UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 20212022
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From                     to
Commission file number 1-8400
American Airlines Group Inc.
(Exact name of registrant as specified in its charter)
 
Delaware75-1825172
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1 Skyview Drive,Fort Worth,Texas76155(682)278-9000
(Address of principal executive offices, including zip code)(Registrant’s telephone number, including area code)
Commission file number 1-2691
American Airlines, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware13-1502798
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1 Skyview Drive,Fort Worth,Texas76155(682)278-9000
(Address of principal executive offices, including zip code)(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value per share AAL The Nasdaq Global Select Market
Preferred Stock Purchase Rights—(1)
(1)Attached to the Common Stock
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
American Airlines Group Inc.☒Yes ☐No
American Airlines, Inc.☒Yes ☐No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 
American Airlines Group Inc.☒Yes ☐No
American Airlines, Inc.☒Yes ☐No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
American Airlines Group Inc.☒Large accelerated filer☐Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company
American Airlines, Inc.☐Large accelerated filer☐Accelerated filer
☒

Non-accelerated filer☐Smaller reporting company☐Emerging growth company
If an emerging growth company, indicate by checkmarkcheck mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
American Airlines Group Inc.☐
American Airlines, Inc.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
American Airlines Group Inc.☐Yes ☒No
American Airlines, Inc.☐Yes☒No
As of July 16, 2021,15, 2022, there were 647,457,831649,845,927 shares of American Airlines Group Inc. common stock outstanding.
As of July 16, 2021,15, 2022, there were 1,000 shares of American Airlines, Inc. common stock outstanding, all of which were held by American Airlines Group Inc.


American Airlines Group Inc.
American Airlines, Inc.
Form 10-Q
Quarterly Period Ended June 30, 20212022
Table of Contents
  Page
PART I: FINANCIAL INFORMATION
Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II: OTHER INFORMATION
Item 1.
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Item 1A.
8469
Item 6.
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1

General
This report is filed by American Airlines Group Inc. (AAG) and its wholly-owned subsidiary American Airlines, Inc. (American). References in this report to “we,” “us,” “our,” the “Company” and similar terms refer to AAG and its consolidated subsidiaries. References in this report to “mainline” refer to the operations of American only and exclude regional operations.
Glossary of Terms
For the convenience of the reader, the definitions of certain capitalized industry and other terms used in this report have been consolidated into a Glossaryglossary beginning on page 5.
Note Concerning Forward-Looking Statements
Certain of the statements contained in this report should be considered forward-looking statements within the meaning of the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “would,” “continue,” “seek,” “target,” “guidance,” “outlook,” “if current trends continue,” “optimistic,” “forecast” and other similar words. Such statements include, but are not limited to, statements about our plans, objectives, expectations, intentions, estimates and strategies for the future, the continuing availability of borrowings under revolving lines of credit, and other statements that are not historical facts. These forward-looking statements are based on our current objectives, beliefs and expectations, and they are subject to significant risks and uncertainties that may cause actual results and financial position and timing of certain events to differ materially from the information in the forward-looking statements. These risks and uncertainties include, but are not limited to, those described below under Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Part II, Item 1A. Risk Factors and other risks and uncertainties listed from time to time in our filings with the Securities and Exchange Commission (the SEC).
All of the forward-looking statements are qualified in their entirety by reference to the factors discussed in Part II, Item 1A. Risk Factors and elsewhere in this report. There may be other factors of which we are not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ materially from those discussed. In particular, the consequences of the coronavirus (COVID-19) outbreak and subsequent volatility in demand for air travel due to economic conditions and the travel industry in general and our financial position and operating results in particular have been material, are changing rapidly, and cannot be predicted. We do not assume any obligation to publicly update or supplement any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting such statements other than as required by law. Any forward-looking statements speak only as of the date of this report or as of the dates indicated in the statements.
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Summary of Risk Factors
Our business is subject to a number of risks and uncertainties that may affect our business, results of operations and financial condition, or the trading price of our common stock or other securities. We caution the reader that these risk factors may not be exhaustive. We operate in a continually changing business environment, and new risks and uncertainties emerge from time to time. Management cannot predict such new risks and uncertainties, nor can it assess the extent to which any of the risk factors below or any such new risks and uncertainties, or any combination thereof, may impact our business. These risks are more fully described in Part II, Item 1A. Risk Factors. These risks include, among others, the following:
Risks Related to our Business
•The outbreak and global spread of COVID-19 hasand government-imposed measures to prevent or reduce its spread have resulted in a severe declinesignificant volatility in demand for air travel, the impacts of which hashave and will continue to adversely impact our business, operating results, financial condition and liquidity.
•Downturns in economic conditions and related depressed demand for air travel could adversely affect our business.
•We will need to obtain sufficient financing or other capital to operate successfully.
•Our high level of debt and other obligations may limit our ability to fund general corporate requirements and obtain additional financing, may limit our flexibility in responding to competitive developments and cause our business to be vulnerable to adverse economic and industry conditions.
•We have significant pension and other postretirement benefit funding obligations, which may adversely affect our liquidity, results of operations and financial condition.
•If our financial condition worsens, provisions in our credit card processing and other commercial agreements may adversely affect our liquidity.
•The loss of key personnel upon whom we depend to operate our business or the inability to attract and develop additional qualified personnel could adversely affect our business.
•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.
•Union disputes, employee strikes and other labor-related disruptions, or our inability to otherwise maintain labor costs at competitive levels may adversely affect our operations and financial performance.
•If we encounter problems with any of our third-party regional operators or third-party service providers, our operations could be adversely affected by a resulting decline in revenue or negative public perception about our services.
•Any damage to our reputation or brand image could adversely affect our business or financial results.
•We face challenges in integrating our computer, communications and other technology systems.
•Changes to our business model that are designed to increase revenues may not be successful and may cause operational difficulties or decreased demand.
•Our intellectual property rights, particularly our branding rights, are valuable, and any inability to protect them may adversely affect our business and 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.
•Our ability to utilize our NOLs and other carryforwards may be limited.
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•Our ability to utilize our NOL Carryforwards may be limited.
•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.
Risks Related to the Airline Industry
•The airline industry is intensely competitive and dynamic.
•The commercial relationships that we have with other airlines,companies, including any related equity investment,investments, may not produce the returns or results we expect.
•Our business is very dependent on the price and availability of aircraft fuel and 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 impact on consumer demand, our operating results and liquidity.
•Our business is subject to extensive government regulation, which may result in increases in our costs, disruptions to our operations, limits on our operating flexibility, reductions in the demand for air travel, and competitive disadvantages.
•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.
•We may be adversely affected by conflicts overseas or terrorist attacks; the travel industry continues to face ongoing security concerns.
•We are subject to risks associated with climate change, including increased regulation of our CO2 emissions, changing consumer preferences and the potential increased impacts of severe weather events on our operations and infrastructure.
•A shortage of pilots or other personnel could materially adversely affect our business.
•We depend on a limited number of suppliers for aircraft, aircraft engines and parts.
•Delays in scheduled aircraft deliveries or other loss of anticipated fleet capacity, and failure of new aircraft to perform as expected, may adversely impact our business, results of operations and financial condition.
•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.
•Evolving data security and privacy requirements could increase our costs, and any significant data security or privacy incident could disrupt our operations, harm our reputation, expose us to legal risks and otherwise materially adversely affect our business, results of operations and financial condition.
•We rely on third-party distribution channels and must manage effectively the costs, rights and functionality of these channels.
•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.
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GLOSSARY OF TERMS
“2013 Credit Agreement” means the Amended and Restated Credit and Guaranty Agreement dated as of May 21, 2015, among American, AAG, the lenders from time to time party thereto, Deutsche Bank AG New York Branch, as administrative agent, and certain other parties thereto, as amended.
“2013 Revolving Facility” means the $750 million revolving credit facility provided for by the 2013 Credit Agreement.
“2013 Term Loan Facility” means the $1.9 billion term loan facility provided for under the 2013 Credit Agreement.
“2014 Credit Agreement” means the Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015, among American, AAG, the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties thereto, as amended.
“2014 Revolving Facility” means the $1.6 billion revolving credit facility provided for by the 2014 Credit Agreement.
“2014 Term Loan Facility” means the $1.2 billion term loan facility provided for by the 2014 Credit Agreement.
“20202021 Form 10-K” means AAG’s and American’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.
“2021-1 Aircraft” means the 26 aircraft financed or to be financed by American under the 2021-1 Aircraft EETCs.
“2021-1 Aircraft EETCs” means the two pass-through trusts created by American in November 2021 that have issued approximately $960 million aggregate face amount of Series 2021-1 Class A and Class B EETCs.
“2026 Notes” means the AAdvantage Issuers' 5.50% Senior Secured Notessenior secured notes due 2026.
“2029 Notes” means the AAdvantage Issuers' 5.75% Senior Secured Notessenior secured notes due 2029.
“AAdvantage” means the AAdvantage® frequent flyer program.
“AAdvantage Agreements” means the AAdvantage program agreements provided as collateral under the AAdvantage Financing.
“AAdvantage Collateral” means the AAdvantage Agreements (including all payments thereunder) and rights under an intercompany agreement and certain IP Licenses, certain rights under the AAdvantage program, certain deposit accounts that will receive cash under the AAdvantage Agreements, certain reserve accounts, the equity of each of Loyalty Issuer and the SPV Guarantors and substantially all other assets of Loyalty Issuer and the SPV Guarantors.
“AAdvantage Financing” means the AAdvantage2026 Notes, the 2029 Notes and the AAdvantage Term Loan Facility.
“AAdvantage Financing Closing Date” means March 24, 2021.
“AAdvantage Guarantees” means the AAdvantage Notes Guarantees, together with the full and unconditional guarantee of the AAdvantage Loans by the AAdvantage Guarantors.
“AAdvantage Guarantors” means the SPV Guarantors and AAG.
“AAdvantage Indenture” means the indenture, dated as of March 24, 2021, by and among the AAdvantage Issuers, the AAdvantage Guarantors and Wilmington Trust, National Association, as trustee and as collateral custodian.
“AAdvantage Issuers” means the Loyalty Issuer and American.
“AAdvantage Loans” means the $3.5 billion of term loans provided pursuant to the AAdvantage Term Loan Facility.
“AAdvantage Note Guarantees” means the full and unconditional guarantee of the AAdvantage Notes by AAG, AAdvantage Holdings 1, Ltd. and HoldCo2.
“AAdvantage Notes” means, collectively, the 2026 Notes and the 2029 Notes.
“AAdvantage Payment Date” means, with respect to the payment of interest on the AAdvantage Notes and AAdvantage Loans, the 20th day of each January, April, July and October.
“AAdvantage Term Loan Facility” means the $3.5 billion term loan facility provided pursuant to the term loan credit and guaranty agreement, dated as of March 24, 2021, with Barclays Bank PLC, as administrative agent, Wilmington Trust, National Association, as collateral administrator, and the lenders party thereto.
“AAG”, “we”, “us”, “our” and similar terms means American Airlines Group Inc. and its consolidated subsidiaries.
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“American” means American Airlines, Inc., a wholly-owned subsidiary of AAG.
“American Eagle” means our regional carriers, including our wholly-owned regional carriers Envoy, PSA and Piedmont, as well as third-party regional carriers including Mesa, Republic and SkyWest.
“AMR” or “AMR Corporation” means AMR Corporation and is used to reference AAG during the period of time prior to its emergence from Chapter 11 and the Merger.
“AOCI” means accumulated other comprehensive income (loss).
“April 2016 Credit Agreement” means the Credit and Guaranty Agreement, dated as of April 29, 2016, among American, AAG, the lenders from time to time party thereto, Barclays Bank PLC, as administrative agent, and certain other parties thereto, as amended.
“April 2016 Revolving Facility” means the $450 million revolving credit facility provided for by the April 2016 Credit Agreement.
“April 2016 Spare Parts Term Loan Facility” means the $1.0 billion term loan facility provided for by the April 2016 Credit Agreement.
“ARP” means the American Rescue Plan Act of 2021.
“ASM” means available seat mile and is a basic measure of production. One ASM represents one seat flown one mile.
“ASU” means Accounting Standards Update.
“ATC system” means the U.S. National Airspace System.
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“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of New York.
“Boeing” means The Boeing Company.
“Bylaws” means AAG’s Amended and Restated Bylaws, as amended.
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act.
“CASM” means total operating cost per available seat mile and is equal to total operating expenses divided by ASMs.
“CBAs” means collective bargaining agreements.
“CEO” means Chief Executive Officer.
“CFO” means Chief Financial Officer.
“Chapter 11 Cases” means the voluntary petitions for relief filed on November 29, 2011 by the Debtors.
“China Southern Airlines” means China Southern Airlines Company Limited.
“CMA” means the United Kingdom Competition and Markets Authority.
“CO2” means carbon dioxide.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” means AAG and its consolidated subsidiaries.
“Convertible Notes” means AAG’s 6.50% convertible senior notes due 2025.
“Convertible Notes Indenture” means the indenture, dated as of June 25, 2020, between AAG and the Convertible Notes Trustee, as supplemented by the first supplemental indenture, dated as of June 25, 2020, among AAG, American and the Convertible Notes Trustee.
“Convertible Notes Trustee” means Wilmington Trust, National Association, as trustee with respect to the Convertible Notes.
“CORSIA” means the Carbon Offsetting and Reduction Scheme for International Aviation.
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Table“COVID-19” refers to a respiratory illness first detected in 2019 and the ensuing global pandemic that remains ongoing as of Contents
“COVID-19” means coronavirus.the date of this report.
“DCA” means Ronald Reagan Washington National Airport.
“DC Court” means the Federal District Court for the District of Columbia.
“Debtors” means AMR, American, and certain of AMR’s other direct and indirect domestic subsidiaries.
“December 2016 Credit Agreement” means the Credit and Guaranty Agreement dated as of December 15, 2016, among American, AAG, the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties thereto, as amended.
“December 2016 Credit Facilities” means, collectively, the December 2016 Term Loan Facility and the revolving credit facility that may be established under the December 2016 Credit Agreement and the December 2016 Term Loan Facility provided for by the December 2016 Credit Agreement.
“December 2016 Term Loan Facility” means the $1.2 billion term loan facility provided for under the December 2016 Credit Agreement.
“Disputed Claims Reserve”DOJ” means a reserve established by the Bankruptcy Court, pursuant to the Plan, to hold sharesUnited States Department of AAG common stock for issuance to disputed claimholders at the Effective Date.Justice.
“DOT” means the U.S.United States Department of Transportation.
“DOT Agreement” means the agreement that had been reached between the DOT, American and JetBlue in January 2021.
“EC” means the European Commission.
“EEA” means European Economic Area.
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“EETC” means enhanced equipment trust certificate.
“Effective Date” means December 9, 2013.
“Envoy” means Envoy Air Inc.
“EPA” means the U.S. Environmental Protection Agency.
“EPS” means earnings (loss) per common share.
“ETS” means EU Emissions Trading System.
“EU” means European Union.
“EWR”"EU-UK Trade and Cooperation Agreement" means Newark Liberty International Airport.the trade and cooperation agreement between the EU and United Kingdom.
“Exchange Act” means Securities Exchange Act of 1934, as amended.
“FAA” means Federal Aviation Administration.
“GAAP” means generally accepted accounting principles in the U.S.
“GDSs”GDS” means global distribution systems.system.
“GHG” means greenhouse gas.
“GOL” means GOL Linhas Aéreas Inteligentes S.A.
“holdback” means an amount of cash held by our credit card processors in certain circumstances (including, with respect to certain agreements, our failure to maintain certain levels of liquidity).
“HoldCo2” means AAdvantage Holdings 2, Ltd., a Cayman Islands exempted company incorporated with limited liability and an indirect wholly owned subsidiary of American and the direct parent of Loyalty Issuer.
“HoldCo2 License” means the exclusive, irrevocable (subject to certain termination rights), perpetual, worldwide, royalty-bearing license to use the Transferred AAdvantage IP granted to HoldCo2 from Loyalty Issuer.
“IAM” means International Association of Machinists & Aerospace Workers.
“IAM Pension Fund” means the IAM National Pension Fund.
“ICAO” means International Civil Aviation Organization.
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“IP Licenses” means the HoldCo2 License and the exclusive, irrevocable (subject to certain termination rights), perpetual, worldwide, royalty-bearing sublicense to use the Transferred AAdvantage IP granted by HoldCo2 to American.
“IP Notes” means American’s $1.0 billion in initial principal amount of 10.75% senior secured IP notes.
“Installment” means the financial assistance payment, in installments, by Treasury pursuant to the PSP2 Agreement.
“JetBlue” means JetBlue Airways Corporation.
“JFK” means John F. Kennedy International Airport.
“LAX” means Los Angeles International Airport.
“LGA/DCA Notes” means American’s $200 million in initial principal amount of 10.75% senior secured LGA/DCA notes.
“LGA” means LaGuardia Airport.
“LGW” or “London Gatwick” means London Gatwick Airport.
“LHR” or “London Heathrow” means London Heathrow Airport.
“LIBOR” means the London interbank offered rate for deposits of U.S. dollars.
“Loyalty Issuer” means AAdvantage Loyalty IP Ltd., a Cayman Islands exempted company incorporated with limited liability and an indirect wholly owned subsidiary of American.
“LTV” means loan to value ratio.
“Mainline” means the operations of American and excludes regional operations.
“Merger” means the merger of US Airways Group and AMR Corporation on December 9, 2013.
“Mesa” means Mesa Airlines, Inc.
"NEA" means Northeast Alliance arrangement between American and JetBlue.
“NMB” means National Mediation Board.
“NOL Carryforwards” means a deduction in any taxable year for net operating losses carried over from prior taxable years.
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“NOLs” means net operating losses.
“ORD” means Chicago O’Hare International Airport.
“OSHA” means Occupational Health and Safety Administration.
“OTAs” means online travel agents.
“Passenger load factor” means the percentage of available seats that are filled with revenue passengers.
“PEB” means Presidential Emergency Board.
“PFAS” means per- and polyfluoroalkyl substances.
“Piedmont” means Piedmont Airlines, Inc.
“Plan” means the Debtors’ fourth amended joint plan of reorganization.
“PRASM” means passenger revenue per available seat mile and is equal to passenger revenues divided by ASMs.
“PSA” means PSA Airlines, Inc.
“PSP1” means the payroll support program established under the CARES Act.
“PSP1 Agreement” means the Payroll Support Program Agreement entered into by the Subsidiaries with Treasury on April 20, 2020.
“PSP1 Promissory Note” means the promissory note issued to Treasury in connection with PSP1.
“PSP1 Warrant Agreement” means the agreement entered into between AAG and Treasury in connection with the PSP1 Agreement, pursuant to which AAG issued PSP1 Warrants to Treasury to purchase up to an aggregate of approximately 14.114.0 million shares of AAG common stock.
“PSP1 Warrants” means the warrants issued or to be issued to Treasury pursuant to the PSP1 Warrant Agreement.
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“PSP2” means the payroll support program established under the PSP Extension Law.
“PSP2 Agreement” means the Payroll Support Program Extension Agreement entered into by the Subsidiaries with Treasury on the PSP2 Closing Date.
“PSP2 Closing Date” means January 15, 2021.
“PSP2 Financial Assistance” means the portion of financial assistance received from Treasury pursuant to the PSP2 Agreement that is not allocated to the PSP2 Warrants or PSP2 Promissory Note.
“PSP2 Maturity Date” means the tenth anniversary of the PSP2 Closing Date.
“PSP2 Promissory Note” means the promissory note issued to Treasury in connection with PSP2.
“PSP2 Warrant Agreement” means the agreement entered into between AAG and Treasury in connection with the PSP2 Agreement, pursuant to which AAG issued PSP2 Warrants to Treasury to purchase up to an aggregate of approximately 6.6 million shares of AAG common stock.
“PSP2 Warrant Shares” means up to an aggregate of approximately 6.6 million shares of AAG common stock which Treasury will have the right to purchase pursuant to PSP2 Warrants issued or to be issued by AAG in accordance with the PSP2 Warrant Agreement.
“PSP2 Warrants” means the warrants issued or to be issued to Treasury pursuant to the PSP2 Warrant Agreement.
“PSP3” means the payroll support program established under the ARP.
“PSP3 Agreement” means the Payroll Support Program Agreement entered into by the Subsidiaries with Treasury on the PSP3 Closing Date.
“PSP3 Closing Date” means April 23, 2021.
“PSP3 Financial Assistance” means the portion of financial assistance received from Treasury pursuant to the PSP3 Agreement that is not allocated to the PSP3 Warrants or PSP3 Promissory Note.
“PSP3 Installment” means the financial assistance payment, in installments, by Treasury pursuant to the PSP3 Agreement.
“PSP3 Maturity Date” means the tenth anniversary of the PSP3 Closing Date.
“PSP3 Promissory Note” means the promissory note issued to Treasury in connection with PSP3.
“PSP3 Warrant Agreement” means the agreement entered into between AAG and Treasury in connection with the PSP3 Agreement, pursuant to which AAG issued PSP3 Warrants to Treasury to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock.
“PSP3 Warrant Shares” means up to an aggregate of approximately 4.4 million shares of AAG common stock which Treasury will have the right to purchase pursuant to PSP3 Warrants issued or to be issued by AAG in accordance with the PSP3 Warrant Agreement.
“PSP3 Warrants” means the warrants issued or to be issued to Treasury pursuant to the PSP3 Warrant Agreement.
“PSP Extension Law” means Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021.
“Rehabilitation Plan” means the rehabilitation plan adopted by the IAM Pension Fund on April 17, 2019.
“Republic” means Republic Airways Inc.
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“RLA” means Railway Labor Act.
“ROU” means right-of-use.
“RPM” or “RPMs” means revenue passenger mile or miles and is a basic measure of sales volume. One RPM represents one passenger flown one mile.
“SEA”SAF” means Seattle-Tacoma International Airport.sustainable aviation fuel.
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“SAIB” means special airworthiness information bulletin.
“SEC” means Securities and Exchange Commission.
“Section 382” means Section 382 of the Internal Revenue Code.
“Securities Act” means Securities Act of 1933, as amended.
“SkyWest” means SkyWest Airlines, Inc.
“slots” means landing and take-off rights and authorizations, as required by certain airports.
“SOFR” means the Secured Overnight Financing Rate.
“SPV Guarantors” means AAdvantage Holdings 1, Ltd. and HoldCo2.
“Subsidiaries” means American, Envoy, PSA and Piedmont, each a wholly-owned subsidiary of AAG.
“Terminal 8”Tax Benefits Preservation Plan” means the passenger terminal facility usedtax benefits preservation plan adopted by American at JFK.
“Transferred AAdvantage IP” means, amongthe Board of Directors of AAG in December 2021 in order to preserve the Company's ability to use its NOLs and certain other things, American’s rightstax attributes to certain data and other intellectual property used in the AAdvantage program (subject to certain exceptions).reduce potential future income tax obligations.
“TRASM” means the total revenue per available seat mile and is equal to the total revenues divided by total mainline and third-party regional carrier ASMs.
“Treasury” means the U.S. Department of the Treasury.
“Treasury Loan Agreement” means the Loan and Guarantee Agreement, dated as of September 25, 2020, between AAG, American and Treasury which provides for the Treasury Term Loan Facility.
“Treasury Loan Warrants” means the warrants issued or to be issued to Treasury pursuant to the Treasury Loan Warrant Agreement.
“Treasury Term Loan Facility” means the term loan facility provided for under the Treasury Loan Agreement.
“US Airways” means US Airways, Inc.
“US Airways Group” means US Airways Group, Inc. and its consolidated subsidiaries.
“USTR” means the Office of the U.S. Trade Representative.
“Withdrawal Agreement”Vertical” means the agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community.Vertical Aerospace Ltd.
“WTO” means World Trade Organization.
“Yield” means a measure of airline revenue derived by dividing passenger revenue by RPMs.
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PART I: FINANCIAL INFORMATION
This report on Form 10-Q is filed by both AAG and American and includes the Condensed Consolidated Financial Statements of each company in Item 1A and Item 1B, respectively.
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ITEM 1A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.
AMERICAN AIRLINES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share amounts)(Unaudited)
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
2021202020212020 2022202120222021
Operating revenues:Operating revenues:Operating revenues:
PassengerPassenger$6,545 $1,108 $9,724 $8,788 Passenger$12,223 $6,545 $20,041 $9,724 
CargoCargo326 130 641 277 Cargo328 326 692 641 
OtherOther607 384 1,121 1,072 Other871 607 1,588 1,121 
Total operating revenuesTotal operating revenues7,478 1,622 11,486 10,137 Total operating revenues13,422 7,478 22,321 11,486 
Operating expenses:Operating expenses:Operating expenses:
Aircraft fuel and related taxesAircraft fuel and related taxes1,611 309 2,644 2,092 Aircraft fuel and related taxes4,020 1,611 6,522 2,644 
Salaries, wages and benefitsSalaries, wages and benefits2,862 2,610 5,593 5,830 Salaries, wages and benefits3,235 2,862 6,389 5,593 
Regional expensesRegional expenses635 492 1,261 1,632 Regional expenses1,072 635 2,124 1,261 
Maintenance, materials and repairsMaintenance, materials and repairs459 287 835 915 Maintenance, materials and repairs647 459 1,264 835 
Other rent and landing feesOther rent and landing fees686 413 1,256 1,024 Other rent and landing fees694 686 1,372 1,256 
Aircraft rentAircraft rent356 334 706 669 Aircraft rent345 356 698 706 
Selling expensesSelling expenses277 57 427 442 Selling expenses504 277 836 427 
Depreciation and amortizationDepreciation and amortization481 499 959 1,059 Depreciation and amortization504 481 995 959 
Special items, netSpecial items, net(1,288)(1,494)(2,996)(362)Special items, net(5)(1,288)152 (2,996)
OtherOther958 601 1,675 1,870 Other1,389 958 2,675 1,675 
Total operating expensesTotal operating expenses7,037 4,108 12,360 15,171 Total operating expenses12,405 7,037 23,027 12,360 
Operating income (loss)Operating income (loss)441 (2,486)(874)(5,034)Operating income (loss)1,017 441 (706)(874)
Nonoperating income (expense):Nonoperating income (expense):Nonoperating income (expense):
Interest incomeInterest income5 10 8 31 Interest income29 5 37 8 
Interest expense, netInterest expense, net(486)(254)(856)(512)Interest expense, net(468)(486)(932)(856)
Other income (expense), net49 71 158 (34)
Other income, netOther income, net25 49 118 158 
Total nonoperating expense, netTotal nonoperating expense, net(432)(173)(690)(515)Total nonoperating expense, net(414)(432)(777)(690)
Income (loss) before income taxesIncome (loss) before income taxes9 (2,659)(1,564)(5,549)Income (loss) before income taxes603 9 (1,483)(1,564)
Income tax benefit(10)(592)(333)(1,241)
Income tax provision (benefit)Income tax provision (benefit)127 (10)(324)(333)
Net income (loss)Net income (loss)$19 $(2,067)$(1,231)$(4,308)Net income (loss)$476 $19 $(1,159)$(1,231)
Earnings (loss) per common share:Earnings (loss) per common share:Earnings (loss) per common share:
BasicBasic$0.03 $(4.82)$(1.92)$(10.08)Basic$0.73 $0.03 $(1.78)$(1.92)
DilutedDiluted$0.03 $(4.82)$(1.92)$(10.08)Diluted$0.68 $0.03 $(1.78)$(1.92)
Weighted average shares outstanding (in thousands):Weighted average shares outstanding (in thousands):Weighted average shares outstanding (in thousands):
BasicBasic644,123 428,807 639,366 427,260 Basic650,346 644,123 649,925 639,366 
DilutedDiluted656,372 428,807 639,366 427,260 Diluted718,532 656,372 649,925 639,366 
Cash dividends declared per common share$0 $0 $0 $0.10 

See accompanying notes to condensed consolidated financial statements.
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AMERICAN AIRLINES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)(Unaudited)
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Net income (loss)$476 $19 $(1,159)$(1,231)
Other comprehensive income (loss), net of tax:
Pension, retiree medical and other postretirement benefits28 39 56 106 
Investments(2)— (4)— 
Total other comprehensive income, net of tax26 39 52 106 
Total comprehensive income (loss)$502 $58 $(1,107)$(1,125)
See accompanying notes to condensed consolidated financial statements.
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AMERICAN AIRLINES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)BALANCE SHEETS
(In millions)(Unaudited)millions, except share and par value)
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Net income (loss)$19 $(2,067)$(1,231)$(4,308)
Other comprehensive income (loss), net of tax:
Pension, retiree medical and other postretirement benefits39 (4)106 (131)
Investments0 21 0 (1)
Total other comprehensive income (loss), net of tax39 17 106 (132)
Total comprehensive income (loss)$58 $(2,050)$(1,125)$(4,440)
June 30, 2022December 31, 2021
 (Unaudited) 
ASSETS
Current assets
Cash$401 $273 
Short-term investments12,121 12,158 
Restricted cash and short-term investments997 990 
Accounts receivable, net1,835 1,505 
Aircraft fuel, spare parts and supplies, net2,273 1,795 
Prepaid expenses and other898 615 
Total current assets18,525 17,336 
Operating property and equipment
Flight equipment38,754 37,856 
Ground property and equipment9,595 9,335 
Equipment purchase deposits617 517 
Total property and equipment, at cost48,966 47,708 
Less accumulated depreciation and amortization(18,972)(18,171)
Total property and equipment, net29,994 29,537 
Operating lease right-of-use assets7,510 7,850 
Other assets
Goodwill4,091 4,091 
Intangibles, net of accumulated amortization of $805 and $786, respectively2,079 1,988 
Deferred tax asset3,858 3,556 
Other assets1,906 2,109 
Total other assets11,934 11,744 
Total assets$67,963 $66,467 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Current maturities of long-term debt and finance leases$2,106 $2,489 
Accounts payable2,733 1,772 
Accrued salaries and wages1,505 1,489 
Air traffic liability8,969 6,087 
Loyalty program liability3,065 2,896 
Operating lease liabilities1,483 1,507 
Other accrued liabilities2,909 2,766 
Total current liabilities22,770 19,006 
Noncurrent liabilities
Long-term debt and finance leases, net of current maturities34,963 35,571 
Pension and postretirement benefits4,755 5,053 
Loyalty program liability6,189 6,239 
Operating lease liabilities6,313 6,610 
Other liabilities1,395 1,328 
Total noncurrent liabilities53,615 54,801 
Commitments and contingencies00
Stockholders’ equity (deficit)
Common stock, $0.01 par value; 1,750,000,000 shares authorized, 649,779,361 shares issued and outstanding at June 30, 2022; 647,727,595 shares issued and outstanding at December 31, 20216 6 
Additional paid-in capital7,259 7,234 
Accumulated other comprehensive loss(5,890)(5,942)
Retained deficit(9,797)(8,638)
Total stockholders’ deficit(8,422)(7,340)
Total liabilities and stockholders’ equity (deficit)$67,963 $66,467 
See accompanying notes to condensed consolidated financial statements.
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AMERICAN AIRLINES GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share and par value)
June 30, 2021December 31, 2020
 (Unaudited) 
ASSETS
Current assets
Cash$325 $245 
Short-term investments17,625 6,619 
Restricted cash and short-term investments999 609 
Accounts receivable, net1,249 1,342 
Aircraft fuel, spare parts and supplies, net1,789 1,614 
Prepaid expenses and other660 666 
Total current assets22,647 11,095 
Operating property and equipment
Flight equipment37,577 37,816 
Ground property and equipment9,132 9,194 
Equipment purchase deposits714 1,446 
Total property and equipment, at cost47,423 48,456 
Less accumulated depreciation and amortization(17,218)(16,757)
Total property and equipment, net30,205 31,699 
Operating lease right-of-use assets7,958 8,039 
Other assets
Goodwill4,091 4,091 
Intangibles, net of accumulated amortization of $765 and $745, respectively2,008 2,029 
Deferred tax asset3,631 3,239 
Other assets1,924 1,816 
Total other assets11,654 11,175 
Total assets$72,464 $62,008 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Current maturities of long-term debt and finance leases$2,798 $2,797 
Accounts payable2,172 1,196 
Accrued salaries and wages1,580 1,716 
Air traffic liability7,095 4,757 
Loyalty program liability2,632 2,033 
Operating lease liabilities1,587 1,651 
Other accrued liabilities3,657 2,419 
Total current liabilities21,521 16,569 
Noncurrent liabilities
Long-term debt and finance leases, net of current maturities37,201 29,796 
Pension and postretirement benefits6,627 7,069 
Loyalty program liability6,674 7,162 
Operating lease liabilities6,711 6,777 
Other liabilities1,397 1,502 
Total noncurrent liabilities58,610 52,306 
Commitments and contingencies00
Stockholders’ equity (deficit)
Common stock, $0.01 par value; 1,750,000,000 shares authorized, 647,446,499 shares issued and outstanding at June 30, 2021; 621,479,522 shares issued and outstanding at December 31, 20206 6 
Additional paid-in capital7,200 6,894 
Accumulated other comprehensive loss(6,997)(7,103)
Retained deficit(7,876)(6,664)
Total stockholders’ deficit(7,667)(6,867)
Total liabilities and stockholders’ equity (deficit)$72,464 $62,008 
See accompanying notes to condensed consolidated financial statements.
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AMERICAN AIRLINES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)(Unaudited)
Six Months Ended June 30, Six Months Ended June 30,
20212020 20222021
Net cash provided by (used in) operating activities$3,644 $(1,076)
Net cash provided by operating activitiesNet cash provided by operating activities$2,924 $3,644 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Capital expenditures, net of aircraft purchase deposit returnsCapital expenditures, net of aircraft purchase deposit returns118 (1,233)Capital expenditures, net of aircraft purchase deposit returns(1,405)118 
Airport construction projects, net of reimbursementsAirport construction projects, net of reimbursements(156)(77)
Proceeds from sale of property and equipmentProceeds from sale of property and equipment19 161 
Proceeds from sale-leaseback transactionsProceeds from sale-leaseback transactions163 376 Proceeds from sale-leaseback transactions— 163 
Proceeds from sale of property and equipment161 148 
Sales of short-term investmentsSales of short-term investments10,135 2,837 
Purchases of short-term investmentsPurchases of short-term investments(13,840)(7,936)Purchases of short-term investments(10,083)(13,840)
Sales of short-term investments2,837 2,131 
Increase in restricted short-term investmentsIncrease in restricted short-term investments(404)(386)Increase in restricted short-term investments(10)(404)
Purchase of equity investmentPurchase of equity investment(200)— 
Other investing activitiesOther investing activities(71)(61)Other investing activities— 6 
Net cash used in investing activitiesNet cash used in investing activities(11,036)(6,961)Net cash used in investing activities(1,700)(11,036)
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Payments on long-term debt and finance leasesPayments on long-term debt and finance leases(1,659)(5,040)
Proceeds from issuance of long-term debtProceeds from issuance of long-term debt12,096 9,464 Proceeds from issuance of long-term debt574 12,096 
Payments on long-term debt and finance leases(5,040)(2,477)
Shares withheld for taxes pursuant to employee stock plansShares withheld for taxes pursuant to employee stock plans(16)(13)
Proceeds from issuance of equityProceeds from issuance of equity460 1,527 Proceeds from issuance of equity— 460 
Deferred financing costsDeferred financing costs(166)(84)Deferred financing costs— (166)
Treasury stock repurchases and shares withheld for taxes pursuant to employee stock plans(13)(173)
Dividend payments0 (43)
Other financing activitiesOther financing activities121 0 Other financing activities6 121 
Net cash provided by financing activities7,458 8,214 
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities(1,095)7,458 
Net increase in cash and restricted cashNet increase in cash and restricted cash66 177 Net increase in cash and restricted cash129 66 
Cash and restricted cash at beginning of periodCash and restricted cash at beginning of period399 290 Cash and restricted cash at beginning of period408 399 
Cash and restricted cash at end of period (1)
Cash and restricted cash at end of period (1)
$465 $467 
Cash and restricted cash at end of period (1)
$537 $465 
Non-cash transactions:Non-cash transactions:Non-cash transactions:
Right-of-use (ROU) assets acquired through operating leasesRight-of-use (ROU) assets acquired through operating leases$706 $421 Right-of-use (ROU) assets acquired through operating leases$460 $706 
Property and equipment acquired through finance leasesProperty and equipment acquired through finance leases61 0 Property and equipment acquired through finance leases59 61 
Settlement of bankruptcy obligations0 56 
Deferred financing costs paid through issuance of debt0 17 
Supplemental information:Supplemental information:Supplemental information:
Interest paid, netInterest paid, net687 501 Interest paid, net870 687 
Income taxes paidIncome taxes paid1 2 Income taxes paid2 1 
(1)The following table provides a reconciliation of cash and restricted cash to amounts reported within the condensed consolidated balance sheets:
CashCash$325 $462 Cash$401 $325 
Restricted cash included in restricted cash and short-term investmentsRestricted cash included in restricted cash and short-term investments140 5 Restricted cash included in restricted cash and short-term investments136 140 
Total cash and restricted cashTotal cash and restricted cash$465 $467 Total cash and restricted cash$537 $465 
See accompanying notes to condensed consolidated financial statements.
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AMERICAN AIRLINES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(In millions, except share amounts)(Unaudited)
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Deficit		Total
Balance at December 31, 2020$6 $6,894 $(7,103)$(6,664)$(6,867)
Net loss— — — (1,250)(1,250)
Other comprehensive income, net— — 67 — 67 
Impact of adoption of Accounting Standards Update (ASU) 2020-06 related to convertible instruments (see Note 1(c))— (320)— 19 (301)
Issuance of 18,194,573 shares of AAG common stock pursuant to an at-the-market offering, net of offering costs— 316 — — 316 
Issuance of PSP2 Warrants (see Note 1(b))— 65 — — 65 
Issuance of 1,700,380 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes— (13)— — (13)
Share-based compensation expense— 38 — — 38 
Balance at March 31, 20216 6,980 (7,036)(7,895)(7,945)
Net income— — — 19 19 
Other comprehensive income, net— — 39 — 39 
Issuance of 5,956,191 shares of AAG common stock pursuant to an at-the-market offering, net of offering costs0 144 — — 144 
Issuance of PSP2 and PSP3 Warrants (see Note 1(b))— 56 — — 56 
Issuance of 115,833 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes— 0 — — 0 
Share-based compensation expense— 20 — — 20 
Balance at June 30, 2021$6 $7,200 $(6,997)$(7,876)$(7,667)
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Deficit		Total
Balance at December 31, 2021$6 $7,234 $(5,942)$(8,638)$(7,340)
Net loss— — — (1,635)(1,635)
Other comprehensive income, net— — 26 — 26 
Issuance of 1,770,173 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes— (14)— — (14)
Share-based compensation expense— 23 — — 23 
Balance at March 31, 20226 7,243 (5,916)(10,273)(8,940)
Net income— — — 476 476 
Other comprehensive income, net— — 26 — 26 
Issuance of 281,593 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes— (2)— — (2)
Share-based compensation expense— 18 — — 18 
Balance at June 30, 2022$6 $7,259 $(5,890)$(9,797)$(8,422)


























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AMERICAN AIRLINES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(In millions, except share amounts)(Unaudited)
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
(Deficit)
Total
Balance at December 31, 2019$4 $3,945 $(6,331)$2,264 $(118)
Net loss— — — (2,241)(2,241)
Other comprehensive loss, net— — (149)— (149)
Purchase and retirement of 6,378,025 shares of AAG common stock— (145)— — (145)
Dividends declared on AAG common stock ($0.10 per share)— — — (44)(44)
Issuance of 1,062,052 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes— (13)— — (13)
Settlement of single-dip unsecured claims held in Disputed Claims Reserve— 56 — — 56 
Share-based compensation expense— 18 — — 18 
Balance at March 31, 20204 3,861 (6,480)(21)(2,636)
Net loss— — — (2,067)(2,067)
Other comprehensive income, net— — 17 — 17 
Issuance of PSP1 Warrants— 55 — — 55 
Equity component of convertible debt issued, net of tax and offering costs— 320 — — 320 
Issuance of 85,215,000 shares of AAG common stock pursuant to a public stock offering, net of offering costs1 1,112 — — 1,113 
Issuance of 454,621 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes— (2)— — (2)
Share-based compensation expense— 31 — — 31 
Balance at June 30, 2020$5 $5,377 $(6,463)$(2,088)$(3,169)
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Deficit		Total
Balance at December 31, 2020$6 $6,894 $(7,103)$(6,664)$(6,867)
Net loss— — — (1,250)(1,250)
Other comprehensive income, net— — 67 — 67 
Impact of adoption of Accounting Standards Update 2020-06 related to convertible instruments— (320)— 19 (301)
Issuance of 18,194,573 shares of AAG common stock pursuant to an at-the-market offering, net of offering costs— 316 — — 316 
Issuance of PSP2 Warrants— 65 — — 65 
Issuance of 1,700,380 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes— (13)— — (13)
Share-based compensation expense— 38 — — 38 
Balance at March 31, 20216 6,980 (7,036)(7,895)(7,945)
Net income— — — 19 19 
Other comprehensive income, net— — 39 — 39 
Issuance of 5,956,191 shares of AAG common stock pursuant to an at-the-market offering, net of offering costs— 144 — — 144 
Issuance of PSP2 and PSP3 Warrants— 56 — — 56 
Issuance of 115,833 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes— — — — — 
Share-based compensation expense— 20 — — 20 
Balance at June 30, 2021$6 $7,200 $(6,997)$(7,876)$(7,667)
See accompanying notes to condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.
(Unaudited)
1. Basis of Presentation and Recent Accounting Pronouncements
(a) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of American Airlines Group Inc. (we, us, our and similar terms, or AAG) should be read in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020.2021. The accompanying unaudited condensed consolidated financial statements include the accounts of AAG and its wholly-owned subsidiaries. AAG’s principal subsidiary is American Airlines, Inc. (American). All significant intercompany transactions have been eliminated.
Management believes that all adjustments necessary for the fair presentation of results, consisting of normally recurring items, have been included in the unaudited condensed consolidated financial statements for the interim periods presented. 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, deferred tax assets, as well as pension and retiree medical and other postretirement benefits. Certain prior period amounts have been reclassified to conform to the current year presentation. See Note 10 for further information.
(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 travelspread. Ongoing global vaccination efforts and the corresponding lifting of government restrictions testing regimes, closing of borders, “stay at home” ordersin and business closures. Asbetween many markets resulted in a result, we have experienced an unprecedented declinesignificant and rapid recovery in the demand for air travel, which has resulted in a material deterioration in our revenues. While global vaccination efforts are underway and demand for air travel has begun to return, thetravel. The continued impact of the COVID-19 pandemic, including any increases in infection rates, new variants and renewed governmental action to slow the spread of COVID-19 such as has occurred throughout Western Europe and Latin America during the first six months of 2021, cannot be estimated.
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), Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (PSP Extension Law) and Section 7301 of the American Rescue Plan Act of 2021 (the ARP).
Capacity Reductions
Our capacity (as measured by available seat miles) continues to be significantly reduced compared to pre-COVID-19 pandemic levels, with flying duringtotal capacity in the second quarter of 20212022 down 24.6%8.5% as compared to the second quarter of 2019. Domestic capacity in the second quarter of 20212022 was down 12.8%6.6% while international capacity was down 46.5% versus12.1% as compared to the second quarter of 2019.
While demand for domestic and short-haul international markets has largely recovered to 2019 levels, uncertainty continues to exist.remains regarding the timing of a full recovery. We will continue to match our forward capacity with observed booking trends for future travel and make further adjustments to our capacity as needed.
Cost Reductions
17
We have reduced our 2021 operating expenditures as a result of permanent non-volume cost reductions and other efficiency measures. These reductions include labor productivity enhancements, management salaries and benefits and other permanent cost reductions. Also, an additional 1,600 represented team members opted in to a voluntary early retirement program, which occurred during the first quarter of 2021.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.
(Unaudited)
Liquidity
As of June 30, 2021, we had $21.3 billion in total available liquidity, consisting of $18.0 billion in unrestricted cash and short-term investments, $2.8 billion in an undrawn capacity under revolving credit facilities and a total of $470 million in undrawn short-term revolving and other facilities.
During the first six months of 2021, we completed the following financing transactions (see Note 5 for further information):
•issued $3.5 billion in aggregate principal amount of 5.50% Senior Secured Notes due 2026 and $3.0 billion in aggregate principal amount of 5.75% Senior Secured Notes due 2029 and entered into the $3.5 billion AAdvantage Term Loan Facility of which the full amount of term loans was drawn at closing;
•repaid in full $750 million under the 2013 Revolving Facility, $1.6 billion under the 2014 Revolving Facility and $450 million under the April 2016 Revolving Facility, all of which was borrowed in the second quarter of 2020 in response to the COVID-19 pandemic;
•repaid the $550 million of outstanding loans under the $7.5 billion secured term loan facility with the U.S. Department of the Treasury (Treasury) (the Treasury Loan Agreement) and terminated the Treasury Loan Agreement;
•issued 24.2 million shares of AAG common stock at an average price of $19.26 per share pursuant to an at-the-market offering for net proceeds of $460 million (approximately $650 million of at-the-market authorization remains available at June 30, 2021);
•issued approximately $150 million in special facility revenue bonds related to John F. Kennedy International Airport (JFK), of which $62 million was used to fund the redemption of other bonds related to JFK; and
•raised $163 million principally from aircraft sale-leaseback transactions.
In addition to the foregoing financings, during the first quarter of 2021, we received an aggregate of approximately $3.1 billion in financial assistance through the payroll support program (PSP2) established under the PSP Extension Law. In April 2021, we received an additional installment of $463 million for an aggregate $3.5 billion of such PSP2 financial assistance. In connection with our receipt of this financial assistance, AAG issued a promissory note (the PSP2 Promissory Note) to Treasury for $1.0 billion in aggregate principal amount and warrants to purchase up to an aggregate of approximately 6.6 million shares (the PSP2 Warrant Shares) of AAG common stock.
During the second quarter of 2021, we received an aggregate of approximately $3.3 billion in financial assistance through the payroll support program (PSP3) established under the ARP. In connection with our receipt of this financial assistance, AAG issued a promissory note (the PSP3 Promissory Note) to Treasury for $946 million in aggregate principal amount and warrants to purchase up to an aggregate of approximately 4.4 million shares (the PSP3 Warrant Shares) of AAG common stock. See below for further discussion on PSP2 and PSP3.
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 projected cash flows from operations.
PSP2
On January 15, 2021 (the PSP2 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 Extension Agreement (the PSP2 Agreement) with Treasury, with respect to PSP2 as 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.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.
(Unaudited)
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 Payroll Support Program Agreement entered into by the Subsidiaries with Treasury in connection with the payroll support program established under the CARES Act, 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 at least 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 us.
Pursuant to the PSP2 Agreement, Treasury provided us financial assistance in three installments (each prior installment and any future installment disbursement, an Installment) totaling approximately $3.5 billion in the aggregate, all of which was received as of June 30, 2021. As partial compensation to the U.S. Government for the provision of financial assistance under PSP2, AAG issued the PSP2 Promissory Note in the aggregate principal amount of $1.0 billion and issued warrants (each a PSP2 Warrant and, collectively, the PSP2 Warrants) to Treasury to purchase up to an aggregate of approximately 6.6 million shares of AAG common stock for an exercise price of $15.66 per share, subject to adjustment. See Note 5 for further information on the PSP2 Promissory Note and below for more information on the PSP2 Warrant Agreement and PSP2 Warrants.
For accounting purposes, the $3.5 billion of aggregate financial assistance we received pursuant to the PSP2 Agreement is allocated to the PSP2 Promissory Note, the PSP2 Warrants and the other PSP2 financial assistance (the PSP2 Financial Assistance). The aggregate principal amount of $1.0 billion of the PSP2 Promissory Note was recorded as unsecured long-term debt, and the total fair value of the PSP2 Warrants of $76 million, estimated using a Black-Scholes option pricing model, was recorded in stockholders' deficit in the condensed consolidated balance sheet. The remaining amount of approximately $2.4 billion of PSP2 Financial Assistance was recognized as a credit to special items, net in the condensed consolidated statement of operations primarily in the first quarter of 2021, the remaining period over which the continuation of payment of eligible employee wages, salaries and benefits was required. The third installment of PSP2 Financial Assistance was received and recognized as a credit to special items, net in the second quarter of 2021. For the three and six months ended June 30, 2021, $314 million and $2.4 billion of PSP2 Financial Assistance, respectively, was recognized as a credit to special items, net in the condensed consolidated statements of operations.
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 issued the PSP2 Warrants to Treasury to purchase PSP2 Warrant Shares. The exercise price of the PSP2 Warrant Shares is $15.66 per share, subject to certain anti-dilution provisions provided for in the PSP2 Warrants.
Pursuant to the PSP2 Warrant Agreement, AAG issued to Treasury PSP2 Warrants to purchase up to an aggregate of approximately 6.6 million shares of AAG common stock for an exercise price of $15.66 per share, subject to adjustment.
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 our 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.
PSP3
On April 23, 2021 (the PSP3 Closing Date), American, Envoy, Piedmont and PSA (collectively, the Subsidiaries), entered into a Payroll Support Program 3 Agreement (the PSP3 Agreement) with Treasury, with respect to PSP3 as provided pursuant to the ARP. In connection with our entry into the PSP3 Agreement, on the PSP3 Closing Date, AAG also entered into a warrant agreement (the PSP3 Warrant Agreement) with Treasury and issued the PSP3 Promissory Note to Treasury, with the Subsidiaries as guarantors.
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PSP3 Agreement
In connection with PSP3, we are required to comply with the relevant provisions of the ARP, which are substantially similar as the restrictions contained in the Payroll Support Program Agreement entered into by the Subsidiaries with Treasury in connection with the payroll support program established under the CARES Act, but are in effect for a longer time period. These provisions include the requirement that funds provided pursuant to the PSP3 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 at least September 30, 2021, the provisions that prohibit the repurchase of AAG common stock, and the payment of common stock dividends through at least September 30, 2022, the provisions that restrict the payment of certain executive compensation until April 1, 2023. As was the case with PSP1 and PSP2, the PSP3 Agreement also imposes substantial reporting obligations on us.
Pursuant to the PSP3 Agreement, Treasury provided us financial assistance in two installments (each prior installment and any future installment disbursement, a PSP3 Installment) totaling approximately $3.3 billion in the aggregate, all of which was received as of June 30, 2021. As partial compensation to the U.S. Government for the provision of financial assistance under PSP3, AAG issued the PSP3 Promissory Note in the aggregate principal amount of $946 million and issued warrants (each a PSP3 Warrant and, collectively, the PSP3 Warrants) to Treasury to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock for an exercise price of $21.75 per share, subject to adjustment. See Note 5 for further information on the PSP3 Promissory Note and below for more information on the PSP3 Warrant Agreement and PSP3 Warrants.
For accounting purposes, the $3.3 billion of aggregate financial assistance we received pursuant to the PSP3 Agreement is allocated to the PSP3 Promissory Note, the PSP3 Warrants and the other PSP3 financial assistance (the PSP3 Financial Assistance). The aggregate principal amount of $946 million of the PSP3 Promissory Note was recorded as unsecured long-term debt, and the total fair value of the PSP3 Warrants of $46 million, estimated using a Black-Scholes option pricing model, was recorded in stockholders' deficit in the condensed consolidated balance sheet. The remaining amount of approximately $2.3 billion of PSP3 Financial Assistance will be recognized as a credit to special items, net in the condensed consolidated statement of operations in the second and third quarters of 2021, the remaining period over which the continuation of payment of eligible employee wages, salaries and benefits is expected, as required by the PSP3 Agreement. At June 30, 2021, approximately $1.1 billion of the PSP3 Financial Assistance was deferred in other accrued liabilities in the condensed consolidated balance sheet and approximately $1.2 billion was recognized as a credit to special items, net in the condensed consolidated statement of operations.
PSP3 Warrant Agreement and PSP3 Warrants
As partial compensation to the U.S. Government for the provision of financial assistance under the PSP3 Agreement, and pursuant to the PSP3 Warrant Agreement, AAG issued the PSP3 Warrants to Treasury to purchase PSP3 Warrant Shares. The exercise price of the PSP3 Warrant Shares is $21.75 per share, subject to certain anti-dilution provisions provided for in the PSP3 Warrants.
Pursuant to the PSP3 Warrant Agreement, AAG issued to Treasury PSP3 Warrants to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock for an exercise price of $21.75 per share, subject to adjustment.
The PSP3 Warrants do not have any voting rights and are freely transferrable, with registration rights. Each PSP3 Warrant expires on the fifth anniversary of the date of issuance of such PSP3 Warrant. The PSP3 Warrants will be exercisable either through net share settlement or cash, at our option. The PSP3 Warrants were and will be issued solely as compensation to the U.S. Government related to entry into the PSP3 Agreement. No separate proceeds (apart from the financial assistance described above) were received upon issuance of the PSP3 Warrants or will be received upon exercise thereof.
(c) Recent Accounting Pronouncements
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
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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 (the Convertible Notes). We early adopted the New Convertible Debt Standard as of January 1, 2021 using the modified retrospective method to recognize our Convertible 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 Convertible 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 Convertible Notes.
ASU 2019-12: Simplifying the Accounting for Income Taxes (Topic 740)
This standard simplifies the accounting and disclosure requirements for income taxes by clarifying the existing guidance to improve consistency in the application of Accounting Standards Codification 740. This standard also removed the requirement to calculate income tax expense for the stand-alone financial statements of wholly-owned subsidiaries that are not subject to income tax. We adopted this standard effective January 1, 2021, and it did not have a material impact on our condensed consolidated financial statements.
2. Special Items, Net
Special items, net in the condensed consolidated statements of operations consisted of the following (in millions):
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
2021202020212020 2022202120222021
PSP Financial Assistance (1)
$(1,288)$(1,803)$(3,170)$(1,803)
Severance expenses (2)
— 332 168 537 
Mark-to-market adjustments on bankruptcy obligations, net (3)
0 0 6 (49)
Fleet impairment (4)
0 0 0 743 
Labor contract expenses (5)
0 10 0 228 
Fleet impairment (1)
Fleet impairment (1)
$— $— $149 $— 
PSP Financial Assistance (2)
PSP Financial Assistance (2)
— (1,288)— (3,170)
Severance expenses (3)
Severance expenses (3)
— — — 168 
Mark-to-market adjustments on bankruptcy obligations, netMark-to-market adjustments on bankruptcy obligations, net— — — 6 
Other operating special items, netOther operating special items, net0 (33)0 (18)Other operating special items, net(5)— 3 — 
Mainline operating special items, netMainline operating special items, net(1,288)(1,494)(2,996)(362)Mainline operating special items, net(5)(1,288)152 (2,996)
PSP Financial Assistance (1)
(167)(216)(410)(216)
Fleet impairment (4)
0 24 27 117 
PSP Financial Assistance (2)
PSP Financial Assistance (2)
— (167)— (410)
Fleet impairment (1)
Fleet impairment (1)
— — — 27 
Severance expenses (2)(3)
Severance expenses (2)(3)
0 14 2 14 
Severance expenses (2)(3)
— — — 2 
Regional operating special items, netRegional operating special items, net(167)(178)(381)(85)Regional operating special items, net— (167)— (381)
Operating special items, netOperating special items, net(1,455)(1,672)(3,377)(447)Operating special items, net(5)(1,455)152 (3,377)
Mark-to-market adjustments on equity and other investments, net (6)(4)
Mark-to-market adjustments on equity and other investments, net (6)(4)
37 0 (13)180 
Mark-to-market adjustments on equity and other investments, net (6)(4)
89 37 90 (13)
Debt refinancing, extinguishment and other, netDebt refinancing, extinguishment and other, net0 11 26 48 Debt refinancing, extinguishment and other, net— — 2 26 
Nonoperating special items, netNonoperating special items, net37 11 13 228 Nonoperating special items, net89 37 92 13 
Income tax special items, netIncome tax special items, net(9)— (9)— 
(1)Fleet impairment for the six months ended June 30, 2022 included a non-cash impairment charge to write down the carrying value of our retired Airbus A330 fleet to the estimated fair value due to current market conditions for certain used aircraft. We retired our Airbus A330 fleet in 2020 as a result of the decline in demand for air travel due to the COVID-19 pandemic.
Fleet impairment for the six months ended June 30, 2021 included a non-cash impairment charge to write down regional aircraft resulting from the retirement of the remaining Embraer 140 fleet earlier than planned.
(2)The 2021 PSP Financial Assistance represents recognition of a portion of the financial assistance received from the U.S. Department of Treasury (Treasury) pursuant to the PSP2payroll support program established under the PSP Extension Law (PSP2) and PSP3 Agreements. See Note 1(b) for further information. The 2020 PSP Financial Assistance represents recognitionthe American Rescue Plan Act of a portion of the financial assistance received from Treasury pursuant to the PSP1 Agreement.2021 (ARP) (PSP3).
(2)(3)Severance expenses include salary and medical costs primarily associated with certain team members who opted in tointo voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic. Cash payments related to our voluntary early retirement programs for the three and six months ended June 30, 20212022 were approximately $50 million and $140 million, respectively, and approximately $120 million and $290 million for the three and six months ended June 30, 2021, respectively.
(3)(4)Bankruptcy obligations that will be settledMark-to-market adjustments on equity and other investments, net principally included net unrealized gains and losses associated with our equity investments in shares of our common stock are marked-to-market based on our stock price.GOL Linhas Aéreas Inteligentes S.A. (GOL), Vertical Aerospace Ltd. (Vertical) and China Southern Airlines Company Limited (China Southern Airlines).
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(4)Fleet impairment resulted from our decision to retire certain aircraft earlier than planned driven primarily by the severe decline in air travel due to the COVID-19 pandemic. In the first six months of 2021, we retired our remaining fleet of Embraer 140 aircraft resulting in a non-cash write-down of these aircraft. In the first six months of 2020, we retired our Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets as well as certain Embraer 140 and Bombardier CRJ200 aircraft resulting in a $784 million non-cash write-down of mainline and regional aircraft and associated spare parts and $76 million in cash charges primarily for impairment of ROU assets and lease return costs.
(5)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 for our maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.
(6)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.
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):
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
2021202020212020 2022202120222021
Basic EPS:Basic EPS:Basic EPS:
Net income (loss)Net income (loss)$19 $(2,067)$(1,231)$(4,308)Net income (loss)$476 $19 $(1,159)$(1,231)
Weighted average common shares outstanding (in thousands)Weighted average common shares outstanding (in thousands)644,123 428,807 639,366 427,260 Weighted average common shares outstanding (in thousands)650,346 644,123 649,925 639,366 
Basic EPSBasic EPS$0.03 $(4.82)$(1.92)$(10.08)Basic EPS$0.73 $0.03 $(1.78)$(1.92)
Diluted EPS:Diluted EPS:Diluted EPS:
Net income (loss)Net income (loss)$476 $19 $(1,159)$(1,231)
Interest expense on 6.50% convertible senior notesInterest expense on 6.50% convertible senior notes11 — — — 
Net income (loss) for purposes of computing diluted EPSNet income (loss) for purposes of computing diluted EPS$19 $(2,067)$(1,231)$(4,308)Net income (loss) for purposes of computing diluted EPS$487 $19 $(1,159)$(1,231)
Share computation for diluted EPS (in thousands):Share computation for diluted EPS (in thousands):Share computation for diluted EPS (in thousands):
Basic weighted average common shares outstandingBasic weighted average common shares outstanding644,123 428,807 639,366 427,260 Basic weighted average common shares outstanding650,346 644,123 649,925 639,366 
Dilutive effect of stock awards and warrants12,249 0 0 0 
Dilutive effect of stock awardsDilutive effect of stock awards1,477 1,944 — — 
Dilutive effect of warrantsDilutive effect of warrants4,981 10,305 — — 
Assumed conversion of 6.50% convertible senior notesAssumed conversion of 6.50% convertible senior notes61,728 — — — 
Diluted weighted average common shares outstandingDiluted weighted average common shares outstanding656,372 428,807 639,366 427,260 Diluted weighted average common shares outstanding718,532 656,372 649,925 639,366 
Diluted EPSDiluted EPS$0.03 $(4.82)$(1.92)$(10.08)Diluted EPS$0.68 $0.03 $(1.78)$(1.92)
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):
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
6.50% convertible senior notes6.50% convertible senior notes61,728 4,070 61,728 2,035 6.50% convertible senior notes— 61,728 61,728 61,728 
PSP1 Warrants0 6,368 5,632 3,184 
Restricted stock unit awardsRestricted stock unit awards1,182 5,781 3,191 5,357 Restricted stock unit awards4,521 1,182 4,965 3,191 
PSP1 Warrants (1)
PSP1 Warrants (1)
— — 3,610 5,632 
Treasury Loan Warrants(2)Treasury Loan Warrants(2)0 0 1,755 0 Treasury Loan Warrants(2)— — 1,127 1,755 
PSP2 Warrants(3)PSP2 Warrants(3)0 0 1,242 0 PSP2 Warrants(3)— — 456 1,242 
PSP3 Warrants(4)PSP3 Warrants(4)0 0 34 0 PSP3 Warrants(4)— — — 34 
(1)Pursuant to the payroll support program established under the CARES Act (PSP1), AAG issued to Treasury warrants (PSP1 Warrants) to purchase up to an aggregate of approximately 14.0 million shares of AAG common stock for an exercise price of $12.51 per share, subject to adjustment.
(2)Pursuant to the Loan and Guarantee Agreement with Treasury (the Treasury Loan Agreement), AAG issued to Treasury warrants (Treasury Loan Warrants) to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock for an exercise price of $12.51 per share, subject to adjustment.
(3)Pursuant to PSP2, AAG issued to Treasury warrants (PSP2 Warrants) to purchase up to an aggregate of approximately 6.6 million shares of AAG common stock for an exercise price of $15.66 per share, subject to adjustment.
(4)Pursuant to PSP3, AAG issued to Treasury warrants (PSP3 Warrants) to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock for an exercise price of $21.75 per share, subject to adjustment.
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4. Revenue Recognition
Revenue
The following are the significant categories comprising our reported operating revenues (in millions):
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
2021202020212020 2022202120222021
Passenger revenue:Passenger revenue:Passenger revenue:
Passenger travelPassenger travel$5,995 $1,006 $8,888 $8,085 Passenger travel$11,400 $5,995 $18,613 $8,888 
Loyalty revenue - travel (1)
Loyalty revenue - travel (1)
550 102 836 703 
Loyalty revenue - travel (1)
823 550 1,428 836 
Total passenger revenueTotal passenger revenue6,545 1,108 9,724 8,788 Total passenger revenue12,223 6,545 20,041 9,724 
CargoCargo326 130 641 277 Cargo328 326 692 641 
Other:Other:Other:
Loyalty revenue - marketing services (2)
Loyalty revenue - marketing services (2)
529 356 986 927 
Loyalty revenue - marketing services (2)
740 529 1,336 986 
Other revenueOther revenue78 28 135 145 Other revenue131 78 252 135 
Total other revenueTotal other revenue607 384 1,121 1,072 Total other revenue871 607 1,588 1,121 
Total operating revenuesTotal operating revenues$7,478 $1,622 $11,486 $10,137 Total operating revenues$13,422 $7,478 $22,321 $11,486 
(1)Loyalty revenue included in passenger revenue is principally comprised of mileage credit redemptions, which were earned from travel or co-branded credit card and other partners.
(2)During the three months ended June 30, 20212022 and 2020,2021, cash payments from co-branded credit card and other partners waswere $1.0 billion and $684 million and $573 million, respectively. During the six months ended June 30, 20212022 and 2020,2021, cash payments from co-branded credit card and other partners was $1.7were $2.4 billion and $1.8$1.7 billion, respectively.
The following is our total passenger revenue by geographic region (in millions):
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
2021202020212020 2022202120222021
DomesticDomestic$5,444 $1,026 $8,099 $6,806 Domestic$9,120 $5,444 $15,180 $8,099 
Latin AmericaLatin America936 34 1,417 1,214 Latin America1,534 936 2,761 1,417 
AtlanticAtlantic125 42 147 565 Atlantic1,481 125 1,947 147 
PacificPacific40 6 61 203 Pacific88 40 153 61 
Total passenger revenueTotal passenger revenue$6,545 $1,108 $9,724 $8,788 Total passenger revenue$12,223 $6,545 $20,041 $9,724 
We attribute passenger revenue by geographic region based upon the origin and destination of each flight segment.
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 the condensed consolidated balance sheets and (2) ticket sales for transportation that has not yet been provided, reported as air traffic liability on the condensed consolidated balance sheets.
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
(In millions)(In millions)
Loyalty program liabilityLoyalty program liability$9,306 $9,195 Loyalty program liability$9,254 $9,135 
Air traffic liabilityAir traffic liability7,095 4,757 Air traffic liability8,969 6,087 
TotalTotal$16,401 $13,952 Total$18,223 $15,222 
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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, 20202021$9,1959,135 
Deferral of revenue9831,596 
Recognition of revenue (1)
(872)(1,477)
Balance at June 30, 20212022 (2)
$9,3069,254 
(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. In response to24 months or if the COVID-19 pandemic, we suspendedAAdvantage member is the expirationprimary holder of mileage credits through December 31, 2021 and eliminated mileage reinstatement fees for canceled award tickets.a co-branded credit card. As of June 30, 2021,2022, our current loyalty program liability was $2.6$3.1 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 continued impact of 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 the six months ended June 30, 2021, $1.22022, $3.6 billion of revenue was recognized in passenger revenue that was included in our air traffic liability at December 31, 2020.2021. In response to the COVID-19 pandemic, we extended the contract duration for certain tickets to March 31,September 30, 2022, principally those tickets which were scheduled to expire from March 1,issued in 2020 through March 31,and 2021. Additionally, we extended the contract duration to December 31, 2022 for tickets to certain international destinations. We also have eliminated change fees for most domestic and international tickets. As of June 30, 2021,tickets providing more flexibility for customers to change travel plans. Given these changes and the air traffic liability included approximately $1.6 billion of travel credits related to these unused tickets. 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.
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5. Debt
Long-term debt included in the condensed consolidated balance sheets consisted of (in millions):
June 30, 2021December 31, 2020
Secured
2013 Term Loan Facility, variable interest rate of 1.85%, installments through 2025$1,770 $1,788 
2013 Revolving Facility0 750 
2014 Term Loan Facility, variable interest rate of 1.85%, installments through 20271,208 1,220 
2014 Revolving Facility0 1,643 
April 2016 Spare Parts Term Loan Facility, variable interest rate of 2.10%, installments through 2023950 960 
April 2016 Revolving Facility0 450 
December 2016 Term Loan Facility, variable interest rate of 2.07%, installments through 20231,200 1,200 
11.75% senior secured notes, interest only payments until due in July 20252,500 2,500 
10.75% senior secured IP notes, interest only payments until due in February 20261,000 1,000 
10.75% senior secured LGA/DCA notes, interest only payments until due in February 2026200 200 
Treasury Term Loan Facility0 550 
5.50% senior secured notes, installments beginning in July 2023 until due in April 20263,500 0 
5.75% senior secured notes, installments beginning in July 2026 until due in April 20293,000 0 
AAdvantage Term Loan Facility, variable interest rate of 5.50%, installments beginning in July 2023 through April 20283,500 0 
Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 3.00% to 8.39%, averaging 3.91%, maturing from 2021 to 203210,176 11,013 
Equipment loans and other notes payable, fixed and variable interest rates ranging from 1.22% to 4.64%, averaging 1.85%, maturing from 2021 to 20323,788 4,417 
Special facility revenue bonds, fixed interest rates ranging from 2.25% to 5.38%, maturing from 2026 to 20361,129 1,064 
33,921 28,755 
Unsecured
PSP1 Promissory Note1,765 1,765 
PSP2 Promissory Note1,035 0 
PSP3 Promissory Note946 0 
6.50% convertible senior notes, interest only payments until due in July 20251,000 1,000 
5.000% senior notes, interest only payments until due in June 2022750 750 
3.75% senior notes, interest only payments until due in March 2025500 500 
5,996 4,015 
Total long-term debt39,917 32,770 
Less: Total unamortized debt discount, premium and issuance costs496 749 
Less: Current maturities2,692 2,697 
Long-term debt, net of current maturities$36,729 $29,324 
June 30, 2022December 31, 2021
Secured
2013 Term Loan Facility, variable interest rate of 3.37%, installments through 2025$1,752 $1,770 
2014 Term Loan Facility, variable interest rate of 3.40%, installments through 20271,196 1,208 
December 2016 Term Loan Facility, variable interest rate of 2.84%, installments through 20231,188 1,188 
11.75% senior secured notes, interest only payments until due in July 20252,500 2,500 
10.75% senior secured IP notes, interest only payments until due in February 20261,000 1,000 
10.75% senior secured LGA/DCA notes, interest only payments until due in February 2026200 200 
5.50% senior secured notes, installments beginning in July 2023 until due in April 2026 (1)
3,500 3,500 
5.75% senior secured notes, installments beginning in July 2026 until due in April 2029 (1)
3,000 3,000 
AAdvantage Term Loan Facility, variable interest rate of 5.81%, installments beginning in July 2023 through April 2028 (1)
3,500 3,500 
Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 2.88% to 7.13%, averaging 3.78%, maturing from 2022 to 20349,379 9,357 
Equipment loans and other notes payable, fixed and variable interest rates ranging from 2.29% to 4.82%, averaging 3.07%, maturing from 2022 to 20323,185 3,433 
Special facility revenue bonds, fixed interest rates ranging from 2.25% to 5.38%, maturing from 2026 to 20361,129 1,129 
31,529 31,785 
Unsecured
PSP1 Promissory Note, interest only payments until due in April 20301,757 1,765 
PSP2 Promissory Note, interest only payments until due in January 20311,030 1,035 
PSP3 Promissory Note, interest only payments until due in April 2031959 946 
6.50% convertible senior notes, interest only payments until due in July 20251,000 1,000 
3.75% senior notes, interest only payments until due in March 2025500 500 
5.000% senior notes— 750 
5,246 5,996 
Total long-term debt36,775 37,781 
Less: Total unamortized debt discount, premium and issuance costs421 458 
Less: Current maturities1,933 2,315 
Long-term debt, net of current maturities$34,421 $35,008 
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Collectively referred to as the AAdvantage Financing.
As of June 30, 2021,2022, the maximum availability under our revolving credit and other facilities is as follows (in millions):
2013 Revolving Facility$750 
2014 Revolving Facility1,643 
April 2016 Revolving Facility450 
Short-term Revolving and Other Facilities470220 
Total$3,3133,063 
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American has an undrawn $400$150 million short-term revolving credit facility, it entered into in December 2019, which was set to expire at the beginning of July 2021January 2022 but which has been extended through the beginning of October 2021 and the available amount thereunder increased to $500 million. American has the option to extend further this short-term revolving credit facility to January 2022.2023. American also currently has approximately $70 million of available borrowing base under a cargo receivables facility that was entered into in December 2020.2020 and is set to expire in December 2022. The December 2016 Credit Facilities provide for a revolving credit facility that may be established thereunder in the future.
Secured financings, including revolving credit and other facilities, are collateralized by assets, consisting primarily of aircraft, engines, simulators, aircraft spare parts, airport gate leasehold rights, route authorities, and airport slots, as well ascertain receivables, certain intellectual property and certain loyalty program assets.
6.50% Convertible Senior Notes
At June 30, 2021,2022, the if-converted value of the 6.50% convertible senior notes due 2025 (the Convertible Notes exceededNotes) did not exceed the principal amount by $309 million.amount. The last reported sale price per share of our common stock (as defined in the indenture governing our Convertible Notes, the Convertible Notes Indenture) exceededdid not exceed 130% of the conversion price of the Convertible Notes for each of at least 20 trading days duringof the 30 consecutive trading days ending on June 30, 2021.2022. Accordingly, pursuant to the terms of the Convertible Notes Indenture, the holders of the Convertible Notes maycannot convert at their option at any time during the quarter ending September 30, 2021.2022. Each $1,000 principal amount of Convertible Notes is convertible at a rate of 61.7284 shares of our common stock, subject to adjustment as provided in the Convertible Notes Indenture. We may settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.
20212022 Financing Activities
2013, 2014 and April 2016 Revolving Facilities2021-1 Aircraft EETCs
In MarchNovember 2021, American repaidcreated two pass-through trusts which issued approximately $960 million aggregate face amount of Series 2021-1 Class A and Class B EETCs (the 2021-1 Aircraft EETCs) in fullconnection with the $750financing of 26 aircraft previously delivered or originally scheduled to be delivered to American through September 2022 (the 2021-1 Aircraft). In 2021, approximately $94 million of revolving loans outstandingthe proceeds had been used to purchase equipment notes issued by American in connection with the financing of 5 aircraft under the 2013 Revolving Facility,2021-1 Aircraft EETCs, all of which was used to repay existing indebtedness. During the $1.6 billionsix months ended June 30, 2022, approximately $574 million of revolving loans outstandingproceeds had been used to purchase equipment notes issued by American in connection with the financing of 14 aircraft under the 2014 Revolving Facility2021-1 Aircraft EETCs. Interest and principal payments on equipment notes issued in connection with the $450 million2021-1 Aircraft EETCs are payable semi-annually in January and July of revolving loans outstanding under the April 2016 Revolving Facility. Following the March 2021 repayment, American is able to draw upon the commitments under these revolving facilities again as needed upon the terms of the underlying credit agreements or leave them undrawn, in each case, until such commitments expire, which is currentlyyear, with interest payments scheduled to occurbegin in 2024 for substantially allJuly 2022 and with principal payments scheduled to begin in January 2023. The remaining proceeds of such commitments. Asapproximately $292 million as of June 30, 2021, there2022 were 0 borrowings or lettersbeing held in escrow with a depositary for the benefit of credit outstanding under the 2013 Revolving Facility,holders of the 2014 Revolving Facility or the April 2016 Revolving Facility.
PSP2 Promissory Note
As partial compensation2021-1 Aircraft EETCs until such time as American issues additional equipment notes with respect to the U.S. Governmentremaining 2021-1 Aircraft to the pass-through trusts, which 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 its condensed consolidated balance sheets because the proceeds held by the depositary for the provisionbenefit of financial assistance under the PSP2 Agreement, AAG issuedholders of the PSP2 Promissory Note to Treasury, which provides for our unconditional promise to pay to Treasury2021-1 Aircraft EETCs are not American’s assets.
Certain information regarding the principal sum2021-1 Aircraft EETC equipment notes, as of $1.0 billion, andJune 30, 2022, is set forth in the guaranteetable below.
2021-1 Aircraft EETCs
Series ASeries B
Aggregate principal issued$758 million$202 million
Remaining escrowed proceeds$231 million$61 million
Fixed interest rate per annum2.875%3.95%
Maturity dateJuly 2034July 2030
Other Financing Activities
During the six months ended June 30, 2022, we repurchased $349 million of our obligations under the PSP2 Promissory Note by the Subsidiaries.
The PSP2 Promissory Note bears interestunsecured notes 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.open market.
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We 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, 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.
PSP3 Promissory Note
As partial compensation to the U.S. Government for the provision of financial assistance under the PSP3 Agreement, AAG issued the PSP3 Promissory Note to Treasury, which provides for our unconditional promise to pay to Treasury the principal sum of $946 million, subject to an increase equal to 30% of the amount of any additional PSP3 Installment disbursed under the PSP3 Agreement, and the guarantee of our obligations under the PSP3 Promissory Note by the Subsidiaries.
The PSP3 Promissory Note bears interest on the outstanding principal amount at a rate equal to 1.00% per annum until the fifth anniversary of the PSP3 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 PSP3 Closing Date (the PSP3 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 September 30, 2021. The aggregate principal amount outstanding under the PSP3 Promissory Note, together with all accrued and unpaid interest thereon and all other amounts payable under the PSP3 Promissory Note, will be due and payable on the PSP3 Maturity Date.
We may, at any time and from time to time, voluntarily prepay amounts outstanding under the PSP3 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 PSP3 Promissory Note at such time, together with any accrued interest or other amounts owing under the PSP3 Promissory Note at such time.
The PSP3 Promissory Note is our senior unsecured obligation and each guarantee of the PSP3 Promissory Note is the senior unsecured obligation of each of the Subsidiaries, respectively. The PSP3 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 PSP3 Promissory Note may, and in certain circumstances will automatically, be accelerated and become due and payable immediately.
AAdvantage Financing
On March 24, 2021 (the AAdvantage Financing Closing Date), American and AAdvantage Loyalty IP Ltd., a newly formed Cayman Islands exempted company incorporated with limited liability and an indirect wholly owned subsidiary of American (Loyalty Issuer and, together with American, the AAdvantage Issuers), completed the offering of $3.5 billion aggregate principal amount of 5.50% Senior Secured Notes due 2026 (the 2026 Notes) and $3.0 billion aggregate principal amount of 5.75% Senior Secured Notes due 2029 (the 2029 Notes, and together with the 2026 Notes, the AAdvantage Notes). The AAdvantage Notes are fully and unconditionally guaranteed (the AAdvantage Note Guarantees) on a senior unsecured basis by AAG and fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by AAdvantage Holdings 1, Ltd., a newly formed Cayman Islands exempted company incorporated with limited liability and a direct wholly owned subsidiary of American, and AAdvantage Holdings 2, Ltd., a newly formed Cayman Islands exempted company incorporated with limited liability and an indirect wholly owned subsidiary of American and the direct parent of Loyalty Issuer (HoldCo2 and, together with AAdvantage Holdings 1, Ltd., the SPV Guarantors, and the SPV Guarantors together with AAG, the AAdvantage Guarantors). The AAdvantage Notes were issued pursuant to an indenture, dated as of March 24, 2021 (the AAdvantage Indenture), by and among the AAdvantage Issuers, the AAdvantage Guarantors and Wilmington Trust, National Association, as trustee and as collateral custodian.
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Concurrent with the issuance of the AAdvantage Notes, the AAdvantage Issuers, as co-borrowers, entered into a term loan credit and guaranty agreement, dated March 24, 2021, with Barclays Bank PLC, as administrative agent, Wilmington Trust, National Association, as collateral administrator, and the lenders party thereto, providing for a $3.5 billion term loan facility (the AAdvantage Term Loan Facility and collectively with the AAdvantage Notes, the AAdvantage Financing) and pursuant to which the full $3.5 billion of term loans (the AAdvantage Loans) were drawn on the AAdvantage Financing Closing Date. The AAdvantage Loans are fully and unconditionally guaranteed (together with the AAdvantage Note Guarantees, the AAdvantage Guarantees) by the AAdvantage Guarantors.
Subject to certain permitted liens and other exceptions, the AAdvantage Notes, AAdvantage Loans and AAdvantage Guarantees provided by the SPV Guarantors will be secured by a first-priority security interest in, and pledge of, various agreements with respect to the AAdvantage program (the AAdvantage Agreements) (including all payments thereunder) and rights under an intercompany agreement and certain IP Licenses (as defined below), certain rights under the AAdvantage program, certain deposit accounts that will receive cash under the AAdvantage Agreements, certain reserve accounts, the equity of each of Loyalty Issuer and the SPV Guarantors and substantially all other assets of Loyalty Issuer and the SPV Guarantors (collectively, the AAdvantage Collateral).
Payment Terms of the AAdvantage Notes and AAdvantage Loans under the AAdvantage Term Loan Facility
Interest on the AAdvantage Notes is payable in cash, quarterly in arrears on the 20th day of each January, April, July and October (each, an AAdvantage Payment Date), beginning July 20, 2021. The 2026 Notes will mature on April 20, 2026, and the 2029 Notes will mature on April 20, 2029. The outstanding principal on the 2026 Notes will be repaid in quarterly installments of approximately $292 million on each AAdvantage Payment Date, beginning on July 20, 2023. The outstanding principal on the 2029 Notes will be repaid in quarterly installments of $250 million on each AAdvantage Payment Date, beginning on July 20, 2026.
The AAdvantage Issuers may redeem the AAdvantage Notes, at their option, 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 AAdvantage Notes redeemed plus a “make-whole” premium, together with accrued and unpaid interest to the date of redemption.
The scheduled maturity date of the AAdvantage Loans under the AAdvantage Term Loan Facility is April 20, 2028. The AAdvantage Loans bear interest at a variable rate equal to LIBOR (but not less than 0.75% per annum), plus a margin of 4.75% per annum, payable on each AAdvantage Payment Date. The outstanding principal on the AAdvantage Loans will be repaid in quarterly installments of $175 million, on each AAdvantage Payment Date beginning with the AAdvantage Payment Date in July 2023. These amortization payments (as well as those for the AAdvantage Notes) will be subject to the occurrence of certain early amortization events, including the failure to satisfy a minimum debt service coverage ratio at specified determination dates.
Prepayment of some or all of the AAdvantage Loans outstanding under the AAdvantage Term Loan Facility is permitted, although payment of an applicable premium is required as specified in the AAdvantage Term Loan Facility.
The AAdvantage Indenture and the AAdvantage Term Loan Facility contain mandatory prepayment provisions triggered upon (i) the issuance or incurrence by Loyalty Issuer or the SPV Guarantors of certain indebtedness or (ii) the receipt by American or its subsidiaries of net proceeds from pre-paid frequent flyer (i.e., AAdvantage) mile purchases exceeding $500 million, with prepayment required only in respect of net proceeds from such purchases exceeding $505 million in the aggregate. Each of these prepayments would also require payment of an applicable premium. Certain other events, including the occurrence of a change of control with respect to AAG and certain AAdvantage Collateral sales exceeding a specified threshold, will also trigger mandatory repurchase or mandatory prepayment provisions under the AAdvantage Indenture and the AAdvantage Term Loan Facility, respectively.
Other Terms of the AAdvantage Indenture and the AAdvantage Term Loan Facility
The AAdvantage Indenture and the AAdvantage Term Loan Facility contain certain covenants that limit the ability of Loyalty Issuer, the SPV Guarantors and, in certain circumstances, American and AAG, to among other things, (i) incur additional indebtedness and make restricted payments, (ii) incur certain liens on the AAdvantage Collateral, (iii) merge, consolidate or sell substantially all of their assets, (iv) dispose of the AAdvantage Collateral, (v) sell pre-paid frequent flyer (i.e. AAdvantage) miles in excess of $550 million in the aggregate, and (vi) terminate, amend, waive, supplement or modify the IP Licenses, or exercise rights and remedies thereunder, except under certain circumstances. American and Loyalty Issuer are also prohibited from substantially reducing the AAdvantage program business or modifying the terms of the AAdvantage program in a manner that would reasonably be expected to materially impair repayment of the AAdvantage Financing obligations (described as a Payment Material Adverse Effect in the AAdvantage Indenture and the
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AAdvantage Term Loan Facility), and AAG and its subsidiaries are prohibited from changing the policies and procedures of the AAdvantage program in a manner that would reasonably be expected to have a Payment Material Adverse Effect or operating a competing loyalty program. Notwithstanding these restrictions, the AAdvantage program is expected to operate as it has in the past, and the entry into the AAdvantage Financing is not expected to have any impact on the benefits offered to AAdvantage members.
In addition, subject to certain exceptions, the AAdvantage Indenture and the AAdvantage Term Loan Facility restrict the ability of American, Loyalty Issuer or any Guarantor to terminate, or modify certain terms within, the intercompany agreement governing the relationship between American and Loyalty Issuer with respect to the AAdvantage program.
The AAdvantage Indenture and the AAdvantage Term Loan Facility also require the AAdvantage Issuers to comply with certain affirmative covenants, including (i) certain reporting requirements and (ii) the use of commercially reasonable efforts to cause sufficient counterparties to AAdvantage Agreements to direct payments with respect to the AAdvantage program into a collections account, such that at least 90% of such cash receipts in a quarterly reporting period are deposited directly into this collection account, with amounts to be distributed from this collection account for the payment of fees, principal and interest on the AAdvantage Notes and the AAdvantage Loans pursuant to a payment waterfall described in the AAdvantage Indenture and the AAdvantage Term Loan Facility, respectively. In addition, the AAdvantage Indenture and the AAdvantage Term Loan Facility require AAG to maintain minimum liquidity, defined as the sum of (a) unrestricted cash and cash equivalents and (b) the aggregate principal amount committed and available to be drawn under all of AAG's revolving credit and other facilities, at the close of any business day of at least $2.0 billion.
Subject to certain materiality thresholds, qualifications, exceptions, “baskets” and grace and cure periods, the AAdvantage Indenture and the AAdvantage Term Loan Facility contain various events of default, including payment defaults, covenant defaults, cross-defaults to certain indebtedness, termination of certain agreements related to the AAdvantage program, bankruptcy events of Loyalty Issuer or any SPV Guarantor, and a change of control of Loyalty Issuer or any SPV Guarantor. A bankruptcy event of American is not itself an event of default; following an American bankruptcy, an event of default would only occur if American failed to satisfy certain enumerated bankruptcy case milestones, including an assumption of the AAdvantage Financing by a certain date. Upon the occurrence of an event of default, the outstanding obligations under the AAdvantage Indenture and the AAdvantage Term Loan Facility may (or, with respect to the bankruptcy events noted above, shall) be accelerated and become due and payable immediately.
Terms of Certain Intercompany Agreements Related to the AAdvantage Financing
In connection with the issuance of the AAdvantage Notes and entry into the AAdvantage Term Loan Facility, American, Loyalty Issuer and the SPV Guarantors entered into a series of transactions that resulted in the transfer to Loyalty Issuer of, among other things, American’s rights to certain data and other intellectual property used in the AAdvantage program (subject to certain exceptions) (such assets, the Transferred AAdvantage IP) and certain rights of American under specified AAdvantage Agreements. Loyalty Issuer has entered into a license agreement with HoldCo2 pursuant to which Loyalty Issuer has granted to HoldCo2 an exclusive, irrevocable (subject to certain termination rights), perpetual, worldwide, royalty-bearing license to use the Transferred AAdvantage IP (the HoldCo2 License), and HoldCo2 has in turn granted to American an exclusive, irrevocable (subject to certain termination rights), perpetual, worldwide, royalty-bearing sublicense to use the Transferred AAdvantage IP (together with the HoldCo2 License, the IP Licenses). The IP Licenses would be terminated, and American’s right to use the Transferred AAdvantage IP would cease, upon specified termination events, including, but not limited to, the occurrence of an event of default under the AAdvantage Indenture or the AAdvantage Term Loan Facility. In certain circumstances, such a termination would trigger a liquidated damages payment in an amount that is greater than the initial principal amount of the AAdvantage Notes and the AAdvantage Loans.
In addition, proceeds from the AAdvantage Financing were loaned by Loyalty Issuer to American pursuant to an intercompany note that was guaranteed by AAG. The borrowings under this intercompany note are payable on demand by Loyalty Issuer or, after the occurrence and during the continuance of an event of default under the AAdvantage Financing, by the master collateral agent under the AAdvantage Financing.
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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. American had borrowed $550 million under the Treasury Term Loan Facility in September 2020. On March 24, 2021, American used proceeds from the AAdvantage Financing to prepay in full the $550 million outstanding under the Treasury Term Loan Facility and terminated the Treasury Loan Agreement.
JFK Special Facility Revenue Bonds
In January 2020, American and British Airways announced the start of construction projects to upgrade New York's JFK Terminal 8 (the Terminal). The renovation projects at the Terminal include: (i) the reconfiguration or elimination of certain existing gates and the construction of jumbo gates, (ii) the construction of approximately 51,000 square feet of new terminal building space and the refurbishment of 73,300 square feet of existing terminal space, (iii) the expansion of the baggage system capacity of the Terminal, (iv) improvements to the premium passenger lounges, check-in and, potentially, security access areas, and (v) bathroom refreshment, new signage, and other upgrades. The construction project is currently scheduled to be completed in 2023 and is estimated to cost approximately $439 million, of which approximately $298 million was funded with proceeds of the special facility revenue bonds issued by the New York Transportation Development Corporation (NYTDC) on behalf of American in June 2020 (the 2020 JFK Bonds) and approximately $84 million of which will be funded with proceeds of the approximately $150 million of special facility revenue bonds the NYTDC issued in June 2021 (the 2021 JFK Bonds).
American is required to pay debt service on the 2021 JFK Bonds through payments under a loan agreement with NYTDC (as amended), and American and AAG guarantee the 2021 JFK Bonds. American continues to pay debt service on the outstanding bonds issued by NYTDC on behalf of American in 2016 and 2020 (the 2016 and 2020 JFK Bonds) and American and AAG continue to guarantee the 2016 and 2020 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.
The 2021 JFK Bonds, in aggregate, were priced at par value. The gross proceeds from the issuance of the 2021 JFK Bonds were approximately $150 million. Of this amount, approximately $4 million was used to fund the costs of issuance of the 2021 JFK Bonds, approximately $62 million was used to fund the redemption of the 2016 and 2020 JFK Bonds due August 2021, with the remaining amount of proceeds received to be held in restricted cash and short-term investments on the condensed consolidated balance sheet and to be used to finance a portion of the cost of the renovation and expansion of the Terminal. The 2021 JFK Bonds are comprised of term bonds, $70 million of which bear interest at 2.25% per annum and mature on August 1, 2026, and $80 million of which bear interest at 3.00% per annum and mature on August 1, 2031.
6. Income Taxes
At December 31, 2020,2021, we had approximately $16.5$17.2 billion of gross federal net operating losses (NOLs) and $3.0 billion of other carryforwards available to reduce future federal taxable income, of which $8.5$6.9 billion will expire beginning in 20232024 if unused and $8.0$13.3 billion can be carried forward indefinitely (NOL Carryforwards).indefinitely. We also had approximately $5.0$6.0 billion of NOL Carryforwardscarryforwards to reduce future state taxable income at December 31, 2020,2021, which will expire in taxable years 20202021 through 20402041 if unused.
Our ability to use our NOL CarryforwardsNOLs and other 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 NOLs, when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized. 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 availability and price volatility of aircraft fuel and travel demand. We presently have a $34 million valuation allowance on certain net deferred tax assets related to state NOL Carryforwards.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.
During the three and six months ended June 30, 2021,2022, we recorded an income tax provision of $127 million and an income tax benefit of $10 million and $333$324 million, respectively.
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7. Fair Value Measurements and Other Investments
Assets Measured at Fair Value on a Recurring Basis
We utilize the market approach to measure the fair value 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, restricted cash and restricted 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 six months ended June 30, 2021.2022.
Assets measured at fair value on a recurring basis are summarized below (in millions):
Fair Value Measurements as of June 30, 2021 Fair Value Measurements as of June 30, 2022
TotalLevel 1Level 2Level 3 TotalLevel 1Level 2Level 3
Short-term investments (1), (2):
Short-term investments (1), (2):
Short-term investments (1), (2):
Money market fundsMoney market funds$3,983 $3,983 $0 $0 Money market funds$214 $214 $— $— 
Corporate obligationsCorporate obligations9,492 0 9,492 0 Corporate obligations5,859 — 5,859 — 
Bank notes/certificates of deposit/time depositsBank notes/certificates of deposit/time deposits2,835 0 2,835 0 Bank notes/certificates of deposit/time deposits4,633 — 4,633 — 
Repurchase agreementsRepurchase agreements1,315 0 1,315 0 Repurchase agreements1,415 — 1,415 — 
17,625 3,983 13,642 0 12,121 214 11,907 — 
Restricted cash and short-term investments (1), (3)
Restricted cash and short-term investments (1), (3)
999 785 214 0 
Restricted cash and short-term investments (1), (3)
997 582 415 — 
Long-term investments (4)
Long-term investments (4)
168 168 0 0 
Long-term investments (4)
231 231 — — 
TotalTotal$18,792 $4,936 $13,856 $0 Total$13,349 $1,027 $12,322 $— 
(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 mature in one year or less.
(3)Restricted cash and short-term investments primarily include collateral held to support workers' compensation obligations, collateral associated with the payment of certain fees and interest in respect offor the AAdvantage Financing and money market funds to be used to finance a substantial portion of the cost of the renovation and expansion of Terminal 8 at JFK as well as collateral held to support workers' compensation obligations.John F. Kennedy International Airport.
(4)Long-term investments primarily include our equity investmentinvestments in China Southern Airlines, in which we presently own a 1.8% equity interest,GOL and Vertical. These investments are classifiedreflected in other assets on the condensed consolidated balance sheet.sheets.
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(Unaudited)
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 $3.7 billion and $2.3 billion as of June 30, 20212022 and December 31, 2020, respectively,2021, which would have been classified as Level 3 in the fair value hierarchy. The fair value of ourthe Convertible Notes, which would have been classified as Level 2, was $1.6$1.0 billion and $1.2$1.4 billion as of June 30, 20212022 and December 31, 2020,2021, respectively.
The carrying value and estimated fair value of our long-term debt, including current maturities, were as follows (in millions):
 June 30, 2021December 31, 2020
 Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Long-term debt, including current maturities$39,421 $41,521 $32,021 $30,454 
 June 30, 2022December 31, 2021
 
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Long-term debt, including current maturities$36,354 $33,472 $37,323 $38,567 
Other Investments
An important part of our strategy to expand our network has been to initiate or expand our commercial relationships with other airlines, such as by entering into global alliances, joint business and codeshare relationships, and, in certain instances, by making an equity investment in another airline or other companies.
GOL
In April 2022, we completed our definitive investment agreement with GOL and invested $200 million in 22.2 million of newly issued preferred shares, representing a 5.3% economic interest in GOL. The total consideration of $200 million has been allocated as follows based on relative fair values: $81 million to the preferred shares and $119 million to the indefinite-lived intangible asset derived from the related commercial agreements. The ownership interest is accounted for at fair value based on GOL’s stock price and mark-to-market adjustments are recorded to nonoperating other income, net on the condensed consolidated statements of operations.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.
(Unaudited)
8. Employee Benefit Plans
The following table provides the components of net periodic benefit cost (income) (in millions):
Pension BenefitsRetiree Medical and Other
Postretirement Benefits		 Pension BenefitsRetiree Medical and Other
Postretirement Benefits
Three Months Ended June 30,Three Months Ended June 30,2021202020212020Three Months Ended June 30,2022202120222021
Service costService cost$1 $1 $3 $2 Service cost$1 $1 $3 $3 
Interest costInterest cost131 154 8 8 Interest cost139 131 7 8 
Expected return on assetsExpected return on assets(271)(252)(3)(3)Expected return on assets(285)(271)(3)(3)
Settlements0 4 0 0 
Amortization of:Amortization of:Amortization of:
Prior service cost (benefit)Prior service cost (benefit)7 7 (3)(52)Prior service cost (benefit)7 7 (3)(3)
Unrecognized net loss (gain)Unrecognized net loss (gain)52 41 (6)(5)Unrecognized net loss (gain)38 52 (6)(6)
Net periodic benefit incomeNet periodic benefit income$(80)$(45)$(1)$(50)Net periodic benefit income$(100)$(80)$(2)$(1)
Pension BenefitsRetiree Medical and Other
Postretirement Benefits		 Pension BenefitsRetiree Medical and Other
Postretirement Benefits
Six Months Ended June 30,Six Months Ended June 30,2021202020212020Six Months Ended June 30,2022202120222021
Service costService cost$2 $2 $5 $3 Service cost$2 $2 $7 $5 
Interest costInterest cost262 307 14 14 Interest cost277 262 15 14 
Expected return on assetsExpected return on assets(543)(505)(6)(6)Expected return on assets(569)(543)(6)(6)
Special termination benefitsSpecial termination benefits0 0 139 0 Special termination benefits— — — 139 
Settlements0 4 0 0 
Amortization of:Amortization of:Amortization of:
Prior service cost (benefit)Prior service cost (benefit)14 14 (7)(106)Prior service cost (benefit)14 14 (7)(7)
Unrecognized net loss (gain)Unrecognized net loss (gain)105 83 (11)(12)Unrecognized net loss (gain)77 105 (12)(11)
Net periodic benefit cost (income)Net periodic benefit cost (income)$(160)$(95)$134 $(107)Net periodic benefit cost (income)$(199)$(160)$(3)$134 
Effective November 1, 2012, substantially all of our defined benefit pension plans were frozen.
The service cost component of net periodic benefit cost (income) is included in operating expenses, the cost for the special termination benefits is included in special items, net and the other components of net periodic benefit cost (income) are included in nonoperating other income, (expense), net in the condensed consolidated statements of operations.
During the first quarter of 2021, we remeasured our retiree medical and other postretirement benefits to account for enhanced healthcare benefits provided to eligible team members who opted in tointo voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic. For the six months ended June 30, 2021, we recognized a $139 million special charge for these enhanced healthcare benefits and increased our postretirement benefits obligation by $139 million.
In January 2021, we made $241 million in contributions to our pension plans, including a contribution of $130 million for the 2020 calendar year that was permitted to be deferred to January 4, 2021 as provided under the CARES Act. On March 11, 2021, the ARP was enacted, which included funding relief provisions benefiting single employer qualified retirement benefit pension plans such as those sponsored by us. Based on our current understanding of the ARP provisions applicable to our pension plans, we will have no additional funding requirements for 2021.until 2023.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.
(Unaudited)
9. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss (AOCI) are as follows (in millions):
Pension,
Retiree
Medical and
Other
Postretirement
Benefits		Unrealized Gain (Loss) on Investments
Income Tax
Benefit
(Provision) (1)
Total Pension,
Retiree
Medical and
Other
Postretirement
Benefits		Unrealized Loss on Investments
Income Tax
Benefit
(Provision) (1)
Total
Balance at December 31, 2020$(6,236)$(2)$(865)$(7,103)
Balance at December 31, 2021Balance at December 31, 2021$(4,736)$(2)$(1,204)$(5,942)
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications35 0 (8)27 Other comprehensive income (loss) before reclassifications— (5)1 (4)
Amounts reclassified from AOCIAmounts reclassified from AOCI101 0 (22)(2)79 Amounts reclassified from AOCI72 — (16)(2)56 
Net current-period other comprehensive income (loss)Net current-period other comprehensive income (loss)136 0 (30)106 Net current-period other comprehensive income (loss)72 (5)(15)52 
Balance at June 30, 2021$(6,100)$(2)$(895)$(6,997)
Balance at June 30, 2022Balance at June 30, 2022$(4,664)$(7)$(1,219)$(5,890)
(1)Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net lossincome (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 benefitprovision (benefit) on the condensed consolidated statementstatements of operations.
Reclassifications out of AOCI are as follows (in millions):
 Amounts reclassified from AOCIAffected line items on the
condensed consolidated
statements of operations
AOCI ComponentsThree Months Ended June 30,Six Months Ended
June 30,
2021202020212020
Amortization of pension, retiree medical
      and other postretirement benefits:
Prior service cost (benefit)$3 $(34)$6 $(71)Nonoperating other income (expense), net
Actuarial loss36 30 73 58 Nonoperating other income (expense), net
Total reclassifications for the period,
       net of tax		$39 $(4)$79 $(13)
 Amounts reclassified from AOCIAffected line items on the
condensed consolidated
statements of operations
AOCI ComponentsThree Months Ended June 30,Six Months Ended
June 30,
2022202120222021
Amortization of pension, retiree medical and other postretirement benefits:
Prior service cost$3 $3 $6 $6 Nonoperating other income, net
Actuarial loss25 36 50 73 Nonoperating other income, net
Total reclassifications for the period, net of tax$28 $39 $56 $79 
10. Regional Expenses
Our regional carriers provide scheduled air transportation under the brand name “American Eagle.” The American Eagle carriers include our wholly-owned regional carriers as well as third-party regional carriers. Substantially all of our regional carrier arrangements are in the form of capacity purchase agreements. Expenses associated with American Eagle operations are classified as regional expenses on the condensed consolidated statements of operations.
Beginning in the first quarter of 2021, aircraft fuel and related taxes as well as certain salaries, wages and benefits, other rent and landing fees, selling and other expenses are no longer allocated to regional expenses on our condensed consolidated statements of operations. The second quarter and six months ended June 30, 2020 condensed consolidated statements of operations have been recast to conform to the 2021 presentation. This statement of operations presentation change has no impact on total operating expenses or net loss.
Regional expenses for the three months ended June 30, 2022 and 2021 and 2020 include $77$80 million and $84$77 million of depreciation and amortization, respectively, and $2$1 million and $3$2 million of aircraft rent, respectively. Regional expenses for the six months ended June 30, 2022 and 2021 and 2020 include $159$160 million and $168$159 million of depreciation and amortization, respectively, and $4$3 million and $8$4 million of aircraft rent, respectively.
During the three months ended June 30, 20212022 and 2020,2021, we recognized $91$160 million and $61$91 million, respectively, of expense under our capacity purchase agreement with Republic Airways Inc. (Republic). During the six months ended June 30, 20212022 and 2020,2021, we recognized $218$310 million and $211$218 million, respectively, of expense under our capacity purchase agreement with Republic. We hold a 25% equity interest in Republic Airways Holdings Inc., the parent company of Republic.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.
(Unaudited)
11. Legal Proceedings
Chapter 11 Cases. On November 29, 2011, AMR Corporation (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 acquisition of US Airways Group, Inc. by AMR (the Merger).
Pursuant to rulings of the Bankruptcy Court, the Plan established a disputed claims reserve (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. The shares of AAG common stock issued to the Disputed Claims 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 receive distributions of shares from the Disputed Claims 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. 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 and former convertible noteholders treated as stockholders under the Plan. As of June 30, 2021, the Disputed Claims Reserve held approximately 4.8 million shares of AAG common stock.
Private Party Antitrust Action Related to 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, were named as defendants in approximately 100 putative class action lawsuits alleging unlawful agreements with respect to air passenger capacity. The U.S. lawsuits were consolidated in the Federal District Court for the District of Columbia (the DC Court). On June 15, 2018, we reached a settlement agreement with the plaintiffs in the amount of $45 million to resolve all class claims in the 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 without merit and intend to vigorously defend against them.
Private Party Antitrust Action Related to the Merger. On August 6, 2013, a lawsuit captioned Carolyn Fjord, et al., v. AMR Corporation, et al., was filed in the United States Bankruptcy Court.Court for the Southern District of New York (Bankruptcy Court). The complaint named as defendants US Airways Group, Inc., US Airways, Inc., AMR Corporation and American, alleged that the effect of the Mergermerger of US Airways Group and AMR Corporation (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 November 27, 2013, the Bankruptcy Court denied plaintiffs’ motion to preliminarily enjoin the Merger. On August 29, 2018, the Bankruptcy Court denied in part defendants' motion for summary judgment, and fully denied plaintiffs' cross-motion for summary judgment. 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 Bankruptcy Court published its decision finding in our favor. The plaintiffsOn March 25, 2022, the U.S. District Court for the Southern District of New York entered judgment affirming the Bankruptcy Court's decision. Plaintiffs have appealed this ruling.that decision to the United States Court of Appeals for the Second Circuit, and the plaintiffs' opening brief is due August 2, 2022. We believe this lawsuit is without merit and intend to continue to vigorously defend against it, including against any further appeals by plaintiffs.
Government Antitrust Action Related to the allegations, including plaintiffs' appealNortheast Alliance. On September 21, 2021, the United States Department of Justice (DOJ), joined by Attorneys General from six states and the District of Columbia, filed an antitrust complaint against American and JetBlue Airways Corporation (JetBlue) alleging that American and JetBlue violated U.S. antitrust laws in connection with the previously disclosed Northeast Alliance arrangement (NEA). We believe the complaint is without merit and intend to defend against it vigorously.
Also on September 21, 2021, the United States Department of Transportation (DOT) published a Clarification Notice relating to the agreement that had been reached between the DOT, American, and JetBlue in January 2021, at the conclusion of the Bankruptcy Court's January 29, 2021 ruling.DOT’s review of the NEA (DOT Agreement). The DOT Clarification Notice stated, among other things, that the DOT Agreement remains in force during the pendency of the DOJ action against the NEA and, while the DOT retains independent statutory authority to prohibit unfair methods of competition in air transportation, the DOT intends to defer to DOJ to resolve the antitrust concerns that DOJ has identified with respect to the NEA. The DOT simultaneously published a Notice Staying Proceeding in relation to a complaint by Spirit Airlines, Inc. regarding the NEA, pending resolution of the DOJ action described above.
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.
12. Subsequent Event
April 2016 Spare Parts Term Loan Facility
On July 22, 2021, American repaid in full the outstanding term loans in the aggregate principal amount of $950 million and terminated the April 2016 Spare Parts Term Loan Facility. The April 2016 Revolving Facility, in the aggregate principal amount of $450 million, none of which was drawn or outstanding as of June 30, 2021, and which has a final maturity of October 2024, remains in place.
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ITEM 1B. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.
AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions)(Unaudited)
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
2021202020212020 2022202120222021
Operating revenues:Operating revenues:Operating revenues:
PassengerPassenger$6,545 $1,108 $9,724 $8,788 Passenger$12,223 $6,545 $20,041 $9,724 
CargoCargo326 130 641 277 Cargo328 326 692 641 
OtherOther607 384 1,120 1,071 Other870 607 1,584 1,120 
Total operating revenuesTotal operating revenues7,478 1,622 11,485 10,136 Total operating revenues13,421 7,478 22,317 11,485 
Operating expenses:Operating expenses:Operating expenses:
Aircraft fuel and related taxesAircraft fuel and related taxes1,611 309 2,644 2,092 Aircraft fuel and related taxes4,020 1,611 6,522 2,644 
Salaries, wages and benefitsSalaries, wages and benefits2,860 2,610 5,590 5,827 Salaries, wages and benefits3,233 2,860 6,385 5,590 
Regional expensesRegional expenses639 447 1,264 1,555 Regional expenses1,058 639 2,081 1,264 
Maintenance, materials and repairsMaintenance, materials and repairs459 287 835 915 Maintenance, materials and repairs647 459 1,264 835 
Other rent and landing feesOther rent and landing fees686 413 1,256 1,024 Other rent and landing fees694 686 1,372 1,256 
Aircraft rentAircraft rent356 334 706 669 Aircraft rent345 356 698 706 
Selling expensesSelling expenses277 57 427 442 Selling expenses504 277 836 427 
Depreciation and amortizationDepreciation and amortization481 499 959 1,059 Depreciation and amortization501 481 992 959 
Special items, netSpecial items, net(1,288)(1,494)(2,996)(362)Special items, net(5)(1,288)152 (2,996)
OtherOther958 601 1,676 1,891 Other1,390 958 2,676 1,676 
Total operating expensesTotal operating expenses7,039 4,063 12,361 15,112 Total operating expenses12,387 7,039 22,978 12,361 
Operating income (loss)Operating income (loss)439 (2,441)(876)(4,976)Operating income (loss)1,034 439 (661)(876)
Nonoperating income (expense):Nonoperating income (expense):Nonoperating income (expense):
Interest incomeInterest income9 92 18 196 Interest income41 9 52 18 
Interest expense, netInterest expense, net(447)(255)(780)(515)Interest expense, net(437)(447)(861)(780)
Other income (expense), net49 72 158 (33)
Other income, netOther income, net23 49 117 158 
Total nonoperating expense, netTotal nonoperating expense, net(389)(91)(604)(352)Total nonoperating expense, net(373)(389)(692)(604)
Income (loss) before income taxesIncome (loss) before income taxes50 (2,532)(1,480)(5,328)Income (loss) before income taxes661 50 (1,353)(1,480)
Income tax benefit(1)(564)(315)(1,191)
Income tax provision (benefit)Income tax provision (benefit)140 (1)(296)(315)
Net income (loss)Net income (loss)$51 $(1,968)$(1,165)$(4,137)Net income (loss)$521 $51 $(1,057)$(1,165)
See accompanying notes to condensed consolidated financial statements.

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AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)(Unaudited)
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
2021202020212020 2022202120222021
Net income (loss)Net income (loss)$51 $(1,968)$(1,165)$(4,137)Net income (loss)$521 $51 $(1,057)$(1,165)
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Pension, retiree medical and other postretirement benefitsPension, retiree medical and other postretirement benefits39 (4)105 (131)Pension, retiree medical and other postretirement benefits28 39 56 105 
InvestmentsInvestments0 21 0 (1)Investments(2)— (4)— 
Total other comprehensive income (loss), net of tax39 17 105 (132)
Total other comprehensive income, net of taxTotal other comprehensive income, net of tax26 39 52 105 
Total comprehensive income (loss)Total comprehensive income (loss)$90 $(1,951)$(1,060)$(4,269)Total comprehensive income (loss)$547 $90 $(1,005)$(1,060)
See accompanying notes to condensed consolidated financial statements.

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AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share and par value)
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
(Unaudited)(Unaudited)
ASSETSASSETSASSETS
Current assetsCurrent assetsCurrent assets
CashCash$305 $231 Cash$373 $265 
Short-term investmentsShort-term investments17,609 6,617 Short-term investments12,118 12,155 
Restricted cash and short-term investmentsRestricted cash and short-term investments999 609 Restricted cash and short-term investments997 990 
Accounts receivable, netAccounts receivable, net1,240 1,334 Accounts receivable, net1,812 1,484 
Receivables from related parties, netReceivables from related parties, net5,328 7,877 Receivables from related parties, net6,403 5,547 
Aircraft fuel, spare parts and supplies, netAircraft fuel, spare parts and supplies, net1,693 1,520 Aircraft fuel, spare parts and supplies, net2,160 1,692 
Prepaid expenses and otherPrepaid expenses and other631 633 Prepaid expenses and other860 579 
Total current assetsTotal current assets27,805 18,821 Total current assets24,723 22,712 
Operating property and equipmentOperating property and equipmentOperating property and equipment
Flight equipmentFlight equipment37,235 37,485 Flight equipment38,413 37,520 
Ground property and equipmentGround property and equipment8,772 8,836 Ground property and equipment9,180 8,966 
Equipment purchase depositsEquipment purchase deposits714 1,446 Equipment purchase deposits617 517 
Total property and equipment, at costTotal property and equipment, at cost46,721 47,767 Total property and equipment, at cost48,210 47,003 
Less accumulated depreciation and amortizationLess accumulated depreciation and amortization(16,826)(16,393)Less accumulated depreciation and amortization(18,540)(17,770)
Total property and equipment, netTotal property and equipment, net29,895 31,374 Total property and equipment, net29,670 29,233 
Operating lease right-of-use assetsOperating lease right-of-use assets7,917 7,994 Operating lease right-of-use assets7,443 7,810 
Other assetsOther assetsOther assets
GoodwillGoodwill4,091 4,091 Goodwill4,091 4,091 
Intangibles, net of accumulated amortization of $765 and $745, respectively2,008 2,029 
Intangibles, net of accumulated amortization of $805 and $786, respectivelyIntangibles, net of accumulated amortization of $805 and $786, respectively2,079 1,988 
Deferred tax assetDeferred tax asset3,520 3,235 Deferred tax asset3,682 3,408 
Other assetsOther assets1,713 1,671 Other assets1,697 1,903 
Total other assetsTotal other assets11,332 11,026 Total other assets11,549 11,390 
Total assetsTotal assets$76,949 $69,215 Total assets$73,385 $71,145 
LIABILITIES AND STOCKHOLDER’S EQUITYLIABILITIES AND STOCKHOLDER’S EQUITYLIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilitiesCurrent liabilitiesCurrent liabilities
Current maturities of long-term debt and finance leasesCurrent maturities of long-term debt and finance leases$2,053 $2,800 Current maturities of long-term debt and finance leases$2,100 $1,742 
Accounts payableAccounts payable2,069 1,116 Accounts payable2,615 1,630 
Accrued salaries and wagesAccrued salaries and wages1,504 1,661 Accrued salaries and wages1,352 1,385 
Air traffic liabilityAir traffic liability7,095 4,757 Air traffic liability8,969 6,087 
Loyalty program liabilityLoyalty program liability2,632 2,033 Loyalty program liability3,065 2,896 
Operating lease liabilitiesOperating lease liabilities1,577 1,641 Operating lease liabilities1,468 1,496 
Other accrued liabilitiesOther accrued liabilities3,403 2,300 Other accrued liabilities2,781 2,628 
Total current liabilitiesTotal current liabilities20,333 16,308 Total current liabilities22,350 17,864 
Noncurrent liabilitiesNoncurrent liabilitiesNoncurrent liabilities
Long-term debt and finance leases, net of current maturitiesLong-term debt and finance leases, net of current maturities31,985 26,182 Long-term debt and finance leases, net of current maturities29,727 30,352 
Pension and postretirement benefitsPension and postretirement benefits6,586 7,027 Pension and postretirement benefits4,722 5,020 
Loyalty program liabilityLoyalty program liability6,674 7,162 Loyalty program liability6,189 6,239 
Operating lease liabilitiesOperating lease liabilities6,677 6,739 Operating lease liabilities6,259 6,578 
Other liabilitiesOther liabilities1,347 1,449 Other liabilities1,276 1,266 
Total noncurrent liabilitiesTotal noncurrent liabilities53,269 48,559 Total noncurrent liabilities48,173 49,455 
Commitments and contingenciesCommitments and contingencies00Commitments and contingencies00
Stockholder’s equityStockholder’s equityStockholder’s equity
Common stock, $1.00 par value; 1,000 shares authorized, issued and outstandingCommon stock, $1.00 par value; 1,000 shares authorized, issued and outstanding0 0 Common stock, $1.00 par value; 1,000 shares authorized, issued and outstanding— — 
Additional paid-in capitalAdditional paid-in capital17,108 17,050 Additional paid-in capital17,193 17,152 
Accumulated other comprehensive lossAccumulated other comprehensive loss(7,089)(7,194)Accumulated other comprehensive loss(5,989)(6,041)
Retained deficitRetained deficit(6,672)(5,508)Retained deficit(8,342)(7,285)
Total stockholder's equityTotal stockholder's equity3,347 4,348 Total stockholder's equity2,862 3,826 
Total liabilities and stockholder’s equityTotal liabilities and stockholder’s equity$76,949 $69,215 Total liabilities and stockholder’s equity$73,385 $71,145 
See accompanying notes to condensed consolidated financial statements.
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AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)(Unaudited)
Six Months Ended June 30, Six Months Ended June 30,
20212020 20222021
Net cash provided by operating activitiesNet cash provided by operating activities$6,134 $2,295 Net cash provided by operating activities$2,100 $6,134 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Capital expenditures, net of aircraft purchase deposit returnsCapital expenditures, net of aircraft purchase deposit returns133 (1,208)Capital expenditures, net of aircraft purchase deposit returns(1,377)133 
Airport construction projects, net of reimbursementsAirport construction projects, net of reimbursements(156)(77)
Proceeds from sale of property and equipmentProceeds from sale of property and equipment19 161 
Proceeds from sale-leaseback transactionsProceeds from sale-leaseback transactions163 376 Proceeds from sale-leaseback transactions— 163 
Proceeds from sale of property and equipment161 148 
Sales of short-term investmentsSales of short-term investments10,135 2,837 
Purchases of short-term investmentsPurchases of short-term investments(13,827)(7,936)Purchases of short-term investments(10,083)(13,827)
Sales of short-term investments2,837 2,131 
Increase in restricted short-term investmentsIncrease in restricted short-term investments(404)(386)Increase in restricted short-term investments(10)(404)
Purchase of equity investmentPurchase of equity investment(200)— 
Other investing activitiesOther investing activities(71)(62)Other investing activities— 6 
Net cash used in investing activitiesNet cash used in investing activities(11,008)(6,937)Net cash used in investing activities(1,672)(11,008)
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Payments on long-term debt and finance leasesPayments on long-term debt and finance leases(901)(5,016)
Proceeds from issuance of long-term debtProceeds from issuance of long-term debt10,115 6,868 Proceeds from issuance of long-term debt574 10,115 
Payments on long-term debt and finance leases(5,016)(1,971)
Deferred financing costsDeferred financing costs(165)(75)Deferred financing costs— (165)
Net cash provided by financing activities4,934 4,822 
Other financing activitiesOther financing activities8 — 
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities(319)4,934 
Net increase in cash and restricted cashNet increase in cash and restricted cash60 180 Net increase in cash and restricted cash109 60 
Cash and restricted cash at beginning of periodCash and restricted cash at beginning of period385 277 Cash and restricted cash at beginning of period400 385 
Cash and restricted cash at end of period (1)
Cash and restricted cash at end of period (1)
$445 $457 
Cash and restricted cash at end of period (1)
$509 $445 
Non-cash transactions:Non-cash transactions:Non-cash transactions:
Right-of-use (ROU) assets acquired through operating leasesRight-of-use (ROU) assets acquired through operating leases$704 $412 Right-of-use (ROU) assets acquired through operating leases$427 $704 
Property and equipment acquired through finance leasesProperty and equipment acquired through finance leases61 0 Property and equipment acquired through finance leases59 61 
Settlement of bankruptcy obligations0 56 
Deferred financing costs paid through issuance of debt0 17 
Supplemental information:Supplemental information:Supplemental information:
Interest paid, netInterest paid, net615 469 Interest paid, net795 615 
Income taxes paidIncome taxes paid1 2 Income taxes paid2 1 
(1)The following table provides a reconciliation of cash and restricted cash to amounts reported within the condensed consolidated balance sheets:
CashCash$305 $452 Cash$373 $305 
Restricted cash included in restricted cash and short-term investmentsRestricted cash included in restricted cash and short-term investments140 5 Restricted cash included in restricted cash and short-term investments136 140 
Total cash and restricted cashTotal cash and restricted cash$445 $457 Total cash and restricted cash$509 $445 
See accompanying notes to condensed consolidated financial statements.

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AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(In millions)(Unaudited)
Common
Stock		Additional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Deficit		TotalCommon
Stock		Additional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Deficit		Total
Balance at December 31, 2020$0 $17,050 $(7,194)$(5,508)$4,348 
Balance at December 31, 2021Balance at December 31, 2021$— $17,152 $(6,041)$(7,285)$3,826 
Net lossNet loss— — — (1,215)(1,215)Net loss— — — (1,578)(1,578)
Other comprehensive income, netOther comprehensive income, net— — 66 — 66 Other comprehensive income, net— — 26 — 26 
Share-based compensation expenseShare-based compensation expense— 38 — — 38 Share-based compensation expense— 23 — — 23 
Balance at March 31, 20210 17,088 (7,128)(6,723)3,237 
Balance at March 31, 2022Balance at March 31, 2022— 17,175 (6,015)(8,863)2,297 
Net incomeNet income— — — 51 51 Net income— — — 521 521 
Other comprehensive income, netOther comprehensive income, net— — 39 — 39 Other comprehensive income, net— — 26 — 26 
Share-based compensation expenseShare-based compensation expense— 20 — — 20 Share-based compensation expense— 18 — — 18 
Balance at June 30, 2021$0 $17,108 $(7,089)$(6,672)$3,347 
Balance at June 30, 2022Balance at June 30, 2022$— $17,193 $(5,989)$(8,342)$2,862 
Common
Stock		Additional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Earnings
(Deficit)		TotalCommon
Stock		Additional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Deficit		Total
Balance at December 31, 2019$0 $16,903 $(6,423)$2,942 $13,422 
Net loss— — — (2,169)(2,169)
Other comprehensive loss, net— — (149)— (149)
Share-based compensation expense— 18 — — 18 
Intercompany equity transfer— 56 — — 56 
Balance at March 31, 20200 16,977 (6,572)773 11,178 
Balance at December 31, 2020Balance at December 31, 2020$— $17,050 $(7,194)$(5,508)$4,348 
Net lossNet loss— — — (1,968)(1,968)Net loss— — — (1,215)(1,215)
Other comprehensive income, netOther comprehensive income, net— — 17 — 17 Other comprehensive income, net— — 66 — 66 
Share-based compensation expenseShare-based compensation expense— 31 — — 31 Share-based compensation expense— 38 — — 38 
Balance at June 30, 2020$0 $17,008 $(6,555)$(1,195)$9,258 
Balance at March 31, 2021Balance at March 31, 2021— 17,088 (7,128)(6,723)3,237 
Net incomeNet income— — — 51 51 
Other comprehensive income, netOther comprehensive income, net— — 39 — 39 
Share-based compensation expenseShare-based compensation expense— 20 — — 20 
Balance at June 30, 2021Balance at June 30, 2021$— $17,108 $(7,089)$(6,672)$3,347 
See accompanying notes to condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.
(Unaudited)
1. Basis of Presentation and Recent Accounting Pronouncements
(a) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of American Airlines, Inc. (American) should be read in conjunction with the consolidated financial statements contained in American’s Annual Report on Form 10-K for the year ended December 31, 2020.2021. American is the principal wholly-owned subsidiary of American Airlines Group Inc. (AAG). All significant intercompany transactions have been eliminated.
Management believes that all adjustments necessary for the fair presentation of results, consisting of normally recurring items, have been included in the unaudited condensed consolidated financial statements for the interim periods presented. 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, deferred tax assets, as well as pension and retiree medical and other postretirement benefits. Certain prior period amounts have been reclassified to conform to the current year presentation. See Note 9 for further information.
(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 travelspread. Ongoing global vaccination efforts and the corresponding lifting of government restrictions testing regimes, closing of borders, “stay at home” ordersin and business closures. Asbetween many markets resulted in a result, American has experienced an unprecedented declinesignificant and rapid recovery in the demand for air travel, which has resulted in a material deterioration in its revenues. While global vaccination efforts are underway and demand for air travel has begun to return, thetravel. The continued impact of the COVID-19 pandemic, including any increases in infection rates, new variants and renewed governmental action to slow the spread of COVID-19 such as has occurred throughout Western Europe and Latin America during the first six months of 2021, cannot be estimated.
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), Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (PSP Extension Law) and Section 7301 of the American Rescue Plan Act of 2021 (the ARP).
Capacity Reductions
American's capacity (as measured by available seat miles) continues to be significantly reduced compared to pre-COVID-19 pandemic levels, with flying duringtotal capacity in the second quarter of 20212022 down 24.6%8.5% as compared to the second quarter of 2019. Domestic capacity in the second quarter of 20212022 was down 12.8%6.6% while international capacity was down 46.5% versus12.1% as compared to the second quarter of 2019.
While demand for domestic and short-haul international markets has largely recovered to 2019 levels, uncertainty continues to exist.remains regarding the timing of a full recovery. American will continue to match its forward capacity with observed booking trends for future travel and make further adjustments to American's capacity as needed.
Cost Reductions
American has reduced its 2021 operating expenditures as a result of permanent non-volume cost reductions and other efficiency measures. These reductions include labor productivity enhancements, management salaries and benefits and other permanent cost reductions. Also, an additional 1,600 represented team members opted in to a voluntary early retirement program, which occurred during the first quarter of 2021.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.
(Unaudited)

Liquidity
As of June 30, 2021, American had $21.2 billion in total available liquidity, consisting of $17.9 billion in unrestricted cash and short-term investments, $2.8 billion in an undrawn capacity under revolving credit facilities and a total of $470 million in undrawn short-term revolving and other facilities.
During the first six months of 2021, American completed the following financing transactions (see Note 4 for further information):
•issued $3.5 billion in aggregate principal amount of 5.50% Senior Secured Notes due 2026 and $3.0 billion in aggregate principal amount of 5.75% Senior Secured Notes due 2029 and entered into the $3.5 billion AAdvantage Term Loan Facility of which the full amount of term loans was drawn at closing;
•repaid in full $750 million under the 2013 Revolving Facility, $1.6 billion under the 2014 Revolving Facility and $450 million under the April 2016 Revolving Facility, all of which was borrowed in the second quarter of 2020 in response to the COVID-19 pandemic;
•repaid the $550 million of outstanding loans under the $7.5 billion secured term loan facility with the U.S. Department of the Treasury (Treasury) (the Treasury Loan Agreement) and terminated the Treasury Loan Agreement;
•issued approximately $150 million in special facility revenue bonds related to John F. Kennedy International Airport (JFK), of which $62 million was used to fund the redemption of other bonds related to JFK; and
•raised $163 million principally from aircraft sale-leaseback transactions.
In addition to the foregoing financings, during the first quarter of 2021, AAG and the Subsidiaries (as defined below) received an aggregate of approximately $3.1 billion in financial assistance through the payroll support program (PSP2) established under the PSP Extension Law. In April 2021, AAG and the Subsidiaries received an additional installment of $463 million for an aggregate $3.5 billion of such PSP2 financial assistance. In connection with AAG and the Subsidiaries receipt of this financial assistance, AAG issued a promissory note (the PSP2 Promissory Note) to Treasury for $1.0 billion in aggregate principal amount and warrants to purchase up to an aggregate of approximately 6.6 million shares (the PSP2 Warrant Shares) of AAG common stock.
During the second quarter of 2021, AAG and the Subsidiaries received an aggregate of approximately $3.3 billion in financial assistance through the payroll support program (PSP3) established under the ARP. In connection with AAG and the Subsidiaries receipt of this financial assistance, AAG issued a promissory note (the PSP3 Promissory Note) to Treasury for $946 million in aggregate principal amount and warrants to purchase up to an aggregate of approximately 4.4 million shares (the PSP3 Warrant Shares) of AAG common stock. See below for further discussion on PSP2 and PSP3.
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 projected cash flows from operations.
PSP2
On January 15, 2021 (the PSP2 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 Extension Agreement (the PSP2 Agreement) with Treasury, with respect to PSP2 as provided pursuant to the PSP Extension Law. In connection with AAG and 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.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.
(Unaudited)

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 Payroll Support Program Agreement entered into by the Subsidiaries with Treasury in connection with the payroll support program established under the CARES Act, 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 at least 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 provided AAG and its Subsidiaries financial assistance in three installments (each prior installment and any future installment disbursement, an Installment) totaling approximately $3.5 billion in the aggregate, all of which was received as of June 30, 2021. As partial compensation to the U.S. Government for the provision of financial assistance under PSP2, AAG issued the PSP2 Promissory Note in the aggregate principal amount of $1.0 billion and issued warrants (each a PSP2 Warrant and, collectively, the PSP2 Warrants) to Treasury to purchase up to an aggregate of approximately 6.6 million shares of AAG common stock for an exercise price of $15.66 per share, subject to adjustment. See below for more information on the PSP2 Warrant Agreement and PSP2 Warrants.
For accounting purposes, the $3.5 billion of aggregate financial assistance AAG and the Subsidiaries received pursuant to the PSP2 Agreement is allocated to the PSP2 Promissory Note, the PSP2 Warrants and the other PSP2 financial assistance (the PSP2 Financial Assistance). The aggregate principal amount of $1.0 billion of the PSP2 Promissory Note was recorded as unsecured long-term debt, and the total fair value of the PSP2 Warrants of $76 million, estimated using a Black-Scholes option pricing model, was recorded in stockholders' deficit in AAG's condensed consolidated balance sheet. The remaining amount of approximately $2.4 billion of PSP2 Financial Assistance was recognized as a credit to special items, net in the condensed consolidated statement of operations primarily in the first quarter of 2021, the remaining period over which the continuation of payment of eligible employee wages, salaries and benefits was required. The third installment of PSP2 Financial Assistance was received and recognized as a credit to special items, net in the second quarter of 2021. For the three and six months ended June 30, 2021, $314 million and $2.4 billion of PSP2 Financial Assistance, respectively, was recognized as a credit to special items, net in the condensed consolidated statements of operations.
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 issued the PSP2 Warrants to Treasury to purchase PSP2 Warrant Shares. The exercise price of the PSP2 Warrant Shares is $15.66 per share, subject to certain anti-dilution provisions provided for in the PSP2 Warrants.
Pursuant to the PSP2 Warrant Agreement, AAG issued to Treasury PSP2 Warrants to purchase up to an aggregate of approximately 6.6 million shares of AAG common stock for an exercise price of $15.66 per share, subject to adjustment.
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.
PSP3
On April 23, 2021 (the PSP3 Closing Date), American, Envoy, Piedmont and PSA (collectively, the Subsidiaries), entered into a Payroll Support Program 3 Agreement (the PSP3 Agreement) with Treasury, with respect to PSP3 as provided pursuant to the ARP. In connection with AAG and the Subsidiaries’ entry into the PSP3 Agreement, on the PSP3 Closing Date, AAG also entered into a warrant agreement (the PSP3 Warrant Agreement) with Treasury and issued the PSP3 Promissory Note to Treasury, with the Subsidiaries as guarantors.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.
(Unaudited)

PSP3 Agreement
In connection with PSP3, AAG and the Subsidiaries are required to comply with the relevant provisions of the ARP, which are substantially similar as the restrictions contained in the Payroll Support Program Agreement entered into by the Subsidiaries with Treasury in connection with the payroll support program established under the CARES Act, but are in effect for a longer time period. These provisions include the requirement that funds provided pursuant to the PSP3 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 at least September 30, 2021, the provisions that prohibit the repurchase of AAG common stock, and the payment of common stock dividends through at least September 30, 2022, the provisions that restrict the payment of certain executive compensation until April 1, 2023. As was the case with PSP1 and PSP2, the PSP3 Agreement also imposes substantial reporting obligations on AAG and the Subsidiaries.
Pursuant to the PSP3 Agreement, Treasury provided AAG and the Subsidiaries financial assistance in two installments (each prior installment and any future installment disbursement, a PSP3 Installment) totaling approximately $3.3 billion in the aggregate, all of which was received as of June 30, 2021. As partial compensation to the U.S. Government for the provision of financial assistance under PSP3, AAG issued the PSP3 Promissory Note in the aggregate principal amount of $946 million and issued warrants (each a PSP3 Warrant and, collectively, the PSP3 Warrants) to Treasury to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock for an exercise price of $21.75 per share, subject to adjustment. See below for more information on the PSP3 Warrant Agreement and PSP3 Warrants.
For accounting purposes, the $3.3 billion of aggregate financial assistance AAG and the Subsidiaries received pursuant to the PSP3 Agreement is allocated to the PSP3 Promissory Note, the PSP3 Warrants and the other PSP3 financial assistance (the PSP3 Financial Assistance). The aggregate principal amount of $946 million of the PSP3 Promissory Note was recorded as unsecured long-term debt, and the total fair value of the PSP3 Warrants of $46 million, estimated using a Black-Scholes option pricing model, was recorded in stockholders' deficit in AAG's condensed consolidated balance sheet. The remaining amount of approximately $2.3 billion of PSP3 Financial Assistance will be recognized as a credit to special items, net in the condensed consolidated statement of operations in the second and third quarters of 2021, the remaining period over which the continuation of payment of eligible employee wages, salaries and benefits is expected, as required by the PSP3 Agreement. At June 30, 2021, approximately $1.1 billion of the PSP3 Financial Assistance was deferred in other accrued liabilities in the condensed consolidated balance sheet and approximately $1.2 billion was recognized as a credit to special items, net in the condensed consolidated statement of operations.
PSP3 Warrant Agreement and PSP3 Warrants
As partial compensation to the U.S. Government for the provision of financial assistance under the PSP3 Agreement, and pursuant to the PSP3 Warrant Agreement, AAG issued the PSP3 Warrants to Treasury to purchase PSP3 Warrant Shares. The exercise price of the PSP3 Warrant Shares is $21.75 per share, subject to certain anti-dilution provisions provided for in the PSP3 Warrants.
Pursuant to the PSP3 Warrant Agreement, AAG issued to Treasury PSP3 Warrants to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock for an exercise price of $21.75 per share, subject to adjustment.
The PSP3 Warrants do not have any voting rights and are freely transferrable, with registration rights. Each PSP3 Warrant expires on the fifth anniversary of the date of issuance of such PSP3 Warrant. The PSP3 Warrants will be exercisable either through net share settlement or cash, at AAG's option. The PSP3 Warrants were and will be issued solely as compensation to the U.S. Government related to entry into the PSP3 Agreement. No separate proceeds (apart from the financial assistance described above) were received upon issuance of the PSP3 Warrants or will be received upon exercise thereof.
(c) Recent Accounting Pronouncement
Accounting Standards Update 2019-12: Simplifying the Accounting for Income Taxes (Topic 740)
This standard simplifies the accounting and disclosure requirements for income taxes by clarifying the existing guidance to improve consistency in the application of Accounting Standards Codification 740. This standard also removed the requirement to calculate income tax expense for the stand-alone financial statements of wholly-owned subsidiaries that are not subject to income tax. American adopted this standard effective January 1, 2021, and it did not have a material impact on its condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.
(Unaudited)

2. Special Items, Net
Special items, net in the condensed consolidated statements of operations consisted of the following (in millions):
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
PSP Financial Assistance (1)
$(1,288)$(1,803)$(3,170)$(1,803)
Severance expenses (2)
0 332 168 537 
Mark-to-market adjustments on bankruptcy obligations, net (3)
0 0 6 (49)
Fleet impairment (4)
0 0 0 743 
Labor contract expenses (5)
0 10 0 228 
Other operating special items, net0 (33)0 (18)
Mainline operating special items, net(1,288)(1,494)(2,996)(362)
PSP Financial Assistance (1)
(167)(216)(410)(216)
Fleet impairment (4)
0 13 27 106 
Regional operating special items, net(167)(203)(383)(110)
Operating special items, net(1,455)(1,697)(3,379)(472)
Mark-to-market adjustments on equity and other investments, net (6)
37 0 (13)180 
Debt refinancing, extinguishment and other, net0 11 26 48 
Nonoperating special items, net37 11 13 228 
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Fleet impairment (1)
$— $— $149 $— 
PSP Financial Assistance (2)
— (1,288)— (3,170)
Severance expenses (3)
— — — 168 
Mark-to-market adjustments on bankruptcy obligations, net— — — 6 
Other operating special items, net(5)— 3 — 
Mainline operating special items, net(5)(1,288)152 (2,996)
PSP Financial Assistance (2)
— (167)— (410)
Fleet impairment (1)
— — — 27 
Regional operating special items, net— (167)— (383)
Operating special items, net(5)(1,455)152 (3,379)
Mark-to-market adjustments on equity and other investments, net (4)
89 37 90 (13)
Debt refinancing, extinguishment and other, net— — — 26 
Nonoperating special items, net89 37 90 13 
Income tax special items, net(9)— (9)— 
(1)Fleet impairment for the six months ended June 30, 2022 included a non-cash impairment charge to write down the carrying value of American's retired Airbus A330 fleet to the estimated fair value due to current market conditions for certain used aircraft. American retired its Airbus A330 fleet in 2020 as a result of the decline in demand for air travel due to the COVID-19 pandemic.
Fleet impairment for the six months ended June 30, 2021 included a non-cash impairment charge to write down regional aircraft resulting from the retirement of the remaining Embraer 140 fleet earlier than planned.
(2)The 2021 PSP Financial Assistance represents recognition of a portion of the financial assistance received from the U.S. Department of Treasury pursuant to the PSP2payroll support program established under the PSP Extension Law (PSP2) and PSP3 Agreements. See Note 1(b) for further information. The 2020 PSP Financial Assistance represents recognitionthe American Rescue Plan Act of a portion of the financial assistance received from Treasury pursuant to the PSP1 Agreement.2021 (ARP) (PSP3).
(2)(3)Severance expenses include salary and medical costs primarily associated with certain team members who opted in tointo voluntary early retirement programs offered as a result of reductions to American's operation due to the COVID-19 pandemic. Cash payments related to American's voluntary early retirement programs for the three and six months ended June 30, 20212022 were approximately $50 million and $140 million, respectively, and approximately $120 million and $290 million for the three and six months ended June 30, 2021, respectively.
(3)Bankruptcy obligations that will be settled in shares of AAG common stock are marked-to-market based on AAG's stock price.
(4)Fleet impairment resulted from American's decision to retire certain aircraft earlier than planned driven primarily by the severe decline in air travel due to the COVID-19 pandemic. In the first six months of 2021, American retired its remaining fleet of Embraer 140 aircraft resulting in a non-cash write-down of these aircraft. In the first six months of 2020, American retired its Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets as well as certain Embraer 140 and Bombardier CRJ200 aircraft resulting in a $773 million non-cash write-down of mainline and regional aircraft and associated spare parts and $76 million in cash charges primarily for impairment of ROU assets and lease return costs.
(5)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 for American's maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.
(6)Mark-to-market adjustments on equity and other investments, net primarily related toprincipally included net unrealized gains and losses associated with American's equity investmentinvestments in GOL Linhas Aéreas Inteligentes S.A. (GOL), Vertical Aerospace Ltd. (Vertical) and China Southern Airlines Company Limited (China Southern Airlines) and certain treasury rate lock derivative instruments..
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(Unaudited)

3. Revenue Recognition
Revenue
The following are the significant categories comprising American's reported operating revenues (in millions):
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
2021202020212020 2022202120222021
Passenger revenue:Passenger revenue:Passenger revenue:
Passenger travelPassenger travel$5,995 $1,006 $8,888 $8,085 Passenger travel$11,400 $5,995 $18,613 $8,888 
Loyalty revenue - travel (1)
Loyalty revenue - travel (1)
550 102 836 703 
Loyalty revenue - travel (1)
823 550 1,428 836 
Total passenger revenueTotal passenger revenue6,545 1,108 9,724 8,788 Total passenger revenue12,223 6,545 20,041 9,724 
CargoCargo326 130 641 277 Cargo328 326 692 641 
Other:Other:Other:
Loyalty revenue - marketing services (2)
Loyalty revenue - marketing services (2)
529 356 986 927 
Loyalty revenue - marketing services (2)
740 529 1,336 986 
Other revenueOther revenue78 28 134 144 Other revenue130 78 248 134 
Total other revenueTotal other revenue607 384 1,120 1,071 Total other revenue870 607 1,584 1,120 
Total operating revenuesTotal operating revenues$7,478 $1,622 $11,485 $10,136 Total operating revenues$13,421 $7,478 $22,317 $11,485 
(1)Loyalty revenue included in passenger revenue is principally comprised of mileage credit redemptions, which were earned from travel or co-branded credit card and other partners.
(2)During the three months ended June 30, 20212022 and 2020,2021, cash payments from co-branded credit card and other partners waswere $1.0 billion and $684 million and $573 million, respectively. During the six months ended June 30, 20212022 and 2020,2021, cash payments from co-branded credit card and other partners was $1.7were $2.4 billion and $1.8$1.7 billion, respectively.
The following is American's total passenger revenue by geographic region (in millions):
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
2021202020212020 2022202120222021
DomesticDomestic$5,444 $1,026 $8,099 $6,806 Domestic$9,120 $5,444 $15,180 $8,099 
Latin AmericaLatin America936 34 1,417 1,214 Latin America1,534 936 2,761 1,417 
AtlanticAtlantic125 42 147 565 Atlantic1,481 125 1,947 147 
PacificPacific40 6 61 203 Pacific88 40 153 61 
Total passenger revenueTotal passenger revenue$6,545 $1,108 $9,724 $8,788 Total passenger revenue$12,223 $6,545 $20,041 $9,724 
American attributes passenger revenue by geographic region based upon the origin and destination of each flight segment.
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 the condensed consolidated balance sheets and (2) ticket sales for transportation that has not yet been provided, reported as air traffic liability on the condensed consolidated balance sheets.
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
(In millions)(In millions)
Loyalty program liabilityLoyalty program liability$9,306 $9,195 Loyalty program liability$9,254 $9,135 
Air traffic liabilityAir traffic liability7,095 4,757 Air traffic liability8,969 6,087 
TotalTotal$16,401 $13,952 Total$18,223 $15,222 
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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, 20202021$9,1959,135 
Deferral of revenue9831,596 
Recognition of revenue (1)
(872)(1,477)
Balance at June 30, 20212022 (2)
$9,3069,254 
(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. In response to24 months or if the COVID-19 pandemic, American suspendedAAdvantage member is the expirationprimary holder of mileage credits through December 31, 2021 and eliminated mileage reinstatement fees for canceled award tickets.a co-branded credit card. As of June 30, 2021,2022, American's current loyalty program liability was $2.6$3.1 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 continued impact of 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 the six months ended June 30, 2021, $1.22022, $3.6 billion of revenue was recognized in passenger revenue that was included in American's air traffic liability at December 31, 2020.2021. In response to the COVID-19 pandemic, American extended the contract duration for certain tickets to March 31,September 30, 2022, principally those tickets which were scheduled to expire from March 1,issued in 2020 through March 31,and 2021. Additionally, American extended the contract duration to December 31, 2022 for tickets to certain international destinations. American also has eliminated change fees for most domestic and international tickets. As of June 30, 2021,tickets providing more flexibility for customers to change travel plans. Given these changes and the air traffic liability included approximately $1.6 billion of travel credits related to these unused tickets. 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'sits estimates of refunds may be subject to variability and differ from historical experience.
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4. Debt
Long-term debt included in the condensed consolidated balance sheets consisted of (in millions):
June 30, 2021December 31, 2020
Secured
2013 Term Loan Facility, variable interest rate of 1.85%, installments through 2025$1,770 $1,788 
2013 Revolving Facility0 750 
2014 Term Loan Facility, variable interest rate of 1.85%, installments through 20271,208 1,220 
2014 Revolving Facility0 1,643 
April 2016 Spare Parts Term Loan Facility, variable interest rate of 2.10%, installments through 2023950 960 
April 2016 Revolving Facility0 450 
December 2016 Term Loan Facility, variable interest rate of 2.07%, installments through 20231,200 1,200 
11.75% senior secured notes, interest only payments until due in July 20252,500 2,500 
10.75% senior secured IP notes, interest only payments until due in February 20261,000 1,000 
10.75% senior secured LGA/DCA notes, interest only payments until due in February 2026200 200 
Treasury Term Loan Facility0 550 
5.50% senior secured notes, installments beginning in July 2023 until due in April 20263,500 0 
5.75% senior secured notes, installments beginning in July 2026 until due in April 20293,000 0 
AAdvantage Term Loan Facility, variable interest rate of 5.50%, installments beginning in July 2023 through April 20283,500 0 
Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 3.00% to 8.39%, averaging 3.91%, maturing from 2021 to 203210,176 11,013 
Equipment loans and other notes payable, fixed and variable interest rates ranging from 1.22% to 4.64%, averaging 1.85%, maturing from 2021 to 20323,788 4,417 
Special facility revenue bonds, fixed interest rates ranging from 2.25% to 5.38%, maturing from 2026 to 20361,129 1,040 
Total long-term debt33,921 28,731 
Less: Total unamortized debt discount, premium and issuance costs462 321 
Less: Current maturities1,946 2,700 
Long-term debt, net of current maturities$31,513 $25,710 
June 30, 2022December 31, 2021
Secured
2013 Term Loan Facility, variable interest rate of 3.37%, installments through 2025$1,752 $1,770 
2014 Term Loan Facility, variable interest rate of 3.40%, installments through 20271,196 1,208 
December 2016 Term Loan Facility, variable interest rate of 2.84%, installments through 20231,188 1,188 
11.75% senior secured notes, interest only payments until due in July 20252,500 2,500 
10.75% senior secured IP notes, interest only payments until due in February 20261,000 1,000 
10.75% senior secured LGA/DCA notes, interest only payments until due in February 2026200 200 
5.50% senior secured notes, installments beginning in July 2023 until due in April 2026 (1)
3,500 3,500 
5.75% senior secured notes, installments beginning in July 2026 until due in April 2029 (1)
3,000 3,000 
AAdvantage Term Loan Facility, variable interest rate of 5.81%, installments beginning in July 2023 through April 2028 (1)
3,500 3,500 
Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 2.88% to 7.13%, averaging 3.78%, maturing from 2022 to 20349,379 9,357 
Equipment loans and other notes payable, fixed and variable interest rates ranging from 2.29% to 4.82%, averaging 3.07%, maturing from 2022 to 20323,185 3,433 
Special facility revenue bonds, fixed interest rates ranging from 2.25% to 5.38%, maturing from 2026 to 20361,129 1,129 
Total long-term debt31,529 31,785 
Less: Total unamortized debt discount, premium and issuance costs396 428 
Less: Current maturities1,933 1,568 
Long-term debt, net of current maturities$29,200 $29,789 
(1)Collectively referred to as the AAdvantage Financing.
As of June 30, 2021,2022, the maximum availability under American's revolving credit and other facilities is as follows (in millions):
2013 Revolving Facility$750 
2014 Revolving Facility1,643 
April 2016 Revolving Facility450 
Short-term Revolving and Other Facilities470220 
Total$3,3133,063 
American has an undrawn $400$150 million short-term revolving credit facility, it entered into in December 2019, which was set to expire at the beginning of July 2021January 2022 but which has been extended through the beginning of October 2021 and the available amount thereunder increased to $500 million. American has the option to extend further this short-term revolving credit facility to January 2022.2023. American also currently has approximately $70 million of available borrowing base under a cargo receivables facility that was entered into in December 2020.2020 and is set to expire in December 2022. The December 2016 Credit Facilities provide for a revolving credit facility that may be established thereunder in the future.
Secured financings, including revolving credit and other facilities, are collateralized by assets, consisting primarily of aircraft, engines, simulators, aircraft spare parts, airport gate leasehold rights, route authorities, airport slots, certain receivables, certain intellectual property and certain loyalty program assets.
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Secured financings are collateralized by assets, consisting primarily of aircraft, engines, simulators, aircraft spare parts, airport gate leasehold rights, route authorities and airport slots, as well as certain intellectual property and loyalty program assets.
20212022 Financing Activities
2013, 2014 and April 2016 Revolving Facilities2021-1 Aircraft EETCs
In MarchNovember 2021, American repaidcreated two pass-through trusts which issued approximately $960 million aggregate face amount of Series 2021-1 Class A and Class B EETCs (the 2021-1 Aircraft EETCs) in fullconnection with the $750financing of 26 aircraft previously delivered or originally scheduled to be delivered to American through September 2022 (the 2021-1 Aircraft). In 2021, approximately $94 million of revolving loans outstandingthe proceeds had been used to purchase equipment notes issued by American in connection with the financing of 5 aircraft under the 2013 Revolving Facility,2021-1 Aircraft EETCs, all of which was used to repay existing indebtedness. During the $1.6 billionsix months ended June 30, 2022, approximately $574 million of revolving loans outstandingproceeds had been used to purchase equipment notes issued by American in connection with the financing of 14 aircraft under the 2014 Revolving Facility2021-1 Aircraft EETCs. Interest and principal payments on equipment notes issued in connection with the $450 million2021-1 Aircraft EETCs are payable semi-annually in January and July of revolving loans outstanding under the April 2016 Revolving Facility. Following the March 2021 repayment, American is able to draw upon the commitments under these revolving facilities again as needed upon the terms of the underlying credit agreements or leave them undrawn, in each case, until such commitments expire, which is currentlyyear, with interest payments scheduled to occurbegin in 2024 for substantially allJuly 2022 and with principal payments scheduled to begin in January 2023. The remaining proceeds of such commitments. Asapproximately $292 million as of June 30, 2021, there2022 were 0 borrowings or letters of credit outstanding underbeing held in escrow with a depositary for the 2013 Revolving Facility, the 2014 Revolving Facility or the April 2016 Revolving Facility.
AAdvantage Financing
On March 24, 2021 (the AAdvantage Financing Closing Date), American and AAdvantage Loyalty IP Ltd., a newly formed Cayman Islands exempted company incorporated with limited liability and an indirect wholly owned subsidiary of American (Loyalty Issuer and, together with American, the AAdvantage Issuers), completed the offering of $3.5 billion aggregate principal amount of 5.50% Senior Secured Notes due 2026 (the 2026 Notes) and $3.0 billion aggregate principal amount of 5.75% Senior Secured Notes due 2029 (the 2029 Notes, and together with the 2026 Notes, the AAdvantage Notes). The AAdvantage Notes are fully and unconditionally guaranteed (the AAdvantage Note Guarantees) on a senior unsecured basis by AAG and fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by AAdvantage Holdings 1, Ltd., a newly formed Cayman Islands exempted company incorporated with limited liability and a direct wholly owned subsidiary of American, and AAdvantage Holdings 2, Ltd., a newly formed Cayman Islands exempted company incorporated with limited liability and an indirect wholly owned subsidiary of American and the direct parent of Loyalty Issuer (HoldCo2 and, together with AAdvantage Holdings 1, Ltd., the SPV Guarantors, and the SPV Guarantors together with AAG, the AAdvantage Guarantors). The AAdvantage Notes were issued pursuant to an indenture, dated as of March 24, 2021 (the AAdvantage Indenture), by and among the AAdvantage Issuers, the AAdvantage Guarantors and Wilmington Trust, National Association, as trustee and as collateral custodian.
Concurrent with the issuancebenefit of the AAdvantage Notes,holders of the AAdvantage Issuers,2021-1 Aircraft EETCs until such time as co-borrowers, entered into a term loan credit and guaranty agreement, dated March 24, 2021, with Barclays Bank PLC, as administrative agent, Wilmington Trust, National Association, as collateral administrator, and the lenders party thereto, providing for a $3.5 billion term loan facility (the AAdvantage Term Loan Facility and collectively with the AAdvantage Notes, the AAdvantage Financing) and pursuant to which the full $3.5 billion of term loans (the AAdvantage Loans) were drawn on the AAdvantage Financing Closing Date. The AAdvantage Loans are fully and unconditionally guaranteed (together with the AAdvantage Note Guarantees, the AAdvantage Guarantees) by the AAdvantage Guarantors.
Subject to certain permitted liens and other exceptions, the AAdvantage Notes, AAdvantage Loans and AAdvantage Guarantees provided by the SPV Guarantors will be secured by a first-priority security interest in, and pledge of, various agreementsAmerican issues additional equipment notes with respect to the AAdvantage program (the AAdvantage Agreements) (including all payments thereunder) and rights under an intercompany agreement and certain IP Licenses (as defined below), certain rights under the AAdvantage program, certain deposit accounts that will receive cash under the AAdvantage Agreements, certain reserve accounts, the equity of each of Loyalty Issuer and the SPV Guarantors and substantially all other assets of Loyalty Issuer and the SPV Guarantors (collectively, the AAdvantage Collateral).
Payment Terms of the AAdvantage Notes and AAdvantage Loans under the AAdvantage Term Loan Facility
Interest on the AAdvantage Notes is payable in cash, quarterly in arrears on the 20th day of each January, April, July and October (each, an AAdvantage Payment Date), beginning July 20, 2021. The 2026 Notes will mature on April 20, 2026, and the 2029 Notes will mature on April 20, 2029. The outstanding principal on the 2026 Notes will be repaid in quarterly installments of approximately $292 million on each AAdvantage Payment Date, beginning on July 20, 2023. The outstanding principal on the 2029 Notes will be repaid in quarterly installments of $250 million on each AAdvantage Payment Date, beginning on July 20, 2026.
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The AAdvantage Issuers may redeem the AAdvantage Notes, at their option, 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 AAdvantage Notes redeemed plus a “make-whole” premium, together with accrued and unpaid interestremaining 2021-1 Aircraft to the date of redemption.
The scheduled maturity date of the AAdvantage Loans under the AAdvantage Term Loan Facility is April 20, 2028. The AAdvantage Loans bear interest at a variable rate equal to LIBOR (but not less than 0.75% per annum), plus a margin of 4.75% per annum, payable on each AAdvantage Payment Date. The outstanding principal on the AAdvantage Loanspass-through trusts, which will be repaid in quarterly installments of $175 million, on each AAdvantage Payment Date beginningpurchase such additional equipment notes with the AAdvantage Payment Date in July 2023.escrowed funds. These amortization payments (as well as those for the AAdvantage Notes) will be subject to the occurrence of certain early amortization events, including the failure to satisfy a minimum debt service coverage ratio at specified determination dates.
Prepayment of some or all of the AAdvantage Loans outstanding under the AAdvantage Term Loan Facility is permitted, although payment of an applicable premium is required as specified in the AAdvantage Term Loan Facility.
The AAdvantage Indenture and the AAdvantage Term Loan Facility contain mandatory prepayment provisions triggered upon (i) the issuance or incurrence by Loyalty Issuer or the SPV Guarantors of certain indebtedness or (ii) the receiptescrowed funds are not guaranteed by American orand are not reported as debt on its subsidiaries of net proceeds from pre-paid frequent flyer (i.e., AAdvantage) mile purchases exceeding $500 million, with prepayment required only in respect of net proceeds from such purchases exceeding $505 million in the aggregate. Each of these prepayments would also require payment of an applicable premium. Certain other events, including the occurrence of a change of control with respect to AAG and certain AAdvantage Collateral sales exceeding a specified threshold, will also trigger mandatory repurchase or mandatory prepayment provisions under the AAdvantage Indenture and the AAdvantage Term Loan Facility, respectively.
Other Terms of the AAdvantage Indenture and the AAdvantage Term Loan Facility
The AAdvantage Indenture and the AAdvantage Term Loan Facility contain certain covenants that limit the ability of Loyalty Issuer, the SPV Guarantors and, in certain circumstances, American and AAG, to among other things, (i) incur additional indebtedness and make restricted payments, (ii) incur certain liens on the AAdvantage Collateral, (iii) merge, consolidate or sell substantially all of their assets, (iv) dispose of the AAdvantage Collateral, (v) sell pre-paid frequent flyer (i.e. AAdvantage) miles in excess of $550 million in the aggregate, and (vi) terminate, amend, waive, supplement or modify the IP Licenses, or exercise rights and remedies thereunder, except under certain circumstances. American and Loyalty Issuer are also prohibited from substantially reducing the AAdvantage program business or modifying the terms of the AAdvantage program in a manner that would reasonably be expected to materially impair repayment of the AAdvantage Financing obligations (described as a Payment Material Adverse Effect in the AAdvantage Indenture and the AAdvantage Term Loan Facility), and AAG and its subsidiaries are prohibited from changing the policies and procedures of the AAdvantage program in a manner that would reasonably be expected to have a Payment Material Adverse Effect or operating a competing loyalty program. Notwithstanding these restrictions, the AAdvantage program is expected to operate as it has in the past, and the entry into the AAdvantage Financing is not expected to have any impact on the benefits offered to AAdvantage members.
In addition, subject to certain exceptions, the AAdvantage Indenture and the AAdvantage Term Loan Facility restrict the ability of American, Loyalty Issuer or any Guarantor to terminate, or modify certain terms within, the intercompany agreement governing the relationship between American and Loyalty Issuer with respect to the AAdvantage program.
The AAdvantage Indenture and the AAdvantage Term Loan Facility also require the AAdvantage Issuers to comply with certain affirmative covenants, including (i) certain reporting requirements and (ii) the use of commercially reasonable efforts to cause sufficient counterparties to AAdvantage Agreements to direct payments with respect to the AAdvantage program into a collections account, such that at least 90% of such cash receipts in a quarterly reporting period are deposited directly into this collection account, with amounts to be distributed from this collection account for the payment of fees, principal and interest on the AAdvantage Notes and the AAdvantage Loans pursuant to a payment waterfall described in the AAdvantage Indenture and the AAdvantage Term Loan Facility, respectively. In addition, the AAdvantage Indenture and the AAdvantage Term Loan Facility require AAG to maintain minimum liquidity, defined as the sum of (a) unrestricted cash and cash equivalents and (b) the aggregate principal amount committed and available to be drawn under all of AAG's revolving credit and other facilities, at the close of any business day of at least $2.0 billion.
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Subject to certain materiality thresholds, qualifications, exceptions, “baskets” and grace and cure periods, the AAdvantage Indenture and the AAdvantage Term Loan Facility contain various events of default, including payment defaults, covenant defaults, cross-defaults to certain indebtedness, termination of certain agreements related to the AAdvantage program, bankruptcy events of Loyalty Issuer or any SPV Guarantor, and a change of control of Loyalty Issuer or any SPV Guarantor. A bankruptcy event of American is not itself an event of default; following an American bankruptcy, an event of default would only occur if American failed to satisfy certain enumerated bankruptcy case milestones, including an assumption of the AAdvantage Financing by a certain date. Upon the occurrence of an event of default, the outstanding obligations under the AAdvantage Indenture and the AAdvantage Term Loan Facility may (or, with respect to the bankruptcy events noted above, shall) be accelerated and become due and payable immediately.
Terms of Certain Intercompany Agreements Related to the AAdvantage Financing
In connection with the issuance of the AAdvantage Notes and entry into the AAdvantage Term Loan Facility, American, Loyalty Issuer and the SPV Guarantors entered into a series of transactions that resulted in the transfer to Loyalty Issuer of, among other things, American’s rights to certain data and other intellectual property used in the AAdvantage program (subject to certain exceptions) (such assets, the Transferred AAdvantage IP) and certain rights of American under specified AAdvantage Agreements. Loyalty Issuer has entered into a license agreement with HoldCo2 pursuant to which Loyalty Issuer has granted to HoldCo2 an exclusive, irrevocable (subject to certain termination rights), perpetual, worldwide, royalty-bearing license to use the Transferred AAdvantage IP (the HoldCo2 License), and HoldCo2 has in turn granted to American an exclusive, irrevocable (subject to certain termination rights), perpetual, worldwide, royalty-bearing sublicense to use the Transferred AAdvantage IP (together with the HoldCo2 License, the IP Licenses). The IP Licenses would be terminated, and American’s right to use the Transferred AAdvantage IP would cease, upon specified termination events, including, but not limited to, the occurrence of an event of default under the AAdvantage Indenture or the AAdvantage Term Loan Facility. In certain circumstances, such a termination would trigger a liquidated damages payment in an amount that is greater than the initial principal amount of the AAdvantage Notes and the AAdvantage Loans.
In addition, proceeds from the AAdvantage Financing were loaned by Loyalty Issuer to American pursuant to an intercompany note that was guaranteed by AAG. The borrowings under this intercompany note are payable on demand by Loyalty Issuer or, after the occurrence and during the continuance of an event of default under the AAdvantage Financing, by the master collateral agent under the AAdvantage Financing.
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. American had borrowed $550 million under the Treasury Term Loan Facility in September 2020. On March 24, 2021, American used proceeds from the AAdvantage Financing to prepay in full the $550 million outstanding under the Treasury Term Loan Facility and terminated the Treasury Loan Agreement.
JFK Special Facility Revenue Bonds
In January 2020, American and British Airways announced the start of construction projects to upgrade New York's JFK Terminal 8 (the Terminal). The renovation projects at the Terminal include: (i) the reconfiguration or elimination of certain existing gates and the construction of jumbo gates, (ii) the construction of approximately 51,000 square feet of new terminal building space and the refurbishment of 73,300 square feet of existing terminal space, (iii) the expansion of the baggage system capacity of the Terminal, (iv) improvements to the premium passenger lounges, check-in and, potentially, security access areas, and (v) bathroom refreshment, new signage, and other upgrades. The construction project is currently scheduled to be completed in 2023 and is estimated to cost approximately $439 million, of which approximately $298 million was funded with proceeds of the special facility revenue bonds issued by the New York Transportation Development Corporation (NYTDC) on behalf of American in June 2020 (the 2020 JFK Bonds) and approximately $84 million of which will be funded with proceeds of the approximately $150 million of special facility revenue bonds the NYTDC issued in June 2021 (the 2021 JFK Bonds).
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American is required to pay debt service on the 2021 JFK Bonds through payments under a loan agreement with NYTDC (as amended), and American and AAG guarantee the 2021 JFK Bonds. American continues to pay debt service on the outstanding bonds issued by NYTDC on behalf of American in 2016 and 2020 (the 2016 and 2020 JFK Bonds) and American and AAG continue to guarantee the 2016 and 2020 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.
The 2021 JFK Bonds, in aggregate, were priced at par value. The gross proceeds from the issuance of the 2021 JFK Bonds were approximately $150 million. Of this amount, approximately $4 million was used to fund the costs of issuance of the 2021 JFK Bonds, approximately $62 million was used to fund the redemption of the 2016 and 2020 JFK Bonds due August 2021, with the remaining amount of proceeds received to be held in restricted cash and short-term investments on the condensed consolidated balance sheet and to be used to finance a portionsheets because the proceeds held by the depositary for the benefit of the costholders of the renovation and expansion2021-1 Aircraft EETCs are not American’s assets.
Certain information regarding the 2021-1 Aircraft EETC equipment notes, as of June 30, 2022, is set forth in the Terminal. The 2021 JFK Bonds are comprised of term bonds, $70 million of which bear interest at 2.25% per annum and mature on August 1, 2026, and $80 million of which bear interest at 3.00% per annum and mature on August 1, 2031.table below.
2021-1 Aircraft EETCs
Series ASeries B
Aggregate principal issued$758 million$202 million
Remaining escrowed proceeds$231 million$61 million
Fixed interest rate per annum2.875%3.95%
Maturity dateJuly 2034July 2030
5. Income Taxes
At December 31, 2020,2021, American had approximately $16.5$17.1 billion of gross federal net operating losses (NOLs) and $2.4 billion of other carryforwards available to reduce future federal taxable income, of which $8.9$7.3 billion will expire beginning in 20232024 if unused and $7.6$12.2 billion can be carried forward indefinitely (NOL Carryforwards).indefinitely. 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 $16.5 billion to reduce AAG's future federal taxable income. American also had approximately $5.0$6.0 billion of NOL Carryforwardscarryforwards to reduce future state taxable income at December 31, 2020,2021, which will expire in taxable years 20202021 through 20402041 if unused.
American's ability to use its NOL CarryforwardsNOLs and other 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 NOLs, when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. 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 availability and price volatility of aircraft fuel and travel demand. American presently has a $24 million valuation allowance on certain net deferred tax assets related to state NOL Carryforwards.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.
During the three and six months ended June 30, 2021,2022, American recorded an income tax provision of $140 million and an income tax benefit of $1 million and $315$296 million, respectively.
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6. Fair Value Measurements and Other Investments
Assets Measured at Fair Value on a Recurring Basis
American utilizes the market approach to measure the fair value 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, restricted cash and restricted 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 six months ended June 30, 2021.2022.
Assets measured at fair value on a recurring basis are summarized below (in millions):
Fair Value Measurements as of June 30, 2021 Fair Value Measurements as of June 30, 2022
TotalLevel 1Level 2Level 3 TotalLevel 1Level 2Level 3
Short-term investments (1), (2):
Short-term investments (1), (2):
Short-term investments (1), (2):
Money market fundsMoney market funds$3,968 $3,968 $0 $0 Money market funds$212 $212 $— $— 
Corporate obligationsCorporate obligations9,492 0 9,492 0 Corporate obligations5,859 — 5,859 — 
Bank notes/certificates of deposit/time depositsBank notes/certificates of deposit/time deposits2,834 0 2,834 0 Bank notes/certificates of deposit/time deposits4,632 — 4,632 — 
Repurchase agreementsRepurchase agreements1,315 0 1,315 0 Repurchase agreements1,415 — 1,415 — 
17,609 3,968 13,641 0 12,118 212 11,906 — 
Restricted cash and short-term investments (1), (3)
Restricted cash and short-term investments (1), (3)
999 785 214 0 
Restricted cash and short-term investments (1), (3)
997 582 415 — 
Long-term investments (4)
Long-term investments (4)
168 168 0 0 
Long-term investments (4)
231 231 — — 
TotalTotal$18,776 $4,921 $13,855 $0 Total$13,346 $1,025 $12,321 $— 
(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)American’s short-term investments mature in one year or less.
(3)Restricted cash and short-term investments primarily include collateral held to support workers' compensation obligations, collateral associated with the payment of certain fees and interest in respect offor the AAdvantage Financing and money market funds to be used to finance a substantial portion of the cost of the renovation and expansion of Terminal 8 at JFK as well as collateral held to support workers' compensation obligations.John F. Kennedy International Airport.
(4)Long-term investments primarily include American's equity investmentinvestments in China Southern Airlines, in which American presently owns a 1.8% equity interest,GOL and Vertical. These investments are classifiedreflected in other assets on the condensed consolidated balance sheet.sheets.
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 as of December 31, 2020, which would have been classified as Level 3 in the fair value hierarchy.2.
The carrying value and estimated fair value of American’s long-term debt, including current maturities, were as follows (in millions):
 June 30, 2021December 31, 2020
 Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Long-term debt, including current maturities$33,459 $35,429 $28,410 $27,193 
 June 30, 2022December 31, 2021
 Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Long-term debt, including current maturities$31,133 $29,544 $31,357 $32,999 
Other Investments
An important part of American's strategy to expand its network has been to initiate or expand its commercial relationships with other airlines, such as by entering into global alliances, joint business and codeshare relationships, and, in certain instances, by making an equity investment in another airline or other companies.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.
(Unaudited)

GOL
In April 2022, American completed its definitive investment agreement with GOL and invested $200 million in 22.2 million of newly issued preferred shares, representing a 5.3% economic interest in GOL. The total consideration of $200 million has been allocated as follows based on relative fair values: $81 million to the preferred shares and $119 million to the indefinite-lived intangible asset derived from the related commercial agreements. The ownership interest is accounted for at fair value based on GOL’s stock price and mark-to-market adjustments are recorded to nonoperating other income, net on the condensed consolidated statements of operations.
7. Employee Benefit Plans
The following table provides the components of net periodic benefit cost (income) (in millions):
Pension BenefitsRetiree Medical and Other
Postretirement Benefits		 Pension BenefitsRetiree Medical and Other
Postretirement Benefits
Three Months Ended June 30,Three Months Ended June 30,2021202020212020Three Months Ended June 30,2022202120222021
Service costService cost$1 $1 $3 $2 Service cost$1 $1 $3 $3 
Interest costInterest cost130 153 8 8 Interest cost138 130 7 8 
Expected return on assetsExpected return on assets(270)(251)(3)(3)Expected return on assets(283)(270)(3)(3)
Settlements0 4 0 0 
Amortization of:Amortization of:Amortization of:
Prior service cost (benefit)Prior service cost (benefit)7 7 (3)(52)Prior service cost (benefit)7 7 (3)(3)
Unrecognized net loss (gain)Unrecognized net loss (gain)52 41 (6)(5)Unrecognized net loss (gain)38 52 (6)(6)
Net periodic benefit incomeNet periodic benefit income$(80)$(45)$(1)$(50)Net periodic benefit income$(99)$(80)$(2)$(1)
Pension BenefitsRetiree Medical and Other
Postretirement Benefits		 Pension BenefitsRetiree Medical and Other
Postretirement Benefits
Six Months Ended June 30,Six Months Ended June 30,2021202020212020Six Months Ended June 30,2022202120222021
Service costService cost$2 $1 $5 $3 Service cost$2 $2 $7 $5 
Interest costInterest cost261 306 14 14 Interest cost275 261 15 14 
Expected return on assetsExpected return on assets(540)(503)(6)(6)Expected return on assets(567)(540)(6)(6)
Special termination benefitsSpecial termination benefits0 0 139 0 Special termination benefits— — — 139 
Settlements0 4 0 0 
Amortization of:Amortization of:Amortization of:
Prior service cost (benefit)Prior service cost (benefit)14 14 (7)(106)Prior service cost (benefit)14 14 (7)(7)
Unrecognized net loss (gain)Unrecognized net loss (gain)104 83 (11)(12)Unrecognized net loss (gain)77 104 (12)(11)
Net periodic benefit cost (income)Net periodic benefit cost (income)$(159)$(95)$134 $(107)Net periodic benefit cost (income)$(199)$(159)$(3)$134 
Effective November 1, 2012, substantially all of American’s defined benefit pension plans were frozen.
The service cost component of net periodic benefit cost (income) is included in operating expenses, the cost for the special termination benefits is included in special items, net and the other components of net periodic benefit cost (income) are included in nonoperating other income, (expense), net in the condensed consolidated statements of operations.
During the first quarter of 2021, American remeasured its retiree medical and other postretirement benefits to account for enhanced healthcare benefits provided to eligible team members who opted in tointo voluntary early retirement programs offered as a result of reductions to its operation due to the COVID-19 pandemic. For the six months ended June 30, 2021, American recognized a $139 million special charge for these enhanced healthcare benefits and increased its postretirement benefits obligation by $139 million.
In January 2021, American made $241 million in contributions to its pension plans, including a contribution of $130 million for the 2020 calendar year that was permitted to be deferred to January 4, 2021 as provided under the CARES Act. On March 11, 2021, the ARP was enacted, which included funding relief provisions benefiting single employer qualified retirement benefit pension plans such as those sponsored by American. Based on American's current understanding of the ARP provisions applicable to its pension plans, American will have no additional funding requirements for 2021.until 2023.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.
(Unaudited)

8. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss (AOCI) are as follows (in millions):
Pension,
Retiree
Medical and
Other
Postretirement
Benefits		Unrealized Gain (Loss) on Investments
Income Tax
Benefit
(Provision) (1)
Total Pension,
Retiree
Medical and
Other
Postretirement
Benefits		Unrealized Loss on Investments
Income Tax
Benefit
(Provision) (1)
Total
Balance at December 31, 2020$(6,215)$(2)$(977)$(7,194)
Balance at December 31, 2021Balance at December 31, 2021$(4,724)$(2)$(1,315)$(6,041)
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications35 0 (8)27 Other comprehensive income (loss) before reclassifications— (5)1 (4)
Amounts reclassified from AOCIAmounts reclassified from AOCI100 0 (22)(2)78 Amounts reclassified from AOCI72 — (16)(2)56 
Net current-period other comprehensive income (loss)Net current-period other comprehensive income (loss)135 0 (30)105 Net current-period other comprehensive income (loss)72 (5)(15)52 
Balance at June 30, 2021$(6,080)$(2)$(1,007)$(7,089)
Balance at June 30, 2022Balance at June 30, 2022$(4,652)$(7)$(1,330)$(5,989)
(1)Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net lossincome (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 benefitprovision (benefit) on the condensed consolidated statementstatements of operations.
Reclassifications out of AOCI are as follows (in millions): 
 Amounts reclassified from AOCIAffected line items on the condensed consolidated statements of operations
AOCI ComponentsThree Months Ended June 30,Six Months Ended
June 30,
2021202020212020
Amortization of pension, retiree medical
      and other postretirement benefits:
Prior service cost (benefit)$3 $(34)$6 $(71)Nonoperating other income (expense), net
Actuarial loss36 30 72 57 Nonoperating other income (expense), net
Total reclassifications for the period,
      net of tax		$39 $(4)$78 $(14)
 Amounts reclassified from AOCIAffected line items on the condensed consolidated statements of operations
AOCI ComponentsThree Months Ended June 30,Six Months Ended
June 30,
2022202120222021
Amortization of pension, retiree medical and other postretirement benefits:
Prior service cost$3 $3 $6 $6 Nonoperating other income, net
Actuarial loss25 36 50 72 Nonoperating other income, net
Total reclassifications for the period, net of tax$28 $39 $56 $78 
9. Regional Expenses
American's regional carriers provide scheduled air transportation under the brand name “American Eagle.” The American Eagle carriers include AAG's wholly-owned regional carriers as well as third-party regional carriers. Substantially all of American's regional carrier arrangements are in the form of capacity purchase agreements. Expenses associated with American Eagle operations are classified as regional expenses on the condensed consolidated statements of operations.
Beginning in the first quarter of 2021, aircraft fuel and related taxes as well as certain salaries, wages and benefits, other rent and landing fees, selling and other expenses are no longer allocated to regional expenses on American's condensed consolidated statements of operations. The second quarter and six months ended June 30, 2020 condensed consolidated statements of operations have been recast to conform to the 2021 presentation. This statement of operations presentation change has no impact on total operating expenses or net loss.
Regional expenses for the three months ended June 30, 2022 and 2021 and 2020 include $64$67 million and $71$64 million of depreciation and amortization, respectively, and $2$1 million and $3$2 million of aircraft rent, respectively. Regional expenses for the six months ended June 30, 2022 and 2021 and 2020 include $132$134 million and $141$132 million of depreciation and amortization, respectively, and $4$3 million and $8$4 million of aircraft rent, respectively.
During the three months ended June 30, 20212022 and 2020,2021, American recognized $91$160 million and $61$91 million, respectively, of expense under its capacity purchase agreement with Republic Airways Inc. (Republic). During the six months ended June 30, 20212022 and 2020,2021, American recognized $218$310 million and $211$218 million, respectively, of expense under its capacity purchase agreement with Republic. American holds a 25% equity interest in Republic Airways Holdings Inc., the parent company of Republic.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.
(Unaudited)

10. Transactions with Related Parties
The following represents the net receivables (payables) to related parties (in millions):
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
AAG (1)
AAG (1)
$7,487 $9,940 
AAG (1)
$8,493 $7,613 
AAG’s wholly-owned subsidiaries (2)
AAG’s wholly-owned subsidiaries (2)
(2,159)(2,063)
AAG’s wholly-owned subsidiaries (2)
(2,090)(2,066)
TotalTotal$5,328 $7,877 Total$6,403 $5,547 
(1)The decreaseincrease in American’s net related party receivable from AAG is primarily due to American providing the cash received from the proceeds of AAGfunding for AAG's financing transactions including the PSP2 Promissory Note, the PSP3 Promissory Note and the issuance of shares of AAG common stock pursuant to an at-the-market offering.transactions.
(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.
11. Legal Proceedings
Chapter 11 Cases. On November 29, 2011, AMR Corporation (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 acquisition of US Airways Group, Inc. by AMR (the Merger).
Pursuant to rulings of the Bankruptcy Court, the Plan established a disputed claims reserve (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. The shares of AAG common stock issued to the Disputed Claims 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 receive distributions of shares from the Disputed Claims 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. If any of the reserved shares remain undistributed upon resolution of all remaining disputed claims, such shares will not be returned to AAG but rather will be distributed to former AMR stockholders and former convertible noteholders treated as stockholders under the Plan. As of June 30, 2021, the Disputed Claims Reserve held approximately 4.8 million shares of AAG common stock.
Private Party Antitrust Action Related to 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, were named as defendants in approximately 100 putative class action lawsuits alleging unlawful agreements with respect to air passenger capacity. The U.S. lawsuits were consolidated in the Federal District Court for the District of Columbia (the DC Court). On June 15, 2018, American reached a settlement agreement with the plaintiffs in the amount of $45 million to resolve all class claims in the 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 without merit and intends to vigorously defend against them.
Private Party Antitrust Action Related to the Merger. On August 6, 2013, a lawsuit captioned Carolyn Fjord, et al., v. AMR Corporation, et al., was filed in the United States Bankruptcy Court.Court for the Southern District of New York (Bankruptcy Court). The complaint named as defendants US Airways Group, Inc., US Airways, Inc., AMR Corporation and American, alleged that the effect of the Mergermerger of US Airways Group and AMR Corporation (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 November 27, 2013, the Bankruptcy Court denied plaintiffs’ motion to preliminarily enjoin the Merger. On August 29, 2018, the Bankruptcy Court denied in part defendants' motion for summary judgment, and fully denied plaintiffs' cross-motion for summary judgment. 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 Bankruptcy Court published its decision finding in American’s favor. The plaintiffsOn March 25, 2022, the U.S. District Court for the Southern District of New York entered judgment affirming the Bankruptcy Court's decision. Plaintiffs have appealed this ruling.that decision to the United States Court of Appeals for the Second Circuit, and the plaintiffs' opening brief is due August 2, 2022. American believes this lawsuit is without merit and intends to continue to vigorously defend against it, including against any further appeals by plaintiffs.
Government Antitrust Action Related to the allegations, including plaintiffs' appealNortheast Alliance. On September 21, 2021, the United States Department of Justice (DOJ), joined by Attorneys General from six states and the District of Columbia, filed an antitrust complaint against American and JetBlue Airways Corporation (JetBlue) alleging that American and JetBlue violated U.S. antitrust laws in connection with the previously disclosed Northeast Alliance arrangement (NEA). American believes this complaint is without merit and intends to defend against it vigorously.
Also on September 21, 2021, the United States Department of Transportation (DOT) published a Clarification Notice relating to the agreement that had been reached between the DOT, American, and JetBlue in January 2021, at the conclusion of the Bankruptcy Court's January 29, 2021 ruling.DOT’s review of the NEA (DOT Agreement). The DOT Clarification Notice stated, among other things, that the DOT Agreement remains in force during the pendency of the DOJ action against the NEA and, while the DOT retains independent statutory authority to prohibit unfair methods of competition in air transportation, the DOT intends to defer to DOJ to resolve the antitrust concerns that DOJ has identified with respect to the NEA. The DOT simultaneously published a Notice Staying Proceeding in relation to a complaint by Spirit Airlines, Inc. regarding the NEA, pending resolution of the DOJ action described above.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.
(Unaudited)

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.
12. Subsequent Event
April 2016 Spare Parts Term Loan Facility
On July 22, 2021, American repaid in full the outstanding term loans in the aggregate principal amount of $950 million and terminated the April 2016 Spare Parts Term Loan Facility. The April 2016 Revolving Facility, in the aggregate principal amount of $450 million, none of which was drawn or outstanding as of June 30, 2021, and which has a final maturity of October 2024, remains in place.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Part I, Item 2 of this report should be read in conjunction with Part II, Item 7 of AAG’s and American’s Annual Report on Form 10-K for the year ended December 31, 20202021 (the 20202021 Form 10-K). The information contained herein is not a comprehensive discussion and analysis of the financial condition and results of operations of AAG and American, but rather updates disclosures made in the 20202021 Form 10-K.
Financial Overview
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 travelspread. Ongoing global vaccination efforts and the corresponding lifting of government restrictions testing regimes, closing of borders, “stay at home” ordersin and business closures. Asbetween many markets resulted in a result, we have experienced an unprecedented declinesignificant and rapid recovery in the demand for air travel, which has resulted in a material deterioration in our revenues. While global vaccination efforts are underway and demand for air travel has begun to return, thetravel. The continued impact of the COVID-19 pandemic, including any increases in infection rates, new variants and renewed governmental action to slow the spread of COVID-19 such as has occurred throughout Western Europe and Latin America during the first six months of 2021, cannot be estimated.
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), Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (PSP Extension Law) and Section 7301 of the American Rescue Plan Act of 2021 (the ARP).
Capacity Reductions
Our capacity (as measured by available seat miles) continues to be significantly reduced compared to pre-COVID-19 pandemic levels, with flying duringtotal capacity in the second quarter of 20212022 down 24.6%8.5% as compared to the second quarter of 2019. Domestic capacity in the second quarter of 20212022 was down 12.8%6.6% while international capacity was down 46.5% versus12.1% as compared to the second quarter of 2019.
We currently expect our third quarter of 2021 system capacity to be down 15% to 20% as compared to the third quarter of 2019. While demand for domestic and short-haul international markets has largely recovered to 2019 levels, uncertainty continues to exist.remains regarding the timing of a full recovery. We will continue to match our forward capacity with observed booking trends for future travel and make further adjustments to our capacity as needed.
Cost Reductions
In aggregate, we estimate that we have reduced our 2021 operating expenditures by more than $1.3 billion, which are permanent non-volume cost reductions and other efficiency measures. These reductions include approximately $600 million in labor productivity enhancements, $500 million in management salaries and benefits and $200 million in other permanent cost reductions. Also, an additional 1,600 represented team members opted in to a voluntary early retirement program, which occurred during the first quarter of 2021.
Liquidity
As of June 30, 2021,2022, we had $21.3$15.6 billion in total available liquidity, consisting of $18.0$12.5 billion in unrestricted cash and short-term investments, $2.8 billion in an undrawn capacity under revolving credit facilities and a total of $470$220 million in undrawn short-term revolving and other facilities.
During the first six months of 2021,2022, we completed the following financing transactions (see Note 5 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for further information):
•issued $3.5 billion in aggregate principal amount of 5.50% Senior Secured Notes due 2026 and $3.0 billion in aggregate principal amount of 5.75% Senior Secured Notes due 2029 and entered into the $3.5 billion AAdvantage Term Loan Facility of which the full amount of term loans was drawn at closing;
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•repaid in full $750 million under the 2013 Revolving Facility, $1.6 billion under the 2014 Revolving Facility and $450 million under the April 2016 Revolving Facility, all of which was borrowed in the second quarter of 2020 in response to the COVID-19 pandemic;
•repaid the $550 million of outstanding loans under the $7.5 billion secured term loan facility with the U.S. Department of the Treasury (Treasury) (the Treasury Loan Agreement) and terminated the Treasury Loan Agreement;
•issued 24.2 million shares of AAG common stock at an average price of $19.26 per share pursuant to an at-the-market offering for net proceeds of $460 million (approximately $650 million of at-the-market authorization remains available at June 30, 2021);
•issuedreceived approximately $150$574 million in special facility revenue bonds related to John F. Kennedy International Airport (JFK), of which $62 million was used to fund the redemption of other bonds related to JFK;proceeds from enhanced equipment trust certificates (EETCs); and
•raised $163repurchased $349 million principally from aircraft sale-leaseback transactions.
In addition toof unsecured notes on the foregoing financings, during the first quarter of 2021, we received an aggregate of approximately $3.1 billion in financial assistance through the payroll support program (PSP2) established under the PSP Extension Law. In April 2021, we received an additional installment of $463 million for an aggregate $3.5 billion of such PSP2 financial assistance. In connection with our receipt of this financial assistance, AAG issued a promissory note (the PSP2 Promissory Note) to Treasury for $1.0 billion in aggregate principal amount and warrants to purchase up to an aggregate of approximately 6.6 million shares (the PSP2 Warrant Shares) of AAG common stock.
During the second quarter of 2021, we received an aggregate of approximately $3.3 billion in financial assistance through the payroll support program (PSP3) established under the ARP. In connection with our receipt of this financial assistance, AAG issued a promissory note (the PSP3 Promissory Note) to Treasury for $946 million in aggregate principal amount and warrants to purchase up to an aggregate of approximately 4.4 million shares (the PSP3 Warrant Shares) of AAG common stock. See Note 1 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for further discussion on PSP2 and PSP3.open market.
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 covenants requiring us to meet certain loan to value, collateral coverage and/or peak debt service coverage ratio covenants.ratios.
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 projected cash flows from operations.
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AAG’s Second Quarter 20212022 Results
The selected financial data presented below is derived from AAG’s unaudited condensed consolidated financial statements included in Part I, Item 1A of this report and should be read in conjunction with those financial statements and the related notes thereto.
Beginning in the first quarter of 2021, aircraft fuel and related taxes as well as certain salaries, wages and benefits, other rent and landing fees, selling and other expenses are no longer allocated to regional expenses on our condensed consolidated statements of operations. The second quarter and six months ended June 30, 2020 condensed consolidated statements of operations have been recast to conform to the 2021 presentation within this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This statement of operations presentation change has no impact on total operating expenses or net loss.
Three Months Ended June 30,Increase
(Decrease)
Percent
Increase
(Decrease)
 Three Months Ended June 30,Increase
Percent
Increase (2)
20212020 20222021
(In millions, except percentage changes) (In millions, except percentage changes)
Passenger revenuePassenger revenue$6,545 $1,108 $5,437 
 nm (2)
Passenger revenue$12,223 $6,545 $5,678 86.8
Cargo revenueCargo revenue326 130 196  nmCargo revenue328 326 2 0.5
Other operating revenueOther operating revenue607 384 223 57.9 Other operating revenue871 607 264 43.5
Total operating revenuesTotal operating revenues7,478 1,622 5,856  nmTotal operating revenues13,422 7,478 5,944 79.5
Aircraft fuel and related taxesAircraft fuel and related taxes1,611 309 1,302  nmAircraft fuel and related taxes4,020 1,611 2,409 
nm (3)
Salaries, wages and benefitsSalaries, wages and benefits2,862 2,610 252 9.6 Salaries, wages and benefits3,235 2,862 373 13.0
Total operating expensesTotal operating expenses7,037 4,108 2,929 71.3 Total operating expenses12,405 7,037 5,368 76.3
Operating income (loss)441 (2,486)(2,927) nm
Pre-tax income (loss)9 (2,659)(2,668) nm
Income tax benefit(10)(592)(582)(98.4)
Net income (loss)19 (2,067)(2,086) nm
Operating incomeOperating income1,017 441 576  nm
Pre-tax incomePre-tax income603 9 594  nm
Income tax provision (benefit)Income tax provision (benefit)127 (10)137  nm
Net incomeNet income476 19 457  nm
Pre-tax income (loss) – GAAP$9 $(2,659)$(2,668) nm
Pre-tax income – GAAPPre-tax income – GAAP$603 $9 $594  nm
Adjusted for: pre-tax net special items (1)
Adjusted for: pre-tax net special items (1)
(1,418)(1,661)(243)(14.6)
Adjusted for: pre-tax net special items (1)
84 (1,418)1,502  nm
Pre-tax loss excluding net special items$(1,409)$(4,320)$(2,911)(67.4)
Pre-tax income (loss) excluding net special itemsPre-tax income (loss) excluding net special items$687 $(1,409)$2,096  nm
(1)See below “Reconciliation of GAAP to Non-GAAP Financial Measures” and Note 2 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for details on the components of net special items.
(2)NotFluctuations may not be meaningful or greater than 100% change. In addition, due to the volatility caused by the COVID-19 pandemic, many line item fluctuations may be expressed as not meaningful.pandemic.
(3)Not meaningful or greater than 100% change.
Pre-Tax Income (Loss) and Net Income (Loss)
Pre-tax income and net income were $9$603 million and $19$476 million, respectively, in the second quarter of 2021.2022. This compares to second quarter 20202021 pre-tax lossincome and net lossincome of $2.7$9 million and $19 million, respectively. The quarter-over-quarter increase in our pre-tax income on a GAAP basis was due to higher passenger revenue driven by a significant recovery in demand for air travel, offset in part by increased aircraft fuel and related taxes, primarily as a result of an increase in the average price per gallon of aircraft fuel and a 21.3% increase in capacity as compared to the second quarter of 2021. The second quarter of 2021 also includes the recognition of $1.4 billion and $2.1 billion, respectively. of net pre-tax special credits principally related to PSP Financial Assistance. See Note 2 to AAG's Condensed Consolidated Financial Statement in Part I, Item 1A for further information on net special items.
Excluding the effects of pre-tax net special items, pre-tax income was $687 million in the second quarter of 2022 and pre-tax loss was $1.4 billion and $4.3 billion in the second quarter of 2021 and 2020, respectively.2021. The quarter-over-quarter improvement in our pre-tax income (loss), on both a GAAP basis and excluding pre-tax net special items was primarily due to higher revenuespassenger revenue driven by strong leisurea significant recovery in demand domestically and in Latin America,for air travel, offset in part by an increase in our operating expenses due to tripling our capacityincreased aircraft fuel and related taxes, as compared to the second quarter of 2020 as demand returned from the trough of the COVID-19 pandemic.described above.
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Revenue
In the second quarter of 2021,2022, we reported total operating revenues of $7.5$13.4 billion, an increase of $5.9 billion, or 79.5%, as compared to the second quarter of 2020.2021. Passenger revenue was $6.5$12.2 billion in the second quarter of 2021,2022, an increase of $5.4$5.7 billion, or 86.8%, as compared to the second quarter of 2020.2021. The increase in passenger revenue in the second quarter of 20212022 was due to increaseda 36.9% increase in revenue passenger miles (RPMs), driven by strong leisurea significant recovery in demand domestically and in Latin Americafor air travel, resulting in a 77.0%an 86.9% load factor in the second quarter of 2021.
In the second quarter of 2021, cargo revenue was $326 million, an increase of $196 million as compared to the second quarter of 2020. The2022, and a 36.4% increase in cargo revenue was primarily due to an increase in cargo ton miles reflecting increases in freight volumes, principally as a result of adding capacity and cargo-only flights to our schedule.passenger yield.
Other operating revenue increased $223$264 million, or 57.9%43.5%, as compared to the second quarter of 2020,2021, driven primarily by higher revenue associated with our loyalty program. During the three months ended June 30, 2022 and 2021, cash payments from co-branded credit card and other partners were $1.0 billion and $684 million, respectively.
Our total revenue per available seat mile (TRASM) was 20.29 cents in the second quarter of 2022, a 48.0% increase as compared to 13.71 cents in the second quarter of 2021, a 44.3% increase as compared to 9.50 cents in the second quarter of 2020.2021.
Fuel
Aircraft fuel expense was $1.6$4.0 billion in the second quarter of 2021,2022, which was $1.3$2.4 billion higher as compared to the second quarter of 2020.2021. This increase was primarily driven by higher fuel consumption as a result of increased capacity and a 69.5%an increase in the average price per gallon of aircraft fuel including related taxes to $4.03 in the second quarter of 2022 from $1.91 in the second quarter of 2021 from $1.13and an 18.1% increase in the second quartergallons of 2020.fuel consumed principally due to increased capacity.
As of June 30, 2021,2022, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption. 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: general economic conditions and the price of fuel. In particular, the onset of the COVID-19 pandemic resulted in a very rapid deterioration in general economic conditions.conditions, and the subsequent rapid economic expansion resulted in significant inflationary pressures, including on the cost of fuel.
Our 20212022 second quarter total operating cost per available seat mile (CASM) was 12.9018.75 cents, a decreasean increase of 46.4%45.3%, from 24.0512.90 cents in the second quarter of 2020.2021. This decreaseincrease in CASM was primarily driven by higher capacity dueaircraft fuel and related taxes in the second quarter of 2022, as described above, and the recognition of $1.5 billion of net special credits in the second quarter of 2021 related to increased passenger demand and cost reduction and efficiency initiatives as discussed above, offset in part by an increase in fuel price.PSP Financial Assistance.
Our 20212022 second quarter total operating CASM excluding net special items and fuel was 12.6112.68 cents, a decreasean increase of 60.6%0.5%, from 32.0412.61 cents in the second quarter of 2020. This decrease in CASM excluding net special items and fuel was primarily driven by higher capacity and cost reduction and efficiency initiatives as previously discussed.2021.
For a reconciliation of total operating CASM to total operating CASM excluding net special items and fuel, see below “Reconciliation of GAAP to Non-GAAP Financial Measures.”
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Reconciliation of GAAP to Non-GAAP Financial Measures
We sometimes use financial measures that are derived from the condensed consolidated financial statements but that are not presented in accordance with GAAPaccounting 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.
The following table presents the reconciliation of pre-tax income (loss) (GAAP measure) to pre-tax lossincome (loss) excluding net special items (non-GAAP measure). Management uses this non-GAAP financial measure 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 understand our core operating performance.
Three Months Ended
June 30,		Six Months Ended
June 30,		 Three Months Ended
June 30,		Six Months Ended
June 30,
2021202020212020 2022202120222021
(In millions)(In millions)
Reconciliation of Pre-Tax Loss Excluding Net Special Items:
Reconciliation of Pre-Tax Income (Loss) Excluding Net Special Items:Reconciliation of Pre-Tax Income (Loss) Excluding Net Special Items:
Pre-tax income (loss) – GAAPPre-tax income (loss) – GAAP$9 $(2,659)$(1,564)$(5,549)Pre-tax income (loss) – GAAP$603 $9 $(1,483)$(1,564)
Pre-tax net special items (1):
Pre-tax net special items (1):
Pre-tax net special items (1):
Operating special items, netOperating special items, net(1,455)(1,672)(3,377)(447)Operating special items, net(5)(1,455)152 (3,377)
Nonoperating special items, netNonoperating special items, net37 11 13 228 Nonoperating special items, net89 37 92 13 
Total pre-tax net special itemsTotal pre-tax net special items(1,418)(1,661)(3,364)(219)Total pre-tax net special items84 (1,418)244 (3,364)
Pre-tax loss excluding net special items$(1,409)$(4,320)$(4,928)$(5,768)
Pre-tax income (loss) excluding net special itemsPre-tax income (loss) excluding net special items$687 $(1,409)$(1,239)$(4,928)
(1)See Note 2 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for further information on net special items.
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Additionally, the table below presents the reconciliation of total operating expensescosts (GAAP measure) to total operating costs excluding net special items and fuel (non-GAAP measure) and CASM to CASM excluding net special items and fuel. Management uses total operating costs excluding net special items and fuel and CASM excluding net 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 fuel and net special items allows management an additional tool to understand and analyze our non-fuel costs and core operating performance. Amounts may not recalculate due to rounding.
Three Months Ended
June 30,		Six Months Ended
June 30,		 Three Months Ended
June 30,		Six Months Ended
June 30,
2021202020212020 2022202120222021
Reconciliation of CASM Excluding Net Special Items and Fuel:Reconciliation of CASM Excluding Net Special Items and Fuel:Reconciliation of CASM Excluding Net Special Items and Fuel:
(In millions)(In millions)(In millions)
Total operating expenses – GAAPTotal operating expenses – GAAP$7,037 $4,108 $12,360 $15,171 Total operating expenses – GAAP$12,405 $7,037 $23,027 $12,360 
Operating net special items (1):
Operating net special items (1):
Operating net special items (1):
Mainline operating special items, netMainline operating special items, net1,288 1,494 2,996 362 Mainline operating special items, net5 1,288 (152)2,996 
Regional operating special items, netRegional operating special items, net167 178 381 85 Regional operating special items, net— 167 — 381 
Aircraft fuel and related taxesAircraft fuel and related taxes(1,611)(309)(2,644)(2,092)Aircraft fuel and related taxes(4,020)(1,611)(6,522)(2,644)
Total operating expenses, excluding net special items and fuelTotal operating expenses, excluding net special items and fuel$6,881 $5,471 $13,093 $13,526 Total operating expenses, excluding net special items and fuel$8,390 $6,881 $16,353 $13,093 
Total Available Seat Miles (ASM)Total Available Seat Miles (ASM)54,555 17,081 92,319 79,180 Total Available Seat Miles (ASM)66,163 54,555 125,697 92,319 
(In cents)(In cents)(In cents)
CASMCASM12.90 24.05 13.39 19.16 CASM18.75 12.90 18.32 13.39 
Operating net special items per ASM (1):
Operating net special items per ASM (1):
Operating net special items per ASM (1):
Mainline operating special items, netMainline operating special items, net2.36 8.75 3.25 0.46 Mainline operating special items, net0.01 2.36 (0.12)3.25 
Regional operating special items, netRegional operating special items, net0.31 1.04 0.41 0.11 Regional operating special items, net— 0.31 — 0.41 
Aircraft fuel and related taxes per ASMAircraft fuel and related taxes per ASM(2.95)(1.81)(2.86)(2.64)Aircraft fuel and related taxes per ASM(6.08)(2.95)(5.19)(2.86)
CASM, excluding net special items and fuelCASM, excluding net special items and fuel12.61 32.04 14.18 17.08 CASM, excluding net special items and fuel12.68 12.61 13.01 14.18 
(1)See Note 2 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for further information on net special items.
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AAG’s Results of Operations
Operating Statistics
The table below sets forth selected operating data for the three and six months ended June 30, 20212022 and 2020.2021. Amounts may not recalculate due to rounding.
Three Months Ended
June 30,		Increase
(Decrease)		Six Months Ended
June 30,
Increase
(Decrease)
 Three Months Ended
June 30,		IncreaseSix Months Ended
June 30,		Increase
2021202020212020 2022202120222021
Revenue passenger miles (millions) (a)
Revenue passenger miles (millions) (a)
42,022 7,231  nm %64,486 52,402 23.1 %
Revenue passenger miles (millions) (a)
57,516 42,022 36.9%101,806 64,486 57.9%
Available seat miles (millions) (b)
Available seat miles (millions) (b)
54,555 17,081  nm %92,319 79,180 16.6 %
Available seat miles (millions) (b)
66,163 54,555 21.3%125,697 92,319 36.2%
Passenger load factor (percent) (c)
Passenger load factor (percent) (c)
77.0 42.3 34.7 pts69.9 66.2 3.7 pts
Passenger load factor (percent) (c)
86.9 77.0 9.9pts81.0 69.9 11.1pts
Yield (cents) (d)
Yield (cents) (d)
15.57 15.32 1.7 %15.08 16.77 (10.1)%
Yield (cents) (d)
21.25 15.57 36.4%19.69 15.08 30.5%
Passenger revenue per available seat mile (cents) (e)
Passenger revenue per available seat mile (cents) (e)
12.00 6.48 85.0 %10.53 11.10 (5.1)%
Passenger revenue per available seat mile (cents) (e)
18.47 12.00 54.0%15.94 10.53 51.4%
Total revenue per available seat mile (cents) (f)
Total revenue per available seat mile (cents) (f)
13.71 9.50 44.3 %12.44 12.80 (2.8)%
Total revenue per available seat mile (cents) (f)
20.29 13.71 48.0%17.76 12.44 42.7%
Fuel consumption (gallons in millions)Fuel consumption (gallons in millions)844 275  nm %1,452 1,246 16.5 %Fuel consumption (gallons in millions)997 844 18.1%1,891 1,452 30.2%
Average aircraft fuel price including related taxes (dollars per gallon)Average aircraft fuel price including related taxes (dollars per gallon)1.91 1.13 69.5 %1.82 1.68 8.4 %Average aircraft fuel price including related taxes (dollars per gallon)4.03 1.91  nm3.45 1.82 89.4%
Total operating cost per available seat mile (cents) (g)
Total operating cost per available seat mile (cents) (g)
12.90 24.05 (46.4)%13.39 19.16 (30.1)%
Total operating cost per available seat mile (cents) (g)
18.75 12.90 45.3%18.32 13.39 36.8%
Aircraft at end of period (h)
Aircraft at end of period (h)
1,413 1,394 1.4 %1,413 1,394 1.4 %
Aircraft at end of period (h)
1,471 1,413 4.1%1,471 1,413 4.1%
Full-time equivalent employees at end of periodFull-time equivalent employees at end of period117,400 107,400 9.3 %117,400 107,400 9.3 %Full-time equivalent employees at end of period129,200 117,400 10.1%129,200 117,400 10.1%
(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 revenue divided by ASMs.
(f)Total revenue per available seat mile (TRASM) – Total revenues divided by ASMs.
(g)Total operating cost per available seat mile (CASM) – Total operating expenses divided by ASMs.
(h)Includes aircraft owned and leased by American as well as aircraft operated by third-party regional carriers under capacity purchase agreements. Excludes 37 Boeing 737-80020 mainline aircraft and three Embraer 14519 regional aircraft that are in temporary storage at June 30, 2021.2022 as follows: 20 Boeing 737-800, 15 Embraer 145 and four Embraer 170.
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Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Operating Revenues
Three Months Ended
June 30,		Increase
Percent
Increase
 Three Months Ended
June 30,		Increase
Percent
Increase
20212020 20222021
(In millions, except percentage changes) (In millions, except percentage changes)
PassengerPassenger$6,545 $1,108 $5,437  nmPassenger$12,223 $6,545 $5,678 86.8
CargoCargo326 130 196  nmCargo328 326 2 0.5
OtherOther607 384 223 57.9Other871 607 264 43.5
Total operating revenuesTotal operating revenues$7,478 $1,622 $5,856  nmTotal operating revenues$13,422 $7,478 $5,944 79.5
This table presents our passenger revenue and the quarter-over-quarter change in certain operating statistics:
  
Increase
vs. Three Months Ended June 30, 2020
 Three Months Ended
June 30, 2021		RPMsASMs
Load
Factor
Passenger
Yield
PRASM
 (In millions)     
Passenger revenue$6,545  nm % nm %34.7 pts1.7 %85.0 %
  
Increase
vs. Three Months Ended June 30, 2021
 Three Months Ended
June 30, 2022		RPMsASMs
Load
Factor
Passenger
Yield
PRASM
 (In millions)     
Passenger revenue$12,223 36.9%21.3%9.9pts36.4%54.0%
Passenger revenue increased $5.4$5.7 billion, or 86.8%, in the second quarter of 20212022 from the second quarter of 20202021 primarily due to increaseda 36.9% increase in RPMs, driven by strong leisurea significant recovery in demand domestically and in Latin Americafor air travel, resulting in a 77.0%an 86.9% load factor in the second quarter of 2021.
Cargo revenue increased $196 million in the second quarter of 2021 from the second quarter of 2020 primarily due to an2022, and a 36.4% increase in cargo ton miles reflecting increases in freight volumes, principally as a result of adding capacity and cargo-only flights to our schedule.passenger yield.
Other operating revenue increased $223$264 million, or 57.9%43.5%, as compared to the second quarter of 2020,2021, driven primarily by higher revenue associated with our loyalty program.
Total operating revenues in the second quarter of 20212022 increased $5.9 billion, or 79.5%, from the second quarter of 20202021 driven principally by the increase in passenger revenue as described above. Our TRASM wasincreased 48.0% to 20.29 cents in the second quarter of 2022 from 13.71 cents in the second quarter of 2021, a 44.3% increase as compared to 9.50 cents in the second quarter of 2020.2021.
Operating Expenses 
Three Months Ended
June 30,
Increase
(Decrease)
Percent
Increase
(Decrease)
 Three Months Ended
June 30,		Increase
(Decrease)		Percent
Increase
(Decrease)
20212020 20222021
(In millions, except percentage changes) (In millions, except percentage changes)
Aircraft fuel and related taxesAircraft fuel and related taxes$1,611 $309 $1,302  nmAircraft fuel and related taxes$4,020 $1,611 $2,409  nm
Salaries, wages and benefitsSalaries, wages and benefits2,862 2,610 252 9.6Salaries, wages and benefits3,235 2,862 373 13.0
Regional expensesRegional expenses635 492 143 29.3Regional expenses1,072 635 437 68.5
Maintenance, materials and repairsMaintenance, materials and repairs459 287 172 59.9Maintenance, materials and repairs647 459 188 40.9
Other rent and landing feesOther rent and landing fees686 413 273 66.2Other rent and landing fees694 686 8 1.2
Aircraft rentAircraft rent356 334 22 6.4Aircraft rent345 356 (11)(2.9)
Selling expensesSelling expenses277 57 220  nmSelling expenses504 277 227 82.2
Depreciation and amortizationDepreciation and amortization481 499 (18)(3.6)Depreciation and amortization504 481 23 4.8
Mainline operating special items, netMainline operating special items, net(1,288)(1,494)206 (13.8)Mainline operating special items, net(5)(1,288)1,283 (99.6)
OtherOther958 601 357 59.6Other1,389 958 431 45.0
Total operating expensesTotal operating expenses$7,037 $4,108 $2,929 71.3Total operating expenses$12,405 $7,037 $5,368 76.3
Total operating expenses increased $2.9$5.4 billion, or 71.3%76.3%, in the second quarter of 20212022 from the second quarter of 20202021 driven by higher aircraft fuel and related taxes and other expenses, primarily dueas a result of an increase in the average price per gallon of aircraft fuel and increased capacity, as well as an increase in net operating special items related to our increased capacity.the $1.5 billion of PSP Financial Assistance recognized as a net special credit in the second quarter of 2021. See further discussion of operating special items, net below.
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Aircraft fuel and related taxes increased $1.3$2.4 billion in the second quarter of 20212022 from the second quarter of 20202021 primarily due to increased capacity as well as a 69.5%an increase in the average price per gallon of aircraft fuel including related taxes to $4.03 in the second quarter of 2022 from $1.91 in the second quarter of 2021 from $1.13and an 18.1% increase in the second quartergallons of 2020.fuel consumed principally due to increased capacity.
Aircraft rentSalaries, wages and benefits increased $22$373 million, or 6.4%13.0%, in the second quarter of 20212022 from the second quarter of 20202021 primarily due to the delivery of 31 new leaseda 12.1% increase in mainline aircraftfull-time equivalent employees subsequent to the second quarter of 2020.2021.
SellingRegional expenses increased $220$437 million, or 68.5%, in the second quarter of 20212022 from the second quarter of 20202021 primarily due to pay rate increases and retention bonuses offered at our wholly-owned regional carriers as well as contractual rate increases with our third-party regional carriers. The second quarter of 2021 also includes the recognition of $167 million of PSP Financial Assistance as a regional operating special credit.
Maintenance, materials and repairs increased $188 million, or 40.9%, in the second quarter of 2022 from the second quarter of 2021 primarily due to increased capacity and an increase in the volume of engine overhauls performed under time and material contracts where expense is incurred and recognized as maintenance is performed.
Selling expenses increased $227 million, or 82.2%, in the second quarter of 2022 from the second quarter of 2021 due to higher credit card fees, commission expense and credit cardbooking fees driven by the overall increase in revenues.
Other operating expenses increased $431 million, or 45.0%, in the second quarter of 2022 from the second quarter of 2021 primarily as a result of increased capacity and expenses associated with improving our product offerings, customer experience and operational reliability.
Operating Special Items, Net 
Three Months Ended June 30,
Three Months Ended June 30, 20222021
20212020 (In millions)
(In millions)
PSP Financial Assistance (1)
PSP Financial Assistance (1)
$(1,288)$(1,803)
PSP Financial Assistance (1)
$— $(1,288)
Severance expenses (2)
— 332 
Labor contract expenses— 10 
Other operating special items, netOther operating special items, net— (33)Other operating special items, net(5)— 
Mainline operating special items, netMainline operating special items, net(1,288)(1,494)Mainline operating special items, net(5)(1,288)
PSP Financial Assistance (1)
PSP Financial Assistance (1)
(167)(216)
PSP Financial Assistance (1)
— (167)
Fleet impairment (3)
— 24 
Severance expenses (2)
— 14 
Regional operating special items, netRegional operating special items, net(167)(178)Regional operating special items, net— (167)
Operating special items, netOperating special items, net$(1,455)$(1,672)Operating special items, net$(5)$(1,455)
(1)The 2021 PSP Financial Assistance represents recognition of a portion of the financial assistance received from the U.S. Department of Treasury (Treasury) pursuant to the PSP2payroll support program established under the PSP Extension Law (PSP2) and PSP3 Agreements. See Note 1(b) to AAG's Condensed Consolidated Financial Statementsthe American Rescue Plan Act of 2021 (ARP) (PSP3).
Nonoperating Results
 Three Months Ended
June 30,
Increase
(Decrease)
Percent
Increase
(Decrease)
 20222021
 (In millions, except percentage changes)
Interest income$29 $5 $24  nm
Interest expense, net(468)(486)18 (3.7)
Other income, net25 49 (24)(50.4)
Total nonoperating expense, net$(414)$(432)$18 (4.0)
Interest income increased in Part I, Item 1A for further information. The 2020 PSP Financial Assistance represents recognitionthe second quarter of a portion of the financial assistance received from Treasury pursuant2022 compared to the PSP1 Agreement.
(2)Severance expenses include salary and medical costssecond quarter of 2021 primarily associated with certain team members who opted in to voluntary early retirement programs offered as a result of reductions tohigher returns on our operation due to the COVID-19 pandemic. Cash payments related to our voluntary early retirement programs for the three months ended June 30, 2021 were approximately $120 million.
(3)Fleet impairment resulted from our decision to retire certain aircraft earlier than planned driven primarily by the severe decline in air travel due to the COVID-19 pandemic. In the second quarter of 2020, we retired certain Embraer 140 and Bombardier CRJ200 aircraft resulting in a non-cash write-down of regional aircraft and associated spare parts.short-term investments.
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Nonoperating Results
 Three Months Ended
June 30,
Increase
(Decrease)
Percent
Increase
(Decrease)
 20212020
 (In millions, except percentage changes)
Interest income$5 $10 $(5)(50.7)
Interest expense, net(486)(254)(232)91.0
Other income, net49 71 (22)(31.1)
Total nonoperating expense, net$(432)$(173)$(259) nm
Interest income decreased inIn the second quarter of 2021 compared to the second quarter2022, other nonoperating income, net primarily included $106 million of 2020 primarily as a resultnon-service related pension and other postretirement benefit plan income, offset in part by $89 million of lower returns on our short-term investments. Interest expense, net increased in the second quarter of 2021 compared to the second quarter of 2020 primarily due to the issuance of debt subsequent to the second quarter of 2020, including $10.0 billionspecial charges principally for mark-to-market net unrealized losses associated with the AAdvantage Financing, to improve our liquidity positionequity investments in response to the COVID-19 pandemic.Vertical Aerospace Ltd. (Vertical), GOL Linhas Aéreas Inteligentes S.A. (GOL) and China Southern Airlines Company Limited (China Southern Airlines).
In the second quarter of 2021, other nonoperating income, net included $85 million of non-service related pension and other postretirement benefit plan income, offset in part by $37 million of net special charges principally for mark-to-market net unrealized losses associated with our equity investment in China Southern Airlines Company Limited (China Southern Airlines).
In the second quarter of 2020, other nonoperating income, net included $98 million of non-service related pension and other postretirement benefit plan income, offset in part by $11 million of net special charges associated with debt refinancings and extinguishments and $10 million of net foreign currency losses, principally associated with losses from Latin American currencies.Airlines.
Income Taxes
In the second quarter of 2021,2022, we recorded an income tax benefitprovision of $10$127 million. Substantially all of our income or loss before income taxes is attributable to the United States.
See Note 6 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for additional information on income taxes.
Six Months Ended June 30, 20212022 Compared to Six Months Ended June 30, 20202021
Operating Revenues
 Six Months Ended
June 30,
Increase		Percent
Increase
 20212020
 (In millions, except percentage changes)
Passenger$9,724 $8,788 $936 10.7
Cargo641 277 364  nm
Other1,121 1,072 49 4.5
Total operating revenues$11,486 $10,137 $1,349 13.3
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 Six Months Ended
June 30,
Increase		Percent
Increase
 20222021
 (In millions, except percentage changes)
Passenger$20,041 $9,724 $10,317  nm
Cargo692 641 51 7.8
Other1,588 1,121 467 41.7
Total operating revenues$22,321 $11,486 $10,835 94.3
This table presents our passenger revenue and the period-over-period change in certain operating statistics: 
  
Increase (Decrease)
vs. Six Months Ended June 30, 2020
 Six Months Ended
June 30, 2021		RPMsASMs
Load
Factor
Passenger
Yield
PRASM
 (In millions)     
Passenger revenue$9,724 23.1 %16.6 %3.7 pts(10.1)%(5.1)%
  
Increase
vs. Six Months Ended June 30, 2021
 Six Months Ended
June 30, 2022		RPMsASMs
Load
Factor
Passenger
Yield
PRASM
 (In millions)     
Passenger revenue$20,041 57.9%36.2%11.1pts30.5%51.4%
Passenger revenue increased $936$10.3 billion in the first six months of 2022 from the first six months of 2021 primarily due to a 57.9% increase in RPMs, driven by a significant recovery in demand for air travel, resulting in an 81.0% load factor in the first six months of 2022, and a 30.5% increase in passenger yield.
Cargo revenue increased $51 million, or 10.7%7.8%, in the first six months of 20212022 from the first six months of 20202021 primarily due to a 23.1%13.1% increase in RPMs. This increase in RPMs was principally due to increased flying domestically and in Latin America driven by leisure demand,cargo yield, offset in part by reduced Atlantic and Pacific flying as a result of low passenger demand and government-imposed travel restrictions related to the COVID-19 pandemic. A 10.1%4.7% decrease in passenger yield offset in partcargo ton miles driven by the capacity driven increase to passenger revenue.reduced operation of cargo-only flights.
CargoOther operating revenue increased $364$467 million, or 41.7%, in the first six months of 20212022 from the first six months of 20202021, driven primarily due to a 77.5% increase in cargo ton miles reflectingby higher freight volumes and the addition of cargo-only flights torevenue associated with our schedule as well as a 30.4% increase in cargo yield as a result of higher rates.loyalty program.
Total operating revenues in the first six months of 20212022 increased $1.3$10.8 billion, or 13.3%94.3%, from the first six months of 20202021 driven principally by the increase in passenger and cargo revenue as described above. While our operating revenuesOur TRASM increased our TRASM decreased 2.8%42.7% to 17.76 cents in the first six months of 2022 from 12.44 cents in the first six months of 2021 from 12.80 cents in the 2020 period driven by a 10.1% reduction in passenger yield.2021.
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Operating Expenses 
Six Months Ended
June 30,		Increase
(Decrease)		Percent
Increase
(Decrease)		 Six Months Ended
June 30,		Increase
(Decrease)		Percent
Increase
(Decrease)
20212020 20222021
(In millions, except percentage changes) (In millions, except percentage changes)
Aircraft fuel and related taxesAircraft fuel and related taxes$2,644 $2,092 $552 26.4Aircraft fuel and related taxes$6,522 $2,644 $3,878  nm
Salaries, wages and benefitsSalaries, wages and benefits5,593 5,830 (237)(4.1)Salaries, wages and benefits6,389 5,593 796 14.2
Regional expensesRegional expenses1,261 1,632 (371)(22.7)Regional expenses2,124 1,261 863 68.4
Maintenance, materials and repairsMaintenance, materials and repairs835 915 (80)(8.8)Maintenance, materials and repairs1,264 835 429 51.3
Other rent and landing feesOther rent and landing fees1,256 1,024 23222.7Other rent and landing fees1,372 1,256 116 9.2
Aircraft rentAircraft rent706 669 375.6Aircraft rent698 706 (8)(1.1)
Selling expensesSelling expenses427 442 (15)(3.4)Selling expenses836 427 409 95.8
Depreciation and amortizationDepreciation and amortization959 1,059 (100)(9.4)Depreciation and amortization995 959 36 3.8
Mainline operating special items, netMainline operating special items, net(2,996)(362)(2,634) nmMainline operating special items, net152 (2,996)3,148  nm
OtherOther1,675 1,870 (195)(10.5)Other2,675 1,675 1,000 59.8
Total operating expensesTotal operating expenses$12,360 $15,171 $(2,811)(18.5)Total operating expenses$23,027 $12,360 $10,667 86.3
Total operating expenses decreased $2.8increased $10.7 billion, or 18.5%86.3%, in the first six months of 20212022 from the first six months of 20202021 driven by higher aircraft fuel and related taxes and other expenses, primarily due toas a $2.9 billionresult of an increase in the average price per gallon of aircraft fuel and increased capacity, as well as an increase in net operating special credits.items principally related to the $3.6 billion of PSP Financial Assistance recognized as a net special credit in the first six months of 2021. See further discussion of operating special items, net below. Excluding the impact of operating special items, net, total operating expenses increased $119 million, or 0.8%. Although our capacity increased 16.6% in the first six months of 2021, our total operating expenses, excluding net special items, remained relatively flat due to the significant actions taken in 2020 to reduce costs including labor productivity enhancements, reductions in management salaries and benefits, and other non-volume cost reductions.
Aircraft fuel and related taxes increased $552 million, or 26.4%,$3.9 billion in the first six months of 20212022 from the first six months of 20202021 primarily due to increased capacity as well as an 8.4%89.4% increase in the average price per gallon of aircraft fuel including related taxes to $3.45 in the first six months of 2022 from $1.82 in the first six months of 2021 from $1.68and a 30.2% increase in gallons of fuel consumed principally due to increased capacity.
Salaries, wages and benefits increased $796 million, or 14.2%, in the first six months of 2020.2022 from the first six months of 2021 primarily due to a 12.1% increase in mainline full-time equivalent employees subsequent to the second quarter of 2021.
Regional expenses increased $863 million, or 68.4%, in the first six months of 2022 from the first six months of 2021 primarily due to increased capacity, pay rate increases and retention bonuses offered at our wholly-owned regional carriers, as well as contractual rate increases with our third-party regional carriers. The first six months of 2021 also includes the recognition of $410 million of PSP Financial Assistance as a regional operating special credit.
Maintenance, materials and repairs increased $429 million, or 51.3%, in the first six months of 2022 from the first six months of 2021 primarily due to increased capacity and an increase in the volume of engine overhauls performed under time and material contracts where expense is incurred and recognized as maintenance is performed.
Other rent and landing fees increased $232$116 million, or 22.7%9.2%, in the first six months of 20212022 from the first six months of 20202021 primarily due to an increase in variable rent and landing fees as a result of increased departures.
Selling expenses increased $409 million, or 95.8%, in the first six months of 2022 from the first six months of 2021 due to higher credit card fees, commission expense and booking fees driven by the overall increase in revenues.
Other operating expenses increased $1.0 billion, or 59.8%, in the first six months of 2022 from the first six months of 2021 primarily as a result of increased capacity and expenses associated with improving our increased capacity.product offerings, customer experience and operational reliability.
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Aircraft rent increased $37 million, or 5.6%, in the first six months of 2021 from the first six months of 2020 primarily due to the delivery of 31 new leased mainline aircraft subsequent to the first six months of 2020.
Depreciation and amortization decreased $100 million, or 9.4%, in the first six months of 2021 from the first six months of 2020 primarily due to the early retirement of aircraft as a result of the COVID-19 pandemic.
Operating Special Items, Net
 Six Months Ended June 30,
 20212020
 (In millions)
PSP Financial Assistance (1)
$(3,170)$(1,803)
Severance expenses (2)
168 537 
Mark-to-market adjustments on bankruptcy obligations, net (3)
6 (49)
Fleet impairment (4)
— 743 
Labor contract expenses (5)
— 228 
Other operating special items, net— (18)
Mainline operating special items, net(2,996)(362)
PSP Financial Assistance (1)
(410)(216)
Fleet impairment (4)
27 117 
Severance expenses (2)
2 14 
Regional operating special items, net(381)(85)
Operating special items, net$(3,377)$(447)
 Six Months Ended June 30,
 20222021
 (In millions)
Fleet impairment (1)
$149 $— 
PSP Financial Assistance (2)
— (3,170)
Severance expenses (3)
— 168 
Mark-to-market adjustments on bankruptcy obligations, net— 6 
Other operating special items, net3 — 
Mainline operating special items, net152 (2,996)
PSP Financial Assistance (2)
— (410)
Fleet impairment (1)
— 27 
Severance expenses (3)
— 2 
Regional operating special items, net— (381)
Operating special items, net$152 $(3,377)
(1)Fleet impairment for the six months ended June 30, 2022 included a non-cash impairment charge to write down the carrying value of our retired Airbus A330 fleet to the estimated fair value due to current market conditions for certain used aircraft. We retired our Airbus A330 fleet in 2020 as a result of the decline in demand for air travel due to the COVID-19 pandemic.
Fleet impairment for the six months ended June 30, 2021 included a non-cash impairment charge to write down regional aircraft resulting from the retirement of the remaining Embraer 140 fleet earlier than planned.
(2)The 2021 PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the payroll support program established under PSP2 and PSP3 Agreements. See Note 1(b) to AAG's Condensed Consolidated Financial Statements in Part I, Item 1A for further information. The 2020 PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the PSP1 Agreement.PSP3.
(2)(3)Severance expenses include salary and medical costs primarily associated with certain team members who opted in tointo voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic. Cash payments related to our voluntary early retirement programs for the six months ended June 30, 2022 and 2021 were approximately $140 million and $290 million.
(3)Bankruptcy obligations that will be settled in shares of our common stock are marked-to-market based on our stock price.
(4)Fleet impairment resulted from our decision to retire certain aircraft earlier than planned driven primarily by the severe decline in air travel due to the COVID-19 pandemic. In the first six months of 2021, we retired our remaining fleet of Embraer 140 aircraft resulting in a non-cash write down of these aircraft. In the first six months of 2020, we retired our Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets as well as certain Embraer 140 and Bombardier CRJ200 aircraft resulting in a $784 million, non-cash write-down of mainline and regional aircraft and associated spare parts and $76 million in cash charges primarily for impairment of right-of-use (ROU) assets and lease return costs.respectively.
(5)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 for our maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.
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Nonoperating Results
Six Months Ended
June 30,		Increase
(Decrease)		Percent
Increase
(Decrease)		 Six Months Ended
June 30,		Increase
(Decrease)		Percent
Increase
(Decrease)
20212020 20222021
(In millions, except percentage changes) (In millions, except percentage changes)
Interest incomeInterest income$8 $31 $(23)(73.2)Interest income$37 $8 $29  nm
Interest expense, netInterest expense, net(856)(512)(344)67.3Interest expense, net(932)(856)(76)8.8
Other income (expense), net158 (34)192  nm
Other income, netOther income, net118 158 (40)(25.7)
Total nonoperating expense, netTotal nonoperating expense, net$(690)$(515)$(175)34.2Total nonoperating expense, net$(777)$(690)$(87)12.6
Interest income decreasedincreased in the first six months of 20212022 compared to the first six months of 20202021 primarily as a result of lowerhigher returns on our short-term investments.
Interest expense, net increased in the first six months of 20212022 compared to the first six months of 20202021 primarily due to the issuanceimpact of debt, including $10.0 billion associated with the AAdvantage Financing to improveissued at the end of the first quarter of 2021, which improved our liquidity position in response to the COVID-19 pandemic.
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In the first six months of 2022, other nonoperating income, net primarily included $211 million of non-service related pension and other postretirement benefit plan income, offset in part by $92 million of net special charges principally for mark-to-market net unrealized losses associated with our equity investments in GOL, Vertical and China Southern Airlines.
In the first six months of 2021, other nonoperating income, net included $172 million of non-service related pension and other postretirement benefit plan income and $13 million of net special charges principally for non-cash charges associated with debt refinancings and extinguishments, offset in part by mark-to-market net unrealized gains associated with our equity investment in China Southern Airlines and certain treasury rate lock derivativeother instruments.
In the first six months of 2020, other nonoperating expense, net included $228 million of net special charges principally for mark-to-market unrealized losses associated with our equity investment in China Southern Airlines and certain treasury rate lock derivative instruments and $15 million of net foreign currency losses, primarily associated with losses from Latin American currencies, offset in part by $207 million of non-service related pension and other postretirement benefit plan income.
Income Taxes
In the first six months of 2021,2022, we recorded an income tax benefit of $333$324 million. Substantially all of our income or loss before income taxes is attributable to the United States.
See Note 6 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for additional information on income taxes.
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American’s Results of Operations
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Operating Revenues 
Three Months Ended
June 30,		Increase
Percent
Increase
 Three Months Ended
June 30,		Increase
Percent
Increase
20212020 20222021
(In millions, except percentage changes) (In millions, except percentage changes)
PassengerPassenger$6,545 $1,108 $5,437 nmPassenger$12,223 $6,545 $5,678 86.8
CargoCargo326 130 196 nmCargo328 326 2 0.5
OtherOther607 384 223 57.9Other870 607 263 43.4
Total operating revenuesTotal operating revenues$7,478 $1,622 $5,856 nmTotal operating revenues$13,421 $7,478 $5,943 79.5
Passenger revenue increased $5.4$5.7 billion, or 86.8%, in the second quarter of 20212022 from the second quarter of 20202021 primarily due to increasedan increase in RPMs, driven by strong leisurea significant recovery in demand domestically and in Latin Americafor air travel, resulting in an increased load factor in the second quarter of 2021.
Cargo revenue increased $196 million in the second quarter of 2021 from the second quarter of 2020 primarily due to2022, and an increase in cargo ton miles reflecting increases in freight volumes, principally as a result of adding capacity and cargo-only flights to our schedule.passenger yield.
Other operating revenue increased $223$263 million, or 57.9%43.4%, as compared to the second quarter of 2020,2021, driven primarily by higher revenue associated with ourAmerican's loyalty program.
Total operating revenues in the second quarter of 20212022 increased $5.9 billion, or 79.5%, from the second quarter of 20202021 driven principally by the increase in passenger revenue as described above.
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Operating Expenses 
Three Months Ended
June 30,
Increase
(Decrease)
Percent
Increase
(Decrease)
 Three Months Ended
June 30,		Increase
(Decrease)		Percent
Increase
(Decrease)
20212020 20222021
(In millions, except percentage changes) (In millions, except percentage changes)
Aircraft fuel and related taxesAircraft fuel and related taxes$1,611 $309 $1,302 nmAircraft fuel and related taxes$4,020 $1,611 $2,409 nm
Salaries, wages and benefitsSalaries, wages and benefits2,860 2,610 250 9.6Salaries, wages and benefits3,233 2,860 373 13.0
Regional expensesRegional expenses639 447 192 42.9Regional expenses1,058 639 419 65.3
Maintenance, materials and repairsMaintenance, materials and repairs459 287 172 59.9Maintenance, materials and repairs647 459 188 40.9
Other rent and landing feesOther rent and landing fees686 413 273 66.2Other rent and landing fees694 686 8 1.2
Aircraft rentAircraft rent356 334 22 6.4Aircraft rent345 356 (11)(2.9)
Selling expensesSelling expenses277 57 220 nmSelling expenses504 277 227 82.2
Depreciation and amortizationDepreciation and amortization481 499 (18)(3.6)Depreciation and amortization501 481 20 4.3
Mainline operating special items, netMainline operating special items, net(1,288)(1,494)206 (13.8)Mainline operating special items, net(5)(1,288)1,283 (99.6)
OtherOther958 601 357 59.6Other1,390 958 432 45.0
Total operating expensesTotal operating expenses$7,039 $4,063 $2,976 73.3Total operating expenses$12,387 $7,039 $5,348 76.0
Total operating expenses increased $3.0$5.3 billion, or 73.3%76.0%, in the second quarter of 20212022 from the second quarter of 20202021 driven by higher aircraft fuel and related taxes and other expenses, primarily dueas a result of an increase in the average price per gallon of aircraft fuel and increased capacity, as well as an increase in net operating special items related to American's increased capacity.the $1.5 billion of PSP Financial Assistance recognized as a net special credit in the second quarter of 2021. See further discussion of operating special items, net below.
Aircraft fuel and related taxes increased $1.3$2.4 billion in the second quarter of 20212022 from the second quarter of 20202021 primarily due to increased capacity as well as a 69.5%an increase in the average price per gallon of aircraft fuel including related taxes to $4.03 in the second quarter of 2022 from $1.91 in the second quarter of 2021 from $1.13and an 18.1% increase in the second quartergallons of 2020.fuel consumed principally due to increased capacity.
Aircraft rentSalaries, wages and benefits increased $22$373 million, or 6.4%13.0%, in the second quarter of 20212022 from the second quarter of 20202021 primarily due to the delivery of 31 new leaseda 12.1% increase in mainline aircraftfull-time equivalent employees subsequent to the second quarter of 2020.2021.
Regional expenses increased $419 million, or 65.3%, in the second quarter of 2022 from the second quarter of 2021 primarily due to contractual rate increases with American's third-party regional carriers. The second quarter of 2021 also includes the recognition of $167 million of PSP Financial Assistance as a regional operating special credit.
Maintenance, materials and repairs increased $188 million, or 40.9%, in the second quarter of 2022 from the second quarter of 2021 primarily due to increased capacity and an increase in the volume of engine overhauls performed under time and material contracts where expense is incurred and recognized as maintenance is performed.
Selling expenses increased $227 million, or 82.2%, in the second quarter of 2022 from the second quarter of 2021 due to higher credit card fees, commission expense and booking fees driven by the overall increase in revenues.
Other operating expenses increased $432 million, or 45.0%, in the second quarter of 2022 from the second quarter of 2021 primarily as a result of increased capacity and expenses associated with improving American's product offerings, customer experience and operational reliability.
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Selling expenses increased $220 million in the second quarter of 2021 from the second quarter of 2020 due to higher commission expense and credit card fees driven by the overall increase in revenues.
Operating Special Items, Net
Three Months Ended June 30,
Three Months Ended June 30, 20222021
20212020 (In millions)
(In millions)
PSP Financial Assistance (1)
PSP Financial Assistance (1)
$(1,288)$(1,803)
PSP Financial Assistance (1)
$— $(1,288)
Severance expenses (2)
— 332 
Labor contract expenses— 10 
Other operating special items, netOther operating special items, net— (33)Other operating special items, net(5)— 
Mainline operating special items, netMainline operating special items, net(1,288)(1,494)Mainline operating special items, net(5)(1,288)
PSP Financial Assistance (1)
PSP Financial Assistance (1)
(167)(216)
PSP Financial Assistance (1)
— (167)
Fleet impairment (3)
— 13 
Regional operating special items, netRegional operating special items, net(167)(203)Regional operating special items, net— (167)
Operating special items, netOperating special items, net$(1,455)$(1,697)Operating special items, net$(5)$(1,455)
(1)The 2021 PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the payroll support program established under PSP2 and PSP3 Agreements. See Note 1(b) to American's Condensed Consolidated Financial Statements in Part I, Item 1B for further information. The 2020 PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the PSP1 Agreement.
(2)Severance expenses include 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 American's voluntary early retirement programs for the three months ended June 30, 2021 were approximately $120 million.
(3)Fleet impairment resulted from American's decision to retire certain aircraft earlier than planned driven primarily by the severe decline in air travel due to the COVID-19 pandemic. In the second quarter of 2020, American retired certain Embraer 140 and Bombardier CRJ200 aircraft resulting in a non-cash write-down of regional aircraft and associated spare parts.PSP3.
Nonoperating Results
Three Months Ended
June 30,
Increase
(Decrease)
Percent
Increase
(Decrease)
 Three Months Ended
June 30,
Increase
(Decrease)
Percent
Increase
(Decrease)
20212020 20222021
(In millions, except percentage changes) (In millions, except percentage changes)
Interest incomeInterest income$9 $92 $(83)(90.1)Interest income$41 $9 $32 nm
Interest expense, netInterest expense, net(447)(255)(192)75.4Interest expense, net(437)(447)10 (2.2)
Other income, netOther income, net49 72 (23)(31.8)Other income, net23 49 (26)(51.5)
Total nonoperating expense, netTotal nonoperating expense, net$(389)$(91)$(298)nmTotal nonoperating expense, net$(373)$(389)$16 (4.2)
Interest income decreasedincreased in the second quarter of 20212022 compared to the second quarter of 20202021 primarily as a result of lowerhigher returns on American's short-term investments and lower interest-bearing related party receivables from American's parent company, AAG. Interest expense, net increased ininvestments.
In the second quarter of 2021 compared to the second quarter2022, other nonoperating income, net primarily included $105 million of 2020 primarily due to the issuancenon-service related pension and other postretirement benefit plan income, offset in part by $89 million of debt subsequent to the second quarter of 2020, including $10.0 billionnet special charges principally for mark-to-market net unrealized losses associated with the AAdvantage Financing, to improve American's liquidity positionequity investments in response to the COVID-19 pandemic.Vertical, GOL and China Southern Airlines.
In the second quarter of 2021, other nonoperating income, net included $85 million of non-service related pension and other postretirement benefit plan income, offset in part by $37 million of net special charges principally for mark-to-market net unrealized losses associated with American's equity investment in China Southern Airlines.
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In the second quarter of 2020, other nonoperating income, net included $98 million of non-service related pension and other postretirement benefit plan income, offset in part by $11 million of net special charges associated with debt refinancings and extinguishments and $10 million of net foreign currency losses, principally associated with losses from Latin American currencies.
Income Taxes
American is a member of AAG's consolidated federal and certain state income tax returns.
In the second quarter of 2021,2022, American recorded an income tax benefitprovision of $1$140 million. Substantially all of American’s income or loss before income taxes is attributable to the United States.
See Note 5 to American’s Condensed Consolidated Financial Statements in Part I, Item 1B for additional information on income taxes.
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Six Months Ended June 30, 20212022 Compared to Six Months Ended June 30, 20202021
Operating Revenues 
Six Months Ended
June 30,
Increase		Percent
Increase		 Six Months Ended
June 30,
Increase		Percent
Increase
20212020 20222021
(In millions, except percentage changes) (In millions, except percentage changes)
PassengerPassenger$9,724 $8,788 $936 10.7Passenger$20,041 $9,724 $10,317 nm
CargoCargo641 277 364 nmCargo692 641 51 7.8
OtherOther1,120 1,071 49 4.6Other1,584 1,120 464 41.4
Total operating revenuesTotal operating revenues$11,485 $10,136 $1,349 13.3Total operating revenues$22,317 $11,485 $10,832 94.3
Passenger revenue increased $936$10.3 billion in the first six months of 2022 from the first six months of 2021 primarily due to an increase in RPMs, driven by a significant recovery in demand for air travel, resulting in an increased load factor in the first six months of 2022, and an increase in passenger yield.
Cargo revenue increased $51 million, or 10.7%7.8%, in the first six months of 20212022 from the first six months of 2020 primarily due to an increase in RPMs. This increase in RPMs was principally due to increased flying domestically and in Latin America driven by leisure demand, offset in part by reduced Atlantic and Pacific flying as a result of low passenger demand and government-imposed travel restrictions related to the COVID-19 pandemic. A decrease in passenger yield offset in part the capacity driven increase to passenger revenue.
Cargo revenue increased $364 million in the first six months of 2021 from the first six months of 2020 primarily due to an increase in cargo yield, offset in part by a decrease in cargo ton miles reflecting higher freight volumes anddriven by the additionreduced operation of cargo-only flights toflights.
Other operating revenue increased $464 million, or 41.4%, in the first six months of 2022 from the first six months of 2021, driven primarily by higher revenue associated with American's schedule as well as an increase in cargo yield as a result of higher rates.loyalty program.
Total operating revenues in the first six months of 20212022 increased $1.3$10.8 billion, or 13.3%94.3%, from the first six months of 20202021 driven principally by the increase in passenger and cargo revenue as described above.
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Operating Expenses
Six Months Ended
June 30,		Increase
(Decrease)		Percent
Increase
(Decrease)		 Six Months Ended
June 30,		Increase
(Decrease)		Percent
Increase
(Decrease)
20212020 20222021
(In millions, except percentage changes) (In millions, except percentage changes)
Aircraft fuel and related taxesAircraft fuel and related taxes$2,644 $2,092 $552 26.4Aircraft fuel and related taxes$6,522 $2,644 $3,878 nm
Salaries, wages and benefitsSalaries, wages and benefits5,590 5,827 (237)(4.1)Salaries, wages and benefits6,385 5,590 795 14.2
Regional expensesRegional expenses1,264 1,555 (291)(18.7)Regional expenses2,081 1,264 817 64.6
Maintenance, materials and repairsMaintenance, materials and repairs835 915 (80)(8.8)Maintenance, materials and repairs1,264 835 429 51.3
Other rent and landing feesOther rent and landing fees1,256 1,024 232 22.7Other rent and landing fees1,372 1,256 116 9.2
Aircraft rentAircraft rent706 669 37 5.6Aircraft rent698 706 (8)(1.1)
Selling expensesSelling expenses427 442 (15)(3.4)Selling expenses836 427 409 95.8
Depreciation and amortizationDepreciation and amortization959 1,059 (100)(9.4)Depreciation and amortization992 959 33 3.5
Mainline operating special items, netMainline operating special items, net(2,996)(362)(2,634)nmMainline operating special items, net152 (2,996)3,148 nm
OtherOther1,676 1,891 (215)(11.4)Other2,676 1,676 1,000 59.7
Total operating expensesTotal operating expenses$12,361 $15,112 $(2,751)(18.2)Total operating expenses$22,978 $12,361 $10,617 85.9
Total operating expenses decreased $2.8increased $10.6 billion, or 18.2%85.9%, in the first six months of 20212022 from the first six months of 20202021, driven by higher aircraft fuel and related taxes and other expenses, primarily due toas a $2.9 billionresult of an increase in the average price per gallon of aircraft fuel and increased capacity, as well as an increase in net operating special credits.items principally related to the $3.6 billion of PSP Financial Assistance recognized as a net special credit in the first six months of 2021. See further discussion of operating special items, net below. Excluding the impact of operating special items, net, total operating expenses increased $156 million, or 1.0%. Although American's capacity increased in the first six months of 2021, American's total operating expenses, excluding net special items, remained relatively flat due to the significant actions taken in 2020 to reduce costs including labor productivity enhancements, reductions in management salaries and benefits, and other non-volume cost reductions.
Aircraft fuel and related taxes increased $552 million, or 26.4%,$3.9 billion in the first six months of 20212022 from the first six months of 20202021 primarily due to increased capacity as well as an 89.4% increase in the average price per gallon of aircraft fuel including related taxes.
Other rent and landing fees increased $232 million, or 22.7%,taxes to $3.45 in the first six months of 2022 from $1.82 in the first six months of 2021 from the first six monthsand a 30.2% increase in gallons of 2020fuel consumed principally due to an increase in variable rent and landing fees due to our increased capacity.
Aircraft rent increased $37 million, or 5.6%, in the first six months of 2021 from the first six months of 2020 primarily due to the delivery of 31 new leased mainline aircraft subsequent to the first six months of 2020.
Depreciation and amortization decreased $100 million, or 9.4%, in the first six months of 2021 from the first six months of 2020 primarily due to the early retirement of aircraft as a result of the COVID-19 pandemic.
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Salaries, wages and benefits increased $795 million, or 14.2%, in the first six months of 2022 from the first six months of 2021 primarily due to a 12.1% increase in mainline full-time equivalent employees subsequent to the second quarter of 2021.
Regional expenses increased $817 million, or 64.6%, in the first six months of 2022 from the first six months of 2021 primarily due to increased capacity and contractual rate increases with American's third-party regional carriers. The first six months of 2021 also includes the recognition of $410 million of PSP Financial Assistance as a regional operating special credit.
Maintenance, materials and repairs increased $429 million, or 51.3%, in the first six months of 2022 from the first six months of 2021 primarily due to increased capacity and an increase in the volume of engine overhauls performed under time and material contracts where expense is incurred and recognized as maintenance is performed.
Other rent and landing fees increased $116 million, or 9.2%, in the first six months of 2022 from the first six months of 2021 primarily due to an increase in landing fees as a result of increased departures.
Selling expenses increased $409 million, or 95.8%, in the first six months of 2022 from the first six months of 2021 due to higher credit card fees, commission expense and booking fees driven by the overall increase in revenues.
Other operating expenses increased $1.0 billion, or 59.7%, in the first six months of 2022 from the first six months of 2021 primarily as a result of increased capacity and expenses associated with improving American's product offerings, customer experience and operational reliability.
Operating Special Items, Net
 Six Months Ended June 30,
 20212020
 (In millions)
PSP Financial Assistance (1)
$(3,170)$(1,803)
Severance expenses (2)
168 537 
Mark-to-market adjustments on bankruptcy obligations, net (3)
6 (49)
Fleet impairment (4)
— 743 
Labor contract expenses (5)
— 228 
Other operating special items, net— (18)
Mainline operating special items, net(2,996)(362)
PSP Financial Assistance (1)
(410)(216)
Fleet impairment (4)
27 106 
Regional operating special items, net(383)(110)
Operating special items, net$(3,379)$(472)
 Six Months Ended June 30,
 20222021
 (In millions)
Fleet impairment (1)
$149 $— 
PSP Financial Assistance (2)
— (3,170)
Severance expenses (3)
— 168 
Mark-to-market adjustments on bankruptcy obligations, net— 6 
Other operating special items, net3 — 
Mainline operating special items, net152 (2,996)
PSP Financial Assistance (2)
— (410)
Fleet impairment (1)
— 27 
Regional operating special items, net— (383)
Operating special items, net$152 $(3,379)
(1)Fleet impairment for the six months ended June 30, 2022 included a non-cash impairment charge to write down the carrying value of American's retired Airbus A330 fleet to the estimated fair value due to current market conditions for certain used aircraft. American retired its Airbus A330 fleet in 2020 as a result of the decline in demand for air travel due to the COVID-19 pandemic.
Fleet impairment for the six months ended June 30, 2021 included a non-cash impairment charge to write down regional aircraft resulting from the retirement of the remaining Embraer 140 fleet earlier than planned.
(2)The 2021 PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the payroll support program established under PSP2 and PSP3 Agreements. See Note 1(b) to American's Condensed Consolidated Financial Statements in Part I, Item 1B for further information. The 2020 PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the PSP1 Agreement.PSP3.
(2)(3)Severance expenses include salary and medical costs primarily associated with certain team members who opted in tointo voluntary early retirement programs offered as a result of reductions to American's operation due to the COVID-19 pandemic. Cash payments related to American's voluntary early retirement programs for the six months ended June 30, 2022 and 2021 were approximately $140 million and $290 million.
(3)Bankruptcy obligations that will be settled in shares of AAG common stock are marked-to-market based on AAG's stock price.
(4)Fleet impairment resulted from American's decision to retire certain aircraft earlier than planned driven primarily by the severe decline in air travel due to the COVID-19 pandemic. In the first six months of 2021, American retired its remaining fleet of Embraer 140 aircraft resulting in a non-cash write down of these aircraft. In the first six months of 2020, American retired its Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets as well as certain Embraer 140 and Bombardier CRJ200 aircraft resulting in a $773 million, non-cash write down of mainline and regional aircraft and associated spare parts and $76 million in cash charges primarily for impairment of ROU assets and lease return costs.
(5)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 for American's maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.respectively.
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Nonoperating Results 
Six Months Ended
June 30,		Increase
(Decrease)		Percent
Increase
(Decrease)		 Six Months Ended
June 30,		Increase
(Decrease)		Percent
Increase
(Decrease)
20212020 20222021
(In millions, except percentage changes) (In millions, except percentage changes)
Interest incomeInterest income$18 $196 $(178)(90.8)Interest income$52 $18 $34 nm
Interest expense, netInterest expense, net(780)(515)(265)51.4Interest expense, net(861)(780)(81)10.4
Other income (expense), net158 (33)191 nm
Other income, netOther income, net117 158 (41)(25.0)
Total nonoperating expense, netTotal nonoperating expense, net$(604)$(352)$(252)71.6Total nonoperating expense, net$(692)$(604)$(88)14.3
Interest income decreasedincreased in the first six months of 20212022 compared to the first six months of 20202021 primarily as a result of lowerhigher returns on American's short-term investments and lower interest-bearing related party receivables from American's parent company, AAG. investments.
Interest expense, net increased in the first six months of 20212022 compared to the first six months of 20202021 primarily due to the issuanceimpact of debt, including $10.0 billion associated with the AAdvantage Financing to improveissued at the end of the first quarter of 2021, which improved American's liquidity position in response to the COVID-19 pandemic.
In the first six months of 2022, other nonoperating income, net primarily included $211 million of non-service related pension and other postretirement benefit plan income, offset in part by $90 million of net special charges principally for mark-to-market net unrealized losses associated with American's equity investments in GOL, Vertical and China Southern Airlines.
In the first six months of 2021, other nonoperating income, net included $171 million of non-service related pension and other postretirement benefit plan income and $13 million of net special charges principally for non-cash charges associated with debt refinancings and extinguishments, offset in part by mark-to-market net unrealized gains associated with American's equity investment in China Southern Airlines and certain treasury rate lock derivativeother instruments.
In the first six months of 2020, other nonoperating expense, net included $228 million of net special charges principally for mark-to-market unrealized losses associated with American's equity investment in China Southern Airlines and certain treasury rate lock derivative instruments and $15 million of net foreign currency losses, primarily associated with losses from Latin American currencies, offset in part by $206 million of non-service related pension and other postretirement benefit plan income.
Income Taxes
American is a member of AAG's consolidated federal and certain state income tax returns.
In the first six months of 2021,2022, American recorded an income tax benefit of $315$296 million. Substantially all of American’s income or loss before income taxes is attributable to the United States.
See Note 5 to American’s Condensed Consolidated Financial Statements in Part I, Item 1B for additional information on income taxes.
Liquidity and Capital Resources
Liquidity
As ofAt June 30, 2021,2022, AAG had $21.3$15.6 billion in total available liquidity and $999$997 million in restricted cash and short-term investments. Additional detail regarding our available liquidity is provided in the table below (in millions): 
AAGAmerican AAGAmerican
June 30, 2021December 31, 2020June 30, 2021December 31, 2020 June 30, 2022December 31, 2021June 30, 2022December 31, 2021
CashCash$325 $245 $305 $231 Cash$401 $273 $373 $265 
Short-term investmentsShort-term investments17,625 6,619 17,609 6,617 Short-term investments12,121 12,158 12,118 12,155 
Undrawn facilitiesUndrawn facilities3,313 7,396 3,313 7,396 Undrawn facilities3,063 3,411 3,063 3,411 
Total available liquidityTotal available liquidity$21,263 $14,260 $21,227 $14,244 Total available liquidity$15,585 $15,842 $15,554 $15,831 
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 projected cash flows from operations.
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In the ordinary course of our business, we or our affiliates may, at any time and from time to time, seek to prepay, retire or repurchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, prepayments, retirements or exchanges, if any, will be conducted on such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. For further information regarding our debt repurchases during the first six months of 2022, see Note 5 to AAG's Condensed Consolidated Financial Statements in Part I, Item 1A.
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), collateral coverage or collateralpeak debt service coverage ratio covenants and certain agreements require us to appraise the related collateral annually or semiannually. Pursuant to such agreements, if the applicable LTV, collateral coverage or collateralpeak debt service coverage ratio exceeds a specified threshold or if the value of the appraised collateral fails to meetfalls below a specified threshold, as the case may be, we arewill be required, as applicable, to pledge additional qualifying collateral (which in some cases may include cash or investment securities), withhold additional cash in certain accounts, or pay down such financing, in whole or in part, or the interest rate for the relevant financing under such agreements will be increased. As of the most recent applicable measurement dates, we were in compliance with each of the foregoing LTV, collateral coverage and peak debt service coverage 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 cash equivalents and amounts available to be drawn under revolving credit facilities, and our AAdvantage Financing contains a peak debt service coverage ratio, pursuant to which failure to comply with a certain threshold may result in early repayment, in whole or in part, of the AAdvantage Financing. For further information regarding our debt covenants, see Note 5 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A and Note 4 to American’s Condensed Consolidated Financial Statements in Part I, Item 1B.
Sources and Uses of Cash
AAG
Operating Activities
Our net cash provided by operating activities was $2.9 billion and $3.6 billion for the first six months of 2022 and 2021, as compared to net cash used in operating activities of $1.1 billion for the first six months of 2020,respectively, a $4.7 billion$720 million period-over-period increase.decrease. In the first six months of 2021, and 2020, we received cash proceeds of approximately $4.7 billion and $3.7 billion associated with the PSP Financial Assistance, respectively.Assistance. Excluding the PSP Financial Assistance, our operating cash flows increased $3.7$4.0 billion compared to the first six months of 2020 driven by a decrease in our pre-tax loss as well as working capital increases principally in our air traffic liability as demand for travel returns.2021 primarily due to higher profitability. In addition, during the first six months of 2021,2022, we made $241 million in contributions to our pension plans andhad approximately $290$140 million in cash payments associated with our voluntary early retirement programs. We expectExcluding the enhanced healthcare benefits provided to eligible team members, we estimate cash payments under these programs ofto be approximately $280$50 million in the remainder of 2021, approximately $230 million in 2022 and approximately $530$20 million in 2023 and beyond.2023.
Investing Activities
Our net cash used in investing activities was $11.0$1.7 billion and $7.0$11.0 billion for the first six months of 2022 and 2021, respectively.
Our principal investing activities in the first six months of 2022 included $1.4 billion of capital expenditures, which principally related to the purchase of 14 Airbus A321neo aircraft and 2020, respectively.10 spare engines. We also made a $200 million equity investment in GOL. Additionally, we incurred $156 million related to airport construction projects, net of reimbursements, principally in connection with the renovation and expansion of Terminal 8 at John F. Kennedy International Airport (JFK) and the modernization of Terminals 4 and 5 at Los Angeles International Airport (LAX). These cash outflows were offset in part by $52 million in net sales of short-term investments.
Our principal investing activities in the first six months of 2021 included $11.0 billion in net purchases of short-term investments as well as a $404 million increase in restricted short-term investments primarily related to collateral for the AAdvantage Financing. Additionally, we incurred $77 million related to airport construction projects, net of reimbursements, principally in connection with the renovation and expansion of Terminal 8 at JFK and the modernization of Terminals 4 and 5 at LAX. These cash outflows were offset in part by $163 million of proceeds primarily from aircraft sale-leaseback transactions and $161 million of proceeds from the sale of property and equipment. Additionally, aircraft purchase deposit returns of $772 million exceeded our capital expenditures for the first six months of 2021, which expenditures were principally related to the harmonization of interior configurations across our mainline fleet and the purchase of two Airbus A321neo aircraft.
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Financing Activities
Our net cash used in financing activities was $1.1 billion for the first six months of 2022 as compared to net cash provided by financing activities of $7.5 billion for the first six months of 2021.
Our principal investingfinancing activities in the first six months of 20202022 included $5.8$1.7 billion in net purchasesrepayments of short-term investments, expendituresdebt and finance lease obligations, consisting of $1.2$1.3 billion for propertyof scheduled debt repayments including the repayment of $401 million in connection with the maturity of our 5.000% unsecured notes, and equipment, including six Airbus A321neo aircraft, three Embraer 175 aircraft and three Bombardier CRJ900 aircraft as well as a $386the repurchase of $349 million increase in restricted short-term investments primarily related to cash proceeds from special facility revenue bonds.of unsecured notes on the open market. These cash outflows were offset in part by $376$574 million of proceeds primarily from aircraft sale-leaseback transactions and $148 million oflong-term debt proceeds from the saleissuance of property and equipment.
Financing Activities
Our net cash provided by financing activities was $7.5 billion and $8.2 billion forequipment notes related to the first six months of 2021 and 2020, respectively.2021-1 Aircraft EETCs.
Our principal financing activities in the first six months of 2021 included $12.1 billion in proceeds from the issuance of debt, including approximately $10.0 billion associated with the AAdvantage Financing, $1.0 billion in aggregate principal amount under the PSP2 Promissory Note, $946 million in aggregate principal amount under the PSP3 Promissory Note and the $150 million issuance of special facility revenue bonds related to JFK. We also had $460 million in net proceeds
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from the issuance of equity pursuant to an at-the-market offering. These cash inflows were offset in part by $5.0 billion in debt repayments, including prepayments totaling $2.8 billion for our revolving credit facilities and $550 million of outstanding loans under the Treasury Loan Agreement, and $1.6 billion in scheduled debt repayments. In addition, we had $166 million of deferred financing cost cash outflows.
Our principal financing activities in the first six months of 2020 included $9.5 billion in proceeds from the issuance of debt and $1.5 billion in proceeds from the issuance of 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, $1.5 billion in aggregate principal amount under the PSP Promissory Note, $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, $500 million in aggregate principal amount of 3.75% unsecured senior notes due 2025 and the $360 million issuance of special facility revenue bonds related to JFK as well as $1.1 billion of net proceeds from a public offering of common stock. These cash inflows were offset in part by $2.5 billion in debt repayments, consisting of approximately $1.5 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 $173 million in share repurchases (which occurred in the first quarter of 2020), $84 million of deferred financing costs and $43 million in dividend payments (which occurred in the first quarter of 2020).
American
Operating Activities
American’s net cash provided by operating activities was $6.1$2.1 billion and $2.3$6.1 billion for the first six months of 20212022 and 2020,2021, respectively, a $3.8$4.0 billion period-over-period increase. In the first six months of 2021 and 2020,decrease. American received cash proceeds of approximately $4.2 billion and $3.3 billion associated with the PSP Financial Assistance, respectively. American also had a $755 million$2.9 billion net decrease in intercompany cash receipts principally from AAG's financing transactions. Additionally, in the first six months of 2021, American received cash proceeds of approximately $4.2 billion associated with PSP Financial Assistance. Excluding the PSP Financial Assistance and decrease in AAG's financing transactions, American's operating cash flows increased $3.7$3.1 billion compared to the first six months of 2020 driven by a decrease in its pre-tax loss as well as working capital increases principally in American's air traffic liability as demand for travel returns. In addition,2021 primarily due to higher profitability. Also, during the first six months of 2021,2022, American made $241 million in contributions to its pension plans andhad approximately $290$140 million in cash payments associated with American'sits voluntary early retirement programs. Excluding the enhanced healthcare benefits provided to eligible team members, American expectsestimates cash payments under these programs ofto be approximately $280$50 million in the remainder of 2021, approximately $230 million in 2022 and approximately $530$20 million in 2023 and beyond.2023.
Investing Activities
American’s net cash used in investing activities was $11.0$1.7 billion and $6.9$11.0 billion for the first six months of 2022 and 2021, respectively.
American’s principal investing activities in the first six months of 2022 included $1.4 billion of capital expenditures, which principally related to the purchase of 14 Airbus A321neo aircraft and 2020, respectively.10 spare engines. American also made a $200 million equity investment in GOL. Additionally, American incurred $156 million related to airport construction projects, net of reimbursements, principally in connection with the renovation and expansion of Terminal 8 at JFK and the modernization of Terminals 4 and 5 at LAX. These cash outflows were offset in part by $52 million in net sales of short-term investments.
American’s principal investing activities in the first six months of 2021 included $11.0 billion in net purchases of short-term investments as well as a $404 million increase in restricted short-term investments primarily related to collateral for the AAdvantage Financing. Additionally, American incurred $77 million related to airport construction projects, net of reimbursements, principally in connection with the renovation and expansion of Terminal 8 at JFK and the modernization of Terminals 4 and 5 at LAX. These cash outflows were offset in part by $163 million of proceeds primarily from aircraft sale-leaseback transactions and $161 million of proceeds from the sale of property and equipment. Additionally, aircraft purchase deposit returns of $772 million exceeded American's capital expenditures for the first six months of 2021, which expenditures were principally related to the harmonization of interior configurations across its mainline fleet and the purchase of two Airbus A321neo aircraft.
Financing Activities
American’s principal investingnet cash used in financing activities inwas $319 million for the first six months of 2020 included $5.8 billion in net purchases of short-term investments, expenditures of $1.2 billion for property and equipment, including six Airbus A321neo aircraft, three Embraer 175 aircraft and three Bombardier CRJ900 aircraft2022 as well as a $386 million increase in restricted short-term investments primarily relatedcompared to cash proceeds from special facility revenue bonds. These cash outflows were offset in part by $376 million of proceeds primarily from aircraft sale-leaseback transactions and $148 million of proceeds from the sale of property and equipment.
Financing Activities
American’s net cash provided by financing activities wasof $4.9 billion and $4.8 billion for the first six months of 2021 and 2020, respectively.2021.
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American’s principal financing activities in the first six months of 2022 included $901 million in repayments of debt and finance lease obligations, offset in part by $574 million of long-term debt proceeds from the issuance of equipment notes related to the 2021-1 Aircraft EETCs.
American’s principal financing activities in the first six months of 2021 included $10.1 billion in proceeds from the issuance of debt, including approximately $10.0 billion associated with the AAdvantage Financing and the $150 million issuance of special facility revenue bonds related to JFK. These cash inflows were offset in part by $5.0 billion in debt repayments, including prepayments totaling $2.8 billion for American's revolving credit facilities and $550 million of outstanding loans under the Treasury Loan Agreement, and $1.6 billion in scheduled debt repayments. In addition, American had $165 million of deferred financing cost cash outflows.
American’s principal financing activities in the first six months of 2020 included $6.9 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, $1.0 billion under the Delayed Draw Term Loan Credit Facility and the $360 million issuance of special facility revenue bonds related to JFK. These cash inflows were offset in part by $2.0 billion in debt repayments, consisting of the prepayment of the $1.0 billion Delayed Draw Term Loan Credit Facility and approximately $1.0 billion in scheduled debt repayments, as well as $75 million of deferred financing costs.
Commitments
Significant Indebtedness
As of June 30, 2021,2022, AAG had $39.9$36.8 billion in long-term debt, including current maturities of $2.7$1.9 billion. As of June 30, 2021,2022, American had $33.9$31.5 billion in long-term debt, including current maturities of $1.9 billion. All material changes in our significant indebtedness since our 20202021 Form 10-K are discussed in Note 5 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A and Note 4 to American’s Condensed Consolidated Financial Statements in Part I, Item 1B.
Aircraft and Engine Purchase Commitments
As of June 30, 2021,2022, we had definitive purchase agreements for the acquisition of the following aircraft (1): 
Remainder
of 2021		20222023202420252026 and ThereafterTotalRemainder
of 2022		20232024202520262027 and ThereafterTotal
AirbusAirbusAirbus
A320neo FamilyA320neo Family9 26 5 18 22 5 85 A320neo Family12 — 14 25 15 — 66 
BoeingBoeingBoeing
737 MAX Family(2)737 MAX Family(2)1 — 12 6 20 20 59 737 MAX Family(2)— 27 21 20 20 — 88 
787 Family787 Family11 2 11 6 8 5 43 787 Family9 4 12 9 4 5 43 
EmbraerEmbraer
1751753 — — — — — 3 
TotalTotal21 28 28 30 50 30 187 Total24 31 47 54 39 5 200 
(1)Delivery schedule represents our best estimate as of the date of this report. Actual delivery dates are subject to change, which could be material, based on various potential factors including production delays by the manufacturer.manufacturer and regulatory concerns, such as those that have recently prevented The Boeing Company (Boeing) from timely delivering 787 Family aircraft.
(2)The table above and the "Contractual Obligations" table below reflect our exercise of purchase options for four Airbus A320neo Family aircraft in July 2022 and assume our exercise of seven purchase options for 737 MAX Family aircraft that we previously announced our intention to exercise over the course of 2022.
We also have agreements for 2656 spare engines to be delivered in 20212022 and beyond.
We currently have financing commitments in place for all remaining 21 aircraft on order and scheduled to be delivered in 2021: 11 Boeing 787 Family aircraft, nine2022 except for five Airbus A320neo Family aircraft and one Boeing 737 MAX Familythree Embraer 175 aircraft. We also have financing commitments in place for two Boeing 787 Family aircraft in 2022 and five Boeing 787 Family Aircraft in 2023. 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 by a certain date and (2) the performance by the counterparty providing such financing commitments of its obligations thereunder. See Part II, Item 1A. Risk Factors – “We will needdo not have financing commitments in place for any of the aircraft scheduled to obtain sufficient financing or other capital to operate successfully”be delivered in 2023 and beyond, except for for additional discussion.four Boeing 787 Family aircraft scheduled to be delivered in 2023 and five Boeing 787 Family aircraft scheduled to be delivered in 2024.
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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.
There have been no material changes in our off-balance sheet arrangements as discussed in our 20202021 Form 10-K.
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Contractual Obligations
The following table provides details of our futurematerial cash requirements from known contractual obligations as of June 30, 20212022 (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 Payments Due by Period
Remainder
of 2021		20222023202420252026 and ThereafterTotal Remainder
of 2022		20232024202520262027 and ThereafterTotal
AmericanAmericanAmerican
Long-term debt:Long-term debt:Long-term debt:
Principal amount (a), (c)
Principal amount (a), (c)
$1,181 $1,655 $5,109 $3,470 $7,752 $14,754 $33,921 
Principal amount (a), (c)
$807 $4,202 $3,502 $7,784 $4,447 $10,786 $31,528 
Interest obligations (b), (c)
Interest obligations (b), (c)
842 1,552 1,499 1,343 1,170 1,377 7,783 
Interest obligations (b), (c)
854 1,822 1,501 1,249 673 867 6,966 
Finance lease obligationsFinance lease obligations67 148 126 132 97 110 680 Finance lease obligations127 186 181 118 93 105 810 
Aircraft and engine purchase commitments (d)
Aircraft and engine purchase commitments (d)
449 1,676 1,625 2,496 3,382 1,764 11,392 
Aircraft and engine purchase commitments (d)
859 1,935 3,203 3,728 2,270 702 12,697 
Operating lease commitmentsOperating lease commitments981 2,004 1,856 1,483 1,096 4,973 12,393 Operating lease commitments993 1,957 1,646 1,294 1,024 5,083 11,997 
Regional capacity purchase agreements (e)
Regional capacity purchase agreements (e)
575 1,621 1,646 1,620 1,482 3,486 10,430 
Regional capacity purchase agreements (e)
801 1,831 1,867 1,710 1,093 2,159 9,461 
Minimum pension obligations (f)
Minimum pension obligations (f)
— — 46 136 111 224 517 
Minimum pension obligations (f)
— 31 23 — — — 54 
Retiree medical and other postretirement benefitsRetiree medical and other postretirement benefits46 90 85 82 77 358 738 Retiree medical and other postretirement benefits47 89 84 81 78 312 691 
Other purchase obligations (g)
Other purchase obligations (g)
1,691 2,350 1,500 754 154 1,066 7,515 
Other purchase obligations (g)
3,545 3,083 2,332 1,133 604 933 11,630 
Total American Contractual ObligationsTotal American Contractual Obligations5,832 11,096 13,492 11,516 15,321 28,112 85,369 Total American Contractual Obligations8,033 15,136 14,339 17,097 10,282 20,947 85,834 
AAG Parent and Other AAG SubsidiariesAAG Parent and Other AAG SubsidiariesAAG Parent and Other AAG Subsidiaries
Long-term debt:Long-term debt:Long-term debt:
Principal amount (a)
Principal amount (a)
— 750 — — 1,500 3,746 5,996 
Principal amount (a)
— — — 1,500 — 3,746 5,246 
Interest obligations (b)
Interest obligations (b)
78 140 122 121 133 775 1,369 
Interest obligations (b)
61 122 121 138 139 699 1,280 
Finance lease obligationsFinance lease obligations3 10 10 — — — 23 
Operating lease commitmentsOperating lease commitments7 13 12 9 4 16 61 Operating lease commitments11 19 14 10 8 34 96 
Minimum pension obligations (f)
Minimum pension obligations (f)
1 — — — 1 4 6 
Minimum pension obligations (f)
— 1 — — — 1 2 
Total AAG Contractual ObligationsTotal AAG Contractual Obligations$5,918 $11,999 $13,626 $11,646 $16,959 $32,653 $92,801 Total AAG Contractual Obligations$8,108 $15,288 $14,484 $18,745 $10,429 $25,427 $92,481 
(a)Amounts represent contractual amounts due. Excludes $462$396 million and $34$25 million of unamortized debt discount, premium and issuance costs as of June 30, 20212022 for American and AAG Parent, respectively. For additional information, see Note 5 and Note 4 to AAG’s and American’s Condensed Consolidated Financial Statements in Part I, Items 1A and 1B, respectively.
(b)For variable-rate debt, future interest obligations are estimated using the current forward rates at June 30, 2021.2022.
(c)Includes $10.2$9.4 billion of future principal payments and $1.7$1.5 billion of future interest payments as of June 30, 2021,2022, related to EETCs associated with mortgage financings of certain aircraft and spare engines.
(d)See "Aircraft and Engine Purchase Commitments" in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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
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uncertainty surrounding the timing of delivery of certain aircraft, the amounts in the table represent our most current best estimate; however, the actual delivery schedule may differ from the table above, potentially materially. Additionally, the amounts in the table exclude 11nine and twofour Boeing 787-8 aircraft to be delivered in 20212022 and 2022,2023, respectively, as well as five Boeing 787-9 aircraft to be delivered in 2023,2024, in each case, for which we have obtained committed lease financing. This financing is reflected in the operating lease commitments line above.
(e)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.
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(f)On March 11, 2021, the ARP was enacted, which included funding relief provisions benefiting single employer qualified retirement benefit pension plans such as those sponsored by American. The amounts in the table representRepresents minimum pension contributions based on actuarially determined estimates as of December 31, 2021 and reflect our current understanding of the ARP provisions applicable to our pension plans and could changeis based on any associated regulations or interpretive guidance from certain government agencies or any other factors.estimated payments through 2031.
(g)Includes purchase commitments for aircraft fuel, flight equipment maintenance, construction projects and information technology support.
Capital Raising Activity and Other Possible Actions
In light of theour significant cash needs, imposed by the currentin particular during periods in which we incur operating losses due to reduced demand in response to(such as during the COVID-19 pandemicpandemic), as well as our significant financial commitments related to, among other things, the servicing and amortization of existing debt and equipment leasing arrangements and new flight equipment, and 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 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 (in particular the ongoing global outbreakimpact of COVID-19)the COVID-19 pandemic), natural disasters or other causes could reduce the demand for air travel, which would reduce the amount of cash generated by operations. See Part II, 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, 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 and Note 4 to AAG's and American's Condensed Consolidated Financial Statements in Part I, Items 1A and 1B, respectively.
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, 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.
Critical Accounting Policies and Estimates
For information regarding our critical accounting policies and estimates, see disclosures in the Consolidated Financial Statements and accompanying notes contained in our 20202021 Form 10-K.
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Recent Accounting Pronouncements
Accounting Standards Update (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 (the Convertible Notes). We early adopted the New Convertible Debt Standard as of January 1, 2021 using the modified retrospective method to recognize our Convertible 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 Convertible 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 Convertible Notes.
ASU 2019-12: Simplifying the Accounting for Income Taxes (Topic 740)
This standard simplifies the accounting and disclosure requirements for income taxes by clarifying the existing guidance to improve consistency in the application of Accounting Standards Codification 740. This standard also removed the requirement to calculate income tax expense for the stand-alone financial statements of wholly-owned subsidiaries that are not subject to income tax. We adopted this standard effective January 1, 2021, and it did not have a material impact on our condensed consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
AAG's and American’s Market Risk Sensitive Instruments and Positions
Our primary market risk exposures include the price of aircraft fuel, foreign currency exchange rates and interest rate risk. Our exposure to these market risks has not changed materially from our exposure discussed in our 20202021 Form 10-K except as updated below.
Aircraft Fuel
As of June 30, 2021,2022, 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. 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. Based on our 2021 2022
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forecasted fuel consumption, we estimate that a one cent per gallon increase in the price of aircraft fuel would increase our 20212022 annual fuel expense by $34approximately $40 million.
Foreign Currency
We are exposed to the effect of foreign exchange rate fluctuations on the U.S. dollar value of foreign currency-denominated transactions. Our largest exposure comes from the Euro, British pound sterling, Euro, Canadian dollar and various Latin American currencies, primarily the Brazilian real.real, Canadian dollar and Chinese yuan. We do not currently have a foreign currency hedge program.
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 II, 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.
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Interest
Our earnings and cash flow are affected by changes in interest rates due to the impact those changes have on our interest expense from variable-rate debt instruments and our interest income from short-term, interest-bearing investments. If annual interest rates increase 100 basis points, based on our June 30, 20212022 variable-rate debt and short-term investments balances, annual interest expense on variable rate debt would increase by approximately $120$106 million and annual interest income on short-term investments would increase by approximately $180$125 million.
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 LIBORthe London interbank offered rate (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) was subsequently extended by the ICE Benchmark Administration (the administrator of LIBOR) until June 30, 2023. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2023. 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 SOFRthe secured overnight financing rate (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 transactiontransition 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 June 30, 2021,2022, we had $12.2$10.6 billion of borrowings based onlinked to 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 4. 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 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'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 June 30, 20212022 was performed under the supervision and with the participation of AAG’s and American’s management, including AAG’s and American’s CEO and 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 June 30, 20212022 at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
For the quarter ended June 30, 2021,2022, there have been no changes in AAG’s or American’s internal control over financial reporting that have materially affected, or are 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 level as of June 30, 2021.2022.
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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 11 to each of AAG and American's Condensed Consolidated Financial Statements in Part I, Item 1A and Part I, Item 1B, respectively, for information on legal proceedings.
ITEM 1A. RISK FACTORS
Below are certain risk factors that may affect our business, results of operations and financial condition, or the trading price of our common stock or other securities. We caution the reader that these risk factors may not be exhaustive. We operate in a continually changing business environment, and new risks and uncertainties emerge from time to time. Management cannot predict such new risks and uncertainties, nor can it assess the extent to which any of the risk factors below or any such new risks and uncertainties, or any combination thereof, may impact our business.
Risks Related to our Business
The outbreak and global spread of COVID-19 hasand government-imposed measures to prevent or reduce its spread have resulted in a severe declinesignificant volatility in demand for air travel, the impacts of which hashave 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.
The COVID-19 outbreak, along with the measures governments and private organizations worldwide have implemented in an attempt to contain the spread of this pandemic, hashave resulted in a severe declinesignificant volatility in demand for air travel, which has adversely affected our business, operations and financial condition to an unprecedented extent. Measures implemented during the pandemic—such as travel restrictions, including testing regimes, “stay at home” and quarantine orders, limitations on public gatherings, cancellation of public events and many others haveothers—initially resulted in a precipitous decline in demand for both domestic and international business and leisure travel. In response to this material deterioration in demand, we have takentook a number of aggressive actions to ameliorate our business, operations and financial condition. We have focused on reducing our capacity, making structural changes to our fleet, reducing costs including implementing cost reductions,voluntary leave and early retirement programs, preserving cash and improving our overall liquidity position. We have reduced our system-wide capacity and, while we have increased capacity to match a subsequent recovery in demand for air travel, we will continue to monitor conditions and to proactively evaluate and adjust our schedule to match demand. Additionally, we have retired certain mainline aircraft earlier than planned, including all of our Airbus A330-200,A330, Boeing 757, Boeing 767 Airbus A330-300 and Embraer 190 aircraft as well as certain regional aircraft, including certainall of our Embraer 140 and Bombardier CRJ200 aircraft, which we expect will allow us to be more efficient by reducing the number of sub-fleets we operate, and we have also placed a number of Boeing 737-800 aircraft into temporary storage. We have moved quickly to attempt to better align our costs with our reduced schedule and madeimplemented other cost-saving initiatives (including reductions in maintenance expense, marketing expense, event and training expense, airport facilities expense, salaries and benefits expense, and other volume-related expense reductions, including fuel). Nonetheless, we incurred significant net losses, excluding net special items, in 2020 and the first half of 2021, we continue to do so, and we expect to continue to do so until there is a significant global recovery in demand for air travel. The duration and severity of the COVID-19 pandemic remain uncertain, and there can be no assurance that any of the mitigating actions we have taken will suffice to sustain our business and operations through this pandemic.
We have taken and willmay take additional actions to improve our financial position, including measures to improve liquidity, such as obtaining financial assistance under the CARES Act, the PSP Extension Law and the ARP.American Rescue Plan Act of 2021 (ARP). In 2020, we received approximately $6.0 billion in financial assistance from Treasury through PSP1 established under the CARES Act, and in the first six months of 2021, we received approximately $3.5 billion in financial assistance from Treasury through PSP2 established under the PSP Extension Law and $3.3 billion in financial assistance from Treasury through PSP3 established under the ARP. In connection with the financial assistance we have received through PSP1, PSP2 and PSP3, we are required to comply with the relevant provisions of the CARES Act, the PSP Extension Law and the ARP, including the requirement that funds provided pursuant to PSP1, PSP2 and PSP3 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 at least September 30, 2021; the requirement to recall employees involuntarily terminated or furloughed after September 30, 2020; the requirement that certain levels of commercial air service be maintained; provisions prohibiting the repurchase of AAG common stock and the payment of common stock dividends through September 30, 2022; and restrictions on the payment of certain executive compensation until April 1, 2023. Additionally, under PSP1, PSP2 and PSP3, we and certain of our subsidiaries are and will continue to be, subject to substantial and continuing reporting obligations. The substance and duration of these restrictions may materially affect our operations, and we may not be successful in managing these impacts.
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We may pursue additional financing through, among other things, the issuance of additional unsecured and secured debt securities, equity securities and equity-linked securities and/or the entry into additional bilateral and syndicated secured and/or unsecured credit facilities, among other items.facilities. There can be no assurance as to the timing of any such financing transactions, which may be in the near term, or that we will be able to obtain such additional financing on favorable terms, or at all. Any such actions could be conducted in the near term, may be material in nature, could result in the incurrence and issuance of significant additional indebtedness or equity and could impose significant covenants and restrictions to which we are not currently subject.
The measures we have taken to reduce our expenditures and to improve our liquidity, and any other strategic actions that we may take in the future in response to the COVID-19 pandemic may not be effective in offsetting decreased demand, and we may not be permitted to take certain strategic actions that we believe are beneficial if such strategic actions are in contravention of the requirements under the CARES Act, the PSP Extension Law or the ARP, which could result in a material adverse effect on our business, operating results and financial condition.
The full extent of the ongoing impact of the COVID-19 pandemic on our longer-term operational and financial performance will depend on future developments, many of which are outside our control, including the effectiveness of the mitigation strategies discussed above; the duration and spread of COVID-19, including recurrence of the pandemic or the emergence of novel variants, and related travel advisories, restrictions and testing regimes; the supply of effective vaccines and success of efforts to deploy the vaccines; the impact of the COVID-19 pandemic on overall long-term demand for air travel; the impact on demand and capacity which could result from government mandates on air service (including, for instance, requirements for passengers to wear face coverings while traveling or have their temperature checked or have administered COVID-19 tests and other checks prior to or after entering an airport or boarding an airplane, or which would limit the number of seats that can be occupied on an aircraft to allow for social distancing or prohibit flights to certain locations); the impact of COVID-19 on our employees’ ability to work because they are quarantined or sickened as a result of exposure to COVID-19 or if they are subject to additional governmental COVID-19 curfews or "stay at home" health orders or similar restrictions; the impact of federal vaccine mandates, including the willingness of our employees to comply with such mandates and potential conflict with actions by certain states that are in conflict with the federal mandate; the impact of the COVID-19 pandemic on the financial health and operations of our business partners and future governmental actions, all of which are highly uncertain and cannot be predicted. Despite recalling previously furloughed frontline team members and continuously hiring new employees, airlines have experienced, and may continue to experience, periodic staffing shortages which may result in flight cancellations and other operational disruptions. The emergence of novel variants, such as the fast-spreading omicron variant in late 2021, could result in a significant rise in global cases, which could lead to higher than normal employee absences. Continued volatility in demand for travel, coupled with the unpredictability of the ongoing pandemic, presents challenges in building and flying our schedule, in particular during peak travel periods. At this time, we are also not able to predict whether the COVID-19 pandemic will result in permanent changes to our customers' behavior, with such changes including but not limited to a permanent reduction in business travel as a result of increased usage of "virtual" and "teleconferencing" products and more broadly a general reluctance to travel by consumers, each of which could have a material impact on our business.
The COVID-19 pandemic has also caused significant disruption in global supply chains and staffing shortages, which have affected the availability and timely delivery and fulfillment of many goods, including certain of those that we purchase directly or which are required by third parties to perform contracted services for us. We rely on the operation of complex supply chains and a large number of third parties for the procurement and fulfillment of parts, components, consumable or disposable goods and other products and services essential to our business. Following a faster than expected return of demand for air travel as COVID-19 cases declined worldwide and governments lifted travel restrictions, suppliers and many of the airports we serve have experienced acute shortages of personnel, resulting in increased delays, cancellations and, in certain cases, restrictions on the number of flights to or from certain airports. We cannot guarantee that, as a result of ongoing or future supply chain disruptions or staffing shortages, we, our third-party partners, or the airports we serve will be able to timely source all of the products and services we require in the course of our business, or that we will be successful in procuring suitable alternatives.
We are also dependingdependent upon successfuleffective COVID-19 vaccines, including an efficient distribution and sufficient supply, and significant uptake by the general public in order to normalize economic conditions and the airline industry and to realize our financial and growth plans and business strategy. The failure of a vaccine, including to the extent it is not effective against any new COVID-19 variants, significant unplanned adverse reactions to the vaccine, politicization of the vaccine or general public distrust of the vaccine could prolong the pandemic and have an adverse effect on our business, financial condition and results of operations. Additionally, in September 2021, the Biden Administration issued an executive order mandating a COVID-19 vaccination requirement for federal contractors. Due to a number of our agreements, American is
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classified as a government contractor. Consistent with this executive order and guidance from the Safer Federal Workforce Task Force responsible for implementing the order, we announced that the federal vaccine mandate would require all of American’s U.S.-based team members and certain international crew members to be vaccinated or be exempt due to an accommodation for a medical disability or sincerely held religious belief. Lawsuits have been filed in multiple jurisdictions challenging the order, and the U.S. District Court for the Southern District of Georgia in one of these cases issued a nationwide stay of enforcement of the executive order. The cases are currently before several U.S. Courts of Appeal and may ultimately be decided by the U.S. Supreme Court. Given the uncertainty of its viability in the courts, the timing of implementation and availability of accommodations, we cannot predict the impact of this federal vaccination requirement on our business. Moreover, we may be subject to state and local vaccine mandates and other COVID-19-related requirements governing airports where we operate. While the Occupational Health and Safety Administration (OSHA) has withdrawn its overarching COVID-19 Emergency Temporary Standard, the U.S. Supreme Court has acknowledged that OSHA may potentially issue a revised COVID-19 standard targeted to high-risk occupations or workplaces, which could impact our regional carriers and other service providers.
The COVID-19 pandemic continues to evolve, and its ultimate impact remains highly uncertain and subject to change. Even once the pandemic subsides, demand for certain types of air travel may remain weak for a prolonged period due to, among other things, adverse changes in business travel patterns or perceived or actual economic factors such as declines in income levels and/or loss of wealth resulting from the impact of the COVID-19 pandemic. In addition, an outbreak of another disease or similar public health threat, or fear of such an event, that affects travel demand, travel behavior or travel restrictions could adversely impact our business, financial condition and operating results. Outbreaks of other diseases could also result in increased government restrictions and regulation, such as those actions described above or otherwise, which could adversely affect our operations.
Downturns in economic conditions could adversely affect our business.
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 havehad a severe and prolonged effect on the global economy generally and, in turn, may depressresulted in a prolonged period of depressed demand for air travel intotravel. In addition, a rapid economic expansion following the foreseeable future. Dueheight of the pandemic resulted in significant inflationary pressures, which have increased our costs for aircraft fuel, wages and benefits and other goods and services we require to operate our business, as well as increasing 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.interest expense on our variable-rate indebtedness. Accordingly, we cannot predict the ultimate impact of the COVID-19 pandemic or its after-effects on our business, financial condition and results of operations. Additionally, the COVID-19 pandemic has necessitated changes in business practices which may persist. For example, businesses and other travelers may continue to forego air travel in favor of remote or flexible working policies and communication alternatives such as videoconferencing. In addition, to the extent businesses continue to permit air travel during the COVID-19 pandemic, they are more likely to require the purchase of less expensive tickets to reduce costs, thereby potentially impacting our average revenue per available seat mile. See also “The outbreak and global spread of COVID-19 hasand government-imposed measures to prevent or reduce its spread have resulted in a severe declinesignificant volatility in demand for air travel, the impacts of which hashave 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
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additional adverse effects on our business, operating results, financial condition and liquidity” and “The airline industry is intensely competitive and dynamic.”
We will need to obtain sufficient financing or other capital to operate successfully.
Our business plan contemplates continued significant investments related to our fleet, improving the experience of our customers and updating our facilities. Significant capital resources will be required to execute this plan. We estimate that, based on our commitments as of June 30, 2021,2022, our planned aggregate expenditures for aircraft purchase commitments and certain engines on a consolidated basis for calendar years 2021-2025the remainder of 2022 through 2026 would be approximately $9.6$12.0 billion. We may also require financing to refinance maturing obligations and to provide liquidity to fund other corporate requirements. Accordingly, we will need substantial liquidity, financing or other capital resources to finance such aircraft and engines and meet such other liquidity needs. If needed, to meet our liquidity needs, it may be difficult for us to raise additional capital on acceptable terms, or at all, due to, among other factors: our substantial level of existing indebtedness, particularly following the additional liquidity transactions completed and contemplated in response to the impact of the COVID-19 pandemic; our non-investment grade credit rating; unfavorable market conditions; the availability of assets to use as collateral for loans or
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other indebtedness, which has been reduced significantly as a result of certain financing transactions we have undertaken since the beginning of 2020 and may be further reduced; and the effect the COVID-19 pandemic has had on the global economy generally and the air transportation industry in particular. Accordingly, we will need substantial liquidity, financing or other capital resources to finance such aircraft and engines and meet such other liquidity needs. If we are unable to arrange any such required financing at customary advance rates and on terms and conditions acceptable to us, we may need to use cash from operations or cash on hand to purchase such aircraft and engines or fund such other corporate requirements or may seek to negotiate deferrals for such aircraft and engines with the applicable aircraft and engine manufacturers or otherwise defer corporate obligations. Depending on numerous factors applicable at the time we seek capital, many of which are out of our control, such as the state of the domestic and global economies, the capital and credit markets’ view of our prospects and the airline industry in general, and the general availability of debt and equity capital, the financing or other capital resources that we will need may not be available to us, or may be available only on onerous terms and conditions. There can be no assurance that we will be successful in obtaining financing or other needed sources of capital to operate successfully.successfully or to fund our committed expenditures. An inability to obtain necessary financing on acceptable terms would limit our ability to execute necessary capital projects and would have a material adverse impact on our business, results of operations and financial condition.
Our high level of debt and other obligations may limit our ability to fund general corporate requirements and obtain additional financing, may limit our flexibility in responding to competitive developments and cause our business to be vulnerable to adverse economic and industry conditions.
We have significant amounts of indebtedness and other obligations, including pension obligations, obligations to make future payments on flight equipment and property leases related to airport and other facilities, and substantial non-cancelable obligations under aircraft and related spare engine purchase agreements. Moreover, currently a very significant portion of our assets are pledged to secure our indebtedness. Our substantial indebtedness and other obligations, which are generally greater than the indebtedness and other obligations of our competitors, could have important consequences. For example, they may:
•make it more difficult for us to satisfy our obligations under our indebtedness;
•limit our ability to obtain additional funding for working capital, capital expenditures, acquisitions, investments integration costs and general corporate purposes, and adversely affect the terms on which such funding can be obtained;
•require us to dedicate a substantial portion of our liquidity or cash flow from operations to payments on our indebtedness and other obligations, thereby reducing the funds available for other purposes;
•make us more vulnerable to economic downturns, industry conditions and catastrophic external events, particularly relative to competitors with lower relative levels of financial leverage;
•significantly constrain our ability to respond, or respond quickly, to unexpected disruptions in our own operations, the U.S. or global economies, or the businesses in which we operate, or to take advantage of opportunities that would improve our business, operations, or competitive position versus other airlines;
•limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions;
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•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;facilities and collateral coverage ratios and peak debt service coverage ratios; and
•contain restrictive covenants that could, among other things:
◦limit our ability to merge, consolidate, sell assets, incur additional indebtedness, issue preferred stock, make investments and pay dividends; and
◦if breached, result in an event of default under our indebtedness.
In addition, in response to the travel restrictions, decreased demand and other effects the COVID-19 pandemic has had and is expected to continue to have on our business, we have obtained and currently anticipate that it may be necessary to continue to obtain a significant amount of additional financing from a variety of sources.sources and given continued uncertainty we cannot guarantee that we will not need to obtain additional financing in the future. Such financing may include the issuance of additional unsecured or secured debt securities, equity securities and equity-linked securities as well as additional bilateral and syndicated secured and/or unsecured credit
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facilities, among other items. There can be no assurance as to the timing of any such financing transactions, which may be in the near term, or that we will be able to obtain such additional financing on favorable terms, or at all. Any such actions could be conducted in the near term, may be material in nature, could result in the incurrence and issuance of significant additional indebtedness or equity and could impose significant covenants and restrictions to which we are not currently subject. In particular, in connection with the financial assistance we have received through PSP1, PSP2 and PSP3, we are required to comply with the relevant provisions of the CARES Act, the PSP Extension Law and the ARP, including the requirement that funds provided pursuant to PSP1, PSP2 and PSP3 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 at least September 30, 2021; provisions prohibiting the repurchase of AAG common stock and the payment of common stock dividends through September 30, 2022; and restrictions on the payment of certain executive compensation until April 1, 2023. Additionally, under PSP1, PSP2 and PSP3, we and certain of our subsidiaries are subject to substantial and continuing reporting obligations. Moreover, as a result of the recent financing activities we have undertaken in response to the COVID-19 pandemic, the number of financings with respect to which such covenants and provisions apply has increased, thereby subjecting us to more substantial risk of cross-default and cross-acceleration in the event of breach, and additional covenants and provisions could become binding on us as we continue to seek additional liquidity.
The obligations discussed above, including those imposed as a result of the CARES Act, the PSP Extension Law, the ARP and any additional financings we may be required to undertake as a result of the impact of the COVID-19 pandemic, could also impact our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business, and could materially adversely affect our liquidity, results of operations and financial condition.
Further, a substantial portion of our long-term indebtedness bears interest at fluctuating interest rates, primarily based on the London interbank offered rate (LIBOR)LIBOR for deposits of U.S. dollars. LIBOR tends to fluctuate based on general short-term interest rates, rates set by the U.S. Federal Reserve and other central banks, the supply of and demand for credit in the London interbank market and general economic conditions. We have not hedged our interest rate exposure with respect to our floating rate debt. Accordingly, our interest expense for any particular period will fluctuate based on LIBOR and other variable interest rates. To the extent the interest rates applicable to our floating rate debt increase, our interest expense will increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be adversely affected.
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) was subsequently extended by the ICE Benchmark Administration (the administrator of LIBOR) until June 30, 2023. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2023. 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 the Secured Overnight Financing Rate (SOFR)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. See also the discussion of interest rate risk in Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk – “Interest.”
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We may in the future pursue amendments to our LIBOR-based debt transactions to provide for a transactiontransition 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 June 30, 2021,2022, we had $12.2$10.6 billion of borrowings based onlinked to 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.
We have significant pension and other postretirement benefit funding obligations, which may adversely affect our liquidity, results of operations and financial condition.
Our pension funding obligations are significant. The amount of theseour pension funding obligations will depend on the performance of investments held in trust by the pension plans, interest rates for determining liabilities and actuarial experience. The minimum funding obligation applicable to our pension plans was subject to favorable temporary funding rules that expired at the end of 2017 and, as a result, our minimum pension funding obligations increased materially beginning in 2019. In January 2021, we made $241 million in contributions to our pension plans, including a contribution of $130 million for the 2020 calendar year that was permitted to be deferred to January 4, 2021 as provided under the CARES Act. On March 11, 2021, the ARP was enacted, which included funding relief provisions benefiting single employer qualified retirement benefit pension plans such as those sponsored by American. Based on our current understanding of the ARP provisions applicable to our pension plans, we will have no additional funding requirements for 2021. In addition, weuntil 2023. We also have significant obligations for retiree medical and other postretirement benefits.
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Additionally, we participate in the IAM National Pension Fund (the IAM Pension Fund). The funding status of the IAM Pension Fund is subject to the risk that other employers may not meet their obligations, which under certain circumstances could cause our obligations to increase. 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. Furthermore, if we were to withdraw from the IAM Pension Fund, if the IAM Pension fund were to terminate, or if the IAM Pension Fund were to undergo a mass withdrawal, we could be subject to liability as imposed by law.
If our financial condition worsens, provisions in our credit card processing and other commercial agreements may adversely affect our liquidity.
We have agreements with companies that process customer credit card transactions for the sale of air travel and other services. These agreements allow these credit card processing companies, under certain conditions (including, with respect to certain agreements, our failure to maintain certain levels of liquidity), to hold an amount of our cash (referred to as a holdback) equal to some or all of the advance ticket sales that have been processed by that credit card processor, but for which we have not yet provided the air transportation. Additionally, such credit card processing companies may require cash or other collateral reserves to be established. These credit card processing companies are not currently entitled to maintain any holdbacks pursuant to these requirements. These holdback requirements can be modified at the discretion of the credit card processing companies upon the occurrence of specific events, including material adverse changes in our financial condition or the triggering of a liquidity covenant. In light of the effect of the COVID-19 pandemic is having on demand for air travel and, in turn, capacity, we have seen anexperienced a prolonged increase in demand from consumers for refunds on their tickets, and we anticipate thiscannot assure that we will continue to benot experience periods of elevated refund demand in the case for the near future. RequestsA material increase in requests for refunds and the ongoing impact of the COVID-19 pandemic on our longer-term financial performance may reduce our liquidity and cause us to be forced to post cash or other collateral with the credit card processing companies in respect of advance ticket sales. The imposition of holdback requirements, up to and including 100% of relevant advanced ticket sales, would materially reduce our liquidity. Likewise, other of our commercial agreements contain provisions that allow other entities to impose less-favorable terms, including the acceleration of amounts due, in the event of material adverse changes in our financial condition. For example, we maintain certain letters of credit, insurance- and surety-related agreements under which counterparties may require collateral, including cash collateral.
The loss of key personnel upon whom we depend to operate our business or the inability to attract and develop additional qualified personnel could adversely affect our business.
We believe that our future success will depend in large part on our ability to attract, develop and retain highly qualified management, technical and other personnel. Retaining and recruiting people with the appropriate skills is particularly challenging as the economy in general, and the airline industry in particular, continue to recover from the COVID-19 pandemic resulting in competition for the human resources necessary to operate our business successfully. We may not be successful in attracting, developing or retaining key personnel or other highly qualified personnel. Among other things, the CARES Act, the PSP Extension Law and the ARP impose significant restrictions on executive compensation, which will remain in place until April 1, 2023. Such restrictions, over time, will likely result in lower executive compensation in the airline industry than is prevailing in other industries, creating increasing retention challenges in the case of executives presented with alternative, non-airline opportunities. In addition, competition for skilled personnel has intensified and may continue to intensify if overall industry capacity continues to increase and/or we were to incur attrition at levels higher than we have historically. Any inability to attract, develop and retain significant numbers of qualified management and other personnel would have a material adverse effect on our business, results of operations and financial condition.
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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:
•the effects of the ongoing COVID-19 pandemic;
•actual or potential changes in international, national, regional and local economic, business and financial conditions, including recession, inflation and higher interest rates,rates;
•the occurrence of 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 U.S. National Airspace System (the ATC system);
•increases in costs of safety, security, and environmental measures;
•outbreaks of diseases that affect travel behavior; and
•weather and natural disasters, including increases in frequency, severity or duration of such disasters, and related costs caused by more severe weather due to climate change.
In addition to the effects of the ongoing COVID-19 pandemic, an outbreak of aanother contagious disease disease—such as has occurred in the past with the Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu, Zika virus or any other similar illness, 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. See also "The outbreak and global spread of COVID-19 hasand government-imposed measures to prevent or reduce its spread have resulted in a severe declinesignificant volatility in demand for air travel, the impacts of which hashave 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.” 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.
Union disputes, employee strikes and other labor-related disruptions, or our inability to otherwise maintain labor costs at competitive levels may adversely affect our operations and financial performance.
Relations between air carriers and labor unions in the U.S. are governed by the Railway Labor Act (RLA). Under the RLA, collective bargaining agreements (CBAs) generally contain “amendable dates” rather than expiration dates, and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the National Mediation Board (NMB). As of December 31, 2021, approximately 86% of our employees were represented for collective bargaining purposes by labor unions, and 45% were covered by CBAs that are currently amendable or that will become amendable within one year. For the dates that the CBAs with our major work groups become amendable under the RLA, see Part I, Item 1. Business – “Employees and Our People—Labor Relations” in our 20202021 Form 10-K.
In the case of a CBA that is amendable under the RLA, if no agreement is reached during direct negotiations between the parties, either party may request that the NMB appoint a federal mediator. The RLA prescribes no timetable for the direct negotiation and mediation processes, and it is not unusual for those processes to last for many months or even several years. If no agreement is reached in mediation, the NMB in its discretion may declare that an impasse exists and proffer binding arbitration to the parties. Either party may decline to submit to arbitration, and if arbitration is rejected by either party, a 30-day “cooling off” period commences. During or after that period, a Presidential Emergency Board (PEB) may be established, which examines the parties’ positions and recommends a solution. The PEB process lasts for 30 days and is followed by another 30-day “cooling off” period. At the end of this “cooling off” period, unless an agreement is
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reached or action is taken by Congress, the labor organization may exercise “self-help,” such as a strike, which could materially adversely affect our business, results of operations and financial condition.
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None of the unions representing our employees presently may lawfully engage in concerted slowdowns or refusals to work, such as strikes, sick-outs or other similar activity, against us. Nonetheless, there is a risk that employees, either with or without union involvement, could engage in one or more concerted refusals to work that could individually or collectively harm the operation of our airline and impair our financial performance. Additionally, some of our unions have brought and may continue to bring grievances to binding arbitration, including those related to wages. If successful, there is a risk these arbitral avenues could result in material additional costs that we did not anticipate. See also Part I, Item 1. Business – “Employees and Our People—Labor Relations”in our 20202021 Form 10-K.
As of December 31, 2020, approximately 84% of our employees were represented for collective bargaining purposes by labor unions. Currently, we believe our labor costs are generally competitive relative to the other large network carriers. However, we cannot provide assurance that labor costs going forward will remain competitive because we are in negotiations for several important new labor agreements now and other agreements are scheduled to become amendable, competitors may significantly reduce their labor costs or we may agree to higher-cost provisions unilaterally or in connection with our current or future labor negotiations.
If we encounter problems with any of our third-party regional operators or third-party service providers, our operations could be adversely affected by a resulting decline in revenue or negative public perception about our services.
A significant portion of our regional operations are conducted by third-party operators on our behalf, substantially all of which are provided for under capacity purchase agreements. Due to our reliance on third parties to provide these essential services, we are subject to the risk of disruptions to their operations, which has in the past and may in the future result from many of the same risk factors disclosed in this report, such as the impact of adverse economic conditions, the inability of third parties to hire or retain skilled personnel, including in particular pilots and mechanics, and other risk factors, such as an out-of-court or bankruptcy restructuring of any of our regional operators. Several of these third-party regional operators provide significant regional capacity that we would be unable to replace in a short period of time should that operator fail to perform its obligations to us. Disruptions to capital markets, shortages of pilots, mechanics and other skilled personnel and adverse economic conditions in general have subjected certain of these third-party regional operators to significant financial pressures, which have in the past and may in the future lead to bankruptcies among these operators. In particular, the severe decline in demand for air travel resulting from the COVID-19 pandemic and related governmental restrictions on travel have materially impacted demand for services provided by our regional carriers and, as a result, we havetemporarily significantly reduced our regional capacity. Further, as airlines attempt to restore capacity in line with increased demand for air travel following the height of the pandemic, these third-party operators have experienced difficulties in recruiting and expectretaining sufficient personnel to maintain these reduced levels of capacity for the foreseeable future.operate significantly increased schedules. We expect the disruption to services resulting from the COVID-19 pandemic and subsequent rapid return of demand to continue to adversely affect our regional operators, some of whom may experience significant financial stress, declare bankruptcy or otherwise cease to operate. We may also experience disruption to our regional operations or incur financial damages if we terminate the capacity purchase agreement with one or more of our current operators or transition the services to another provider. Any significant disruption to our regional operations would have a material adverse effect on our business, results of operations and financial condition.
In addition, our reliance upon others to provide essential services on behalf of our operations may result in our relative inability to control the efficiency and timeliness of contract services. We have entered into agreements with contractors to provide various facilities and services required for our operations, including distribution and sale of airline seat inventory, reservations, provision of information technology and services, regional operations, aircraft maintenance, ground services and facilities and baggage handling. Similar agreements may be entered into in any new markets we decide to serve. These agreements are generally subject to termination after notice by the third-party service provider. We are also at risk should one of these service providers cease operations, and there is no guarantee that we could replace these providers on a timely basis with comparably priced providers, or at all. These third parties are also facing challenges retaining and recruiting people with the appropriate skills to meet our requirements as the economy in general, and the airline industry in particular, continue to recover from the COVID-19 pandemic. Any material problems with the adequacy, efficiency and timeliness of contract services, resulting from financial hardships, personnel shortages or otherwise, could have a material adverse effect on our business, results of operations and financial condition.
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Any damage to our reputation or brand image could adversely affect our business or financial results.
Maintaining a good reputation globally is critical to our business. Our reputation or brand image could be adversely impacted by, among other things, any failure to maintain high ethical, social and environmental sustainability practices for all of our operations and activities, our impact on the environment, public pressure from investors or policy groups to change our policies, such as movements to institute a “living wage,” customer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs, customer perceptions of our use of social media, or customer perceptions of statements made by us, our employees and executives, agents or other third parties. In addition, we operate in a highly visible industry that has significant exposure to social media. Negative publicity, including as a result of
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misconduct by our customers, vendors or employees, can spread rapidly through social media. Should we not respond in a timely and appropriate manner to address negative publicity, our brand and reputation may be significantly harmed. Damage to our reputation or brand image or loss of customer confidence in our services could adversely affect our business and financial results, as well as require additional resources to rebuild our reputation.
Moreover, the outbreak and spread of COVID-19 have adversely impacted consumer perceptions of the health and safety of travel, and in particular airline travel, and these negative perceptions could continue even after the pandemic subsides. Actual or perceived risk of infection on our flights has had, and may continue to have, a material adverse effect on the public's perception of us, which has harmed, and may continue to harm, our reputation and business. We have taken various measures to reassure our team members and the traveling public of the safety of air travel, including requirements that passengers wear face coverings, the provision of protective equipment for team members and enhanced cleaning procedures onboard aircraft and in airports. Wewe expect that we will continue to incur COVID-19 related costs as we sanitize aircraft, implement additional hygiene-related protocols and take other actions to limit the threat of infection among our employees and passengers. However, we cannot assure that these or any other actions we might take in response to the COVID-19 pandemic will be sufficient to restore the confidence of consumers in the safety of air travel. In addition, as a result of mask mandates and other mitigating measures that airports and carriers were required by law to implement to limit the spread of COVID-19, we experienced an increase in the incidence of aggressive customer behavior and physical confrontation on our flights, certain of which resulted in injuries to our personnel. If our employees feel unsafe or believe that we are not doing enough to prevent and prosecute these incidents, we could experience higher rates of employee absence and we may suffer reputational harm which could make it more difficult to attract and retain employees, and which could in turn negatively affect our business, financial condition and results of operations.
We are at risk of losses and adverse publicity stemming from 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, weWe are at risk of adverse publicity stemming from any public incident involving our company, our people or our brand.brand, particularly given the ease with which individuals can now capture and rapidly disseminate news via social media. Such an incident could involve the actual or alleged behavior of any of our employees.employees, contractors or passengers. Further, if our personnel, one of our aircraft, a type of aircraft in our fleet, 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, catastrophe or regulatory enforcement action, 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, catastrophe or action. In the event that our insurance is inapplicable or inadequate, we may be forced to bear substantial losses from an incident or accident. In addition, any such incident, accident, catastrophe or action involving our personnel, one of our aircraft (or personnel and aircraft of our regional operators and our codeshare partners), or a type of aircraft in our fleet could create an adverse public perception, which could harm our reputation, result in air travelers being reluctant to fly on our aircraft or those of our regional operators or codeshare partners, and adversely impact our business, results of operations and financial condition.
We face challenges in integrating our computer, communications and other technology systems.
While we have to date successfully integrated many of our computer, communication and other technology systems in connection with the merger of US Airways and American, including our customer reservations system and our pilot, flight attendant and fleet scheduling system, we still have to complete several additional important system integration or replacement projects. In a number of prior airline mergers, the integration of these systems or deployment of replacement systems has taken longer, been more disruptive and cost more than originally forecasted. The implementation process to integrate or replace 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 implementations 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 of business and financial processes.
We cannot assure 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 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.
Changes to our business model that are designed to increase revenues may not be successful and may cause operational difficulties or decreased demand.
We have in the past instituted, and intend to institute in the future, changes to our business model designed to increase revenues and offset costs. These measures include further segmentation of the classes of services we offer, such as Premium Economy service and Basic Economy service, enhancements to our AAdvantage loyalty program, charging separately for services that had previously been included within the price of a ticket, changing (whether it be increasing,
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decreasing or eliminating) other pre-existing fees, reconfiguration of our aircraft cabins, and efforts to optimize our network including by focusing growth on a limited number of large hubs and entering into agreements with other airlines. For example, in 2020, we eliminated change fees for most domestic and international tickets, which has reduced our change fee revenue, a trend which is expected to continue as demand for air travel recovers, assuming this change remains in
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place. We may introduce additional initiatives in the future; however, as time goes on, we expect that it will be more difficult to identify and implement additional initiatives. We cannot assure that these measures or any future initiatives will be successful in increasing our revenues.revenues or offsetting our costs. Additionally, the implementation of these initiatives may create logistical challenges that could harm the operational performance of our airline or result in decreased demand. Also, our implementation of any new or increased fees might result in adverse brand perceptions or reputational harm, and could reduce the demand for air travel on our airline or across the industry in general, particularly if weakened economic conditions make our customers more sensitive to increased travel costs or provide a significant competitive advantage to other carriers that determine not to institute similar charges.
Our intellectual property rights, particularly our branding rights, are valuable, and any inability to protect them may adversely affect our business and financial results.
We consider our intellectual property rights, particularly our branding rights such as our trademarks applicable to our airline and AAdvantage loyalty program, to be a significant and valuable aspect of our business. We protect our intellectual property rights through a combination of trademark, copyright and other forms of legal protection, contractual agreements and policing of third-party misuses of our intellectual property. Our failure to obtain or adequately protect our intellectual property or any change in law that lessens or removes the current legal protections of our intellectual property may diminish our competitiveness and adversely affect our business and financial results. Any litigation or disputes regarding intellectual property may be costly and time-consuming and may divert the attention of our management and key personnel from our business operations, either of which may adversely affect our business and financial results.
In addition, we have used certain of our branding and AAdvantage loyalty program intellectual property as collateral for various financings (including the AAdvantage Financing), which contain covenants that impose restrictions on the use of such intellectual property and, in the case of the AAdvantage Financing, on certain amendments or changes to our AAdvantage loyalty program. These covenants may have an adverse effect on our ability to use such intellectual property.
We may be a party to litigation in the normal course of business or otherwise, which could affect our financial position and liquidity.
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. Litigation is subject to significant uncertainty and may be expensive, time-consuming, and disruptive to our operations. Although we will vigorously defend ourselves in such legal proceedings, their ultimate resolution and potential financial and other impacts on us are uncertain. For these and other reasons, we may choose to settle legal proceedings and claims, regardless of their actual merit. If 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 imposed 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 matters in which we are involved can be found in Note 11 to each of AAG and American's Condensed Consolidated Financial Statements in Part I, Item 1A and Part I, Item 1B, respectively.
Our ability to utilize our NOL CarryforwardsNOLs and other carryforwards may be limited.
Under the Internal Revenue Code of 1986, as amended (the Code), a corporation is generally allowed a deduction for net operating losses (NOLs) carried over from prior taxable years (NOL Carryforwards).years. As of December 31, 2020,2021, we had approximately $16.5$17.2 billion of gross federal NOLs and $3.0 billion of other carryforwards available to reduce future federal taxable income, of which $8.5$6.9 billion will expire beginning in 20232024 if unused and $8.0$13.3 billion can be carried forward indefinitely. We also had approximately $5.0$6.0 billion of NOL Carryforwardscarryforwards to reduce future state taxable income at December 31, 2020,2021, which will expire in taxable years 20202021 through 20402041 if unused. Our NOL Carryforwardscarryforwards are subject to adjustment on audit by the Internal Revenue
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Service and the respective state taxing authorities. Additionally, due to the COVID-19 pandemic and other economic factors, the NOL Carryforwardscarryforwards may expire before we can generate sufficient taxable income to use them.
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Our ability to use our NOL CarryforwardsNOLs and other carryforwards will depend on the amount of taxable income generated in future periods. We presently have a $34 million valuation allowance on certain net deferred tax assets related to state NOL Carryforwards.carryforwards. If our financial results continue to be adversely impacted by the COVID-19 pandemic, 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.
A corporation’s ability to deduct its federal NOL Carryforwardscarryforwards and to utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 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% during a rolling three-year period). In 2013, we experienced an ownership change in connection with our emergence from bankruptcy and US Airways Group experienced an ownership change in connection with the Merger.merger of US Airways Group and AMR Corporation (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 elected to be covered by certain special rules for federal income tax purposes that permitted approximately $9.0 billion (with $7.0$5.4 billion of unlimited NOLs still remaining at December 31, 2020)2021) of our federal NOL Carryforwardscarryforwards 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 Carryforwardscarryforwards may be subject to limitation. In addition, under the loan program of the CARES Act, the warrants (and common stock issuable upon exercise thereof) we issued to Treasury did not and will not result in an ownership change"ownership change" for purposes of Section 382. This exception does not apply for companies issuing warrants, stock options, common or preferred stock or other equity pursuant to PSP1, PSP2 and PSP3 and accordingly will not apply to the warrants issued by us under PSP1, PSP2 and PSP3. Substantially all of our remaining federal NOL Carryforwardscarryforwards attributable to US Airways Group and its subsidiaries are subject to limitation under Section 382 as a result of the Merger; however, our ability to utilize such NOL Carryforwardscarryforwards 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 bankruptcy may severely limit or effectively eliminate our ability to utilize our NOL Carryforwardscarryforwards and other tax attributes. To reduceIn connection with the riskexpiration in December 2021 of a potential adverse effect on our abilitycertain transfer restrictions applicable to utilize our NOL Carryforwards,substantial shareholders contained in our Certificate of Incorporation, contains transfer restrictions applicablethe Board of Directors of AAG adopted a tax benefits preservation plan (the Tax Benefits Preservation Plan) in order to preserve our ability to use our NOLs and certain substantialother tax attributes to reduce potential future income tax obligations. The Tax Benefits Preservation Plan was subsequently ratified by our stockholders which are scheduledat the 2022 Annual Meeting of Stockholders of AAG. The Tax Benefits Preservation Plan is designed to expire on December 31, 2021. These restrictionsreduce the likelihood that we experience an ownership change by deterring certain acquisitions of AAG common stock. There is no assurance, however, that the deterrent mechanism will be effective, and such acquisitions may still occur. In addition, the Tax Benefits Preservation Plan may adversely affect the ability of certain holdersmarketability of AAG common stock to dispose ofby discouraging existing or acquirepotential investors from acquiring AAG common stock or additional shares of AAG common stock. Althoughstock, because any non-exempt third party that acquires 4.9% or more of the purposethen-outstanding shares of AAG common stock would suffer substantial dilution of its ownership interest in AAG.
New U.S. tax legislation may adversely affect our financial condition, results of operations and cash flows.
The U.S. government may enact significant changes to the taxation of business entities including, among others, an increase in the corporate income tax rate, the imposition of minimum taxes or surtaxes on certain types of income, significant changes to the taxation of income derived from international operations, and an addition of further limitations on the deductibility of business interest. While certain draft legislation has been publicly released and is under development in Congress at this time, the likelihood of these transfer restrictionschanges being enacted or implemented is unclear. We are currently unable to prevent an ownership change from occurring,predict whether such changes will occur. If such changes are enacted or implemented, we are currently unable to predict the ultimate impact on our business and therefore there can be no assurance can be given that an ownership changeour business will not occur even with these restrictions in place. See also “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.”be adversely affected.
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.
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Future impairment of goodwill or other long-lived assets 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, including as a result of significant or prolonged declines in demand for air travel and corresponding reductions to capacity. In 2020, we recorded a $1.5 billion impairment charge associated with our decision to retire certain mainline aircraft, principally 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, earlier than previously planned as a result of the severe decline in demand for air travel due to the COVID-19 pandemic. We can provide no assurance that a material impairment loss of tangible or intangible assets will not occur in a future period,period; we have previously incurred significant impairment charges associated with our decision to retire certain aircraft as a result of the severe decline in demand for air travel due to the COVID-19 pandemic, and the risk of future material impairments has beenremains significantly
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heightened as a result of the effects of the COVID-19 pandemic on our flight schedules and business.business as well as the associated impact on values of certain aircraft and flight equipment. Such impairment charges could have a material adverse effect on our business, results of operations and financial condition.
Risks Related to the Airline Industry
The airline industry is intensely competitive and dynamic.
Our competitors include other major domestic airlines and foreign, regional and new entrant airlines, as well as joint ventures formed by some of these airlines, many of which have more financial or other resources and/or lower cost structures than ours, as well as other forms of transportation, including rail and private automobiles.automobiles or alternatives to commuting or business travel including remote or flexible working policies and communication alternatives such as videoconferencing. In many of our markets, we compete with at least one low-cost carrier (including so-called ultra-low-cost carriers). Our revenues are sensitive to the actions of other carriers in many areas, including pricing, scheduling, capacity, fees (including cancellation, change and baggage fees), amenities, loyalty benefits and promotions, which can have a substantial adverse impact not only on our revenues, but on overall industry revenues. These factors may become even more significant in periods when the industry experiences large losses (such as the current one caused byoccurred recently during the COVID-19 pandemic), as airlines under financial stress, or in bankruptcy, may institute pricing or fee structures intended to attract more customers to achieve near term survival at the expense of long-term viability.
Low-cost carriers (including so-called ultra-low-cost carriers) have a profound impact on industry revenues. Using the advantage of low unit costs, these carriers offer lower fares in order to shift demand from larger, more established airlines, and represent significant competitors, particularly for customers who fly infrequently, are price sensitive and therefore tend not to be loyal to any one particular carrier. A number of these low-cost carriers have recently commenced operations.operations, and several new entrants have announced their intention to start up new ultra-low-cost carriers. Many of these new and existing carriers have announced growth strategies including commitments to acquire significant numbers of new aircraft for delivery in the next few years. These low-cost carriers are attempting to continue to increase their market share through growth and several new entrants have announced their intention to start up new ultra-low-cost carriers and, potentially, consolidation, and are expected to continue to have an impact on our revenues and overall performance. We and several other large network carriers have implemented “Basic Economy” fares designed to more effectively compete against low-cost carriers, but we cannot predict whether these initiatives will be successful. While historically these carriers have provided competition in domestic markets, we have recently experienced new competition from low-cost carriers on international routes, including low-cost airlines executing international long-haul expansion strategies, a trend likely to continue with the delivery of planned, long-range narrowbody aircraft. The actions of existing or future low-cost carriers, including those described above, could have a material adverse effect on our operations and financial performance.
We provide air travel internationally, directly as well as through joint businesses, alliances, codeshare and similar arrangements to which we are a party. While our network is comprehensive, compared to some of our key global competitors, we generally have somewhat greater relative exposure to certain regions (for example, Latin America) and somewhat lower relative exposure to others (for example, China). Our financial performance relative to our key competitors will therefore be influenced significantly by macro-economic conditions in particular regions around the world and the relative exposure of our network to the markets in those regions, including the duration of declines in demand for travel to specific regions as a result of the continuing outbreak of COVID-19 and the speed with which demand for travel to these regions returns.
Our international service exposes us to foreign economies and the potential for reduced demand when any foreign country we serve suffers adverse local economic conditions or if governments restrict commercial air service to or from any of these markets. For example, the COVID-19 pandemic has resulted in a precipitous decline in demand for air travel, in particular international travel, in part as a result of the imposition by the U.S. and foreign governments of restrictions on travel from certain regions. In addition, open skies agreements, which are now in place with a substantial number of
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countries around the world, provide international airlines with open access to U.S. markets, potentially subjecting us to increased competition on our international routes. See also “Our business is subject to extensive government regulation, which may result in increases in our costs, disruptions to our operations, limits on our operating flexibility, reductions in the demand for air travel, and competitive disadvantages.”
Certain airline alliances, joint ventures and joint businesses have been, or may in the future be, granted immunity from antitrust regulations by governmental authorities for specific areas of cooperation, such as joint pricing decisions. To the extent alliances formed by our competitors can undertake activities that are not available to us, our ability to effectively compete may be hindered. Our ability to attract and retain customers is dependent upon, among other things, our ability to offer our customers convenient access to desired markets. Our business could be adversely affected if we are unable to maintain or obtain alliance and marketing relationships with other air carriers in desired markets.
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American has established a transatlantic joint business with British Airways, Aer Lingus, Iberia and Finnair, a transpacific joint business with Japan Airlines and a joint business relating to Australia and New Zealand with Qantas, each of which has been granted antitrust immunity. The transatlantic joint business benefits from a grant of antitrust immunity from the United States Department of Transportation (DOT) and was reviewed by the European Commission (EC) in July 2010. In connection with this review, we provided certain commitments to the EC regarding, among other things, the availability of take-off and landing slots at London Heathrow (LHR) or London Gatwick (LGW) airports. The commitments accepted by the EC were binding for 10 years. In October 2018, in anticipation of the exit of the United Kingdom from the European Union (EU), commonly referred to as Brexit, and the expiry of the EC commitments in July 2020, the United Kingdom Competition and Markets Authority (CMA) opened an investigation into the transatlantic joint business. We continue to fully cooperate with the CMA and, in September 2020, the CMA adopted interim measures that effectively extend the EC commitments for an additional three years until March 2024 in light of the uncertainty created byand other impacts resulting from the COVID-19 pandemic. In April 2022, the CMA adopted a second interim measures decision that effectively extends the EC commitments for a further two years until March 2026 in light of the uncertainty and other impacts resulting from the COVID-19 pandemic. The CMA plans to complete its investigation before the scheduled expiration of the interim measures expire.in March 2026. The foregoing arrangements are important aspects of our international network and we are dependent on the performance and continued cooperation of the other airlines party to those arrangements.
In 2020,2021, we entered into an expanded marketing relationship with Alaska Airlines. This arrangement expands our existing codeshare relationship, including codeshare on certainbegan implementing key aspects of our international routes from SEA and LAX, and provides for reciprocal loyalty program benefits and shared lounge access. Pursuant to federal law, American and Alaska Airlines submitted this proposed arrangement to the DOT for review. After the DOT allowed the review period to expire with no further actions, American and Alaska Airlines commenced implementation of this arrangement.
Also, in 2020, we announced our intention to enter into a marketing relationship with JetBlue. This arrangement includes an alliance agreement with reciprocal codesharing on certain domestic and certain international routes from New York (JFK, LGA,LaGuardia Airport (LGA), and EWR)Newark Liberty International Airport) and BOS,Boston Logan International Airport, and provides for reciprocal loyalty program benefits. The arrangement does not include JetBlue’s future transatlantic flying. Pursuant to federal law, American and JetBlue submitted this proposed alliance arrangement to the DOT for review. After American, JetBlue and the DOT agreed to a series of commitments, the DOT terminated its review of the proposed alliance.alliance in January 2021. The commitments include growth commitments to ensure capacity expansion, slot divestitures at JFK and at DCARonald Reagan Washington National Airport (DCA) near Washington, D.C. and antitrust compliance measures. Beyond this agreement with the DOT Agreement, American and JetBlue will also be refrainingrefrain from certain kinds of coordination on certain city pair markets. In additionUpon the DOT’s termination of its review of the proposed alliance, American and JetBlue implemented the proposed alliance subject to these commitments. On September 21, 2021, the DOT review, the U.S.United States Department of Justice (DOJ), joined by Attorneys General from six states and the New York Attorney General, the Massachusetts Attorney General, and the Attorneys GeneralDistrict of certain other state and local jurisdictions are investigating this proposed alliance, which investigations remain ongoing.Columbia, filed an antitrust complaint against American and JetBlue alleging that American and JetBlue violated U.S. antitrust laws in connection with the Northeast Alliance arrangement (NEA). We believe the complaint is without merit and intend to cooperate with those investigations, but are proceeding with plans to implement this alliance.defend against it vigorously.
Notwithstanding the DOT’s termination of its reviews of the Alaska AirlinesNEA and JetBluecertain other alliances, the DOT maintains authority to conduct investigations under the scope of its existing statutes and regulations, including conduct related to these alliances.this alliance. On September 21, 2021, the DOT published a Clarification Notice relating to the DOT Agreement. The DOT Clarification Notice stated, among other things, that the DOT Agreement remains in force during the pendency of the DOJ action against the NEA and, while the DOT retains independent statutory authority to prohibit unfair methods of competition in air transportation, the DOT intends to defer to DOJ to resolve the antitrust concerns that DOJ has identified with respect to the NEA. The DOT simultaneously published a Notice Staying Proceeding in relation to a complaint by Spirit Airlines, Inc. regarding the NEA, pending resolution of the DOJ action described above.
No assurances can be given as to any benefits that we may derive from any of the foregoing arrangements or any other arrangements that may ultimately be implemented, or whether or not regulators will, or if granted continue to, approve or impose material conditions on our business activities.
Additional
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Other mergers and other forms of industry consolidation,airline partnerships, including antitrust immunity grants, may take place and may not involve us as a participant. Depending on which carriers combine or integrate and which assets, if any, are sold or otherwise transferred to other carriers in connection with any such combinations,transactions, our competitive position relative to the post-combinationpost-transaction carriers or other carriers that acquire such assets could be harmed. In addition, as carriers combine through traditional mergers or integrate their operations through antitrust immunity grants, their route networks will grow, and that growth will result in greater overlap with our network, which in turn could decrease our overall market share and revenues. Such consolidationcombination or collaboration is not limited to the U.S., but could include further consolidationtransactions among international carriers in Europe and elsewhere.elsewhere that result in broader networks offered by rival airlines.
Additionally, our AAdvantage loyalty program, which is an important element of our sales and marketing programs, faces significant and increasing competition from the loyalty programs offered by other travel companies, as well as from similar loyalty benefits offered by banks and other financial services companies. Competition among loyalty programs is intense regarding the rewards, fees, required usage, and other terms and conditions of these programs. In addition, we have used certain assets from our AAdvantage loyalty program as collateral for the AAdvantage Financing, which contains covenants that impose restrictions on certain amendments or changes to certain of our AAdvantage Agreements and other aspects of the AAdvantage loyalty program. These competitive factors and covenants (to the extent applicable) may affect our ability to attract and retain customers, increase usage of our loyalty program and maximize the revenue generated by our loyalty program.
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The commercial relationships that we have with other airlines,companies, including any related equity investment,investments, may not produce the returns or results we expect.
An important part of our strategy to expand our network has been to initiate or expand our commercial relationships with other airlines, such as by entering into global alliance, joint business and codeshare relationships, including with Alaska Airlines Group, Inc. and Qatar Airways Company Q.C.S.C., and, in one instance involvingcertain instances, including China Southern Airlines, GOL and our previously announced proposed investment in JetSMART, by making a significant equity investment in another airline in connection with initiating or expanding such a commercial relationship. We may explore additional investments in, and joint ventures and strategic alliances with, other carriers as part of our global business strategy. We face competition in forming and maintaining these commercial relationships since there are a limited number of potential arrangements and other airlines are looking to enter into similar relationships, and our inability to form or maintain these relationships or inability to form as many of these relationships as our competitors may have an adverse effect on our business. Any such existing or future investment could involve significant challenges and risks, including that we may not realize a satisfactory return on our investment or that they may not generate the expected revenue synergies.synergies, and they may distract management focus from our operations or other strategic options. We may also be subject to consequences from any illegal conduct of joint business partners as well as to any political or regulatory change that negatively impacts or prohibits our arrangements with any such business partners. In addition,, as a result of the global spread of COVID-19 and subsequent economic recovery, the industry has experienced a precipitous declinesignificant volatility in demand for air travel both internationally and domestically, which is expected to continue into the foreseeable future and could materially disrupt our partners' abilities to provide air service, the timely execution of our strategic operating plans, including the finalization, approval and implementation of new strategic relationships or the maintenance or expansion of existing relationships. relationships. If any carriers with which we partner or in which we hold an equity stake were to cease trading or be declared insolvent, we could lose the value of any such investment or experience significant operational disruption. These events could have a material adverse effect on our business, results of operations and financial condition.
We may also from time to time pursue commercial relationships with companies outside the airline industry, which relationships may include equity investments or other financial commitments. Any such relationship or related investment could involve unique risks, particularly where these relationships involve new industry participants, emerging technologies or industries with which we are unfamiliar.
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 impact on consumer demand, our operating results and liquidity.
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 and thus is a significant factor in the price of airline tickets. Market prices for aircraft fuel have fluctuated substantially over the past several years and prices continue to be highly volatile.volatile, with market spot prices ranging from a low of approximately $0.37 per gallon to a high of approximately $4.40 per gallon during the period from January 1, 2019 to June 30, 2022. In particular, fuel prices rose substantially in 2021, and significant price increases have continued in 2022.
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Because of the amount of fuel needed to operate our business, even a relatively small increase or decrease in the price of fuel can have a material effect on our operating results and liquidity. Due to the competitive nature of the airline industry and unpredictability of the market for air travel, we can offer no assurance that we may be able to increase our fares, impose fuel surcharges or otherwise increase revenues or decrease other operating costs sufficiently to offset fuel price increases. Similarly, we cannot predict actions that may be taken by our competitors in response to changes in fuel prices.
Although we are currently able to obtain adequate supplies of aircraft fuel, weWe cannot predict the future availability, price volatility or cost of aircraft fuel. Natural disasters (including hurricanes or similar events in the U.S. Southeast and on the Gulf Coast where a significant portion of domestic refining capacity is located), political disruptions or wars involving oil-producing countries, economic sanctions imposed against oil-producing countries or specific industry participants, changes in fuel-related governmental policy, the strength of the U.S. dollar against foreign currencies, changes in the cost to transport or store petroleum products and any related staffing or transportation equipment shortages, changes in access to petroleum product pipelines and terminals, speculation in the energy futures markets, changes in aircraft fuel production capacity, environmental concerns and other unpredictable events, may result in fuel supply shortages, distribution challenges, additional fuel price volatility and cost increases in the future. For instance, effective January 1, 2020, rules adopted by the International Maritime Organization restrict the sulfur content allowable in marine fuels from 3.5% to 0.5%, which is expected to cause increased demand by maritime shipping companies for low-sulfur fuel and potentially lead to increased costs of aircraft fuel. Any of these factors or events could cause a disruption in or increased demands on oil production, refinery operations, pipeline capacity or terminal access and possibly result in significant increases in the price of aircraft fuel and diminished availability of aircraft fuel supply.
Our aviation fuel purchase contracts generally do not provide meaningful price protection against increases in fuel costs. Our current policy is not to enter into transactions to hedge our fuel consumption, although we review this 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. Accordingly, as of June 30, 2021,2022, 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. See also the discussion in Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk – “Aircraft Fuel.”
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Our business is subject to extensive government regulation, which may result in increases in our costs, disruptions to our operations, limits on our operating flexibility, reductions in the demand for air travel, and competitive disadvantages.
Airlines are subject to extensive domestic and international regulatory requirements. In the last several years, Congress and state and local governments have passed laws and regulatory initiatives, and the DOT, the FAA,Federal Aviation Administration (FAA), the Transportation Security Administration the Department of Homeland Security and several of their respective international counterparts have issued regulations and a number of other directives, that affect the airline industry. These requirements impose substantial costs on us and restrict the ways we may conduct our business.
For example, the FAA from time to time issues directives and other regulations relating to the maintenance and operation of aircraft that require significant expenditures or operational restrictions. These requirements can be issued with little or no notice, or can otherwise impact our ability to efficiently or fully utilize our aircraft, and in some instances have resulted in the temporary and prolonged grounding of aircraft types altogether (including, for example, the March 2019 grounding of all Boeing 737 MAX Family aircraft, which remained in place for over a year and was not lifted in the United States until November 2020), or otherwise caused substantial disruption and resulted in material costs to us and lost revenues. The recent telecom industry roll-out of 5G technology, and concerns regarding its possible interference with aircraft navigation systems, also resulted in regulatory uncertainty and the potential for operational impacts, including possible suspension of service to certain airports or the operation of certain aircraft. See "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." The FAA also exercises comprehensive regulatory authority over nearly all technical aspects of our operations. Our failure to comply with such requirements has in the past and may in the future result in fines and other enforcement actions by the FAA or other regulators. We anticipate that the FAA will soon issue a final rule implementing flight attendant duty and rest periods, which will impact our scheduling flexibility. In the future, any new regulatory requirements, particularly requirements that limit our ability to operate or price our products, could have a material adverse effect on us and the industry. In 2021, the FAA is expected to issue a number
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DOT consumer rules, and rules promulgated by certain analogous agencies in other countries we serve, dictate procedures for customer handling during long onboard delays, further regulate airline interactions with passengers, including passengers with disabilities, through the ticketing process, at the airport, and onboard the aircraft, and require disclosures concerning airline fares and ancillary fees such as baggage fees. Other DOT rules apply to post-ticket purchase price increases and an expansion of tarmac delay regulations to international airlines. In 2021,2022, the DOT is expected to propose or implement a number of new regulations that will impact us, including disability rules for accessible lavatories and wheelchair assistance, refund requirements, display of ancillary fees during initial flights search, and refunds for checked bag fees in the event of certain delays in delivery.
The Aviation and Transportation Security Act mandates the federalization of certain airport security procedures and imposes additional security requirements on airports and airlines, most of which are funded by a per-ticket tax on passengers and a tax on airlines. Present and potential future security requirements can have the effect of imposing costs and inconvenience on travelers, potentially reducing the demand for air travel.
Similarly, there are a number of legislative and regulatory initiatives and reforms at the state and local levels. These initiatives include increasingly stringent laws to protect the environment, wage/hour requirements, mandatory paid sick or family leave, and health carehealthcare mandates. These laws could affect our relationship with our workforce and the vendors that serve our airlines and cause our expenses to increase without an ability to pass through these costs. In recent years, the airline industry has experienced an increase in litigation over the application of state and local employment laws, particularly in California. Application of these laws may result in operational disruption, increased litigation risk and impact our negotiated labor agreements. For example, we are currently involved in legal proceedings brought by flight attendants and certain other work groups in California concerning alleged violations of the state's labor code including, among other things, violations of certain meal and rest break laws, and an adverse determination in any of these cases could adversely impact our operational flexibility and result in the imposition of damages and fines, which could potentially be significant. Additionally, in September 2021, the Biden Administration issued an executive order mandating a COVID-19 vaccination requirement for federal contractors.Due to a number of our agreements, American is classified as a government contractor. Consistent with this executive order and guidance from the Safer Federal Workforce Task Force responsible for implementing the order, we announced in that the federal vaccine mandate would require all of American’s U.S.-based team members and certain international crew members to be vaccinated or be exempt due to an accommodation for a medical disability or sincerely held religious belief. Lawsuits have been filed in multiple jurisdictions challenging the order, and the U.S. District Court for the Southern District of Georgia in one of these cases issued a nationwide stay of enforcement of the executive order.The cases are currently before several U.S. Courts of Appeal and may ultimately be decided by the U.S. Supreme Court. Given the uncertainty of its viability in the courts, the timing of implementation and availability of accommodations, we cannot predict the impact of this federal vaccination requirement on our business. Moreover, we may be subject to state and local vaccine mandates and other COVID-19-related requirements governing airports where we operate. While OSHA has withdrawn its overarching COVID-19 Emergency Temporary Standard, the U.S. Supreme Court has acknowledged that OSHA may potentially issue a revised COVID-19 standard targeted to high-risk occupations or workplaces, which could impact our regional carriers and other service providers.
The results of our operations, demand for air travel, and the manner in which we conduct business each may be affected by changes in law and future actions taken by governmental agencies, including:
•changes in law that affect the services that can be offered by airlines in particular markets and at particular airports, or the types of fares offered or fees that can be charged to passengers;
•the granting and timing of certain governmental approvals (including antitrust or foreign government approvals) needed for codesharing alliances, joint businesses and other arrangements with other airlines, and the imposition of regulatory investigations or commencement of litigation related to any of the foregoing (including our arrangements with JetBlue);
•restrictions on competitive practices (for example, court orders, or agency regulations or orders, that would curtail an airline’s ability to respond to a competitor);
•the adoption of new passenger security standards or regulations that impact customer service standards;
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•restrictions on airport operations, such as restrictions on the use of slots at airports or the auction or reallocation of slot rights currently held by us;
•the adoption of more restrictive locally-imposed noise restrictions; and
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•restrictions on travel or special guidelines regarding aircraft occupancy or hygiene related to COVID-19, including the imposition of preflight testing regimes or vaccination confirmation requirements which have to date and may in the future have the effect of reducing demand for air travel in the markets where such requirements are imposed.
Each additional regulation or other form of regulatory oversight increases costs and adds greater complexity to airline operations and, in some cases, may reduce the demand for air travel. There can be no assurance that the increased costs or greater complexity associated with our compliance with new rules, anticipated rules or other forms of regulatory oversight will not have a material adverse effect on us.
Any significant reduction in air traffic capacity at and in the airspace serving key airports in the U.S. or overseas could have a material adverse effect on our business, results of operations and financial condition. In addition, the ATC system is not successfully modernizing to meet the growing demand for U.S. air travel. Air traffic controllers rely on outdated procedures and technologies that routinely compel airlines, including ourselves, to fly inefficient routes or take significant delays on the ground. The ATC system’s inability to manage existing travel demand has led government agencies to implement short-term capacity constraints during peak travel periods or adverse weather conditions in certain markets, resulting in delays and disruptions of air traffic. The outdated technologies also cause the ATC system to be less resilient in the event of a failure. For example, an automation failure, and an evacuation, in 2015 and 2017, respectively, at the Washington Air Route Control Centerpast system disruptions have resulted in large-scale flight cancellations and delays of hundreds of flights traversing the greater Washington, D.C. airspace.delays.
In the early 2000s, the FAA embarked on a path to modernize the national airspace system, including migration from the current radar-based ATC system to a GPS-based system. This modernization of the ATC system, generally referred to as “NextGen,” has been plagued by delays and cost overruns, and it remains uncertain when the full array of benefits expected from this modernization will be available to the public and the airlines, including ourselves. Failure to update the ATC system and the substantial costs that may be imposed on airlines, including ourselves, to fund a modernized ATC system may have a material adverse effect on our business.
Further, our business has been adversely impacted when government agencies have ceased to operate as expected, including due to partial shut-downs, sequestrations or similar events and the COVID-19 pandemic. These events have resulted in, among other things, reduced demand for air travel, an actual or perceived reduction in air traffic control and security screening resources and related travel delays, as well as disruption in the ability of the FAA to grant required regulatory approvals, such as those that are involved when a new aircraft is first placed into service.
Our operating authority in international markets is subject to aviation agreements between the U.S. and the respective countries or governmental authorities, such as the EU, and in some cases, fares and schedules require the approval of the DOT and/or the relevant foreign governments. Moreover, alliances with international carriers may be subject to the jurisdiction and regulations of various foreign agencies. The U.S. government has negotiated “open skies” agreements with 130 trading partners, which agreements allow unrestricted route authority access between the U.S. and the foreign markets. While the U.S. has worked to increase the number of countries with which open skies agreements are in effect, a number of markets important to us, including China, do not have open skies agreements. For example, the open skies air services agreement between the U.S. and the EU, which took effect in March 2008, provides airlines from the U.S. and EU member states open access to each other’s markets, with freedom of pricing and unlimited rights to fly from the U.S. to any airport in the EU. As a result of the agreement and a subsequent open skies agreement involving the U.S. and the United Kingdom, which was agreed in anticipation of Brexit, we face increased competition in these markets, including LHR. Bilateral and multilateral agreements among the U.S. and various foreign governments of countries we serve but which are not covered by an open skies treaty are subject to periodic renegotiation. We currently operate a number of international routes under government arrangements that limit the number of airlines permitted to operate on the route, the capacity of the airlines providing services on the route, or the number of airlines allowed access to particular airports. If an open skies policy were to be adopted for any of these markets, it could have a material adverse impact on us and could result in the impairment of material amounts of our related tangible and intangible assets. In addition, competition from foreign airlines, revenue-sharing joint ventures, joint business agreements, and other alliance arrangements by and among other airlines could impair the value of our business and assets on the open skies routes.
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Brexit occurred on January 31, 2020 underOn May 1, 2021 the terms of the agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the EU and the European Atomic Energy Community (the Withdrawal Agreement). The Withdrawal Agreement provided for a transition period that ended on December 31, 2020. Prior to the end of the transition period, on December 24, 2020, EU and United Kingdom negotiators agreed toentered into a new trade and cooperation agreement which was signed on December 30, 2020 (the EU-UK Trade and Cooperation Agreement). The EU-UK Trade and Cooperation Agreement was provisionally applied as to govern certain aspects of January 1, 2021 and entered into force on May 1, 2021.their relationship following Brexit. We face risks associated with Brexit, notably given the extent of our passenger and cargo traffic and that of our joint business partners that flows through LHR in the United Kingdom. The EU-UK Trade and Cooperation Agreement includes provisions in relation to commercial air service that we expect to be sufficient to sustain our current services under the transatlantic joint business. However, the scope of traffic rights under the EU-UK Trade and Cooperation Agreement is less extensive than before Brexit and therefore the full impact of the EU-UK Trade and Cooperation Agreement is uncertain. As a result, the
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continuation of our current services, and those of our partners could be disrupted. This could materially adversely affect our business, results of operations and financial condition. More generally, changes in U.S. or foreign government aviation policies could result in the alteration or termination of such agreements, diminish the value of route authorities, slots or other assets located abroad, or otherwise adversely affect our international operations.
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.
We operate a global business with significant operations outside of the U.S. Our current international activities and prospects have been, and in the future could be, adversely affected by government policies, reversals or delays in the opening of foreign markets, increased competition in international markets, the performance of our alliance, joint business and codeshare partners in a given market, exchange controls or other restrictions on repatriation of funds, currency and political risks (including changes in exchange rates and currency devaluations), environmental regulation, increases in taxes and fees and changes in international government regulation of our operations, including the inability to obtain or retain needed route authorities and/or slots. In particular, the outbreak and global spread of COVID-19 have severely impacted the demand for international travel and have resulted in the imposition of significant governmental restrictions on commercial air service to or from certain regions. We have responded by temporarily suspending a significant portion of our long-haul international flights through the summer of 2021 and delaying the introduction of certain new long-haul international routes. We can provide no assurance as to when such restrictions will be eased or lifted, when demand for international travel will return to pre-COVID-19 pandemic levels, if at all, or whether certain international destinations we previously served will be economical in the future.
More generally, our industry may be affected by any deterioration in global trade relations, including shifts in the trade policies of individual nations. For example, much of the demand for international air travel is the result of business travel in support of global trade. Should protectionist governmental policies, such as increased tariff or other trade barriers, travel limitations and other regulatory actions, have the effect of reducing global commercial activity, the result could be a material decrease in the demand for international air travel. Additionally, certain of the products and services that we purchase, including certain of our aircraft and related parts, are sourced from suppliers located in foreign countries,outside the U.S., and the imposition of new tariffs, or any increase in existing tariffs, by the U.S. government in respect of the importation of such products could materially increase the amounts we pay for them. In particular, onin October 2, 2019, the Office of the U.S. Trade Representative (USTR), as part of an ongoing dispute with the EU before the World Trade Organization (WTO) concerning, among other things, aircraft subsidies, was authorized by an arbitration tribunal of the WTO to impose up to $7.5 billion per year in import tariffs on certain goods originating from the EU. In October 2019, theThe USTR subsequently imposed tariffs of up to 15% on certain imports from the EU, including on certain Airbus aircraft that we previously contracted to purchase; these aircraft were initially subject to an ad valorem duty of 10% that was subsequently increased to 15% in March 2020. In January 2021, the USTR expanded the scope of the 15% tariff to apply topurchase and certain imported aircraft parts in addition to imported aircraft.parts. In June 2021, the United States, the EU and the EUUK announced an agreementagreements to suspend the imposition of these tariffs. Nonetheless,tariffs, contingent upon each party remaining satisfied that subsidies do not arise. However, if and to the extent any of these tariffs are in fact imposedreimposed on us without any available means for us to mitigate or pass on the burden of these tariffs to Airbus, the effective cost of new Airbus aircraft required to implement our fleet plan would increase.
Brexit occurred on January 31, 2020 under the terms of the Withdrawal Agreement. The Withdrawal Agreement provided for a transition period that ended on December 31, 2020. Prior to the end of the transition period, on December 24, 2020, EU and United Kingdom negotiators agreed to the EU-UK Trade and Cooperation Agreement, which was signed on December 30, 2020. The EU-UK Trade and Cooperation Agreement was provisionally applied as of January 1, 2021 and entered into force on May 1, 2021. We face risks associated with Brexit, notably given the extent of our passenger
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and cargo traffic and that of our joint business partners that flows through LHR in the United Kingdom. The EU-UK Trade and Cooperation Agreement includes provisions in relation to commercial air service that we expect to be sufficient to sustain our current services under the transatlantic joint business. However, the scope of traffic rights under the EU-UK Trade and Cooperation Agreement is less extensive than before Brexit and therefore the full impact of the EU-UK Trade and Cooperation Agreement is uncertain. As a result, the continuation of our current services, and those of our partners could be disrupted. This could materially adversely affect our business, results of operations and financial condition.
Moreover, Brexit could adversely affect European or worldwide economic or market conditions and could contribute to further instability in global financial markets. In addition, Brexit has created uncertainty as to the future trade relationship between the EU and the United Kingdom, including air traffic services. LHR is presently a very important element of our international network, however it may become less desirable as a destination or as a hub location after Brexit when compared to other airports in Europe. This could materially adversely affect our business, results of operations and financial condition.
Brexit couldhas also leadled to legal and regulatory uncertainty such as the identity of the relevant regulators, new regulatory action and/or potentially divergent treaties, laws and regulations as the United Kingdom determines which EU treaties, laws and regulations to replace or replicate, including those governing 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. For example, in October 2018, in anticipation of Brexit and the expiry of the EC commitments in July 2020, the CMA opened an investigation into the transatlantic joint business. We continue to fully cooperate with the CMA and, in September 2020, the CMA adopted interim measures that effectively extend the EC
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commitments for an additional three years until March 2024 in light of the uncertainty created byand other impacts resulting from the COVID-19 pandemic. In April 2022, the CMA adopted a second interim measures decision that effectively extends the EC commitments for a further two years until March 2026 in light of the uncertainty and other impacts resulting from the COVID-19 pandemic. The CMA plans to complete its investigation before the interim measures expire.are scheduled to expire in March 2026. The impact on our business of any treaties, laws and regulations that replace the existing EU counterparts, or other governmental or regulatory actions taken by the United Kingdom or the EU in connection with or subsequent to Brexit, cannot be predicted, including whether or not regulators will continue to approve or impose material conditions on our business activities. Any of these effects, and others we cannot anticipate, could materially adversely affect our business, results of operations and financial condition.
Additionally, fluctuations in foreign currencies, including devaluations, exchange controls and other restrictions on the repatriation of funds, have significantly affected and may continue to significantly affect our operating performance, liquidity and the value of any cash held outside the U.S. in local currency. Such 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.
We may be adversely affected by conflicts overseas or terrorist attacks; the travel industry continues to face ongoing security concerns.
Acts of terrorism or fear of such attacks, including elevated national threat warnings, wars or other military conflicts, may depress air travel, particularly on international routes, and cause declines in revenues and increases in costs. The attacks of September 11, 2001 and continuing terrorist threats, attacks and attempted attacks materially impacted and continue to impact air travel. Increased security procedures introduced at airports since the attacks of September 11, 2001 and any other such measures that may be introduced in the future generate higher operating costs for airlines. The Aviation and Transportation Security Act mandated improved flight deck security, deployment of federal air marshals on board flights, improved airport perimeter access security, airline crew security training, enhanced security screening of passengers, baggage, cargo, mail, employees and vendors, enhanced training and qualifications of security screening personnel, additional provision of passenger data to the U.S. Customs and Border Protection Agency and enhanced background checks. A concurrent increase in airport security charges and procedures, such as restrictions on carry-on baggage, has also had and may continue to have a disproportionate impact on short-haul travel, which constitutes a significant portion of our flying and revenue. Implementation of and compliance with increasingly-complexincreasingly complex security and customs requirements will continue to result in increased costs for us and our passengers, and have caused and likely will continue to cause periodic service disruptions and delays. We have at times found it necessary or desirable to make significant expenditures to comply with security-related requirements while seeking to reduce their impact on our customers, such as expenditures for automated security screening lines at airports. As a result of competitive pressure, and the need to improve security screening throughput to support the pace of our operations, it is unlikely that we will be able to capture all security-related costs through increased fares. In addition, we cannot forecast what new security requirements may be imposed in the future, or their impact on our business.
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We are subject to risks associated with climate change, including increased regulation of our CO2 emissions, changing consumer preferences and the potential increased impacts of severe weather events on our operations and infrastructure.
Efforts to transition to a low-carbon future have increased the focus by global, regional and national regulators on climate change and greenhouse gas (GHG)emissions, including carbon dioxide (CO2) emissions. In particular, the International Civil Aviation Organization (ICAO) has adopted rules, including those pertaining to the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which will require American to address the growth in CO2 emissions of a significant majority of our international flights. For more information on CORSIA, see “Aircraft Emissions and Climate Change Requirements” under Part I, Item 1. Business – Domestic and Global Regulatory Landscape – Environmental Matters in our 20202021 Form 10-K.
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At this time, the costs of complying with our future obligations under CORSIA are uncertain, primarily because it is difficult to estimate the return of demand for international air travel during and in the recovery from the COVID-19 pandemic. There is also significant uncertainty with respect to the future supply and price of carbon offset credits and sustainable or lower carbon aircraft fuels that could allow us to reduce our emissions of CO2. In addition, we will not directly control our CORSIA compliance costs through 2029 because those obligations are based on the growth in emissions of the global aviation sector and begin to incorporate a factor for individual airline operator emissions growth beginning in 2030. Due to the competitive nature of the airline industry and unpredictability of the market for air travel, we can offer no assurance that we may be able to increase our fares, impose surcharges or otherwise increase revenues or decrease other operating costs sufficiently to offset our costs of meeting obligations under CORSIA.
In the event that CORSIA does not come into force as expected, American and other airlines could become subject to an unpredictable and inconsistent array of national or regional emissions restrictions, creating a patchwork of complex regulatory requirements that could affect global competitors differently without offering meaningful aviation environmental improvements. For example, in June 2022, the European Parliament and European Council adopted their respective positions on a set of measures to reform the EU Emissions Trading System (ETS) as part of the EU's "Fit for 55" program, an initiative published by the EC in July 2021. To the extent that the EC's initial proposals are adopted, these measures would expand the scope of the EU ETS to include emissions from all flights departing from an airport located in the European Economic Area (EEA); currently the EU ETS applies only to emissions from intra-EEA flights. These proposals, if enacted in the form proposed by the EC, may lead to increased expense related to the emissions of our flights departing from EEA airports. Concerns over climate change are likely to result in continued attempts by municipal, state, regional, and federal agencies to adopt requirements or change business environments related to aviation that, if successful, may result in increased costs to the airline industry and us. In addition, several countries and U.S. states have adopted or are considering adopting programs, including new taxes, to regulate domestic GHG emissions. Finally, certain airports have adopted, and others could in the future adopt, GHG emission or climate-related goals that could impact our operations or require us to make changes or investments in our infrastructure.
In January 2021, the U.S. Environmental Protection Agency (EPA) adopted GHG emission standards for new aircraft engines, designed to implement the ICAO standard, which are aligned with the 2017 ICAO airplaneaircraft engine GHG emission standards. Like the ICAO standards, the final EPA standards for new aircraft engines would not apply retroactively to engines already on in-service aircraft. TheThese final standards have been challenged by several states and environmental groups, and the Biden administrationAdministration has issued an executive order requiring a review of these final standards. On November 15, 2021, the EPA announced that it will not rewrite the existing aircraft engine GHG emissions standards along with others issuedbut will press for ambitious new aircraft GHG emission standards at international negotiations organized by the prior administration. On February 17, 2021, the United States CourtICAO in late 2022. The development of Appeals for the District of Columbia Circuit ordered to hold the challenge by the states and environmental groups in abeyance pending EPA's review. The outcome of the legal challenge and administrative reviewnew aircraft GHG emissions standards cannot be predicted at this time.
The EC has proposed the creation of a sustainable aviation fuel (SAF) blending mandate for aviation fuel suppliers set at 2% beginning in 2025 and rising to 63% by 2050, among other requirements. Individual EU member states have been developing their own requirements including, for example, a 1% SAF mandate in France that came into force on January 1, 2022. Whether these regulations will be finalized and the potential effects on our business are uncertain at this time.
All such climate change-related regulatory activity and developments may adversely affect our business and financial results by requiring us to reduce our emissions before cost-effective emissions reduction technologies are available, for example through requirements to make capital investments to purchase specific types of equipment or technologies, purchase carbon offset credits, or otherwise incur additional costs related to our emissions. Such activity may also impact us indirectly by increasing our operating costs, including fuel costs.
Growing recognition among consumers of the dangers of climate change may mean some customers choose to fly less frequently or fly on an airline they perceive as operating in a manner that is more sustainable to the climate. Business customers may choose to use alternatives to travel, such as virtual meetings and workspaces. Greater development of high-speed rail in markets now served by short-haul flights could provide passengers with lower-carbon alternatives to flying with us. Our collateral to secure loans, in the form of aircraft, spare parts and airport slots, could lose value as customer demand shifts and economies move to low-carbon alternatives, which may increase our financing cost.
Finally, the potential acute and chronic physical effects of climate change, such as increased frequency and severity of storms, floods, fires, sea-level rise, excessive heat, longer-term changes in weather patterns and other climate-related events, could affect our operations, infrastructure and financial results. Operational impacts, such as the canceling of flights, could result in loss of revenue. We could incur significant costs to improve the climate resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We are not able to predict accurately the materiality of any potential losses or costs associated with the physical effects of climate change.
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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 human health and the environment and noise reduction, including those relating to emissions to the air, discharges to land and surface and subsurface waters, safe drinking water, and the management of hazardous substances, oils and waste materials. This universe of substances is evolving to encompass many substances not previously regulated. Compliance with environmental laws and regulations can require significant expenditures, and violations can lead to significant fines and penalties, andas well as civil liability.
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 retroactive, strict, joint and several, meaning that we could be liable for the costs of cleaning up environmental contamination regardless of when it occurred, 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.
Governmental authorities in the U.S. and abroad are increasingly focused on potential contamination resulting from the use of so-called “forever chemicals,” most notably per- and polyfluoroalkyl, substances (PFAS). Products containing PFAS have been used in manufacturing, industrial, and consumer applications over many decades, including those related to aviation. We may incur costs in connection with obligations to transition away from the usage of PFAS-containing products, to dispose of PFAS-containing waste or to remediate any PFAS contamination.
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 certain cases 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, 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. The FAA is also currently evaluating possible changes to how aircraft noise is measured, and the resulting standards that are based on them. Ultimately, these changes could have an impact on, or limit, our operations, or make it more difficult for the FAA to modernize and increase the efficiency of airspace and airports we utilize.
A higher than normal number of pilot retirements, more stringent duty time regulations, increased flight hour 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.
Large numbers of pilots in the industry accepted early retirement during the COVID-19 pandemic or are approaching the FAA’s mandatory retirement age of 65. 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. Commencing in 2013, the 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 time and cost commitment required to 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. Further, in the course of the domestic airline industry rapidly restoring capacity during the recovery from the COVID-19 pandemic, the significant training requirements to return large numbers of pilots to active flying have been time consuming and disruptive.
These and other factors have contributed to a significant shortage of qualified, entry-level pilots, shortages of experienced pilots trained and ready for duty, 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 and other 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 and significant proposed increases in mainline pilot compensation. We believe that this industry-wide pilot shortage is becoming an
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increasing problem for airlines in the United States. Our regional airline subsidiaries and other 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 compensation expense and 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.
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. For example, as of the end of 20202021, 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 and the recent transactions involving Airbus and Bombardier and BombardierMitsubishi and Mitsubishi.Bombardier. Due 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, 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 certify or 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 a year and was not lifted in the United States until November 2020, and more recently in April 2021, we removed from operations, pending ongoing inspection and investigation, a subset of our Boeing 737 MAX Family aircraft after receipt of notice from Boeing of a potential electrical power system issue relating to those aircraft. More recently, Boeing has been unable to deliver 787 aircraft that we have on order due to regulatory concerns raised by the FAA, as a result of which we have been forced, on more than one occasion, to significantly reduce our previously scheduled long-haul flying and suspend or delay our service to certain long-haul markets. The limited number of these suppliers may 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 perform as expected, may adversely impact our business, results of operations and financial condition.
The success of our business depends on, among other things, effectively managing the number and types of aircraft we operate. If, for any reason, we are unable to accept or secure deliveries of new aircraft on contractually scheduled delivery dates, this could 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
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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. More recently, Boeing has been unable to deliver 787 aircraft that we have on order due to regulatory concerns raised by the FAA, as a result of which we have been forced, on more than one occasion, to significantly reduce our previously scheduled long-haul flying and suspend or delay our service to certain long-haul markets. Repeated or prolonged delays in the production, delivery or induction of our new aircraft could require us to scale back our growth plans, reduce frequencies or forgo service entirely to certain markets, which could adversely affect our business, financial condition and results of operations.
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
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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 aircraft employ a number of sophisticated radio and satellite-based navigation and safety technologies, and we are subject to risks associated with the introduction or expansion of technologies that could interfere with the safe operation of these flight systems. For example, telecommunications companies are expanding and increasing the commercial and consumer applications of 5G cellular communication networks, and regulators, manufacturers and operators have expressed concerns that certain 5G applications could interfere with certain flight systems. On December 23, 2021, the FAA issued a special airworthiness information bulletin (SAIB), in which it indicated that further testing and assessment is needed regarding the effects of 5G on certain aircraft equipped with radar altimeters, which measure the aircraft’s altitude and guide pilots during landings. If it were determined that 5G signals posed an interference risk to these altimeters or other systems, the FAA indicated in its SAIB that it could restrict flight operations in areas where such interference could occur. On January 18, 2022, major U.S. telecommunications companies agreed to delay the implementation of 5G near airports until July 5, 2022 while working with the FAA to develop long-term mitigations to support safe aviation operations. While the telecommunications industry agreed to delay the activation of 5G transmitters in close proximity to airports, it did move forward with the activation of a vast majority of 5G transmitters away from airports, and we expect that companies will continue expanding their 5G networks over the next several years. As a result, the FAA has taken precautionary steps to mitigate any remaining interference risks, which have resulted in minimal impacts to our operations, particularly in low-visibility conditions at certain airports and with our regional carriers. While we are working closely with the FAA and other aviation industry participants to develop a long-term strategy that permits the full implementation of the 5G spectrum without disruption to safe aviation operations, any new restrictions imposed to mitigate interference risks would require us to adjust our operating procedures and could impact our ability to operate certain aircraft or to serve certain markets. On June 17, 2022, the FAA announced that major U.S. telecommunications companies have agreed to continue to keep 5G mitigations beyond July 5, 2022, but simultaneously announced their expectation that the U.S. mainline commercial fleet to have radio altimeter retrofits or other enhancements in place by July 2023. We have signaled to the FAA our commitment to update our aircraft as soon as possible.
Our technologies and automated systems cannot beare not 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. SubstantialWhen service interruptions occur as a result of any of the aforementioned events, we address them in accordance with applicable laws, rules and regulations. However, substantial or sustained system failures could cause service delays or failures and result in our customers purchasing tickets from other airlines. We cannot assure 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.
Evolving data security and privacy requirements could increase our costs, and any significant data security or privacy incident could disrupt our operations, harm our reputation, expose us to legal risks and otherwise materially adversely affect our business, results of operations and financial condition.
Our business requires the secure processing and storage of sensitivepersonal information relating to our customers, employees, business partners and others. However, like any global enterprise operating in today’s digital business environment, we are subject to threats to the security of our networkshave experienced cybersecurity incidents and data including threats potentially involving criminal hackers, hacktivists, state-sponsored actors, corporate espionage, employee malfeasance, and human or technological error. These threats continuebreaches. The threat of cybersecurity incidents continues to increase as the frequency, intensity and sophistication of attempted attacks and intrusions increase around the world. We and our business partners have been the target of cybersecurity attacks and data breaches in the past and expect that we will continue to be in the future.
Furthermore, in response We react and respond to these threats therecybersecurity attacks in accordance with the applicable legal requirements, our own approved cybersecurity protocols, as well as our commercial partners’ standards, but we cannot ensure that our responses will be sufficient to prevent or mitigate the potential adverse impacts of these incidents, which may be material.
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 data privacy and cybersecurity standards as well as requirements for notifying regulators and affected individuals in the
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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.
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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 involving us or one of our AAdvantage partners or other business partners have in the past and may in the future 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 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. For example, in March 2021, a sub-set of AAdvantage members as well as members of several other major airline loyalty programs received a notification about a security incident involving a limited amount of loyalty data held by a service provider. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of time. The constantly changing nature of the threats means that we maycannot and have not bebeen able to prevent all data security breaches or misuse of data. Similarly, we depend on the ability of our key commercial partners, including AAdvantage partners, other business partners, 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, we use third-party service providers to help us deliver services to customers. These service providers may store personal information, credit card information and/or other confidential information. Such information may be the target of unauthorized access or subject to security breaches as a result of third-party action, employee error, malfeasance or otherwise. Any of these could (a) result in the loss of information, litigation, indemnity obligations, damage to our reputation and other liability, or (b) have a material adverse effect on our business, financial condition and results of operations.
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 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, including that of the AAdvantage Program,program, harm our reputation and adversely impact our relationship with our customers, employees and stockholders. The increased regulatory focus on data privacy practices apart from how personal data is secured, such as how personal data is collected, used for marketing purposes, and shared with third parties, also increases the risk on our business in the event of a significant violation. Accordingly, failure to appropriately address thesedata privacy and cybersecurity 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
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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. In addition, our agreements with GDSs and other distribution channels are subject to periodic renegotiation, and our efforts to control our distribution costs depend on our ability to renew or continue these agreements on favorable terms. We cannot assure that we will be able to renew our distribution agreements on commercially acceptable terms, and any failure to do so could materially increase our costs, thereby adversely impacting our business, financial condition and results of operations.
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.
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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 Dallas/Fort Worth International Airport, JFK, Chicago O'HareO’Hare International Airport (ORD), Los Angeles International Airport (LAX), LaGuardia Airport (LGA)LAX and Ronald Reagan Washington National Airport (DCA).LGA. 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, 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 haveimpose 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: John F. Kennedy International AirportJFK 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 wedepending on the applicable authority these exemptions can vary in the way they are structured and applied. We cannot predict whether such exemptions will continue to be granted,
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whether they will be granted on the same or similar terms, or whether we ultimately could be at risk of losing valuable operating rights. If we are forced to surrender slots, we may be unable to provide our desired level of service to or from certain destinations in the future. 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 gates 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.
Interruptions or disruptions in service at one of our key facilities could have a 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 air traffic control delays, weather conditions, natural disasters, growth constraints, performance by third-party service providers
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(such (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. We have limited control, particularly in the short term, over the operation, quality or maintenance of many of the services on which our operations depend and over whether vendors of such services will improve or continue to provide services that are essential to our business.
A higher than normal number of pilot retirements, more stringent duty time regulations, increased flight hour 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. 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. Commencing in 2013, the 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 time and cost commitment required to 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. The occurrence or persistence of certain events, including armed conflicts, could also impact our ability to obtain commercial insurance coverage against certain risks, or to obtain such insurance on commercially acceptable terms. If we are unable to maintain adequate insurance coverage or to secure suitable alternatives outside the commercial insurance markets, 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.
The airline industry is heavily taxed.
The airline industry is subject to extensive government fees and taxation that negatively impact our revenue and profitability. The U.S. airline industry is one of the most heavily taxed of all industries. These fees and taxes have grown significantly in the past decade for domestic flights, and various U.S. fees and taxes also are assessed on international flights. For example, as permitted by federal legislation, most major U.S. airports impose a per-passenger facility charge on us. In addition, the 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 obligated to collect a federal excise tax, commonly referred to as the “ticket tax,” on domestic and international air transportation. We collect the excise tax, along with certain other U.S. and foreign taxes and user fees on air transportation (such as passenger security fees), and pass along the 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 various taxes,
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fees, and charges imposed on airlines and their passengers, including the passenger facility charge, and we may not be
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able to recover all of these charges from our customers. Increases in such taxes, fees and charges could negatively impact our business, results of operations and financial condition.
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 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:
•the effects of the COVID-19 pandemic on our business or the U.S. and global economies;
•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;
•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 future determination to cease repurchasing stock or paying dividends (which we have suspended for an indefinite period in accordance with the applicable requirements under the CARES Act, the PSP Extension Law and the ARP);
•new regulatory pronouncements and changes in regulatory guidelines;
•general and industry-specific economic conditions;
•changes in our key personnel;
•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 restricted stock unit awards, stock appreciation rights, or other securities that may be issued from time to time, including warrants we have or will issueissued in connection with our receipt of funds under the CARES Act, the PSP Extension Law and the ARP;
•increases or decreases in reported holdings by insiders or other significant stockholders;
•fluctuations in trading volume; and
•technical factors in the public trading market 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.
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The closing price of our common stock on Nasdaq varied from $9.04 to $30.47 during 2020 and $15.00 to $25.82 during 2021 and $12.16 to $20.22 during 2022 year-to-date through July 16, 2021.15, 2022. 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 facing the challenges imposed by the COVID-19 pandemic, we also believe, based in part on the commentary of market 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, the PSP Extension Law and the ARP. 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.
In connection with the financial assistance provided under PSP1, PSP2 and PSP3, we agreed not to repurchase shares of AAG common stock through September 30, 2022. If we determine to make any 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 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, the ARP 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.
In connection with the financial assistance provided under PSP1, PSP2 and PSP3, we agreed not to pay dividends on AAG common stock through September 30, 2022. 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 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 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 they will do so.
AAG’s Certificate of Incorporation and Bylaws include provisions that limit voting and acquisition and disposition of our equity interests.interests and specify an exclusive forum for certain stockholder disputes.
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 in our 20202021 Form 10-K. 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 to acquire shares of AAG common stock and our other equity interests.
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Our Certificate of Incorporation also specifies that the Court of Chancery of the State of Delaware shall be the exclusive forum for substantially all disputes between us and our stockholders. Because the applicability of the exclusive forum provision is limited to the extent permitted by applicable law, we do not intend for the exclusive forum provision to apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction, and acknowledge that federal courts have concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act of 1933 (Securities Act). We note that there is uncertainty as to whether a court would enforce the provision as it applies to the Securities Act and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. This provision may have the effect of discouraging lawsuits against our directors and officers.
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 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 special meeting unless they hold at least 20% of our outstanding shares and follow the procedures provided for in the amended Bylaws;
•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.
The issuance or sale of shares of our common stock, rights to acquire shares of our common stock, or warrants issued to Treasury under the CARES Act, the PSP Extension Law, the ARP, PSP1, PSP2 and PSP3, 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 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 or PSP3). 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 5. OTHER INFORMATION
We are party to that certain Credit and Guaranty Agreement, dated as of April 29, 2016, among American as the Borrower, AAG as Parent and a Guarantor, certain other subsidiaries of AAG as Guarantors, the lenders party thereto, Barclays Bank PLC, as Administrative Agent and Collateral Agent, and certain other parties thereto (as amended, the April 2016 Credit Agreement). The April 2016 Credit Agreement has been filed as Exhibits 10.25 through 10.30 to our 2020 Form 10-K. Pursuant to the April 2016 Credit Agreement, as of June 30, 2021, we had (a) outstanding term loans in the aggregate principal amount of $950 million which bore interest at a variable rate of interest then equal to 2.10% per annum and with a final maturity of 2023, and (b) revolving credit loans available to us in the aggregate principal amount of $450 million, none of which was drawn or outstanding. On July 22, 2021, we repaid in full at par and terminated the term loan. The revolving credit facility component of the April 2016 Credit Agreement, which has a final maturity of October 2024, remains in place.

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ITEM 6. 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% 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
4.1
4.2
10.1
Payroll Support Program 3Supplemental Agreement No. 23, dated as of April 23, 2021, between American Airlines, Inc. and the United States Department of the Treasury.
10.2
10.3
10.410.2
Supplemental Agreement No. 16,24, dated as of May 21, 2021,June 6, 2022, to Purchase Agreement No. 321903735 dated as of October 15, 2008, by andFebruary 1, 2013, between American Airlines, Inc. and The Boeing Company.*
10.510.3
Supplemental Agreement No. 19,Amendment, dated as of April 8, 2021,June 30, 2022, to Purchase Agreement No. 03735 dated as of February 1, 2013,the Promissory Notes and the Warrants issued by and between American Airlines Group Inc. and The Boeing Company.to the United States Department of the Treasury.*
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
AAG 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
American 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).
101.1Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL (eXtensible Business Reporting Language).
104.1Cover page interactive data file (formatted in Inline XBRL and contained in Exhibit 101.1).
* Certain confidential information containedPortions of this exhibit have been omitted in this agreement has been omittedaccordance with Item 601(b)(10) of Regulation S-K because it (i) is not material and (ii) would be competitively harmful if publicly disclosed.
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SIGNATURES
Pursuant to the requirements 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: July 22, 202121, 2022By: /s/ Derek J. Kerr
 Derek J. Kerr
 Executive Vice President andChair, Chief Financial Officer and
President, American Eagle
 (Duly Authorized Officer and Principal Financial Officer)
Pursuant to the requirements 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, Inc.
Date: July 22, 202121, 2022By: /s/ Derek J. Kerr
 Derek J. Kerr
 Executive Vice President andChair, Chief Financial Officer and
President, American Eagle
 (Duly Authorized Officer and Principal Financial Officer)

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