UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




FORM	~~FORM~~ 10-Q



☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended ~~September 30, 2017~~March 31, 2020



☐	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)



~~Delaware~~		~~75-1825172~~
~~(State or other jurisdiction of incorporation or organization)~~		~~(I.R.S. Employer Identification No.)~~
~~4333 Amon Carter Blvd., Fort Worth, Texas 76155~~		~~(817) 963-1234~~
~~(Address of principal executive offices, including zip code)~~		~~(Registrant’s telephone number, including area code)~~

Delaware

75-1825172

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1 Skyview Drive,

Fort Worth,

Texas

76155

(817)

963-1234

(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)

Delaware

13-1502798

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1 Skyview Drive,

Fort Worth,

Texas

76155

(817)

963-1234

(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:



~~Delaware~~Title of each class		~~13-1502798~~
~~(State or other jurisdiction of incorporation or organization)~~Trading Symbol(s)		~~(I.R.S. Employer Identification No.)~~Name of each exchange on which registered
~~4333 Amon Carter Blvd., Fort Worth, Texas 76155~~Common Stock, $0.01 par value per share		~~(817) 963-1234~~
~~(Address of principal executive offices, including zip code)~~AAL		~~(Registrant’s telephone number, including area code)~~The Nasdaq Global Select Market

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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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 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	☐	Accelerated ~~Filer~~filer	☐	Non-accelerated ~~Filer~~filer	☐	Smaller ~~Reporting Company~~reporting company	☐	Emerging ~~Growth Company~~growth company
American Airlines, Inc.	☐	Large ~~Accelerated Filer~~accelerated filer	☐	Accelerated ~~Filer~~filer	☒	Non-accelerated ~~Filer~~filer	☐	Smaller ~~Reporting Company~~reporting company	☐	Emerging ~~Growth Company~~growth company

If an emerging growth company, indicate by checkmark 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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.



~~American Airlines Group Inc.~~	☒	~~Yes~~	☐	No
~~American Airlines, Inc.~~	☒	~~Yes~~	☐	No

As of ~~October 20, 2017,~~April 24, 2020, there were ~~478,499,073~~422,894,501 shares of American Airlines Group Inc. common stock outstanding.

As of ~~October 20, 2017,~~April 24, 2020, 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 ~~September 30, 2017~~March 31, 2020

Table of Contents



		Page
PART I: FINANCIAL INFORMATION
Item 1A.	Condensed Consolidated Financial Statements of American Airlines Group Inc.	4
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of Stockholders' Equity (Deficit)	8
	Notes to the Condensed Consolidated Financial Statements	89
Item 1B.	Condensed Consolidated Financial Statements of American Airlines, Inc.	2024
	Condensed Consolidated Statements of Operations	2024
	Condensed Consolidated Statements of Comprehensive Income (Loss)	2125
	Condensed Consolidated Balance Sheets	2226
	Condensed Consolidated Statements of Cash Flows	2327
	Condensed Consolidated Statements of Stockholder's Equity	28
	Notes to the Condensed Consolidated Financial Statements	2429
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3543
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6062
Item 4.	Controls and Procedures	6063
PART II: OTHER INFORMATION
Item 1.	Legal Proceedings	6264
Item 1A.	Risk Factors	6365
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7988
Item 6.	Exhibits	7988
SIGNATURES		8290

General

This ~~combined Quarterly Report on Form 10-Q~~report is filed by American Airlines Group Inc. ~~(formerly named AMR Corporation)~~ (AAG) and its wholly-owned subsidiary American Airlines, Inc. (American). References in this ~~Quarterly Report on Form 10-Q~~report to “we,” “us,” “our,” the “Company” and similar terms refer to AAG and its consolidated subsidiaries. “AMR” or “AMR Corporation” refers to the Company during the period of time prior to its emergence from Chapter 11 and its acquisition of US Airways Group, Inc. (US Airways Group) on December 9, 2013 (the Merger). References to “US Airways Group” and “US Airways,” a subsidiary of US Airways Group, represent the entities during the period of time prior to AAG’s internal corporate restructuring on December 30, 2015. References in this ~~Quarterly Report on Form 10-Q~~report to “mainline” refer to the operations of American only and exclude regional operations.

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, 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, ~~and~~ 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. 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. Forward-looking statements speak only as of the date of this ~~Quarterly Report on Form 10-Q~~report or as of the dates indicated in the statements.

PART I: FINANCIAL INFORMATION

This ~~combined Quarterly Report~~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.

ITEM 1A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC.

AMERICAN AIRLINES GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Operating revenues:
Mainline passenger	$	7,628		$	7,419		$	21,981		$	21,192
Regional passenger	1,749			1,731			5,133			5,040
Passenger													$	7,681		$	9,658
Cargo	200			171			568			506			147			218
Other	1,301			1,273			3,924			3,653			687			708
Total operating revenues	10,878			10,594			31,606			30,391			8,515			10,584
Operating expenses:
Aircraft fuel and related taxes	1,570			1,393			4,481			3,736			1,395			1,726
Salaries, wages and benefits	2,995			2,772			8,824			8,094			3,140			3,090
Regional expenses	1,654			1,538			4,848			4,488			1,924			1,763
Maintenance, materials and repairs	487			481			1,474			1,352			629			561
Other rent and landing fees	471			463			1,363			1,342			468			503
Aircraft rent	304			299			892			908			334			327
Selling expenses	400			347			1,094			990			305			370
Depreciation and amortization	433			399			1,255			1,128			560			480
Special items, net	112			289			432			450			1,132			138
Other	1,220			1,182			3,575			3,386			1,177			1,251
Total operating expenses	9,646			9,163			28,238			25,874			11,064			10,209
Operating income	1,232			1,431			3,368			4,517
Operating income (loss)													(2,549		)	375
Nonoperating income (expense):
Interest income	25			16			70			45			21			33
Interest expense, net	(266		)	(250		)	(787		)	(738		)	(257		)	(271		)
Other, net	13			(8		)	8			(25		)
Other income (expense), net													(105		)	108
Total nonoperating expense, net	(228		)	(242		)	(709		)	(718		)	(341		)	(130		)
Income before income taxes	1,004			1,189			2,659			3,799
Income tax provision	380			452			998			1,412
Net income	$	624		$	737		$	1,661		$	2,387
Income (loss) before income taxes													(2,890		)	245
Income tax provision (benefit)													(649		)	60
Net income (loss)													$	(2,241	)	$	185

Earnings per common share:
Earnings (loss) per common share:
Basic	$	1.29		$	1.40		$	3.37		$	4.23		$	(5.26	)	$	0.41
Diluted	$	1.28		$	1.40		$	3.35		$	4.20		$	(5.26	)	$	0.41
Weighted average shares outstanding (in thousands):
Basic	484,772			525,415			493,164			564,886			425,713			451,951
Diluted	486,625			528,510			495,796			568,679			425,713			453,429
Cash dividends declared per common share	$	0.10		$	0.10		$	0.30		$	0.30		$	0.10		$	0.10

See accompanying notes to condensed consolidated financial statements.

AMERICAN AIRLINES GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Net income	$	624		$	737		$	1,661		$	2,387
Other comprehensive loss, net of tax:
Net income (loss)													$	(2,241	)	$	185
Other comprehensive income (loss), net of tax:
Pension, retiree medical and other postretirement benefits	(15		)	(17		)	(44		)	(52		)	(126		)	(16		)
Investments	—			2			—			6			(23		)	3
Total other comprehensive loss, net of tax	(15		)	(15		)	(44		)	(46		)	(149		)	(13		)
Total comprehensive income	$	609		$	722		$	1,617		$	2,341
Total comprehensive income (loss)													$	(2,390	)	$	172

See accompanying notes to condensed consolidated financial statements.

AMERICAN AIRLINES GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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


	September 30, 2017			December 31, 2016			March 31, 2020			December 31, 2019
	(Unaudited)						(Unaudited)
ASSETS
Current assets
Cash	$	340		$	322		$	474		$	280
Short-term investments	5,428			6,037			3,102			3,546
Restricted cash and short-term investments	393			638			157			158
Accounts receivable, net	1,700			1,594			1,020			1,750
Aircraft fuel, spare parts and supplies, net	1,315			1,094			1,772			1,851
Prepaid expenses and other	826			639			650			621
Total current assets	10,002			10,324			7,175			8,206
Operating property and equipment
Flight equipment	39,545			37,028			39,305			42,537
Ground property and equipment	7,902			7,116			9,602			9,443
Equipment purchase deposits	1,280			1,209			1,740			1,674
Total property and equipment, at cost	48,727			45,353			50,647			53,654
Less accumulated depreciation and amortization	(15,416		)	(14,194		)	(16,441		)	(18,659		)
Total property and equipment, net	33,311			31,159			34,206			34,995
Operating lease right-of-use assets							8,619			8,737
Other assets
Goodwill	4,091			4,091			4,091			4,091
Intangibles, net of accumulated amortization of $612 and $578, respectively	2,214			2,173
Intangibles, net of accumulated amortization of $714 and $704, respectively							2,059			2,084
Deferred tax asset	538			1,498			1,237			645
Other assets	2,245			2,029			1,193			1,237
Total other assets	9,088			9,791			8,580			8,057
Total assets	$	52,401		$	51,274		$	58,580		$	59,995

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Current maturities of long-term debt and capital leases	$	2,467		$	1,855
Current maturities of long-term debt and finance leases							$	3,518		$	2,861
Accounts payable	1,638			1,592			1,648			2,062
Accrued salaries and wages	1,413			1,516			1,633			1,541
Air traffic liability	4,653			3,912			5,473			4,808
Loyalty program liability	2,893			2,789			3,094			3,193
Operating lease liabilities							1,752			1,708
Other accrued liabilities	2,243			2,208			2,095			2,138
Total current liabilities	15,307			13,872			19,213			18,311
Noncurrent liabilities
Long-term debt and capital leases, net of current maturities	22,217			22,489
Long-term debt and finance leases, net of current maturities							21,564			21,454
Pension and postretirement benefits	7,467			7,842			6,107			6,052
Loyalty program liability							5,757			5,422
Operating lease liabilities							7,239			7,421
Other liabilities	3,462			3,286			1,336			1,453
Total noncurrent liabilities	33,146			33,617			42,003			41,802
Commitments and contingencies
Stockholders’ equity
Common stock, $0.01 par value; 1,750,000,000 shares authorized, 479,999,894 shares issued and outstanding at September 30, 2017; 507,294,153 shares issued and outstanding at December 31, 2016	5			5
Stockholders’ equity (deficit)
Common stock, $0.01 par value; 1,750,000,000 shares authorized, 422,886,533 shares issued and outstanding at March 31, 2020; 428,202,506 shares issued and outstanding at December 31, 2019							4			4
Additional paid-in capital	5,918			7,223			3,861			3,945
Accumulated other comprehensive loss	(5,127		)	(5,083		)	(6,480		)	(6,331		)
Retained earnings	3,152			1,640
Total stockholders’ equity	3,948			3,785
Total liabilities and stockholders’ equity	$	52,401		$	51,274
Retained earnings (deficit)							(21		)	2,264
Total stockholders’ deficit							(2,636		)	(118		)
Total liabilities and stockholders’ equity (deficit)							$	58,580		$	59,995

See accompanying notes to condensed consolidated financial statements.

AMERICAN AIRLINES GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2020			2019
Net cash provided by operating activities	$	4,307		$	5,897
Net cash provided by (used in) operating activities							$	(168	)	$	1,651
Cash flows from investing activities:
Capital expenditures and aircraft purchase deposits	(4,563		)	(4,271		)	(845		)	(1,305		)
Proceeds from sale-leaseback transactions							280			352
Proceeds from sale of property and equipment							35			7
Purchases of short-term investments	(4,093		)	(5,078		)	(820		)	(570		)
Sales of short-term investments	4,714			4,587			1,237			1,051
Purchase of equity investment	(203		)	—
Decrease in restricted cash and short-term investments	245			60
Proceeds from sale of property and equipment and sale-leaseback transactions	831			60
Other investing activities							(49		)	(15		)
Net cash used in investing activities	(3,069		)	(4,642		)	(162		)	(480		)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	2,160			5,392			1,698			400
Payments on long-term debt and capital leases	(1,813		)	(2,534		)
Payments on long-term debt and finance leases							(926		)	(849		)
Deferred financing costs	(66		)	(39		)	(31		)	(6		)
Treasury stock repurchases	(1,372		)	(3,931		)	(171		)	(608		)
Dividend payments	(150		)	(172		)	(43		)	(46		)
Other financing activities	21			20			(1		)	—
Net cash used in financing activities	(1,220		)	(1,264		)
Net increase (decrease) in cash	18			(9		)
Cash at beginning of period	322			390
Cash at end of period	$	340		$	381
Net cash provided by (used in) financing activities							526			(1,109		)
Net increase in cash and restricted cash							196			62
Cash and restricted cash at beginning of period							290			286
Cash and restricted cash at end of period ⁽¹⁾							$	486		$	348

Non-cash investing and financing activities:
Non-cash transactions:
Right-of-use (ROU) assets acquired through operating leases							$	328		$	332
Settlement of bankruptcy obligations	$	15		$	3		56			—
Deferred financing costs paid through issuance of debt							17			—
Property and equipment acquired through finance leases							—			2
Supplemental information:
Interest paid, net	778			714			239			267
Income taxes paid	15			10			2			3


⁽¹⁾	The following table provides a reconciliation of cash and restricted cash to amounts reported within the condensed consolidated balance sheets:



Cash	$	474	$	337
Restricted cash included in restricted cash and short-term investments	12		11
Total cash and restricted cash	$	486	$	348

See accompanying notes to condensed consolidated financial statements.

AMERICAN AIRLINES GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (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, 2020	$	4	$	3,861		$	(6,480	)	$	(21	)	$	(2,636	)



	Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at December 31, 2018	$	5	$	4,964		$	(5,896	)	$	758		$	(169	)
Net income	—		—			—			185			185
Other comprehensive loss, net	—		—			(13		)	—			(13		)
Purchase and retirement of 16,947,393 shares of AAG common stock	—		(610		)	—			—			(610		)
Dividends declared on AAG common stock ($0.10 per share)	—		—			—			(46		)	(46		)
Issuance of 552,752 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes	—		(8		)	—			—			(8		)
Share-based compensation expense	—		25			—			—			25
Balance at March 31, 2019	$	5	$	4,371		$	(5,909	)	$	897		$	(636	)

See accompanying notes to condensed consolidated financial statements.

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

(Unaudited)

1. Basis of Presentation and Recent Accounting Pronouncement

(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, ~~2016.~~2019. 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.

On December 9, 2013, a subsidiary of AMR Corporation (AMR) merged with and into US Airways Group, Inc. (US Airways Group), a Delaware corporation, which survived as a wholly-owned subsidiary of AAG, and AAG emerged from Chapter 11 (the Merger). Upon closing of the Merger and emergence from Chapter 11, AMR changed its name to American Airlines Group Inc. On December 30, 2015, in order to simplify AAG’s internal corporate structure, US Airways, Inc. (US Airways), a wholly-owned subsidiary of US Airways Group, merged with and into American, with American as the surviving corporation.

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, ~~valuation allowance for deferred tax assets,~~ as well as pension and retiree medical and other postretirement benefits. ~~Certain prior period amounts~~

(b) Impact of Coronavirus (COVID-19)

COVID-19 has been declared a global health pandemic by the World Health Organization. COVID-19 has surfaced in nearly all regions of the world, which has driven the implementation of significant, government-imposed measures to prevent or reduce its spread, including travel restrictions, closing of borders, “shelter in place” orders and business closures. As a result, we have ~~been reclassified to conform~~experienced an unprecedented decline in the demand for air travel, which has resulted in a material deterioration in our revenues. While our business performed largely as expected in January and February of 2020, a severe reduction in air travel during March 2020 resulted in our total operating revenues decreasing nearly 20% in the first quarter of 2020 as compared to the ~~current year presentation.~~first quarter of 2019. While the length and severity of the reduction in demand due to COVID-19 is uncertain, we presently expect the deterioration to increase in the second quarter of 2020 and our results of operations for the remainder of 2020 to be severely impacted.

~~Recent Accounting Pronouncements~~

~~Revenue~~

~~In May 2014,~~We have taken aggressive actions to mitigate the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board (IASB) to improve financial reporting by creating common revenue recognition guidance for GAAP and International Financial Reporting Standards (IFRS). Subsequently, the FASB has issued several additional ASUs to clarify the implementation. The new revenue standard applies to all companies that enter into contracts with customers to transfer goods or services and is effective for public entities for interim and annual reporting periods beginning after December 15, 2017. We will adopt the new revenue standard effective January 1, 2018. Entities have the choice to apply the new revenue standard either retrospectively to each reporting period presented or by recognizing the cumulative effect of ~~applying~~COVID-19 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 ~~new revenue standard at the date of initial application and not adjusting comparative information. We will adopt the new revenue standard using the full retrospective method.~~

~~We are in the process of finalizing how the application~~terms of the ~~new revenue standard~~financial support we have received from the U.S. Government under the Coronavirus Aid, Relief, and Economic Security (CARES) Act which, among other things, includes obligations regarding minimum air service and restrictions on involuntary workforce actions. See Note 14 for further information.

Capacity Reductions

We have significantly reduced our capacity (as measured by available seat miles), with April and May 2020 flying expected to decrease by approximately 80% year-over-year and June 2020 flying expected to decrease by approximately 70% year-over-year. Given the fluidity of the environment, we will ~~impact~~continue to evaluate these targets and make further demand-driven adjustments to our ~~condensed consolidated financial statements. We currently expect that~~capacity as needed.

Fleet

To better align our network with lower passenger demand, we have accelerated the ~~new revenue standard will materially impact~~retirement of Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets as well as certain regional aircraft. These retirements remove complexity from our ~~liability~~operation and bring forward cost savings and efficiencies associated with operating fewer aircraft types. See Note 13 for outstanding mileage credits earned by AAdvantage loyalty program members. We currently use the incremental cost method to account for this portion of our loyalty program liability, which values these mileage credits basedfurther information on the ~~estimated incremental cost of carrying one additional passenger. The new revenue standard will require us~~accounting for our fleet retirements. Due to change our policy and apply a relative selling price approach whereby a portion of each passenger ticket sale attributable to mileage credits earned will be deferred and recognized in passenger revenue upon future mileage redemption. The carrying valuethe inherent uncertainties of the ~~earned mileage credits recognized in loyalty program liability is expected~~current operating environment, we will continue to ~~be materially greater under the relative selling price approach than the value attributed~~evaluate our current fleet and may decide to these mileage credits under the incremental cost method. The new revenue standard will also require us to reclassify certain ancillary fees to passenger revenue, which are currently included within other operating revenue. See Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - “~~Recent Accounting Pronouncements”~~ ~~for our preliminary assessment of the quantitative impacts of the new revenue standard on our consolidated financial statements.~~

~~Leases~~

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet and aligns many of the underlying principles of the new lessor model with those in Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. ASU 2016-02

permanently retire additional aircraft.

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

(Unaudited)

Cost Reductions

We are moving quickly to align our costs with our reduced schedule. In aggregate, we estimate that we have reduced our 2020 operating and capital expenditures by more than $12 billion. These savings have been achieved through lower fuel expense and a series of actions, including the capacity reductions and accelerated fleet retirements discussed above as well as reductions in heavy maintenance expense, the deferral of marketing expenditures, consolidation of space at airport facilities and reductions in contractor, event and training expenses. We have also suspended all non-essential hiring, paused non-contractual pay rate increases, reduced executive and board of director compensation and implemented voluntary leave and early retirement programs to reduce our labor costs consistent with our obligations under the CARES Act. In total, nearly 39,000 team members have opted for early retirement, a reduced work schedule or a partially-paid leave status. Our average estimated second quarter 2020 cash burn rate is ~~effective~~currently expected to be approximately $70 million per day, and we presently expect this amount to decrease over time to approximately $50 million per day for ~~fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption~~the month of June 2020 as these cost-savings initiatives gain traction and assuming no material, unforecasted revenue reductions, costs or other events.

Liquidity

At March 31, 2020, we had $6.8 billion in total available liquidity, consisting of $3.6 billion in unrestricted cash and short-term investments and $3.2 billion in undrawn capacity under our revolving credit facilities, of which we borrowed $2.7 billion in April 2020.

During the first quarter of 2020, we completed the following financing transactions (see Note 6 for further information):

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

raised $1.0 billion from a 364-day senior secured delayed draw term loan credit facility;

issued $500 million in aggregate principal amount of 3.75% unsecured senior notes due 2025 and repaid $500 million of 4.625% unsecured senior notes that matured in March 2020;

raised $280 million from aircraft sale-leaseback transactions; and


•	raised $197 million from aircraft financings, of which $17 million was used to repay existing indebtedness.

We have been approved to receive an aggregate of $5.8 billion in financial assistance to be paid in installments through the payroll support program (Payroll Support Program) under the CARES Act of which we received an initial disbursement of $2.9 billion in April 2020 (representing 50% of the current expected total). We currently anticipate receiving three additional installments from May to July 2020. As partial compensation to the U.S. Government for the provision of financial assistance under the Payroll Support Program, we expect to issue an aggregate principal amount of approximately $1.7 billion under a promissory note and warrants to purchase up to 13.7 million shares of AAG common stock (assuming the full $5.8 billion of financial assistance is permitted. We expect we will adopt the new lease standard effective January 1, 2019. Entities are required to adopt the new lease standard using a modified retrospective approach for all leases existing at or commencing afterreceived). As of the date of ~~initial application with~~this report, the principal amount of this promissory note is $842 million and a warrant to purchase up to 6.7 million shares of AAG common stock has been issued. The principal amount of this promissory note will increase by an ~~option~~amount equal to ~~use certain practical expedients.~~30% of each additional installment disbursed under the PSP Agreement, and we will issue a warrant for a number of shares of AAG common stock equal to 10% of each such increase in the principal amount of this promissory note, divided by $12.51 per share (the exercise price per share of such warrants). See Note 14 for further information on the Payroll Support Program. We ~~are currently evaluating how~~also applied for a secured loan from the ~~adoption~~U.S. Department of the ~~new lease standard~~Treasury (Treasury) of approximately $4.75 billion under the CARES Act, which if granted will ~~impact~~involve the issuance of additional warrants to purchase approximately 38.0 million shares of AAG common stock. As of the date of this report, the secured loan application has not been acted on. Also, we are permitted to, and will, defer payment of the employer portion of social security taxes through the end of 2020 (with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022). This deferral is expected to provide approximately $300 million in additional liquidity during 2020. Additionally, we have suspended our ~~condensed consolidated financial statements. Interpretations are on-going~~capital return program, including share repurchases and ~~could have a material impact on our implementation. Currently, we expect~~the payment of future dividends for at least the period that the ~~adoption~~restrictions imposed by the CARES Act are applicable.

We continue to evaluate future financing opportunities and have engaged third-party appraisers to evaluate some of our unencumbered assets. We expect to pledge a portion of these unencumbered assets as collateral for future financings, including as part of the ~~new lease standard will~~approximately $4.75 billion secured loan we have ~~a material impact on~~applied for under the CARES Act.

Certain of our ~~condensed consolidated balance sheet due~~debt financing agreements contain covenants requiring us to ~~the recognition~~maintain an aggregate of ~~right-of-use assets and lease liabilities principally for certain leases currently accounted for as operating leases.~~

~~Statement~~at least $2.0 billion of ~~Cash Flows~~

~~In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” ASU 2016-18 requires that the change in total~~unrestricted cash ~~cash at beginning of period~~ and cash ~~at end of period on the statement of cash flows include restricted cash~~equivalents and ~~restricted cash equivalents. ASU 2016-18 also requires companies who report cash and restricted cash separately on the balance sheet to reconcile those~~ amounts ~~to the statement of cash flows. This standard is~~available to be ~~applied retrospectively~~drawn under revolving credit facilities and/or contain loan to each period presented and is effective for public entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We expect we will adopt this new standard effective January 1, 2018. This standard is not expected to have a material impact on our condensed consolidated financial statements.

~~Retirement Benefits~~

In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” ASU 2017-07 requires an entity to present the service cost component of net benefit cost in the income statement line items where it reports compensation cost. Entities will present all other components of net benefit cost outside of operating income, if this subtotal is presented. This standard is to be applied retrospectively to each period presented and is effective for public entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We will adopt this standard on January 1, 2018. The new standard will require all components of our net periodic benefit cost (income), with the exception of service cost, currently reported within operating expenses as salaries, wages and benefits, to be reclassified and reported within nonoperating income (expense). The adoption of this new standard will have no impact on pre-tax income or net income reported. See Note 8 for our current components of net periodic benefit cost (income).

~~Financial Instruments~~

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10)." ASU 2016-01 makes several modifications to Subtopic 825-10, including the elimination of the available-for-sale classification of equity investments, and it requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017. We will adopt this standard on January 1, 2018. Based on our portfolio of investments as of September 30, 2017, we do not expect the adoption of ASU 2016-01 to have a material impact on our condensed consolidated financial statements.

ratio covenants.

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

(Unaudited)

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

Accounting Standards Update (ASU) 2016-13: Financial Instruments – Credit Losses (Topic 326)

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

2. Special Items, Net

Special items, net onin the condensed consolidated statements of operations consisted of the following (in millions):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Merger integration expenses ⁽¹⁾
$ 62
$ 194
$ 192
$ 395
Fleet restructuring expenses ⁽²⁾
62
31
174
72
Mark-to-market adjustments for bankruptcy obligations and other (12 ) 39
7
(22 )
Labor contract expenses ⁽³⁾
—
—
45
—
Other operating charges, net —
25
14
5
Mainline operating special items, net 112
289
432
450

Regional operating special items, net ⁽⁴⁾
(5 ) 5
(1 ) 13
Nonoperating special items, net ⁽⁵⁾
3
—
12
36



	Three Months Ended March 31,
	2020			2019
Fleet impairment ⁽¹⁾	$	744		$	—
Labor contract expenses ⁽²⁾	218			—
Severance expenses ⁽³⁾	205			—
Mark-to-market adjustments on bankruptcy obligations, net ⁽⁴⁾	(50		)	—
Fleet restructuring expenses ⁽⁵⁾	—			83
Merger integration expenses	—			37
Other operating charges, net	15			18
Mainline operating special items, net	1,132			138
Regional operating special items, net ⁽⁶⁾	93			—
Operating special items, net	1,225			138

Mark-to-market adjustments on equity and other investments, net ⁽⁷⁾	180			(69		)
Debt refinancing, extinguishment and other charges	37			—
Nonoperating special items, net	217			(69		)

⁽¹⁾

~~Merger integration expenses included costs related to information technology, professional fees, re-branding~~Fleet impairment primarily includes a $676 million non-cash write-down of aircraft and ~~airport facilities~~spare parts and ~~training. Additionally,~~$68 million in write-offs of ROU assets and lease return costs associated with our mainline fleet, principally Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 aircraft, which are being retired earlier than previously planned as a result of the ~~2016 periods also included costs~~decline in demand for air travel due to COVID-19. See Note 13 for further information related to ~~alignment of labor union contracts, re-branded uniforms, relocation and severance.~~these charges.

⁽²⁾

~~Fleet restructuring~~Labor contract expenses ~~driven by~~primarily relate to one-time charges resulting from the ~~Merger principally included~~ratification of a new contract with the ~~acceleration~~Transport Workers Union and International Association of ~~aircraft depreciation~~Machinists & Aerospace Workers for our maintenance and ~~impairments for aircraft grounded or expected~~fleet service team members, including signing bonuses and adjustments to ~~be grounded earlier than planned.~~vacation accruals resulting from pay rate increases.

⁽³⁾

~~Labor contract~~Severance expenses ~~primarily included one-time charges~~principally include salary and medical costs associated with certain team members who opted in to ~~adjust the vacation accruals for pilots and flight attendants~~a voluntary early retirement program offered as a result of ~~the mid-contract pay rate adjustments effective in the second quarter of 2017.~~reductions to our operation due to COVID-19.


⁽⁴⁾	~~Regional operating special items, net principally related to a gain~~Bankruptcy obligations that will be settled in shares of our common stock are marked-to-market based on ~~the sale of certain aircraft in the 2017 period and Merger integration expenses in the 2016 period.~~


⁽⁵⁾	Nonoperating special items, net primarily consisted of debt issuance and extinguishment costs associated with term loan refinancings. Additionally, the 2016 nine-month period included costs associated with a bond refinancing.our stock price.

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

(Unaudited)


⁽⁵⁾	Fleet restructuring expenses principally included accelerated depreciation and rent expense for aircraft and related equipment expected to be retired earlier than planned.


⁽⁶⁾	Regional operating special items, net primarily includes an $88 million non-cash write-down of regional aircraft, principally certain Embraer 140 and certain Bombardier CRJ200 aircraft, which are being retired earlier than previously planned as a result of the decline in demand for air travel due to COVID-19. See Note 13 for further information related to this charge.


⁽⁷⁾	Mark-to-market adjustments on equity and other investments, net primarily relates 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 March 31,
	2020			2019
Basic EPS:
Net income (loss)	$	(2,241	)	$	185
Weighted average common shares outstanding (in thousands)	425,713			451,951
Basic EPS	$	(5.26	)	$	0.41

Diluted EPS:
Net income (loss) for purposes of computing diluted EPS	$	(2,241	)	$	185
Share computation for diluted EPS (in thousands):
Basic weighted average common shares outstanding	425,713			451,951
Dilutive effect of stock awards	—			1,478
Diluted weighted average common shares outstanding	425,713			453,429
Diluted EPS	$	(5.26	)	$	0.41

Restricted stock unit awards excluded from the calculation of diluted EPS because inclusion would be antidilutive (in thousands)	4,934			2,267

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Basic EPS:
Net income $ 624
$ 737
$ 1,661
$ 2,387
Weighted average common shares outstanding (in thousands) 484,772
525,415
493,164
564,886
Basic EPS $ 1.29
$ 1.40
$ 3.37
$ 4.23

Diluted EPS:
Net income for purposes of computing diluted EPS $ 624
$ 737
$ 1,661
$ 2,387
Share computation for diluted EPS (in thousands):
Basic weighted average common shares outstanding 484,772
525,415
493,164
564,886
Dilutive effect of stock awards 1,853
3,095
2,632
3,793
Diluted weighted average common shares outstanding 486,625
528,510
495,796
568,679
Diluted EPS $ 1.28
$ 1.40
$ 3.35
$ 4.20

Restricted stock unit awards excluded from the calculation of diluted EPS because inclusion would be antidilutive (in thousands) 66
1,623
432
1,771

4. Share Repurchase Programs and Dividends

Since July 2014, our Board of Directors has approved six share repurchase programs aggregating $11.0 billion of authority. As of September 30, 2017, $677 million remained unused under a repurchase program that expires on December 31, 2018. Share repurchases under our share repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. Any such repurchases will be made from time to time subject to market and economic conditions, applicable legal requirements and other relevant factors. Our share repurchase programs do not obligate us to repurchase any specific number of shares and may be suspended at any time at our discretion.

During the three months ended ~~September 30, 2017,~~March 31, 2020, we repurchased ~~7.7~~6.4 million shares of AAG common stock for ~~$362~~$145 million at a weighted average cost per share of ~~$46.97. During~~$22.77.

In January 2020, our Board of Directors declared a cash dividend of $0.10 per share for stockholders of record as of February 5, 2020 and paid on February 19, 2020, totaling $43 million.

We have suspended our capital return program, including share repurchases and the ~~nine months ended~~payment of future dividends. In connection with our receipt of financial support under the Payroll Support Program, we agreed not to repurchase shares of or make dividend payments in respect of AAG common stock through September 30, ~~2017,~~2021. If we ~~repurchased 29.4 million~~receive a secured loan from Treasury pursuant to the CARES Act, we will be prohibited from repurchasing shares of AAG common stock ~~for $1.3 billion at a weighted average cost per share of $45.05. Since~~through the ~~inception of our share repurchase programs in July 2014, we have repurchased 257.7 million shares of AAG common stock for $10.3 billion at a weighted average cost per share of $40.05.~~

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

Period Per share For stockholders
of record as of Payable on Total
(millions)
First Quarter $ 0.10
February 13, 2017 February 27, 2017 $ 51
Second Quarter 0.10
May 16, 2017 May 30, 2017 50
Third Quarter 0.10
August 14, 2017 August 28, 2017 49
Total $ 150

~~Any future dividends~~date 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 payment of dividends may be suspended at any time at our discretion.is one year after such secured loan is fully repaid.

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

(Unaudited)

5. Revenue Recognition

Revenue

The following are the significant categories comprising our reported operating revenues (in millions):



	Three Months Ended March 31,
	2020		2019
Passenger revenue:
Passenger travel	$	7,079	$	8,772
Loyalty revenue - travel ⁽¹⁾	602		886
Total passenger revenue	7,681		9,658
Cargo	147		218
Other:
Loyalty revenue - marketing services	571		578
Other revenue	116		130
Total other revenue	687		708
Total operating revenues	$	8,515	$	10,584


⁽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.

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



	Three Months Ended March 31,
	2020		2019
Domestic	$	5,780	$	7,226
Latin America	1,180		1,371
Atlantic	523		673
Pacific	198		388
Total passenger revenue	$	7,681	$	9,658

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.



	March 31, 2020		December 31, 2019
	(In millions)
Loyalty program liability	$	8,851	$	8,615
Air traffic liability	5,473		4,808
Total	$	14,324	$	13,423

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

(Unaudited)

The balance of the loyalty program liability fluctuates based on seasonal patterns, which impact the volume of mileage credits issued through travel or sold to co-branded credit card and other partners (deferral of revenue) and mileage credits redeemed (recognition of revenue). Changes in loyalty program liability are as follows (in millions):



Balance at December 31, 2019	$	8,615
Deferral of revenue	887
Recognition of revenue ⁽¹⁾	(651		)
Balance at March 31, 2020 ⁽²⁾	$	8,851

⁽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 do not expire as long as that AAdvantage member has any type of qualifying activity at least every 18 months. As of March 31, 2020, our current loyalty program liability was $3.1 billion and represents our current estimate of revenue expected to be recognized in the next 12 months based on historical 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 COVID-19, 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 three months ended March 31, 2020, $2.6 billion of revenue was recognized in passenger revenue that was included in our air traffic liability at December 31, 2019. In response to COVID-19, we extended the contract duration for certain tickets, principally those with travel scheduled March 1, 2020 through September 30, 2020. Accordingly, any revenue associated with these tickets will be recognized within 21 months. Additionally, given this change in contract duration, our estimates of revenue from unused tickets may be subject to variability and differ from historical experience.

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

(Unaudited)

6. Debt

Long-term debt ~~and capital lease obligations~~ included in the condensed consolidated balance sheets consisted of (in millions):



	March 31, 2020		December 31, 2019
Secured
2013 Credit Facilities, variable interest rate of 2.71%, installments through 2025	$	1,807	$	1,807
2014 Credit Facilities, variable interest rate of 2.69%, installments through 2027	1,220		1,202
April 2016 Credit Facilities, variable interest rate of 2.94%, installments through 2023	970		970
December 2016 Credit Facilities, variable interest rate of 2.70%, installments through 2023	1,213		1,213
Delayed Draw Term Loan Credit Facility, variable interest rate of 3.00%, interest only payments until due March 2021	1,000		—
Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 3.00% to 8.39%, averaging 4.03%, maturing from 2020 to 2032	11,712		11,933
Equipment loans and other notes payable, fixed and variable interest rates ranging from 1.87% to 7.31%, averaging 3.02%, maturing from 2020 to 2032	4,755		4,727
Special facility revenue bonds, fixed interest rates ranging from 5.00% to 8.00%, maturing from 2020 to 2031	754		754
	23,431		22,606
Unsecured
5.000% senior notes, interest only payments until due in June 2022	750		750
3.75% senior notes, interest only payments until due in March 2025	500		—
4.625% senior notes	—		500
	1,250		1,250
Total long-term debt	24,681		23,856
Less: Total unamortized debt discount, premium and issuance costs	233		211
Less: Current maturities	3,415		2,749
Long-term debt, net of current maturities	$	21,033	$	20,896

September 30, 2017 December 31, 2016
Secured
2013 Credit Facilities, variable interest rate of 3.24%, installments through 2020 $ 1,825
$ 1,843
2014 Credit Facilities, variable interest rate of 3.24%, installments through 2021 735
735
April 2016 Credit Facilities, variable interest rate of 3.74%, installments through 2023 990
1,000
December 2016 Credit Facilities, variable interest rate of 3.73%, installments through 2023 1,250
1,250
Aircraft enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 3.00% to 9.75%, maturing from 2018 to 2029 11,396
10,912
Equipment loans and other notes payable, fixed and variable interest rates ranging from 2.34% to 8.99%, maturing from 2018 to 2029 5,330
5,343
Special facility revenue bonds, fixed interest rates ranging from 5.00% to 8.00%, maturing from 2018 to 2035 857
891
Other secured obligations, fixed interest rates ranging from 3.60% to 12.24%, maturing from 2017 to 2028 789
849
23,172
22,823
Unsecured
5.50% senior notes, interest only payments until due in 2019 750
750
6.125% senior notes, interest only payments until due in 2018 500
500
4.625% senior notes, interest only payments until due in 2020 500
500
1,750
1,750
Total long-term debt and capital lease obligations 24,922
24,573
Less: Total unamortized debt discount, premium and issuance costs 238
229
Less: Current maturities 2,467
1,855
Long-term debt and capital lease obligations, net of current maturities $ 22,217
$ 22,489

The table below shows the maximum availability under revolving credit facilities, all of which were undrawn, as of ~~September 30, 2017~~March 31, 2020 (in millions):



2013 Revolving Facility	$	750
2014 Revolving Facility	1,643
April 2016 Revolving Facility	450
Other Short-term Revolving Facility	400
Total	$	3,243

2013 Revolving Facility $ 1,200
2014 Revolving Facility 1,000
April 2016 Revolving Facility 300
Total $ 2,500

The December 2016 Credit Facilities provide for a revolving credit facility that may be established thereunder in the future.

In April 2020, we borrowed an aggregate of $2.7 billion under our revolving credit facilities. See Note 14 for further information related to this subsequent event.

Secured financings are collateralized by assets, primarily aircraft, engines, simulators, aircraft spare parts, airport gate leasehold rights, route authorities, airport slots and certain pre-delivery payments.

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

(Unaudited)

~~2017 Aircraft~~2020 Financing Activities

~~2017-2 EETCs~~

In August 2017, American created two pass-through trusts which issued approximately $797 million aggregate principal amount of Series 2017-2 Class AA and Class A EETCs (the 2017-2 EETCs) in connection with the financing of 30 aircraft previously delivered to American or scheduled to be delivered to American through April 2018 (the 2017-2 Aircraft). A portion of the net proceeds received from the sale of the 2017-2 EETCs has been used to acquire Series AA and A equipment notes issued by American to the pass-through trusts and the balance of such proceeds is being held in escrow for the benefit of the holders of the 2017-2 EETCs until such time as American issues additional Series AA and A equipment notes to the pass-through trusts, which trusts will purchase such additional equipment notes with the escrowed funds. These escrowed funds are not guaranteed by American and are not reported as debt on our condensed consolidated balance sheet because the proceeds held by the depository are not American's assets.

As of September 30, 2017, approximately $253 million of the escrowed proceeds from the 2017-2 EETCs have been used to purchase equipment notes issued by American. Interest and principal payments on equipment notes issued in connection with the 2017-2 EETCs are payable semi-annually in April and October of each year, with interest payments beginning in April 2018 and principal payments beginning in October 2018. These equipment notes are secured by liens on the aircraft financed with the proceeds of the 2017-2 EETCs.

~~Certain information regarding the 2017-2 EETC equipment notes and the remaining escrowed proceeds of the 2017-2 EETCs, as of September 30, 2017, is set forth in the table below.~~

2017-2 EETCs
Series AA Series A
Aggregate principal issued $545 million $252 million
Remaining escrowed proceeds $372 million $172 million
Fixed interest rate per annum 3.35% 3.60%
Maturity date October 2029 October 2029

~~2017-1 EETCs~~2014 Credit Facilities

In January 2017, American created three pass-through trusts which issued approximately $983 million aggregate principal amount of Series 2017-1 Class AA, Class A and Class B EETCs (the 2017-1 EETCs) in connection with the financing of 24 aircraft delivered to American through May 2017 (the 2017-1 Aircraft).

During the first six months of 2017, all of the net proceeds received from the sale of the 2017-1 EETCs were used to purchase equipment notes issued by American in connection with the financing of the 2017-1 Aircraft. Interest and principal payments on equipment notes issued in connection with the 2017-1 EETCs are payable semi-annually in February and August of each year, with interest payments that began in August 2017 and principal payments beginning in February 2018. These equipment notes are secured by liens on the 2017-1 Aircraft.

~~Certain information regarding the 2017-1 EETC equipment notes, as of September 30, 2017, is set forth in the table below.~~

2017-1 EETCs
Series AA Series A Series B
Aggregate principal issued $537 million $248 million $198 million
Fixed interest rate per annum 3.65% 4.00% 4.95%
Maturity date February 2029 February 2029 February 2025

~~2016-3 EETCs~~

During the first quarter of 2017, all remaining net proceeds of the Series 2016-3 Class AA and Class A EETCs (the 2016-3 EETCs), in the amount of $109 million, were used to purchase equipment notes issued by American in connection with the financing of two of the 25 aircraft financed under the 2016-3 EETCs (such 25 aircraft, the 2016-3 Aircraft). Interest and principal payments on equipment notes issued in connection with the 2016-3 EETCs are payable semi-annually in April and October of each year, with interest payments that began in April 2017 and principal payments beginning in October 2017. These equipment notes are secured by liens on the 2016-3 Aircraft.

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

~~(Unaudited)~~

~~Certain information regarding the 2016-3 EETC equipment notes, as of September 30, 2017, is set forth in the table below.~~

2016-3 EETCs
Series AA Series A
Aggregate principal issued $558 million $256 million
Fixed interest rate per annum 3.00% 3.25%
Maturity date October 2028 October 2028

~~Equipment Loans and Other Notes Payable Issued in 2017~~

In the first nine months of 2017, American entered into agreements under which it borrowed $815 million in connection with the financing of certain aircraft. Debt incurred under these agreements matures in 2021 through 2029.

~~2017 Other Financing Activities~~

~~2013 Credit Facilities~~

~~In March 2017,~~2020, American and AAG entered into the ~~Second~~Eighth Amendment to the Amended and Restated Credit and Guaranty Agreement, amending the Amended and Restated Credit and Guaranty Agreement dated as of May 21, 2015 (which amended and restated the Credit and Guaranty Agreement dated as of June 27, 2013), as previously amended by the First Amendment to Amended and Restated Credit and Guaranty Agreement dated as of October 26, 2015, pursuant to which we refinanced the $1.8 billion term loan facility due June 2020 established thereunder (the 2013 Term Loan Facility and, together with the $1.4 billion revolving credit facility established under such agreement (the 2013 Revolving Facility), the 2013 Credit Facilities) to reduce the LIBOR margin from 2.50% to 2.00% and the base rate margin from 1.50% to 1.00%.

In August 2017, American and AAG entered into the Third Amendment to the Amended and Restated Credit and Guaranty Agreement pursuant to which the maturity date of the 2013 Revolving Facility was extended to October 2022, the LIBOR margin thereon was reduced from 3.00% to 2.25%, and the maximum principal amount of such facility was reduced to $1.2 billion. As of September 30, 2017, approximately $1.8 billion of principal was outstanding under the 2013 Term Loan Facility and there were no borrowings or letters of credit outstanding under the 2013 Revolving Facility.

~~2014 Credit Facilities~~

~~In June 2017, American and AAG entered into the Third Amendment to the~~ Amended and Restated Credit and Guaranty Agreement, amending the Amended and Restated Credit and Guaranty Agreement dated as of April 20, 2015 ~~(which amended and restated the Credit and Guaranty Agreement dated as of October 10, 2014), as~~(as previously amended, by the ~~First Amendment to Amended~~2014 Credit Agreement; the revolving credit facility established thereunder, the 2014 Revolving Facility; the term loan facility established thereunder, the 2014 Term Loan Facility; and ~~Restated~~collectively, the 2014 Credit ~~and Guaranty Agreement dated as of October 26, 2015 and the Second Amendment to Amended and Restated Credit and Guaranty Agreement dated as of September 22, 2016,~~Facilities), pursuant to which weAmerican refinanced the ~~$735 million term loan facility due October 2021 established thereunder (the~~ 2014 Term Loan Facility, ~~and, together with~~increasing the ~~$1.025~~total aggregate principal amount outstanding to $1.22 billion, ~~revolving credit facility established under such agreement (the 2014 Revolving Facility), the 2014 Credit Facilities) to reduce~~reducing the LIBOR margin from ~~2.50%~~2.00% to ~~2.00%~~1.75%, with a LIBOR floor of 0%, and reducing the base rate margin from ~~1.50%~~1.00% to ~~1.00%~~0.75%.

In ~~August 2017, American and AAG entered into the Fourth Amendment to the Amended and Restated Credit and Guaranty Agreement pursuant to which~~addition, the maturity date of the 2014 Revolving Facility was extended to October 2022, the LIBOR margin thereon was reduced from 3.00% to 2.25%, and the maximum principal amount of such facility was reduced to $1.0 billion. As of September 30, 2017, approximately $735 million of principal was outstanding underfor the 2014 Term Loan Facility was extended to January 2027 from October 2021. The 2014 Revolving Facility remains unchanged and, as of March 31, 2020, there were no borrowings or letters of credit outstanding ~~under the 2014 Revolving Facility.~~thereunder.

~~April 2016~~3.75% Senior Notes

In February 2020, AAG issued $500 million aggregate principal amount of 3.75% senior notes due 2025 (the 3.75% senior notes). These notes bear interest at a rate of 3.75% per annum, payable semi-annually in arrears in March and September of each year, beginning in September 2020. The 3.75% senior notes are senior unsecured obligations of AAG and are fully and unconditionally guaranteed by American. The 3.75% senior notes mature in March 2025.

Delayed Draw Term Loan Credit ~~Facilities~~Facility

In ~~August 2017,~~March 2020, American and AAG entered into ~~the Second Amendment to the~~a Credit and Guaranty Agreement amending the Credit and Guaranty Agreement dated as of April 29, 2016 (the April 2016 Credit Facilities), as previously amended by the First Amendment to the Credit and Guaranty Agreement, dated as of October 31, 2016, pursuant to which provides for a ~~new $300 million revolving~~364-day $1.0 billion senior secured delayed draw term loan credit facility (the ~~April 2016 Revolving~~Delayed Draw Term Loan Credit Facility) ~~was established with~~, which will be due and payable in a single installment on the maturity date in March 2021. Borrowings under the Delayed Draw Term Loan Credit Facility bear interest at an index rate plus an applicable index margin or, at American's option, LIBOR (subject to a floor of ~~October 2022 and a~~1.00%) plus an applicable LIBOR margin for interest periods of ~~2.25%~~one, three or six months (or, if available to all affected lenders, 12 months or a shorter period). Voluntary prepayments at par may be made by American at any time. As of ~~September 30, 2017, approximately $990 million of principal was~~March 31, 2020, $1.0 billion in borrowings were outstanding under the Delayed Draw Term Loan Credit Facility. The proceeds of the term ~~loan facility~~loans under the ~~April 2016~~Delayed Draw Term Loan Credit ~~Facilities~~Facility are being used for general corporate purposes.

Subject to certain limitations and ~~there were no borrowings or letters of credit outstanding~~exceptions, the Delayed Draw Term Loan Credit Facility is secured by collateral, including certain slots, foreign gate leaseholds and route authorities (collectively, SGR) utilized by American in providing its scheduled air carrier services to and from Mexico and Central America and to London and certain cities in the European Union. The lien on Mexico and Central America SGR is a first-priority lien and the lien on London and European SGR is a second-priority lien. American has the ability to make future modifications to the collateral pledged, subject to certain restrictions. American's obligations under the ~~April 2016 Revolving Facility.~~Delayed Draw Term Loan Credit Facility are guaranteed by AAG. American is required to maintain a certain minimum ratio of appraised value of collateral to the outstanding term loans.

The Delayed Draw Term Loan Credit Facility contains events of default customary for similar financings, including cross default to other material indebtedness. Upon the occurrence of an event of default, the outstanding obligations may be accelerated and become due and payable immediately. The Delayed Draw Term Loan Credit Facility also includes covenants that, among other things, require AAG to maintain a minimum aggregate liquidity of not less than $2.0 billion and limit the ability of AAG and its restricted subsidiaries to pay dividends and make certain other payments, make certain investments, incur additional indebtedness, incur liens on the collateral, dispose of the collateral, enter into certain affiliate transactions and engage in certain business activities, in each case subject to certain exceptions.

Equipment Notes and Other Notes Payable Issued in 2020

14In the three months ended March 31, 2020, American entered into agreements under which it borrowed $197 million in connection with the financing or refinancing, as the case may be, of certain aircraft, of which $17 million was used to repay existing indebtedness. Debt incurred under these agreements matures in 2029 through 2032 and bears interest at variable rates (comprised of LIBOR plus an applicable margin) averaging 2.99% at March 31, 2020.

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

~~(Unaudited)~~

6.7. Income Taxes

At December 31, ~~2016,~~2019, we had approximately ~~$10.5~~$9.1 billion of ~~gross~~federal net operating losses (NOLs) carried over from prior taxable years (NOL Carryforwards) to reduce future federal taxable ~~income, substantially all of which are expected to be available for use in 2017.~~income. The federal NOL Carryforwards will expire beginning in ~~2022~~2023 if unused. We also had approximately ~~$3.7~~$3.0 billion of NOL Carryforwards to reduce future state taxable income at December 31, ~~2016,~~2019, which will expire in years ~~2017~~2020 through ~~2036~~2039 if unused.

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

(Unaudited)

At December 31, ~~2016,~~2019, we had an ~~alternative minimum tax~~Alternative Minimum Tax (AMT) credit carryforward of approximately ~~$339~~$170 million available for federal income tax purposes, which is ~~available for an indefinite period.~~presently expected to be fully refunded in 2020 as a result of the CARES Act enacted in March of 2020.

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2020, we recorded an income tax ~~provision~~benefit of $380 million and $998 million, respectively, which was substantially non-cash due to the utilization of the NOLs described above. Substantially all of our income before income taxes is attributable to the United States.$649 million.

7.8. 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 ~~for~~of our financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. Our short-term investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No changes in valuation techniques or inputs occurred during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2020.

Assets measured at fair value on a recurring basis are summarized below (in millions):


	Fair Value Measurements as of September 30, 2017								Fair Value Measurements as of March 31, 2020
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Short-term investments ^{(1) (2)}:
Short-term investments ^{(1), (2)}:
Money market funds	$	170	$	170	$	—	$	—	$	239	$	239	$	—	$	—
Bank notes/certificates of deposit/time deposits									2,048		—		2,048		—
Corporate obligations	2,320		—		2,320		—		815		—		815		—
Bank notes/certificates of deposit/time deposits	2,738		—		2,738		—
Repurchase agreements	200		—		200		—
	5,428		170		5,258		—		3,102		239		2,863		—
Restricted cash and short-term investments ⁽¹⁾	393		104		289		—		157		12		145		—
Long-term investments ⁽³⁾									122		122		—		—
Total	$	5,821	$	274	$	5,547	$	—	$	3,381	$	373	$	3,008	$	—


⁽¹⁾	~~Unrealized gains or losses on short-term investments and restricted cash and short-term investments are recorded in accumulated other comprehensive loss at each measurement date.~~


⁽²⁾	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 except for ~~$1.2 billion~~$823 million of bank notes/certificates of deposit/time deposits and ~~$341~~$115 million of corporate obligations.


⁽³⁾	Long-term investments primarily include our equity investment in China Southern Airlines, in which we presently own a 2.2% equity interest, and are classified in other assets on the condensed consolidated balance sheet.

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 in the fair value hierarchy.

The carrying value and estimated fair value of our long-term debt, including current maturities, were as follows (in millions):



	March 31, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	24,448	$	21,377	$	23,645	$	24,508

September 30, 2017 December 31, 2016
Carrying
Value Fair
Value Carrying
Value Fair
Value
Long-term debt, including current maturities $ 24,684
$ 25,681
$ 24,344
$ 24,983

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

(Unaudited)

~~Other Investments~~

We have an approximate 25% ownership interest in Republic Airways Holdings Inc. (Republic), which we received in the second quarter of 2017 in consideration for our unsecured claim in Republic’s bankruptcy case. This ownership interest is accounted for under the equity method and our portion of Republic’s financial results is recognized within other, net on the condensed consolidated statements of operations.

Additionally, in the third quarter of 2017, we acquired 2.7% of the outstanding shares of China Southern Airlines Company Limited for $203 million. Since our subscription agreement restricts the sale or transfer of these shares for three years, we account for this investment under the cost method.

8.9. Employee Benefit Plans

The following ~~tables provide~~table provides the components of net periodic benefit cost (income) (in millions):



	Pension Benefits						Retiree Medical and Other Postretirement Benefits
Three Months Ended March 31,	2020			2019			2020			2019
Service cost	$	1		$	1		$	1		$	1
Interest cost	153			176			7			8
Expected return on assets	(252		)	(204		)	(4		)	(4		)
Amortization of:
Prior service cost (benefit)	7			7			(54		)	(59		)
Unrecognized net loss (gain)	41			38			(6		)	(8		)
Net periodic benefit cost (income)	$	(50	)	$	18		$	(56	)	$	(62	)

Pension Benefits Retiree Medical and Other
Postretirement Benefits
Three Months Ended September 30, 2017 2016 2017 2016
Service cost $ 1
$ 1
$ 1
$ 1
Interest cost 180
187
10
12
Expected return on assets (198 ) (188 ) (5 ) (5 )
Amortization of:
Prior service cost (benefit) 7
7
(59 ) (60 )
Unrecognized net loss (gain) 36
32
(6 ) (4 )
Net periodic benefit cost (income) $ 26
$ 39
$ (59 ) $ (56 )

Pension Benefits Retiree Medical and Other
Postretirement Benefits
Nine Months Ended September 30, 2017 2016 2017 2016
Service cost $ 2
$ 2
$ 3
$ 2
Interest cost 541
562
29
36
Expected return on assets (592 ) (562 ) (16 ) (15 )
Amortization of:
Prior service cost (benefit) 21
21
(178 ) (180 )
Unrecognized net loss (gain) 108
95
(17 ) (12 )
Net periodic benefit cost (income) $ 80
$ 118
$ (179 ) $ (169 )

Effective November 1, 2012, substantially all of our defined benefit pension plans were frozen.

~~During~~The components of net periodic benefit cost (income) other than the ~~first nine months~~service cost component are included in nonoperating other income (expense), net in the condensed consolidated statements of ~~2017, we contributed $281 million~~operations.

Pursuant to ~~our defined benefit pension plans, including supplemental contributions of $256 million in addition to a $25 million~~the CARES Act, minimum required ~~cash contribution.~~pension contributions to be made in the calendar year 2020 can be deferred to January 1, 2021, with interest accruing from the original due date to the new payment date. We expect to defer our $196 million 2020 minimum required contribution to January 1, 2021.

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

~~(Unaudited)~~

9.10. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive ~~income (loss)~~loss (AOCI) are as follows (in millions):

Pension, Retiree
Medical and
Other
Postretirement
Benefits
Income Tax
Benefit
(Provision) ⁽¹⁾
Total
Balance at December 31, 2016 $ (4,406 ) $ (677 ) $ (5,083 )
Other comprehensive loss before reclassifications (1 ) —
(1 )
Amounts reclassified from AOCI (66 ) 23
(2) (43 )
Net current-period other comprehensive income (loss) (67 ) 23
(44 )
Balance at September 30, 2017 $ (4,473 ) $ (654 ) $ (5,127 )



	Pension, Retiree Medical and Other Postretirement Benefits			Unrealized Loss on Investments			Income Tax Benefit (Provision) ⁽¹⁾				Total
Balance at December 31, 2019	$	(5,238	)	$	(2	)	$	(1,091	)		$	(6,331	)
Other comprehensive income (loss) before reclassifications	(152		)	(29		)	41				(140		)
Amounts reclassified from AOCI	(12		)	—			3			(2)	(9		)
Net current-period other comprehensive income (loss)	(164		)	(29		)	44				(149		)
Balance at March 31, 2020	$	(5,402	)	$	(31	)	$	(1,047	)		$	(6,480	)


⁽¹⁾	Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net income until the obligations are fully extinguished.


⁽²⁾	Relates to pension, retiree medical and other postretirement benefits obligations and is recognized within the income tax provision (benefit) on the condensed consolidated statement of operations.

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

(Unaudited)

Reclassifications out of AOCI are as follows (in millions):



	Amounts reclassified from AOCI						Affected line items on the condensed consolidated statements of operations
AOCI Components	Three Months Ended March 31,
AOCI Components	2020			2019
Amortization of pension, retiree medical and other postretirement benefits:
Prior service benefit	$	(36	)	$	(40	)	Nonoperating other income (expense), net
Actuarial loss	27			24			Nonoperating other income (expense), net
Total reclassifications for the period, net of tax	$	(9	)	$	(16	)

Amounts reclassified from AOCI Affected line items on the
condensed consolidated
statements of operations
AOCI Components Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Amortization of pension, retiree medical and other postretirement benefits:
Prior service cost (benefit) $ (33 ) $ (33 ) $ (100 ) $ (100 ) Salaries, wages and benefits
Actuarial loss 19
17
57
52
Salaries, wages and benefits
Total reclassifications for the period, net of tax $ (14 ) $ (16 ) $ (43 ) $ (48 )

~~10.~~11. Regional Expenses

Expenses associated with ~~our wholly-owned regional airlines and third-party regional carriers operating under the brand name~~ American Eagle operations are classified as regional expenses on the condensed consolidated statements of operations. Regional expenses consist of the following (in millions):



	Three Months Ended March 31,
	2020		2019
Aircraft fuel and related taxes	$	389	$	423
Salaries, wages and benefits	471		409
Capacity purchases from third-party regional carriers ⁽¹⁾	354		340
Maintenance, materials and repairs	116		93
Other rent and landing fees	152		167
Aircraft rent	6		7
Selling expenses	80		92
Depreciation and amortization	83		79
Special items, net	93		—
Other	180		153
Total regional expenses	$	1,924	$	1,763

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Aircraft fuel and related taxes $ 352
$ 303
$ 999
$ 801
Salaries, wages and benefits 369
337
1,074
990
Capacity purchases from third-party regional carriers 404
378
1,210
1,164
Maintenance, materials and repairs 74
82
209
264
Other rent and landing fees 159
143
466
413
Aircraft rent 9
9
26
26
Selling expenses 95
90
269
256
Depreciation and amortization 79
78
235
218
Special items, net (5 ) 5
(1 ) 13
Other 118
113
361
343
Total regional expenses $ 1,654
$ 1,538
$ 4,848
$ 4,488


⁽¹⁾	During the three months ended March 31, 2020 and 2019, we recognized $150 million and $143 million, respectively, of expense under our capacity purchase agreement with Republic Airline Inc. (Republic). We hold a 25% equity interest in Republic Airways Holdings Inc., the parent company of Republic.

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

~~(Unaudited)~~

~~11.~~12. 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 ~~Merger.~~acquisition of US Airways Group, Inc. by AMR (the Merger).

Pursuant to rulings of the Bankruptcy Court, the Plan established the Disputed Claims Reserve to hold shares of AAG common stock reserved for issuance to disputed claimholders at the Effective Date that ultimately become holders of allowed claims. ~~As of September 30, 2017, there were approximately 24.5 million~~The shares of AAG common stock ~~remaining in~~issued to the Disputed Claims ~~Reserve.~~Reserve were originally issued on December 13, 2013 and have at all times since been included in the number of shares issued and outstanding as reported from time to time in our quarterly and annual reports, including for calculating earnings per common share. As disputed claims are resolved, the claimants ~~will~~ receive distributions of shares from the Disputed Claims ~~Reserve on the same basis as if such distributions had been made on or about the Effective Date. However, we~~Reserve. We are not required to distribute additional shares above the limits contemplated by the Plan, even if the shares remaining for distribution in the Disputed Claims Reserve are not sufficient to fully pay any additional allowed unsecured claims. ~~To the extent that~~If any of the reserved shares remain undistributed upon resolution of all remaining disputed claims, such shares will not be returned to us but rather will be distributed to former

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

(Unaudited)

AMR ~~stockholders.~~

~~There is also pending in~~stockholders and former convertible noteholders treated as stockholders under the Bankruptcy Court an adversary proceeding relating to an action brought by American to seek a determination that certain non-pension, postemployment benefits are not vested benefits and thus may be modified or terminated without liability to American. On April 18, 2014,Plan. In the ~~Bankruptcy Court granted American’s motion for summary judgment with respect to certain non-union employees, concluding that their benefits~~first quarter of 2020, 2.2 million shares of AAG common stock were ~~not vested and could be terminated. The summary judgment motion was denied with respect to all other retirees. The Bankruptcy Court has not yet scheduled a trial on~~distributed from the merits concerning whether those retirees’ benefits are vested, and American cannot predict whether it will receive relief from obligations to provide benefits to any of those retirees. Our financial statements presently reflect these retirement programs withoutDisputed Claims Reserve. After giving effect to ~~any modification or termination~~this distribution, as of ~~benefits that may ultimately be implemented based upon~~March 31, 2020, the ~~outcome~~Disputed Claims Reserve held 4.8 million shares of ~~this proceeding.~~AAG common stock.

~~DOJ~~Private Party Antitrust ~~Civil Investigative Demand~~. In June 2015, we received a Civil Investigative Demand (CID) from the United States Department of Justice (DOJ) as part of an investigation into whether there have been illegal agreements or coordination of air passenger capacity. The CID seeks documents and other information from us, and other airlines have announced that they have received similar requests. We are cooperating fully with the DOJ investigation. In addition, subsequentAction Related to ~~announcement of the delivery of CIDs by the DOJ, we,~~Passenger Capacity. We, along with Delta Air Lines, Inc., Southwest Airlines Co., United Airlines, Inc. and, in the case of litigation filed in Canada, Air Canada, ~~have been~~were named as defendants in approximately 100 putative class action lawsuits alleging unlawful agreements with respect to air passenger capacity. The U.S. lawsuits ~~have been~~were consolidated in the Federal District Court for the District of ~~Columbia.~~Columbia (the DC Court). On ~~October 28, 2016,~~June 15, 2018, we reached a settlement agreement with the ~~Court denied a motion by~~plaintiffs in the ~~airline defendants~~amount of $45 million to ~~dismiss~~resolve all class claims in the ~~class actions. Both~~U.S. lawsuits. That settlement was approved by the ~~DOJ investigation~~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 ~~these lawsuits are in their relatively early stages and we~~ intend to vigorously defend ~~these matters vigorously.~~against them.

Private Party Antitrust Action Related to the Merger. On ~~July 2,~~August 6, 2013, a lawsuit captioned Carolyn Fjord, et al., v. ~~US Airways Group, Inc.,~~AMR Corporation, et al., was filed in the ~~United States District Court for the Northern District of California.~~Bankruptcy Court. The complaint named as defendants US Airways Group, ~~and~~Inc., US Airways, Inc., AMR and American, alleged that the effect of the Merger may be to create a monopoly in violation of Section 7 of the Clayton Antitrust Act, and sought injunctive relief and/or divestiture. On ~~August 6, 2013, the plaintiffs re-filed their complaint in the Bankruptcy Court, adding AMR and American as defendants. On~~ November 27, 2013, the Bankruptcy Court denied plaintiffs’ motion to preliminarily enjoin the Merger. On ~~May 12, 2017, defendants filed a~~August 29, 2018, the Bankruptcy Court denied in part defendants' motion for summary ~~judgment. On June 23, 2017, plaintiffs filed an opposition to defendants’ motion~~judgment, and fully denied plaintiffs' cross-motion for summary judgment. ~~Briefing~~The parties' evidentiary cases were presented before the Bankruptcy Court in a bench trial in March 2019. The parties submitted proposed findings of fact and conclusions of law and made closing arguments in April 2019, and we are awaiting the ~~parties’ respective motions concluded on September 1, 2017; a hearing date has not yet been set.~~Bankruptcy Court's decision. We believe this lawsuit is without merit and intend to vigorously defend against the allegations.

~~DOJ Investigation Related to~~Pension Benefits Action. On December 11, 2018, a lawsuit captioned Torres, et al. v. American Airlines, Inc., The Employee Benefits Committee and John/Jane Does 1-5, was filed in the United States ~~Postal Service. In April 2015, the DOJ informed us of an inquiry regarding American’s 2009 and 2011 contracts with the United States Postal Service~~District Court for the ~~international transportation~~Northern District of ~~mail~~Texas. The plaintiffs in this lawsuit purport to represent a class consisting of all participants in and beneficiaries under any of the four American defined benefit pension plans who elected to receive an optional form of benefit other than a lump sum distribution of a participant’s vested benefit. Under the Employee Retirement Income Security Act, participants covered by ~~air. In October 2015, we received~~defined benefit plans accrue retirement benefits in the form of a ~~CID from~~single life annuity payable upon retirement on a monthly basis until the ~~DOJ seeking~~employee’s death, and may elect certain ~~information relating~~alternative forms of benefit payments. Plaintiffs contend that the mortality tables used by American for purposes of calculations related to these ~~contracts~~alternative forms of benefits are outdated and that more recent mortality tables would have provided more generous benefits and should have been used to make those calculations. The court has denied our motion to dismiss the ~~DOJ has also sought information concerning certain of~~complaint. We believe this lawsuit is without merit and intend to vigorously defend against the airlines that transport mail on a codeshare basis. The DOJ has indicated it is investigating potential violations of the False Claims Act or other statutes. We are cooperating fully with the DOJ with regard to its investigation.allegations.

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,

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

~~(Unaudited)~~

although we will vigorously defend ourselves in each of the actions described above and such other legal proceedings, their ultimate resolution and potential financial and other impacts on us are uncertain but could be material. ~~See Part II, Item 1A. Risk Factors – “We may be a party to litigation in the normal course of business or otherwise, which could affect our financial position and liquidity” for additional discussion.~~

~~12.~~13. Impairment

Long-lived Assets

Accounting Standards Codification (ASC) 360 - Property, Plant, and Equipment (ASC 360) requires long-lived assets to be assessed for impairment when events and circumstances indicate that the assets may be impaired. Long-lived assets consist of owned flight and ground equipment, ROU assets and definite-lived intangible assets such as certain domestic airport slots and gate leasehold rights, customer relationships and marketing agreements.

As previously discussed, in the first quarter of 2020, our operations, liquidity and stock price were significantly impacted by decreased passenger demand and U.S. government travel restrictions due to COVID-19. Additionally, we decided to retire certain mainline aircraft earlier than planned including Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 aircraft as well as regional aircraft, including certain Embraer 140 and Bombardier CRJ200 aircraft. As a result of these events and circumstances, we performed impairment tests on our long-lived assets in connection with the preparation of our financial statements.

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

(Unaudited)

In accordance with ASC 360, an impairment of a long-lived asset or group of long-lived assets exists only when the sum of the estimated undiscounted future cash flows expected to be generated directly by the assets are less than the carrying value of the assets. We group assets principally by fleet-type when estimating future cash flows, which is generally the lowest level for which identifiable cash flows exist. Estimates of future cash flows are based on historical results adjusted to reflect management’s best estimate of future market and operating conditions, including our current fleet plan.

As a result of the impairment tests performed on our long-lived assets, we determined the sum of the estimated undiscounted future cash flows exceeded the $44.6 billion carrying value for our long-lived assets except for the aircraft being retired earlier than planned as discussed above. For those aircraft and certain related spare parts, we recorded an $815 million impairment charge reflecting the difference between the carrying values of these assets and their fair values. Fair value reflects management’s best estimate including inputs from published pricing guides and bids from third parties as well as contracted sales agreements when applicable. Due to the inherent uncertainties of the current operating environment, we will continue to evaluate our current fleet and may decide to permanently retire additional aircraft.

Goodwill and Indefinite-lived Intangible Assets

ASC 350 - Intangibles - Goodwill and Other (ASC 350) requires goodwill and indefinite-lived intangible assets to be assessed for impairment annually or more frequently if events or circumstances indicate that the fair values of goodwill and indefinite-lived intangible assets may be lower than their carrying values. Goodwill represents the purchase price in excess of the fair value of the net assets acquired and liabilities assumed in connection with the merger with US Airways Group, Inc. We have 1 reporting unit. Indefinite-lived intangible assets consist of certain domestic airport slots and international slots and route authorities.

In the first quarter of 2020, we performed an interim impairment test on our goodwill and indefinite-lived intangible assets as a result of the events and circumstances previously discussed due to the impact of COVID-19 on our business. In accordance with ASC 350, for goodwill, we performed a quantitative analysis by using a market approach. Under the market approach, the fair value of the reporting unit was determined based on quoted market prices for equity and the fair value of debt as described in Note 8. The fair value exceeded the carrying value of the reporting unit, and our $4.1 billion of goodwill was not impaired.

Additionally, in the first quarter of 2020, we performed an interim qualitative impairment test on our $1.8 billion of indefinite-lived intangible assets and determined there was no material impairment.

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

14. Subsequent Events

~~Dividend Declaration~~2013 Revolving Facility, 2014 Revolving Facility and April 2016 Revolving Facility Borrowings

In ~~October 2017,~~April 2020, American borrowed $750 million under the 2013 Revolving Facility, $1.5 billion under the 2014 Revolving Facility and $450 million under the April 2016 Revolving Facility. Following the April 2020 draw, American had 0 remaining borrowing capacity available under the 2013 Revolving Facility or the April 2016 Revolving Facility and had $110 million in remaining borrowing capacity available under the 2014 Revolving Facility.

Payroll Support Program

On April 20, 2020 (the PSP 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), each our wholly-owned subsidiary, entered into a Payroll Support Program Agreement (the PSP Agreement) with Treasury, with respect to the Payroll Support Program provided pursuant to the CARES Act. In connection with our entry into the PSP Agreement, on the PSP Closing Date, we ~~announced~~also entered into a Warrant Agreement (the Warrant Agreement) with Treasury, and we issued a promissory note to Treasury (the Promissory Note), with the Subsidiaries as guarantors (the Guarantors).

Payroll Support Program Agreement

Pursuant to the PSP Agreement, Treasury is to provide to us financial assistance to be paid in installments (each, an Installment) expected to total in the aggregate approximately $5.8 billion. The first Installment, in the amount of approximately $2.9 billion (representing 50% of the current expected total) was disbursed by Treasury on April 21, 2020, and we currently anticipate receiving three additional Installments from May to July 2020.

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

(Unaudited)

In connection with the Payroll Support Program, we are required to comply with the relevant provisions of the CARES Act, including the requirement that funds provided pursuant to the PSP Agreement be used exclusively for the continuation of payment of employee wages, salaries and benefits, the requirement against involuntary furloughs and reductions in employee pay rates and benefits through September 30, 2020, the requirement that certain levels of commercial air service be maintained and the provisions that prohibit the repurchase of AAG common stock, and the payment of common stock dividends through September 30, 2021, as well as those that restrict the payment of certain executive compensation until March 24, 2022. The PSP Agreement also imposes substantial reporting obligations on us and the Subsidiaries.

Payroll Support Program Promissory Note

As compensation to the U.S. Government for the provision of financial assistance under the PSP Agreement, we issued the Promissory Note to Treasury, which provides for our ~~Board~~unconditional promise to pay to Treasury the initial principal sum of ~~Directors had declared~~approximately $842 million, subject to an increase equal to 30% of the amount of each additional Installment disbursed under the PSP Agreement after the PSP Closing Date, and the guarantee of our obligations by the Guarantors. Assuming the total Installments to be paid pursuant to the PSP Agreement aggregate approximately $5.8 billion, the Promissory Note will have a ~~$0.10~~total principal sum of approximately $1.7 billion.

The Promissory Note bears interest on the outstanding principal amount at a rate equal to 1.00% per ~~share dividend for stockholders~~annum until the fifth anniversary of ~~record~~the PSP Closing Date and 2.00% plus an interest rate based on ~~November 13, 2017,~~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 PSP Closing Date (the 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, 2020. The aggregate principal amount outstanding under the Promissory Note, together with all accrued and unpaid interest thereon and all other amounts payable under the Promissory Note, will be due and payable on ~~November 27, 2017. Any future dividends that~~the Maturity Date.

We may, ~~be declared~~at any time and ~~paid~~ from time to time, ~~will be~~voluntarily prepay amounts outstanding under the 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 Promissory Note at such time, together with any accrued interest or other amounts owing under the Promissory Note at such time.

The Promissory Note is our senior unsecured obligation and each guarantee of the Promissory Note is the senior unsecured obligation of each of the Guarantors, respectively.

The 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 Promissory Note may, and in certain circumstances will automatically, be accelerated and become due and payable immediately.

Payroll Support Program Warrant Agreement and Warrants

As compensation to the U.S. Government for the provision of financial assistance under the PSP Agreement, and pursuant to the Warrant Agreement, we have agreed to issue warrants (each a PSP Warrant and, collectively, the PSP Warrants) to Treasury to purchase up to an aggregate of approximately 13.7 million shares (the Warrant Shares) of AAG common stock. The exercise price of the Warrant Shares is $12.51 per share (which was the closing price of AAG common stock on The Nasdaq Global Select Market on April 9, 2020) (the Exercise Price) subject to certain anti-dilution provisions provided for in the PSP Warrant.

Pursuant to the Warrant Agreement, (a) on the PSP Closing Date, we issued to Treasury a PSP Warrant to purchase up to an aggregate of approximately 6.7 million shares of AAG common stock based on the terms described herein and (b) on the date of each increase of the principal amount of the Promissory Note in connection with the disbursement of an additional Installment under the PSP Agreement, we will issue to Treasury an additional PSP Warrant for a number of shares of AAG common stock equal to 10% of such increase of the principal amount of the Promissory Note, divided by the Exercise Price. Assuming the total Installments to be paid pursuant to the PSP Agreement aggregate approximately $5.8 billion, the total number of Warrant Shares issuable is approximately 13.7 million, subject to certain anti-dilution provisions, including, among others, for below market ~~and economic conditions, applicable legal requirements and other relevant factors. We are not obligated to continue a dividend for any fixed period,~~issuances and payment of dividends, ~~may be suspended at~~provided for in the PSP Warrants.

The PSP Warrant does not have any ~~time at our discretion.~~

~~2016-3 Class B EETCs~~

~~In October 2017, American created one additional pass-through trust which issued approximately $193 million aggregate principal amount~~voting rights and is freely transferrable, with registration rights. Each PSP Warrant expires on the fifth anniversary of ~~Series 2016-3 Class B EETCs (the 2016-3 Class B EETCs) in connection with the financing of the 2016-3 Aircraft. The proceeds received from the sale of the 2016-3 Class B EETCs were used on~~ the date of issuance of such PSP Warrant. The PSP Warrants will be exercisable either through net share settlement or cash, at our option.

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

(Unaudited)

The PSP Warrant was issued solely as compensation to the ~~2016-3 Class B EETCs~~U.S. Government related to ~~acquire Series B equipment notes issued by American in connection with~~entry into the ~~financing of the 2016-3 Aircraft.~~

These Series B equipment notes bear interest at 3.75% per annum. Interest and principal payments on equipment notes issued in connection with the 2016-3 Class B EETCs are payable semi-annually in April and October of each year, beginning in April 2018.

~~2017-2 Class B EETCs~~

In October 2017, American created one additional pass-through trust which issued approximately $221 million aggregate principal amount of Series 2017-2 Class B EETCs (the 2017-2 Class B EETCs) in connection with the financing of the 2017-2 Aircraft. A portion of the netPSP Agreement. No separate proceeds ~~received~~(apart from the ~~sale of the Series 2017-2 Class B EETCs was used on the date of~~financial assistance Installments described above) were received upon issuance of the 2017-2 Class B EETCs to acquire Series B equipment notes issued by American in connection with the financing of certain 2017-2 Aircraft, and the balance of such proceeds is being held in escrow for the benefit of the holders of the 2017-2 Class B EETCs until such time as American issues additional Series B equipment notes to the pass-through trust, which trustsPSP Warrant or will purchase such additional equipment notes with the escrowed funds. These escrowed funds are not guaranteed by American and are not reported as debt on our condensed consolidated balance sheet because the proceeds held by the depository are not American's assets.be received upon exercise thereof.

These Series B equipment notes bear interest at 3.70% per annum. Interest and principal payments on equipment notes issued in connection with the 2017-2 Class B EETCs are payable semi-annually in April and October of each year, with interest payments beginning in April 2018 and principal payments beginning in October 2018.

ITEM 1B. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

AMERICAN AIRLINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions)(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Operating revenues:
Mainline passenger	$	7,628		$	7,419		$	21,981		$	21,192
Regional passenger	1,749			1,731			5,133			5,040
Passenger													$	7,681		$	9,658
Cargo	200			171			568			506			147			218
Other	1,298			1,270			3,916			3,639			686			705
Total operating revenues	10,875			10,591			31,598			30,377			8,514			10,581
Operating expenses:
Aircraft fuel and related taxes	1,570			1,393			4,481			3,736			1,395			1,726
Salaries, wages and benefits	2,991			2,770			8,816			8,087			3,138			3,089
Regional expenses	1,662			1,534			4,860			4,480			1,891			1,791
Maintenance, materials and repairs	487			481			1,474			1,352			629			561
Other rent and landing fees	471			463			1,363			1,342			468			503
Aircraft rent	304			299			892			908			334			327
Selling expenses	400			347			1,094			990			305			370
Depreciation and amortization	433			399			1,255			1,128			560			480
Special items, net	112			289			432			450			1,132			138
Other	1,220			1,184			3,575			3,391			1,198			1,251
Total operating expenses	9,650			9,159			28,242			25,864			11,050			10,236
Operating income	1,225			1,432			3,356			4,513
Operating income (loss)													(2,536		)	345
Nonoperating income (expense):
Interest income	56			28			158			74			104			127
Interest expense, net	(250		)	(229		)	(738		)	(674		)	(260		)	(277		)
Other, net	13			(8		)	8			(27		)
Other income (expense), net													(105		)	109
Total nonoperating expense, net	(181		)	(209		)	(572		)	(627		)	(261		)	(41		)
Income before income taxes	1,044			1,223			2,784			3,886
Income tax provision	395			465			1,046			1,445
Net income	$	649		$	758		$	1,738		$	2,441
Income (loss) before income taxes													(2,797		)	304
Income tax provision (benefit)													(628		)	74
Net income (loss)													$	(2,169	)	$	230

AMERICAN AIRLINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

(In millions)(Unaudited)



	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at December 31, 2019	$	—	$	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, 2020	$	—	$	16,977	$	(6,572	)	$	773		$	11,178



	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Retained Earnings		Total
Balance at December 31, 2018	$	—	$	16,802	$	(5,992	)	$	960	$	11,770
Net income	—		—		—			230		230
Other comprehensive loss, net	—		—		(13		)	—		(13		)
Share-based compensation expense	—		25		—			—		25
Balance at March 31, 2019	$	—	$	16,827	$	(6,005	)	$	1,190	$	12,012

See accompanying notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(Unaudited)

1. Basis of Presentation and Recent Accounting Pronouncement

(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, ~~2016.~~2019. American is the principal wholly-owned subsidiary of American Airlines Group Inc. (AAG). All significant intercompany transactions have been eliminated.

(b) Impact of Coronavirus (COVID-19)

COVID-19 has been ~~reclassified~~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 ~~conform~~prevent or reduce its spread, including travel restrictions, closing of borders, “shelter in place” orders and business closures. As a result, American has experienced an unprecedented decline in the demand for air travel, which has resulted in a material deterioration in its revenues. While American's business performed largely as expected in January and February of 2020, a severe reduction in air travel during March 2020 resulted in its total operating revenues decreasing nearly 20% in the first quarter of 2020 as compared to the ~~current year presentation.~~first quarter of 2019. While the length and severity of the reduction in demand due to COVID-19 is uncertain, American presently expects the deterioration to increase in the second quarter of 2020 and its results of operations for the remainder of 2020 to be severely impacted.

~~Recent Accounting Pronouncements~~American has taken aggressive actions to mitigate the effect of COVID-19 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 support it has received from the U.S. Government under the Coronavirus Aid, Relief, and Economic Security (CARES) Act which, among other things, includes obligations regarding minimum air service and restrictions on involuntary workforce actions. See Note 13 for further information.

~~Revenue~~Capacity Reductions

InAmerican has significantly reduced its capacity (as measured by available seat miles), with April and May ~~2014,~~2020 flying expected to decrease by approximately 80% year-over-year and June 2020 flying expected to decrease by approximately 70% year-over-year. Given the ~~Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 completes~~fluidity of the joint effort by the FASB and International Accounting Standards Board (IASB) to improve financial reporting by creating common revenue recognition guidance for GAAP and International Financial Reporting Standards (IFRS). Subsequently, the FASB has issued several additional ASUs to clarify the implementation. The new revenue standard applies to all companies that enter into contracts with customers to transfer goods or services and is effective for public entities for interim and annual reporting periods beginning after December 15, 2017.environment, American will ~~adopt~~continue to evaluate these targets and make further demand-driven adjustments to its capacity as needed.

Fleet

To better align American’s network with lower passenger demand, American has accelerated the ~~new revenue standard effective January 1, 2018. Entities have~~retirement of Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets as well as certain regional aircraft. These retirements remove complexity from its operation and bring forward cost savings and efficiencies associated with operating fewer aircraft types. See Note 12 for further information on the ~~choice~~accounting for American's fleet retirements. Due to ~~apply~~ the ~~new revenue standard either retrospectively to each reporting period presented or by recognizing~~inherent uncertainties of the ~~cumulative effect of applying the new revenue standard at the date of initial application and not adjusting comparative information.~~current operating environment, American will ~~adopt the new revenue standard using the full retrospective method.~~

~~American is in the process of finalizing how the application of the new revenue standard will impact~~continue to evaluate its condensed consolidated financial statements. American currently expects that the new revenue standard will materially impact its liability for outstanding mileage credits earned by AAdvantage loyalty program members. American currently uses the incremental cost methodcurrent fleet and may decide to ~~account for this portion of its loyalty program liability, which values these mileage credits based on the estimated incremental cost of carrying one~~permanently retire additional passenger. The new revenue standard will require American to change its policy and apply a relative selling price approach whereby a portion of each passenger ticket sale attributable to mileage credits earned will be deferred and recognized in passenger revenue upon future mileage redemption. The carrying value of the earned mileage credits recognized in loyalty program liability is expected to be materially greater under the relative selling price approach than the value attributed to these mileage credits under the incremental cost method. The new revenue standard will also require American to reclassify certain ancillary fees to passenger revenue, which are currently included within other operating revenue. See Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - “~~Recent Accounting Pronouncements”~~ ~~for American's preliminary assessment of the quantitative impacts of the new revenue standard on its consolidated financial statements.~~

~~Leases~~

aircraft.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(Unaudited)

~~adoption~~Cost Reductions

American is ~~permitted.~~moving quickly to align its costs with its reduced schedule. In aggregate, American estimates that it has reduced its 2020 operating and capital expenditures by more than $12 billion. These savings have been achieved through lower fuel expense and a series of actions, including the capacity reductions and accelerated fleet retirements discussed above as well as reductions in heavy maintenance expense, the deferral of marketing expenditures, consolidation of space at airport facilities and reductions in contractor, event and training expenses. American has also suspended all non-essential hiring, paused non-contractual pay rate increases, reduced executive and board of director compensation and implemented voluntary leave and early retirement programs to reduce its labor costs consistent with its obligations under the CARES Act. In total, nearly 39,000 team members have opted for early retirement, a reduced work schedule or a partially-paid leave status. American's average estimated second quarter 2020 cash burn rate is currently expected to be approximately $70 million per day, and American presently expects this amount to decrease over time to approximately $50 million per day for the month of June 2020 as these cost-savings initiatives gain traction and assuming no material, unforecasted revenue reductions, costs or other events.

Liquidity

At March 31, 2020, American had $6.8 billion in total available liquidity, consisting of $3.6 billion in unrestricted cash and short-term investments and $3.2 billion in undrawn capacity under its revolving credit facilities, of which American borrowed $2.7 billion in April 2020.

During the first quarter of 2020, American completed the following financing transactions (see Note 4 for further information):

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

raised $1.0 billion from a 364-day senior secured delayed draw term loan credit facility;

raised $280 million from aircraft sale-leaseback transactions; and


•	raised $197 million from aircraft financings, of which $17 million was used to repay existing indebtedness.

AAG and its subsidiaries have been approved to receive an aggregate of $5.8 billion in financial assistance to be paid in installments through the payroll support program (Payroll Support Program) under the CARES Act of which it received an initial disbursement of $2.9 billion in April 2020 (representing 50% of the current expected total). American and its regional affiliates currently anticipate receiving three additional installments from May to July 2020. As partial compensation to the U.S. Government for the provision of financial assistance under the Payroll Support Program, AAG and its subsidiaries expect to issue an aggregate principal amount of approximately $1.7 billion under a promissory note and warrants to purchase up to 13.7 million shares of AAG common stock (assuming the full $5.8 billion of financial assistance is received). As of the date of this report, the principal amount of this promissory note is $842 million and a warrant to purchase up to 6.7 million shares of AAG common stock has been issued. The principal amount of this promissory note will increase by an amount equal to 30% of each additional installment disbursed under the PSP Agreement, and AAG will issue a warrant for a number of shares of AAG common stock equal to 10% of each such increase in the principal amount of this promissory note, divided by $12.51 per share (the exercise price per share of such warrants). See Note 13 for further information on the Payroll Support Program. AAG and its subsidiaries also applied for a secured loan from the U.S. Department of the Treasury (Treasury) of approximately $4.75 billion under the CARES Act, which if granted will involve the issuance of additional warrants to purchase approximately 38.0 million shares of AAG common stock. As of the date of this report, the secured loan application has not been acted on. Also, American is permitted to, and will, defer payment of the employer portion of social security taxes through the end of 2020 (with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022). This deferral is expected to provide approximately $300 million in additional liquidity during 2020. Additionally, AAG has suspended its capital return program, including share repurchases and the payment of future dividends for at least the period that the restrictions imposed by the CARES Act are applicable.

American continues to evaluate future financing opportunities and has engaged third-party appraisers to evaluate some of its unencumbered assets. American expects to ~~adopt the new lease standard effective January 1, 2019. Entities are required to adopt the new lease standard using~~pledge a ~~modified retrospective approach~~portion of these unencumbered assets as collateral for ~~all leases existing at or commencing after the date of initial application with an option to use certain practical expedients. American is currently evaluating how the adoption~~future financings, including as part of the ~~new lease standard will impact~~approximately $4.75 billion secured loan AAG and its ~~condensed consolidated financial statements. Interpretations are on-going and could~~subsidiaries have ~~a material impact on~~applied for under the CARES Act.

Certain of American’s ~~implementation. Currently, American expects that the adoption~~debt financing agreements contain covenants requiring it to maintain an aggregate of ~~the new lease standard will have a material impact on its condensed consolidated balance sheet due to the recognition~~at least $2.0 billion of ~~right-of-use assets and lease liabilities principally for certain leases currently accounted for as operating leases.~~

~~Statement of Cash Flows~~

~~In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” ASU 2016-18 requires that the change in total~~unrestricted cash ~~cash at beginning of period~~ and cash ~~at end of period on the statement of cash flows include restricted cash~~equivalents and ~~restricted cash equivalents. ASU 2016-18 also requires companies who report cash and restricted cash separately on the balance sheet to reconcile those~~ amounts ~~to the statement of cash flows. This standard is~~available to be ~~applied retrospectively~~drawn under revolving credit facilities and/or contain loan to each period presented and is effective for public entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. American expects to adopt this new standard effective January 1, 2018. This standard is not expected to have a material impact on American’s condensed consolidated financial statements.

~~Retirement Benefits~~

In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” ASU 2017-07 requires an entity to present the service cost component of net benefit cost in the income statement line items where it reports compensation cost. Entities will present all other components of net benefit cost outside of operating income, if this subtotal is presented. This standard is to be applied retrospectively to each period presented and is effective for public entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. American will adopt this standard on January 1, 2018. The new standard will require all components of American’s net periodic benefit cost (income), with the exception of service cost, currently reported within operating expenses as salaries, wages and benefits, to be reclassified and reported within nonoperating income (expense). The adoption of this new standard will have no impact on pre-tax income or net income reported. See Note 6 for American’s current components of net periodic benefit cost (income).

~~Financial Instruments~~

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10)." ASU 2016-01 makes several modifications to Subtopic 825-10, including the elimination of the available-for-sale classification of equity investments, and it requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017. American will adopt this standard on January 1, 2018. Based on American's portfolio of investments as of September 30, 2017, it does not expect the adoption of ASU 2016-01 to have a material impact on its condensed consolidated financial statements.

ratio covenants.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(Unaudited)

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

Accounting Standards Update (ASU) 2016-13: Financial Instruments – Credit Losses (Topic 326)

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

2. Special Items, Net

Special items, net onin the condensed consolidated statements of operations consisted of the following (in millions):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Merger integration expenses ⁽¹⁾
$ 62
$ 194
$ 192
$ 395
Fleet restructuring expenses ⁽²⁾
62
31
174
72
Mark-to-market adjustments for bankruptcy obligations and other (12 ) 39
7
(22 )
Labor contract expenses ⁽³⁾
—
—
45
—
Other operating charges, net —
25
14
5
Mainline operating special items, net 112
289
432
450

Regional operating special items, net ⁽⁴⁾
(1 ) 3
3
11
Nonoperating special items, net ⁽⁵⁾
3
—
12
36



	Three Months Ended March 31,
	2020			2019
Fleet impairment ⁽¹⁾	$	744		$	—
Labor contract expenses ⁽²⁾	218			—
Severance expenses ⁽³⁾	205			—
Mark-to-market adjustments on bankruptcy obligations, net ⁽⁴⁾	(50		)	—
Fleet restructuring expenses ⁽⁵⁾	—			83
Merger integration expenses	—			37
Other operating charges, net	15			18
Mainline operating special items, net	1,132			138
Regional operating special items, net ⁽⁶⁾	93			—
Operating special items, net	1,225			138

Mark-to-market adjustments on equity and other investments, net ⁽⁷⁾	180			(69		)
Debt refinancing, extinguishment and other charges	37			—
Nonoperating special items, net	217			(69		)

⁽¹⁾

~~Merger integration expenses included costs related to information technology, professional fees, re-branding~~Fleet impairment primarily includes a $676 million non-cash write-down of aircraft and ~~airport facilities~~spare parts and ~~training. Additionally,~~$68 million in write-offs of ROU assets and lease return costs associated with American's mainline fleet, principally Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 aircraft, which are being retired earlier than previously planned as a result of the ~~2016 periods also included costs~~decline in demand for air travel due to COVID-19. See Note 12 for further information related to ~~alignment of labor union contracts, re-branded uniforms, relocation and severance.~~these charges.

⁽²⁾

~~Fleet restructuring~~Labor contract expenses ~~driven by~~primarily relate to one-time charges resulting from the ~~Merger principally included~~ratification of a new contract with the ~~acceleration~~Transport Workers Union and International Association of ~~aircraft depreciation~~Machinists & Aerospace Workers for American's maintenance and ~~impairments for aircraft grounded or expected~~fleet service team members, including signing bonuses and adjustments to ~~be grounded earlier than planned.~~vacation accruals resulting from pay rate increases.


⁽³⁾	~~Labor contract~~Severance expenses ~~primarily included one-time charges~~principally include salary and medical costs associated with certain team members who opted in to ~~adjust the vacation accruals for pilots and flight attendants~~a voluntary early retirement program offered as a result of ~~the mid-contract pay rate adjustments effective in the second quarter of 2017.~~


⁽⁴⁾	~~Regional operating special items, net principally related~~reductions to ~~Merger integration expenses.~~


⁽⁵⁾	Nonoperating special items, net primarily consisted of debt issuance and extinguishment costs associated with term loan refinancings. Additionally, the 2016 nine-month period included costs associated with a bond refinancing.American's operation due to COVID-19.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(Unaudited)


⁽⁴⁾	Bankruptcy obligations that will be settled in shares of AAG common stock are marked-to-market based on AAG's stock price.


⁽⁵⁾	Fleet restructuring expenses principally included accelerated depreciation and rent expense for aircraft and related equipment expected to be retired earlier than planned.


⁽⁶⁾	Regional operating special items, net primarily includes an $88 million non-cash write-down of regional aircraft, principally certain Embraer 140 and certain Bombardier CRJ200 aircraft, which are being retired earlier than previously planned as a result of the decline in demand for air travel due to COVID-19. See Note 12 for further information related to this charge.


⁽⁷⁾	Mark-to-market adjustments on equity and other investments, net primarily relates to net unrealized gains and losses associated with American's equity investment in China Southern Airlines Company Limited (China Southern Airlines) and certain treasury rate lock derivative instruments.

3. Revenue Recognition

Revenue

The following are the significant categories comprising American's reported operating revenues (in millions):



	Three Months Ended March 31,
	2020		2019
Passenger revenue:
Passenger travel	$	7,079	$	8,772
Loyalty revenue - travel ⁽¹⁾	602		886
Total passenger revenue	7,681		9,658
Cargo	147		218
Other:
Loyalty revenue - marketing services	571		578
Other revenue	115		127
Total other revenue	686		705
Total operating revenues	$	8,514	$	10,581


⁽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.

The following is American's total passenger revenue by geographic region (in millions):



	Three Months Ended March 31,
	2020		2019
Domestic	$	5,780	$	7,226
Latin America	1,180		1,371
Atlantic	523		673
Pacific	198		388
Total passenger revenue	$	7,681	$	9,658

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(Unaudited)

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.



	March 31, 2020		December 31, 2019
	(In millions)
Loyalty program liability	$	8,851	$	8,615
Air traffic liability	5,473		4,808
Total	$	14,324	$	13,423



Balance at December 31, 2019	$	8,615
Deferral of revenue	887
Recognition of revenue ⁽¹⁾	(651		)
Balance at March 31, 2020 ⁽²⁾	$	8,851

⁽¹⁾

⁽²⁾

Mileage credits can be redeemed at any time and do not expire as long as that AAdvantage member has any type of qualifying activity at least every 18 months. As of March 31, 2020, American's current loyalty program liability was $3.1 billion and represents American's current estimate of revenue expected to be recognized in the next 12 months based on historical 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 COVID-19, 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 three months ended March 31, 2020, $2.6 billion of revenue was recognized in passenger revenue that was included in American's air traffic liability at December 31, 2019. In response to COVID-19, American extended the contract duration for certain tickets, principally those with travel scheduled March 1, 2020 through September 30, 2020. Accordingly, any revenue associated with these tickets will be recognized within 21 months. Additionally, given this change in contract duration, American's estimates of revenue from unused tickets may be subject to variability and differ from historical experience.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(Unaudited)

4. Debt

Long-term debt ~~and capital lease obligations~~ included in the condensed consolidated balance sheets consisted of (in millions):



	March 31, 2020		December 31, 2019
Secured
2013 Credit Facilities, variable interest rate of 2.71%, installments through 2025	$	1,807	$	1,807
2014 Credit Facilities, variable interest rate of 2.69%, installments through 2027	1,220		1,202
April 2016 Credit Facilities, variable interest rate of 2.94%, installments through 2023	970		970
December 2016 Credit Facilities, variable interest rate of 2.70%, installments through 2023	1,213		1,213
Delayed Draw Term Loan Credit Facility, variable interest rate of 3.00%, interest only payments until due March 2021	1,000		—
Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 3.00% to 8.39%, averaging 4.03%, maturing from 2020 to 2032	11,712		11,933
Equipment loans and other notes payable, fixed and variable interest rates ranging from 1.87% to 7.31%, averaging 3.02%, maturing from 2020 to 2032	4,755		4,727
Special facility revenue bonds, fixed interest rate of 5.00%, maturing from 2020 to 2031	725		725
Total long-term debt	23,402		22,577
Less: Total unamortized debt discount, premium and issuance costs	221		205
Less: Current maturities	3,414		2,246
Long-term debt, net of current maturities	$	19,767	$	20,126

September 30, 2017 December 31, 2016
Secured
2013 Credit Facilities, variable interest rate of 3.24%, installments through 2020 $ 1,825
$ 1,843
2014 Credit Facilities, variable interest rate of 3.24%, installments through 2021 735
735
April 2016 Credit Facilities, variable interest rate of 3.74%, installments through 2023 990
1,000
December 2016 Credit Facilities, variable interest rate of 3.73%, installments through 2023 1,250
1,250
Aircraft enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 3.00% to 9.75%, maturing from 2018 to 2029 11,396
10,912
Equipment loans and other notes payable, fixed and variable interest rates ranging from 2.34% to 8.99%, maturing from 2018 to 2029 5,330
5,343
Special facility revenue bonds, fixed interest rates ranging from 5.00% to 5.50%, maturing from 2018 to 2035 828
862
Other secured obligations, fixed interest rates ranging from 3.60% to 12.24%, maturing from 2017 to 2028 788
848
Total long-term debt and capital lease obligations 23,142
22,793
Less: Total unamortized debt discount, premium and issuance costs 230
216
Less: Current maturities 1,970
1,859
Long-term debt and capital lease obligations, net of current maturities $ 20,942
$ 20,718

The table below shows the maximum availability under revolving credit facilities, all of which were undrawn, as of ~~September 30, 2017~~March 31, 2020 (in millions):



2013 Revolving Facility	$	750
2014 Revolving Facility	1,643
April 2016 Revolving Facility	450
Other Short-term Revolving Facility	400
Total	$	3,243

2013 Revolving Facility $ 1,200
2014 Revolving Facility 1,000
April 2016 Revolving Facility 300
Total $ 2,500

The December 2016 Credit Facilities provide for a revolving credit facility that may be established thereunder in the future.

~~2017 Aircraft~~In April 2020, American borrowed an aggregate of $2.7 billion under its revolving credit facilities. See Note 13 for further information related to this subsequent event.

2020 Financing Activities

~~2017-2 EETCs~~

In August 2017, American created two pass-through trusts which issued approximately $797 million aggregate principal amount of Series 2017-2 Class AA and Class A EETCs (the 2017-2 EETCs) in connection with the financing of 30 aircraft previously delivered to American or scheduled to be delivered to American through April 2018 (the 2017-2 Aircraft). A portion of the net proceeds received from the sale of the 2017-2 EETCs has been used to acquire Series AA and A equipment notes issued by American to the pass-through trusts and the balance of such proceeds is being held in escrow for the benefit of the holders of the 2017-2 EETCs until such time as American issues additional Series AA and A equipment notes to the pass-through trusts, which trusts will purchase such additional equipment notes with the escrowed funds. These escrowed funds are not guaranteed by American and are not reported as debt on American's condensed consolidated balance sheet because the proceeds held by the depository are not American's assets.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

~~(Unaudited)~~

~~Certain information regarding the 2017-2 EETC equipment notes and the remaining escrowed proceeds of the 2017-2 EETCs, as of September 30, 2017, is set forth in the table below.~~

~~2017-1 EETCs~~2014 Credit Facilities

~~Certain information regarding the 2017-1 EETC equipment notes, as of September 30, 2017, is set forth in the table below.~~

~~2016-3 EETCs~~

~~Certain information regarding the 2016-3 EETC equipment notes, as of September 30, 2017, is set forth in the table below.~~

2016-3 EETCs
Series AA Series A
Aggregate principal issued $558 million $256 million
Fixed interest rate per annum 3.00% 3.25%
Maturity date October 2028 October 2028

~~Equipment Loans and Other Notes Payable Issued in 2017~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.~~

~~(Unaudited)~~

~~2017 Other Financing Activities~~

~~2013 Credit Facilities~~

~~In March 2017,~~2020, American and AAG entered into the ~~Second~~Eighth Amendment to the Amended and Restated Credit and Guaranty Agreement, amending the Amended and Restated Credit and Guaranty Agreement dated as of May 21, 2015 (which amended and restated the Credit and Guaranty Agreement dated as of June 27, 2013), as previously amended by the First Amendment to Amended and Restated Credit and Guaranty Agreement dated as of October 26, 2015, pursuant to which American refinanced the $1.8 billion term loan facility due June 2020 established thereunder (the 2013 Term Loan Facility and, together with the $1.4 billion revolving credit facility established under such agreement (the 2013 Revolving Facility), the 2013 Credit Facilities) to reduce the LIBOR margin from 2.50% to 2.00% and the base rate margin from 1.50% to 1.00%.

~~2014 Credit Facilities~~

~~In June 2017, American and AAG entered into the Third Amendment to the~~ Amended and Restated Credit and Guaranty Agreement, amending the Amended and Restated Credit and Guaranty Agreement dated as of April 20, 2015 ~~(which amended and restated the Credit and Guaranty Agreement dated as of October 10, 2014), as~~(as previously amended, by the ~~First Amendment to Amended~~2014 Credit Agreement; the revolving credit facility established thereunder, the 2014 Revolving Facility; the term loan facility established thereunder, the 2014 Term Loan Facility; and ~~Restated~~collectively, the 2014 Credit ~~and Guaranty Agreement dated as of October 26, 2015 and the Second Amendment to Amended and Restated Credit and Guaranty Agreement dated as of September 22, 2016,~~Facilities), pursuant to which American refinanced the ~~$735 million term loan facility due October 2021 established thereunder (the~~ 2014 Term Loan Facility, ~~and, together with~~increasing the ~~$1.025~~total aggregate principal amount outstanding to $1.22 billion, ~~revolving credit facility established under such agreement (the 2014 Revolving Facility), the 2014 Credit Facilities) to reduce~~reducing the LIBOR margin from ~~2.50%~~2.00% to ~~2.00%~~1.75%, with a LIBOR floor of 0%, and reducing the base rate margin from ~~1.50%~~1.00% to ~~1.00%~~0.75%.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(Unaudited)

October 2021. The 2014 Revolving Facility remains unchanged and, as of March 31, 2020, there were no borrowings or letters of credit outstanding ~~under the 2014 Revolving Facility.~~thereunder.

~~April 2016~~Delayed Draw Term Loan Credit ~~Facilities~~Facility

Equipment Notes and Other Notes Payable Issued in 2020

In the three months ended March 31, 2020, American entered into agreements under which it borrowed $197 million in connection with the financing or refinancing, as the case may be, of certain aircraft, of which $17 million was used to repay existing indebtedness. Debt incurred under these agreements matures in 2029 through 2032 and bears interest at variable rates (comprised of LIBOR plus an applicable margin) averaging 2.99% at March 31, 2020.

4.5. Income Taxes

At December 31, ~~2016,~~2019, American had approximately ~~$11.3~~$9.2 billion of ~~gross~~federal net operating losses (NOLs) carried over from prior taxable years (NOL Carryforwards) to reduce future federal taxable ~~income, substantially all of which are expected to be available for use in 2017.~~income. American is a member of AAG’s consolidated federal and certain state income tax returns. The amount of federal NOL Carryforwards available in those returns is ~~$10.5~~$9.1 billion ~~substantially all of which is expected~~ to ~~be available for use in 2017.~~reduce AAG's future federal taxable income. The federal NOL Carryforwards will expire beginning in ~~2022~~2023 if unused. American also had approximately ~~$3.4~~$2.9 billion of NOL Carryforwards to reduce future state taxable income at December 31, ~~2016,~~2019, which will expire in years ~~2017~~2020 through ~~2034~~2039 if unused.

At December 31, ~~2016,~~2019, American had an ~~alternative minimum tax~~Alternative Minimum Tax (AMT) credit carryforward of approximately ~~$452~~$226 million available for federal income tax purposes, which is ~~available for an indefinite period.~~presently expected to be fully refunded in 2020 as a result of the CARES Act enacted in March of 2020.

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2020, American recorded an income tax ~~provision~~benefit of $395 million and $1.0 billion, respectively, which was substantially non-cash due to the utilization of the NOLs described above. Substantially all of American’s income before income taxes is attributable to the United States.$628 million.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(Unaudited)

5.6. 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 ~~for~~of its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. American’s short-term investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No changes in valuation techniques or inputs occurred during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2020.

Assets measured at fair value on a recurring basis are summarized below (in millions):


	Fair Value Measurements as of September 30, 2017								Fair Value Measurements as of March 31, 2020
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Short-term investments ^{(1) (2)}:
Short-term investments ^{(1), (2)}:
Money market funds	$	169	$	169	$	—	$	—	$	237	$	237	$	—	$	—
Bank notes/certificates of deposit/time deposits									2,048		—		2,048		—
Corporate obligations	2,320		—		2,320		—		815		—		815		—
Bank notes/certificates of deposit/time deposits	2,736		—		2,736		—
Repurchase agreements	200		—		200		—
	5,425		169		5,256		—		3,100		237		2,863		—
Restricted cash and short-term investments ⁽¹⁾	393		104		289		—		157		12		145		—
Long-term investments ⁽³⁾									122		122		—		—
Total	$	5,818	$	273	$	5,545	$	—	$	3,379	$	371	$	3,008	$	—

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Private Party Antitrust Action Related to the Merger. On ~~July 2,~~August 6, 2013, a lawsuit captioned Carolyn Fjord, et al., v. ~~US Airways Group, Inc.,~~AMR Corporation, et al., was filed in the ~~United States District Court for the Northern District of California.~~Bankruptcy Court. The complaint named as defendants US Airways Group, ~~and~~ US Airways, Inc. (US Airways), AMR and American, alleged that the effect of the Merger may be to create a monopoly in violation of Section 7 of the Clayton Antitrust Act, and sought injunctive relief and/or divestiture. On ~~August 6, 2013, the plaintiffs re-filed their complaint in the Bankruptcy Court, adding AMR and American as defendants. On~~ November 27, 2013, the Bankruptcy Court denied plaintiffs’ motion to preliminarily enjoin the Merger. On ~~May 12, 2017, defendants filed a~~August 29, 2018, the Bankruptcy Court denied in part defendants' motion for summary ~~judgment. On June 23, 2017, plaintiffs filed an opposition to defendants’ motion~~judgment, and fully denied plaintiffs' cross-motion for summary judgment. ~~Briefing~~The parties' evidentiary cases were presented before the Bankruptcy Court in a bench trial in March 2019. The parties submitted proposed findings of fact and conclusions of law and made closing arguments in April 2019, and we are awaiting the ~~parties’ respective motions concluded on September 1, 2017; a hearing date has not yet been set.~~Bankruptcy Court's decision. We believe this lawsuit is without merit and intend to vigorously defend against the allegations.

ultimate resolution and potential financial and other impacts on us are uncertain but could be material. See Part II, Item 1A. Risk Factors – “We may be a party to litigation in the normal course of business or otherwise, which could affect our financial position and ~~liquidity~~”liquidity” for additional discussion.

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 Relating~~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.

The COVID-19 outbreak, along with the measures governments and private organizations worldwide have implemented in an attempt to ~~AAG~~contain the spread of this pandemic, has resulted in a severe decline in demand for air travel, which has adversely affected our business, operations and ~~Industry-Related Risks~~financial condition to an unprecedented extent. Measures ranging from travel restrictions, “shelter in place” and quarantine orders, limitations on public gatherings to cancellation of public events and many others have 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 taken 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, implementing cost reductions, preserving cash and improving our overall liquidity position. We have reduced our system-wide capacity and will continue to monitor conditions and to proactively evaluate and adjust our schedule to match demand. Additionally, we have determined to retire certain mainline aircraft earlier than planned including Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 aircraft as well as regional aircraft, including certain 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. We have moved quickly to attempt to align our costs with our reduced schedule and made other cost-saving initiatives (including reductions in heavy maintenance expense, the deferral of marketing expenditures and reductions in contractor, event and training expenses and management compensation). Nonetheless, we are presently incurring significant negative cash flow and we expect this circumstance to continue until there is a significant recovery in demand for air travel. The duration and severity of the COVID-19 pandemic remain uncertain, and there can be no assurance that these actions will suffice to sustain our business and operations through this pandemic.

We have taken and will take additional actions to improve our financial position, including measures to improve liquidity, such as obtaining financial assistance under the CARES Act. We expect to receive approximately $5.8 billion from Treasury through the Payroll Support Program. In connection with the financial assistance we have received and expect to receive under this legislation, we will be required to comply with certain provisions of the CARES Act, including the requirement that funds provided pursuant to the Payroll Support Program be used exclusively for the continuation of payment of employee wages, salaries and benefits; the requirement against involuntary furloughs and reductions in employee pay rates and benefits through September 30, 2020; the requirement that certain levels of commercial air service be maintained; provisions prohibiting the repurchase of AAG’s common stock and the payment of common stock dividends through September 30, 2021; and restrictions on the payment of certain executive compensation until March 24, 2022. Additionally, under the Payroll Support Program, we and certain of our subsidiaries are subject to substantial and continuing reporting obligations. If we receive a secured loan from the U.S. Treasury Department pursuant to the CARES Act, the stock repurchase, dividend and executive compensation restrictions will remain in place through the date that is one year after such secured loan is fully repaid. The substance and duration of these restrictions may materially affect our operations, and we may not be successful in managing these impacts.

We may also pursue the issuance of additional unsecured and secured debt securities, equity securities and equity-linked securities, the sale of assets and/or the entry into additional bilateral and syndicated secured and/or unsecured credit 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 of significant additional indebtedness 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 COVID-19 may not be effective in offsetting decreased demand, and we will not be permitted to take certain strategic actions, such as prescribed levels of furloughs and lay-offs or reductions in capacity as a result of the restrictions imposed by the CARES Act, which could result in a material adverse effect on our business, operating results and financial condition.

The full extent of the ongoing impact of COVID-19 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 any recurrence of the pandemic, and related travel advisories and restrictions, the impact of COVID-19 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, any requirement for passengers to wear masks while traveling or have their temperature checked or have administered other tests or examinations prior to 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, the impact of COVID-19 on the financial health and operations of our business partners and future governmental actions, all of which are highly uncertain and cannot be predicted.

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 ~~revenues.~~business. In particular, the ongoing COVID-19 pandemic and associated decline in economic activity and increase in unemployment levels are expected to have a severe and prolonged effect on the global economy generally and, in turn, is expected to depress demand for air travel into the foreseeable future. Due to the uncertainty surrounding the duration and severity of this pandemic, we can provide no assurance as to when and at what pace demand for air travel will return to pre-pandemic levels, if at all. Accordingly, we cannot predict the ultimate impact of COVID-19 on our business, financial condition and results of operations. See also “The outbreak and global spread of COVID-19 has resulted in a severe decline in demand for air travel which has adversely impacted our and other airlines’ 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” and “The airline industry is intensely competitive and ~~dynamic”~~ ~~below.~~dynamic.”

We will need to obtain sufficient financing or other capital to operate successfully.

Our business ~~is very dependent~~plan contemplates continued significant investments related to modernizing 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 March 31, 2020, our planned aggregate expenditures for aircraft purchase commitments and certain engines on a consolidated basis for calendar years 2020-2024 would be approximately $8.4 billion. We may also require financing to refinance maturing obligations and to provide liquidity to fund other corporate requirements, in particular given the severe decline in revenue we have experienced as a result of COVID-19. 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 COVID-19; our non-investment grade credit rating; market conditions; the availability of assets to use as collateral for loans or other indebtedness, which has been reduced as a result of certain financing transactions we have undertaken since the beginning of 2020 and may be further reduced as we continue to seek significant additional liquidity; and the effect the COVID-19 pandemic has had on the ~~price~~global economy generally and ~~availability~~the air transportation industry in particular. Accordingly, we will need substantial financing or other capital

resources to finance such aircraft and engines and meet such other liquidity needs. If we are unable to arrange such 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 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 ~~aircraft fuel. Continued periods~~which are out of ~~high volatility in fuel costs, increased fuel prices or significant disruptions in~~our control, such as the ~~supply of aircraft fuel could have a significant negative impact on 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~~state of the ~~largest single cost items in~~domestic and global economies, the capital and credit markets’ view of our ~~business. Jet fuel market prices have fluctuated substantially over the past several years~~prospects and ~~prices continue to be highly volatile.~~

Although we are currently able to obtain adequate supplies of aircraft fuel, we cannot predict the future availability, price volatility or cost of aircraft fuel. Natural disasters, political disruptions or wars involving oil-producing countries, changes in fuel-related governmental policy, the strength of the U.S. dollar against foreign currencies, changes in access to petroleum product pipelinesavailable only on onerous terms 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, additional fuel price volatility and cost increases in the future.

Our aviation fuel purchase contracts generally do not provide meaningful price protection against increases in fuel costs. Prior to the closing of the Merger, we sought to manage the risk of fuel price increases by using derivative contracts. 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. Accordingly, as of September 30, 2017, we did not have any fuel hedging contracts outstanding. 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.

~~If in the future we enter into derivative contracts to hedge our fuel consumption, there~~conditions. There can be no assurance that ~~at any given time,~~ we will be successful in obtaining financing or other needed sources of capital to operate successfully. An inability to obtain necessary financing on acceptable terms would have ~~derivatives in place to provide any particular~~a material adverse impact on our business, results of operations and financial condition.

Our high level of protection against increased fuel costs or that our counterparties will be able to perform under our derivative contracts. To the extent we use derivative contracts that have the potential to create an obligation to pay upon settlement if prices decline significantly, such derivative contractsdebt and other obligations may limit our ability to ~~benefit~~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 substantial 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;

may 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 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 ~~fuel costs~~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;

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

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 have on our business, we currently anticipate that it will be necessary to obtain a significant amount of additional financing in the ~~future. Also,~~near-term from a ~~rapid decline~~variety of sources. Such financing may include the issuance of additional unsecured or secured debt securities, equity securities and equity-linked securities, the sale of assets as well as additional bilateral and syndicated secured and/or unsecured credit facilities, among other items. There can be no assurance as to the timing of any such financing transactions, which may be in the ~~projected price~~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 of ~~fuel at a time when~~significant additional indebtedness 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 and expect to receive through the Payroll Support and Loan Programs under the CARES Act, we will be required to comply with the

relevant provisions of the CARES Act, including the requirement that funds provided pursuant to the Payroll Support Program be used exclusively for the continuation of payment of employee wages, salaries and benefits; the requirement against involuntary furloughs and reductions in employee pay rates and benefits through 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, 2021; and restrictions on the payment of certain executive compensation until March 24, 2022. Additionally, under the Payroll Support Program 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 ~~fuel hedging contracts~~undertaken in ~~place~~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 and any additional financings we may be required to undertake as a result of the impact of COVID-19, could also impact our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business, and could materially adversely ~~impact~~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) for deposits of U.S. dollars. LIBOR tends to fluctuate based on general short-term ~~liquidity, because hedge counterparties could require that we post collateral~~interest rates, rates set by the U.S. Federal Reserve and other central banks, the supply of and demand for credit in the ~~form~~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 ~~cash~~LIBOR after 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or ~~letters~~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, is considering replacing U.S. dollar LIBOR with a newly created index, calculated based on repurchase agreements backed by treasury securities, we cannot currently predict whether this index will gain widespread acceptance as a replacement for LIBOR. It is not possible to predict the effect of ~~credit.~~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 – “~~Aircraft Fuel.~~Interest.”

We may in the future pursue amendments to our LIBOR-based debt transactions to provide for a transaction mechanism or other reference rate in anticipation of LIBOR’s discontinuation, but we may not be able to reach agreement with our lenders on any such amendments. As of March 31, 2020, we had $10.7 billion of borrowings based on LIBOR. The replacement of LIBOR with a comparable or successor rate could cause the amount of interest payable on our long-term debt to be different or higher than expected.

The loss of key personnel upon whom we depend to operate our business or the inability to attract additional qualified personnel could adversely affect our business.

We believe that our future success will depend in large part on our ability to retain or attract highly qualified management, technical and other personnel. We may not be successful in retaining key personnel or in attracting other highly qualified personnel. Among other things, the CARES Act imposes significant restrictions on executive compensation which, assuming we receive a secured loan from the U.S. Treasury Department, will remain in place through the date that is one year after such secured loan is fully repaid. Such restrictions, over time, will likely result in lower executive compensation in the airline industry than is prevailing in other industries which may present retention challenges in the case of executives presented with alternative, non-airline opportunities. Any inability to retain or attract significant numbers of qualified management and other personnel would have a material adverse effect on our business, results of operations and financial condition.

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. In many of our markets we compete with at least one low-cost ~~air carrier.~~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, 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 by the COVID-19 pandemic), as airlines under financial stress, or in bankruptcy, may institute pricing structures intended to achieve near-term survival rather than long-term viability.

Low-cost carriers ~~including~~(including so-called ultra-low-cost ~~carriers,~~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, ~~and~~ are price sensitive and therefore tend not to be loyal to any one particular carrier. A number of these low-cost 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, potentially, consolidation, and ~~could~~are expected to continue to have an impact on our revenues and overall performance. For example, as a result of divestitures completed in connection with gaining regulatory approval for the Merger, low-fare, low-cost carriers have gained additional access in a number of markets, including Ronald Reagan Washington National Airport (DCA), a slot-controlled airport. In addition, weWe and several other large network carriers have ~~announced “basic economy”~~implemented “Basic Economy” fares designed to more effectively compete against low-cost carriers ~~and~~, but we cannot predict whether these initiatives will be ~~successful or the competitive reaction of the~~successful. While historically these carriers have provided competition in domestic markets, we have recently experienced new competition from low-cost ~~carriers.~~carriers on international routes, including low-cost airlines executing international long-haul expansion strategies. The actions of ~~the~~existing or future low-cost carriers, including those described above, could have a material adverse effect on our operations and financial performance.

~~Our presence in international markets~~We provide air travel internationally, directly as well as through joint business, alliance, codeshare and similar arrangements to which we are a party. While our network is ~~not as extensive as that of~~comprehensive, compared to some of our ~~competitors.~~ 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.

In providing international air transportation, we compete to provide scheduled passenger and cargo service between the U.S. and various overseas locations with U.S. airlines, foreign investor-owned airlines and foreign state-owned or state-affiliated airlines. Competition is increasing from foreign state-owned and state-affiliated airlines ~~including~~in the Gulf region. These carriers ~~based~~have large numbers of international widebody aircraft in service and on order and are increasing service to the U.S. from locations both in and outside the Middle East. Service to and from locations outside of the Middle East is provided by some of these carriers under so-called “fifth freedom” rights permitted under international treaties which allow service to and from stopover points between an airline’s home country and the ~~three largest of which we~~ultimate destination. Such flights, such as a stopover in Europe on flights to the United States, allow the carrier to sell tickets for travel between the stopover point and the United States in competition with service provided by us. We believe these state-owned and state-affiliated carriers in the Gulf region, including their affiliated carriers, benefit from significant government ~~subsidies.~~ subsidies, which have allowed them to grow quickly, reinvest in their product and expand their global presence.

Our international service exposes us to foreign economies and the potential for reduced demand ~~such as we have recently experienced in Brazil and Venezuela,~~ when any foreign ~~countries~~country we serve ~~suffer~~suffers adverse local economic ~~conditions.~~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 ~~an increasing~~a substantial number of countries around the world, provide international airlines with open access to U.S. ~~markets.~~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.

We are party to antitrust-immunized cooperation agreements with British Airways, Iberia, Finnair, Royal Jordanian, Japan Airlines, LAN Airlines and LAN Peru. As part of the antitrust-immunized relationships, we have alsoAmerican has established a transatlantic joint business ~~agreements (JBAs)~~agreement (JBA) with British Airways, Iberia and Finnair, ~~and separately~~a transpacific JBA with Japan ~~Airlines. In October 2017, American~~ Airlines and ~~its transatlantic partners executed an amended~~a JBA relating to Australia and ~~restated JBA which, among other things, extends the term of the agreement. Also, we had previously signed a revised JBA~~New Zealand with Qantas Airways, ~~and applied for~~each of which has been granted antitrust immunity. The transatlantic JBA relationship benefits from a grant of antitrust immunity ~~with~~from the ~~U.S.~~ Department of Transportation (DOT) ~~for the revised relationship, but we withdrew that application in November 2016 after it~~and was ~~tentatively denied~~reviewed by the ~~DOT.~~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 are 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 JBA. We ~~intend~~continue to ~~file a new~~fully cooperate with the CMA. An application for antitrust immunity is also pending with the DOT ~~this year,~~to add Aer Lingus, which ~~if granted, would allow us~~is owned by the parent company of British Airways and Iberia, to ~~expand that relationship further. In addition, we have signed JBAs with certain air carriers of~~ the LATAM Airlines Group and have applied for approval in the relevant jurisdictions affected by such agreements, which applications have been approved in Brazil, Colombia and Uruguay, but are still pending before other relevant authorities, including the DOT and in Chile.transatlantic JBA. 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 agreements. No assurances can be given as to any benefits that we may derive from such arrangements or any other arrangements that may ultimately be ~~implemented.~~

implemented, or whether or not regulators will, or if granted continue to, approve or impose material conditions on our business activities.

Additional mergers and other forms of industry consolidation, including antitrust immunity grants, may take place and may not involve us as a participant. Depending on which carriers combine and which assets, if any, are sold or otherwise transferred to other carriers in connection with any such combinations, our competitive position relative to the post-combination carriers or other carriers that acquire such assets could be harmed. In addition, as carriers combine through traditional mergers or antitrust immunity grants, their route networks will grow, and that growth will result in greater overlap with our network, which in turn could ~~result in lower~~decrease our overall market share and ~~revenues for us.~~revenues. Such consolidation is not limited to the U.S., but could include further consolidation among international carriers in Europe and elsewhere.

~~Ongoing data security requirements~~Additionally, our AAdvantage loyalty program, which is an important element of our sales and ~~obligations~~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. These competitive factors affect our ability to attract and retain customers, increase usage of our loyalty program and maximize the revenue generated by our loyalty program.

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 ~~increase our costs,~~be volatile and ~~any significant data security incident could disrupt our operations and harm our reputation,~~fluctuate due to seasonality.

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

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

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

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

actual or potential disruptions to the United States 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 particular, an outbreak of a contagious disease such as the Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu, Zika virus, COVID-19 or any other similar illness, if it were to become associated with air travel or persist for an extended period, could materially affect the airline industry and us by reducing revenues and adversely impacting our operations and passengers’ travel behavior. See also "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.” 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.

Our business ~~requires~~is very dependent on the ~~appropriate~~price and ~~secure utilization~~availability of ~~customer, employee, business partner and other sensitive information, and confidence~~aircraft fuel. Continued periods of high volatility in fuel costs, increased fuel prices or significant disruptions in the ~~networks~~supply of aircraft fuel could have a significant negative impact on consumer demand, our operating results and ~~systems that allow us~~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 ~~operate. We cannot~~ be ~~certain~~highly volatile.

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 ~~will not~~may be ~~the target of attacks on~~able to increase our ~~networks and intrusions into~~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 data, particularly given recent advances in technical capabilities, and increased financial and political motivations to carry out cyber-attacks on physical systems, gain unauthorized access to information, and make information unavailable for use through, for example, ransomware or denial-of-service attacks, and otherwise exploit new and existing vulnerabilities in our infrastructure. The risk of a data security incident or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Furthermore,competitors in response to ~~these threats there has been heightened legislative and regulatory focus on attacks on critical infrastructures, including those~~changes in fuel prices.

Although we are currently able to obtain adequate supplies of aircraft fuel, we cannot predict the ~~transportation sector, and on data security~~future availability, price volatility or cost of aircraft fuel. Natural disasters (including hurricanes or similar events in the U.S. Southeast and ~~abroad (particularly~~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 ~~European Union (EU)), including requirements for varying levels of data subject notification~~cost to transport or store petroleum products, changes in access to petroleum product pipelines and terminals, speculation in the ~~event~~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 ~~data security incident.~~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.

~~In addition, many~~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. Although spot prices for oil and jet fuel are presently very low by historical standards, we do not currently view the market opportunities to hedge fuel prices as attractive because, among other things, the forward curve for the purchase of such products, or hedges related to such products, is very steep, any hedging would potentially require significant capital or collateral to be placed at risk, and our ~~commercial partners, including credit card companies,~~future fuel needs remain unclear due to uncertainties regarding air travel demand. Accordingly, as of March 31, 2020, we did not have ~~imposed data security standards~~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 and, while the price of fuel has been at historically low levels during the COVID-19 pandemic, there is no assurance that ~~we must meet. In particular,~~it will remain so and any increase in fuel prices, coupled with the severe reduction in demand we are ~~required by~~experiencing, during 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 data security incident or our failure to comply with applicable U.S. or foreign data security regulations or other data security standards may impact our brand and expose us to litigation and regulatory enforcement actions, resulting in fines, sanctions or other penalties. Such actions could further harm our reputation, adversely impact our relationship with our customers, employees, and stockholders, result in material financial impact, and disrupt business operations. Failure to appropriately address these issues could also give rise to similar legal risks and damages.

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 causeCOVID-19 pandemic will materially affect 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, and substantial non-cancelable obligations under aircraft and related spare engine purchase agreements. Moreover, currently a substantial portion of our assets are pledged to secure our indebtedness. Our substantial indebtedness and other obligations could have important consequences. For example, they:

~~may make it more difficult for us to satisfy our obligations under our indebtedness;~~

may 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 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;~~

~~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;~~

~~contain restrictive covenants that could:~~

~~limit our ability to merge, consolidate, sell assets, incur additional indebtedness, issue preferred stock, make investments and pay dividends;~~

~~limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions; and~~

~~result~~ in an ~~event of default under our indebtedness.~~

Further, a substantial portion of our indebtedness bears interest at fluctuating interest rates, primarily based on the London interbank offered rate for deposits of U.S. dollars (LIBOR). LIBOR tends to fluctuate based on general interest rates, rates set by the 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 these interest rates 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.adverse manner. See also the discussion ~~of interest rate risk~~ in Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk –“~~Interest.~~Aircraft Fuel.”

These obligations 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.

~~We will need to obtain sufficient financing or other capital to operate successfully.~~

Our business plan contemplates significant investments in modernizing our fleet. Significant capital resources will be required to execute this plan. We estimate that, based on our commitments as of September 30, 2017, our planned aggregate expenditures for aircraft purchase commitments and certain engines on a consolidated basis for calendar years 2017-2021 would be approximately $10.9 billion. Accordingly, we will need substantial financing or other capital resources to finance such aircraft. If we are unable to arrange financing for such aircraft 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 or may seek to negotiate deferrals for such aircraft with the aircraft manufacturers. Depending on numerous factors, 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 at the time we seek 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. An inability to obtain necessary financing on acceptable terms would have a material adverse impact on our business, results of operations and financial condition.

~~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 these obligations will depend on the performance of investments held in trust by the pension plans, interest rates for determining liabilities and actuarial experience. Currently, our minimum funding obligation for our pension plans is subject to favorable temporary funding rules that are scheduled to expire at the end of 2017. Our minimum pension funding obligations are likely to increase materially beginning in 2019, when we will be required to make contributions relating to the 2018 fiscal year. In addition, we may have significant obligations for other postretirement benefits, the ultimate amount of which depends on, among other things, the outcome of an adversary proceeding related to retiree medical and other postretirement benefits and life insurance obligations filed in the Chapter 11 Cases.

~~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 processing companies, under certain conditions (including, with respect to certain agreements, the failure of American to maintain certain levels of liquidity) to hold an amount of our cash (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. We are not currently required 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. An increase in the current holdbacks, up to and including 100% of relevant advanced ticket sales, could 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.

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.~~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). For the dates that the CBAs with our major work groups become amendable under the RLA, see Part I, Item 1. Business – “Employees and Labor Relations” in our ~~2016~~2019 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 athis “cooling off” period, unless an agreement is 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.

None of the unions representing our employees presently may lawfully engage in concerted slowdowns or refusals to work, such as strikes, ~~slow-downs,~~ sick-outs or other similar activity, against us. Nonetheless, there is a risk that ~~disgruntled~~ 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 Labor Relations” in our ~~2016~~2019 Form 10-K.

~~The inability to maintain~~

As of December 31, 2019, approximately 85% of our employees were represented for collective bargaining purposes by labor ~~costs at competitive levels would harm our financial performance.~~

unions. Currently, we believe our labor costs are 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 ~~some~~several important new labor agreements now and other agreements ~~may~~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, such as the employee profit sharing program we instituted effective January 1, 2016 and the mid-contract adjustment we provided to our flight attendants and pilots in 2017. As of December 31, 2016, approximately 85% of our employees were represented for collective bargaining purposes by labor unions. Some of our unions have brought and may continue to bring grievances to binding arbitration, including those related to wages. Unions may also bring court actions and may seek to compel us to engage in bargaining processes where we believe we have no such obligation. If successful, there is a risk these judicial or arbitral avenues could create material additional costs that we did not anticipate.

~~Interruptions or disruptions in service at one of our key facilities could have a material adverse impact on our operations.~~negotiations.

We ~~operate principally through hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix~~have significant pension and ~~Washington, D.C. Substantially all of~~other postretirement benefit funding obligations, which may adversely affect our flights either originate in or fly into one of these locations. A significant interruption or disruption in service at one of our hubs resulting from air traffic control (ATC) delays, weather conditions, natural disasters, growth constraints, relations with third-party service providers, failure of computer systems, disruptions at

airport facilities or other key facilities used by us to manage our operations, 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,liquidity, results of operations and financial condition.

IfOur pension funding obligations are significant. The amount of these 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 addition, we ~~are unable to obtain~~have significant obligations for retiree medical and ~~maintain adequate facilities and infrastructure throughout our system and, at some airports, adequate slots,~~other postretirement benefits. Additionally, we ~~may be unable to operate our existing flight schedule and to expand or change our route network~~participate in the ~~future,~~International Association of Machinists & Aerospace Workers (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 ~~may have~~under certain circumstances could cause our obligations to increase. 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 ~~material adverse impact on~~mass withdrawal, we could be subject to liability as imposed by law.

Any damage to our ~~operations.~~reputation or brand image could adversely affect our business or financial results.

~~In order~~Maintaining a good reputation globally is critical to ~~operate~~ our ~~existing and proposed flight schedule and, where desirable, add service along new~~business. Our reputation or ~~existing routes, we must~~brand image could be ~~able~~adversely impacted by, among other things, any failure to maintain ~~and/or obtain adequate gates, check-in counters, operations areas, operations control facilities~~high ethical, social and ~~office space. As airports around the world become more congested, we are not always able to ensure that our plans~~environmental sustainability practices for new service can be implemented in a commercially viable manner, given operating constraints at airports throughout our network, including due to inadequate facilities at desirable airports. Further, our operating costs at airports at which we operate, including our hubs, may increase significantly becauseall of capital improvements at such airports that we may be required to fund, directly or indirectly. In some circumstances, such costs could be imposed by the relevant airport authority without our approval.

In addition, operations at three major domestic airports, certain smaller domestic airports and certain foreign airports served by us are regulated by governmental entities through the use of slots or similar regulatory mechanisms which limit the rights of carriers to conduct operations at those airports. Each slot represents the authorization to land at or take off from the particular airport during a specified time period and may have other operational restrictions as well. In the U.S., the Federal Aviation Administration (FAA) currently regulates the allocation of slots or slot exemptions at DCA and two New York City airports: John F. Kennedy International Airport and La Guardia Airport (LGA). In addition to slot restrictions, operations at LGA and DCA are also limited based on the stage length of the flight. Our operations at these airports generally require the allocation of slots or similar regulatory authority. Similarly, our operations at international airports in Beijing, Frankfurt, London Heathrow, Paris, Tokyo and other airports outside the U.S. are regulated by local slot authorities pursuant to the International Airline Trade Association (IATA) Worldwide Scheduling Guidelines and applicable local law. 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 activities, our impact on the environment, public pressure from investors or policy groups to change our ~~schedules. However, there is no assurance that we will be able~~policies, such as movements to ~~obtain sufficient slots~~institute a “living wage,” customer perceptions of our advertising campaigns, sponsorship arrangements or ~~analogous authorizations~~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. 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 ~~future~~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 ~~as to the cost~~perceived risk 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. We cannot provide any assurance that regulatory changes regarding the allocation of slots or similar regulatory authority will not have a material adverse impactinfection on our ~~operations.~~

Our ability to provide service can also be impaired at airports, such as Chicago O’Hare International Airport (ORD) and Los Angeles International Airport, where the airport gate and other facilities are 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~~flights could have a material adverse effect on the public's perception of us, which could harm our ~~business, results~~reputation and business. We have taken various measures to reassure our team members and the traveling public of ~~operations~~the safety of air travel, including the provision of protective equipment and ~~financial condition.~~enhanced cleaning procedures onboard aircraft and in airports. We 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 COVID-19 will be sufficient to restore the confidence of consumers in the safety of air travel.

~~If we encounter problems with~~We are at risk of losses and adverse publicity stemming from any ofpublic incident involving our ~~third-party regional operators~~company, our people or ~~third-party service providers,~~ our ~~operations could be adversely affected by a resulting decline in revenue~~brand, including any accident or ~~negative~~other public ~~perception about~~incident involving our ~~services.~~

~~A significant portion~~personnel or aircraft, or the personnel or aircraft of our regional, ~~operations are conducted by third-party operators on our behalf, primarily under capacity purchase agreements. Due to our reliance on third parties to provide these essential services,~~codeshare or joint business operators.

In a modern world where news can be captured and travel rapidly, we are ~~subject to the risks of disruptions to their operations, which may result from many of the same~~at risk ~~factors disclosed in this report, such as the impact~~ of adverse ~~economic conditions,~~publicity stemming from any public incident involving our company, our people or our brand. Such an incident could involve the ~~inability of third parties to hire~~actual or ~~retain necessary personnel, including in particular pilots, and other risk factors, such as an out-of-court or bankruptcy restructuring~~alleged behavior of any of our regional operators. Many 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. Volatility in fuel prices, disruptions to capital markets 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. For example,more than 131,000 employees. Further, if our personnel, one of our ~~significant third-party operators~~aircraft, a type of ~~regional capacity, Republic, commenced a Chapter 11 bankruptcy~~aircraft in ~~2016. In connection with Republic’s bankruptcy process, we restructured~~ our ~~contractual relationship with Republic and received~~fleet, or personnel of, or an ~~approximate 25% equity interest in Republic in consideration for~~aircraft that is operated under our ~~unsecured claim in the case. We may also experience disruption to~~brand by, one of our regional ~~operations if~~operators or an airline with which we ~~terminate~~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 ~~capacity purchase agreement with~~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 ~~or more~~ of our ~~current~~aircraft (or personnel and aircraft of our regional operators and

~~transition the services~~ our codeshare partners), or a type of aircraft fleet could create an adverse public perception, which could harm our reputation, result in air travelers being reluctant to ~~another provider. Any significant disruption to~~fly on our aircraft or those of our regional ~~operations would have a material adverse effect on our business, results of operations~~operators or codeshare partners, 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, provision of information technology and services, regional operations, aircraft maintenance, ground services and facilities, reservations 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. Any material problems with the efficiency and timeliness of contract services, resulting from financial hardships or otherwise, could have a material adverse effect on 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.~~

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 and online travel agents (OTAs) (e.g., Expedia, including its booking sites Orbitz and Travelocity, and The Priceline Group), to distribute a significant portion of our airline tickets, and we expect in the future to continue to rely on these channels and hope to expand their ability to distribute and collect revenues for ancillary products (e.g., fees for selective seating). These distribution channels are more expensive and at present have less functionality in respect of ancillary product offerings than those we operate ourselves, such as our call centers and our website. Certain of these distribution channels also effectively restrict the manner in which we distribute our products generally. To remain competitive, we will need to manage successfully our distribution costs and rights, increase our distribution flexibility and improve the functionality of third-party distribution channels, while maintaining an industry-competitive cost structure. These imperatives may affect our relationships with GDSs and OTAs, including as consolidation of OTAs continues or is proposed to continue, and require us to make significant investments in potential new distribution technologies. 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 onadversely impact our business, results of operations and financial condition.

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 has passed laws, and the DOT, the FAA, the Transportation Security Administration, ~~and~~ the Department of Homeland Security and several of their respective international counterparts have issued regulations and a number of ~~directives and~~ other ~~regulations,~~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. Additionally,~~aircraft, and in some instances have resulted in the temporary grounding of aircraft types altogether (including the March 2019 grounding of all Boeing 737 MAX aircraft, including the 24 aircraft in our fleet, which remains in place as of the date of this report), or otherwise caused substantial disruption and resulted in material costs to us and lost revenues. The FAA ~~is presently considering regulations that would impose a cap on ticket change fees charged by airlines.~~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. 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.

DOT consumer rules, ~~that took effect~~and rules promulgated by certain analogous agencies in ~~2010 require~~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 ~~reservations~~ticketing process, at the airport, and onboard the aircraft, and require disclosures concerning airline fares and ancillary fees such as baggage fees. ~~The DOT has been aggressively investigating alleged violations of these rules.~~ Other DOT rules apply to post-ticket purchase price increases and an expansion of tarmac delay regulations to international airlines. In 2020, the DOT is expected to implement a number of new regulations that will impact us, including disability rules for accessible lavatories 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.

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 ~~which~~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;

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 (for example, a “passenger bill of rights”);~~standards;

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; ~~and~~

the adoption of more restrictive locally-imposed noise ~~restrictions.~~restrictions; and

restrictions on travel or special guidelines regarding aircraft occupancy or hygiene related to COVID-19.

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 ~~United States National Airspace System (the~~ ATC ~~system)~~system is not successfully ~~managing~~modernizing to meet the growing demand for U.S. air travel. Air traffic controllers rely on outdated procedures and technologies that ~~are~~ routinely ~~overwhelmed and~~ compel airlines to fly inefficient routes or take significant delays on the ground. The ATC system’s inability to ~~handle~~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 ~~2014~~2015 and 2017, respectively, at the ~~ATC systems in Chicago took weeks to recover following a fire in the ATC tower at ORD, which~~Washington Air Route Control Center resulted in ~~thousands~~cancellations and delays of ~~cancelled flights.~~hundreds of flights traversing the greater Washington, D.C. airspace.

~~The~~In the early 2000s, the FAA ~~has~~ embarked on ~~transforming~~a path to modernize the national airspace system, ~~to include~~including migration from the current radar-based ~~air traffic control~~ATC system to a GPS-based system. This modernization of the ATC ~~modernization,~~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 ~~ATC~~this modernization will be available to the public and the airlines. Failure to update the ATC system in a timely manner and the substantial ~~funding requirements~~costs that may be imposed on airlines ofin order to fund a modernized ATC system may have a material adverse effect on our business. ~~We support legislative efforts that would establish a nimble not-for-profit entity better suited~~

Further, our business has been adversely impacted when government agencies have ceased to ~~manage~~operate as expected including due to partial shut-downs, sequestrations or similar events and the ~~long-term investments~~COVID-19 pandemic. These events have resulted in, ~~technology~~among other things, reduced demand for air travel, an actual or perceived reduction in ATC and ~~provide a governance structure needed to successfully implement NextGen~~security screening resources and ~~improve~~related travel delays, as well as disruption in the ~~operation~~ability of the ~~air traffic control system.~~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 many countries, 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 ~~routes, such an event~~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, JBAs, and other alliance arrangements by and among other airlines could impair the value of our business and assets on the open skies routes. ~~For example,~~

Brexit occurred on January 31, 2020 under 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, including London Heathrow Airport (LHR). As a resultterms of the agreement ~~we face increased competition in these markets, including LHR. The pending~~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). There will now be a transition period during which the United Kingdom and the EU will seek to negotiate an agreement governing their future relationship, including in relation to air services. Under the Withdrawal Agreement, this transition period is scheduled to end on December 31, 2020, with a potential extension of up to two years, although the United Kingdom government has passed legislation preventing any such extension of the transition period. 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. During the transition period, our current air services may continue as we currently conduct them. However, Brexit will mandate further modification in the current regulatory ~~regime. Changes~~regime, including in relation to commercial air service. The precise scope of traffic rights between the EU and the United Kingdom remains uncertain and therefore the continuation of our current services, and those of our partners, is not assured and could be subject to disruption. During the transition period, the United Kingdom and the EU will seek to implement a new air services agreement. We cannot predict the terms of any such successor air services agreement or whether changes in the relationship between the United Kingdom and the EU, including whether or not an agreement governing their future relationship is reached before the end of the transition period, 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.

~~The U.S. government has negotiated “open skies” agreements~~We operate a global business with ~~many countries, which allow unrestricted route authority access between~~significant operations outside of the U.S. Our current international activities 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~~prospects have ~~open skies agreements.~~

~~The airline industry is heavily taxed.~~

~~The airline industry is subject to extensive government fees~~been 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~~future could be adversely affected by ~~federal legislation, most major U.S. airports impose a passenger facility charge per passenger on us. In addition,~~government policies, reversals or delays in the ~~governments~~opening of foreign ~~countries~~markets, increased competition in ~~which we operate impose~~international markets, the performance of our alliance, joint business and codeshare partners in a given market, exchange controls or other restrictions on ~~U.S. airlines, including us, various fees~~repatriation of funds, currency and ~~taxes,~~political risks (including changes in exchange rates and ~~these assessments have been increasing~~currency devaluations), environmental regulation, increases 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~~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 has severely impacted the demand for international travel and has resulted in the imposition of significant governmental restrictions on commercial air service to or from certain regions. We have responded by suspending a significant majority of our international flights through at least June 2020 and have announced plans to delay the introduction of certain new 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-pandemic levels, if at all, or whether certain international destinations we previously served will be economical in the future. 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 ~~expenses, they represent an additional cost to~~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 ~~customers. There are continuing efforts in Congress and in other countries to raise different portions~~assets located outside the United States. These conditions, as well as any further delays, devaluations or imposition of ~~the various taxes, fees, and charges imposed on airlines and their passengers, and we~~more stringent repatriation restrictions, may ~~not be able to recover all of these charges from our customers. Increases in such taxes, fees and charges could negatively impact~~materially adversely affect our business, results of operations and financial condition.

~~Under DOT regulations, all governmental taxes and fees must~~More generally, our industry may be ~~included~~affected by any deterioration in global trade relations, including shifts in the ~~prices~~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 ~~quote~~purchase, including certain of our aircraft and related parts, are sourced from suppliers located in foreign countries, and the imposition of new tariffs, or ~~advertise to our customers. Due to the competitive revenue environment, many increases~~any increase in ~~these fees and taxes have been absorbed~~existing tariffs, by the ~~airline industry rather than being passed~~U.S. government in respect of the importation of such products could materially increase the amounts we pay for them. In particular, on toOctober 2, 2019, the ~~customer. Further increases in fees and taxes may reduce demand for air travel, and thus our revenues.~~

~~Potential tax reform in~~Office of the U.S. ~~may result in significant changes to U.S. federal income taxation law, including changes to~~Trade Representative (USTR), as part of an ongoing dispute with the ~~U.S. federal income taxation of corporations (including us), which could,~~EU before the World Trade Organization (WTO) concerning, among other things, ~~result~~aircraft subsidies, was authorized by an arbitration tribunal of the WTO to impose up to $7.5 billion per year in ~~a lower corporate tax~~import tariffs on certain goods originating from the EU. In October 2019, the USTR imposed tariffs on certain imports from the EU, including certain Airbus aircraft that we previously contracted to purchase, which were initially subject to an ad valorem duty of 10%. On February 14, 2020, the USTR increased such duty to 15% effective March 18, 2020. While the scope and rate ~~the elimination~~ of ~~certain tax deductions~~these tariffs are subject to change, if and ~~preferences, and impacts~~ to the ~~international tax environment. We~~extent these tariffs are ~~currently unable to predict whether such changes will occur and, if so, the impact such changes would have~~imposed 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. There will now be a transition period during which the United Kingdom and the EU will seek to negotiate an agreement governing their future relationship, including in relation to air services. Under the Withdrawal Agreement, this transition period is scheduled to end on December 31, 2020, with a potential extension of up to two years, although the United Kingdom government has passed legislation preventing any such extension of the transition period. We face risks associated with Brexit, notably given the extent of our ~~subsidiaries.~~

~~Changes~~passenger and cargo traffic and that of our joint business partners that flows through LHR in the United Kingdom. During the transition period, our current air services may continue as we currently conduct them. The precise scope of traffic rights between the EU and the United Kingdom remains uncertain and therefore the continuation of our current services, and those of our partners, is not assured and could be subject to disruption. During the transition period, the United Kingdom and the EU will seek to implement a new air services agreement. We cannot predict the terms of any such successor air services agreement or whether changes in the relationship between the United Kingdom and the EU, including whether or not an agreement governing their future relationship is reached before the end of the transition period, could materially adversely affect our business, ~~model that are designed to increase revenues may not be successful~~results of operations and ~~may cause operational difficulties or decreased demand.~~financial condition.

We have recently instituted, and intend to institute in the future, changes to our business model to increase revenues and offset costs. These measures include premium economy service, basic economy service and charging separately for services that had previously been included within the price of a ticket and increasing other pre-existing fees. 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 you that these measures or any future initiatives will be successful in increasing our revenues. Additionally, the implementation of these initiatives may create logistical challenges that could harm the operational performance of our airline. Also, any new and increased fees might 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.

~~The loss of key personnel upon whom we depend to operate our business or the inability to attract additional qualified personnel~~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 ~~business.~~

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. Brexit could also lead 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 JBA. We ~~believe that our future success will depend in large part~~continue to fully cooperate with the CMA. The impact on our ~~ability~~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 ~~retain~~Brexit, cannot be predicted, including whether or ~~attract highly qualified management, technical~~not regulators will continue to approve or impose material conditions on our business activities. Any of these effects, and other personnel. We may not be successful in retaining key personnel or in attracting other highly qualified personnel. Any inability to retain or attract significant numbers of qualified management and other personnel would have a material adverse effect onothers we cannot anticipate, could 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-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.

We ~~operate a global business with international operations that~~ are subject to ~~economic~~risks associated with climate change, including increased regulation of our CO₂emissions and ~~political instability~~the potential increased impacts of severe weather events on our operations and infrastructure.

There is increasing global regulatory focus on climate change and greenhouse gas (GHG)emissions, including carbon dioxide (CO₂). In particular, the International Civil Aviation Organization is in the process of adopting rules, including the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), that will require American to limit the CO₂ emissions of a significant majority of our international flights to a baseline level equal to our 2019-2020 average emissions from such flights.

At this time, the costs of our obligations under CORSIA are uncertain and cannot be fully predicted. For example, we will not directly control our CORSIA compliance costs during the CORSIA Pilot and First Phases because such phases include a sharing mechanism for the growth in emissions for the global aviation sector. In addition, there is uncertainty with respect to the future supply, demand and price of sustainable or lower carbon aircraft fuel, carbon offset credits and technologies that could allow airlines to reduce their emissions of CO₂. 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 will often affect global competitors differently and frequently offer no meaningful aviation environmental improvements. 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 ~~been,~~adopted or are considering adopting programs to regulate domestic GHG emissions. Finally, certain airports have adopted, and others could in the future ~~may continue to be, adversely affected by numerous events, circumstances~~adopt, GHG emission or ~~government actions beyond our control.~~

~~We operate a global business with operations outside of the U.S. Our current international activities and prospects have been and in the future~~climate-neutral goals that could be adversely affected by 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 ofimpact our operations ~~including the inability~~or require us to ~~obtain~~make changes or ~~retain needed route authorities and/or slots. In particular, fluctuations~~investments in ~~foreign currencies, including devaluations, exchange controls~~our infrastructure.

All such climate change-related regulatory activity and ~~other restrictions on the repatriation of funds, have significantly affected and~~developments may ~~continue to significantly affect our operating performance, liquidity and the value of any cash held outside the U.S. in local currency.~~

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.~~results by requiring us to reduce our emissions, make capital investments to modernize certain aspects of our operations, 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.

~~The United Kingdom held a referendum~~Finally, the potential physical effects of climate change, such as increased frequency and severity of storms, floods, fires, sea-level rise and other climate-related events, could affect our operations, infrastructure and financial results. Operational impacts, such as the canceling of flights, could result in ~~June 2016 regarding its membership in~~loss of revenue. We could incur significant costs to improve the ~~EU in which a majority~~climate resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We are not able to accurately predict the ~~United Kingdom electorate voted in favor~~materiality of the British government taking the necessary action for the United Kingdom to leave the EU. In March 2017, the United Kingdom served notice of its decision to withdraw to the EU, formally initiating the withdrawal process. Serving this notice began the two-year period for the United Kingdom to negotiate the terms for its withdrawal from the EU. At this time, it is not certain what steps will need to be taken to facilitate the United Kingdom’s exit from the EU. The implications of the United Kingdom withdrawing from the EU are similarly unclear at present because it is unclear what relationship the United Kingdom will have with the EU after withdrawal. We face risksany potential losses or costs associated with the ~~uncertainty following the referendum and the consequences that may flow from the decision to exit the EU, notably given the extent~~physical effects of our passenger and cargo traffic that flows between the U.S. and the EU via LHR in the United Kingdom. Among other things, the exit of the United Kingdom from the EU could adversely affect European or worldwide economic or market conditions and could contribute to further instability in global financial markets. In addition, the exit of the United Kingdom from the EU has created uncertainty as to the future trade relationship between the EU and the United Kingdom, including as to air traffic services. The exit of the United Kingdom could also lead to legal and regulatory uncertainty and potentially divergent treaties, laws and regulations as the United Kingdom determines which EU treaties, laws and regulations to replace or replicate, including those 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. The impact on our business of any treaties, laws and regulations that replace the existing EU counterparts cannot be predicted. Any of these effects, and others we cannot anticipate, could materially adversely affect our business, results of operations and financial condition.climate change.

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

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

with environmental laws and regulations can require significant expenditures, and violations can lead to significant fines and penalties.

We are also subject to other environmental laws and regulations, including those that require us to investigate and remediate soil or groundwater to meet certain remediation standards. Under federal law, generators of waste materials, and current and former owners or operators of facilities, can be subject to liability for investigation and remediation costs at locations that have been identified as requiring response actions. Liability under these laws may be strict, joint and several, meaning that we could be liable for the costs of cleaning up environmental contamination regardless of fault or

the amount of waste directly attributable to us. We have liability for investigation and remediation costs at various sites, although such costs currently are not expected to have a material adverse effect on our business.

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

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

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

There is increasing global regulatory focus on climate change and greenhouse gas (GHG) emissions. For example, in October 2016, International Civil Aviation Organization (ICAO) passed a resolution adopting the ICAO Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which is a global, market-based emissions offset program to encourage carbon-neutral growth beyond 2020. The CORSIA was supported by the board of Airlines For America (the principal U.S. airline trade association) and IATA (the principal international airline trade association), and by American and many other U.S. and foreign airlines. The CORSIA will increase operating costs for American and most other airlines, including other U.S. airlines that operate internationally, but the implementation of a global program, as compared to regional emission reduction schemes, should help to ensure that these costs will be more predictable and more evenly applied to American and its competitors. The CORSIA is expected to be implemented in phases, beginning in 2021. Certain details still need to be developed and the impact of the CORSIA cannot be fully predicted. While we do not anticipate any significant emissions allowance expenditures in 2017, compliance with the CORSIA or similar emissions-related requirements could significantly increase our operating costs beyond 2017. Further, the potential impact of the CORSIA or other emissions-related requirements on our costs will ultimately depend on a limited number of ~~factors, including baseline emissions,~~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, under our current fleet plan, by the ~~price~~end of ~~emission allowances~~2020 all of our mainline aircraft will have been manufactured by either Airbus or ~~offsets~~Boeing and all of our regional aircraft will have been manufactured by either Bombardier or Embraer. Further, our supplier base continues to consolidate as evidenced by the recent acquisition of Rockwell Collins by United Technologies, the recent transactions involving Airbus and Bombardier and the pending transactions involving Boeing and Embraer, and Bombardier and Mitsubishi. Due to the limited number of ~~future flights subject~~these suppliers, we are vulnerable to ~~such emissions-related requirements. These~~any problems associated with the performance of their obligation to supply key aircraft, parts and engines, including design defects, mechanical problems, contractual performance by suppliers, adverse perception by the public that would result in customer avoidance of any of our aircraft or any action by the FAA or any other regulatory authority resulting in an inability to operate our aircraft, even temporarily. In particular, in March 2019, the FAA ordered the grounding of all Boeing 737 MAX aircraft, which remains in place as of the date of this report.

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, ~~have~~or reductions to our schedule, thereby reducing revenues. If new aircraft orders are not ~~been completely defined~~filled on a timely basis, we could face higher financing and ~~could fluctuate.~~

operating costs than planned. In addition, ~~in December 2015, at~~if the ~~21st Conference of the Parties to the United Nations Framework Convention on Climate Change, over 190 countries,~~aircraft we receive do not meet expected performance or quality standards, including the United States, reached an agreement (the Paris Agreement) to reduce global greenhouse gas emissions. While the United States has since announced that it will withdraw from the Paris Agreement and there is no express reference to aviation in that agreement, to the extent countries implement that agreement or impose other climate change regulations, either with respect to 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 ~~aviation industry or with respect~~FAA grounded all Boeing 737 MAX aircraft, including the 24 aircraft in our fleet. For the duration of the Boeing 737 MAX grounding, we have been unable to ~~related industries such~~take delivery of the Boeing 737 MAX aircraft we have on order from Boeing and have in some instances been required to extend the service lives of older, less efficient aircraft and delay service that we planned to offer. Further, deliveries of Boeing 737 MAX aircraft have remained suspended following the grounding, and Boeing is not currently manufacturing new 737 MAX aircraft. Depending on the ultimate duration of the grounding, various Boeing 737 MAX aircraft financings and financing commitments we previously obtained may be terminated and, as a result, we may be required to obtain alternate financing and financing commitments for these aircraft, which may not be available on terms and conditions as favorable as the ~~aviation fuel industry, it could have an adverse direct or indirect effect on our business.~~

~~The Environmental Protection Agency (EPA) recently issued an endangerment finding that aircraft engine GHG emissions cause or contribute~~previously obtained financings and financing commitments. Further, once the grounding has been lifted, we are likely to air pollution that may reasonably be anticipated to endanger public health or welfare, which is a precursor to EPA regulation of aircraft engine GHG emission standards. It is anticipated that any such standards established by the EPA would closely align with emission standards currently being developed by ICAO. In February 2016, the ICAO Committee on Aviation Environmental Protection recommended that ICAO adopt carbon dioxide certification standards that would apply to new type aircraft certified beginning in 2020, and would be phased in for newly manufactured existing aircraft type designs starting in 2023.

In addition, several states have adopted or are considering initiatives to regulate emissions of GHGs, primarily through the planned development of GHG emissions inventories and/or regional GHG cap and trade programs. Depending on the

~~scope of such regulation, certain of our facilities and operations, or the operations of our suppliers, may~~ be subject to training requirements. Boeing has recommended that pilots receive special flight simulator training before operating the Boeing 737 MAX aircraft, and although the FAA is ultimately responsible for establishing training requirements for operating the Boeing 737 MAX, such additional ~~operating~~training would further delay the aircraft’s return to service and impose restrictions on our ability to optimize our fleet. This and other ~~permit~~operational requirements ~~likely resulting in increased operating costs.~~

~~These regulatory efforts, both internationally~~ and inuncertainties regarding the ~~U.S. at~~timing of the ~~federal~~delivery of Boeing 737 MAX aircraft we have on order and ~~state levels, are still developing, and~~how rapidly we ~~cannot yet determine what the final regulatory programs or their impact~~ will be able to take delivery of and integrate such Boeing 737 MAX aircraft into our fleet could potentially result in the U.S., the EU or in other areas in which we do business. However, such climate change-related regulatory activity in the future may adversely affect our business and financial results by requiring us to reduce our emissions, purchase allowances or otherwise pay for our emissions. Such activity may also impact us indirectly by increasingfurther significant constraints on our operating ~~costs, including fuel costs.~~efficiency, capacity and growth plans. In addition, the timing of the 737 MAX’s recertification and return to service, and the resumption of deliveries, could be significantly impacted by the COVID-19 pandemic.

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

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

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

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

Among the principal risks of integrating our businesses and operations are the risks relating to integrating various computer, communications and other technology systems that will be necessary to operate US Airways and American as a single airline and to achieve cost synergies by eliminating redundancies in the businesses. While we have to date successfully integrated ~~several~~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. ~~The integration of these systems in~~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 ~~forecast.~~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 implementation will be a complex and time-consuming project involving substantial expenditures for implementation consultants, system hardware, software and implementation activities, as well as the transformation of business and financial processes.

We cannot assure ~~you~~ that our security measures, change control procedures or disaster recovery plans will be adequate to prevent disruptions or delays in connection with systems integration or replacement. Disruptions in or changes to these systems could result in a disruption to our business and the loss of important data. Any of the foregoing could result in a material adverse effect on our business, results of operations and financial condition.

~~We are at risk of losses~~Evolving data security and ~~adverse publicity stemming from~~privacy requirements could increase our costs, and any ~~public~~significant data security incident ~~accident involving~~could disrupt our ~~personnel or aircraft or the personnel or aircraft of our regional or codeshare operators.~~

If our personnel or one of our aircraft, or personnel of, or an aircraft that is operated under our brand by, one of our regional operators or an airline with which we have a marketing alliance, joint business or codeshare relationship, were to be involved in a public incident, accident or catastrophe, we could be exposed to significant reputational harm and potential legal liability. The insurance we carry may be inapplicable or inadequate to cover any such incident, accident or catastrophe. In the event

that our insurance is inapplicable or not adequate, we may be forced to bear substantial losses from an incident or accident. In addition, any such incident, accident or catastrophe involving our personnel or one of our aircraft (or personnel and aircraft of our regional operators and our codeshare partners) could create an adverse public perception, which couldoperations, harm our reputation, ~~result in air travelers being reluctant~~expose us to ~~fly on our aircraft or those of our regional operators or codeshare partners,~~legal risks and otherwise materially adversely ~~impact~~affect our business, results of operations and financial condition.

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

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

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

A significant cybersecurity incident could result in a range of potentially material negative consequences for us, including unauthorized access to, disclosure, modification, misuse, loss or destruction of company systems or data; theft of sensitive, regulated or confidential data, such as personal identifying information or our intellectual property; the loss of functionality of critical systems through ransomware, denial of service or other ~~loss~~attacks; a deterioration in our relationships with business partners and other third parties; and business delays, service or system disruptions, damage to equipment and injury to persons or property. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of ~~anticipated fleet~~time. The constantly changing nature of the threats means that we may not be able to prevent all data security breaches or misuse of data. Similarly, we depend on the ability of our key commercial partners, including our regional carriers, distribution partners and technology vendors, to conduct their businesses in a manner that complies with applicable security standards and assures their ability to perform on a timely basis. A security failure, including a failure to meet relevant payment security standards, breach or other significant cybersecurity incident affecting one of our partners could result in potentially material negative consequences for us.

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

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 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 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 significant 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 have significantly reduced our regional capacity and ~~failure~~expect to maintain these reduced levels of ~~new aircraft~~capacity for the foreseeable future. We expect the disruption to ~~perform as expected,~~services resulting from the COVID-19 pandemic to adversely affect our regional operators, some of whom may ~~adversely impact~~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.

~~The success~~In addition, our reliance upon others to provide essential services on behalf of our ~~business depends on, among other things, effectively managing the number and types of aircraft we operate. In many cases, the aircraft we intend to operate are not yet~~operations may result in our ~~fleet, but~~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 ~~have contractual commitments~~decide to ~~purchase~~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 ~~lease them. If for any reason we were unable to accept~~at all. Any material problems with the efficiency and timeliness of contract services, resulting from financial hardships or ~~secure deliveries of new aircraft on contractually scheduled delivery dates, this~~otherwise, could have a ~~negative~~material adverse effect on 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.

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

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

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

In light of constraints on existing facilities, there is presently a significant amount of capital spending underway at major airports in the United States, including large projects underway at a number of airports where we have significant operations, such as Chicago O'Hare International Airport (ORD), Los Angeles International Airport (LAX), LaGuardia Airport (LGA) and Ronald Reagan Washington National Airport (DCA). This spending is expected to result in increased costs to airlines and the traveling public that use those facilities as the airports seek to recover their investments through increased rental, landing and other facility costs. In some circumstances, such costs could be imposed by the relevant airport authority without our approval. Accordingly, our operating costs are expected to increase significantly at many airports at which we operate, including a number of our hubs and gateways, as a result of capital spending projects currently underway and additional projects that we expect to commence over the next several years.

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

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

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

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 and gateways in Charlotte, Chicago, Dallas/Fort Worth, London Heathrow, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C. 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 (such as electric utility or telecommunications providers), failure of computer systems, disruptions at airport facilities or other key facilities used by us to manage our operations (such as occurred in the United Kingdom at LGW on December 20, 2018 and LHR on January 8, 2019 due to unauthorized

drone activity), labor relations, power supplies, fuel supplies, terrorist activities, or otherwise could result in the cancellation or delay of a significant portion of our flights and, as a result, could have a severe impact on our business, results of operations and financial condition. ~~Our failure to integrate newly purchased aircraft into our fleet as planned might require us to seek extensions~~We have limited control, particularly in the short term, over the operation, quality or maintenance of many of the ~~terms for some leased aircraft~~services on which our operations depend and over whether vendors of such services will improve or ~~otherwise delay the exit of certain aircraft from~~continue to provide services that are essential to our ~~fleet. Such unanticipated extensions or delays may require us~~business.

Changes to operate existing aircraft beyond the point at which it is economically optimal to retire them, resulting in increased maintenance costs. If new aircraft orders are not filled on a timely basis, we could face higher operating costs than planned. In addition, if the aircraft we receive do not meet expected performance or quality standards, including with respect to fuel efficiency and reliability, our business ~~results of operations~~model that are designed to increase revenues may not be successful and ~~financial condition could be adversely impacted.~~may cause operational difficulties or decreased demand.

We ~~depend~~have recently 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, increasing other pre-existing fees, reconfiguration of our aircraft cabins, and efforts to optimize our network including by focusing growth on a limited number of ~~suppliers for aircraft, aircraft engines~~large hubs. We may introduce additional initiatives in the future; however, as time goes on, we expect that it will be more difficult to identify and ~~parts.~~

implement additional initiatives. We ~~depend on a limited number~~cannot assure that these measures or any future initiatives will be successful in increasing our revenues. Additionally, the implementation of ~~suppliers for aircraft, aircraft engines and many aircraft and engine parts. As a result, we are vulnerable to any problems associated with~~these initiatives may create logistical challenges that could harm the ~~supply~~operational performance of ~~those aircraft, parts and engines, including design defects, mechanical problems, contractual performance by the suppliers,~~our airline or ~~adverse perception by the public that would~~ result in ~~customer avoidance~~decreased demand. Also, our implementation of any new or ~~in actions by~~increased fees might reduce the ~~FAA resulting in an inability to operate our aircraft.~~

~~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:~~

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

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

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

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

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

~~weather and natural disasters.~~

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

A higher than normal number of pilot retirements, more stringent duty time regulations, increased flight hour requirements for commercial airline pilots and other factors have caused a shortage of pilots which could materiallyany inability to protect them may adversely affect our ~~business.~~

We currently have a higher than normal number of pilots eligible for retirement. Among other things, the extension of pilot careers facilitated by the FAA’s 2007 modification of the mandatory retirement age from age 60 to age 65 has now been fully implemented, resulting in large numbers of pilots in the industry approaching the revised mandatory retirement age. Further, in July 2013, the FAA issued regulations that increased the flight hours required for pilots working for airlines certificated under Part 121 of the Federal Aviation Regulations. In addition, on January 4, 2014, more stringent pilot flight and duty time requirements under Part 117 of the Federal Aviation Regulations took effect. These and other factors, including reductions in the number of military pilots being trained by the U.S. armed forces and available as commercial pilots upon their retirement from military service, 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 to hire pilots to replace retiring pilots. 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~~business and financial results.

~~The terrorist attacks of September 11, 2001 led~~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 ~~increase in insurance premiums~~ and valuable aspect of our business. We protect our intellectual property rights through a ~~decrease in the insurance coverage available to commercial air carriers. Accordingly,~~combination of trademark, copyright and other forms of legal protection, contractual agreements and policing of third-party misuses of our ~~insurance costs increased significantly, and our ability to continue~~intellectual property. Our failure to obtain ~~insurance even at~~or adequately protect our intellectual property or any change in law that lessens or removes the current ~~prices remains uncertain. If we are unable to maintain adequate insurance coverage,~~legal protections of our intellectual property may diminish our competitiveness and adversely affect our business ~~could~~and financial results. Any litigation or disputes regarding intellectual property may be ~~materially~~costly and time-consuming and may divert the attention of our management and key personnel from our business operations, either of which may adversely ~~affected. Additionally, severe disruptions in the domestic~~affect our business and global financial markets could adversely impact the claims paying ability of some insurers. Future downgrades in the ratings of enough insurers could adversely impact both the availability of appropriate insurance coverage and its cost. Because of competitive pressures in our industry, our ability to pass along additional insurance costs to passengers is limited. As a result, further increases in insurance costs or reductions in available insurance coverage could have an adverse impact on our financial results.

We may be a party to litigation in the normal course of business or otherwise, which could affect our financial position and liquidity.

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 Part II, Item 1. Legal Proceedings.

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 (an Air Transport Pilot’s certificate) 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. If we are unable to maintain adequate insurance coverage, our business could be materially and adversely affected. Additionally, severe disruptions in the domestic and global financial markets could adversely impact the claims paying ability of some insurers. Future downgrades in the ratings of enough insurers could adversely impact both the availability of appropriate insurance coverage and its cost. Because of competitive pressures in our industry, our ability to pass along additional insurance costs to passengers is limited. As a result, further increases in insurance costs or reductions in available insurance coverage could have an adverse impact on our financial results.

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, fees, and charges imposed on airlines and their passengers, including the passenger facility charge, and we may not be 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.

Our ability to utilize our NOL 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). As of December 31, ~~2016,~~2019, we had available NOL Carryforwards of approximately ~~$10.5~~$9.1 billion for regular federal income tax purposes ~~which~~that will expire, if unused, beginning in ~~2022,~~2023, and approximately ~~$3.7~~$3.0 billion for state income tax purposes ~~which~~that will expire, if unused, between

~~2017~~ 2020 and ~~2036.~~2039. Our NOL Carryforwards are subject to adjustment on audit by the Internal Revenue Service and the respective state taxing authorities.

A corporation’s ability to deduct its federal NOL Carryforwards and to utilize 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 percent during a rolling three-year period). WeIn 2013, we experienced an ownership change in connection with our emergence from ~~the Chapter 11 Cases~~bankruptcy and US Airways Group experienced an ownership change in connection with the Merger. The general limitation rules for a debtor in a bankruptcy case are liberalized where the ownership change occurs upon emergence from bankruptcy. We elected to be covered by certain special rules for federal income tax purposes that permitted approximately $9.0 billion (with ~~$8.9~~$7.3 billion of unlimited NOL still remaining at December 31, ~~2016)~~2019) of our federal NOL Carryforwards to be utilized without regard to the annual limitation generally imposed by Section 382. If the special rules are determined not to apply, our ability to utilize such federal NOL Carryforwards may be subject to limitation. In addition, under the Loan Program of the CARES Act, a government acquisition of warrants, stock options, common or preferred stock or other equity acquired in relation to the program does not result in an 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 the Payroll Support Program and accordingly will not apply to the warrants issued by us under that program. Substantially all of our remaining federal NOL Carryforwards ~~(attributable~~attributable to US Airways Group and its ~~subsidiaries)~~subsidiaries are subject to limitation under Section 382 as a result of the Merger; however, our ability to utilize such NOL Carryforwards is not anticipated to be effectively constrained as a result of such limitation. Similar limitations may apply for state income tax purposes.

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

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

The commercial relationships that we have with other airlines, including any related equity investment, may not produce the returns or results we expect.

An important part of our strategy to expand our network has been to expand our commercial relationships with other airlines, such as by entering into global alliance, joint business and codeshare relationships, and, in one recent instance involving China Southern Airlines, by making a significant equity investment in another airline in connection with initiating such a commercial relationship. We may explore similar non-controlling 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. In addition, as a result of the global spread of COVID-19, the industry has experienced a precipitous decline in demand for air travel both internationally and domestically, which is expected to continue into the foreseeable future and could materially disrupt the timely execution of our strategic operating plans, including the finalization, approval and implementation of new strategic relationships or the expansion of existing relationships. These events could have a material adverse effect on our business, 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.

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 (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. In light of the effect COVID-19 is having on demand for air travel and, in turn, capacity, we have seen an increase in demand from consumers for refunds on their tickets, and we anticipate this will continue to be the case for the near future. Requests for refunds may reduce our liquidity and risk triggering liquidity covenants in these processing agreements and, in doing so, could force us 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.

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

Future impairment of goodwill or other long-lived assets could be recorded in results of operations as a result of changes in assumptions, estimates, or circumstances, some of which are beyond our control. There can be no assurance that a material impairment charge of goodwill or tangible or intangible assets will be avoided. The value of our aircraft could be impacted in future periods by changes in supply and demand for these aircraft. Such changes in supply and demand for certain aircraft types could result from grounding of aircraft by us or other ~~airlines. An~~airlines, including as a result of significant or prolonged declines in demand for air travel and corresponding reductions to capacity. In the first quarter of 2020, we recorded an $815 million impairment charge associated with our decision to retire certain mainline aircraft, principally 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 decline in demand for air travel due to COVID-19. We can provide no assurance that a material impairment loss of tangible or intangible assets will not occur in a future period, and the risk of future material impairments has been significantly heightened as result of the effects of the COVID-19 pandemic on our flight schedules and business. Such impairment charges could have a material adverse effect on our business, results of operations and financial condition.

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

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

~~AAG’s~~macro-economic conditions, including the price of fuel;

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

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

changes in financial estimates or recommendations by securities analysts;

changes in our level of outstanding indebtedness and other obligations;

changes in our credit ratings;

material announcements by us or our competitors;

~~movements in fuel prices;~~

expectations regarding our capital deployment program, including ~~our~~any existing or potential future share repurchase ~~program~~programs and any future dividend payments that may be declared by our Board of ~~Directors;~~Directors, or any 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);

new regulatory pronouncements and changes in regulatory guidelines;

general and industry-specific economic conditions;

~~the success or failure of AAG’s integration efforts;~~

changes in our key personnel;

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

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

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

fluctuations in trading ~~volume; and~~

~~changes in market values of airline companies as well as general market conditions.~~volume.

We have ceased making repurchases of our common stock and paying dividends on our common stock as required by the CARES Act. 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 ~~repurchase our common stock pursuant to our share repurchase programs or~~ continue to ~~pay dividends on our common stock~~do so or that our capital deployment program will enhance long-term stockholder value. Our capital deployment program could increase the volatility of the price of our common stock and diminish our cash reserves.

Since July 2014, as part of our capital deployment program, our Board of Directors has approved ~~six~~seven share repurchase programs aggregating ~~$11.0~~$13.0 billion of authority. As of March 31, 2020, there was $420 million of remaining authority to repurchase shares under our current $2.0 billion share repurchase program. In connection with our receipt of payroll support under the CARES Act, we agreed not to repurchase shares of AAG common stock through September 30, ~~2017, $677 million remained unused under~~2021. If we receive a ~~repurchase program~~secured loan from the U.S. Treasury Department pursuant to the CARES Act, we will be prohibited from repurchasing shares of AAG common stock through the date that ~~expires on December 31, 2018. Share~~is one year after such secured loan is fully repaid. If we determine to make any share repurchases in the future, such repurchases under our ~~share~~ repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. These share repurchase programs do not obligate us to acquire any specific number of shares or to repurchase any specific number of shares for any fixed period, and may be suspended again at any time at our ~~discretion.~~discretion and without prior notice. The timing and amount of repurchases, if any, will be subject to market and economic conditions, applicable legal requirements, such as the requirements of the CARES Act and other relevant factors. ~~The~~Our repurchase ~~programs~~of AAG common stock may be limited, suspended or discontinued at any time at our discretion and without prior notice.

~~Although our~~Our Board of Directors commenced declaring quarterly cash dividends in July 2014 as part of our capital deployment ~~program,~~program. In connection with our receipt of payroll support under the CARES Act, we agreed not to pay dividends on AAG common stock through September 30, 2021. If we receive a secured loan from the U.S. Treasury Department pursuant to the CARES Act, we will be prohibited from paying dividends on AAG common stock through the date that is one year after such secured loan is fully repaid. If we determine to make any dividends in the future, such dividends that may be declared and paid from time to time will be subject to market and economic conditions, applicable legal requirements and other relevant factors. We are not obligated to continue a dividend for any fixed period, and the payment of dividends may be suspended or discontinued again at any time at our ~~discretion.~~discretion and without prior notice. We will continue to retain future earnings to develop our business, as opportunities arise, and evaluate on a quarterly basis the amount and timing of future dividends based on our operating results, financial condition, capital requirements and general business conditions. The amount and timing of any future dividends may vary, and the payment of any dividend does not assure that we will ~~be able to~~ pay dividends in the future.

In addition, any future repurchases of AAG common stock ~~pursuant~~or payment of dividends, or any determination to ~~our share repurchase programs and any future~~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, ~~our share repurchase programs and~~ 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 ~~share~~ repurchase ~~programs~~of AAG common stock may fluctuate such that our cash flow may be insufficient to fully cover our share repurchases. Although our share repurchase programs are intended to enhance long-term stockholder value, there is no assurance that itthey will do ~~so because the market price~~so.

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

Our Certificate of Incorporation and Bylaws include significant provisions that limit voting and ownership and disposition of our equity interests, as described in Part II, Item 5. Market for American Airlines Group's Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities - "Ownership Restrictions" in our 2019 10-K. These restrictions may adversely affect the ability of certain holders of AAG common stock ~~may decline below~~and our other equity interests to vote such interests and adversely affect the ~~levels at which we repurchased~~ability of persons to acquire shares of AAG common stock and ~~short-term stock price fluctuations could reduce the program’s effectiveness.~~our other equity interests.

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

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

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

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

a prohibition against stockholders taking action by written consent;

stockholders are restricted from calling a ~~prohibition against stockholders calling~~ special ~~meetings~~meeting unless they hold at least 20% of ~~stockholders;~~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.

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

Our Certificate of Incorporation and Bylaws include certain provisions that limit voting and ownership and disposition of our equity interests. These restrictions may adversely affect the ability of certain holders of AAG common stock and our other equity interests to vote such interests and adversely affect the ability of persons to acquire shares of AAG common stock and our other equity interests.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In April 2018, we announced that our Board of Directors authorized a $2.0 billion share repurchase program that will expire on December 31, 2020. Since July 2014, our Board of Directors has approved seven share repurchase programs aggregating $13.0 billion of authority. As of March 31, 2020, there was $420 million of remaining authority to repurchase shares under our current $2.0 billion share repurchase program. In connection with our receipt of financial support under the Payroll Support Program, we agreed not to repurchase shares of AAG common stock through September 30, 2021.

The following table displays information with respect to our purchases of shares of AAG common stock during the three months ended ~~September 30, 2017.~~March 31, 2020.

Period
Total number of
shares purchased

Average price
paid per share

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

Maximum dollar value of shares
that may be purchased under
the plan or program
(in millions)
July 2017 1,037,573 $51.79 1,037,573 $985
August 2017
3,186,417 ⁽¹⁾
$46.63 3,177,325 $837
September 2017 3,485,296 $45.85 3,485,296 $677



Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plan or program	Maximum dollar value of shares that may be purchased under the plan or program (in millions)
January 2020	1,129,820	$27.47	1,129,820	$534
February 2020	2,912,400	$25.61	2,912,400	$460
March 2020	2,335,805	$16.96	2,335,805	$420


⁽¹⁾	Includes the repurchase of 9,092 shares of AAG common stock separate from our share repurchase programs in August 2017 for less than $1 million from the Disputed Claims Reserve at the then prevailing market price in order to fund cash tax obligations resulting from distributions by the Disputed Claims Reserve.

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 percent of our assets, pursuant to paragraph (b)(4) of Item 601 of Regulation S-K, in lieu of filing such as an exhibit, we hereby agree to furnish to the Commission upon request a copy of any agreement with respect to such long-term debt.



Exhibit Number		Description

4.1		~~Pass Through Trust Agreement,~~Indenture, dated as of ~~September 16, 2014, between~~February 25, 2020, by and among American Airlines Group Inc., the Guarantor (as defined therein) and Wilmington Trust, ~~Company,~~National Association, as ~~Trustee~~trustee (incorporated by reference to Exhibit 4.1 to ~~American Airlines, Inc.’s~~AAG's Current Report on Form 8-K filed on ~~September 17, 2014~~February 26, 2020 (Commission File No. ~~1-2691)~~1-8400)).
4.2		Trust Supplement No. 2017-2AA, dated as of August 14, 2017, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.2 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.3~~		Trust Supplement No. 2017-2A, dated as of August 14, 2017, between American Airlines, Inc. and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement, dated as of September 16, 2014 (incorporated by reference to Exhibit 4.3 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.4~~		Intercreditor Agreement (2017-2), dated as of August 14, 2017, among Wilmington Trust Company, as Trustee of the American Airlines Pass Through Trust 2017-2AA and as Trustee of the American Airlines Pass Through Trust 2017-2A, National Australia Bank Limited, as Class AA Liquidity Provider and Class A Liquidity Provider, and Wilmington Trust Company, as Subordination Agent (incorporated by reference to Exhibit 4.4 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.5~~		Deposit Agreement (Class AA), dated as of August 14, 2017, between Wilmington Trust, National Association, as Escrow Agent, and Natixis S.A., acting through its New York Branch, as Depositary (incorporated by reference to Exhibit 4.5 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.6~~		Deposit Agreement (Class A), dated as of August 14, 2017, between Wilmington Trust, National Association, as Escrow Agent, and Natixis S.A., acting through its New York Branch, as Depositary (incorporated by reference to Exhibit 4.6 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.7~~		Escrow and Paying Agent Agreement (Class AA), dated as of August 14, 2017, among Wilmington Trust, National Association, as Escrow Agent, Goldman Sachs & Co. LLC, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2017-2AA, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.7 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.8~~		Escrow and Paying Agent Agreement (Class A), dated as of August 14, 2017, among Wilmington Trust, National Association, as Escrow Agent, Goldman Sachs & Co. LLC, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., for themselves and on behalf of the several Underwriters, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Airlines Pass Through Trust 2017-2A, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.8 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.9~~		Note Purchase Agreement, dated as of August 14, 2017, among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent (incorporated by reference to Exhibit 4.9 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.10~~		Form of Participation Agreement (Participation Agreement among American Airlines, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein) (incorporated by reference to Exhibit B to Exhibit 4.9 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.11~~		Form of Indenture and Security Agreement (Indenture and Security Agreement between American Airlines, Inc., and Wilmington Trust Company, as Loan Trustee) (incorporated by reference to Exhibit C to Exhibit 4.9 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.12~~		~~Form of Pass Through Trust Certificate, Series 2017-2AA~~3.75% Senior Notes due 2025 (incorporated by reference to Exhibit A to Exhibit ~~4.2~~4.1 to ~~American Airlines, Inc.’s~~AAG's Current Report on Form 8-K filed on ~~August 14, 2017~~February 26, 2020 (Commission File No. ~~1-2691)~~1-8400)).
~~4.13~~	4.3	Form of Pass Through Trust Certificate, Series 2017-2A (incorporated by reference to Exhibit A to Exhibit 4.3 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
~~4.14~~		Revolving Credit Agreement (2017-2AA), dated as of August 14, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2017-2AA, as Borrower, and National Australia Bank Limited, as Liquidity Provider (incorporated by reference to Exhibit 4.14 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).



~~4.15~~		Revolving Credit Agreement (2017-2A), dated as of August 14, 2017, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the trustee of the American Airlines Pass Through Trust 2017-2A, as Borrower, and National Australia Bank Limited, as Liquidity Provider (incorporated by reference to Exhibit 4.15 to American Airlines, Inc.’s Current Report on Form 8-K filed on August 14, 2017 (Commission File No. 1-2691)).
10.1*		~~Second Amendment to the Credit and Guaranty Agreement, dated as of August 21, 2017, amending the Credit and Guaranty~~Warrant Agreement, dated as of April ~~29, 2016, among American Airlines, Inc.,~~20, 2020, between American Airlines Group, Inc., and the ~~lenders from time to time party thereto, Barclays Bank PLC, as administrative agent, and certain other parties thereto.~~United States Department of the Treasury.
10.2*	4.4	~~Third Amendment~~Form of Warrant (incorporated by reference to ~~the Amended and Restated Credit And Guaranty~~Annex B to Exhibit 4.3).
10.1	Supplemental Agreement No. 14, dated as of ~~August 21, 2017, amending the Amended and Restated Credit and Guaranty~~February 24, 2020, to Purchase Agreement No. 3219 dated as of ~~May 21, 2015, among~~October 15, 2008, by and between American Airlines, Inc.~~, American Airlines Group Inc., the lenders from time to time party thereto, Deutsche Bank AG New York Branch, as administrative agent,~~ and ~~certain other parties thereto.~~The Boeing Company.*
10.3*	10.2	~~Fourth~~Supplemental Agreement No. 15, dated as of March 16, 2020, to Purchase Agreement No. 3219 dated as of October 15, 2008, by and between American Airlines, Inc. and The Boeing Company.*
10.3	Eighth Amendment to the Amended and Restated Credit and Guaranty Agreement, dated as of ~~August 21, 2017,~~January 29, 2020, amending the Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015, among American Airlines, Inc., American Airlines Group Inc., the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties thereto.
~~12.1~~	10.4	~~Computation~~Credit and Guaranty Agreement, dated as of ~~ratio of earnings to fixed charges of~~March 18, 2020, among American Airlines, Inc., as the borrower, American Airlines Group Inc. ~~for~~, as parent and guarantor, the ~~nine months ended September 30, 2017.~~lenders party thereto, Citibank N.A., as administrative agent and collateral agent and certain other parties thereto.*
~~12.2~~	10.5	~~Computation~~Payroll Support Program Agreement, dated as of ~~ratio of earnings to fixed charges of~~April 20, 2020, between American Airlines, Inc. ~~for~~and the ~~nine months ended September 30, 2017.~~United States Department of the Treasury.
10.6	Promissory Note, dated as of April 20, 2020, issued by American Airlines Group Inc. in the name of the United States Department of the Treasury and guaranteed by American Airlines, Inc., Envoy Air Inc., Piedmont Airlines, Inc. and PSA Airlines, Inc.
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~~	101.1	Interactive data files pursuant to Rule 405 of Regulation ~~S-T.~~S-T, formatted in Inline XBRL (eXtensible Business Reporting Language).
104.1
*		~~Confidential treatment has been requested with respect to certain portions of this agreement.~~Cover page interactive data file (formatted in Inline XBRL and contained in Exhibit 101.1).

^*Certain confidential information contained in this agreement has been omitted because it (i) is not material and (ii) would be competitively harmful if publicly disclosed.

SIGNATURES

Pursuant to the requirements ~~of Section 13 or 15(d)~~ of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




		American Airlines Group Inc.

Date: ~~October 26, 2017~~April 30, 2020	By:	/s/ Derek J. Kerr
		Derek J. Kerr
		Executive Vice President and Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)




		American Airlines, Inc.

Date: ~~October 26, 2017~~April 30, 2020	By:	/s/ Derek J. Kerr
		Derek J. Kerr
		Executive Vice President and Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

8290


	September 30, 2017			December 31, 2016			March 31, 2020			December 31, 2019
	(Unaudited)						(Unaudited)
ASSETS
Current assets
Cash	$	328		$	310		$	464		$	267
Short-term investments	5,425			6,034			3,100			3,543
Restricted cash and short-term investments	393			638			157			158
Accounts receivable, net	1,705			1,599			1,038			1,770
Receivables from related parties, net	8,457			6,810			12,815			12,451
Aircraft fuel, spare parts and supplies, net	1,252			1,032			1,666			1,754
Prepaid expenses and other	820			633			613			584
Total current assets	18,380			17,056			19,853			20,527
Operating property and equipment
Flight equipment	39,214			36,671			38,981			42,213
Ground property and equipment	7,661			6,910			9,243			9,089
Equipment purchase deposits	1,280			1,209			1,740			1,674
Total property and equipment, at cost	48,155			44,790			49,964			52,976
Less accumulated depreciation and amortization	(15,127		)	(13,909		)	(16,111		)	(18,335		)
Total property and equipment, net	33,028			30,881			33,853			34,641
Operating lease right-of-use assets							8,578			8,694
Other assets
Goodwill	4,091			4,091			4,091			4,091
Intangibles, net of accumulated amortization of $612 and $578, respectively	2,214			2,173
Intangibles, net of accumulated amortization of $714 and $704, respectively							2,059			2,084
Deferred tax asset	903			1,912			1,232			689
Other assets	2,177			1,979			1,112			1,164
Total other assets	9,385			10,155			8,494			8,028
Total assets	$	60,793		$	58,092		$	70,778		$	71,890

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Current maturities of long-term debt and capital leases	$	1,970		$	1,859
Current maturities of long-term debt and finance leases							$	3,517		$	2,358
Accounts payable	1,580			1,546			1,565			1,990
Accrued salaries and wages	1,366			1,460			1,574			1,461
Air traffic liability	4,653			3,912			5,473			4,808
Loyalty program liability	2,893			2,789			3,094			3,193
Operating lease liabilities							1,739			1,695
Other accrued liabilities	2,132			2,106			2,019			2,055
Total current liabilities	14,594			13,672			18,981			17,560
Noncurrent liabilities
Long-term debt and capital leases, net of current maturities	20,942			20,718
Long-term debt and finance leases, net of current maturities							20,299			20,684
Pension and postretirement benefits	7,426			7,800			6,064			6,008
Loyalty program liability							5,757			5,422
Operating lease liabilities							7,209			7,388
Other liabilities	3,421			3,253			1,290			1,406
Total noncurrent liabilities	31,789			31,771			40,619			40,908
Commitments and contingencies
Stockholder’s equity
Common stock, $1.00 par value; 1,000 shares authorized, issued and outstanding	—			—			—			—
Additional paid-in capital	16,690			16,624			16,977			16,903
Accumulated other comprehensive loss	(5,226		)	(5,182		)	(6,572		)	(6,423		)
Retained earnings	2,946			1,207			773			2,942
Total stockholder’s equity	14,410			12,649
Total stockholder's equity							11,178			13,422
Total liabilities and stockholder’s equity	$	60,793		$	58,092		$	70,778		$	71,890



Period	Per share		For stockholders of record as of	Payable on	Total (millions)
First Quarter	$	0.10	February 13, 2017	February 27, 2017	$	51
Second Quarter	0.10		May 16, 2017	May 30, 2017	50
Third Quarter	0.10		August 14, 2017	August 28, 2017	49
Total					$	150



2013 Revolving Facility	$	1,200
2014 Revolving Facility	1,000
April 2016 Revolving Facility	300
Total	$	2,500



	2017-2 EETCs
	Series AA	Series A
Aggregate principal issued	$545 million	$252 million
Remaining escrowed proceeds	$372 million	$172 million
Fixed interest rate per annum	3.35%	3.60%
Maturity date	October 2029	October 2029



	2017-1 EETCs
	Series AA	Series A	Series B
Aggregate principal issued	$537 million	$248 million	$198 million
Fixed interest rate per annum	3.65%	4.00%	4.95%
Maturity date	February 2029	February 2029	February 2025



	2016-3 EETCs
	Series AA	Series A
Aggregate principal issued	$558 million	$256 million
Fixed interest rate per annum	3.00%	3.25%
Maturity date	October 2028	October 2028


⁽²⁾	American’s short-term investments mature in one year or less except for ~~$1.2 billion~~$823 million of bank notes/certificates of deposit/time deposits and ~~$341~~$115 million of corporate obligations.



	Amounts reclassified from AOCI						Affected line items on the condensed consolidated statements of operations
AOCI Components	Three Months Ended March 31,
AOCI Components	2020			2019
Amortization of pension, retiree medical and other postretirement benefits:
Prior service benefit	$	(36	)	$	(40	)	Nonoperating other income (expense), net
Actuarial loss	27			24			Nonoperating other income (expense), net
Total reclassifications for the period, net of tax	$	(9	)	$	(16	)


⁽¹⁾	The increase in American’s net related party receivable from AAG is primarily due to American providing the cash funding for AAG’s share repurchase and dividend programs.


⁽²⁾	The net payable to AAG’s wholly-owned subsidiaries consists primarily of amounts due under regional capacity purchase agreements with AAG’s wholly-owned regional airlines operating under the brand name of American Eagle.



	Three Months Ended September 30,				Increase (Decrease)			Percent Increase (Decrease)
	2017		2016		Increase (Decrease)			Percent Increase (Decrease)
	(In millions, except percentage changes)
Mainline and regional passenger revenues	$	9,377	$	9,150	$	227		2.5
Other operating revenues	1,301		1,273		28			2.2
Total operating revenues	10,878		10,594		284			2.7
Mainline and regional aircraft fuel and related taxes	1,922		1,696		226			13.3
Salaries, wages and benefits	2,995		2,772		223			8.0
Total operating expenses	9,646		9,163		483			5.3
Operating income	1,232		1,431		(199		)	(13.9	)
Pre-tax income	1,004		1,189		(185		)	(15.6	)
Income tax provision	380		452		(72		)	(16.0	)
Net income	624		737		(113		)	(15.4	)

Pre-tax income	$	1,004	$	1,189	$	(185	)	(15.6	)
Adjusted for: Total pre-tax special items ⁽¹⁾	110		294		(184		)	(62.6	)
Pre-tax income excluding special items	$	1,114	$	1,483	$	(369	)	(24.9	)


⁽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.


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


	Three Months Ended September 30,		Increase (Decrease)		Nine Months Ended September 30,		Increase (Decrease)		Three Months Ended March 31,		Increase (Decrease)
	2017	2016	Increase (Decrease)		2017	2016	Increase (Decrease)		2020	2019	Increase (Decrease)
Mainline
Revenue passenger miles (millions) ^(a)	54,012	53,472	1.0	%	152,400	151,619	0.5	%	45,171	54,802	(17.6	)%
Available seat miles (millions) ^(b)	64,582	63,751	1.3	%	184,665	183,985	0.4	%	62,099	66,674	(6.9	)%
Passenger load factor (percent) ^(c)	83.6	83.9	(0.3	)pts	82.5	82.4	0.1	pts	72.7	82.2	(9.5	)pts
Yield (cents) ^(d)	14.12	13.87	1.8	%	14.42	13.98	3.2	%	17.00	17.62	(3.5	)%
Passenger revenue per available seat mile (cents) ^(e)	11.81	11.64	1.5	%	11.90	11.52	3.3	%	12.37	14.49	(14.6	)%
Operating cost per available seat mile (cents) ^(f)	12.37	11.96	3.5	%	12.67	11.62	9.0	%
Aircraft at end of period	947	922	2.7	%	947	922	2.7	%
Total revenue per available seat mile (cents) ^(f)									13.71	15.87	(13.6	)%
Aircraft at end of period ^(g)									1,484	1,564	(5.1	)%
Fuel consumption (gallons in millions)	947	953	(0.6	)%	2,713	2,739	(0.9	)%	972	1,053	(7.6	)%
Average aircraft fuel price including related taxes (dollars per gallon)	1.66	1.46	13.4	%	1.65	1.36	21.1	%	1.83	2.04	(10.1	)%
Full-time equivalent employees at end of period	105,000	101,200	3.8	%	105,000	101,200	3.8	%	131,500	129,800	1.3	%
Total Mainline and Regional
Revenue passenger miles (millions) ^(a)	60,471	59,919	0.9	%	171,019	170,025	0.6	%
Available seat miles (millions) ^(b)	73,053	71,911	1.6	%	209,136	207,726	0.7	%
Passenger load factor (percent)^(c)	82.8	83.3	(0.5	)pts	81.8	81.9	(0.1	)pts
Yield (cents) ^(d)	15.51	15.27	1.6	%	15.85	15.43	2.8	%
Passenger revenue per available seat mile (cents) ^(e)	12.84	12.72	0.9	%	12.96	12.63	2.7	%
Total revenue per available seat mile (cents)^(g)	14.89	14.73	1.1	%	15.11	14.63	3.3	%
Aircraft at end of period	1,558	1,521	2.4	%	1,558	1,521	2.4	%
Fuel consumption (gallons in millions)	1,148	1,149	—	%	3,291	3,304	(0.4	)%
Average aircraft fuel price including related taxes (dollars per gallon)	1.67	1.48	13.3	%	1.67	1.37	21.2	%
Full-time equivalent employees at end of period^(h)	127,600	121,800	4.8	%	127,600	121,800	4.8	%
Operating cost per available seat mile (cents) ^(h)									17.82	15.31	16.3	%


^(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.


^(f)(g)	Includes aircraft owned and leased by American as well as aircraft operated by third-party regional carriers under capacity purchase agreements. Excludes 49 regional aircraft that are in temporary storage as follows: 17 Embraer 145, 15 Embraer 175, nine Embraer 140 and eight Bombardier CRJ200 aircraft.


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


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


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



			Increase (Decrease) vs. Three Months Ended September 30, 2016
	Three Months Ended September 30, 2017		Passenger Revenue	RPMs	ASMs	Load Factor		Passenger Yield		PRASM
	(In millions)
Mainline passenger	$	7,628	2.8%	1.0%	1.3%	(0.3	)pts	1.8	%	1.5	%
Regional passenger	1,749		1.1%	0.2%	3.8%	(2.7	)pts	0.9	%	(2.7	)%
Total passenger revenues	$	9,377	2.5%	0.9%	1.6%	(0.5	)pts	1.6	%	0.9	%



			Decrease vs. Three Months Ended March 31, 2019
	Three Months Ended March 31, 2020		RPMs	ASMs		Load Factor		Passenger Yield		PRASM
	(In millions)
Passenger revenue	$	7,681	(17.6)%	(6.9	)%	(9.5	)pts	(3.5	)%	(14.6	)%


•	Maintenance, materials and repairs per ASM increased 20.3% in the first quarter of 2020 as compared to the first quarter of 2019, due to an 8.8% decrease in capacity as described above as well as an increase in the volume of aircraft engine and component part repairs in the first quarter of 2020.


⁽²⁾	Labor contract expenses primarily relate to one-time charges resulting from the ratification of a new contract with the Transport Workers Union and International Association of Machinists & Aerospace Workers (the TWU-IAM Association) for our maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.


⁽³⁾	Severance expenses principally include salary and medical costs associated with certain team members who opted in to a voluntary early retirement program offered as a result of reductions to our operation due to COVID-19.


⁽⁵⁾	Fleet restructuring expenses ~~driven by the Merger~~ principally included ~~the acceleration of aircraft~~accelerated depreciation and ~~impairments~~rent expense for aircraft ~~grounded or~~and related equipment expected to be ~~grounded~~retired earlier than planned.



			Increase (Decrease) vs. Nine Months Ended September 30, 2016
	Nine Months Ended September 30, 2017		Passenger Revenue	RPMs	ASMs	Load Factor		Passenger Yield	PRASM
	(In millions)
Mainline passenger	$	21,981	3.7%	0.5%	0.4%	0.1	pts	3.2%	3.3	%
Regional passenger	5,133		1.8%	1.2%	3.1%	(1.4	)pts	0.7%	(1.2	)%
Total passenger revenues	$	27,114	3.4%	0.6%	0.7%	(0.1	)pts	2.8%	2.7	%