What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-20 compared with 2022-07-21 · 223 added, 206 removed, 395 unchanged (52% of the section changed)

6 unchanged sentences

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 and rapid recovery in demand for air travel.

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 which continued into the third quarter of 2022.

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 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 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);

As of September 30, 2022, we had $14.3 billion in total available liquidity, consisting of $11.2 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 nine 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 $699 million in proceeds from enhanced equipment trust certificates (EETCs);

• repurchased $349 million of unsecured notes on the open market.

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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 Second Quarter 2022 Results

AAG’s Third 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 June 30, Increase Percent

Three Months Ended September 30, Increase

(Decrease) Percent

Increase (Decrease) (2)

(In millions, except percentage changes)

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Total operating revenues 13,462 8,969 4,493 50.1

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

Aircraft fuel and related taxes 3,847 1,952 1,895 97.1

Salaries, wages and benefits 3,384 3,018 366 12.1

Total operating expenses 12,532 8,374 4,158 49.7

Operating income 1,017 441 576 nm

Operating income 930 595 335 56.3

Pre-tax income 658 206 452 nm (3)

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

Income tax provision 175 37 138 nm

Net income 483 169 314 nm

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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.

Pre-tax income and net income were $658 million and $483 million, respectively, in the third quarter of 2022.

This compares to third quarter 2021 pre-tax income and net income of $206 million and $169 million, respectively.

The quarter-over-quarter improvement in our pre-tax income on a GAAP basis was driven by a significant recovery in demand for air travel and a 12.2% increase in capacity as compared to the third quarter of 2021, resulting in higher passenger revenue, offset in part by higher aircraft fuel and related taxes, due to an increase in the average price per gallon of aircraft fuel, and other increases in operating expenses.

The third quarter of 2021 also included the recognition of $1.0 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 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.

Excluding the effects of pre-tax net special items, pre-tax income was $640 million in the third quarter of 2022 and pre-tax loss was $833 million in the third 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, offset in part by higher aircraft fuel and related taxes and other increases in operating expenses, as described above.

In the third quarter of 2022, we reported total operating revenues of $13.5 billion, an increase of $4.5 billion, or 50.1%, as compared to the third quarter of 2021.

Passenger revenue was $12.4 billion in the third quarter of 2022, an increase of $4.4 billion, or 55.8%, as compared to the third quarter of 2021.

The increase in passenger revenue in the third quarter of 2022 was due to a 28.0% increase in passenger yield and a 21.7% increase in revenue passenger miles (RPMs), driven by a significant recovery in demand for air travel domestically and in the Atlantic and Latin America regions, resulting in an 85.3% load factor in the third quarter of 2022.

Cargo revenue decreased $53 million, or 15.9%, in the third quarter of 2022 from the third quarter of 2021 primarily due to a 10.3% decrease in cargo yield and a 6.2% decrease in cargo ton miles as a result of lower demand and increased global air freight capacity.

Other operating revenue increased $107 million, or 15.8%, as compared to the third quarter of 2021, driven primarily by higher revenue associated with our loyalty program.

During the three months ended September 30, 2022 and 2021, cash payments from co-branded credit card and other partners were $1.0 billion and $835 million, respectively.

Our total revenue per available seat mile (TRASM) was 19.63 cents in the third quarter of 2022, a 33.8% increase as compared to 14.68 cents in the third quarter of 2021.

Aircraft fuel expense was $3.8 billion in the third quarter of 2022, which was $1.9 billion, or 97.1%, higher as compared to the third quarter of 2021.

This increase was primarily driven by a 79.9% increase in the average price per gallon of aircraft fuel including related taxes to $3.73 in the third quarter of 2022 from $2.07 in the third quarter of 2021 and a 9.5% increase in gallons of fuel consumed due to increased capacity.

As of September 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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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.

Our 2022 third quarter total operating cost per available seat mile (CASM) was 18.28 cents, an increase of 33.4%, from 13.70 cents in the third quarter of 2021.

This increase in CASM was primarily driven by higher aircraft fuel and related taxes in the third quarter of 2022, as described above, and the recognition of $1.1 billion of operating net special credits in the third quarter of 2021 principally related to PSP Financial Assistance.

Our 2022 third quarter CASM excluding net special items and fuel was 12.61 cents, an increase of 3.0%, from 12.24 cents in the third 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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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

5 unchanged sentences

Regional operating special items, net

(2) 67 (2) 449

Aircraft fuel and related taxes (3,847) (1,952) (10,369) (4,596)

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Operating Statistics

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

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

Amounts may not recalculate due to rounding.

Three Months Ended

June 30, Increase Six Months Ended

June 30, Increase

September 30, Increase Nine Months Ended

September 30, Increase

2022 2021 2022 2021

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

4.03 1.91 nm 3.45 1.82 89.4%

3.73 2.07 79.9% 3.55 1.92 84.8%

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 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

Excludes 14 mainline aircraft and 53 regional aircraft that are in temporary storage at September 30, 2022 as follows:

14 Boeing 737-800, 30 Embraer 145, 13 Bombardier CRJ 700, five Bombardier CRJ 900 and five Embraer 170.

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

Operating Revenues

Three Months Ended

June 30, Increase Percent

September 30, Increase

(Decrease) Percent

(In millions, except percentage changes)

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Three Months Ended

June 30, 2022 RPMs ASMs Load

September 30, 2022 RPMs ASMs Load

(In millions)

Passenger revenue $ 12,396 21.7% 12.2% 6.6pts 28.0% 38.8%

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.

Passenger revenue increased $4.4 billion, or 55.8%, in the third quarter of 2022 from the third quarter of 2021 primarily due to a 28.0% increase in passenger yield and a 21.7% increase in RPMs, driven by a significant recovery in demand for air travel domestically and in the Atlantic and Latin America regions, resulting in an 85.3% load factor in the third quarter of 2022.

Other operating revenue increased $107 million, or 15.8%, as compared to the third quarter of 2021, driven primarily by higher revenue associated with our loyalty program.

Total operating revenues in the third quarter of 2022 increased $4.5 billion, or 50.1%, from the third quarter of 2021 driven principally by the increase in passenger revenue as described above.

Our TRASM increased 33.8% to 19.63 cents in the third quarter of 2022 from 14.68 cents in the third quarter of 2021.

Operating Expenses

Three Months Ended

June 30, Increase

September 30, Increase

(Decrease) Percent

(In millions, except percentage changes)

Aircraft fuel and related taxes $ 4,020 $ 1,611 $ 2,409 nm

Aircraft fuel and related taxes $ 3,847 $ 1,952 $ 1,895 97.1

Salaries, wages and benefits 3,384 3,018 366 12.1

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Depreciation and amortization 491 480 11 2.1

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

Mainline operating special items, net 37 (990) 1,027 nm

Other 1,362 1,109 253 22.9

Total operating expenses $ 12,532 $ 8,374 $ 4,158 49.7

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.

Total operating expenses increased $4.2 billion, or 49.7%, in the third quarter of 2022 from the third quarter of 2021 driven by higher aircraft fuel and related taxes and other expenses as a result of an increase in the average price per gallon of aircraft fuel and increased capacity.

The third quarter of 2021 total operating expenses also included $1.1 billion of net operating special credits principally related to the PSP Financial Assistance.

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.

Aircraft fuel and related taxes increased $1.9 billion, or 97.1%, in the third quarter of 2022 from the third quarter of 2021 primarily due to a 79.9% increase in the average price per gallon of aircraft fuel including related taxes to $3.73 in the third quarter of 2022 from $2.07 in the third quarter of 2021 and a 9.5% increase in gallons of fuel consumed due to increased capacity.

Salaries, wages and benefits increased $366 million, or 12.1%, in the third quarter of 2022 from the third quarter of 2021 primarily due to an 8.7% increase in mainline full-time equivalent employees subsequent to the third quarter of 2021.

Regional expenses increased $287 million, or 32.3%, in the third quarter of 2022 from the third 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 third quarter of 2021 also included the recognition of $128 million of PSP Financial Assistance as a regional operating special credit.

Maintenance, materials and repairs increased $137 million, or 25.1%, in the third quarter of 2022 from the third 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 $177 million, or 55.7%, in the third quarter of 2022 from the third quarter of 2021 primarily due to higher credit card fees and commission expense driven by the overall increase in passenger revenues.

Other operating expenses increased $253 million, or 22.9%, in the third quarter of 2022 from the third quarter of 2021 primarily as a result of increased capacity and expenses associated with improving our product offerings, customer experience and operational reliability.

Operating Special Items, Net

Three Months Ended June 30,

Three Months Ended September 30,

(In millions)

Litigation reserve adjustments $ 37 $ —

PSP Financial Assistance (1)

$ — $ (1,288)

Mark-to-market adjustments on bankruptcy obligations, net — (1)

Other operating special items, net — 3

1 unchanged sentence

PSP Financial Assistance (1)

Regional pilot retention program (2)

Other operating special items, net 2 —

Regional operating special items, net 2 (67)

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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).

(2) 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.

Nonoperating Results

Three Months Ended

June 30, Increase

September 30, Increase

(In millions, except percentage changes)

3 unchanged sentences

Total nonoperating expense, net $ (272) $ (389) $ 117 (30.0)

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.

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

In the third quarter of 2022, other nonoperating income, net primarily included $103 million of non-service related pension and other postretirement benefit plan income and $57 million of net special credits for mark-to-market net unrealized gains principally associated with our equity investments in Vertical Aerospace Ltd.

(Vertical), China Southern Airlines Company Limited (China Southern Airlines) and GOL Linhas Aéreas Inteligentes S.A.

In the third quarter of 2021, other nonoperating income, net included $80 million of non-service related pension and other postretirement benefit plan income.

In the third quarter of 2022, we recorded an income tax provision of $175 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

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Operating Revenues

Six Months Ended

Increase Percent

Nine Months Ended

September 30,

(Decrease) Percent

(In millions, except percentage changes)

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

Passenger $ 32,438 $ 17,682 $ 14,756 83.5

Cargo 970 973 (3) (0.3)

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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

Nine Months Ended September 30, 2021

Nine Months Ended

September 30, 2022 RPMs ASMs Load

(In millions)

Passenger revenue $ 32,438 42.4% 26.6% 9.1pts 28.8% 44.9%

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.

Passenger revenue increased $14.8 billion, or 83.5%, in the first nine months of 2022 from the first nine months of 2021 primarily due to a 42.4% increase in RPMs, driven by a significant recovery in demand for air travel domestically and in the Atlantic and Latin America regions, resulting in an 82.5% load factor in the first nine months of 2022, and a 28.8% increase in passenger yield.

Other operating revenue increased $575 million, or 31.9%, in the first nine months of 2022 from the first nine months of 2021, driven primarily by higher revenue associated with our loyalty program.

Total operating revenues in the first nine months of 2022 increased $15.3 billion, or 74.9%, from the first nine months of 2021 driven principally by the increase in passenger revenue as described above.

Our TRASM increased 38.2% to 18.42 cents in the first nine months of 2022 from 13.33 cents in the first nine months of 2021.

Operating Expenses

Six Months Ended

June 30, Increase

Nine Months Ended

September 30, Increase

(Decrease) Percent

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Total operating expenses $ 35,558 $ 20,734 $ 14,824 71.5

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.

Total operating expenses increased $14.8 billion, or 71.5%, in the first nine months of 2022 from the first nine months of 2021 driven by higher aircraft fuel and related taxes and other expenses as a result of an increase in the average price per gallon of aircraft fuel and increased capacity.

The first nine months of 2021 total operating expenses also included $4.4 billion of net operating special credits principally related to the PSP Financial Assistance.

See further discussion of operating special items, net below.

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.

Aircraft fuel and related taxes increased $5.8 billion in the first nine months of 2022 from the first nine months of 2021 primarily due to an 84.8% increase in the average price per gallon of aircraft fuel including related taxes to $3.55 in the first nine months of 2022 from $1.92 in the first nine months of 2021 and a 22.1% increase in gallons of fuel consumed due to increased capacity.

Salaries, wages and benefits increased $1.2 billion, or 13.5%, in the first nine months of 2022 from the first nine months of 2021 primarily due to an 8.7% increase in mainline full-time equivalent employees subsequent to the third quarter of 2021.

Regional expenses increased $1.2 billion, or 53.5%, in the first nine months of 2022 from the first nine months 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 first nine months of 2021 also included the recognition of $539 million of PSP Financial Assistance as a regional operating special credit.

Maintenance, materials and repairs increased $566 million, or 40.9%, in the first nine months of 2022 from the first nine 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 $131 million, or 6.8%, in the first nine months of 2022 from the first nine months of 2021 primarily due to an increase in landing fees as a result of increased departures.

Selling expenses increased $586 million, or 78.7%, in the first nine months of 2022 from the first nine months of 2021 primarily due to higher credit card fees and commission expense driven by the overall increase in passenger revenues.

Other operating expenses increased $1.3 billion, or 45.1%, in the first nine months of 2022 from the first nine 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

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions)

Fleet impairment (1)

Litigation reserve adjustments 37 —

PSP Financial Assistance (2)

4 unchanged sentences

PSP Financial Assistance (2)

Regional pilot retention program (4)

Fleet impairment (1)

Severance expenses (3)

Other operating special items, net 2 —

Regional operating special items, net 2 (449)

Operating special items, net $ 191 $ (4,435)

(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.

(1) Fleet impairment for the nine months ended September 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 the market conditions for certain used aircraft.

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

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

Fleet impairment for the nine months ended September 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 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.

Cash payments related to our voluntary early retirement programs for the nine months ended September 30, 2022 and 2021 were approximately $180 million and $480 million, respectively.

(4) 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.

Nonoperating Results

Six Months Ended

June 30, Increase

Nine Months Ended

September 30, Increase

(Decrease) Percent

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Total nonoperating expense, net $ (1,049) $ (1,078) $ 29 (2.7)

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.

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

Interest expense, net increased in the first nine months of 2022 compared to the first nine 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 nine months of 2022, other nonoperating income, net primarily included $315 million of non-service related pension and other postretirement benefit plan income, offset in part by $34 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 nine months of 2021, other nonoperating income, net included $252 million of non-service related pension and other postretirement benefit plan income, offset in part by $31 million of net special charges principally for non-cash charges associated with debt refinancings and extinguishments.

In the first nine months of 2022, we recorded an income tax benefit of $148 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 June 30, 2022 Compared to Three Months Ended June 30, 2021

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

Operating Revenues

Three Months Ended

June 30, Increase Percent

September 30, Increase

(Decrease) Percent

Increase (Decrease)

(In millions, except percentage changes)

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Total operating revenues $ 13,461 $ 8,968 $ 4,493 50.1

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.

Passenger revenue increased $4.4 billion, or 55.8%, in the third quarter of 2022 from the third quarter of 2021 primarily due to an increase in passenger yield and an increase in RPMs, driven by a significant recovery in demand for air travel domestically and in the Atlantic and Latin America regions, resulting in an increased load factor in the third quarter of 2022.

Cargo revenue decreased $53 million, or 15.9%, in the third quarter of 2022 from the third quarter of 2021 primarily due to a decrease in cargo yield and cargo ton miles as a result of lower demand and increased global air freight capacity.

Other operating revenue increased $107 million, or 15.7%, as compared to the third quarter of 2021, driven primarily by higher revenue associated with American's loyalty program.

Total operating revenues in the third quarter of 2022 increased $4.5 billion, or 50.1%, from the third quarter of 2021 driven principally by the increase in passenger revenue as described above.

Operating Expenses

Three Months Ended

June 30, Increase

September 30, Increase

(Decrease) Percent

(In millions, except percentage changes)

Aircraft fuel and related taxes $ 4,020 $ 1,611 $ 2,409 nm

Aircraft fuel and related taxes $ 3,847 $ 1,952 $ 1,895 97.1

Salaries, wages and benefits 3,382 3,017 365 12.1

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Depreciation and amortization 488 480 8 1.7

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

Mainline operating special items, net 37 (990) 1,027 nm

Other 1,363 1,109 254 22.9

Total operating expenses $ 12,526 $ 8,275 $ 4,251 51.4

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.

Total operating expenses increased $4.3 billion, or 51.4%, in the third quarter of 2022 from the third quarter of 2021 driven by higher aircraft fuel and related taxes and other expenses as a result of an increase in the average price per gallon of aircraft fuel and increased capacity.

The third quarter of 2021 total operating expenses also included $1.1 billion of net operating special credits principally related to the PSP Financial Assistance.

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.

Salaries, wages and benefits increased $365 million, or 12.1%, in the third quarter of 2022 from the third quarter of 2021 primarily due to an 8.7% increase in mainline full-time equivalent employees subsequent to the third quarter of 2021.

Regional expenses increased $383 million, or 48.5%, in the third quarter of 2022 from the third quarter of 2021 primarily due to contractual rate increases with American's third-party regional carriers.

The third quarter of 2021 also included the recognition of $128 million of PSP Financial Assistance as a regional operating special credit.

Other operating expenses increased $254 million, or 22.9%, in the third quarter of 2022 from the third 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,

Three Months Ended September 30,

(In millions)

Litigation reserve adjustments $ 37 $ —

PSP Financial Assistance (1)

$ — $ (1,288)

Mark-to-market adjustments on bankruptcy obligations, net — (1)

Other operating special items, net — 3

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Three Months Ended

June 30, Increase

September 30, Increase

(In millions, except percentage changes)

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Total nonoperating expense, net $ (215) $ (345) $ 130 (37.6)

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.

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

In the third quarter of 2021, other nonoperating income, net included $80 million of non-service related pension and other postretirement benefit plan income.

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.

In the third quarter of 2022, American recorded an income tax provision of $180 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

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Operating Revenues

Six Months Ended

Increase Percent

Nine Months Ended

September 30,

(Decrease) Percent

Increase (Decrease)

(In millions, except percentage changes)

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

Passenger $ 32,438 $ 17,682 $ 14,756 83.5

Cargo 970 973 (3) (0.3)

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Total operating revenues $ 35,778 $ 20,454 $ 15,324 74.9

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.

Passenger revenue increased $14.8 billion, or 83.5%, in the first nine months of 2022 from the first nine months of 2021 primarily due to an increase in RPMs, driven by a significant recovery in demand for air travel domestically and in the Atlantic and Latin America regions, resulting in an increased load factor in the first nine months of 2022, and an increase in passenger yield.

Other operating revenue increased $571 million, or 31.7%, in the first nine months of 2022 from the first nine months of 2021, driven primarily by higher revenue associated with American's loyalty program.

Operating Expenses

Six Months Ended

June 30, Increase

Nine Months Ended

September 30, Increase

(Decrease) Percent

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Total operating expenses $ 35,504 $ 20,636 $ 14,868 72.1

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.

Total operating expenses increased $14.9 billion, or 72.1%, in the first nine months of 2022 from the first nine months of 2021 driven by higher aircraft fuel and related taxes and other expenses as a result of an increase in the average price per gallon of aircraft fuel and increased capacity.

The first nine months of 2021 total operating expenses also included $4.5 billion of net operating special credits principally related to the PSP Financial Assistance.

See further discussion of operating special items, net below.

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.

Regional expenses increased $1.2 billion, or 58.4%, in the first nine months of 2022 from the first nine months of 2021 primarily due to contractual rate increases with American's third-party regional carriers.

The first nine months of 2021 also included the recognition of $539 million of PSP Financial Assistance as a regional operating special credit.

Other operating expenses increased $1.3 billion, or 45.1%, in the first nine months of 2022 from the first nine months of 2021 primarily as a result of increased capacity and expenses associated with improving American's product offerings, customer experience and operational reliability.

Operating Special Items, Net

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions)

Fleet impairment (1)

Litigation reserve adjustments 37 —

PSP Financial Assistance (2)

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Operating special items, net $ 189 $ (4,498)

(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.

(1) Fleet impairment for the nine months ended September 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 the 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 Treasury pursuant to the payroll support program established under PSP2 and PSP3.

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.

Cash payments related to American's voluntary early retirement programs for the nine months ended September 30, 2022 and 2021 were approximately $180 million and $480 million, respectively.

Nonoperating Results

Six Months Ended

June 30, Increase

Nine Months Ended

September 30, Increase

(Decrease) Percent

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Total nonoperating expense, net $ (906) $ (949) $ 43 (4.6)

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.

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

Interest expense, net increased in the first nine months of 2022 compared to the first nine 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 nine months of 2022, other nonoperating income, net primarily included $314 million of non-service related pension and other postretirement benefit plan income, offset in part by $32 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 nine months of 2021, other nonoperating income, net included $251 million of non-service related pension and other postretirement benefit plan income, offset in part by $31 million of net special charges principally for non-cash charges associated with debt refinancings and extinguishments.

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

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

In the first nine months of 2022, American recorded an income tax benefit of $115 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 June 30, 2022, AAG had $15.6 billion in total available liquidity and $997 million in restricted cash and short-term investments.

At September 30, 2022, AAG had $14.3 billion in total available liquidity and $953 million in restricted cash and short-term investments.

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

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

September 30, 2022 December 31, 2021 September 30, 2022 December 31, 2021

Cash $ 332 $ 273 $ 327 $ 265

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The amounts involved may be material.

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

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

Certain Covenants

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Additionally, a significant portion of our debt financing agreements contain covenants requiring us to maintain an aggregate of at least $2.0 billion of unrestricted cash and cash equivalents and amounts available to be drawn under revolving credit facilities, and our AAdvantage Financing contains a peak debt service coverage ratio, pursuant to which failure to comply with a certain threshold may result in early repayment, in whole or in part, of the AAdvantage Financing.

For further information regarding our debt covenants, see Note 5 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A and Note 4 to American’s Condensed Consolidated Financial Statements in Part I, Item 1B.

Sources and Uses of Cash

Operating Activities

Our net cash provided by operating activities was $2.9 billion and $3.6 billion for the first six months of 2022 and 2021, 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.

Our net cash provided by operating activities was $2.3 billion and $1.9 billion for the first nine months of 2022 and 2021, respectively, a $427 million period-over-period increase.

In the first nine 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 $5.1 billion compared to the first nine months of 2021 primarily due to higher profitability.

In addition, during the first nine months of 2022, we made approximately $180 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 $20 million in the remainder of 2022 and approximately $20 million in 2023.

Investing Activities

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.

Our net cash used in investing activities was $916 million and $7.7 billion for the first nine months of 2022 and 2021, respectively.

Our principal investing activities in the first nine months of 2022 included $1.9 billion of capital expenditures, which primarily related to the purchase of 17 Airbus A321neo aircraft and 12 spare engines, and the purchase of $205 million of equity investments, principally related to GOL.

Additionally, we incurred $274 million related to airport construction projects, net of reimbursements, principally in connection with the renovation and expansion of Terminal 8 at John F.

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

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

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

These cash outflows were offset in part by $1.3 billion in net sales of short-term investments.

Our principal investing activities in the first nine months of 2021 included $7.6 billion in net purchases of short-term investments as well as a $330 million increase in restricted short-term investments primarily related to collateral for the AAdvantage Financing.

Additionally, we incurred $110 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.

These cash outflows were offset in part by $181 million of proceeds from the sale of property and equipment principally related to our retired fleet and $168 million of proceeds primarily from aircraft sale-leaseback transactions.

Additionally, aircraft purchase deposit returns of $874 million offset our capital expenditures for the first nine 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 $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.

Our net cash used in financing activities was $1.3 billion for the first nine months of 2022 as compared to net cash provided by financing activities of $5.8 billion for the first nine months of 2021.

Our principal financing activities in the first nine months of 2022 included $2.0 billion in repayments of debt and finance lease obligations, consisting of $1.7 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 $699 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 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 $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.

Our principal financing activities in the first nine 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 received $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 $6.6 billion in debt repayments, including prepayments totaling $2.8 billion for our revolving credit facilities, $950 million for the April 2016 Spare Parts Term Loan Facility, $550 million of outstanding loans under the Treasury Loan Agreement and $2.3 billion in scheduled debt repayments.

In addition, we had $176 million of deferred financing cost cash outflows.

Operating Activities

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’s net cash provided by operating activities was $1.5 billion and $4.4 billion for the first nine months of 2022 and 2021, respectively, a $2.9 billion period-over-period decrease.

American had a $2.8 billion net decrease in intercompany cash receipts principally from AAG's financing transactions.

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

Excluding the PSP Financial Assistance and decrease in AAG's financing transactions, American's operating cash flows increased $3.1 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.

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

Excluding the PSP Financial Assistance and the decrease in AAG's financing transactions, American's operating cash flows increased $4.1 billion compared to the first nine months of 2021 primarily due to higher profitability.

Also, during the first nine months of 2022, American made approximately $180 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 $20 million in the remainder of 2022 and approximately $20 million in 2023.

Investing Activities

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.

American’s net cash used in investing activities was $874 million and $7.7 billion for the first nine months of 2022 and 2021, respectively.

American’s principal investing activities in the first nine months of 2022 included $1.8 billion of capital expenditures, which primarily related to the purchase of 17 Airbus A321neo aircraft and 12 spare engines, and the purchase of $205 million of equity investments, principally related to GOL.

Additionally, American incurred $274 million related to airport construction projects, net of reimbursements, principally in connection with the renovation and expansion of Terminal 8 at JFK and the modernization of Terminals 4 and 5 at LAX.

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

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

These cash outflows were offset in part by $1.3 billion in net sales of short-term investments.

American’s principal investing activities in the first nine months of 2021 included $7.6 billion in net purchases of short-term investments as well as a $330 million increase in restricted short-term investments primarily related to collateral for the AAdvantage Financing.

Additionally, American incurred $110 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.

These cash outflows were offset in part by $181 million of proceeds from the sale of property and equipment principally related to American's retired fleet and $168 million of proceeds primarily from aircraft sale-leaseback transactions.

Additionally, aircraft purchase deposit returns of $874 million offset American's capital expenditures for the first nine 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 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.

American’s net cash used in financing activities was $570 million for the first nine months of 2022 as compared to net cash provided by financing activities of $3.3 billion for the first nine months of 2021.

American’s principal financing activities in the first nine months of 2022 included $1.3 billion in repayments of debt and finance lease obligations, offset in part by $699 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 nine 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 $6.6 billion in debt repayments, including prepayments totaling $2.8 billion for American's revolving credit facilities, $950 million for the April 2016 Spare Parts Term Loan Facility, $550 million of outstanding loans under the Treasury Loan Agreement and $2.3 billion in scheduled debt repayments.

In addition, American had $174 million of deferred financing cost cash outflows.

Significant Indebtedness

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.

As of September 30, 2022, AAG had $36.6 billion in long-term debt, including current maturities of $2.6 billion.

As of September 30, 2022, American had $31.3 billion in long-term debt, including current maturities of $2.6 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 June 30, 2022, we had definitive purchase agreements for the acquisition of the following aircraft (1) :

As of September 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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737 MAX Family — 19 29 20 20 — 88

— 27 21 20 20 — 88

787 Family 5 4 12 9 4 5 39

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Total 16 24 50 51 46 10 197

(1) Delivery schedule represents our best estimate as of the date of this report.

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

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

(1) Delivery schedule represents our best estimate as of the date of this report as described in footnote (d) to the " Contractual Obligations " table below.

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.

We also have agreements for 52 spare engines to be delivered in 2022 and beyond.

We currently have financing commitments in place for all aircraft on order and scheduled to be delivered in 2022 except for five Airbus A320neo Family aircraft and three Embraer 175 aircraft.

We currently have financing commitments in place for all aircraft on order and scheduled to be delivered in 2022 and 2023, except for 14 Boeing 737 MAX Family aircraft scheduled to be delivered in 2023.

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

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.

We do not have financing commitments in place for any of the aircraft scheduled to be delivered in 2024 and beyond, except for 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 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.

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

The table does not include commitments that are contingent on events or other factors that are uncertain or unknown at this time and is subject to other conventions as set forth in the applicable accompanying footnotes.

Payments Due by Period

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(a) Amounts represent contractual amounts due.

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.

Excludes $378 million and $23 million of unamortized debt discount, premium and issuance costs as of September 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 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.

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

(c) Includes $9.4 billion of future principal payments and $1.4 billion of future interest payments as of September 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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information about the firm commitment aircraft delivery schedule, in particular the footnotes to the table thereunder as to potential changes to such delivery schedule.

uncertainty surrounding the timing of delivery of certain aircraft, the amounts in the table represent our most current estimate;

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

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.

Due to uncertainty surrounding the timing of delivery of certain aircraft, the amounts in the table represent our most current estimate based on contractual delivery schedules adjusted for updates and revisions to such schedules communicated to management by the applicable equipment manufacturer.

However, the actual delivery schedule may differ from the table above, potentially materially, based on various potential factors including production delays by the manufacturer and regulatory concerns.

Additionally, the amounts in the table exclude five 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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(f) Represents minimum pension contributions based on actuarially determined estimates as of December 31, 2021 and is based on estimated payments through 2031.

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

(g) Includes purchase commitments for aircraft fuel, flight equipment maintenance, construction projects and information technology support and excludes obligations under certain fuel offtake agreements subject to material contingencies, such as the construction of a production facility.

Capital Raising Activity and Other Possible Actions

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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