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Item 7. Management’s Discussion and Analysis

2026-02-18 compared with 2025-02-19 · 152 added, 156 removed, 361 unchanged (46% of the section changed)

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2025 Financial Overview

Business and Macroeconomic Conditions

Starting in the first quarter of 2025, the U.S.

Government has promoted and implemented plans to place additional tariffs on goods imported into the U.S.

from numerous countries and has pursued other trade policies intended to restrict imports and, in response, multiple nations have countered with reciprocal tariffs and other actions.

These or additional changes in U.S.

or international trade policies, along with continued uncertainty surrounding such policies, could lead to further weakened business conditions for the transportation industry, which may adversely impact our operations through increased supply chain challenges, commodity price volatility and a decline in discretionary spending and consumer confidence, among others.

We continue to monitor the situation.

Many aspects of our airline operations depend on the U.S.

Government, and in the fourth quarter of 2025, the prolonged government shutdown led to mandated schedule reductions, strained air traffic control and security screening resources, reduced air traffic capacity at key U.S.

airports, and increased delays and cancellations.

Additionally, the government shutdown-related uncertainty temporarily impacted customer bookings in the fourth quarter of 2025 and negatively impacted our revenue by approximately $325 million.

AAG’s 2025 Financial Results

The selected financial data presented below is derived from AAG’s audited consolidated financial statements included in Part II, Item 8A of this report and should be read in conjunction with those financial statements and the related notes thereto.

December 31, Increase

Year Ended December 31, Increase

(Decrease) Percent

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Pre-Tax Income and Net Income

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

Pre-tax income and net income were $190 million and $111 million, respectively, in 2025.

This compares to 2024 pre-tax income and net income of $1.2 billion and $846 million, respectively.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Pre-tax income on a GAAP basis decreased in 2025 as compared to 2024.

This decrease was driven primarily by increases in certain operating expenses including salaries, wages and benefits, regional expenses and other operating expenses, offset in part by lower costs for aircraft fuel and related taxes, a decrease in pre-tax net special items and higher revenues.

Excluding the effects of pre-tax net special items, pre-tax income was $352 million and $1.8 billion in 2025 and 2024, respectively.

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

In 2025, we reported total operating revenues of $54.6 billion, an increase of $422 million, or 0.8%, as compared to 2024.

Passenger revenue was $49.6 billion and remained relatively flat as compared to 2024.

Our passenger revenue in 2025 was impacted by the American Eagle flight 5342 accident and softness in domestic demand for air travel in the first half of the year, offset by strength in international travel, particularly in the Atlantic and Pacific regions, and recovery in domestic travel in the second half of the year despite the negative revenue impact from the temporary shutdown of the U.S.

Government in the fourth quarter of 2025.

Other operating revenue increased $330 million, or 8.7%, in 2025 as compared to 2024, driven primarily by higher revenue associated with our loyalty program.

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

During 2025 and 2024, cash payments from co-branded credit card and other partners were $6.2 billion and $6.1 billion, respectively.

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

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In 2025, aircraft fuel expense totaled $10.7 billion, a decrease of $700 million, or 6.1%, as compared to 2024.

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

This decrease was primarily driven by an 8.2% decrease in the average price per gallon of aircraft fuel including related taxes to $2.39 in 2025 from $2.60 in 2024, offset in part by a 2.2% increase in gallons of fuel consumed due to increased capacity.

As of December 31, 2025, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption.

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

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

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

general economic conditions and the price of fuel.

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

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

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

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

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

Additionally, we continue to focus on initiatives to reengineer our business through the use of digital solutions, process enhancements and procurement transformation and we intend to continue to invest in reengineering our business through 2026 and beyond to build an even more efficient airline and continue to manage costs while delivering a better experience for our customers and team.

Our 2025 CASM was 17.76 cents, an increase of 0.8%, from 17.61 cents in 2024.

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

Our 2025 CASM excluding net special items and fuel was 14.12 cents, an increase of 4.6%, from 13.50 cents in 2024, which was primarily driven by higher costs for salaries, wages and benefits, regional expenses and other operating expenses.

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

Selected Consolidated Financial Data – “Reconciliation of GAAP to Non-GAAP Financial Measures.”

As of December 31, 2024, we had $10.3 billion in total available liquidity, consisting of $7.0 billion in unrestricted cash and short-term investments and $3.3 billion in total undrawn capacity under revolving credit and other short-term facilities.

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

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

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

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

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

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

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

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

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

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

Recent Developments

As of December 31, 2025, we had $9.2 billion in total available liquidity, consisting of $5.8 billion in unrestricted cash and short-term investments and $3.4 billion in total undrawn capacity under revolving credit and other facilities.

During 2025, we completed the following financing transactions (see Notes 1, 4 and 11 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information):

• amended the AAdvantage term loan credit and guaranty agreement to reduce the applicable interest rate margin and to reduce the scheduled quarterly principal amortization amount;

• issued $1.0 billion of incremental term loans pursuant to the AAdvantage term loan credit guaranty agreement (2025 AAdvantage Term Loan Facility), as amended;

• prepaid $487 million of the outstanding principal amounts of certain equipment notes issued under enhanced equipment trust certificates (EETCs);

• increased the aggregate revolving commitments under the 2013, 2014 and 2023 Revolving Facilities from approximately $2.9 billion to $3.0 billion;

• received $432 million of gross proceeds pursuant to special facility revenue bonds issued by the Tulsa Municipal Airport Trust (TMAT), of which a portion was used to fund the redemption of other bonds related to TMAT and the remaining amount will be used to finance the cost of improvements at American’s overhaul and maintenance base at Tulsa International Airport;

• prepaid in full $937 million of the outstanding principal amounts of the 10.75% senior secured IP notes (the IP Notes) and the 10.75% senior secured LGA/DCA notes (LGA/DCA Notes and together with the IP Notes, the 10.75% Senior Secured Notes);

• borrowed $629 million under a senior unsecured short-term term loan facility due in January 2026;

• received approximately $978 million in proceeds from EETCs;

• received $840 million in net proceeds from fuel financing transactions;

• issued $1.2 billion of equipment loans and other notes payable in connection with the financing of certain aircraft.

American Eagle Flight 5342

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

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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.

We estimate that the accident reduced first quarter 2025 total operating revenues by approximately $200 million, of which the impacted revenue is not covered by insurance.

Beginning on September 24, 2025, multiple wrongful death and survival actions have been filed against the U.S.

Government, PSA and American seeking unspecified damages, and we expect that additional lawsuits will be filed.

While we cannot predict the outcome of these lawsuits, American has industry standard insurance coverage for this incident and we believe these lawsuits are without merit and are defending against them vigorously.

AAG’s Results of Operations

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

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

five Embraer 145 and two Bombardier CRJ 900.

Excluded from the aircraft count above as of December 31, 2025 are three Airbus A321XLR mainline aircraft and four Bombardier CRJ900 regional aircraft held in temporary storage.

Operating Revenues

Year Ended December 31, Increase

(Decrease) Percent

Year Ended December 31, Increase Percent

(In millions, except percentage changes)

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Passenger revenue $ 49,643 0.1% 0.6% 2.2% (1.3)pts (0.5)% (2.0)%

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

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

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

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

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

Passenger revenue remained relatively flat in 2025 as compared to 2024.

Government in the fourth quarter of 2025.

Other operating revenue increased $330 million, or 8.7%, in 2025 from 2024 driven primarily by higher revenue associated with our loyalty program.

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

During 2025 and 2024, cash payments from co-branded credit card and other partners were $6.2 billion and $6.1 billion, respectively.

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

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

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

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

Operating Expenses

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Total operating expenses $ 53,166 $ 51,597 $ 1,569 3.0

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

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

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

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

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

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

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

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

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

Aircraft fuel and related taxes decreased $700 million, or 6.1%, in 2025 from 2024 primarily due to an 8.2% decrease in the average price per gallon of aircraft fuel including related taxes to $2.39 in 2025 from $2.60 in 2024, offset in part by a 2.2% increase in gallons of fuel consumed due to increased capacity.

Salaries, wages and benefits increased $1.5 billion, or 9.6%, in 2025 from 2024 primarily due to contractual wage rate increases and higher costs for benefit-related items associated with newly ratified and extended labor agreements reached in 2024, as well as annual contractual wage rate increases in our other labor agreements.

Regional expenses increased $406 million, or 8.1%, in 2025 from 2024 primarily due to an increase in regional flight operations as regional capacity, as measured by ASMs, increased 10.3% year over year.

Higher maintenance, materials and repair costs driven by an increase in the volume of airframe heavy checks and cost of materials also contributed to the increase in regional expenses.

Maintenance, materials and repairs increased $50 million, or 1.3%, in 2025 from 2024 primarily due to increased costs for airframe heavy checks and component part repairs driven by higher volume, offset in part by a decrease in the volume of engine overhauls.

Other rent and landing fees increased $173 million, or 5.2%, in 2025 from 2024 primarily due to rate increases at certain airports, offset in part by a decrease in leased engines.

Selling expenses increased $185 million, or 10.2%, in 2025 from 2024 primarily due to an increase in commissions expense, driven by higher costs resulting from renegotiated agency contracts, as well as an increase in advertising expenses.

Higher credit card fees driven by higher rates also contributed to the increase in selling expenses.

Other operating expenses increased $419 million, or 6.5%, in 2025 from 2024 primarily driven by increased costs for crew travel, onboard food and catering, ground and cargo handling, and airport lounge operations, as well as certain general and administrative expenses.

Operating Special Items, Net

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(In millions)

Litigation reserve adjustments $ 77 $ —

Labor contract expenses (1)

A330 fleet-related adjustments (2)

Severance expenses 44 13

A330 fleet-related adjustments (2)

Other operating special items, net 7 34

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Operating special items, net $ 162 $ 643

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

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

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

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

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

(1) Labor contract expenses for 2025 included a one-time charge resulting from adjustments to vacation accruals due to pay rate increases effective January 1, 2025, following the ratification of the contract extension in the fourth quarter of 2024 with our mainline maintenance and fleet service team members.

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

(2) In 2024, we entered into a sales agreement for certain Airbus A330 aircraft, resulting in a $42 million gain.

These aircraft were previously retired in 2020 as a result of the decline in demand for air travel due to the COVID-19 pandemic.

(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 ERJ145 aircraft.

Nonoperating Results

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Interest expense, net (1,716) (1,934) 218 (11.2)

Other income (expense), net 6 (359) 365 nm (1)

Other income, net 82 6 76 nm (1)

Total nonoperating expense, net $ (1,277) $ (1,460) $ 183 (12.5)

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

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

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

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

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

Interest income decreased $111 million, or 23.7%, in 2025 compared to 2024 primarily due to lower interest rates and a decrease in the average balance of our short-term investments, resulting in reduced returns.

Interest expense, net decreased $218 million, or 11.2%, in 2025 compared to 2024 primarily due to lower interest rates on our variable-rate debt instruments and lower outstanding debt in 2025, as we continue our efforts to strengthen the balance sheet.

In 2025, other nonoperating income, net included $57 million of non-service related pension and other postretirement benefit plan income, $51 million of net earnings related to our equity investments accounted for under the equity method

and $40 million of mark-to-market net unrealized gains associated with certain equity investments recognized as net special items.

These amounts were offset in part by $40 million of net special charges related to debt refinancings and extinguishments and other costs, as well as $15 million of foreign currency losses.

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

In 2025, we recorded an income tax provision of $79 million with an effective rate of approximately 41.2%, which was substantially non-cash.

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Operating Revenues

Year Ended December 31, Increase (Decrease) Percent

Increase (Decrease)

Year Ended December 31, Increase Percent

(In millions, except percentage changes)

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Total operating revenues $ 54,626 $ 54,204 $ 422 0.8

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

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

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

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

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

Passenger revenue remained relatively flat in 2025 as compared to 2024.

American’s passenger revenue in 2025 was impacted by the American Eagle flight 5342 accident and softness in domestic demand for air travel in the first half of the year, offset by strength in international travel, particularly in the Atlantic and Pacific regions, and recovery in domestic travel in the second half of the year despite the negative revenue impact from the temporary shutdown of the U.S.

Government in the fourth quarter of 2025.

Other operating revenue increased $330 million, or 8.7%, in 2025 from 2024 driven primarily by higher revenue associated with American’s loyalty program.

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

During 2025 and 2024, cash payments from co-branded credit card and other partners were $6.2 billion and $6.1 billion, respectively.

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

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

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

Operating Expenses

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Total operating expenses $ 53,115 $ 51,550 $ 1,565 3.0

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

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

Regional expenses increased $397 million, or 7.9%, in 2025 from 2024 primarily due to an increase in regional flight operations and costs at American’s regional carriers.

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

Other rent and landing fees increased $173 million, or 5.2%, in 2025 from 2024 primarily due to rate increases at certain airports, offset in part by a decrease in leased engines.

Higher credit card fees driven by higher rates also contributed to the increase in selling expenses.

Other operating expenses increased $424 million, or 6.6%, in 2025 from 2024 primarily driven by increased costs for crew travel, onboard food and catering, ground and cargo handling, and airport lounge operations, as well as certain general and administrative expenses.

Operating Special Items, Net

1 unchanged sentence

(In millions)

Litigation reserve adjustments $ 77 $ —

Labor contract expenses (1)

A330 fleet-related adjustments (2)

Severance expenses 44 13

A330 fleet-related adjustments (2)

Other operating special items, net 7 34

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Operating special items, net $ 162 $ 643

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

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

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

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

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

(1) Labor contract expenses for 2025 included a one-time charge resulting from adjustments to vacation accruals due to pay rate increases effective January 1, 2025, following the ratification of the contract extension in the fourth quarter of 2024 with American’s mainline maintenance and fleet service team members.

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

(2) In 2024, American entered into a sales agreement for certain Airbus A330 aircraft, resulting in a $42 million gain.

These aircraft were previously retired in 2020 as a result of the decline in demand for air travel due to the COVID-19 pandemic.

(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 ERJ145 aircraft.

Nonoperating Results

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Interest expense, net (1,780) (2,029) 249 (12.3)

Other income (expense), net 5 (359) 364 nm

Other income, net 81 5 76 nm

Total nonoperating expense, net $ (750) $ (966) $ 216 (22.3)

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

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

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

Interest income decreased $109 million, or 10.3%, in 2025 compared to 2024 primarily due to lower interest rates and a decrease in the average balance of American’s short-term investments, resulting in reduced returns.

Interest expense, net decreased $249 million, or 12.3%, in 2025 compared to 2024 primarily due to lower interest rates on American’s variable-rate debt instruments and lower outstanding debt in 2025, as American continues its efforts to strengthen the balance sheet.

In 2025, other nonoperating income, net included $56 million of non-service related pension and other postretirement benefit plan income, $51 million of net earnings related to American’s equity investments accounted for under the equity method and $40 million of mark-to-market net unrealized gains associated with certain equity investments recognized as net special items.

These amounts were offset in part by $40 million of net special charges related to debt refinancings and extinguishments and other costs, as well as $15 million of foreign currency losses.

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

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

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Certain Covenants

Our debt agreements contain customary terms and conditions as well as various affirmative, negative and financial covenants that, among other things, may restrict the ability of us and our subsidiaries to incur additional indebtedness, pay dividends or repurchase stock.

Our debt agreements contain customary terms and conditions as well as various affirmative, negative and financial covenants that, among other things, may restrict our ability and that of our subsidiaries to incur additional indebtedness, pay dividends or repurchase stock.

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.

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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.

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.

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

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Operating Activities

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

Our net cash provided by operating activities was $3.1 billion and $4.0 billion in 2025 and 2024, respectively, an $884 million year-over-year decrease driven by lower profitability and net changes in working capital.

Investing Activities

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

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

Our net cash used in investing activities was $1.9 billion and $968 million in 2025 and 2024, respectively.

Our principal investing activities in 2025 included $3.8 billion of capital expenditures, which primarily related to the purchase of 23 Boeing 737 MAX aircraft, 12 Embraer E175 aircraft, eight Bombardier CRJ900 aircraft, six Boeing 787-9 aircraft, five Airbus A321XLR aircraft, two Boeing 737-800 aircraft lease repurchases, one Airbus A321neo aircraft, one Airbus A320 aircraft lease repurchase and eight aircraft engines.

These cash outflows were offset in part by $1.3 billion in net sales of short-term investments and $344 million in proceeds from sale-leaseback transactions and sale of property and equipment, which primarily related to the modernization of Terminals 4 and 5 at LAX and sale of certain of our A330 aircraft.

Additionally, we had $328 million in net proceeds from the issuance of the TMAT special facility revenue bonds.

Our principal investing activities in 2024 included $2.7 billion of capital expenditures, which primarily related to the purchase of 16 Embraer E175 aircraft, six Boeing 737 MAX aircraft, four Airbus A321neo aircraft , four Boeing 737-800 aircraft lease repurchases, two Bombardier CRJ900 aircraft, one Airbus A320 aircraft lease repurchase, 48 aircraft engines and aircraft purchase deposits.

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

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

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

Financing Activities

Our net cash used in financing activities was $1.1 billion and $2.8 billion in 2025 and 2024, respectively.

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

Our principal financing activities in 2025 included $5.5 billion in long-term debt and finance lease repayments, consisting of $4.1 billion in scheduled repayments, including the $1.0 billion cash settlement of AAG’s 6.50% convertible senior notes.

Debt and finance lease repayments also included the early repayments of $937 million for the outstanding principal amounts of the 10.75% Senior Secured Notes and $487 million for the outstanding principal amount of equipment notes issued under EETCs.

These cash outflows were offset in part by $3.8 billion of proceeds from issuance of long-term debt, consisting of $1.2 billion from the issuance of equipment loans and other notes payable, $978 million from the issuance of EETCs in connection with the financing of certain aircraft, $1.0 billion from the issuance of the 2025 AAdvantage Term Loan Facility and $629 million under a senior unsecured short-term term loan facility due January 2026.

Additionally, we had $840 million in net proceeds from fuel financing transactions.

Our principal financing activities in 2024 included $4.5 billion in long-term debt and finance lease repayments, consisting of $3.7 billion in scheduled repayments and the early repayments of $487 million of the outstanding principal amount of the 3.75% Senior Notes and $263 million toward portions of the outstanding principal amounts of the 10.75% Senior Secured Notes.

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

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

In February 2023, we refinanced approximately $1.8 billion in aggregate principal amount of term loans outstanding under the 2013 Term Loan Facility through the combination of (i) issuing $750 million in aggregate principal amount of the 7.25% Senior Secured Notes and (ii) extending the maturity of $1.0 billion in term loans under the 2013 Term Loan Facility.

In December 2023, we issued $1.0 billion aggregate principal amount of the 8.50% Senior Secured Notes and entered into the 2023 Term Loan Facility in an aggregate principal amount of $1.1 billion.

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

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

Operating Activities

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

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

American’s net cash provided by operating activities was $1.9 billion and $3.4 billion in 2025 and 2024, respectively, a $1.5 billion year-over-year decrease driven by a net increase in receivables from related parties, including the scheduled repayment of AAG’s $1.0 billion 6.50% convertible senior notes.

Excluding this net increase in receivables from related parties, American’s operating cash flows decreased $877 million compared to 2024 due to lower profitability and net changes in working capital.

Investing Activities

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

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

American’s net cash used in investing activities was $1.8 billion and $909 million in 2025 and 2024, respectively.

American’s principal investing activities in 2025 included $3.7 billion of capital expenditures, which primarily related to the purchase of 23 Boeing 737 MAX aircraft, 12 Embraer E175 aircraft, eight Bombardier CRJ900 aircraft, six Boeing 787-9 aircraft, five Airbus A321XLR aircraft, two Boeing 737-800 aircraft lease repurchases, one Airbus A321neo aircraft, one Airbus A320 aircraft lease repurchase and eight aircraft engines.

These cash outflows were offset in part by $1.3 billion in net sales of short-term investments and $343 million in proceeds from sale-leaseback transactions and sale of property and equipment, which primarily related to the modernization of Terminals 4 and 5 at LAX and sale of certain of American’s A330 aircraft.

Additionally, American had $328 million in net proceeds from the issuance of the TMAT special facility revenue bonds.

American’s principal investing activities in 2024 included $2.6 billion of capital expenditures, which primarily related to the purchase of 16 Embraer E175 aircraft, six Boeing 737 MAX aircraft, four Airbus A321neo aircraft , four Boeing 737-800 aircraft lease repurchases, two Bombardier CRJ900 aircraft, one Airbus A320 aircraft lease repurchase, 48 aircraft engines and aircraft purchase deposits.

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

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

Financing Activities

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

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

American’s net cash used in financing activities was $47 million and $2.3 billion in 2025 and 2024, respectively.

American’s principal financing activities in 2025 included $4.5 billion in long-term debt and finance lease repayments, consisting of $3.1 billion in scheduled repayments and the early repayments of $937 million for the outstanding principal amounts of the 10.75% Senior Secured Notes and $487 million for the outstanding principal amount of equipment notes issued under EETCs.

Additionally, American had $840 million in net proceeds from fuel financing transactions.

American’s principal financing activities in 2024 included $4.0 billion in long-term debt and finance lease repayments, consisting of $3.7 billion in scheduled repayments and the early repayment of $263 million toward portions of the outstanding principal amounts of the 10.75% Senior Secured Notes.

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

In February 2023, American refinanced approximately $1.8 billion in aggregate principal amount of term loans outstanding under the 2013 Term Loan Facility through the combination of (i) issuing $750 million in aggregate principal amount of the 7.25% Senior Secured Notes and (ii) extending the maturity of $1.0 billion in term loans under the 2013 Term Loan Facility.

In December 2023, American issued $1.0 billion aggregate principal amount of the 8.50% Senior Secured Notes and entered into the 2023 Term Loan Facility in an aggregate principal amount of $1.1 billion.

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

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

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In the case of aircraft EETCs, rather than finance each aircraft separately when such aircraft is purchased, delivered or refinanced, these trusts allow American to raise the financing for a number of aircraft at one time and, if applicable, place such funds in escrow pending a future purchase, delivery or refinancing of the relevant aircraft.

Similarly, in the case of the spare engine EETCs, the trusts allow American to use its existing pool of spare engines to raise financing under a single facility.

Similarly, in the case of spare engine EETCs, the trusts allow American to use its existing pool of spare engines to raise financing under a single facility.

The trusts have also been structured to provide for certain credit enhancements, such as liquidity facilities to cover certain interest payments, that reduce the risks to the purchasers of the trust certificates and, as a result, reduce the cost of aircraft financing to American.

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172 197 201 208 171 49 998

Finance lease obligations (See Note 5)

3 — — — — — 3

Operating lease commitments (See Note 5)

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(c) For variable-rate debt, future interest obligations are estimated using the current forward rates at December 31, 2025.

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

(d) Includes $6.9 billion of future principal payments and $1.0 billion of future interest payments as of December 31, 2025, related to EETCs associated with mortgage financings of certain aircraft and spare engines.

(e) See Part I, Item 2.

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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 and certain management assumptions.

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

Additionally, the amounts in the table exclude five

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

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

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

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

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

(g) Represents minimum pension contributions and expected contributions to our retiree medical and other post-retirement plans based on actuarially determined estimates as of December 31, 2025 and is based on estimated payments through 2035.

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

In January 2026, we made required contributions of $236 million and a supplemental contribution of $50 million to our defined benefit pension plans.

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

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

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

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

See Part I, Item 1A.

Risk Factors – “Downturns in economic conditions could adversely affect our business” for additional discussion.

An increase in costs, either due to an increase in borrowing costs caused by a reduction in credit ratings or a general increase in interest rates, or due to an increase in the cost of fuel, maintenance, aircraft, aircraft engines or parts, could decrease the amount of cash available to cover cash contractual obligations.

An increase in costs, either due to an increase in borrowing costs caused by a reduction in credit ratings or a general increase in interest rates, due to an increase in the cost of fuel, maintenance, aircraft, aircraft engines or parts, or due to an increase in tariffs, could decrease the amount of cash available to cover cash contractual obligations.

Moreover, certain of our financing arrangements contain significant minimum cash balance or similar liquidity requirements.

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Ticket and other related sales for transportation that has not yet been provided are initially deferred and recorded as air traffic liability on our consolidated balance sheets.

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

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

The contract duration of passenger tickets is generally one year.

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We currently operate the loyalty program, AAdvantage.

This program awards mileage credits to passengers who fly on American, any one world airline or other partner airlines, or by using the services of other program participants, such as our co-branded credit cards, and certain hotels and car rental companies.

Mileage credits can be redeemed for travel on American and other participating partner airlines, as well as non-air travel awards such as hotels and rental cars.

This program awards mileage credits to passengers who fly on American, American Eagle, any one world airline or other partner airlines, or by using the services of other program participants, such as our co-branded credit cards, and certain hotels and car rental companies.

Mileage credits can be redeemed for travel on American, American Eagle and other participating partner airlines, as well as for other non-air travel awards such as car rentals, hotel stays, cruises and retail goods from program partners.

For mileage credits earned by AAdvantage program members, we apply the deferred revenue method.

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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.

For the year ended December 31, 2024, a hypothetical 10% increase in the estimated selling price of mileage credits would have decreased revenues by approximately $140 million as a result of additional amounts deferred from passenger ticket sales to be recognized in future periods.

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 10 years as of December 31, 2024.

For the year ended December 31, 2025, a hypothetical 10% increase in the estimated selling price of mileage credits would have decreased revenues by approximately $155 million primarily as a result of additional amounts deferred from passenger ticket sales to be recognized in future periods.

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

We sell mileage credits to participating airline partners and non-airline business partners, including our co-branded credit card partner, under contracts with remaining terms generally from one to 10 years as of December 31, 2025.

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.

Sales of mileage credits to co-branded credit card and non-airline business partners are comprised of two revenue elements:

a transportation component and a marketing component.

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.

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.

Our most significant mileage credit partner agreement is our co-branded credit card agreement with Citi.

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

starting in 2026.

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

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

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

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fixed income securities, 18% U.S.

stocks, 24% private investments, 14% developed international stocks and 5% emerging market stocks.

stocks, 25% private investments, 9% international developed market stocks and 3% emerging market stocks.

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

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

Lowering the expected long-term rate of return on plan assets by 50 basis points would increase estimated 2026 pension expense by approximately $60 million.

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

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

The net effect of changing these assumptions for the pension plans resulted in an increase of $238 million in the projected benefit obligation at December 31, 2025.

The net effect of changing these assumptions for retiree medical and other postretirement benefits plans resulted in a decrease of $10 million in the accumulated postretirement benefit obligation at December 31, 2025.

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Accounting Standards Update (ASU) 2024-03:

Income Taxes (Topic 740) Improvements to Income Tax Disclosures

This standard enhances transparency of income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information, as well as improvements to the effectiveness and comparability of other income tax disclosures.

The amendments in this update are effective for annual periods beginning after December 15, 2024, and early adoption is permitted.

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

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

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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.

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

Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) Targeted Improvements to the Accounting for Internal-Use Software

This standard modernizes the accounting for costs related to internal-use software by removing references to project stages and by clarifying the thresholds entities apply to begin capitalizing costs.

The amendments in this update are effective for interim and annual periods beginning after December 15, 2027, and early adoption is permitted.

We are currently evaluating how the adoption of this standard may impact our consolidated financial statements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis