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Item 5. Market for Registrant’s Common Equity

2022-02-22 compared with 2021-02-17 · 45 added, 66 removed, 126 unchanged (47% of the section changed)

2 unchanged sentences

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

As of February 12, 2021, the closing price of our common stock was $17.27 and there were 12,527 holders of record.

As of February 18, 2022, there were approximately 13,000 holders of record of our common stock.

However, because many of the shares of our common stock are held by brokers and other institutions on behalf of stockholders, we believe there are substantially more beneficial holders of our common stock than record holders.

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Dividends on Common Stock

The total cash payment for dividends during the years ended December 31, 2020 and 2019 was $43 million and $178 million, respectively.

In connection with our receipt of financial assistance under PSP1 and PSP2, we agreed not to pay dividends on AAG common stock through at least March 31, 2022.

In addition, we have entered into the Treasury Loan Agreement, and as a result, we are further prohibited from paying dividends on AAG common stock through the date that is one year after the secured loan provided under the Treasury Loan Agreement is fully repaid.

There were no cash dividend payments during the year ended December 31, 2021.

The total cash payment for dividends during the year ended December 31, 2020 was $43 million.

In connection with our receipt of financial assistance under PSP1, PSP2 and PSP3, we agreed not to pay dividends on AAG common stock through at least September 30, 2022.

If we determine to make any dividends in the future, such dividends that may be declared and paid from time to time will be subject to market and economic conditions, applicable legal requirements and other relevant factors.

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Since July 2014, as part of our capital deployment program, our Board of Directors had approved seven share repurchase programs aggregating $13.0 billion of authority.

The $420 million of remaining authority to repurchase shares under our most recent $2.0 billion share repurchase program expired on December 31, 2020.

In connection with our receipt of financial assistance under PSP1 and PSP2, we agreed not to repurchase shares of AAG common stock through at least March 31, 2022.

In addition, we have entered into the Treasury Loan Agreement and, as a result, we are further prohibited from repurchasing shares of AAG common stock through the date that is one year after the secured loan provided under the Treasury Loan Agreement is fully repaid.

In 2020, we repurchased 6.4 million shares of AAG common stock for $145 million at a weighted average cost per share of $22.77, all of which were purchased in the first quarter of 2020.

In 2019, we repurchased 33.8 million shares of AAG common stock for $1.1 billion at a weighted average cost per share of $32.09.

If we determine to make any share repurchases in the future, such repurchases under our repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions.

These share repurchase programs do not obligate us to acquire any specific number of shares or to repurchase any specific number of shares for any fixed period, and may be suspended again at any time at our discretion and without prior notice.

The timing and amount of repurchases, if any, will be subject to market and economic conditions, applicable legal requirements, such as the requirements of the CARES Act, the PSP Extension Law and other relevant factors.

Our repurchase of AAG common stock may be limited, suspended or discontinued at any time at our discretion and without prior notice.

The authority to repurchase $420 million of remaining shares under our most recent $2.0 billion share repurchase program expired on December 31, 2020.

In connection with our receipt of financial assistance under PSP1, PSP2 and PSP3, we agreed not to repurchase shares of AAG common stock through at least September 30, 2022.

See Part I, Item 1A.

Risk Factors – “ We have ceased making repurchases of our common stock and paying dividends on our common stock as required by the CARES Act and the PSP Extension Law.

Risk Factors – “ We have ceased making repurchases of our common stock and paying dividends on our common stock as required by the CARES Act, the PSP Extension Law and the ARP.

Following the end of those restrictions, if we do decide to make repurchases of or pay dividends on our common stock, we cannot guarantee that we will continue to do so or that our capital deployment program will enhance long-term stockholder value.

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Our Certificate of Incorporation and Bylaws further specify that it is the duty of each stockholder who is a non-citizen to register his, her or its equity securities on our foreign stock record and provide for remedies applicable to stockholders that exceed the voting and ownership caps described above.

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

This provision is currently scheduled to expire by its terms in December 2021.

In addition, to reduce the risk of a potential adverse effect on our ability to use our NOL carryforwards and certain other tax attributes for federal income tax purposes, and in connection with the expiration in December 2021 of certain transfer restrictions applicable to substantial shareholders contained in our Certificate of Incorporation, the Board of Directors of AAG adopted the Tax Benefits Preservation Plan in order to preserve our ability to use our NOLs and certain other tax attributes to reduce potential future income tax obligations.

The Tax Benefits Preservation Plan is designed to reduce the likelihood that we experience an "ownership change” for purposes of Section 382 by deterring certain acquisitions of AAG common stock.

There is no assurance, however, that the deterrent mechanism will be effective, and such acquisitions may still occur.

In addition, the Tax Benefits Preservation Plan may adversely affect the marketability of AAG common stock by discouraging existing or potential investors from acquiring AAG common stock or additional shares of AAG common stock, because any non-exempt third party that acquires 4.9% or more of the then-outstanding shares of AAG common stock would suffer substantial dilution of its ownership interest in AAG.

We intend to submit the Tax Benefits Preservation Plan for ratification to our stockholders at the 2022 Annual Meeting of Stockholders of American Airlines Group Inc.

See Part I, Item 1A.

Risk Factors – “AAG’s Certificate of Incorporation and Bylaws include provisions that limit voting and acquisition and disposition of our equity interests.” Also see AAG’s Certification of Incorporation and Bylaws, which are filed as Exhibits 3.1, 3.2 and 3.3 hereto, for the full text of the foregoing restrictions and AAG’s Description of the Registrants’ Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, which is filed as Exhibit 4.1 hereto, for a more detailed description.

Risk Factors – “AAG’s Certificate of Incorporation and Bylaws include provisions that limit voting and acquisition and disposition of our equity interests and specify an exclusive forum for certain stockholder disputes” and “ Our ability to utilize our NOLs and other carryforwards may be limited.” Also see AAG’s Certification of Incorporation and Bylaws, which are filed as Exhibits 3.1, 3.2 and 3.3 hereto, for the full text of the foregoing restrictions and AAG’s Description of the Registrants’ Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, which is filed as Exhibit 4.1 hereto, for a more detailed description.

SELECTED CONSOLIDATED FINANCIAL DATA

We adopted three new accounting standards as of January 1, 2018:

Accounting Standards Update (ASU) 2016-02:

Leases (Topic 842) (the New Lease Standard), ASU 2014-09:

Revenue from Contracts with Customers (the New Revenue Standard) and ASU 2017-07:

Compensation - Retirement Benefits (the New Retirement Standard).

The 2017 and 2016 financial information presented within this Item 6.

Selected Consolidated Financial Data has been recast to reflect the impact of the adoption of the New Revenue Standard and the New Retirement Standard.

The New Lease Standard did not require the recast of prior periods.

See Note 1(b) to each of AAG’s and American’s Consolidated Financial Statements in Part II, Items 8A and 8B, respectively, of AAG’s and American’s Annual Report on Form 10-K for the year ended December 31, 2018, for further information on the impacts of these new accounting standards.

Selected Consolidated Financial Data of AAG

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We are providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.

The following table presents the components of our total net special items and the reconciliation of pre-tax income (loss) and net income (loss) (GAAP measures) to pre-tax income (loss) excluding net special items and net income (loss) excluding net special items (non-GAAP measures).

Management uses pre-tax income (loss) excluding net special items and net income (loss) excluding net special items to evaluate our current operating performance and to allow for period-to-period comparisons.

The following table presents the components of our total net special items and the reconciliation of pre-tax loss and net loss (GAAP measures) to pre-tax loss excluding net special items and net loss excluding net special items (non-GAAP measures).

Management uses these non-GAAP financial measures to evaluate our current operating performance and to allow for period-to-period comparisons.

As net special items may vary from period-to-period in nature and amount, the adjustment to exclude net special items allows management an additional tool to understand our core operating performance.

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$ (4,162) $ (3,710)

Fleet impairment (3)

Severance expenses (3)

Labor contract expenses (5)

Mark-to-market adjustments on bankruptcy obligations, net (6)

Fleet restructuring expenses (7)

Merger integration expenses (8)

Litigation reserve adjustments (19) —

Mark-to-market adjustments on bankruptcy obligations, net (4)

Fleet impairment (5)

Labor contract expenses (6)

Other operating special items, net 10 (18)

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PSP Financial Assistance (2)

Regional pilot retention program (7)

Fleet impairment (5)

Severance expenses (3)

Other operating special items, net — 6

Regional operating special items, net (449) (309)

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Total special items, net $ (4,395) $ (796)

Reconciliation of Pre-Tax Income (Loss) Excluding Net Special Items:

Pre-tax income (loss) – GAAP $ (11,453) $ 2,256

Reconciliation of Pre-Tax Loss Excluding Net Special Items:

Pre-tax loss – GAAP $ (2,548) $ (11,453)

Adjusted for:

Pre-tax special items, net (4,395) (796)

Pre-tax income (loss) excluding net special items $ (12,249) $ 2,900

Reconciliation of Net Income (Loss) Excluding Net Special Items:

Net income (loss) – GAAP $ (8,885) $ 1,686

Pre-tax loss excluding net special items $ (6,943) $ (12,249)

Reconciliation of Net Loss Excluding Net Special Items:

Net loss – GAAP $ (1,993) $ (8,885)

Adjusted for:

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Net tax effect of net special items 993 170

Net income (loss) excluding net special items $ (9,511) $ 2,179

Net loss excluding net special items $ (5,395) $ (9,511)

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

(2) PSP1 Financial Assistance represents recognition of financial assistance received from Treasury pursuant to the PSP1 Agreement.

(2) The 2021 PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the PSP2 and PSP3 Agreements.

See Note 1(b) to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information.

(3) The 2020 fleet impairment resulted from our decision to retire certain aircraft earlier than planned driven by the severe decline in air travel due to the COVID-19 pandemic.

Aircraft retired include Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300, Embraer 190, certain Embraer 140 and Bombardier CRJ200 aircraft.

This included a $1.5 billion non-cash write-down of mainline and regional aircraft and spare parts and $109 million in cash charges primarily for impairment of right-of-use (ROU) assets and lease return costs.

The 2020 PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the PSP1 Agreement.

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

Cash payments primarily associated with our voluntary early retirement programs were approximately $520 million and $365 million in 2021 and 2020, respectively.

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

(5) Fleet impairment charges resulted from the retirement of certain aircraft earlier than planned driven by the severe decline in air travel due to the COVID-19 pandemic.

In 2021, we retired our remaining Embraer 140 fleet resulting in a non-cash write-down of these regional aircraft.

See Note 1(g) to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information related to these charges.

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

(4) The 2020 severance expenses included salary and medical costs primarily associated with certain team members who opted in to voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic.

Cash payments related to these charges for the year ended December 31, 2020 were approximately $365 million.

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

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

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

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

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

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

Additionally, the table below presents the reconciliation of total operating expenses (GAAP measure) to total operating costs excluding net special items and fuel (non-GAAP measure).

Management uses total operating costs excluding net special items and aircraft fuel to evaluate our current operating performance and for period-to-period comparisons.

In 2020, we retired our entire Airbus A330-200, Boeing 757, Boeing 767, Airbus A330-300 and Embraer 190 fleets as well as certain Embraer 140 and Bombardier CRJ200 aircraft resulting in a $1.5 billion non-cash write-down of mainline and regional aircraft and associated spare parts and $109 million in cash charges primarily for impairment of right-of-use (ROU) assets and lease return costs.

(6) The 2020 labor contract expenses primarily related to one-time charges due to the ratification of a new contract with the TWU-IAM Association for our maintenance and fleet service team members, including signing bonuses and adjustments to vacation accruals resulting from pay rate increases.

(7) Our regional pilot retention program provides for, among other things, a cash retention bonus paid in the fourth quarter of 2021 to eligible captains at our wholly-owned regional airlines included on the pilot seniority list as of September 1, 2021.

(8) Mark-to-market adjustments on equity and other investments, net primarily related to net unrealized gains and losses associated with our equity investments in China Southern Airlines and in 2021, Vertical Aerospace Ltd.

(Vertical), and certain treasury rate lock derivative instruments.

Additionally, the table below presents the reconciliation of total operating expenses (GAAP measure) to total operating costs excluding net special items and fuel (non-GAAP measure) and total operating cost per available seat mile (CASM) to CASM excluding net special items and fuel.

Management uses total operating costs excluding net special items and fuel and CASM excluding net special items and fuel to evaluate our current operating performance and for period-to-period comparisons.

The price of fuel, over which we have no control, impacts the comparability of period-to-period financial performance.

The adjustment to exclude aircraft fuel and net special items allows management an additional tool to understand and analyze our non-fuel costs and core operating performance.

The adjustment to exclude fuel and net special items allows management an additional tool to understand and analyze our non-fuel costs and core operating performance.

Amounts may not recalculate due to rounding.

Year Ended December 31,

Reconciliation of Total Operating Costs per Available Seat

Mile (CASM) Excluding Net Special Items and Fuel:

Reconciliation of CASM Excluding Net Special Items and Fuel:

(In millions)

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Regional operating special items, net

Aircraft fuel and related taxes – mainline (2,581) (7,526)

Aircraft fuel and related taxes – regional (821) (1,869)

Aircraft fuel and related taxes (6,792) (3,402)

Total operating expenses, excluding net special items and fuel $ 28,604 $ 25,322

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Total Available Seat Miles (ASM) 214,535 143,167

Total operating CASM 19.39 14.98

CASM 14.42 19.39

Operating net special items per ASM (1) :

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Regional operating special items, net 0.21 0.22

Fuel per ASM:

Aircraft fuel and related taxes – mainline (1.80) (2.64)

Aircraft fuel and related taxes – regional (0.57) (0.66)

Total operating CASM, excluding net special items and fuel 17.69 11.46

Aircraft fuel and related taxes per ASM (3.17) (2.38)

CASM, excluding net special items and fuel 13.33 17.69

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity