What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-21 compared with 2022-04-21 · 304 added, 157 removed, 297 unchanged (61% of the section changed)

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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.

Ongoing global vaccination efforts and the corresponding lifting of government restrictions in and between many markets resulted in a significant recovery in demand for air travel, with $8.9 billion of total revenue in the first quarter of 2022, a recovery of 84% as compared to the first quarter of 2019.

Ongoing global vaccination efforts and the corresponding lifting of government restrictions in and between many markets resulted in a significant and rapid recovery in demand for air travel.

The continued impact of the COVID-19 pandemic, including any increases in infection rates, new variants and renewed governmental action to slow the spread of COVID-19 cannot be estimated.

Our capacity (as measured by available seat miles) continues to be reduced compared to pre-COVID-19 pandemic levels, with total capacity in the first quarter of 2022 down 10.7% as compared to the first quarter of 2019.

Domestic capacity in the first quarter of 2022 was down 7.5% while international capacity was down 17.4% as compared to the first quarter of 2019.

Our capacity (as measured by available seat miles) continues to be reduced compared to pre-COVID-19 pandemic levels, with total capacity in the second quarter of 2022 down 8.5% as compared to the second quarter of 2019.

Domestic capacity in the second quarter of 2022 was down 6.6% while international capacity was down 12.1% as compared to the second quarter of 2019.

While demand for domestic and short-haul international markets has largely recovered to 2019 levels, uncertainty remains regarding the timing of a full recovery.

We will continue to match our forward capacity with observed booking trends for future travel and make further adjustments to our capacity as needed.

As of March 31, 2022, we had $15.5 billion in total available liquidity, consisting of $12.5 billion in unrestricted cash and short-term investments, $2.8 billion in undrawn capacity under revolving credit facilities and a total of $220 million in undrawn short-term revolving and other facilities.

During the first three months of 2022, we completed the following financing transactions (see Note 5 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for further information):

As of June 30, 2022, we had $15.6 billion in total available liquidity, consisting of $12.5 billion in unrestricted cash and short-term investments, $2.8 billion in undrawn capacity under revolving credit facilities and a total of $220 million in undrawn short-term revolving and other facilities.

During the first six months of 2022, we completed the following financing transactions (see Note 5 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for further information):

• received approximately $574 million in proceeds from enhanced equipment trust certificates (EETCs);

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

AAG’s First Quarter 2022 Results

AAG’s Second Quarter 2022 Results

The selected financial data presented below is derived from AAG’s unaudited condensed consolidated financial statements included in Part I, Item 1A of this report and should be read in conjunction with those financial statements and the related notes thereto.

Three Months Ended March 31, Increase

(Decrease) Percent

(Decrease) (2)

Three Months Ended June 30, Increase Percent

(In millions, except percentage changes)

Passenger revenue $ 7,818 $ 3,179 $ 4,639 nm (3)

Passenger revenue $ 12,223 $ 6,545 $ 5,678 86.8

Cargo revenue 328 326 2 0.5

Other operating revenue 871 607 264 43.5

Total operating revenues 8,899 4,008 4,891 nm

Total operating revenues 13,422 7,478 5,944 79.5

Aircraft fuel and related taxes 4,020 1,611 2,409 nm (3)

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Total operating expenses 12,405 7,037 5,368 76.3

Operating loss (1,723) (1,315) 408 31.0

Pre-tax loss (2,086) (1,573) 513 32.6

Income tax benefit (451) (323) 128 39.6

Net loss (1,635) (1,250) 385 30.8

Pre-tax loss – GAAP $ (2,086) $ (1,573) $ 513 32.6

Operating income 1,017 441 576 nm

Pre-tax income 603 9 594 nm

Income tax provision (benefit) 127 (10) 137 nm

Net income 476 19 457 nm

Pre-tax income – GAAP $ 603 $ 9 $ 594 nm

Adjusted for:

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84 (1,418) 1,502 nm

Pre-tax loss excluding net special items $ (1,926) $ (3,519) $ (1,593) (45.3)

Pre-tax income (loss) excluding net special items $ 687 $ (1,409) $ 2,096 nm

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

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(3) Not meaningful or greater than 100% change.

Pre-Tax Loss and Net Loss

Pre-tax loss and net loss were $2.1 billion and $1.6 billion, respectively, in the first quarter of 2022.

This compares to first quarter 2021 pre-tax loss and net loss of $1.6 billion and $1.3 billion, respectively.

The quarter-over-quarter increase in our pre-tax loss on a GAAP basis was driven by higher aircraft fuel and related taxes and other operating expenses, primarily as a result of a 64.7% increase in the average price per gallon of aircraft fuel and a 57.6% increase in capacity as compared to the first quarter of 2021.

The first quarter of 2021 also includes the recognition of $1.9 billion of net special credits principally related to PSP Financial Assistance.

These increases in operating expenses were offset in part by higher revenues driven by a significant recovery in domestic and short-haul international demand.

Pre-Tax Income and Net Income

Pre-tax income and net income were $603 million and $476 million, respectively, in the second quarter of 2022.

This compares to second quarter 2021 pre-tax income and net income of $9 million and $19 million, respectively.

The quarter-over-quarter increase in our pre-tax income on a GAAP basis was due to higher passenger revenue driven by a significant recovery in demand for air travel, offset in part by increased aircraft fuel and related taxes, primarily as a result of an increase in the average price per gallon of aircraft fuel and a 21.3% increase in capacity as compared to the second quarter of 2021.

The second quarter of 2021 also includes the recognition of $1.4 billion of net pre-tax special credits principally related to PSP Financial Assistance.

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

Excluding the effects of pre-tax net special items, pre-tax loss was $1.9 billion and $3.5 billion in the first quarter of 2022 and 2021, respectively.

The quarter-over-quarter improvement in our pre-tax loss excluding pre-tax net special items was primarily due to higher revenues driven by a significant recovery in domestic and short-haul international demand, offset in part by an increase in our aircraft fuel and related taxes and other operating expenses primarily as a result of a 64.7% increase in the average price per gallon of aircraft fuel and a 57.6% increase in capacity as compared to the first quarter of 2021.

In the first quarter of 2022, we reported total operating revenues of $8.9 billion, an increase of $4.9 billion as compared to the first quarter of 2021.

Passenger revenue was $7.8 billion in the first quarter of 2022, an increase of $4.6 billion as compared to the first quarter of 2021.

The increase in passenger revenue in the first quarter of 2022 was due to a 97.2% increase in revenue passenger miles (RPMs) driven by a significant recovery in domestic and short-haul international demand, resulting in a 74.4% load factor in the first quarter of 2022.

In the first quarter of 2022, cargo revenue was $364 million, an increase of $49 million, or 15.4%, as compared to the first quarter of 2021.

The increase in cargo revenue was primarily due to a 14.6% increase in cargo yield as a result of higher rates.

Other operating revenue increased $203 million, or 39.6%, as compared to the first quarter of 2021, driven primarily by higher revenue associated with our loyalty program.

During the three months ended March 31, 2022 and 2021, cash payments from co-branded credit card and other partners were $1.4 billion and $1.0 billion, respectively.

Our total revenue per available seat mile (TRASM) was 14.95 cents in the first quarter of 2022, a 40.8% increase as compared to 10.61 cents in the first quarter of 2021.

Aircraft fuel expense was $2.5 billion in the first quarter of 2022, which was $1.5 billion higher as compared to the first quarter of 2021.

This increase was primarily driven by a 64.7% increase in the average price per gallon of aircraft fuel including related taxes to $2.80 in the first quarter of 2022 from $1.70 in the first quarter of 2021 and a 47.0% increase in gallons of fuel consumed principally due to increased capacity.

As of March 31, 2022, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption.

Excluding the effects of pre-tax net special items, pre-tax income was $687 million in the second quarter of 2022 and pre-tax loss was $1.4 billion in the second quarter of 2021.

The quarter-over-quarter improvement in our pre-tax income excluding pre-tax net special items was primarily due to higher passenger revenue driven by a significant recovery in demand for air travel, offset in part by increased aircraft fuel and related taxes, as described above.

In the second quarter of 2022, we reported total operating revenues of $13.4 billion, an increase of $5.9 billion, or 79.5%, as compared to the second quarter of 2021.

Passenger revenue was $12.2 billion in the second quarter of 2022, an increase of $5.7 billion, or 86.8%, as compared to the second quarter of 2021.

The increase in passenger revenue in the second quarter of 2022 was due to a 36.9% increase in revenue passenger miles (RPMs), driven by a significant recovery in demand for air travel, resulting in an 86.9% load factor in the second quarter of 2022, and a 36.4% increase in passenger yield.

Other operating revenue increased $264 million, or 43.5%, as compared to the second quarter of 2021, driven primarily by higher revenue associated with our loyalty program.

During the three months ended June 30, 2022 and 2021, cash payments from co-branded credit card and other partners were $1.0 billion and $684 million, respectively.

Our total revenue per available seat mile (TRASM) was 20.29 cents in the second quarter of 2022, a 48.0% increase as compared to 13.71 cents in the second quarter of 2021.

Aircraft fuel expense was $4.0 billion in the second quarter of 2022, which was $2.4 billion higher as compared to the second quarter of 2021.

This increase was primarily driven by an increase in the average price per gallon of aircraft fuel including related taxes to $4.03 in the second quarter of 2022 from $1.91 in the second quarter of 2021 and an 18.1% increase in gallons of fuel consumed principally due to increased capacity.

As of June 30, 2022, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption.

Our current policy is not to enter into transactions to hedge our fuel consumption, although we review that policy from time to time based on market conditions and other factors.

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general economic conditions and the price of fuel.

In particular, the onset of the COVID-19 pandemic resulted in a very rapid deterioration in general economic conditions.

Our 2022 first quarter total operating cost per available seat mile (CASM) was 17.84 cents, an increase of 26.6%, from 14.09 cents in the first quarter of 2021.

This increase in CASM was primarily driven by higher aircraft fuel and related taxes and other operating expenses as described above.

In addition, the 2021 first quarter CASM includes the recognition of $1.9 billion of net special credits principally related to PSP Financial Assistance.

Our 2022 first quarter CASM excluding net special items and fuel was 13.38 cents, a decrease of 18.7%, from 16.45 cents in the first quarter of 2021.

This decrease in CASM excluding net special items and fuel was primarily driven by higher capacity due to increased passenger demand as described above.

In particular, the onset of the COVID-19 pandemic resulted in a very rapid deterioration in general economic conditions, and the subsequent rapid economic expansion resulted in significant inflationary pressures, including on the cost of fuel.

Our 2022 second quarter total operating cost per available seat mile (CASM) was 18.75 cents, an increase of 45.3%, from 12.90 cents in the second quarter of 2021.

This increase in CASM was primarily driven by higher aircraft fuel and related taxes in the second quarter of 2022, as described above, and the recognition of $1.5 billion of net special credits in the second quarter of 2021 related to PSP Financial Assistance.

Our 2022 second quarter CASM excluding net special items and fuel was 12.68 cents, an increase of 0.5%, from 12.61 cents in the second quarter of 2021.

For a reconciliation of CASM to CASM excluding net special items and fuel, see below “Reconciliation of GAAP to Non-GAAP Financial Measures.”

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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 reconciliation of pre-tax loss (GAAP measure) to pre-tax loss excluding net special items (non-GAAP measure).

The following table presents the reconciliation of pre-tax income (loss) (GAAP measure) to pre-tax income (loss) excluding net special items (non-GAAP measure).

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

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(In millions)

Reconciliation of Pre-Tax Loss Excluding Net Special Items:

Pre-tax loss – GAAP $ (2,086) $ (1,573)

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

Pre-tax income (loss) – GAAP $ 603 $ 9 $ (1,483) $ (1,564)

Pre-tax net special items (1) :

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Total pre-tax net special items 84 (1,418) 244 (3,364)

Pre-tax loss excluding net special items $ (1,926) $ (3,519)

Pre-tax income (loss) excluding net special items $ 687 $ (1,409) $ (1,239) $ (4,928)

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

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Reconciliation of CASM Excluding Net Special Items and Fuel:

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Operating Statistics

The table below sets forth selected operating data for the three months ended March 31, 2022 and 2021.

The table below sets forth selected operating data for the three and six months ended June 30, 2022 and 2021.

Amounts may not recalculate due to rounding.

Three Months Ended

March 31, Increase

June 30, Increase Six Months Ended

June 30, Increase

2022 2021 2022 2021

Revenue passenger miles (millions) (a)

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Passenger load factor (percent) (c)

74.4 59.5 14.9pts

86.9 77.0 9.9pts 81.0 69.9 11.1pts

Yield (cents) (d)

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Average aircraft fuel price including related taxes (dollars per gallon)

2.80 1.70 64.7%

4.03 1.91 nm 3.45 1.82 89.4%

Total operating cost per available seat mile (cents) (g)

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(h) Includes aircraft owned and leased by American as well as aircraft operated by third-party regional carriers under capacity purchase agreements.

Excludes 29 mainline aircraft and 12 regional aircraft that are in temporary storage at March 31, 2022 as follows:

29 Boeing 737-800, 11 Embraer 145 and one Embraer 170.

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Excludes 20 mainline aircraft and 19 regional aircraft that are in temporary storage at June 30, 2022 as follows:

20 Boeing 737-800, 15 Embraer 145 and four Embraer 170.

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Operating Revenues

Three Months Ended

March 31, Increase Percent

June 30, Increase Percent

(In millions, except percentage changes)

Passenger $ 7,818 $ 3,179 $ 4,639 nm

Passenger $ 12,223 $ 6,545 $ 5,678 86.8

Cargo 328 326 2 0.5

Other 871 607 264 43.5

Total operating revenues $ 8,899 $ 4,008 $ 4,891 nm

Total operating revenues $ 13,422 $ 7,478 $ 5,944 79.5

This table presents our passenger revenue and the quarter-over-quarter change in certain operating statistics:

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Three Months Ended

March 31, 2022 RPMs ASMs Load

June 30, 2022 RPMs ASMs Load

(In millions)

Passenger revenue $ 12,223 36.9% 21.3% 9.9pts 36.4% 54.0%

Passenger revenue increased $4.6 billion in the first quarter of 2022 from the first quarter of 2021 primarily due to a 97.2% increase in RPMs driven by a significant recovery in domestic and short-haul international demand, resulting in a 74.4% load factor in the first quarter of 2022.

Cargo revenue increased $49 million, or 15.4%, in the first quarter of 2022 from the first quarter of 2021 primarily due to a 14.6% increase in cargo yield as a result of higher rates.

Other operating revenue increased $203 million, or 39.6%, as compared to the first quarter of 2021, driven primarily by higher revenue associated with our loyalty program.

Total operating revenues in the first quarter of 2022 increased $4.9 billion from the first quarter of 2021 driven principally by the increase in passenger revenue as described above.

Our TRASM increased 40.8% to 14.95 cents in the first quarter of 2022 from 10.61 cents in the first quarter of 2021.

Passenger revenue increased $5.7 billion, or 86.8%, in the second quarter of 2022 from the second quarter of 2021 primarily due to a 36.9% increase in RPMs, driven by a significant recovery in demand for air travel, resulting in an 86.9% load factor in the second quarter of 2022, and a 36.4% increase in passenger yield.

Other operating revenue increased $264 million, or 43.5%, as compared to the second quarter of 2021, driven primarily by higher revenue associated with our loyalty program.

Total operating revenues in the second quarter of 2022 increased $5.9 billion, or 79.5%, from the second quarter of 2021 driven principally by the increase in passenger revenue as described above.

Our TRASM increased 48.0% to 20.29 cents in the second quarter of 2022 from 13.71 cents in the second quarter of 2021.

Operating Expenses

Three Months Ended

March 31, Increase Percent

June 30, Increase

(Decrease) Percent

(In millions, except percentage changes)

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Aircraft rent 345 356 (11) (2.9)

Selling expenses 332 151 181 nm

Selling expenses 504 277 227 82.2

Depreciation and amortization 504 481 23 4.8

Mainline operating special items, net (5) (1,288) 1,283 (99.6)

Other 1,389 958 431 45.0

Total operating expenses $ 12,405 $ 7,037 $ 5,368 76.3

Total operating expenses increased $5.4 billion, or 76.3%, in the second quarter of 2022 from the second quarter of 2021 driven by higher aircraft fuel and related taxes and other expenses, primarily as a result of an increase in the average price per gallon of aircraft fuel and increased capacity, as well as an increase in net operating special items related to the $1.5 billion of PSP Financial Assistance recognized as a net special credit in the second quarter of 2021.

See further discussion of operating special items, net below.

Aircraft fuel and related taxes increased $2.4 billion in the second quarter of 2022 from the second quarter of 2021 primarily due to an increase in the average price per gallon of aircraft fuel including related taxes to $4.03 in the second quarter of 2022 from $1.91 in the second quarter of 2021 and an 18.1% increase in gallons of fuel consumed principally due to increased capacity.

Salaries, wages and benefits increased $373 million, or 13.0%, in the second quarter of 2022 from the second quarter of 2021 primarily due to a 12.1% increase in mainline full-time equivalent employees subsequent to the second quarter of 2021.

Regional expenses increased $437 million, or 68.5%, in the second quarter of 2022 from the second quarter of 2021 primarily due to pay rate increases and retention bonuses offered at our wholly-owned regional carriers as well as contractual rate increases with our third-party regional carriers.

The second quarter of 2021 also includes the recognition of $167 million of PSP Financial Assistance as a regional operating special credit.

Maintenance, materials and repairs increased $188 million, or 40.9%, in the second quarter of 2022 from the second quarter of 2021 primarily due to increased capacity and an increase in the volume of engine overhauls performed under time and material contracts where expense is incurred and recognized as maintenance is performed.

Selling expenses increased $227 million, or 82.2%, in the second quarter of 2022 from the second quarter of 2021 due to higher credit card fees, commission expense and booking fees driven by the overall increase in revenues.

Other operating expenses increased $431 million, or 45.0%, in the second quarter of 2022 from the second quarter of 2021 primarily as a result of increased capacity and expenses associated with improving our product offerings, customer experience and operational reliability.

Operating Special Items, Net

Three Months Ended June 30,

(In millions)

PSP Financial Assistance (1)

$ — $ (1,288)

Other operating special items, net (5) —

Mainline operating special items, net (5) (1,288)

PSP Financial Assistance (1)

Regional operating special items, net — (167)

Operating special items, net $ (5) $ (1,455)

(1) The PSP Financial Assistance represents recognition of a portion of the financial assistance received from the U.S.

Department of Treasury (Treasury) pursuant to the payroll support program established under the PSP Extension Law (PSP2) and the American Rescue Plan Act of 2021 (ARP) (PSP3).

Nonoperating Results

Three Months Ended

June 30, Increase

(In millions, except percentage changes)

Interest income $ 29 $ 5 $ 24 nm

Interest expense, net (468) (486) 18 (3.7)

Other income, net 25 49 (24) (50.4)

Total nonoperating expense, net $ (414) $ (432) $ 18 (4.0)

Interest income increased in the second quarter of 2022 compared to the second quarter of 2021 primarily as a result of higher returns on our short-term investments.

In the second quarter of 2022, other nonoperating income, net primarily included $106 million of non-service related pension and other postretirement benefit plan income, offset in part by $89 million of net special charges principally for mark-to-market net unrealized losses associated with our equity investments in Vertical Aerospace Ltd.

(Vertical), GOL Linhas Aéreas Inteligentes S.A.

(GOL) and China Southern Airlines Company Limited (China Southern Airlines).

In the second quarter of 2021, other nonoperating income, net included $85 million of non-service related pension and other postretirement benefit plan income, offset in part by $37 million of net special charges principally for mark-to-market net unrealized losses associated with our equity investment in China Southern Airlines.

In the second quarter of 2022, we recorded an income tax provision of $127 million.

Substantially all of our income or loss before income taxes is attributable to the United States.

See Note 6 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for additional information on income taxes.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Operating Revenues

Six Months Ended

Increase Percent

(In millions, except percentage changes)

Passenger $ 20,041 $ 9,724 $ 10,317 nm

Cargo 692 641 51 7.8

Other 1,588 1,121 467 41.7

Total operating revenues $ 22,321 $ 11,486 $ 10,835 94.3

This table presents our passenger revenue and the period-over-period change in certain operating statistics:

Six Months Ended June 30, 2021

Six Months Ended

June 30, 2022 RPMs ASMs Load

(In millions)

Passenger revenue $ 20,041 57.9% 36.2% 11.1pts 30.5% 51.4%

Passenger revenue increased $10.3 billion in the first six months of 2022 from the first six months of 2021 primarily due to a 57.9% increase in RPMs, driven by a significant recovery in demand for air travel, resulting in an 81.0% load factor in the first six months of 2022, and a 30.5% increase in passenger yield.

Cargo revenue increased $51 million, or 7.8%, in the first six months of 2022 from the first six months of 2021 primarily due to a 13.1% increase in cargo yield, offset in part by a 4.7% decrease in cargo ton miles driven by the reduced operation of cargo-only flights.

Other operating revenue increased $467 million, or 41.7%, in the first six months of 2022 from the first six months of 2021, driven primarily by higher revenue associated with our loyalty program.

Total operating revenues in the first six months of 2022 increased $10.8 billion, or 94.3%, from the first six months of 2021 driven principally by the increase in passenger revenue as described above.

Our TRASM increased 42.7% to 17.76 cents in the first six months of 2022 from 12.44 cents in the first six months of 2021.

Operating Expenses

Six Months Ended

June 30, Increase

(Decrease) Percent

(In millions, except percentage changes)

Aircraft fuel and related taxes $ 6,522 $ 2,644 $ 3,878 nm

Salaries, wages and benefits 6,389 5,593 796 14.2

Regional expenses 2,124 1,261 863 68.4

Maintenance, materials and repairs 1,264 835 429 51.3

Other rent and landing fees 1,372 1,256 116 9.2

Aircraft rent 698 706 (8) (1.1)

Selling expenses 836 427 409 95.8

Depreciation and amortization 995 959 36 3.8

Mainline operating special items, net 152 (2,996) 3,148 nm

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Total operating expenses $ 23,027 $ 12,360 $ 10,667 86.3

Total operating expenses increased $5.3 billion, or 99.6%, in the first quarter of 2022 from the first quarter of 2021 driven by higher aircraft fuel and related taxes and other expenses, primarily as a result of an increase in the average price per gallon of aircraft fuel and increased capacity, as well as an increase in net operating special items principally

related to the PSP Financial Assistance recognized as a net special credit in the first quarter of 2021.

Total operating expenses increased $10.7 billion, or 86.3%, in the first six months of 2022 from the first six months of 2021 driven by higher aircraft fuel and related taxes and other expenses, primarily as a result of an increase in the average price per gallon of aircraft fuel and increased capacity, as well as an increase in net operating special items principally related to the $3.6 billion of PSP Financial Assistance recognized as a net special credit in the first six months of 2021.

See further discussion of operating special items, net below.

Aircraft fuel and related taxes increased $1.5 billion in the first quarter of 2022 from the first quarter of 2021 primarily due to a 64.7% increase in the average price per gallon of aircraft fuel including related taxes to $2.80 in the first quarter of 2022 from $1.70 in the first quarter of 2021 and a 47.0% increase in gallons of fuel consumed principally due to increased capacity.

Salaries, wages and benefits increased $424 million, or 15.5%, in the first quarter of 2022 from the first quarter of 2021 primarily due to a 12.2% increase in full-time equivalent employees from the first quarter of 2021.

Maintenance, materials and repairs increased $241 million, or 64.0%, in the first quarter of 2022 from the first quarter of 2021 primarily due to increased capacity and an increase in the volume of engine overhauls performed under time and material contracts where expense is incurred and recognized as maintenance is performed.

Selling expenses increased $181 million in the first quarter of 2022 from the first quarter of 2021 due to higher credit card fees, commission expense and booking fees driven by the overall increase in revenues.

Other operating expenses increased $569 million, or 79.5%, in the first quarter of 2022 from the first quarter of 2021 primarily as a result of increased capacity and expenses associated with improving our product offerings, customer experience and operational reliability.

Aircraft fuel and related taxes increased $3.9 billion in the first six months of 2022 from the first six months of 2021 primarily due to an 89.4% increase in the average price per gallon of aircraft fuel including related taxes to $3.45 in the first six months of 2022 from $1.82 in the first six months of 2021 and a 30.2% increase in gallons of fuel consumed principally due to increased capacity.

Salaries, wages and benefits increased $796 million, or 14.2%, in the first six months of 2022 from the first six months of 2021 primarily due to a 12.1% increase in mainline full-time equivalent employees subsequent to the second quarter of 2021.

Regional expenses increased $863 million, or 68.4%, in the first six months of 2022 from the first six months of 2021 primarily due to increased capacity, pay rate increases and retention bonuses offered at our wholly-owned regional carriers, as well as contractual rate increases with our third-party regional carriers.

The first six months of 2021 also includes the recognition of $410 million of PSP Financial Assistance as a regional operating special credit.

Maintenance, materials and repairs increased $429 million, or 51.3%, in the first six months of 2022 from the first six months of 2021 primarily due to increased capacity and an increase in the volume of engine overhauls performed under time and material contracts where expense is incurred and recognized as maintenance is performed.

Other rent and landing fees increased $116 million, or 9.2%, in the first six months of 2022 from the first six months of 2021 primarily due to an increase in landing fees as a result of increased departures.

Selling expenses increased $409 million, or 95.8%, in the first six months of 2022 from the first six months of 2021 due to higher credit card fees, commission expense and booking fees driven by the overall increase in revenues.

Other operating expenses increased $1.0 billion, or 59.8%, in the first six months of 2022 from the first six months of 2021 primarily as a result of increased capacity and expenses associated with improving our product offerings, customer experience and operational reliability.

Operating Special Items, Net

Three Months Ended March 31,

Six Months Ended June 30,

(In millions)

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Operating special items, net $ 152 $ (3,377)

(1) Fleet impairment in the first quarter of 2022 included a non-cash impairment charge to write down the carrying value of our retired Airbus A330 fleet to the estimated fair value due to current market conditions for certain used aircraft.

(1) Fleet impairment for the six months ended June 30, 2022 included a non-cash impairment charge to write down the carrying value of our retired Airbus A330 fleet to the estimated fair value due to current market conditions for certain used aircraft.

We retired our Airbus A330 fleet in 2020 as a result of the decline in demand for air travel due to the COVID-19 pandemic.

Fleet impairment in the first quarter of 2021 included a non-cash impairment charge to write down regional aircraft resulting from the retirement of the remaining Embraer 140 fleet earlier than planned.

(2) The PSP Financial Assistance represents recognition of a portion of the financial assistance received from the U.S.

Department of Treasury pursuant to the payroll support program established under the PSP Extension Law.

Fleet impairment for the six months ended June 30, 2021 included a non-cash impairment charge to write down regional aircraft resulting from the retirement of the remaining Embraer 140 fleet earlier than planned.

(2) The PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the payroll support program established under PSP2 and PSP3.

(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 $90 million and $170 million for the first quarter of 2022 and 2021, respectively.

Cash payments related to our voluntary early retirement programs for the six months ended June 30, 2022 and 2021 were approximately $140 million and $290 million, respectively.

Nonoperating Results

Three Months Ended

March 31, Increase

Six Months Ended

June 30, Increase

(Decrease) Percent

(In millions, except percentage changes)

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Total nonoperating expense, net $ (777) $ (690) $ (87) 12.6

Interest expense, net increased in the first quarter of 2022 compared to the first quarter of 2021 primarily due to the impact of the AAdvantage Financing issued at the end of the first quarter of 2021, which improved our liquidity position in response to the COVID-19 pandemic.

In the first quarter of 2022, other nonoperating income, net primarily included $106 million of non-service related pension and other postretirement benefit plan income.

In the first quarter of 2021, other nonoperating income, net included $87 million of non-service related pension and other postretirement benefit plan income and $23 million of net special credits principally for mark-to-market net unrealized gains associated with our equity investment in China Southern Airlines and other instruments, offset in part by non-cash charges associated with debt refinancings and extinguishments.

In the first quarter of 2022, we recorded an income tax benefit of $451 million.

Interest income increased in the first six months of 2022 compared to the first six months of 2021 primarily as a result of higher returns on our short-term investments.

Interest expense, net increased in the first six months of 2022 compared to the first six months of 2021 primarily due to the impact of the AAdvantage Financing issued at the end of the first quarter of 2021, which improved our liquidity position in response to the COVID-19 pandemic.

In the first six months of 2022, other nonoperating income, net primarily included $211 million of non-service related pension and other postretirement benefit plan income, offset in part by $92 million of net special charges principally for mark-to-market net unrealized losses associated with our equity investments in GOL, Vertical and China Southern Airlines.

In the first six months of 2021, other nonoperating income, net included $172 million of non-service related pension and other postretirement benefit plan income and $13 million of net special charges principally for non-cash charges associated with debt refinancings and extinguishments, offset in part by mark-to-market net unrealized gains associated with our equity investment in China Southern Airlines and other instruments.

In the first six months of 2022, we recorded an income tax benefit of $324 million.

Substantially all of our income or loss before income taxes is attributable to the United States.

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American’s Results of Operations

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Operating Revenues

Three Months Ended

March 31, Increase Percent

June 30, Increase Percent

(In millions, except percentage changes)

Passenger $ 7,818 $ 3,179 $ 4,639 nm

Passenger $ 12,223 $ 6,545 $ 5,678 86.8

Cargo 328 326 2 0.5

Other 870 607 263 43.4

Total operating revenues $ 8,896 $ 4,008 $ 4,888 nm

Passenger revenue increased $4.6 billion in the first quarter of 2022 from the first quarter of 2021 primarily due to an increase in RPMs driven by a significant recovery in domestic and short-haul international demand, resulting in an increased load factor in the first quarter of 2022.

Cargo revenue increased $49 million, or 15.4%, in the first quarter of 2022 from the first quarter of 2021 primarily due to an increase in cargo yield as a result of higher rates.

Other operating revenue increased $200 million, or 39.1%, as compared to the first quarter of 2021, driven primarily by higher revenue associated with American's loyalty program.

Total operating revenues in the first quarter of 2022 increased $4.9 billion from the first quarter of 2021 driven principally by the increase in passenger revenue as described above.

Total operating revenues $ 13,421 $ 7,478 $ 5,943 79.5

Passenger revenue increased $5.7 billion, or 86.8%, in the second quarter of 2022 from the second quarter of 2021 primarily due to an increase in RPMs, driven by a significant recovery in demand for air travel, resulting in an increased load factor in the second quarter of 2022, and an increase in passenger yield.

Other operating revenue increased $263 million, or 43.4%, as compared to the second quarter of 2021, driven primarily by higher revenue associated with American's loyalty program.

Total operating revenues in the second quarter of 2022 increased $5.9 billion, or 79.5%, from the second quarter of 2021 driven principally by the increase in passenger revenue as described above.

Operating Expenses

Three Months Ended

March 31, Increase Percent

June 30, Increase

(Decrease) Percent

(In millions, except percentage changes)

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Aircraft rent 345 356 (11) (2.9)

Selling expenses 332 151 181 nm

Selling expenses 504 277 227 82.2

Depreciation and amortization 501 481 20 4.3

Mainline operating special items, net (5) (1,288) 1,283 (99.6)

Other 1,390 958 432 45.0

Total operating expenses $ 12,387 $ 7,039 $ 5,348 76.0

Total operating expenses increased $5.3 billion, or 76.0%, in the second quarter of 2022 from the second quarter of 2021 driven by higher aircraft fuel and related taxes and other expenses, primarily as a result of an increase in the average price per gallon of aircraft fuel and increased capacity, as well as an increase in net operating special items related to the $1.5 billion of PSP Financial Assistance recognized as a net special credit in the second quarter of 2021.

See further discussion of operating special items, net below.

Regional expenses increased $419 million, or 65.3%, in the second quarter of 2022 from the second quarter of 2021 primarily due to contractual rate increases with American's third-party regional carriers.

The second quarter of 2021 also includes the recognition of $167 million of PSP Financial Assistance as a regional operating special credit.

Other operating expenses increased $432 million, or 45.0%, in the second quarter of 2022 from the second quarter of 2021 primarily as a result of increased capacity and expenses associated with improving American's product offerings, customer experience and operational reliability.

Operating Special Items, Net

Three Months Ended June 30,

(In millions)

PSP Financial Assistance (1)

$ — $ (1,288)

Other operating special items, net (5) —

Mainline operating special items, net (5) (1,288)

PSP Financial Assistance (1)

Regional operating special items, net — (167)

Operating special items, net $ (5) $ (1,455)

(1) The PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the payroll support program established under PSP2 and PSP3.

Nonoperating Results

Three Months Ended

June 30, Increase

(In millions, except percentage changes)

Interest income $ 41 $ 9 $ 32 nm

Interest expense, net (437) (447) 10 (2.2)

Other income, net 23 49 (26) (51.5)

Total nonoperating expense, net $ (373) $ (389) $ 16 (4.2)

Interest income increased in the second quarter of 2022 compared to the second quarter of 2021 primarily as a result of higher returns on American's short-term investments.

In the second quarter of 2022, other nonoperating income, net primarily included $105 million of non-service related pension and other postretirement benefit plan income, offset in part by $89 million of net special charges principally for mark-to-market net unrealized losses associated with American's equity investments in Vertical, GOL and China Southern Airlines.

American is a member of AAG's consolidated federal and certain state income tax returns.

In the second quarter of 2022, American recorded an income tax provision of $140 million.

Substantially all of American’s income or loss before income taxes is attributable to the United States.

See Note 5 to American’s Condensed Consolidated Financial Statements in Part I, Item 1B for additional information on income taxes.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Operating Revenues

Six Months Ended

Increase Percent

(In millions, except percentage changes)

Passenger $ 20,041 $ 9,724 $ 10,317 nm

Cargo 692 641 51 7.8

Other 1,584 1,120 464 41.4

Total operating revenues $ 22,317 $ 11,485 $ 10,832 94.3

Passenger revenue increased $10.3 billion in the first six months of 2022 from the first six months of 2021 primarily due to an increase in RPMs, driven by a significant recovery in demand for air travel, resulting in an increased load factor in the first six months of 2022, and an increase in passenger yield.

Cargo revenue increased $51 million, or 7.8%, in the first six months of 2022 from the first six months of 2021 primarily due to an increase in cargo yield, offset in part by a decrease in cargo ton miles driven by the reduced operation of cargo-only flights.

Other operating revenue increased $464 million, or 41.4%, in the first six months of 2022 from the first six months of 2021, driven primarily by higher revenue associated with American's loyalty program.

Operating Expenses

Six Months Ended

June 30, Increase

(Decrease) Percent

(In millions, except percentage changes)

Aircraft fuel and related taxes $ 6,522 $ 2,644 $ 3,878 nm

Salaries, wages and benefits 6,385 5,590 795 14.2

Regional expenses 2,081 1,264 817 64.6

Maintenance, materials and repairs 1,264 835 429 51.3

Other rent and landing fees 1,372 1,256 116 9.2

Aircraft rent 698 706 (8) (1.1)

Selling expenses 836 427 409 95.8

Depreciation and amortization 992 959 33 3.5

Mainline operating special items, net 152 (2,996) 3,148 nm

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Total operating expenses $ 22,978 $ 12,361 $ 10,617 85.9

Total operating expenses increased $5.3 billion, or 99.0%, in the first quarter of 2022 from the first quarter of 2021 driven by higher aircraft fuel and related taxes and other expenses, primarily as a result of an increase in the average price per gallon of aircraft fuel and increased capacity, as well as an increase in net operating special items principally related to the PSP Financial Assistance recognized as a net special credit in the first quarter of 2021.

Total operating expenses increased $10.6 billion, or 85.9%, in the first six months of 2022 from the first six months of 2021, driven by higher aircraft fuel and related taxes and other expenses, primarily as a result of an increase in the average price per gallon of aircraft fuel and increased capacity, as well as an increase in net operating special items principally related to the $3.6 billion of PSP Financial Assistance recognized as a net special credit in the first six months of 2021.

See further discussion of operating special items, net below.

Salaries, wages and benefits increased $423 million, or 15.5%, in the first quarter of 2022 from the first quarter of 2021 primarily due to an increase in full-time equivalent employees from the first quarter of 2021.

Other operating expenses increased $569 million, or 79.3%, in the first quarter of 2022 from the first quarter of 2021 primarily as a result of increased capacity and expenses associated with improving our product offerings, customer experience and operational reliability.

Salaries, wages and benefits increased $795 million, or 14.2%, in the first six months of 2022 from the first six months of 2021 primarily due to a 12.1% increase in mainline full-time equivalent employees subsequent to the second quarter of 2021.

Regional expenses increased $817 million, or 64.6%, in the first six months of 2022 from the first six months of 2021 primarily due to increased capacity and contractual rate increases with American's third-party regional carriers.

The first six months of 2021 also includes the recognition of $410 million of PSP Financial Assistance as a regional operating special credit.

Other operating expenses increased $1.0 billion, or 59.7%, in the first six months of 2022 from the first six months of 2021 primarily as a result of increased capacity and expenses associated with improving American's product offerings, customer experience and operational reliability.

Operating Special Items, Net

Three Months Ended March 31,

Six Months Ended June 30,

(In millions)

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Operating special items, net $ 152 $ (3,379)

(1) Fleet impairment in the first quarter of 2022 included a non-cash impairment charge to write down the carrying value of American's retired Airbus A330 fleet to the estimated fair value due to current market conditions for certain used aircraft.

(1) Fleet impairment for the six months ended June 30, 2022 included a non-cash impairment charge to write down the carrying value of American's retired Airbus A330 fleet to the estimated fair value due to current market conditions for certain used aircraft.

American retired its Airbus A330 fleet in 2020 as a result of the decline in demand for air travel due to the COVID-19 pandemic.

(2) The PSP Financial Assistance represents recognition of a portion of the financial assistance received from the U.S.

Department of Treasury pursuant to the payroll support program established under the PSP Extension Law.

(2) The PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the payroll support program established under PSP2 and PSP3.

Cash payments primarily associated with American's voluntary early retirement programs were approximately $90 million and $170 million for the first quarter of 2022 and 2021, respectively.

Cash payments related to American's voluntary early retirement programs for the six months ended June 30, 2022 and 2021 were approximately $140 million and $290 million, respectively.

Nonoperating Results

Three Months Ended

March 31, Increase

Six Months Ended

June 30, Increase

(Decrease) Percent

(In millions, except percentage changes)

Interest income $ 11 $ 9 $ 2 20.0

Interest income $ 52 $ 18 $ 34 nm

Interest expense, net (861) (780) (81) 10.4

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Total nonoperating expense, net $ (692) $ (604) $ (88) 14.3

Interest expense, net increased in the first quarter of 2022 compared to the first quarter of 2021 primarily due to the impact of the AAdvantage Financing issued at the end of the first quarter of 2021, which improved American's liquidity position in response to the COVID-19 pandemic.

In the first quarter of 2022, other nonoperating income, net primarily included $105 million of non-service related pension and other postretirement benefit plan income.

In the first quarter of 2021, other nonoperating income, net included $87 million of non-service related pension and other postretirement benefit plan income and $23 million of net special credits principally for mark-to-market net unrealized gains associated with American's equity investment in China Southern Airlines and other instruments, offset in part by non-cash charges associated with debt refinancings and extinguishments.

Interest income increased in the first six months of 2022 compared to the first six months of 2021 primarily as a result of higher returns on American's short-term investments.

Interest expense, net increased in the first six months of 2022 compared to the first six months of 2021 primarily due to the impact of the AAdvantage Financing issued at the end of the first quarter of 2021, which improved American's liquidity position in response to the COVID-19 pandemic.

In the first six months of 2022, other nonoperating income, net primarily included $211 million of non-service related pension and other postretirement benefit plan income, offset in part by $90 million of net special charges principally for mark-to-market net unrealized losses associated with American's equity investments in GOL, Vertical and China Southern Airlines.

In the first six months of 2021, other nonoperating income, net included $171 million of non-service related pension and other postretirement benefit plan income and $13 million of net special charges principally for non-cash charges associated with debt refinancings and extinguishments, offset in part by mark-to-market net unrealized gains associated with American's equity investment in China Southern Airlines and other instruments.

American is a member of AAG's consolidated federal and certain state income tax returns.

In the first quarter of 2022, American recorded an income tax benefit of $436 million.

In the first six months of 2022, American recorded an income tax benefit of $296 million.

Substantially all of American’s income or loss before income taxes is attributable to the United States.

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Liquidity and Capital Resources

At March 31, 2022, AAG had $15.5 billion in total available liquidity and $952 million in restricted cash and short-term investments.

At June 30, 2022, AAG had $15.6 billion in total available liquidity and $997 million in restricted cash and short-term investments.

Additional detail regarding our available liquidity is provided in the table below (in millions):

March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021

Cash $ 401 $ 273 $ 373 $ 265

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The amounts involved may be material.

For further information regarding our debt repurchases during the first quarter of 2022, see Note 5 to AAG's Condensed Consolidated Financial Statements in Part I, Item 1A.

For further information regarding our debt repurchases during the first six months of 2022, see Note 5 to AAG's Condensed Consolidated Financial Statements in Part I, Item 1A.

Certain Covenants

Certain of our debt financing agreements (including our secured notes, term loans, revolving credit facilities and spare engine EETCs) contain loan to value (LTV), collateral coverage or peak debt service coverage ratio covenants and certain agreements require us to appraise the related collateral annually or semiannually.

Pursuant to such agreements, if the applicable LTV, collateral coverage or peak debt service coverage ratio exceeds or falls below a specified threshold, as the case may be, we will be required, as applicable, to pledge additional qualifying collateral (which in some cases may include cash or investment securities), withhold additional cash in certain accounts, or to pay down such financing, in whole or in part, or the interest rate for the relevant financing will be increased.

Pursuant to such agreements, if the applicable LTV, collateral coverage or peak debt service coverage ratio exceeds or falls below a specified threshold, as the case may be, we will be required, as applicable, to pledge additional qualifying collateral (which in some cases may include cash or investment securities), withhold additional cash in certain accounts, or pay down such financing, in whole or in part, or the interest rate for the relevant financing will be increased.

As of the most recent applicable measurement dates, we were in compliance with each of the foregoing LTV, collateral coverage and peak debt service coverage tests.

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Operating Activities

Our net cash provided by operating activities was $1.2 billion and $174 million for the first quarter of 2022 and 2021, respectively, a $1.0 billion quarter-over-quarter increase.

In the first quarter of 2021, we received cash proceeds of approximately $2.1 billion associated with PSP Financial Assistance.

Excluding the PSP Financial Assistance, our operating cash flows increased $3.1 billion compared to the first quarter of 2021 primarily due to higher profitability as well as working capital increases, principally in our air traffic liability as passenger demand for travel returned.

In addition, during the first quarter of 2022, we had approximately $90 million in cash payments associated with our voluntary early retirement programs.

Excluding the enhanced healthcare benefits provided to eligible team members, we estimate cash payments under these programs to be approximately $90 million in the remainder of 2022 and approximately $20 million in 2023 and beyond.

Our net cash provided by operating activities was $2.9 billion and $3.6 billion for the first six months of 2022 and 2021, respectively, a $720 million period-over-period decrease.

In the first six months of 2021, we received cash proceeds of approximately $4.7 billion associated with the PSP Financial Assistance.

Excluding the PSP Financial Assistance, our operating cash flows increased $4.0 billion compared to the first six months of 2021 primarily due to higher profitability.

In addition, during the first six months of 2022, we had approximately $140 million in cash payments associated with our voluntary early retirement programs.

Excluding the enhanced healthcare benefits provided to eligible team members, we estimate cash payments under these programs to be approximately $50 million in the remainder of 2022 and approximately $20 million in 2023.

Investing Activities

Our net cash used in investing activities was $771 million and $7.2 billion for the first quarter of 2022 and 2021, respectively.

Our principal investing activities in the first quarter of 2022 included $807 million of capital expenditures, which principally related to the purchase of nine Airbus A321neo aircraft.

Our net cash used in investing activities was $1.7 billion and $11.0 billion for the first six months of 2022 and 2021, respectively.

Our principal investing activities in the first six months of 2022 included $1.4 billion of capital expenditures, which principally related to the purchase of 14 Airbus A321neo aircraft and 10 spare engines.

We also made a $200 million equity investment in GOL.

Additionally, we incurred $156 million related to airport construction projects, net of reimbursements, principally in connection with the renovation and expansion of Terminal 8 at John F.

Kennedy International Airport (JFK) and the modernization of Terminals 4 and 5 at Los Angeles International Airport (LAX).

These cash outflows were offset in part by $54 million in net sales of short-term investments as well as a $36 million decrease in restricted short-term investments primarily related to money market funds to be used to finance the renovation and expansion of Terminal 8 at JFK.

Our principal investing activities in the first quarter of 2021 included $7.1 billion in net purchases of short-term investments as well as a $194 million increase in restricted short-term investments primarily related to collateral for the AAdvantage Financing.

These cash outflows were offset in part by $108 million of proceeds from the sale of property and equipment and $99 million of proceeds primarily from aircraft sale-leaseback transactions.

Additionally, aircraft purchase deposit returns exceeded our capital expenditures for the first quarter of 2021, which expenditures were principally related to the harmonization of interior configurations across our mainline fleet and the purchase of one Airbus A321neo aircraft.

These cash outflows were offset in part by $52 million in net sales of short-term investments.

Our principal investing activities in the first six months of 2021 included $11.0 billion in net purchases of short-term investments as well as a $404 million increase in restricted short-term investments primarily related to collateral for the AAdvantage Financing.

Additionally, we incurred $77 million related to airport construction projects, net of reimbursements, principally in connection with the renovation and expansion of Terminal 8 at JFK and the modernization of Terminals 4 and 5 at LAX.

These cash outflows were offset in part by $163 million of proceeds primarily from aircraft sale-leaseback transactions and $161 million of proceeds from the sale of property and equipment.

Additionally, aircraft purchase deposit returns of $772 million exceeded our capital expenditures for the first six months of 2021, which expenditures were principally related to the harmonization of interior configurations across our mainline fleet and the purchase of two Airbus A321neo aircraft.

Financing Activities

Our net cash used in financing activities was $310 million for the first quarter of 2022 as compared to net cash provided by financing activities of $7.0 billion for the first quarter of 2021.

Our principal financing activities in the first quarter of 2022 included $661 million in debt repayments, including $344 million in scheduled debt repayments and the repurchase of $317 million of unsecured notes on the open market.

Our net cash used in financing activities was $1.1 billion for the first six months of 2022 as compared to net cash provided by financing activities of $7.5 billion for the first six months of 2021.

Our principal financing activities in the first six months of 2022 included $1.7 billion in repayments of debt and finance lease obligations, consisting of $1.3 billion of scheduled debt repayments including the repayment of $401 million in connection with the maturity of our 5.000% unsecured notes, and the repurchase of $349 million of unsecured notes on the open market.

These cash outflows were offset in part by $574 million of long-term debt proceeds from the issuance of equipment notes related to the 2021-1 Aircraft EETCs.

Our principal financing activities in the first quarter of 2021 included $10.9 billion in proceeds from the issuance of debt, including approximately $10.0 billion associated with the AAdvantage Financing and $896 million in aggregate principal amount under the PSP2 Promissory Note.

Our principal financing activities in the first six months of 2021 included $12.1 billion in proceeds from the issuance of debt, including approximately $10.0 billion associated with the AAdvantage Financing, $1.0 billion in aggregate principal amount under the PSP2 Promissory Note, $946 million in aggregate principal amount under the PSP3 Promissory Note and the $150 million issuance of special facility revenue bonds related to JFK.

We also had $460 million in net proceeds from the issuance of equity pursuant to an at-the-market offering.

These cash inflows were offset in part by $4.1 billion in debt repayments, including prepayments totaling $2.8 billion for our revolving credit facilities and $550 million of outstanding loans under the Treasury Loan Agreement, and $661 million in scheduled debt repayments.

These cash inflows were offset in part by $5.0 billion in debt repayments, including prepayments totaling $2.8 billion for our revolving credit facilities and $550 million of outstanding loans under the Treasury Loan Agreement, and $1.6 billion in scheduled debt repayments.

In addition, we had $166 million of deferred financing cost cash outflows.

Operating Activities

American’s net cash provided by operating activities was $810 million and $1.4 billion for the first quarter of 2022 and 2021, respectively, a $618 million quarter-over-quarter decrease.

American’s net cash provided by operating activities was $2.1 billion and $6.1 billion for the first six months of 2022 and 2021, respectively, a $4.0 billion period-over-period decrease.

American had a $2.9 billion net decrease in intercompany cash receipts principally from AAG's financing transactions.

Additionally, in the first quarter of 2021, American received cash proceeds of approximately $1.9 billion associated with PSP Financial Assistance.

Excluding the PSP Financial Assistance and decrease in AAG's financing transactions, American's operating cash flows increased $2.9 billion compared to the first quarter of 2021 primarily due to higher profitability as well as working capital increases principally in American's air traffic liability as passenger demand for travel returned.

Also, during the first quarter of 2022, American had approximately $90 million in cash payments associated with its voluntary early retirement programs.

Excluding the enhanced healthcare benefits provided to eligible team members, American estimates cash payments under these programs to be approximately $90 million in the remainder of 2022 and approximately $20 million in 2023 and beyond.

Additionally, in the first six months of 2021, American received cash proceeds of approximately $4.2 billion associated with PSP Financial Assistance.

Excluding the PSP Financial Assistance and decrease in AAG's financing transactions, American's operating cash flows increased $3.1 billion compared to the first six months of 2021 primarily due to higher profitability.

Also, during the first six months of 2022, American had approximately $140 million in cash payments associated with its voluntary early retirement programs.

Excluding the enhanced healthcare benefits provided to eligible team members, American estimates cash payments under these programs to be approximately $50 million in the remainder of 2022 and approximately $20 million in 2023.

Investing Activities

American’s net cash used in investing activities was $741 million and $7.1 billion for the first quarter of 2022 and 2021, respectively.

American’s principal investing activities in the first quarter of 2022 included $790 million of capital expenditures, which principally related to the purchase of nine Airbus A321neo aircraft.

American’s net cash used in investing activities was $1.7 billion and $11.0 billion for the first six months of 2022 and 2021, respectively.

American’s principal investing activities in the first six months of 2022 included $1.4 billion of capital expenditures, which principally related to the purchase of 14 Airbus A321neo aircraft and 10 spare engines.

American also made a $200 million equity investment in GOL.

Additionally, American incurred $156 million related to airport construction projects, net of reimbursements, principally in connection with the renovation and expansion of Terminal 8 at JFK and the modernization of Terminals 4 and 5 at LAX.

These cash outflows were offset in part by $67 million in net sales of short-term investments as well as a $36 million decrease in restricted short-term investments primarily related to money market funds to be used to finance the renovation and expansion of Terminal 8 at JFK.

American’s principal investing activities in the first quarter of 2021 included $7.1 billion in net purchases of short-term investments as well as a $194 million increase in restricted short-term investments primarily related to collateral for the AAdvantage Financing.

These cash outflows were offset in part by $108 million of proceeds from the sale of property and equipment and $99 million of proceeds primarily from aircraft sale-leaseback transactions.

Additionally, aircraft purchase deposit returns exceeded American's capital expenditures for the first quarter of 2021, which expenditures were principally related to the harmonization of interior configurations across its mainline fleet and the purchase of one Airbus A321neo aircraft.

These cash outflows were offset in part by $52 million in net sales of short-term investments.

American’s principal investing activities in the first six months of 2021 included $11.0 billion in net purchases of short-term investments as well as a $404 million increase in restricted short-term investments primarily related to collateral for the AAdvantage Financing.

Additionally, American incurred $77 million related to airport construction projects, net of reimbursements, principally in connection with the renovation and expansion of Terminal 8 at JFK and the modernization of Terminals 4 and 5 at LAX.

These cash outflows were offset in part by $163 million of proceeds primarily from aircraft sale-leaseback transactions and $161 million of proceeds from the sale of property and equipment.

Additionally, aircraft purchase deposit returns of $772 million exceeded American's capital expenditures for the first six months of 2021, which expenditures were principally related to the harmonization of interior configurations across its mainline fleet and the purchase of two Airbus A321neo aircraft.

Financing Activities

American’s net cash provided by financing activities was $28 million and $5.7 billion for the first quarter of 2022 and 2021, respectively.

American’s principal financing activities in the first quarter of 2022 included $367 million of long-term debt proceeds from the issuance of equipment notes related to the 2021-1 Aircraft EETCs offset in part by $339 million in scheduled debt repayments.

American’s principal financing activities in the first quarter of 2021 included $10.0 billion in proceeds associated with the AAdvantage Financing.

These cash inflows were offset in part by $4.1 billion in debt repayments, including prepayments totaling $2.8 billion for American's revolving credit facilities and $550 million of outstanding loans under the Treasury Loan Agreement, and $661 million in scheduled debt repayments.

American’s net cash used in financing activities was $319 million for the first six months of 2022 as compared to net cash provided by financing activities of $4.9 billion for the first six months of 2021.

American’s principal financing activities in the first six months of 2022 included $901 million in repayments of debt and finance lease obligations, offset in part by $574 million of long-term debt proceeds from the issuance of equipment notes related to the 2021-1 Aircraft EETCs.

American’s principal financing activities in the first six months of 2021 included $10.1 billion in proceeds from the issuance of debt, including approximately $10.0 billion associated with the AAdvantage Financing and the $150 million issuance of special facility revenue bonds related to JFK.

These cash inflows were offset in part by $5.0 billion in debt repayments, including prepayments totaling $2.8 billion for American's revolving credit facilities and $550 million of outstanding loans under the Treasury Loan Agreement, and $1.6 billion in scheduled debt repayments.

In addition, American had $165 million of deferred financing cost cash outflows.

Significant Indebtedness

As of March 31, 2022, AAG had $37.5 billion in long-term debt, including current maturities of $2.2 billion.

As of March 31, 2022, American had $31.9 billion in long-term debt, including current maturities of $1.8 billion.

As of June 30, 2022, AAG had $36.8 billion in long-term debt, including current maturities of $1.9 billion.

As of June 30, 2022, American had $31.5 billion in long-term debt, including current maturities of $1.9 billion.

All material changes in our significant indebtedness since our 2021 Form 10-K are discussed in Note 5 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A and Note 4 to American’s Condensed Consolidated Financial Statements in Part I, Item 1B.

Aircraft and Engine Purchase Commitments

As of March 31, 2022, we had definitive purchase agreements for the acquisition of the following aircraft (1) :

As of June 30, 2022, we had definitive purchase agreements for the acquisition of the following aircraft (1) :

of 2022 2023 2024 2025 2026 2027 and Thereafter Total

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Actual delivery dates are subject to change, which could be material, based on various potential factors including production delays by the manufacturer and regulatory concerns, such as those that have recently prevented The Boeing Company (Boeing) from timely delivering 787 Family aircraft.

(2) The table above and the "Contractual Obligations" table below assume our exercise of seven purchase options for 737 MAX Family aircraft that we previously announced our intention to exercise over the course of 2022.

(2) The table above and the "Contractual Obligations" table below reflect our exercise of purchase options for four Airbus A320neo Family aircraft in July 2022 and assume our exercise of seven purchase options for 737 MAX Family aircraft that we previously announced our intention to exercise over the course of 2022.

We also have agreements for 56 spare engines to be delivered in 2022 and beyond.

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Our ability to draw on the financing commitments we have in place is subject to (1) the satisfaction of various terms and conditions, including in some cases, on our acquisition of the aircraft by a certain date and (2) the performance by the counterparty providing such financing commitments of its obligations thereunder.

We do not have financing commitments in place for any of the aircraft scheduled to be delivered in 2023 and beyond, except for six Boeing 787 Family aircraft scheduled to be delivered in 2023 and five Boeing 787 Family aircraft scheduled to be delivered in 2024.

We do not have financing commitments in place for any of the aircraft scheduled to be delivered in 2023 and beyond, except for four Boeing 787 Family aircraft scheduled to be delivered in 2023 and five Boeing 787 Family aircraft scheduled to be delivered in 2024.

Off-Balance Sheet Arrangements

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Contractual Obligations

The following table provides details of our material cash requirements from known contractual obligations as of March 31, 2022 (in millions).

The following table provides details of our material cash requirements from known contractual obligations as of June 30, 2022 (in millions).

Except to the extent set forth in the applicable accompanying footnotes, the table does not include commitments that are contingent on events or other factors that are uncertain or unknown at this time.

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(a) Amounts represent contractual amounts due.

Excludes $412 million and $27 million of unamortized debt discount, premium and issuance costs as of March 31, 2022 for American and AAG Parent, respectively.

Excludes $396 million and $25 million of unamortized debt discount, premium and issuance costs as of June 30, 2022 for American and AAG Parent, respectively.

For additional information, see Note 5 and Note 4 to AAG’s and American’s Condensed Consolidated Financial Statements in Part I, Items 1A and 1B, respectively.

(b) For variable-rate debt, future interest obligations are estimated using the current forward rates at March 31, 2022.

(c) Includes $9.6 billion of future principal payments and $1.5 billion of future interest payments as of March 31, 2022, related to EETCs associated with mortgage financings of certain aircraft and spare engines.

(b) For variable-rate debt, future interest obligations are estimated using the current forward rates at June 30, 2022.

(c) Includes $9.4 billion of future principal payments and $1.5 billion of future interest payments as of June 30, 2022, related to EETCs associated with mortgage financings of certain aircraft and spare engines.

(d) See " Aircraft and Engine Purchase Commitments " in Part I, Item 2.

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however, the actual delivery schedule may differ from the table above, potentially materially.

Additionally, the amounts in the table exclude seven and six Boeing 787-8 aircraft to be delivered in 2022 and 2023, respectively, as well as five Boeing 787-9 aircraft to be delivered in 2024, in each case, for which we have obtained committed lease financing.

Additionally, the amounts in the table exclude nine and four Boeing 787-8 aircraft to be delivered in 2022 and 2023, respectively, as well as five Boeing 787-9 aircraft to be delivered in 2024, in each case, for which we have obtained committed lease financing.

This financing is reflected in the operating lease commitments line above.

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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-Q

Item 2. Management’s Discussion and Analysis