted average health care cost trend rate assumed for next year (1)	N/A	N/A	N/A	4.0%	3.7%	3.9%


⁽¹⁾ (1)The weighted average health care cost trend rate at December 31, 2020 is assumed to decline gradually to 3.4% by 2027 and remain level thereafter.	~~The weighted average health care cost trend rate at December 31, 2017 is assumed to decline gradually to 3.76% by 2025 and remain level thereafter.~~

As of December 31, ~~2017,~~2020, our estimate of the long-term rate of return on plan assets was 8%8.0% based on the target asset allocation. Expected returns on long duration bonds are based on yields to maturity of the bonds held at year-end. Expected returns on other assets are based on a combination of long-term historical returns, actual returns on plan assets achieved over the last ten years, current and expected market conditions, and expected value to be generated through active management ~~currency overlay~~ and securities lending programs.

~~A one percentage point change in the assumed health care cost trend rates would have the following effects on our retiree medical and other postretirement benefits plans (in millions):~~

1% Increase 1% Decrease
Increase (decrease) on 2017 service and interest cost $ 2
$ (2 )
Increase (decrease) on benefit obligation as of December 31, 2017 54
(51 )

Minimum Contributions

We are required to make minimum contributions to our defined benefit pension plans under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and various other laws for U.S. based plans as well as ~~under funding~~underfunding rules specific to countries where we maintain defined benefit plans. Based on current

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funding assumptions, we have minimum required contributions of ~~$42~~$697 million for ~~2018~~2021 including contributions to defined benefit plans for our wholly-owned regional ~~subsidiaries. We expect to make supplemental~~subsidiaries and $130 million of minimum contributions ~~of $425 million to our U.S. based defined benefit pension plans in 2018. The minimum funding obligation~~required for ~~our U.S. based defined benefit pension plans was subject to temporary favorable rules~~2020 that ~~expired at the end of 2017. Our pension funding obligations are likely to increase materially beginning in 2019, when we will be required to make contributions relating~~were deferred pursuant to the ~~2018 fiscal year. The amount~~CARES Act as discussed above. In January 2021, we made $241 million of ~~these~~required pension contributions, including the $130 million minimum contributions required for 2020. Our funding obligations will depend on the performance of our investments held in trust by the pension plans, interest rates for determining liabilities, the amount of and timing of any supplemental contributions and our actuarial experience.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

Benefit Payments

The following benefit payments, which reflect expected future service as appropriate, are expected to be paid (approximately, in millions):


	2018		2019		2020		2021		2022		2023-2027			2021		2022		2023		2024		2025		2026-2030
Pension benefits	$	715	$	754	$	799	$	843	$	884	$	4,976	Pension benefits	$	790	$	830	$	872	$	914	$	952	$	5,150
Retiree medical and other postretirement benefits	96		92		80		75		70		315		Retiree medical and other postretirement benefits	102		93		89		86		82		356

Plan Assets

The objectives of our investment policies are to: maintain sufficient income and liquidity to pay retirement benefits; produce a long-term rate of return that meets or exceeds the assumed rate of return for plan assets; limit the volatility of asset performance and funded status; and diversify assets among asset classes and investment managers.

Based on these investment objectives, a long-term strategic asset allocation has been established. This strategic allocation seeks to balance the potential benefit of improving the funded position with the potential risk that the funded position would decline. The current strategic target asset allocation is as follows:



Asset Class/Sub-Class		Allowed Range
Equity		~~65%~~45% - ~~90%~~80%
Public:
U.S. Large		~~20%~~10% - ~~50%~~40%
U.S. Small/Mid		2% - 10%
International		10% - 25%
International Small/Mid		0% - 10%
~~International~~Emerging Markets		~~17%~~2% - ~~27%~~15%
~~Emerging Markets~~Alternative Investments		5% ~~- 11%~~
~~Alternative Investments~~	~~5% - 20%~~
~~Fixed Income~~	~~15% - 40%~~
~~Public:~~
~~U.S. Long Duration~~	~~15%~~ - 30%
Fixed Income		20% - 55%
Public:
U.S. Long Duration		15% - 45%
High Yield and Emerging Markets		0% - 10%
Private Income		0% - ~~10%~~15%
Other		0% - 5%
Cash Equivalents		0% - 5%20%

U.S. long duration bonds are used to partially hedge the assets from declines in interest rates. Public equity ~~and emerging market~~as well as high yield fixed income securities are used to provide diversification and are expected to generate higher returns over the long-term than U.S. long duration bonds. Public stocks are managed using a value investment approach in order to participate in the returns generated by stocks in the long-term, while reducing year-over-year volatility. U.S. long duration bonds are used to partially hedge the assets from declines in interest rates. Alternative (private) investments are used to provide expected returns in excess of the public markets over the long-term. Additionally, the pension plan’s master trust engages currency overlay managers in an attempt to increase returns by protecting non-U.S. dollar denominated assets from a rise in the relative value of the U.S. dollar. The pension plan’s master trust also participates in securities lending programs to generate additional income by loaning plan assets to borrowers on a fully collateralized basis. These programs are subject to market risk.

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Investments in securities traded on recognized securities exchanges are valued at the last reported sales price on the last business day of the year. Securities traded in the over-the-counter market are valued at the last bid price. ~~The money market fund is valued at fair value which represents the net asset value of the shares of such fund as of the close of business at the end of the period.~~ Investments in limited partnerships are carried at estimated net asset value as determined by and reported by the general partners of the partnerships and represent the proportionate share of the estimated fair value of the underlying assets of the limited partnerships. Common/collective trusts are valued at net asset value based on the fair values of the underlying investments of the trusts as determined by the sponsor of the trusts. The pension plan’s master trust also invests in a 103-12 investment entity (the 103-12 Investment Trust) which is designed to invest plan assets of more than one unrelated employer. The 103-12 Investment Trust is valued at net asset value which is determined by the issuer at the end of each month and is based on the aggregate fair value

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

~~of trust assets less liabilities, divided by the number of units outstanding.~~ No changes in valuation techniques or inputs occurred during the year.

Benefit Plan Assets Measured at Fair Value on a Recurring Basis

The fair value of our pension plan assets at December 31, ~~2017~~2020 and ~~2016,~~2019, by asset category, ~~are~~were as follows (in millions):

Fair Value Measurements as of December 31, 2017
Asset Category
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
Cash and cash equivalents $ 28
$ —
$ —
$ 28
Equity securities:

International markets ^(a) ^(b)
3,837
—
—
3,837
Large-cap companies ^(b)
2,451
—
—
2,451
Mid-cap companies ^(b)
744
—
—
744
Small-cap companies ^(b)
125
—
—
125
Mutual funds ^(c)
55
—
—
55
Fixed income:

Corporate bonds ^(d)
—
2,344
—
2,344
Government securities ^(e)
—
238
—
238
U.S. municipal securities —
39
—
39
Alternative instruments:

Private equity partnerships ^(f)
—
—
14
14
Private equity partnerships measured at net asset value ^{(f) (h)}
—
—
—
879
Common/collective trusts ^(g)
—
315
—
315
Common/collective trusts and 103-12 Investment Trust measured at net asset value ^{(g) (h)}
—
—
—
283
Insurance group annuity contracts —
—
2
2
Dividend and interest receivable 44
—
—
44
Due to/from brokers for sale of securities – net 3
—
—
3
Other liabilities – net (6 ) —
—
(6 )
Total $ 7,281
$ 2,936
$ 16
$ 11,395


	Fair Value Measurements as of December 31, 2020
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash and cash equivalents	$	40	$	0	$	0	$	40
Equity securities:
International markets (a), (b)	2,282		0		0		2,282
Large-cap companies (b)	2,085		0		0		2,085
Mid-cap companies (b)	428		0		0		428
Small-cap companies (b)	73		1		0		74
Mutual funds (c)	80		0		0		80
Fixed income:
Corporate debt (d)	0		3,026		0		3,026
Government securities (e)	0		1,010		0		1,010
U.S. municipal securities	0		30		0		30

Alternative instruments:
Private market partnerships (f)	0		0		15		15
Private market partnerships measured at net asset value (f), (g)	—		—		—		1,791
Common/collective trusts (h)	0		259		0		259
Common/collective trusts measured at net asset value (g), (h)	—		—		—		2,384
Insurance group annuity contracts	0		0		2		2
Dividend and interest receivable	49		0		0		49
Due from brokers for sale of securities – net	1		0		0		1
Other receivables – net	1		0		0		1
Total	$	5,039	$	4,326	$	17	$	13,557

^a)

(a)Holdings are diversified as follows: 11% Switzerland, 11% Ireland, 10% United Kingdom, 9% France, 8% Japan, 7% Germany, 6% Netherlands, 13% emerging markets and the remaining 25% with no concentration greater than 5% in any one country.

(b)There are no significant concentrations of holdings by company or industry.

(c)Investment includes mutual funds invested 39% in equity securities of large-cap, mid-cap and small-cap U.S. companies, 35% in U.S. treasuries and corporate bonds and 26% in equity securities of international companies.

(d)Includes approximately 77% investments in corporate debt with a S&P rating lower than A and 23% investments in corporate debt with a S&P rating A or higher. Holdings include 89% U.S. companies, 9% international companies and 2% emerging market companies.

~~Holdings are diversified as follows: 17% United Kingdom, 11% Japan, 9% France, 6% Switzerland, 16% emerging markets and the remaining 41% with no concentration greater than 5% in any one country.~~


^b)	~~There are no significant concentrations of holdings by company or industry.~~


^c)	Investment includes mutual funds invested 39% in equity securities of large-cap, mid-cap and small-cap U.S. companies, 34% in U.S. treasuries and corporate bonds and 27% in equity securities of international companies.


^d)	Includes approximately 76% investments in corporate debt with a S&P rating lower than A and 24% investments in corporate debt with a S&P rating A or higher. Holdings include 85% U.S. companies, 12% international companies and 3% emerging market companies.


^e)	Includes approximately 27% investments in U.S. domestic government securities, 43% in emerging market government securities and 30% in international government securities. There are no significant foreign currency risks within this classification.

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(e)Includes approximately 89% investments in U.S. domestic government securities, 9% in emerging market government securities and 2% in international government securities. There are no significant foreign currency risks within this classification.

(f)Includes limited partnerships that invest primarily in domestic private equity and private income opportunities. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next one to ten years. Additionally, the pension plan’s master trust has future funding commitments of approximately $1.6 billion over the next ten years.

(g)Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.

(h)Investment includes 34% in a common/collective trust investing in large market capitalization equity securities within the U.S., 30% in three common/collective trusts investing in emerging country equity securities, 21% in a common/collective trust investing in equity securities of companies located outside the U.S., 9% in a collective interest trust investing primarily in short-term securities, 5% in a common/collective trust investing in smaller market capitalization equity securities within the U.S. and 1% in Canadian segregated balanced value, income growth and diversified pooled funds. For some trusts, requests for withdrawals must meet specific requirements with advance notice of redemption preferred.


	Fair Value Measurements as of December 31, 2019
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash and cash equivalents	$	20	$	0	$	0	$	20
Equity securities:
International markets (a), (b)	2,769		0		0		2,769
Large-cap companies (b)	2,312		0		0		2,312
Mid-cap companies (b)	543		0		0		543
Small-cap companies (b)	97		0		0		97
Mutual funds (c)	68		0		0		68
Fixed income:
Corporate debt (d)	0		2,804		0		2,804
Government securities (e)	0		923		0		923
U.S. municipal securities	0		51		0		51
Mortgage backed securities	0		4		0		4
Alternative instruments:
Private market partnerships (f)	0		0		10		10
Private market partnerships measured at net asset value (f), (g)	—		—		—		1,464
Common/collective trusts (h)	0		358		0		358
Common/collective trusts and 103-12 Investment Trust measured at net asset value (g), (h)	—		—		—		1,423
Insurance group annuity contracts	0		0		2		2
Dividend and interest receivable	53		0		0		53
Due to brokers for sale of securities – net	(4)		0		0		(4)

Total	$	5,858	$	4,140	$	12	$	12,897


^f)			Includes limited partnerships that invest primarily in U.S. (94%) and European (6%) buyout opportunities of a range of privately held companies. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next one to ten years. Additionally, the pension plan’s master trust has future funding commitments of approximately $903 million over the next ten years.

^g)

Investment includes 42% in a collective interest trust investing primarily in short-term securities, 40% in an emerging market 103-12 Investment Trust with investments in emerging country equity securities, 10% in Canadian segregated balanced value, income growth and diversified pooled funds and 8% in a common/collective trust investing in securities of smaller companies located outside the U.S., including developing markets. For some trusts, requests for withdrawals must meet specific requirements with advance notice of redemption preferred.


^h)	Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.

Fair Value Measurements as of December 31, 2016
Asset Category
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
Cash and cash equivalents $ 573
$ —
$ —
$ 573
Equity securities:
International markets ^{(a) (b)}
3,232
—
—
3,232
Large-cap companies ^(b)
2,253
—
—
2,253
Mid-cap companies ^(b)
371
—
—
371
Small-cap companies ^(b)
6
—
—
6
Mutual funds ^(c)
49
—
—
49
Fixed income:
Corporate bonds ^(d)
—
2,337
—
2,337
Government securities ^(e)
—
150
—
150
U.S. municipal securities —
37
—
37
Alternative instruments:
Private equity partnerships ^(f)
—
—
21
21
Private equity partnerships measured at net asset value ^{(f) (h)}
—
—
—
703
Common/collective trusts ^(g)
—
32
—
32
Common/collective trusts and 103-12 Investment Trust measured at net asset value ^{(g) (h)}
—
—
—
227
Insurance group annuity contracts —
—
2
2
Dividend and interest receivable 40
—
—
40
Due to/from brokers for sale of securities – net (9 ) —
—
(9 )
Other liabilities – net (7 ) —
—
(7 )
Total $ 6,508
$ 2,556
$ 23
$ 10,017


^a) (a)Holdings are diversified as follows: 14% United Kingdom, 8% Switzerland, 8% Ireland, 7% Japan, 7% France, 6%	Holdings are diversified as follows: 15% United Kingdom, 12% Japan, 10% France, 7% Switzerland, 6% Netherlands, 17% other emerging markets and the remaining 33% with no concentration greater than 5% in any one country.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

South Korea, 6% Canada, 18% emerging markets and the remaining 26% with no concentration greater than 5% in any one country.


^b)	~~There are no significant concentrations of holdings by company or industry.~~


^c)	Investment includes mutual funds invested 42% in equity securities of large-cap, mid-cap and small-cap U.S. companies, 33% in U.S. treasuries and corporate bonds and 25% in equity securities of international companies.


^d)	Includes approximately 74% investments in corporate debt with a S&P rating lower than A and 26% investments in corporate debt with a S&P rating A or higher. Holdings include 86% U.S. companies, 12% international companies and 2% emerging market companies.


^e)	Includes approximately 61% investments in U.S. domestic government securities and 39% in emerging market government securities. There are no significant foreign currency risks within this classification.

^f)

Includes limited partnerships that invest primarily in U.S. (95%) and European (5%) buyout opportunities of a range of privately held companies. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next one to ten years. Additionally, the pension plan’s master trust has future funding commitments of approximately $456 million over the next ten years.

^g)

Investment includes 73% in an emerging market 103-12 Investment Trust with investments in emerging country equity securities, 12% in Canadian segregated balanced value, income growth and diversified pooled funds and 15% in a common/collective trust investing in securities of smaller companies located outside the U.S., including developing markets. Requests for withdrawals must meet specific requirements with advance notice of redemption preferred.

^h)

(b)There are no significant concentrations of holdings by company or industry.

(c)Investment includes mutual funds invested 40% in equity securities of large-cap, mid-cap and small-cap U.S. companies, 33% in U.S. treasuries and corporate bonds and 27% in equity securities of international companies.

(d)Includes approximately 76% investments in corporate debt with a S&P rating lower than A and 24% investments in corporate debt with a S&P rating A or higher. Holdings include 86% U.S. companies, 11% international companies and 3% emerging market companies.

(e)Includes approximately 79% investments in U.S. domestic government securities, 13% in emerging market government securities and 8% in international government securities. There are no significant foreign currency risks within this classification.

~~Changes in~~ fair value ~~measurements~~have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of ~~Level 3~~the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.

(h)Investment includes 36% in a common/collective trust investing in securities of larger companies within the U.S., 29% in a common/collective trust investing in securities of smaller companies located outside the U.S., 16% in a collective interest trust investing primarily in short-term securities, 15% in an emerging market 103-12 Investment Trust with investments ~~during the year ended December 31, 2017, were as follows (in millions):~~

Private Equity
Partnerships

Insurance Group
Annuity Contracts
Beginning balance at December 31, 2016 $ 21
$ 2
Actual loss on plan assets:
Relating to assets still held at the reporting date (4 ) —
Purchases 1
—
Sales (1 ) —
Transfers out (3 ) —
Ending balance at December 31, 2017 $ 14
$ 2
in emerging country equity securities and 4% in Canadian segregated balanced value, income growth and diversified pooled funds. For some trusts, requests for withdrawals must meet specific requirements with advance notice of redemption preferred.

Changes in fair value measurements of Level 3 investments during the year ended December 31, ~~2016,~~2020, were as follows (in millions):


	Private Market Partnerships		Insurance Group Annuity Contracts
Beginning balance at December 31, 2019	$	10	$	2
Actual gain on plan assets:
Relating to assets still held at the reporting date	1		0
Purchases	4		0


Ending balance at December 31, 2020	$	15	$	2

Private Equity
Partnerships

Insurance Group
Annuity Contracts
Beginning balance at December 31, 2015 $ 16
$ 2
Actual return on plan assets:
Relating to assets sold during the period 7
—
Purchases 7
—
Sales (9 ) —
Ending balance at December 31, 2016 $ 21
$ 2
Changes in fair value measurements of Level 3 investments during the year ended December 31, 2019, were as follows (in millions):


	Private Market Partnerships		Insurance Group Annuity Contracts
Beginning balance at December 31, 2018	$	7	$	2


Purchases	3		0


Ending balance at December 31, 2019	$	10	$	2

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

The fair value of our retiree medical and other postretirement benefits plans assets ~~at December 31, 2017~~ by asset category, were as follows (in millions):


	Fair Value Measurements as of December 31, 2020
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Money market fund	$	4	$	0	$	0	$	4
Mutual funds – AAL Class	0		166		0		166
Total	$	4	$	166	$	0	$	170

~~The fair value of our retiree medical and other postretirement benefits plans assets at December 31, 2016 by asset category, were as follows (in millions):~~


	Fair Value Measurements as of December 31, 2016									Fair Value Measurements as of December 31, 2019
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Money market fund	$	5	$	—	$	—	$	5	Money market fund	$	4	$	0	$	0	$	4
Mutual funds – Institutional Class	261		—		—		261
Mutual funds – AAL Class									Mutual funds – AAL Class	0		200		0		200
Total	$	266	$	—	$	—	$	266	Total	$	4	$	200	$	0	$	204

Investments in the retiree medical and other postretirement benefits plans’ mutual funds are valued by quoted prices on the active market, which is fair value, and represents the net asset value of the shares of such funds as of the close of business at the end of the period. At December 31, 2017, these funds were invested in an AAL Class mutual fund, in which trading is restricted only to American, resulting in a fair value classification of Level 2. At December 31, 2016, these investments were part of an Institutional Class of mutual funds and were actively traded on the open market resulting in a fair value classification of Level 1. Investments include approximately 30% and 27% of investments in non-U.S. common stocks in 2017 and 2016, respectively. Net asset value is based on the fair market value of the funds’ underlying assets and liabilities at the date of determination. The AAL Class mutual funds are offered only to benefit plans of American, therefore, trading is restricted only to American, resulting in a fair value classification of Level 2. Investments included approximately 25% and 24% of investments in non-U.S. common stocks in 2020 and 2019, respectively.

Defined Contribution and Multiemployer Plans

The costs associated with our defined contribution plans were $860 million for each of the years ended December 31, 2020 and 2019 and $846 million for the year ended December 31, 2018.

We participate in the International Association of Machinists & Aerospace Workers (IAM) National Pension Fund, Employer Identification No. 51-6031295 and Plan No. 002 (the IAM Pension Fund). Our contributions to the IAM Pension Fund were $40 million, $32 million and $31 million for the years ended December 31, 2020, 2019 and 2018, respectively. The IAM Pension Fund reported $510 million in employers’ contributions for the year ended December 31, 2019, which is the most recent year for which such information is available. For 2019, our contributions represented more than 5% of total contributions to the IAM Pension Fund.

On March 29, 2019, the actuary for the IAM Pension Fund certified that the fund was in “endangered” status despite reporting a funded status of over 80%. Additionally, the IAM Pension Fund’s Board voluntarily elected to enter into “critical” status on April 17, 2019. Upon entry into critical status, the IAM Pension Fund was required by law to adopt a rehabilitation plan aimed at restoring the financial health of the pension plan and did so on April 17, 2019 (the Rehabilitation Plan). Under the Rehabilitation Plan, we were subject to an immaterial contribution surcharge, which ceased to apply June 14, 2019 upon our mandatory adoption of a contribution schedule under the Rehabilitation Plan. The contribution schedule requires 2.5% annual increases to our contribution rate. This contribution schedule will remain in effect through the earlier of December 31, 2031 or the date the IAM Pension Fund emerges from critical status.

Profit Sharing Program

We accrue 5% of our pre-tax income excluding net special items for our profit sharing program. ~~For the year ended December 31, 2017, we accrued $241 million~~As a result of our pre-tax loss excluding net special items, there will not be a payout for ~~this program, which will be distributed to employees in the first quarter~~2020 under our profit sharing program.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

~~10.~~11. Accumulated Other Comprehensive ~~Income (Loss)~~Loss

The components of ~~accumulated other comprehensive income (loss) (AOCI)~~AOCI are as follows (in millions):

Pension,
Retiree
Medical and
Other
Postretirement
Benefits Unrealized Gain (Loss) on Investments
Income Tax
Benefit
(Provision) ⁽¹⁾
Total
Balance at December 31, 2015 $ (3,842 ) $ (10 ) $ (880 ) $ (4,732 )
Other comprehensive income (loss) before reclassifications (462 ) 10
166
(286 )
Amounts reclassified from AOCI (102 ) —
37
⁽²⁾
(65 )
Net current-period other comprehensive income (loss) (564 ) 10
203
(351 )
Balance at December 31, 2016 (4,406 ) —
(677 ) (5,083 )
Other comprehensive income (loss) before reclassifications (30 ) (1 ) 15
(16 )
Amounts reclassified from AOCI (87 ) —
32
⁽²⁾
(55 )
Net current-period other comprehensive income (loss) (117 ) (1 ) 47
(71 )
Balance at December 31, 2017 $ (4,523 ) $ (1 ) $ (630 ) $ (5,154 )


	Pension, Retiree Medical and Other Postretirement Benefits		Unrealized Gain on Investments		Income Tax Benefit (Provision) (1)			Total
Balance at December 31, 2018	$	(4,673)	$	(5)	$	(1,218)		$	(5,896)
Other comprehensive income (loss) before reclassifications	(476)		3		107			(366)
Amounts reclassified from AOCI	(89)		0		20		(2)	(69)
Net current-period other comprehensive income (loss)	(565)		3		127			(435)
Balance at December 31, 2019	(5,238)		(2)		(1,091)			(6,331)
Other comprehensive income (loss) before reclassifications	(1,045)		0		236			(809)
Amounts reclassified from AOCI	47		0		(10)		(2)	37
Net current-period other comprehensive income (loss)	(998)		0		226			(772)
Balance at December 31, 2020	$	(6,236)	$	(2)	$	(865)		$	(7,103)


⁽¹⁾ (1)Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net income (loss) until the obligations are fully extinguished. (2)Relates to pension, retiree medical and other postretirement benefits obligations and is recognized within the income tax provision (benefit) on our consolidated statements of operations.	~~Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net income until the obligations are fully extinguished.~~


⁽²⁾	~~Relates to pension, retiree medical and other postretirement benefits obligations and is recognized within the income tax provision on the consolidated statement of operations.~~

Reclassifications out of AOCI for the years ended December 31, ~~2017~~2020 and ~~2016~~2019 are as follows (in millions):


	Amount reclassified from AOCI						Affected line items on the consolidated statement of operations		Amounts reclassified from AOCI				Affected line items on the consolidated statements of operations
	Year Ended December 31,								Year Ended December 31,
AOCI Components	2017			2016				AOCI Components	2020		2019
Amortization of pension, retiree medical and other postretirement benefits:								Amortization of pension, retiree medical and other postretirement benefits:
Prior service benefit	$	(132	)	$	(134	)	Salaries, wages and benefits	Prior service benefit	$	(81)	$	(162)	Nonoperating other income, net
Actuarial loss	77			69			Salaries, wages and benefits	Actuarial loss	118		93		Nonoperating other income, net
Total reclassifications for the period, net of tax	$	(55	)	$	(65	)		Total reclassifications for the period, net of tax	$	37	$	(69)

Amounts allocated to ~~OCI~~other comprehensive income for income taxes as further described in Note 67 will remain in AOCI until we cease all related activities, such as termination of the pension plan.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

~~11.~~12. Commitments, Contingencies and Guarantees

(a) Aircraft, Engine and ~~Engine~~Other Purchase Commitments

Under all of our aircraft and engine purchase agreements, our total future commitments as of December 31, ~~2017~~2020 are expected to be as follows (approximately, in millions):

2018 2019 2020 2021 2022 2023 and Thereafter Total
Payments for aircraft commitments and certain engines ⁽¹⁾
$ 1,826
$ 2,730
$ 2,730
$ 2,858
$ 2,138
$ 1,482
$ 13,764


	2021		2022		2023		2024		2025		2026 and Thereafter		Total
Payments for aircraft commitments and certain engines (1)	$	527	$	1,661	$	1,592	$	2,377	$	3,381	$	1,742	$	11,280

⁽¹⁾

These amounts are net of purchase deposits currently held by the manufacturers and include all commitments for regional aircraft. American has granted a security interest in its purchase deposits with Boeing. Our purchase deposits held by all manufacturers totaled $1.2

(1)These amounts are net of purchase deposits currently held by the manufacturers. We have granted a security interest in certain of our purchase deposits with Boeing to secure certain obligations to Boeing and third-party financing sources. Our purchase deposits held by all manufacturers totaled $1.4 billion as ~~of December 31, 2017.~~

~~(b) Operating Leases and Other~~

~~We lease certain aircraft, engines and ground equipment, in addition to the majority of our ground facilities and terminal space. As~~ of December 31, ~~2017,~~2020.

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On March 13, 2019, a directive from the Federal Aviation Administration (FAA) grounded all U.S.-registered Boeing 737 MAX Family aircraft and, as a result, all deliveries of Boeing 737 MAX Family aircraft were suspended. Since the time of the FAA recertification of the Boeing 737 MAX Family aircraft on November 18, 2020, deliveries have resumed and we ~~had 421~~accepted delivery of 10 Boeing 737 MAX Family aircraft ~~under operating leases, with remaining terms ranging~~during the period between the date of recertification and December 31, 2020. We have rights to defer 1 Boeing 737 MAX Family aircraft from ~~three months~~delivery in 2021 to approximately 12 years. Airports are utilized for flight operations under lease arrangements with the municipalities or agencies owning or controlling such airports. Substantially all leases provide that the lessee must pay taxes, maintenance, insurance2023 and ~~certain other operating expenses applicable~~rights to defer 10 Boeing 737 MAX Family aircraft from delivery in 2022 to 2023-2024.

Due to the ~~leased property. Some leases also include renewal and purchase options.~~uncertainty surrounding the timing of delivery of certain aircraft, the amounts in the table represent our current best estimate; however, the actual delivery schedule may differ from the table above, potentially materially.

~~As of December 31, 2017, obligations under noncancellable~~The amounts in the table exclude 19 Boeing 787-8 aircraft to be delivered in 2021 for which we have obtained committed lease financing. See Note 6 for information regarding this operating ~~leases for future minimum~~ lease ~~payments are as follows (approximately, in millions):~~

2018 2019 2020 2021 2022 2023 and Thereafter Total
Future minimum lease payments $ 2,195
$ 1,974
$ 1,784
$ 1,339
$ 1,159
$ 3,266
$ 11,717

~~Mainline and regional rent expense, excluding landing fees, was $2.8 billion in each of 2017, 2016 and 2015.~~commitment.

Additionally, we have purchase commitments related to ~~jet~~aircraft fuel, ~~facility~~flight equipment maintenance, construction projects and information technology support as follows (approximately): ~~$2.0~~$2.3 billion in ~~2018, $1.4~~2021, $1.3 billion in ~~2019, $890~~2022, $1.2 billion in 2023, $242 million in ~~2020 and $950~~2024, $163 million in ~~2021.~~2025 and $1.0 billion in 2026 and thereafter.

~~(c)~~(b) Capacity Purchase Agreements with Third-Party Regional Carriers

American has capacity purchase agreements with third-party regional carriers. The capacity purchase agreements provide that all revenues, including passenger, in-flight, ancillary, mail and freight revenues, go to American. American controls marketing, scheduling, ticketing, pricing and seat inventories. In return, American agrees to pay predetermined fees to these airlines for operating an agreed-upon number of aircraft, without regard to the number of passengers on board. In addition, these agreements provide that American either reimburses or pays 100% of certain variable costs, such as airport landing fees, fuel and passenger liability insurance. ~~American controls marketing, scheduling, ticketing, pricing and seat inventories.~~

As of December 31, ~~2017,~~2020, American’s capacity purchase agreements with third-party regional carriers had expiration dates ranging from ~~2018~~2021 to 2027, with rights of American to extend the respective terms of certain agreements. ~~See Part I, Item 2. Properties for unaudited information on the aircraft operated by third-party regional carriers under such capacity purchase agreements.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

As of December 31, ~~2017,~~2020, American’s minimum ~~fixed~~ obligations under its capacity purchase agreements with third-party regional carriers are as follows (approximately, in millions):

2018 2019 2020 2021 2022 2023 and Thereafter Total
Minimum fixed obligations under capacity purchase agreements with third-party regional carriers ⁽¹⁾
$ 1,457
$ 1,311
$ 1,063
$ 866
$ 699
$ 2,073
$ 7,469


	2021		2022		2023		2024		2025		2026 and Thereafter		Total
Minimum obligations under capacity purchase agreements with third-party regional carriers (1)	$	1,120	$	1,666	$	1,685	$	1,663	$	1,511	$	3,646	$	11,291

⁽¹⁾

(1)Represents minimum payments under capacity purchase agreements with third-party regional carriers, which are estimates of costs based on assumed minimum levels of flying under the capacity purchase agreements and American’s actual payments could differ materially. Excludes payments for the lease of certain aircraft under capacity purchase agreements, which are reflected in the operating lease obligations in Note 6.

Los Angeles International Airport (LAX)

From time to time, airports where we have operations engage in construction projects, often substantial, that result in new or improved facilities that are ultimately funded through increases in the rent and other occupancy costs payable by airlines using the airport. Unlike this construction and funding model, we are managing a project at LAX where we have legal title to the assets during construction. In 2018, we executed a lease agreement with Los Angeles World Airports (LAWA), which owns and operates LAX, in connection with a $1.6 billion modernization project related to LAX Terminals 4 and 5. Construction, which started in October 2018 and is expected to be completed in 2028, will occur in a phased approach. The modernization project will include a unified departure hall to the entranceway of Terminals 4 and 5, reconfigured ticket counter and check-in areas with seamless access to security screening areas, 10 new security screening lanes with automated technology in addition to the existing Terminal 5 lanes, and a new Terminal 4 South concourse with more open and upgraded amenities at gate areas. The project will also include renovated break rooms, multi-use meeting rooms and team gathering spaces throughout the terminals to support our team members at LAX.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

As each phase is completed, the assets will be sold and transferred to LAWA, including the site improvements and non-proprietary improvements. As we control the assets during construction, they are recognized on our balance sheet until legal title has transferred. As of December 31, 2020, we have incurred approximately $223 million in costs relating to the LAX modernization project, of which $114 million were incurred during 2020, and have been included within operating property and equipment on our consolidated balance sheet. As of December 31, 2020, we have sold and transferred $111 million of non-proprietary improvements to LAWA, all of which occurred during 2020.

Represents minimum payments under capacity purchase agreements with third-party regional carriers. These commitments are estimates of costs based on assumed minimum levels of flying under the capacity purchase agreements and American’s actual payments could differ materially. These obligations also include the portion of American’s future obligations representing the lease of aircraft for accounting purposes in the amount of approximately $377 million in 2018, $355 million in 2019, $320 million in 2020, $282 million in 2021, $239 million in 2022 and $699 million in 2023 and thereafter.

(d) Off-Balance Sheet Arrangements

Aircraft and Engines

American currently operates ~~387~~350 owned aircraft and ~~113~~24 leased aircraft, and owns 62 spare aircraft engines, which in each case were financed with EETCs issued by pass-through trusts. These trusts are off-balance sheet entities, the primary purpose of which is to finance the acquisition of flight equipment or to permit issuance of debt backed by existing flight equipment. ~~Rather~~In the case of aircraft EETCs, rather than finance each aircraft separately when such aircraft is purchased, delivered or refinanced, these trusts allow American to raise the financing for a number of aircraft at one time and, if applicable, place such funds in escrow pending a future purchase, delivery or refinancing of the relevant aircraft. Similarly, in the case of the spare engine EETCs, the trusts allow American to use its existing pool of spare engines to raise financing under a single facility. The trusts ~~were~~have also been structured to provide for certain credit enhancements, such as liquidity facilities to cover certain interest payments, that reduce the risks to the purchasers of the trust certificates and, as a result, reduce the cost of aircraft financing to American.

With respect to leveraged leases, American evaluated whether the leases had characteristics of a variable interest entity. American concluded the leasing entities met the criteria for variable interest entities. American generally is not the primary beneficiary of the leasing entities if the lease terms are consistent with market terms at the inception of the lease and do not include a residual value guarantee, fixed-price purchase option or similar feature that obligates American to absorb decreases in value or entitles American to participate in increases in the value of the aircraft. American does not provide residual value guarantees to the bondholders or equity participants in the trusts. Some leases have a fair market value or a fixed price purchase option that allows American to purchase the aircraft at or near the end of the lease term. However, the option price approximates an estimate of the aircraft’s fair value at the option date. Under this feature, American does not participate in any increases in the value of the aircraft.entities; however, American concluded it is not the primary beneficiary under these ~~arrangements. Therefore, American~~leasing arrangements and accounts for the majority of its EETC leveraged lease financings as operating leases. American’s total future ~~obligations~~payments to the trusts of each of the relevant EETCs under these leveraged lease financings are ~~$572~~$78 million as of December 31, ~~2017,~~2020, which are ~~included~~reflected in the ~~future minimum~~operating lease ~~payments table above.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

obligations in Note 6.

Letters of Credit and Other

(e) Legal Proceedings

Chapter 11 Cases. On November 29, 2011, AMR, American, and certain of AMR’s other direct and indirect domestic subsidiaries (the Debtors) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). On October 21, 2013, the Bankruptcy Court entered an order approving and confirming the Debtors’ fourth amended joint plan of reorganization (as amended, the Plan). On the Effective Date, December 9, 2013, the Debtors consummated their reorganization pursuant to the Plan and completed the Merger.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

Pursuant to rulings of the Bankruptcy Court, the Plan established the Disputed Claims Reserve to hold shares of AAG common stock reserved for issuance to disputed claimholders at the Effective Date that ultimately become holders of allowed claims. ~~As of December 31, 2017, there were approximately 24.5 million~~The shares of AAG common stock ~~remaining in~~issued to the Disputed Claims ~~Reserve.~~Reserve were originally issued on December 13, 2013 and have at all times since been included in the number of shares issued and outstanding as reported from time to time in our quarterly and annual reports, including for calculating earnings per common share. As disputed claims are resolved, the claimants ~~will~~ receive distributions of shares from the Disputed Claims ~~Reserve on the same basis as if such distributions had been made on or about the Effective Date. However, we~~Reserve. We are not required to distribute additional shares above the limits contemplated by the Plan, even if the shares remaining for distribution in the Disputed Claims Reserve are not sufficient to fully pay any additional allowed unsecured claims. ~~To the extent that~~If any of the reserved shares remain undistributed upon resolution of all remaining disputed claims, such shares will not be returned to us but rather will be distributed to former AMR ~~stockholders.~~

~~There is also pending in~~stockholders and former convertible noteholders treated as stockholders under the Bankruptcy Court an adversary proceeding relating to an action brought by American to seek a determination that certain non-pension, postemployment benefits are not vested benefits and thus may be modified or terminated without liability to American. On April 18, 2014,Plan. In February 2020, 2.2 million shares of AAG common stock were distributed from the Bankruptcy Court granted American’s motion for summary judgment with respect to certain non-union employees, concluding that their benefits were not vested and could be terminated. The summary judgment motion was denied with respect to all other retirees. The Bankruptcy Court has not yet scheduled a trial on the merits concerning whether those retirees’ benefits are vested, and American cannot predict whether it will receive relief from obligations to provide benefits to any of those retirees. Our financial statements presently reflect these retirement programs withoutDisputed Claims Reserve. After giving effect to ~~any modification or termination~~this distribution, as of ~~benefits that may ultimately be implemented based upon~~December 31, 2020, the ~~outcome~~Disputed Claims Reserve held approximately 4.8 million shares of ~~this proceeding.~~AAG common stock.

~~DOJ Antitrust Civil Investigative Demand~~. In June 2015, we received a Civil Investigative Demand (CID) from the United States Department of Justice (DOJ) as part of an investigation into whether there have been illegal agreements or coordination of air passenger capacity. The CID seeks documents and other information from us, and other airlines have announced that they have received similar requests. We are cooperating fully with the DOJ investigation.

Private Party Antitrust Action~~. Subsequent~~ Related to ~~announcement of the delivery of CIDs by the DOJ, we,~~Passenger Capacity. We, along with Delta Air Lines, Inc., Southwest Airlines Co., United Airlines, Inc. and, in the case of litigation filed in Canada, Air Canada, ~~have been~~were named as defendants in approximately 100 putative class action lawsuits alleging unlawful agreements with respect to air passenger ~~capacity, although Southwest has entered into a settlement with the plaintiffs that is pending approval by the court.~~capacity. The U.S. lawsuits ~~have been~~were consolidated in the Federal District Court for the District of ~~Columbia.~~Columbia (the DC Court). On ~~October 28, 2016,~~June 15, 2018, we reached a settlement agreement with the ~~Court denied a motion by~~plaintiffs in the ~~airline defendants~~amount of $45 million to ~~dismiss~~resolve all class claims in the ~~class actions. These lawsuits~~U.S. lawsuits. That settlement was approved by the DC Court on May 13, 2019, however three parties who objected to the settlement have appealed that decision to the United States Court of Appeals for the District of Columbia. We believe these appeals are ~~in their relatively early stages~~without merit and we intend to vigorously defend ~~these matters vigorously.~~against them.

Private Party Antitrust Action Related to the Merger. On ~~July 2,~~August 6, 2013, a lawsuit captioned Carolyn Fjord, et al., v. ~~US Airways Group, Inc.,~~AMR Corporation, et al., was filed in the ~~United States District Court for the Northern District of California.~~Bankruptcy Court. The complaint named as defendants US Airways Group, ~~and~~ US Airways, ~~Inc.,~~AMR and American, alleged that the effect of the Merger may be to create a monopoly in violation of Section 7 of the Clayton Antitrust Act, and sought injunctive relief and/or divestiture. On ~~August 6, 2013, the plaintiffs re-filed their complaint in the Bankruptcy Court, adding AMR and American as defendants. On~~ November 27, 2013, the Bankruptcy Court denied plaintiffs’ motion to preliminarily enjoin the Merger. On ~~May 12, 2017, defendants filed a~~August 29, 2018, the Bankruptcy Court denied in part defendants' motion for summary ~~judgment. On June 23, 2017, plaintiffs filed an opposition to defendants’ motion~~judgment, and fully denied plaintiffs' cross-motion for summary judgment. ~~Briefing~~The parties' evidentiary cases were presented before the Bankruptcy Court in a bench trial in March 2019 and the parties submitted proposed findings of fact and conclusions of law and made closing arguments in April 2019. On January 29, 2021, the ~~parties’ respective motions concluded on~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

~~September 1, 2017; a hearing date has not yet been set.~~Bankruptcy Court published its decision finding in our favor. We expect the plaintiffs to appeal this ruling. We believe this lawsuit is without merit and intend to continue to vigorously defend against the ~~allegations.~~

~~DOJ Investigation Related to the United States Postal Service. In April 2015, the DOJ informed us~~allegations, including in respect of an inquiry regarding American’s 2009 and 2011 contracts with the United States Postal Service for the international transportation of mail by air. In October 2015, we received a CID from the DOJ seeking certain information relating to these contracts and the DOJ has also sought information concerning certainany appeal of the airlines that transport mail on a codeshare basis. The DOJ has indicated it is investigating potential violations of the False Claims Act or other statutes. We are cooperating fully with the DOJ with regard to its investigation.January 29, 2021 ruling.

General. In addition to the specifically identified legal proceedings, we and our subsidiaries are also engaged in other legal proceedings from time to time. Legal proceedings can be complex and take many months, or even years, to reach resolution, with the final outcome depending on a number of variables, some of which are not within our control. Therefore, although we will vigorously defend ourselves in each of the actions described above and such other legal proceedings, their ultimate resolution and potential financial and other impacts on us are uncertain but could be material. ~~See Part I, Item 1A. Risk Factors –“We may be a party to litigation in the normal course of business or otherwise, which could affect our financial position and liquidity”~~ ~~for unaudited additional discussion.~~

(f) Guarantees and Indemnifications

We are party to many routine contracts in which we provide general indemnities in the normal course of business to third parties for various risks. We are not able to estimate the potential amount of any liability resulting from the indemnities. These indemnities are discussed in the following paragraphs.

In our aircraft financing agreements, we generally indemnify the financing parties, trustees acting on their behalf and other relevant parties against liabilities (including certain taxes) resulting from the financing, manufacture, design, ownership, operation and maintenance of the aircraft regardless of whether these liabilities ~~(or~~(including certain taxes) relate to the negligence of the indemnified parties.

Our loan agreements and other LIBOR-based financing transactions (including certain leveraged aircraft leases) generally obligate us to reimburse the applicable lender for incremental costs due to a change in law that imposes (i) any reserve or special deposit requirement against assets of, deposits with or credit extended by such lender related to the loan, (ii) any tax, duty or other charge with respect to the loan (except standard income tax) or (iii) capital adequacy requirements. In addition, our loan agreements and other financing arrangements typically contain a withholding tax provision that requires us to pay additional amounts to the applicable lender or other financing party, generally if withholding taxes are imposed on such lender or other financing party as a result of a change in the applicable tax law.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

In certain transactions, including certain aircraft financing leases and loans, the lessors, lenders and/or other parties have rights to terminate the transaction based on changes in foreign tax law, illegality or certain other events or circumstances. In such a case, we may be required to make a lump sum payment to terminate the relevant transaction.

We have general indemnity clauses in many of our airport and other real estate leases where we as lessee indemnify the lessor (and related parties) against liabilities related to our use of the leased property. Generally, these indemnifications cover liabilities resulting from the negligence of the indemnified parties, but not liabilities resulting from the gross negligence or willful misconduct of the indemnified parties. In addition, we provide environmental indemnities in many of these leases for contamination related to our use of the leased property.

Under certain contracts with third parties, we indemnify the third-party against legal liability arising out of an action by the third-party, or certain other parties. The terms of these contracts vary and the potential exposure under these indemnities cannot be determined. We have liability insurance protecting us for some of the obligations we have undertaken under these indemnities.

American is required to make principal and interest payments for certain special facility revenue bonds issued by municipalities primarily to build or improve airport facilities and purchase equipment, which are leased to American. The payment of principal and interest of certain special facility revenue bonds is guaranteed by AAG. As of December 31, ~~2017,~~2020, the remaining lease payments through 2035 guaranteeing the principal and interest on these bonds are ~~$589~~$572 million ~~which are accounted for as~~and the current carrying amount of the associated operating ~~leases.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

lease liability in the accompanying consolidated balance sheet is $321 million.

As of December 31, ~~2017,~~2020, AAG had issued guarantees covering approximately ~~$810 million principal amount of American’s special facility revenue bonds (and interest thereon) and $8.5~~$15.0 billion ~~principal amount~~ of American’s secured debt (and interest thereon), including the Credit Facilities and certain EETC ~~financings.~~financings and $1.0 billion of American’s special facility revenue bonds (and interest thereon).

(g) Credit Card Processing Agreements

We have agreements with companies that process customer credit card transactions for the sale of air travel and other services. Our agreements allow these credit card processing companies, under certain conditions, to hold an amount of our cash (referred to as a holdback) equal to a portion of advance ticket sales that have been processed by that company, but for which we have not yet provided the air transportation. Additional holdback requirements in the event of material adverse changes in our financial condition will reduce our liquidity in the form of unrestricted cash by the amount of the holdbacks. WeThese credit card processing companies are not currently ~~required~~entitled to maintain any holdbacks pursuant to these requirements.

(h) Labor Negotiations

As of December 31, ~~2017,~~2020, we employed approximately ~~126,600~~102,700 active full-time equivalent (FTE) employees, of which ~~23,500~~24,400 were employed by our wholly-owned regional ~~operations. Approximately 85% of~~subsidiaries. Of the total active FTE employees, 84% are covered by collective bargaining agreements (CBAs) with various labor ~~unions. Negotiations for joint~~unions and 43% are covered by CBAs that are currently amendable or that will become amendable within one year. Joint collective bargaining agreements ~~covering~~(JCBAs) have been reached with post-Merger employee groups, including a new five-year JCBA ratified with the TWU-IAM Association, which represents our mainline ~~maintenance,~~mechanics and related, fleet service, stock clerks, maintenance control technicians and maintenance training ~~instructors~~instructors. Additionally, the post-Merger JCBAs covering our pilots and flight attendants are now amendable. The JCBA covering our passenger service employees ~~as well as for~~and CBAs covering certain employee groups at our wholly-owned regional subsidiaries are ~~continuing. There is no assurance that a successful or timely resolution~~also amendable.

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Table of ~~these labor negotiations will be achieved.~~Contents

~~(i) Other~~

As a result of the terrorist attacks of September 11, 2001 and the subsequent liability protections provided for by the Air Transportation Safety and System Stabilization Act (the Stabilization Act), we recorded a liability for these terrorist attacks claims equal to the related insurance receivable due to us. The Stabilization Act provides that, notwithstanding any other provision of law, liability for all claims, whether compensatory or punitive, arising from these terrorist attacks, against any air carrier shall not exceed the liability coverage maintained by the air carrier. As of December 31, 2017, claims relating to this matter have been substantially resolved and the remaining liability and the amount of the offsetting receivable are not material.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

~~12.~~13. Supplemental Cash Flow Information

Supplemental disclosure of cash flow information and non-cash investing and financing activities are as follows (in millions):


	Year Ended December 31,
	2020		2019		2018
Non-cash investing and financing activities:
Settlement of bankruptcy obligations	$	56	$	7	$	0

Supplemental information:
Interest paid, net	944		1,111		1,091
Income taxes paid	6		8		18

Year Ended December 31,
2017 2016 2015
Non-cash investing and financing activities:
Equity investment $ 120
$ —
$ —
Settlement of bankruptcy obligations 15
3
63
Capital lease obligations —
—
5
Supplemental information:
Interest paid, net 1,040
964
873
Income taxes paid 20
16
20

~~13.~~14. Operating Segments and Related Disclosures

We are managed as a single business unit that provides air transportation for passengers and cargo. This allows us to benefit from an integrated revenue pricing and route network that includes American and our wholly-owned and third-party regional carriers that fly under capacity purchase agreements operating as American Eagle. The flight equipment of all these carriers is combined to form ~~one~~1 fleet that is deployed through a single route scheduling system. Financial information and annual operational plans and forecasts are prepared and reviewed by the chief operating decision maker at the consolidated level. When making operational decisions, the chief operating decision maker evaluates flight profitability data, which considers aircraft type and route economics, but is indifferent to the results of the individual ~~wholly-owned~~ regional carriers. The objective in making operational decisions is to maximize consolidated financial results, not the individual results of American or American Eagle.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.~~

~~Our operating revenues~~See Note 1(l) for our passenger revenue by geographic ~~region as defined by the U.S. Department of Transportation (DOT) are summarized below (in millions):~~

Year Ended December 31,
2017 2016 2015
DOT Domestic $ 29,612
$ 28,620
$ 28,761
DOT Latin America 5,422
4,995
5,539
DOT Atlantic 5,059
4,769
5,146
DOT Pacific 2,114
1,796
1,544
Total operating revenues $ 42,207
$ 40,180
$ 40,990

~~We attribute operating revenues by geographic region based upon the origin and destination of each flight segment.~~region. Our tangible assets consist primarily of flight equipment, which are mobile across geographic markets and, therefore, have not been allocated.

~~14.~~15. Share-based Compensation

The 2013 AAG Incentive Award Plan (the 2013 Plan) provides that awards may be in the form of an option, restricted stock award, restricted stock unit award, performance award, dividend equivalent award, deferred stock award, deferred stock unit award, stock payment award or stock appreciation right. The 2013 Plan initially authorized the grant of awards for the issuance of up to 40 million shares. Any shares underlying awards granted under the 2013 Plan ~~or any pre-existing US Airways Group plan,~~ that are forfeited, terminate or are settled in cash (in whole or in part) without the delivery of shares will again be available for grant.

~~Our~~For the years ended December 31, 2020, 2019 and 2018, we recorded $91 million, $95 million and $88 million, respectively, of share-based compensation costs principally in salaries, wages and benefits expense for the years ended December 31, 2017, 2016 and 2015 included $90 million, $102 million and $274 million, respectively, of share-based compensation costs. Of the 2015 amount, $198 million was related to awards granted to certain employees in connection with the Merger and recorded in special items, net on ~~the accompanying~~our consolidated statements of operations.

During ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, we withheld approximately ~~1.1~~0.7 million, ~~1.4~~0.8 million and ~~7.0~~0.8 million shares of AAG common stock, respectively, and paid approximately ~~$51~~$15 million, ~~$56~~$25 million and ~~$306~~$37 million, respectively, in satisfaction of certain tax withholding obligations associated with employee equity awards.

~~(a)~~ Restricted Stock Unit Awards (RSUs)

WeThe majority of our RSUs have ~~granted RSUs with~~ service conditions (time vested primarily over three years) ~~and performance conditions.~~. The grant-date fair value of these RSUs is equal to the market price of the underlying shares of AAG common stock on the date of grant. ~~For time vested awards, the~~The expense for these RSUs is recognized on a straight-line basis over the vesting period for the entire award. ~~For awards with performance conditions, the expense is recognized based on the expected achievement at each reporting period. Stock-settled~~ RSUs are classified as equity awards as the vesting results in the issuance of shares of AAG common stock.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

~~Stock-settled~~ RSU award activity for all plans for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018 is as follows:


						Number of Shares	Weighted Average Grant Date Fair Value
	Number of Shares		Weighted Average Grant Date Fair Value			(In thousands)
	(In thousands)
Outstanding at December 31, 2014	21,342		$	26.43
Outstanding at December 31, 2017					Outstanding at December 31, 2017	4,324	$	46.94
Granted	2,213		46.62		Granted	2,194	47.65
Vested and released	(17,163	)	25.20		Vested and released	(1,999)	44.99
Forfeited	(785	)	27.12		Forfeited	(199)	45.72
Outstanding at December 31, 2015	5,607		$	38.08
Outstanding at December 31, 2018					Outstanding at December 31, 2018	4,320	$	44.29
Granted	2,655		41.34		Granted	3,206	34.00
Vested and released	(2,754	)	34.83		Vested and released	(2,002)	44.90
Forfeited	(321	)	40.15		Forfeited	(337)	42.55
Outstanding at December 31, 2016	5,187		$	41.48
Outstanding at December 31, 2019					Outstanding at December 31, 2019	5,187	$	37.01
Granted	2,309		48.58		Granted	5,883	22.07
Vested and released	(2,708	)	39.63		Vested and released	(2,268)	39.46
Forfeited	(464	)	44.48		Forfeited	(920)	29.78
Outstanding at December 31, 2017	4,324		$	46.94
Outstanding at December 31, 2020					Outstanding at December 31, 2020	7,882	$	23.66

As of December 31, ~~2017,~~2020, there was ~~$121~~$107 million of unrecognized compensation cost related to ~~stock-settled~~ RSUs. These costs are expected to be recognized over a weighted average period of one year. The total fair value of ~~stock-settled~~ RSUs vested during the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018 was ~~$123~~$51 million, ~~$107~~$68 million and ~~$750~~$91 million, respectively.

~~(b) Stock Appreciation Rights (SARs)~~

~~We assumed US Airways Group’s outstanding SARs in connection with the Merger using an exchange ratio~~16. Valuation and Qualifying Accounts (in millions)


	Balance at Beginning of Year		Additions Charged to Statement of Operations Accounts		Deductions		Balance at End of Year
Allowance for obsolescence of spare parts
Year ended December 31, 2020	$	784	$	100	$	(394)	$	490
Year ended December 31, 2019	814		91		(121)		784
Year ended December 31, 2018	769		70		(25)		814
Allowance for credit losses on accounts receivable
Year ended December 31, 2020	$	31	$	27	$	(22)	$	36
Year ended December 31, 2019	29		19		(17)		31
Year ended December 31, 2018	24		42		(37)		29

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Table of one to one. These SARs were granted with an exercise price equal to the underlying common stock’s fair value at the date of each grant, have service conditions, become exercisable over a three-year vesting period and expire if unexercised at the end of their term, which ranges from seven to ten years. During 2017, 2016 and 2015, 0.8 million, 1.7 million and 3.0 million SARs, respectively, were exercised at weighted average exercise prices of $15.71, $14.49 and $12.09, respectively, for a total intrinsic value of $27 million, $49 million and $102 million, respectively. As of December 31, 2017, we had 1.2 million SARs outstanding with an aggregate intrinsic value of $54 million and weighted average exercise price of $8.08 that expire between 2018 and 2020 if unexercised.Contents

~~(c) ASU 2016-09: Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~

This ASU simplified the accounting for share-based payment award transactions including the financial statement presentation of excess tax benefits and deficiencies. We adopted this ASU during the second quarter of 2016, which resulted in the recognition of $418 million of previously unrecognized excess tax benefits in deferred tax assets and an increase to retained earnings on the consolidated balance sheet as of the beginning of 2016.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

~~15. Valuation and Qualifying Accounts (in millions)~~

Balance at Beginning of Year Changes Charged to Statement of Operations Accounts
Write-offs
(Net of Recoveries)
Sales, Retirements and Transfers Balance at End of Year
Allowance for obsolescence of spare parts
Year ended December 31, 2017 $ 765
$ 29
$ (4 ) $ (21 ) $ 769
Year ended December 31, 2016 728
37
(3 ) 3
765
Year ended December 31, 2015 673
50
(4 ) 9
728
Allowance for uncollectible accounts
Year ended December 31, 2017 $ 36
$ 43
$ (55 ) $ —
$ 24
Year ended December 31, 2016 41
47
(52 ) —
36
Year ended December 31, 2015 17
46
(22 ) —
41

~~16.~~17. Quarterly Financial Data (Unaudited)

Unaudited summarized financial data by quarter for ~~2017~~2020 and ~~2016~~2019 (in millions, except share and per share amounts):


										First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2020									2020
Operating revenues									Operating revenues	$	8,515	$	1,622	$	3,173	$	4,027
Operating expenses									Operating expenses	11,064		4,108		6,044		6,542
Operating loss									Operating loss	(2,549)		(2,486)		(2,871)		(2,515)
Net loss									Net loss	(2,241)		(2,067)		(2,399)		(2,178)
Loss per share:									Loss per share:
Basic and diluted									Basic and diluted	$	(5.26)	$	(4.82)	$	(4.71)	$	(3.81)
Shares used for computation (in thousands):									Shares used for computation (in thousands):
Basic and diluted									Basic and diluted	425,713		428,807		509,049		571,984
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2017
2019									2019
Operating revenues	$	9,624	$	11,105	$	10,878	$	10,600	Operating revenues	$	10,584	$	11,960	$	11,911	$	11,313
Operating expenses	9,023		9,570		9,646		9,910		Operating expenses	10,209		10,807		11,103		10,584
Operating income	601		1,535		1,232		690		Operating income	375		1,153		808		729
Net income	234		803		624		258		Net income	185		662		425		414
Earnings per share:									Earnings per share:
Basic	$	0.46	$	1.64	$	1.29	$	0.54	Basic	$	0.41	$	1.49	$	0.96	$	0.95
Diluted	$	0.46	$	1.63	$	1.28	$	0.54	Diluted	$	0.41	$	1.49	$	0.96	$	0.95
Shares used for computation (in thousands):									Shares used for computation (in thousands):
Basic	503,902		490,818		484,772		477,165		Basic	451,951		445,008		441,915		434,578
Diluted	507,797		492,965		486,625		479,382		Diluted	453,429		445,587		442,401		435,659

2016
Operating revenues	$	9,435	$	10,363	$	10,594	$	9,789
Operating expenses	8,100		8,612		9,163		9,022
Operating income	1,335		1,751		1,431		767
Net income	700		950		737		289
Earnings per share:
Basic	$	1.15	$	1.69	$	1.40	$	0.56
Diluted	$	1.14	$	1.68	$	1.40	$	0.56
Shares used for computation (in thousands):
Basic	606,245		563,000		525,415		514,571
Diluted	611,488		566,040		528,510		518,358

Our fourth quarter ~~2017~~2020 results ~~include $307~~included $36 million of total pre-tax net special items driven principally by mark-to-market net unrealized gains and losses associated with certain equity investments and treasury rate lock derivative instruments.

Our fourth quarter 2019 results included $108 million of total pre-tax net special items that principally included ~~a $149 million charge for the $1,000 cash bonus and associated payroll taxes granted to our employees as of December 31, 2017 in recognition of the 2017 Tax Act, $81~~$85 million of ~~Merger~~merger integration expenses ~~$58~~and $39 million of fleet restructuring expenses, offset in part by $42 million of mark-to-market net unrealized gains associated with certain equity investments and treasury rate lock derivative instruments.

18. Subsequent Events

PSP2

On January 15, 2021 (the PSP2 Closing Date), the Subsidiaries entered into a ~~$20 million net charge resulting from fair value adjustments~~Payroll Support Program Extension Agreement (the PSP2 Agreement) with Treasury, with respect to ~~bankruptcy~~PSP2 provided pursuant to the PSP Extension Law. In connection with our entry into the PSP2 Agreement, on the PSP2 Closing Date, AAG also entered into a warrant agreement (the PSP2 Warrant Agreement) with Treasury and issued the PSP2 Promissory Note to Treasury, with the Subsidiaries as guarantors.

PSP2 Agreement

In connection with PSP2, we are required to comply with the relevant provisions of the PSP Extension Law, which are substantially similar as the restrictions contained in the PSP1 Agreement, but are in effect for a longer time period. These provisions include the requirement that funds provided pursuant to the PSP2 Agreement be used exclusively for the continuation of payment of eligible employee wages, salaries and benefits, the requirement against involuntary furloughs and reductions in employee pay rates and benefits through March 31, 2021, the provisions that prohibit the repurchase of AAG common stock, and the payment of common stock dividends through at least March 31, 2022, the provisions that restrict the payment of certain executive compensation until October 1, 2022, as well as a requirement to recall employees involuntarily terminated or furloughed after September 30, 2020. As was the case with PSP1, the PSP2 Agreement also imposes substantial reporting obligations ~~and a $7 million special non-cash benefit to income tax expense to reflect the impact~~ on ~~our deferred tax assets and liabilities resulting from the 2017 Tax Act.~~us.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP ~~INC.~~INC.

Pursuant to the PSP2 Agreement, Treasury is to provide us financial assistance to be paid in installments (each, an Installment) expected to total at least $3.0 billion in the aggregate, of which $1.5 billion was received on January 15, 2021. As partial compensation to the U.S. Government for the provision of financial assistance under PSP2, and assuming a total principal sum of approximately $3.0 billion, we expect AAG to issue a PSP2 Promissory Note in the aggregate principal amount of approximately $896 million and issue warrants (each a PSP2 Warrant and, collectively, the PSP2 Warrants) to Treasury to purchase up to an aggregate of approximately 5.7 million shares of AAG common stock.

~~Our fourth quarter 2016 results include $273~~PSP2 Promissory Note

As partial compensation to the U.S. Government for the provision of financial assistance under the PSP2 Agreement, AAG issued the PSP2 Promissory Note to Treasury, which provides for our unconditional promise to pay to Treasury the initial principal sum of approximately $433 million, subject to an increase equal to 30% of the amount of each additional Installment disbursed under the PSP2 Agreement after the PSP2 Closing Date, and the guarantee of the Company’s obligations by the Subsidiaries. Assuming the total ~~net special items that principally included $121 million~~Installments to be paid pursuant to the PSP2 Agreement aggregate approximately $3.0 billion, the PSP2 Promissory Note will have a total principal sum of ~~Merger integration expenses, $104 million~~approximately $896 million.

The PSP2 Promissory Note bears interest on the outstanding principal amount at a rate equal to 1.00% per annum until the fifth anniversary of ~~fleet restructuring expenses~~the PSP2 Closing Date and ~~a $47 million net charge resulting from fair value adjustments~~2.00% plus an interest rate based on the secured overnight financing rate per annum or other benchmark replacement rate consistent with customary market conventions (but not to ~~bankruptcy obligations.~~

~~17. Subsequent Event~~

~~Dividend Declaration~~

~~In January 2018, we announced that our Board~~be less than 0.00%) thereafter until the tenth anniversary of ~~Directors declared a $0.10 per share dividend for stockholders~~the PSP2 Closing Date (the PSP2 Maturity Date), and interest accrued thereon will be payable in arrears on the last business day of ~~record~~March and September of each year, beginning on ~~February 6, 2018,~~March 31, 2021. The aggregate principal amount outstanding under the PSP2 Promissory Note, together with all accrued and unpaid interest thereon and all other amounts payable under the PSP2 Promissory Note, will be due and payable on ~~February 20, 2018. Any future dividends that~~the PSP2 Maturity Date.

We may, ~~be declared~~at any time and ~~paid~~ from time to time, voluntarily prepay amounts outstanding under the PSP2 Promissory Note, in whole or in part, without penalty or premium. Within 30 days of the occurrence of certain change of control triggering events, we are required to prepay the aggregate outstanding principal amount of the PSP2 Promissory Note at such time, together with any accrued interest or other amounts owing under the PSP2 Promissory Note at such time.

The PSP2 Promissory Note is our senior unsecured obligation and each guarantee of the PSP2 Promissory Note is the senior unsecured obligation of each of the Subsidiaries, respectively.

The PSP2 Promissory Note contains events of default, including cross-default with respect to acceleration or failure to pay at maturity other material indebtedness. Upon the occurrence of an event of default and subject to certain grace periods, the outstanding obligations under the PSP2 Promissory Note may, and in certain circumstances will automatically, be accelerated and become due and payable immediately.

PSP2 Warrant Agreement and PSP2 Warrants

As partial compensation to the U.S. Government for the provision of financial assistance under the PSP2 Agreement, and pursuant to the PSP2 Warrant Agreement, AAG agreed to issue warrants to Treasury to purchase PSP2 Warrant Shares. The exercise price of the PSP2 Warrant Shares is $15.66 per share (which was the closing price of the AAG common stock on The Nasdaq Global Select Market on December 24, 2020), subject to certain anti-dilution provisions provided for in the PSP2 Warrants.

Pursuant to the PSP2 Warrant Agreement, (a) on the PSP2 Closing Date, AAG issued to Treasury a PSP2 Warrant to purchase up to an aggregate of approximately 2.8 million shares of Common Stock based on the terms described herein and (b) on the date of each increase of the principal amount of the PSP2 Promissory Note in connection with the disbursement of an additional Installment under the PSP2 Agreement, AAG will issue to Treasury an additional PSP2 Warrant for a number of shares of AAG common stock equal to 10% of such increase of the principal amount of the PSP2 Promissory Note, divided by $15.66, the exercise price of such shares. Assuming the total Installments to be paid pursuant to the PSP2 Agreement aggregate approximately $3.0 billion, the total number of PSP2 Warrant Shares issuable is approximately 5.7 million, subject to certain anti-dilution provisions, provided for in the PSP2 Warrants.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

The PSP2 Warrants do not have any voting rights and are freely transferrable, with registration rights. Each PSP2 Warrant expires on the fifth anniversary of the date of issuance of such PSP2 Warrant. The PSP2 Warrants will be subject to market and economic conditions, applicable legal requirements and other relevant factors. We are not obligated to continue a dividend for any fixed period, and payment of dividends may be suspended at any timeexercisable either through net share settlement or cash, at our ~~discretion.~~

option. The PSP2 Warrants were and will be issued solely as compensation to the U.S. Government related to entry into the PSP2 Agreement. No separate proceeds (apart from the financial assistance described above) were received upon issuance of the PSP2 Warrants or will be received upon exercise thereof.

At the Market Offering

On October 22, 2020, AAG entered into an Equity Distribution Agreement (Prior ATM) relating to the issuance and sale of shares of AAG common stock pursuant to an at-the-market offering up to an aggregate value of $1.0 billion. Since the inception of the Prior ATM through January 28, 2021, we issued 68.6 million shares of AAG common stock at an average price of $12.87 per share for net proceeds of $869 million. We provided notice to terminate the Prior ATM effective as of January 28, 2021 with $118 million of shares of AAG common stock available for issuance.

On January 29, 2021, AAG entered into a new Equity Distribution Agreement (ATM Offering) relating to the issuance and sale of shares of AAG common stock pursuant to an at-the-market offering up to an aggregate value of $1.1 billion. The net proceeds from the sale of shares of AAG common stock related to the ATM Offering will be used for general corporate purposes and to enhance our liquidity position. Since the inception of the ATM Offering through February 16, 2021, we have issued 18.2 million shares of AAG common stock at an average price of $17.59 per share for proceeds of $320 million.

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ITEM 8B. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OF AMERICAN AIRLINES, INC.

Report of Independent Registered Public Accounting Firm

To the Stockholder and Board of Directors

American Airlines, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of American Airlines, Inc. and subsidiaries (American) as of December 31, ~~2017~~2020 and ~~2016,~~2019, the related consolidated statements of operations, comprehensive income (loss), cash flows, and stockholder’s equity for each of the years in the three-year period ended December 31, ~~2017,~~2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of American as of December 31, ~~2017~~2020 and ~~2016,~~2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, ~~2017,~~2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), American’s internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February ~~21, 2018~~17, 2021 expressed an unqualified opinion on the effectiveness of American’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of American’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to American in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Critical Audit Matters

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Estimate of mileage credits not expected to be redeemed

As discussed in Note 1(l) to the consolidated financial statements, American’s loyalty program awards mileage credits to passengers for flights on American, flights on partner airlines, or for using the services of other program participants. American accounts for such mileage credits earned using the deferred revenue method, which includes an estimate for mileage credits not expected to be redeemed. American’s loyalty program liability was $9.2 billion as of December 31, 2020 and the associated passenger revenue for mileage credits redeemed for travel was $1.1 billion for the year ended December 31, 2020.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over American’s loyalty program accounting process, including controls related to the estimation of mileage credits not expected to be redeemed. We assessed American’s methodology used to evaluate this estimate and determined it was consistent with historical periods. We developed an independent expectation of mileage credits not expected to be redeemed, which included consideration of industry and historical information. We compared the results of our independent expectation to American’s recorded amount of loyalty program liability and the associated passenger revenue.

Sufficiency of audit evidence over realizability of operating loss carryforwards

As discussed in Notes 1(i) and 5 to the consolidated financial statements, American had $3.9 billion of operating loss carryforwards, which are recorded as deferred tax assets at December 31, 2020. Deferred tax assets are recognized related to operating loss carryforwards that will reduce future taxable income. American provides a valuation allowance for deferred tax assets when it is more likely than not that some portion, or all the deferred tax assets, will not be realized. In evaluating the need for a valuation allowance, management considers the weighting of all available positive and negative evidence, which includes, among other things, the nature, frequency and severity of current and cumulative taxable income or losses, as well as future projections of profitability.

The following are the primary procedures we performed to address this critical audit matter. We performed risk assessment procedures and applied auditor judgment to determine the nature and extent of procedures to be performed over the income tax accounts and disclosures. We evaluated the design and tested the operating effectiveness of certain internal controls over American’s deferred tax asset valuation allowance process, including controls related to the realizability of operating loss carryforwards. We evaluated positive and negative evidence used in assessing whether the deferred tax assets were more-likely-than-not to be realized in the future, including evaluating the nature, frequency and severity of current and cumulative taxable income or losses, as well as future projections of profitability. We evaluated the reasonableness of management’s future projections of profitability considering (i) historical profitability of American, (ii) consistency with industry data and economic trends, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. We involved tax professionals who assisted in the evaluation of the nature, frequency and severity of current and cumulative taxable income or losses. Further, we assessed the sufficiency of audit evidence obtained over the realizability of the operating loss carryforwards by evaluating the cumulative results of the audit procedures, qualitative aspects of American’s accounting practices, and potential bias in the accounting estimate.

/s/ KPMG LLP

We have served as American’s auditor since 2014.

Dallas, Texas

February ~~21, 2018~~17, 2021

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AMERICAN AIRLINES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions)


	Year Ended December 31,										Year Ended December 31,
	2017			2016			2015				2020		2019		2018
Operating revenues:										Operating revenues:
Mainline passenger	$	29,238		$	27,909		$	29,037
Regional passenger	6,895			6,670			6,475
Passenger										Passenger	$	14,518	$	42,010	$	40,676
Cargo	800			700			760			Cargo	769		863		1,013
Other	5,262			4,884			4,666			Other	2,048		2,888		2,841
Total operating revenues	42,195			40,163			40,938			Total operating revenues	17,335		45,761		44,530
Operating expenses:										Operating expenses:
Aircraft fuel and related taxes	6,128			5,071			6,226			Aircraft fuel and related taxes	2,581		7,526		8,053
Salaries, wages and benefits	11,804			10,881			9,514			Salaries, wages and benefits	10,955		12,600		12,240
Regional expenses	6,572			6,009			5,952			Regional expenses	4,676		7,518		7,064
Maintenance, materials and repairs	1,959			1,834			1,889			Maintenance, materials and repairs	1,583		2,380		2,050
Other rent and landing fees	1,806			1,772			1,731			Other rent and landing fees	1,536		2,055		1,900
Aircraft rent	1,197			1,203			1,250			Aircraft rent	1,341		1,326		1,264
Selling expenses	1,477			1,323			1,394			Selling expenses	513		1,602		1,520
Depreciation and amortization	1,702			1,525			1,364			Depreciation and amortization	2,040		1,982		1,839
Special items, net	712			709			1,051			Special items, net	(657)		635		787
Other	4,806			4,532			4,378			Other	2,991		5,090		5,090
Total operating expenses	38,163			34,859			34,749			Total operating expenses	27,559		42,714		41,807
Operating income	4,032			5,304			6,189
Operating income (loss)										Operating income (loss)	(10,224)		3,047		2,723
Nonoperating income (expense):										Nonoperating income (expense):
Interest income	215			104			49			Interest income	337		515		330
Interest expense, net	(988		)	(906		)	(796		)	Interest expense, net	(1,171)		(1,109)		(1,028)
Other, net	(15		)	(59		)	(774		)
Other income, net										Other income, net	155		152		167
Total nonoperating expense, net	(788		)	(861		)	(1,521		)	Total nonoperating expense, net	(679)		(442)		(531)
Income before income taxes	3,244			4,443			4,668
Income (loss) before income taxes										Income (loss) before income taxes	(10,903)		2,605		2,192
Income tax provision (benefit)	1,322			1,662			(3,452		)	Income tax provision (benefit)	(2,453)		633		534
Net income	$	1,922		$	2,781		$	8,120
Net income (loss)										Net income (loss)	$	(8,450)	$	1,972	$	1,658

See accompanying notes to consolidated financial statements.

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AMERICAN AIRLINES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

Year Ended December 31,
2017 2016 2015
Net income $ 1,922
$ 2,781
$ 8,120
Other comprehensive income (loss), net of tax:
Pension, retiree medical and other postretirement benefits:
Amortization of actuarial loss and prior service cost (55 ) (65 ) (109 )
Current year change (13 ) (292 ) (51 )
Investments and derivative financial instruments (1 ) 6
(15 )
Total other comprehensive loss, net of tax (69 ) (351 ) (175 )
Total comprehensive income $ 1,853
$ 2,430
$ 7,945


	Year Ended December 31,
	2020		2019		2018
Net income (loss)	$	(8,450)	$	1,972	$	1,658
Other comprehensive income (loss), net of tax:
Pension, retiree medical and other postretirement benefits	(771)		(434)		(116)


Investments	0		3		(3)
Total other comprehensive loss, net of tax	(771)		(431)		(119)
Total comprehensive income (loss)	$	(9,221)	$	1,541	$	1,539

See accompanying notes to consolidated financial statements.

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AMERICAN AIRLINES, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except ~~shares~~share and par value)


	December 31,							December 31,
	2017			2016				2020		2019
ASSETS							ASSETS
Current assets							Current assets
Cash	$	287		$	310		Cash	$	231	$	267
Short-term investments	4,768			6,034			Short-term investments	6,617		3,543
Restricted cash and short-term investments	318			638			Restricted cash and short-term investments	609		158
Accounts receivable, net	1,755			1,599			Accounts receivable, net	1,334		1,770
Receivables from related parties, net	8,822			6,810			Receivables from related parties, net	7,877		12,451
Aircraft fuel, spare parts and supplies, net	1,294			1,032			Aircraft fuel, spare parts and supplies, net	1,520		1,754
Prepaid expenses and other	647			633			Prepaid expenses and other	633		584
Total current assets	17,891			17,056			Total current assets	18,821		20,527
Operating property and equipment							Operating property and equipment
Flight equipment	39,993			36,671			Flight equipment	37,485		42,213
Ground property and equipment	8,006			6,910			Ground property and equipment	8,836		9,089
Equipment purchase deposits	1,217			1,209			Equipment purchase deposits	1,446		1,674
Total property and equipment, at cost	49,216			44,790			Total property and equipment, at cost	47,767		52,976
Less accumulated depreciation and amortization	(15,354		)	(13,909		)	Less accumulated depreciation and amortization	(16,393)		(18,335)
Total property and equipment, net	33,862			30,881			Total property and equipment, net	31,374		34,641
Operating lease right-of-use assets							Operating lease right-of-use assets	7,994		8,694
Other assets							Other assets
Goodwill	4,091			4,091			Goodwill	4,091		4,091
Intangibles, net of accumulated amortization of $622 and $578, respectively	2,203			2,173
Intangibles, net of accumulated amortization of $745 and $704, respectively							Intangibles, net of accumulated amortization of $745 and $704, respectively	2,029		2,084
Deferred tax asset	682			1,912			Deferred tax asset	3,235		689
Other assets	1,283			1,979			Other assets	1,671		1,164
Total other assets	8,259			10,155			Total other assets	11,026		8,028
Total assets	$	60,012		$	58,092		Total assets	$	69,215	$	71,890

LIABILITIES AND STOCKHOLDER’S EQUITY							LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities							Current liabilities
Current maturities of long-term debt and capital leases	$	2,058		$	1,859
Current maturities of long-term debt and finance leases							Current maturities of long-term debt and finance leases	$	2,800	$	2,358
Accounts payable	1,625			1,546			Accounts payable	1,116		1,990
Accrued salaries and wages	1,613			1,460			Accrued salaries and wages	1,661		1,461
Air traffic liability	3,978			3,912			Air traffic liability	4,757		4,808
Loyalty program liability	2,791			2,789			Loyalty program liability	2,033		3,193
Operating lease liabilities							Operating lease liabilities	1,641		1,695
Other accrued liabilities	2,209			2,106			Other accrued liabilities	2,300		2,055
Total current liabilities	14,274			13,672			Total current liabilities	16,308		17,560
Noncurrent liabilities							Noncurrent liabilities
Long-term debt and capital leases, net of current maturities	21,236			20,718
Long-term debt and finance leases, net of current maturities							Long-term debt and finance leases, net of current maturities	26,182		20,684
Pension and postretirement benefits	7,452			7,800			Pension and postretirement benefits	7,027		6,008
Loyalty program liability							Loyalty program liability	7,162		5,422
Operating lease liabilities							Operating lease liabilities	6,739		7,388
Other liabilities	2,456			3,253			Other liabilities	1,449		1,406
Total noncurrent liabilities	31,144			31,771			Total noncurrent liabilities	48,559		40,908
Commitments and contingencies (Note 9)
Commitments and contingencies (Note 10)							Commitments and contingencies (Note 10)	0		0
Stockholder’s equity							Stockholder’s equity
Common stock, $1.00 par value; 1,000 shares authorized, issued and outstanding	—			—			Common stock, $1.00 par value; 1,000 shares authorized, issued and outstanding	0		0
Additional paid-in capital	16,716			16,624			Additional paid-in capital	17,050		16,903
Accumulated other comprehensive loss	(5,251		)	(5,182		)	Accumulated other comprehensive loss	(7,194)		(6,423)
Retained earnings	3,129			1,207
Retained earnings (deficit)							Retained earnings (deficit)	(5,508)		2,942
Total stockholder’s equity	14,594			12,649			Total stockholder’s equity	4,348		13,422
Total liabilities and stockholder’s equity	$	60,012		$	58,092		Total liabilities and stockholder’s equity	$	69,215	$	71,890

See accompanying notes to consolidated financial statements.

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AMERICAN AIRLINES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)


	Year Ended December 31,
	2020		2019		2018
Cash flows from operating activities:
Net income (loss)	$	(8,450)	$	1,972	$	1,658
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	2,313		2,267		2,108
Net gains from sale of property and equipment and sale-leaseback transactions	(98)		(109)		(57)
Special items, net non-cash	1,588		384		458
Pension and postretirement	(319)		(178)		(302)
Deferred income tax provision (benefit)	(2,453)		623		503
Share-based compensation	91		94		86
Other, net	14		(56)		(102)
Changes in operating assets and liabilities:
Decrease in accounts receivable	595		130		232
Decrease (increase) in other assets	42		(321)		(354)
Increase (decrease) in accounts payable and accrued liabilities	(619)		273		(171)
Increase (decrease) in air traffic liability	(51)		469		297
Decrease (increase) in receivables from related parties, net	4,134		(1,772)		(1,849)
Increase (decrease) in loyalty program liability	580		76		(283)
Contributions to pension plans	(6)		(1,224)		(472)
Increase (decrease) in other liabilities	1,210		(199)		191
Net cash provided by (used in) operating activities	(1,429)		2,429		1,943
Cash flows from investing activities:
Capital expenditures and aircraft purchase deposits	(1,922)		(4,156)		(3,677)
Proceeds from sale-leaseback transactions	665		850		1,096
Proceeds from sale of property and equipment	351		49		106
Purchases of short-term investments	(5,874)		(3,184)		(3,412)
Sales of short-term investments	2,803		4,144		3,705
Proceeds from vendor	90		250		0
Decrease (increase) in restricted short-term investments	(308)		(3)		72
Proceeds from sale of investments	41		0		207


Other investing activities	(154)		(96)		(7)
Net cash used in investing activities	(4,308)		(2,146)		(1,910)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	8,959		3,210		2,354
Payments on long-term debt and finance leases	(3,029)		(3,440)		(2,442)
Deferred financing costs	(85)		(52)		(59)

Net cash provided by (used in) financing activities	5,845		(282)		(147)
Net increase (decrease) in cash and restricted cash	108		1		(114)
Cash and restricted cash at beginning of year	277		276		390
Cash and restricted cash at end of year (a)	$	385	$	277	$	276

December 31,
2017 2016 2015
Cash flows from operating activities:
Net income $ 1,922
$ 2,781
$ 8,120
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,964
1,762
1,560
Deferred income tax provision (benefit) 1,298
1,652
(3,467 )
Debt discount and lease amortization (119 ) (124 ) (126 )
Special items, non-cash 272
270
295
Pension and postretirement (132 ) (70 ) (194 )
Share-based compensation 90
100
284
Other, net (25 ) (16 ) (21 )
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (189 ) (169 ) 354
Increase in other assets (405 ) (205 ) (22 )
Increase in accounts payable and accrued liabilities 266
336
214
Increase (decrease) in air traffic liability 66
164
(505 )
Increase in receivables from related parties, net (1,994 ) (4,862 ) (3,695 )
Increase (decrease) in loyalty program liability 2
264
(295 )
Contributions to pension plans (286 ) (32 ) (6 )
Increase (decrease) in other liabilities 140
(101 ) 91
Net cash provided by operating activities 2,870
1,750
2,587
Cash flows from investing activities:
Capital expenditures and aircraft purchase deposits (5,881 ) (5,657 ) (6,075 )
Proceeds from sale of property and equipment and sale-leaseback transactions 922
115
26
Purchases of short-term investments (4,633 ) (6,241 ) (8,126 )
Sales of short-term investments 5,915
6,092
8,517
Decrease in restricted cash and short-term investments 319
57
79
Purchase of equity investment (203 ) —
—
Net cash used in investing activities (3,561 ) (5,634 ) (5,579 )
Cash flows from financing activities:
Proceeds from issuance of long-term debt 3,058
7,701
4,509
Payments on long-term debt and capital leases (2,332 ) (3,827 ) (2,153 )
Deferred financing costs (85 ) (77 ) (80 )
Other financing activities 27
33
96
Net cash provided by financing activities 668
3,830
2,372
Net decrease in cash (23 ) (54 ) (620 )
Cash at beginning of year 310
364
984
Cash at end of year $ 287
$ 310
$ 364

(a) The following table provides a reconciliation of cash and restricted cash to amounts reported within the consolidated balance sheets:


Cash	$	231	$	267	$	265
Restricted cash included in restricted cash and short-term investments	154		10		11
Total cash and restricted cash	$	385	$	277	$	276

See accompanying notes to consolidated financial statements.

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AMERICAN AIRLINES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(In millions)

Common
Stock

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Income (Loss)

Retained
Earnings
(Deficit)
Total
Balance at December 31, 2014 $ —
$ 16,174
$ (4,656 ) $ (10,112 ) $ 1,406
Net income —
—
—
8,120
8,120
Changes in pension, retiree medical and other postretirement benefits liability —
—
(160 ) —
(160 )
Net changes in fair value of derivative financial instruments —
—
(9 ) —
(9 )
Share-based compensation expense —
284
—
—
284
Intercompany equity transfer —
63
—
—
63
Change in unrealized loss on investments —
—
(6 ) —
(6 )
Balance at December 31, 2015 —
16,521
(4,831 ) (1,992 ) 9,698
Net income —
—
—
2,781
2,781
Changes in pension, retiree medical and other postretirement benefits liability —
—
(563 ) —
(563 )
Non-cash tax benefit —
—
203
—
203
Share-based compensation expense —
100
—
—
100
Impact of adoption of Accounting Standards Update (ASU) 2016-09 related to share-based compensation (See Note 12) —
—
—
418
418
Intercompany equity transfer —
3
—
—
3
Change in unrealized loss on investments —
—
9
—
9
Balance at December 31, 2016 —
16,624
(5,182 ) 1,207
12,649
Net income —
—
—
1,922
1,922
Changes in pension, retiree medical and other postretirement benefits liability —
—
(114 ) —
(114 )
Non-cash tax benefit —
—
46
—
46
Share-based compensation expense —
90
—
—
90
Intercompany equity transfer —
2
—
—
2
Change in unrealized loss on investments —
—
(1 ) —
(1 )
Balance at December 31, 2017 $ —
$ 16,716
$ (5,251 ) $ 3,129
$ 14,594


	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings (Deficit)		Total
Balance at December 31, 2017	$	0	$	16,716	$	(5,873)	$	(955)	$	9,888
Net income	—		—		—		1,658		1,658
Other comprehensive loss, net	—		—		(119)		—		(119)
Share-based compensation expense	—		86		—		—		86
Impact of adoption of Accounting Standards Update (ASU) 2016-01 related to financial instruments	—		—		—		60		60
Impact of adoption of ASU 2016-02 related to leases	—		—		—		197		197
Balance at December 31, 2018	0		16,802		(5,992)		960		11,770
Net income	—		—		—		1,972		1,972
Other comprehensive loss, net	—		—		(431)		—		(431)
Share-based compensation expense	—		94		—		—		94

Intercompany equity transfer	—		7		—		10		17
Balance at December 31, 2019	0		16,903		(6,423)		2,942		13,422
Net loss	—		—		—		(8,450)		(8,450)
Other comprehensive loss, net	—		—		(771)		—		(771)
Share-based compensation expense	—		91		—		—		91
Intercompany equity transfer	—		56		—		0		56
Balance at December 31, 2020	$	0	$	17,050	$	(7,194)	$	(5,508)	$	4,348

See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

1. Basis of Presentation and Summary of Significant Accounting Policies

(a) Basis of Presentation

American Airlines, Inc. (American) is a Delaware corporation whose primary business activity is the operation of a major network air ~~carrier.~~carrier, providing scheduled air transportation for passengers and cargo. American is the principal wholly-owned subsidiary of American Airlines Group Inc. (AAG), which owns all of American’s outstanding common stock, par value $1.00 per share. On December 9, 2013, a subsidiary of AMR Corporation (AMR) merged with and into US Airways Group, Inc. (US Airways Group), a Delaware corporation, which survived as a wholly-owned subsidiary of AAG, and AAG emerged from Chapter 11 (the Merger). Upon closing of the Merger and emergence from Chapter 11, AMR changed its name to American Airlines Group Inc. On December 30, 2015, in order to simplify AAG’s internal corporate structure, US Airways, Inc. (US Airways), a wholly-owned subsidiary of US Airways Group, merged with and into American, with American as the surviving corporation. All significant intercompany transactions have been eliminated.

(b) Impact of Coronavirus (COVID-19)

COVID-19 has been declared a global health pandemic by the World Health Organization. COVID-19 has surfaced in nearly all regions of the world, which has driven the implementation of significant, government-imposed measures to prevent or reduce its spread, including travel restrictions, testing regimes, closing of borders, “stay at home” orders and business closures. As a result, American has experienced an unprecedented decline in the demand for air travel, which has resulted in a material deterioration in its revenues. While American's business performed largely as expected in January and February of 2020, a severe reduction in air travel starting in March 2020 resulted in its total operating revenues decreasing approximately 62% in 2020 as compared to 2019. While the length and severity of the reduction in demand due to the COVID-19 pandemic is uncertain, American's business, operations and financial condition in 2020 were severely impacted.

American has taken aggressive actions to mitigate the effects of the COVID-19 pandemic on its business including deep capacity reductions, structural changes to its fleet, cost reductions, and steps to preserve cash and improve its overall liquidity position. American remains extremely focused on taking all self-help measures available to manage its business during this unprecedented time, consistent with the terms of the financial assistance it has received from the U.S. Government under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Capacity Reductions

American has significantly reduced its capacity (as measured by available seat miles), with 2020 flying decreasing by 50% year-over-year. Domestic capacity in 2020 was down 41% year-over-year while international capacity was down 68% year-over-year. The demand environment continues to be uncertain as COVID-19 cases have continued to fluctuate in jurisdictions to which American flies and travel restrictions have generally remained in place. Due to this uncertainty, American will continue to adjust its future capacity to match observed booking trends for future travel and make further adjustments to its capacity as needed.

Fleet

To better align American’s network with lower passenger demand, American accelerated the retirement of Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets as well as certain regional aircraft, including certain Embraer 140 and Bombardier CRJ200 aircraft. These retirements remove complexity from American’s operation and bring forward cost savings and efficiencies associated with operating fewer aircraft types. See Note 1(g) below for further information on the accounting for American's fleet retirements. Due to the inherent uncertainties of the current operating environment, American will continue to evaluate its current fleet and may decide to permanently retire additional aircraft. In addition, American has placed a number of Boeing 737-800 and certain regional aircraft into temporary storage.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Cost Reductions

American moved quickly to better align its costs with its reduced schedule. In aggregate, American estimates that it has reduced its 2020 operating and capital expenditures by more than $17 billion. These savings were achieved primarily through capacity reductions. In addition, American implemented a series of actions, including the accelerated fleet retirements discussed above as well as reductions in maintenance expense and $700 million in non-aircraft capital expenditures through less fleet modification work, the elimination of ground service equipment purchases and pausing non-critical facility investments and information technology projects. American also suspended all non-essential hiring, paused non-contractual pay rate increases, reduced executive and board of director compensation, implemented voluntary leave and early retirement programs and decreased its management and support staff team, including officers, by approximately 30%. In total, more than 20,000 team members have opted for an early retirement or long-term partially paid leave. Additionally, American has made reductions in marketing, contractor, event and training expenses as well as consolidated space at airport facilities.

Due to the effects of the COVID-19 pandemic, American involuntarily furloughed certain team members starting October 1, 2020, and subsequently recalled the team members effective December 1, 2020 covered by the financial assistance provided pursuant to the payroll support program (PSP2) established under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (PSP Extension Law) (see Note 17 for further information).

Liquidity

As of December 31, 2020, American had $14.3 billion in total available liquidity, consisting of $6.9 billion in unrestricted cash and short-term investments, $7.0 billion in an undrawn term loan facility under the CARES Act and a total of $446 million in undrawn short-term revolving and other facilities.

During 2020, American completed the following financing transactions (see Note 3 for further information):

•refinanced the $1.2 billion 2014 Term Loan Facility at a lower interest rate and extended the maturity from 2021 to 2027;

•raised $1.0 billion from the senior secured delayed draw term loan credit facility (Delayed Draw Term Loan Credit Facility);

•borrowed $750 million under the 2013 Revolving Facility, $1.6 billion under the 2014 Revolving Facility and $450 million under the April 2016 Revolving Facility;

•issued approximately $360 million in special facility revenue bonds, of which $47 million was used to fund the redemption of certain outstanding bonds;

•entered into a $7.5 billion secured term loan facility with the U.S. Department of Treasury (Treasury), of which American borrowed $550 million (see below for additional information on the Treasury Loan Agreement);

•issued $1.2 billion in aggregate principal amount of two series of 10.75% senior secured notes due 2026 secured by various collateral;

•raised $665 million principally from aircraft sale-leaseback transactions as well as $351 million from asset sales primarily related to previously parked aircraft; and

In addition to the foregoing financings, AAG and the Subsidiaries (as defined below) received an aggregate of $6.0 billion in financial assistance through the payroll support program (PSP1) established under the CARES Act, all of which was received by the end of September 2020. In connection with the receipt by AAG and the Subsidiaries of this financial assistance, AAG issued a promissory note (the PSP1 Promissory Note) to Treasury for $1.8 billion in aggregate principal amount and warrants to purchase up to an aggregate of approximately 14.1 million shares (the PSP1 Warrant Shares) of AAG common stock. See below for further discussion on PSP1.

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In January 2021, AAG and the Subsidiaries received $1.5 billion (of an expected total of at least $3.0 billion) in financial assistance through PSP2. In connection with the receipt by AAG and the Subsidiaries of this financial assistance, AAG issued a promissory note (the PSP2 Promissory Note) to Treasury for an initial principal sum of approximately $433 million and warrants to purchase up to an aggregate of approximately 2.8 million shares (the PSP2 Warrant Shares) of AAG common stock. See Note 17 for further discussion on PSP2.

Also, American is permitted to, and has, deferred payment of the employer portion of Social Security taxes through the end of 2020 (with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022). This deferral provided approximately $325 million in additional liquidity during 2020. Additionally, AAG has suspended its capital return program, including share repurchases and the payment of future dividends for at least the period that the restrictions imposed by the CARES Act and the PSP Extension Law are applicable.

American continues to evaluate future financing opportunities and work with third-party appraisers on valuations of its remaining unencumbered assets.

A significant portion of American’s debt financing agreements contain covenants requiring it to maintain an aggregate of at least $2.0 billion of unrestricted cash and cash equivalents and amounts available to be drawn under revolving credit facilities and/or contain loan to value, collateral coverage and/or debt service coverage ratio covenants.

Given the above actions and American’s current assumptions about the future impact of the COVID-19 pandemic on travel demand, which could be materially different due to the inherent uncertainties of the current operating environment, American expects to meet its cash obligations as well as remain in compliance with the debt covenants in its existing financing agreements for the next 12 months based on its current level of unrestricted cash and short-term investments, its anticipated access to liquidity (including via proceeds from financings and funds from government assistance obtained pursuant to the CARES Act and the PSP Extension Law) and projected cash flows from operations.

PSP1

On April 20, 2020 (the PSP1 Closing Date), American, Envoy Air Inc. (Envoy), Piedmont Airlines, Inc. (Piedmont) and PSA Airlines, Inc. (PSA and together with American, Envoy and Piedmont, the Subsidiaries), entered into a Payroll Support Program Agreement (the PSP1 Agreement) with Treasury, with respect to PSP1 provided pursuant to the CARES Act. In connection with the Subsidiaries' entry into the PSP1 Agreement, on the PSP1 Closing Date, AAG also entered into a warrant agreement (the PSP1 Warrant Agreement) with Treasury and issued the PSP1 Promissory Note to Treasury, with the Subsidiaries as guarantors.

PSP1 Agreement

In connection with PSP1, AAG and the Subsidiaries are required to comply with the relevant provisions of the CARES Act, including the requirement that funds provided pursuant to the PSP1 Agreement be used exclusively for the continuation of payment of eligible employee wages, salaries and benefits, the requirement against involuntary furloughs and reductions in employee pay rates and benefits, which expired on September 30, 2020, the requirement that certain levels of commercial air service be maintained and the provisions that prohibit the repurchase of AAG common stock, and the payment of common stock dividends through at least September 30, 2021, as well as those that restrict the payment of certain executive compensation until March 24, 2022. The PSP1 Agreement also imposes substantial reporting obligations on AAG and the Subsidiaries. These provisions were subsequently extended upon the entry of AAG and its Subsidiaries into PSP2. See Note 17 for further discussion on PSP2. In addition, AAG and the Subsidiaries have entered into the Treasury Loan Agreement (as defined below) and, as a result, the stock repurchase, dividend and executive compensation restrictions imposed by the Treasury Loan Agreement will remain in place through the date that is one year after the secured loan provided under the Treasury Loan Agreement is fully repaid. See below for additional information on the Treasury Loan Agreement.

Pursuant to the PSP1 Agreement, Treasury provided to AAG and the Subsidiaries financial assistance in an aggregate of approximately $6.0 billion. As partial compensation to the U.S. Government for the provision of financial assistance under PSP1, AAG issued the PSP1 Promissory Note in an aggregate principal amount of approximately $1.8 billion and issued warrants (each a PSP1 Warrant and, collectively, the PSP1 Warrants) to Treasury to purchase up to an aggregate of approximately 14.1 million PSP1 Warrant Shares. See below for more information on the PSP1 Warrant Agreement and the PSP1 Warrants.

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For accounting purposes, the $6.0 billion of aggregate financial assistance AAG and the Subsidiaries received pursuant to the PSP1 Agreement is allocated to the PSP1 Promissory Note, the PSP1 Warrants and other PSP1 financial assistance (the PSP1 Financial Assistance). The aggregate principal amount of approximately $1.8 billion of the PSP1 Promissory Note was recorded as unsecured long-term debt, and the total fair value of the PSP1 Warrants of $63 million, estimated using a Black-Scholes option pricing model, was recorded in stockholders' equity in AAG's consolidated balance sheet. The remaining amount of approximately $4.2 billion of PSP1 Financial Assistance was recognized as a credit to special items, net in the consolidated statement of operations in the second and third quarters of 2020, the period over which the continuation of payment of eligible employee wages, salaries and benefits was required.

PSP1 Warrant Agreement and PSP1 Warrants

The PSP1 Warrants do not have any voting rights and are freely transferrable, with registration rights. Each PSP1 Warrant expires on the fifth anniversary of the date of issuance of such PSP1 Warrant. The PSP1 Warrants will be exercisable either through net share settlement or cash, at AAG's option. The PSP1 Warrants were issued solely as compensation to the U.S. Government related to entry into the PSP1 Agreement. No separate proceeds (apart from the financial assistance described above) were received upon issuance of the PSP1 Warrants or will be received upon exercise thereof.

Treasury Loan Agreement

On September 25, 2020 (the Treasury Loan Closing Date), AAG and American entered into a Loan and Guarantee Agreement (the Treasury Loan Agreement) with Treasury, which provided for a secured term loan facility (the Treasury Term Loan Facility) that permitted American to borrow up to $5.5 billion. Subsequently, on October 21, 2020, AAG and American entered into an amendment to the Treasury Loan Agreement, which increased the borrowing amount to up to $7.5 billion. The Treasury Loan Agreement will involve the issuance of additional warrants to purchase up to an aggregate of approximately 60.0 million shares of AAG common stock, assuming the Treasury Term Loan Facility is fully drawn. As of December 31, 2020, American had borrowed $550 million under the Treasury Term Loan Facility, which is scheduled to mature on June 30, 2025, and issued warrants to Treasury to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock. See Note 3 for further information on the Treasury Loan Agreement and below for more information on the Treasury Loan Warrant Agreement and Treasury Loan Warrants.

Treasury Loan Warrant Agreement and Warrants

In connection with the Treasury Loan Agreement, AAG also entered into a warrant agreement (the Treasury Loan Warrant Agreement) with Treasury. Pursuant to the Treasury Loan Warrant Agreement, AAG agreed to issue warrants (each a Treasury Loan Warrant and, collectively, the Treasury Loan Warrants) to Treasury to purchase up to an aggregate of approximately 60.0 million shares (the Treasury Loan Warrant Shares) of AAG's common stock based on the $7.5 billion commitment amount under the Treasury Term Loan Facility. The exercise price of the Treasury Loan Warrant Shares is $12.51 per share subject to certain anti-dilution provisions provided for in the Treasury Loan Warrant Agreement. For accounting purposes, the fair value for the Treasury Loan Warrant Shares is estimated using a Black-Scholes option pricing model and recorded in stockholders' equity in AAG's consolidated balance sheet with an offsetting debt discount to the Treasury Term Loan Facility in American’s consolidated balance sheet.

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ASU 2016-13: Measurement of Credit Losses on Financial Instruments

This ASU requires the use of an expected loss model for certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade receivables, loans and held-to-maturity debt securities, an estimate of lifetime expected credit losses is required. For available-for-sale debt securities, an allowance for credit losses will be required rather than a reduction to the carrying value of the asset. American adopted this accounting standard prospectively as of January 1, 2020, and it did not have a material impact on American's consolidated financial statements.

(d) Short-term Investments

Short-term investments are classified as available-for-sale and stated at fair value. Realized gains and losses are recorded in nonoperating expense on ~~the~~American’s consolidated ~~statement~~statements of operations. Unrealized gains and losses are recorded in accumulated other comprehensive loss on ~~the~~American’s consolidated balance sheets. For investments in an unrealized loss position, American determines whether a credit loss exists by considering information about the collectability of the instrument, current market conditions and reasonable and supportable forecasts of economic conditions. There have been no credit losses.

~~(c)~~(e) Restricted Cash and Short-term Investments

American has restricted cash and short-term investments related primarily to money market funds to be used to finance a substantial portion of the cost of the renovation and expansion of Terminal 8 at JFK and collateral held to support workers’ compensation obligations.

~~(d)~~(f) Aircraft Fuel, Spare Parts and Supplies, Net

Aircraft fuel is recorded on a first-in, first-out basis. Spare parts and supplies are recorded at average costs less an allowance for obsolescence. These items are expensed when used.

~~(e)~~(g) Operating Property and Equipment



Principal Property and Equipment Classification			Estimated Useful Life
Aircraft, engines and related rotable parts			20 – 30 years
Buildings and improvements			5 – 30 years
Furniture, fixtures and other equipment			3 – 10 years
Capitalized software			5 – 10 years

Total depreciation and amortization expense was $2.3 billion, $2.5 billion and $2.4 billion for the years ended December 31, 2020, 2019 and 2018, respectively.

American assesses impairment onof operating property and equipment when events and circumstances indicate that the assets may be impaired. An impairment of an asset or group of assets ~~is considered impaired~~exists only when the sum of the estimated undiscounted cash flows ~~estimated~~expected to be generated directly by the assets are less than the carrying ~~amount of the assets and the net book~~ value of the assets. American groups assets ~~exceeds their estimated fair value. If such assets are considered to be impaired,~~principally by fleet-type when estimating future cash flows, which is generally the ~~impairment to be recognized~~lowest level for

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which identifiable cash flows exist. Estimates of future cash flows are based on historical results adjusted to reflect management’s best estimate of future market and operating conditions, including American’s current fleet plan. If such assets are impaired, the impairment charge recognized is ~~measured by~~ the amount by which the carrying ~~amount~~value of the assets ~~exceeds~~exceed their fair value. Fair value reflects management’s best estimate including inputs from published pricing guides and bids from third parties as well as contracted sales agreements when applicable.

In 2020, American’s operations, liquidity and stock price were significantly impacted by decreased passenger demand and government travel restrictions due to the ~~fair value~~COVID-19 pandemic. Additionally, American decided to retire certain mainline aircraft earlier than planned, including Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 aircraft as well as certain regional aircraft, including certain Embraer 140 and Bombardier CRJ200 aircraft. As a result of these events and circumstances, American performed impairment tests for its long-lived assets in the first three quarters of 2020.

As a result of the ~~assets. Assets to be disposed of are reported at~~impairment tests performed, American determined the ~~lower~~sum of the estimated undiscounted future cash flows exceeded the carrying ~~amount or fair~~ value ~~less the cost to sell.~~

~~Total depreciation and amortization expense was $2.1 billion, $1.8 billion and $1.6 billion~~except for the ~~years~~aircraft being retired earlier than planned as discussed above. For those aircraft and certain related spare parts, American recorded $1.5 billion in non-cash special impairment charges reflecting the difference between the carrying values of these assets and their fair values for the year ended December 31, ~~2017, 2016~~2020. At December 31, 2020, prepaid expense and ~~2015, respectively.~~other on the consolidated balance sheet included $164 million of these retired aircraft that are expected to be sold in the next year, and other assets on the consolidated balance sheet included $400 million of nonoperating retired aircraft. Due to the inherent uncertainties of the current operating environment, American will continue to evaluate its current fleet (including aircraft in temporary storage) and may decide to permanently retire additional aircraft.

~~(f)~~(h) Leases

American determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (ROU) assets, current operating lease liabilities and noncurrent operating lease liabilities in American’s consolidated balance sheet. Finance leases are included in property and equipment, current maturities of long-term debt and finance leases and long-term debt and finance leases, net of current maturities, in American’s consolidated balance sheets.

ROU assets represent American’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

American uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. American gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates.

American’s lease term includes options to extend the lease when it is reasonably certain that it will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet. American’s lease agreements do not contain any residual value guarantees.

Under certain of American’s capacity purchase agreements with third-party regional carriers, American does not own the underlying aircraft. However, since American controls the marketing, scheduling, ticketing, pricing and seat inventories of these aircraft and therefore control the asset, the aircraft is deemed to be leased for accounting purposes. For these capacity purchase agreements, American accounts for the lease and non-lease components separately. The lease component consists of the aircraft and the non-lease components consist of services, such as the crew and maintenance. American allocates the consideration in the capacity purchase agreements to the lease and non-lease components using their estimated relative standalone prices. See Note 10(b) for additional information on its capacity purchase agreements.

For real estate, American accounts for the lease and non-lease components as a single lease component.

(i) Income Taxes

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American provides a valuation allowance for its deferred tax assets when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. American considers all available positive and negative evidence and makes certain assumptions in evaluating the realizability of its deferred tax assets. Many factors are considered that impact American’s assessment of future profitability, including conditions which are beyond American’s control, such as the health of the economy, the ~~level~~availability and price volatility of aircraft fuel ~~prices~~ and travel demand.

~~(g)~~(j) Goodwill

Goodwill represents the ~~excess of the~~ purchase price ~~over~~in excess of the fair value of the net assets acquired and liabilities ~~assumed. Goodwill is not amortized but assessed~~assumed in connection with the merger with US Airways Group. American has 1 reporting unit. American assesses goodwill for impairment annually ~~on October 1~~^st or more frequently if events or circumstances indicate that the fair value of goodwill may be ~~impaired. American has one consolidated reporting unit.~~lower than the carrying value. American’s annual assessment date is October 1.

Goodwill is assessed for impairment by initially performing a qualitative assessment. If American determines that it is more likely than not that its goodwill may be impaired, it uses a quantitative approach to assess the asset’s fair value and the amount of the impairment, if any.

In addition to American’s annual impairment assessment, it performed interim impairment tests in 2020 on its goodwill as a result of the events and ~~if necessary, then comparing~~circumstances previously discussed due to the impact of the COVID-19 pandemic on American’s business. American performed a quantitative analysis by using a market approach. Under the market approach, the fair value of the reporting unit ~~to its carrying value, including goodwill. If~~was determined based on quoted market prices for equity and the fair value of debt as described in Note 7. The fair value exceeded the carrying value of the reporting unit, ~~is less than the carrying value, a second step is performed to determine the implied fair value of goodwill. If the implied fair value of~~and American’s goodwill ~~is lower than its carrying value, an impairment charge equal to the difference is recorded. Based upon American’s annual assessment, there~~ was ~~no goodwill impairment in 2017.~~not impaired. The carrying value of ~~the~~American’s goodwill on ~~American’s~~its consolidated balance sheets was $4.1 billion as of December 31, ~~2017~~2020 and ~~2016.~~2019.

~~(h)~~As discussed above, due to the inherent uncertainties of the current operating environment, American will continue to evaluate its goodwill for events and circumstances that indicate that the fair value of the reporting unit may be lower than the carrying value.

(k) Other Intangibles, Net

~~Finite-Lived~~Definite-Lived Intangible Assets

The following table provides information relating to American’s amortizable intangible assets as of December 31, ~~2017~~2020 and ~~2016~~2019 (in millions):


	December 31,							December 31,
	2017			2016				2020		2019
Domestic airport slots	$	365		$	365		Domestic airport slots	$	365	$	365
Customer relationships	300			300			Customer relationships	300		300
Marketing agreements	105			105			Marketing agreements	105		105
Tradenames	35			35			Tradenames	35		35
Airport gate leasehold rights	137			137			Airport gate leasehold rights	137		137
Accumulated amortization	(622		)	(578		)	Accumulated amortization	(745)		(704)
Total	$	320		$	364		Total	$	197	$	238

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

are amortized on a straight-line basis over approximately nine years and 30 years, respectively. Tradenames are fully amortized.

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American recorded amortization expense related to these intangible assets of ~~$44~~$41 million ~~$76 million and $55 million~~ for each of the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015, respectively.~~2018. American expects to record annual amortization expense for these intangible assets as follows (in millions):

2018 $ 41
2019 41
2020 41
2021 41
2022 41
2023 and thereafter 115
Total $ 320


2021	$	41
2022	41
2023	7
2024	7
2025	7
2026 and thereafter	94
Total	$	197

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets include certain domestic airport slots ~~at American’s hubs~~ and international slots and route authorities. ~~Indefinite-lived~~American assesses indefinite-lived intangible assets ~~are not amortized but instead are assessed~~ for impairment annually ~~on October 1~~^st or more frequently if events or circumstances indicate that the ~~asset may be impaired. As of December 31, 2017 and 2016, American had $1.9 billion and $1.8 billion, respectively,~~fair values of indefinite-lived intangible assets ~~on its consolidated balance sheets.~~may be lower than their carrying values. American’s annual assessment date is October 1.

Indefinite-lived intangible assets are assessed for impairment by initially performing a qualitative ~~assessment to determine whether~~assessment. If American ~~believes~~determines that it is more likely than not that ~~an asset has been impaired. If~~its indefinite-lived intangible assets may be impaired, American ~~believes impairment has occurred, American then evaluates for impairment by comparing~~uses a quantitative approach to assess the ~~estimated~~asset’s fair value and the amount of the impairment, if any.

In addition to its annual impairment assessment, American performed interim impairment tests in 2020 on its indefinite-lived intangible assets as a result of the events and circumstances previously discussed due to the ~~carrying value. An~~impact of the COVID-19 pandemic on American’s business. American performed qualitative impairment ~~charge is recognized if the asset’s estimated fair value is less than~~tests on its ~~carrying value. Based upon American’s annual assessment,~~indefinite-lived intangible assets and determined there was no0 material impairment. American had $1.8 billion of indefinite-lived intangible ~~asset impairment in 2017.~~

~~(i) Loyalty Program~~

~~American currently operates the loyalty program, AAdvantage. This program awards mileage credits to passengers who fly~~assets on ~~American, any~~ ~~one~~world airline or other partner airlines, or by using the services of other program participants, such as the Citi and Barclaycard US co-branded credit cards, hotels and car rental companies. Mileage credits can be redeemed for travel on American or other participating partner airlines.

~~Through December 31, 2017, American used the incremental cost method to account for the portion of~~ its ~~loyalty program liability incurred when AAdvantage members earn mileage credits by flying on American, any~~ ~~one~~world airline or other partner airlines. American has an obligation to provide future travel when these mileage credits are redeemed and therefore have recorded a liability for mileage credits outstanding.

The incremental cost liability includes all mileage credits, even mileage credits for members whose account balances have not yet reached the minimum level required to redeem an award. Mileage credits are subject to expiration. The liability for outstanding mileage credits is valued based on the estimated incremental cost of carrying one additional passenger. The estimated incremental cost primarily includes unit costs incurred for fuel, food and insurance as well as fees incurred when travel awards are redeemed on partner airlines. In calculating the liability, American estimates how many mileage credits will never be redeemed for travel and excludes those mileage credits from the estimate of the liability. Estimates are also made for the number of miles that will be used per award redemption and the number of travel awards that will be redeemed on partner airlines. These costs and estimates are based on American’s historical program experience as well as consideration of enacted program changes, as applicable. Changes in the liability resulting from members earning additional mileage credits or changes in estimates are recorded in the consolidated ~~statements of operations as a part of passenger revenue.~~

Asbalance sheets at each of December 31, ~~2017~~2020 and ~~2016,~~2019.

As discussed above, due to the ~~liability~~inherent uncertainties of the current operating environment, American will continue to evaluate its indefinite-lived intangible assets for ~~outstanding~~events and circumstances that indicate that their fair values may be lower than the carrying values.

(l) Revenue Recognition

Revenue

The following are the significant categories comprising American’s reported operating revenues (in millions):


	Year Ended December 31,
	2020		2019		2018
Passenger revenue:
Passenger travel	$	13,456	$	38,831	$	37,457
Loyalty revenue - travel (1)	1,062		3,179		3,219
Total passenger revenue	14,518		42,010		40,676
Cargo	769		863		1,013
Other:
Loyalty revenue - marketing services	1,825		2,361		2,352
Other revenue	223		527		489
Total other revenue	2,048		2,888		2,841
Total operating revenues	$	17,335	$	45,761	$	44,530

(1)Loyalty revenue included in passenger revenue is principally comprised of mileage ~~credits accounted~~credit redemptions, which were earned from travel or co-branded credit card and other partners. See “Loyalty Revenue” below for ~~under the incremental cost method was $677 million and $669 million, respectively, and is included~~further discussion on ~~the consolidated balance sheets within loyalty program liability.~~these mileage credits.

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The following is American’s total passenger revenue by geographic region (in millions):


	Year Ended December 31,
	2020		2019		2018
Domestic	$	11,765	$	30,881	$	29,573
Latin America	1,852		5,047		5,125
Atlantic	654		4,624		4,376
Pacific	247		1,458		1,602
Total passenger revenue	$	14,518	$	42,010	$	40,676

American ~~also sells loyalty program mileage credits to participating airline partners~~attributes passenger revenue by geographic region based upon the origin and non-airline business partners, such as the Citi and Barclaycard US co-branded credit cards. Sales of mileage credits to non-airline business partners is comprised of two components, transportation and marketing. American accounts for mileage sales under its agreements with non-airline business partners in accordance with ASU 2009-13, “Revenue Recognition (Topic 605) — Multiple-Deliverable Revenue Arrangements.” In accordance with ASU 2009-13, American allocates the consideration received from the sale of mileage credits based on the relative selling pricedestination of each ~~product or service delivered.~~

As a result of American’s co-branded credit card program agreements with Citi and Barclaycard US that it entered into in 2016, American identified the following revenue elements in these co-branded credit card agreements: the transportation component; and the use of the American brand including access to loyalty program member lists, advertising and other travel related benefits (collectively, the marketing component).

The transportation component represents the estimated selling price of future travel awards and is determined using historical transaction information, including information related to customer redemption patterns. The transportation component is deferred based on its relative selling price and is amortized into passenger revenue on a straight-line basis over the period in which the mileage credits are expected to be redeemed for travel. As of December 31, 2017 and 2016, American had $2.1 billion in deferred revenue from the sale of mileage credits recorded within loyalty program liability on its consolidated balance sheets.

~~Effective January 1, 2018, American is adopting ASU 2014-09: Revenue from Contracts with Customers (Topic 606). See Recent Accounting Pronouncements in Note 1(r) below for further discussion.~~

~~(j) Revenue~~flight segment.

Passenger Revenue

~~Passenger~~American recognizes all revenues generated from transportation on American and its regional flights operated under the brand name American Eagle, including associated baggage fees and other inflight services, as passenger revenue ~~is recognized~~ when transportation is provided. Ticket and other related sales for transportation that has not yet been provided are initially deferred and recorded as air traffic liability on ~~the~~American’s consolidated balance sheets. The air traffic liability principally represents tickets sold for future travel ~~dates~~on American and partner airlines, as well as estimated future refunds and exchanges of tickets sold for past travel dates. The balance in the air traffic liability fluctuates throughout the year based on seasonal travel patterns. American’s air traffic liability was $4.0 billion and $3.9 billion as of December 31, 2017 and 2016, respectively.travel.

The majority of tickets sold are nonrefundable. A small percentage of tickets, some of which are partially used tickets, expire unused. Due to complex pricing structures, refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized in passenger revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are generally based on the analysis of American’s historical data. American ~~and other airline industry participants have~~has consistently applied this accounting method to estimate revenue from ~~forfeited~~unused tickets at the date of travel. Estimated future refunds and exchanges included in the air traffic liability are routinely evaluated based on subsequent activity to validate the accuracy of American’s estimates. Any adjustments resulting from periodic evaluations of the estimated air traffic liability are included in passenger revenue during the period in which the evaluations are completed.

Regional carriers provide scheduled air transportation under the brand name American Eagle. American classifies revenues generated from transportation on these carriers as regional passenger revenues. Liabilities related to tickets sold by American for travel on these air carriers are also included in American’s air traffic liability and are subsequently recognized as revenue in the same manner as described above.

~~Passenger Taxes and Fees~~

Various taxes and fees assessed on the sale of tickets to end customers are collected by American as an agent and remitted to taxing authorities. These taxes and fees have been presented on a net basis in the accompanying consolidated statements of operations and recorded as a liability until remitted to the appropriate taxing authority. The CARES Act provided for a temporary tax holiday from collecting and remitting certain government ticket taxes for tickets purchased between March 28, 2020 and December 31, 2020.

Loyalty Revenue

American currently operates the loyalty program, AAdvantage. This program awards mileage credits to passengers who fly on American, any oneworld airline or other partner airlines, or by using the services of other program participants, such as the Citi and Barclaycard US co-branded credit cards, and certain hotels and car rental companies. Mileage credits can be redeemed for travel on American and other participating partner airlines, as well as other non-air travel awards such as hotels and rental cars. For mileage credits earned by AAdvantage loyalty program members, American applies the deferred revenue method. In response to the COVID-19 pandemic, American suspended the expiration of mileage credits through June 30, 2021 and eliminated mileage reinstatement fees for canceled award tickets.

Mileage credits earned through travel

For mileage credits earned through travel, American applies a relative selling price approach whereby the total amount collected from each passenger ticket sale is allocated between the air transportation and the mileage credits earned. The portion of each passenger ticket sale attributable to mileage credits earned is initially deferred and then recognized in passenger revenue when mileage credits are redeemed and transportation is provided. The estimated selling price of mileage credits is determined using an equivalent ticket value approach, which uses historical data, including award redemption patterns by geographic region and class of service, as well as similar fares as those used to settle award redemptions. The estimated selling price of miles is adjusted for an estimate of the miles that will not be redeemed using statistical models based on historical redemption patterns to develop an estimate of the likelihood of future redemption.

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Given the inherent uncertainty of the current operating environment due to the COVID-19 pandemic, American will continue to monitor redemption patterns and may adjust its estimates in the future.

Mileage credits sold to co-branded credit cards and other partners

American sells mileage credits to participating airline partners and non-airline business partners, including American’s co-branded credit card partners, under contracts with terms extending generally for one to seven years. Consideration received from the sale of mileage credits is variable and payment terms typically are within 30 days subsequent to the month of mileage sale. Sales of mileage credits to non-airline business partners are comprised of 2 components, transportation and marketing. American allocates the consideration received from these sales of mileage credits based on the relative selling price of each product or service delivered.

American’s most significant partner agreements are its co-branded credit card agreements with Citi and Barclaycard US. American identified the following revenue elements in these co-branded credit card agreements: the transportation component; and the use of intellectual property, including the American brand and access to loyalty program member lists, which is the predominant element in the agreements, as well as advertising (collectively, the marketing component). Accordingly, American recognizes the marketing component in other revenue in the period of the mileage sale following the sales-based royalty method.

For the portion of American’s outstanding mileage credits that it estimates will not be redeemed, American recognizes the associated value proportionally as the remaining mileage credits are redeemed. American’s estimates use statistical models based on historical redemption patterns to develop an estimate of the likelihood of future redemption.

Cargo Revenue

Cargo revenue is recognized when American provides the transportation.

Other Revenue

Other revenue includes revenue associated with ~~marketing services provided to~~ American’s ~~business partners as part of its~~ loyalty program, ~~baggage fees, ticketing change fees, airport clubs~~which is comprised principally of the marketing component of mileage sales to co-branded credit card and ~~inflight services.~~other partners and other marketing related payments. Loyalty revenue included in other revenue was $1.8 billion for the year ended December 31, 2020 and $2.4 billion for both 2019 and 2018. The accounting and recognition for the loyalty program marketing services are discussed above in ~~Note 1(i) above. Baggage~~“Loyalty Revenue.” The remaining amounts included within other revenue relate to airport clubs, advertising and vacation-related services.

Contract Balances

American’s significant contract liabilities are comprised of (1) outstanding loyalty program mileage credits that may be redeemed for future travel and other non-air travel awards, reported as loyalty program liability on American’s consolidated balance sheets and (2) ticket sales for transportation that has not yet been provided, reported as air traffic liability on American’s consolidated balance sheets.


	December 31,
	2020		2019
	(in millions)
Loyalty program liability	$	9,195	$	8,615
Air traffic liability	4,757		4,808
Total	$	13,952	$	13,423

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.


Balance at December 31, 2019	$	8,615
Deferral of revenue	1,812
Recognition of revenue (1)	(1,232)
Balance at December 31, 2020 (2)	$	9,195

(2)Mileage credits can be redeemed at any time and generally do not expire as long as that AAdvantage member has any type of qualifying activity at least every 18 months. As previously discussed, in response to the COVID-19 pandemic, American suspended the expiration of mileage credits through June 30, 2021 and eliminated mileage reinstatement fees ~~ticketing~~for canceled award tickets. As of December 31, 2020, American’s current loyalty program liability was $2.0 billion and represents American’s current estimate of revenue expected to be recognized in the next 12 months based on historical as well as projected trends, with the balance reflected in long-term loyalty program liability expected to be recognized as revenue in periods thereafter. Given the inherent uncertainty of the current operating environment due to the COVID-19 pandemic, American will continue to monitor redemption patterns and may adjust its estimates in the future.

The air traffic liability principally represents tickets sold for future travel on American and partner airlines, as well as estimated future refunds and exchanges of tickets sold for past travel. The balance in American’s air traffic liability also fluctuates with seasonal travel patterns. The contract duration of passenger tickets is generally one year. Accordingly, any revenue associated with tickets sold for future travel will be recognized within 12 months. For 2020, $2.8 billion of revenue was recognized in passenger revenue that was included in American’s air traffic liability at December 31, 2019. In response to the COVID-19 pandemic, American extended the contract duration for certain tickets to December 31, 2021, principally those with travel scheduled from March 1, 2020 through December 31, 2020. Additionally, American has eliminated change fees ~~airport clubs~~for most domestic and ~~inflight service revenues~~international tickets. As of December 31, 2020, the air traffic liability included approximately $2.6 billion of travel credits related to these unused tickets for travel prior to December 31, 2020. Accordingly, any revenue associated with these tickets will be recognized within the next 12 months. Given this change in contract duration and uncertainty surrounding the future demand for air travel, American's estimates of revenue that will be recognized from the air traffic liability for future flown or unused tickets as well as American's estimates of refunds may be subject to variability and differ from historical experience.

American’s ticket contract receivables relate to ticket sales to individual passengers primarily through the use of major credit cards and are ~~recognized~~reflected as accounts receivable, net on the accompanying consolidated balance sheets. These receivables are short-term, mostly settled within seven days after sale. All accounts receivable are reported net of an allowance for credit losses, which have been minimal in the past. American considers past and future financial and qualitative factors when ~~American provides~~establishing the ~~service.~~allowance for credit losses.

~~Effective January 1, 2018, American is adopting ASU 2014-09: Revenue from Contracts with Customers (Topic 606). See Recent Accounting Pronouncements in Note 1(r) below for further discussion.~~

~~(k)~~(m) Maintenance, Materials and Repairs

~~(l)~~(n) Selling Expenses

~~(m)~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(o) Share-based Compensation

American accounts for its share-based compensation expense based on the fair value of the stock award at the time of grant, which is recognized ratably over the vesting period of the stock award. ~~Certain~~The majority of American’s stock awards ~~have performance conditions that must be achieved prior to vesting~~are time vested restricted stock units, and ~~are expensed based on~~ the ~~expected achievement at each reporting period. The~~ fair value of ~~stock appreciation rights is estimated using a Black-Scholes option pricing model. The fair value of restricted stock units~~such awards is based on the market price of the underlying shares of AAG common stock on the date of grant. See Note 1213 for further discussion of share-based compensation.

~~(n) Deferred Gains and Credits, Net~~

Included within deferred gains and credits, net are amounts deferred and amortized into future periods associated with the adjustment of leases to fair value in connection with the application of acquisition accounting, deferred gains on the sale-leaseback of aircraft and certain vendor incentives. American periodically receives vendor incentives in connection with acquisition of aircraft and engines. These credits are deferred until aircraft and engines are delivered and then applied as a reduction to the cost of the related equipment.

~~(o)~~(p) Foreign Currency Gains and Losses

Foreign currency gains and losses are recorded as part of other income, net within total nonoperating expense, net in American’s consolidated statements of operations. ~~Foreign currency losses for 2017 were $4 million. Foreign currency gains were $1 million for 2016.~~ For ~~2015,~~the years ended December 31, 2020, 2019 and 2018, respectively, foreign currency losses were ~~$751~~$24 million, $32 million and included a $592 million nonoperating special charge to write off all of the value of Venezuelan bolivars held by American due to continued lack of repatriations and deterioration of economic conditions in Venezuela.$54 million.

~~(p)~~(q) Other Operating Expenses

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

~~(q)~~(r) Regional Expenses

Expenses associated with American Eagle operations are classified as regional expenses on ~~the~~American’s consolidated statements of operations. Regional expenses consist of the following (in millions):

Year Ended December 31,
2017 2016 2015
Aircraft fuel and related taxes $ 1,382
$ 1,109
$ 1,230
Salaries, wages and benefits 356
327
276
Capacity purchases from third-party regional carriers ⁽¹⁾
3,283
3,186
3,137
Maintenance, materials and repairs 7
4
4
Other rent and landing fees 602
487
434
Aircraft rent 27
28
28
Selling expenses 361
347
333
Depreciation and amortization 262
237
197
Special items, net 3
13
18
Other 289
271
295
Total regional expenses $ 6,572
$ 6,009
$ 5,952


	Year Ended December 31,
	2020		2019		2018
Aircraft fuel and related taxes	$	821	$	1,869	$	1,843
Salaries, wages and benefits	275		325		338
Capacity purchases from third-party regional carriers (1)	2,750		3,562		3,267
Maintenance, materials and repairs	3		30		8
Other rent and landing fees	468		621		583
Aircraft rent	13		29		27
Selling expenses	153		402		369
Depreciation and amortization	273		286		267
Special items, net	(338)		0		0
Other	258		394		362
Total regional expenses	$	4,676	$	7,518	$	7,064


⁽¹⁾	~~For the years ended December 31, 2017, 2016~~ (1)In 2020, 2019, and ~~2015, the component of capacity purchase expenses representing the lease of aircraft for accounting purposes was approximately $437 million, $405 million and $492 million, respectively.~~

~~(r) Recent Accounting Pronouncements~~

~~Standards Effective for 2018 Reporting Periods~~

~~Effective January 1,~~ 2018, American ~~is adopting~~recognized $438 million, $590 million and $565 million, respectively, of expense under its capacity purchase agreement with Republic Airways Inc. (Republic). American holds a 25% equity interest in Republic Airways Holdings Inc. (Republic Holdings), the ~~accounting pronouncements described below. The adoption and related required disclosures will be reported in American’s first quarter 2018 Quarterly Report on Form 10-Q.~~

~~ASU 2014-09: Revenue from Contracts with Customers (Topic 606) (the New Revenue Standard)~~

The New Revenue Standard applies to all companies that enter into contracts with customers to transfer goods or services. American is adopting the New Revenue Standard using the full retrospective method, which results in the recastparent company of ~~each prior reporting period presented.~~

The adoption of the New Revenue Standard will impact American’s accounting for outstanding mileage credits earned through travel by AAdvantage loyalty program members. There is no change in accounting for sales of mileage credits to co-branded card or other partners as those are currently reported in accordance with the New Revenue Standard. Through December 31, 2017, American used the incremental cost method to account for the portion of its loyalty program liability related to mileage credits earned through travel, which were valued based on the estimated incremental cost of carrying one additional passenger (see (i) Loyalty Program above). The New Revenue Standard requires American to change its policy to the deferred revenue method and apply a relative selling price approach whereby a portion of each passenger ticket sale attributable to mileage credits earned is deferred and recognized in passenger revenue upon future mileage redemption. The value of the earned mileage credits is materially greater under the deferred revenue method than the value attributed to these mileage credits under the incremental cost method.

The New Revenue Standard will also require certain reclassifications, principally the reclassification of certain ancillary revenues previously classified and reported as other revenue to passenger revenue and as applicable to cargo revenue. Additionally, the New Revenue Standard requires a gross presentation on the face of American’s statement of operations for certain revenues and expenses that had previously been presented on a net basis.

~~See recast 2017 statement of operations and balance sheet data presented below for the expected effects of adoption.~~Republic.

165

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

2. Special Items, Net

~~ASU 2017-07: Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (the New Retirement Standard)~~

~~The New Retirement Standard requires all components of American’s~~Special items, net periodic benefit cost (income), with the exception of service cost, previously reported within operating expenses as salaries, wages and benefits, to be reclassified and reported within nonoperating income (expense). The New Retirement Standard is required to be applied retrospectively, which results in the recast of each prior reporting period presented. The adoption of the New Retirement Standard has no impact on pre-tax income or net income reported. See recast 2017 statement of operations data presented below for the expected effects of adoption.

~~ASU 2016-01: Financial Instruments - Overall (Subtopic 825-10)~~

This ASU makes several modifications to Subtopic 825-10, including the elimination of the available-for-sale classification of equity investments, and it requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. This standard is applied prospectively as of the beginning of the year of adoption. The adoption of this standard is not expected to have a material impact on American’s consolidated statements of operations consisted of the following (in millions):


	Year Ended December 31,
	2020		2019		2018
PSP1 Financial Assistance (1)	$	(3,710)	$	0	$	0
Fleet impairment (2)	1,484		213		0
Severance expenses (3)	1,408		11		58
Labor contract expenses (4)	228		0		13
Mark-to-market adjustments on bankruptcy obligations, net (5)	(49)		(11)		(76)
Fleet restructuring expenses (6)	0		271		422
Merger integration expenses (7)	0		191		268
Litigation reserve adjustments	0		(53)		45
Intangible asset impairment (8)	0		0		26
Other operating special items, net	(18)		13		31
Mainline operating special items, net	(657)		635		787

PSP1 Financial Assistance (1)	(444)		0		0
Fleet impairment (2)	106		0		0


Regional operating special items, net	(338)		0		0
Operating special items, net	(995)		635		787

Mark-to-market adjustments on equity and other investments, net (9)	135		(5)		104
Debt refinancing, extinguishment and other, net	35		16		9


Nonoperating special items, net	170		11		113

Income tax special items (10)	0		0		18

(1)PSP1 Financial Assistance represents recognition of financial ~~statements.~~

~~ASU 2016-18: Statement of Cash Flows (Topic 230): Restricted Cash~~

This ASU requires that the change in total cash, cash at beginning of period and cash at end of period on the statement of cash flows include restricted cash and restricted cash equivalents and also requires companies who report cash and restricted cash separately on the balance sheet to reconcile those amountsassistance received from Treasury pursuant to the ~~statement~~PSP1 Agreement. See Note 1(b) for further information.

(2)The 2020 fleet impairment resulted from American's decision to retire certain aircraft earlier than planned driven by the severe decline in air travel due to the COVID-19 pandemic. Aircraft retired include Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300, Embraer 190, certain Embraer 140 and Bombardier CRJ200 aircraft. This included a $1.5 billion non-cash write-down of mainline and regional aircraft and spare parts and $109 million in cash ~~flows. This standard is required~~charges primarily for impairment of ROU assets and lease return costs. See Note 1(g) for further information related to be applied retrospectively, which results in the recast of each prior reporting period statement of cash flows presented. The adoption of this standard is not expected to have a material impact on American’s consolidated financial statements.

~~Impacts to 2017 Results~~these charges.

The ~~expected effects~~2019 fleet impairment principally included a non-cash write-down of ~~adoption~~aircraft related to the retirement of American’s Embraer 190 fleet.

(3)The 2020 severance expenses included salary and medical costs primarily associated with certain team members who opted in to voluntary early retirement programs offered as a result of reductions to American's operation due to the ~~New Revenue Standard and New Retirement Standard~~COVID-19 pandemic. Cash payments related to ~~American’s statement of operations~~these charges for the ~~twelve months~~year ended December 31, ~~2017 are as follows:~~2020 were approximately $365 million.

The 2019 and 2018 severance expenses primarily included costs associated with reductions of management and support staff team members.

(4)The 2020 labor contract expenses primarily related to one-time charges resulting from the ratification of a new contract with the Transport Workers Union and International Association of Machinists & Aerospace Workers (TWU-IAM Association) for American's maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.

166

New Revenue Standard New Retirement Standard
As Reported Deferred Revenue Method Reclassifications Reclassifications As Recast
Operating revenues:
    Passenger $ 36,133
$ 311
$ 2,687
$ —
$ 39,131
    Cargo 800
—
90
—
890
    Other 5,262
—
(2,673 ) —
2,589
    Total operating revenues 42,195
311
104
—
42,610
    Total operating expenses 38,163
—
104
138
38,405
Operating income 4,032
311
—
(138 ) 4,205
    Total nonoperating expense, net (788 ) —
—
138
(650 )
Income before income taxes 3,244
311
—
—
3,555
Income tax provision ⁽¹⁾
1,322
948
—
—
2,270
Net income $ 1,922
$ (637 ) $ —
$ —
$ 1,285

Table of Contents


⁽¹⁾	The adjustment to the 2017 income tax provision includes an $830 million special charge to reduce American’s deferred tax asset associated with loyalty program liabilities as a result of H.R. 1, the 2017 Tax Cuts and Jobs Act (the 2017 Tax Act), enacted in December 2017 that reduced the federal corporate income tax rate from 35% to 21%.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(5)Bankruptcy obligations that will be settled in shares of AAG common stock are marked-to-market based on AAG’s stock price.

~~The~~(6)Fleet restructuring expenses principally included accelerated depreciation and rent expense for aircraft and related equipment expected ~~effects of adoption~~to be retired earlier than planned.

(7)Merger integration expenses included costs associated with integration projects, principally American's technical operations, flight attendant, human resources and payroll systems.

(8)Intangible asset impairment included a non-cash charge to write-off American’s Brazil route authority as a result of the ~~New Revenue Standard~~U.S.-Brazil open skies agreement.

(9)Mark-to-market adjustments on equity and other investments, net primarily related to net unrealized gains and losses associated with American’s ~~December 31, 2017 balance sheet are as follows:~~equity investment in China Southern Airlines Company Limited (China Southern Airlines) and certain treasury rate lock derivative instruments.

(10)Income tax special items included an $18 million charge related to an international income tax matter.

3. Debt

As Reported New Revenue Standard As Recast
Deferred tax asset $ 682
$ 1,389
$ 2,071
Air traffic liability 3,978
64
4,042
Current loyalty program liability 2,791
384
3,175
Noncurrent loyalty program liability —
5,647
5,647
Total stockholder’s equity (deficit) 14,594
(4,706 ) 9,888

~~Standards Effective for 2019 Reporting Periods~~

~~ASU 2016-02: Leases (Topic 842) (the New Lease Standard)~~

~~The New Lease Standard requires lessees to recognize a lease liability and a right-of-use asset~~Long-term debt included on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the New Revenue Standard. The New Lease Standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. American expects it will adopt the New Lease Standard effective January 1, 2019. Entities are required to adopt the New Lease Standard using a modified retrospective approach, which results in the recast of each prior reporting period presented, for all leases existing at or commencing after the date of initial application with an option to use certain practical expedients. American is currently evaluating how the adoption of the New Lease Standard will impact its consolidated financial statements. Interpretations are on-going and could have a material impact on its implementation. Currently, American expects that the adoption of the New Lease Standard will have a material impact on itsAmerican’s consolidated balance ~~sheet due to the recognition~~sheets consisted of ~~right-of-use assets and lease liabilities principally for certain leases currently accounted for as operating leases.~~(in millions):


	December 31,
	2020		2019
Secured
2013 Term Loan Facility, variable interest rate of 1.90%, installments through 2025 (a)	$	1,788	$	1,807
2013 Revolving Facility, variable interest rate of 2.15%, due 2024 (a)	750		0
2014 Term Loan Facility, variable interest rate of 1.90%, installments through 2027 (a)	1,220		1,202
2014 Revolving Facility, variable interest rate of 2.15%, due 2024 (a)	1,643		0
April 2016 Term Loan Facility, variable interest rate of 2.15%, installments through 2023 (a)	960		970
April 2016 Revolving Facility, variable interest rate of 2.15%, due 2024 (a)	450		0
December 2016 Term Loan Facility, variable interest rate of 2.16%, installments through 2023 (a)	1,200		1,213
11.75% senior secured notes, interest only payments until due in July 2025 (b)	2,500		0
10.75% senior secured IP notes, interest only payments until due in February 2026 (b)	1,000		0
10.75% senior secured LGA/DCA notes, interest only payments until due in February 2026 (b)	200		0
Treasury Term Loan Facility, variable interest rate of 3.73%, interest only payments until due June 2025 (c)	550		0
Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 3.00% to 8.39%, averaging 3.98%, maturing from 2021 to 2032 (d)	11,013		11,933
Equipment loans and other notes payable, fixed and variable interest rates ranging from 1.32% to 5.83%, averaging 1.88%, maturing from 2021 to 2032 (e)	4,417		4,727
Special facility revenue bonds, fixed interest rates ranging from 5.00% to 5.38%, maturing from 2021 to 2036 (f)	1,040		725

Total long-term debt	28,731		22,577
Less: Total unamortized debt discount, premium and issuance costs	321		205
Less: Current maturities	2,700		2,246
Long-term debt, net of current maturities	$	25,710	$	20,126

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

~~2. Special Items, Net~~

~~Special items, net on~~As of December 31, 2020, the ~~consolidated statements of operations consisted of the following~~maximum availability under American’s Treasury Term Loan Facility and other facilities is as follows (in millions):

Year Ended December 31,
2017 2016 2015
Merger integration expenses ⁽¹⁾
$ 273
$ 514
$ 826
Fleet restructuring expenses ⁽²⁾
232
177
210
Employee 2017 Tax Act bonus expense ⁽³⁾
123
—
—
Labor contract expenses ⁽⁴⁾
46
—
—
Mark-to-market adjustments for bankruptcy obligations 27
25
(53 )
Other operating charges (credits), net 11
(7 ) 68
Mainline operating special items, net 712
709
1,051
Regional operating special items, net 3
13
18
Operating special items, net 715
722
1,069

Debt refinancing and extinguishment charges 22
49
24
Venezuela foreign currency losses —
—
592
Nonoperating special items, net 22
49
616

Impact of the 2017 Tax Act on deferred tax assets and liabilities 93
—
—
Release of deferred tax valuation allowance —
—
(3,493 )
Other tax charges —
—
25
Income tax special items, net 93
—
(3,468 )


⁽¹⁾			Merger integration expenses included costs related to information technology, professional fees, re-branding of aircraft and airport facilities and training, and in 2016, also included costs related to alignment of labor union contracts, the launch of re-branded uniforms, relocation and severance, and in 2015, also included share-based compensation related to awards granted in connection with the Merger that fully vested in December 2015.


⁽²⁾ Treasury Term Loan Facility			Fleet restructuring expenses, driven in part by the Merger, principally included the acceleration of depreciation, impairments, remaining lease payments and lease return costs for aircraft and related equipment grounded or expected to be grounded earlier than planned.$

6,950
⁽³⁾ Short-term Revolving and Other Facilities			~~Employee bonus expense included costs related to the $1,000 cash bonus and associated payroll taxes granted to mainline employees as of December 31, 2017 in recognition of the 2017 Tax Act.~~

446
⁽⁴⁾ Total			Labor contract expenses primarily included one-time charges to adjust the vacation accruals for pilots and flight attendants as a result of the mid-contract pay rate adjustments effective in the second quarter of 2017.$	7,396

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

~~3. Debt~~

~~Long-term debt and capital lease obligations included~~Pursuant to the Treasury Loan Agreement, at December 31, 2020, American had a $7.5 billion Treasury Term Loan Facility of which it has drawn $550 million. In addition, American has an undrawn $400 million short-term revolving credit facility it entered into in December 2019, which was set to expire at the end of December 2020 but which has been extended through the beginning of July 2021. American also currently has approximately $46 million of available borrowing base under a cargo receivables facility that was entered into in December 2020. The December 2016 Credit Facilities provide for a revolving credit facility that may be established thereunder in the ~~consolidated balance sheets consisted of (in millions):~~

December 31,
2017 2016
Secured
2013 Credit Facilities, variable interest rate of 3.55%, installments through 2020 ^(a)
$ 1,825
$ 1,843
2014 Credit Facilities, variable interest rate of 3.43%, installments through 2021 ^(a)
728
735
April 2016 Credit Facilities, variable interest rate of 3.57%, installments through 2023 ^(a)
990
1,000
December 2016 Credit Facilities, variable interest rate of 3.48%, installments through 2023 ^(a)
1,238
1,250
Aircraft enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 3.00% to 9.75%, averaging 4.30%, maturing from 2018 to 2029 ^(b)
11,881
10,912
Equipment loans and other notes payable, fixed and variable interest rates ranging from 2.34% to 8.48%, averaging 3.29%, maturing from 2018 to 2029 ^(c)
5,259
5,343
Special facility revenue bonds, fixed interest rates ranging from 5.00% to 5.50%, maturing from 2018 to 2035 828
862
Other secured obligations, fixed interest rates ranging from 3.81% to 12.24%, maturing from 2018 to 2028 772
848
Total long-term debt and capital lease obligations 23,521
22,793
Less: Total unamortized debt discount, premium and issuance costs 227
216
Less: Current maturities 2,058
1,859
Long-term debt and capital lease obligations, net of current maturities $ 21,236
$ 20,718

~~The table below shows the maximum availability under revolving credit facilities, all of which were undrawn, as of December 31, 2017 (in millions):~~

2013 Revolving Facility $ 1,200
2014 Revolving Facility 1,000
April 2016 Revolving Facility 300
Total $ 2,500
future.

Secured financings are collateralized by assets, consisting primarily of aircraft, engines, simulators, aircraft spare parts, airport gate leasehold rights, route authorities, airport slots and airport slots. At December 31, 2017, American was operating 33 aircraft under capital leases. Leases can generally be renewed at rates based on fair market value at the end of the lease term for a number of additional years.certain pre-delivery payments, as well as certain intellectual property and loyalty program assets.

At December 31, ~~2017,~~2020, the maturities of long-term debt ~~and capital lease obligations~~ are as follows (in millions):

2018 $ 2,098
2019 2,118
2020 3,563
2021 2,854
2022 1,286
2023 and thereafter 11,602
Total $ 23,521

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~


2021	$	2,749
2022	1,672
2023	4,162
2024	4,401
2025	6,421
2026 and thereafter	9,326
Total	$	28,731

(a) 2013, 2014, April 2016 and December 2016 Credit Facilities

2013 Credit Facilities

2014 Credit Facilities

~~2014 Credit Facilities~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

In April and May 2020, American borrowed, in aggregate, $1.6 billion under the 2014 Revolving Facility. The 2014 Revolving Facility bears interest at LIBOR plus a margin ~~thereon was reduced from 3.00% to 2.25%,~~of 2.00% and has a final maturity date of October 2024. Following the ~~maximum principal amount of such facility was reduced to $1.0 billion.~~April and May draws, American had 0 remaining borrowing capacity available under the 2014 Revolving Facility.

April 2016 Credit Facilities

December 2016 Credit Facilities

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

Certain details of American’s 2013 Credit Facilities, 2014 Credit Facilities, April 2016 Credit Facilities and December 2016 Credit Facilities (collectively referred to as the Credit Facilities) are shown in the table below as of December 31, ~~2017:~~2020:


	2013 Credit Facilities		2014 Credit Facilities		April 2016 Credit Facilities		December 2016 Credit Facilities		2013 Credit Facilities		2014 Credit Facilities		April 2016 Credit Facilities		December 2016 Credit Facilities
	2013 Term Loan	2013 Revolving Facility	2014 Term Loan	2014 Revolving Facility	April 2016 Term Loan	April 2016 Revolving Facility	December 2016 Term Loan		2013 Term Loan	2013 Revolving Facility	2014 Term Loan	2014 Revolving Facility	April 2016 Term Loan	April 2016 Revolving Facility	December 2016 Term Loan
Aggregate principal issued or credit facility availability (in millions)	$1,900	$1,200	$750	$1,000	$1,000	$300	$1,250	Aggregate principal issued or credit facility availability (in millions)	$1,919	$750	$1,280	$1,643	$1,000	$450	$1,250
Principal outstanding or drawn (in millions)	$1,825	$—	$728	$—	$990	$—	$1,238	Principal outstanding or drawn (in millions)	$1,788	$750	$1,220	$1,643	$960	$450	$1,200
Maturity date	June 2020	October 2022	October 2021	October 2022	April 2023	October 2022	December 2023	Maturity date	June 2025	October 2024	January 2027	October 2024	April 2023	October 2024	December 2023
LIBOR margin	2.00%	2.25%	2.00%	2.25%	2.00%	2.25%	2.00%	LIBOR margin	1.75%	2.00%	1.75%	2.00%	2.00%	2.00%	2.00%

The 2013 Revolving Facility, 2014 Revolving Facility and April 2016 Revolving ~~Facilities~~Facility provide that American may from time to time borrow, repay and reborrow loans thereunder. The 2013 Revolving Facility and 2014 Revolving ~~Facilities~~Facility have the ability to issue letters of credit thereunder in an aggregate amount outstanding at any time up to ~~$150~~$100 million and ~~$300~~$200 million, respectively. The 2013 Revolving Facility, 2014 Revolving Facility and April 2016 Revolving ~~Facilities~~Facility are each subject to an undrawn annual fee of ~~0.75%~~0.63%. As

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Table of December 31, 2017, there were no borrowings or letters of credit outstanding under the 2013, 2014 or April 2016 Revolving Facilities. The December 2016 Credit Facilities provide for a revolving credit facility that may be established in the future.Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

The Credit Facilities contain events of default customary for similar financings, including cross default to other material indebtedness. Upon the occurrence of an event of default, the outstanding obligations may be accelerated and become due and payable immediately. In addition, if a “change of control” occurs, American will (absent an amendment or waiver) be required to repay at par the loans outstanding under the Credit Facilities and terminate the 2013 Revolving Facility, 2014 Revolving Facility and April 2016 Revolving ~~Facilities~~Facility and any revolving credit ~~facilities~~facility established under the December 2016 Credit Facilities. The Credit Facilities also include covenants that, among other things, require AAG to maintain ~~a minimum~~an aggregate ~~liquidity (as defined in the Credit Facilities)~~ of ~~not less than~~at least $2.0 billion of unrestricted cash and cash equivalents and amounts available to be drawn under revolving credit facilities and limit the ability of AAG and its restricted subsidiaries to pay dividends and make certain other payments, make certain investments, incur additional indebtedness, incur liens on the collateral, dispose of the collateral, enter into certain affiliate transactions and engage in certain business activities, in each case subject to certain exceptions.

Delayed Draw Term Loan Credit Facility

(b) Senior Secured Notes

11.75% Senior Secured Notes

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

10.75% Senior Secured Notes

The proceeds from the 10.75% Senior Secured Notes were used to pay transaction-related fees and expenses and for general corporate purposes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

On or prior to the fourth anniversary of the 10.75% Senior Secured Notes Closing Date, American may redeem all or any part of the 10.75% Senior Secured Notes, at its option, at a redemption price equal to 100% of the principal amount of the 10.75% Senior Secured Notes redeemed plus a make whole premium, together with accrued and unpaid interest thereon, if any. After the fourth anniversary of the 10.75% Senior Secured Notes Closing Date and on or prior to the fifth anniversary of the 10.75% Senior Secured Notes Closing Date, American may redeem all or any part of the 10.75% Senior Secured Notes, at its option, at a redemption price equal to 105.375% of the principal amount of the 10.75% Senior Secured Notes redeemed, together with accrued and unpaid interest thereon, if any. After the fifth anniversary of the 10.75% Senior Secured Notes Closing Date, American may redeem all or any part of the 10.75% Senior Secured Notes, at its option, at par, together with accrued and unpaid interest thereon, if any.

The 10.75% Senior Secured Notes Indentures contain covenants that, among other things, restrict the ability of AAG and the ability of its restricted subsidiaries (including American) to: (i) pay dividends, redeem or repurchase stock or make other distributions or restricted payments, (ii) incur liens on the 10.75% Senior Secured Notes Collateral and dispose of or release the 10.75% Senior Secured Notes Collateral, (iii) repay subordinated indebtedness, (iv) make certain loans and investments, (v) incur indebtedness or issue preferred stock, (vi) merge, consolidate or sell assets, and (vii) designate subsidiaries as unrestricted. In addition, the 10.75% Senior Secured Notes Indentures include covenants that require AAG to maintain (a) an aggregate of at least $2.0 billion of unrestricted cash and cash equivalents and amounts available to be drawn under revolving credit facilities and (b) a certain minimum ratio of appraised value of the collateral to outstanding debt secured thereby on a first lien basis as further described below in “Certain Covenants.” These covenants are subject to a number of important exceptions and qualifications set forth in the 10.75% Senior Secured Notes Indentures.

Upon the occurrence of any event of default (other than certain bankruptcy or insolvency or reorganization events affecting AAG or certain of its subsidiaries, including American), the 10.75% Senior Secured Notes may be declared to be due and payable immediately. Upon the occurrence of certain bankruptcy, insolvency or reorganization events affecting AAG or certain of its subsidiaries (including American), all outstanding 10.75% Senior Secured Notes will become due and payable immediately without further action or notice on the part of the 10.75% Senior Secured Notes Trustee or any holder of the 10.75% Senior Secured Notes.

The Treasury Term Loan Facility bears interest at a variable rate per annum equal to (a)(i) the LIBOR rate divided by (ii) one minus the Eurodollar Reserve Percentage plus (b) 3.50%. Accrued interest on the loans will be payable in arrears on the first business day following the 14th day of each March, June, September and December, beginning with September 15, 2021, and on June 30, 2025 (the Treasury Term Loan Maturity Date). As of December 31, 2020, the applicable interest rate for the $550 million loan drawn under the Treasury Term Loan Facility was 3.73% per annum through September 15, 2021, at which time the interest rate will reset.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

All advances under the Treasury Term Loan Facility will be in the form of term loans, all of which will mature and be due and payable in a single installment on the Treasury Term Loan Maturity Date. American may, at any time and from time to time, voluntarily prepay amounts outstanding under the Treasury Loan Agreement, in whole or in part, without penalty or premium. Amounts prepaid may not be reborrowed. Mandatory prepayments of loans under the Treasury Term Loan Facility are required, without penalty or premium, to the extent necessary to comply with American's covenants regarding the expiry of certain agreements constituting Treasury Collateral (as defined below), the debt service coverage ratio, certain dispositions of Treasury Collateral, certain debt issuances secured by liens on the Treasury Collateral and certain indemnity, termination, liquidated damages or insurance payments related to the Treasury Collateral, in addition to the occurrence of a change in control of AAG.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(d) EETCs

~~2016-3~~2019-1 Aircraft EETCs

~~During~~In August 2019, American created three pass-through trusts which issued approximately $1.1 billion aggregate face amount of Series 2019-1 Class AA, Class A and Class B EETCs (the 2019-1 Aircraft EETCs) in connection with the ~~first quarter~~financing of ~~2017, all remaining net proceeds~~35 aircraft (the 2019-1 Aircraft). In 2019, $804 million of the ~~Series 2016-3 Class AA and Class A EETCs (the 2016-3 EETCs), in the amount of $109 million, were~~proceeds had been used to purchase equipment notes issued by American in connection with the financing of ~~two~~28 aircraft under the 2019-1 Aircraft EETCs, of which $608 million was used to repay existing indebtedness. In 2020, the remaining $293 million of the ~~25 aircraft financed under the 2016-3 EETCs (such 25 aircraft, the 2016-3 Aircraft).~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

~~date of issuance of the 2016-3 Class B EETCs to acquire Series B equipment notes issued by American in connection with the financing of the 2016-3 Aircraft.~~

~~Certain information regarding the 2016-3 EETC equipment notes, as of December 31, 2017, is set forth in the table below.~~

~~2017-1 EETCs~~

~~During the first six months of 2017, all of the net proceeds received from the sale of the 2017-1 EETCs were~~had been used to purchase equipment notes issued by American in connection with the financing of 7 aircraft under the ~~2017-1 Aircraft.~~2019-1 Aircraft EETCs. Interest and principal payments on equipment notes issued in connection with the ~~2017-1~~2019-1 Aircraft EETCs are payable ~~semi-annually~~semiannually in February and August of each year, ~~with~~which interest payments ~~that~~ began in ~~August 2017~~February 2020 and which principal payments ~~beginning~~began or are scheduled to begin (i) in the case of equipment notes with respect to any 2019-1 Aircraft owned by American at the time of issuance of the 2019-1 Aircraft EETCs, in February ~~2018. These~~2020 and (ii) in the case of equipment notes ~~are secured by liens on~~with respect to the ~~2017-1 Aircraft.~~Embraer 175 aircraft and the Airbus A321neo aircraft scheduled to be delivered after the issuance of the 2019-1 Aircraft EETCs, in August 2020 and August 2021, respectively.

Certain information regarding the ~~2017-1~~2019-1 Aircraft EETC equipment notes, as of December 31, ~~2017,~~2020, is set forth in the table below.

2019-1 Aircraft EETCs

Series AA

Series A

Series B

Aggregate principal issued

$579 million

$289 million

$229 million

Fixed interest rate per annum

3.15%

3.50%

3.85%

Maturity date

February 2032

February 2028

~~2017-2 EETCs~~(e) Equipment Loans and Other Notes Payable Issued in 2020

In ~~August 2017,~~2020, American ~~created two pass-through trusts~~entered into agreements under which ~~issued approximately $797~~it borrowed $307 million ~~aggregate principal amount of Series 2017-2 Class AA and Class A EETCs (the 2017-2 EETCs)~~ in connection with the financing or refinancing, as the case may be, of 30certain aircraft ~~previously delivered~~and other flight equipment, of which $17 million was used to repay existing indebtedness. Debt incurred under these agreements matures in 2029 through 2032 and bears interest at variable rates (comprised of LIBOR plus an applicable margin) averaging 2.28% at December 31, 2020.

(f) Special Facility Revenue Bonds Issued in 2020

In January 2020, American ~~or scheduled~~and British Airways announced the start of construction on a $344 million investment to ~~be delivered to American through April 2018~~upgrade New York's John F. Kennedy International Airport (JFK) Terminal 8.

In June 2020, the New York Transportation Development Corporation (NYTDC) issued approximately $360 million of special facility revenue bonds (the ~~2017-2 Aircraft).~~2020 JFK Bonds) on behalf of American. A portion of the net proceeds ~~received~~ from the ~~sale~~2020 JFK Bonds have been or will be used to fund costs of issuance of the ~~2017-2 EETCs has been~~2020 JFK Bonds, to fund a substantial portion of the cost of the renovation and expansion of a passenger terminal facility (the Terminal) leased and utilized by American at JFK and to fund the August 2020 maturity of the outstanding bonds issued by NYTDC on behalf of American in 2016 (the 2016 JFK Bonds).

The 2020 JFK Bonds, in aggregate, were priced at approximately 98% of par value. The gross proceeds from the issuance of the 2020 JFK Bonds were approximately $353 million. Of this amount, approximately $8 million was used to ~~acquire Series AA~~fund the costs of issuance of the 2020 JFK Bonds, approximately $47 million was used to fund the redemption of the 2016 JFK Bonds due August 2020 and ~~A equipment notes issued by~~approximately $17 million was reimbursed to American for the Terminal construction costs incurred, with the remaining amount of proceeds received to ~~the pass-through trusts and the balance of such proceeds is being~~be held in ~~escrow for~~restricted cash and short-term investments on the benefit of the holders of the 2017-2 EETCs until such time as American issues additional Series AA and A equipment notes to the pass-through trusts, which trusts will purchase such additional equipment notes with the escrowed funds. These escrowed funds are not guaranteed by American and are not reported as debt on American’s consolidated balance sheet ~~because~~and to be used to finance a substantial portion of the ~~proceeds held by~~cost of the ~~depository~~renovation and expansion of the Terminal. The 2020 JFK Bonds are ~~not American’s assets.~~comprised of term bonds, $214 million of which bear interest at 5.25% per annum and mature on August 1, 2031, and $146 million of which bear interest at 5.375% per annum and mature on August 1, 2036.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

In October 2017, American created one additional pass-through trust which issued approximately $221 million aggregate principal amount of Series 2017-2 Class B EETCs (the 2017-2 Class B EETCs) in connection with the financing of the 2017-2 Aircraft. A portion of the net proceeds received from the sale of the Series 2017-2 Class B EETCs was used on the date of issuance of the 2017-2 Class B EETCs to acquire Series B equipment notes issued by American in connection with the financing of certain 2017-2 Aircraft, and the balance of such proceeds is being held in escrow for the benefit of the holders of the 2017-2 Class B EETCs until such time as American issues additional Series B equipment notes to the pass-through trust, which will purchase such additional equipment notes with a portion of the escrowed funds. These escrowed funds are not guaranteed by American and are not reported as debt on American’s consolidated balance sheet because the proceeds held by the depository are not American’s assets.

~~Certain information regarding the 2017-2 EETC equipment notes and the remaining escrowed proceeds of the 2017-2 EETCs, as of December 31, 2017, is set forth in the table below.~~

~~(c) Equipment Loans and Other Notes Payable Issued in 2017~~

In 2017, American entered into agreements under which it borrowed $1.0 billion in connection with the financing of certain aircraft. Debt incurred under these agreements matures in 2027 through 2029 and bears interest at fixed and variable rates of LIBOR plus an applicable margin averaging 3.08% at December 31, 2017.

Guarantees

As of December 31, ~~2017,~~2020, American had issued guarantees covering AAG’s ~~$500 million~~$1.8 billion aggregate principal amount of ~~6.125%~~the PSP1 Promissory Note due April 2030, $1.0 billion aggregate principal amount of 6.50% convertible senior notes due ~~2018,~~July 2025, $750 million aggregate principal amount of ~~5.50%~~5.000% senior notes due ~~2019~~June 2022 and $500 million aggregate principal amount of ~~4.625%~~3.75% senior notes due ~~2020.~~March 2025.

~~Collateral-Related~~Certain Covenants

Certain of American’s debt financing agreements (including its secured notes, term loans, revolving credit facilities and spare engine EETCs) contain loan to value (LTV) or collateral coverage ratio covenants and require American to ~~annually~~ appraise the related ~~collateral.~~collateral annually or semiannually. Pursuant to such agreements, if the LTV or collateral coverage ratio exceeds a specified threshold or if the value of the appraised collateral fails to meet a specified threshold, as the case may be, American is required, as applicable, to pledge additional qualifying collateral (which in some cases may include cash ~~collateral)~~or investment securities), or pay down such financing, in whole or in ~~part.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

part, or the interest rate for the financing under such agreements will be increased. Additionally, a significant portion of American’s debt financing agreements contain covenants requiring it to maintain an aggregate of at least $2.0 billion of unrestricted cash and cash equivalents and amounts available to be drawn under revolving credit facilities, and its Treasury Term Loan Facility contains a debt service coverage ratio, pursuant to which failure to comply with a certain threshold may result in mandatory prepayment of the Treasury Term Loan Facility.

Specifically, American is required to meet certain collateral coverage tests ~~on an annual basis~~ for ~~four credit facilities,~~its Credit Facilities, 10.75% Senior Secured Notes, 11.75% Senior Secured Notes and Treasury Loan Agreement, as described below:

2013 Credit Facilities

2014 Credit Facilities

April 2016 Credit

Facilities

December 2016

Credit Facilities

2013 Credit Facilities

2014 Credit Facilities

April 2016 Credit
Facilities

December 2016
Credit Facilities

10.75% Senior Secured Notes

11.75% Senior Secured Notes

Treasury Loan Agreement

Frequency of Appraisals

of Appraised Collateral

Annual

Frequency of Appraisals of Appraised Collateral

Annual

Semi-Annual

LTV Requirement

1.6x Collateral valuation to amount of debt outstanding (62.5% LTV)

LTV Requirement

1.6x Collateral valuation to amount of debt outstanding (62.5% LTV)

LTV as of Last

Measurement Date

33.9%

23.1%

42.7%

59.0%

LTV as of Last Measurement Date

53.1%

44.3%

48.0%

61.2%

35.2%

De Minimis

Collateral Description

Generally, certain slots, route authorities, and airport gate leasehold rights used by American to operate all services between the U.S. and South America

Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate certain services between the U.S. and London Heathrow

Generally, certain spare parts

Generally, certain Ronald Reagan Washington National Airport (DCA) slots, certain La Guardia Airport (LGA) slots, certain simulators and certain leasehold rights

Collateral Description

Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate all services between the U.S. and South America

Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate certain services between the U.S. and European Union (including London Heathrow)

Generally, certain spare parts

Generally, certain Ronald Reagan Washington National Airport (DCA) slots, certain La Guardia Airport (LGA) slots, certain simulators and certain leasehold rights

Generally, certain DCA slots, certain LGA slots, certain simulators and certain leasehold rights and, in the case of the IP Notes, certain intellectual property of American

Generally, certain rights under U.S. co-branded credit card agreements and certain other loyalty program agreements and intellectual property related to AAdvantage

At December 31, ~~2017,~~2020, American was in compliance with the applicable collateral coverage tests as of the most recent measurement dates.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

4. Leases

American leases certain aircraft and engines, including aircraft under capacity purchase agreements. As of December 31, 2020, American had 641 leased aircraft, with remaining terms ranging from less than one year to 12 years.

At each airport where American conducts flight operations, American has agreements, generally with a governmental unit or authority, for the use of passenger, operations and baggage handling space as well as runways and taxiways. These agreements, particularly in the U.S., often contain provisions for periodic adjustments to rates and charges applicable under such agreements. These rates and charges also vary with American’s level of operations and the operations of the airport. Because of the variable nature of these rates, these leases are not recorded on American’s balance sheet as a ROU asset or a lease liability. Additionally, at American’s hub locations and in certain other cities it serves, American leases administrative offices, catering, cargo, training, maintenance and other facilities.

The components of lease expense were as follows (in millions):


	Year Ended December 31,
	2020		2019		2018
Operating lease cost	$	1,943	$	2,012	$	1,889
Finance lease cost:
Amortization of assets	92		79		78
Interest on lease liabilities	38		43		48
Variable lease cost	1,786		2,542		2,353
Total net lease cost	$	3,859	$	4,676	$	4,368

Included in the table above is $172 million, $236 million and $226 million of operating lease cost under American’s capacity purchase agreement with Republic for the years ended December 31, 2020, 2019 and 2018, respectively. American holds a 25% equity interest in Republic Holdings, the parent company of Republic.

Additionally, not included in the table above, American recognized $109 million in cash special charges in 2020 related to the impairment of ROU assets and lease return costs resulting from its decision to retire certain leased aircraft earlier than planned driven by the severe decline in air travel due to the COVID-19 pandemic.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):


	December 31,
	2020			2019
Operating leases:
Operating lease ROU assets	$	7,994		$	8,694

Current operating lease liabilities	$	1,641		$	1,695
Noncurrent operating lease liabilities	6,739			7,388
Total operating lease liabilities	$	8,380		$	9,083

Finance leases:
Property and equipment, at cost	$	1,021		$	954
Accumulated amortization	(539)			(447)
Property and equipment, net	$	482		$	507

Current finance lease liabilities	$	100		$	112
Noncurrent finance lease liabilities	472			558
Total finance lease liabilities	$	572		$	670

Weighted average remaining lease term (in years):
Operating leases	7.4			7.4
Finance leases	5.4			6.2

Weighted average discount rate:
Operating leases	5.6		%	4.7		%
Finance leases	6.3		%	6.2		%

Supplemental cash flow and other information related to leases was as follows (in millions):


	Year Ended December 31,
	2020		2019		2018
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,015	$	1,996	$	1,914
Operating cash flows from finance leases	39		43		48
Financing cash flows from finance leases	114		83		78

Non-cash transactions:
ROU assets acquired through operating leases	898		1,144		1,258
Operating lease conversion to finance lease	5		41		0
Property and equipment acquired through finance leases	11		20		0

Gain on sale leaseback transactions, net	107		107		59

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Maturities of lease liabilities were as follows (in millions):


	December 31, 2020
	Operating Leases		Finance Leases
2021	$	1,932	$	131
2022	1,764		136
2023	1,575		114
2024	1,184		120
2025	808		85
2026 and thereafter	3,291		89
Total lease payments	10,554		675
Less: Imputed interest	(2,174)		(103)
Total lease obligations	8,380		572
Less: Current obligations	(1,641)		(100)
Long-term lease obligations	$	6,739	$	472

As of December 31, 2020, American has additional operating lease commitments that have not yet commenced of approximately $1.7 billion for 19 Boeing 787-8 aircraft to be delivered in 2021 with lease terms of 10 years.

5. Income Taxes

The significant components of the income tax provision (benefit) were (in millions):

Year Ended December 31,
2017 2016 2015
Current income tax provision:
Federal $ —
$ —
$ —
State and Local 24
10
15
Current income tax provision 24
10
15
Deferred income tax provision (benefit):
Federal 1,235
1,559
(3,407 )
State and Local 63
93
(60 )
Deferred income tax provision (benefit) 1,298
1,652
(3,467 )
Total income tax provision (benefit) $ 1,322
$ 1,662
$ (3,452 )

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~


	Year Ended December 31,
	2020		2019		2018
Current income tax provision (benefit):
State and Local	$	0	$	2	$	3
Foreign	0		8		28
Current income tax provision (benefit)	0		10		31
Deferred income tax provision (benefit):
Federal	(2,224)		567		453
State and Local	(229)		56		50
Deferred income tax provision (benefit)	(2,453)		623		503
Total income tax provision (benefit)	$	(2,453)	$	633	$	534

The income tax provision (benefit) differed from amounts computed at the statutory federal income tax rate as follows (in millions):


	Year Ended December 31,
	2020		2019		2018
Statutory income tax provision (benefit)	$	(2,290)	$	547	$	460
State income tax provision (benefit), net of federal tax effect	(181)		41		46
Book expenses not deductible for tax purposes	20		29		10
Foreign income taxes, net of federal tax effect	0		8		22
Change in valuation allowance	0		5		(6)

Other, net	(2)		3		2
Income tax provision (benefit)	$	(2,453)	$	633	$	534

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Year Ended December 31,
2017 2016 2015
Statutory income tax provision $ 1,135
$ 1,555
$ 1,635
State income tax provision, net of federal tax effect 54
67
71
Book expenses not deductible for tax purposes 30
32
55
Bankruptcy administration expenses 1
1
3
2017 Tax Act 93
—
—
Change in valuation allowance 4
(1 ) (5,216 )
Other, net 5
8
—
Income tax provision (benefit) $ 1,322
$ 1,662
$ (3,452 )
The components of American’s deferred tax assets and liabilities were (in millions):


	December 31,
	2020		2019
Deferred tax assets:
Operating loss carryforwards and other credits	$	3,944	$	2,115
Loyalty program liability	1,977		1,755
Leases	1,904		2,067
Pensions	1,397		1,219
Postretirement benefits other than pensions	203		145
Rent expense	96		126
Reorganization items	28		30
Alternative minimum tax (AMT) credit carryforwards	0		118
Other	796		569
Total deferred tax assets	10,345		8,144
Valuation allowance	(24)		(24)
Net deferred tax assets	10,321		8,120
Deferred tax liabilities:
Accelerated depreciation and amortization	(4,992)		(5,153)
Leases	(1,809)		(1,968)
Other	(294)		(340)
Total deferred tax liabilities	(7,095)		(7,461)
Net deferred tax asset	$	3,226	$	659

At December 31, 2020, American had approximately $16.5 billion of federal net operating losses (NOLs) available to reduce future federal taxable income, of which $8.9 billion will expire beginning in 2023 if unused and $7.6 billion can be carried forward indefinitely (NOL Carryforwards). American is a member of AAG’s consolidated federal and certain state income tax returns. American also had approximately $5.0 billion of NOL Carryforwards to reduce future state taxable income at December 31, 2020, which will expire in taxable years 2020 through 2040 if unused.

American’s ability to use its NOL Carryforwards depends on the amount of taxable income generated in future periods. American provides a valuation allowance for its deferred tax assets, which include the ~~net operating losses (NOLs),~~NOLs, when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. ~~The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.~~ American considers all available positive and negative evidence and makes certain assumptions in evaluating the realizability of its deferred tax assets. Many factors are considered that impact American’s assessment of future profitability, including conditions which are beyond its control, such as the health of the economy, the ~~level~~availability and price volatility of aircraft fuel ~~prices~~ and travel demand.

~~In connection with the preparation of American’s financial statements at the end of 2015,~~ American determined that after considering all positive and negative evidence, including the completion of certain critical Merger integration milestones as well as its financial performance, it was more likely than not that substantially all of its deferred income tax assets, which include its NOLs, would be realized. Accordingly, during the year ended December 31, 2015, American reversed $3.5 billion of thepresently has a $24 million valuation allowance ~~which resulted in a special non-cash tax benefit recorded in the consolidated statement of operations.~~

In addition to the changes in the valuation allowance from operations described above, the valuation allowance was also impacted by the changes in the components of accumulated other comprehensive income (loss), described in Note 8. The total increase to the valuation allowance was $12 million in 2017, $8 million of which is included in the 2017 Tax Act amount in the table above. In 2016 and 2015, the decrease in the valuation allowance was $1 million and $5.2 billion, respectively.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

~~The components of American’s~~on certain net deferred tax assets ~~and liabilities were (in millions):~~related to state NOL Carryforwards. There can be no assurance that an additional valuation allowance on American’s net deferred tax assets will not be required. Such valuation allowance could be material.

December 31,
2017 2016
Deferred tax assets:
Operating loss carryforwards $ 2,409
$ 4,087
Pensions 1,549
2,595
Loyalty program liability 420
485
Alternative minimum tax (AMT) credit carryforwards 457
456
Postretirement benefits other than pensions 170
291
Rent expense 160
256
Gains from lease transactions 107
213
Reorganization items 35
53
Other 638
911
Total deferred tax assets 5,945
9,347
Valuation allowance (25 ) (13 )
Net deferred tax assets 5,920
9,334

Deferred tax liabilities:
Accelerated depreciation and amortization (4,999 ) (7,101 )
Other (274 ) (335 )
Total deferred tax liabilities (5,273 ) (7,436 )
Net deferred tax asset $ 647
$ 1,898

At December 31, 2017, American had approximately $10.6 billion of federal NOLs carried over from prior taxable years (NOL Carryforwards) to reduce future federal taxable income, substantially all of which American expects to be available for use in 2018. American is a member of AAG’s consolidated federal and certain state income tax returns. The amount of federal NOL Carryforwards available in those returns is $10.0 billion, substantially all of which is expected to be available for use in 2018. The federal NOL Carryforwards will expire beginning in 2022 if unused. American also had approximately $3.2 billion of NOL Carryforwards to reduce future state taxable income at December 31, 2017, which will expire in years 2018 through 2037 if unused. American’s ability to deduct its NOL Carryforwards and to utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 where an “ownership change” has occurred. Substantially all of American’s remaining federal NOL Carryforwards attributable to US Airways Group are subject to limitation under Section 382; however, American’s ability to utilize such NOL Carryforwards is not anticipated to be effectively constrained as a result of such limitation. American elected to be covered by certain special rules for federal income tax purposes that permitted approximately $9.5 billion (with $8.6 billion of unlimited NOL still remaining at December 31, 2017) of its federal NOL Carryforwards to be utilized without regard to the annual limitation generally imposed by Section 382. Similar limitations may apply for state income tax purposes. American’s ability to utilize any new NOL Carryforwards arising after the ownership changes is not affected by the annual limitation rules imposed by Section 382 unless another ~~future~~ ownership change occurs. Under the Section 382 limitation, cumulative stock ownership changes among material stockholders exceeding 50% during a rolling three-year period can potentially limit ~~a company’s~~American’s future use of NOLs and tax credits. ~~See Part I, Item 1A. Risk Factors –~~ ~~“Our ability to utilize our NOL Carryforwards may be limited”~~ ~~for unaudited additional discussion of this risk.~~

At December 31, ~~2017,~~2019, American had an AMT credit carryforward of approximately ~~$452~~$226 million available for federal income tax purposes, which ~~is now expected to be~~was fully refunded in ~~2019 and~~ 2020 as a result of the ~~repeal~~CARES Act.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

In ~~2017,~~2020, American recorded an income tax ~~provision~~benefit of ~~$1.3~~$2.5 billion, with an effective rate of approximately ~~41%~~22%, which was substantially ~~non-cash as American utilized the NOLs described above.~~non-cash. Substantially all of American’s income before income taxes is attributable to the United States.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

~~American is part of the AAG consolidated income tax return.~~ American files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. American’s ~~2014~~2017 through ~~2016~~2019 tax years are still subject to examination by the Internal Revenue Service. Various state and foreign jurisdiction tax years remain open to examination and American is under examination, in administrative appeals, or engaged in tax litigation in certain jurisdictions. American believes that the effect of any assessments will not be material to its consolidated financial statements.

The amount of, and changes to, American’s uncertain tax positions were not material in any of the years presented. American accrues interest and penalties related to unrecognized tax benefits in interest expense and operating expense, respectively.

The 2017 Tax Act was enacted on December 22, 2017. The 2017 Tax Act is the most comprehensive tax change in more than 30 years. As of December 31, 2017, American has not completed its evaluation of the 2017 Tax Act; however, to the extent possible, American has made a reasonable estimate of its effects, including the impact of lower corporate income tax rates (21% vs. 35%) on its deferred tax assets and liabilities and the one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred. For the year ended December 31, 2017, American recognized a special income tax expense of $93 million to reflect these impacts of the 2017 Tax Act.

The 2017 Tax Act is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementation regulations by the Treasury and Internal Revenue Service. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. Accordingly, American has not yet been able to make a reasonable estimate of the impact of certain items and continues to account for those items based on the tax laws in effect prior to the 2017 Tax Act.

~~As further interpretations, clarifications and amendments to the 2017 Tax Act are made, American’s future financial statements could be materially impacted.~~

5.6. Risk Management

American’s economic prospects are heavily dependent upon two variables it cannot control: ~~the health of the economy~~general economic conditions and the price of fuel.

Due to the discretionary nature of business and leisure travel spending and the highly competitive nature of the airline industry, American’s revenues are heavily influenced by the condition of the U.S. economy and economies in other regions of the world. Unfavorable conditions in these broader economies have resulted, and may result in the future, in decreased passenger demand for air travel, changes in booking practices and related reactions by American’s competitors, all of which in turn have had, and may have in the future, a strong negative effect on American’s business. In particular, the ongoing COVID-19 pandemic and associated decline in economic activity and increase in unemployment levels are expected to have a severe and prolonged effect on the global economy generally and, in turn, is expected to depress demand for air travel into the foreseeable future. Due to the uncertainty surrounding the duration and severity of this pandemic, American can provide no assurance as to when and at what pace demand for air travel will return to pre-COVID-19 pandemic levels, if at all. Accordingly, American cannot predict the ultimate impact of the COVID-19 pandemic on its business, financial condition and results of operations. In addition, during challenging economic times, actions by its competitors to increase their revenues can have an adverse impact on American’s revenues.

American’s operating results are materially impacted by changes in the availability, price volatility and cost of aircraft fuel, which represents one of the largest single cost items in American’s business. ~~Jet~~Aircraft fuel ~~market~~ prices have ~~fluctuated substantially over~~in the past, ~~several years~~ and ~~prices continue to be highly volatile.~~may in the future, experience substantial volatility. Because of the amount of fuel needed to operate American’s business, even a relatively small increase or decrease in the price of aircraft fuel can have a material effect on American’s operating results and liquidity.

These additional factors could impact American’s results of operations, financial performance and liquidity:

(a) Credit Risk

~~Most of~~ American’s ~~receivables~~accounts receivable relate primarily to its contracts with airline and non-airline business partners, including its co-branded credit card partners, and to tickets sold to individual passengers primarily through the use of major credit ~~cards or to tickets sold by other airlines and used by passengers on American. These receivables~~cards. Receivables from American’s business partners are typically settled within 30 days. Receivables from ticket sales are short-term, mostly settled within seven days after sale. ~~Bad debt~~All accounts receivable are reported net of an allowance for credit losses, which have been minimal in the past. American considers past ~~have been considered in~~and future financial and qualitative factors when establishing ~~allowances~~the allowance for ~~doubtful accounts.~~credit losses. American does not believe it is subject to any significant concentration of credit risk.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

(b) Interest Rate Risk

American has exposure to market risk associated with changes in interest rates related primarily to its ~~variable rate~~LIBOR variable-rate debt obligations. Interest rates on ~~$9.6~~$12.8 billion principal amount of long-term debt as of December 31, ~~2017~~2020 are subject to adjustment to reflect changes in floating interest rates. The weighted average effective interest rate on American’s ~~variable rate~~variable-rate debt was ~~3.4%~~2.0% at December 31, ~~2017.~~2020. American currently does not ~~currently~~ have an interest rate hedge ~~program.~~program to hedge its exposure to floating interest rates on its variable-rate debt obligations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

On July 27, 2017, the U.K. Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The discontinuation date for submission and publication of rates for certain tenors of USD LIBOR (1-month, 3-month, 6-month, and 12-month) is currently under consultation by the ICE Benchmark Administration (the administrator of LIBOR) and may be extended until June 30, 2023. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become acceptable alternatives to LIBOR, or what effect these changes in views or alternatives may have on financial markets for LIBOR-linked financial instruments. The replacement of LIBOR with a comparable or successor rate could cause the amount of interest payable on American’s long-term debt to be different or higher than expected.

American is exposed to the effect of foreign exchange rate fluctuations on the U.S. dollar value of foreign currency-denominated ~~operating revenues and expenses.~~transactions. American’s largest exposure comes from the British pound sterling, Euro, Canadian dollar and various Latin American currencies, primarily the Brazilian real. American does not currently have a foreign currency hedge program. ~~See Part I, Item 1A. Risk Factors –~~ “We operate a global business with international operations that are subject to economic and political instability and have been, and in the future may continue to be, adversely affected by numerous events, circumstances or government actions beyond our control” ~~for unaudited additional discussion of this risk.~~

6.7. Fair Value Measurements and Other Investments

Assets Measured at Fair Value on a Recurring Basis

•Level 1 – Observable inputs such as quoted prices in active markets;

•Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

•Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

When available, American uses quoted market prices to determine the fair value of its financial assets. If quoted market prices are not available, American measures fair value using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates and currency rates.

American utilizes the market approach to measure the fair value ~~for~~of its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. American’s short-term investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No changes in valuation techniques or inputs occurred during the year ended December 31, ~~2017.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

2020.

Assets measured at fair value on a recurring basis are summarized below (in millions):


	Fair Value Measurements as of December 31, 2020
	Total		Level 1		Level 2		Level 3
Short-term investments (1), (2):
Money market funds	$	245	$	245	$	0	$	0
Corporate obligations	3,449		0		3,449		0
Bank notes/certificates of deposit/time deposits	2,168		0		2,168		0
Repurchase agreements	755		0		755		0
	6,617		245		6,372		0
Restricted cash and short-term investments (1), (3)	609		448		161		0
Long-term investments (4)	161		161		0		0
Total	$	7,387	$	854	$	6,533	$	0

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Fair Value Measurements as of December 31, 2017
Total Level 1 Level 2 Level 3
Short-term investments ^{(1) (2)}:

Money market funds $ 186
$ 186
$ —
$ —
Corporate obligations 1,620
—
1,620
—
Bank notes/certificates of deposit/time deposits 2,662
—
2,662
—
Repurchase agreements 300
—
300
—
4,768
186
4,582
—
Restricted cash and short-term investments ⁽¹⁾
318
108
210
—
Total $ 5,086
$ 294
$ 4,792
$ —


	Fair Value Measurements as of December 31, 2019
	Total		Level 1		Level 2		Level 3
Short-term investments (1):
Money market funds	$	331	$	331	$	0	$	0
Bank notes/certificates of deposit/time deposits	2,106		0		2,106		0
Corporate obligations	1,021		0		1,021		0
Repurchase agreements	85		0		85		0
	3,543		331		3,212		0
Restricted cash and short-term investments (1)	158		10		148		0
Long-term investments (4)	204		204		0		0
Total	$	3,905	$	545	$	3,360	$	0


⁽¹⁾	~~Unrealized gains or losses on short-term investments and restricted cash and short-term investments are recorded in accumulated other comprehensive income (loss) at each measurement date.~~


⁽²⁾	All short-term investments are classified as available-for-sale and stated at fair value. American’s short-term investments mature in one year or less except for $700 million of bank notes/certificates of deposit/time deposits and $341 million of corporate obligations.

Fair Value Measurements as of December 31, 2016
Total Level 1 Level 2 Level 3
Short-term investments ⁽¹⁾ ⁽²⁾:

Money market funds $ 587
$ 587
$ —
$ —
Corporate obligations 2,550
—
2,550
—
Bank notes/certificates of deposit/time deposits 2,897
—
2,897
—
6,034
587
5,447
—
Restricted cash and short-term investments ⁽¹⁾
638
638
—
—
Total $ 6,672
$ 1,225
$ 5,447
$ —
(2)American’s short-term investments as of December 31, 2020 mature in one year or less except for $235 million of bank notes/certificates of deposit/time deposits.

(4)Long-term investments primarily include American's equity investment in China Southern Airlines, in which American presently owns a 1.8% equity interest, and are classified in other assets on the consolidated balance sheets.


⁽¹⁾	~~Unrealized gains or losses on short-term investments and restricted cash and short-term investments are recorded in accumulated other comprehensive income (loss) at each measurement date.~~


⁽²⁾	All short-term investments are classified as available-for-sale and stated at fair value. American’s short-term investments mature in one year or less except for $385 million of bank notes/certificates of deposit/time deposits and $230 million of corporate obligations.

Fair Value of Debt

The fair value of American’s long-term debt was estimated using quoted market prices or discounted cash flow analyses, based on American’s current estimated incremental borrowing rates for similar types of borrowing arrangements. If American’s long-term debt was measured at fair value, it would have been classified as Level 2 except for $550 million which would have been classified as Level 3 in the fair value hierarchy.

The carrying value and estimated fair value of American’s long-term debt, including current maturities, were as follows (in millions):

December 31, 2017 December 31, 2016

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value
Long-term debt, including current maturities $ 23,294
$ 24,029
$ 22,577
$ 23,181

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~


	December 31, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	28,410	$	27,193	$	22,372	$	23,196

Other Investments

American has an approximate 25% ownership interest in Republic ~~Airways~~ Holdings, ~~Inc. (Republic),~~ which it received in ~~the second quarter of~~ 2017 in consideration for its unsecured claim in ~~Republic’s~~the Republic Holdings bankruptcy case. This ownership interest is accounted for under the equity method and American’s portion of ~~Republic’s~~Republic Holdings’ financial results is recognized within other, net on the consolidated statements of ~~operations. In 2017, American recognized $544 million of regional expense from its capacity purchase agreement with Republic.~~

~~Additionally, in~~operations and the third quarter of 2017, American acquired 2.7% of the outstanding shares of China Southern Airlines Company Limited for $203 million. Since American’s subscription agreement restricts the sale or transfer of these shares for three years, American accounts for this investment ~~under the cost method.~~

~~These investments are~~is reflected within other assets on ~~American’s~~its consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

8. Employee Benefit Plans

American sponsors defined benefit and defined contribution pension plans for eligible employees. The defined benefit pension plans provide benefits for participating employees based on years of service and average compensation for a specified period of time before retirement. Effective November 1, 2012, substantially all of American’s defined benefit pension plans were frozen and American began providing enhanced benefits under its defined contribution pension plans for certain employee groups. American uses a December 31 measurement date for all of its defined benefit pension plans. American also provides certain retiree medical and other postretirement benefits, including health care and life insurance benefits, to retired employees. Effective November 1, 2012, American modified its retiree medical and other postretirement benefits plans to eliminate the company subsidy for employees who retire on or after November 1, 2012. As a result of modifications to its retiree medical and other postretirement benefits plans in 2012, American recognized a negative plan amendment of $1.9 billion, which iswas included as a component of prior service benefit in ~~OCI~~accumulated other comprehensive income (loss) (AOCI) and ~~will be~~was amortized over the future service life of the active plan participants for whom the benefit was ~~eliminated, or approximately eight years.~~eliminated. As of December 31, ~~2017, $631~~2020, this prior service benefit was fully amortized.

Effective January 1, 2021, health coverage under American’s retiree medical benefit program that is currently provided to certain retirees age 65 and over who retired prior to November 1, 2012, transitioned from a self-insured plan to a fully-insured Medicare Advantage plan. Benefits coverage has not been reduced and cost shared has not changed as a result of this transition. Due to this transition, as of December 31, 2020, American recognized a negative plan amendment of $313 million to reduce its benefit obligation, which was included as a component of prior service ~~benefit remains to~~cost in accumulated other comprehensive loss and will be ~~amortized.~~amortized over the average remaining life expectancy of all retirees, or approximately 13.3 years.

Benefit Obligations, Fair Value of Plan Assets and Funded Status


	Pension Benefits				Retiree Medical and Other Postretirement Benefits
	2020		2019		2020		2019

	(In millions)
Benefit obligation at beginning of period	$	18,246	$	16,282	$	824	$	837
Service cost	2		2		8		3
Interest cost	611		699		30		33
Actuarial loss (1), (2)	1,603		1,951		46		20
Special termination benefits (3)	0		0		410		0
Plan amendments (4)	0		0		(195)		0
Settlements	(36)		(2)		0		0
Benefit payments	(736)		(686)		(77)		(74)
Other	0		0		0		5
Benefit obligation at end of period	$	19,690	$	18,246	$	1,046	$	824






Fair value of plan assets at beginning of period	$	12,829	$	10,001	$	204	$	225
Actual return on plan assets	1,414		2,292		13		41
Employer contributions (5)	6		1,224		30		12
Settlements	(36)		(2)		0		0
Benefit payments	(736)		(686)		(77)		(74)
Fair value of plan assets at end of period	$	13,477	$	12,829	$	170	$	204
Funded status at end of period	$	(6,213)	$	(5,417)	$	(876)	$	(620)

(1)The 2020 and 2019 pension actuarial loss primarily relates to the change in American’s weighted average discount rate assumption and, additionally, in 2019, the change to American’s mortality assumption.

(2)The 2020 retiree medical and other postretirement benefits actuarial loss primarily relates to the change in American’s weighted average discount rate assumption.

183

Pension Benefits
Retiree Medical and
Other Postretirement Benefits
2017 2016 2017 2016
(In millions)
Benefit obligation at beginning of period $ 17,148
$ 16,310
$ 990
$ 1,129
Service cost 2
2
4
3
Interest cost 717
746
39
47
Actuarial (gain) loss ^{(1) (2)}
1,007
725
49
(104 )
Plan amendments —
—
—
7
Settlements (4 ) (2 ) —
—
Benefit payments (723 ) (633 ) (80 ) (92 )
Other 28
—
8
—
Benefit obligation at end of period $ 18,175
$ 17,148
$ 1,010
$ 990

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

The 2019 retiree medical and other postretirement benefits actuarial loss primarily relates to changes in American’s weighted average discount rate assumption and plan experience adjustments.

Pension Benefits
Retiree Medical and
Other Postretirement Benefits
2017 2016 2017 2016
(In millions)
Fair value of plan assets at beginning of period $ 9,968
$ 9,660
$ 266
$ 253
Actual return on plan assets 1,788
911
37
22
Employer contributions ⁽³⁾
286
32
72
83
Settlements (4 ) (2 ) —
—
Benefit payments (723 ) (633 ) (80 ) (92 )
Other 25
—
—
—
Fair value of plan assets at end of period $ 11,340
$ 9,968
$ 295
$ 266
Funded status at end of period $ (6,835 ) $ (7,180 ) $ (715 ) $ (724 )
(3)During the third quarter of 2020, American remeasured its retiree medical and other postretirement benefits to account for enhanced healthcare benefits provided to eligible team members who opted in to voluntary early retirement programs offered as a result of reductions to its operation due to the COVID-19 pandemic. During the third quarter of 2020, American recognized a $410 million special charge for these enhanced healthcare benefits and increased its postretirement benefits obligation by $410 million.

(4)Principally relates to the transition of American’s retiree medical benefit program from a self-insured plan to a fully-insured Medicare Advantage plan as discussed above.

(5)Pursuant to the CARES Act, minimum required contributions to be made in the calendar year 2020 can be deferred to January 1, 2021, with interest accruing from the original due date to the new payment date. During 2019, American contributed $1.2 billion to its defined benefit pension plans, including a $780 million minimum required contribution and supplemental contributions of $444 million.


⁽¹⁾	~~The December 31, 2017 and 2016 pension actuarial loss primarily relates to weighted average discount rate assumption changes and changes to American’s mortality assumptions.~~


⁽²⁾	The December 31, 2017 retiree medical and other postretirement benefits actuarial (gain) loss primarily relates to plan experience adjustments, weighted average discount rate assumption changes and changes to American’s mortality assumptions and as of December 31, 2016, also includes medical trend and cost assumption changes.


⁽³⁾	During 2017, American contributed $286 million to its defined benefit pension plans, including supplemental contributions of $261 million in addition to a $25 million minimum required cash contribution.

Balance Sheet Position

Pension Benefits
Retiree Medical and
Other Postretirement Benefits
2017 2016 2017 2016
(In millions)
As of December 31,
Current liability $ 10
$ 7
$ 88
$ 97
Noncurrent liability 6,825
7,173
627
627
Total liabilities $ 6,835
$ 7,180
$ 715
$ 724

Net actuarial loss (gain) $ 5,337
$ 5,472
$ (388 ) $ (429 )
Prior service cost (benefit) 159
188
(600 ) (837 )
Total accumulated other comprehensive loss (income), pre-tax $ 5,496
$ 5,660
$ (988 ) $ (1,266 )


	Pension Benefits				Retiree Medical and Other Postretirement Benefits
	2020		2019		2020		2019

	(In millions)
As of December 31,
Current liability	$	7	$	5	$	55	$	24
Noncurrent liability	6,206		5,412		821		596
Total liabilities	$	6,213	$	5,417	$	876	$	620


Net actuarial loss (gain)	$	6,679	$	5,662	$	(358)	$	(426)
Prior service cost (benefit)	75		102		(181)		(120)
Total accumulated other comprehensive loss (income), pre-tax	$	6,754	$	5,764	$	(539)	$	(546)

Plans with Projected Benefit Obligations Exceeding Fair Value of Plan Assets


	Pension Benefits
	2020		2019

	(In millions)
Projected benefit obligation	$	19,690	$	18,215
Fair value of plan assets	13,477		12,794

Plans with Accumulated Benefit Obligations Exceeding Fair Value of Plan Assets


	Pension Benefits				Retiree Medical and Other Postretirement Benefits
	2020		2019		2020		2019

	(In millions)
Accumulated benefit obligation (ABO)	$	19,678	$	18,204	$	—	$	—
Accumulated postretirement benefit obligation	—		—		1,046		824
Fair value of plan assets	13,477		12,794		170		204

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

~~Plans with Accumulated Benefit Obligations Exceeding Fair Value of Plan Assets~~

Pension Benefits
Retiree Medical and
Other Postretirement Benefits
2017 2016 2017 2016
(In millions)
Projected benefit obligation $ 18,144
$ 17,119
$ —
$ —
Accumulated benefit obligation (ABO) 18,135
17,108
—
—
Accumulated postretirement benefit obligation —
—
1,010
990
Fair value of plan assets 11,307
9,936
295
266
ABO less fair value of plan assets 6,828
7,172
—
—

Net Periodic Benefit Cost (Income)


																				Pension Benefits						Retiree Medical and Other Postretirement Benefits
	Pension Benefits									Retiree Medical and Other Postretirement Benefits										2020		2019		2018		2020		2019		2018
	2017			2016			2015			2017			2016			2015
	(In millions)																			(In millions)
Defined benefit plans:																			Defined benefit plans:
Service cost	$	2		$	2		$	1		$	4		$	3		$	3		Service cost	$	2	$	2	$	2	$	8	$	3	$	5
Interest cost	717			746			733			39			47			50			Interest cost	611		699		670		30		33		35
Expected return on assets	(786		)	(747		)	(848		)	(21		)	(20		)	(19		)	Expected return on assets	(1,005)		(811)		(901)		(11)		(15)		(24)
Special termination benefits																			Special termination benefits	0		0		0		410		0		0
Settlements	1			—			1			—			—			—			Settlements	12		0		0		0		0		0
Amortization of:																			Amortization of:
Prior service cost (benefit)	28			28			28			(237		)	(240		)	(243		)	Prior service cost (benefit)	29		28		28		(135)		(236)		(236)
Unrecognized net loss (gain)	144			125			111			(23		)	(16		)	(9		)	Unrecognized net loss (gain)	164		150		140		(24)		(31)		(21)
Net periodic benefit cost (income)	106			154			26			(238		)	(226		)	(218		)	Net periodic benefit cost (income)	$	(187)	$	68	$	(61)	$	278	$	(246)	$	(241)
Defined contribution plan cost	844			761			657			N/A			N/A			N/A
Total cost (income)	$	950		$	915		$	683		$	(238	)	$	(226	)	$	(218	)

The ~~estimated amount of unrecognized actuarial net loss and prior~~ service cost ~~for the defined benefit pension plans that will be amortized from accumulated other comprehensive income (loss) into~~component of net periodic benefit cost ~~over~~(income) is included in operating expenses, the ~~next fiscal year is $171 million.~~

~~The estimated amount of unrecognized actuarial net gain and prior service benefit~~cost for the ~~retiree medical~~special termination benefits is included in special items, net and the other ~~postretirement benefits plans that will be amortized from accumulated other comprehensive income (loss) into~~components of net periodic benefit cost ~~over the next fiscal year is $258 million.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

(income) are included in nonoperating other income (expense), net in American’s consolidated statements of operations.

Assumptions

The following actuarial assumptions were used to determine American’s benefit obligations and net periodic benefit cost (income) for the periods presented:


	Pension Benefits		Retiree Medical and Other Postretirement Benefits			Pension Benefits		Retiree Medical and Other Postretirement Benefits
	2017	2016	2017	2016		2020	2019	2020	2019
Benefit obligations:					Benefit obligations:
Weighted average discount rate	3.80%	4.30%	3.60%	4.10%	Weighted average discount rate	2.7%	3.4%	2.4%	3.3%


								Pension Benefits			Retiree Medical and Other Postretirement Benefits
	Pension Benefits			Retiree Medical and Other Postretirement Benefits				2020	2019	2018	2020	2019	2018
	2017	2016	2015	2017	2016	2015
Net periodic benefit cost:
Net periodic benefit cost (income):							Net periodic benefit cost (income):
Weighted average discount rate	4.30%	4.70%	4.30%	4.10%	4.42%	4.00%	Weighted average discount rate	3.4%	4.4%	3.8%	3.2%	4.3%	3.6%
Weighted average expected rate of return on plan assets	8.00%	8.00%	8.00%	8.00%	8.00%	8.00%	Weighted average expected rate of return on plan assets	8.0%	8.0%	8.0%	8.0%	8.0%	8.0%
Weighted average health care cost trend rate assumed for next year ⁽¹⁾	N/A	N/A	N/A	4.19%	4.25%	5.21%	Weighted average health care cost trend rate assumed for next year (1)	N/A	N/A	N/A	4.0%	3.7%	3.9%

(1)The weighted average health care cost trend rate at December 31, 2020 is assumed to decline gradually to 3.4% by 2027 and remain level thereafter.


⁽¹⁾	~~The weighted average health care cost trend rate at December 31, 2017 is assumed to decline gradually to 3.76% by 2025 and remain level thereafter.~~

As of December 31, ~~2017,~~2020, American’s estimate of the long-term rate of return on plan assets was 8%8.0% based on the target asset allocation. Expected returns on long duration bonds are based on yields to maturity of the bonds held at year-end. Expected returns on other assets are based on a combination of long-term historical returns, actual returns on plan assets achieved over the last ten years, current and expected market conditions, and expected value to be generated through active management ~~currency overlay~~ and securities lending programs.

~~A one percentage point change in the assumed health care cost trend rates would have the following effects on American’s retiree medical and other postretirement benefits plans (in millions):~~

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1% Increase 1% Decrease
Increase (decrease) on 2017 service and interest cost $ 2
$ (2 )
Increase (decrease) on benefit obligation as of December 31, 2017 54
(51 )
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Minimum Contributions

American is required to make minimum contributions to its defined benefit pension plans under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and various other laws for U.S. based plans as well as ~~under funding~~underfunding rules specific to countries where American maintains defined benefit plans. Based on current funding assumptions, American has minimum required contributions of ~~$39~~$694 million for ~~2018. American expects to make supplemental~~2021 including $130 million of minimum contributions ~~of $425 million to its U.S. based defined benefit pension plans in 2018. The minimum funding obligation~~required for ~~American’s U.S. based defined benefit pension plans was subject to temporary favorable rules~~2020 that ~~expired at the end of 2017. American’s pension funding obligations are likely to increase materially beginning in 2019, when American will be required to make contributions relating~~were deferred pursuant to the ~~2018 fiscal year. The amount~~CARES Act as discussed above. In January 2021, American made $241 million of ~~these~~required pension contributions, including the $130 million minimum contributions required for 2020. American’s funding obligations will depend on the performance of American’s investments held in trust by the pension plans, interest rates for determining liabilities, the amount of and timing of any supplemental contributions and American’s actuarial experience.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

Benefit Payments

The following benefit payments, which reflect expected future service as appropriate, are expected to be paid (approximately, in millions):


	2018		2019		2020		2021		2022		2023-2027			2021		2022		2023		2024		2025		2026-2030
Pension benefits	$	712	$	750	$	795	$	839	$	879	$	4,951	Pension benefits	$	786	$	825	$	868	$	909	$	947	$	5,120
Retiree medical and other postretirement benefits	96		92		80		75		70		314		Retiree medical and other postretirement benefits	102		93		89		86		82		356

Plan Assets

The objectives of American’s investment policies are to: maintain sufficient income and liquidity to pay retirement benefits; produce a long-term rate of return that meets or exceeds the assumed rate of return for plan assets; limit the volatility of asset performance and funded status; and diversify assets among asset classes and investment managers.



Asset Class/Sub-Class		Allowed Range
Equity		~~65%~~45% - ~~90%~~80%
Public:
U.S. Large		~~20%~~10% - ~~50%~~40%
U.S. Small/Mid		2% - 10%
International		10% - 25%
International Small/Mid		0% - 10%
~~International~~Emerging Markets		~~17%~~2% - ~~27%~~15%
~~Emerging Markets~~Alternative Investments		5% ~~- 11%~~
~~Alternative Investments~~	~~5% - 20%~~
~~Fixed Income~~	~~15% - 40%~~
~~Public:~~
~~U.S. Long Duration~~	~~15%~~ - 30%
Fixed Income		20% - 55%
Public:
U.S. Long Duration		15% - 45%
High Yield and Emerging Markets		0% - 10%
Private Income		0% - ~~10%~~15%
Other		0% - 5%
Cash Equivalents		0% - 5%20%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

~~at net asset value which is determined by the issuer at the end of each month and is based on the aggregate fair value of trust assets less liabilities, divided by the number of units outstanding.~~ No changes in valuation techniques or inputs occurred during the year.

Benefit Plan Assets Measured at Fair Value on a Recurring Basis

The fair value of American’s pension plan assets at December 31, ~~2017~~2020 and ~~2016,~~2019, by asset category, ~~are~~were as follows (in millions):


	Fair Value Measurements as of December 31, 2017											Fair Value Measurements as of December 31, 2020
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total			Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
Cash and cash equivalents	$	28		$	—	$	—	$	28		Cash and cash equivalents	$	40		$	0		$	0		$	40
Equity securities:											Equity securities:
International markets ^{(a) (b)}	3,837			—		—		3,837
International markets (a), (b)											International markets (a), (b)	2,282			0			0			2,282
Large-cap companies ^(b)	2,451			—		—		2,451			Large-cap companies (b)	2,085			0			0			2,085
Mid-cap companies ^(b)	744			—		—		744			Mid-cap companies (b)	428			0			0			428
Small-cap companies ^(b)	125			—		—		125			Small-cap companies (b)	73			1			0			74
Fixed income:											Fixed income:
Corporate bonds ^(c)	—			2,344		—		2,344
Corporate debt (c)											Corporate debt (c)	0			3,026			0			3,026
Government securities ^(d)	—			238		—		238			Government securities (d)	0			1,010			0			1,010
U.S. municipal securities	—			39		—		39			U.S. municipal securities	0			30			0			30

Alternative instruments:											Alternative instruments:
Private equity partnerships ^(e)	—			—		14		14
Private equity partnerships measured at net asset value ^{(e) (g)}	—			—		—		879
Private market partnerships (e)											Private market partnerships (e)	0			0			15			15
Private market partnerships measured at net asset value (e), (f)											Private market partnerships measured at net asset value (e), (f)	—			—			—			1,791
Common/collective trusts ^(f)(g)	—			315		—		315			0			259			0			259
Common/collective trusts and 103-12 Investment Trust measured at net asset value ^{(f) (g)}	—			—		—		283
Common/collective trusts measured at net asset value (f), (g)											Common/collective trusts measured at net asset value (f), (g)	—			—			—			2,384
Insurance group annuity contracts	—			—		2		2			Insurance group annuity contracts	0			0			2			2
Dividend and interest receivable	44			—		—		44			Dividend and interest receivable	49			0			0			49
Due to/from brokers for sale of securities – net	3			—		—		3
Other liabilities – net	(6		)	—		—		(6		)
Due from brokers for sale of securities – net											Due from brokers for sale of securities – net	1			0			0			1
Other receivables – net											Other receivables – net	1			0			0			1
Total	$	7,226		$	2,936	$	16	$	11,340		Total	$	4,959		$	4,326		$	17		$	13,477

(a)Holdings are diversified as follows: 11% Switzerland, 11% Ireland, 10% United Kingdom, 9% France, 8% Japan, 7% Germany, 6%Netherlands, 13% emerging markets and the remaining 25% with no concentration greater than 5% in any one country.

^a)

(b)There are no significant concentrations of holdings by company or industry.

(c)Includes approximately 77% investments in corporate debt with a S&P rating lower than A and 23% investments in corporate debt with a S&P rating A or higher. Holdings include 89% U.S. companies, 9% international companies and 2% emerging market companies.

(d)Includes approximately 89% investments in U.S. domestic government securities, 9% in emerging market government securities and 2% in international government securities. There are no significant foreign currency risks within this classification.

~~Holdings are diversified as follows: 17% United Kingdom, 11% Japan, 9% France, 6% Switzerland, 16% emerging markets and the remaining 41% with no concentration greater than 5% in any one country.~~


^b)	~~There are no significant concentrations of holdings by company or industry.~~


^c)	Includes approximately 76% investments in corporate debt with a S&P rating lower than A and 24% investments in corporate debt with a S&P rating A or higher. Holdings include 85% U.S. companies, 12% international companies and 3% emerging market companies.


^d)	Includes approximately 27% investments in U.S. domestic government securities, 43% in emerging market government securities and 30% in international government securities. There are no significant foreign currency risks within this classification.

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(e)Includes limited partnerships that invest primarily in domestic private equity and private income opportunities. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next one to ten years. Additionally, the pension plan’s master trust has future funding commitments of approximately $1.6 billion over the next ten years.

(f)Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.

(g)Investment includes 34% in a common/collective trust investing in large market capitalization equity securities within the U.S., 30% in three common/collective trusts investing in emerging country equity securities, 21% in a common/collective trust investing in equity securities of companies located outside the U.S., 9% in a collective interest trust investing primarily in short-term securities, 5% in a common/collective trust investing in smaller market capitalization equity securities within the U.S. and 1% in Canadian segregated balanced value, income growth and diversified pooled funds. For some trusts, requests for withdrawals must meet specific requirements with advance notice of redemption preferred.


	Fair Value Measurements as of December 31, 2019
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash and cash equivalents	$	20	$	0	$	0	$	20
Equity securities:
International markets (a), (b)	2,769		0		0		2,769
Large-cap companies (b)	2,312		0		0		2,312
Mid-cap companies (b)	543		0		0		543
Small-cap companies (b)	97		0		0		97
Fixed income:
Corporate debt (c)	0		2,804		0		2,804
Government securities (d)	0		923		0		923
U.S. municipal securities	0		51		0		51
Mortgage backed securities	0		4		0		4
Alternative instruments:
Private market partnerships (e)	0		0		10		10
Private market partnerships measured at net asset value (e), (f)	—		—		—		1,464
Common/collective trusts (g)	0		358		0		358
Common/collective trusts and 103-12 Investment Trust measured at net asset value (f), (g)	—		—		—		1,423
Insurance group annuity contracts	0		0		2		2
Dividend and interest receivable	53		0		0		53
Due to brokers for sale of securities – net	(4)		0		0		(4)

Total	$	5,790	$	4,140	$	12	$	12,829


^e)			Includes limited partnerships that invest primarily in U.S. (94%) and European (6%) buyout opportunities of a range of privately held companies. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next one to ten years. Additionally, the pension plan’s master trust has future funding commitments of approximately $903 million over the next ten years.

^f)


^g)	Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.

Fair Value Measurements as of December 31, 2016
Asset Category
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
Cash and cash equivalents $ 573
$ —
$ —
$ 573
Equity securities:
International markets ^{(a) (b)}
3,232
—
—
3,232
Large-cap companies ^(b)
2,253
—
—
2,253
Mid-cap companies ^(b)
371
—
—
371
Small-cap companies ^(b)
6
—
—
6
Fixed income:
Corporate bonds ^(c)
—
2,337
—
2,337
Government securities ^(d)
—
150
—
150
U.S. municipal securities —
37
—
37
Alternative instruments:
Private equity partnerships ^(e)
—
—
21
21
Private equity partnerships measured at net asset value ^{(e) (g)}
—
—
—
703
Common/collective trusts ^(f)
—
32
—
32
Common/collective trusts and 103-12 Investment Trust measured at net asset value ^{(f) (g)}
—
—
—
227
Insurance group annuity contracts —
—
2
2
Dividend and interest receivable 40
—
—
40
Due to/from brokers for sale of securities – net (9 ) —
—
(9 )
Other liabilities – net (7 ) —
—
(7 )
Total $ 6,459
$ 2,556
$ 23
$ 9,968


^a) (a)Holdings are diversified as follows: 14% United Kingdom, 8% Switzerland, 8% Ireland, 7% Japan, 7% France, 6% South Korea, 6% Canada, 18% emerging markets and the remaining 26% with no concentration greater than 5% in any one country. (b)There are no significant concentrations of holdings by company or industry.	Holdings are diversified as follows: 15% United Kingdom, 12% Japan, 10% France, 7% Switzerland, 6% Netherlands, 17% other emerging markets and the remaining 33% with no concentration greater than 5% in any one country.


^b)	~~There are no significant concentrations of holdings by company or industry.~~

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(c)Includes approximately 76% investments in corporate debt with a S&P rating lower than A and 24% investments in corporate debt with a S&P rating A or higher. Holdings include 86% U.S. companies, 11% international companies and 3% emerging market companies.


^c)	Includes approximately 74% investments in corporate debt with a S&P rating lower than A and 26% investments in corporate debt with a S&P rating A or higher. Holdings include 86% U.S. companies, 12% international companies and 2% emerging market companies.


^d)	Includes approximately 61% investments in U.S. domestic government securities and 39% in emerging market government securities. There are no significant foreign currency risks within this classification.

^e)

^f)

^g)

(d)Includes approximately 79% investments in U.S. domestic government securities, 13% in emerging market government securities and 8% in international government securities. There are no significant foreign currency risks within this classification.

(g)Investment includes 36% in a common/collective trust investing in securities of larger companies within the U.S., 29% in a common/collective trust investing in securities of smaller companies located outside the U.S., 16% in a collective interest trust investing primarily in short-term securities, 15% in an emerging market 103-12 Investment Trust with investments ~~during the year ended December 31, 2017, were as follows (in millions):~~

Changes in fair value measurements of Level 3 investments during the year ended December 31, ~~2016,~~2020, were as follows (in millions):


	Private Market Partnerships		Insurance Group Annuity Contracts
Beginning balance at December 31, 2019	$	10	$	2
Actual gain on plan assets:
Relating to assets still held at the reporting date	1		0
Purchases	4		0


Ending balance at December 31, 2020	$	15	$	2

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~


	Private Market Partnerships		Insurance Group Annuity Contracts
Beginning balance at December 31, 2018	$	7	$	2


Purchases	3		0


Ending balance at December 31, 2019	$	10	$	2

The fair value of American’s retiree medical and other postretirement benefits plans assets ~~at December 31, 2017~~ by asset category, were as follows (in millions):


	Fair Value Measurements as of December 31, 2020
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Money market fund	$	4	$	0	$	0	$	4
Mutual funds – AAL Class	0		166		0		166
Total	$	4	$	166	$	0	$	170

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~~The fair value of American’s retiree medical and other postretirement benefits plans assets at December 31, 2016 by asset category, were as follows (in millions):~~


	Fair Value Measurements as of December 31, 2016									Fair Value Measurements as of December 31, 2019
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Money market fund	$	5	$	—	$	—	$	5	Money market fund	$	4	$	0	$	0	$	4
Mutual funds – Institutional Class	261		—		—		261
Mutual funds – AAL Class									Mutual funds – AAL Class	0		200		0		200
Total	$	266	$	—	$	—	$	266	Total	$	4	$	200	$	0	$	204

Defined Contribution and Multiemployer Plans

The costs associated with American’s defined contribution plans were $835 million, $836 million and $825 million for the years ended December 31, 2020, 2019 and 2018, respectively.

American participates in the International Association of Machinists & Aerospace Workers (IAM) National Pension Fund, Employer Identification No. 51-6031295 and Plan No. 002 (the IAM Pension Fund). American’s contributions to the IAM Pension Fund were $40 million, $32 million and $31 million for the years ended December 31, 2020, 2019 and 2018, respectively. The IAM Pension Fund reported $510 million in employers’ contributions for the year ended December 31, 2019, which is the most recent year for which such information is available. For 2019, American’s contributions represented more than 5% of total contributions to the IAM Pension Fund.

On March 29, 2019, the actuary for the IAM Pension Fund certified that the fund was in “endangered” status despite reporting a funded status of over 80%. Additionally, the IAM Pension Fund’s Board voluntarily elected to enter into “critical” status on April 17, 2019. Upon entry into critical status, the IAM Pension Fund was required by law to adopt a rehabilitation plan aimed at restoring the financial health of the pension plan and did so on April 17, 2019 (the Rehabilitation Plan). Under the Rehabilitation Plan, American was subject to an immaterial contribution surcharge, which ceased to apply June 14, 2019 upon American’s mandatory adoption of a contribution schedule under the Rehabilitation Plan. The contribution schedule requires 2.5% annual increases to its contribution rate. This contribution schedule will remain in effect through the earlier of December 31, 2031 or the date the IAM Pension Fund emerges from critical status.

Profit Sharing Program

American accrues 5% of its pre-tax income excluding net special items for its profit sharing program. ~~For the year ended December 31, 2017, American accrued $241 million~~As a result of American’s pre-tax loss excluding net special items, there will not be a payout for ~~this program, which will be distributed to employees in the first quarter~~2020 under its profit sharing program.

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Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

8.9. Accumulated Other Comprehensive ~~Income (Loss)~~Loss

The components of ~~accumulated other comprehensive income (loss) (AOCI)~~AOCI are as follows (in millions):

Pension,
Retiree
Medical and
Other
Postretirement
Benefits Unrealized Gain (Loss) on Investments
Income
Tax Benefit
(Provision) ⁽¹⁾
Total
Balance at December 31, 2015 $ (3,831 ) $ (9 ) $ (991 ) $ (4,831 )
Other comprehensive income (loss) before reclassifications (461 ) 9
166
(286 )
Amounts reclassified from AOCI (102 ) —
37
⁽²⁾
(65 )
Net current-period other comprehensive income (loss) (563 ) 9
203
(351 )
Balance at December 31, 2016 (4,394 ) —
(788 ) (5,182 )
Other comprehensive income (loss) before reclassifications (27 ) (1 ) 14
(14 )
Amounts reclassified from AOCI (87 ) —
32
⁽²⁾
(55 )
Net current-period other comprehensive income (loss) (114 ) (1 ) 46
(69 )
Balance at December 31, 2017 $ (4,508 ) $ (1 ) $ (742 ) $ (5,251 )


	Pension, Retiree Medical and Other Postretirement Benefits		Unrealized Gain on Investments		Income Tax Benefit (Provision) (1)			Total
Balance at December 31, 2018	$	(4,658)	$	(5)	$	(1,329)		$	(5,992)
Other comprehensive income (loss) before reclassifications	(471)		3		106			(362)
Amounts reclassified from AOCI	(89)		0		20		(2)	(69)
Net current-period other comprehensive income (loss)	(560)		3		126			(431)
Balance at December 31, 2019	(5,218)		(2)		(1,203)			(6,423)
Other comprehensive income (loss) before reclassifications	(1,043)		0		236			(807)
Amounts reclassified from AOCI	46		0		(10)		(2)	36
Net current-period other comprehensive income (loss)	(997)		0		226			(771)
Balance at December 31, 2020	$	(6,215)	$	(2)	$	(977)		$	(7,194)

⁽¹⁾

(1)Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net income (loss) until the obligations are fully extinguished.

(2)Relates to pension, retiree medical and other postretirement benefits obligations and is recognized within the income tax provision (benefit) on American’s consolidated statements of operations.

~~Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net income until the obligations are fully extinguished.~~


⁽²⁾	~~Relates to pension, retiree medical and other postretirement benefits obligations and is recognized within the income tax provision on the consolidated statement of operations.~~

Reclassifications out of AOCI for the years ended December 31, ~~2017~~2020 and ~~2016~~2019 are as follows (in millions):


	Amount reclassified from AOCI						Affected line items on the consolidated statement of operations		Amounts reclassified from AOCI				Affected line items on the consolidated statements of operations
	Year Ended December 31,								Year Ended December 31,
AOCI Components	2017			2016				AOCI Components	2020		2019
Amortization of pension, retiree medical and other postretirement benefits:								Amortization of pension, retiree medical and other postretirement benefits:
Prior service benefit	$	(132	)	$	(134	)	Salaries, wages and benefits	Prior service benefit	$	(82)	$	(162)	Nonoperating other income, net
Actuarial loss	77			69			Salaries, wages and benefits	Actuarial loss	118		93		Nonoperating other income, net
Total reclassifications for the period, net of tax	$	(55	)	$	(65	)		Total reclassifications for the period, net of tax	$	36	$	(69)

Amounts allocated to ~~OCI~~other comprehensive income for income taxes as further described in Note 45 will remain in AOCI until American ceases all related activities, such as termination of the pension plan.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

9.10. Commitments, Contingencies and Guarantees

(a) Aircraft, Engine and ~~Engine~~Other Purchase Commitments

Under all of American’s aircraft and engine purchase agreements, its total future commitments as of December 31, ~~2017~~2020 are expected to be as follows (approximately, in millions):

2018 2019 2020 2021 2022 2023 and Thereafter Total
Payments for aircraft commitments and certain engines ⁽¹⁾
$ 1,826
$ 2,730
$ 2,730
$ 2,858
$ 2,138
$ 1,482
$ 13,764


	2021		2022		2023		2024		2025		2026 and Thereafter		Total
Payments for aircraft commitments and certain engines (1)	$	527	$	1,661	$	1,592	$	2,377	$	3,381	$	1,742	$	11,280

⁽¹⁾

These amounts are net of purchase deposits currently held by the manufacturers and include all commitments for regional aircraft. American has granted a security interest in its purchase deposits with Boeing. American’s purchase deposits held by all manufacturers totaled $1.2

(1)These amounts are net of purchase deposits currently held by the manufacturers. American has granted a security interest in certain of its purchase deposits with Boeing to secure certain obligations to Boeing and third-party financing sources. American’s purchase deposits held by all manufacturers totaled $1.4 billion as ~~of December 31, 2017.~~

~~(b) Operating Leases and Other~~

~~American leases certain aircraft, engines and ground equipment, in addition to the majority of its ground facilities and terminal space. As~~ of December 31, ~~2017,~~2020.

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On March 13, 2019, a directive from the Federal Aviation Administration (FAA) grounded all U.S.-registered Boeing 737 MAX Family aircraft and, as a result, all deliveries of Boeing 737 MAX Family aircraft were suspended. Since the time of the FAA recertification of the Boeing 737 MAX Family aircraft on November 18, 2020, deliveries have resumed and American ~~had 410~~accepted delivery of 10 Boeing 737 MAX Family aircraft ~~under operating leases, with remaining terms ranging~~during the period between the date of recertification and December 31, 2020. American has rights to defer 1 Boeing 737 MAX Family aircraft from ~~three months~~delivery in 2021 to approximately 12 years. Airports are utilized for flight operations under lease arrangements with the municipalities or agencies owning or controlling such airports. Substantially all leases provide that the lessee must pay taxes, maintenance, insurance2023 and ~~certain other operating expenses applicable~~rights to defer 10 Boeing 737 MAX Family aircraft from delivery in 2022 to 2023-2024.

Due to the ~~leased property. Some leases also include renewal and purchase options.~~uncertainty surrounding the timing of delivery of certain aircraft, the amounts in the table represent American’s current best estimate; however, the actual delivery schedule may differ from the table above, potentially materially.

~~As of December 31, 2017, obligations under noncancellable~~The amounts in the table exclude 19 Boeing 787-8 aircraft to be delivered in 2021 for which American has obtained committed lease financing. See Note 4 for information regarding this operating ~~leases for future minimum~~ lease ~~payments are as follows (approximately, in millions):~~

2018 2019 2020 2021 2022 2023 and Thereafter Total
Future minimum lease payments $ 2,178
$ 1,966
$ 1,776
$ 1,331
$ 1,155
$ 3,253
$ 11,659

~~Mainline and regional rent expense, excluding landing fees, was $2.8 billion in 2017 and $2.7 billion in each of 2016and 2015.~~commitment.

Additionally, American has purchase commitments related to ~~jet~~aircraft fuel, ~~facility~~flight equipment maintenance, construction projects and information technology support as follows (approximately): ~~$2.0~~$2.3 billion in ~~2018, $1.4~~2021, $1.3 billion in ~~2019, $890~~2022, $1.2 billion in 2023, $242 million in ~~2020 and $950~~2024, $163 million in ~~2021.~~2025 and $1.0 billion in 2026 and thereafter.

~~(c)~~(b) Capacity Purchase Agreements with Third-Party Regional Carriers

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

As of December 31, ~~2017,~~2020, American’s minimum ~~fixed~~ obligations under its capacity purchase agreements with third-party regional carriers are as follows (approximately, in millions):


	2021		2022		2023		2024		2025		2026 and Thereafter		Total
Minimum obligations under capacity purchase agreements with third-party regional carriers (1)	$	1,120	$	1,666	$	1,685	$	1,663	$	1,511	$	3,646	$	11,291

⁽¹⁾

Los Angeles International Airport (LAX)

From time to time, airports where American has operations engage in construction projects, often substantial, that result in new or improved facilities that are ultimately funded through increases in the rent and other occupancy costs payable by airlines using the airport. Unlike this construction and funding model, American is managing a project at LAX where it has legal title to the assets during construction. In 2018, American executed a lease agreement with Los Angeles World Airports (LAWA), which owns and operates LAX, in connection with a $1.6 billion modernization project related to LAX Terminals 4 and 5. Construction, which started in October 2018 and is expected to be completed in 2028, will occur in a phased approach. The modernization project will include a unified departure hall to the entranceway of Terminals 4 and 5, reconfigured ticket counter and check-in areas with seamless access to security screening areas, 10 new security screening lanes with automated technology in addition to the existing Terminal 5 lanes, and a new Terminal 4 South concourse with more open and upgraded amenities at gate areas. The project will also include renovated break rooms, multi-use meeting rooms and team gathering spaces throughout the terminals to support American’s team members at LAX.

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As each phase is completed, the assets will be sold and transferred to LAWA, including the site improvements and non-proprietary improvements. As American controls the assets during construction, they are recognized on its balance sheet until legal title has transferred. As of December 31, 2020, American has incurred approximately $223 million in costs relating to the LAX modernization project, of which $114 million were incurred during 2020, and have been included within operating property and equipment on its consolidated balance sheet. As of December 31, 2020, American has sold and transferred $111 million of non-proprietary improvements to LAWA, all of which occurred during 2020.

(d) Off-Balance Sheet Arrangements

Aircraft and Engines

With respect to leveraged leases, American evaluated whether the leases had characteristics of a variable interest entity. American concluded the leasing entities met the criteria for variable interest entities. American generally is not the primary beneficiary of the leasing entities if the lease terms are consistent with market terms at the inception of the lease and do not include a residual value guarantee, fixed-price purchase option or similar feature that obligates American to absorb decreases in value or entitles American to participate in increases in the value of the aircraft. American does not provide residual value guarantees to the bondholders or equity participants in the trusts. Some leases have a fair market value or a fixed price purchase option that allows American to purchase the aircraft at or near the end of the lease term. However, the option price approximates an estimate of the aircraft’s fair value at the option date. Under this feature, American does not participate in any increases in the value of the aircraft.entities; however, American concluded it is not the primary beneficiary under these ~~arrangements. Therefore, American~~leasing arrangements and accounts for the majority of its EETC leveraged lease financings as operating leases. American’s total future ~~obligations~~payments to the trusts of each of the relevant EETCs under these leveraged lease financings are ~~$572~~$78 million as ofDecember 31, ~~2017,~~2020, which are ~~included~~reflected in the ~~future minimum~~operating lease ~~payments table above.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

obligations in Note 4.

Letters of Credit and Other

American provides financial assurance, such as letters of credit, surety bonds or restricted cash and investments, primarily to ~~primarily~~ support projected workers’ compensation obligations and airport commitments. As of December 31, ~~2017,~~2020, American had ~~$448~~$476 million of letters of credit and surety bonds securing various obligations, of which ~~$88~~$110 million is collateralized with ~~its~~American’s restricted cash. The letters of credit and surety bonds that are subject to expiration will expire on various dates through ~~2022.~~2024.

(e) Legal Proceedings

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Pursuant to rulings of the Bankruptcy Court, the Plan established the Disputed Claims Reserve to hold shares of AAG common stock reserved for issuance to disputed claimholders at the Effective Date that ultimately become holders of allowed claims. ~~As of December 31, 2017, there were approximately 24.5 million~~The shares of AAG common stock ~~remaining in~~issued to the Disputed Claims ~~Reserve.~~Reserve were originally issued on December 13, 2013 and have at all times since been included in the number of shares issued and outstanding as reported by AAG from time to time in its quarterly and annual reports, including for calculating earnings per common share. As disputed claims are resolved, the claimants ~~will~~ receive distributions of shares from the Disputed Claims ~~Reserve on the same basis as if such distributions had been made on or about the Effective Date. However,~~Reserve. American is not required to distribute additional shares above the limits contemplated by the Plan, even if the shares remaining for distribution in the Disputed Claims Reserve are not sufficient to fully pay any additional allowed unsecured claims. ~~To the extent that~~If any of the reserved shares remain undistributed upon resolution of all remaining disputed claims, such shares will not be returned to ~~American~~AAG but rather will be distributed to former AMR ~~stockholders.~~

~~There is also pending in~~stockholders and former convertible noteholders treated as stockholders under the Bankruptcy Court an adversary proceeding relating to an action brought by American to seek a determination that certain non-pension, postemployment benefits are not vested benefits and thus may be modified or terminated without liability to American. On April 18, 2014,Plan. In February 2020, 2.2 million shares of AAG common stock were distributed from the Bankruptcy Court granted American’s motion for summary judgment with respect to certain non-union employees, concluding that their benefits were not vested and could be terminated. The summary judgment motion was denied with respect to all other retirees. The Bankruptcy Court has not yet scheduled a trial on the merits concerning whether those retirees’ benefits are vested, and American cannot predict whether it will receive relief from obligations to provide benefits to any of those retirees. American’s financial statements presently reflect these retirement programs withoutDisputed Claims Reserve. After giving effect to ~~any modification or termination~~this distribution, as of ~~benefits that may ultimately be implemented based upon~~December 31, 2020, the ~~outcome~~Disputed Claims Reserve held approximately 4.8 million shares of ~~this proceeding.~~AAG common stock.

~~DOJ Antitrust Civil Investigative Demand~~. In June 2015, American received a Civil Investigative Demand (CID) from the United States Department of Justice (DOJ) as part of an investigation into whether there have been illegal agreements or coordination of air passenger capacity. The CID seeks documents and other information from American, and other airlines have announced that they have received similar requests. American is cooperating fully with the DOJ investigation.

Private Party Antitrust Action~~. Subsequent~~ Related to ~~announcement of the delivery of CIDs by the DOJ,~~ Passenger Capacity. American, along with Delta Air Lines, Inc., Southwest Airlines Co., United Airlines, Inc. and, in the case of litigation filed in Canada, Air Canada, ~~have been~~were named as defendants in approximately 100 putative class action lawsuits alleging unlawful agreements with respect to air passenger ~~capacity, although Southwest has entered into a settlement with the plaintiffs that is pending approval by the court.~~capacity. The U.S. lawsuits ~~have been~~were consolidated in the Federal District Court for the District of ~~Columbia.~~Columbia (the DC Court). On ~~October 28, 2016,~~June 15, 2018, American reached a settlement agreement with the ~~Court denied a motion by~~plaintiffs in the ~~airline defendants~~amount of $45 million to ~~dismiss~~resolve all class claims in the ~~class actions. These lawsuits~~U.S. lawsuits. That settlement was approved by the DC Court on May 13, 2019, however three parties who objected to the settlement have appealed that decision to the United States Court of Appeals for the District of Columbia. American believes these appeals are ~~in their relatively early stages~~without merit and ~~American~~ intends to vigorously defend ~~these matters vigorously.~~against them.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

~~defendants’ motion~~judgment, and fully denied plaintiffs' cross-motion for summary judgment. ~~Briefing~~The parties' evidentiary cases were presented before the Bankruptcy Court in a bench trial in March 2019 and the parties submitted proposed findings of fact and conclusions of law and made closing arguments in April 2019. On January 29, 2021, the ~~parties’ respective motions concluded on September 1, 2017; a hearing date has not yet been set.~~Bankruptcy Court published its decision finding in American’s favor. American expects the plaintiffs to appeal this ruling. American believes this lawsuit is without merit and intends to continue to vigorously defend against the ~~allegations.~~

~~DOJ Investigation Related to the United States Postal Service. In April 2015, the DOJ informed American~~allegations, including in respect of an inquiry regarding American’s 2009 and 2011 contracts with the United States Postal Service for the international transportation of mail by air. In October 2015, American received a CID from the DOJ seeking certain information relating to these contracts and the DOJ has also sought information concerning certainany appeal of the airlines that transport mail on a codeshare basis. The DOJ has indicated it is investigating potential violations of the False Claims Act or other statutes. American is cooperating fully with the DOJ with regard to its investigation.January 29, 2021 ruling.

General. In addition to the specifically identified legal proceedings, American and its subsidiaries are also engaged in other legal proceedings from time to time. Legal proceedings can be complex and take many months, or even years, to reach resolution, with the final outcome depending on a number of variables, some of which are not within American’s control. Therefore, although American will vigorously defend itself in each of the actions described above and such other legal proceedings, their ultimate resolution and potential financial and other impacts on American are uncertain but could be material. ~~See Part I, Item 1A. Risk Factors –“We may be a party to litigation in the normal course of business or otherwise, which could affect our financial position and liquidity”~~ ~~for unaudited additional discussion.~~

(f) Guarantees and Indemnifications

American is a party to many routine contracts in which it provides general indemnities in the normal course of business to third parties for various risks. American is not able to estimate the potential amount of any liability resulting from the indemnities. These indemnities are discussed in the following paragraphs.

In its aircraft financing agreements, American generally indemnifies the financing parties, trustees acting on their behalf and other relevant parties against liabilities (including certain taxes) resulting from the financing, manufacture, design, ownership, operation and maintenance of the aircraft regardless of whether these liabilities ~~(or~~(including certain taxes) relate to the negligence of the indemnified parties.

American’s loan agreements and other LIBOR-based financing transactions (including certain leveraged aircraft leases) generally obligate American to reimburse the applicable lender for incremental costs due to a change in law that imposes (i) any reserve or special deposit requirement against assets of, deposits with or credit extended by such lender related to the loan, (ii) any tax, duty or other charge with respect to the loan (except standard income tax) or (iii) capital adequacy requirements. In addition, American’s loan agreements and other financing arrangements typically contain a withholding tax provision that requires American to pay additional amounts to the applicable lender or other financing

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

party, generally if withholding taxes are imposed on such lender or other financing party as a result of a change in the applicable tax law.

In certain transactions, including certain aircraft financing leases and loans, the lessors, lenders and/or other parties have rights to terminate the transaction based on changes in foreign tax law, illegality or certain other events or circumstances. In such a case, American may be required to make a lump sum payment to terminate the relevant transaction.

American has general indemnity clauses in many of its airport and other real estate leases where American as lessee indemnifies the lessor (and related parties) against liabilities related to American’s use of the leased property. Generally, these indemnifications cover liabilities resulting from the negligence of the indemnified parties, but not liabilities resulting from the gross negligence or willful misconduct of the indemnified parties. In addition, American provides environmental indemnities in many of these leases for contamination related to American’s use of the leased property.

Under certain contracts with third parties, American indemnifies the third-party against legal liability arising out of an action by the third-party, or certain other parties. The terms of these contracts vary and the potential exposure under these indemnities cannot be determined. American has liability insurance protecting American for some of the obligations it has undertaken under these indemnities.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

December 31, ~~2017,~~2020, the remaining lease payments through 2035 guaranteeing the principal and interest on these bonds are ~~$589~~$572 million ~~which are accounted for as~~and the current carrying amount of the associated operating ~~leases.~~lease liability in the accompanying consolidated balance sheet is $321 million.

(g) Credit Card Processing Agreements

American has agreements with companies that process customer credit card transactions for the sale of air travel and other services. American’s agreements allow these credit card processing companies, under certain conditions, to hold an amount of its cash (referred to as a holdback) equal to a portion of advance ticket sales that have been processed by that company, but for which American has not yet provided the air transportation. Additional holdback requirements in the event of material adverse changes in American’s financial condition will reduce its liquidity in the form of unrestricted cash by the amount of the holdbacks. ~~American is~~These credit card processing companies are not currently ~~required~~entitled to maintain any holdbacks pursuant to these requirements.

(h) Labor Negotiations

As of December 31, ~~2017,~~2020, American employed approximately ~~103,100~~78,300 active full-time equivalent (FTE) employees. ~~Approximately~~Of the total active FTE employees, 84% ~~of employees~~ are covered by collective bargaining agreements (CBAs) with various labor ~~unions. Negotiations for joint~~unions and 47% are covered by CBAs that are currently amendable or that will become amendable within one year. Joint collective bargaining agreements ~~covering~~(JCBAs) have been reached with post-Merger employee groups, including a new five-year JCBA ratified with the TWU-IAM Association, which represents American’s ~~maintenance,~~mainline mechanics and related, fleet service, stock clerks, maintenance control technicians and maintenance training ~~instructors~~instructors. Additionally, the post-Merger JCBAs covering American’s pilots and flight attendants are now amendable. The JCBA covering American’s passenger service employees ~~are continuing. There~~ is ~~no assurance that a successful or timely resolution~~also amendable.

195

Table of ~~these labor negotiations will be achieved.~~Contents

~~(i) Other~~

As a result of the terrorist attacks of September 11, 2001 and the subsequent liability protections provided for by the Air Transportation Safety and System Stabilization Act (the Stabilization Act), American recorded a liability for these terrorist attacks claims equal to the related insurance receivable due to American. The Stabilization Act provides that, notwithstanding any other provision of law, liability for all claims, whether compensatory or punitive, arising from these terrorist attacks, against any air carrier shall not exceed the liability coverage maintained by the air carrier. As of December 31, 2017, claims relating to this matter have been substantially resolved and the remaining liability and the amount of the offsetting receivable are not material.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

~~10.~~11. Supplemental Cash Flow Information

Supplemental disclosure of cash flow information and non-cash investing and financing activities are as follows (in millions):


	Year Ended December 31,
	2020		2019		2018
Non-cash investing and financing activities:
Settlement of bankruptcy obligations	$	56	$	7	$	0

Supplemental information:
Interest paid, net	877		1,025		1,009
Income taxes paid	6		8		16

~~11.~~12. Operating Segments and Related Disclosures

American is managed as a single business unit that provides air transportation for passengers and cargo. This allows it to benefit from an integrated revenue pricing and route network that includes American and AAG’s wholly-owned and third-party regional carriers that fly under capacity purchase agreements operating as American Eagle. The flight equipment of all these carriers is combined to form ~~one~~1 fleet that is deployed through a single route scheduling system. Financial information and annual operational plans and forecasts are prepared and reviewed by the chief

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

operating decision maker at the consolidated level. When making operational decisions, the chief operating decision maker evaluates flight profitability data, which considers aircraft type and route economics, but is indifferent to the results of the individual regional carriers. The objective in making operational decisions is to maximize consolidated financial results, not the individual results of American or American Eagle.

See Note 1(l) for American’s ~~operating revenues~~passenger revenue by geographic ~~region as defined by the U.S. Department of Transportation (DOT) are summarized below (in millions):~~

Year Ended December 31,
2017 2016 2015
DOT Domestic $ 29,600
$ 28,603
$ 28,709
DOT Latin America 5,422
4,995
5,539
DOT Atlantic 5,059
4,769
5,146
DOT Pacific 2,114
1,796
1,544
Total operating revenues $ 42,195
$ 40,163
$ 40,938

~~American attributes operating revenues by geographic region based upon the origin and destination of each flight segment.~~region. American’s tangible assets consist primarily of flight equipment, which are mobile across geographic markets and, therefore, have not been allocated.

~~12.~~13. Share-based Compensation

~~American’s~~For the years ended December 31, 2020, 2019 and 2018, American recorded $91 million, $95 million and $88 million, respectively, of share-based compensation costs principally in salaries, wages and benefits expense for the years ended December 31, 2017, 2016 and 2015 included $90 million, $102 million and $274 million, respectively, of share-based compensation costs. Of the 2015 amount, $198 million was related to awards granted to certain employees in connection with the Merger and recorded in special items, net on ~~the accompanying~~its consolidated statements of operations.

During ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, AAG withheld approximately ~~1.1~~0.7 million, ~~1.4~~0.8 million and ~~7.0~~0.8 million shares of AAG common stock, respectively, and paid approximately ~~$51~~$15 million, ~~$56~~$25 million and ~~$306~~$37 million, respectively, in satisfaction of certain tax withholding obligations associated with employee equity awards.

~~(a)~~

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Restricted Stock Unit Awards (RSUs)

~~AAG has granted~~The majority of American’s RSUs ~~with~~have service conditions (time vested primarily over three years) ~~and performance conditions.~~. The grant-date fair value of these RSUs is equal to the market price of the underlying shares of AAG common stock on the date of grant. ~~For time vested awards, the~~The expense for these RSUs is recognized on a straight-line basis over the vesting period for the entire award. ~~For awards with performance conditions, the expense is recognized based on the expected achievement at each reporting period. Stock-settled~~ RSUs are classified as equity awards as the vesting results in the issuance of shares of AAG common stock.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

~~Stock-settled~~ RSU award activity for all plans for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018 is as follows:


						Number of Shares	Weighted Average Grant Date Fair Value
	Number of Shares		Weighted Average Grant Date Fair Value			(In thousands)
	(In thousands)
Outstanding at December 31, 2014	21,342		$	26.43
Outstanding at December 31, 2017					Outstanding at December 31, 2017	4,324	$	46.94
Granted	2,213		46.62		Granted	2,194	47.65
Vested and released	(17,163	)	25.20		Vested and released	(1,999)	44.99
Forfeited	(785	)	27.12		Forfeited	(199)	45.72
Outstanding at December 31, 2015	5,607		$	38.08
Outstanding at December 31, 2018					Outstanding at December 31, 2018	4,320	$	44.29
Granted	2,655		41.34		Granted	3,206	34.00
Vested and released	(2,754	)	34.83		Vested and released	(2,002)	44.90
Forfeited	(321	)	40.15		Forfeited	(337)	42.55
Outstanding at December 31, 2016	5,187		$	41.48
Outstanding at December 31, 2019					Outstanding at December 31, 2019	5,187	$	37.01
Granted	2,309		48.58		Granted	5,883	22.07
Vested and released	(2,708	)	39.63		Vested and released	(2,268)	39.46
Forfeited	(464	)	44.48		Forfeited	(920)	29.78
Outstanding at December 31, 2017	4,324		$	46.94
Outstanding at December 31, 2020					Outstanding at December 31, 2020	7,882	$	23.66

~~(b) Stock Appreciation Rights (SARs)~~

~~AAG assumed US Airways Group’s outstanding SARs in connection with the Merger using an exchange ratio~~14. Valuation and Qualifying Accounts (in millions)


	Balance at Beginning of Year		Additions Charged to Statement of Operations Accounts		Deductions		Balance at End of Year
Allowance for obsolescence of spare parts
Year ended December 31, 2020	$	729	$	81	$	(368)	$	442
Year ended December 31, 2019	754		79		(104)		729
Year ended December 31, 2018	717		57		(20)		754
Allowance for credit losses on accounts receivable
Year ended December 31, 2020	$	25	$	25	$	(21)	$	29
Year ended December 31, 2019	24		17		(16)		25
Year ended December 31, 2018	21		39		(36)		24

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Table of one to one. These SARs were granted with an exercise price equal to the underlying common stock’s fair value at the date of each grant, have service conditions, become exercisable over a three-year vesting period and expire if unexercised at the end of their term, which ranges from seven to ten years. During 2017, 2016 and 2015, 0.8 million, 1.7 million and 3.0 million SARs, respectively, were exercised at weighted average exercise prices of $15.71, $14.49 and $12.09, respectively, for a total intrinsic value of $27 million, $49 million and $102 million, respectively. As of December 31, 2017, AAG had 1.2 million SARs outstanding with an aggregate intrinsic value of $54 million and weighted average exercise price of $8.08 that expire between 2018 and 2020 if unexercised.Contents

~~(c) ASU 2016-09: Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~

This ASU simplified the accounting for share-based payment award transactions including the financial statement presentation of excess tax benefits and deficiencies. American adopted this ASU during the second quarter of 2016, which resulted in the recognition of $418 million of previously unrecognized excess tax benefits in deferred tax assets and an increase to retained earnings on the consolidated balance sheet as of the beginning of 2016.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

~~13. Valuation and Qualifying Accounts (in millions)~~

Balance at Beginning of Year Changes Charged to Statement of Operations Accounts
Write-offs
(Net of Recoveries)
Sales, Retirements and Transfers Balance at End of Year
Allowance for obsolescence of spare parts
Year ended December 31, 2017 $ 720
$ 18
$ —
$ (21 ) $ 717
Year ended December 31, 2016 689
28
—
3
720
Year ended December 31, 2015 638
42
—
9
689
Allowance for uncollectible accounts
Year ended December 31, 2017 $ 35
$ 41
$ (55 ) $ —
$ 21
Year ended December 31, 2016 37
47
(49 ) —
35
Year ended December 31, 2015 14
45
(22 ) —
37

~~14.~~15. Quarterly Financial Data (Unaudited)

Unaudited summarized financial data by quarter for ~~2017~~2020 and ~~2016~~2019 (in millions):


										First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2020									2020
Operating revenues									Operating revenues	$	8,514	$	1,622	$	3,172	$	4,027
Operating expenses									Operating expenses	11,050		4,063		5,981		6,465
Operating loss									Operating loss	(2,536)		(2,441)		(2,809)		(2,438)
Net loss									Net loss	(2,169)		(1,968)		(2,276)		(2,037)
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2017
2019									2019
Operating revenues	$	9,621	$	11,102	$	10,875	$	10,597	Operating revenues	$	10,581	$	11,958	$	11,910	$	11,312
Operating expenses	9,017		9,575		9,650		9,921		Operating expenses	10,236		10,831		11,082		10,565
Operating income	604		1,527		1,225		676		Operating income	345		1,127		828		747
Net income	263		827		649		183		Net income	230		714		508		520

2016
Operating revenues	$	9,427	$	10,360	$	10,591	$	9,786
Operating expenses	8,104		8,603		9,159		8,995
Operating income	1,323		1,757		1,432		791
Net income	710		972		758		341

American’s fourth quarter ~~2017~~2020 results ~~include $384~~included $36 million of total pre-tax net special items driven principally by mark-to-market net unrealized gains and losses associated with certain equity investments and treasury rate lock derivative instruments.

American’s fourth quarter 2019 results included $108 million of total pre-tax net special items that principally included ~~a $123 million charge for the $1,000 cash bonus and associated payroll taxes granted to mainline employees as of December 31, 2017 in recognition of the 2017 Tax Act, $81~~$85 million of ~~Merger~~merger integration expenses ~~$58~~and $39 million of fleet restructuring expenses, a $20 million net charge resulting from fair value adjustments to bankruptcy obligations and a $93 million special non-cash charge to income tax expense to reflect the impact on American’s deferred tax assets and liabilities resulting from the 2017 Tax Act.

~~American’s fourth quarter 2016 results include $273~~offset in part by $42 million of ~~total~~mark-to-market net ~~special items that principally included $121 million of Merger integration expenses, $104 million of fleet restructuring expenses~~unrealized gains associated with certain equity investments and ~~a $47 million net charge resulting from fair value adjustments to bankruptcy obligations.~~

treasury rate lock derivative instruments.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

~~15.~~16. Transactions with Related Parties

The following represents the net receivables (payables) to related parties (in millions):

December 31,
2017 2016
AAG ⁽¹⁾
$ 10,968
$ 8,981
AAG’s wholly-owned subsidiaries ⁽²⁾
(2,146 ) (2,171 )
Total $ 8,822
$ 6,810


	December 31,
	2020		2019
AAG (1)	$	9,940	$	14,597
AAG’s wholly-owned subsidiaries (2)	(2,063)		(2,146)
Total	$	7,877	$	12,451

⁽¹⁾

(1)The decrease in American’s net related party receivable from AAG is primarily due to cash received from the proceeds of AAG financing transactions including the PSP1 Promissory Note, the 6.50% convertible senior notes, the issuance of shares of AAG common stock pursuant to two public stock offerings and an at-the-market offering.

(2)The net payable to AAG’s wholly-owned subsidiaries consists primarily of amounts due under regional capacity purchase agreements with AAG’s wholly-owned regional airlines operating under the brand name of American Eagle.

~~The increase in American’s net related party receivable from AAG is primarily due to American providing the cash funding for AAG’s share repurchase and dividend programs.~~


⁽²⁾	The net payable to AAG’s wholly-owned subsidiaries consists primarily of amounts due under regional capacity purchase agreements with AAG’s wholly-owned regional airlines operating under the brand name of American Eagle.

Pursuant to a capacity purchase agreement between American and AAG’s wholly-owned regional airlines operating as American Eagle, American purchases all of the capacity from these carriers and recognizes passenger revenue from flights operated by American Eagle. In ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, American recognized expense of approximately ~~$1.7~~$1.8 billion, ~~$1.5~~$2.2 billion and ~~$1.2~~$1.8 billion, respectively, related to wholly-owned regional airline capacity purchase agreements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

17. Subsequent Event

PSP2

On January 15, 2021 (the PSP2 Closing Date), the Subsidiaries entered into a Payroll Support Program Extension Agreement (the PSP2 Agreement) with Treasury, with respect to PSP2 provided pursuant to the PSP Extension Law. In connection with the Subsidiaries’ entry into the PSP2 Agreement, on the PSP2 Closing Date, AAG also entered into a warrant agreement (the PSP2 Warrant Agreement) with Treasury and issued the PSP2 Promissory Note to Treasury, with the Subsidiaries as guarantors.

PSP2 Agreement

In connection with PSP2, AAG and the Subsidiaries are required to comply with the relevant provisions of the PSP Extension Law, which are substantially similar as the restrictions contained in the PSP1 Agreement, but are in effect for a longer time period. These provisions include the requirement that funds provided pursuant to the PSP2 Agreement be used exclusively for the continuation of payment of eligible employee wages, salaries and benefits, the requirement against involuntary furloughs and reductions in employee pay rates and benefits through March 31, 2021, the provisions that prohibit the repurchase of AAG common stock, and the payment of common stock dividends through at least March 31, 2022, the provisions that restrict the payment of certain executive compensation until October 1, 2022, as well as a requirement to recall employees involuntarily terminated or furloughed after September 30, 2020. As was the case with PSP1, the PSP2 Agreement also imposes substantial reporting obligations on AAG and its Subsidiaries.

Pursuant to the PSP2 Agreement, Treasury is to provide AAG and its Subsidiaries financial assistance to be paid in installments (each, an Installment) expected to total at least $3.0 billion in the aggregate, of which $1.5 billion was received on January 15, 2021. As partial compensation to the U.S. Government for the provision of financial assistance under PSP2, and assuming a total principal sum of approximately $3.0 billion, AAG expects to issue a PSP2 Promissory Note in the aggregate principal amount of approximately $896 million and issue warrants (each a PSP2 Warrant and, collectively, the PSP2 Warrants) to Treasury to purchase up to an aggregate of approximately 5.7 million shares of AAG common stock.

PSP2 Promissory Note

As partial compensation to the U.S. Government for the provision of financial assistance under the PSP2 Agreement, AAG issued the PSP2 Promissory Note to Treasury, which provides for AAG’s unconditional promise to pay to Treasury the initial principal sum of approximately $433 million, subject to an increase equal to 30% of the amount of each additional Installment disbursed under the PSP2 Agreement after the PSP2 Closing Date, and the guarantee of AAG’s obligations by the Subsidiaries. Assuming the total Installments to be paid pursuant to the PSP2 Agreement aggregate approximately $3.0 billion, the PSP2 Promissory Note will have a total principal sum of approximately $896 million.

The PSP2 Promissory Note bears interest on the outstanding principal amount at a rate equal to 1.00% per annum until the fifth anniversary of the PSP2 Closing Date and 2.00% plus an interest rate based on the secured overnight financing rate per annum or other benchmark replacement rate consistent with customary market conventions (but not to be less than 0.00%) thereafter until the tenth anniversary of the PSP2 Closing Date (the PSP2 Maturity Date), and interest accrued thereon will be payable in arrears on the last business day of March and September of each year, beginning on March 31, 2021. The aggregate principal amount outstanding under the PSP2 Promissory Note, together with all accrued and unpaid interest thereon and all other amounts payable under the PSP2 Promissory Note, will be due and payable on the PSP2 Maturity Date.

AAG may, at any time and from time to time, voluntarily prepay amounts outstanding under the PSP2 Promissory Note, in whole or in part, without penalty or premium. Within 30 days of the occurrence of certain change of control triggering events, AAG is required to prepay the aggregate outstanding principal amount of the PSP2 Promissory Note at such time, together with any accrued interest or other amounts owing under the PSP2 Promissory Note at such time.

The PSP2 Promissory Note is AAG’s senior unsecured obligation and each guarantee of the PSP2 Promissory Note is the senior unsecured obligation of each of the Subsidiaries, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

PSP2 Warrant Agreement and PSP2 Warrants

The PSP2 Warrants do not have any voting rights and are freely transferrable, with registration rights. Each PSP2 Warrant expires on the fifth anniversary of the date of issuance of such PSP2 Warrant. The PSP2 Warrants will be exercisable either through net share settlement or cash, at AAG’s option. The PSP2 Warrants were and will be issued solely as compensation to the U.S. Government related to entry into the PSP2 Agreement. No separate proceeds (apart from the financial assistance described above) were received upon issuance of the PSP2 Warrants or will be received upon exercise thereof.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Management’s Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange ~~Act.~~Act of 1934, as amended (the Exchange Act). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the ~~SEC.~~SEC’s rules and forms, and is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate to allow timely decisions regarding required disclosure. An evaluation of the effectiveness of AAG’s and American’s disclosure controls and procedures as of December 31, ~~2017~~2020 was performed under the supervision and with the participation of AAG’s and American’s management, including AAG’s and American’s ~~Chief Executive Officer (CEO)~~CEO and ~~Chief Financial Officer (CFO).~~CFO. Based on that evaluation, AAG’s and American’s management, including AAG’s and American’s CEO and CFO, concluded that AAG’s and American’s disclosure controls and procedures were effective as of December 31, ~~2017.~~2020 at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

On December 9, 2013, AAG acquired US Airways Group and its subsidiaries. We are still in the process of integrating certain processes, technology and operations for the post-Merger combined company, and we will continue to evaluate the impact of any related changes to our internal control over financial reporting. For the ~~year~~three months ended December 31, ~~2017,~~2020, there ~~has~~have been no ~~change~~changes in AAG’s or American’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, AAG’s and American’s internal control over financial reporting.

Limitation on the Effectiveness of Controls

We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and, as noted above, the CEO and CFO of AAG and American believe that our disclosure controls and procedures were effective at the ~~“reasonable assurance”~~reasonable assurance level as of December 31, ~~2017.~~2020.

Management’s Annual Report on Internal Control over Financial Reporting

Management of AAG and American is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. AAG’s and American’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. AAG’s and American’s internal control over financial reporting includes policies and procedures that:

•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of AAG or American, respectively;

•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of AAG or American are being made only in accordance with authorizations of management and directors of AAG or American, respectively; and

•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of AAG’s or American’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of AAG’s and American’s internal control over financial reporting as of December 31, ~~2017.~~2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its Internal Control – Integrated Framework (2013 Framework).

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Based on our assessment and those criteria, AAG’s and American’s management concludes that AAG and American, respectively, maintained effective internal control over financial reporting as of December 31, ~~2017.~~

2020.

AAG’s and American’s independent registered public accounting firm has issued an attestation report on the effectiveness of AAG’s and American’s internal control over financial reporting. That report has been included herein.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

American Airlines Group Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited American Airlines Group Inc.’s and subsidiaries’ (the Company) internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, ~~2017~~2020 and ~~2016,~~2019, the related consolidated statements of operations, comprehensive income (loss), cash flows, and stockholders’ equity (deficit) for each of the years in the three-year period ended December 31, ~~2017,~~2020, and the related notes (collectively, the consolidated financial statements), and our report dated February ~~21, 2018~~17, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

/s/ KPMG LLP

Dallas, Texas

February ~~21, 2018~~17, 2021

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Report of Independent Registered Public Accounting Firm

To the Stockholder and Board of Directors

American Airlines, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited American Airlines, Inc.’s and subsidiaries’ (American) internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established inInternal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, American maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of American as of December 31, ~~2017~~2020 and ~~2016,~~2019, the related consolidated statements of operations, comprehensive income (loss), cash flows, and stockholder’s equity for each of the years in the three-year period ended December 31, ~~2017,~~2020, and the related notes (collectively, the consolidated financial statements), and our report dated February ~~21, 2018~~17, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

American’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on American’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to American in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Definition and Limitations of Internal Control Over Financial Reporting

/s/ KPMG LLP

Dallas, Texas

February ~~21, 2018~~17, 2021

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ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Except as stated below, the information required by this Item will be set forth in the Proxy Statement under the captions “Proposal 1 – Election of Directors,” “Executive Officers,” ~~“Section 16(a) Beneficial Ownership Reporting Compliance”~~“Board Composition” and “Information About the Board of Directors and Corporate Governance” and is incorporated by reference into this Annual Report on Form 10-K.

~~American Airlines Group~~AAG and American have adopted Standards of Business Conduct (the Ethics Standards) within the meaning of Item 406(b) of Regulation S-K. The Ethics Standards apply to all officers and employees of ~~American Airlines Group Inc.~~AAG and its subsidiaries, including American. The Ethics Standards are available on our website at www.aa.com. If we make substantive amendments to the Ethics Standards or grant any waiver, including any implicit waiver, to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K in accordance with applicable rules and regulations.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item will be set forth in the Proxy Statement under the captions ~~“Risk~~“Information About the Board of Directors and Corporate Governance - Risk Assessment with Respect to Compensation Practices,” “Director Compensation,” “Compensation Discussion and Analysis,” “Executive Compensation” and “Compensation Committee Report” and is incorporated by reference into this Annual Report on Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

~~Except as stated below, the~~The information required by this Item will be set forth in the Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” and is incorporated by reference into this Annual Report on Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item will be set forth in the Proxy Statement under the captions “Certain Relationships and Related Party Transactions” and “Information About the Board of Directors and Corporate Governance” and is incorporated by reference into this Annual Report on Form 10-K.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item will be set forth in the Proxy Statement under the caption “Proposal 2 – Ratification of Appointment of Independent Registered Public Accounting Firm” and is incorporated by reference into this Annual Report on Form 10-K.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Consolidated Financial Statements

The following consolidated financial statements of American Airlines Group Inc. and Independent Auditors’ Report are filed as part of this report:



			Page
Report of Independent Registered Public Accounting Firm			8089
Consolidated Statements of Operations for the Years Ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			8191
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			8292
Consolidated Balance Sheets at December 31, ~~2017~~2020 and ~~2016~~2019			8393
Consolidated Statements of Cash Flows for the Years Ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			8494
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			8595
Notes to Consolidated Financial Statements			8696

The following consolidated financial statements of American Airlines, Inc. and Independent Auditors’ Report are filed as part of this report:



			Page
Report of Independent Registered Public Accounting Firm			~~125~~147
Consolidated Statements of Operations for the Years Ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			~~126~~149
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			~~127~~150
Consolidated Balance Sheets at December 31, ~~2017~~2020 and ~~2016~~2019			~~128~~151
Consolidated Statements of Cash Flows for the Years Ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			~~129~~152
Consolidated Statements of Stockholder’s Equity for the Years Ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			~~130~~153
Notes to Consolidated Financial Statements			~~131~~154

Schedules not included have been omitted because they are not applicable or because the required information is included in the Consolidated Financial Statements or notes thereto.

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Exhibits

Exhibits required to be filed by Item 601 of Regulation S-K: Where the amount of securities authorized to be issued under any of our long-term debt agreements does not exceed 10 percent of our assets, pursuant to paragraph (b)(4) of Item 601 of Regulation S-K, in lieu of filing such as an exhibit, we hereby agree to furnish to the Commission upon request a copy of any agreement with respect to such long-term debt.



Exhibit Number		Description
2.1		Confirmation Order and Plan (incorporated by reference to Exhibit 2.1 to AMR’s Current Report on Form 8-K filed on October 23, 2013 (Commission File No. 1-8400)).
2.2		Agreement and Plan of Merger, dated as of February 13, 2013, among AMR Corporation, AMR Merger Sub, Inc. and US Airways Group, Inc. (incorporated by reference to Exhibit 2.1 to US Airways Group’s Current Report on Form 8-K/A filed on February 14, 2013 (Commission File No. 1-8444)).#
~~2.3~~	Amendment to Agreement and Plan of Merger, dated as of May 15, 2013, among AMR Corporation, AMR Merger Sub, Inc. and US Airways Group, Inc. (incorporated by reference to Exhibit 2.1 to US Airways Group’s Current Report on Form 8-K filed on May 16, 2013 (Commission File No. 1-8444)).
~~2.4~~	Second Amendment to Agreement and Plan of Merger, dated as of June 7, 2013, among AMR Corporation, AMR Merger Sub, Inc. and US Airways Group, Inc. (incorporated by reference to Exhibit 2.1 to US Airways Group’s Current Report on Form 8-K filed on June 12, 2013 (Commission File No. 1-8444)).
~~2.5~~	Third Amendment to Agreement and Plan of Merger, dated as of September 20, 2013, among AMR Corporation, AMR Merger Sub, Inc. and US Airways Group, Inc. (incorporated by reference to Exhibit 2.1 to US Airways Group’s Current Report on Form 8-K filed on September 23, 2013 (Commission File No. 1-8444)).
~~2.6~~	Agreement and Plan of Merger, dated as of December 28, 2015, between American Airlines, Inc. and US Airways, Inc. (incorporated by reference to Exhibit 2.1 to AAG’s Current Report on Form 8-K filed on December 31, 2015 (Commission File No. 1-8400)).
3.1		Restated Certificate of Incorporation of American Airlines Group Inc., including the Certificate of Designations, Powers, Preferences and Rights of the American Airlines Group Inc. Series A Convertible Preferred Stock attached as Annex I thereto (incorporated by reference to Exhibit 3.1 to AAG’s Current Report on Form 8-K filed on December 9, 2013 (Commission File No. 1-8400)).
3.2		~~Second Amended and~~Certificate of Amendment of Restated ~~Bylaws~~Certificate of Incorporation of American Airlines Group Inc. (incorporated by reference to Exhibit 3.1 to AAG’s Current Report on Form 8-K filed on ~~January 30, 2017~~June 13, 2018 (Commission File No. ~~001-08400)~~1-8400)).
3.3		Third Amended and Restated Bylaws of American Airlines Group Inc. (incorporated by reference to Exhibit 3.2 to AAG’s Current Report on Form 8-K filed on June 13, 2018 (Commission File No. 1-8400)).
3.4		Amended and Restated Certificate of Incorporation of American Airlines, Inc. (incorporated by reference to Exhibit 3.3 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2013 (Commission File No. 1-8400)).
~~3.4~~3.5		Amended and Restated Bylaws of American Airlines, Inc. (incorporated by reference to Exhibit 3.4 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2013 (Commission File No. 1-8400)).
4.1		~~Pass Through Trust Agreement, dated as~~Description of ~~March~~securities registered under Section 12 2013, between American Airlines, Inc. and Wilmington Trust Company (incorporated by reference to Exhibit 4.1 to AMR’s Current Report on Form 8-K filed on March 12, 2013 (Commission File No. 1-8400)).
~~4.2~~	Trust Supplement No. 2013-2B, dated as of November 27, 2013, among American Airlines, Inc. and Wilmington Trust Company, as Class B Trustee, to the Pass Through Trust Agreement, dated as of March 12, 2013 (incorporated by reference to Exhibit 4.2 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400)).
~~4.3~~	Form of Pass Through Trust Certificate, Series 2013-2B (included in Exhibit A to Exhibit 4.2) (incorporated by reference to Exhibit 4.3 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400)).
~~4.4~~	Revolving Credit Agreement (2013-2B), dated as of November 27, 2013, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for Trustee of American Airlines Pass Through Trust 2013-2B and as Borrower, and Morgan Stanley Bank, N.A., as Class B Liquidity Provider (incorporated by reference to Exhibit 4.5 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400)).
~~4.5~~	~~Participation Agreement (N907AN), dated as of September 9, 2013, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each~~ of the Pass Through Trust Agreements in effect as of the date thereof, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein (incorporated by reference to Exhibit 4.6 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400)).
~~4.6~~	Indenture and Security Agreement (N907AN), dated as of September 9, 2013, between American Airlines, Inc. and Wilmington Trust Company, as Loan Trustee (incorporated by reference to Exhibit 4.7 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.7~~	First Amendment to Participation Agreement (N907AN), dated as of November 27, 2013, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein (incorporated by reference to Exhibit 4.8 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400)).
~~4.8~~	First Amendment to Indenture and Security Agreement (N907AN), dated as of November 27, 2013, between American Airlines, Inc. and Wilmington Trust Company, as Loan Trustee (incorporated by reference to Exhibit 4.9 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400)).
~~4.9~~	Series 2013-2A N907AN Equipment Note No. 1, dated as of September 9, 2013 (incorporated by reference to Exhibit 4.10 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400)).
~~4.10~~	Series 2013-2B N907AN Equipment Note No. 1, dated as of November 27, 2013 (incorporated by reference to Exhibit 4.11 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400)).
~~4.11~~	Registration Rights Agreement, dated as of November 27, 2013, among American Airlines, Inc., Wilmington Trust Company, as Trustee under Trust Supplement No. 2013-2B, dated as of November 27, 2013, and Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, in their capacity as representatives of the Initial Purchasers (incorporated by reference to Exhibit 4.12 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400)).
~~4.12~~	Schedule I (Pursuant to Instruction 2 to Item 601 of Regulation S-K, this Schedule I contains a list of documents applicable to the financing of the Aircraft in connection with the offering of the Class B Certificates, which documents are substantially identical to those filed herewith as Exhibits 4.6, 4.7, 4.8, 4.9, 4.10 and 4.11 to Exhibit 99.2 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400). Schedule I sets forth the details by which such documents differ from the corresponding Exhibits) (incorporated by reference to Exhibit 99.2 to AMR’s Current Report on Form 8-K filed on November 27, 2013 (Commission File No. 1-8400)).
~~4.13~~	Trust Supplement No. 2013-2C, dated as of December 20, 2013, among American Airlines, Inc. and Wilmington Trust Company, as Class C Trustee, to the Pass Through Trust Agreement, dated as of March 12, 2013 (incorporated by reference to Exhibit 4.2 to AMR’s Current Report on Form 8-K filed on December 20, 2013 (Commission File No. 1-8400)).
~~4.14~~	Form of Pass Through Trust Certificate, Series 2013-2C (incorporated by reference to Exhibit A to Exhibit 4.2 to AAG’s Current Report on Form 8-K filed on December 20, 2013 (Commission File No. 1-8400)).
~~4.15~~	Amended and Restated Intercreditor Agreement (2013-2), dated as of December 20, 2013, among Wilmington Trust Company, as Trustee of American Airlines Pass Through Trust 2013-2A, American Airlines Pass Through Trust 2013-2B and American Airlines Pass Through Trust 2013-2C, Morgan Stanley Bank, N.A., as Class A Liquidity Provider and as Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.4 to AMR’s Current Report on Form 8-K filed on December 20, 2013 (Commission File No. 1-8400)).
~~4.16~~	Second Amendment to Participation Agreement (N907AN), dated as of December 20, 2013, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein (incorporated by reference to Exhibit 4.9 to AMR’s Current Report on Form 8-K filed on December 20, 2013 (Commission File No. 1-8400)).
~~4.17~~	Second Amendment to Indenture and Security Agreement (N907AN), dated as of December 20, 2013, between American Airlines, Inc. and Wilmington Trust Company, as Loan Trustee (incorporated by reference to Exhibit 4.10 to AMR’s Current Report on Form 8-K filed on December 20, 2013 (Commission File No. 1-8400)).
~~4.18~~	Series 2013-2C N907AN Equipment Note No. 1, dated as of December 20, 2013 (incorporated by reference to Exhibit 4.11 to AMR’s Current Report on Form 8-K filed on December 20, 2013 (Commission File No. 1-8400)).
~~4.19~~	Registration Rights Agreement, dated as of December 20, 2013, among American Airlines, Inc., Wilmington Trust Company, as Trustee under Trust Supplement No. 2013-2C, dated as of December 20, 2013, and Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, in their capacity as representatives of the Initial Purchasers (incorporated by reference to Exhibit 4.12 to AMR’s Current Report on Form 8-K filed on December 20, 2013 (Commission File No. 1-8400)).
~~4.20~~	Schedule I (Pursuant to Instruction 2 to Item 601 of Regulation S-K, this Schedule I contains a list of documents applicable to the financing of the Aircraft in connection with the offering of the Class C Certificates, which documents are substantially identical to those filed herewith as Exhibits 4.14, 4.17 and 4.20. Schedule I sets forth the details by which such documents differ from the corresponding Exhibits) (incorporated by reference to Exhibit 99.2 to AMR’s Current Report on Form 8-K filed on December 20, 2013 (Commission File No. 1-8400)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.21~~	Indenture, dated as of May 24, 2013, between American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.) and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to US Airways Group’s Current Report on Form 8-K filed on May 24, 2013 (Commission File No. 1-8444)).
~~4.22~~	First Supplemental Indenture, dated as of May 24, 2013, among American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.), American Airlines, Inc. (as successor in interest to US Airways, Inc.) and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to US Airways Group’s Current Report on Form 8-K filed on May 24, 2013 (Commission File No. 1-8444)).
~~4.23~~	Second Supplemental Indenture dated as of December 9, 2013, among American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.) and Wilmington Trust, National Association, as trustee, to the Indenture, dated as of May 24, 2013Exchange Act (incorporated by reference to Exhibit 4.1 to AAG’s ~~Current~~Annual Report on Form ~~8-K filed on~~10-K for the year ended December ~~9, 2013~~31, 2019 (Commission File No. 1-8400)).
~~4.24~~4.2		Third Supplemental Indenture, dated as of December 30, 2015, among American Airlines Group Inc., American Airlines, Inc. and Wilmington Trust, National Association, as trustee, to the Indenture dated as of May 24, 2013 (incorporated by reference to Exhibit 4.1 to AAG’s Current Report on Form 8-K filed on December 31, 2015 (Commission File No. 1-8400)).
~~4.25~~	Pass Through Trust Agreement, dated as of September 16, 2014, between American Airlines, Inc. and Wilmington Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 to American’s Current Report on Form 8-K filed on September 17, 2014 (Commission File No. 1-2691)).
~~4.26~~4.3		Trust Supplement No. 2014-1A, dated as of September 16, 2014, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on September 17, 2014 (Commission File No. 1-2691)).
~~4.27~~4.4		Trust Supplement No. 2014-1B, dated as of September 16, 2014, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on September 17, 2014 (Commission File No. 1-2691)).
~~4.28~~4.5		Intercreditor Agreement (2014-1), dated as of September 16, 2014, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2014-1A and as Trustee of the American Airlines Pass Through Trust 2014-1B, Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on September 17, 2014 (Commission File No. 1-2691)).
~~4.29~~4.6		Amendment No. 1 to Intercreditor Agreement (2014-1), dated as of June 24, 2015, among American Airlines, Inc., Credit Agricole Corporate and Investment Bank, as Class A and Class B liquidity provider and Wilmington Trust Company, as subordination agent and trustee (incorporated by reference to Exhibit 10.6 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (Commission File No. 1-8400)).
~~4.30~~4.7		Note Purchase Agreement, dated as of September 16, 2014, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.9 to American’s Current Report on Form 8-K filed on September 17, 2014 (Commission File No. 1-2691)).

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~~4.31~~ Exhibit Number			Description
4.8			Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (Exhibit B to Note Purchase Agreement) (incorporated by reference to Exhibit 4.10 to American’s Current Report on Form 8-K filed on September 17, 2014 (Commission File No. 1-2691)).
~~4.32~~4.9			Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (Exhibit C to Note Purchase Agreement) (incorporated by reference to Exhibit 4.11 to American’s Current Report on Form 8-K filed on September 17, 2014 (Commission File No. 1-2691)).
~~4.33~~4.10			Revolving Credit Agreement (2014-1A), dated as of September 16, 2014, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2014-1A, as Borrower, and Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4.14 to American’s Current Report on Form 8-K filed on September 17, 2014 (Commission File No. 1-2691)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.34~~4.11	Revolving Credit Agreement (2014-1B), dated as of September 16, 2014, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2014-1B, as Borrower, and Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4.15 to American’s Current Report on Form 8-K filed on September 17, 2014 (Commission File No. 1-2691)).
~~4.35~~4.12		Indenture, dated as of September 25, 2014, among American Airlines Group Inc., the Guarantors (as defined therein) and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to AAG’s Current Report on Form 8-K filed on September 26, 2014 (Commission File No. 1-8400)).
~~4.36~~	First Supplemental Indenture, dated as of December 30, 2015, among American Airlines Group Inc., American Airlines, Inc. and Wilmington Trust, National Association, as trustee, to the Indenture dated as of September 25, 2014 (incorporated by reference to Exhibit 4.2 to AAG’s Current Report on Form 8-K filed on December 31, 2015 (Commission File No. 1-8400)).
~~4.37~~	Indenture, dated as of March 5, 2015, among American Airlines Group Inc., the Guarantors (as defined therein) and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to AAG’s Current Report on Form 8-K filed on March 12, 2015 (Commission File No. 1-8400)).
~~4.38~~	~~Form of 6.125% Senior Notes due 2018 (incorporated by reference to Exhibit A to Exhibit 4.2 to US Airways Group’s Current Report on Form 8-K filed on May 24, 2013 (Commission File No. 1-8444)).~~
~~4.39~~	~~Form of 5.50% Senior Notes due 2019 (incorporated by reference to Exhibit A to Exhibit 4.1 to AAG’s Current Report on Form 8-K filed on September 26, 2014 (Commission File No. 1-8400)).~~
~~4.40~~	~~Form of 4.625% Senior Notes due 2020 (incorporated by reference to Exhibit A to Exhibit 4.1 to AAG’s Current Report on Form 8-K filed on March 12, 2015 (Commission File No. 1-8400)).~~
~~4.41~~	First Supplemental Indenture, dated as of December 30, 2015, among American Airlines Group Inc., American Airlines, Inc. and Wilmington Trust, National Association, as trustee, to the Indenture dated as of March 5, 2015 (incorporated by reference to Exhibit 4.3 to AAG’s Current Report on Form 8-K filed on December 31, 2015 (Commission File No. 1-8400)).
~~4.42~~4.13		Trust Supplement No. 2015-1A, dated as of March 16, 2015, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on March 16, 2015 (Commission File No. 1-2691)).
~~4.43~~4.14		Trust Supplement No. 2015-1B, dated as of March 16, 2015, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on March 16, 2015 (Commission File No. 1-2691)).
~~4.44~~4.15		Intercreditor Agreement (2015-1), dated as of March 16, 2015, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2015-1A and as Trustee of the American Airlines Pass Through Trust 2015-1B, Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on March 16, 2015 (Commission File No. 1-2691)).
~~4.45~~4.16		Note Purchase Agreement, dated as of March 16, 2015, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.9 to American’s Current Report on Form 8-K filed on March 16, 2015 (Commission File No. 1-2691)).
~~4.46~~4.17		Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit 4.10 to American’s Current Report on Form 8-K filed on March 16, 2015 (Commission File No. 1-2691)).
~~4.47~~4.18		Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit 4.11 to American’s Current Report on Form 8-K filed on March 16, 2015 (Commission File No. 1-2691)).
~~4.48~~4.19		Form of Pass Through Trust Certificate, Series 2015-1A (incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on March 16, 2015 (Commission File No. 1-2691)).
~~4.49~~4.20		Form of Pass Through Trust Certificate, Series 2015-1B (incorporated by reference to Exhibit A to Exhibit 4.3 to American’s Current Report on Form 8-K filed on March 16, 2015 (Commission File No. 1-2691)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.50~~4.21	Revolving Credit Agreement (2015-1A), dated as of March 16, 2015, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2015-1A, as Borrower, and Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4.14 to American’s Current Report on Form 8-K filed on March 16, 2015 (Commission File No. 1-2691)).

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~~4.51~~ Exhibit Number			Description
4.22			Revolving Credit Agreement (2015-1B), dated as of March 16, 2015, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2015-1B, as Borrower, and Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4.15 to American’s Current Report on Form 8-K filed on March 16, 2015 (Commission File No. 1-2691)).
~~4.52~~4.23			Trust Supplement No. 2015-2AA, dated as of September 24, 2015, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).
~~4.53~~4.24			Trust Supplement No. 2015-2A, dated as of September 24, 2015, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).
~~4.54~~4.25			Trust Supplement No. 2015-2B, dated as of September 24, 2015, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).
~~4.55~~4.26			Intercreditor Agreement (2015-2), dated as of September 24, 2015, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2015-2AA, as Trustee of the American Airlines Pass Through Trust 2015-2A and as Trustee of the American Airlines Pass Through Trust 2015-2B, Commonwealth Bank of Australia, New York Branch, as Class AA Liquidity Provider, Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.5 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).
~~4.56~~4.27			Note Purchase Agreement, dated as of September 24, 2015, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.6 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).
~~4.57~~4.28			Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit B to Exhibit 4.6 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).
~~4.58~~4.29			Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4.6 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).
~~4.59~~4.30			Form of Pass Through Trust Certificate, Series 2015-2AA (incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).
~~4.60~~4.31			Form of Pass Through Trust Certificate, Series 2015-2A (incorporated by reference to Exhibit A to Exhibit 4.3 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).
~~4.61~~4.32			Form of Pass Through Trust Certificate, Series 2015-2B (incorporated by reference to Exhibit A to Exhibit 4.4 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).
~~4.62~~4.33			Revolving Credit Agreement (2015-2AA), dated as of September 24, 2015, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2015-2AA, as Borrower, and Commonwealth Bank of Australia, New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4.12 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).
~~4.63~~4.34			Revolving Credit Agreement (2015-2A), dated as of September 24, 2015, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2015-2A, as Borrower, and Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4.13 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.64~~4.35	Revolving Credit Agreement (2015-2B), dated as of September 24, 2015, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2015-2B, as Borrower, and Crédit Agricole Corporate and Investment Bank, acting through its New York Branch, as Liquidity Provider (incorporated by reference to Exhibit 4.14 to American’s Current Report on Form 8-K filed on September 24, 2015 (Commission File No. 1-2691)).

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Table of Contents


~~4.65~~ Exhibit Number			Description
4.36			Note Purchase Agreement, dated as of April 24, 2013, among American Airlines, Inc. (as successor in interest to US Airways, Inc.) Wilmington Trust Company, as Pass Through Trustee, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.12 to US Airways Group’s Current Report on Form 8-K filed on April 25, 2013 (Commission File No. 1-8444)).
~~4.66~~4.37			Assumption Agreement, dated as of December 30, 2015, by American Airlines, Inc. for the benefit of Wilmington Trust Company, as pass through trustee, subordination agent, and paying agent, and Wilmington Trust, National Association, as escrow agent, in each case, under the Note Purchase Agreement, dated as of April 24, 2013, among American Airlines, Inc. (as successor in interest to US Airways, Inc.), Wilmington Trust Company, Wilmington Trust, National Association and Wilmington Trust Company (incorporated by reference to Exhibit 10.2 to AAG’s Current Report on Form 8-K filed on December 31, 2015 (Commission File No. 1-8400)).
~~4.67~~4.38			Form of Participation Agreement between American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, and Wilmington Trust Company, as Indenture Trustee, Subordination Agent and Pass Through Trustee (incorporated by reference to Exhibit 4.13 to US Airways Group’s Current Report on Form 8-K filed on April 25, 2013 (Commission File No. 1-8444)).
~~4.68~~4.39			Form of Trust Indenture and Security Agreement among American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, Wilmington Trust, National Association, as Securities Intermediary, and Wilmington Trust Company, as Indenture Trustee (incorporated by reference to Exhibit 4.14 to US Airways Group’s Current Report on Form 8-K filed on April 25, 2013 (Commission File No. 1-8444)).
~~4.69~~4.40			Form of Amendment No. 1 to Participation Agreement between American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, and Wilmington Trust Company, as Indenture Trustee, Subordination Agent and Pass Through Trustee (Exhibit A to Note Purchase Agreement) (incorporated by reference to Exhibit 4.8 to US Airways Group’s Current Report on Form 8-K filed on June 6, 2013 (Commission File No. 1-8444)).
~~4.70~~4.41			Form of Amendment No. 1 to Trust Indenture and Security Agreement among American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, Wilmington Trust, National Association, as Securities Intermediary, and Wilmington Trust Company, as Indenture Trustee (Exhibit B to Note Purchase Agreement) (incorporated by reference to Exhibit 4.9 to US Airways Group’s Current Report on Form 8-K filed on June 6, 2013 (Commission File No. 1-8444)).
~~4.71~~4.42			Amended and Restated Guarantee, dated as of March 31, 2014, from American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.) relating to obligations of US Airways under the equipment notes relating to its Series 2013-1 Pass Through Certificates (incorporated by reference to Exhibit 10.5 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (Commission File No. 1-8400)).
~~4.72~~4.43			Form of Participation Agreement between American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, and Wilmington Trust Company, as Indenture Trustee, Subordination Agent and Pass Through Trustee (Schedule I to Amendment No. 1 to Note Purchase Agreement (2012-2)) (incorporated by reference to Exhibit 4.10 to US Airways Group’s Current Report on Form 8-K filed on June 6, 2013 (Commission File No. 1-8444)).
~~4.73~~4.44			Form of Trust Indenture and Security Agreement among American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, Wilmington Trust, National Association, as Securities Intermediary, and Wilmington Trust Company, as Indenture Trustee (Schedule II to Amendment No. 1 to Note Purchase Agreement (2012-2)) (incorporated by reference to Exhibit 4.11 to US Airways Group’s Current Report on Form 8-K filed on June 6, 2013 (Commission File No. 1-8444)).
~~4.74~~4.45			Form of Participation Agreement (Participation Agreement between American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, and Wilmington Trust Company, as Indenture Trustee and Subordination Agent) (incorporated by reference to Exhibit 4.14 to US Airways Group’s Current Report on Form 8-K filed on December 23, 2010 (Commission File No. 1-8444)).
~~4.75~~4.46			Form of Indenture (Trust Indenture and Security Agreement between American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, and Wilmington Trust Company, as Indenture Trustee) (incorporated by reference to Exhibit 4.15 to US Airways Group’s Current Report on Form 8-K filed on December 23, 2010 (Commission File No. 1-8444)).
~~4.76~~4.47			Amended and Restated Guarantee, dated as of March 31, 2014, from American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.) relating to obligations of US Airways under the equipment notes relating to its Series 2010-1 Pass Through Certificates (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (Commission File No. 1-8400)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.77~~4.48	Form of Participation Agreement (Participation Agreement between American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, and Wilmington Trust Company, as Indenture Trustee and Subordination Agent) (incorporated by reference to Exhibit 4.18 to US Airways Group’s Current Report on Form 8-K filed on July 1, 2011 (Commission File No. 1-08444)).

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Table of Contents


~~4.78~~ Exhibit Number			Description
4.49			Form of Indenture (Trust Indenture and Security Agreement between American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, and Wilmington Trust Company, as Indenture Trustee) (incorporated by reference to Exhibit 4.19 to US Airways Group’s Current Report on Form 8-K filed on July 1, 2011 (Commission File No. 1-08444)).
~~4.79~~4.50			Guarantee, dated as of June 28, 2011, from American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.) (incorporated by reference to Exhibit 4.23 to US Airways Group’s Current Report on Form 8-K filed on July 1, 2011 (Commission File No. 1-08444)).
~~4.80~~4.51			Amended and Restated Guarantee, dated as of March 31, 2014, from American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.) relating to obligations of US Airways under the equipment notes relating to its Series 2011-1 Pass Through Certificates (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (Commission File No. 1-8400)).
~~4.81~~4.52			Form of Participation Agreement (Participation Agreement between American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, and Wilmington Trust Company, as Indenture Trustee and Subordination Agent) (incorporated by reference to Exhibit 4.18 to US Airways Group’s Current Report on Form 8-K filed on May 16, 2012 (Commission File No. 1-08444)).
~~4.82~~4.53			Form of Indenture (Trust Indenture and Security Agreement between American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, and Wilmington Trust Company, as Indenture Trustee) (incorporated by reference to Exhibit 4.19 to US Airways Group’s Current Report on Form 8-K filed on May 16, 2012 (Commission File No. 1-08444)).
~~4.83~~4.54			Amended and Restated Guarantee, dated as of March 31, 2014, from American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.) relating to obligations of US Airways under the equipment notes relating to its Series 2012-1 Pass Through Certificates (incorporated by reference to Exhibit 10.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (Commission File No. 1-8400)).
~~4.84~~4.55			Form of Participation Agreement (Participation Agreement between American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, and Wilmington Trust Company, as Indenture Trustee and Subordination Agent) (incorporated by reference to Exhibit B to Exhibit 4.12 to US Airways Group’s Current Report on Form 8-K filed on December 13, 2012 (Commission File No. 1-08444)).
~~4.85~~4.56			Form of Indenture (Trust Indenture and Security Agreement between American Airlines, Inc. (as successor in interest to US Airways, Inc.), as Owner, and Wilmington Trust Company, as Indenture Trustee) (incorporated by reference to Exhibit C to Exhibit 4.12 to US Airways Group’s Current Report on Form 8-K filed on December 13, 2012 (Commission File No. 1-08444)).
~~4.86~~4.57			Amended and Restated Guarantee, dated as of March 31, 2014, from American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.) relating to obligations of US Airways under the equipment notes relating to its Series 2012-2 Pass Through Certificates (incorporated by reference to Exhibit 10.4 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (Commission File No. 1-8400)).
~~4.87~~4.58			Form of Assumption Agreement, dated as of December 30, 2015, by American Airlines, Inc. for the benefit of Wilmington Trust Company, as Indenture Trustee, to (i) each Participation Agreement between, among others, American Airlines, Inc. (as successor in interest to US Airways, Inc.) and Wilmington Trust Company, as Indenture Trustee, entered into pursuant to the 2010-1, 2011-1, 2012-1, 2012-2 and 2013-1 EETC note purchase agreements and (ii) each Trust Indenture and Security Agreement, between, among others, American Airlines, Inc. (as successor in interest to US Airways, Inc.), and Wilmington Trust Company, as Indenture Trustee entered into pursuant to the 2010-1, 2011-1, 2012-1, 2012-2 and 2013-1 EETC note purchase agreements (incorporated by reference to Exhibit 10.3 to AAG’s Current Report on Form 8-K filed on December 31, 2015 (Commission File No. 1-8400)).
~~4.88~~4.59			Trust Supplement No. 2016-1AA, dated as of January 19, 2016, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.89~~4.60			Trust Supplement No. 2016-1A, dated as of January 19, 2016, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.90~~4.61			Trust Supplement No. 2016-1B, dated as of January 19, 2016, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).

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Exhibit Number		Description
~~4.91~~4.62		Intercreditor Agreement (2016-1), dated as of January 19, 2016, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2016-1AA, as Trustee of the American Airlines Pass Through Trust 2016-1A and as Trustee of the American Airlines Pass Through Trust 2016-1B, KfW IPEX-Bank GmbH, as Class AA Liquidity Provider, Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to exhibit 4.5 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.92~~4.63		Note Purchase Agreement, dated as of January 19, 2016, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.6 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.93~~4.64		Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit B to Exhibit 4.6 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.94~~4.65		Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4.6 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.95~~4.66		Form of Pass Through Trust Certificate, Series 2016-1AA (incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.96~~4.67		Form of Pass Through Trust Certificate, Series 2016-1A (incorporated by reference to Exhibit A to Exhibit 4.3 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.97~~4.68		Form of Pass Through Trust Certificate, Series 2016-1B (incorporated by reference to Exhibit A to Exhibit 4.4 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.98~~4.69		Revolving Credit Agreement (2016-1AA), dated as of January 19, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016-1AA, as Borrower, and KfW IPEX-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4.12 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.99~~4.70		Revolving Credit Agreement (2016-1A), dated as of January 19, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016-1A, as Borrower, and KfW IPEX-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4.13 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.100~~4.71		Revolving Credit Agreement (2016-1B), dated as of January 19, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016-1B, as Borrower, and KfW IPEX-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4.14 to American’s Current Report on Form 8-K filed on January 21, 2016 (Commission File No. 1-2691)).
~~4.101~~4.72		Trust Supplement No. 2016-2AA, dated as of May 16, 2016, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.102~~4.73		Trust Supplement No. 2016-2A, dated as of May 16, 2016, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.103~~4.74		Intercreditor Agreement (2016-2), dated as of May 16, 2016, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2016-2AA and as Trustee of the American Airlines Pass Through Trust 2016-2A, KfW IPEX-Bank GmbH, as Class AA Liquidity Provider and Class A Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.104~~4.75		Deposit Agreement (Class AA), dated as of May 16, 2016, between Wilmington Trust, National Association, as Escrow Agent, and Citibank, N.A., as Depositary (incorporated by reference to Exhibit 4.5 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.105~~	Deposit Agreement (Class A), dated as of May 16, 2016, between Wilmington Trust, National Association, as Escrow Agent, and Citibank, N.A., as Depositary (incorporated by reference to Exhibit 4.6 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.106~~	Escrow and Paying Agent Agreement (Class AA), dated as of May 16, 2016, among Wilmington Trust, National Association, as Escrow Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2016-2AA, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.7 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.107~~	Escrow and Paying Agent Agreement (Class A), dated as of May 16, 2016, among Wilmington Trust, National Association, as Escrow Agent, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2016-2A, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.8 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.108~~	Note Purchase Agreement, dated as of May 16, 2016, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.9 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.109~~4.76		Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit B to Exhibit 4.9 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).

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~~4.110~~ Exhibit Number		Description
4.77		Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4.9 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.111~~4.78		Form of Pass Through Trust Certificate, Series 2016-2AA (incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.112~~4.79		Form of Pass Through Trust Certificate, Series 2016-2A (incorporated by reference to Exhibit A to Exhibit 4.3 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.113~~4.80		Revolving Credit Agreement (2016-2AA), dated as of May 16, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016-2AA, as Borrower, and KfW IPEX-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4.14 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.114~~4.81		Revolving Credit Agreement (2016-2A), dated as of May 16, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016-2A, as Borrower, and KfW IPEX-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4.15 to American’s Current Report on Form 8-K filed on May 17, 2016 (Commission File No. 1-2691)).
~~4.115~~4.82		Trust Supplement No. 2016-2B, dated as of July 8, 2016, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on July 12, 2016 (Commission File No. 1-2691)).
~~4.116~~4.83		Amended and Restated Intercreditor Agreement (2016-2), dated as of July 8, 2016, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2016-2AA, as Trustee of the American Airlines Pass Through Trust 2016-2A and as Trustee of the American Airlines Pass Through Trust 2016-2B, KfW IPEX-Bank GmbH, as Class AA Liquidity Provider, Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on July 12, 2016 (Commission File No. 1-2691)).
~~4.117~~4.84		Deposit Agreement (Class B), dated as of July 8, 2016, between Wilmington Trust, National Association, as Escrow Agent, and Citibank, N.A., as Depositary (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on July 12, 2016 (Commission File No. 1-2691)).
~~4.118~~	Escrow and Paying Agent Agreement (Class B), dated as of July 8, 2016, among Wilmington Trust, National Association, as Escrow Agent, Citigroup Global Markets Inc., as the initial purchaser, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2016-2B, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.5 to American’s Current Report on Form 8-K filed on July 12, 2016 (Commission File No. 1-2691)).
~~4.119~~	Amended and Restated Note Purchase Agreement, dated as of July 8, 2016, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.6 to American’s Current Report on Form 8-K filed on July 12, 2016 (Commission File No. 1-2691)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.120~~4.85	Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) ~~(included in~~(incorporated by reference to Exhibit B to Exhibit 4.6 to American’s Current Report on Form 8-K filed on July 12, 2016 (Commission File No. 1-2691)).
~~4.121~~4.86		Form of First Amendment to Participation Agreement (First Amendment to Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) ~~(included in~~(incorporated by reference to Exhibit D to Exhibit 4.6 to American’s Current Report on Form 8-K filed on July 12, 2016 (Commission File No. 1-2691)).
~~4.122~~4.87		Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) ~~(included in~~(incorporated by reference to Exhibit C to Exhibit 4.6 to American’s Current Report on Form 8-K filed on July 12, 2016 (Commission File No. 1-2691)).
~~4.123~~4.88		Form of First Amendment to Indenture and Security Agreement (First Amendment to Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) ~~(included in~~(incorporated by reference to Exhibit E to Exhibit 4.6 to American’s Current Report on Form 8-K filed on July 12, 2016 (Commission File No. 1-2691)).
~~4.124~~4.89		Form of Pass Through Trust Certificate, Series 2016-2B ~~(included in~~(incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on July 12, 2016 (Commission File No. 1-2691)).
~~4.125~~4.90		Revolving Credit Agreement (2016-2B), dated as of July 8, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016-2B, as Borrower, and KfW IPEX Bank GmbH, as ~~liquidity~~Liquidity Provider (incorporated by reference to Exhibit 4.12 to American’s Current Report on Form 8-K filed on July 12, 2016 (Commission File No. 1-2691)).
~~4.126~~4.91		Trust Supplement No. 2016-3AA, dated as of October 3, 2016, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).

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~~4.127~~ Exhibit Number		Description
4.92		Trust Supplement No. 2016-3A, dated as of October 3, 2016, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.128~~4.93		Intercreditor Agreement (2016-3), dated as of October 3, 2016, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2016-3AA and as Trustee of the American Airlines Pass Through Trust 2016-3A, KfW IPEX-Bank GmbH, as Class AA Liquidity Provider and Class A Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.129~~4.94		Amended and Restated Intercreditor Agreement (2016-3), dated as of October 4, 2017, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2016-3AA, as Trustee of the American Airlines Pass Through Trust 2016-3A and as Trustee of the American Airlines Pass Through Trust 2016-3B, KfW IPEX-Bank GmbH, as Class AA Liquidity Provider, Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on October 5, 2017 (Commission File No. 1-2691)).
~~4.130~~4.95		Deposit Agreement (Class AA), dated as of October 3, 2016, between Wilmington Trust, National Association, as Escrow Agent, and Citibank, N.A., as Depositary (incorporated by reference to Exhibit 4.5 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.131~~	Deposit Agreement (Class A), dated as of October 3, 2016, between Wilmington Trust, National Association, as Escrow Agent, and Citibank, N.A., as Depositary (incorporated by reference to Exhibit 4.6 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.132~~	Escrow and Paying Agent Agreement (Class AA), dated as of October 3, 2016, among Wilmington Trust, National Association, as Escrow Agent, Morgan Stanley & Co. LLC and Goldman, Sachs & Co., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2016-3AA, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.7 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.133~~	Escrow and Paying Agent Agreement (Class A), dated as of October 3, 2016, among Wilmington Trust, National Association, as Escrow Agent, Morgan Stanley & Co. LLC and Goldman, Sachs & Co., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2016-3A, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.8 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.134~~	Note Purchase Agreement, dated as of October 3, 2016, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.9 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.135~~4.96		Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) ~~(included in Exhibit B to Exhibit 4.9)~~ (incorporated by reference to Exhibit B to Exhibit 4.9 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.136~~4.97		Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) ~~(included in Exhibit C to Exhibit 4.9)~~ (incorporated by reference to Exhibit C to Exhibit 4.9 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.137~~4.98		Form of Pass Through Trust Certificate, Series 2016-3AA (incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.138~~4.99		Form of Pass Through Trust Certificate, Series 2016-3A (incorporated by reference to Exhibit A to Exhibit 4.3 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.139~~4.100		Revolving Credit Agreement (2016-3AA), dated as of October 3, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016-3AA, as Borrower, and KfW IPEX-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4.14 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.140~~4.101		Revolving Credit Agreement (2016-3A), dated as of October 3, 2016, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016-3A, as Borrower, and KfW IPEX-Bank GmbH, as Liquidity Provider (incorporated by reference to Exhibit 4.15 to American’s Current Report on Form 8-K filed on October 4, 2016 (Commission File No. 1-2691)).
~~4.141~~4.102		Trust Supplement No. 2017-1AA, dated as of January 13, 2017, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.142~~4.103		Trust Supplement No. 2017-1A, dated as of January 13, 2017, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014, (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.143~~4.104		Trust Supplement No. 2017-1B, dated as of January 13, 2017, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.144~~4.105		Intercreditor Agreement (2017-1), dated as of January 13, 2017, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2017-1AA, as Trustee of the American Airlines Pass Through Trust 2017-1A and as Trustee of the American Airlines Pass Through Trust 2017-1B, Citibank N.A., as Class AA Liquidity Provider, Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.5 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.145~~	Deposit Agreement (Class AA), dated as of January 13, 2017, between Wilmington Trust, National Association, as Escrow Agent, and Citibank, N.A., as Depositary (incorporated by reference to Exhibit 4.6 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.146~~	Deposit Agreement (Class A), dated as of January 13, 2017, between Wilmington Trust, National Association, as Escrow Agent, and Citibank, N.A., as Depositary (incorporated by reference to Exhibit 4.7 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.147~~	Deposit Agreement (Class B), dated as of January 13, 2017, between Wilmington Trust, National Association, as Escrow Agent, and Citibank, N.A., as Depositary (incorporated by reference to Exhibit 4.8 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.148~~	Escrow and Paying Agent Agreement (Class AA), dated as of January 13, 2017, among Wilmington Trust, National Association, as Escrow Agent, Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2017-1AA, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.9 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).

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Exhibit Number		Description
~~4.149~~4.106		Escrow and Paying Agent Agreement (Class A), dated as of January 13, 2017, among Wilmington Trust, National Association, as Escrow Agent, Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2017-1A, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.10 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.150~~	Escrow and Paying Agent Agreement (Class B), dated as of January 13, 2017, among Wilmington Trust, National Association, as Escrow Agent, Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2017-1A, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.11 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.151~~	Note Purchase Agreement, dated as of January 13, 2017, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.12 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.152~~4.107		Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit B to Exhibit 4.12 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.153~~4.108		Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4.12 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.154~~4.109		Form of Pass Through Trust Certificate, Series 2017-1AA (incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.155~~4.110		Form of Pass Through Trust Certificate, Series 2017-1A (incorporated by reference to Exhibit A to Exhibit 4.3 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.156~~4.111		Form of Pass Through Trust Certificate, Series 2017-1B (incorporated by reference to Exhibit A to Exhibit 4.4 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.157~~4.112		Revolving Credit Agreement (2017-1AA), dated as of January 13, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2017-1AA, as Borrower, and Citibank N.A., as Liquidity Provider (incorporated by reference to Exhibit 4.18 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.158~~4.113		Revolving Credit Agreement (2017-1A), dated as of January 13, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2017-1A, as Borrower, and Citibank N.A., as Liquidity Provider (incorporated by reference to Exhibit 4.19 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.159~~4.114		Revolving Credit Agreement (2017-1B), dated as of January 13, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2017-1B, as Borrower, and Citibank N.A., as Liquidity Provider (incorporated by reference to Exhibit 4.20 to American’s Current Report on Form 8-K filed on January 17, 2017 (Commission File No. 1-02691)).
~~4.160~~4.115		Acknowledgment and Agreement (2017-1), dated as of March 31, 2017, by and among American Airlines Inc., Citibank, N.A., as initial Liquidity Provider, National Australia Bank Limited, as Replacement Liquidity Provider, and Wilmington Trust Company, as Subordination Agent and trustee (incorporated by reference to Exhibit 4.20 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (Commission File No. 1-8400)).
~~4.161~~4.116		Revolving Credit Agreement (2017-1AA), dated as of March 31, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2017-1AA, as Borrower, and National Australia Bank Limited, as Liquidity Provider (incorporated by reference to Exhibit 4.21 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (Commission File No. 1-8400)).
~~4.162~~4.117		Revolving Credit Agreement (2017-1A), dated as of March 31, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2017-1A, as Borrower, and National Australia Bank Limited, as Liquidity Provider (incorporated by reference to Exhibit 4.22 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (Commission File No. 1-8400)).
~~4.163~~4.118		Revolving Credit Agreement (2017-1B), dated as of March 31, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2017-1B, as Borrower, and National Australia Bank Limited, as Liquidity Provider (incorporated by reference to Exhibit 4.23 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (Commission File No. 1-8400)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.164~~4.119	Form of American Airlines Group Inc. Indenture for Debt Securities (incorporated by reference to Exhibit 4.1 to AAG’s Registration Statement on Form S-3ASR filed on February 22, 2017 (Commission File No. 333-216167).
~~4.165~~4.120		Form of American Airlines, Inc. Indenture for Debt Securities (incorporated by reference to Exhibit 4.2 to AAG’s Registration Statement on Form S-3ASR filed on February 22, 2017 (Commission File No. 333-216167).
~~4.166~~4.121		Trust Supplement No. 2017-2AA, dated as of August 14, 2017, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).

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~~4.167~~ Exhibit Number		Description
4.122		Trust Supplement No. 2017-2A, dated as of August 14, 2017, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.168~~4.123		Intercreditor Agreement (2017-2), dated as of August 14, 2017, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2017-2AA and as Trustee of the American Airlines Pass Through Trust 2017-2A, National Australia Bank Limited, as Class AA Liquidity Provider and Class A Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.169~~4.124		Deposit Agreement (Class AA), dated as of August 14, 2017, between Wilmington Trust, National Association, as Escrow Agent, and Natixis S.A., acting through its New York Branch, as Depositary (incorporated by reference to Exhibit 4.5 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.170~~	Deposit Agreement (Class A), dated as of August 14, 2017, between Wilmington Trust, National Association, as Escrow Agent, and Natixis S.A., acting through its New York Branch, as Depositary (incorporated by reference to Exhibit 4.6 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.171~~	Escrow and Paying Agent Agreement (Class AA), dated as of August 14, 2017, among Wilmington Trust, National Association, as Escrow Agent, Goldman Sachs & Co. LLC, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2017-2AA, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.7 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.172~~	Escrow and Paying Agent Agreement (Class A), dated as of August 14, 2017, among Wilmington Trust, National Association, as Escrow Agent, Goldman Sachs & Co. LLC, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2017-2A, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.8 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.173~~	Note Purchase Agreement, dated as of August 14, 2017, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.9 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.174~~4.125		Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit B to Exhibit 4.9 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.175~~4.126		Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4.9 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.176~~4.127		Form of Pass Through Trust Certificate, Series 2017-2AA (incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.177~~4.128		Form of Pass Through Trust Certificate, Series 2017-2A (incorporated by reference to Exhibit A to Exhibit 4.3 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.178~~4.129		Revolving Credit Agreement (2017-2AA), dated as of August 14, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2017-2AA, as Borrower, and National Australia Bank Limited, as Liquidity Provider (incorporated by reference to Exhibit 4.14 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.179~~4.130	Revolving Credit Agreement (2017-2A), dated as of August 14, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2017-2A, as Borrower, and National Australia Bank Limited, as Liquidity Provider (incorporated by reference to Exhibit 4.15 to American’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.180~~4.131		Trust Supplement No. 2016-3B, dated as of October 4, 2017, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on October 5, 2017 (Commission File No. 1-2691)).
~~4.181~~4.132		Amended and Restated Note Purchase Agreement, dated as of October 4, 2017, amending the Note Purchase Agreement, dated as of October 3, 2016, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on October 5, 2017 (Commission File No. 1-2691)).
~~4.182~~4.133		Form of First Amendment to Participation Agreement (First Amendment to Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit A to Exhibit 4.4 to American’s Current Report on Form 8-K filed on October 5, 2017 (Commission File No. 1-2691)).
~~4.183~~4.134		Form of First Amendment to Indenture and Security Agreement (First Amendment to Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit E to Exhibit 4.6 to American’s Current Report on Form 8-K filed on October 6, 2017 (Commission File No. 1-2691)).
~~4.184~~4.135		Form of First Amendment to Indenture and Security Agreement (First Amendment to Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit B to Exhibit 4.4 to American’s Current Report on Form 8-K filed on October 5, 2017 (Commission File No. 1-2691)).
~~4.185~~4.136		Form of Pass Through Trust Certificate, Series 2016-3B (incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on October 5, 2017 (Commission File No. 1-2691)).

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~~4.186~~ Exhibit Number		Description
4.137		Revolving Credit Agreement (2016-3B), dated as of October 4, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2016-3B, as Borrower, and KfW IPEX-Bank GmbH, as Liquidity Provider 3B (incorporated by reference to Exhibit 4.8 to American’s Current Report on Form 8-K filed on October 5, 2017 (Commission File No. 1-2691)).
~~4.187~~4.138		Trust Supplement No. 2017-2B, dated as of October 5, 2017, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on October 6, 2017 (Commission File No. 1-2691)).
~~4.188~~4.139		Amended and Restated Intercreditor Agreement (2017-2), dated as of October 5, 2017, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2017-2AA, as Trustee of the American Airlines Pass Through Trust 2017-2A and as Trustee of the American Airlines Pass Through Trust 2017-2B, National Australia Bank Limited, as Class AA Liquidity Provider, Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on October 6, 2017 (Commission File No. 1-2691)).
~~4.189~~4.140		Deposit Agreement (Class B), dated as of October 5, 2017, between Wilmington Trust, National Association, as Escrow Agent, and Natixis S.A., acting through its New York Branch, as Depositary (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on October 6, 2017 (Commission File No. 1-2691)).
~~4.190~~	Escrow and Paying Agent Agreement (Class B), dated as of October 5, 2017, among Wilmington Trust, National Association, as Escrow Agent, Deutsche Bank Securities Inc. and Credit Suisse Securities (USA) LLC, as the representatives of the underwriters named therein, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2017-2B, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.5 to American’s Current Report on Form 8-K filed on October 6, 2017 (Commission File No. 1-2691)).
~~4.191~~	Amended and Restated Note Purchase Agreement, dated as of October 5, 2017, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.6 to American’s Current Report on Form 8-K filed on October 6, 2017 (Commission File No. 1-2691)).



~~Exhibit~~ ~~Number~~	~~Description~~
~~4.192~~4.141	Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit B to Exhibit 4.6 to American’s Current Report on Form 8-K filed on October 6, 2017 (Commission File No. 1-2691)).
~~4.193~~4.142		Form of First Amendment to Participation Agreement (First Amendment to Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit D to Exhibit 4.6 to American’s Current Report on Form 8-K filed on October 6, 2017 (Commission File No. 1-2691)).
~~4.194~~4.143		Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4.6 to American’s Current Report on Form 8-K filed on October 6, 2017 (Commission File No. 1-2691)).
~~4.195~~4.144		Form of Pass Through Trust Certificate, Series 2017-2B (incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on October 6, 2017 (Commission File No. 1-2691)).
~~4.196~~4.145		Revolving Credit Agreement (2017-2B), dated as of October 5, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2017-2B, as Borrower, and National Australia Bank Limited, as Liquidity Provider (incorporated by reference to Exhibit 4.12 to American’s Current Report on Form 8-K filed on October 6, 2017 (Commission File No. 1-2691)).
~~10.1~~4.146		Trust Supplement No. 2012-2C(R), dated as of May 15, 2018, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on May 16, 2018 (Commission File No. 1-2691)).
4.147		Form of Amendment No. 2 to Intercreditor Agreement (2012-2C(R)) among Wilmington Trust Company, not in its individual capacity but solely as Trustee of the American Airlines, Inc. Pass Through Trust 2012-2C(R), American Airlines, Inc. and Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent and Trustee (incorporated by reference to Exhibit C to Exhibit 4.6 to American’s Current Report on Form 8-K filed on May 16, 2018 (Commission File No. 1-2691)).
4.148		Note Purchase Agreement, dated as of May 15, 2018, among American Airlines, Inc., Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee under the Class C(R) Pass Through Trust Agreement, as Subordination Agent and as Indenture Trustee, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.6 to American’s Current Report on Form 8-K filed on May 16, 2018 (Commission File No. 1- 2691)).
4.149		Form of Amendment to Participation Agreement (Amendment to Participation Agreement among American Airlines, Inc., Wilmington Trust Company, not in its individual capacity, but solely as Subordination Agent and as Indenture Trustee, and Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee under each of the Pass Through Trust Agreements) (incorporated by reference to Exhibit A to Exhibit 4.6 to American’s Current Report on Form 8-K filed on May 16, 2018 (Commission File No. 1- 2691)).

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Exhibit Number			Description
4.150			Form of Amendment to Trust Indenture and Security Agreement (Amendment to Trust Indenture and Security Agreement between American Airlines, Inc., Wilmington Trust Company, not in its individual capacity, but solely as Indenture Trustee, and Wilmington Trust, National Association, as Securities Intermediary) (incorporated by reference to Exhibit B to Exhibit 4.6 to American’s Current Report on Form 8-K filed on May 16, 2018 (Commission File No. 1-2691)).
4.151			Form of Pass Through Trust Certificate, Series 2012-2C(R) (incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on May 16, 2018 (Commission File No. 1-2691)).
4.152			Trust Supplement No. 2019-1AA (Aircraft EETC), dated as of August 15, 2019, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.153			Trust Supplement No. 2019-1A (Aircraft EETC), dated as of August 15, 2019, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.3 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.154			Trust Supplement No. 2019-1B (Aircraft EETC), dated as of August 15, 2019, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.4 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.155			Intercreditor Agreement (2019-1), dated as of August 15, 2019, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2019-1AA (Aircraft EETC), as Trustee of the American Airlines Pass Through Trust 2019-1A (Aircraft EETC) and as Trustee of the American Airlines Pass Through Trust 2019-1B (Aircraft EETC), National Australia Bank Limited, as Class AA Liquidity Provider, Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.5 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.156			Note Purchase Agreement, dated as of August 15, 2019, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.12 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.157			Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit B to Exhibit 4.12 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.158			Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4.12 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.159			Form of Pass Through Trust Certificate, Series 2019-1AA (Aircraft EETC) (incorporated by reference to Exhibit A to Exhibit 4.2 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.160			Form of Pass Through Trust Certificate, Series 2019-1A (Aircraft EETC) (incorporated by reference to Exhibit A to Exhibit 4.3 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.161			Form of Pass Through Trust Certificate, Series 2019-1B (Aircraft EETC) (incorporated by reference to Exhibit A to Exhibit 4.4 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.162			Revolving Credit Agreement (2019-1AA), dated as of August 15, 2019, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2019-1AA (Aircraft EETC), as Borrower, and National Australia Bank Limited, as Liquidity Provider (incorporated by reference to Exhibit 4.18 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.163			Revolving Credit Agreement (2019-1A), dated as of August 15, 2019, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2019-1A (Aircraft EETC), as Borrower, and National Australia Bank Limited, as Liquidity Provider (incorporated by reference to Exhibit 4.19 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).

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Exhibit Number			Description
4.164			Revolving Credit Agreement (2019-1B), dated as of August 15, 2019, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2019-1B (Aircraft EETC), as Borrower, and National Australia Bank Limited, as Liquidity Provider (incorporated by reference to Exhibit 4.20 to American’s Current Report on Form 8-K filed on August 15, 2019 (Commission File No. 1-02691)).
4.165			Indenture, dated as of May 20, 2019, by and among American Airlines Group Inc., the Guarantor (as defined therein) and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to AAG’s Current Report on Form 8-K filed on May 21, 2019 (Commission File No. 1-8400)).
4.166			Form of 5.000% Senior Notes due 2022 (incorporated by reference to Exhibit A to Exhibit 4.1 to AAG’s Current Report on Form 8-K filed on May 21, 2019 (Commission File No. 1-8400)).
4.167			Indenture, dated as of February 25, 2020, by and among American Airlines Group Inc., the Guarantor (as defined therein) and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to AAG's Current Report on Form 8-K filed on February 26, 2020 (Commission File No. 1-8400)).
4.168			Form of 3.75% Senior Notes due 2025 (incorporated by reference to Exhibit A to Exhibit 4.1 to AAG's Current Report on Form 8-K filed on February 26, 2020 (Commission File No. 1-8400)).
4.169			Indenture, dated as of June 25, 2020, by and between American Airlines Group Inc. and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to AAG’s Current Report on Form 8-K filed on June 25, 2020 (Commission File No. 1-8400)).
4.170			First Supplemental Indenture, dated as of June 25, 2020, by and among American Airlines Group Inc., American Airlines, Inc. and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.2 to AAG’s Current Report on Form 8-K filed on June 25, 2020 (Commission File No. 1-8400)).
4.171			Form of 6.50% Convertible Senior Notes due 2025 (incorporated by reference to Exhibit A to Exhibit 4.2 to AAG’s Current Report on Form 8-K filed on June 25, 2020 (Commission File No. 1-8400)).
4.172			Indenture, dated as of June 30, 2020, by and among American Airlines, Inc., American Airlines Group, Inc. and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to AAG’s Current Report on Form 8-K filed on July 2, 2020 (Commission File No. 1-8400)).
4.173			Form of 11.75% Senior Notes due 2025 (incorporated by reference to Exhibit A to Exhibit 4.1 to AAG’s Current Report on Form 8-K filed on July 2, 2020 (Commission File Number 1-8400)).
4.174			Indenture (IP Notes), dated as of September 25, 2020, by and among American Airlines, Inc., American Airlines Group Inc. and Wilmington Trust, National Association, as trustee and as collateral trustee (incorporated by reference to Exhibit 4.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (Commission File No. 1-8400)).#
4.175			Form of 10.75%/12.00% PIK Senior Secured IP Notes due 2026 (incorporated by reference to Exhibit A to Exhibit 4.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (Commission File No. 1-8400)).
4.176			Indenture (LGA/DCA Notes), dated as of September 25, 2020, by and among American Airlines, Inc., American Airlines Group Inc. and Wilmington Trust, National Association, as trustee and as collateral trustee (incorporated by reference to Exhibit 4.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (Commission File No. 1-8400)).#
4.177			Form of 10.75%/12.00% PIK Senior Secured Notes due 2026 (incorporated by reference to Exhibit A to Exhibit 4.4 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (Commission File No. 1-8400)).
4.178			Warrant Agreement, dated as of April 20, 2020, between American Airlines Group, Inc. and the United States Department of the Treasury (incorporated by reference to Exhibit 4.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (Commission File No. 1-8400)).
4.179			Form of PSP1 Warrant (incorporated by reference to Annex B to Exhibit 4.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (Commission File No. 1-8400)).
4.180			Warrant Agreement, dated as of September 25, 2020, between American Airlines Group, Inc. and the United States Department of the Treasury (incorporated by reference to Exhibit 4.5 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (Commission File No. 1-8400)).
4.181			Form of Treasury Loan Warrant (incorporated by reference to Annex B to Exhibit 4.5 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (Commission File No. 1-8400)).
4.182			Warrant Agreement, dated as of January 15, 2021, between American Airlines Group, Inc. and the United States Department of the Treasury.
4.183			Form of PSP2 Warrant (incorporated by reference to Annex B to Exhibit 4.182 ).
10.1			Payroll Support Program Agreement, dated as of April 20, 2020, between American Airlines, Inc. and the United States Department of the Treasury (incorporated by reference to Exhibit 10.5 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (Commission File No. 1-8400)).

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Exhibit Number			Description
10.2			Promissory Note, dated as of April 20, 2020, issued by American Airlines Group Inc. in the name of the United States Department of the Treasury and guaranteed by American Airlines, Inc., Envoy Air Inc., Piedmont Airlines, Inc. and PSA Airlines, Inc. (incorporated by reference to Exhibit 10.5 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (Commission File No. 1-8400)).
10.3			Payroll Support Program Extension Agreement, dated as of January 15, 2021, between American Airlines, Inc. and the United States Department of the Treasury.
10.4			Promissory Note, dated as of January 15, 2021, issued by American Airlines Group Inc. in the name of the United States Department of the Treasury and guaranteed by American Airlines, Inc., Envoy Air Inc., Piedmont Airlines, Inc. and PSA Airlines, Inc.
10.5			Loan and Guarantee Agreement, dated as of September 25, 2020, among American Airlines, Inc., American Airlines Group Inc., the other guarantors party thereto from time to time, the United States Department of the Treasury and the Bank of New York Mellon, as administrative and collateral agent (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (Commission File No. 1-8400).**
10.6			Restatement Agreement, dated as of October 21, 2020, to Loan and Guarantee Agreement, dated as of September 25, 2020, among American Airlines, Inc., American Airlines Group Inc., the other guarantors party thereto from time to time, the United States Department of the Treasury and the Bank of New York Mellon, as administrative and collateral agent.**
10.7			Letter Agreement, dated as of January 15, 2021, to Loan and Guarantee Agreement, dated as of September 25, 2020, among American Airlines, Inc., American Airlines Group Inc., the other guarantors party thereto from time to time, the United States Department of the Treasury and the Bank of New York Mellon, as administrative and collateral agent.
10.8			Amended and Restated Credit and Guaranty Agreement, dated as of December 15, 2016, amending the Loan Agreement, dated as of May 23, 2013, among American Airlines, Inc. (as successor in interest to US Airways, Inc., as borrower), as the borrower, American Airlines Group Inc., as parent and guarantor (as successor in interest to US Airways Group, Inc., as parent and guarantor), the lenders from time to time party thereto, Citibank N.A., as administrative agent and collateral agent (as successor in interest to Citicorp North America Inc., as administrative agent and collateral agent), and certain other parties thereto. (incorporated by reference to Exhibit 10.1 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2016 (Commission File No. 1-8400)).
~~10.2~~10.9			First Amendment to Amended and Restated Credit and Guaranty Agreement, dated as of November 14, 2017, amending the Amended and Restated Credit and Guaranty Agreement, dated as of December 15, 2016, amending the Loan Agreement, dated as of May 23, 2013, among American Airlines, Inc. (as successor in interest to US Airways, Inc., as borrower), as the borrower, American Airlines Group Inc., as parent and guarantor (as successor in interest to US Airways Group, Inc., as parent and guarantor), the lenders from time to time party thereto, Citibank N.A., as administrative agent and collateral agent (as successor in interest to Citicorp North America Inc., as administrative agent and collateral agent), and certain other parties ~~thereto.~~thereto (incorporated by reference to Exhibit 10.2 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2017 (Commission File No. 1-8400)).
~~10.3~~10.10			First Amendment and Restatement Agreement, dated as of April 20, 2015, in relation to the Credit and Guaranty Agreement, dated as of October 10, 2014 (as amended), among American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.), American Airlines, Inc. (as successor in interest to US Airways, Inc.), the Revolving Lenders (as defined therein) party thereto, the 2015 Term Loan Lenders (as defined therein) party thereto and Citibank N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.4 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (Commission File No. 1-8400)).
~~10.4~~10.11			First Amendment to Amended and Restated Credit and Guaranty Agreement, dated as of October 26, 2015, amending the Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015, among American Airlines, Inc. (as successor in interest to US Airways, Inc.), American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.), the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties thereto (incorporated by reference to Exhibit 10.6 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2015 (Commission File No. 1-8400)).
~~10.5~~10.12			Second Amendment to Amended and Restated Credit and Guaranty Agreement, dated as of September 22, 2016, amending the Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties thereto (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (Commission File No. 1-8400)).

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~~10.6~~ Exhibit Number			Description
10.13			Third Amendment to the Amended and Restated Credit and Guaranty Agreement, dated as of June 14, 2017, amending the Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties thereto (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (Commission File No. 1-8400)).
~~10.7~~10.14			Fourth Amendment to the Amended and Restated Credit and Guaranty Agreement, dated as of August 21, 2017, amending the Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties ~~thereto.~~thereto (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 201 8 (Commission File No. 1-8400)).**


10.15		Fifth Amendment to the Amended and Restated Credit and Guaranty Agreement, dated as of September 17, 2018, amending the Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties thereto (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (Commission File No. 1-8400)).
~~Exhibit~~ ~~Number~~ 10.16		~~Description~~ Sixth Amendment to the Amended and Restated Credit and Guaranty Agreement, dated as of December 10, 2018, amending the Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties thereto (incorporated by reference to Exhibit 10.9 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2018 (Commission File No. 1-8400)).*
~~10.8~~10.17		Seventh Amendment to the Amended and Restated Credit and Guaranty Agreement, dated as of November 8, 2019, amending the Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties thereto (incorporated by reference to Exhibit 10.10 to AAG ’s Annual Report on Form 10-K for the year ended December 31, 2019 (Commission File No. 1-8400)).**
10.18		First Amendment and Restatement Agreement, dated as of May 21, 2015, in relation to the Credit and Guaranty Agreement, dated as of June 27, 2013 (as amended), among American Airlines Group Inc. (as successor in interest to US Airways Group, Inc.), American Airlines, Inc. (as successor in interest to US Airways, Inc.), the Revolving Lenders (as defined therein) party thereto, the 2015 Term Loan Lenders (as defined therein) party thereto and Deutsche Bank AG New York Branch, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.5 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (Commission File No. 1-8400)).
~~10.9~~10.19		First Amendment to Amended and Restated Credit and Guaranty Agreement, dated as of October 26, 2015, amending the Amended and Restated Credit and Guaranty Agreement, dated as of May 21, 2015, among American Airlines, Inc. (as successor in interest to US Airways, Inc.), American Airlines Group Inc., (as successor in interest to US Airways Group, ~~Inc .)~~Inc.), the lenders from time to time party thereto, Deutsche Bank AG New York Branch, as administrative agent, and certain other parties thereto (incorporated by reference to Exhibit 10.8 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2015 (Commission File No. 1-8400)).
~~10.10~~10.20		Second Amendment to Amended and Restated Credit and Guaranty Agreement, dated as of March 14, 2017, amending the Amended and Restated Credit and Guaranty Agreement, dated as of May 21, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Deutsche Bank AG New York Branch, as administrative agent, and certain other parties thereto (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (Commission File No. 1-8400)).
~~10.11~~10.21		Third Amendment to the Amended and Restated Credit And Guaranty Agreement, dated as of August 21, 2017, amending the Amended and Restated Credit and Guaranty Agreement, dated as of May 21, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Deutsche Bank AG New York Branch, as administrative agent, and certain other parties ~~thereto.~~**
~~10.12~~	~~Purchase Agreement No. 3219, dated as of October 15, 2008, between American Airlines, Inc. and The Boeing Company~~thereto (incorporated by reference to Exhibit ~~10.29~~10.11 to ~~American’s~~AAG’s Annual Report on Form 10-K for the year ended December 31, ~~2008~~2017 (Commission File No. 1-8400)).*
~~10.13~~10.22		Fourth Amendment to Amended and Restated Credit and Guaranty Agreement, dated as of May 15, 2018, amending the Amended and Restated Credit and Guaranty Agreement, dated as of May 21, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Deutsche Bank AG New York Branch, as administrative agent, and Barclays Bank PLC, as designated replacement term lender (incorporated by reference to Exhibit 10.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 (Commission File No. 1-8400)).

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Exhibit Number			Description
10.23			Fifth Amendment to Amended and Restated Credit and Guaranty Agreement, dated as of December 10, 2018, amending the Amended and Restated Credit and Guaranty Agreement, dated as of May 21, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Deutsche Bank AG New York Branch, as administrative agent, and Barclays Bank PLC, as designated replacement term lender (incorporated by reference to Exhibit 10.15 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2018 (Commission File No. 1-8400)).*
10.24			Sixth Amendment to Amended and Restated Credit and Guaranty Agreement, dated as of November 8, 2019, amending the Amended and Restated Credit and Guaranty Agreement, dated as of May 21, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Deutsche Bank AG New York Branch, as administrative agent, and Barclays Bank PLC, as designated replacement term lender (incorporated by reference to Exhibit 10.17 to AGG ’s Annual Report on Form 10-K for the year ended December 31, 2019 (Commission File No. 1-8400)).**
10.25			Credit and Guaranty Agreement, dated as of April 29, 2016, among American Airlines, Inc. as borrower, American Airlines Group Inc., as parent and guarantor, certain other subsidiaries of American Airlines Group Inc., as guarantors, the lenders party thereto, Barclays Bank PLC, as administrative agent and collateral agent, and certain other parties thereto (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q filed on July 22, 2016 (Commission File No. 1-8400)).
~~10.14~~10.26			First Amendment to Credit and Guaranty Agreement, dated as of October 31, 2016, amending the Credit and Guaranty Agreement, dated as of April 29, 2016, among American Airlines, Inc. as borrower, American Airlines Group Inc., as parent and guarantor, the lenders party thereto, Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10.81 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2016 (Commission File No. 1-8400)).
~~10.15~~10.27			Second Amendment to the Credit and Guaranty Agreement, dated as of August 21, 2017, amending the Credit and Guaranty Agreement, dated as of April 29, 2016, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Barclays Bank PLC, as administrative agent, and certain other parties ~~thereto.~~thereto (incorporated by reference to Exhibit 10.15 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2017 (Commission File No. 1-8400)).**
~~10.16~~10.28			Third Amendment to Credit and Guaranty Agreement, dated as of November 1, 2017, amending the Credit and Guaranty Agreement, dated as of April 29, 2016, among American Airlines, Inc. as borrower, American Airlines Group Inc., as parent and guarantor, the lenders party thereto, Barclays Bank PLC, as administrative ~~agent.~~agent (incorporated by reference to Exhibit 10.16 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2017 (Commission File No. 1-8400)).
~~10.17~~10.29			Fourth Amendment to Credit and Guaranty Agreement, dated as of December 10, 2018, amending the Credit and Guaranty Agreement, dated as of April 29, 2016, among American Airlines, Inc. as borrower, American Airlines Group Inc., as parent and guarantor, the lenders party thereto, Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10.20 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2018 (Commission File No. 1-8400)).*
10.30			Fifth Amendment to Credit and Guaranty Agreement, dated as of November 8, 2019, amending the Credit and Guaranty Agreement, dated as of April 29, 2016, among American Airlines, Inc. as borrower, American Airlines Group Inc., as parent and guarantor, the lenders party thereto, Barclays Bank PLC, as administrative agent.*
10.31			Purchase Agreement No. 3219, dated as of October 15, 2008, between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.29 to American’s Annual Report on Form 10-K for the year ended December 31, 2008 (Commission File No. 1-8400)).*
10.32			Supplemental Agreement No. 2, dated as of July 21, 2010, to Purchase Agreement No. 3219 between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.2 to AMR’s ~~report~~Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (Commission File No. 1-8400)).*
~~10.18~~10.33			Supplemental Agreement No. 3, dated as of February 1, 2013, to Purchase Agreement No. 3219 between American Airlines, Inc., and The Boeing Company (incorporated by reference to Exhibit 10.2 to AMR’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 (Commission File No. 1-8400)).*
~~10.19~~10.34			Supplemental Agreement No. 4, dated as of June 9, 2014, to Purchase Agreement No. 3219 between The Boeing Company and American Airlines, Inc. dated as of October 15, 2008, ~~Relating~~relating to Boeing Model 787 Aircraft, as amended, restated, amended and restated, supplemented or otherwise modified (incorporated by reference to Exhibit 10.6 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (Commission File No. 1-8400)).*
~~10.20~~10.35			Supplemental Agreement No. 5, dated as of January 20, 2015, to Purchase Agreement No. 3219 between The Boeing Company and American Airlines, Inc., dated as of October 15, 2008, ~~Relating~~relating to Boeing Model 787 Aircraft, as amended, restated, amended and restated, supplemented or otherwise modified (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (Commission File No. 1-8400)).*

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Exhibit Number			Description
~~10.21~~10.36			Supplemental Agreement No. 6, dated as of April 21, 2015, to Purchase Agreement No. 3219 between American Airlines, Inc. and The Boeing Company, dated as of October 15, 2008, as amended, restated, amended and restated, supplemented or otherwise modified (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (Commission File No. 1-8400)).*
~~10.22~~10.37			Supplemental Agreement No. 7, dated as of September 12, 2016, to Purchase Agreement No. 3219 dated as of October 15, 2008, between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (Commission File No. 1-8400)).*
~~10.23~~10.38			Supplemental Agreement No. 8, dated as of January 26, 2017, to Purchase Agreement No. 3219 dated as of October 15, 2008, between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (Commission File No. 1-8400)).*
~~10.24~~10.39			Supplemental Agreement No. 9, dated as of April 24, 2017, to Purchase Agreement No. 3219 dated as of October 15, 2008, by and between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.5 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (Commission File No. 1-8400)).*
~~10.25~~10.40			Supplemental Agreement No. 10, dated as of May 11, 2017, to Purchase Agreement No. 3219 dated as of October 15, 2008, by and between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.6 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (Commission File No. 1-8400)).*
~~10.26~~10.41			Supplemental Agreement No. 11, dated as of April 6, 2018, to Purchase Agreement No. 3219 dated as of October 15, 2008, by and between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 (Commission File No. 1-8400)).*
10.42			Supplemental Agreement No. 12, dated as of May 29, 2019, to Purchase Agreement No. 3219 dated as of October 15, 2008, by and between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (Commission File No. 1-8400)).**
10.43			Supplemental Agreement No. 13, dated as of August 20, 2019, to Purchase Agreement No. 3219 dated as of October 15, 2008, by and between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 (Commission File No. 1-8400)).**
10.44			Supplemental Agreement No. 14, dated as of February 24, 2020, to Purchase Agreement No. 3219 dated as of October 15, 2008, by and between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (Commission File No. 1-8400)).**
10.45			Supplemental Agreement No. 15, dated as of March 16, 2020, to Purchase Agreement No. 3219 dated as of October 15, 2008, by and between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (Commission File No. 1-8400)).**
10.46			A320 Family Aircraft Purchase Agreement, dated as of July 20, 2011, between American Airlines, Inc. and Airbus S.A.S. ~~(incorporated by reference to Exhibit 10.4 to AMR’s report on Form 10-Q for the quarter ended September 30, 2011 (Commission File No. 1-8400)).~~***
~~10.27~~10.47			Amendment No. 1, dated as of January 11, 2013, to A320 Family Aircraft Purchase Agreement between American Airlines, Inc. and Airbus S.A.S., dated as of July 20, ~~2011 (incorporated by reference to Exhibit 10.8 to AMR’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 (Commission File No. 1-8400)).~~2011.***
~~10.28~~10.48			Amendment No. 2, dated as of May 30, 2013, to A320 Family Aircraft Purchase Agreement between American Airlines, Inc. and Airbus S.A.S, dated as of July 20, ~~2011 (incorporated by reference to Exhibit 10.2 to AMR’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (Commission File No. 1-8400)).~~2011.***
~~10.29~~10.49			Amendment No. 3, dated as of November 20, 2013, to A320 Family Aircraft Purchase Agreement between American Airlines, Inc. and Airbus S.A.S., dated as of July 20, ~~2011 (incorporated by reference to Exhibit 10.27 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2013 (Commission File No. 1-8400)).~~2011.***
~~10.30~~10.50			Amendment No. 4, dated as of June 18, 2014, to the A320 Family Aircraft Purchase Agreement between Airbus S.A.S., as seller, and American Airlines, Inc., as buyer, dated as of July 20, 2011, as amended, restated, amended and restated, supplemented or otherwise ~~modified (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (Commission File No. 1-8400)).~~modified.***
~~10.31~~10.51			Amendment No. 5, dated as of June 24, 2014, to the A320 Family Aircraft Purchase Agreement between Airbus S.A.S., as seller, and American Airlines, Inc., as buyer, dated as of July 20, 2011, as amended, restated, amended and restated, supplemented or otherwise ~~modified (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (Commission File No. 1-8400)).~~modified.***
~~10.32~~10.52			Amendment No. 6, dated as of July 1, 2014, to the A320 Family Aircraft Purchase Agreement between Airbus S.A.S., as seller, and American Airlines, Inc., as buyer, dated as of July 20, 2011, as amended, restated, amended and restated, supplemented or otherwise ~~modified (incorporated by reference to Exhibit 10.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (Commission File No. 1-8400)).~~modified.***

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Table of Contents


~~10.33~~ Exhibit Number			Description
10.53			Amendment No. 7, dated as of November 25, 2014, to the A320 Family Aircraft Purchase Agreement between Airbus S.A.S., as seller, and American Airlines, Inc., as buyer, dated as of July 20, 2011, as amended, restated, amended and restated, supplemented or ~~otherwise (incorporated by reference to Exhibit 10.51 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2014 (Commission File No. 1-8400)).~~otherwise.***
~~10.34~~10.54			Amendment No. 8, dated as of June 11, 2015, to the A320 Family Aircraft Purchase Agreement between American Airlines, Inc. and Airbus S.A.S., dated as of July 20, 2011, as amended, restated, amended and restated, supplemented or otherwise ~~modified (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (Commission File No. 1-8400)).~~modified.***
~~10.35~~10.55			Amendment No. 9, dated as of September 23, 2015, to the A320 Family Aircraft Purchase Agreement, dated as of July 20, 2011, between American Airlines, Inc. and Airbus S.A.S.**
10.56			Amendment No. 10, dated as of July 16, 2018, to the A320 Family Aircraft Purchase Agreement, dated as of July 20, 2011, between American Airlines, Inc. and Airbus S.A.S.**
10.57			Amendment No. 11, dated as of June 19, 2019, to the A320 Family Aircraft Purchase Agreement, dated as of July 20, 2011, between American Airlines, Inc. and Airbus S.A.S. (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (Commission File No. 1-8400)).**
10.58			Amendment No. 12, dated as of June 26, 2020, to the A320 Family Aircraft Purchase Agreement between Airbus S.A.S., as seller, and American Airlines, Inc. as buyer, dated as of July 20, 2011, as amended, restated, amended and restated, supplemented or otherwise (incorporated by reference to Exhibit 10.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2015~~2020 (Commission File No. 1-8400)).***
~~10.36~~10.59			Amendment No. 13, dated as of July 13, 2020, to the A320 Family Aircraft Purchase Agreement between Airbus S.A.S., as seller, and American Airlines, Inc. as buyer, dated as of July 20, 2011, as amended, restated, amended and restated, supplemented or otherwise (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (Commission File No. 1-8400)).**
10.60			Amendment No. 14, dated as of October 8, 2020, to the A320 Family Aircraft Purchase Agreement between Airbus S.A.S., as seller, and American Airlines, Inc. as buyer, dated as of July 20, 2011, as amended, restated, amended and restated, supplemented or otherwise.**
10.61			Purchase Agreement No. 03735, dated as of February 1, 2013, between American Airlines, Inc., and The Boeing Company (incorporated by reference to Exhibit 10.7 to AMR’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 (Commission File No. 1-8400)).*



~~Exhibit~~ ~~Number~~	~~Description~~
~~10.37~~10.62	Supplemental Agreement No. 1, dated as of April 15, 2013, to Purchase Agreement No. 03735 dated as of February 1, 2013, between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.1 to AMR’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (Commission File No. 1-8400)).*
~~10.38~~10.63		Supplemental Agreement No. 2, dated as of March 6, 2015, to Purchase Agreement No. 03735 dated as of February 1, 2013, between American Airlines, Inc. and The Boeing Company ~~dated as of February 1, 2013. Relating to Boeing Model 737 MAX Aircraft, as amended, restated, amended and restated, supplemented or otherwise modified (incorporated~~(incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (Commission File No. 1-8400)).*
~~10.39~~10.64		Supplemental Agreement No. 3, dated as of May 22, 2015, to Purchase Agreement No. 03735 dated as of February 1, 2013, between American Airlines, Inc. and The Boeing Company ~~dated as of February 1, 2013. Relating to Boeing Model 737 MAX Aircraft, as amended, restated, amended and restated, supplemented or otherwise modified (incorporated~~(incorporated by reference to Exhibit 10.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (Commission File No. 1-8400)).*
~~10.40~~10.65		Letter Agreement, dated as of January 14, 2016, to Purchase Agreement No. 03735 dated as of February 1, 2013, between American Airlines, Inc. and The Boeing Company ~~dated as of February 1, 2013. Relating to Boeing Model 737 MAX Aircraft, as amended, restated, amended and restated, supplemented or otherwise modified~~ (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (Commission File No. 1-8400)).*
~~10.41~~10.66		Supplemental Agreement No. 4, dated as of June 6, 2016, to Purchase Agreement No. 03735 dated as of February 1, ~~2016,~~201 3 , between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 (Commission File No. 1-8400)).*
~~10.42~~10.67		Supplemental Agreement No. 5, dated as of August 8, 2016, to Purchase Agreement No. 03735 dated as of February 1, 2013, between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (Commission File No. 1-8400)).*
~~10.43~~10.68		Supplemental Agreement No. 6, dated as of November 15, 2016, to Purchase Agreement No. 03735 dated as of February 1, 2013, between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.33 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2016 (Commission File No. 1-8400)).*
~~10.44~~10.69		Supplemental Agreement No. 7, dated as of March 2, 2017, to Purchase Agreement No. 03735 dated as of February 1, 2013, between American Airlines, Inc. and The Boeing Company (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (Commission File No. 1-8400)).*

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~~10.45~~ Exhibit Number		Description
10.70		Supplemental Agreement No. 8, dated as of December 7, 2017, to Purchase Agreement No. 03735 dated as of February 1, 2013, between American Airlines, Inc. and The Boeing ~~Company.~~**
~~10.46~~	Amended and Restated Airbus A350 XWB Purchase Agreement, dated as of October 2, 2007, among AVSA, S.A.R.L. and American Airlines, Inc. (as successor in interest to US Airways, Inc .), AWA and American Airlines Group Inc. (as successor in interest to US Airways Group, Inc .)Company (incorporated by reference to Exhibit ~~10.19~~10.45 to ~~US Airways Group’s~~AAG’s Annual Report on Form 10-K for the year ended December 31, ~~2007 (Commission File No. 1-8444)).~~*
~~10.47~~	Amendment No. 1, dated as of October 20, 2008, to the Amended and Restated Airbus A350 XWB Purchase Agreement, dated as of October 2, 2007, between American Airlines, Inc. (as successor in interest to US Airways, Inc .) and Airbus S.A.S., including Amended and Restated Letter Agreement No. 3, Amended and Restated Letter Agreement No. 5, and Amended and Restated Letter Agreement No. 9 to the Purchase Agreement (incorporated by reference to Exhibit 10.23 to US Airways Group’s Annual Report on Form 10-K for the year ended December 31, 2008 (Commission File No. 1-8444)).*
~~10.48~~	Amendment No. 2, dated as of January 16, 2009, to the Amended and Restated Airbus A350 XWB Purchase Agreement, dated as of October 2, 2007, among AVSA, S.A.R.L. and American Airlines, Inc, (as successor in interest to US Airways, Inc.), AWA and American Airlines Group Inc. (as successor in interest to US Airways Group, Inc .) (incorporated by reference to Exhibit 10.3 to US Airways Group’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (Commission File No. 1-8444)).*
~~10.49~~	Amendment No. 3, dated as of July 23, 2009, to the Amended and Restated Airbus A350 XWB Purchase Agreement dated as of October 2, 2007 between Airbus S.A.S. and American Airlines, Inc. (as successor in interest to US Airways, Inc.) (incorporated by reference to Exhibit 10.3 to US Airways Group’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 (Commission File No. 1-8444)).*
~~10.50~~	Amendment No. 4, dated as of November 20, 2009, to the Amended and Restated Airbus A350 XWB Purchase Agreement dated as of October 2, 2007 between Airbus S.A.S. and American Airlines, Inc. (as successor in interest to US Airways, Inc.) (incorporated by reference to Exhibit 10.96 to US Airways Group’s Annual Report on Form 10-K for the year ended December 31, 2009 (Commission File No. 1-8444)).*



~~Exhibit~~ ~~Number~~	~~Description~~
~~10.51~~	Amendment No. 5, dated as of December 20, 2013, to the Amended and Restated Airbus A350 XWB Purchase Agreement dated as of October 2, 2007 between Airbus S.A.S. and American Airlines, Inc. (as successor in interest to US Airways, Inc.), including Amended and Restated Letter Agreement No. 2, Amended and Restated Letter Agreement No. 4, Third Amended and Restated Letter Agreement No. 5, Amended and Restated Letter Agreement No. 6, Amended and Restated Letter Agreement No. 7, Amended and Restated Letter Agreement No. 8-2, Second Amended and Restated Letter Agreement No. 9, Amended and Restated Letter Agreement No. 12, Amended and Restated Letter Agreement No. 13 and Amended and Restated Letter Agreement No. 14 to the Amended and Restated Airbus A350 XWB Purchase Agreement dated as of October 2, 2007 between Airbus S.A.S. and American Airlines, Inc. (as successor in interest to US Airways, Inc.) (incorporated by reference to Exhibit 10.43 to US Airways Group’s Annual Report on Form 10-K for the year ended December 31, 2013 (Commission File No. 1-8444)).*
~~10.52~~	Second Amended and Restated Letter Agreement No. 6, dated as of July 7, 2015 to the Amended and Restated Airbus A350 XWB Purchase Agreement, dated as of October 2, 2007, between American Airlines, Inc. (as successor in interest to US Airways, Inc.) and Airbus S.A.S. (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 20152017 (Commission File No. 1-8400)).*
~~10.53~~10.71		~~Third Amended and Restated Letter~~Supplemental Agreement No. 9, dated as of April ~~24, 2017~~6, 2018, to ~~the Amended and Restated Airbus A350 XWB~~ Purchase Agreement No. 03735 dated as of ~~October 2, 2007,~~February 1, 2013, by and between American Airlines, Inc. and ~~Airbus S.A.S~~The Boeing Company (incorporated by reference to Exhibit ~~10.4~~10.2 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2017~~2018 (Commission File No. 1-8400)).*
~~10.54~~10.72		~~Amendment~~Supplemental Agreement No. 6,10, dated as of ~~December 15, 2015,~~March 26, 2019, to ~~the Amended and Restated Airbus A350 XWB~~ Purchase Agreement dated as of October 2, 2007 between Airbus S.A.S. and American Airlines, Inc. (as successor in interest to US Airways, Inc.) (incorporated by reference to Exhibit 10.97 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2015 (Commission File No. ~~1-8400)).~~*
~~10.55~~	~~Amendment No. 7,~~03735 dated as of February ~~24, 2016 , to the Amended~~1, 2013, by and ~~Restated Airbus A350 XWB Purchase Agreement dated as of October 2, 2007~~ between ~~Airbus S.A.S. and~~ American Airlines, Inc. ~~(as successor in interest to US Airways, Inc.)~~and The Boeing Company (incorporated by reference to Exhibit 10.1 to AAG’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2016~~2019 (Commission File No. 1-8400)).***
~~10.56~~10.73		~~Amendment No. 8, dated as of July 18, 2016, to the Amended and Restated Airbus A350 XWB Purchase~~Letter Agreement, dated as of ~~October 2, 2007, between American Airlines, Inc. and Airbus S.A.S (incorporated by reference~~September 4, 2020, to ~~Exhibit 10.4 to AAG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (Commission File~~Purchase Agreement No. ~~1-8400)).~~*
~~10.57~~	~~Amendment No. 9,~~03735 dated as of ~~April 24, 2017, to the Amended and Restated Airbus A350 XWB Purchase Agreement, dated as of October 2, 2007,~~February 1, 2013, by and between American Airlines, Inc. and ~~Airbus S.A.S.~~The Boeing Company (incorporated by reference to Exhibit 10.3 to AAG’s Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, ~~2017~~2020 (Commission File No. 1-8400)).***
~~10.58~~10.74		Supplemental Agreement No. 11, dated as of October 9, 2020, to Purchase Agreement No. 03735 dated as of February 1, 2013, by and between American Airlines, Inc. and The Boeing Company.**
10.75		Supplemental Agreement No. 12, dated as of October 22, 2020, to Purchase Agreement No. 03735 dated as of February 1, 2013, by and between American Airlines, Inc. and The Boeing Company.**
10.76		Supplemental Agreement No. 13, dated as of November 17, 2020, to Purchase Agreement No. 03735 dated as of February 1, 2013, by and between American Airlines, Inc. and The Boeing Company.**
10.77		Supplemental Agreement No. 14, dated as of November 25, 2020, to Purchase Agreement No. 03735 dated as of February 1, 2013, by and between American Airlines, Inc. and The Boeing Company.**
10.78		Supplemental Agreement No. 15, dated as of December 15, 2020, to Purchase Agreement No. 03735 dated as of February 1, 2013, by and between American Airlines, Inc. and The Boeing Company.**
10.79		Amendment 1, dated as of December 31, 2020, to the Letter Agreement, dated as of September 4, 2020, to Purchase Agreement No. 03735 dated as of February 1, 2013, by and between American Airlines, Inc. and The Boeing Company.**
10.80		Consent Agreement, dated as of October 5, 2015, between American Airlines, Inc. (as successor in interest to US Airways, Inc.), American Airlines, Inc. and Airbus S.A.S. (incorporated by reference to Exhibit 10.98 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2015 (Commission File No. 1-8400)).*
~~10.59~~10.81		AMR Corporation Amended and Restated Directors Pension Benefits Plan, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.149 to AMR’s Annual Report on Form 10-K for the year ended December 31, 2008 (Commission File No. 1-8400)).†
~~10.60~~	Supplemental Executive Retirement Program for Officers of American Airlines, Inc., as amended and restated as of January 1, 2005 (incorporated by reference to Exhibit 10.127 to AMR’s Annual Report on Form 10-K for the year ended December 31, 2008 (Commission File No. 1-8400)).†
~~10.61~~10.82		Trust Agreement Under Supplemental Retirement Program for Officers of American Airlines, Inc., as amended and restated as of June 1, 2007 (incorporated by reference to Exhibit 10.128 to AMR’s Annual Report on Form 10-K for the year ended December 31, 2008 (Commission File No. 1-8400)).†
~~10.62~~10.83		Trust Agreement Under Supplemental Executive Retirement Program for Officers of American Airlines, Inc. Participating in the Super Saver Plus Plan, as amended and restated as of June 1, 2007 (incorporated by reference to Exhibit 10.129 to AMR’s Annual Report on Form 10-K for the year ended December 31, 2008 (Commission File No. 1-8400)).†
~~10.63~~10.84		American Airlines Group Inc. 2013 Incentive Award Plan (incorporated by reference to Exhibit 4.1 of AAG’s Form S-8 Registration Statement, filed on December 4, ~~2013)~~2013 (Registration No. 333-192660)).†
~~10.64~~10.85		First Amendment to the American Airlines Group Inc. 2013 Incentive Award ~~Plan.~~Plan (incorporated by reference to Exhibit 10.64 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2017 (Commission File No. 1-8400)).†
~~10.65~~10.86		Form of American Airlines Group Inc. 2013 Incentive Award Plan Restricted Stock Unit (Cash-Settled) Award Grant Notice and Award Agreement (incorporated by reference to Exhibit 10.125 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2013 (Commission File No. 1-8400)).†



~~Exhibit~~ ~~Number~~	~~Description~~
~~10.66~~10.87	Form of American Airlines Group Inc. 2013 Incentive Award Plan Restricted Stock Unit (Stock-Settled) Award Grant Notice and Award Agreement (incorporated by reference to Exhibit 10.127 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2013 (Commission File No. 1-8400)).†
~~10.67~~10.88		Form of American Airlines Group Inc. 2013 Incentive Award Plan Restricted Stock Unit (Stock-Settled) Award Grant Notice and Award Agreement for Director Grants (incorporated by reference to Exhibit 10.129 to AAG’s Annual Report on Form 10-K for the year ended December 31, 2013 (Commission File No. 1-8400)).†
~~10.68~~10.89		Form of Indemnification Agreement (incorporated by reference to Exhibit 10.9 to AAG’s Current Report on Form 8-K filed on December 9, 2013 (Commission File No. 1-8400)).†

225

Table of Contents


~~10.69~~ Exhibit Number		~~US Airways Group 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to US Airways Group’s Current Report on Form 8-K filed on October 3, 2005 (Commission File No. 1-8444)).~~† Description
~~10.70~~10.90		Form of Stock Appreciation Rights Award Agreement under US Airways Group’s 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.75 to US Airways Group’s Annual Report on Form 10-K for the year ended December 31, 2005 (Commission File No. 1-8444)).†
~~10.71~~	US Airways Group, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 to US Airways Group’s Registration Statement on Form S-8 filed on June 30, 2008 (Registration No. 333-152033)).†
~~10.72~~	Form of Stock Appreciation Right Award Agreement under the US Airways Group, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to US Airways Group’s Current Report on Form 8-K filed August 7, 2008 (Commission File No. 1-8444)).†
~~10.73~~	Form of Stock Appreciation Right (Cash-Settled) Award Agreement under the US Airways Group, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to US Airways Group’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (Commission File No. 1-8444)).†
~~10.74~~	Form of Stock Appreciation Right (Stock-Settled) Award Agreement under the US Airways Group, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.9 to US Airways Group’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (Commission File No. 1-8444)).†
~~10.75~~	US Airways Group, Inc. 2011 Incentive Award Plan (incorporated by reference to Exhibit 4.1 to US Airways Group’s Registration Statement on Form S-8 filed on July 1, 2011 (Registration No. 333-175323)).†
~~10.76~~10.91		Form of Stock Appreciation Right (Cash-Settled) Award Grant Notice and Stock Appreciation Right (Cash-Settled) Award Agreement under the US Airways Group, Inc. 2011 Incentive Award Plan (incorporated by reference to Exhibit 4.3 to US Airways Group’s Registration Statement on Form S-8 filed on July 1, 2011 (Registration No. 333-175323)).†
~~10.77~~	Form of Stock Appreciation Right (Stock-Settled) Award Grant Notice and Stock Appreciation Right Award Agreement under the US Airways Group, Inc. 2011 Incentive Award Plan (incorporated by reference to Exhibit 4.4 to US Airways Group’s Registration Statement on Form S-8 filed on July 1, 2011 (Registration No. 333-175323)).†
~~10.78~~	2014 Short-Term Incentive Program Under 2013 Incentive Award Plan (incorporated by reference to Exhibit 10.8 to AAG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (Commission File No. 1-8400)).†
~~10.79~~10.92		Form of Letter Agreement for Directors Travel Program (incorporated by reference to Exhibit 10.106 to US Airways Group’s Annual Report on Form 10-K for the year ended December 31, 2007 (Commission File No. 1-8444)).†
~~10.80~~10.93		Amended and Restated Employment Agreement, dated as of November 28, 2007, among US Airways Group, US Airways, Inc. and W. Douglas Parker (incorporated by reference to Exhibit 10.1 to US Airways Group’s Current Report on Form 8-K filed on November 29, 2007 (Commission File No. 1-8444)).†
~~10.81~~10.94		Form of Letter Agreement, dated April 25, 2017, by and between American Airlines Group Inc. and each of Robert D. Isom, Jr., Elise Eberwein, Stephen L. Johnson and Derek J. Kerr (incorporated by reference to Exhibit 10.1 to AAG’s Current Report on Form 8-K filed on May 1, 2017 (Commission File No. 1-8400)).†
~~10.82~~10.95		~~Proposed Final Judgment (incorporated by reference to Exhibit 10.1 to AMR’s Current Report on Form 8-K filed on November 13, 2013 (Commission File No. 1-8400)).~~
~~10.83~~	~~Asset Preservation Order (incorporated by reference to Exhibit 10.2 to AMR’s Current Report on Form 8-K filed on November 13, 2013 (Commission File No. 1-8400)).~~
~~10.84~~	~~Supplemental Stipulated Order (incorporated by reference to Exhibit 10.3 to AMR’s Current Report on Form 8-K filed on November 13, 2013 (Commission File No. 1-8400)).~~
~~10.85~~	~~Joint Stipulation (incorporated by reference to Exhibit 10.4 to AMR’s Current Report on Form 8-K filed on November 13, 2013 (Commission File No. 1-8400)).~~
~~10.86~~	~~DOT Agreement (incorporated by reference to Exhibit 10.5 to AMR’s Current Report on Form 8-K filed on November 13, 2013 (Commission File No. 1-8400)).~~



~~Exhibit~~ ~~Number~~	~~Description~~
~~10.87~~	Letter Agreement, dated as of April 28, 2016, between American Airlines Group Inc. and W. Douglas Parker (incorporated by reference to Exhibit 10.1 to AAG’s Current Report on Form 8-K filed on April 29, 2016 (Commission File No. 1-8400)).†
~~10.88~~14.1		Transition and Separation Agreement, dated as of August 29, 2016, among J. Scott Kirby, American Airlines Group Inc. and American Airlines, Inc. (incorporated by reference to Exhibit 99.1 to AAG’s Current Report on Form 8-K filed on August 29, 2016 (Commission File No. 1-8400)).†
~~12.1~~	~~Computation of ratio of earnings to combined fixed charges and preferred dividends of American Airlines Group Inc. for 2017, 2016, 2015, 2014 and 2013.~~
~~12.2~~	~~Computation of ratio of earnings to fixed charges of American Airlines, Inc. for 2017, 2016, 2015, 2014 and 2013.~~
~~14.1~~	Code of Ethics (incorporated by reference to Exhibit 14.1 to AAG’s Current Report on Form 8-K filed on December 9, 2013 (Commission File No. 1-8400)).
21.1		Significant subsidiaries of AAG and American as of December 31, ~~2017.~~2020.
23.1		Consent of Independent Registered Public Accounting Firm – KPMG LLP.
24.1		Powers of Attorney (included in signature page of this Annual Report on Form 10-K).
31.1		Certification of AAG Chief Executive Officer pursuant to Rule 13a-14(a).
31.2		Certification of AAG Chief Financial Officer pursuant to Rule 13a-14(a).
31.3		Certification of American Chief Executive Officer pursuant to Rule 13a-14(a).
31.4		Certification of American Chief Financial Officer pursuant to Rule 13a-14(a).
32.1		Certification pursuant to Rule 13a-14(b) and section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code).
32.2		Certification pursuant to Rule 13a-14(b) and section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code).
101.1		Interactive data files pursuant to Rule 405 of Regulation ~~S-T.~~

S-T, formatted in Inline XBRL (eXtensible Business Reporting Language).
104.1
Cover page interactive data file (formatted in Inline XBRL and contained in Exhibit 101.1).

Pursuant to Item ~~601(b)(2)~~601(a)(5) of Regulation S-K promulgated by the Securities and Exchange Commission, certain exhibits and schedules to this agreement have been omitted. Such exhibits and schedules are described in the referenced agreement. AAG and American hereby agree to furnish to the Securities and Exchange Commission, upon its request, any or all of such omitted exhibits or schedules.

Confidential treatment has been granted with respect to certain portions of this agreement.

~~Confidential treatment~~Certain confidential information contained in this agreement has been ~~requested with respect to certain portions of this agreement.~~

omitted because it (i) is not material and (ii) would be competitively harmful if publicly disclosed.

†

Management contract or compensatory plan or arrangement.

226

Table of Contents

ITEM 16. FORM 10-K SUMMARY

None.

227

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	American Airlines Group Inc.
Date: February ~~21, 2018~~17, 2021	By:	/s/ W. Douglas Parker
		W. Douglas Parker
		Chairman and Chief Executive Officer
		(Principal Executive Officer)



	American Airlines, Inc.
Date: February ~~21, 2018~~17, 2021	By:	/s/ W. Douglas Parker
		W. Douglas Parker
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

228

Table of Contents

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints W. Douglas Parker and Derek J. Kerr and each or any of them, his or her true and lawful attorneys and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to the ~~Registrants’~~registrants’ Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017,~~2020, and to file the same with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each or any of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys and agents, and each of them, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of American Airlines Group Inc. and in the capacities and on the dates noted:


Date: February 17, 2021		/s/ W. Douglas Parker
		W. Douglas Parker
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

Date: February ~~21, 2018~~17, 2021		~~/s/ W. Douglas Parker~~
	~~W. Douglas Parker~~
	~~Chairman and Chief Executive Officer~~
	~~(Principal Executive Officer)~~

~~Date: February 21, 2018~~	/s/ Derek J. Kerr
		Derek J. Kerr
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

~~Date: February 21, 2018~~	~~/s/ James F. Albaugh~~
	~~James F. Albaugh, Director~~

~~Date: February 21, 2018~~	~~/s/ Jeffrey D. Benjamin~~
	~~Jeffrey D. Benjamin, Director~~

~~Date: February 21, 2018~~	~~/s/ John T. Cahill~~
	~~John T. Cahill, Director~~

~~Date: February 21, 2018~~	~~/s/ Michael J. Embler~~
	~~Michael J. Embler, Director~~

~~Date: February 21, 2018~~	~~/s/ Matthew J. Hart~~
	~~Matthew J. Hart, Director~~

~~Date: February 21, 2018~~	~~/s/ Alberto Ibargüen~~
	~~Alberto Ibargüen, Director~~

~~Date: February 21, 2018~~	~~/s/ Richard C. Kraemer~~
	~~Richard C. Kraemer, Director~~



Date: February ~~21, 2018~~17, 2021			/s/ James F. Albaugh
			James F. Albaugh, Director

Date: February 17, 2021			/s/ Jeffrey D. Benjamin
			Jeffrey D. Benjamin, Director

Date: February 17, 2021			/s/ John T. Cahill
			John T. Cahill, Director

Date: February 17, 2021			/s/ Michael J. Embler
			Michael J. Embler, Director

Date: February 17, 2021			/s/ Matthew J. Hart
			Matthew J. Hart, Director

229

Table of Contents


Date: February 17, 2021			/s/ Susan D. Kronick
			Susan D. Kronick, Director

Date: February ~~21, 2018~~17, 2021			/s/ Martin H. Nesbitt
			Martin H. Nesbitt, Director

Date: February ~~21, 2018~~17, 2021			/s/ Denise M. O’Leary
			Denise M. O’Leary, Director

Date: February ~~21, 2018~~17, 2021			/s/ Ray M. Robinson
			Ray M. Robinson, Director

Date: February ~~21, 2018~~17, 2021			/s/ ~~Richard P. Schifter~~Douglas M. Steenland
			~~Richard P. Schifter,~~Douglas M. Steenland, Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of American Airlines, Inc. and in the capacities and on the dates noted:


Date: February 17, 2021		/s/ W. Douglas Parker
		W. Douglas Parker
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

Date: February ~~21, 2018~~17, 2021		~~/s/ W. Douglas Parker~~
	~~W. Douglas Parker~~
	~~Chairman and Chief Executive Officer~~
	~~(Principal Executive Officer)~~

~~Date: February 21, 2018~~	/s/ Derek J. Kerr
		Derek J. Kerr
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

Date: February ~~21, 2018~~17, 2021		/s/ Stephen L. Johnson
		Stephen L. Johnson, Director

Date: February ~~21, 2018~~17, 2021		/s/ Robert D. Isom
		Robert D. Isom, Director

~~200~~230



~~Delaware~~		~~75-1825172~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~	~~(I.R.S. Employer~~ ~~Identification No.)~~
~~4333 Amon Carter Blvd., Fort Worth, Texas 76155~~	~~(817) 963-1234~~
~~(Address of principal executive offices, including zip code)~~	~~Registrant’s telephone number, including area code~~



~~Delaware~~		~~13-1502798~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~	~~(I.R.S. Employer~~ ~~Identification No.)~~
~~4333 Amon Carter Blvd., Fort Worth, Texas 76155~~	~~(817) 963-1234~~
~~(Address of principal executive offices, including zip code)~~	~~Registrant’s telephone number, including area code~~



~~American Airlines Group Inc.~~	☒
~~American Airlines, Inc.~~	☒



~~American Airlines Group Inc.~~	~~Yes~~	☒	No	☐
~~American Airlines, Inc.~~	~~Yes~~	☒	No	☐



		Page
PART I
Item 1.	Business	57
Item 1A.	Risk Factors	1528
Item 1B.	Unresolved Staff Comments	3253
Item 2.	Properties	3354
Item 3.	Legal Proceedings	3656
Item 4.	Mine Safety Disclosures	3756

PART II
Item 5.	Market for American Airlines Group’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities	3857
Item 6.	Selected Consolidated Financial Data	4160
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4565
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	7887
Item 8A.	Consolidated Financial Statements and Supplementary Data of American Airlines Group Inc.	8089
Item 8B.	Consolidated Financial Statements and Supplementary Data of American Airlines, Inc.	~~125~~147
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	~~170~~201
Item 9A.	Controls and Procedures	~~170~~201
Item 9B.	Other Information	205

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	~~174~~205
Item 11.	Executive Compensation	~~174~~205
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~174~~205
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~174~~205
Item 14.	Principal Accountant Fees and Services	~~174~~205

PART IV
Item 15.	Exhibits and Financial Statement Schedules	~~175~~206
Item 16.	Form 10-K Summary	~~197~~227
SIGNATURES		~~198~~228


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




American Airlines Group Inc.
(Exact name of registrant as specified in its charter)


Union	Class or Craft	Employees (1)	Contract Amendable Date
Mainline:
Allied Pilots Association (APA)	Pilots	13,400	2020
Association of Professional Flight Attendants (APFA)	Flight Attendants	24,550	2019
Airline Customer Service Employee Association – Communications Workers of America and International Brotherhood of Teamsters (CWA-IBT)	Passenger Service	13,500	2020
Transport Workers Union and International Association of Machinists & Aerospace Workers (TWU-IAM Association)	Mechanics and Related	12,300	2025
TWU-IAM Association	Fleet Service	16,600	2025
TWU-IAM Association	Stock Clerks	1,750	2025
TWU-IAM Association	Flight Simulator Engineers	140	2021
TWU-IAM Association	Maintenance Control Technicians	190	2025
TWU-IAM Association	Maintenance Training Instructors	50	2025
Professional Airline Flight Control Association (PAFCA)	Dispatchers	470	2021
Transport Workers Union (TWU)	Flight Crew Training Instructors	350	2021
Envoy:
Air Line Pilots Associations (ALPA)	Pilots	2,150	2024
Association of Flight Attendants-CWA (AFA)	Flight Attendants	1,500	2020
TWU	Ground School Instructors	10	2023
TWU	Mechanics and Related	1,400	2020
TWU	Stock Clerks	140	2020
TWU	Fleet Service	3,800	2019
TWU	Dispatchers	70	2025
Communications Workers of America (CWA)	Passenger Service	4,850	2026



Union	Class or Craft	Employees ⁽¹⁾	Contract Amendable Date
Mainline: ⁽²⁾
Allied Pilots Association (APA)	Pilots	13,200	2020
Association of Professional Flight Attendants (APFA)	Flight Attendants	24,900	2019
Airline Customer Service Employee Association –Communications Workers of America and International Brotherhood of Teamsters (CWA-IBT)	Passenger Service	16,000	2020
Transport Workers Union and International Association of Machinists & Aerospace Workers (TWU-IAM Association)	Mechanics and Related	12,400	2018
TWU-IAM Association	Fleet Service	16,700	2018
TWU-IAM Association	Stock Clerks	1,900	2018
TWU-IAM Association	Flight Simulator Engineers	150	2021
TWU-IAM Association	Maintenance Control Technicians	200	2018
TWU-IAM Association	Maintenance Training Instructors	50	2018
TWU (Transport Workers Union)	Dispatchers	450	2021
TWU	Flight Crew Training Instructors	300	2021
Envoy: ⁽³⁾
Air Line Pilots Associations (ALPA)	Pilots	2,200	2024
Association of Flight Attendants-CWA (AFA)	Flight Attendants	1,300	2020
TWU	Ground School Instructors	10	2019
TWU	Mechanics and Related	1,300	2020
TWU	Stock Clerks	150	2020
TWU	Fleet Service Clerks	3,500	2019
TWU	Dispatchers	60	2019
Communications Workers of America (CWA)	Passenger Service	4,300	Initial Contract in Negotiation
Piedmont: ⁽³⁾
ALPA	Pilots	550	2024
AFA	Flight Attendants	300	2019
International Brotherhood of Teamsters (IBT)	Mechanics	350	2021
IBT	Stock Clerks	50	2021
CWA	Fleet and Passenger Service	3,400	2017
IBT	Dispatchers	20	2019
ALPA	Flight Crew Training Instructors	40	2024
PSA: ⁽³⁾
ALPA	Pilots	1,500	2023
AFA	Flight Attendants	1,000	2017
International Association of Machinists & Aerospace Workers (IAM)	Mechanics	350	2016
TWU	Dispatchers	50	2022


⁽¹⁾	~~Approximate number of active full-time equivalent employees as of December 31, 2017.~~



Year	Gallons	Average Price per Gallon	Aircraft Fuel Expense	Percent of Total Operating Expenses
2017	4,352	$1.73	$7,510	19.7%
2016	4,347	1.42	6,180	17.7%
2015	4,323	1.72	7,456	21.4%



	Average Seating Capacity	Average Age (Years)	��	Owned	Leased	Total
Airbus A319	128	13.8		21	104	125
Airbus A320	150	16.7		10	38	48
Airbus A321	178	5.4		165	54	219
Airbus A330-200	251	6.0		15	—	15
Airbus A330-300	291	17.4		4	5	9
Boeing 737-800	160	8.1		132	172	304
Boeing 737-8 MAX	172	0.1		4	—	4
Boeing 757-200	180	18.1		31	3	34
Boeing 767-300ER	209	19.1		24	—	24
Boeing 777-200ER	269	17.0		44	3	47
Boeing 777-300ER	310	3.8		18	2	20
Boeing 787-8	226	2.1		20	—	20
Boeing 787-9	285	0.7		14	—	14
Embraer 190	99	10.2		20	—	20
McDonnell Douglas MD-80	140	21.3		13	32	45
Total		10.1		535	413	948



		Common Stock Prices
Year Ended December 31	Period	High		Low		Cash Dividends Declared (Per share)
2017	First Quarter	$	50.00	$	39.21	$	0.10
	Second Quarter	51.95		40.82		0.10
	Third Quarter	54.48		42.61		0.10
	Fourth Quarter	53.74		45.27		0.10
2016	First Quarter	43.78		34.76		0.10
	Second Quarter	41.76		24.85		0.10
	Third Quarter	39.52		27.12		0.10
	Fourth Quarter	50.64		36.33		0.10



	12/9/2013		12/31/2013		12/31/2014		12/31/2015		12/31/2016		12/31/2017
American Airlines Group Inc. (AAL)	$	100	$	103	$	219	$	175	$	194	$	219
NYSE ARCA Airline Index (XAL)	100		102		152		127		162		170
S&P 500 Index (GSPC)	100		102		114		113		124		148




~~FORM 10-K~~



☒FORM			10-K



Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plan or program	Maximum remaining dollar value of shares that may be purchased under the plan or program (in millions)
October 2017	2,497,462	$50.37	2,497,462	$551
November 2017	1,236,546	$47.59	1,236,546	$492
December 2017	834,577	$50.96	834,577	$450



	Year Ended December 31,			Increase (Decrease) 2017-2016	Increase (Decrease) 2016-2015
	2017	2016	2015	Increase (Decrease) 2017-2016	Increase (Decrease) 2016-2015
Mainline
Revenue passenger miles (millions) ^(a)	201,351	199,014	199,467	1.2%	(0.2)%
Available seat miles (millions) ^(b)	243,806	241,734	239,375	0.9%	1.0%
Passenger load factor (percent) ^(c)	82.6	82.3	83.3	0.3pts	(1.0)pts
Yield (cents) ^(d)	14.52	14.02	14.56	3.5%	(3.7)%
Passenger revenue per available seat mile (cents) ^(e)	11.99	11.55	12.13	3.9%	(4.8)%
Operating cost per available seat mile (cents) ^(f)	12.96	11.94	12.03	8.6%	(0.8)%
Aircraft at end of period	948	930	946	1.9%	(1.7)%
Fuel consumption (gallons in millions)	3,579	3,596	3,611	(0.5)%	(0.4)%
Average aircraft fuel price including related taxes (dollars per gallon)	1.71	1.41	1.72	21.4%	(18.2)%
Full-time equivalent employees at end of period	103,100	101,500	98,900	1.6%	2.6%

Total Mainline and Regional
Revenue passenger miles (millions) ^(a)	226,346	223,477	223,010	1.3%	0.2%
Available seat miles (millions) ^(b)	276,493	273,410	268,736	1.1%	1.7%
Passenger load factor (percent) ^(c)	81.9	81.7	83.0	0.2pts	(1.3)pts
Yield (cents) ^(d)	15.96	15.47	15.92	3.2%	(2.8)%
Passenger revenue per available seat mile (cents) ^(e)	13.07	12.65	13.21	3.3%	(4.3)%
Total revenue per available seat mile (cents) ^(g)	15.27	14.70	15.25	3.9%	(3.7)%
Aircraft at end of period	1,545	1,536	1,533	0.6%	0.2%
Fuel consumption (gallons in millions)	4,352	4,347	4,323	0.1%	0.5%
Average aircraft fuel price including related taxes (dollars per gallon)	1.73	1.42	1.72	21.4%	(17.6)%
Full-time equivalent employees at end of period ^(h)	126,600	122,300	118,500	3.5%	3.2%



			Increase (Decrease) vs. Year Ended December 31, 2016
	Year Ended December 31, 2017		Passenger Revenue	RPMs	ASMs	Load Factor	Passenger Yield	PRASM
	(In millions)
Mainline passenger	$	29,238	4.8%	1.2%	0.9%	0.3pts	3.5%	3.9%
Regional passenger	6,895		3.4%	2.2%	3.2%	(0.7)pts	1.2%	0.2%
Total passenger revenues	$	36,133	4.5%	1.3%	1.1%	0.2pts	3.2%	3.3%



			Increase (Decrease) vs. Year Ended December 31, 2015
	Year Ended December 31, 2016		Passenger Revenue	RPMs	ASMs	Load Factor	Passenger Yield	PRASM
	(In millions)
Mainline passenger	$	27,909	(3.9)%	(0.2)%	1.0%	(1.0)pts	(3.7)%	(4.8)%
Regional passenger	6,670		3.0%	3.9%	7.9%	(3.0)pts	(0.9)%	(4.5)%
Total passenger revenues	$	34,579	(2.6)%	0.2%	1.7%	(1.3)pts	(2.8)%	(4.3)%



Period	Per share		For stockholders of record as of	Payable on	Total (millions)
First Quarter	$	0.10	February 13, 2017	February 27, 2017	$	51
Second Quarter	0.10		May 16, 2017	May 30, 2017	50
Third Quarter	0.10		August 14, 2017	August 28, 2017	49
Fourth Quarter	0.10		November 13, 2017	November 27, 2017	48
Total	$	0.40			$	198



	2017		2016
Pension weighted average discount rate ⁽¹⁾	3.80	%	4.30	%
Retiree medical and other postretirement benefits weighted average discount rate ⁽¹⁾	3.60	%	4.10	%
Expected rate of return on plan assets ⁽²⁾	8.00	%	8.00	%
Weighted average health care cost trend rate assumed for next year ⁽³⁾:
Initial	4.19	%	4.25	%
Ultimate (2025)	3.76	%	3.77	%
Pilot Retirement Age	62		62



				New Revenue Standard						New Retirement Standard
	As Reported			Deferred Revenue Method			Reclassifications			Reclassifications			As Recast
Operating revenues:
Passenger	$	36,133		$	311		$	2,687		$	—		$	39,131
Cargo	800			—			90			—			890
Other	5,274			—			(2,673		)	—			2,601
Total operating revenues	42,207			311			104			—			42,622
Total operating expenses	38,149			—			104			138			38,391
Operating income	4,058			311			—			(138		)	4,231
Total nonoperating expense, net	(974		)	—			—			138			(836		)
Income before income taxes	3,084			311			—			—			3,395
Income tax provision ⁽¹⁾	1,165			948			—			—			2,113
Net income	$	1,919		$	(637	)	$	—		$	—		$	1,282
Diluted earnings per common share	$	3.90											$	2.61



	Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Deficit)			Total
Balance at December 31, 2014	$	7		$	15,135		$	(4,559	)	$	(8,562	)	$	2,021
Net income	—			—			—			7,610			7,610
Changes in pension, retiree medical and other postretirement benefits liability	—			—			(159		)	—			(159		)
Net changes in fair value of derivative financial instruments	—			—			(9		)	—			(9		)
Cash tax withholding on shares issued	—			(306		)	—			—			(306		)
Purchase and retirement of 85,141,691 shares of AAG common stock	(1		)	(3,585		)	—			—			(3,586		)
Dividends declared on common stock ($0.40 per share)	—			—			—			(278		)	(278		)
Issuance of 12,289,537 shares of common stock pursuant to employee stock plans	—			—			—			—			—
Settlement of single-dip unsecured claims held in distributed claims reserve	—			63			—			—			63
Share-based compensation expense	—			284			—			—			284
Change in unrealized loss on investments	—			—			(5		)	—			(5		)
Balance at December 31, 2015	6			11,591			(4,732		)	(1,230		)	5,635
Net income	—			—			—			2,676			2,676
Changes in pension, retiree medical and other postretirement benefits liability	—			—			(564		)	—			(564		)
Non-cash tax benefit	—			—			203			—			203
Cash tax withholding on shares issued	—			(56		)	—			—			(56		)
Purchase and retirement of 119,823,621 shares of AAG common stock	(1		)	(4,415		)	—			—			(4,416		)
Dividends declared on common stock ($0.40 per share)	—			—			—			(224		)	(224		)
Issuance of 2,506,067 shares of common stock pursuant to employee stock plans	—			—			—			—			—
Settlement of single-dip unsecured claims held in distributed claims reserve	—			3			—			—			3
Share-based compensation expense	—			100			—			—			100
Impact of adoption of Accounting Standards Update (ASU) 2016-09 related to share-based compensation (See Note 14)	—			—			—			418			418
Change in unrealized loss on investments	—			—			10			—			10
Balance at December 31, 2016	5			7,223			(5,083		)	1,640			3,785
Net income	—			—			—			1,919			1,919
Changes in pension, retiree medical and other postretirement benefits liability	—			—			(117		)	—			(117		)
Non-cash tax benefit	—			—			47			—			47
Cash tax withholding on shares issued	—			(51		)	—			—			(51		)
Purchase and retirement of 33,953,127 shares of AAG common stock	—			(1,563		)	—			—			(1,563		)
Dividends declared on common stock ($0.40 per share)	—			—			—			(198		)	(198		)
Issuance of 2,166,861 shares of common stock pursuant to employee stock plans	—			—			—			—			—
Settlement of single-dip unsecured claims held in distributed claims reserve	—			15			—			—			15
Share-based compensation expense	—			90			—			—			90
Change in unrealized loss on investments	—			—			(1		)	—			(1		)
Balance at December 31, 2017	$	5		$	5,714		$	(5,154	)	$	3,361		$	3,926



2013 Revolving Facility	$	1,200
2014 Revolving Facility	1,000
April 2016 Revolving Facility	300
Total	$	2,500



2018	$	2,598
2019	2,868
2020	4,069
2021	2,856
2022	1,288
2023 and thereafter	11,622
Total	$	25,301



	2016-3 EETCs
	Series AA	Series A	Series B
Aggregate principal issued	$558 million	$256 million	$193 million
Fixed interest rate per annum	3.00%	3.25%	3.75%
Maturity date	October 2028	October 2028	October 2025



	2017-1 EETCs
	Series AA	Series A	Series B
Aggregate principal issued	$537 million	$248 million	$198 million
Fixed interest rate per annum	3.65%	4.00%	4.95%
Maturity date	February 2029	February 2029	February 2025



	2017-2 EETCs
	Series AA	Series A	Series B
Aggregate principal issued	$545 million	$252 million	$221 million
Remaining escrowed proceeds	$152 million	$70 million	$61 million
Fixed interest rate per annum	3.35%	3.60%	3.70%
Maturity date	October 2029	October 2029	October 2025



	6.125% Senior Notes	5.50% Senior Notes	4.625% Senior Notes
Aggregate principal issued and outstanding	$500 million	$750 million	$500 million
Maturity date	June 2018	October 2019	March 2020
Fixed interest rate per annum	6.125%	5.50%	4.625%
Interest payments	Semi-annually in arrears in June and December	Semi-annually in arrears in April and October	Semi-annually in arrears in March and September



	December 31, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	25,065	$	25,848	$	24,344	$	24,983



Net actuarial loss (gain)	$	5,351	$	5,484	$	(388	)	$	(430	)
Prior service cost (benefit)	160		188		(600		)	(837		)
Total accumulated other comprehensive loss (income), pre-tax	$	5,511	$	5,672	$	(988	)	$	(1,267	)



	1% Increase		1% Decrease
Increase (decrease) on 2017 service and interest cost	$	2	$	(2	)
Increase (decrease) on benefit obligation as of December 31, 2017	54		(51		)



	Private Equity Partnerships			Insurance Group Annuity Contracts
Beginning balance at December 31, 2016	$	21		$	2
Actual loss on plan assets:
Relating to assets still held at the reporting date	(4		)	—
Purchases	1			—
Sales	(1		)	—
Transfers out	(3		)	—
Ending balance at December 31, 2017	$	14		$	2



	Private Equity Partnerships			Insurance Group Annuity Contracts
Beginning balance at December 31, 2015	$	16		$	2
Actual return on plan assets:
Relating to assets sold during the period	7			—
Purchases	7			—
Sales	(9		)	—
Ending balance at December 31, 2016	$	21		$	2



	Pension, Retiree Medical and Other Postretirement Benefits			Unrealized Gain (Loss) on Investments			Income Tax Benefit (Provision) ⁽¹⁾				Total
Balance at December 31, 2015	$	(3,842	)	$	(10	)	$	(880	)		$	(4,732	)
Other comprehensive income (loss) before reclassifications	(462		)	10			166				(286		)
Amounts reclassified from AOCI	(102		)	—			37			⁽²⁾	(65		)
Net current-period other comprehensive income (loss)	(564		)	10			203				(351		)
Balance at December 31, 2016	(4,406		)	—			(677		)		(5,083		)
Other comprehensive income (loss) before reclassifications	(30		)	(1		)	15				(16		)
Amounts reclassified from AOCI	(87		)	—			32			⁽²⁾	(55		)
Net current-period other comprehensive income (loss)	(117		)	(1		)	47				(71		)
Balance at December 31, 2017	$	(4,523	)	$	(1	)	$	(630	)		$	(5,154	)