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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2025-02-19 compared with 2024-02-21 · 700 added, 684 removed, 2125 unchanged (39% of the section changed)

19 unchanged sentences

Generally, fluctuations in foreign currencies, including devaluations, cannot be predicted by us and can significantly affect the value of our assets located outside the United States.

These conditions, as well as any further delays, devaluations or imposition of more stringent repatriation restrictions, may materially adversely affect our business, results of operations and financial condition.

These conditions, devaluations or imposition of more stringent repatriation restrictions, may materially adversely affect our business, results of operations and financial condition.

See Part I, Item 1A.

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Our largest exposure with respect to variable-rate debt comes from changes in the relevant benchmark rate underlying such debt financings, principally SOFR.

We had variable-rate debt instruments representing 30% of our total long-term debt at December 31, 2023.

Variable-rate debt instruments represented 30% of our total long-term debt as of December 31, 2024.

We currently do not have an interest rate hedge program to hedge our exposure to floating interest rates on our variable-rate debt obligations.

1 unchanged sentence

Additionally, the fair value of fixed-rate debt would have decreased by approximately $540 million for AAG and $370 million for American.

In connection with the phase-out of LIBOR as a reference rate in June 2023, the U.S.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, has chosen SOFR, and specifically Term SOFR, as the recommended risk-free reference rate for the U.S.

(calculated based on repurchase agreements backed by treasury securities).

Prior to the discontinuation of LIBOR, we amended substantially all of our LIBOR-based financing arrangements to transition them to successor rates, primarily Term SOFR.

We cannot predict the extent to which Term SOFR will gain widespread acceptance as a replacement for LIBOR, the consequences of the replacement of LIBOR on financial markets generally or on our business, financial condition or results of operations specifically, and our transition to successor rates could cause the amount of interest payable on our long-term debt to be different or higher than expected.

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OF AMERICAN AIRLINES GROUP INC.

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We have audited the accompanying consolidated balance sheets of American Airlines Group Inc.

and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), cash flows, and stockholders’ equity (deficit) for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, cash flows, and stockholders’ deficit for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S.

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Sufficiency of audit evidence over the realizability of tax net operating loss and other carryforwards

As discussed in Notes 1(j) and 6 to the consolidated financial statements, the Company had $4.2 billion of tax net operating loss and other carryforwards, which are recorded as deferred tax assets at December 31, 2023.

As discussed in Notes 1(i) and 6 to the consolidated financial statements, the Company had $4.3 billion of tax net operating loss and other carryforwards, which are recorded as deferred tax assets at December 31, 2024.

Deferred tax assets are recognized related to tax net operating loss and other carryforwards that will reduce future taxable income.

The Company provides a valuation allowance for deferred tax assets when it is more likely than not that some portion, or all of the deferred tax assets, will not be realized.

In evaluating the need for a valuation allowance, management considers all available positive and negative evidence.

We identified the evaluation of the sufficiency of audit evidence over the realizability of the federal tax net operating loss and other carryforwards as a critical audit matter.

In evaluating the need for a valuation allowance, management considers the weighting of all available positive and negative evidence.

We identified the evaluation of the sufficiency of audit evidence over the realizability of federal tax net operating loss and other carryforwards as a critical audit matter.

Evaluating the sufficiency of audit evidence required subjective auditor judgment in order to assess the extent of procedures performed in assessing the realizability of the federal tax net operating loss and other carryforwards.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s deferred tax asset valuation allowance process, including controls related to the realizability of the federal tax net operating loss and other carryforwards.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s deferred tax asset valuation allowance process, including controls related to the realizability of federal tax net operating loss and other carryforwards.

We evaluated positive and negative evidence used in assessing whether the federal tax net operating loss and other carryforwards were more likely than not to be realized in the future.

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Total operating expenses 51,597 49,754 47,364

Operating income (loss) 3,034 1,607 ( 1,059 )

Operating income 2,614 3,034 1,607

Nonoperating income (expense):

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Total nonoperating expense, net ( 1,460 ) ( 1,913 ) ( 1,421 )

Income (loss) before income taxes 1,121 186 ( 2,548 )

Income tax provision (benefit) 299 59 ( 555 )

Net income (loss) $ 822 $ 127 $ ( 1,993 )

Earnings (loss) per common share:

Income before income taxes 1,154 1,121 186

Income tax provision 308 299 59

Net income $ 846 $ 822 $ 127

Earnings per common share:

Basic $ 1.29 $ 1.26 $ 0.20

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AMERICAN AIRLINES GROUP INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

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2024 2023 2022

Net income (loss) $ 822 $ 127 $ ( 1,993 )

Net income $ 846 $ 822 $ 127

Other comprehensive income (loss), net of tax:

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Total other comprehensive income (loss), net of tax 329 ( 309 ) 1,357

Total comprehensive income (loss) $ 513 $ 1,484 $ ( 832 )

Total comprehensive income $ 1,175 $ 513 $ 1,484

See accompanying notes to consolidated financial statements.

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Cash flows from operating activities:

Net income (loss) $ 822 $ 127 $ ( 1,993 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net income $ 846 $ 822 $ 127

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 2,245 2,254 2,298

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Pension and postretirement ( 82 ) ( 13 ) ( 405 )

Deferred income tax provision (benefit) 299 65 ( 555 )

Share-based compensation 102 78 98

Deferred income tax provision 308 299 65

Share-based compensation, non-cash 92 102 78

Other, net ( 249 ) ( 205 ) ( 37 )

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Increase in other assets ( 314 ) ( 11 ) ( 775 )

Increase in accounts payable and accrued liabilities 873 585 461

Increase in accounts payable 257 209 360

Increase (decrease) in air traffic liability 559 ( 545 ) 658

Increase (decrease) in loyalty program liability 182 10 ( 60 )

Increase in loyalty program liability 727 182 10

Contributions to pension plans ( 300 ) ( 73 ) ( 5 )

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Cash flows from investing activities:

Capital expenditures, net of aircraft purchase deposit returns ( 2,596 ) ( 2,546 ) ( 208 )

Proceeds from sale of property and equipment and sale-leaseback transactions 230 147 374

Capital expenditures and aircraft purchase deposits ( 2,683 ) ( 2,596 ) ( 2,546 )

Proceeds from sale-leaseback transactions and sale of property and equipment 654 230 147

Sales of short-term investments 8,013 8,861 14,972

Purchases of short-term investments ( 7,194 ) ( 7,323 ) ( 11,257 )

Decrease (increase) in restricted short-term investments 51 1 ( 401 )

Decrease in restricted short-term investments 177 51 1

Purchase of equity investments — — ( 321 )

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Proceeds from issuance of long-term debt 1,670 4,822 1,069

Proceeds from issuance of equity — — 460

Other financing activities 3 ( 310 ) 52

Net cash provided by (used in) financing activities ( 3,206 ) ( 2,631 ) 5,288

Net cash used in financing activities ( 2,794 ) ( 3,206 ) ( 2,631 )

Net increase in cash and restricted cash 221 95 178

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AMERICAN AIRLINES GROUP INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In millions, except share amounts)

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Balance at December 31, 2021 $ 6 $ 7,234 $ ( 5,942 ) $ ( 8,638 ) $ ( 7,340 )

Net loss — — — ( 1,993 ) ( 1,993 )

Net income — — — 127 127

Other comprehensive income, net — — 1,357 — 1,357

Issuance of 24,150,764 shares of AAG common stock pursuant to an at-the-market offering, net of offering costs

— 460 — — 460

Impact of adoption of Accounting Standards Update (ASU) 2020-06 related to convertible instruments — ( 320 ) — 19 ( 301 )

Issuance of PSP2 and PSP3 Warrants (see Note 1(b))

— 121 — — 121

Issuance of 2,914,866 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes

— ( 21 ) — — ( 21 )

Settlement of single-dip unsecured claims held in Disputed Claims Reserve (DCR) and retirement of 259,878 shares of AAG common stock

— ( 1 ) — — ( 1 )

Share-based compensation expense — 78 — — 78

1 unchanged sentence

Net income — — — 822 822

Other comprehensive income, net — — 1,357 — 1,357

Other comprehensive loss, net — — ( 309 ) — ( 309 )

Issuance of 3,630,731 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes

1 unchanged sentence

Share-based compensation expense — 102 — — 102

Settlement of single-dip unsecured claims held in Disputed Claims Reserve — 4 — — 4

Balance at December 31, 2023 7 7,374 ( 4,894 ) ( 7,689 ) ( 5,202 )

Net income — — — 846 846

Other comprehensive loss, net — — ( 309 ) — ( 309 )

Other comprehensive income, net — — 329 — 329

Issuance of 3,292,974 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes

1 unchanged sentence

Share-based compensation expense — 92 — — 92

Settlement of single-dip unsecured claims held in DCR — 4 — — 4

Modification of share-based awards — ( 20 ) — — ( 20 )

Balance at December 31, 2024 $ 7 $ 7,424 $ ( 4,565 ) $ ( 6,843 ) $ ( 3,977 )

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The most significant areas of judgment relate to passenger revenue recognition, the loyalty program, deferred tax assets, as well as pension and retiree medical and other postretirement benefits.

(b) Government Assistance

Payroll Support Programs

During 2020 and 2021, American, Envoy Air Inc.

(Envoy), Piedmont and PSA (together with American, Envoy and Piedmont, the Subsidiaries) entered into payroll support program agreements (PSP Agreements) with the U.S.

Department of Treasury (Treasury) pursuant to the payroll support program established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (PSP1), the payroll support program established under the Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (PSP Extension Law) (PSP2) and the payroll support program established under the American Rescue Plan Act of 2021 (ARP) (PSP3).

The aggregate amount of financial assistance received was approximately $ 12.8 billion, and as partial compensation to the U.S.

Government for the provision of financial assistance provided under each of these programs, AAG issued promissory notes and warrants to Treasury.

The table below provides a summary of the financial assistance received and the promissory notes and the warrants issued under each program (in millions, except exercise price amounts):

Program Closing Date PSP Financial Assistance Promissory Notes (1)

PSP Warrants Total Warrants Issued (Shares) (2)

Exercise Price of Warrants

PSP1 April 20, 2020 $ 4,138 $ 1,757 $ 63 $ 5,958 14.0 $ 12.51

PSP2 January 15, 2021 2,427 1,030 76 3,533 6.6 15.66

PSP3 April 23, 2021 2,290 959 46 3,295 4.4 21.75

Total $ 8,855 $ 3,746 $ 185 $ 12,786 25.0

(1) See Note 4 for further information on the promissory notes issued.

(2) The payroll support program warrants (PSP Warrants) are subject to certain anti-dilution provisions, do not have any voting rights and are freely transferable, with registration rights.

Each warrant expires on the fifth anniversary of the date of issuance, with expiration dates ranging from April 2025 to June 2026, and will be exercisable either through net share settlement or cash, at our option.

The warrants were issued solely as compensation to the U.S.

Government related to entry into the PSP Agreements.

No separate proceeds (apart from the financial assistance described below) were received upon issuance of the warrants or will be received upon exercise thereof.

In connection with the PSP Agreements entered into with Treasury, we were required to comply with the relevant provisions of the CARES Act, the PSP Extension Law, and the ARP, which included the requirement that funds provided pursuant to these programs be used exclusively for the continuation of payment of eligible employee wages, salaries and benefits, the prohibition against involuntary furloughs and reductions in employee pay rates and benefits, the requirement that certain levels of commercial air service be maintained, provisions that prohibited the repurchase of AAG common stock and the payment of common stock dividends as well as provisions that restrict the payment of certain executive compensation.

As of December 31, 2023, all of these provisions have expired.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

For accounting purposes, the $ 12.8 billion of aggregate financial assistance received pursuant to the PSP Agreements was allocated to the promissory notes, warrants and other financial assistance (PSP Financial Assistance).

The aggregate principal amount of the promissory notes was recorded as unsecured long-term debt and the total fair value of the warrants, estimated using a Black-Scholes option pricing model, was recorded in stockholders’ deficit in the consolidated balance sheets.

The remaining amounts were recognized in 2020 and 2021 as a credit to special items, net in the consolidated statements of operations over the period which the continuation of payment of eligible employee wages, salaries and benefits was required.

Treasury Loan Agreement

On September 25, 2020 (the Treasury Loan Closing Date), AAG and American entered into a Loan and Guarantee Agreement (the Treasury Loan Agreement) with Treasury, which provided for a secured term loan facility (the Treasury Term Loan Facility) that permitted American to borrow up to $ 5.5 billion.

Subsequently, on October 21, 2020, AAG and American entered into an amendment to the Treasury Loan Agreement which increased the borrowing amount up to $ 7.5 billion.

In connection with entry into the Treasury Loan Agreement, on the Treasury Loan Closing Date, AAG also entered into a warrant agreement (the Treasury Loan Warrant Agreement) with Treasury.

In September 2020, American borrowed $ 550 million under the Treasury Term Loan Facility and on March 24, 2021, used a portion of the proceeds from the AAdvantage Financing to prepay in full the $ 550 million of outstanding loans under the Treasury Term Loan Facility and terminated the Treasury Loan Agreement.

Pursuant to the Treasury Loan Agreement, AAG issued to Treasury warrants (Treasury Loan Warrants) to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock (the Treasury Loan Warrant Shares), which expire in September 2025.

The exercise price of the Treasury Loan Warrant Shares is $ 12.51 per share, subject to certain anti-dilution provisions provided for in the Treasury Loan Warrant Agreement.

For accounting purposes, the fair value for the Treasury Loan Warrant Shares, estimated using a Black-Scholes option pricing model, was recorded in stockholders' deficit with an offsetting debt discount to the Treasury Term Loan Facility in the consolidated balance sheet.

The provisions of the Treasury Loan Warrants are substantially similar to the PSP Warrants.

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.

Certain prior year amounts within “changes in operating assets and liabilities” presented in the consolidated statement of cash flows have been reclassified to conform to current year presentation.

This change in the presentation on the consolidated statement of cash flows had no impact on net cash provided by operating activities or net change in cash and restricted cash.

(b) Recent Accounting Pronouncements

Accounting Standards Update (ASU) 2023-09:

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.

(d) Investments

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.

Short-term investments primarily include debt securities and are classified as available-for-sale and stated at fair value.

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Equity investments for which we do not have significant influence are recorded at fair value or at cost, if fair value is not readily determinable, with adjustments for observable changes in price or impairments (referred to as the measurement alternative).

Our equity investments are reflected in other assets on our consolidated balance sheets.

Our share of equity method investees’ financial results and changes in fair value are recorded in nonoperating other income (expense), net on the consolidated statements of operations.

See Note 8 for additional information related to our equity investments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

(e) Restricted Cash and Short-term Investments

(d) Restricted Cash and Short-term Investments

We have restricted cash and short-term investments related primarily to collateral held to support workers’ compensation obligations and collateral associated with the AAdvantage Financing.

(f) Accounts Receivable, Net

See Note 4 for further information on the AAdvantage Financing.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

(e) Accounts Receivable, Net

Accounts receivable primarily consist of amounts due from credit card processing companies for tickets sold to individual passengers, amounts due from airline and non-airline business partners, including our co-branded credit card partners and cargo customers.

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We consider past and future financial and qualitative factors, including aging, payment history and other credit monitoring indicators, when establishing the allowance for credit losses.

(g) Aircraft Fuel, Spare Parts and Supplies, Net

(f) Aircraft Fuel, Spare Parts and Supplies, Net

Aircraft fuel is recorded on a first-in, first-out basis.

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Aircraft fuel, spare parts and supplies are expensed when used.

(h) Operating Property and Equipment

(g) Operating Property and Equipment

Operating property and equipment is recorded at cost and depreciated or amortized to residual values over the asset’s estimated useful life or the lease term, whichever is less, using the straight-line method.

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Capitalized software 5 – 10 years

Total mainline and regional depreciation and amortization expense was $ 2.3 billion for each of the years ended December 31, 2023, 2022 and 2021.

Total mainline and regional depreciation and amortization expense was $ 2.2 billion for the year ended December 31, 2024 and $ 2.3 billion for each of the years ended December 31, 2023 and 2022.

We assess impairment of operating property and equipment when events and circumstances indicate that the assets may be impaired.

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ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

We use our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments.

We give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option.

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For real estate, we account for the lease and non-lease components as a single lease component.

(j) Income Taxes

(i) Income Taxes

Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are recorded net as noncurrent deferred income taxes.

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.

Deferred tax assets and liabilities are recorded net as noncurrent on our consolidated balance sheets.

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.

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The carrying value of our goodwill on our consolidated balance sheets was $ 4.1 billion as of December 31, 2024 and 2023.

(l) Other Intangibles, Net

Intangible assets consist primarily of certain domestic airport slots and gate leasehold rights, customer relationships, marketing agreements, commercial agreements, international slots and route authorities and tradenames.

(k) Other Intangibles, Net

Intangible assets consist of certain domestic airport slots and gate leasehold rights, international slots and route authorities, commercial agreements, marketing agreements, customer relationships and tradenames.

Definite-Lived Intangible Assets

Definite-lived intangible assets are originally recorded at their acquired fair values, subsequently amortized over their respective estimated useful lives and are assessed for impairment whenever events and circumstances indicate that the assets may be impaired.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

The following table provides information relating to our amortizable intangible assets as of December 31, 2023 and 2022 (in millions):

Domestic airport slots $ 365 $ 365

Customer relationships 300 300

Marketing agreements 105 105

Tradenames 35 35

Airport gate leasehold rights 137 137

Accumulated amortization ( 834 ) ( 827 )

Total $ 108 $ 115

Certain domestic airport slots and airport gate leasehold rights are amortized on a straight-line basis over 25 years.

Certain marketing agreements were identified as intangible assets subject to amortization and are amortized on a straight-line basis over approximately 30 years.

Customer relationships and tradenames are fully amortized.

We recorded amortization expense related to these intangible assets of $ 7 million for the year ended December 31, 2023 and $ 41 million for each of the years ended December 31, 2022 and 2021.

We expect to record annual amortization expense for these intangible assets as follows (in millions):

2029 and thereafter 76

We had $ 101 million and $ 108 million of definite-lived intangible assets, net of accumulated amortization on our consolidated balance sheets as of December 31, 2024 and 2023, respectively.

We expect to record amortization expense related to these assets of approximately $ 6 million for each of the years in 2025 through 2029, and $ 70 million of amortization expense in 2030 and thereafter until fully amortized.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Indefinite-Lived Intangible Assets

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We had $ 1.9 billion of indefinite-lived intangible assets on our consolidated balance sheets as of December 31, 2024 and 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

(l) Fuel Financing

In December 2024, we entered into a fuel financing facility with a bank pursuant to which the bank pays certain fuel invoices on our behalf.

The agreement contains a maximum allowable outstanding principal balance at any time of $ 1.0 billion and is required to be repaid at least quarterly.

The fuel financing facility bears interest at a base rate equal to one-month Secured Overnight Financing Rate (SOFR) plus a margin of 3.75 %.

Our obligations to the counterparty are secured on a second-priority basis by certain intellectual property of American, including the “American Airlines” trademark and the “aa.com” domain name in the United States and certain foreign jurisdictions, as provided in, and subject to the covenants and conditions of, the Second Lien Brand Collateral Security Agreement.

Either American or the bank may terminate this agreement at any time and with immediate effect upon sixty days’ prior written notice to the other party.

As of December 31, 2024, we had $ 74 million in fuel financing obligations included within other accrued liabilities on our consolidated balance sheet.

During the year ended December 31, 2024, we recognized a nominal amount of interest expense related to this agreement.

We include payments to designated fuel suppliers as an operating activity in the consolidated statement of cash flows.

Proceeds and payments related to fuel financing transactions are presented net as a financing activity in the consolidated statement of cash flows.

(m) Revenue Recognition

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See “ Loyalty Revenue ” below for further discussion on these mileage credits.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

The following is our total passenger revenue by geographic region (in millions):

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These taxes and fees have been presented on a net basis in the accompanying consolidated statements of operations and recorded as a liability until remitted to the appropriate taxing authority.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Loyalty Revenue

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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.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

of two components, transportation and marketing.

We allocate the consideration received from these sales of mileage credits based on the relative selling price of each product or service delivered.

Our most significant mileage credit partner agreements are our co-branded credit card agreements with Citi and Barclaycard US.

Our most significant mileage credit partner agreements are our co-branded credit card agreements with Citibank N.A.

(Citi) and Barclaycard US.

We identified two revenue elements in these co-branded credit card agreements:

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.

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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The accounting and recognition for the loyalty program marketing services are discussed above in “ Loyalty Revenue .” The remaining amounts included within other revenue relate to airport clubs, other commission revenue, advertising and vacation-related services.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Contract Balances

Our significant contract liabilities are comprised of (1) outstanding loyalty program mileage credits that may be redeemed for future travel and non-air travel awards, reported as loyalty program liability on our consolidated balance sheets and (2) ticket sales for transportation that has not yet been provided, reported as air traffic liability on our consolidated balance sheets.

Our significant contract liabilities are comprised of (1) outstanding loyalty program mileage credits that may be redeemed for future air travel, non-air travel and other awards, reported as loyalty program liability on our consolidated balance sheets and (2) ticket sales for transportation that has not yet been provided, reported as air traffic liability on our consolidated balance sheets.

(In millions)

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Balance at December 31, 2024 (2)

(1) Principally relates to revenue recognized from the redemption of mileage credits for both air and non-air travel awards.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

(1) Principally relates to revenue recognized from the redemption of mileage credits for both air travel, non-air travel and other awards.

Mileage credits are combined in one homogenous pool and are not separately identifiable.

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As of December 31, 2024, our current loyalty program liability was $ 3.6 billion and represents our current estimate of revenue expected to be recognized in the next 12 months based on historical trends, with the balance reflected in long-term loyalty program liability expected to be recognized as revenue in periods thereafter.

Additionally, as of December 31, 2024, our loyalty program liability includes a one-time cash payment related to the new co-branded credit card agreement announced in December 2024, which will be amortized over the life of the new agreement beginning in 2026.

The air traffic liability principally represents tickets sold for future travel on American and partner airlines.

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Advertising costs are expensed as incurred.

Advertising expense was $ 114 million for the year ended December 31, 2023 and $ 105 million for each of the years ended December 31, 2022 and 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Advertising expense was $ 143 million, $ 114 million and $ 105 million f or the years ended December 31, 2024, 2023 and 2022, respectively.

(p) Share-based Compensation

We account for our share-based compensation expense based on the fair value of the stock award at the time of grant, which is recognized ratably over the vesting period of the stock award.

We account for our share-based compensation expense based on the fair value of the equity award at the time of grant, which is recognized ratably over the vesting period of the award.

Certain awards have performance conditions that must be achieved prior to vesting and are expensed based on the expected achievement at each reporting period.

The majority of our stock awards are time vested restricted stock units, and the fair value of such awards is based on the market price of the underlying shares of AAG common stock on the date of grant.

The majority of our equity awards are time vested restricted stock units.

For equity-classified awards, the fair value of such awards is based on the market price of the underlying shares of AAG common stock on the date of grant and is not subsequently remeasured unless modified.

For liability-classified awards, the fair value of such awards is remeasured at the end of each reporting period until settled.

See Note 14 for further discussion of share-based compensation.

1 unchanged sentence

Foreign currency gains and losses are recorded as part of other income (expense), net within total nonoperating expense, net on our consolidated statements of operations.

For the years ended December 31, 2023, 2022 and 2021, respectively, foreign currency losses were $ 30 million, $ 38 million and $ 4 million.

For the years ended December 31, 2024, 2023 and 2022, foreign currency losses were $ 48 million, $ 30 million and $ 38 million, respectively.

(r) Other Operating Expenses

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Our regional carriers provide scheduled air transportation under the brand name “American Eagle.” The American Eagle carriers include our wholly-owned regional carriers as well as third-party regional carriers.

Our regional carrier arrangements are in the form of capacity purchase agreements with our third-party regional partners and similar arrangements with our wholly-owned regional affiliates.

Our regional carrier arrangements are in the form of capacity purchase agreements with our third-party regional partners and similar

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

arrangements with our wholly-owned regional affiliates.

Expenses associated with American Eagle operations are classified as regional expenses on the consolidated statements of operations.

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(Republic Holdings), the parent company of Republic.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Special Items, Net

4 unchanged sentences

$ 605 $ 989 $ —

A330 fleet-related adjustments (2)

Severance expenses 13 23 —

Fleet impairment (3)

Litigation reserve adjustments — — 37

PSP Financial Assistance (4)

— — ( 4,162 )

Other operating special items, net 34 ( 41 ) 7

Mainline operating special items, net 610 971 193

PSP Financial Assistance (4)

Regional pilot retention program (5)

Fleet impairment (3)

Severance expenses (2)

Other operating special items, net 8 5 —

Regional operating special items, net (3)

Operating special items, net 643 979 198

Debt refinancing, extinguishment and other, net (6)

Mark-to-market adjustments on equity and other investments, net (7)

Debt refinancing and extinguishment (4)

Mark-to-market adjustments on equity investments, net (5)

Nonoperating special items, net 24 362 74

Income tax special items, net — — ( 9 )

(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 for 2023 included costs associated with headcount reductions in certain corporate functions.

Severance expenses for 2021 included salary and medical costs primarily associated with certain team members who opted into voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic.

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

(1) Labor contract expenses for 2024 related to one-time charges resulting from the ratification of new collective bargaining agreements (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.

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

(4) The PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the payroll support programs established by the U.S.

See Note 1(b) for further information.

(5) Our regional pilot retention program provides for, among other things, a cash retention bonus paid in the fourth quarter of 2021 to eligible captains at our wholly-owned regional carriers included on the pilot seniority list as of September 1, 2021.

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.

(4) Debt refinancing and extinguishment costs in 2023 primarily included cash charges for premiums paid in connection with the early repayment of debt.

See Note 4 for further information.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

(7) Mark-to-market adjustments on equity and other investments, net principally included net unrealized gains and losses associated with certain equity investments and certain other investments.

(5) Mark-to-market adjustments on equity investments, net included net unrealized gains and losses associated with certain equity investments.

See Note 8 for further information related to our equity investments.

Earnings (Loss) Per Common Share

The following table provides the computation of basic and diluted earnings (loss) per common share (EPS) (in millions, except share and per share amounts):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Earnings Per Common Share

The following table provides the computation of basic and diluted earnings per common share (EPS) (in millions, except share and per share amounts):

Year Ended December 31,

2024 2023 2022

Net income (loss) $ 822 $ 127 $ ( 1,993 )

Net income $ 846 $ 822 $ 127

Weighted average common shares outstanding (in thousands) 656,996 653,612 650,345

Basic EPS $ 1.29 $ 1.26 $ 0.20

Net income (loss) $ 822 $ 127 $ ( 1,993 )

Net income $ 846 $ 822 $ 127

Interest expense on 6.50 % convertible senior notes

Net income (loss) for purposes of computing diluted EPS $ 868 $ 127 $ ( 1,993 )

Net income for purposes of computing diluted EPS $ 897 $ 868 $ 127

Share computation for diluted EPS (in thousands):

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Assumed conversion of 6.50 % convertible senior notes

61,728 61,728 —

Diluted weighted average common shares outstanding 721,300 719,669 655,122

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6.50 % convertible senior notes

— 61,728 61,728

In addition, certain shares underlying our PSP Warrants and Treasury Loan Warrants for the years ended December 31, 2023, 2022 and 2021, were excluded from the calculation of diluted EPS because inclusion of such shares would be antidilutive.

In addition, for the years ended December 31, 2024, 2023 and 2022, excluded from the calculation of diluted EPS because inclusion of such shares would be antidilutive, are certain shares underlying the warrants issued pursuant to (i) the payroll support program established under the Coronavirus Aid, Relief, and Economic Security Act (PSP1), (ii) the payroll support program established under the Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (PSP2), (iii) the payroll support program established under the American Rescue Plan Act of 2021 (PSP3) (collectively, the PSP Warrants) and (iv) the Loan and Guarantee Agreement with the U.S.

Department of Treasury (Treasury Loan Warrants).

The table below provides a summary of the PSP Warrants and the Treasury Loan Warrants:

Warrants Warrants Issued (shares, in thousands) (1)

Exercise Price ($) Expiration

PSP1 Warrants 14,048 12.51 April 2025 to September 2025

PSP2 Warrants 6,576 15.66 January 2026 to April 2026

PSP3 Warrants 4,407 21.75 April 2026 to June 2026

Treasury Loan Warrants 4,396 12.51 September 2025

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

(1) The PSP Warrants and the Treasury Loan Warrants are subject to certain anti-dilution provisions, do not have any voting rights and are freely transferable, with registration rights.

Each warrant will be exercisable either through net share settlement or cash, at our option.

The warrants were issued solely as compensation to the U.S.

Government related to entry into the PSP and Treasury Loan Agreements.

No separate proceeds (apart from the financial assistance previously received in 2021 and 2020) were received upon issuance of the warrants or will be received upon exercise thereof.

Long-term debt included on our consolidated balance sheets consisted of (in millions):

2013 Term Loan Facility, variable interest rate of 8.60 %, installments through February 2028 (a)

$ 990 $ 1,752

2014 Term Loan Facility, variable interest rate of 7.32 %, installments through January 2027 (a)

2023 Term Loan Facility, variable interest rate of 8.87 %, installments beginning in December 2024 through June 2029 (a)

11.75 % senior secured notes, interest only payments until due in July 2025 (b)

10.75 % senior secured IP notes, interest only payments until due in February 2026 (b)

10.75 % senior secured LGA/DCA notes, interest only payments until due in February 2026 (b)

2013 Term Loan Facility, variable interest rate of 6.65 %, installments until due in February 2028 (a)

2014 Term Loan Facility, variable interest rate of 6.17 %, installments until due in January 2027 (a)

2023 Term Loan Facility, variable interest rate of 6.96 %, installments until due in June 2029 (a)

10.75 % senior secured IP notes, interest and principal payments due through February 2026 (b)

10.75 % senior secured LGA/DCA notes, interest and principal payments due through February 2026 (b)

7.25 % senior secured notes, interest only payments until due in February 2028 (b)

8.50 % senior secured notes, interest only payments until due in May 2029 (b)

5.50 % senior secured notes, installments through April 2026 (c)

5.50 % senior secured notes, installments until due in April 2026 (c)

5.75 % senior secured notes, installments beginning in July 2026 until due in April 2029 (c)

AAdvantage Term Loan Facility, variable interest rate of 10.43 %, installments through April 2028 (c)

Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 2.88 % to 5.90 %, averaging 3.60 %, maturing from 2024 to 2034

Equipment loans and other notes payable, fixed and variable interest rates ranging from 2.55 % to 8.90 %, averaging 6.98 %, maturing from 2024 to 2035 (d)

AAdvantage Term Loan Facility, variable interest rate of 9.63 %, installments until due in April 2028 (c)

Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 2.88 % to 7.15 %, averaging 3.84 %, maturing from 2025 to 2034 (d)

Equipment loans and other notes payable, fixed and variable interest rates ranging from 2.55 % to 7.25 %, averaging 6.17 %, maturing from 2025 to 2036 (e)

Special facility revenue bonds, fixed interest rates ranging from 2.25 % to 5.38 %, maturing from 2026 to 2036

25,372 27,526

PSP1 Promissory Note, interest only payments until due in April 2030 (e)

PSP2 Promissory Note, interest only payments until due in January 2031 (e)

PSP3 Promissory Note, interest only payments until due in April 2031 (e)

6.50 % convertible senior notes, interest only payments until due in July 2025 (f)

3.75 % senior notes, interest only payments until due in March 2025 (g)

PSP1 Promissory Note, interest only payments until due in April 2030 (f)

PSP2 Promissory Note, interest only payments until due in January 2031 (f)

PSP3 Promissory Note, interest only payments until due in April 2031 (f)

6.50 % convertible senior notes, interest only payments until due in July 2025 (g)

3.75 % senior notes, interest only payments until due in March 2025 (h)

Total long-term debt 30,118 32,759

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Long-term debt, net of current maturities $ 24,617 $ 28,895

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

As of December 31, 2024, the maximum availability under our revolving credit and other facilities is as follows (in millions):

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2014 Revolving Facility 1,500

April 2016 Revolving Facility 446

Other short-term facility 49

2023 Revolving Facility 890

Other facilities 399

Total $ 3,289

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

As of December 31, 2023, American had $ 49 million of available borrowing base under a cargo receivables facility that is set to expire in December 2024.

As a result of the below amendments to the 2013, 2014 and April 2016 Revolving Facilities, the aggregate commitments under these facilities will be $ 2.8 billion through October 11, 2024, and thereafter through October 13, 2026, such aggregate commitments will decrease to $ 2.2 billion.

Secured financings, including revolving credit and other facilities, are collateralized by assets, consisting primarily of aircraft, engines, simulators, aircraft spare parts, airport gate leasehold rights, route authorities, airport slots, certain receivables, certain intellectual property and certain loyalty program assets.

In March 2024, American 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.

As of December 31, 2024, there were no amounts drawn under this facility.

Additionally, American currently has $ 49 million of available borrowing base under a cargo receivables facility that is set to expire in December 2025.

As further described below, the aggregate commitments under the 2013, 2014, and 2023 Revolving Facilities are $ 2.9 billion through June 4, 2029.

Secured financings, including revolving credit and other facilities, are collateralized by assets, consisting primarily of aircraft, engines, simulators, airport gate leasehold rights, route authorities, airport slots, certain receivables, certain intellectual property and certain loyalty program assets.

At December 31, 2024, the maturities of long-term debt are as follows (in millions):

1 unchanged sentence

Total $ 30,118

(a) 2013 and 2014 Credit Facilities, April 2016 Revolving Facility and 2023 Term Loan Facility

(a) 2013, 2014 and 2023 Credit Facilities

2013 Credit Facilities

The Amended and Restated Credit and Guaranty Agreement dated as of May 21, 2015, as amended (the 2013 Credit Agreement), includes a revolving credit facility (the 2013 Revolving Facility) and term loan (the 2013 Term Loan Facility), collectively referred to as the 2013 Credit Facilities.

In February 2023, American and AAG 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 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.

The Seventh Amendment also amended certain other terms of the 2013 Credit Agreement, including the interest rate and amortization schedule for the 2013 Term Loan Facility, the requirements for delivery of appraisals and certain covenants relating to dispositions of collateral.

Additionally, the Seventh Amendment transitioned the benchmark interest rate from the London Interbank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR).

As a result, the 2013 Term Loan Facility bears interest at a base rate (subject to a floor of 1.00 %) plus an applicable margin of 1.75 % or, at American’s option, the SOFR rate for a tenor of one, three or six months, depending on the interest period selected by American, plus the SOFR adjustment applicable to such interest period (with such SOFR rate plus SOFR adjustment being subject to a floor of 0.00 %) and an applicable margin of 2.75 %.

As of December 31, 2023, the margin elected was 2.75 %.

In March 2023, American and AAG entered into the Eighth Amendment to the 2013 Credit Agreement, pursuant to which American extended the maturity of certain commitments under the 2013 Revolving Facility.

The Eighth Amendment also amended certain other terms of the 2013 Credit Agreement, including certain covenants and transitioned the benchmark interest rate from LIBOR to SOFR.

T he 2013 Revolving Facility bears interest at a base rate (subject to a floor of 1.00 %) plus an applicable margin of 2.25 %, 2.50 % or 2.75 %, depending on AAG’s public corporate rating, or, at American’s option, the SOFR rate for a tenor of one, three or six months, depending on the interest period selected by American, plus the SOFR adjustment applicable to such interest period (with such SOFR rate plus SOFR adjustment being subject to a floor of 0.00 %) plus an applicable margin of 3.25 %, 3.50 % or 3.75 %, depending on AAG’s public corporate rating.

Additionally, as a result of the Eighth Amendment, through October 11, 2024, the aggregate commitments under the 2013 Revolving Facility will be $ 736 million, and thereafter through October 13, 2026, such aggregate commitments will decrease to $ 563 million.

The Amended and Restated Credit and Guaranty Agreement dated as of May 21, 2015, as amended (the 2013 Credit Agreement), includes a revolving credit facility (the 2013 Revolving Facility) and a term loan facility (the 2013 Term Loan Facility), collectively referred to as the 2013 Credit Facilities.

On June 4, 2024, American and AAG entered into the Ninth Amendment to Amended and Restated Credit and Guaranty Agreement (the Ninth Amendment), amending the 2013 Credit Agreement, pursuant to which American terminated all existing revolving commitments and letter of credit commitments available under the 2013 Credit Agreement and established new revolving commitments in an aggregate amount of $ 500 million (which includes the ability to issue letters of credit in an aggregate amount of $ 100 million) (the newly established commitments, the 2013 Revolving Facility), which have a maturity date of June 4, 2029.

Additionally, as a result of the Ninth Amendment, the 2013 Revolving Facility bears interest at a base rate (subject to a floor of 1.00 %) plus an applicable margin of 2.00 %, 2.25 % or 2.50 %, depending on AAG’s public corporate credit rating, or, at American’s option, SOFR for a tenor of one, three or six months, depending on the interest period selected by American (subject to a floor of 0.00 %), plus an applicable margin of 3.00 %, 3.25 % or 3.50 %, depending on AAG’s public corporate credit rating.

Pursuant to the Ninth Amendment, SOFR borrowings under the 2013 Revolving Facility are not subject to a credit spread adjustment.

As of December 31, 2024, there were no borrowings or letters of credit outstanding under the 2013 Revolving Facility.

On December 19, 2024, American and AAG entered into the Tenth Amendment to Amended and Restated Credit and Guaranty Agreement (the 2013 Credit Agreement Tenth Amendment), amending the 2013 Credit Agreement.

As a result of the 2013 Credit Agreement Tenth Amendment, the term loans outstanding under the 2013 Credit Agreement with an outstanding principal amount of $ 980 million were replaced with term loans with a principal amount of $ 980 million.

Pursuant to the 2013 Credit Agreement Tenth Amendment, the 2013 Term Loan Facility bears interest at a base rate (subject to a floor of 1.00 %) plus an applicable margin of 1.25 % per annum or, at American’s option, the SOFR rate for a tenor of one, three or six months, depending on the interest period selected by American (subject to a floor of 0.00 %), plus

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

an applicable margin of 2.25 % per annum.

Additionally, the 2013 Credit Agreement Tenth Amendment amended certain other terms of the 2013 Credit Agreement, including, among other things, reducing the minimum liquidity financial covenant threshold from $ 2.2 billion to $ 2.0 billion and removing the cost spread adjustment on the 2013 Term Loan Facility.

As of December 31, 2024, the margin elected was 2.25 % per annum.

2014 Credit Facilities

The Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015, as amended (the 2014 Credit Agreement), includes a revolving credit facility (the 2014 Revolving Facility) and term loan (the 2014 Term Loan Facility), collectively referred to as the 2014 Credit Facilities.

In March 2023, American and AAG entered into the Ninth Amendment to the 2014 Credit Agreement, pursuant to which American extended the maturity of certain commitments under the 2014 Revolving Facility.

The Ninth Amendment also amended certain other terms of the 2014 Credit Agreement including the requirements for delivery of appraisals and certain other covenants and transitioned the benchmark interest rate for the 2014 Revolving Facility and the 2014 Term Loan Facility from LIBOR to SOFR.

T he 2014 Revolving Facility bears interest at the same base rate and applicable margin as the 2013 Revolving Facility, as noted above in “ 2013 Credit Facilities.” The 2014 Term Loan Facility bears interest at a base rate (subject to a floor of 1.00 %) plus an applicable margin of 0.75 % or, at American’s option, the SOFR rate for a tenor of one, three or six months, depending on the interest period selected by American, plus the SOFR adjustment applicable to such interest period (with such SOFR rate plus SOFR adjustment being subject to a floor of 0.00 %) plus an applicable margin of 1.75 %.

As of December 31, 2023, the margin elected was 1.75 %.

Additionally, a s a result of the Ninth Amendment, through October 11, 2024, the aggregate commitments under the 2014 Revolving Facility will be $ 1.6 billion, and thereafter through October 13, 2026, such aggregate commitments will decrease to $ 1.2 billion.

The Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015, as amended (the 2014 Credit Agreement), includes a revolving credit facility (the 2014 Revolving Facility) and term loan facility (the 2014 Term Loan Facility), collectively referred to as the 2014 Credit Facilities.

The 2014 Term Loan Facility bears interest at a base rate (subject to a floor of 1.00 %) plus an applicable margin of 0.75 % or, at American’s option, the SOFR rate for a tenor of one, three or six months, depending on the interest period selected by American, plus the SOFR adjustment applicable to such interest period (with such SOFR rate plus SOFR adjustment being subject to a floor of 0.00 %) plus an applicable margin of 1.75 %.

As of December 31, 2024, the margin elected was 1.75 % per annum.

On June 4, 2024, American and AAG entered into the Tenth Amendment to Amended and Restated Credit and Guaranty Agreement (the 2014 Credit Agreement Tenth Amendment), amending the 2014 Credit Agreement, pursuant to which American terminated all existing revolving commitments and letter of credit commitments available under the 2014 Credit Agreement and established new revolving commitments in an aggregate amount of $ 1.5 billion (which includes the ability to issue letters of credit in an aggregate amount of $ 200 million) (the newly established commitments, the 2014 Revolving Facility), which have a maturity date of June 4, 2029.

Additionally, as a result of the 2014 Credit Agreement Tenth Amendment, the 2014 Revolving Facility bears interest at a base rate (subject to a floor of 1.00 %) plus an applicable margin of 2.00 %, 2.25 % or 2.50 %, depending on AAG’s public corporate credit rating, or, at American’s option, the SOFR rate for a tenor of one, three or six months, depending on the interest period selected by American (subject to a floor of 0.00 %), plus an applicable margin of 3.00 %, 3.25 % or 3.50 %, depending on AAG’s public corporate credit rating.

The 2014 Credit Agreement Tenth Amendment also reduced the minimum liquidity financial covenant threshold from $ 2.2 billion to $ 2.0 billion and reduced the liquidity requirement for making certain restricted payments from $ 4.2 billion to $ 4.0 billion.

Pursuant to the 2014 Credit Agreement Tenth Amendment, SOFR borrowings under the 2014 Revolving Facility are not subject to a credit spread adjustment.

As of December 31, 2024, there were no borrowings or letters of credit outstanding under the 2014 Revolving Facility.

April 2016 Revolving Facility

In March 2023, American and AAG entered into the Sixth Amendment to the Credit and Guaranty Agreement, dated as of April 29, 2016 (the April 2016 Credit Agreement), which includes a revolving credit facility (the April 2016 Revolving Facility).

Pursuant to the Sixth Amendment, American extended the maturity of certain commitments under the April 2016 Revolving Facility.

The Sixth Amendment also amended certain other terms under the April 2016 Credit Agreement including the requirements for delivery of appraisals and certain other covenants and transitioned the benchmark interest rate for the April 2016 Revolving Facility from LIBOR to SOFR.

The April 2016 Revolving Facility bears interest at the same base rate and applicable margin as the 2013 Revolving Facility, as noted above in “ 2013 Credit Facilities.” Additionally, a s a result of the Sixth Amendment, through October 11, 2024, the aggregate commitments under the April 2016 Revolving Facility will be $ 446 million, and thereafter through October 13, 2026, such aggregate commitments will decrease to $ 342 million.

As of December 31, 2023, there were no borrowings outstanding under the April 2016 Revolving Facility.

2023 Term Loan Facility

2023 Credit Facilities

In December 2023, American and AAG entered into a credit and guaranty agreement (the 2023 Credit Agreement) that provided for a term loan facility (the 2023 Term Loan Facility) in an aggregate principal amount of $ 1.1 billion, maturing in June 2029.

Loans made under the 2023 Term Loan Facility bear interest at a base rate (subject to a floor of 1.00 %) plus an applicable margin of 2.50 % or, at American’s option, the SOFR rate for a tenor of one, three or six months (or if agreed by the relevant lenders, any other tenor), depending on the interest period selected by American (subject to a floor of 0.00 %), plus an applicable margin of 3.50 %.

As of December 31, 2023, the margin elected was 3.50 %.

The net proceeds from the 2023 Term Loan Facility, together with the net proceeds from the private offering of the 8.50 % Senior Secured Notes (as defined below) and cash on hand, were used to redeem all of the outstanding 11.75 % Senior Secured Notes in December 2023.

Other Terms of the 2013 and 2014 Credit Facilities, April 2016 Revolving Facility and 2023 Term Loan Facility

The term loans under the 2013 Credit Facilities and 2014 Credit Facilities (collectively referred to as the Credit Facilities) and the 2023 Term Loan Facility are repayable in annual installments, in an amount equal to 1.00 % of the aggregate principal amount issued, with any unpaid balance due on the respective maturity dates.

Voluntary prepayments may be made by American at any time.

The 2013 Revolving Facility, 2014 Revolving Facility and April 2016 Revolving Facility provide that American may from time to time borrow, repay and reborrow loans thereunder.

The 2013 Revolving Facility and 2014 Revolving Facility have the ability to issue letters of credit thereunder in an aggregate amount outstanding at any time up to $ 150 million and $ 300 million, respectively.

The 2013 Revolving Facility, 2014 Revolving Facility and April 2016 Revolving Facility are each subject to an undrawn annual fee of 0.750 %.

On June 4, 2024, American and AAG entered into the First Amendment to Credit and Guaranty Agreement (the First Amendment) and the Second Amendment to Credit and Guaranty Agreement (the Second Amendment), each amending the 2023 Credit Agreement.

Pursuant to the First Amendment, American established a revolving credit facility (the 2023 Revolving Facility, collectively with the 2023 Term Loan Facility, referred to as the 2023 Credit Facilities) in an aggregate amount of $ 890 million, maturing June 4, 2029.

The 2023 Revolving Facility bears interest at a base rate (subject to a floor of 1.00 %) plus an applicable margin of 2.00 %, 2.25 % or 2.50 %, depending on AAG’s public corporate credit rating, or, at American’s option, the SOFR rate for a tenor of one, three or six months, depending on the interest period selected by American (subject to a floor of 0.00 %), plus an applicable margin of 3.00 %, 3.25 % or 3.50 %, depending on AAG’s public corporate credit rating.

SOFR borrowings under the 2023 Revolving Facility are not subject to a credit spread adjustment.

As of December 31, 2024, there were no borrowings outstanding under the 2023 Revolving Facility.

Pursuant to the Second Amendment, American replaced the $ 1.1 billion of initial term loans made pursuant to the 2023 Credit Agreement with new term loans in a principal amount of $ 1.1 billion.

On December 23, 2024, American and AAG entered into the Third Amendment to Credit and Guaranty Agreement (the Third Amendment), amending the 2023 Credit Agreement.

As a result of the Third Amendment, the term loans outstanding under the 2023 Credit Agreement with an outstanding principal amount of $ 1.1 billion were replaced with term loans with a principal amount of $ 1.1 billion.

Pursuant to the Third Amendment, the 2023 Term Loan Facility bears interest at a base rate (subject to a floor of 1.00 %) plus an applicable margin of 1.25 % per annum or, at American’s option, the SOFR rate for a tenor of one, three or six months, depending on the interest period selected by American (subject to a floor of 0.00 %), plus an applicable margin of 2.25 % per annum.

SOFR borrowings under the 2023 Term Loan Facility are not subject to a credit spread adjustment.

As of December 31, 2024, the margin elected was 2.25 % per annum.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Subject to certain limitations and exceptions, the Credit Facilities, April 2016 Revolving Facility and 2023 Term Loan Facility are secured by collateral, including certain spare parts, slots, route authorities, simulators and leasehold rights.

April 2016 Revolving Facility

On June 4, 2024, American terminated all revolving commitments under the Credit and Guaranty Agreement, dated as of April 29, 2016 (as amended, the April 2016 Credit Agreement).

As a result, the April 2016 Credit Agreement was terminated and all liens securing the April 2016 Credit Agreement were released.

Other Terms of the 2013, 2014 and 2023 Credit Facilities

The term loans under the 2013, 2014 and 2023 Credit Facilities (collectively referred to as the Credit Facilities) are repayable in annual installments, in an amount equal to 1.00 % of the aggregate principal amount issued, with any unpaid balance due on the respective maturity dates.

Voluntary prepayments may be made by American at any time.

The 2013, 2014 and 2023 Revolving Facilities provide that American may from time to time borrow, repay and reborrow loans thereunder.

The 2013, 2014 and 2023 Revolving Facilities are each subject to an undrawn annual fee of 0.750 %.

Subject to certain limitations and exceptions, the Credit Facilities are secured by collateral, including certain slots, route authorities, simulators and leasehold rights.

American has the ability to make future modifications to the collateral pledged, subject to certain restrictions.

American’s obligations under the Credit Facilities, April 2016 Revolving Facility and 2023 Term Loan Facility are guaranteed by AAG, and such guarantee is AAG’s senior unsecured obligations (all of the collateral is owned by American, and AAG has not granted a security interest in any assets to secure any of the foregoing obligations).

The Credit Facilities, April 2016 Revolving Facility and 2023 Term Loan Facility contain events of default customary for similar financings, including cross default and cross-acceleration to other material indebtedness.

American’s obligations under the Credit Facilities are guaranteed by AAG, and such guarantee is AAG’s senior unsecured obligations (all of the collateral is owned by American, and AAG has not granted a security interest in any assets to secure any of the foregoing obligations).

The Credit Facilities contain events of default customary for similar financings, including cross default and cross-acceleration to other material indebtedness.

(b) Senior Secured Notes

10.75 % Senior Secured Notes

In June 2020, American issued $ 2.5 billion aggregate principal amount of 11.75 % senior secured notes due 2025 (the 11.75 % Senior Secured Notes) at a price equal to 99 % of their aggregate principal amount.

In December 2023, American redeemed all of its outstanding 11.75 % Senior Secured Notes using net proceeds from the offering of the 8.50 % Senior Secured Notes (as defined below), together with net proceeds from borrowings under the 2023 Term Loan Facility and cash on hand.

In connection with the early redemption of the 11.75 % Senior Secured Notes, in the fourth quarter of 2023, American recorded a $ 186 million cash special charge for the make-whole premium paid and a $ 19 million non-cash special charge to write off unamortized debt issuance costs and debt discount.

10.75 % Senior Secured Notes

On September 25, 2020 (the 10.75 % Senior Secured Notes Closing Date), American issued $ 1.0 billion in initial principal amount of senior secured IP notes (the IP Notes) and $ 200 million in initial principal amount of senior secured LGA/DCA notes (the LGA/DCA Notes and together with the IP Notes, the 10.75 % Senior Secured Notes).

5 unchanged sentences

LGA/DCA Notes are secured by a first lien security interest in the LGA/DCA Collateral.

On or prior to the fourth anniversary of the 10.75 % Senior Secured Notes Closing Date, American may redeem all or any part of the 10.75 % Senior Secured Notes, at its option, at a redemption price equal to 100 % of the principal amount of the 10.75 % Senior Secured Notes redeemed plus a “make-whole” premium, together with accrued and unpaid interest thereon, if any.

After the fourth anniversary of the 10.75 % Senior Secured Notes Closing Date and on or prior to the fifth anniversary of the 10.75 % Senior Secured Notes Closing Date, American may redeem all or any part of the 10.75 % Senior Secured Notes, at its option, at a redemption price equal to 105.375 % of the principal amount of the 10.75 % Senior Secured Notes redeemed, together with accrued and unpaid interest thereon, if any.

After the fifth anniversary of the 10.75 % Senior Secured Notes Closing Date, American may redeem all or any part of the 10.75 % Senior Secured Notes, at its option, at par, together with accrued and unpaid interest thereon, if any.

In December 2024, American redeemed an aggregate amount of $ 263 million toward portions of the outstanding principal amounts of the 10.75 % Senior Secured Notes and agreed to redeem an aggregate amount of $ 308 million by no later than April 15, 2025.

American redeemed the aggregate amount of $ 308 million on February 4, 2025.

7.25 % Senior Secured Notes

On February 15, 2023, as part of the 2013 Term Loan Facility Refinancing, American issued $ 750 million aggregate principal amount of 7.25 % senior secured notes due 2028 (the 7.25 % Senior Secured Notes) in a private offering.

On February 15, 2023, American issued $ 750 million aggregate principal amount of 7.25 % senior secured notes due 2028 (the 7.25 % Senior Secured Notes) in a private offering.

The 7.25 % Senior Secured Notes were issued at par and bear interest at a rate of 7.25 % per annum (subject to increase if the collateral coverage ratio described below is not met).

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The obligations of American under the 7.25 % Senior Secured Notes are fully and unconditionally guaranteed on a senior unsecured basis by AAG.

American used the proceeds from the offering of the 7.25 % Senior Secured Notes, together with cash on hand, to repay a portion of the term loans then outstanding under the 2013 Term Loan Facility and to pay related fees and expenses.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

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The 7.25 % Senior Secured Notes are American’s senior secured obligations and are secured on a first lien basis by security interests in certain assets, rights and properties that American uses to provide non-stop scheduled air carrier services between (a) certain airports in the United States and (b) airports in certain countries in South America and New Zealand (collectively, the 7.25 % Senior Secured Notes Collateral).

The 7.25 % Senior Secured Notes Collateral also secures, on a first lien, pari passu basis with the 7.25 % Senior Secured Notes, the 2013 Credit Facilities under the 2013 Credit Agreement.

The 7.25 % Senior Secured Notes Collateral also secures, on a first lien, pari passu basis with the 7.25 % Senior Secured Notes, the 2013 Credit Facilities.

American may redeem the 7.25 % Senior Secured Notes, in whole at any time or in part from time to time prior to February 15, 2025, at a redemption price equal to 100 % of the principal amount of the 7.25 % Senior Secured Notes to be redeemed, plus a “make-whole” premium, plus any accrued and unpaid interest thereon to but excluding the date of redemption.

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The 8.50 % Senior Secured Notes were issued at par and bear interest at a rate of 8.50 % per annum (subject to increase if the collateral coverage ratio described below is not met).

Interest on the 8.50 % Senior Secured Notes is payable semiannually in arrears on May 15 and November 15 of each year, beginning on May 15, 2024.

Interest on the 8.50 % Senior Secured Notes is payable semiannually in arrears on May 15 and November 15 of each year, which began on May 15, 2024.

The 8.50 % Senior Secured Notes will mature on May 15, 2029.

The obligations of American under the 8.50 % Senior Secured Notes are fully and unconditionally guaranteed on a senior unsecured basis by AAG.

The net proceeds from the 8.50 % Senior Secured Notes, together with borrowings under the 2023 Term Loan Facility and cash on hand, were used to redeem all of the outstanding 11.75 % Senior Secured Notes in December 2023.

The 8.50 % Senior Secured Notes were issued pursuant to an indenture, dated as of December 4, 2023 (the 8.50 % Senior Secured Notes Indenture), by and among American, AAG and Wilmington Trust, National Association, as trustee and collateral agent.

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At any time on or after November 15, 2025, American may redeem all or any of the 8.50 % Senior Secured Notes in whole at any time, or in part from time to time, at the redemption prices described in the 8.50 % Senior Secured Notes Indenture, plus any accrued and unpaid interest thereon to but excluding the date of redemption.

In addition, at any time prior to November 15, 2025, American may redeem up to 40 % of the original aggregate principal amount of the 8.50 % Senior Secured Notes (calculated after giving effect to any issuance of additional notes) with the net cash proceeds of certain equity offerings, at a redemption price equal to 108.50 % of the aggregate principal amount of the 8.50 % Senior

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Secured Notes to be redeemed, plus any accrued and unpaid interest thereon to but excluding the date of redemption.

In addition, during each twelve-month period beginning on December 4, 2023 and ending on or prior to November 15, 2025, American may redeem up to 10 % of the original aggregate principal amount of the 8.50 % Senior Secured Notes at a redemption price of 103 % of the principal amount thereof, plus any accrued and unpaid interest thereon to, but excluding, the applicable date of redemption.

addition, during each twelve-month period beginning on December 4, 2023 and ending on or prior to November 15, 2025, American may redeem up to 10 % of the original aggregate principal amount of the 8.50 % Senior Secured Notes at a redemption price of 103 % of the principal amount thereof, plus any accrued and unpaid interest thereon to, but excluding, the applicable date of redemption.

Twice per year, American is required to deliver an appraisal of the 8.50 % Senior Secured Notes Collateral and an officer’s certificate demonstrating the calculation of a collateral coverage ratio in relation to the 8.50 % Senior Secured Notes Collateral (the 8.50 % Senior Secured Notes Collateral Coverage Ratio) as of the date of delivery of the appraisal for the applicable period.

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The AAdvantage Notes are fully and unconditionally guaranteed by the SPV Guarantors and AAG.

Concurrent with the issuance of the AAdvantage Notes, the AAdvantage Issuers, as co-borrowers, entered into a term loan credit and guaranty agreement, dated March 24, 2021, providing for a $ 3.5 billion term loan facility (the AAdvantage Term Loan Facility and collectively with the AAdvantage Notes, the AAdvantage Financing) and pursuant to which the full $ 3.5 billion of term loans (the AAdvantage Loans) were drawn on the AAdvantage Financing Closing Date.

Concurrent with the issuance of the AAdvantage Notes, the AAdvantage Issuers, as co-borrowers, entered into a term loan credit and guaranty agreement, dated March 24, 2021, as amended, providing for a $ 3.5 billion term loan facility (the AAdvantage Term Loan Facility and collectively with the AAdvantage Notes, the AAdvantage Financing) and pursuant to which the full $ 3.5 billion of term loans (the AAdvantage Loans) were drawn on the AAdvantage Financing Closing Date.

The AAdvantage Loans are fully and unconditionally guaranteed (together with the AAdvantage Note Guarantees, the AAdvantage Guarantees) by the SPV Guarantors and AAG.

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These amortization payments (as well as those for the AAdvantage Notes) will be subject to the occurrence of certain early amortization events, including the failure to satisfy a minimum debt service coverage ratio at specified determination dates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Prepayment of some or all of the AAdvantage Loans outstanding under the AAdvantage Term Loan Facility is permitted, although payment of an applicable premium is required as specified in the AAdvantage Term Loan Facility.

The AAdvantage Indenture and the AAdvantage Term Loan Facility contain mandatory prepayment provisions triggered upon (i) the issuance or incurrence by Loyalty Issuer or the SPV Guarantors of certain indebtedness or (ii) the receipt by American or its subsidiaries of net proceeds from pre-paid frequent flyer (i.e., AAdvantage) mile sales exceeding $ 505 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Each of these prepayments would also require payment of an applicable premium.

Certain other events, including the occurrence of a change of control with respect to AAG and certain AAdvantage Collateral sales exceeding a specified threshold, will also trigger mandatory repurchase or mandatory prepayment provisions under the AAdvantage Indenture and the AAdvantage Term Loan Facility, respectively.

In June 2023, American and AAdvantage Loyalty IP Ltd.

entered into the First Amendment to the AAdvantage Term Loan Facility pursuant to which the benchmark interest rate transitioned from LIBOR to SOFR, effective July 1, 2023.

As a result, the AAdvantage Term Loan Facility bears interest at a base rate (subject to a floor of 0.00 %) plus an applicable margin of 3.75 % or, at American’s option, the SOFR rate for a tenor of three months, plus a 0.26161 % credit spread adjustment (with such SOFR rate plus SOFR adjustment being subject to a floor of 0.75 %) and an applicable margin of 4.75 %.

The AAdvantage Term Loan Facility bears interest at a base rate (subject to a floor of 0.00 %) plus an applicable margin of 3.75 % or, at American’s option, the SOFR rate for a tenor of three months, plus a 0.26161 % credit spread adjustment (with such SOFR rate plus SOFR adjustment being subject to a floor of 0.75 %) and an applicable margin of 4.75 %.

As of December 31, 2024, the margin elected was 4.75 %.

Other than the foregoing, the terms of the AAdvantage Term Loan Facility remain substantially unchanged.

(d) Equipment Loans and Other Notes Payable Issued in 2023

In 2023, American entered into agreements under which it borrowed $ 1.1 billion in connection with the financing of certain aircraft.

Debt incurred under these agreements matures in 2032 through 2035 and bears interest at fixed and variable rates (comprised of SOFR plus an applicable margin) averaging 7.15 % as of December 31, 2023.

(e) PSP Promissory Notes

(d) EETCs issued in 2024

In 2024, American entered into agreements under which it borrowed $ 684 million in connection with the financing of certain aircraft that had been previously delivered.

Debt incurred under these agreements is junior to existing equipment notes, matures in 2027 through 2028 and bears interest at fixed rates averaging 7.10 %.

(e) Equipment Loans and Other Notes Payable Issued in 2024

In 2024, American entered into agreements under which it borrowed $ 990 million in connection with the financing of certain aircraft.

Debt incurred under these agreements matures in 2030 through 2036 and bears interest at variable rates (comprised of SOFR plus an applicable margin) averaging 6.28 % as of December 31, 2024.

(f) PSP Promissory Notes

As partial compensation to the U.S.

Government for the provision of financial assistance under the PSP Agreements, AAG issued promissory notes to Treasury (PSP1 Promissory Note, PSP2 Promissory Note and PSP3 Promissory Note, collectively the PSP Promissory Notes), in the aggregate principal sum of $ 3.7 billion which provides for the guarantee of our obligations under the PSP Promissory Notes by the Subsidiaries.

The PSP Promissory Notes bear interest on the outstanding principal amount at a rate equal to 1.00 % per annum until the fifth anniversary of the applicable PSP closing date and 2.00 % plus an interest rate based on SOFR per annum or other benchmark replacement rate consistent with customary market conventions (but not to be less than 0.00 %) thereafter until the tenth anniversary of the applicable PSP closing date, and interest accrued thereon will be payable in arrears on the last business day of March and September of each year.

The aggregate principal amount outstanding under the PSP Promissory Notes, together with all accrued and unpaid interest thereon and all other amounts payable under the PSP Promissory Notes, will be due and payable on the maturity date.

Government for the provision of financial assistance under the PSP Agreements, AAG issued promissory notes to Treasury (PSP1 Promissory Note, PSP2 Promissory Note and PSP3 Promissory Note, collectively the PSP Promissory Notes), in the aggregate principal amount of $ 3.7 billion which provides for the guarantee of our obligations under the PSP Promissory Notes by AAG’s subsidiaries American, Envoy Air Inc., Piedmont and PSA (together, the Subsidiaries).

The PSP Promissory Notes bear interest on the outstanding principal amount at a rate equal to 1.00 % per annum until the fifth anniversary of the applicable PSP closing date and 2.00 % plus an interest rate based on SOFR per annum or other benchmark replacement rate consistent with customary market conventions (but not to be less than 0.00 %) thereafter until maturity on the tenth anniversary of the applicable PSP closing date, and interest accrued thereon is payable in arrears on the last business day of March and September of each year.

The PSP Promissory Notes are our senior unsecured obligation and each guarantee of the PSP Promissory Notes is the senior unsecured obligation of each of the Subsidiaries, respectively.

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Within 30 days of the occurrence of certain change of control triggering events, we are required to prepay the aggregate outstanding principal amount of the PSP Promissory Notes at such time, together with any accrued interest or other amounts owing under the PSP Promissory Notes at such time.

(f) 6.50 % Convertible Senior Notes

(g) 6.50 % Convertible Senior Notes

In June 2020, AAG completed the public offering of $ 1.0 billion aggregate principal amount of AAG’s 6.50 % convertible senior notes due 2025 (the Convertible Notes).

The Convertible Notes are fully and unconditionally guaranteed by American on a senior unsecured basis (the Convertible Notes Guarantee).

The net proceeds from the Convertible Notes were approximately $ 970 million, after deducting the underwriters’ discounts and commissions and our estimated offering expenses.

The net proceeds from the Convertible Notes were approximately $ 970 million, after deducting the underwriters’ discounts and commissions and our offering expenses.

The Convertible Notes bear interest at a rate of 6.50 % per annum.

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In addition, following certain corporate events that occur prior to the maturity date or upon AAG’s issuance of a notice of redemption, AAG will increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such corporate event or during the related redemption period in certain circumstances by a specified number of shares of AAG common stock as described in the Convertible Notes Indenture.

AAG did not have the right to redeem the Convertible Notes prior to July 5, 2023.

On or after July 5, 2023 and on or before the 20th scheduled trading day immediately before the maturity date, AAG may redeem the Convertible Notes, in whole or in part, if the last reported sale price of AAG common stock has been at least 130 % of the conversion price then in effect on (1) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date AAG sends the related redemption notice;

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Total interest expense $ 72 $ 71 $ 71

At December 31, 2023, the if-converted value of the Convertible Notes did not exceed the principal amount.

At December 31, 2024, the if-converted value of the Convertible Notes exceeded the principal amount by $ 76 million.

The last reported sale price per share of our common stock (as defined in the Convertible Notes Indenture) did not exceed 130 % of the conversion price of the Convertible Notes for at least 20 of the 30 consecutive trading days ending on December 31, 2024.

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Each $1,000 principal amount of Convertible Notes is convertible at a rate of 61.7284 shares of our common stock, subject to adjustment as provided in the Convertible Notes Indenture.

We may settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

We may settle conversions by paying or delivering, as applicable, cash, shares of our

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

(g) Unsecured Senior Notes

common stock or a combination of cash and shares of our common stock, at our election.

If certain conditions are not met at maturity, cash settlement is required.

(h) Unsecured Senior Notes

3.75 % Senior Notes

In February 2020, AAG issued $ 500 million aggregate principal amount of 3.75 % senior notes due 2025 (the 3.75 % Senior Notes).

The 3.75 % Senior Notes bear interest at a rate of 3.75 % per annum, payable semiannually in arrears in March and September of each year, which began in September 2020.

The 3.75 % Senior Notes mature in March 2025.

The 3.75 % Senior Notes are senior unsecured obligations of AAG.

These Senior Notes are fully and unconditionally guaranteed by American.

The indentures for these Senior Notes contain covenants and events of default generally customary for similar financings.

Other Financing Activities

During the year ended December 31, 2023, we repurchased $ 552 million of secured and unsecured notes in the open market.

In connection with the repurchase of these secured and unsecured notes in the open market, American recorded $ 57 million of cash special charges for premiums paid and $ 6 million of non-cash special charges to write off unamortized debt issuance costs and debt discounts.

As of December 31, 2023, AAG had issued guarantees covering approximately $ 17.5 billion of American’s secured debt (and interest thereon), including the Credit Facilities, 2023 Term Loan Facility, the AAdvantage Financing, certain EETC financings and special facility revenue bonds.

In December 2024, AAG repaid the outstanding principal amount of the 3.75 % Senior Notes in advance of the March 2025 maturity.

As of December 31, 2024, AAG had issued guarantees covering approximately $ 15.2 billion of American’s secured debt (and interest thereon), including the Credit Facilities, the AAdvantage Financing, certain EETC financings and special facility revenue bonds.

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.

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

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

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.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Specifically, we are required to meet certain collateral coverage tests for our Credit Facilities, April 2016 Revolving Facility, 2023 Term Loan Facility, 7.25 % Senior Secured Notes, 8.50 % Senior Secured Notes and 10.75 % Senior Secured Notes, as described below:

Specifically, we are required to meet certain collateral coverage tests for our Credit Facilities, 7.25 % Senior Secured Notes, 8.50 % Senior Secured Notes and 10.75 % Senior Secured Notes, as described below:

Facilities 7.25 % Senior Secured Notes

Facilities April 2016

Revolving Facility 2023 Term Loan Facility 8.50 % Senior Secured Notes

Facilities 2023 Credit Facilities 8.50 % Senior Secured Notes

10.75 % Senior Secured Notes

LTV Requirement 1.6 x Collateral valuation to amount of debt outstanding ( 62.5 % LTV)

LTV as of Last Measurement Date 34.2 % 16.4 % Not Applicable 25.9 % 6.9 %

LTV as of Last Measurement Date 35.0 % 15.8 % 24.7 % 5.2 %

Frequency of Appraisals of Appraised Collateral Semi-Annual Annual

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and South America and New Zealand Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate certain services between the U.S.

and European Union (including London Heathrow) Generally, certain spare parts Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate certain services between the U.S.

and European Union (including London Heathrow) Generally, certain slots, route authorities and airport gate leasehold rights used by American to operate certain services between the U.S.

and Australia, Canada, the Caribbean, Central America, China, Hong Kong, Japan, Mexico, South Korea and Switzerland Generally, certain DCA slots, certain LGA slots, certain simulators and certain leasehold rights and, in the case of the IP Notes, certain intellectual property of American

At December 31, 2024, we were in compliance with the applicable collateral coverage tests as of the most recent measurement dates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

We lease certain aircraft and engines, including aircraft under capacity purchase agreements.

As of December 31, 2023, we operated 737 leased aircraft, including seven aircraft in temporary storage and 237 aircraft leased under capacity purchase agreements, with remaining terms ranging from less than one year to 10 years.

As of December 31, 2024, we operated 716 leased aircraft, including 210 aircraft leased under capacity purchase agreements, with remaining terms ranging from less than one year to approximately 11 years.

At each airport where we conduct flight operations, we have agreements, generally with a governmental unit or authority, for the use of passenger, operations and baggage handling space as well as runways and taxiways.

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2028 1,114 77

2029 1,010 72

2030 and thereafter 3,049 256

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As of December 31, 2024, we had additional operating lease commitments that have not yet commenced of approximately $ 693 million for five Boeing 787 Family aircraft scheduled to be delivered in 2025 with lease terms of 10 years.

The significant components of the income tax provision (benefit) were (in millions):

The significant components of the income tax provision were (in millions):

Year Ended December 31,

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State, local and foreign $ — $ — $ ( 6 )

Deferred income tax provision (benefit):

Deferred income tax provision:

Federal 285 268 59

State and local 23 31 6

Deferred income tax provision (benefit) 299 65 ( 555 )

Total income tax provision (benefit) $ 299 $ 59 $ ( 555 )

The income tax provision (benefit) differed from amounts computed at the statutory federal income tax rate as follows (in millions):

Deferred income tax provision 308 299 65

Total income tax provision $ 308 $ 299 $ 59

The income tax provision differed from amounts computed at the statutory federal income tax rate as follows (in millions):

Year Ended December 31,

2024 2023 2022

Statutory income tax provision (benefit) $ 235 $ 39 $ ( 535 )

State, local and foreign income tax provision (benefit), net of federal tax effect 22 — ( 37 )

Statutory income tax provision $ 242 $ 235 $ 39

State, local and foreign income tax provision, net of federal tax effect 21 22 —

Book expenses not deductible for tax purposes 44 38 22

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Other, net 1 1 ( 2 )

Income tax provision (benefit) $ 299 $ 59 $ ( 555 )

Income tax provision $ 308 $ 299 $ 59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

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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, which include our NOLs, when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized.

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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We have determined that positive factors outweigh negative factors in the determination of the realizability of our deferred tax assets.

There can be no assurance that an additional valuation allowance on our net deferred tax assets will not be required.

Such valuation allowance could be material.

Our ability to deduct our NOL carryforwards and to utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 where an “ownership change” has occurred.

Substantially all of our remaining federal NOL carryforwards attributable to US Airways Group are subject to limitation under Section 382;

however, our ability to utilize such NOL carryforwards is not anticipated to be effectively constrained as a result of such limitation.

Similar limitations may apply for state income tax purposes.

Our ability to utilize any new NOL carryforwards arising after the ownership changes is not affected by the annual limitation rules imposed by Section 382 unless another ownership change occurs.

Under the Section 382 limitation, cumulative stock ownership changes among material stockholders exceeding 50% during a rolling three-year period can potentially limit our future use of NOLs and tax credits.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

We file our tax returns as prescribed by the tax laws of the jurisdictions in which we operate.

Our 2021 through 2023 tax years are still subject to examination by the Internal Revenue Service.

Various state and foreign jurisdiction tax years remain open to examination, and we are under examination, in administrative appeals or engaged in tax litigation in certain jurisdictions.

Various state, local and foreign jurisdiction tax years remain open to examination, and we are under examination, in administrative appeals or engaged in tax litigation in certain jurisdictions.

We believe that the effect of any assessments will not be material to our consolidated financial statements.

1 unchanged sentence

We accrue interest and penalties related to unrecognized tax benefits in interest expense and operating expense, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Fair Value Measurements

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Repurchase agreements 550 — 550 —

government and agency obligations 100 — 100 —

6,180 680 5,500 —

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Total $ 7,073 $ 1,283 $ 5,790 $ —

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Fair Value Measurements as of December 31, 2023

5 unchanged sentences

Repurchase agreements 450 — 450 —

government and agency obligations 100 — 100 —

7,000 818 6,182 —

3 unchanged sentences

Total $ 8,073 $ 1,440 $ 6,633 $ —

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

(1) All short-term investments are classified as available-for-sale and stated at fair value.

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(3) Restricted cash and short-term investments primarily include collateral held to support workers' compensation obligations and collateral associated with the payment of interest for the AAdvantage Financing.

Restricted short-term investments mature in one year or less except for $ 218 million as of December 31, 2023.

(4) Long-term investments include our equity investments in China Southern Airlines Company Limited (China Southern Airlines), GOL and Vertical Aerospace Ltd.

Restricted short-term investments mature in one year or less except for $ 155 million and $ 218 million as of December 31, 2024 and December 31, 2023, respectively.

(4) Long-term investments include our equity investments in China Southern Airlines Company Limited (China Southern Airlines), Vertical Aerospace Ltd.

(Vertical) and GOL.

See Note 8 for further information on our equity investments.

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The fair value of our long-term debt was estimated using quoted market prices or discounted cash flow analyses based on our current estimated incremental borrowing rates for similar types of borrowing arrangements.

If our long-term debt was measured at fair value, it would have been classified as Level 2 except for $ 3.7 billion as of December 31, 2023 and December 31, 2022, which would have been classified as Level 3 in the fair value hierarchy.

The fair value of the Convertible Notes, which would have been classified as Level 2, was $ 1.1 billion as of December 31, 2023 and December 31, 2022.

The fair value of the Convertible Notes, which would have been classified as Level 2, was $ 1.2 billion and $ 1.1 billion as of December 31, 2024 and December 31, 2023, respectively.

The carrying value and estimated fair value of our long-term debt, including current maturities, were as follows (in millions):

December 31, 2023 December 31, 2022

Value Carrying

December 31, 2024

Value Fair Value

Total Level 1 Level 2 Level 3

Long-term debt, including current maturities $ 29,813 $ 30,010 $ — $ 26,402 $ 3,608

December 31, 2023

Value Fair Value

Total Level 1 Level 2 Level 3

Long-term debt, including current maturities $ 32,396 $ 32,310 $ — $ 28,594 $ 3,716

To help expand our network and as part of our ongoing commitment to sustainability, we enter into various commercial relationships or other strategic partnerships, including equity investments, with other airlines and companies.

Our equity investments are reflected in other assets on our consolidated balance sheets.

Our share of equity method investees’ financial results and changes in fair value are recorded in nonoperating other income (expense), net on the consolidated statements of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Our equity investments, ownership interest and carrying value were as follows:

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Total $ 515 $ 541

(1) Primarily includes our investment in JetSMART Holdings Limited, which is accounted for under the equity method, and our investments in GOL and Vertical, which are each accounted for at fair value.

(1) Primarily includes our investment in JetSMART Holdings Limited, which is accounted for under the equity method, and our investments in Vertical and GOL, which are each accounted for at fair value.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Employee Benefit Plans

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We use a December 31 measurement date for all of our defined benefit pension plans.

We also provide certain retiree medical and other postretirement benefits, including health care and life insurance benefits, to retired employees.

We also provide certain retiree medical and other postretirement benefits, including health care and life insurance benefits to retired employees and notional retiree health reimbursement arrangements for eligible participants.

Benefit Obligations, Fair Value of Plan Assets and Funded Status

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Plan amendments (3)

Other — — — 3

Benefit payments ( 913 ) ( 894 ) ( 107 ) ( 84 )

Other ( 132 ) — — —

Benefit obligation at end of period $ 13,349 $ 14,410 $ 1,308 $ 1,325

Fair value of plan assets at beginning of period $ 12,431 $ 11,884 $ 133 $ 133

Actual return (loss) on plan assets 1,368 ( 1,943 ) 14 ( 18 )

Actual return on plan assets 568 1,368 9 14

Employer contributions (4)

Benefit payments ( 913 ) ( 894 ) ( 107 ) ( 84 )

Other ( 132 ) — — —

Fair value of plan assets at end of period $ 12,254 $ 12,431 $ 128 $ 133

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(1) The 2024 and 2023 pension actuarial loss (gain) primarily relates to the change in our weighted average discount rate assumption.

(2) The 2023 and 2022 retiree medical and other postretirement benefits actuarial loss (gain) primarily relates to the change in our weighted average discount rate assumption and, in 2023, the change in health care cost assumptions.

(2) The 2024 retiree medical and other postretirement benefits actuarial gain primarily relates to changes in certain retirement and weighted average discount rate assumptions, offset by increases in health care premiums and health care cost assumptions.

The 2023 retiree medical and other postretirement benefits actuarial loss primarily relates to the change in our weighted average discount rate assumption and change in health care cost assumptions.

(3) We remeasured our retiree medical and other postretirement benefits to account for enhanced retirement benefits pursuant to the ratification of new CBAs.

As a result, in 2024 and 2023, we increased our postretirement benefits obligation by $ 55 million and $ 339 million, respectively, which was included as a component of prior service cost in accumulated other comprehensive loss.

(4) In 2024, we made required contributions of $ 285 million and supplemental contributions of $ 15 million to our defined benefit pension plans, and in 2023, we made required contributions of $ 69 million and supplemental contributions of $ 4 million to our defined benefit pension plans.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

(3) As of September 30, 2023, we remeasured our retiree medical and other postretirement benefits to account for enhanced retirement benefits provided to our mainline pilots pursuant to the new collective bargaining agreement ratified in August 2023.

As a result, we increased our postretirement benefits obligation by $ 339 million, which was included as a component of prior service cost in accumulated other comprehensive loss.

(4) In 2023, we made required contributions of $ 69 million to our defined benefit pension plans.

Balance Sheet Position

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(In millions)

As of December 31:

Net actuarial loss (gain) $ 3,128 $ 3,566 $ ( 408 ) $ ( 383 )

Prior service cost (benefit) — 18 197 ( 148 )

Prior service cost 1 — 238 197

Total accumulated other comprehensive loss (income), pre-tax

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(In millions)

As of December 31:

Projected benefit obligation $ 13,349 $ 14,410

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(In millions)

As of December 31:

Accumulated benefit obligation $ 13,341 $ 14,403 $ — $ —

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(In millions)

For the years ended December 31:

Defined benefit plans:

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Expected return on assets ( 978 ) ( 918 ) ( 1,138 ) ( 10 ) ( 11 ) ( 12 )

Special termination benefits — — — — — 139

Amortization of:

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Net periodic benefit cost (income) $ ( 148 ) $ ( 34 ) $ ( 395 ) $ 66 $ 21 $ ( 10 )

The service cost component of net periodic benefit cost (income) is included in operating expenses, the cost for the special termination benefits is included in special items, net and the other components of net periodic benefit cost (income) are included in nonoperating other income (expense), net on our consolidated statements of operations.

The service cost component of net periodic benefit cost (income) is included in operating expenses and the other components of net periodic benefit cost (income) are included in nonoperating other income (expense), net on our consolidated statements of operations.

The following actuarial assumptions were used to determine our benefit obligations and net periodic benefit cost (income) for the periods presented:

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2024 2023 2024 2023

Benefit obligations:

Benefit obligations as of December 31:

Weighted average discount rate 5.7 % 5.2 % 5.6 % 5.3 %

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2024 2023 2022 2024 2023 2022

Net periodic benefit cost (income):

Net periodic benefit cost (income) for the years ended December 31:

Weighted average discount rate 5.2 % 5.6 % 3.0 % 5.3 % 5.7 % 2.8 %

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(1) The weighted average health care cost trend rate at December 31, 2024 is assumed to decline gradually to 4.5 % by 2033 and remain level thereafter.

As of December 31, 2023, our estimate of the long-term rate of return on plan assets was 8.0 % based on the target asset allocation.

As of January 1, 2025, our estimate of the long-term rate of return on plan assets is 7.75 % based on the target asset allocation.

Expected returns on long duration bonds are based on yields to maturity of the bonds held at year-end.

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(1) See Note 7 for a description of the levels within the fair value hierarchy.

(2) Equity investments include domestic and international common stock, preferred stock and mutual funds invested in equity securities.

(2) Equity investments include domestic and international common stock and preferred stock.

(3) Fixed income investments include corporate, government and U.S.

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As of December 31, 2024, the pension plan’s master trust has future funding commitments to these limited partnerships of approximately $ 1.1 billion, most of which are expected to be called over the next five years .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Changes in fair value measurements of Level 3 investments during the years ended December 31, 2024 and 2023, were as follows (in millions):

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Sales — ( 2 )

Transfers out — ( 4 )

Balance at end of year $ 68 $ 84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Plan assets in the retiree medical and other postretirement benefits plans are primarily Level 2 mutual funds valued by quoted prices on the active market, which is fair value, and represents the NAV of the shares of such funds as of the close of business at the end of the period.

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Defined Contribution and Multiemployer Plans

The costs associated with our defined contribution plans were $ 1.1 billion, $ 949 million and $ 920 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The costs associated with our defined contribution plans were $ 1.4 billion, $ 1.1 billion and $ 949 million for the years ended December 31, 2024, 2023 and 2022, respectively.

We participate in the International Association of Machinists & Aerospace Workers (IAM) National Pension Fund, Employer Identification No.

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This contribution schedule will remain in effect through the earlier of December 31, 2031 or the date the IAM Pension Fund emerges from critical status.

As of the most recent data available, the IAM Pension Fund remains in critical status.

Profit Sharing Program

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For the year ended December 31, 2024, we accrued $ 228 million for this program, which will be distributed to employees in the first quarter of 2025.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Accumulated Other Comprehensive Loss

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Balance at December 31, 2024 $ ( 2,959 ) $ — $ ( 1,606 ) $ ( 4,565 )

(1) Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net income (loss) until the obligations are fully extinguished.

(2) Relates to pension, retiree medical and other postretirement benefits obligations and is recognized within the income tax provision (benefit) on our consolidated statements of operations.

(1) Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net income until the obligations are fully extinguished.

(2) Relates to pension, retiree medical and other postretirement benefits obligations and is recognized within the income tax provision on our consolidated statements of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Reclassifications out of AOCI for the years ended December 31, 2024 and 2023 are as follows (in millions):

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(1) These amounts are net of purchase deposits currently held by the manufacturers.

Our purchase deposits held by all manufacturers totaled $ 760 million and $ 613 million as of December 31, 2023 and 2022, respectively.

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.

Our purchase deposits held by all manufacturers totaled $ 1.0 billion and $ 760 million as of December 31, 2024 and 2023, respectively.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

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.

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Additionally, we have other purchase commitments primarily related to aircraft fuel, flight equipment maintenance and information technology support as follows (approximately):

$ 4.7 billion in 2024, $ 2.0 billion in 2025, $ 1.4 billion in 2026, $ 150 million in 2027, $ 124 million in 2028 and $ 843 million in 2029 and thereafter.

$ 4.6 billion in 2025, $ 2.0 billion in 2026, $ 1.5 billion in 2027, $ 386 million in 2028, $ 502 million in 2029 and $ 3.4 billion in 2030 and thereafter.

These amounts exclude 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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As of December 31, 2024, American’s capacity purchase agreements with third-party regional carriers had expiration dates ranging from 2025 to 2033, with rights of American to extend the respective terms of certain agreements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

As of December 31, 2024, American’s minimum obligations under its capacity purchase agreements with third-party regional carriers are expected to be as follows (approximately, in millions):

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$ 1,114 $ 1,068 $ 1,066 $ 990 $ 829 $ 849 $ 5,916

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

(1) 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.

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Los Angeles International Airport (LAX)

From time to time, airports engage in construction projects, often substantial, that result in new or improved facilities that are ultimately funded through increases in the rent and other occupancy costs payable by airlines operating at the airport.

Unlike this construction and funding model, we are managing a project at LAX where we have legal title to the assets during construction.

In 2018, we executed a lease agreement with Los Angeles World Airports (LAWA), which owns and operates LAX, in connection with a $ 1.6 billion modernization project related to LAX Terminals 4 and 5.

Construction, which started in October 2018 and is expected to be completed in 2028, will occur in a phased approach.

The modernization project will include a unified departure hall to the entranceway of Terminals 4 and 5, reconfigured ticket counter and check-in areas with seamless access to security screening areas, 10 new security screening lanes with automated technology in addition to the existing Terminal 5 lanes, and a new Terminal 4 South concourse with more open and upgraded amenities at gate areas.

The project will also include renovated break rooms, multi-use meeting rooms and team gathering spaces throughout the terminals to support our team members at LAX.

As each phase is completed and ready for use, the assets will be sold and transferred to LAWA, including the site improvements and other non-proprietary improvements.

As we control the assets during construction, they are recognized on our consolidated balance sheets within operating property and equipment until the assets are sold and transferred to LAWA.

As of December 31, 2023, we have incurred $ 862 million in costs relating to the LAX modernization project, of which $ 283 million were incurred in 2023.

Cash paid for non-proprietary improvements are included within other investing activities on our consolidated statements of cash flows.

In addition, as of December 31, 2023, we have sold and transferred $ 346 million of non-proprietary improvements to LAWA, of which $ 170 million occurred during 2023.

For non-proprietary improvements which are not yet ready for use, any cash payments received from LAWA will be reflected as a financial liability included within noncurrent other liabilities on our consolidated balance sheets and reflected as other

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

financing activities on our consolidated statements of cash flows.

As of December 31, 2023, $ 53 million of cash proceeds received for non-proprietary improvements were not yet ready for use, and therefore have not been sold and transferred back to LAWA.

Construction started in October 2018 and is expected to be completed in 2028 in a phased approach.

Under the lease agreement and subsequent project component approvals, the City of Los Angeles Board of Airport Commissioners has appropriated approximately $ 1.6 billion to purchase completed project assets, representing the maximum allowable reimbursement by LAWA.

In September 2024, we executed an agreement to where a substantial majority of the non-proprietary project costs will be funded through the Regional Airports Improvement Corporation (RAIC), a quasigovernmental special purpose entity that acts as a conduit borrower under a syndicated credit facility provided by a group of lenders in the form of a $ 250 million revolving credit facility.

Loans made under the credit facility are being repaid with the proceeds from LAWA’s purchase of completed project assets.

We guarantee the obligation of the RAIC under the credit facility associated with the Terminals 4 and 5 lease.

As of December 31, 2024, our outstanding guaranteed obligation under the credit facility for the Terminals 4 and 5 project was $ 250 million.

Additionally, we have recovered $ 1.2 billion since project inception through the end of 2024 and expect to receive approximately $ 450 million in additional reimbursements by the end of 2028.

As we control the assets during construction, they are recognized on our consolidated balance sheets within operating property and equipment until the assets are sold and transferred.

For the years ended December 31, 2024 and 2023, we have sold and transferred $ 588 million and $ 170 million of non-proprietary improvements, respectively, which are included within proceeds from sale-leaseback transactions and sale of property and equipment on our consolidated statements of cash flows.

For the years ended December 31, 2024, 2023 and 2022, we had $ 187 million, $ 283 million and $ 241 million, respectively, of non-proprietary improvement costs relating to the LAX modernization project, which are included within other investing activities on our consolidated statements of cash flows.

(d) Off-Balance Sheet Arrangements

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The equipment notes are secured by a security interest in the aircraft or engines, as applicable.

The pass-through trust certificates are not direct obligations of, nor are they guaranteed by, AAG or American.

The pass-through trust certificates are not direct obligations of, nor are they guaranteed

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

by, AAG or American.

However, the equipment notes issued to the trusts are direct obligations of American and, in certain instances, have been guaranteed by AAG.

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District Court for the District of Massachusetts issued an order permanently enjoining American and JetBlue from continuing and further implementing the NEA.

In June 2023, JetBlue delivered a notice of termination of the NEA, effective July 29, 2023, and the carriers have commenced wind-down activities to accommodate mutual customers.

In June 2023, JetBlue delivered a notice of termination of the NEA, effective July 29, 2023, and the carriers have substantially completed wind-down activities.

Following written submissions by the parties and a hearing on July 26, 2023, the U.S.

District Court for the District of Massachusetts entered a Final Judgment and Order Entering Permanent Injunction on July 28, 2023.

The parties are complying with the terms of the Final Judgment and Order Entering Permanent Injunction, including winding down activities related to the NEA.

The parties are complying with the terms of the Final Judgment and Order Entering Permanent Injunction, including by completing wind-down activities related to the NEA.

American filed a notice of appeal to the U.S.

Court of Appeals for the First Circuit on September 25, 2023, and American’s opening brief was filed on December 6, 2023.

Court of Appeals for the First Circuit on September 25, 2023.

The First Circuit affirmed the District Court’s decision on November 8, 2024.

Any petition for writ of certiorari to the U.S.

Supreme Court would be due February 27, 2025.

Private Party Antitrust Actions Related to the Northeast Alliance.

5 unchanged sentences

On February 2, 2023 and February 15, 2023, private party plaintiffs filed two additional putative class action antitrust complaints against American and JetBlue in the U.S.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Court for the District of Massachusetts and the U.S.

District Court for the District of Massachusetts and the U.S.

District Court for the Eastern District of New York, respectively.

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In June 2023, the private party plaintiffs filed a second amended consolidated complaint, followed by a third amended complaint filed in August 2023.

In September 2023, American, together with JetBlue, filed a motion to dismiss the third amended complaint, and that motion remains pending.

In September 2023, American, together with JetBlue, filed a motion to dismiss the third amended complaint.

In September 2024, the court denied that motion.

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

Securities Litigation.

On July 18, 2024, AAG and certain of its current and former officers were named as defendants in a putative class action lawsuit filed in the United States District Court for the Northern District of Texas, captioned Qawasmi v.

American Airlines Group Inc., et al .

The Qawasmi plaintiff purports to represent investors who acquired AAG securities between January 25, 2024 and May 28, 2024.

On August 28, 2024, AAG and certain of its current and former officers were named as defendants in a second putative class action lawsuit filed in the same court, captioned Thornburg v.

American Airlines Group Inc., et al .

The Thornburg plaintiff purports to represent investors who acquired AAG securities between July 20, 2023 and May 28, 2024.

Both the Qawasmi and Thornburg complaints assert violations of Sections 10(b) and 20(a) of the Exchange Act based on allegations that, during the relevant periods, AAG misrepresented and/or omitted material facts related to its financial outlook and certain commercial initiatives.

On September 16, 2024, certain purported AAG investors moved for consolidation of the Qawasmi and Thornburg actions as well as appointment as lead plaintiff.

On November 22, 2024, the Qawasmi and Thornburg complaints were consolidated into a single action bearing the caption In re American Airlines Group Inc.

Securities Litigation.

The court also appointed co-lead plaintiffs and lead counsel to represent the putative class in the consolidated action.

The parties now anticipate briefing a motion to dismiss the action.

Additionally, on September 19, 2024, certain of AAG’s current and former directors and officers were named as defendants in a shareholder derivative lawsuit (in which AAG is a nominal defendant) filed in the United States District

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Court for the Northern District of Texas, captioned Hollin v.

Isom, et al .

The Hollin complaint asserts violations of Section 10(b) of the Exchange Act, breach of fiduciary duty, and claims for unjust enrichment and corporate waste.

On September 26, 2024, a second derivative complaint was filed in the same court, similarly naming certain of AAG’s current and former directors and officers (as well as AAG as a nominal defendant), captioned Leon v.

Isom, et al .

The Leon complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duty, claims of unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and a claim for contribution.

The Hollin and Leon complaints generally allege the same purported misconduct as alleged in the securities class actions.

On November 25, 2024, the Hollin and Leon complaints were consolidated into a single action bearing the caption In re American Airlines Group Inc.

Stockholder Derivative Action.

We believe both the securities class actions and shareholder derivative lawsuits are without merit and intend to defend against them vigorously.

In addition to the specifically identified legal proceedings, we and our subsidiaries are also engaged in other legal proceedings from time to time.

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As of December 31, 2024, the remaining lease payments through 2035 guaranteeing the principal and interest on these bonds are $ 503 million and the current carrying amount of the associated operating lease liability in the accompanying consolidated balance sheet is $ 321 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

(g) Credit Card Processing Agreements

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These holdback requirements can be implemented at the discretion of the credit card processing companies upon the occurrence of specific events, including material adverse changes in our financial condition or the triggering of a liquidity covenant.

These credit card processing companies are not currently entitled to maintain any holdbacks.

The imposition of holdback requirements would reduce our liquidity.

(h) Labor Contracts

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 (CBA), 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.

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

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 condensed consolidated statement of operations, including the one-time payment of $ 514 million which was paid in November 2024.

As of December 31, 2024, we employed approximately 133,300 active full-time equivalent (FTE) employees, of which 30,600 were employed by our wholly-owned regional subsidiaries.

Of the total active FTE employees, 87 % are covered by CBAs with various labor unions and 6 % are covered by CBAs that are currently amendable or that will become amendable within one year.

In January 2024, mainline passenger service employees represented by the CWA-IBT ratified a new five-year agreement.

The CBA covering our flight attendants is now amendable.

The CBAs covering certain employee groups at our wholly-owned regional subsidiaries are also amendable.

Supplemental Cash Flow Information

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Property and equipment acquired through debt, finance leases and other 152 317 46

Finance leases converted to operating leases 42 3 —

Operating leases converted to finance leases 293 5 107

Settlement of bankruptcy obligations 4 — ( 1 )

Equity investments — 12 88

Finance leases converted to operating leases 50 42 3

Supplemental information:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Operating Segments and Related Disclosures

We are managed as a single business unit that provides air transportation for passengers and cargo.

This allows us to benefit from an integrated revenue pricing and route network that includes American and our wholly-owned and third-party regional carriers that fly under capacity purchase agreements operating as American Eagle.

The flight equipment of all these carriers is combined to form one fleet that is deployed through a single route scheduling system.

Financial information and annual operational plans and forecasts are prepared and reviewed by the chief operating decision maker at the consolidated level.

When making operational decisions, the chief operating decision maker evaluates flight profitability data, which considers aircraft type and route economics, but is indifferent to the results of the individual regional carriers.

The objective in making operational decisions is to maximize consolidated financial results, not the individual results of American or American Eagle.

Segment Disclosures

Operating segments are defined as components of an enterprise for which separate financial information is available and regularly reviewed by the chief operating decision maker (CODM) in deciding how to allocate resources and in assessing performance.

Our Chief Executive Officer is considered to be our CODM.

We are managed as a single operating segment that provides scheduled air transportation for passengers and cargo, and includes our loyalty program.

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

See Note 1(m) for our passenger revenue by geographic region.

Our tangible assets consist primarily of flight equipment, which are mobile across geographic markets and, therefore, have not been allocated.

Managing the business activities on a consolidated basis allows us to benefit from an integrated revenue pricing and route network that includes American and our wholly-owned and third-party regional carriers that fly under capacity purchase agreements operating as American Eagle.

The flight equipment of all these carriers is combined to form one fleet that is deployed through a single route scheduling system.

Our tangible assets consist primarily of flight equipment, which are mobile across geographic markets and, therefore, have not been allocated by geographic region.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

Financial information and operational plans and forecasts are provided to and reviewed by our CODM at the consolidated level and are used to monitor forecast and budget versus actual results.

Our CODM assesses performance and decides how to allocate resources based on net income which is reported on the statement of operations as consolidated net income.

When making operational and resource allocation decisions, our CODM is indifferent to the results on a geographic region or on a mainline and regional carrier basis.

The objective in making resource allocation decisions is to maximize consolidated financial results.

Share-based Compensation

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Any shares underlying awards granted under the 2023 Plan or 2013 Plan that are forfeited, terminate or are settled in cash (in whole or in part) without the delivery of shares will again be available for grant under the 2023 Plan.

For the years ended December 31, 2023, 2022 and 2021, we recorded $ 102 million, $ 78 million and $ 98 million, respectively, of share-based compensation costs principally in salaries, wages and benefits expense on our consolidated statements of operations.

Share-based compensation expense for our equity awards, including awards settled in AAG common stock or cash, was $ 130 million, $ 102 million and $ 78 million for the years ended December 31, 2024, 2023 and 2022, respectively, and is included in salaries, wages and benefits on our consolidated statements of operations.

During 2024, 2023 and 2022, we withheld approximately 1.6 million, 1.5 million and 1.2 million shares of AAG common stock, respectively, and paid approximately $ 27 million, $ 23 million and $ 21 million, respectively, in satisfaction of certain tax withholding obligations associated with employee equity awards.

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For awards with performance conditions, the expense is recognized based on the expected achievement at each reporting period.

RSUs are classified as equity awards as the vesting results in the issuance of shares of AAG common stock.

Stock-settled RSUs are equity-classified as the vesting results in the issuance of shares of AAG common stock.

Cash-settled restricted stock unit awards (CRSUs) are liability-classified as the vesting results in payment of cash by AAG.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

RSU award activity for all plans for the years ended December 31, 2023, 2022 and 2021 is as follows:

Stock-settled RSU award activity for all plans for the years ended December 31, 2024, 2023 and 2022 is as follows:

Number of Shares Weighted Average Grant Date Fair Value

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Granted 2,580 15.76

( 2,809 ) 16.18

Vested and released ( 4,833 ) 15.91

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Outstanding at December 31, 2024 8,346 $ 15.59

As of December 31, 2023, there was $ 127 million of unrecognized compensation cost related to RSUs.

(1) The settlement terms of 2.8 million stock-settled RSUs were modified from settlement in AAG common stock to settlement in cash.

This change in award settlement method was the only modification to these awards, and the vesting, forfeiture and all other terms and conditions were unchanged.

The modification resulted in a $ 20 million reclassification from additional paid-in capital to accrued salaries and wages on our consolidated balance sheet.

As of December 31, 2024, there was $ 46 million of unrecognized compensation cost related to stock-settled RSUs.

These costs are expected to be recognized over a weighted average period of one year .

The total fair value of RSUs vested during the years ended December 31, 2023, 2022 and 2021 was $ 78 million, $ 70 million and $ 62 million, respectively.

The total fair value of stock-settled RSUs vested during the years ended December 31, 2024, 2023 and 2022 was $ 69 million, $ 78 million and $ 70 million, respectively.

CRSU award activity for all plans for the year ended December 31, 2024 is as follows:

Number of Shares Weighted Average

(In thousands)

Outstanding at December 31, 2023 37 $ 13.74

Granted 5,634 17.43

Vested and released ( 1,337 ) 14.75

Forfeited ( 136 ) 17.42

Outstanding at December 31, 2024 7,007 $ 17.43

(1) The settlement terms of 2.8 million stock-settled RSUs were modified from settlement in AAG common stock to settlement in cash.

See table above for further discussion.

As of December 31, 2024, the liability related to CRSUs was $ 39 million, which will continue to be remeasured at fair value at each reporting date until all awards are vested.

As of December 31, 2024, there was $ 83 million of unrecognized compensation cost related to CRSUs.

These costs are expected to be recognized over a weighted average period of one year .

The total cash paid for CRSUs vested during the year ended December 31, 2024 was $ 18 million.

For the years ended December 31, 2023 and 2022, CRSU award activity was nominal.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC .

Valuation and Qualifying Accounts (in millions)

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Year ended December 31, 2022 634 96 ( 114 ) 616

Subsequent Event

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.

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OF AMERICAN AIRLINES, INC.

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We have audited the accompanying consolidated balance sheets of American Airlines, Inc.

and subsidiaries (American) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), cash flows, and stockholder’s equity for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (American) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, cash flows, and stockholder’s equity for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of American as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S.

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Sufficiency of audit evidence over the realizability of tax net operating loss and other carryforwards

As discussed in Notes 1(j) and 5 to the consolidated financial statements, American had $4.0 billion of tax net operating loss and other carryforwards, which are recorded as deferred tax assets at December 31, 2023.

As discussed in Notes 1(i) and 5 to the consolidated financial statements, American had $3.9 billion of tax net operating loss and other carryforwards, which are recorded as deferred tax assets at December 31, 2024.

Deferred tax assets are recognized related to tax net operating loss and other carryforwards that will reduce future taxable income.

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

In evaluating the need for a valuation allowance, management considers all available positive and negative evidence.

We identified the evaluation of the sufficiency of audit evidence over the realizability of the federal tax net operating loss and other carryforwards as a critical audit matter.

In evaluating the need for a valuation allowance, management considers the weighting of all available positive and negative evidence.

We identified the evaluation of the sufficiency of audit evidence over the realizability of federal tax net operating loss and other carryforwards as a critical audit matter.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to American’s deferred tax asset valuation allowance process, including controls related to the realizability of the federal tax net operating loss and other carryforwards.

We evaluated the design and tested the operating effectiveness of certain internal controls related to American’s deferred tax asset valuation allowance process, including controls related to the realizability of federal tax net operating loss and other carryforwards.

We evaluated positive and negative evidence used in assessing whether the federal tax net operating loss and other carryforwards were more likely than not to be realized in the future.

27 unchanged sentences

Total operating expenses 51,550 49,715 47,312

Operating income (loss) 3,069 1,653 ( 961 )

Operating income 2,654 3,069 1,653

Nonoperating income (expense):

3 unchanged sentences

Total nonoperating expense, net ( 966 ) ( 1,487 ) ( 1,199 )

Income (loss) before income taxes 1,582 454 ( 2,277 )

Income tax provision (benefit) 394 116 ( 500 )

Net income (loss) $ 1,188 $ 338 $ ( 1,777 )

Income before income taxes 1,688 1,582 454

Income tax provision 426 394 116

Net income $ 1,262 $ 1,188 $ 338

See accompanying notes to consolidated financial statements.

AMERICAN AIRLINES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

1 unchanged sentence

2024 2023 2022

Net income (loss) $ 1,188 $ 338 $ ( 1,777 )

Net income $ 1,262 $ 1,188 $ 338

Other comprehensive income (loss), net of tax:

2 unchanged sentences

Total other comprehensive income (loss), net of tax 322 ( 309 ) 1,351

Total comprehensive income (loss) $ 879 $ 1,689 $ ( 624 )

Total comprehensive income $ 1,584 $ 879 $ 1,689

See accompanying notes to consolidated financial statements.

58 unchanged sentences

Cash flows from operating activities:

Net income (loss) $ 1,188 $ 338 $ ( 1,777 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net income $ 1,262 $ 1,188 $ 338

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 2,198 2,198 2,238

2 unchanged sentences

Pension and postretirement ( 82 ) ( 14 ) ( 404 )

Deferred income tax provision (benefit) 394 122 ( 500 )

Share-based compensation 97 75 95

Deferred income tax provision 426 394 122

Share-based compensation, non-cash 89 97 75

Other, net ( 260 ) ( 216 ) ( 48 )

2 unchanged sentences

Increase in other assets ( 287 ) ( 2 ) ( 744 )

Increase in accounts payable and accrued liabilities 828 549 335

Increase in accounts payable 284 147 406

Increase (decrease) in air traffic liability 559 ( 545 ) 658

Decrease (increase) in receivables from related parties, net ( 482 ) ( 1,044 ) 1,857

Increase (decrease) in loyalty program liability 182 10 ( 60 )

Increase in receivables from related parties, net ( 1,099 ) ( 482 ) ( 1,044 )

Increase in loyalty program liability 727 182 10

Contributions to pension plans ( 295 ) ( 71 ) ( 4 )

2 unchanged sentences

Cash flows from investing activities:

Capital expenditures, net of aircraft purchase deposit returns ( 2,542 ) ( 2,489 ) ( 169 )

Proceeds from sale of property and equipment and sale-leaseback transactions 230 147 373

Capital expenditures and aircraft purchase deposits ( 2,624 ) ( 2,542 ) ( 2,489 )

Proceeds from sale-leaseback transactions and sale of property and equipment 654 230 147

Sales of short-term investments 8,013 8,861 14,972

Purchases of short-term investments ( 7,194 ) ( 7,324 ) ( 11,257 )

Decrease (increase) in restricted short-term investments 51 1 ( 401 )

Decrease in restricted short-term investments 177 51 1

Purchase of equity investments — — ( 321 )

5 unchanged sentences

Other financing activities 26 ( 287 ) 75

Net cash provided by (used in) financing activities ( 3,162 ) ( 1,847 ) 2,770

Net cash used in financing activities ( 2,277 ) ( 3,162 ) ( 1,847 )

Net increase in cash and restricted cash 223 95 175

16 unchanged sentences

Balance at December 31, 2021 $ — $ 17,152 $ ( 6,041 ) $ ( 7,285 ) $ 3,826

Net loss — — — ( 1,777 ) ( 1,777 )

Net income — — — 338 338

Other comprehensive income, net — — 1,351 — 1,351

3 unchanged sentences

Net income — — — 1,188 1,188

Other comprehensive income, net — — 1,351 — 1,351

Other comprehensive loss, net — — ( 309 ) — ( 309 )

Share-based compensation expense — 97 — — 97

2 unchanged sentences

Net income — — — 1,262 1,262

Other comprehensive loss, net — — ( 309 ) — ( 309 )

Other comprehensive income, net — — 322 — 322

Share-based compensation expense — 89 — — 89

Modification of share-based awards — ( 20 ) — — ( 20 )

Intercompany equity transfer — 4 — — 4

12 unchanged sentences

The most significant areas of judgment relate to passenger revenue recognition, the loyalty program, deferred tax assets, as well as pension and retiree medical and other postretirement benefits.

(b) Government Assistance

Payroll Support Programs

During 2020 and 2021, American, Envoy Air Inc.

(Envoy), Piedmont Airlines, Inc.

(Piedmont) and PSA Airlines, Inc.

(PSA and together with American, Envoy and Piedmont, the Subsidiaries) entered into payroll support program agreements (PSP Agreements) with the U.S.

The aggregate amount of financial assistance received was approximately $ 12.8 billion, and as partial compensation to the U.S.

Government for the provision of financial assistance provided under each of these programs, AAG issued promissory notes and warrants to Treasury.

The table below provides a summary of the financial assistance received and the promissory notes and the warrants issued under each program (in millions, except exercise price amounts):

Program Closing Date PSP Financial Assistance Promissory Notes (1)

PSP Warrants Total Warrants Issued (Shares) (2)

Exercise Price of Warrants

PSP1 April 20, 2020 $ 4,138 $ 1,757 $ 63 $ 5,958 14.0 $ 12.51

PSP2 January 15, 2021 2,427 1,030 76 3,533 6.6 15.66

PSP3 April 23, 2021 2,290 959 46 3,295 4.4 21.75

Total $ 8,855 $ 3,746 $ 185 $ 12,786 25.0

(1) As partial compensation to the U.S.

Government for the provision of financial assistance under the PSP Agreements, AAG issued promissory notes to Treasury (PSP1 Promissory Note, PSP2 Promissory Note and PSP3 Promissory Note, collectively the PSP Promissory Notes), in the aggregate principal sum of $ 3.7 billion which provides for the guarantee of AAG’s obligations under the PSP Promissory Notes by the Subsidiaries.

(2) The payroll support program warrants (PSP Warrants) are subject to certain anti-dilution provisions, do not have any voting rights and are freely transferable, with registration rights.

The warrants were issued solely as compensation to the U.S.

Government related to entry into the PSP Agreements.

No separate proceeds (apart from the financial assistance described below) were received upon issuance of the warrants or will be received upon exercise thereof.

In connection with the PSP Agreements entered into with Treasury, AAG and the Subsidiaries were required to comply with the relevant provisions of the CARES Act, the PSP Extension Law, and the ARP, which included the requirement that funds provided pursuant to these programs be used exclusively for the continuation of payment of eligible employee wages, salaries and benefits, the prohibition against involuntary furloughs and reductions in employee pay rates and benefits, the requirement that certain levels of commercial air service be maintained, provisions that prohibited the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

repurchase of AAG common stock and the payment of common stock dividends as well as provisions that restrict the payment of certain executive compensation.

As of December 31, 2023, all of these provisions have expired.

Treasury Loan Agreement

Subsequently, on October 21, 2020, AAG and American entered into an amendment to the Treasury Loan Agreement which increased the borrowing amount up to $ 7.5 billion.

In connection with AAG’s entry into the Treasury Loan Agreement, on the Treasury Loan Closing Date, AAG also entered into a warrant agreement (the Treasury Loan Warrant Agreement) with Treasury.

The exercise price of the Treasury Loan Warrant Shares is $ 12.51 per share, subject to certain anti-dilution provisions provided for in the Treasury Loan Warrant Agreement.

For accounting purposes, the fair value for the Treasury Loan Warrant Shares, estimated using a Black-Scholes option pricing model, was recorded in stockholders' deficit in AAG’s consolidated balance sheet with an offsetting debt discount to the Treasury Term Loan Facility in American’s consolidated balance sheet.

The provisions of the Treasury Loan Warrants are substantially similar to the PSP Warrants.

This change in the presentation on the consolidated statement of cash flows had no impact on net cash provided by operating activities or net change in cash and restricted cash.

(b) Recent Accounting Pronouncements

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.

American is currently evaluating how the adoption of this standard will impact its reportable segment disclosures.

Income Taxes (Topic 740) Improvements to Income Tax Disclosures

2 unchanged sentences

American is currently evaluating how the adoption of this standard will impact its income tax disclosures.

(d) Investments

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.

American is currently evaluating how the adoption of this standard will impact its disclosures.

Short-term investments primarily include debt securities and are classified as available-for-sale and stated at fair value.

3 unchanged sentences

There have been no credit losses.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Equity investments are accounted for under the equity method if American is able to exercise significant influence over an investee.

Equity investments for which American does not have significant influence are recorded at fair value or at cost, if fair value is not readily determinable, with adjustments for observable changes in price or impairments (referred to as the measurement alternative).

American’s equity investments are reflected in other assets on its consolidated balance sheets.

American’s share of equity method investees’ financial results and changes in fair value are recorded in nonoperating other income (expense), net on the consolidated statements of operations.

See Note 7 for additional information related to American’s equity investments.

(e) Restricted Cash and Short-term Investments

(d) Restricted Cash and Short-term Investments

American has restricted cash and short-term investments related primarily to collateral held to support workers’ compensation obligations and collateral associated with the AAdvantage Financing.

(f) Accounts Receivable, Net

See Note 3 for further information on the AAdvantage Financing.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(e) Accounts Receivable, Net

Accounts receivable primarily consist of amounts due from credit card processing companies for tickets sold to individual passengers, amounts due from airline and non-airline business partners, including American’s co-branded credit card partners and cargo customers.

3 unchanged sentences

American considers past and future financial and qualitative factors, including aging, payment history and other credit monitoring indicators, when establishing the allowance for credit losses.

(g) Aircraft Fuel, Spare Parts and Supplies, Net

(f) Aircraft Fuel, Spare Parts and Supplies, Net

Aircraft fuel is recorded on a first-in, first-out basis.

2 unchanged sentences

Aircraft fuel, spare parts and supplies are expensed when used.

(h) Operating Property and Equipment

(g) Operating Property and Equipment

7 unchanged sentences

Capitalized software 5 – 10 years

Total mainline and regional depreciation and amortization expense was $ 2.2 billion for each of the years ended December 31, 2023 and 2022 and $ 2.3 billion for the year ended December 31, 2021.

Total mainline and regional depreciation and amortization expense was $ 2.2 billion for each of the years ended December 31, 2024, 2023 and 2022.

American assesses impairment of operating property and equipment when events and circumstances indicate that the assets may be impaired.

4 unchanged sentences

Fair value reflects management’s best estimate including inputs from published pricing guides and bids from third parties as well as contracted sales agreements when applicable.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

American determines if an arrangement is a lease at inception.

4 unchanged sentences

American uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments.

American gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates.

American gives consideration to its recent debt

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

issuances as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates.

American’s lease term includes options to extend the lease when it is reasonably certain that it will exercise that option.

7 unchanged sentences

For real estate, American accounts for the lease and non-lease components as a single lease component.

(j) Income Taxes

(i) Income Taxes

Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recorded net as noncurrent deferred income taxes.

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

Deferred tax assets and liabilities are recorded net as noncurrent on American’s consolidated balance sheets.

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

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

11 unchanged sentences

The carrying value of American’s goodwill on its consolidated balance sheets was $ 4.1 billion as of December 31, 2024 and 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(l) Other Intangibles, Net

(k) Other Intangibles, Net

Definite-Lived Intangible Assets

The following table provides information relating to American’s amortizable intangible assets as of December 31, 2023 and 2022 (in millions):

Domestic airport slots $ 365 $ 365

Customer relationships 300 300

Marketing agreements 105 105

Tradenames 35 35

Airport gate leasehold rights 137 137

Accumulated amortization ( 834 ) ( 827 )

Total $ 108 $ 115

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Certain domestic airport slots and airport gate leasehold rights are amortized on a straight-line basis over 25 years.

Certain marketing agreements were identified as intangible assets subject to amortization and are amortized on a straight-line basis over approximately 30 years.

Customer relationships and tradenames are fully amortized.

American recorded amortization expense related to these intangible assets of $ 7 million for the year ended December 31, 2023 and $ 41 million for each of the years ended December 31, 2022 and 2021.

American expects to record annual amortization expense for these intangible assets as follows (in millions):

2029 and thereafter 76

American had $ 101 million and $ 108 million of definite-lived intangible assets, net of accumulated amortization on its consolidated balance sheets as of December 31, 2024 and 2023, respectively.

American expects to record amortization expense related to these assets of approximately $ 6 million for each of the years in 2025 through 2029, and $ 70 million of amortization expense in 2030 and thereafter until fully amortized.

Indefinite-Lived Intangible Assets

6 unchanged sentences

American had $ 1.9 billion of indefinite-lived intangible assets on its consolidated balance sheets as of December 31, 2024 and 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(l) Fuel Financing

In December 2024, American entered into a fuel financing facility with a bank pursuant to which the bank pays certain fuel invoices on its behalf.

The agreement contains a maximum allowable outstanding principal balance at any time of $ 1.0 billion and is required to be repaid at least quarterly.

The fuel financing facility bears interest at a base rate equal to one-month Secured Overnight Financing Rate (SOFR) plus a margin of 3.75 %.

American’s obligations to the counterparty are secured on a second-priority basis by certain intellectual property of American, including the “American Airlines” trademark and the “aa.com” domain name in the United States and certain foreign jurisdictions, as provided in, and subject to the covenants and conditions of, the Second Lien Brand Collateral Security Agreement.

Either American or the bank may terminate this agreement at any time and with immediate effect upon sixty days’ prior written notice to the other party.

As of December 31, 2024, American had $ 74 million in fuel financing obligations included within other accrued liabilities on American’s consolidated balance sheet.

During the year ended December 31, 2024, American recognized a nominal amount of interest expense related to this agreement.

American includes payments to designated fuel suppliers as an operating activity in the consolidated statement of cash flows.

Proceeds and payments related to fuel financing transactions are presented net as a financing activity in the consolidated statement of cash flows.

( m) Revenue Recognition

12 unchanged sentences

Total operating revenues $ 54,204 $ 52,784 $ 48,965

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(1) Loyalty revenue included in passenger revenue is principally comprised of mileage credit redemptions, which were earned from travel or co-branded credit card and other partners.

21 unchanged sentences

These taxes and fees have been presented on a net basis in the accompanying consolidated statements of operations and recorded as a liability until remitted to the appropriate taxing authority.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Loyalty Revenue

8 unchanged sentences

The estimated selling price of mileage credits is adjusted for an estimate of mileage credits that will not be redeemed using a statistical model based on historical redemption patterns to develop an estimate of the likelihood of future redemption.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

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

American sells mileage credits to participating airline partners and non-airline business partners, including American’s 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.

American allocates the consideration received from these sales of mileage credits based on the relative selling price of each product or service delivered.

American’s most significant mileage credit partner agreements are its co-branded credit card agreements with Citi and Barclaycard US.

American’s most significant mileage credit partner agreements are its co-branded credit card agreements with Citibank N.A.

(Citi) and Barclaycard US.

American identified two revenue elements in these co-branded credit card agreements:

the transportation component and the marketing component.

In December 2024, American 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.

Based on the revised terms, the products and services delivered are generally consistent with American’s previous agreement, and American 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.

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Contract Balances

American’s significant contract liabilities are comprised of (1) outstanding loyalty program mileage credits that may be redeemed for future travel and non-air travel awards, reported as loyalty program liability on American’s consolidated balance sheets and (2) ticket sales for transportation that has not yet been provided, reported as air traffic liability on American’s consolidated balance sheets.

American’s significant contract liabilities are comprised of (1) outstanding loyalty program mileage credits that may be redeemed for future air travel, non-air travel and other awards, reported as loyalty program liability on American’s consolidated balance sheets and (2) ticket sales for transportation that has not yet been provided, reported as air traffic liability on American’s consolidated balance sheets.

(In millions)

2 unchanged sentences

Total $ 16,813 $ 15,527

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

The balance of the loyalty program liability fluctuates based on seasonal patterns, which impact the volume of mileage credits issued through travel or sold to co-branded credit card and other partners (deferral of revenue) and mileage credits redeemed (recognition of revenue).

4 unchanged sentences

Balance at December 31, 2024 (2)

(1) Principally relates to revenue recognized from the redemption of mileage credits for both air and non-air travel awards.

(1) Principally relates to revenue recognized from the redemption of mileage credits for both air travel, non-air travel and other awards.

Mileage credits are combined in one homogenous pool and are not separately identifiable.

2 unchanged sentences

As of December 31, 2024, American’s current loyalty program liability was $ 3.6 billion and represents American’s current estimate of revenue expected to be recognized in the next 12 months based on historical trends, with the balance reflected in long-term loyalty program liability expected to be recognized as revenue in periods thereafter.

Additionally, as of December 31, 2024, American’s loyalty program liability includes a one-time cash payment related to the new co-branded credit card agreement announced in December 2024, which will be amortized over the life of the new agreement beginning in 2026.

The air traffic liability principally represents tickets sold for future travel on American and partner airlines.

9 unchanged sentences

Advertising costs are expensed as incurred.

Advertising expense was $ 114 million for the year ended December 31, 2023 and $ 105 million for each of the years ended December 31, 2022 and 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Advertising expense was $ 143 million, $ 114 million and $ 105 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(p) Share-based Compensation

American accounts for its share-based compensation expense based on the fair value of the stock award at the time of grant, which is recognized ratably over the vesting period of the stock award.

American accounts for its share-based compensation expense based on the fair value of the equity award at the time of grant, which is recognized ratably over the vesting period of the award.

Certain awards have performance conditions that must be achieved prior to vesting and are expensed based on the expected achievement at each reporting period.

The majority of American’s stock awards are time vested restricted stock units, and the fair value of such awards is based on the market price of the underlying shares of AAG common stock on the date of grant.

The majority of American’s equity awards are time vested restricted stock units.

For liability-classified awards, the fair value of such awards is remeasured at the end of each reporting period until settled.

See Note 13 for further discussion of share-based compensation.

1 unchanged sentence

Foreign currency gains and losses are recorded as part of other income (expense), net within total nonoperating expense, net on American’s consolidated statements of operations.

For the years ended December 31, 2023 , 2022 and 2021, respectively, foreign currency losses were $ 30 million, $ 38 million and $ 4 million.

For the years ended December 31, 2024, 2023 and 2022, foreign currency losses were $ 47 million, $ 30 million and $ 38 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(r) Other Operating Expenses

8 unchanged sentences

(Republic Holdings), the parent company of Republic.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Special Items, Net

4 unchanged sentences

$ 605 $ 989 $ —

A330 fleet-related adjustments (2)

Severance expenses 13 23 —

Fleet impairment (3)

Litigation reserve adjustments — — 37

PSP Financial Assistance (4)

— — ( 4,162 )

Other operating special items, net 34 ( 41 ) 7

Mainline operating special items, net 610 971 193

PSP Financial Assistance (4)

Fleet impairment (3)

Regional operating special items, net (3)

Operating special items, net 643 971 193

Debt refinancing, extinguishment and other, net (5)

Mark-to-market adjustments on equity and other investments, net (6)

Debt refinancing and extinguishment (4)

Mark-to-market adjustments on equity investments, net (5)

Nonoperating special items, net 24 362 72

Income tax special items, net — — ( 9 )

(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 for 2023 included costs associated with headcount reductions in certain corporate functions.

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

(1) Labor contract expenses for 2024 related to one-time charges resulting from the ratification of new collective bargaining agreements (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.

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

(4) The PSP Financial Assistance represents recognition of a portion of the financial assistance received from Treasury pursuant to the payroll support programs established by the U.S.

See Note 1(b) for further information.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

(4) Debt refinancing and extinguishment costs in 2023 primarily included cash charges for premiums paid in connection with the early repayment of debt.

See Note 3 for further information.

(6) Mark-to-market adjustments on equity and other investments, net principally included net unrealized gains and losses associated with certain equity investments and certain other investments.

(5) Mark-to-market adjustments on equity investments, net included net unrealized gains and losses associated with certain equity investments.

See Note 7 for further information related to American’s equity investments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC.

Long-term debt included on American’s consolidated balance sheets consisted of (in millions):