What changed in this filing

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Item 1A. Risk Factors

2022-10-20 compared with 2022-07-21 · 108 added, 102 removed, 760 unchanged (22% of the section changed)

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We reduced our system-wide capacity and, while we have increased capacity to match a subsequent recovery in demand for air travel, we will continue to monitor conditions and to proactively evaluate and adjust our schedule to match demand.

Additionally, we retired certain mainline aircraft earlier than planned, including all of our Airbus A330, Boeing 757, Boeing 767 and Embraer 190 aircraft as well as certain regional aircraft, including all of our Embraer 140 and Bombardier CRJ200 aircraft, which we expect will allow us to be more efficient by reducing the number of sub-fleets we operate, and we have also placed a number of Boeing 737-800 aircraft into temporary storage.

Additionally, we retired certain mainline and regional aircraft types earlier than planned, which we expect will allow us to be more efficient by reducing the number of sub-fleets we operate, and we also placed a significant number of aircraft into temporary storage.

We moved quickly to attempt to better align our costs with our reduced schedule and implemented other cost-saving initiatives (including reductions in maintenance expense, marketing expense, event and training expense, airport facilities expense, salaries and benefits expense, and other volume-related expense reductions, including fuel).

The duration and severity of the COVID-19 pandemic remain uncertain, and there can be no assurance that any of the mitigating actions we have taken will suffice to sustain our business and operations through this pandemic.

While cases have declined globally and many governments have loosened or lifted COVID-related travel restrictions, the duration and severity of the pandemic and its aftereffects remain uncertain, and there can be no assurance that any of the mitigating actions we have taken will suffice to sustain our business and operations through this pandemic.

We have taken and may take additional actions to improve our financial position, including measures to improve liquidity, such as obtaining financial assistance under the CARES Act, the PSP Extension Law and the American Rescue Plan Act of 2021 (ARP).

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the requirement that certain levels of commercial air service be maintained;

provisions prohibiting the repurchase of AAG common stock and the payment of common stock dividends through September 30, 2022;

and restrictions on the payment of certain executive compensation until April 1, 2023.

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Any such actions may be material in nature, could result in the incurrence and issuance of significant additional indebtedness or equity and could impose significant covenants and restrictions to which we are not currently subject.

The measures we have taken to reduce our expenditures and to improve our liquidity, and any other strategic actions that we may take in the future in response to the COVID-19 pandemic may not be effective in offsetting decreased demand, and we may not be permitted to take certain strategic actions that we believe are beneficial if such strategic actions are in contravention of the requirements under the CARES Act, the PSP Extension Law or the ARP, which could result in a material adverse effect on our business, operating results and financial condition.

The measures we have taken to reduce our expenditures and to improve our liquidity in response to the COVID-19 pandemic, and any other strategic actions that we may be required to take in the future as a result of any resurgence or prolongation of the pandemic may not be effective in offsetting decreased demand, and we may not be permitted to take certain strategic actions that we believe are beneficial if such strategic actions are in contravention of the requirements under the CARES Act, the PSP Extension Law or the ARP, which could result in a material adverse effect on our business, operating results and financial condition.

The full extent of the ongoing impact of the COVID-19 pandemic on our longer-term operational and financial performance will depend on future developments, many of which are outside our control, including the effectiveness of the mitigation strategies discussed above;

the duration and spread of COVID-19, including recurrence of the pandemic or the emergence of novel variants, and related travel advisories, restrictions and testing regimes;

the supply of effective vaccines and success of efforts to deploy the vaccines;

the supply of effective vaccines and boosters, and the success of efforts to deploy them;

the impact of the COVID-19 pandemic on overall long-term demand for air travel;

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We rely on the operation of complex supply chains and a large number of third parties for the procurement and fulfillment of parts, components, consumable or disposable goods and other products and services essential to our business.

Following a faster than expected return of demand for air travel as COVID-19 cases declined worldwide and governments lifted travel restrictions, suppliers and many of the airports we serve have experienced acute shortages of personnel, resulting in increased delays, cancellations and, in certain cases, restrictions on the number of flights to or from certain airports.

We cannot guarantee that, as a result of ongoing or future supply chain disruptions or staffing shortages, we, our third-party partners, or the airports we serve will be able to timely source all of the products and services we require in the course of our business, or that we will be successful in procuring suitable alternatives.

We are also dependent upon effective COVID-19 vaccines, including an efficient distribution and sufficient supply, and significant uptake by the general public in order to normalize economic conditions and the airline industry and to realize our financial and growth plans and business strategy.

The failure of a vaccine, including to the extent it is not effective against any new COVID-19 variants, significant unplanned adverse reactions to the vaccine, politicization of the vaccine or general public distrust of the vaccine could prolong the pandemic and have an adverse effect on our business, financial condition and results of operations.

Additionally, in September 2021, the Biden Administration issued an executive order mandating a COVID-19 vaccination requirement for federal contractors.

Due to a number of our agreements, American is

classified as a government contractor.

The failure of a vaccine or any subsequently developed vaccine booster, including to the extent it is not effective against any new COVID-19 variants, significant unplanned adverse reactions to the vaccine, politicization or general public distrust of vaccines could prolong the pandemic and have an adverse effect on our business, financial condition and results of operations.

Additionally, in September 2021, the Biden

Administration issued an executive order mandating a COVID-19 vaccination requirement for federal contractors.

Due to a number of our agreements, American is classified as a government contractor.

Consistent with this executive order and guidance from the Safer Federal Workforce Task Force responsible for implementing the order, we announced that the federal vaccine mandate would require all of American’s U.S.-based team members and certain international crew members to be vaccinated or be exempt due to an accommodation for a medical disability or sincerely held religious belief.

Lawsuits have been filed in multiple jurisdictions challenging the order, and the U.S.

District Court for the Southern District of Georgia in one of these cases issued a nationwide stay of enforcement of the executive order.

The cases are currently before several U.S.

Courts of Appeal and may ultimately be decided by the U.S.

Supreme Court.

Given the uncertainty of its viability in the courts, the timing of implementation and availability of accommodations, we cannot predict the impact of this federal vaccination requirement on our business.

Lawsuits have been filed in multiple jurisdictions challenging the order, and several courts have issued injunctions against the government's enforcement of the mandate.

Courts of Appeal have issued rulings upholding the lower courts’ injunctions;

however, in one of these cases, the Eleventh Circuit Court of Appeals narrowed the nationwide stay of enforcement of the executive order issued by the U.S.

District Court for the Southern District of Georgia, holding that the stay of enforcement only applies to the parties and states involved in that particular dispute.

Following the Eleventh Circuit ruling, the U.S.

government may seek to enforce the executive order in states where American operates that are not subject to an injunction.

Given the uncertainty of its viability in the courts, the timing of implementation and availability of accommodations, we are still unable to predict the ultimate impact of this federal vaccination requirement on our business should the federal government move to reinstate and enforce it.

Moreover, we may be subject to state and local vaccine mandates and other COVID-19-related requirements governing airports where we operate.

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In particular, the COVID-19 pandemic and associated decline in economic activity and increase in unemployment levels had a severe and prolonged effect on the global economy generally and, in turn, resulted in a prolonged period of depressed demand for air travel.

In addition, a rapid economic expansion following the height of the pandemic resulted in significant inflationary pressures, which have increased our costs for aircraft fuel, wages and benefits and other goods and services we require to operate our business, as well as increasing the interest expense on our variable-rate indebtedness.

In addition, a rapid economic expansion following the height of the pandemic resulted in significant inflationary pressures and volatility in certain currencies, which have increased our costs for aircraft fuel, wages and benefits and other goods and services we require to operate our business, as well as increasing the interest expense on our variable-rate indebtedness.

Accordingly, we cannot predict the ultimate impact of the COVID-19 pandemic or its after-effects on our business, financial condition and results of operations.

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Significant capital resources will be required to execute this plan.

We estimate that, based on our commitments as of June 30, 2022, our planned aggregate expenditures for aircraft purchase commitments and certain engines on a consolidated basis for the remainder of 2022 through 2026 would be approximately $12.0 billion.

We may also require financing to refinance maturing obligations and to provide liquidity to fund other corporate requirements.

We estimate that, based on our commitments as of September 30, 2022, our planned aggregate expenditures for aircraft purchase commitments and certain engines on a consolidated basis for the remainder of 2022 through 2026 would be approximately $11.8 billion.

We may also require financing to refinance maturing obligations and to provide liquidity to

fund other corporate requirements.

Accordingly, we will need substantial liquidity, financing or other capital resources to finance such aircraft and engines and meet such other liquidity needs.

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our non-investment grade credit rating;

unfavorable market conditions;

the availability of assets to use as collateral for loans or

other indebtedness, which has been reduced significantly as a result of certain financing transactions we have undertaken since the beginning of 2020 and may be further reduced;

volatile or otherwise unfavorable market conditions;

the availability of assets to use as collateral for loans or other indebtedness, which has been reduced significantly as a result of certain financing transactions we have undertaken since the beginning of 2020 and may be further reduced;

and the effect the COVID-19 pandemic has had on the global economy generally and the air transportation industry in particular.

If we are unable to arrange any such required financing at customary advance rates and on terms and conditions acceptable to us, we may need to use cash from operations or cash on hand to purchase such aircraft and engines or fund such other corporate requirements or may seek to negotiate deferrals for such aircraft and engines with the applicable manufacturers or otherwise defer corporate obligations.

If we are unable to arrange any such required financing at customary advance rates and on terms and conditions acceptable to us, we may need to use cash from operations or cash on hand to purchase aircraft and engines or fund our other corporate requirements, or may seek to negotiate deferrals for such aircraft and engines with the applicable manufacturers or otherwise defer corporate obligations.

Depending on numerous factors applicable at the time we seek capital, many of which are out of our control, such as the state of the domestic and global economies, the capital and credit markets’ view of our prospects and the airline industry in general, and the general availability of debt and equity capital, the financing or other capital resources that we will need may not be available to us, or may be available only on onerous terms and conditions.

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Our high level of debt and other obligations may limit our ability to fund general corporate requirements and obtain additional financing, may limit our flexibility in responding to competitive developments and cause our business to be vulnerable to adverse economic and industry conditions.

We have significant amounts of indebtedness and other obligations, including pension obligations, obligations to make future payments on flight equipment and property leases related to airport and other facilities, and substantial non-cancelable obligations under aircraft and related spare engine purchase agreements.

We have significant amounts of indebtedness and other financial obligations, including pension obligations, obligations to make future payments on flight equipment and property leases related to airport and other facilities, and substantial non-cancelable obligations under aircraft and related spare engine purchase agreements.

Moreover, currently a very significant portion of our assets are pledged to secure our indebtedness.

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

• bear interest at floating rates, which could subject us to volatility in interest rates and make servicing our debt more expensive;

• 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 collateral coverage ratios and peak debt service coverage ratios;

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◦ if breached, result in an event of default under our indebtedness.

In addition, in response to the travel restrictions, decreased demand and other effects the COVID-19 pandemic has had and is expected to continue to have on our business, we have obtained a significant amount of additional financing from a variety of sources and given continued uncertainty we cannot guarantee that we will not need to obtain additional financing in the future.

Such financing may include the issuance of additional unsecured or secured debt securities, equity securities and equity-linked securities as well as additional bilateral and syndicated secured and/or unsecured credit

facilities, among other items.

In addition, in response to the travel restrictions, decreased demand and other effects of the COVID-19 pandemic on our business, we obtained a significant amount of additional financing from a variety of sources and given continued uncertainty we cannot guarantee that we will not need to obtain additional financing in the future.

There can be no assurance as to the timing of any such financing transactions, which may be in the near term, or that we will be able to obtain such additional financing on favorable terms, or at all.

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In particular, in connection with the financial assistance we have received through PSP1, PSP2 and PSP3, we are required to comply with the relevant provisions of the CARES Act, the PSP Extension Law and the ARP, including the requirement that funds provided pursuant to PSP1, PSP2 and PSP3 be used exclusively for the continuation of payment of eligible employee wages, salaries and benefits;

provisions prohibiting the repurchase of AAG common stock and the payment of common stock dividends through September 30, 2022;

and restrictions on the payment of certain executive compensation until April 1, 2023.

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We may in the future pursue amendments to our LIBOR-based debt transactions to provide for a transition mechanism or other reference rate in anticipation of LIBOR’s discontinuation, but we may not be able to reach agreement with our lenders on any such amendments.

As of June 30, 2022, we had $10.6 billion of borrowings linked to LIBOR.

As of September 30, 2022, we had $10.5 billion of borrowings linked to LIBOR.

The replacement of LIBOR with a comparable or successor rate could cause the amount of interest payable on our long-term debt to be different or higher than expected.

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In light of the effect of the COVID-19 pandemic on demand for air travel and, in turn, capacity, we experienced a prolonged increase in demand from consumers for refunds on their tickets, and we cannot assure that we will not experience periods of elevated refund demand in the future.

A material increase in requests for refunds and the ongoing impact of the COVID-19 pandemic on our longer-term financial performance may reduce our liquidity and cause us to be forced to post cash or other collateral with the credit card processing companies in respect of advance ticket sales.

A material increase in requests for refunds may reduce our liquidity and cause us to be forced to post cash or other collateral with the credit card processing companies in respect of advance ticket sales.

The imposition of holdback requirements, up to and including 100% of relevant advanced ticket sales, would materially reduce our liquidity.

Likewise, other of our commercial agreements contain provisions that allow other entities to impose less-favorable terms, including the acceleration of amounts due, in the event of material adverse changes in our financial condition.

Likewise, other of our commercial agreements contain provisions that allow other counterparties to impose less-favorable terms, including the acceleration of amounts due, in the event of material adverse changes in our financial condition.

For example, we maintain certain letters of credit, insurance- and surety-related agreements under which counterparties may require collateral, including cash collateral.

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Such restrictions, over time, will likely result in lower executive compensation in the airline industry than is prevailing in other industries, creating increasing retention challenges in the case of executives presented with alternative, non-airline opportunities.

In addition, competition for skilled personnel has intensified and may continue to intensify if overall industry capacity continues to increase and/or we were to incur attrition at levels higher than we have historically.

In addition, competition for skilled personnel has intensified and may continue to intensify if overall industry capacity continues to increase and/or we were to incur attrition at levels higher than

we have historically.

Any inability to attract, develop and retain significant numbers of qualified management and other personnel would have a material adverse effect on our business, results of operations and financial condition.

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

• the effects of the ongoing COVID-19 pandemic;

• actual or potential changes in international, national, regional and local economic, business and financial conditions, including recession, inflation and higher interest rates;

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

• outbreaks of diseases that affect travel behavior;

• outbreaks of diseases that affect travel behavior, including the ongoing COVID-19 pandemic;

• weather and natural disasters, including increases in frequency, severity or duration of such disasters, and related costs caused by more severe weather due to climate change.

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During or after that period, a Presidential Emergency Board (PEB) may be established, which examines the parties’ positions and recommends a solution.

The PEB process lasts for 30 days and is followed by another 30-day “cooling off” period.

At the end of this “cooling off” period, unless an agreement is

reached or action is taken by Congress, the labor organization may exercise “self-help,” such as a strike, which could materially adversely affect our business, results of operations and financial condition.

The PEB process lasts for 30

days and is followed by another 30-day “cooling off” period.

At the end of this “cooling off” period, unless an agreement is reached or action is taken by Congress, the labor organization may exercise “self-help,” such as a strike, which could materially adversely affect our business, results of operations and financial condition.

None of the unions representing our employees presently may lawfully engage in concerted slowdowns or refusals to work, such as strikes, sick-outs or other similar activity, against us.

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In particular, the severe decline in demand for air travel resulting from the COVID-19 pandemic and related governmental restrictions on travel materially impacted demand for services provided by our regional carriers and, as a result, we temporarily significantly reduced our regional capacity.

Further, as airlines attempt to restore capacity in line with increased demand for air travel following the height of the pandemic, these third-party operators have experienced difficulties in recruiting and retaining sufficient personnel to operate significantly increased schedules, and have in some instances been required to offer significant increases in pay and other benefits to recruit and retain pilots and other personnel.

We expect the disruption to services resulting from the COVID-19 pandemic and subsequent rapid return of demand to continue to adversely affect our regional operators, some of whom may experience significant financial stress, declare bankruptcy or otherwise cease to operate.

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We have in the past instituted, and intend to institute in the future, changes to our business model designed to increase revenues and offset costs.

These measures include further segmentation of the classes of services we offer, such as Premium Economy service and Basic Economy service, enhancements to our AAdvantage loyalty program, charging separately for services that had previously been included within the price of a ticket, changing (whether it be increasing, decreasing or eliminating) other pre-existing fees, reconfiguration of our aircraft cabins, and efforts to optimize our network including by focusing growth on a limited number of large hubs and entering into agreements with other airlines.

These measures include further segmentation of the classes of service we offer, such as Premium Economy service and Basic Economy service, enhancements to our AAdvantage loyalty program, charging separately for services that had previously been included within the price of a ticket, changing (whether it be increasing, decreasing or eliminating) other pre-existing fees, reconfiguration of our aircraft cabins, and efforts to optimize our network including by focusing growth on a limited number of large hubs and entering into agreements with other airlines.

For example, in 2020, we eliminated change fees for most domestic and international tickets, which has reduced our change fee revenue, a trend which is expected to continue as demand for air travel recovers, assuming this change remains in

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Additionally, the implementation of these initiatives may create logistical challenges that could harm the operational performance of our airline or result in decreased demand.

Also, our implementation of any new or increased fees might result in adverse brand perceptions or reputational harm, and could reduce the demand for air travel on our airline or across the industry in general, particularly if weakened economic conditions make our customers more sensitive to increased travel costs or provide a significant competitive advantage to other carriers that determine not to institute similar charges.

Also, our implementation of any new or increased fees might result in adverse brand perceptions, reputational harm or regulatory scrutiny, and could reduce the demand for air travel on our airline or across the industry in general, particularly if weakened economic conditions make our customers more sensitive to increased travel costs or provide a significant competitive advantage to other carriers that determine not to institute similar charges.

Our intellectual property rights, particularly our branding rights, are valuable, and any inability to protect them may adversely affect our business and financial results.

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tax legislation may adversely affect our financial condition, results of operations and cash flows.

government may enact significant changes to the taxation of business entities including, among others, an increase in the corporate income tax rate, the imposition of minimum taxes or surtaxes on certain types of income, significant changes to the taxation of income derived from international operations, and an addition of further limitations on the deductibility of business interest.

While certain draft legislation has been publicly released and is under development in Congress at this time, the likelihood of these changes being enacted or implemented is unclear.

We are currently unable to predict whether such changes will occur.

On August 16, 2022, the Inflation Reduction Act (the IRA) was signed into law in the U.S.

Among other changes, the IRA introduced a corporate minimum tax on certain corporations with average adjusted financial statement income over a three-tax year period in excess of $1.0 billion and an excise tax on certain stock repurchases by certain covered corporations for taxable years beginning after December 31, 2022.

The corporate minimum tax and any excise tax imposed on any repurchases of AAG common stock made after December 31, 2022 may adversely affect our financial condition in the future.

government may enact additional significant changes to the taxation of business entities including, among others, an increase in the corporate income tax rate, significant changes to the taxation of income derived from international operations, and an addition of further limitations on the deductibility of business interest.

We are currently unable to predict whether such additional changes will occur.

If such changes are enacted or implemented, we are currently unable to predict the ultimate impact on our business and therefore there can be no assurance our business will not be adversely affected.

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We can provide no assurance that a material impairment loss of tangible or intangible assets will not occur in a future period;

we have previously incurred significant impairment charges associated with our decision to retire certain aircraft as a result of the severe decline in demand for air travel due to the COVID-19 pandemic, and the risk of future material impairments remains significantly heightened as a result of the effects of the COVID-19 pandemic on our flight schedules and business as well as the associated impact on values of certain aircraft and flight equipment.

Such impairment charges could have a material adverse effect on our business, results of operations and financial condition.

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While our network is comprehensive, compared to some of our key global competitors, we generally have somewhat greater relative exposure to certain regions (for example, Latin America) and somewhat lower relative exposure to others (for example, China).

Our financial performance relative to our key competitors will therefore be influenced significantly by macro-economic conditions in particular regions around the world and the relative exposure of our network to the markets in those regions, including the duration of declines in demand for travel to specific regions as a result of the continuing outbreak of COVID-19 and the speed with which demand for travel to these regions returns.

travel to specific regions as a result of the COVID-19 pandemic and the speed with which demand for travel to these regions returns.

Our international service exposes us to foreign economies and the potential for reduced demand when any foreign country we serve suffers adverse local economic conditions or if governments restrict commercial air service to or from any of these markets.

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and foreign governments of restrictions on travel from certain regions.

In addition, open skies agreements, which are now in place with a substantial number of

countries around the world, provide international airlines with open access to U.S.

In addition, open skies agreements, which are now in place with a substantial number of countries around the world, provide international airlines with open access to U.S.

markets, potentially subjecting us to increased competition on our international routes.

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In October 2018, in anticipation of the exit of the United Kingdom from the European Union (EU), commonly referred to as Brexit, and the expiry of the EC commitments in July 2020, the United Kingdom Competition and Markets Authority (CMA) opened an investigation into the transatlantic joint business.

We continue to fully cooperate with the CMA and, in September 2020, the CMA adopted interim measures that effectively extend the EC commitments for an additional three years until March 2024 in light of the uncertainty and other impacts resulting from the COVID-19 pandemic.

In April 2022, the CMA adopted a second interim measures decision that effectively extends the EC commitments for a further two years until March 2026 in light of the uncertainty and other impacts resulting from the COVID-19 pandemic.

We continue to fully cooperate with the CMA and, in September 2020 and April 2022, the CMA adopted interim measures that effectively extend the EC commitments until March 2026 in light of the uncertainty and other impacts resulting from the COVID-19 pandemic.

The CMA plans to complete its investigation before the scheduled expiration of the interim measures in March 2026.

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antitrust laws in connection with the Northeast Alliance arrangement (NEA).

We believe the complaint is without merit and intend to defend against it vigorously.

The parties are currently presenting their respective cases in a bench trial that commenced on September 27, 2022.

We believe this complaint is without merit and are defending against it vigorously.

Notwithstanding the DOT’s termination of its reviews of the NEA and certain other alliances, the DOT maintains authority to conduct investigations under the scope of its existing statutes and regulations, including conduct related to this alliance.

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regarding the NEA, pending resolution of the DOJ action described above.

On September 30, 2022, the

DOT issued a further statement referencing the prior Clarification Notice and, among other things, indicating its intention to continue working with the DOJ in its efforts to resolve the ongoing proceedings regarding the Northeast Alliance.

No assurances can be given as to any benefits that we may derive from any of the foregoing arrangements or any other arrangements that may ultimately be implemented, or whether regulators will, or if granted continue to, approve or impose material conditions on our business activities.

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These competitive factors and covenants (to the extent applicable) may affect our ability to attract and retain customers, increase usage of our loyalty program and maximize the revenue generated by our loyalty program.

We may also be impacted by competition regulations affecting certain of our major commercial partners, including our co-branded credit card partners.

For example, there has been bipartisan legislation proposed in Congress called the Credit Card Competition Act designed to increase credit card transaction routing options for merchants which, if enacted, could result in a reduction of the fees levied on credit card transactions.

If this legislation were successful, it could fundamentally alter our agreements with co-branded credit card partners and the benefits we provide to our consumers through the co-branded credit cards issued by these partners.

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

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We may also be subject to consequences from any illegal conduct of joint business partners as well as to any political or regulatory change that negatively impacts or prohibits our arrangements with any such business partners.

In addition, as a result of the global spread of COVID-19 and subsequent economic recovery, the industry experienced significant volatility in demand for air travel both internationally and domestically, which is expected to continue into the foreseeable future and could materially disrupt our partners' abilities to provide air service, the timely execution of our strategic operating plans, including the finalization, approval and implementation of new strategic relationships or the maintenance or expansion of existing relationships.

In addition, as a result of the COVID-19 pandemic and subsequent economic recovery, the industry experienced significant volatility in demand for air travel both internationally and domestically, which is expected to continue into the foreseeable future and could materially disrupt our partners' abilities to provide air service, the timely execution of our strategic operating plans, including the finalization, approval and implementation of new strategic relationships or the maintenance or expansion of existing relationships.

If any carriers with which we partner or in which we hold an equity stake were to cease trading or be declared insolvent, we could lose the value of any such investment or experience significant operational disruption.

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Our operating results are materially impacted by changes in the availability, price volatility and cost of aircraft fuel, which represents one of the largest single cost items in our business and thus is a significant factor in the price of airline tickets.

Market prices for aircraft fuel have fluctuated substantially over the past several years and prices continue to be highly volatile, with market spot prices ranging from a low of approximately $0.37 per gallon to a high of approximately $4.40 per gallon during the period from January 1, 2019 to June 30, 2022.

In particular, fuel prices rose substantially in 2021, and significant price increases have continued in 2022.

In particular, fuel prices rose substantially in 2021, and significant price increases continued into 2022.

Because of the amount of fuel needed to operate our business, even a relatively small increase or decrease in the price of fuel can have a material effect on our operating results and liquidity.

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

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

Accordingly, as of September 30, 2022, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption.

As such, and assuming we do not enter into any future transactions to hedge our fuel consumption, we will continue to be fully exposed to fluctuations in fuel prices.

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These requirements can be issued with little or no notice, or can otherwise impact our ability to efficiently or fully utilize our aircraft, and in some instances have resulted in the temporary and prolonged grounding of aircraft types altogether (including, for example, the March 2019 grounding of all Boeing 737 MAX Family aircraft, which remained in place for over a year and was not lifted in the United States until November 2020), or otherwise caused substantial disruption and resulted in material costs to us and lost revenues.

The recent telecom industry roll-out of 5G technology, and concerns regarding its possible interference with aircraft navigation systems, also resulted in regulatory uncertainty and the potential for operational impacts, including possible suspension of service to certain airports or the operation of certain aircraft.

The recent telecom industry roll-out of 5G technology, and concerns regarding its possible interference with

aircraft navigation systems, also resulted in regulatory uncertainty and the potential for operational impacts, including possible suspension of service to certain airports or the operation of certain aircraft.

See "We rely heavily on technology and automated systems to operate our business, and any failure of these technologies or systems could harm our business, results of operations and financial condition." The FAA also exercises comprehensive regulatory authority over nearly all technical aspects of our operations.

Our failure to comply with such requirements has in the past and may in the future result in fines and other enforcement actions by the FAA or other regulators.

We anticipate that the FAA will soon issue a final rule implementing flight attendant duty and rest periods, which will impact our scheduling flexibility.

The FAA recently issued a final rule implementing flight attendant duty and rest periods, which will impact our scheduling flexibility.

In the future, any new regulatory requirements, particularly requirements that limit our ability to operate or price our products, could have a material adverse effect on us and the industry.

DOT consumer rules, and rules promulgated by certain analogous agencies in other countries we serve, dictate procedures for customer handling during long onboard delays, further regulate airline interactions with passengers, including passengers with disabilities, through the ticketing process, at the airport, and onboard the aircraft, and require disclosures concerning airline fares and ancillary fees such as baggage fees.

In 2022, the DOT is expected to propose or implement a number of new regulations that will impact us, including disability rules for accessible lavatories and wheelchair assistance, refund requirements, display of ancillary fees during initial flights search, and refunds for checked bag fees in the event of certain delays in delivery.

DOT consumer rules, and rules promulgated by certain analogous agencies in other countries we serve, dictate procedures for many aspects of our customer's journey, including at the time of ticket purchase, at the airport, and onboard the aircraft.

DOT requires multiple disclosures of airline fares, taxes and baggage fees and is further changing these requirements to increase the number of disclosures and the time at which they must be disclosed.

DOT also recently issued a proposed rule mandating refunds in certain circumstances, such as a global pandemic.

Finally, DOT will be proposing and implementing a number of new disability regulations that will impact us, including rules for accessible lavatories on single-aisle aircraft, wheelchair damage and prompt wheelchair assistance.

The Aviation and Transportation Security Act mandates the federalization of certain airport security procedures and imposes additional security requirements on airports and airlines, most of which are funded by a per-ticket tax on passengers and a tax on airlines.

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Due to a number of our agreements, American is classified as a government contractor.

Consistent with this executive order and guidance from the Safer Federal Workforce Task Force responsible for implementing the order, we announced in that the federal vaccine mandate would require all of American’s U.S.-based team members and certain international crew members to be vaccinated or be exempt due to an accommodation for a medical disability or sincerely held religious belief.

Lawsuits have been filed in multiple jurisdictions challenging the order, and the U.S.

District Court for the Southern District of Georgia in one of these cases issued a nationwide stay of enforcement of the executive order.

The cases are currently before several U.S.

Courts of Appeal and may ultimately be decided by the U.S.

Supreme Court.

Lawsuits have been filed in multiple jurisdictions challenging the order, and several courts have issued injunctions against the government’s enforcement of the mandate.

Courts of Appeal have issued rulings upholding the lower courts’ injunctions;

however, in one of these cases, the Eleventh Circuit Court of Appeals narrowed the nationwide stay of enforcement of the executive order issued by the U.S.

District Court for the Southern District of Georgia, holding that the stay of enforcement only applies to the parties and states involved in that particular dispute.

Following the Eleventh Circuit ruling, the U.S.

government may seek to enforce the executive order in states where American operates that are not subject to an injunction.

Moreover, we may be subject to state and local vaccine mandates and other COVID-19-related requirements governing airports where we operate.

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• the adoption of more restrictive locally-imposed noise restrictions;

• restrictions on travel or special guidelines regarding aircraft occupancy or hygiene related to COVID-19, including the imposition of preflight testing regimes or vaccination confirmation requirements which have to date and may in the future have the effect of reducing demand for air travel in the markets where such requirements are imposed.

• restrictions on travel or special guidelines regarding aircraft occupancy or hygiene in response to outbreaks of illness, such as occurred during the COVID-19 pandemic, including the imposition of preflight testing regimes or vaccination confirmation requirements which have to date and may in the future have the effect of reducing demand for air travel in the markets where such requirements are imposed.

Each additional regulation or other form of regulatory oversight increases costs and adds greater complexity to airline operations and, in some cases, may reduce the demand for air travel.

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While the U.S.

has worked to increase the number of countries with which open skies agreements are in effect, a number of markets important to us, including China, do not have open skies agreements.

has worked to increase the number of countries with which open skies agreements are in effect, a

number of markets important to us, including China, do not have open skies agreements.

For example, the open skies air services agreement between the U.S.

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However, the scope of traffic rights under the EU-UK Trade and Cooperation Agreement is less extensive than before Brexit and therefore the full impact of the EU-UK Trade and Cooperation Agreement is uncertain.

As a result, the

continuation of our current services, and those of our partners could be disrupted.

As a result, the continuation of our current services, and those of our partners could be disrupted.

This could materially adversely affect our business, results of operations and financial condition.

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For example, in October 2018, in anticipation of Brexit and the expiry of the EC commitments in July 2020, the CMA opened an investigation into the transatlantic joint business.

We continue to fully cooperate with the CMA and, in September 2020, the CMA adopted interim measures that effectively extend the EC

commitments for an additional three years until March 2024 in light of the uncertainty and other impacts resulting from the COVID-19 pandemic.

The CMA plans to complete its investigation before the interim measures are scheduled to expire in March 2026.

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Large numbers of pilots in the industry accepted early retirement during the COVID-19 pandemic or are approaching the FAA’s mandatory retirement age of 65.

Our pilots and other employees are subject to rigorous certification standards, and our pilots and other crew members must adhere to flight time and rest requirements.

Our pilots and other employees are subject to rigorous certification standards,

and our pilots and other crew members must adhere to flight time and rest requirements.

Commencing in 2013, the minimum flight hour requirement to achieve a commercial pilot’s license in the United States increased from 250 to 1,500 hours, thereby significantly increasing the time and cost commitment required to become licensed to fly commercial aircraft.

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The foregoing factors have also led to increased competition from large, mainline carriers attempting to meet their hiring needs and significant proposed increases in mainline pilot compensation.

We believe that this industry-wide pilot shortage is becoming an

increasing problem for airlines in the United States.

We believe that this industry-wide pilot shortage is becoming an increasing problem for airlines in the United States.

Our regional airline subsidiaries and other regional partners have recently been unable to hire adequate numbers of pilots to meet their needs, resulting in a reduction in the number of flights offered, disruptions, increased compensation expense and costs of operations, financial difficulties and other adverse effects, and these circumstances may become more severe in the future and thereby cause a material adverse effect on our business.

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More recently, Boeing has been unable to deliver 787 aircraft that we have on order due to regulatory concerns raised by the FAA, as a result of which we have been forced, on more than one occasion, to significantly reduce our previously scheduled long-haul flying and suspend or delay our service to certain long-haul markets.

Repeated or prolonged delays in the production, delivery or induction of our new aircraft could require us to scale back our growth plans, reduce frequencies or forgo service entirely to certain markets, which could adversely affect our business, financial condition and results of operations.

Repeated or prolonged delays in the production, delivery or induction of

our new aircraft could require us to scale back our growth plans, reduce frequencies or forgo service entirely to certain markets, which could adversely affect our business, financial condition and results of operations.

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

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We depend on our reservation system, which is hosted and maintained under a long-term contract by a third-party service provider, to be able to issue, track and accept these electronic tickets.

If our technologies or automated

systems are not functioning or if our third-party service providers were to fail to adequately provide technical support, system maintenance or timely software upgrades for any one of our key existing systems, we could experience service disruptions or delays, which could harm our business and result in the loss of important data, increase our expenses and decrease our revenues.

If our technologies or automated systems are not functioning or if our third-party service providers were to fail to adequately provide technical support, system maintenance or timely software upgrades for any one of our key existing systems, we could experience service disruptions or delays, which could harm our business and result in the loss of important data, increase our expenses and decrease our revenues.

In the event that one or more of our primary technology or systems vendors goes into bankruptcy, ceases operations or fails to perform as promised, replacement services may not be readily available on a timely basis, at competitive rates or at all, and any transition time to a new system may be significant.

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mainline commercial fleet to have radio altimeter retrofits or other enhancements in place by July 2023.

We have signaled to the FAA our commitment to update our aircraft as soon as possible.

We have made clear our commitment to updating our aircraft as soon as possible and expect our Airbus A320 mainline and Embraer regional fleets to have their updates completed by the end of the year.

Our most pressing concern moving forward is having certified solutions in place for the rest of our impacted fleet, both mainline and regional.

For each fleet type, we need the FAA to certify a solution, the aircraft manufacturer to issue a service bulletin, the radio altimeter manufacturer to produce the solution, and for the solution to be delivered to us with enough time to install it on our aircraft in advance of July 2023.

Our technologies and automated systems are not completely protected against events that are beyond our control, including natural disasters, power failures, terrorist attacks, cyber-attacks, data theft, equipment and software failures, computer viruses or telecommunications failures.

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We and our business partners have been the target of cybersecurity attacks and data breaches in the past and expect that we will continue to be in the future.

For example, in March 2021, a sub-set of AAdvantage members as well as members of several other major airline loyalty programs received a notification about a security incident involving a limited amount of loyalty data held by a service provider.

As another example, in July 2022, a minor phishing incident resulted in certain employee email accounts being accessed and acquired without authorization that contained personal information about a very limited number of individuals, including travelers (following which we notified the individuals).

We react and respond to these cybersecurity attacks in accordance with the applicable legal requirements, our own approved cybersecurity protocols, as well as our commercial partners’ standards, but we cannot ensure that our responses will be sufficient to prevent or mitigate the potential adverse impacts of these incidents, which may be material.

There has been heightened legislative and regulatory focus on data privacy and cybersecurity in the U.S., the EU and elsewhere, particularly with respect to critical infrastructure providers, including those in the transportation sector.

As a result, we must comply with a proliferating and fast-evolving set of legal requirements in this area, including substantive data privacy and cybersecurity standards as well as requirements for notifying regulators and affected individuals in the

event of a data security incident.

This regulatory environment is increasingly challenging and may present material obligations and risks to our business, including significantly expanded compliance burdens, costs and enforcement risks.

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While we continue our efforts to meet these standards, new and revised standards may be imposed that may be difficult for us to meet and could increase our costs.

A significant cybersecurity incident involving us or one of our AAdvantage partners or other business partners have in the past and may in the future result in a range of potentially material negative consequences for us, including unauthorized access to, disclosure, modification, misuse, loss or destruction of company systems or data;

Significant cybersecurity incidents involving us or one of our AAdvantage partners or other business partners have in the past and may in the future result in a range of potentially material negative consequences for us, including unauthorized access to, disclosure, modification, misuse, loss or destruction of company systems or data;

theft of sensitive, regulated or confidential data, such as personal information or our intellectual property;

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and business delays, service or system disruptions, damage to equipment and injury to persons or property.

The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of time.

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Further, we could be exposed to litigation, regulatory enforcement or other legal action as a result of an incident, carrying the potential for damages, fines, sanctions or other penalties, as well as injunctive relief and enforcement actions requiring costly compliance measures.

A significant number of recent privacy and data security incidents, including those involving other large airlines, have resulted in very substantial adverse financial consequences to those companies.

A significant number

of recent privacy and data security incidents, including those involving other large airlines, have resulted in very substantial adverse financial consequences to those companies.

A cybersecurity incident could also impact our brand, including that of the AAdvantage program, harm our reputation and adversely impact our relationship with our customers, employees and stockholders.

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We are also dependent upon the ability and willingness of these distribution channels to expand their ability to distribute and collect revenues for ancillary products (e.g., fees for selective seating).

These distribution channels are more expensive and at present have less functionality in respect of ancillary product offerings

than those we operate ourselves, such as our website at www.aa.com .

These distribution channels are more expensive and at present have less functionality in respect of ancillary product offerings than those we operate ourselves, such as our website at www.aa.com .

Certain of these distribution channels also effectively restrict the manner in which we distribute our products generally.

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Due to the dramatic reduction in air travel resulting from the COVID-19 pandemic, we are in many instances relying on exemptions granted by applicable authorities from the requirement that we continuously use certain slots, gates and routes or risk having such operating rights revoked, and depending on the applicable authority these exemptions can vary in the way they are structured and applied.

We cannot predict whether such exemptions will continue to be granted,

whether they will be granted on the same or similar terms, or whether we ultimately could be at risk of losing valuable operating rights.

We cannot predict whether such exemptions will continue to be granted, whether they will be granted on the same or similar terms, or whether we ultimately could be at risk of losing valuable operating rights.

If we are forced to surrender slots, we may be unable to provide our desired level of service to or from certain destinations in the future.

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Although these taxes and fees are not our operating expenses, they represent an additional cost to our customers.

There are continuing efforts in Congress and in other countries to raise different portions of the various taxes,

fees, and charges imposed on airlines and their passengers, including the passenger facility charge, and we may not be able to recover all of these charges from our customers.

There are continuing efforts in Congress and in other countries to raise different portions of the various taxes, fees, and charges imposed on airlines and their passengers, including the passenger facility charge, and we may not be able to recover all of these charges from our customers.

Increases in such taxes, fees and charges could negatively impact our business, results of operations and financial condition.

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• technical factors in the public trading market for our stock that may produce price movements that may or may not comport with macro, industry or company-specific fundamentals, including, without limitation, the sentiment of retail investors (including as may be expressed on financial trading and other social media sites), the amount and status of short interest in our securities, access to margin debt, trading in options and other derivatives on our common stock and any related hedging and other technical trading factors.

The closing price of our common stock on Nasdaq varied from $15.00 to $25.82 during 2021 and $12.16 to $20.22 during 2022 year-to-date through July 15, 2022.

The closing price of our common stock on Nasdaq varied from $15.00 to $25.82 during 2021 and $11.86 to $20.22 during 2022 year-to-date through October 14, 2022.

At times during this period, fluctuations in our stock price have been rapid, imposing risks on investors due to the possibility of significant, short-term price volatility.

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A “short squeeze” condition in the market for a stock can lead to short-term conditions involving very high volatility and trading that may or may not track fundamental valuation models.

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

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

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

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

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

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

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

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

The timing and amount of repurchases, if any, will be subject to market and economic conditions, applicable legal requirements and other relevant factors.

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

In connection with the financial assistance provided under PSP1, PSP2 and PSP3, we agreed not to pay dividends on AAG common stock through September 30, 2022.

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

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

We are not obligated to continue a dividend for any fixed period, and the payment of dividends may be suspended or discontinued again at any time at our discretion and without prior notice.

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Further, our repurchase of AAG common stock may fluctuate such that our cash flow may be insufficient to fully cover our share repurchases.

Under the recently enacted IRA, we may become subject to an excise tax on the fair market value of AAG common stock repurchased after December 31, 2022, which may adversely affect our financial condition.

Although our share repurchase programs are intended to enhance long-term stockholder value, there is no assurance that they will do so.

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10.1 Supplemental Agreement No.

23, dated as of May 5, 2022, to Purchase Agreement No.

25, dated as of July 1 , 2022, to Purchase Agreement No.

03735 dated as of February 1, 2013, between American Airlines, Inc.

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10.2 Supplemental Agreement No.

24, dated as of June 6, 2022, to Purchase Agreement No.

26, dated as of August 1 , 2022, to Purchase Agreement No.

03735 dated as of February 1, 2013, between American Airlines, Inc.

and the Boeing Company.

10.3 Amendment, dated as of June 30, 2022, to the Promissory Notes and the Warrants issued by American Airlines Group Inc.

to the United States Department of the Treasury.*

31.1 Certification of AAG Chief Executive Officer pursuant to Rule 13a-14(a).

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American Airlines Group Inc.

July 21, 2022 By:

October 20, 2022 By:

Vice Chair, Chief Financial Officer and

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American Airlines, Inc.

July 21, 2022 By:

October 20, 2022 By:

Vice Chair, Chief Financial Officer and

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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 1A. Risk Factors