What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-19 compared with 2024-02-21 · 154 added, 129 removed, 363 unchanged (44% of the section changed)

13 unchanged sentences

Operating income 2,614 3,034 (420) (13.9)

Pre-tax income 1,121 186 935 nm (2)

Income tax provision 299 59 240 nm

Net income 822 127 695 nm

Pre-tax income – GAAP $ 1,121 $ 186 $ 935 nm

Pre-tax income 1,154 1,121 33 2.9

Income tax provision 308 299 9 2.9

Net income 846 822 24 2.9

Pre-tax income – GAAP $ 1,154 $ 1,121 $ 33 2.9

Adjusted for:

pre-tax net special items (1)

1,341 272 1,069 nm

Pre-tax income excluding net special items $ 2,462 $ 458 $ 2,004 nm

667 1,341 (674) (50.2)

Pre-tax income excluding net special items $ 1,821 $ 2,462 $ (641) (26.0)

(1) See Part II, Item 6.

Selected Consolidated Financial Data – “Reconciliation of GAAP to Non-GAAP Financial Measures” and Note 2 to AAG’s Consolidated Financial Statements in Part II, Item 8A for details on the components of pre-tax net special items.

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

Pre-Tax Income and Net Income

Pre-tax income and net income were $1.2 billion and $846 million, respectively, in 2024.

This compares to 2022 pre-tax income and net income of $186 million and $127 million, respectively.

The year-over-year improvement in our pre-tax income on a GAAP basis was driven primarily by higher passenger revenue and lower fuel costs.

Continued strength in demand for air travel and a 7.6% increase in revenue passenger miles (RPMs) as compared to 2022 contributed to record passenger revenue in 2023.

Aircraft fuel costs were lower primarily due to a 16.3% decrease in the average price per gallon of aircraft fuel as compared to 2022.

The increase to pre-tax income was partially offset by increases in certain operating expenses including salaries, wages and benefits costs, primarily as a result of the ratification of a new collective bargaining agreement with our mainline pilots, as described below.

The 2023 period also included $1.3 billion of pre-tax net special items, principally related to one-time charges resulting from the new collective bargaining agreement.

Excluding the effects of pre-tax net special items, pre-tax income was $2.5 billion and $458 million in 2023 and 2022, respectively.

The year-over-year improvement in our pre-tax income excluding pre-tax net special items was primarily due to record passenger revenue in 2023 and lower fuel costs, offset in part by increases in certain operating expenses including salaries, wages and benefits, as described above.

In May 2023, American and the Allied Pilots Association, the union representing our mainline pilots, reached an agreement in principle on a new collective bargaining agreement, which was ratified in August 2023.

This four-year agreement provides wage rate increases, including an initial wage rate increase of 21% effective as of January 1, 2023,

quality-of-life benefits and other benefit-related items.

The additional compensation for the 2023 period prior to contract ratification as a result of the higher wage rates was recorded within salaries, wages and benefits in the consolidated statements of operations in the second and third quarters of 2023.

The agreement also included a provision for a one-time payment upon ratification.

In 2023, one-time charges resulting from the ratification of this new agreement were recorded as mainline operating special items, net in the consolidated statement of operations, including the one-time payment of $754 million as well as adjustments to other benefit-related items of $235 million.

The one-time payment and the additional compensation were principally paid in 2023, with remaining payments expected to be paid in the first quarter of 2024.

This compares to 2023 pre-tax income and net income of $1.1 billion and $822 million, respectively.

Pre-tax income on a GAAP basis increased slightly in 2024 as compared to 2023.

This was driven primarily by increases in passenger revenue, lower costs for aircraft fuel and related taxes and decreases in pre-tax net special items, offset in part by increases in certain operating expenses including salaries, wages and benefits, maintenance, materials and repairs and certain other operating expenses.

Excluding the effects of pre-tax net special items, pre-tax income was $1.8 billion and $2.5 billion in 2024 and 2023, respectively.

The year-over-year decrease in our pre-tax income excluding pre-tax net special items was principally driven by certain operating expenses as mentioned above, offset in part by increases in passenger revenue and lower costs for aircraft fuel and related taxes.

In September 2024, American and the Association of Professional Flight Attendants, the union representing our mainline flight attendants, ratified a new collective bargaining agreement.

This five-year agreement provides wage rate increases, quality-of-life benefits and other benefit-related items.

The ratified agreement also included a provision for a one-time payment.

In 2024, one-time charges resulting from the ratification of this new agreement were recorded as mainline operating special items, net in the consolidated statement of operations, including the one-time payment of $514 million which was paid in November 2024.

In 2024, we reported total operating revenues of $54.2 billion, an increase of $1.4 billion, or 2.7%, as compared to 2023.

Passenger revenue was $49.6 billion, an increase of $1.1 billion, or 2.2%, as compared to 2023.

The increase in passenger revenue in 2023 was primarily due to a 7.6% increase in RPMs, driven by the continued strength in demand for air travel, resulting in an 83.5% load factor.

Cargo revenue decreased $421 million, or 34.1%, in 2023 as compared to 2022, primarily due to a 29.4% decrease in cargo yield and a 6.7% decrease in cargo ton miles driven by lower demand and increased air freight capacity globally.

In 2024, revenue passenger miles (RPMs) increased 7.3%, resulting in a load factor of 84.9% as compared to 83.5% in 2023.

Passenger yield decreased 4.7% on 5.5% capacity growth year-over-year, as measured by available seat miles (ASMs).

Our passenger revenue in 2024 was impacted by certain commercial initiatives we had previously deployed, along with an over-supply of industry capacity in the first half of the year.

Mid-year, we took actions to adjust our strategy as well as capacity growth which, combined with industry capacity deceleration, resulted in sequential year-over-year improvement in passenger unit revenue performance in the third and fourth quarters of 2024.

Cargo revenue decreased $8 million, or 0.9%, in 2024 as compared to 2023, primarily due to an 11.8% decrease in cargo yield driven by increased air freight capacity, offset in part by a 12.3% increase in cargo ton miles.

Other operating revenue increased $357 million, or 10.3%, in 2024 as compared to 2023, driven primarily by higher revenue associated with our loyalty program.

During 2023 and 2022, cash payments from co-branded credit card and other partners were $5.2 billion and $4.5 billion, respectively.

Our total revenue per available seat mile (TRASM) was 19.01 cents in 2023, a 1.0% increase as compared to 18.82 cents in 2022.

In 2023, aircraft fuel expense totaled $12.3 billion, a decrease of $1.5 billion, or 11.1%, as compared to 2022.

During 2024 and 2023, cash payments from co-branded credit card and other partners were $6.1 billion and $5.2 billion, respectively, an increase of 17% year-over-year.

Cash remuneration in 2024 included a one-time cash payment related to the new co-branded credit card agreement announced in December 2024.

This one-time cash payment will be amortized over the life of the new agreement beginning in 2026.

Our total revenue per available seat mile (TRASM) was 18.51 cents in 2024, a 2.6% decrease as compared to 19.01 cents in 2023.

In 2024, aircraft fuel expense totaled $11.4 billion, a decrease of $839 million, or 6.8%, as compared to 2023.

This decrease was primarily driven by a 12.2% decrease in the average price per gallon of aircraft fuel including related taxes to $2.60 in 2024 from $2.96 in 2023, offset in part by a 6.1% increase in gallons of fuel consumed due to increased capacity.

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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.

See Part I, Item 1A.

Risk Factors – “ Our business is very dependent on the price and availability of aircraft fuel.

Continued periods of high volatility in fuel costs, increased fuel prices or significant disruptions in the supply of aircraft fuel could have a significant negative impact on consumer demand, our operating results and liquidity.”

We remain committed to actively managing our cost structure, which we believe is necessary in an industry in which economic prospects are heavily dependent upon two variables we cannot control:

general economic conditions and the price of fuel.

In 2024, we continued to focus on our reengineering the business initiatives through the use of digital solutions, process enhancements and procurement transformation.

We will continue to invest in reengineering our business in 2025 and beyond to build an even more efficient airline and continue to manage costs while delivering a better experience for our customers and team.

Our 2024 CASM was 17.61 cents, a decrease of 1.7%, from 17.92 cents in 2023.

This decrease in CASM was primarily driven by lower aircraft fuel costs in 2023, as described above, offset by higher salaries, wages and benefits costs associated with the ratification of a new collective bargaining agreement with our mainline pilots, as described above.

Our 2023 CASM excluding net special items and fuel was 13.15 cents, an increase of 2.5%, from 12.83 cents in 2022, which was primarily driven by higher salaries, wages and benefits costs associated with the ratification of a new collective bargaining agreement with our mainline pilots, as described above.

This decrease in CASM was primarily driven by lower aircraft fuel costs as well as a decrease in mainline operating special items, net, offset in part by higher costs for salaries, wages and benefits and maintenance, materials and repairs.

Our 2024 CASM excluding net special items and fuel was 13.50 cents, an increase of 2.6%, from 13.15 cents in 2023, which was primarily driven by higher costs for salaries, wages and benefits and maintenance, materials and repairs.

For a reconciliation of total operating CASM to total operating CASM excluding net special items and fuel, see Part II, Item 6.

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During 2024, we completed the following financing transactions (see Note 4 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information):

• refinanced approximately $1.8 billion in aggregate principal amount of term loans outstanding under the 2013 Term Loan Facility (the 2013 Term Loan Facility Refinancing) through the combination of (i) the issuance of $750 million in aggregate principal amount of 7.25% senior secured notes due 2028 (the 7.25% Senior Secured Notes) and (ii) the entry into the Seventh Amendment to the 2013 Credit Agreement, pursuant to which the maturity of $1.0 billion in term loans under the 2013 Term Loan Facility was extended to February 2028 from June 2025;

• extended the maturity of certain commitments under the 2013 Revolving Facility, 2014 Revolving Facility and April 2016 Revolving Facility to October 2026;

• issued $1.0 billion aggregate principal amount of 8.50% senior secured notes due 2029 (the 8.50% Senior Secured Notes) in a private offering and entered into the 2023 Credit Agreement that provides for a term loan facility (the 2023 Term Loan Facility) in an aggregate principal amount of $1.1 billion.

The net proceeds from the offering of the 8.50% Senior Secured Notes, together with net proceeds from borrowings under the 2023 Term Loan Facility and cash on hand were used to redeem all of American’s outstanding 11.75% senior secured notes due 2025 (the 11.75% Senior Secured Notes);

• issued $1.1 billion of equipment loans and other notes payable in connection with the financing of certain aircraft;

• repurchased $552 million of secured and unsecured notes in the open market.

• entered into a revolving credit facility that provides for borrowing capacity of up to $350 million, maturing in March 2027 with an option to extend for an additional year;

• amended the 2013, 2014 and 2023 Credit Agreements to reduce the applicable interest rate margins, and terminated all revolving commitments under the April 2016 Credit Agreement, increasing overall available revolving credit capacity from $2.8 billion to $2.9 billion, maturing in June 2029;

• amended the 2013 and 2023 Term Loan Facilities to reduce the applicable interest rate margins;

• prepaid in full $487 million of the outstanding principal amount of the 3.75% senior notes due 2025 (3.75% Senior Notes);

• prepaid $263 million toward portions of the outstanding principal amounts of the 10.75% senior secured IP notes (the IP Notes) and the 10.75% senior secured LGA/DCA notes (LGA/DCA Notes);

• issued $684 million of enhanced equipment trust certificates (EETCs) in connection with the financing of certain aircraft that had been previously delivered;

• issued $990 million of equipment loans and other notes payable in connection with the financing of certain aircraft.

A significant portion of our debt financing agreements contain covenants requiring us to maintain an aggregate of at least $2.0 billion of unrestricted cash and cash equivalents and amounts available to be drawn under revolving credit facilities and/or contain covenants requiring us to meet certain loan to value, collateral coverage and/or peak debt service coverage ratios.

See Note 4 to AAG’s Consolidated Financial Statements in Part II, Item 8A for additional information on our debt obligations.

Recent Developments

On January 29, 2025, American Eagle flight 5342 was involved in a fatal accident in Washington, D.C.

The Bombardier CRJ 700 aircraft operated by PSA was en route to Washington, D.C.

from Wichita, Kansas when it was involved in a midair collision near Ronald Reagan Washington National Airport.

American has industry standard insurance coverage for this incident, and is continuing its assessment of the impact on its business resulting from the accident.

AAG’s Results of Operations

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

Excluded from the aircraft count above are 77 regional aircraft in temporary storage as of December 31, 2023 as follows:

57 Embraer 145, 11 Bombardier CRJ 700, six Bombardier CRJ 900 and three Embraer 170.

Excluded from the aircraft count above are seven regional aircraft in temporary storage as of December 31, 2024 as follows:

five Embraer 145 and two Bombardier CRJ 900.

Operating Revenues

7 unchanged sentences

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

Increase (Decrease)

Year Ended December 31, 2023

4 unchanged sentences

Passenger revenue $ 49,586 2.2% 7.3% 5.5% 1.4pts (4.7)% (3.1)%

Passenger revenue increased $3.9 billion, or 8.8%, in 2023 from 2022 primarily due to continued strength in demand for air travel, resulting in a 7.6% increase in RPMs and an 83.5% load factor in 2023.

Cargo revenue decreased $421 million, or 34.1%, in 2023 from 2022 primarily due to a 29.4% decrease in cargo yield and a 6.7% decrease in cargo ton miles driven by lower demand and increased air freight capacity globally.

Passenger revenue increased $1.1 billion, or 2.2%, in 2024 from 2023.

In 2024, RPMs increased 7.3%, resulting in a load factor of 84.9% as compared to 83.5% in 2023.

Passenger yield decreased 4.7% on 5.5% capacity growth year-over-year, as measured by ASMs.

Our passenger revenue in 2024 was impacted by certain commercial initiatives we had previously deployed, along with an over-supply of industry capacity in the first half of the year.

Cargo revenue decreased $8 million, or 0.9%, in 2024 from 2023 primarily due to an 11.8% decrease in cargo yield driven by increased air freight capacity, offset in part by a 12.3% increase in cargo ton miles.

Other operating revenue increased $357 million, or 10.3%, in 2024 from 2023 driven primarily by higher revenue associated with our loyalty program.

During 2023 and 2022, cash payments from co-branded credit card and other partners were $5.2 billion and $4.5 billion, respectively.

During 2024 and 2023, cash payments from co-branded credit card and other partners were $6.1 billion and $5.2 billion, respectively, an increase of 17% year-over-year.

Cash remuneration in 2024 included a one-time cash payment related to the new co-branded credit card agreement announced in December 2024.

This one-time cash payment will be amortized over the life of the new agreement beginning in 2026.

Total operating revenues in 2024 increased $1.4 billion, or 2.7%, from 2023 driven primarily by the increase in passenger revenue as described above.

Our TRASM was 19.01 cents in 2023, a 1.0% increase as compared to 18.82 cents in 2022.

Our TRASM was 18.51 cents in 2024, a 2.6% decrease as compared to 19.01 cents in 2023.

Operating Expenses

10 unchanged sentences

Depreciation and amortization 1,926 1,936 (10) (0.5)

Mainline operating special items, net 971 193 778 nm

Mainline operating special items, net 610 971 (361) (37.2)

Other 6,429 6,006 423 7.0

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Additional detail regarding changes in our operating expenses is as follows:

Aircraft fuel and related taxes decreased $1.5 billion, or 11.1%, in 2023 from 2022 primarily due to a 16.3% decrease in the average price per gallon of aircraft fuel including related taxes to $2.96 in 2023 from $3.54 in 2022, offset in part by a 6.1% increase in gallons of fuel consumed due to increased capacity.

Salaries, wages and benefits increased $1.6 billion, or 12.4%, in 2023 from 2022 primarily driven by higher wage rates associated with the ratification of a new collective bargaining agreement with our mainline pilots.

Regional expenses increased $258 million, or 5.9%, in 2023 from 2022 primarily due to increased costs at our wholly-owned regional carriers, including pay rate increases and higher costs for maintenance, materials and repairs driven by an increase in the volume of engine overhauls.

Maintenance, materials and repairs increased $581 million, or 21.6%, in 2023 from 2022 primarily due to increased costs for engine overhauls and airframe heavy checks driven by higher volume, flight hours and cost of materials.

Other rent and landing fees increased $198 million, or 7.3%, in 2023 from 2022 primarily due to rate increases at certain airports, incremental engine leases and higher landing fees.

Selling expenses remained flat in 2023 from 2022 primarily due to a decrease in commissions expense, offset primarily by higher credit card fees driven by the overall increase in passenger revenues.

Other operating expenses increased $584 million, or 10.8%, in 2023 from 2022 primarily driven by the increase in flight operations, including increased costs for onboard food and catering, crew travel, ground handling and airport lounge operations, as well as certain general and administrative expenses.

Aircraft fuel and related taxes decreased $839 million, or 6.8%, in 2024 from 2023 primarily due to a 12.2% decrease in the average price per gallon of aircraft fuel including related taxes to $2.60 in 2024 from $2.96 in 2023, offset in part by a 6.1% increase in gallons of fuel consumed due to increased capacity.

Salaries, wages and benefits increased $1.4 billion, or 9.9%, in 2024 from 2023 primarily driven by higher wage rates and costs for benefit-related items associated with the ratification of new CBAs with our mainline pilots in August 2023 and with our mainline flight attendants in September 2024.

Regional expenses increased $399 million, or 8.6%, in 2024 from 2023 primarily due to an increase in regional flight operations at our wholly-owned regional carriers, as regional capacity as measured by ASMs increased 12.4% year over year, and also due to higher maintenance, materials and repair costs driven by an increase in the volume of engine overhauls and airframe heavy checks.

Maintenance, materials and repairs increased $529 million, or 16.2%, in 2024 from 2023 primarily due to increased costs for engine overhauls, component part repairs and airframe heavy checks driven by higher volume and cost of materials.

Other rent and landing fees increased $375 million, or 12.8%, in 2024 from 2023 primarily driven by rate increases at certain airports as a result of extensive airport redevelopment projects and an 8.1% increase in the number of departures.

Aircraft rent decreased $127 million, or 9.2%, in 2024 from 2023 primarily due to decreased rental payments associated with aircraft operating lease extensions.

Selling expenses increased $13 million, or 0.7%, in 2024 from 2023 primarily due to higher credit card fees driven by the overall increase in passenger revenues, as well as an increase in advertising expense and booking fees, offset in part by a decrease in commissions expense.

Other operating expenses increased $423 million, or 7.0%, in 2024 from 2023 primarily driven by the increase in flight operations, including increased costs for onboard food and catering, crew travel, ground and cargo handling, passenger accommodation and airport lounge operations, as well as certain general and administrative expenses.

Operating Special Items, Net

2 unchanged sentences

Labor contract expenses (1)

A330 fleet-related adjustments (2)

Severance expenses 13 23

Fleet impairment (3)

Litigation reserve adjustments — 37

Other operating special items, net 34 (41)

2 unchanged sentences

Operating special items, net $ 643 $ 979

(1) Labor contract expenses relate to one-time charges resulting from the ratification of a new collective bargaining agreement with our mainline pilots, including a one-time payment of $754 million as well as adjustments to other benefit-related items of $235 million.

(2) Severance expenses included costs associated with headcount reductions in certain corporate functions.

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

(1) Labor contract expenses for 2024 related to one-time charges resulting from the ratification of new CBAs with our mainline flight attendants and passenger service team members, including one-time payments and adjustments to vacation accruals resulting from pay rate increases.

Labor contract expenses for 2023 related to one-time charges resulting from the ratification of a new CBA with our mainline pilots, including a one-time payment of $754 million as well as adjustments to other benefit-related items of $235 million.

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

In 2022, we recorded a non-cash impairment charge to write down the carrying value of our retired Airbus A330 fleet to their then estimated fair value due to the market conditions for certain used aircraft, and in 2024, we entered into a sales agreement for our remaining Airbus A330 aircraft, resulting in a $42 million gain.

(3) Regional operating special items, net for 2024 included a $33 million non-cash write down of regional aircraft resulting from the decision to permanently park 43 Embraer 145 aircraft.

Nonoperating Results

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(In millions, except percentage changes)

Interest income $ 591 $ 216 $ 375 nm

Interest income $ 468 $ 591 $ (123) (20.8)

Interest expense, net (1,934) (2,145) 211 (9.9)

1 unchanged sentence

Total nonoperating expense, net $ (1,460) $ (1,913) $ 453 (23.7)

Interest income increased $375 million in 2023 compared to 2022 primarily as a result of higher returns on our short-term investments.

Interest expense, net increased $183 million, or 9.3%, in 2023 compared to 2022 primarily due to higher interest rates on our variable-rate debt instruments, offset in part by debt repayments.

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

Interest income decreased $123 million, or 20.8%, in 2024 compared to 2023 primarily due to a decrease in the average balance of short-term investments.

Interest expense, net decreased $211 million, or 9.9%, in 2024 compared to 2023 primarily due to lower outstanding debt in 2024, as we continue our efforts to strengthen the balance sheet.

In 2024, other nonoperating income, net included $113 million of non-service related pension and other postretirement benefit plan income, offset in part by $48 million of foreign currency losses and $24 million of net special charges primarily for debt refinancings and extinguishments and mark-to-market net unrealized losses associated with certain equity investments.

In 2023, other nonoperating expense, net primarily included $362 million of net special charges principally associated with debt refinancings and extinguishments and mark-to-market net unrealized losses associated with certain equity investments, offset in part by $32 million of non-service related pension and other postretirement benefit plan income.

In 2022, other nonoperating income, net primarily included $424 million of non-service related pension and other postretirement benefit plan income, offset in part by $74 million of net special charges principally for mark-to-market net unrealized losses associated with certain equity investments.

The decrease in non-service related pension and other postretirement benefit plan income in 2023 as compared to 2022 is principally due to an increase in interest cost for the pension and other postretirement benefit obligations driven by higher discount rates and a decrease in expected return on pension plan assets from a reduction in plan assets.

In 2024, we recorded an income tax provision of $308 million with an effective rate of approximately 27%, which was substantially non-cash.

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Total operating revenues $ 54,204 $ 52,784 $ 1,420 2.7

Passenger revenue increased $3.9 billion, or 8.8%, in 2023 from 2022 primarily due to continued strength in demand for air travel, resulting in an increase in RPMs and an increase in load factor in 2023.

Cargo revenue decreased $421 million, or 34.1%, in 2023 from 2022 primarily due to decreases in cargo yield and cargo ton miles driven by lower demand and increased air freight capacity globally.

Passenger revenue increased $1.1 billion, or 2.2%, in 2024 from 2023.

American’s passenger revenue in 2024 was impacted by certain commercial initiatives it had previously deployed, along with an over-supply of industry capacity in the first half of the year.

Mid-year, American took actions to adjust its strategy as well as capacity growth which, combined with

industry capacity deceleration, resulted in sequential year-over-year improvement in passenger unit revenue performance in the third and fourth quarters of 2024.

Cargo revenue decreased $8 million, or 0.9%, in 2024 from 2023 primarily due to a decrease in cargo yield driven by increased air freight capacity, offset in part by an increase in cargo ton miles.

Other operating revenue increased $354 million, or 10.3%, in 2024 from 2023 driven primarily by higher revenue associated with American’s loyalty program.

During 2023 and 2022, cash payments from co-branded credit card and other partners were $5.2 billion and $4.5 billion, respectively.

During 2024 and 2023, cash payments from co-branded credit card and other partners were $6.1 billion and $5.2 billion, respectively, an increase of 17% year-over-year.

Cash remuneration in 2024 included a one-time cash payment related to the new co-branded credit card agreement announced in December 2024.

This one-time cash payment will be amortized over the life of the new agreement beginning in 2026.

Total operating revenues in 2024 increased $1.4 billion, or 2.7%, from 2023 driven primarily by the increase in passenger revenue as described above.

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Depreciation and amortization 1,919 1,927 (8) (0.4)

Mainline operating special items, net 971 193 778 nm

Mainline operating special items, net 610 971 (361) (37.2)

Other 6,431 6,008 423 7.0

1 unchanged sentence

Additional detail regarding changes in American’s operating expenses is as follows:

Regional expenses increased $274 million, or 6.3%, in 2023 from 2022 primarily due to contractual rate increases with American’s regional carriers.

Other rent and landing fees increased $198 million, or 7.3%, in 2023 from 2022 primarily due to rate increases at certain airports, incremental engine leases and higher landing fees.

Selling expenses remained flat in 2023 from 2022 primarily due to a decrease in commissions expense, offset primarily by higher credit card fees driven by the overall increase in passenger revenues.

Other operating expenses increased $583 million, or 10.8%, in 2023 from 2022 primarily driven by the increase in flight operations, including increased costs for onboard food and catering, crew travel, ground handling and airport lounge operations, as well as certain general and administrative expenses.

Salaries, wages and benefits increased $1.4 billion, or 9.9%, in 2024 from 2023 primarily driven by higher wage rates and costs for benefit-related items associated with the ratification of new CBAs with American’s mainline pilots in August 2023 and with its mainline flight attendants in September 2024.

Regional expenses increased $390 million, or 8.4%, in 2024 from 2023 primarily due to an increase in regional flight operations and costs at American’s regional carriers.

Aircraft rent decreased $127 million, or 9.2%, in 2024 from 2023 primarily due to decreased rental payments associated with aircraft operating lease extensions.

Operating Special Items, Net

2 unchanged sentences

Labor contract expenses (1)

A330 fleet-related adjustments (2)

Severance expenses 13 23

Fleet impairment (3)

Litigation reserve adjustments — 37

Other operating special items, net 34 (41)

Mainline operating special items, net 610 971

(1) Labor contract expenses relate to one-time charges resulting from the ratification of a new collective bargaining agreement with American’s mainline pilots, including a one-time payment of $754 million as well as adjustments to other benefit-related items of $235 million.

(2) Severance expenses included costs associated with headcount reductions in certain corporate functions.

(3) Fleet impairment included a non-cash impairment charge to write down the carrying value of American’s retired Airbus A330 fleet to the estimated fair value due to the market conditions for certain used aircraft.

Regional operating special items, net (3)

Operating special items, net $ 643 $ 971

(1) Labor contract expenses for 2024 related to one-time charges resulting from the ratification of new CBAs with American’s mainline flight attendants and passenger service team members, including one-time payments and adjustments to vacation accruals resulting from pay rate increases.

Labor contract expenses for 2023 related to one-time charges resulting from the ratification of a new CBA with American’s mainline pilots, including a one-time payment of $754 million as well as adjustments to other benefit-related items of $235 million.

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

In 2022, American recorded a non-cash impairment charge to write down the carrying value of its retired Airbus A330 fleet to their then estimated fair value due to the market conditions for certain used aircraft, and in 2024, American entered into a sales agreement for its remaining Airbus A330 aircraft, resulting in a $42 million gain.

(3) Regional operating special items, net for 2024 included a $33 million non-cash write down of regional aircraft resulting from the decision to permanently park 43 Embraer 145 aircraft.

Nonoperating Results

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(In millions, except percentage changes)

Interest income $ 1,078 $ 349 $ 729 nm

Interest income $ 1,058 $ 1,078 $ (20) (1.8)

Interest expense, net (2,029) (2,206) 177 (8.0)

1 unchanged sentence

Total nonoperating expense, net $ (966) $ (1,487) $ 521 (35.0)

Interest income increased $729 million in 2023 compared to 2022 primarily as a result of higher returns on American’s short-term investments and related party receivables from AAG.

Interest expense, net increased $334 million, or 17.8%, in 2023 compared to 2022 primarily due to higher interest rates on American’s variable-rate debt instruments and related party payables from AAG’s wholly-owned subsidiaries, offset in part by debt repayments.

Interest expense, net decreased $177 million, or 8.0%, in 2024 compared to 2023 primarily due to lower outstanding debt in 2024, as American continues its efforts to strengthen the balance sheet.

In 2024, other nonoperating income, net included $113 million of non-service related pension and other postretirement benefit plan income, offset in part by $47 million of foreign currency losses and $24 million of net special charges primarily for debt refinancings and extinguishments and mark-to-market net unrealized losses associated with certain equity investments.

In 2023, other nonoperating expense, net primarily included $362 million of net special charges principally associated with debt refinancings and extinguishments and mark-to-market net unrealized losses associated with certain equity investments, offset in part by $33 million of non-service related pension and other postretirement benefit plan income.

In 2022, other nonoperating income, net primarily included $423 million of non-service related pension and other postretirement benefit plan income, offset in part by $72 million of net special charges principally for mark-to-market net unrealized losses associated with certain equity investments.

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

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The amounts involved may be material.

For further information regarding our debt repurchases for the year ended December 31, 2023, see Note 4 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 3 to American’s Consolidated Financial Statements in Part II, Item 8B.

Certain Covenants

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Our debt agreements also contain customary change of control provisions, which may require us to repay or redeem such indebtedness upon certain events constituting a change of control under the relevant agreement, in certain cases at a premium.

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

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

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

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

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

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

early repayment, in whole or in part, of the AAdvantage Financing.

As of the most recent applicable measurement dates, we were in compliance with each of the foregoing covenants.

For further information regarding our debt covenants, see Note 4 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 3 to American’s Consolidated Financial Statements in Part II, Item 8B.

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Operating Activities

Our net cash provided by operating activities was $3.8 billion and $2.2 billion in 2023 and 2022, respectively, a $1.6 billion year-over-year increase due to higher profitability and cash provided by working capital management.

Our net cash provided by operating activities was $4.0 billion and $3.8 billion in 2024 and 2023, respectively, a $180 million year-over-year increase due to sustained profitability and net changes in working capital.

Investing Activities

Our net cash used in investing activities was $502 million in 2023 as compared to net cash provided by investing activities of $636 million in 2022.

Our principal investing activities in 2023 included $2.6 billion of capital expenditures, which primarily related to the purchase of 17 Boeing 737-8 MAX aircraft, ten Airbus A321neo aircraft, seven Embraer 175 aircraft, seven Bombardier CRJ 900 aircraft and 28 spare engines.

Our net cash used in investing activities was $968 million and $502 million in 2024 and 2023, respectively.

Our principal investing activities in 2024 included $2.7 billion of capital expenditures, which primarily related to the purchase of 16 Embraer 175 aircraft, six Boeing 737-8 MAX aircraft, four Airbus A321neo aircraft, four Boeing 737-800 aircraft lease repurchases, two Bombardier CRJ 900 aircraft, one Airbus A320 aircraft lease repurchase, 48 aircraft engines and aircraft purchase deposits.

These cash outflows were offset in part by $819 million in net sales of short-term investments and $654 million of proceeds from sale-leaseback transactions and sale of property and equipment, which primarily related to the modernization of Terminals 4 and 5 at LAX.

Our principal investing activities in 2023 included $2.6 billion of capital expenditures, which primarily related to the purchase of 17 Boeing 737-8 MAX aircraft, 10 Airbus A321neo aircraft, seven Embraer 175 aircraft, seven Bombardier CRJ 900 aircraft and 28 spare engines.

These cash outflows were offset in part by $1.5 billion in net sales of short-term investments and $230 million of proceeds from the sale of property and equipment and sale-leaseback transactions.

Our principal investing activities in 2022 included $3.7 billion in net sales of short-term investments.

These cash inflows were offset in part by $2.5 billion of capital expenditures, which primarily related to the purchase of 24 Airbus A321neo aircraft and 12 spare engines, and $321 million of equity investments, principally related to GOL.

Financing Activities

Our net cash used in financing activities was $2.8 billion and $3.2 billion in 2024 and 2023, respectively.

Our principal financing activities in 2024 included $4.5 billion in debt and finance lease repayments, consisting of $3.7 billion in scheduled repayments and the early repayments of $487 million of the outstanding principal amount of the 3.75% Senior Notes and $263 million toward portions of the outstanding principal amounts of the IP Notes and LGA/DCA Notes.

These cash outflows were offset in part by $1.7 billion of proceeds from issuance of long-term debt, consisting of $990 million from the issuance of equipment loans and other notes payable and $684 million from the issuance of EETCs in connection with the financing of certain aircraft that had previously been delivered.

Our principal financing activities in 2023 included $2.9 billion in net repayments of debt and finance lease obligations primarily due to scheduled debt repayments.

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In addition, we borrowed $1.1 billion in connection with the financing of certain aircraft and repurchased $552 million of secured and unsecured notes in the open market.

Our principal financing activities in 2022 included $3.8 billion in repayments of debt and finance lease obligations, consisting of $2.2 billion of scheduled debt repayments including the repayment of $401 million in connection with the maturity of our 5.000% unsecured notes, the $1.2 billion prepayment of the December 2016 Term Loan Facility and the repurchase of $349 million of unsecured notes in the open market.

These cash outflows were offset in part by $1.1 billion of long-term debt proceeds, consisting of $866 million from the issuance of equipment notes related to EETCs and $205 million in connection with the financing of certain aircraft.

Operating Activities

American’s net cash provided by operating activities was $3.7 billion and $1.3 billion in 2023 and 2022, respectively, a $2.4 billion year-over-year increase due to higher profitability and cash provided by working capital management.

American’s net cash provided by operating activities was $3.4 billion and $3.7 billion in 2024 and 2023, respectively, a $297 million year-over-year decrease due to a net increase in receivables from related parties including from the early repayment of AAG’s 3.75% Senior Notes.

Excluding this net increase in receivables from related parties, American’s operating cash flows increased $320 million compared to 2023 due to sustained profitability and net changes in working capital.

Investing Activities

American’s net cash used in investing activities was $449 million in 2023 as compared to net cash provided by investing activities of $693 million in 2022.

American’s principal investing activities in 2023 included $2.5 billion of capital expenditures, which primarily related to the purchase of 17 Boeing 737-8 MAX aircraft, ten Airbus A321neo aircraft, seven Embraer 175 aircraft, seven Bombardier CRJ 900 aircraft and 28 spare engines.

American’s net cash used in investing activities was $909 million and $449 million in 2024 and 2023, respectively.

American’s principal investing activities in 2024 included $2.6 billion of capital expenditures, which primarily related to the purchase of 16 Embraer 175 aircraft, six Boeing 737-8 MAX aircraft, four Airbus A321neo aircraft, four Boeing 737-800 aircraft lease repurchases, two Bombardier CRJ 900 aircraft, one Airbus A320 aircraft lease repurchase, 48 aircraft engines and aircraft purchase deposits.

American’s principal investing activities in 2023 included $2.5 billion of capital expenditures, which primarily related to the purchase of 17 Boeing 737-8 MAX aircraft, 10 Airbus A321neo aircraft, seven Embraer 175 aircraft, seven Bombardier CRJ 900 aircraft and 28 spare engines.

These cash outflows were offset in part by $1.5 billion in net sales of short-term investments and $230 million of proceeds from the sale of property and equipment and sale-leaseback transactions.

American’s principal investing activities in 2022 included $3.7 billion in net sales of short-term investments.

Financing Activities

American’s net cash used in financing activities was $2.3 billion and $3.2 billion in 2024 and 2023, respectively.

American’s principal financing activities in 2024 included $4.0 billion in debt and finance lease repayments, consisting of $3.7 billion in scheduled repayments and the early repayment of $263 million toward portions of the outstanding principal amounts of the IP Notes and LGA/DCA Notes.

American’s principal financing activities in 2023 included $2.9 billion in net repayments of debt and finance lease obligations primarily due to scheduled debt repayments.

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In addition, American borrowed $1.1 billion in connection with the financing of certain aircraft and repurchased $539 million of secured notes in the open market.

American’s principal financing activities in 2022 included $3.0 billion in repayments of debt and finance lease obligations, consisting of $1.8 billion of scheduled debt repayments and the $1.2 billion prepayment of the December 2016 Term Loan Facility.

For further information regarding our commitments, see the Notes to AAG’s Consolidated Financial Statements in Part II, Item 8A and the Notes to American’s Consolidated Financial Statements in Part II, Item 8B at the referenced footnotes below.

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221 251 157 107 81 46 863

Retiree medical and other postretirement benefits (See Note 8)

Retiree medical and other postretirement benefits (g) (See Note 8)

134 138 135 131 128 615 1,281

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142 181 223 222 223 230 1,221

Finance lease obligations (See Note 5)

10 — — — — — 10

Operating lease commitments (See Note 5)

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3 2 1 1 1 2 10

Other purchase obligations (See Note 11(a))

8 14 12 5 2 — 41

Total AAG Contractual Obligations $ 16,806 $ 14,763 $ 14,357 $ 12,348 $ 10,423 $ 24,784 $ 93,481

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(c) For variable-rate debt, future interest obligations are estimated using the current forward rates at December 31, 2024.

(d) Includes $7.7 billion of future principal payments and $1.0 billion of future interest payments as of December 31, 2023, related to EETCs associated with mortgage financings of certain aircraft and spare engines.

(d) Includes $7.3 billion of future principal payments and $883 million of future interest payments as of December 31, 2024, related to EETCs associated with mortgage financings of certain aircraft and spare engines.

(e) See Part I, Item 2.

Properties – “Aircraft and Engine Purchase Commitments” for additional information about the firm commitment aircraft delivery schedule, in particular the footnote to the table thereunder as to potential changes to such delivery schedule.

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

Properties – “Aircraft and Engine Purchase Commitments” for additional information about the firm commitments for the acquisition of aircraft and engines, including the anticipated aircraft delivery schedule.

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

Additionally, the amounts in the table exclude five Boeing 787 Family

aircraft scheduled to be delivered in 2024, for which we have obtained committed lease financing.

Additionally, the amounts in the table exclude five

Boeing 787 Family aircraft scheduled to be delivered in 2025, for which we have obtained committed lease financing.

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

(f) Represents minimum payments under capacity purchase agreements with third-party regional carriers.

These commitments are estimates of costs based on assumed minimum levels of flying under the capacity purchase agreements and American’s actual payments could differ materially.

(f) These commitments are estimates of costs based on assumed minimum levels of flying under the capacity purchase agreements and American’s actual payments could differ materially.

Rental payments under operating leases for certain aircraft flown under these capacity purchase agreements are reflected in the operating lease commitments line above.

(g) Represents minimum pension contributions based on actuarially determined estimates as of December 31, 2023 and is based on estimated payments through 2033.

In January 2024, we made $280 million of required pension contributions.

(g) Represents minimum pension contributions and expected contributions to our retiree medical and other post-retirement plans based on actuarially determined estimates as of December 31, 2024 and is based on estimated payments through 2034.

In January 2025, American made $221 million of required pension contributions.

(h) Includes purchase commitments for aircraft fuel, flight equipment maintenance and information technology support and excludes obligations under certain fuel offtake agreements or other agreements for which the timing of the related expenditure is uncertain, or which are subject to material contingencies, such as the construction of a production facility.

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The cash available from operations (if any) and these sources, however, may not be sufficient to cover our cash obligations because economic factors may reduce the amount of cash generated by operations or increase costs.

For instance, an economic downturn or general global instability caused by military actions, terrorism, disease outbreaks (such as the COVID-19 pandemic), natural disasters or other causes could reduce the demand for air travel, which would reduce the amount of cash generated by operations.

For instance, an economic downturn or general global instability caused by military actions, terrorism, disease outbreaks, natural disasters or other causes could reduce the demand for air travel, which would reduce the amount of cash generated by operations.

See Part I, Item 1A.

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Mileage credits sold to co-branded credit cards and other partners

We sell mileage credits to participating airline partners and non-airline business partners, including our co-branded credit card partners, under contracts with remaining terms generally from one to six years as of December 31, 2023.

Consideration received from the sale of mileage credits is variable and payment terms typically are within 30 days subsequent to the month of mileage sale.

Consideration received from the sale of mileage credits is predominantly variable and payment terms typically are within 30 days subsequent to the month of mileage sale.

Sales of mileage credits to non-airline business partners are comprised of two components, transportation and marketing.

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the transportation component and the marketing component.

In December 2024, we announced a 10-year agreement with Citi to become the exclusive issuer of the AAdvantage co-branded credit card portfolio in the U.S.

starting in 2026.

This agreement with Citi is expected to increase the cash payments we receive from the co-branded credit card.

Based on the revised terms, the products and services delivered are generally consistent with our previous agreement, and we will continue to allocate the consideration received based on the relative selling prices of these products and services.

The transportation component represents the estimated selling price of future travel awards and is determined using the same equivalent ticket value approach described above.

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Our pension and retiree medical and other postretirement benefits costs and liabilities are calculated using various actuarial assumptions and methodologies.

We use certain assumptions including, but not limited to, the selection of the:

(1) discount rate and (2) expected return on plan assets (as discussed below).

These assumptions as of December 31 were:

Pension weighted average discount rate (1)

Retiree medical and other postretirement benefits weighted average discount rate (1)

Expected rate of return on plan assets (2)

We use certain assumptions including, but not limited to, the selection of the discount rate and expected return on plan assets.

As of December 31, 2024, our weighted average discount rate assumptions were 5.7% and 5.6% for our pension and retiree medical and other postretirement benefits obligations, respectively.

When establishing the discount rate to measure our obligations, we match high quality corporate bonds available in the marketplace whose cash flows approximate our projected benefit disbursements.

Lowering the discount rate by 50 basis points as of December 31, 2024 would increase our pension and retiree medical and other postretirement benefits obligations by approximately $645 million and $35 million, respectively, and decrease estimated 2025 pension and retiree medical and other postretirement benefits expense by approximately $10 million and $1 million, respectively.

As of January 1, 2025, our expected rate of return on plan assets is 7.75%.

The expected rate of return on plan assets is based upon an evaluation of our historical trends and experience, taking into account current and expected market conditions and our target asset allocation of 35% U.S.

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The expected rate of return on plan assets component of our net periodic benefit cost is calculated based on the fair value of plan assets and our target asset allocation.

Lowering the expected long-term rate of return on plan assets by 50 basis points as of December 31, 2023 would increase estimated 2024 pension expense and retiree medical and other postretirement benefits expense by approximately $60 million and $1 million, respectively.

Annually, we review and revise certain economic and demographic assumptions including the pension and retiree medical and other postretirement benefits discount rates and health care costs.

The net effect of changing these assumptions for the pension plans resulted in an increase of $546 million in the projected benefit obligation at December 31, 2023.

The net effect of changing these assumptions for retiree medical and other postretirement benefits plans resulted in an increase of $89 million in the accumulated postretirement benefit obligation at December 31, 2023.

Lowering the expected long-term rate of return on plan assets by 50 basis points would increase estimated 2025 pension expense and retiree medical and other postretirement benefits expense by approximately $60 million and $1 million, respectively.

Annually, we review and revise certain economic and demographic assumptions including the pension and retiree medical and other postretirement benefits discount rates, health care costs and certain other retirement assumptions.

The net effect of changing these assumptions for the pension plans resulted in a decrease of $699 million in the projected benefit obligation at December 31, 2024.

The net effect of changing these assumptions for retiree medical and other postretirement benefits plans resulted in a decrease of $65 million in the accumulated postretirement benefit obligation at December 31, 2024.

See Note 9 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 8 to American’s Consolidated Financial Statements in Part II, Item 8B for additional information regarding our employee benefit plans.

Our ability to use our NOLs and other carryforwards depends on the amount of taxable income generated in future periods.

We provide a valuation allowance for our deferred tax assets when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized.

We provide a valuation allowance for our deferred tax assets, which include our NOLs and other carryforwards, when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.

We consider all available positive and negative evidence and make certain assumptions in evaluating the realizability of our deferred tax assets.

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Accounting Standards Update (ASU) 2023-09:

Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures

This standard improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in this update are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted.

We are currently evaluating how the adoption of this standard will impact our reportable segment disclosures.

Income Taxes (Topic 740) Improvements to Income Tax Disclosures

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We are currently evaluating how the adoption of this standard will impact our income tax disclosures.

Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-04) Disaggregation of Income Statement Expenses

This standard enhances transparency in reporting by requiring disaggregation of certain costs and expenses in the notes to financial statements.

This update is effective for annual periods beginning after December 15, 2026 and interim periods within annual periods beginning after December 15, 2027, and early adoption is permitted.

We are currently evaluating how the adoption of this standard will impact our disclosures.

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 7. Management’s Discussion and Analysis