Document

Certain of the statements contained in this report should be considered forward-looking statements within the meaning of the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “would,” “continue,” “seek,” “target,” “guidance,” “outlook,” “if current trends continue,” “optimistic,” “forecast” and other similar words. Such statements include, but are not limited to, statements about our plans, objectives, expectations, intentions, estimates and strategies for the future, and other statements that are not historical facts. These forward-looking statements are based on our current objectives, beliefs and expectations, and they are subject to significant risks and uncertainties that may cause actual results and financial position and timing of certain events to differ materially from the information in the forward-looking statements. These risks and uncertainties include, but are not limited to, those described below under Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Part II, Item 1A. Risk Factors and other risks and uncertainties listed from time to time in our filings with the Securities and Exchange Commission (the SEC).

All of the forward-looking statements are qualified in their entirety by reference to the factors discussed in Part II, Item 1A. Risk Factors and elsewhere in this report. There may be other factors of which we are not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ materially from those discussed. We do not assume any obligation to publicly update or supplement any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting such statements other than as required by law. Forward-looking statements speak only as of the date of this report or as of the dates indicated in the statements.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Operating revenues:
Passenger	$	10,995		$	10,561		$	31,663		$	30,714
Cargo	208			260			647			748
Other	708			738			2,145			2,141
Total operating revenues	11,911			11,559			34,455			33,603
Operating expenses:
Aircraft fuel and related taxes	1,989			2,234			5,710			6,100
Salaries, wages and benefits	3,219			3,131			9,509			9,243
Regional expenses	1,933			1,833			5,582			5,323
Maintenance, materials and repairs	610			526			1,745			1,499
Other rent and landing fees	530			502			1,568			1,463
Aircraft rent	335			318			996			939
Selling expenses	424			395			1,194			1,136
Depreciation and amortization	499			468			1,469			1,366
Special items, net	228			207			487			615
Other	1,336			1,260			3,859			3,834
Total operating expenses	11,103			10,874			32,119			31,518
Operating income	808			685			2,336			2,085
Nonoperating income (expense):
Interest income	34			29			103			84
Interest expense, net	(284		)	(262		)	(830		)	(788		)
Other income (expense), net	(1		)	44			76			108
Total nonoperating expense, net	(251		)	(189		)	(651		)	(596		)
Income before income taxes	557			496			1,685			1,489
Income tax provision	132			124			413			401
Net income	$	425		$	372		$	1,272		$	1,088

Earnings per common share:
Basic	$	0.96		$	0.81		$	2.85		$	2.34
Diluted	$	0.96		$	0.81		$	2.84		$	2.33
Weighted average shares outstanding (in thousands):
Basic	441,915			460,526			446,291			465,452
Diluted	442,401			461,507			447,139			466,908
Cash dividends declared per common share	$	0.10		$	0.10		$	0.30		$	0.30



	September 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
Current assets
Cash	$	312		$	275
Short-term investments	4,856			4,485
Restricted cash and short-term investments	158			154
Accounts receivable, net	1,850			1,706
Aircraft fuel, spare parts and supplies, net	1,800			1,522
Prepaid expenses and other	596			495
Total current assets	9,572			8,637
Operating property and equipment
Flight equipment	42,320			41,499
Ground property and equipment	9,232			8,764
Equipment purchase deposits	1,567			1,278
Total property and equipment, at cost	53,119			51,541
Less accumulated depreciation and amortization	(18,500		)	(17,443		)
Total property and equipment, net	34,619			34,098
Operating lease right-of-use assets	8,842			9,151
Other assets
Goodwill	4,091			4,091
Intangibles, net of accumulated amortization of $694 and $663, respectively	2,095			2,137
Deferred tax asset	666			1,145
Other assets	1,290			1,321
Total other assets	8,142			8,694
Total assets	$	61,175		$	60,580
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Current maturities of long-term debt and finance leases	$	3,608		$	3,294
Accounts payable	1,932			1,773
Accrued salaries and wages	1,413			1,427
Air traffic liability	5,569			4,339
Loyalty program liability	3,197			3,267
Operating lease liabilities	1,672			1,654
Other accrued liabilities	2,169			2,342
Total current liabilities	19,560			18,096
Noncurrent liabilities
Long-term debt and finance leases, net of current maturities	21,625			21,179
Pension and postretirement benefits	5,609			6,907
Loyalty program liability	5,325			5,272
Operating lease liabilities	7,535			7,902
Other liabilities	1,361			1,393
Total noncurrent liabilities	41,455			42,653
Commitments and contingencies
Stockholders’ equity (deficit)
Common stock, $0.01 par value; 1,750,000,000 shares authorized, 438,035,288 shares issued and outstanding at September 30, 2019; 460,610,870 shares issued and outstanding at December 31, 2018	4			5
Additional paid-in capital	4,208			4,964
Accumulated other comprehensive loss	(5,946		)	(5,896		)
Retained earnings	1,894			758
Total stockholders’ equity (deficit)	160			(169		)
Total liabilities and stockholders’ equity (deficit)	$	61,175		$	60,580



	Nine Months Ended September 30,
	2019			2018
Net cash provided by operating activities	$	3,215		$	2,817
Cash flows from investing activities:
Capital expenditures and aircraft purchase deposits	(3,129		)	(2,736		)
Proceeds from sale of property and equipment and sale-leaseback transactions	671			860
Purchases of short-term investments	(2,878		)	(2,590		)
Sales of short-term investments	2,524			2,816
Decrease (increase) in restricted short-term investments	(2		)	72
Other investing activities	(68		)	(5		)
Net cash used in investing activities	(2,882		)	(1,583		)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	3,550			2,149
Payments on long-term debt and finance leases	(2,835		)	(2,440		)
Deferred financing costs	(50		)	(48		)
Treasury stock repurchases	(825		)	(837		)
Dividend payments	(135		)	(140		)
Other financing activities	(1		)	(2		)
Net cash used in financing activities	(296		)	(1,318		)
Net increase (decrease) in cash and restricted cash	37			(84		)
Cash and restricted cash at beginning of period	286			398
Cash and restricted cash at end of period ⁽¹⁾	$	323		$	314

Non-cash transactions:
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	854		$	761
Finance leases	46			—
Settlement of bankruptcy obligations	7			—
Supplemental information:
Interest paid, net	817			801
Income taxes paid	5			16



	Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings (Deficit)			Total
Balance at December 31, 2018	$	5		$	4,964		$	(5,896	)	$	758		$	(169	)
Net income	—			—			—			185			185
Other comprehensive loss, net	—			—			(13		)	—			(13		)
Purchase and retirement of 16,947,393 shares of AAG common stock	—			(610		)	—			—			(610		)
Dividends declared on AAG common stock ($0.10 per share)	—			—			—			(46		)	(46		)
Issuance of 552,752 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes	—			(8		)	—			—			(8		)
Share-based compensation expense	—			25			—			—			25
Balance at March 31, 2019	5			4,371			(5,909		)	897			(636		)
Net income	—			—			—			662			662
Other comprehensive loss, net	—			—			(18		)	—			(18		)
Dividends declared on AAG common stock ($0.10 per share)	—			—			—			(45		)	(45		)
Issuance of 1,046,122 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes	—			(17		)	—			—			(17		)
Settlement of single-dip unsecured claims held in Disputed Claims Reserve	—			7			—			—			7
Share-based compensation expense	—			25			—			—			25
Balance at June 30, 2019	5			4,386			(5,927		)	1,514			(22		)
Net income	—			—			—			425			425
Other comprehensive loss, net	—			—			(19		)	—			(19		)
Purchase and retirement of 7,275,610 shares of AAG common stock	(1		)	(200		)	—			—			(201		)
Dividends declared on AAG common stock ($0.10 per share)	—			—			—			(45		)	(45		)
Issuance of 48,547 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes	—			—			—			—			—
Share-based compensation expense	—			22			—			—			22
Balance at September 30, 2019	$	4		$	4,208		$	(5,946	)	$	1,894		$	160



	Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings (Deficit)			Total
Balance at December 31, 2017	$	5	$	5,714		$	(5,776	)	$	(723	)	$	(780	)
Net income	—		—			—			159			159
Other comprehensive loss, net	—		—			(18		)	—			(18		)
Purchase and retirement of 8,431,150 shares of AAG common stock	—		(449		)	—			—			(449		)
Dividends declared on AAG common stock ($0.10 per share)	—		—			—			(48		)	(48		)
Issuance of 313,744 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes	—		(10		)	—			—			(10		)
Share-based compensation expense	—		24			—			—			24
Impact of adoption of Accounting Standards Update (ASU) 2016-01 related to financial instruments	—		—			—			60			60
Impact of adoption of ASU 2016-02 related to leases	—		—			—			197			197
Balance at March 31, 2018	5		5,279			(5,794		)	(355		)	(865		)
Net income	—		—			—			556			556
Other comprehensive loss, net	—		—			(15		)	—			(15		)
Purchase and retirement of 8,175,007 shares of AAG common stock	—		(350		)	—			—			(350		)
Dividends declared on AAG common stock ($0.10 per share)	—		—			—			(47		)	(47		)
Issuance of 1,286,622 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes	—		(26		)	—			—			(26		)
Share-based compensation expense	—		20			—			—			20
Balance at June 30, 2018	5		4,923			(5,809		)	154			(727		)
Net income	—		—			—			372			372
Other comprehensive loss, net	—		—			(17		)	—			(17		)
Dividends declared on AAG common stock ($0.10 per share)	—		—			—			(46		)	(46		)
Issuance of 57,374 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes	—		—			—			—			—
Share-based compensation expense	—		23			—			—			23
Balance at September 30, 2018	$	5	$	4,946		$	(5,826	)	$	480		$	(395	)

This ASU provides the option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings due to the U.S. federal corporate income tax rate change as a result of H.R. 1, the 2017 Tax Cuts and Jobs Act (the 2017 Tax Act). The amount of the reclassification is the difference between the amount initially charged or credited directly to other comprehensive income at the previous U.S. federal corporate income tax rate that remains in accumulated other comprehensive income and the amount that would have been charged or credited directly to other comprehensive income using the newly enacted U.S. federal corporate income tax rate, excluding the effect of any valuation allowance previously charged to income from continuing operations. This standard is effective for interim and annual reporting periods beginning after December 15, 2018. In the first quarter of 2019, we adopted this standard retrospectively as of December 22, 2017, the date the 2017 Tax Act was enacted, which resulted in the recast of prior reporting periods. As a result of the adoption, we reclassified $622 million of stranded tax effects principally related to our pension plans from accumulated other comprehensive loss to retained earnings.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Operating revenues:
Passenger	$	10,995		$	10,561		$	31,663		$	30,714
Cargo	208			260			647			748
Other	707			735			2,139			2,132
Total operating revenues	11,910			11,556			34,449			33,594
Operating expenses:
Aircraft fuel and related taxes	1,989			2,234			5,710			6,100
Salaries, wages and benefits	3,217			3,129			9,503			9,234
Regional expenses	1,913			1,810			5,616			5,275
Maintenance, materials and repairs	610			526			1,745			1,499
Other rent and landing fees	530			502			1,568			1,463
Aircraft rent	335			318			996			939
Selling expenses	424			395			1,194			1,136
Depreciation and amortization	499			468			1,469			1,366
Special items, net	228			207			487			615
Other	1,337			1,261			3,860			3,835
Total operating expenses	11,082			10,850			32,148			31,462
Operating income	828			706			2,301			2,132
Nonoperating income (expense):
Interest income	131			85			389			240
Interest expense, net	(281		)	(259		)	(835		)	(764		)
Other income (expense), net	(10		)	45			69			109
Total nonoperating expense, net	(160		)	(129		)	(377		)	(415		)
Income before income taxes	668			577			1,924			1,717
Income tax provision	160			144			472			466
Net income	$	508		$	433		$	1,452		$	1,251

(In millions, except shares and par value)



	September 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
Current assets
Cash	$	303		$	265
Short-term investments	4,854			4,482
Restricted cash and short-term investments	158			154
Accounts receivable, net	1,872			1,755
Receivables from related parties, net	11,232			10,666
Aircraft fuel, spare parts and supplies, net	1,710			1,442
Prepaid expenses and other	594			493
Total current assets	20,723			19,257
Operating property and equipment
Flight equipment	41,971			41,180
Ground property and equipment	8,891			8,466
Equipment purchase deposits	1,567			1,277
Total property and equipment, at cost	52,429			50,923
Less accumulated depreciation and amortization	(18,152		)	(17,123		)
Total property and equipment, net	34,277			33,800
Operating lease right-of-use assets	8,795			9,094
Other assets
Goodwill	4,091			4,091
Intangibles, net of accumulated amortization of $694 and $663, respectively	2,095			2,137
Deferred tax asset	714			1,280
Other assets	1,184			1,219
Total other assets	8,084			8,727
Total assets	$	71,879		$	70,878
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Current maturities of long-term debt and finance leases	$	2,356		$	2,547
Accounts payable	1,861			1,707
Accrued salaries and wages	1,355			1,363
Air traffic liability	5,569			4,339
Loyalty program liability	3,197			3,267
Operating lease liabilities	1,657			1,639
Other accrued liabilities	2,063			2,259
Total current liabilities	18,058			17,121
Noncurrent liabilities
Long-term debt and finance leases, net of current maturities	20,857			20,650
Pension and postretirement benefits	5,570			6,863
Loyalty program liability	5,325			5,272
Operating lease liabilities	7,499			7,857
Other liabilities	1,310			1,345
Total noncurrent liabilities	40,561			41,987
Commitments and contingencies
Stockholder’s equity
Common stock, $1.00 par value; 1,000 shares authorized, issued and outstanding	—			—
Additional paid-in capital	16,881			16,802
Accumulated other comprehensive loss	(6,042		)	(5,992		)
Retained earnings	2,421			960
Total stockholder’s equity	13,260			11,770
Total liabilities and stockholder’s equity	$	71,879		$	70,878



	Nine Months Ended September 30,
	2019			2018
Net cash provided by operating activities	$	2,910		$	1,295
Cash flows from investing activities:
Capital expenditures and aircraft purchase deposits	(3,043		)	(2,697		)
Proceeds from sale of property and equipment and sale-leaseback transactions	671			855
Purchases of short-term investments	(2,878		)	(2,582		)
Sales of short-term investments	2,524			2,816
Decrease (increase) in restricted short-term investments	(2		)	72
Other investing activities	(68		)	(5		)
Net cash used in investing activities	(2,796		)	(1,541		)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	2,800			2,149
Payments on long-term debt and finance leases	(2,835		)	(1,940		)
Deferred financing costs	(41		)	(48		)
Net cash provided by (used in) financing activities	(76		)	161
Net increase (decrease) in cash and restricted cash	38			(85		)
Cash and restricted cash at beginning of period	276			390
Cash and restricted cash at end of period ⁽¹⁾	$	314		$	305

Non-cash transactions:
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	853		$	728
Finance leases	46			—
Settlement of bankruptcy obligations	7			—
Supplemental information:
Interest paid, net	772			741
Income taxes paid	5			14



	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Retained Earnings		Total
Balance at December 31, 2018	$	—	$	16,802	$	(5,992	)	$	960	$	11,770
Net income	—		—		—			230		230
Other comprehensive loss, net	—		—		(13		)	—		(13		)
Share-based compensation expense	—		25		—			—		25
Balance at March 31, 2019	—		16,827		(6,005		)	1,190		12,012
Net income	—		—		—			714		714
Other comprehensive loss, net	—		—		(18		)	—		(18		)
Share-based compensation expense	—		25		—			—		25
Intercompany equity transfer	—		7		—			—		7
Balance at June 30, 2019	—		16,859		(6,023		)	1,904		12,740
Net income	—		—		—			508		508
Other comprehensive loss, net	—		—		(19		)	—		(19		)
Share-based compensation expense	—		22		—			—		22
Intercompany equity transfer	—		—		—			9		9
Balance at September 30, 2019	$	—	$	16,881	$	(6,042	)	$	2,421	$	13,260



	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Retained Earnings (Deficit)			Total
Balance at December 31, 2017	$	—	$	16,716	$	(5,873	)	$	(955	)	$	9,888
Net income	—		—		—			209			209
Other comprehensive loss, net	—		—		(18		)	—			(18		)
Share-based compensation expense	—		24		—			—			24
Impact of adoption of Accounting Standards Update (ASU) 2016-01 related to financial instruments	—		—		—			60			60
Impact of adoption of ASU 2016-02 related to leases	—		—		—			197			197
Balance at March 31, 2018	—		16,740		(5,891		)	(489		)	10,360
Net income	—		—		—			609			609
Other comprehensive loss, net	—		—		(15		)	—			(15		)
Share-based compensation expense	—		20		—			—			20
Balance at June 30, 2018	—		16,760		(5,906		)	120			10,974
Net income	—		—		—			433			433
Other comprehensive loss, net	—		—		(17		)	—			(17		)
Share-based compensation expense	—		23		—			—			23
Balance at September 30, 2018	$	—	$	16,783	$	(5,923	)	$	553		$	11,413

This ASU provides the option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings due to the U.S. federal corporate income tax rate change as a result of H.R. 1, the 2017 Tax Cuts and Jobs Act (the 2017 Tax Act). The amount of the reclassification is the difference between the amount initially charged or credited directly to other comprehensive income at the previous U.S. federal corporate income tax rate that remains in accumulated other comprehensive income and the amount that would have been charged or credited directly to other comprehensive income using the newly enacted U.S. federal corporate income tax rate, excluding the effect of any valuation allowance previously charged to income from continuing operations. This standard is effective for interim and annual reporting periods beginning after December 15, 2018. In the first quarter of 2019, American adopted this standard retrospectively as of December 22, 2017, the date the 2017 Tax Act was enacted, which resulted in the recast of prior reporting periods. As a result of the adoption, American reclassified $622 million of stranded tax effects principally related to its pension plans from accumulated other comprehensive loss to retained earnings.



	Three Months Ended September 30,				Increase (Decrease)			Percent Increase (Decrease)
	2019		2018		Increase (Decrease)			Percent Increase (Decrease)
	(In millions, except percentage changes)
Passenger revenue	$	10,995	$	10,561	$	434		4.1
Cargo revenue	208		260		(52		)	(19.9	)
Other operating revenue	708		738		(30		)	(4.1	)
Total operating revenues	11,911		11,559		352			3.0
Mainline and regional aircraft fuel and related taxes	2,474		2,740		(266		)	(9.7	)
Salaries, wages and benefits	3,219		3,131		88			2.8
Total operating expenses	11,103		10,874		229			2.1
Operating income	808		685		123			18.0
Pre-tax income	557		496		61			12.4
Income tax provision	132		124		8			7.1
Net income	425		372		53			14.2

Pre-tax income	$	557	$	496	$	61		12.4
Adjusted for: Total pre-tax net special items ⁽¹⁾	278		224		54			24.0
Pre-tax income excluding net special items	$	835	$	720	$	115		16.0

Pre-tax income and net income were $557 million and $425 million, respectively, in the third quarter of 2019. This compares to third quarter 2018 pre-tax income and net income of $496 million and $372 million, respectively. Excluding the effects of pre-tax net special items, pre-tax income was $835 million and $720 million in the third quarters of 2019 and 2018, respectively. The quarter-over-quarter increase in our pre-tax income, on both a GAAP basis and excluding pre-tax net special items, was principally driven by higher revenues and lower fuel costs, offset in part by increases in salaries, wages and benefits, maintenance expenses, and costs associated with increased regional capacity.

In addition, in May, we initiated litigation against the Transport Workers Union of America, AFL-CIO, International Association of Machinists and Aerospace Workers, and Airline Mechanic and Related Employee Association TWU/IAM, claiming that the unions have been engaged in an illegal work slowdown in an effort to influence contract negotiations. A permanent injunction enjoining the slowdown and further interruption to our operations was granted by the U.S. District Court for the Northern District of Texas on August 12, 2019. On August, 13, 2019, we filed a motion asking for sanctions against the unions as illegal actions were continuing. The issue of sanctions has not yet been decided by the court.

In the third quarter of 2019, we reported total operating revenues of $11.9 billion, an increase of $352 million, or 3.0%, as compared to the third quarter of 2018. Passenger revenue was $11.0 billion in the third quarter of 2019, an increase of $434 million, or 4.1%, as compared to the third quarter of 2018. The increase in passenger revenue in the third quarter of 2019 was due to continued strength in passenger demand resulting in a 4.9% quarter-over-quarter increase in revenue passenger miles (RPMs) and a 3.2 point increase in passenger load factor. Domestic passenger revenue per available seat mile (PRASM) increased 4.0% as compared to the third quarter of 2018. Latin America was the best performing international region with PRASM increasing 5.9%, while Atlantic PRASM declined 4.6% principally due to lower transfer payments related to our joint business arrangement and foreign currency effects.

We sometimes use financial measures that are derived from the condensed consolidated financial statements but that are not presented in accordance with GAAP to understand and evaluate our current operating performance and to allow for period-to-period comparisons. We believe these non-GAAP financial measures may also provide useful information to investors and others. These non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies, and should be considered in addition to and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. We are providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.

Additionally, the table below presents the reconciliation of total operating costs (GAAP measure) to total operating costs excluding net special items and fuel (non-GAAP measure). Management uses total operating costs excluding net special items and fuel to evaluate our current operating performance and for period-to-period comparisons. The price of fuel, over which we have no control, impacts the comparability of period-to-period financial performance. The adjustment to exclude aircraft fuel and net special items allows management an additional tool to understand and analyze our non-fuel costs and core operating performance. Amounts may not recalculate due to rounding.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Reconciliation of Total Operating Costs per Available Seat Mile (CASM) Excluding Net Special Items and Fuel:
(In millions)
Total operating expenses - GAAP	$	11,103		$	10,874		$	32,119		$	31,518
Operating net special items:
Mainline operating special items, net ⁽¹⁾	(228		)	(207		)	(487		)	(615		)
Regional operating special items, net	(6		)	(2		)	(6		)	(1		)
Fuel:
Aircraft fuel and related taxes - mainline	(1,989		)	(2,234		)	(5,710		)	(6,100		)
Aircraft fuel and related taxes - regional	(485		)	(506		)	(1,395		)	(1,369		)
Total operating expenses, excluding net special items and fuel	$	8,395		$	7,925		$	24,521		$	23,433
(In millions)
Total Available Seat Miles (ASM)	75,820			75,039			214,816			213,756
(In cents)
Total operating CASM	14.64			14.49			14.95			14.74
Operating net special items per ASM:
Mainline operating special items, net ⁽¹⁾	(0.30		)	(0.28		)	(0.23		)	(0.29		)
Regional operating special items, net	(0.01		)	—			—			—
Fuel per ASM:
Aircraft fuel and related taxes - mainline	(2.62		)	(2.98		)	(2.66		)	(2.85		)
Aircraft fuel and related taxes - regional	(0.64		)	(0.67		)	(0.65		)	(0.64		)
Total operating CASM, excluding net special items and fuel	11.07			10.56			11.41			10.96



	Three Months Ended September 30,		Increase (Decrease)		Nine Months Ended September 30,		Increase (Decrease)
	2019	2018	Increase (Decrease)		2019	2018	Increase (Decrease)
Revenue passenger miles (millions) ^(a)	64,874	61,865	4.9	%	182,334	175,589	3.8	%
Available seat miles (millions) ^(b)	75,820	75,039	1.0	%	214,816	213,756	0.5	%
Passenger load factor (percent) ^(c)	85.6	82.4	3.2	pts	84.9	82.1	2.8	pts
Yield (cents) ^(d)	16.95	17.07	(0.7	)%	17.37	17.49	(0.7	)%
Passenger revenue per available seat mile (cents) ^(e)	14.50	14.07	3.0	%	14.74	14.37	2.6	%
Total revenue per available seat mile (cents) ^(f)	15.71	15.40	2.0	%	16.04	15.72	2.0	%
Aircraft at end of period ^(g)	1,552	1,541	0.7	%	1,552	1,541	0.7	%
Fuel consumption (gallons in millions)	1,209	1,190	1.5	%	3,420	3,367	1.6	%
Average aircraft fuel price including related taxes (dollars per gallon)	2.05	2.30	(11.1	)%	2.08	2.22	(6.4	)%
Full-time equivalent employees at end of period	131,900	130,500	1.1	%	131,900	130,500	1.1	%
Operating cost per available seat mile (cents) ^(h)	14.64	14.49	1.0	%	14.95	14.74	1.4	%

Passenger revenue increased $434 million, or 4.1%, in the third quarter of 2019 from the third quarter of 2018 primarily due to continued strength in passenger demand resulting in a 4.9% quarter-over-quarter increase in RPMs and a 3.2 point increase in passenger load factor. Domestic PRASM increased 4.0% as compared to the third quarter of 2018. Latin America was the best performing international region with PRASM increasing 5.9%, while Atlantic PRASM declined 4.6% principally due to lower transfer payments related to our joint business arrangement and foreign currency effects.



	Three Months Ended September 30,				Increase (Decrease)			Percent Increase (Decrease)
	2019		2018		Increase (Decrease)			Percent Increase (Decrease)
	(In millions, except percentage changes)
Aircraft fuel and related taxes	$	1,989	$	2,234	$	(245	)	(11.0	)
Salaries, wages and benefits	3,219		3,131		88			2.8
Maintenance, materials and repairs	610		526		84			15.9
Other rent and landing fees	530		502		28			5.5
Aircraft rent	335		318		17			5.2
Selling expenses	424		395		29			7.3
Depreciation and amortization	499		468		31			6.6
Special items, net	228		207		21			10.2
Other	1,336		1,260		76			6.1
Regional expenses:
Aircraft fuel and related taxes	485		506		(21		)	(4.2	)
Other	1,448		1,327		121			9.2
Total operating expenses	$	11,103	$	10,874	$	229		2.1

We sometimes use financial measures that are derived from the condensed consolidated financial statements but that are not presented in accordance with GAAP to understand and evaluate our current operating performance to allow for period-to-period comparisons. We believe these non-GAAP financial measures may also provide useful information to investors and others. These non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies, and should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. We are providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.

The table below presents the reconciliation of total operating expenses (GAAP measure) to total operating costs excluding net special items and fuel (non-GAAP measure). Management uses total operating costs excluding net special items and fuel to evaluate our current operating performance and for period-to-period comparisons. The price of fuel, over which we have no control, impacts the comparability of period-to-period financial performance. The adjustment to exclude aircraft fuel and net special items allows management an additional tool to understand and analyze our non-fuel costs and core operating performance.



	Three Months Ended September 30,				Percent Increase (Decrease)
	2019		2018		Percent Increase (Decrease)
	(In cents, except percentage changes)
Total CASM:
Aircraft fuel and related taxes	2.62		2.98		(11.9	)
Salaries, wages and benefits	4.25		4.17		1.7
Maintenance, materials and repairs	0.80		0.70		14.7
Other rent and landing fees	0.70		0.67		4.4
Aircraft rent	0.44		0.42		4.1
Selling expenses	0.56		0.53		6.2
Depreciation and amortization	0.66		0.62		5.5
Special items, net	0.30		0.28		9.1
Other	1.76		1.68		5.0
Regional expenses:
Aircraft fuel and related taxes	0.64		0.67		(5.2	)
Other	1.91		1.77		8.0
Total CASM	14.64		14.49		1.0
Special items, net	(0.30	)	(0.28	)	9.1
Regional operating special items, net	(0.01	)	—		nm ⁽¹⁾
Aircraft fuel and related taxes:
Aircraft fuel and related taxes - mainline	(2.62	)	(2.98	)	(11.9	)
Aircraft fuel and related taxes - regional	(0.64	)	(0.67	)	(5.2	)
Total CASM, excluding net special items and fuel	11.07		10.56		4.8



	Nine Months Ended September 30,				Increase (Decrease)			Percent Increase (Decrease)
	2019		2018		Increase (Decrease)			Percent Increase (Decrease)
	(In millions, except percentage changes)
Aircraft fuel and related taxes	$	5,710	$	6,100	$	(390	)	(6.4	)
Salaries, wages and benefits	9,509		9,243		266			2.9
Maintenance, materials and repairs	1,745		1,499		246			16.4
Other rent and landing fees	1,568		1,463		105			7.2
Aircraft rent	996		939		57			6.1
Selling expenses	1,194		1,136		58			5.1
Depreciation and amortization	1,469		1,366		103			7.5
Special items, net	487		615		(128		)	(20.8	)
Other	3,859		3,834		25			0.6
Regional expenses:
Aircraft fuel and related taxes	1,395		1,369		26			1.8
Other	4,187		3,954		233			5.9
Total operating expenses	$	32,119	$	31,518	$	601		1.9

We sometimes use financial measures that are derived from the condensed consolidated financial statements but that are not presented in accordance with GAAP to understand and evaluate our current operating performance to allow for period-to-period comparisons. We believe these non-GAAP financial measures may also provide useful information to investors and others. These non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies, and should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. We are providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.



	Nine Months Ended September 30,				Percent Increase (Decrease)
	2019		2018		Percent Increase (Decrease)
	(In cents, except percentage changes)
Total CASM:
Aircraft fuel and related taxes	2.66		2.85		(6.9	)
Salaries, wages and benefits	4.43		4.32		2.4
Maintenance, materials and repairs	0.81		0.70		15.8
Other rent and landing fees	0.73		0.68		6.6
Aircraft rent	0.46		0.44		5.6
Selling expenses	0.56		0.53		4.6
Depreciation and amortization	0.68		0.64		7.0
Special items, net	0.23		0.29		(21.1	)
Other	1.80		1.79		0.2
Regional expenses:
Aircraft fuel and related taxes	0.65		0.64		1.3
Other	1.95		1.85		5.4
Total CASM	14.95		14.74		1.4
Special items, net	(0.23	)	(0.29	)	(21.1	)
Aircraft fuel and related taxes:
Aircraft fuel and related taxes - mainline	(2.66	)	(2.85	)	(6.9	)
Aircraft fuel and related taxes - regional	(0.65	)	(0.64	)	1.3
Total CASM, excluding net special items and fuel	11.41		10.96		4.1



	Nine Months Ended September 30,
	2019			2018
	(In millions)
Fleet impairment ⁽¹⁾	$	201		$	—
Fleet restructuring expenses ⁽²⁾	232			327
Litigation reserve adjustments	(53		)	45
Merger integration expenses ⁽³⁾	106			188
Mark-to-market adjustments on bankruptcy obligations, net ⁽⁴⁾	(18		)	(39		)
Severance expenses ⁽⁵⁾	7			20
Intangible asset impairment ⁽⁶⁾	—			26
Labor contract expenses	—			13
Other operating charges, net	12			35
Total mainline operating special items, net	487			615
Regional operating special items, net	6			1
Total operating special items, net	$	493		$	616

In the first nine months of 2019, other nonoperating income, net principally included $137 million of non-service related pension and other postretirement benefit plan income. This income was offset in part by a $37 million net special charge for mark-to-market unrealized losses primarily associated with our equity investment in China Southern Airlines, $24 million of net foreign currency losses principally associated with losses from Latin American currencies, and $14 million of net special charges associated with debt refinancings and extinguishments.

In the first nine months of 2018, other nonoperating income, net principally included $226 million of non-service related pension and other postretirement benefit plan income. This income was offset in part by an $82 million net special charge for mark-to-market unrealized losses primarily associated with our equity investment in China Southern Airlines, $41 million of net foreign currency losses, principally associated with losses from Latin American currencies, and $13 million of net special charges associated with debt refinancings and extinguishments.

Passenger revenue increased $434 million, or 4.1%, in the third quarter of 2019 from the third quarter of 2018 primarily due to continued strength in passenger demand resulting in a quarter-over-quarter increase in RPMs and an increase in passenger load factor. Domestic PRASM increased in the third quarter of 2019 from the third quarter of 2018. Latin America PRASM was the best performing international region, while Atlantic PRASM declined principally due to lower transfer payments related to American's joint business arrangement and foreign currency effects.



	Three Months Ended September 30,				Increase (Decrease)			Percent Increase (Decrease)
	2019		2018		Increase (Decrease)			Percent Increase (Decrease)
	(In millions, except percentage changes)
Aircraft fuel and related taxes	$	1,989	$	2,234	$	(245	)	(11.0	)
Salaries, wages and benefits	3,217		3,129		88			2.8
Maintenance, materials and repairs	610		526		84			15.9
Other rent and landing fees	530		502		28			5.5
Aircraft rent	335		318		17			5.2
Selling expenses	424		395		29			7.3
Depreciation and amortization	499		468		31			6.6
Special items, net	228		207		21			10.2
Other	1,337		1,261		76			6.1
Regional expenses:
Aircraft fuel and related taxes	485		506		(21		)	(4.2	)
Other	1,428		1,304		124			9.6
Total operating expenses	$	11,082	$	10,850	$	232		2.1



	Nine Months Ended September 30,				Increase (Decrease)			Percent Increase (Decrease)
	2019		2018		Increase (Decrease)			Percent Increase (Decrease)
	(In millions, except percentage changes)
Aircraft fuel and related taxes	$	5,710	$	6,100	$	(390	)	(6.4	)
Salaries, wages and benefits	9,503		9,234		269			2.9
Maintenance, materials and repairs	1,745		1,499		246			16.4
Other rent and landing fees	1,568		1,463		105			7.2
Aircraft rent	996		939		57			6.1
Selling expenses	1,194		1,136		58			5.1
Depreciation and amortization	1,469		1,366		103			7.5
Special items, net	487		615		(128		)	(20.8	)
Other	3,860		3,835		25			0.7
Regional expenses:
Aircraft fuel and related taxes	1,395		1,369		26			1.8
Other	4,221		3,906		315			8.0
Total operating expenses	$	32,148	$	31,462	$	686		2.2

In the first nine months of 2018, other nonoperating income, net principally included $227 million of non-service related pension and other postretirement benefit plan income. This income was offset in part by an $82 million net special charge for mark-to-market unrealized losses primarily associated with American's equity investment in China Southern Airlines, $40 million of net foreign currency losses, principally associated with losses from Latin American currencies, and $13 million of net special charges associated with debt refinancings and extinguishments.

In April 2018, we announced that our Board of Directors authorized a $2.0 billion share repurchase program that will expire on December 31, 2020. Since July 2014, our Board of Directors has approved seven share repurchase programs aggregating $13.0 billion of authority. As of September 30, 2019, there was $850 million of remaining authority to repurchase shares under our current $2.0 billion share repurchase program. Share repurchases under our repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. Any such repurchases that may be made from time to time will be subject to market and economic conditions, applicable legal requirements and other relevant factors. We are not obligated to repurchase any specific number of shares and our repurchase of AAG common stock may be limited, suspended or discontinued at any time at our discretion and without prior notice.

During the three months ended September 30, 2019, we repurchased 7.3 million shares of AAG common stock for $200 million at a weighted average cost per share of $27.49. During the nine months ended September 30, 2019, we repurchased 23.9 million shares of AAG common stock for $800 million at a weighted average cost per share of $33.43. Since the inception of our share repurchase programs in July 2014 through September 30, 2019, we repurchased 302.9 million shares of AAG common stock for $12.1 billion at a weighted average cost per share of $40.12.

Certain of our debt financing agreements (including our term loans, revolving credit facilities and spare engines EETCs) contain loan to value ratio covenants and require us to appraise the related collateral annually. Pursuant to such agreements, if the loan to value ratio exceeds a specified threshold or the value of the appraised collateral fails to meet a specified threshold, as the case may be, we are required, as applicable, to pledge additional qualifying collateral (which in some cases may include cash or investment securities), or pay down such financing, in whole or in part. As of September 30, 2019, we were in compliance with the foregoing collateral coverage tests as of the most recent applicable measurement dates.

Our net cash provided by operating activities was $3.2 billion and $2.8 billion for the first nine months of 2019 and 2018, respectively. The $398 million period-over-period increase in operating cash flows was primarily due to higher profitability in the first nine months of 2019 as well as working capital increases principally in our air traffic liability and loyalty program deferred revenue. These increases were offset in part by higher contributions to our defined benefit pension plans in the first nine months of 2019 as compared to the first nine months of 2018.

Our principal financing activities in the first nine months of 2019 included $2.8 billion in debt repayments, consisting of $1.7 billion in scheduled debt repayments and the prepayment of $1.1 billion of secured loans. We also had $825 million in share repurchases and $135 million in dividend payments. These cash outflows were offset in part by $3.6 billion in net proceeds from the issuance of debt, including the issuance of $750 million aggregate principal amount of 5.000% senior notes and the financing of certain aircraft and spare engines.

Our principal financing activities in the first nine months of 2018 included $2.4 billion in debt repayments, consisting of $2.0 billion in scheduled debt repayments and the prepayment of $454 million of secured loans. We also had $837 million in share repurchases and $140 million in dividend payments. These cash outflows were offset in part by $2.1 billion in net proceeds from the issuance of debt, consisting of $1.6 billion in connection with the issuance of equipment notes related to EETCs and the financing of certain aircraft and pre-delivery purchase deposits as well as an incremental $500 million on a term loan facility.

American’s net cash provided by operating activities was $2.9 billion and $1.3 billion for the first nine months of 2019 and 2018, respectively. The $1.6 billion period-over-period increase in operating cash flows was primarily due to lower intercompany transfers of cash from American to AAG as well as higher profitability in the first nine months of 2019 and working capital increases principally in American's air traffic liability and loyalty program deferred revenue. These increases were offset in part by higher contributions to American's defined benefit pension plans in the first nine months of 2019 as compared to the first nine months of 2018.

American’s principal financing activities in the first nine months of 2018 included $2.1 billion in net proceeds from the issuance of debt, consisting of $1.6 billion in connection with the issuance of equipment notes related to EETCs and the financing of certain aircraft and pre-delivery purchase deposits as well as an incremental $500 million on a term loan facility. These cash inflows were offset in part by $1.9 billion in debt repayments, consisting of $1.5 billion in scheduled debt repayments and the prepayment of $454 million of secured loans.

As of September 30, 2019, AAG had $24.8 billion in long-term debt, including current maturities of $3.5 billion (of which $750 million in aggregate principal amount related to the 5.50% senior notes due October 2019 and $500 million in aggregate principal amount relates to the 4.625% senior notes due March 2020). As of September 30, 2019, American had $22.8 billion in long-term debt, including current maturities of $2.3 billion. During the nine months ended September 30, 2019, there have been no material changes in our significant indebtedness as discussed in our 2018 Form 10-K, except as discussed in Note 6 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A and Note 4 to American’s Condensed Consolidated Financial Statements in Part I, Item 1B.

We currently have financing commitments in place for all aircraft on order and scheduled to be delivered through December 2019. Additionally, we have financing commitments in place for 43 aircraft scheduled to be delivered in 2020: 14 Airbus A320neo Family aircraft, 13 Boeing 737 MAX Family aircraft, 12 Boeing 787 Family aircraft, three Bombardier CRJ900 aircraft, and one Embraer E175 aircraft. Our ability to draw on the financing commitments we have in place is subject to the satisfaction of various terms and conditions, including in some cases, on our acquisition of the aircraft by a certain date. We do not have financing commitments in place for the remaining 28 aircraft scheduled to be delivered in 2020 or any of the aircraft scheduled to be delivered beyond 2020, except for 10 Boeing 787 Family aircraft scheduled to be delivered in 2021. See Part II, Item 1A. Risk Factors – “We will need to obtain sufficient financing or other capital to operate successfully” for additional discussion.

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development arrangements with us.



	Payments Due by Period
	Remainder of 2019		2020		2021		2022		2023		2024 and Thereafter		Total
American
Long-term debt:
Principal amount ^(a), (c)	$	682	$	2,054	$	3,501	$	1,543	$	4,063	$	10,910	$	22,753
Interest obligations ^(b), (c)	236		820		704		578		491		1,199		4,028
Finance lease obligations	29		147		123		127		110		287		823
Aircraft and engine purchase commitments^(d)	730		1,985		943		1,348		1,542		7,426		13,974
Operating lease commitments^(e)	457		1,978		1,950		1,777		1,592		5,488		13,242
Regional capacity purchase agreements ^(f)	288		1,095		1,011		879		755		1,313		5,341
Minimum pension obligations ^(g)	—		625		671		939		909		1,263		4,407
Retiree medical and other postretirement benefits	6		17		17		17		23		280		360
Other purchase obligations ^(h)	668		3,371		3,579		684		115		157		8,574
Total American Contractual Obligations	$	3,096	$	12,092	$	12,499	$	7,892	$	9,600	$	28,323	$	73,502

AAG Parent and Other AAG Subsidiaries
Long-term debt:
Principal amount ^(a)	$	750	$	505	$	2	$	752	$	2	$	18	$	2,029
Interest obligations ^(b)	43		51		39		21		1		4		159
Minimum pension obligations ^(g)	—		4		5		6		6		18		39
Operating lease commitments	5		16		15		13		7		22		78
Total AAG Contractual Obligations	$	3,894	$	12,668	$	12,560	$	8,684	$	9,616	$	28,385	$	75,807

In light of our significant financial commitments related to, among other things, new aircraft, the servicing and amortization of existing debt and equipment leasing arrangements, and future pension funding obligations, we and our subsidiaries will regularly consider, and enter into negotiations related to, capital raising activity, which may include the entry into leasing transactions and future issuances of secured or unsecured debt obligations or additional equity securities in public or private offerings or otherwise. The cash available from operations and these sources, however, may not be sufficient to cover cash contractual 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. 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. Moreover, certain of our financing arrangements contain significant minimum cash balance requirements. As a result, we cannot use all of our available cash to fund operations, capital expenditures and cash obligations without violating these requirements.

As of September 30, 2019, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption. Our current policy is not to enter into transactions to hedge our fuel consumption, although we review that policy from time to time based on market conditions and other factors. As such, and assuming we do not enter into any future transactions to hedge our fuel consumption, we will continue to be fully exposed to fluctuations in fuel prices. Based on our 2019 forecasted fuel consumption, we estimate that a one cent per gallon increase in aviation fuel price would increase our 2019 annual fuel expense by $45 million.

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. See Part II, Item 1A. Risk Factors – “We operate a global business with international operations that are subject to economic and political instability and have been, and in the future may continue to be, adversely affected by numerous events, circumstances or government actions beyond our control” for additional discussion of this and other currency risks.

Our earnings and cash flow are affected by changes in interest rates due to the impact those changes have on our interest expense from variable rate debt instruments and our interest income from short-term, interest bearing investments. If annual interest rates increase 100 basis points, based on our September 30, 2019 variable-rate debt and short term investments balances, annual interest expense on variable rate debt would increase by approximately $98 million and annual interest income on short-term investments would increase by approximately $52 million.

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, and is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate to allow timely decisions regarding required disclosure. An evaluation of the effectiveness of AAG’s and American’s disclosure controls and procedures as of September 30, 2019 was performed under the supervision and with the participation of AAG’s and American’s management, including AAG’s and American’s CEO and CFO. Based on that evaluation, AAG’s and American’s management, including AAG’s and American’s CEO and CFO, concluded that AAG’s and American’s disclosure controls and procedures were effective as of September 30, 2019 at the reasonable assurance level.

On December 9, 2013, AAG acquired US Airways Group, Inc. (US Airways Group) and its subsidiaries. We are still in the process of integrating certain processes, technology and operations for the post-Merger combined company, and we will continue to evaluate the impact of any related changes to our internal control over financial reporting. For the quarter ended September 30, 2019, there have been no changes in AAG’s or American’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, AAG’s and American’s internal control over financial reporting.

We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and, as noted above, the CEO and CFO of AAG and American believe that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2019.

Chapter 11 Cases. On November 29, 2011, AMR Corporation (AMR), American, and certain of AMR’s other direct and indirect domestic subsidiaries (the Debtors) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). On October 21, 2013, the Bankruptcy Court entered an order approving and confirming the Debtors’ fourth amended joint plan of reorganization (as amended, the Plan). On the Effective Date, December 9, 2013, the Debtors consummated their reorganization pursuant to the Plan and completed the acquisition of US Airways Group by AMR (the Merger).

Pursuant to rulings of the Bankruptcy Court, the Plan established the Disputed Claims Reserve to hold shares of AAG common stock reserved for issuance to disputed claimholders at the Effective Date that ultimately become holders of allowed claims. The shares of AAG common stock issued to the Disputed Claims Reserve were originally issued on December 13, 2013 and have at all times since been included in the number of shares issued and outstanding as reported from time to time in our quarterly and annual reports, including for purposes of calculating earnings per common share. As disputed claims are resolved, the claimants will receive distributions of shares from the Disputed Claims Reserve. However, we are not required to distribute additional shares above the limits contemplated by the Plan, even if the shares remaining for distribution in the Disputed Claims Reserve are not sufficient to fully pay any additional allowed unsecured claims. To the extent that any of the reserved shares remain undistributed upon resolution of all remaining disputed claims, such shares will not be returned to us but rather will be distributed to former AMR stockholders and former convertible noteholders treated as stockholders under the Plan. On February 12, 2019, in accordance with the approval granted by the Bankruptcy Court on December 6, 2018, an aggregate of approximately 17.3 million shares of AAG common stock were distributed from the Disputed Claims Reserve to former AMR shareholders and convertible noteholders. After giving effect to this distribution, the Disputed Claims Reserve holds approximately 7 million shares of AAG common stock.

Private Party Antitrust Action Related to Passenger Capacity. We, along with Delta Air Lines, Inc., Southwest Airlines Co., United Airlines, Inc. and, in the case of litigation filed in Canada, Air Canada, have been named as defendants in approximately 100 putative class action lawsuits alleging unlawful agreements with respect to air passenger capacity. The U.S. lawsuits have been consolidated in the Federal District Court for the District of Columbia (the DC Court). On June 15, 2018, we reached a preliminary settlement agreement with the plaintiffs in the amount of $45 million that, once approved, will resolve all class claims in the U.S. lawsuits. That settlement was approved by the DC Court on May 13, 2019. Three parties who objected to the settlement have appealed that decision to the United States Court of Appeals for the District of Columbia. We believe these appeals are without merit and intend to vigorously defend against them.

Private Party Antitrust Action Related to the Merger. On August 6, 2013, a lawsuit captioned Carolyn Fjord, et al., v. AMR Corporation, et al., was filed in the Bankruptcy Court. The complaint named as defendants US Airways Group, US Airways, Inc. (US Airways), AMR and American, alleged that the effect of the Merger may be to create a monopoly in violation of Section 7 of the Clayton Antitrust Act, and sought injunctive relief and/or divestiture. On November 27, 2013, the Bankruptcy Court denied plaintiffs’ motion to preliminarily enjoin the Merger. On August 29, 2018, the Bankruptcy Court denied in part defendants' motion for summary judgment, and fully denied plaintiffs' cross-motion for summary judgment. The parties' evidentiary cases were presented before the Bankruptcy Court in a bench trial in March 2019. The parties submitted proposed findings of fact and conclusions of law and made closing arguments in April 2019, and we are awaiting the Bankruptcy Court's decision. We believe this lawsuit is without merit and intend to vigorously defend against the allegations.

DOJ Investigation Related to the United States Postal Service. In April 2015, the Department of Justice (DOJ) informed us of an inquiry regarding American’s 2009 and 2011 contracts with the United States Postal Service for the international transportation of mail by air and focusing on potential violations of the False Claims Act or other statutes. In October 2015, we received a Civil Investigative Demand from the DOJ seeking certain information relating to these contracts and the DOJ has also sought information concerning certain of the airlines that transport mail on a codeshare basis. In August 2019, we entered into a settlement with the Civil Division of the DOJ, pursuant to which we paid $22 million. We admitted no liability in connection with this settlement.

General. In addition to the specifically identified legal proceedings, we and our subsidiaries are also engaged in other legal proceedings from time to time. Legal proceedings can be complex and take many months, or even years, to reach resolution, with the final outcome depending on a number of variables, some of which are not within our control. Therefore, although we will vigorously defend ourselves in each of the actions described above and such other legal proceedings, their ultimate resolution and potential financial and other impacts on us are uncertain but could be material. See Part II, Item 1A.

Below are certain risk factors that may affect our business, results of operations and financial condition, or the trading price of our common stock or other securities. We caution the reader that these risk factors may not be exhaustive. We operate in a continually changing business environment, and new risks and uncertainties emerge from time to time. Management cannot predict such new risks and uncertainties, nor can it assess the extent to which any of the risk factors below or any such new risks and uncertainties, or any combination thereof, may impact our business.

Due to the discretionary nature of business and leisure travel spending and the highly competitive nature of the airline industry, our revenues are heavily influenced by the condition of the U.S. economy and economies in other regions of the world. Unfavorable conditions in these broader economies have resulted, and may result in the future, in decreased passenger demand for air travel, changes in booking practices and related reactions by our competitors, all of which in turn have had, and may have in the future, a strong negative effect on our business. See also “The airline industry is intensely competitive and dynamic” below.

Because of the amount of fuel needed to operate our business, even a relatively small increase or decrease in the price of fuel can have a material effect on our operating results and liquidity. Due to the competitive nature of the airline industry and unpredictability of the market for air travel, we can offer no assurance that we may be able to increase our fares, impose fuel surcharges or otherwise increase revenues or decrease other operating costs sufficiently to offset fuel price increases. Similarly, we cannot predict actions that may be taken by our competitors in response to changes in fuel prices.

Although we are currently able to obtain adequate supplies of aircraft fuel, we cannot predict the future availability, price volatility or cost of aircraft fuel. Natural disasters (including hurricanes or similar events in the U.S. Southeast and on the Gulf Coast where a significant portion of domestic refining capacity is located), political disruptions or wars involving oil-producing countries, economic sanctions imposed against oil-producing countries or specific industry participants, changes in fuel-related governmental policy, the strength of the U.S. dollar against foreign currencies, changes in the cost to transport or store petroleum products, changes in access to petroleum product pipelines and terminals, speculation in the energy futures markets, changes in aircraft fuel production capacity, environmental concerns and other unpredictable events may result in fuel supply shortages, distribution challenges, additional fuel price volatility and cost increases in the future. For instance, effective January 1, 2020, rules adopted by the International Maritime Organization will restrict the sulfur content allowable in marine fuels from 3.5% to 0.5%, which is expected to cause increased demand by maritime shipping companies for low-sulfur fuel and lead to increased costs of jet fuel. Any of these factors or events could cause a disruption in or increased demands on oil production, refinery operations, pipeline capacity or terminal access and possibly result in significant increases in the price of aircraft fuel and diminished availability of aircraft fuel supply.

Our aviation fuel purchase contracts generally do not provide meaningful price protection against increases in fuel costs. Our current policy is not to enter into transactions to hedge our fuel consumption, although we review this policy from time to time based on market conditions and other factors. Accordingly, as of September 30, 2019, we did not have any fuel hedging contracts outstanding. As such, and assuming we do not enter into any future transactions to hedge our fuel consumption, we will continue to be fully exposed to fluctuations in fuel prices. See also the discussion in Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk – “Aircraft Fuel.”

Our competitors include other major domestic airlines and foreign, regional and new entrant airlines, as well as joint ventures formed by some of these airlines, many of which have more financial or other resources and/or lower cost structures than ours, as well as other forms of transportation, including rail and private automobiles. In many of our markets we compete with at least one low-cost carrier (including so-called ultra-low cost carriers). Our revenues are sensitive to the actions of other carriers in many areas including pricing, scheduling, capacity, amenities, loyalty benefits and promotions, which can have a substantial adverse impact not only on our revenues, but on overall industry revenues. These factors may become even more significant in periods when the industry experiences large losses, as airlines under financial stress, or in bankruptcy, may institute pricing structures intended to achieve near-term survival rather than long-term viability.

Low-cost carriers (including so-called ultra-low-cost carriers) have a profound impact on industry revenues. Using the advantage of low unit costs, these carriers offer lower fares in order to shift demand from larger, more established airlines, and represent significant competitors, particularly for customers who fly infrequently and are price sensitive and tend not to be loyal to any one particular carrier. While historically these carriers have provided competition in domestic markets, we have recently experienced new competition from low-cost carriers on international routes. A number of these low-cost carriers have announced growth strategies including commitments to acquire significant numbers of new aircraft for delivery in the next few years. These low-cost carriers are attempting to continue to increase their market share through growth and, potentially, consolidation, and are expected to continue to have an impact on our revenues and overall performance. We and several other large network carriers have implemented “Basic Economy” fares designed to more effectively compete against low-cost carriers, but we cannot predict whether these initiatives will be successful or the competitive reaction of the low-cost carriers. Competition is also increasing from low-cost airlines executing international long-haul expansion strategies, including, for example, Icelandair and Norwegian Air Shuttle. The actions of existing or future low-cost carriers, including those described above, could have a material adverse effect on our operations and financial performance.

We provide air travel internationally, directly as well as through joint business, alliance, codeshare and similar arrangements to which we are a party. While our network is comprehensive, compared to some of our key global competitors, we generally have somewhat greater relative exposure to certain regions (for example, Latin America) and somewhat lower relative exposures to others (for example, China and parts of Asia). Our financial performance relative to our key competitors will therefore be influenced significantly by macro-economic conditions in particular regions around the world and the relative exposure of our network to the markets in those regions.

In providing international air transportation, we compete to provide scheduled passenger and cargo service between the U.S. and various overseas locations with U.S. airlines, foreign investor-owned airlines and foreign state-owned or state-affiliated airlines. Competition is increasing from foreign state-owned and state-affiliated airlines in the Gulf region, including Emirates, Etihad Airways and Qatar Airways. These carriers have large numbers of international widebody aircraft in service and on order and are increasing service to the U.S. from locations both in and outside the Middle East. Service to and from locations outside of the Middle East is provided by some of these carriers under so-called “fifth freedom” rights permitted under international treaties which allow service to and from stopover points between an airline’s home country and the ultimate destination. Such flights, such as a stopover in Europe on flights to the United States, allow the carrier to sell tickets for travel between the stopover point and the United States in competition with service provided by us. Additionally, these carriers have made significant investments in a number of airlines located outside of the Middle East, such as Air Italy, providing these affiliated airlines with capital and aircraft to permit increases in service that compete with us. We believe these state-owned and state-affiliated carriers in the Gulf region, including their affiliated carriers, benefit from significant government subsidies, which have allowed them to grow quickly, reinvest in their product and expand their global presence.

Our international service exposes us to foreign economies and the potential for reduced demand, such as we have recently experienced in Venezuela, when any foreign country we serve suffers adverse local economic conditions. In addition, open skies agreements with an increasing number of countries around the world provide international airlines with open access to U.S. markets, potentially subjecting us to increased competition on our international routes. See also “Our business is subject to extensive government regulation, which may result in increases in our costs, disruptions to our operations, limits on our operating flexibility, reductions in the demand for air travel, and competitive disadvantages.”

Certain airline alliances, joint ventures and joint businesses have been, or may in the future be, granted immunity from antitrust regulations by governmental authorities for specific areas of cooperation, such as joint pricing decisions. To the extent alliances formed by our competitors can undertake activities that are not available to us, our ability to effectively compete may be hindered. Our ability to attract and retain customers is dependent upon, among other things, our ability to offer our customers convenient access to desired markets. Our business could be adversely affected if we are unable to maintain or obtain alliance and marketing relationships with other air carriers in desired markets.

American has established a transatlantic joint business agreement (JBA) with British Airways, Iberia and Finnair, and separately, a transpacific JBA with Japan Airlines, each of which has been granted antitrust immunity. In October 2017, American and its transatlantic partners executed an amended and restated JBA which, among other things, extends the term of the agreement. An application is pending with the U.S. Department of Transportation (DOT) to add Aer Lingus, which is now owned by the parent company of British Airways and Iberia, to the transatlantic JBA. This relationship benefits from a grant of antitrust immunity from the DOT and was reviewed by the European Commission (EC) in July 2010. In connection with this review, we provided certain commitments to the EC regarding, among other things, the availability of take-off and landing slots at LHR or London Gatwick (LGW) airports. The commitments accepted by the EC are binding for 10 years with the possibility of renewal by the EC. However, in light of Brexit and the related possibility that the EC would no longer have regulatory responsibility for the United Kingdom when the commitments expire in July 2020, the United Kingdom Competition and Markets Authority (CMA) in October 2018 opened an investigation into the transatlantic JBA. We are cooperating fully with the CMA. Also, we signed a JBA with Qantas Airways, which was approved by the competition law regulators in Australia and New Zealand, and in July 2019 the DOT granted its approval. The foregoing arrangements are important aspects of our international network and we are dependent on the performance and continued cooperation of the other airlines party to those agreements. No assurances can be given as to any benefits that we may derive from such arrangements or any other arrangements that may ultimately be implemented, or whether or not regulators will, or if granted continue to, approve or impose material conditions on our business activities.

Additional mergers and other forms of industry consolidation, including antitrust immunity grants, may take place and may not involve us as a participant. Depending on which carriers combine and which assets, if any, are sold or otherwise transferred to other carriers in connection with any such combinations, our competitive position relative to the post-combination carriers or other carriers that acquire such assets could be harmed. In addition, as carriers combine through traditional mergers or antitrust immunity grants, their route networks will grow, and that growth will result in greater overlap with our network, which in turn could result in lower overall market share and revenues for us. Such consolidation is not limited to the U.S., but could include further consolidation among international carriers in Europe and elsewhere.

Additionally, our AAdvantage loyalty program, which is an important element of our sales and marketing programs, faces significant and increasing competition from the loyalty programs offered by other travel companies, as well as from similar loyalty benefits offered by banks and other financial services companies. Competition among loyalty programs is intense regarding the rewards, fees, required usage, and other terms and conditions of these programs. These competitive factors affect our ability to attract and retain customers, increase usage of our loyalty program and maximize the revenue generated by our loyalty program.

Our business requires the secure processing and storage of sensitive information relating to our customers, employees, business partners and others. However, like any global enterprise operating in today’s digital business environment, we are subject to threats to the security of our networks and data, including threats potentially involving criminal hackers, hacktivists, state-sponsored actors, corporate espionage, employee malfeasance, and human or technological error. These threats continue to increase as the frequency, intensity and sophistication of attempted attacks and intrusions increase around the world. We have been the target of cybersecurity attacks in the past and expect that we will continue to be in the future.

Furthermore, in response to these threats there has been heightened legislative and regulatory focus on data privacy and cybersecurity in the U.S., the European Union (EU) and elsewhere, particularly with respect to critical infrastructure providers, including those in the transportation sector. As a result, we must comply with a growing and fast-evolving set of legal requirements in this area, including substantive cybersecurity standards as well as requirements for notifying regulators and affected individuals in the event of a data security incident. This regulatory environment is increasingly challenging and may present material obligations and risks to our business, including significantly expanded compliance burdens, costs and enforcement risks. For example, in May 2018, the EU’s new General Data Protection Regulation, commonly referred to as GDPR, came into effect, which imposes a host of new data privacy and security requirements, imposing significant costs on us and carrying substantial penalties for non-compliance.

A significant cybersecurity incident could result in a range of potentially material negative consequences for us, including unauthorized access to, disclosure, modification, misuse, loss or destruction of company systems or data; theft of sensitive, regulated or confidential data, such as personal identifying information or our intellectual property; the loss of functionality of critical systems through ransomware, denial of service or other attacks; a deterioration in our relationships with business partners and other third parties; and business delays, service or system disruptions, damage to equipment and injury to persons or property. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of time. The constantly changing nature of the threats means that we may not be able to prevent all data security breaches or misuse of data. Similarly, we depend on the ability of our key commercial partners, including our regional carriers, distribution partners and technology vendors, to conduct their businesses in a manner that complies with applicable security standards and assures their ability to perform on a timely basis. A security failure, including a failure to meet relevant payment security standards, breach or other significant cybersecurity incident affecting one of our partners could result in potentially material negative consequences for us.

In addition, the costs and operational consequences of defending against, preparing for, responding to and remediating an incident of cybersecurity breach may be substantial. As cybersecurity threats become more frequent, intense and sophisticated, costs of proactive defense measures may increase. Further, we could be exposed to litigation, regulatory enforcement or other legal action as a result of an incident, carrying the potential for damages, fines, sanctions or other penalties, as well as injunctive relief and enforcement actions requiring costly compliance measures. A significant number of recent privacy and data security incidents, including those involving other large airlines, have resulted in very substantial adverse financial consequences to those companies. A cybersecurity incident could also impact our brand, harm our reputation and adversely impact our relationship with our customers, employees and stockholders. Accordingly, failure to appropriately address these issues could result in material financial and other liabilities and cause significant reputational harm to our company.

We have significant amounts of indebtedness and other obligations, including pension obligations, obligations to make future payments on flight equipment and property leases related to airport and other facilities, and substantial non-cancelable obligations under aircraft and related spare engine purchase agreements. Moreover, currently a substantial portion of our assets are pledged to secure our indebtedness. Our substantial indebtedness and other obligations, which are generally greater than the indebtedness and other obligations of our competitors, could have important consequences. For example, they:

Further, a substantial portion of our long-term indebtedness bears interest at fluctuating interest rates, primarily based on the London interbank offered rate (LIBOR) for deposits of U.S. dollars. LIBOR tends to fluctuate based on general short-term interest rates, rates set by the U.S. Federal Reserve and other central banks, the supply of and demand for credit in the London interbank market and general economic conditions. We have not hedged our interest rate exposure with respect to our floating rate debt. Accordingly, our interest expense for any particular period will fluctuate based on LIBOR and other variable interest rates. To the extent the interest rates applicable to our floating rate debt increase, our interest expense will increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be adversely affected.

On July 27, 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is considering replacing U.S. dollar LIBOR with a newly created index, calculated based on repurchase agreements backed by treasury securities. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere. See also the discussion of interest rate risk in Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk – “Interest.”

Our business plan contemplates continued significant investments related to modernizing our fleet, improving the experience of our customers and updating our facilities. Significant capital resources will be required to execute this plan. We estimate that, based on our commitments as of September 30, 2019, our planned aggregate expenditures for aircraft purchase commitments and certain engines on a consolidated basis for calendar years 2019-2023 would be approximately $8.4 billion. We also require financing to refinance maturing obligations and to provide liquidity to fund other corporate requirements. Accordingly, we will need substantial financing or other capital resources to finance such aircraft and engines and meet such other liquidity needs. If we are unable to arrange such financing at customary advance rates and on terms and conditions acceptable to us, we may need to use cash from operations or cash on hand to purchase such aircraft and engines or may seek to negotiate deferrals for such aircraft and engines with the applicable aircraft and engine manufacturers or otherwise defer corporate obligations. Depending on numerous factors applicable at the time we seek capital, many of which are out of our control, such as the state of the domestic and global economies, the capital and credit markets’ view of our prospects and the airline industry in general, and the general availability of debt and equity capital, the financing or other capital resources that we will need may not be available to us, or may be available only on onerous terms and conditions. There can be no assurance that we will be successful in obtaining financing or other needed sources of capital to operate successfully. An inability to obtain necessary financing on acceptable terms would have a material adverse impact on our business, results of operations and financial condition.

Our pension funding obligations are significant. The amount of these obligations will depend on the performance of investments held in trust by the pension plans, interest rates for determining liabilities and actuarial experience. The minimum funding obligation applicable to our pension plans was subject to favorable temporary funding rules that expired at the end of 2017 and, as a result, our minimum pension funding obligations increased materially beginning in 2019. In addition, we may have significant obligations for other postretirement benefits, retiree medical and other postretirement benefits.

We have agreements with companies that process customer credit card transactions for the sale of air travel and other services. These agreements allow these credit card processing companies, under certain conditions (including, with respect to certain agreements, the failure of American to maintain certain levels of liquidity), to hold an amount of our cash (a holdback) equal to some or all of the advance ticket sales that have been processed by that credit card processor, but for which we have not yet provided the air transportation. These credit card processing companies are not currently entitled to maintain any holdbacks pursuant to these requirements. These holdback requirements can be modified at the discretion of the credit card processing companies upon the occurrence of specific events, including material adverse changes in our financial condition. An increase in the current holdbacks, up to and including 100% of relevant advanced ticket sales, would materially reduce our liquidity. Likewise, other of our commercial agreements contain provisions that allow other entities to impose less-favorable terms, including the acceleration of amounts due, in the event of material adverse changes in our financial condition.

Relations between air carriers and labor unions in the U.S. are governed by the Railway Labor Act (RLA). Under the RLA, collective bargaining agreements (CBAs) generally contain “amendable dates” rather than expiration dates, and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the National Mediation Board (NMB). For the dates that the CBAs with our major work groups become amendable under the RLA, see Part I, Item 1. Business – “Employees and Labor Relations” in our 2018 Form 10-K.

In the case of a CBA that is amendable under the RLA, if no agreement is reached during direct negotiations between the parties, either party may request that the NMB appoint a federal mediator. The RLA prescribes no timetable for the direct negotiation and mediation processes, and it is not unusual for those processes to last for many months or even several years. If no agreement is reached in mediation, the NMB in its discretion may declare that an impasse exists and proffer binding arbitration to the parties. Either party may decline to submit to arbitration, and if arbitration is rejected by either party, a 30-day “cooling off” period commences. During or after that period, a Presidential Emergency Board (PEB) may be established, which examines the parties’ positions and recommends a solution. The PEB process lasts for 30 days and is followed by another 30-day “cooling off” period. At the end of a “cooling off” period, unless an agreement is reached or action is taken by Congress, the labor organization may exercise “self-help,” such as a strike, which could materially adversely affect our business, results of operations and financial condition.

None of the unions representing our employees presently may lawfully engage in concerted slowdowns or refusals to work, such as strikes, sick-outs or other similar activity, against us. Nonetheless, there is a risk that disgruntled employees, either with or without union involvement, could engage in one or more concerted refusals to work that could individually or collectively harm the operation of our airline and impair our financial performance. For example, we are currently engaged in litigation with the unions representing our mechanics and other ground workers alleging that these employees are engaged in an unlawful work action which is adversely affecting our operation. Additionally, some of our unions have brought and may continue to bring grievances to binding arbitration, including those related to wages. If successful, there is a risk these judicial or arbitral avenues could result in material additional costs that we did not anticipate. See also Part I, Item 1. Business – “Employees and Labor Relations” in our 2018 Form 10-K.

As of December 31, 2018, approximately 84% of our employees were represented for collective bargaining purposes by labor unions. Currently, we believe our labor costs are competitive relative to the other large network carriers. However, we cannot provide assurance that labor costs going forward will remain competitive because we are in negotiations for some new agreements now and other agreements may become amendable, competitors may significantly reduce their labor costs or we may agree to higher-cost provisions unilaterally or in connection with our current or future labor negotiations.

We operate principally through our hubs and gateways in Charlotte, Chicago, Dallas/Fort Worth, LHR, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C. Substantially all of our flights either originate at or fly into one of these locations. A significant interruption or disruption in service at one of our hubs, gateways or other airports where we have a significant presence, resulting from air traffic control (ATC) delays, weather conditions, natural disasters, growth constraints, performance by third-party service providers (such as electric utility or telecommunications providers), failure of computer systems, disruptions at airport facilities or other key facilities used by us to manage our operations (such as occurred in the United Kingdom at LGW on December 20, 2018 and LHR on January 8, 2019 due to unauthorized drone activity), labor relations, power supplies, fuel supplies, terrorist activities, or otherwise could result in the cancellation or delay of a significant portion of our flights and, as a result, could have a severe impact on our business, results of operations and financial condition. We have limited control, particularly in the short term, over the operation, quality or maintenance of many of the services on which our operations depend and over whether vendors of such services will improve or continue to provide services that are essential to our business.

In order to operate our existing and proposed flight schedule and, where desirable, add service along new or existing routes, we must be able to maintain and/or obtain adequate gates, check-in counters, operations areas, operations control facilities and administrative support space. As airports around the world become more congested, it may not be possible for us to ensure that our plans for new service can be implemented in a commercially viable manner, given operating constraints at airports throughout our network, including those imposed by inadequate facilities at desirable airports.

In light of constraints on existing facilities, there is presently a significant amount of capital spending underway at major airports in the United States, including large projects underway at a number of airports where we have significant operations, such as Chicago O'Hare International Airport (ORD), Los Angeles International Airport (LAX), La Guardia Airport (LGA) and Ronald Reagan Washington National Airport (DCA). This spending is expected to result in increased costs to airlines and the traveling public that use those facilities as the airports seek to recover their investments through increased rental, landing and other facility costs. In some circumstances, such costs could be imposed by the relevant airport authority without our approval. Accordingly, our operating costs are expected to increase significantly at many airports at which we operate, including a number of our hubs and gateways, as a result of capital spending projects currently underway and additional projects that we expect to commence over the next several years.

In addition, operations at three major domestic airports, certain smaller domestic airports and many foreign airports served by us are regulated by governmental entities through the use of slots or similar regulatory mechanisms that limit the rights of carriers to conduct operations at those airports. Each slot represents the authorization to land at or take off from the particular airport during a specified time period and may have other operational restrictions as well. In the U.S., the DOT and the FAA currently regulate the allocation of slots or slot exemptions at DCA and two New York City airports: John F. Kennedy International Airport (JFK) and LGA. Our operations at these airports generally require the allocation of slots or similar regulatory authority. In addition to slot restrictions, operations at LGA and DCA are also limited based on a so-called “perimeter rule” which generally limits the stage length of the flights that can be operated from those airports to 1,500 and 1,250 miles, respectively. Similarly, our operations at LHR, international airports in Beijing, Frankfurt, Paris, Tokyo and other airports outside the U.S. are regulated by local slot authorities pursuant to the International Airline Trade Association (IATA) Worldwide Scheduling Guidelines and/or applicable local law. Termination of slot controls at some or all of the foregoing airports could affect our operational performance and competitive position. We currently have sufficient slots or analogous authorizations to operate our existing flights and we have generally, but not always, been able to obtain the rights to expand our operations and to change our schedules. However, there is no assurance that we will be able to obtain sufficient slots or analogous authorizations in the future or as to the cost of acquiring such rights because, among other reasons, such allocations are often sought after by other airlines and are subject to changes in governmental policies.

A significant portion of our regional operations are conducted by third-party operators on our behalf, substantially all of which are provided for under capacity purchase agreements. Due to our reliance on third parties to provide these essential services, we are subject to the risk of disruptions to their operations, which may result from many of the same risk factors disclosed in this report, such as the impact of adverse economic conditions, the inability of third parties to hire or retain skilled personnel, including pilots and mechanics, and other risk factors, such as an out-of-court or bankruptcy restructuring of any of our regional operators. Many of these third-party regional operators provide significant regional capacity that we would be unable to replace in a short period of time should that operator fail to perform its obligations to us. Disruptions to capital markets, shortages of skilled personnel and adverse economic conditions in general have subjected certain of these third-party regional operators to significant financial pressures, which have in the past and may in the future lead to bankruptcies among these operators. We may also experience disruption to our regional operations if we terminate the capacity purchase agreement with one or more of our current operators and transition the services to another provider. Any significant disruption to our regional operations would have a material adverse effect on our business, results of operations and financial condition.

In addition, our reliance upon others to provide essential services on behalf of our operations may result in our relative inability to control the efficiency and timeliness of contract services. We have entered into agreements with contractors to provide various facilities and services required for our operations, including distribution and sale of airline seat inventory, reservations, provision of information technology and services, regional operations, aircraft maintenance, ground services and facilities and baggage handling. Similar agreements may be entered into in any new markets we decide to serve. These agreements are generally subject to termination after notice by the third-party service provider. We are also at risk should one of these service providers cease operations, and there is no guarantee that we could replace these providers on a timely basis with comparably priced providers, or at all. Any material problems with the efficiency and timeliness of contract services, resulting from financial hardships or otherwise, could have a material adverse effect on our business, results of operations and financial condition.

An important part of our strategy to expand our network has been to expand our commercial relationships with other airlines, such as by entering into global alliance, joint business and codeshare relationships, and, in one recent instance involving China Southern Airlines, by making a significant equity investment in another airline in connection with initiating such a commercial relationship. We may explore similar non-controlling investments in, and joint ventures and strategic alliances with, other carriers as part of our global business strategy. We face competition in forming and maintaining these commercial relationships since there are a limited number of potential arrangements and other airlines are looking to enter into similar relationships, and our inability to form or maintain these relationships or inability to form as many of these relationships as our competitors may have an adverse effect on our business. Any such existing or future investment could involve significant challenges and risks, including that we may not realize a satisfactory return on our investment or that they may not generate the expected revenue synergies. These events could have a material adverse effect on our business, results of operations and financial condition.

portion of our airline tickets, and we expect in the future to continue to rely on these channels. We are also dependent upon the ability and willingness of these distribution channels to expand their ability to distribute and collect revenues for ancillary products (e.g., fees for selective seating). These distribution channels are more expensive and at present have less functionality in respect of ancillary product offerings than those we operate ourselves, such as our website at www.aa.com. Certain of these distribution channels also effectively restrict the manner in which we distribute our products generally. To remain competitive, we will need to manage successfully our distribution costs and rights, increase our distribution flexibility and improve the functionality of our distribution channels, while maintaining an industry-competitive cost structure. Further, as distribution technology changes we will need to continue to update our technology by acquiring new technology from third parties, building the functionality ourselves, or a combination, which in any event will likely entail significant technological and commercial risk and involve potentially material investments. These imperatives may affect our relationships with conventional travel agents, travel management companies, GDSs and OTAs, including if consolidation of conventional travel agents, travel management companies, GDSs or OTAs continues, or should any of these parties seek to acquire other technology providers thereby potentially limiting our technology alternatives, such as the proposed acquisition of Farelogix by Sabre. Any inability to manage our third-party distribution costs, rights and functionality at a competitive level or any material diminishment or disruption in the distribution of our tickets could have a material adverse effect on our business, results of operations and financial condition.

For example, the FAA from time to time issues directives and other regulations relating to the maintenance and operation of aircraft that require significant expenditures or operational restrictions. These requirements can be issued with little or no notice, or can otherwise impact our ability to efficiently or fully utilize our aircraft, and in some instances have resulted in the temporary grounding of aircraft types altogether (including the March 2019 grounding of all Boeing 737 MAX aircraft, including the 24 aircraft in our fleet, which remains in place as of the date of this filing), or otherwise caused substantial disruption and resulted in material costs to us and lost revenues. The FAA also exercises comprehensive regulatory authority over nearly all technical aspects of our operations. Our failure to comply with such requirements has in the past and may in the future result in fines and other enforcement actions by the FAA or other regulators. In the future, any new regulatory requirements, particularly requirements that limit our ability to operate or price our products, could have a material adverse effect on us and the industry.

Any significant reduction in air traffic capacity at and in the airspace serving key airports in the U.S. or overseas could have a material adverse effect on our business, results of operations and financial condition. In addition, the United States National Airspace System (the ATC system) is not successfully modernizing to meet the growing demand for U.S. air travel. Air traffic controllers rely on outdated procedures and technologies that routinely compel airlines to fly inefficient routes or take significant delays on the ground. The ATC system’s inability to manage existing travel demand has led government agencies to implement short-term capacity constraints during peak travel periods or adverse weather conditions in certain markets, resulting in delays and disruptions of air traffic. The outdated technologies also cause the ATC system to be less resilient in the event of a failure. For example, an automation failure and an evacuation, in 2015 and 2017, respectively, at the Washington Air Route Control Center resulted in cancellations and delays of hundreds of flights traversing the greater Washington, D.C. airspace.

In the early 2000s, the FAA embarked on a path to modernize the national airspace system, including migration from the current radar-based ATC system to a GPS-based system. This modernization of the ATC system, generally referred to as “NextGen,” has been plagued by delays and cost overruns, and it remains uncertain when the full array of benefits expected from this modernization will be available to the public and the airlines. Failure to update the ATC system in a timely manner and the substantial costs that may be imposed on airlines in order to fund a modernized ATC system may have a material adverse effect on our business.

Our operating authority in international markets is subject to aviation agreements between the U.S. and the respective countries or governmental authorities, such as the EU, and in some cases, fares and schedules require the approval of the DOT and/or the relevant foreign governments. Moreover, alliances with international carriers may be subject to the jurisdiction and regulations of various foreign agencies. The U.S. government has negotiated “open skies” agreements with many countries, which allow unrestricted route authority access between the U.S. and the foreign markets. While the U.S. has worked to increase the number of countries with which open skies agreements are in effect, a number of markets important to us, including China, do not have open skies agreements. For example, the open skies air services agreement between the U.S. and the EU, which took effect in March 2008, provides airlines from the U.S. and EU member states open access to each other’s markets, with freedom of pricing and unlimited rights to fly from the U.S. to any airport in the EU, including LHR. As a result of the agreement and a subsequent open skies agreement involving the U.S. and the United Kingdom, which was agreed in anticipation of Brexit, we face increased competition in these markets, including LHR. Bilateral and multilateral agreements among the U.S. and various foreign governments of countries we serve but which are not covered by an open skies treaty are subject to periodic renegotiation. We currently operate a number of international routes under government arrangements that limit the number of airlines permitted to operate on the route, the capacity of the airlines providing services on the route, or the number of airlines allowed access to particular airports. If an open skies policy were to be adopted for any of these markets, it could have a material adverse impact on us and could result in the impairment of material amounts of our related tangible and intangible assets. In addition, competition from foreign airlines, revenue-sharing joint ventures, JBAs, and other alliance arrangements by and among other airlines could impair the value of our business and assets on the open skies routes.

The pending withdrawal of the United Kingdom from the EU, commonly referred to as Brexit, is currently scheduled to occur on October 31, 2019, although the status of the Brexit process is not clear as of the date of this report. Brexit will mandate further modification in the current regulatory regime. We face risks associated with the United Kingdom’s exit from the EU, notably given the extent of our passenger and cargo traffic and that of our joint business partners that flows through LHR in the United Kingdom. Absent a fully-approved withdrawal agreement between the United Kingdom and the EU or an agreed further extension of the Brexit process (resulting in the so-called “No Deal Brexit” scenario), our expectation is that air services (including those involving our joint business and code share partners) will continue

substantially as we currently conduct them, at least for a transition period, in reliance on “basic connectivity” traffic rights adopted by the EU and the United Kingdom's agreement to grant reciprocal rights to EU airlines as well as a new air services agreement between the U.S. and United Kingdom concluded on November 29, 2018. However, the precise scope of traffic rights between the EU and the United Kingdom remains uncertain and therefore the continuation of our current services is not assured and could be subject to disruption. If Brexit is accomplished pursuant to a withdrawal agreement consistent with the agreement that has been negotiated between the United Kingdom and the EU, but which has yet to be approved by the United Kingdom, our current air services would continue as we currently conduct them during a transition period running through the end of 2020, with a potential extension of up to two years. During that transition period, the United Kingdom and the EU would seek to implement a new air services agreement. We cannot predict the terms of any such successor air services agreement or whether changes in the relationship between the United Kingdom and the EU, including whether or not the United Kingdom withdraws from the EU with or without an agreement, could materially adversely affect our business, results of operations and financial condition. More generally, changes in U.S. or foreign government aviation policies could result in the alteration or termination of such agreements, diminish the value of route authorities, slots or other assets located abroad, or otherwise adversely affect our international operations.

The airline industry is subject to extensive government fees and taxation that negatively impact our revenue and profitability. The U.S. airline industry is one of the most heavily taxed of all industries. These fees and taxes have grown significantly in the past decade for domestic flights, and various U.S. fees and taxes also are assessed on international flights. For example, as permitted by federal legislation, most major U.S. airports impose a per-passenger facility charge on us. In addition, the governments of foreign countries in which we operate impose on U.S. airlines, including us, various fees and taxes, and these assessments have been increasing in number and amount in recent years. Moreover, we are obligated to collect a federal excise tax, commonly referred to as the “ticket tax,” on domestic and international air transportation. We collect the excise tax, along with certain other U.S. and foreign taxes and user fees on air transportation (such as passenger security fees), and pass along the collected amounts to the appropriate governmental agencies. Although these taxes and fees are not our operating expenses, they represent an additional cost to our customers. There are continuing efforts in Congress and in other countries to raise different portions of the various taxes, fees, and charges imposed on airlines and their passengers, including the passenger facility charge, and we may not be able to recover all of these charges from our customers. Increases in such taxes, fees and charges could negatively impact our business, results of operations and financial condition.

Recently enacted U.S. tax legislation has significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, adopting elements of a territorial tax system, revising the rules governing NOLs and the rules governing foreign tax credits and introducing new anti-base erosion provisions. Many of these changes became effective immediately, without any transition periods or grandfathering for existing transactions. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementation regulations by the Treasury and Internal Revenue Service, any of which could materially affect the impacts of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. While some of the changes made by the tax legislation may adversely affect us in one or more reporting periods and prospectively, other changes may be beneficial on a going forward basis.

reconfiguration of our aircraft cabins, and efforts to optimize our network including by focusing growth on a limited number of large hubs. We may introduce additional initiatives in the future; however, as time goes on, we expect that it will be more difficult to identify and implement additional initiatives. We cannot assure that these measures or any future initiatives will be successful in increasing our revenues. Additionally, the implementation of these initiatives may create logistical challenges that could harm the operational performance of our airline or result in decreased demand. Also, our implementation of any new or increased fees might reduce the demand for air travel on our airline or across the industry in general, particularly if weakened economic conditions make our customers more sensitive to increased travel costs or provide a significant competitive advantage to other carriers that determine not to institute similar charges.

Acts of terrorism or fear of such attacks, including elevated national threat warnings, wars or other military conflicts, may depress air travel, particularly on international routes, and cause declines in revenues and increases in costs. The attacks of September 11, 2001 and continuing terrorist threats, attacks and attempted attacks materially impacted and continue to impact air travel. Increased security procedures introduced at airports since the attacks of September 11, 2001 and any other such measures that may be introduced in the future generate higher operating costs for airlines. The Aviation and Transportation Security Act mandated improved flight deck security, deployment of federal air marshals on board flights, improved airport perimeter access security, airline crew security training, enhanced security screening of passengers, baggage, cargo, mail, employees and vendors, enhanced training and qualifications of security screening personnel, additional provision of passenger data to the U.S. Customs and Border Protection Agency and enhanced background checks. A concurrent increase in airport security charges and procedures, such as restrictions on carry-on baggage, has also had and may continue to have a disproportionate impact on short-haul travel, which constitutes a significant portion of our flying and revenue. Implementation of and compliance with increasingly-complex security and customs requirements will continue to result in increased costs for us and our passengers, and have caused and likely will continue to cause periodic service disruptions and delays. We have at times found it necessary or desirable to make significant expenditures to comply with security-related requirements while seeking to reduce their impact on our customers, such as expenditures for automated security screening lines at airports. As a result of competitive pressure, and the need to improve security screening throughput to support the pace of our operations, it is unlikely that we will be able to capture all security-related costs through increased fares. In addition, we cannot forecast what new security requirements may be imposed in the future, or their impact on our business.

We operate a global business with significant operations outside of the U.S. Our current international activities and prospects have been and in the future could be adversely affected by government policies, reversals or delays in the opening of foreign markets, increased competition in international markets, the performance of our alliance, joint business and codeshare partners in a given market, exchange controls or other restrictions on repatriation of funds, currency and political risks (including changes in exchange rates and currency devaluations), environmental regulation, increases in taxes and fees and changes in international government regulation of our operations, including the inability to obtain or retain needed route authorities and/or slots. Fluctuations in foreign currencies, including devaluations, exchange controls and other restrictions on the repatriation of funds, have significantly affected and may continue to significantly affect our operating performance, liquidity and the value of any cash held outside the U.S. in local currency.

in support of global trade. Should protectionist governmental policies, such as increased tariff or other trade barriers, travel limitations and other regulatory actions, have the effect of reducing global commercial activity, the result could be a material decrease in the demand for international air travel. Additionally, certain of the products and services that we purchase, including certain of our aircraft and related parts, are sourced from suppliers located in foreign countries, and the imposition of new tariffs, or any increase in existing tariffs, by the U.S. government in respect of the importation of such products could materially increase the amounts we pay for them. In particular, on October 2, 2019, the Office of the U.S. Trade Representative (USTR), as part of an ongoing dispute with the EU before the World Trade Organization (WTO) concerning, among other things, aircraft subsidies, was authorized by an arbitration tribunal of the WTO to impose up to $7.5 billion per year in import tariffs on certain goods originating from the EU. Effective as of October 18, 2019, the USTR imposed tariffs on certain imports from the EU, including certain Airbus aircraft that we previously contracted to purchase, which will be subject to an ad valorem duty of 10%. While the scope and rate of these tariffs are subject to change, if and to the extent these tariffs are imposed on us without any available means for us to mitigate or pass on the burden of these tariffs to Airbus, the effective cost of new Airbus aircraft required to implement our fleet plan could increase.

The United Kingdom held a referendum in June 2016 regarding its membership in the EU in which a majority of the United Kingdom electorate voted in favor of the British government taking the necessary action for the United Kingdom to leave the EU, an event commonly referred to as Brexit. In March 2017, the United Kingdom served notice of its decision to withdraw from the EU, formally initiating the withdrawal process. Serving this notice began the two-year period for the United Kingdom to negotiate the terms for its withdrawal from the EU, which was originally scheduled to occur on March 29, 2019. The United Kingdom's exit from the EU is now scheduled to occur on October 31, 2019, although the status of the Brexit process is not clear as of the date of this report. We face risks associated with the uncertainty following the referendum and the consequences that may flow from the decision to exit the EU, notably given the extent of our passenger and cargo traffic and that of our joint business partners that flows through LHR in the United Kingdom. Absent an approved withdrawal agreement between the United Kingdom and the EU or an agreed further extension of the Brexit process (resulting in the so-called “No Deal Brexit” scenario), our expectation is that air services (including those involving our joint business and code share partners) will continue substantially as we currently conduct them, at least for a transition period, in reliance on “basic connectivity” traffic rights adopted by the EU and the United Kingdom's agreement to grant reciprocal rights to EU airlines as well as the new air services agreements between the U.S. and United Kingdom concluded on November 29, 2018. However, the precise scope of traffic rights between the EU and the United Kingdom remains uncertain and therefore the continuation is not assured and could be subject to disruption. If Brexit is accomplished pursuant to a withdrawal agreement consistent with the agreement that has been negotiated between the United Kingdom and the EU, but which has yet to be approved by the United Kingdom, our current air services would continue as we currently conduct them during a transition period running through the end of 2020, with a potential extension of up to two years. During that transition period, the United Kingdom and the EU would seek to implement a new air services agreement. We cannot predict the terms of any such successor air services agreement or whether changes in the relationship between the United Kingdom and the EU, including whether or not the United Kingdom withdraws from the EU with or without an agreement, could materially adversely affect our business, results of operations and financial condition.

Moreover, the exit of the United Kingdom from the EU could adversely affect European or worldwide economic or market conditions and could contribute to further instability in global financial markets. In addition, the exit of the United Kingdom from the EU has created uncertainty as to the future trade relationship between the EU and the United Kingdom, including air traffic services. LHR is presently a very important element of our international network, however it may become less desirable as a destination or as a hub location after Brexit when compared to other airports in Europe. The exit of the United Kingdom from the EU could also lead to legal and regulatory uncertainty such as the identity of the relevant regulators, new regulatory action and/or potentially divergent treaties, laws and regulations as the United Kingdom determines which EU treaties, laws and regulations to replace or replicate, including those governing aviation, labor, environmental, data protection/privacy, competition and other matters applicable to the provision of air transportation services by us or our alliance, joint business or codeshare partners. For example, in light of Brexit and the related possibility that the EC would no longer have regulatory responsibility for the United Kingdom when existing regulatory commitments are scheduled to expire in 2020, the United Kingdom CMA in October 2018 opened an investigation into our transatlantic JBA. We are cooperating fully with the CMA. The impact on our business of any treaties, laws and regulations that replace the existing EU counterparts, or other governmental or regulatory actions taken by the United Kingdom or the EU in connection with or subsequent to Brexit, cannot be predicted, including whether or not regulators will continue to approve or impose material conditions on our business activities. Any of these effects, and others we cannot anticipate, could materially adversely affect our business, results of operations and financial condition.

We are also subject to other environmental laws and regulations, including those that require us to investigate and remediate soil or groundwater to meet certain remediation standards. Under federal law, generators of waste materials, and current and former owners or operators of facilities, can be subject to liability for investigation and remediation costs at locations that have been identified as requiring response actions. Liability under these laws may be strict, joint and several, meaning that we could be liable for the costs of cleaning up environmental contamination regardless of fault or the amount of waste directly attributable to us. We have liability for investigation and remediation costs at various sites, although such costs currently are not expected to have a material adverse effect on our business.

We have various leases and agreements with respect to real property, tanks and pipelines with airports and other operators. Under these leases and agreements, we have agreed to indemnify the lessor or operator against environmental liabilities associated with the real property or operations described under the agreement, in some cases even if we are not the party responsible for the initial event that caused the environmental damage. We also participate in leases with other airlines in fuel consortiums and fuel committees at airports, where such indemnities are generally joint and several among the participating airlines.

We consider our intellectual property rights, particularly our branding rights such as our trademarks applicable to our airline and AAdvantage loyalty program, to be a significant and valuable aspect of our business. We protect our intellectual property rights through a combination of trademark, copyright and other forms of legal protection, contractual agreements and policing of third-party misuses of our intellectual property. Our failure to obtain or adequately protect our intellectual property or any change in law that lessens or removes the current legal protections of our intellectual property may diminish our competitiveness and adversely affect our business and financial results. Any litigation or disputes regarding intellectual property may be costly and time-consuming and may divert the attention of our management and key personnel from our business operations, either of which may adversely affect our business and financial results.

There is increasing global regulatory focus on climate change and greenhouse gas (GHG) emissions. Efforts by the EU in 2009 to regulate flights arriving from or departing for airports outside of the EU have been postponed as members of the International Civil Aviation Organization (ICAO) implement a global agreement on GHG emissions from the aviation sector. In 2016, ICAO passed a resolution adopting the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which is a global, market-based emissions offset program intended to achieve carbon-neutral growth beyond 2020. CORSIA was supported by the board of Airlines for America (the principal U.S. airline trade association) and IATA (the principal international airline trade association), along with American and many other U.S. and foreign airlines. On June 27, 2018, ICAO adopted standards pertaining to the collection and sharing of information on international aviation emissions beginning in 2019. In furtherance of these standards, on March 6, 2019, the FAA issued a notice of a CORSIA program permitting U.S. carriers to submit emissions data on a voluntary basis. The emissions monitoring plans American and its wholly-owned regional carriers submitted to the FAA have been approved by the FAA and the airlines have begun monitoring their GHG emissions. After data collection, CORSIA is expected to be implemented in phases, with a pilot phase beginning in 2021, the first phase beginning in 2024, and the mandatory second phase beginning in 2027. Certain details still need to be developed, but in early 2019, ICAO reached agreement on general criteria governing the eligibility of emissions units that may be used to comply with CORSIA. At this time, the impact of CORSIA cannot be fully predicted. CORSIA will increase operating costs for American and most other airlines, including other U.S. airlines that operate internationally, but the implementation of a global program, as compared to regional emission reduction schemes, should

ensure that these costs will be more evenly applied to American and its competitors since there will be a common global regulatory regime. While we do not anticipate any significant expenditures in 2019, compliance with CORSIA or similar emissions-related requirements could significantly increase our operating costs beginning in 2021 and beyond when CORSIA’s pilot phase begins. Additionally, in 2017, ICAO adopted new aircraft certification standards to reduce carbon dioxide emissions from aircraft, which will apply to new aircraft type designs in 2020, and to aircraft type designs in production as of 2023.

Separately, the EU has established the Emissions Trading System (ETS) to regulate GHG emissions in the EU. The EU adopted a directive in 2008 under which each EU member state is required to extend the ETS to aviation operations. However, the EU ETS has never fully been imposed, in large part due to the effort to adopt CORSIA. The EU has extended its stay on the extra-territorial application of the EU ETS as applied to international flights to/from the European Economic Area (EEA) through year-end 2023, contingent on successful implementation of CORSIA. Thereafter, the EU will assess CORSIA implementation and decide the future status of the EU ETS as applied to international aviation to/from the EEA. The potential impact of CORSIA or other emissions-related requirements on our costs will ultimately depend on a number of factors, including baseline emissions, the price of emission allowances or offsets that American would need to acquire, the GHG efficiency of the American fleet, and the number of future American flights subject to such emissions-related requirements. These costs have not been completely defined and could fluctuate.

In addition, in December 2015, at the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change, over 190 countries, including the United States, reached an agreement (the Paris Agreement) to reduce GHG emissions. While the United States has since announced that it will withdraw from the Paris Agreement and there is no express reference to aviation in the Paris Agreement, to the extent countries implement the Paris Agreement or impose other climate change regulations, either with respect to the aviation industry or with respect to related industries such as the aviation fuel industry, it could have an adverse direct or indirect effect on our business.

These regulatory efforts, both internationally and in the U.S. at the federal and state levels, are still developing, and we cannot yet determine what the final regulatory programs or their impact will be in the U.S., the EU or in other areas in which we do business. However, such climate change-related regulatory activity in the future may adversely affect our business and financial results by requiring us to reduce our emissions, purchase allowances/offsets or otherwise pay for our emissions. Such activity may also impact us indirectly by increasing our operating costs, including fuel costs.

Maintaining a good reputation globally is critical to our business. Our reputation or brand image could be adversely impacted by any failure to maintain high ethical, social and environmental sustainability practices for all of our operations and activities, our impact on the environment, public pressure from investors or policy groups to change our policies, such as movements to institute a “living wage,” customer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs, customer perceptions of our use of social media, or customer perceptions of statements made by us, our employees and executives, agents or other third parties. Damage to our reputation or brand image or loss of customer confidence in our services could adversely affect our business and financial results, as well as require additional resources to rebuild our reputation.

Among the principal risks of integrating our businesses and operations are the risks relating to integrating various computer, communications and other technology systems that are necessary to operate US Airways and American as a single integrated business and to achieve cost synergies by eliminating redundancies. While we have to date successfully integrated many of our systems, including our customer reservations system and our pilot, flight attendant and fleet scheduling system, we still have to complete several additional important system integration or replacement projects. In a number of prior airline mergers, the integration of these systems or deployment of replacement systems has taken longer, been more disruptive and cost more than originally forecasted. The implementation process to integrate or replace these various systems will involve a number of risks that could adversely impact our business, results of operations and financial condition. New systems will replace multiple legacy systems and the related implementation will be a complex and time-consuming project involving substantial expenditures for implementation consultants, system hardware, software and implementation activities, as well as the transformation of business and financial processes.

We are highly dependent on existing and emerging technology and automated systems to operate our business. These technologies and systems include our computerized airline reservation system, flight operations systems, financial planning, management and accounting systems, telecommunications systems, website, maintenance systems and check-in kiosks. In order for our operations to work efficiently, our website and reservation system must be able to accommodate a high volume of traffic, maintain secure information and deliver flight information, as well as issue electronic tickets and process critical financial information in a timely manner. Substantially all of our tickets are issued to passengers as electronic tickets. We depend on our reservation system, which is hosted and maintained under a long-term contract by a third-party service provider, to be able to issue, track and accept these electronic tickets. If our technologies or automated systems are not functioning or if our third-party service providers were to fail to adequately provide technical support, system maintenance or timely software upgrades for any one of our key existing systems, we could experience service disruptions or delays, which could harm our business and result in the loss of important data, increase our expenses and decrease our revenues. In the event that one or more of our primary technology or systems vendors goes into bankruptcy, ceases operations or fails to perform as promised, replacement services may not be readily available on a timely basis, at competitive rates or at all, and any transition time to a new system may be significant.

Our technologies and automated systems cannot be completely protected against events that are beyond our control, including natural disasters, power failures, terrorist attacks, cyber-attacks, data theft, equipment and software failures, computer viruses or telecommunications failures. Substantial or sustained system failures could cause service delays or failures and result in our customers purchasing tickets from other airlines. We cannot assure that our security measures, change control procedures or disaster recovery plans are adequate to prevent disruptions or delays. Disruption in or changes to these technologies or systems could result in a disruption to our business and the loss of important data. Any of the foregoing could result in a material adverse effect on our business, results of operations and financial condition.

In a modern world where news can be captured and travel rapidly, we are at risk of adverse publicity stemming from any public incident involving our company, our people or our brand. Such an incident could involve the actual or alleged behavior of any of our more than 130,000 employees. Further, if our personnel or one of our aircraft, or personnel of, or an aircraft that is operated under our brand by, one of our regional operators or an airline with which we have a marketing alliance, joint business or codeshare relationship, were to be involved in a public incident, accident, catastrophe or regulatory enforcement action, we could be exposed to significant reputational harm and potential legal liability. The insurance we carry may be inapplicable or inadequate to cover any such incident, accident, catastrophe or action. In the event that our insurance is inapplicable or not adequate, we may be forced to bear substantial losses from an incident or accident. In addition, any such incident, accident, catastrophe or action involving our personnel or one of our aircraft (or personnel and aircraft of our regional operators and our codeshare partners) could create an adverse public perception, which could harm our reputation, result in air travelers being reluctant to fly on our aircraft or those of our regional operators or codeshare partners, and adversely impact our business, results of operations and financial condition.

The success of our business depends on, among other things, effectively managing the number and types of aircraft we operate. If for any reason we are unable to accept or secure deliveries of new aircraft on contractually scheduled delivery dates, this could have a negative impact on our business, results of operations and financial condition. Our failure to integrate newly purchased aircraft into our fleet as planned might require us to seek extensions of the terms for some leased aircraft or otherwise delay the exit of certain aircraft from our fleet. Such unanticipated extensions or delays may require us to operate existing aircraft beyond the point at which it is economically optimal to retire them, resulting in increased maintenance costs. If new aircraft orders are not filled on a timely basis, we could face higher financing and operating costs than planned. In addition, if the aircraft we receive do not meet expected performance or quality standards, including with respect to fuel efficiency and reliability, our business, results of operations and financial condition could be adversely impacted.

We depend on a limited number of suppliers for aircraft, aircraft engines and many aircraft and engine parts. For example, under our current fleet plan, by 2020 all of our mainline aircraft will have been manufactured by either Airbus or Boeing and all of our regional aircraft will have been manufactured by either Bombardier or Embraer. Further, our supplier base continues to consolidate as evidenced by the recent acquisition of Rockwell Collins by United Technologies, the recently completed transaction involving Airbus and Bombardier and the pending transactions involving Boeing and Embraer, and Bombardier and Mitsubishi. Due to the limited number of these suppliers, we are vulnerable to any problems associated with the performance of their obligation to supply key aircraft, parts and engines, including design defects, mechanical problems, contractual performance by suppliers, adverse perception by the public that would result in customer avoidance of any of our aircraft or any action by the FAA or any other regulatory authority resulting in an inability to operate our aircraft, even temporarily.

In particular, an outbreak of a contagious disease such as the Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu, Zika virus or any other similar illness, if it were to become associated with air travel or persist for an extended period, could materially affect the airline industry and us by reducing revenues and adversely impacting our operations and passengers’ travel behavior. As a result of these or other conditions beyond our control, our results of operations could be volatile and subject to rapid and unexpected change. In addition, due to generally weaker demand for air travel during the winter, our revenues in the first and fourth quarters of the year could be weaker than revenues in the second and third quarters of the year.

We currently have a higher than normal number of pilots eligible for retirement. Large numbers of pilots in the industry are approaching the FAA’s mandatory retirement age of 65. Our pilots and other employees are subject to rigorous certification standards, and our pilots and other crew members must adhere to flight time and rest requirements. Commencing in 2013, the minimum flight hour requirement to achieve a commercial pilot’s license in the United States (an Air Transport Pilot’s certificate) increased from 250 to 1,500 hours, thereby significantly increasing the time and cost commitment required to become licensed to fly commercial aircraft. Additionally, the number of military pilots being trained by the U.S. armed forces and available as commercial pilots upon their retirement from military service has been decreasing. These and other factors have contributed to a shortage of qualified, entry-level pilots and increased compensation costs, particularly for our regional subsidiaries and our other regional partners who are being required by market conditions to pay significantly increased wages and large signing bonuses to their pilots in an attempt to achieve desired staffing levels. The foregoing factors have also led to increased competition from large, mainline carriers attempting to meet their hiring needs. We believe that this industry-wide pilot shortage is becoming an increasing problem for airlines in the United States. Our regional partners have recently been unable to hire adequate numbers of pilots to meet their needs, resulting in a reduction in the number of flights offered, disruptions, increased costs of operations, financial difficulties and other adverse effects, and these circumstances may become more severe in the future and thereby cause a material adverse effect on our business.

The terrorist attacks of September 11, 2001 led to a significant increase in insurance premiums and a decrease in the insurance coverage available to commercial air carriers. Accordingly, our insurance costs increased significantly, and our ability to continue to obtain insurance even at current prices remains uncertain. If we are unable to maintain adequate insurance coverage, our business could be materially and adversely affected. Additionally, severe disruptions in the domestic and global financial markets could adversely impact the claims paying ability of some insurers. Future downgrades in the ratings of enough insurers could adversely impact both the availability of appropriate insurance coverage and its cost. Because of competitive pressures in our industry, our ability to pass along additional insurance costs to passengers is limited. As a result, further increases in insurance costs or reductions in available insurance coverage could have an adverse impact on our financial results.

From time to time, we are a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of our business or otherwise. We are currently involved in various legal proceedings and claims that have not yet been fully resolved, and additional claims may arise in the future. Legal proceedings can be complex and take many months, or even years, to reach resolution, with the final outcome depending on a number of variables, some of which are not within our control. Litigation is subject to significant uncertainty and may be expensive, time-consuming, and disruptive to our operations. Although we will vigorously defend ourselves in such legal proceedings, their ultimate resolution and potential financial and other impacts on us are uncertain. For these and other reasons, we may choose to settle legal proceedings and claims, regardless of their actual merit. If a legal proceeding is resolved against us, it could result in significant compensatory damages, and in certain circumstances punitive or trebled damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief imposed on us. If our existing insurance does not cover the amount or types of damages awarded, or if other resolution or actions taken as a result of the legal proceeding were to restrain our ability to operate or market our services, our consolidated financial position, results of operations or cash flows could be materially adversely affected. In addition, legal proceedings, and any adverse resolution thereof, can result in adverse publicity and damage to our reputation, which could adversely impact our business. Additional information regarding certain legal matters in which we are involved can be found in Part II, Item 1. Legal Proceedings.

Under the Internal Revenue Code of 1986, as amended (the Code), a corporation is generally allowed a deduction for NOLs carried over from prior taxable years (NOL Carryforwards). As of December 31, 2018, we had available NOL Carryforwards of approximately $10.2 billion for regular federal income tax purposes that will expire, if unused, beginning in 2022, and approximately $3.2 billion for state income tax purposes that will expire, if unused, between 2019 and 2038. Our NOL Carryforwards are subject to adjustment on audit by the Internal Revenue Service and the respective state taxing authorities.

A corporation’s ability to deduct its federal NOL Carryforwards and to utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 of the Code (Section 382) if it undergoes an “ownership change” as defined in Section 382 (generally where cumulative stock ownership changes among material stockholders exceed 50 percent during a rolling three-year period). We experienced an ownership change in connection with our emergence from the Chapter 11 Cases and US Airways Group experienced an ownership change in connection with the Merger. The general limitation rules for a debtor in a bankruptcy case are liberalized where the ownership change occurs upon emergence from bankruptcy. We elected to be covered by certain special rules for federal income tax purposes that permitted approximately $9.0 billion (with $8.4 billion of unlimited NOL still remaining at December 31, 2018) of our federal NOL Carryforwards to be utilized without regard to the annual limitation generally imposed by Section 382. If the special rules are determined not to apply, our ability to utilize such federal NOL Carryforwards may be subject to limitation. Substantially all of our remaining federal NOL Carryforwards attributable to US Airways Group and its subsidiaries are subject to limitation under Section 382 as a result of the Merger; 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.

Notwithstanding the foregoing, an ownership change subsequent to our emergence from the Chapter 11 Cases may severely limit or effectively eliminate our ability to utilize our NOL Carryforwards and other tax attributes. To reduce the risk of a potential adverse effect on our ability to utilize our NOL Carryforwards, our Certificate of Incorporation contains transfer restrictions applicable to certain substantial stockholders. These restrictions may adversely affect the ability of certain holders of AAG common stock to dispose of or acquire shares of AAG common stock. Although the purpose of these transfer restrictions is to prevent an ownership change from occurring, no assurance can be given that an ownership change will not occur even with these restrictions in place.

Future impairment of goodwill or other long-lived assets could be recorded in results of operations as a result of changes in assumptions, estimates, or circumstances, some of which are beyond our control. There can be no assurance that a material impairment charge of goodwill or tangible or intangible assets will be avoided. The value of our aircraft could be impacted in future periods by changes in supply and demand for these aircraft. Such changes in supply and demand for certain aircraft types could result from grounding of aircraft by us or other airlines. An impairment charge could have a material adverse effect on our business, results of operations and financial condition.

Since July 2014, as part of our capital deployment program, our Board of Directors has approved seven share repurchase programs aggregating $13.0 billion of authority. As of September 30, 2019, there was $850 million of remaining authority to repurchase shares under our share repurchase programs. Share repurchases under our repurchase programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. These share repurchase programs do not obligate us to acquire any specific number of shares or to repurchase any specific number of shares for any fixed period, and may be suspended at any time at our discretion and without prior notice. The timing and amount of repurchases, if any, will be subject to market and economic conditions, applicable legal requirements and other relevant factors. Our repurchase of AAG common stock may be limited, suspended or discontinued at any time at our discretion and without prior notice.

Our Board of Directors commenced declaring quarterly cash dividends in July 2014 as part of our capital deployment program. However, any future dividends that may be declared and paid from time to time will be subject to market and economic conditions, applicable legal requirements and other relevant factors. We are not obligated to continue a dividend for any fixed period, and the payment of dividends may be suspended or discontinued at any time at our discretion and without prior notice. We will continue to retain future earnings to develop our business, as opportunities arise, and evaluate on a quarterly basis the amount and timing of future dividends based on our operating results, financial condition, capital requirements and general business conditions. The amount and timing of any future dividends may vary, and the payment of any dividend does not assure that we will pay dividends in the future.

In addition, any future repurchases of AAG common stock or payment of dividends, or any determination to cease repurchasing stock or paying dividends, could affect our stock price and increase its volatility. The existence of a share repurchase program and any future dividends could cause our stock price to be higher than it would otherwise be and could potentially reduce the market liquidity for our stock. Additionally, any future repurchases of AAG common stock or payment of dividends will diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. Further, our repurchase of AAG common stock may fluctuate such that our cash flow may be insufficient to fully cover our share repurchases. Although our share repurchase programs are intended to enhance long-term stockholder value, there is no assurance that it will do so because the market price of our common stock may decline below the levels at which we repurchased shares of stock and short-term stock price fluctuations could reduce the program’s effectiveness.

These provisions are not intended to prevent a takeover, but are intended to protect and maximize the value of the interests of our stockholders. While these provisions have the effect of encouraging persons seeking to acquire control of our company to negotiate with our Board of Directors, they could enable our Board of Directors to prevent a transaction that some, or a majority, of our stockholders might believe to be in their best interest and, in that case, may prevent or discourage attempts to remove and replace incumbent directors. In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which prohibits business combinations with interested stockholders. Interested stockholders do not include stockholders whose acquisition of our securities is approved by the Board of Directors prior to the investment under Section 203.

Our Certificate of Incorporation and Bylaws include provisions that limit voting and ownership and disposition of our equity interests, as described in Part II, Item 5. Market for American Airlines Group's Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities - "Ownership Restrictions" in our 2018 10-K. These restrictions may adversely affect the ability of certain holders of AAG common stock and our other equity interests to vote such interests and adversely affect the ability of persons to acquire shares of AAG common stock and our other equity interests.



4333 Amon Carter Blvd.,	Fort Worth,	Texas	76155
(Former name or former address if changed since last report.)



4333 Amon Carter Blvd.,	Fort Worth,	Texas	76155
(Former name or former address if changed since last report.)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	AAL	The Nasdaq Global Select Market



American Airlines Group Inc.	☒	Yes	☐	No
American Airlines, Inc.	☒	Yes	☐	No



American Airlines Group Inc.	☒	Yes	☐	No
American Airlines, Inc.	☒	Yes	☐	No



☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934




American Airlines Group Inc.
(Exact name of registrant as specified in its charter)



American Airlines Group Inc.	☒	Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company
American Airlines, Inc.	☐	Large accelerated filer	☐	Accelerated filer	☒	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company



		Page
PART I: FINANCIAL INFORMATION
Item 1A.	Condensed Consolidated Financial Statements of American Airlines Group Inc.	4
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of Stockholders' Equity (Deficit)	8
	Notes to the Condensed Consolidated Financial Statements	10
Item 1B.	Condensed Consolidated Financial Statements of American Airlines, Inc.	21
	Condensed Consolidated Statements of Operations	21
	Condensed Consolidated Statements of Comprehensive Income	22
	Condensed Consolidated Balance Sheets	23
	Condensed Consolidated Statements of Cash Flows	24
	Condensed Consolidated Statements of Stockholder's Equity	25
	Notes to the Condensed Consolidated Financial Statements	26
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	62
PART II: OTHER INFORMATION
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86
Item 6.	Exhibits	86
SIGNATURES		89


⁽¹⁾	The following table provides a reconciliation of cash and restricted cash to amounts reported within the condensed consolidated balance sheets:



Cash	$	312	$	303
Restricted cash included in restricted cash and short-term investments	11		11
Total cash and restricted cash	$	323	$	314


⁽¹⁾	Fleet impairment includes a non-cash write-down of aircraft related to the planned retirement of our Embraer E190 fleet.


⁽²⁾	Fleet restructuring expenses principally included accelerated depreciation and rent expense for aircraft and related equipment grounded or expected to be grounded earlier than planned.


⁽³⁾	Merger integration expenses included costs associated with integration projects, principally our technical operations, flight attendant, human resources and payroll systems.




FORM	10-Q


⁽⁴⁾	Bankruptcy obligations that will be settled in shares of our common stock are marked-to-market based on our stock price.


⁽⁵⁾	Severance expenses primarily included costs associated with reductions of management and support staff team members.


⁽⁶⁾	Intangible asset impairment includes a non-cash charge to write-off our Brazil route authority as a result of the U.S.-Brazil open skies agreement.


⁽⁷⁾	Mark-to-market adjustments on equity and other investments, net primarily relates to net unrealized losses associated with our equity investment in China Southern Airlines Company Limited (China Southern Airlines).


⁽⁸⁾	Income tax special items, net for the nine months ended September 30, 2018 included a $22 million charge to income tax expense to establish a required valuation allowance related to our estimated refund for Alternative Minimum Tax (AMT) credits and an $18 million charge related to an international income tax matter.


⁽¹⁾	Loyalty revenue included in passenger revenue is principally comprised of mileage credit redemptions earned through travel and mileage credits sold to co-branded credit card and other partners.



Balance at December 31, 2018	$	8,539
Deferral of revenue	2,587
Recognition of revenue ⁽¹⁾	(2,604		)
Balance at September 30, 2019 ⁽²⁾	$	8,522



	September 30, 2019		December 31, 2018
Secured
2013 Credit Facilities, variable interest rate of 3.80%, installments through 2025	$	1,807	$	1,825
2014 Credit Facilities, variable interest rate of 4.05%, installments through 2021	1,215		1,215
April 2016 Credit Facilities, variable interest rate of 4.04%, installments through 2023	970		980
December 2016 Credit Facilities, variable interest rate of 4.03%, installments through 2023	1,225		1,225
Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 3.00% to 8.39%, averaging 4.07%, maturing from 2020 to 2032	11,929		11,648
Equipment loans and other notes payable, fixed and variable interest rates ranging from 3.16% to 7.31%, averaging 3.74%, maturing from 2019 to 2031	4,882		5,060
Special facility revenue bonds, fixed interest rates ranging from 5.00% to 8.00%, maturing from 2020 to 2031	754		798
	22,782		22,751
Unsecured
5.50% senior notes, interest only payments until due in October 2019	750		750
4.625% senior notes, interest only payments until due in March 2020	500		500
5.000% senior notes, interest only payments until due in June 2022	750		—
	2,000		1,250
Total long-term debt	24,782		24,001
Less: Total unamortized debt discount, premium and issuance costs	223		222
Less: Current maturities	3,504		3,213
Long-term debt, net of current maturities	$	21,055	$	20,566



2013 Revolving Facility	$	1,000
2014 Revolving Facility	1,543
April 2016 Revolving Facility	300
Total	$	2,843



	2019-1 Aircraft EETCs
	Series AA	Series A	Series B
Aggregate principal issued	$579 million	$289 million	$229 million
Remaining escrowed proceeds	$308 million	$154 million	$122 million
Fixed interest rate per annum	3.15%	3.50%	3.85%
Maturity date	February 2032	February 2032	February 2028



	Fair Value Measurements as of September 30, 2019
	Total		Level 1		Level 2		Level 3
Short-term investments ^{(1), (2)}:
Money market funds	$	671	$	671	$	—	$	—
Bank notes/certificates of deposit/time deposits	3,047		—		3,047		—
Corporate obligations	888		—		888		—
Repurchase agreements	250		—		250		—
	4,856		671		4,185		—
Restricted cash and short-term investments ⁽¹⁾	158		15		143		—
Long-term investments ⁽³⁾	183		183		—		—
Total	$	5,197	$	869	$	4,328	$	—


⁽¹⁾	Unrealized gains or losses on short-term investments are recorded in accumulated other comprehensive loss at each measurement date.


⁽²⁾	All short-term investments are classified as available-for-sale and stated at fair value. Our short-term investments mature in one year or less except for $1.0 billion of bank notes/certificates of deposit/time deposits and $125 million of corporate obligations.


⁽³⁾	Long-term investments primarily include our equity investment in China Southern Airlines and are classified in other assets on the condensed consolidated balance sheets.



	September 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	24,559	$	25,334	$	23,779	$	23,775



	Pension Benefits						Retiree Medical and Other Postretirement Benefits
Three Months Ended September 30,	2019			2018			2019			2018
Service cost	$	1		$	1		$	1		$	1
Interest cost	175			169			9			9
Expected return on assets	(204		)	(226		)	(4		)	(6		)
Amortization of:
Prior service cost (benefit)	7			7			(59		)	(59		)
Unrecognized net loss (gain)	37			36			(8		)	(5		)
Net periodic benefit cost (income)	$	16		$	(13	)	$	(61	)	$	(60	)

	Pension Benefits						Retiree Medical and Other Postretirement Benefits
Nine Months Ended September 30,	2019			2018			2019			2018
Service cost	$	2		$	2		$	3		$	3
Interest cost	527			507			26			26
Expected return on assets	(611		)	(678		)	(12		)	(17		)
Amortization of:
Prior service cost (benefit)	21			21			(177		)	(178		)
Unrecognized net loss (gain)	113			108			(24		)	(15		)
Net periodic benefit cost (income)	$	52		$	(40	)	$	(184	)	$	(181	)



	Pension, Retiree Medical and Other Postretirement Benefits			Unrealized Gain (Loss) on Investments			Income Tax Benefit (Provision) ⁽¹⁾				Total
Balance at December 31, 2018	$	(4,673	)	$	(5	)	$	(1,218	)		$	(5,896	)
Other comprehensive income (loss) before reclassifications	(1		)	4			(1		)		2
Amounts reclassified from AOCI	(67		)	—			15			(2)	(52		)
Net current-period other comprehensive income (loss)	(68		)	4			14				(50		)
Balance at September 30, 2019	$	(4,741	)	$	(1	)	$	(1,204	)		$	(5,946	)


⁽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 the condensed consolidated statement of operations.



	Amounts reclassified from AOCI												Affected line items on the condensed consolidated statements of operations
AOCI Components	Three Months Ended September 30,						Nine Months Ended September 30,
AOCI Components	2019			2018			2019			2018
Amortization of pension, retiree medical and other postretirement benefits:
Prior service benefit	$	(40	)	$	(40	)	$	(121	)	$	(121	)	Nonoperating other income (expense), net
Actuarial loss	22			23			69			72			Nonoperating other income (expense), net
Total reclassifications for the period, net of tax	$	(18	)	$	(17	)	$	(52	)	$	(49	)