What changed in this filing

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Item 1. Business

2023-02-22 compared with 2022-02-22 · 176 added, 230 removed, 443 unchanged (48% of the section changed)

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Together with our wholly-owned regional airline subsidiaries and third-party regional carriers operating as American Eagle, our primary business activity is the operation of a major network air carrier, providing scheduled air transportation for passengers and cargo through our hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C.

and partner gateways, including in London, Madrid, Seattle/Tacoma, Sydney and Tokyo (among others).

More than 165 million passengers boarded our flights in 2021, compared to 95 million passengers in 2020 and 215 million passengers in 2019.

Since March 2020, we have experienced an unprecedented decline in the demand for air travel due to the impact of COVID-19, which has resulted in a material deterioration in our revenues.

Our capacity continues to be reduced compared to pre-COVID-19 pandemic levels, with total capacity in 2021 down 24.7% as compared to 2019.

Domestic capacity in 2021 was down 14.5% while international capacity was down 44.9% as compared to 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.

COVID-19 has been declared a global health pandemic by the World Health Organization.

COVID-19 has surfaced in nearly all regions of the world, which has driven the implementation of significant, government-imposed measures to prevent or reduce its spread, including travel restrictions, testing regimes, closing of borders, “stay at home” orders and business closures.

Ongoing global vaccination efforts and the corresponding lifting of government restrictions in and between many markets resulted in a partial recovery in demand for air travel in 2021, which improved our revenues as compared to 2020.

However, the return of demand was weaker than previous expectations and the speed and strength of this recovery remain uncertain, primarily due to the global rise in COVID-19 cases associated with the delta and omicron variants and the potential for continuation or reimposition of restrictions on global travel.

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

and partner gateways, including in London, Doha, Madrid, Seattle/Tacoma, Sydney and Tokyo (among others).

In 2022, over 199 million passengers boarded our flights.

During 2022, we announced the return of several international routes that had been cut due to the COVID-19 pandemic and aircraft delivery delays.

As of December 31, 2022, we operated 925 mainline aircraft supported by our regional airline subsidiaries and third-party regional carriers, which together operated an additional 536 regional aircraft.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations – “2022 Financial Overview,” “AAG’s Results of Operations” and “American’s Results of Operations” for further discussion of AAG’s and American’s operating results and operating performance.

Also, see Note 1(l) to each of AAG’s and American’s Consolidated Financial Statements in Part II, Items 8A and 8B, respectively, for passenger revenue by geographic region and Note 13 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 12 to American’s Consolidated Financial Statements in Part II, Item 8B for information regarding operating segments.

Also, see Note 1(m) to each of AAG’s and American’s Consolidated Financial Statements in Part II, Items 8A and 8B, respectively, for passenger revenue by geographic region and Note 13 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 12 to American’s Consolidated Financial Statements in Part II, Item 8B for information regarding operating segments.

Our regional carriers provide scheduled air transportation under the brand name “American Eagle.” The American Eagle carriers include our wholly-owned regional carriers Envoy Air Inc.

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(Republic), SkyWest Airlines, Inc.

(SkyWest), and Mesa Airlines, Inc.

(SkyWest), Mesa Airlines, Inc.

(Mesa) and Air Wisconsin Airlines LLC (Air Wisconsin).

Our regional carriers are an integral component of our operating network.

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All American Eagle carriers use logos, service marks, aircraft paint schemes and uniforms similar to those of our mainline operations.

In 2021, 49 million passengers boarded our regional carriers’ planes, approximately 44% of whom connected to or from our mainline flights.

Substantially all of our regional carrier arrangements are in the form of capacity purchase agreements.

In 2022, 48 million passengers boarded our regional flights, approximately 44% of whom connected to or from our mainline flights.

Our regional carrier arrangements are in the form of capacity purchase agreements.

The capacity purchase agreements provide that all revenues, including passenger, in-flight, ancillary, mail and freight revenues, go to us.

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In addition, these agreements provide that we either reimburse or pay 100% of certain variable costs, such as airport landing fees, fuel and passenger liability insurance.

We previously announced that we had entered into an agreement with Air Wisconsin, pursuant to which Air Wisconsin is expected to begin operating scheduled flights under the American Eagle name in the first quarter of 2023.

Additionally, in December 2022, we announced a wind-down of our relationship with Mesa, which we expect to conclude in the second quarter of 2023.

Our cargo division provides a wide range of freight and mail services, with facilities and interline connections available across the globe.

In 2020, we expanded our cargo service and launched our first cargo-only flights since 1984 to transport critical goods, including COVID-19 vaccines, between the U.S.

and Europe, Asia and Latin America.

Since March 2020, we have operated more than 10,000 cargo-only flights serving approximately 30 destinations.

These cargo-only flights have helped our customers move more than 350 million pounds of critical goods around the world amidst the COVID-19 pandemic and the related pandemic-driven supply chain challenges.

In 2022, we served more than 20,000 unique origin and destination pairs, transporting over 890 million pounds of time-sensitive freight and mail across our network.

Also in 2022, we were named Best Cargo Airline from the Americas by Air Cargo News .

Distribution and Marketing Agreements

Passengers can purchase tickets for travel on American through several distribution channels, including our website ( www.aa.com ), our mobile app, our reservations centers and third-party distribution channels, including those provided by or through global distribution systems (e.g., Amadeus, Sabre and Travelport), conventional travel agents, travel management companies and online travel agents (e.g., Expedia, including its booking sites Orbitz and Travelocity, and Booking Holdings, including its booking sites Kayak and Priceline).

In 2022, American entered into new long-term distribution agreements with Amadeus, Sabre and Travelport which will allow us to continue to provide convenient ways for customers to purchase travel from American.

To remain competitive, we will need to manage our distribution costs and rights effectively, increase our distribution flexibility and improve the functionality of our proprietary and third-party distribution channels, while maintaining an industry-competitive cost structure.

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Member of oneworld Alliance

American is a founding member of the one world Alliance, which currently includes Alaska Airlines, British Airways, Cathay Pacific, Finnair, Iberia, Japan Airlines, Malaysia Airlines, Qantas Airways (Qantas), Qatar Airways, Royal Air Maroc, Royal Jordanian Airlines, S7 Airlines and SriLankan Airlines.

Fiji Airways is a one world connect partner.

Fiji Airways is a one world connect partner and Oman Air is expected to join the one world Alliance in 2024.

The one world Alliance links the networks of member carriers and their respective affiliates to enhance customer service and provide smooth connections to the destinations served by the alliance, including linking member carriers’ loyalty programs and providing reciprocal access to the carriers’ airport lounge facilities.

Cooperation and Joint Business Agreements

American has established a transatlantic joint business with British Airways, Aer Lingus, Iberia and Finnair, a transpacific joint business with Japan Airlines and a joint business relating to Australia and New Zealand with Qantas, each of which has been granted antitrust immunity.

Joint business agreements enable the carriers involved to cooperate on flights between particular destinations and allow pooling and sharing of certain revenues and costs, enhanced loyalty program reciprocity and cooperation in other areas.

American and its joint business partners received regulatory approval to enter into these cooperation agreements.

Joint business agreements have become a common approach among major carriers to address key regulatory restrictions typically applicable to international airline service, including limitations on the foreign ownership of airlines and national laws prohibiting foreign airlines from carrying passengers beyond specific gateway cities.

American and its joint business partners received regulatory approval to enter into each of these cooperation agreements and each has been granted antitrust immunity.

Our competitors, including Delta Air Lines and United Airlines, are party to similar arrangements.

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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 created by the COVID-19 pandemic.

The CMA plans to complete its investigation before the interim measures expire.

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.

Marketing Relationships

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and foreign air carriers, including American, have established marketing agreements with other airlines.

These marketing agreements generally provide enhanced customer choice by means of an expanded network with reciprocal loyalty program participation and joint sales cooperation.

As of December 31, 2021, American had codeshare and/or loyalty program relationships with Aer Lingus, Air Tahiti Nui, Alaska Airlines, British Airways, Cape Air, Cathay Pacific, China Southern Airlines Company Limited (China Southern Airlines), EL AL Israel Airlines, Etihad Airways, Fiji Airways, Finnair, GOL Linhas Aéreas Inteligentes S.A.

(GOL), Gulf Air, Hawaiian Airlines, Iberia, IndiGo, Japan Airlines, JetBlue Airways Corporation (JetBlue), Malaysia Airlines, Qantas, Qatar Airways, Royal Air Maroc, Royal Jordanian Airlines, S7 Airlines, Silver Airways, SriLankan Airlines and Vueling Airlines.

These marketing agreements are intended to provide enhanced customer choice by means of an expanded network with reciprocal loyalty program participation and joint sales cooperation.

As of December 31, 2022, American had codeshare, marketing and/or loyalty program relationships with Aer Lingus, Air Tahiti Nui, Alaska Airlines, British Airways, Cape Air, Cathay Pacific, China Southern Airlines Company Limited (China Southern Airlines), EL AL Israel Airlines, Etihad Airways, Fiji Airways, Finnair, GOL Linhas Aéreas Inteligentes S.A.

(GOL), Gulf Air, Hawaiian Airlines, Iberia, IndiGo, Japan Airlines, JetBlue Airways Corporation (JetBlue), Jetstar, Jetstar Japan, Malaysia Airlines, Qantas, Qatar Airways, Royal Air Maroc, Royal Jordanian Airlines, Silver Airways, SriLankan Airlines and Vueling Airlines.

In 2022, we entered into an investment agreement with GOL, a Brazilian low-cost airline.

This expanded partnership with GOL includes an exclusive codeshare agreement allowing customers access to more than 30 destinations served by American in the U.S.

and more than 30 destinations served by GOL in South America.

Members of GOL’s SMILES and American’s AAdvantage loyalty programs will also benefit from a deeper loyalty program partnership.

In addition, the expanded partnership with GOL will allow further commercial cooperation in areas such as purchasing, sales tools and systems integration, subject to relevant regulatory and contractual limitations.

Also in 2022, we expanded our strategic alliance with Qatar Airways, enabling American’s customers to book travel on Qatar Airways flights between the U.S.

and Doha, Qatar and connecting to and from select destinations throughout the Middle East, East Africa, South Asia and Southeast Asia gateways.

In addition to this expanded codeshare, we launched new service in 2022 from New York’s John F.

Kennedy International Airport (JFK) to Doha’s Hamad International Airport.

Additionally, in December 2022, we completed an investment agreement with JetSmart Airlines SpA (JetSMART), an ultra-low-cost carrier operating in South America, which includes a codeshare agreement that remains to be implemented.

In 2021, we began implementing key aspects of our marketing relationship with JetBlue, creating seamless connectivity for travelers in the U.S.

Northeast and more choice for customers across our complementary domestic and international networks.

This arrangement includes an alliance agreement with reciprocal codesharing on certain domestic and international routes from New York (John F.

Kennedy International Airport (JFK), LaGuardia Airport (LGA) and Newark Liberty International Airport (EWR)) and Boston Logan International Airport (BOS), and provides for reciprocal loyalty program benefits.

This arrangement includes an alliance agreement with reciprocal codesharing on certain domestic and international routes from New York (JFK, LaGuardia Airport (LGA) and Newark Liberty International Airport (EWR)) and Boston Logan International Airport (BOS), and provides for reciprocal loyalty program benefits.

The arrangement does not include JetBlue’s transatlantic flying.

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Upon the DOT’s termination of its review of the proposed alliance, American and JetBlue implemented the proposed alliance subject to these commitments.

On September 21, 2021, the United States Department of Justice (DOJ), joined by Attorneys General from six states and the District of Columbia, filed an antitrust complaint against American and JetBlue alleging that American and JetBlue violated U.S.

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

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

Also, in 2021, we entered into a letter of intent to establish a partnership with JetSmart Airlines SpA (JetSMART), an ultra-low-cost carrier operating from Chile and Argentina to destinations throughout South America.

This proposed arrangement includes a codeshare agreement between the two airlines, which would create more options for customers traveling between the U.S.

and South America and enable customers to earn and redeem AAdvantage miles on JetSMART flights.

We also entered into a letter of intent to deepen our partnership with GOL, Brazil’s largest airline, in September 2021, and in February 2022, entered into a definitive investment agreement with GOL pursuant to which we intend to invest $200 million in exchange for a 5.2% economic interest in GOL.

This expanded partnership with GOL includes an exclusive codeshare agreement, allowing customers access to more than 30 destinations served by American in the U.S.

and more than 20 new destinations served by GOL in South America.

Members of GOL’s SMILES and American’s AAdvantage loyalty programs will also benefit from a deeper SMILES and AAdvantage loyalty program partnership.

In addition, the expanded partnership with GOL will allow further commercial cooperation in areas such as purchasing, sales tools and systems integrations, as allowed by regulatory and contractual limitations.

Both the JetSMART and GOL transactions are subject to the satisfaction of closing conditions, certain regulatory approvals and, in the case of the JetSMART transaction, the completion of definitive documentation.

On September 21, 2021, the United States Department of Justice (the DOJ), joined by Attorneys General from six states and the District of Columbia, filed an antitrust complaint against American and JetBlue in the District of Massachusetts alleging that American and JetBlue violated U.S.

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

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

Closing arguments from both parties were presented on November 18, 2022.

A decision is expected in the first quarter of 2023.

Separately, in December 2022, two putative class action lawsuits were filed in the Eastern District of New York also alleging that the NEA violated the antitrust law.

Those lawsuits, which have been consolidated, seek monetary and injunctive relief.

In February 2023, private party plaintiffs filed two additional putative class action antitrust complaints against American and JetBlue in the District of Massachusetts and the Eastern District of New York, respectively.

We believe these complaints are without merit and are defending against them vigorously.

We also have a marketing relationship with Alaska Airlines which includes an expanded codeshare agreement (including codeshare on certain of our international routes from Seattle-Tacoma International Airport and Los Angeles International Airport (LAX)), reciprocal loyalty program benefits and shared lounge access.

Prior to its implementation, American and Alaska Airlines submitted this arrangement to the DOT for review pursuant to federal law.

After the DOT allowed the review period to expire with no further actions, American and Alaska Airlines commenced implementation of this arrangement.

Loyalty Program

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AAdvantage members earn mileage credits for flying on American, any one world Alliance airline or other partner airlines.

For every dollar spent by flying on American, members earn five mileage credits, and Gold, Platinum, Platinum Pro and Executive Platinum status holders earn additional bonus mileage credits of 40%, 60%, 80% and 120%, respectively.

Members also earn mileage credits by using the services of more than 1,000 non-flight partners, such as our co-branded credit cards, and certain hotels and car rental companies.

For every dollar spent by flying on American, members earn mileage credits, and Gold, Platinum, Platinum Pro and Executive Platinum status holders earn additional bonus mileage credits of 40%, 60%, 80% and 120%, respectively.

Members also earn mileage credits by using the services of more than 1,000 non-flight partners, such as our co-branded credit cards, and certain hotel and car rental companies.

The AAdvantage program in general, and our co-branded credit cards in particular, are significant assets of our business and have become increasingly important to our company over time.

All travel on eligible tickets counts toward qualification for status in the AAdvantage program.

Mileage credits can be redeemed for free or upgraded travel on American and participating airlines, membership to our Admirals Club ® or for other non-flight awards from our program partners.

Most travel awards are subject to capacity-controlled seating.

A member’s mileage credits generally do not expire if that member has any type of qualifying activity at least once every 18 months.

In response to the COVID-19 pandemic, we suspended the expiration of mileage credits through March 31, 2022 and eliminated mileage reinstatement fees for canceled award tickets.

Status members can enjoy additional travel benefits of the AAdvantage program, including complimentary upgrades, checked bags, and Preferred and Main Cabin Extra seats, as well as priority check-in, security, boarding and baggage delivery when traveling on American or any one world Alliance airline.

In 2021, we announced a redesign of status qualifying metrics.

Starting in 2022, AAdvantage members will have more pathways to status and only one metric to track:

Mileage credits can be redeemed for free or upgraded travel on American and participating airlines, membership to our Admirals Club ® or for other non-flight awards, such as car rentals and hotels, from our program partners.

Travel awards are available on all flights operated by American and at times are subject to capacity-controlled seating on flights operated by our partners.

A member’s mileage credits generally do not expire if that member has any type of qualifying activity at least once every 24 months or if the AAdvantage member is the primary holder of a co-branded credit card.

Starting in 2022, AAdvantage members have more pathways to status and only one metric to track:

Loyalty Points, which can be earned through a variety of qualifying travel and non-travel activities, including use of our co-branded credit cards.

Additionally, 2020 AAdvantage status was extended through March 31, 2022 for all members.

Loyalty Points are used for measuring status qualification in the AAdvantage program over a 12-month period beginning on March 1 of each year.

In addition, we introduced Loyalty Point Rewards, which, starting in March 2023, will allow members to unlock benefits, rewards and choices before, between and beyond the traditional status tiers.

In 2022, AAdvantage was recognized as the Best Elite Program in the Americas by the 2022 Freddie Awards, which is based entirely on votes from travelers around the world.

In addition, the editorial staff of the digital news outlet, The Points Guy , selected AAdvantage Executive Platinum Status as the Best U.S.

Airline Elite Status and awarded Loyalty Points with the Innovation Award for Loyalty.

Under our agreements with AAdvantage members and program partners, we reserve the right to change the terms of the AAdvantage program at any time and without notice, and may end the program with six months’ notice.

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Most airlines will quickly match price reductions in a particular market, and we have often elected to match discounted or promotional fares initiated by other air carriers in certain markets in order to compete in those markets.

In addition, we face pricing pressures from so-called ultra-low-cost carriers, such as Allegiant Air, Frontier Airlines and Spirit Airlines, which compete in many of the markets in which we operate, with competition from these carriers increasing and new entrants regularly announcing their intention to start up new ultra-low-cost carriers.

In addition, we face pricing pressures from so-called ultra-low-cost carriers, such as Allegiant Air, Frontier Airlines and Spirit

Airlines, which compete in many of the markets in which we operate, with competition from these carriers increasing and new entrants regularly announcing their intention to start up new ultra-low-cost carriers.

In addition to price competition, airlines compete for market share by increasing the size of their route system and the number of markets they serve.

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Many of our competitors also own or have agreements with regional airlines that provide similar services at their hubs and other locations.

We also compete on the basis of scheduling (frequency and flight times), availability of nonstop flights, on-time performance, type of equipment, cabin configuration, amenities provided to passengers, loyalty programs, the automation of travel agent reservation systems, onboard products, health and safety and other services.

International

In addition to our extensive domestic service, we provide international service to Canada, Mexico, the Caribbean, Central and South America, Europe, China, Japan, Korea, India, Australia and New Zealand.

In 2022, we will launch service to Doha, Qatar, allowing customers to access destinations in the Middle East and the surrounding regions.

In 2022, we launched service to Doha, Qatar, allowing customers to connect to and from select destinations throughout the Middle East, East Africa, South Asia and Southeast Asia gateways.

In providing international air transportation, we compete with other U.S.

airlines, foreign investor-owned airlines and foreign state-owned or state-affiliated airlines.

Before the COVID-19 pandemic, competition had been increasing from foreign state-owned and state-affiliated airlines in the Gulf region .

These carriers have large numbers of international widebody aircraft in service and on order and had been increasing service to the U.S.

from locations both in and outside the Middle East.

Service to and from locations outside of the Middle East was provided by some of these carriers under so-called “fifth freedom” rights permitted under international treaties which allow service to and from stopover points between an airline’s home country and the ultimate destination.

Such flights, such as a stopover in Europe on flights to the United States, allow the carrier to sell tickets for travel between the stopover point and the United States in competition with service provided by us.

We believe these state-owned and state-affiliated carriers in the Gulf region, including their affiliated carriers, benefit from significant government subsidies, which have allowed them to grow quickly, reinvest in their product and expand their global presence.

We expect this to continue after the COVID-19 pandemic subsides.

Competition had also been increasing from low-cost airlines executing international long-haul expansion strategies, a trend we also expect to continue after the COVID-19 pandemic subsides and the delivery of planned, long-range narrowbody aircraft commences.

Competition has also been increasing from low-cost airlines executing international long-haul expansion strategies, a trend we also expect to continue, in particular with the planned introduction of long-range narrowbody aircraft in the coming years.

In order to increase our ability to compete in the market for international air transportation service, which is subject to extensive government regulation, U.S.

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See “ Distribution and Marketing Agreements ” above for further discussion.

The airline business is labor intensive, and our team members are our most important asset.

Sustainability

Our purpose is to care for people on life’s journey.

Conducting our business with a view towards operating a sustainable business that has the ability to serve our stakeholders over the long-term is an important part of this purpose.

We have increased our focus over time on a number of elements that we view as important to build a more sustainable company, including those described below.

We recognize the challenge of climate change and have set ambitious goals to transition to operating a low-carbon airline over time.

Our aim is to achieve net zero greenhouse gas (GHG) emissions by 2050, and we have set an intermediate target to drive progress toward that goal.

In April 2022, we received validation from the Science Based Targets initiative (SBTi) that our 2035 GHG reduction target complies with the SBTi criteria.

The vast majority of our direct GHG emissions comes from the use of jet fuel in our operations.

Our current strategy for reaching net zero emissions by 2050 is focused on running a more fuel-efficient operation, with more fuel-efficient aircraft, powered by low-carbon fuel.

To do so, we are working to drive progress across several key levers, including:

• Continuing to replace older, less fuel-efficient aircraft with new, more efficient aircraft over time;

• Helping scale the production of sustainable aviation fuel (SAF) with the aim of transitioning to lower-carbon fuels.

Currently, SAF is not available at the cost or scale necessary to meet our industry’s needs.

We continue to enter into agreements to purchase SAF as part of our goal to replace 10% of our conventional jet fuel with SAF in 2030 and to encourage investment in SAF;

• Evaluating and investing in innovations that may enable commercial aircraft to be powered by low- and no-carbon fuel sources over the long term.

For example, in 2022 we made direct investments in ZeroAvia and Universal Hydrogen, companies working to develop hydrogen-electric propulsion technology and green hydrogen distribution, respectively.

We are also an anchor partner of Breakthrough Energy Catalyst, which aims to make investments to accelerate the development of new clean energy technologies.

Achieving our ambitious goals will require significant action and investments by governments, manufacturers and other stakeholders.

We are committed to engaging with our stakeholders to seek to advance these initiatives, and we have dedicated resources to advance our own progress.

Our Board and Corporate Governance, Public Responsibility and Safety Committee receive updates on our climate strategy, progress and key risks regularly.

And, in 2022, we formally assigned responsibility for oversight of our climate change strategy at the management level to our Chief Executive Officer.

The safety of our customers and team members is a top priority.

Our approach to safety is guided by our Safety Management System (SMS), an organization-wide approach to identifying and managing risk.

The SMS is comprised of four components:

Safety Policy, Safety Assurance, Safety Risk Management and Safety Promotion.

Our Safety Policy sets safety objectives while striving to comply with applicable regulatory requirements and laws in the countries where we operate and establishing standards for acceptable operational behaviors.

The Safety Assurance component of our SMS specifies how we use data and conduct quality assurance and internal oversight to validate the effectiveness of risk controls and the performance of the SMS.

The Safety Risk Management (SRM) element of our SMS provides a decision-making process for identifying hazards and mitigating risk based on a thorough understanding of our systems and their operating environment.

We employ SRM whenever there is a significant change to our operations, such as delivery of new aircraft.

Lastly, the Safety Promotion component includes training and raising awareness among team members so that they can spot potential safety events.

We fly to more than 300 destinations in the United States and internationally, and we are committed to providing our customers with a world-class travel experience.

We continued to rigorously measure and track customer satisfaction through passenger surveys in 2022, efforts that led to further improvements in our operations and the services we provide.

• We recorded a record Likelihood to Recommend score based on our internal customer data derived from approximately three million surveys completed by our customers in 2022;

• We were recognized for the fifth consecutive year with the prestigious Five Star rating in The APEX Official Airline Ratings – Global Airline category.

This rating is based on verified customer feedback on the overall travel experience.

The airline business is labor intensive, and our team members are critical to delivering for our customers.

The operational complexity of our business requires a diverse team of personnel trained and experienced in a variety of technical areas such as flight operations, ground operations, safety and maintenance, customer service and airline scheduling and planning.

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Talent Development

We give our team members the tools, training and resources they need to do their best work.

We have a suite of programs aimed at helping our people develop the skills and experience to succeed in their roles and build rewarding, long-term careers within our company.

Additionally, we’ve partnered with leading online learning platforms to make professional development available on-demand to all our team members.

We focus on providing our team members the tools, training and resources they need to do their best work.

We maintain a suite of programs aimed at helping our people develop the skills and experience they need to succeed in their roles and build rewarding, long-term careers within our company.

Additionally, we have partnered with leading online learning platforms to make professional development available on-demand to all of our team members.

Diversity, Equity and Inclusion

Cultivating an environment that celebrates diversity, equity and inclusion (DEI) is a top priority for us, and we seek to create a workplace where diverse perspectives and experiences are welcomed and encouraged, where team members feel comfortable to be their authentic selves and where we are always learning from one another.

Our DEI goals include:

• diversifying our leadership team by establishing specific objectives and laying out a plan to achieve them, including enhancing our recruiting, development and mentoring programs;

• providing additional learning opportunities beyond implicit bias training to generate further education and awareness of diversity and inclusion matters;

• pledging to assist Black youth in developing job skills and expanding access to well-paying careers as part of our overall strategy to increase opportunities in our hub cities and Tulsa, Oklahoma, where our largest maintenance facility is based.

In 2021, we continued to take steps towards achieving these goals.

• increased Black representation at the directors and above level by approximately 80%, exceeding our goal of a 50% increase set at the beginning of 2021;

• announced a second round of the Executive Sponsorship Program, first launched in September 2020, whereby a group of Black leaders have been paired with an executive leader for a year-long mentorship program;

• launched an inclusive workplace DEI training completed by more than 90,000 team members;

• introduced the Inclusion Education Series, a new web-based training series designed to help each team member become an upstander, with the first course focusing on how team members can recognize when something is wrong, act to make it right and better understand microaggressions;

• started using HiredScore, a hiring technology platform designed to ensure accountability and mitigate potential hiring bias;

• partnered with McKinsey & Company to offer select team members access to its Leadership Academies;

• became one of six companies to receive Fair Pay Workplace’s inaugural pay equity certification for our management and support staff team to ensure equitable pay regardless of gender or race and approximately 86% of our team members are represented by unions and already have built-in pay equity.

This certification will require us to undergo regular check-ins for progress to build upon fair pay practices.

Cultivating an environment that celebrates diversity, equity and inclusion (DEI) is a priority for us, and we seek to create a workplace where diverse perspectives and experiences are welcomed and encouraged, where team members feel comfortable to be their authentic selves and where we are always learning from one another.

Our goal is to make culture a competitive advantage so people will want to work with us, fly with us and invest in us.

We are implementing a multiyear strategy focused on embedding DEI throughout our company by:

• Hiring, engaging and retaining talent for growth;

• Delivering excellence in our operations to serve and expand our global markets;

• Striving to have our teams reflect the diversity of our global customer base;

• Driving innovation to build competitive advantages.

In 2022, we received a perfect score on the 2022 Disability Equality Index and were designated a Human Rights Campaign’s 2022 Best Place to Work for LGBTQ+ Equality.

We also launched the Selection, Onboarding, Advancement and Retention program, an expansion of our Executive Sponsorship Program, which creates a sustainable foundation for supporting diverse talent and underrepresented groups across our company.

Competitive Pay and Comprehensive Benefits

We offer competitive pay, comprehensive benefits and a wide variety of resources designed to support the physical, behavioral and financial well-being of our team members and their families.

We’re committed to providing medical coverage that is both affordable and flexible along with health care navigation and support tools.

Additionally, during the pandemic, we offered COVID-19 testing, paid pandemic leave, and vaccinations to support our team members and ensure the continuity of our operation.

Our internal recognition programs give team members and customers the opportunity to show their appreciation for a job well done, including through our Nonstop Thanks program whereby team members can award each other points for a job well done or as an expression of gratitude.

We seek to offer competitive pay, comprehensive benefits and a wide variety of resources designed to support the physical, behavioral and financial well-being of our team members and their families, including medical coverage that is intended to be affordable and flexible along with healthcare navigation and support tools.

Recognition points earned through the recognition program can be redeemed for items in an online catalog.

In 2021, our team members were recognized by customers, peers and company leaders approximately 2 million times and hundreds of team members were nominated for the annual Chairman’s Award, the highest honor that we bestow upon our team members.

In 2022, our team members were recognized by customers, peers and company leaders over two million times and hundreds of team members were nominated for the annual Chairman’s Award, the highest honor that we bestow upon our team members.

Our future success depends in large part on our ability to attract, develop and retain highly qualified management, technical and other personnel.

Retaining and recruiting people with the appropriate skills has been particularly challenging as the economy in general, and the airline industry in particular, have continued to recover from the COVID-19 pandemic.

A rapid return of demand for air travel and the corresponding need for airlines to staff expanding operations resulted in a period of intense competition for the human resources necessary to operate our business successfully.

Like many other airlines, we have experienced and continue to experience periodic shortages of frontline team members as a result.

Certain of these personnel shortages, such as pilots, are systemic and could persist for some time.

For more discussion, see Part I, Item 1A.

Risk Factors – “The loss of key personnel upon whom we depend to operate our business or the inability to attract and develop additional qualified personnel could adversely affect our business.”

Effects of the COVID-19 Pandemic on our Team Members

The COVID-19 pandemic has resulted in a decline in demand for our services.

We have taken aggressive actions since the beginning of the COVID-19 pandemic to mitigate its effects on our business, including capacity reductions, structural changes to our fleet, cost reductions including implementing voluntary leave and early retirement programs, and steps to preserve cash and improve our overall liquidity position, consistent with the terms of the financial assistance we have received from the U.S.

Government under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (PSP Extension Law) and Section 7301 of the American Rescue Plan Act of 2021 (the ARP).

Pursuant to the Payroll Support Program Agreement (PSP1 Agreement), the U.S.

Department of Treasury (Treasury), provided us with an aggregate of $6.0 billion of financial assistance in 2020.

In addition, pursuant to the Payroll Support Program Extension Agreement (PSP2 Agreement) and the Payroll Support Program 3 Agreement (PSP3 Agreement), Treasury provided us financial assistance in aggregate of approximately $3.5 billion and $3.3 billion, respectively, in 2021.

Using these funds, we were able to continue payment of eligible employee wages, salaries and benefits until demand for air travel sufficiently recovered.

Retaining and recruiting people with the appropriate skills is particularly challenging as the economy in general, and the airline industry in particular, continue to recover from the COVID-19 pandemic resulting in competition for the human resources necessary to operate our business successfully.

Like many other airlines, we have experienced and continue to experience periodic shortages of frontline team members as a result of, among other things, demand for domestic travel returning more quickly than anticipated and higher than normal team member absences due to the impact of the ongoing COVID-19 pandemic.

In advance of the 2021 winter holiday season, one of our busiest travel periods, we offered a holiday incentive pay program intended to encourage attendance and to recognize our team members for their extraordinary efforts during this difficult time.

For more discussion on the effects of the COVID-19 pandemic on our business, including the impact on our people, see Part I, Item 1A.

Risk Factors – “The outbreak and global spread of COVID-19 has resulted in a severe decline in demand for air travel which has adversely impacted our business, operating results, financial condition and liquidity.

The duration and severity of the COVID-19 pandemic, and similar public health threats that we may face in the future, could result in additional adverse effects on our business, operating results, financial condition and liquidity.”

Labor Relations

In 2021, salaries, wages and benefits were our largest expense and represented 43% of our total operating expenses.

In 2022, mainline and regional salaries, wages and benefits were our largest expense and represented 32% of our total operating expenses.

As of December 31, 2022, we had approximately 129,700 active full-time equivalent employees, approximately 87% of whom were represented by various labor unions responsible for negotiating the collective bargaining agreements (CBAs) governing their compensation and job duties, among other things.

Labor relations in the air transportation industry are regulated under the Railway Labor Act (RLA), which vests in the National Mediation Board (NMB) certain functions with respect to disputes between airlines and labor unions relating to

union representation and CBAs.

When an RLA CBA becomes amendable, if either party to the agreement wishes to modify its terms, it must notify the other party in the manner prescribed under the RLA and as agreed by the parties.

Under the RLA, the parties must meet for direct negotiations, and, if no agreement is reached during direct negotiations between the parties, either party may request that the NMB appoint a federal mediator.

The RLA prescribes no timetable for the direct negotiation and mediation processes, and it is not unusual for those processes to last for many months or even several years.

If no agreement is reached in mediation, the NMB in its discretion may declare that an impasse exists and proffer binding arbitration to the parties.

Either party may decline to submit to arbitration and if arbitration is rejected by either party, a 30-day “cooling off” period commences.

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

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

At the end of 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, and the airline may resort to its own “self-help,” including the imposition of any or all of its proposed amendments to the CBA and the hiring of new employees to replace any striking workers.

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.

Nonetheless, there is a risk that employees, either with or without union involvement, could engage in one or more concerted refusals to work that could individually or collectively harm the operation of our airline and impair our financial performance.

The following table shows our domestic airline employee groups that are represented by unions:

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Communications Workers of America (CWA) Passenger Service 6,500 2026

Union Class or Craft Employees (1)

Amendable Date

ALPA Pilots 740 2029

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TWU Dispatchers 50 2024

(1) Represents approximate number of active employees as well as employees who opted for a voluntary partially paid leave as a result of the COVID-19 pandemic as of December 31, 2021.

Joint collective bargaining agreements (JCBAs) covering our mainline pilots, flight attendants, passenger service, flight simulator engineers and dispatchers are now amendable.

In January 2022, our mainline flight crew training instructors ratified a three-year agreement which is now amendable in 2025.

Among our wholly-owned regional subsidiaries, the Envoy mechanics and related, Envoy stock clerks, Piedmont flight attendants, Piedmont mechanics and related and Piedmont stock clerks have agreements that are now amendable and are engaged in traditional RLA negotiations.

In January 2022, the Piedmont flight attendants reached a tentative four-year agreement subject to membership ratification.

ALPA Flight Crew Training Instructors 120 2028

(1) Represents approximate number of active employees as of December 31, 2022.

CBAs covering our mainline pilots, flight attendants and passenger service are now amendable and negotiations involving these workgroups continue.

Among our wholly-owned regional subsidiaries, the Envoy mechanics and related, Envoy stock clerks and PSA mechanics and related have agreements that are now amendable and are engaged in traditional RLA negotiations.

For more discussion, see Part I, Item 1A.

Risk Factors – “ Union disputes, employee strikes and other labor-related disruptions, or our inability to otherwise maintain labor costs at competitive levels may adversely affect our operations and financial performance .”

Risk Factors – “ Union disputes, employee strikes and other labor-related disruptions, or our inability to otherwise maintain labor costs at competitive levels and hire and retain a sufficient number of employees may adversely affect our operations and financial performance .”

Aircraft Fuel

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Therefore, our quarterly results of operations are not necessarily indicative of operating results for the entire year, and historical operating results in a quarterly or annual period are not necessarily indicative of future operating results.

The COVID-19 outbreak, along with the measures governments and private organizations worldwide have implemented in an attempt to contain the spread of this pandemic, has resulted in a decline in demand for air travel, which has adversely affected our business, operations and financial condition to an unprecedented extent, and affected the traditional seasonal trends of the airline business.

Measures ranging from travel restrictions, including testing regimes, “stay at home” and quarantine orders, limitations on public gatherings to cancellation of public events and many others have resulted in a decline in demand for travel .

Domestic and Global Regulatory Landscape

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Domestically, the DOT and the Federal Aviation Administration (FAA) exercise significant regulatory authority over air carriers.

The DOT, among other things, oversees and regulates domestic and international codeshare agreements, international route authorities, competition and consumer protection matters including, among other things, accessibility, advertising and fee display, and refund practices.

The DOT, among other things, oversees and regulates domestic and international codeshare agreements, international route authorities, competition and consumer protection matters including accessibility, the display and sharing of ancillary fee information and refund practices.

The Antitrust Division of the DOJ, along with the DOT in certain instances, have jurisdiction over airline antitrust matters.

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Generally, our ability to retain slots is conditioned on the continued use of such slots, and in the absence of use, the slots are subject to forfeiture.

Since the beginning of the COVID-19 pandemic and through the Winter 2021-2022 season, global regulators have offered varying levels of slot utilization requirement waivers.

In some jurisdictions, we have used these waivers at times to reduce flying levels given limited demand for travel.

We cannot guarantee that such waivers will remain available to us, or that upon expiration or cancellation of such waivers it will be economical for us to resume prior levels of flying to destinations where we currently operate a reduced service.

In certain circumstances, such as during the COVID-19 pandemic, regulators may issue slot waivers which temporarily suspend or amend slot usage requirements, and we have used slot waivers at times to reduce flying levels given limited demand for travel.

We cannot guarantee that such waivers will be made available to us, or that upon expiration or cancellation of such waivers it will be economical for us to resume prior levels of flying to destinations where we have operated a reduced service.

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.

For more discussion, see Part I, Item 1A Risk Factors – “ If we are unable to obtain and maintain adequate facilities and infrastructure throughout our system and, at some airports, adequate slots, we may be unable to operate our existing flight schedule and to expand or change our route network in the future, which may have a material adverse impact on our operations.”

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

For more discussion, see Part I, Item 1A.

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

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

Existing law also permits domestic local airport authorities to implement procedures and impose restrictions designed to abate noise, provided such procedures and restrictions do not unreasonably interfere with interstate or foreign commerce or the national transportation system.

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DOT Passenger Protection Rules

The DOT regulates airline interactions with passengers through the ticketing process, at the airport and on board the aircraft.

The DOT regulates airline interactions with passengers through the ticketing process, at the airport and onboard the aircraft.

Among other things, these regulations govern how our fares are displayed online, required customer disclosures, access by disabled passengers, handling of long onboard flight delays and reporting of mishandled bags.

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.

In 2023, the DOT is expected to propose or implement a number of new disability regulations that will impact us, including rules for accessible lavatories on single-aisle aircraft, penalties for wheelchair loss or damage and prompt wheelchair assistance.

The DOT is also expected to finalize rules requiring refunds for cancellations and significant delays and rules mandating the display of ancillary fees during the initial itinerary search.

International

International air transportation is subject to extensive government regulation, including aviation agreements between the U.S.

and other countries or governmental authorities, such as the EU and the United Kingdom.

and other countries or governmental authorities, such as the EU.

Moreover, our alliances with international carriers may be subject to the jurisdiction and regulations of various foreign agencies.

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Further, various foreign airport authorities impose noise and curfew restrictions at their local airports.

Since shortly after the events of September 11, 2001, substantially all aspects of civil aviation security in the U.S.

Substantially all aspects of civil aviation security in the U.S.

or affecting U.S.

carriers have been controlled or regulated by the federal government through the Transportation Security Administration (TSA).

carriers are controlled or regulated by the federal government through the Transportation Security Administration (TSA).

Requirements include flight deck security;

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airport authorities are actively engaged in efforts to limit discharges of deicing fluid into the environment, often by requiring airlines to participate in the building or reconfiguring of airport deicing facilities.

Additionally, compliance with updated federal and state regulations governing fire extinguishing foams are expected to require modification to fire suppression systems that we operate, as well as those maintained by airports.

We are evaluating the costs and potential impacts to our business of complying with these new regulations.

On November 23, 2022, the EPA also published the final rule for particulate matter emission standards and test procedures for civil aircraft engines, which took effect on December 23, 2022.

The environmental laws to which we are subject include those related to responsibility for potential soil and groundwater contamination.

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We presently anticipate that the ongoing costs of such activities will not have a material impact on our operations.

We employ an environmental management system that provides a systematic approach for compliance with environmental regulations and management of a broad range of issues including air emissions, hazardous waste disposal, underground tanks, and aircraft water quality.

We employ an environmental management system that provides a systematic approach for compliance with environmental regulations and management of a broad range of environmental issues, including but not limited to air emissions, hazardous waste, underground tanks, and aircraft water quality.

Aircraft Emissions and Climate Change Requirements

Efforts to transition to a low-carbon future have increased the focus by global, regional and national regulators on climate change and greenhouse gas (GHG) emissions.

We recognize that air travel impacts the environment and have committed to develop an intermediate, science-based target for reducing GHG emissions by the year 2035 with the goal to achieve net-zero carbon emissions by 2050.

In addition to investing in strategic partnerships in an effort to help develop and support emissions-reduction solutions and accelerate clean energy technologies, we have taken a number of actions that mitigate the GHG emitted by our operations both en route and on the ground, such as:

• retiring older, less fuel-efficient aircraft and replacing them with new, more fuel-efficient aircraft, resulting in the youngest mainline fleet of any U.S.

network carrier;

• reducing fuel consumption through operational initiatives such as single-engine taxi, optimal planned arrival fuel and our new flight planning system;

• entering into agreements to purchase sustainable aviation fuel;

• working with the FAA and vendors to facilitate efficient airspace procedures, which in turn reduce aircraft emissions;

• updating our fleet with lightweight interiors, including seats and furnishings, and replacing existing cargo containers with lighter weight versions;

• replacing older, inefficient ground support equipment with new, more fuel-efficient ground support equipment, including electric powered equipment;

• purchasing renewable electricity to reduce indirect emissions associated with the production of the power we consume;

• obtaining certification of certain of our buildings to the U.S.

Green Building Council’s Leadership in Energy and Environmental Design (LEED) standard.

American is subject to the requirements of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), an international, market-based emissions reduction program adopted by the International Civil Aviation Organization (ICAO) in 2016.

CORSIA is intended to achieve carbon-neutral growth in the international aviation sector from 2021 through 2035 by requiring airlines to compensate for the growth in carbon dioxide (CO 2 ) emissions, relative to a predetermined “baseline,” of a significant majority of international flights through the purchase of carbon offsets or the use of low-carbon fuels.

For each year from 2021 through 2029, CORSIA requires each airline to compensate for the rate of growth of the CO 2 emissions of the aviation sector as a whole as determined by ICAO.

Starting in 2030, CORSIA will require airlines to compensate for growth in CO 2 emissions using a formula determined by ICAO that will combine the growth in aviation sector emissions and the growth in the individual airline’s emissions, with the proportion of the latter rising from at least 20 percent over the period 2030-2032 and to at least 70 percent over the period 2033-2035.

ICAO originally defined the baseline as the average emissions from covered flights in 2019 and 2020.

Due to the COVID-19 pandemic, ICAO decided to remove 2020 emissions from the baseline for the CORSIA “pilot phase” (2021-2023).

ICAO is expected to make a decision about the baseline for CORSIA’s “first phase” (2024-2026) by the end of 2022.

At this point, it is unclear whether ICAO will decide to continue with the 2019-only emissions baseline for future CORSIA implementation phases;

certain environmental groups have advocated for reverting to the original baseline, which would make the CORSIA reduction obligations more stringent and increase the cost of compliance under CORSIA.

Currently, we do not expect to be required to purchase carbon offset credits to comply with CORSIA through 2023, unless the recovery in demand for international travel is unexpectedly strong and exceeds that of 2019 in those years.

Starting in 2024, CORSIA compliance costs are uncertain, primarily because of the difficulty in estimating the return of demand for international air travel in the recovery from the pandemic.

There is also significant uncertainty with respect to the future supply and price of carbon offset credits and sustainable or lower carbon aircraft fuels that could allow us to reduce our emissions of CO 2 .

In addition, as described above, we will not directly control our CORSIA compliance costs because our compliance obligations through 2029 are based on the growth in emissions of the global aviation sector and begin to incorporate a factor for individual airline operator emissions growth starting in 2030.

CORSIA is intended to achieve carbon-neutral growth in the international aviation sector from 2021 through 2035 by requiring airlines to compensate for the growth in carbon dioxide (CO 2 ) emissions, relative to a predetermined baseline determined by ICAO, of a significant majority of international flights through the purchase of carbon offsets or the use of low-carbon fuels.

Currently, we expect to be required to purchase carbon offset credits to comply with CORSIA’s first “implementation phase” (2024-2026).

We do not expect to be required to purchase carbon offset credits beforehand, unless during 2023 the demand for international travel is stronger than expected and exceeds that of 2019.

Our future costs of CORSIA compliance are uncertain because of the difficulty in estimating the return of demand for international air travel in the recovery from the COVID-19 pandemic and the uncertainty with respect to the future supply and price of carbon offset credits and lower-carbon aircraft fuels.

In January 2021, the EPA adopted GHG emission standards for new aircraft engines, which are aligned with the 2017 ICAO aircraft engine GHG emission standards.

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These final standards have been challenged by several states and environmental groups, and the Biden Administration has issued an executive order requiring a review of these final standards.

On November 15, 2021, the EPA announced that it will not rewrite the existing aircraft engine GHG emissions standards but will press for ambitious new aircraft GHG emission standards at international negotiations organized by the ICAO in 2022.

The outcome of the legal challenge and the development of new aircraft GHG emissions standards cannot be predicted at this time.

In addition, on September 9, 2021, the Biden Administration launched the Sustainable Aviation Fuel Grand Challenge to scale up the production of sustainable aviation fuel, aiming to reduce GHG emissions from aviation by 20% by 2030 and to replace all traditional aviation fuel with sustainable aviation fuel by 2050.

Whether these goals will be achieved and the potential effects on our business cannot be predicted at this time.

In 2021, the EC proposed legislation that would expand the application of and increase the stringency of the EU Emission Trading Scheme (ETS) to include flights into and out of the Europe Economic Area beginning in 2027 under certain circumstances.

Further, the EC is considering the creation of a sustainable aviation fuel (SAF) blending mandate for aviation fuel suppliers beginning in 2025, among other requirements.

On November 15, 2021, the EPA announced that it would not rewrite the existing aircraft engine GHG emissions standards but would seek more for ambitious new aircraft GHG emission standards within the ICAO process.

The outcome of the legal challenge and whether there will be any development of new aircraft GHG emissions standards cannot be predicted at this time.

The EC’s ReFuelEU Aviation initiative (part of its “Fit for 55” program) included a proposal for the creation of a SAF blending mandate for aviation fuel suppliers set at 2% beginning in 2025 and rising to 63% by 2050, among other requirements.

The European Parliament (which has proposed stricter targets in relation to SAF blending percentages for 2050) and the European Council have adopted initial negotiating positions with respect to the ReFuelEU Aviation initiative and are currently in negotiations in relation to the final text of the proposed regulation.

Individual EU member states have been developing their own requirements including, for example, a 1% SAF mandate in France that came into force on January 1, 2022.

Whether and in what form these regulations will be finalized and the potential effects on our business are uncertain at this time.

All such climate change-related regulatory activity and developments may adversely affect our business and financial results by requiring us to reduce our emissions before cost-effective emissions reduction technologies are available, for example, through requirements to make capital investments to purchase specific types of equipment or technologies, purchase carbon offset credits or otherwise incur additional costs related to our emissions.

Such activity may also impact us indirectly by increasing our operating costs, including fuel costs.

For more information on American’s approach to ESG issues, see our 2020 ESG Performance Review and 2019-2020 ESG Report at our website www .

aa.com under “Environmental, Social and Governance.” None of the information or contents of our 2020 ESG Performance Review and 2019-2020 ESG Report are incorporated into this Annual Report on Form 10-K.

For more information on our approach to ESG issues, see our 2021 ESG Report at our website www .

aa.com under “Environmental, Social and Governance.” None of the information or contents of our 2021 ESG Report are incorporated into this Annual Report on Form 10-K.

Impact of Regulatory Requirements on Our Business

Regulatory requirements, including but not limited to those discussed above, affect operations and increase operating costs for the airline industry, including our airline subsidiaries, and future regulatory developments may continue to do the same in the future.

For additional information, see Part I, Item 1A.

Risk Factors – “ Evolving data security and privacy requirements could increase our costs, and any significant data security or privacy incident could disrupt our operations, harm our reputation, expose us to legal risks and otherwise materially adversely affect our business, results of operations and financial condition,” “If we are unable to obtain and maintain adequate facilities and infrastructure throughout our system and, at some airports, adequate slots, we may be unable to operate our existing flight schedule and to expand or change our route network in the future, which may have a material adverse impact on our operations,” “Our business is subject to extensive government regulation, which may result in increases in our costs, disruptions to our operations, limits on our operating flexibility, reductions in the demand for air travel, and competitive disadvantages,” “The airline industry is heavily taxed, ” “We are subject to many forms of environmental and noise regulation and may incur substantial costs as a result,” and “We are subject to risks associated with climate change, including increased regulation of our CO 2 emissions, changing consumer preferences and the potential increased impacts of severe weather events on our operations and infrastructure.”

Risk Factors – “ Evolving data security and privacy requirements (in particular, compliance with applicable federal, state and foreign laws relating to handling of personal information about individuals) could increase our costs, and any significant data security or privacy incident could disrupt our operations, harm our reputation, expose us to legal risks and otherwise materially adversely affect our business, results of operations and financial condition,” “If we are unable to obtain and maintain adequate facilities and infrastructure throughout our system and, at some airports, adequate slots, we may be unable to operate our existing flight schedule and to expand or change our route network in the future, which may have a material adverse impact on our operations,” “Our business is subject to extensive government regulation, which may result in increases in our costs, disruptions to our operations, limits on our operating flexibility, reductions in the demand for air travel, and competitive disadvantages,” “The airline industry is heavily taxed, ” “We are subject to many forms of environmental and noise regulation and may incur substantial costs as a result,” and “We are subject to risks associated with climate change, including increased regulation of our CO 2 emissions, changing consumer preferences and the potential increased impacts of severe weather events on our operations and infrastructure.”

Available Information

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“2013 Credit Facilities” means the 2013 Revolving Facility and 2013 Term Loan Facility provided for by the 2013 Credit Agreement.

“2013 Framework” means the criteria for internal control over financial reporting as set forth in the Internal Control – Internal Framework by the Committee of Sponsoring Organizations of the Treadway Commission.

“2013 Plan” means the AAG 2013 Incentive Award Plan.

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“2021 Form 10-K” means AAG’s and American’s Annual Report on Form 10-K for the year ended December 31, 2021.

“2020 JFK Bonds” means special facility revenue bonds issued on behalf of American by NYTDC in June 2020.

“2021 JFK Bonds” means special facility revenue bonds NYTDC issued in June 2021.

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“10.75% Senior Secured Notes Collateral” means the IP Collateral and LGA/DCA Collateral.

“10.75% Senior Secured Notes Indentures” means the IP Notes Indenture and the LGA/DCA Notes Indenture.

“10.75% Senior Secured Notes Trustee” means Wilmington Trust, National Association, as trustee with respect to the 10.75% Senior Secured Notes.

“11.75% Senior Secured Notes” means the 11.75% senior secured notes due in 2025 with an aggregate principal amount of $2.5 billion.

“11.75% Senior Secured Notes Collateral” means the First Lien 11.75% Senior Secured Notes Collateral and the Second Lien 11.75% Senior Secured Notes Collateral.

“11.75% Senior Secured Notes Indenture” means the indenture, dated as of June 30, 2020, by and among American, AAG and Wilmington Trust, National Association, as trustee.

“11.75% Senior Secured Notes Trustee” means Wilmington Trust, National Association, as trustee with respect to the 11.75% Senior Secured Notes.

“AAdvantage” means the AAdvantage ® frequent flyer program.

“AAdvantage Agreements” means the AAdvantage program agreements provided as collateral under the AAdvantage Financing.

“AAdvantage Collateral” means the AAdvantage Agreements (including all payments thereunder) and rights under an intercompany agreement and certain IP Licenses, certain rights under the AAdvantage program, certain deposit accounts that will receive cash under the AAdvantage Agreements, certain reserve accounts, the equity of each of Loyalty Issuer and the SPV Guarantors and substantially all other assets of Loyalty Issuer and the SPV Guarantors.

“AAdvantage Financing” means the AAdvantage Notes and the AAdvantage Term Loan Facility.

“AAdvantage Collateral” means the AAdvantage Agreements (including all payments thereunder) and rights under an intercompany agreement and American’s rights to certain data and other intellectual property used in the AAdvantage program (subject to certain exceptions), certain rights under the AAdvantage program, certain deposit accounts that will receive cash under the AAdvantage Agreements, certain reserve accounts, the equity of each of Loyalty Issuer and the SPV Guarantors and substantially all other assets of Loyalty Issuer and the SPV Guarantors.

“AAdvantage Financing” means, collectively, the AAdvantage Notes and the AAdvantage Term Loan Facility.

“AAdvantage Financing Closing Date” means March 24, 2021.

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“AFA” means Association of Flight Attendants-CWA.

“Air Wisconsin” means Air Wisconsin Airlines LLC.

“ALPA” means Air Line Pilots Association.

“American” means American Airlines, Inc., a wholly-owned subsidiary of AAG.

“American Eagle” means our regional carriers, including our wholly-owned regional carriers Envoy, PSA and Piedmont, as well as third-party regional carriers including Mesa, Republic and SkyWest.

“American Eagle” means our regional carriers, including our wholly-owned regional carriers Envoy, PSA and Piedmont, as well as third-party regional carriers including Air Wisconsin, Mesa, Republic and SkyWest.

“AMR” or “AMR Corporation” means AMR Corporation and is used to reference AAG during the period of time prior to its emergence from Chapter 11 and the Merger.

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“Base Indenture” means the indenture, dated as of June 25, 2020, between AAG and the Convertible Notes Trustee.

“Boeing” means The Boeing Company.

“BOS” means Boston Logan International Airport.

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“CFO” means Chief Financial Officer.

“Chapter 11 Cases” means the voluntary petitions for relief filed on November 29, 2011 by the Debtors.

“China Southern Airlines” means China Southern Airlines Company Limited.

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“COVID-19” refers to a respiratory illness first detected in 2019 and the ensuing global pandemic that remains ongoing as of the date of this report.

“Credit Facilities” means, collectively, the 2013 Credit Facilities, 2014 Credit Facilities, April 2016 Credit Facilities and December 2016 Credit Facilities.

“Credit Facilities” means, collectively, the 2013 Credit Facilities, 2014 Credit Facilities and April 2016 Credit Facilities.

“CWA” means Communications Workers of America.

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“DC Court” means the Federal District Court for the District of Columbia.

“Debtors” means AMR, American, and certain of AMR’s other direct and indirect domestic subsidiaries.

“December 2016 Credit Agreement” means the Credit and Guaranty Agreement dated as of December 15, 2016, among American, AAG, the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties thereto, as amended.

“December 2016 Credit Facilities” means, collectively, the December 2016 Term Loan Facility and the revolving credit facility that may be established under the December 2016 Credit Agreement.

“December 2016 Term Loan Facility” means the term loan facility provided for under the December 2016 Credit Agreement.

“DEI” means diversity, equity and inclusion.

“Delayed Draw Term Loan Credit Facility” means the Credit and Guaranty Agreement dated as of March 18, 2020, among American, AAG, the lenders from time to time party thereto, Citibank N.A., as administrative agent, and certain other parties thereto, as amended.

“DOJ” means the United States Department of Justice.

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“Ethics Standards” means AAG’s and American’s Standards of Business Conduct.

“ETS” means Emission Trading Scheme.

“EU” means European Union.

"EU-UK Trade and Cooperation Agreement" means the trade and cooperation agreement between the EU and United Kingdom.

"eVTOL" means electric vertical take-off and landing.

"EWR" means Newark Liberty International Airport.

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“GAAP” means generally accepted accounting principles in the U.S.

“GDSs” means global distribution systems.

“GDS” means global distribution system.

“GHG” means greenhouse gas.

“GOL” means GOL Linhas Aéreas Inteligentes S.A.

“GSPC” means S&P 500 Index.

“holdback” means an amount of cash held by our credit card processors in certain circumstances (including, with respect to certain agreements, our failure to maintain certain levels of liquidity).

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“IP Collateral” means certain intellectual property of American, including the “American Airlines” trademark and the “aa.com” domain name in the United States and certain foreign jurisdictions, to which American has given a first lien security interest to secure the IP Notes.

“IP Licenses” means the series of intercompany license agreements pursuant to which an exclusive, irrevocable (subject to certain termination rights), perpetual, worldwide, royalty-bearing sublicense to use the Transferred AAdvantage IP was granted indirectly by Loyalty Issuer to American.

“IP Licenses” means the series of intercompany license agreements pursuant to which an exclusive, irrevocable (subject to certain termination rights), perpetual, worldwide, royalty-bearing sublicense to use American’s rights to certain data and other intellectual property used in the AAdvantage program (subject to certain exceptions) which was granted indirectly by Loyalty Issuer to American.

“IP Notes” means American’s $1.0 billion in initial principal amount of 10.75% senior secured IP notes.

“IP Notes Indenture” means the indenture, dated as of September 25, 2020, by and among American, AAG and Wilmington Trust, National Association, as trustee and as collateral trustee, pursuant to which the IP Notes were issued.

“JCBA” means joint collective bargaining agreement.

“IRA” means the Inflation Reduction Act.

“JetBlue” means JetBlue Airways Corporation.

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“LAX” means Los Angeles International Airport.

“LEED” means U.S.

Green Building Council’s Leadership in Energy and Environmental Design.

“LGA/DCA Collateral” means certain slots related to American’s operations at LGA and DCA and certain other assets that are used as (a) a first-lien security interest to secure the December 2016 Credit Facilities, (b) a first lien security interest to secure the LGA/DCA Notes and (c) a second lien security interest to secure the IP Notes.

“LGA/DCA Collateral” means certain slots related to American’s operations at LGA and DCA and certain other assets that are used as (a) a first lien security interest to secure the LGA/DCA Notes and (b) a second lien security interest to secure the IP Notes.

“LGA/DCA Notes” means American’s $200 million in initial principal amount of 10.75% senior secured LGA/DCA notes.

6 unchanged sentences

“LTV” means loan to value ratio.

“Madrid IP SCS” means Madrid IP Lux HoldCo SCS, a Luxembourg common limited partnership (société en commandite simple) and an indirect subsidiary of Loyalty Issuer.

“Madrid SPV Guarantors” means certain Luxembourg limited liability companies and partnerships that are direct or indirect subsidiaries of Loyalty Issuer and which fully and unconditionally guarantee the AAdvantage Financing.

“Mainline” means the operations of American and excludes regional operations.

“marketing component” means, with respect to the AAdvantage program, the use of intellectual property, including the American brand and access to loyalty program member lists, which is the predominant element in the co-branded credit card agreements, as well as advertising.

“Merger” means the merger of US Airways Group and AMR Corporation on December 9, 2013.

“Mesa” means Mesa Airlines, Inc.

“MOU” means memorandum of understanding.

"NEA" means Northeast Alliance arrangement between American and JetBlue.

1 unchanged sentence

“NOLs” means net operating losses.

“NYSE” means the New York Stock Exchange.

“NYTDC” means the New York Transportation Development Corporation.

“ORD” means Chicago O’Hare International Airport.

“Original SPV Guarantors” means AAdvantage Holdings 1, Ltd.

“OSHA” means Occupational Health and Safety Administration.

6 unchanged sentences

“Piedmont” means Piedmont Airlines, Inc.

“Plan” means the Debtors’ fourth amended joint plan of reorganization.

“PRASM” means passenger revenue per available seat mile and is equal to passenger revenues divided by ASMs.

“Proxy Statement” means American Airlines Group Inc.’s Proxy Statement for the 2022 Annual Meeting of Stockholders of American Airlines Group Inc.

“Proxy Statement” means American Airlines Group Inc.’s Proxy Statement for the 2023 Annual Meeting of Stockholders of American Airlines Group Inc., certain sections of which are incorporated by reference into this report.

“PSA” means PSA Airlines, Inc.

“PSP Agreements” means the payroll support program agreements entered into by the Subsidiaries with Treasury under the CARES Act, PSP Extension Law and ARP.

“PSP Financial Assistance” means the portion of financial assistance received from Treasury pursuant to the PSP Agreements that is not allocated to the PSP Warrants or the PSP Promissory Notes.

“PSP Promissory Notes” means the promissory notes issued to Treasury in connection with the PSP Agreements.

“PSP Warrants” means the warrants issued or to be issued to Treasury pursuant to the PSP Agreements.

“PSP1” means the payroll support program established under the CARES Act.

“PSP1 Agreement” means the Payroll Support Program Agreement entered into by the Subsidiaries with Treasury on the PSP1 Closing Date.

“PSP1 Closing Date” means April 20, 2020.

“PSP1 Financial Assistance” means the portion of financial assistance received from Treasury pursuant to the PSP1 Agreement that is not allocated to the PSP1 Warrants or PSP1 Promissory Note.

“PSP1 Maturity Date” means the tenth anniversary of the PSP1 Closing Date.

“PSP1 Promissory Note” means the promissory note issued to Treasury in connection with PSP1.

“PSP1 Warrant Agreement” means the agreement entered into between AAG and Treasury in connection with the PSP1 Agreement, pursuant to which AAG issued PSP1 Warrants to Treasury to purchase up to an aggregate of approximately 14.1 million shares of AAG common stock.

“PSP1 Warrant Agreement” means the agreement entered into between AAG and Treasury in connection with the Payroll Support Program Agreement entered into by the Subsidiaries with Treasury on April 20, 2020, pursuant to which AAG issued PSP1 Warrants to Treasury to purchase up to an aggregate of approximately 14.0 million shares of AAG common stock.

“PSP1 Warrants” means the warrants issued or to be issued to Treasury pursuant to the PSP1 Warrant Agreement.

“PSP1 Warrant Shares” means up to approximately 14.1 million shares of AAG common stock which Treasury will have the right to purchase pursuant to PSP1 Warrants issued by AAG in accordance with the PSP1 Warrant Agreement.

“PSP2” means the payroll support program established under the PSP Extension Law.

“PSP2 Agreement” means the Payroll Support Program Extension Agreement entered into by the Subsidiaries with Treasury on the PSP2 Closing Date.

“PSP2 Closing Date” means January 15, 2021.

“PSP2 Financial Assistance” means the portion of financial assistance received from Treasury pursuant to the PSP2 Agreement that is not allocated to the PSP2 Warrants or PSP2 Promissory Note.

“PSP2 Maturity Date” means the tenth anniversary of the PSP2 Closing Date.

“PSP2 Promissory Note” means the promissory note issued to Treasury in connection with PSP2.

“PSP2 Warrant Agreement” means the agreement entered into between AAG and Treasury in connection with the PSP2 Agreement, pursuant to which AAG issued PSP2 Warrants to Treasury to purchase the PSP2 Warrant Shares.

“PSP2 Warrant Shares” means up to an aggregate of approximately 6.6 million shares of AAG common stock which Treasury will have the right to purchase pursuant to PSP2 Warrants issued or to be issued by AAG in accordance with the PSP2 Warrant Agreement.

“PSP2 Warrant Agreement” means the agreement entered into between AAG and Treasury in connection with the Payroll Support Program Extension Agreement entered into by the Subsidiaries with Treasury on January 15, 2021, pursuant to which AAG issued PSP2 Warrants to Treasury to purchase up to an aggregate of approximately 6.6 million shares of AAG common stock.

“PSP2 Warrants” means the warrants issued or to be issued to Treasury pursuant to the PSP2 Warrant Agreement.

“PSP3” means the payroll support program established under the ARP.

“PSP3 Agreement” means the Payroll Support Program Agreement entered into by the Subsidiaries with Treasury on the PSP3 Closing Date.

“PSP3 Closing Date” means April 23, 2021.

“PSP3 Financial Assistance” means the portion of financial assistance received from Treasury pursuant to the PSP3 Agreement that is not allocated to the PSP3 Warrants or PSP3 Promissory Note.

“PSP3 Maturity Date” means the tenth anniversary of the PSP3 Closing Date.

“PSP3 Promissory Note” means the promissory note issued to Treasury in connection with PSP3.

“PSP3 Warrant Agreement” means the agreement entered into between AAG and Treasury in connection with the PSP3 Agreement, pursuant to which AAG issued PSP3 Warrants to Treasury to purchase the PSP3 Warrant Shares.

“PSP3 Warrant Shares” means up to an aggregate of approximately 4.4 million shares of AAG common stock which Treasury will have the right to purchase pursuant to PSP3 Warrants issued or to be issued by AAG in accordance with the PSP3 Warrant Agreement.

“PSP3 Warrant Agreement” means the agreement entered into between AAG and Treasury in connection with the Payroll Support Program Agreement entered into by the Subsidiaries with Treasury on April 23, 2021, pursuant to which AAG issued PSP3 Warrants to Treasury to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock.

“PSP3 Warrants” means the warrants issued or to be issued to Treasury pursuant to the PSP3 Warrant Agreement.

11 unchanged sentences

“SAIB” means special airworthiness information bulletin.

“SBTi” means Science Based Targets initiative.

“SEC” means Securities and Exchange Commission.

1 unchanged sentence

“Section 382” means Section 382 of the Internal Revenue Code.

“Securities Act” means Securities Act of 1933, as amended.

“Securities Act” means the Securities Act of 1933, as amended.

“SkyWest” means SkyWest Airlines, Inc.

“slots” means landing and take-off rights and authorizations, as required by certain airports.

“SMS” means Safety Management System.

“SOFR” means the Secured Overnight Financing Rate.

“SPV Guarantors” means the Original SPV Guarantors and the Madrid SPV Guarantors.

“SPV Guarantors” means AAdvantage Holdings 1, Ltd.

a Cayman Islands exempted company incorporated with limited liability and a direct wholly-owned subsidiary of American, (ii) AAdvantage Holdings 2, Ltd., a Cayman Islands exempted company incorporated with limited liability and an indirect wholly-owned subsidiary of American and the direct parent of Loyalty Issuer, and (iii) certain Luxembourg limited liability companies and partnerships that are direct or indirect subsidiaries of Loyalty Issuer and which fully and unconditionally guarantee the AAdvantage Financing.

“SRM” means Safety Risk Management.

“Subsidiaries” means American, Envoy, PSA and Piedmont, each a wholly-owned subsidiary of AAG.

1 unchanged sentence

“Tax Benefits Preservation Plan” means the tax benefits preservation plan adopted by the Board of Directors of AAG in December 2021 in order to preserve the Company’s ability to use its NOLs and certain other tax attributes to reduce potential future income tax obligations.

“Terminal” means the passenger terminal facility used by American at JFK.

“Transferred AAdvantage IP” means, among other things, American’s rights to certain data and other intellectual property used in the AAdvantage program (subject to certain exceptions).

“TRASM” means the total revenue per available seat mile and is equal to the total revenues divided by total mainline and third-party regional carrier ASMs.

12 unchanged sentences

and its consolidated subsidiaries.

“USTR” means the Office of the U.S.

Trade Representative.

“Vertical” means Vertical Aerospace Ltd.

“WTO” means World Trade Organization.

“XAL” means NYSE ARCA Airline Index.

“Yield” means a measure of airline revenue derived by dividing passenger revenue by RPMs.

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

What changed 10-K

Item 1. Business