Employee Benefit Plans

12 Months Ended

Dec. 31, 2018

Defined Benefit Plan Disclosure [Line Items]

We sponsor defined benefit and defined contribution pension plans for eligible employees. The defined benefit pension plans provide benefits for participating employees based on years of service and average compensation for a specified period of time before retirement. Effective November 1, 2012, substantially all of our defined benefit pension plans were frozen and we began providing enhanced benefits under our defined contribution pension plans for certain employee groups. We use a December 31 measurement date for all of our defined benefit pension plans. We also provide certain retiree medical and other postretirement benefits, including health care and life insurance benefits, to retired employees. Effective November 1, 2012, we modified our retiree medical and other postretirement benefits plans to eliminate the company subsidy for employees who retire on or after November 1, 2012. As a result of modifications to our retiree medical and other postretirement benefits plans in 2012, we recognized a negative plan amendment of $1.9 billion, which is included as a component of prior service benefit in accumulated other comprehensive income (loss) (AOCI) and will be amortized over the future service life of the active plan participants for whom the benefit was eliminated, or approximately eight years. As of December 31, 2018, $390 million of prior service benefit remains to be amortized.

Benefit Obligations, Fair Value of Plan Assets and Funded Status

The following tables provide a reconciliation of the changes in the pension and retiree medical and other postretirement benefits obligations, fair value of plan assets and a statement of funded status as of December 31, 2018 and 2017:



	Pension Benefits						Retiree Medical and Other Postretirement Benefits
	2018			2017			2018			2017
	(In millions)
Benefit obligation at beginning of period	$	18,275		$	17,238		$	1,011		$	991
Service cost	3			2			5			4
Interest cost	674			721			35			39
Actuarial (gain) loss ^{(1) (2)}	(1,910		)	1,016			(133		)	49
Settlements	(4		)	(4		)	—			—
Benefit payments	(662		)	(726		)	(81		)	(80		)
Other	2			28			—			8
Benefit obligation at end of period	$	16,378		$	18,275		$	837		$	1,011



Fair value of plan assets at beginning of period	$	11,395		$	10,017		$	295		$	266
Actual return on plan assets	(1,151		)	1,797			(24		)	37
Employer contributions ⁽³⁾	475			286			35			72
Settlements	(4		)	(4		)	—			—
Benefit payments	(662		)	(726		)	(81		)	(80		)
Other	—			25			—			—
Fair value of plan assets at end of period	$	10,053		$	11,395		$	225		$	295
Funded status at end of period	$	(6,325	)	$	(6,880	)	$	(612	)	$	(716	)


⁽¹⁾	The December 31, 2018 and 2017 pension actuarial (gain) loss primarily relates to changes in our weighted average discount rate and mortality assumptions and, in 2018, changes to our retirement rate assumptions.


⁽²⁾	The December 31, 2018 and 2017 retiree medical and other postretirement benefits actuarial (gain) loss primarily relates to weighted average discount rate assumption changes and, in 2018, changes to our medical trend and per capita claim assumptions.


⁽³⁾	During 2018, we contributed $475 million to our defined benefit pension plans, including supplemental contributions of $433 million in addition to a $42 million minimum required contribution. During 2017, we contributed $286 million to our defined benefit pension plans, including supplemental contributions of $261 million in addition to a $25 million minimum required contribution.

Balance Sheet Position



	Pension Benefits				Retiree Medical and Other Postretirement Benefits
	2018		2017		2018		2017
	(In millions)
As of December 31,
Current liability	$	7	$	10	$	23	$	89
Noncurrent liability	6,318		6,870		589		627
Total liabilities	$	6,325	$	6,880	$	612	$	716



Net actuarial loss (gain)	$	5,356	$	5,351	$	(452	)	$	(388	)
Prior service cost (benefit)	131		160		(362		)	(600		)
Total accumulated other comprehensive loss (income), pre-tax	$	5,487	$	5,511	$	(814	)	$	(988	)

Plans with Accumulated Benefit Obligations Exceeding Fair Value of Plan Assets



	Pension Benefits				Retiree Medical and Other Postretirement Benefits
	2018		2017		2018		2017
	(In millions)
Projected benefit obligation	$	16,351	$	18,245	$	—	$	—
Accumulated benefit obligation (ABO)	16,341		18,235		—		—
Accumulated postretirement benefit obligation	—		—		837		1,011
Fair value of plan assets	10,023		11,364		225		295
ABO less fair value of plan assets	6,318		6,871		—		—

Net Periodic Benefit Cost (Income)



	Pension Benefits									Retiree Medical and Other Postretirement Benefits
	2018			2017			2016			2018			2017			2016
	(In millions)
Defined benefit plans:
Service cost	$	3		$	2		$	2		$	5		$	4		$	3
Interest cost	674			721			749			35			39			47
Expected return on assets	(905		)	(790		)	(750		)	(24		)	(21		)	(20		)
Settlements	—			1			—			—			—			—
Amortization of:
Prior service cost (benefit)	28			28			28			(236		)	(237		)	(240		)
Unrecognized net loss (gain)	141			144			126			(21		)	(23		)	(17		)
Net periodic benefit cost (income)	$	(59	)	$	106		$	155		$	(241	)	$	(238	)	$	(227	)

The components of net periodic benefit income other than the service cost component are included in nonoperating other income, net in our consolidated statements of operations.

The estimated amount of unrecognized actuarial net loss and prior service cost for the defined benefit pension plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year is $181 million.

The estimated amount of unrecognized actuarial net gain and prior service benefit for the retiree medical and other postretirement benefits plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year is $269 million.

Assumptions

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



	Pension Benefits		Retiree Medical and Other Postretirement Benefits
	2018	2017	2018	2017
Benefit obligations:
Weighted average discount rate	4.40%	3.80%	4.30%	3.60%



	Pension Benefits			Retiree Medical and Other Postretirement Benefits
	2018	2017	2016	2018	2017	2016
Net periodic benefit cost:
Weighted average discount rate	3.80%	4.30%	4.70%	3.60%	4.10%	4.42%
Weighted average expected rate of return on plan assets	8.00%	8.00%	8.00%	8.00%	8.00%	8.00%
Weighted average health care cost trend rate assumed for next year ⁽¹⁾	N/A	N/A	N/A	3.91%	4.19%	4.25%


⁽¹⁾	The weighted average health care cost trend rate at December 31, 2018 is assumed to decline gradually to 3.45% by 2026 and remain level thereafter.

As of December 31, 2018, our estimate of the long-term rate of return on plan assets was 8% based on the target asset allocation. Expected returns on long duration bonds are based on yields to maturity of the bonds held at year-end. Expected returns on other assets are based on a combination of long-term historical returns, actual returns on plan assets achieved over the last ten years, current and expected market conditions, and expected value to be generated through active management and securities lending programs.

A one percentage point change in the assumed health care cost trend rates would have the following effects on our retiree medical and other postretirement benefits plans (in millions):



	1% Increase		1% Decrease
Increase (decrease) on 2018 service and interest cost	$	2	$	(2	)
Increase (decrease) on benefit obligation as of December 31, 2018	47		(43		)

Minimum Contributions

We are required to make minimum contributions to our defined benefit pension plans under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and various other laws for U.S. based plans as well as underfunding rules specific to countries where we maintain defined benefit plans. Based on current funding assumptions, we have minimum required contributions of $786 million for 2019 including contributions to defined benefit plans for our wholly-owned regional subsidiaries. We expect to make supplemental contributions of $21 million to our U.S. based defined benefit pension plans in 2019. Our funding obligations will depend on the performance of our investments held in trust by the pension plans, interest rates for determining liabilities, the amount of and timing of any supplemental contributions and our actuarial experience.

Benefit Payments

The following benefit payments, which reflect expected future service as appropriate, are expected to be paid (approximately, in millions):



	2019		2020		2021		2022		2023		2024-2028
Pension benefits	$	720	$	758	$	797	$	836	$	876	$	4,917
Retiree medical and other postretirement benefits	84		75		71		66		64		280

Plan Assets

The objectives of our investment policies are to: maintain sufficient income and liquidity to pay retirement benefits; produce a long-term rate of return that meets or exceeds the assumed rate of return for plan assets; limit the volatility of asset performance and funded status; and diversify assets among asset classes and investment managers.

Based on these investment objectives, a long-term strategic asset allocation has been established. This strategic allocation seeks to balance the potential benefit of improving funded position with the potential risk that the funded position would decline. The current strategic target asset allocation is as follows:



Asset Class/Sub-Class	Allowed Range
Equity	60% - 85%
Public:
U.S. Large	20% - 50%
U.S. Small/Mid	0% - 10%
International	17% - 27%
Emerging Markets	5% - 11%
Alternative Investments	5% - 20%
Fixed Income	15% - 40%
Public:
U.S. Long Duration	15% - 30%
High Yield and Emerging Markets	0% - 10%
Private Income	0% - 10%
Cash Equivalents	0% - 5%

Public equity as well as high yield and emerging market fixed income securities are used to provide diversification and are expected to generate higher returns over the long-term than U.S. long duration bonds. Public stocks are managed using a value investment approach in order to participate in the returns generated by stocks in the long-term, while reducing year-over-year volatility. U.S. long duration bonds are used to partially hedge the assets from declines in interest rates. Alternative (private) investments are used to provide expected returns in excess of the public markets over the long-term. The pension plan’s master trust also participates in securities lending programs to generate additional income by loaning plan assets to borrowers on a fully collateralized basis. These programs are subject to market risk.

Investments in securities traded on recognized securities exchanges are valued at the last reported sales price on the last business day of the year. Securities traded in the over-the-counter market are valued at the last bid price. The money market fund is valued at fair value which represents the net asset value of the shares of such fund as of the close of business at the end of the period. Investments in limited partnerships are carried at estimated net asset value as determined by and reported by the general partners of the partnerships and represent the proportionate share of the estimated fair value of the underlying assets of the limited partnerships. Common/collective trusts are valued at net asset value based on the fair values of the underlying investments of the trusts as determined by the sponsor of the trusts. The pension plan’s master trust also invests in a 103-12 investment entity (the 103-12 Investment Trust) which is designed to invest plan assets of more than one unrelated employer. The 103-12 Investment Trust is valued at net asset value which is determined by the issuer at the end of each month and is based on the aggregate fair value of trust assets less liabilities, divided by the number of units outstanding. No changes in valuation techniques or inputs occurred during the year.

Benefit Plan Assets Measured at Fair Value on a Recurring Basis

The fair value of our pension plan assets at December 31, 2018 and 2017, by asset category, are as follows (in millions):



	Fair Value Measurements as of December 31, 2018
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash and cash equivalents	$	23		$	—	$	—	$	23
Equity securities:
International markets ^(a) ^(b)	3,181			—		—		3,181
Large-cap companies ^(b)	2,021			—		—		2,021
Mid-cap companies ^(b)	583			—		—		583
Small-cap companies ^(b)	122			—		—		122
Mutual funds ^(c)	52			—		—		52
Fixed income:
Corporate debt ^(d)	—			2,116		—		2,116
Government securities ^(e)	—			228		—		228
U.S. municipal securities	—			40		—		40
Alternative instruments:
Private market partnerships ^(f)	—			—		7		7
Private market partnerships measured at net asset value ^{(f) (h)}	—			—		—		1,188
Common/collective trusts ^(g)	—			218		—		218
Common/collective trusts and 103-12 Investment Trust measured at net asset value ^{(g) (h)}	—			—		—		227
Insurance group annuity contracts	—			—		2		2
Dividend and interest receivable	47			—		—		47
Due to/from brokers for sale of securities – net	5			—		—		5
Other liabilities – net	(7		)	—		—		(7		)
Total	$	6,027		$	2,602	$	9	$	10,053


^(a)	Holdings are diversified as follows: 17% United Kingdom, 10% Japan, 8% France, 7% Switzerland, 6% Ireland, 17% emerging markets and the remaining 35% with no concentration greater than 5% in any one country.


^(b)	There are no significant concentrations of holdings by company or industry.


^(c)	Investment includes mutual funds invested 37% in equity securities of large-cap, mid-cap and small-cap U.S. companies, 38% in U.S. treasuries and corporate bonds and 25% in equity securities of international companies.


^(d)	Includes approximately 77% investments in corporate debt with a S&P rating lower than A and 23% investments in corporate debt with a S&P rating A or higher. Holdings include 85% U.S. companies, 12% international companies and 3% emerging market companies.


^(e)	Includes approximately 32% investments in U.S. domestic government securities, 37% in emerging market government securities and 31% in international government securities. There are no significant foreign currency risks within this classification.

^(f)

Includes limited partnerships that invest primarily in U.S. (94%) and European (6%) buyout opportunities of a range of privately held companies. The pension plan’s master trust does not have the right to redeem its limited partnership investment at its net asset value, but rather receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next one to ten years. Additionally, the pension plan’s master trust has future funding commitments of approximately $1.0 billion over the next ten years.

^(g)

Investment includes 45% in an emerging market 103-12 Investment Trust with investments in emerging country equity securities, 37% in a collective interest trust investing primarily in short-term securities, 12% in Canadian segregated balanced value, income growth and diversified pooled funds and 6% in a common/collective trust investing in securities of smaller companies located outside the U.S., including developing markets. For some trusts, requests for withdrawals must meet specific requirements with advance notice of redemption preferred.


^(h)	Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.



	Fair Value Measurements as of December 31, 2017
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash and cash equivalents	$	28		$	—	$	—	$	28
Equity securities:
International markets ^{(a) (b)}	3,837			—		—		3,837
Large-cap companies ^(b)	2,451			—		—		2,451
Mid-cap companies ^(b)	744			—		—		744
Small-cap companies ^(b)	125			—		—		125
Mutual funds ^(c)	55			—		—		55
Fixed income:
Corporate bonds ^(d)	—			2,344		—		2,344
Government securities ^(e)	—			238		—		238
U.S. municipal securities	—			39		—		39
Alternative instruments:
Private market partnerships ^(f)	—			—		14		14
Private market partnerships measured at net asset value ^{(f) (h)}	—			—		—		879
Common/collective trusts ^(g)	—			315		—		315
Common/collective trusts and 103-12 Investment Trust measured at net asset value ^{(g) (h)}	—			—		—		283
Insurance group annuity contracts	—			—		2		2
Dividend and interest receivable	44			—		—		44
Due to/from brokers for sale of securities – net	3			—		—		3
Other liabilities – net	(6		)	—		—		(6		)
Total	$	7,281		$	2,936	$	16	$	11,395


^(a)	Holdings are diversified as follows: 17% United Kingdom, 11% Japan, 9% France, 6% Switzerland, 16% emerging markets and the remaining 41% with no concentration greater than 5% in any one country.


^(b)	There are no significant concentrations of holdings by company or industry.


^(c)	Investment includes mutual funds invested 39% in equity securities of large-cap, mid-cap and small-cap U.S. companies, 34% in U.S. treasuries and corporate bonds and 27% in equity securities of international companies.


^(d)	Includes approximately 76% investments in corporate debt with a S&P rating lower than A and 24% investments in corporate debt with a S&P rating A or higher. Holdings include 85% U.S. companies, 12% international companies and 3% emerging market companies.


^(e)	Includes approximately 27% investments in U.S. domestic government securities, 43% in emerging market government securities and 30% in international government securities. There are no significant foreign currency risks within this classification.

^(f)

^(g)

Investment includes 42% in a collective interest trust investing primarily in short-term securities, 40% in an emerging market 103-12 Investment Trust with investments in emerging country equity securities, 10% in Canadian segregated balanced value, income growth and diversified pooled funds and 8% in a common/collective trust investing in securities of smaller companies located outside the U.S., including developing markets. For some trusts, requests for withdrawals must meet specific requirements with advance notice of redemption preferred.


^(h)	Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.

Changes in fair value measurements of Level 3 investments during the year ended December 31, 2018, were as follows (in millions):



	Private Market Partnerships			Insurance Group Annuity Contracts
Beginning balance at December 31, 2017	$	14		$	2
Actual loss on plan assets:
Relating to assets still held at the reporting date	(2		)	—
Purchases	1			—
Sales	(6		)	—
Ending balance at December 31, 2018	$	7		$	2

Changes in fair value measurements of Level 3 investments during the year ended December 31, 2017, were as follows (in millions):



	Private Market Partnerships			Insurance Group Annuity Contracts
Beginning balance at December 31, 2016	$	21		$	2
Actual loss on plan assets:
Relating to assets still held at the reporting date	(4		)	—
Purchases	1			—
Sales	(1		)	—
Transfers out	(3		)	—
Ending balance at December 31, 2017	$	14		$	2

The fair value of our retiree medical and other postretirement benefits plans assets at December 31, 2018 by asset category, were as follows (in millions):



	Fair Value Measurements as of December 31, 2018
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Money market fund	$	4	$	—	$	—	$	4
Mutual funds – AAL Class	—		221		—		221
Total	$	4	$	221	$	—	$	225

The fair value of our retiree medical and other postretirement benefits plans assets at December 31, 2017 by asset category, were as follows (in millions):



	Fair Value Measurements as of December 31, 2017
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Money market fund	$	5	$	—	$	—	$	5
Mutual funds – AAL Class	—		290		—		290
Total	$	5	$	290	$	—	$	295

Investments in the retiree medical and other postretirement benefits plans’ mutual funds are valued by quoted prices on the active market, which is fair value and represents the net asset value of the shares of such funds as of the close of business at the end of the period. The AAL Class mutual fund restricts trading only to American, resulting in a fair value classification of Level 2. Investments included approximately 30% of investments in non-U.S. common stocks in both 2018 and 2017. Net asset value is based on the fair market value of the funds’ underlying assets and liabilities at the date of determination.

Defined Contribution Plans

We contributed $877 million, $851 million and $766 million to our defined contribution plans for the years ended December 31, 2018, 2017 and 2016, respectively.

Profit Sharing Program

We accrue 5% of our pre-tax income excluding special items for our profit sharing program. For the year ended December 31, 2018, we accrued $175 million for this program, which will be distributed to employees in the first quarter of 2019.

American Airlines, Inc. [Member]

Defined Benefit Plan Disclosure [Line Items]

Employee Benefit Plans

American sponsors defined benefit and defined contribution pension plans for eligible employees. The defined benefit pension plans provide benefits for participating employees based on years of service and average compensation for a specified period of time before retirement. Effective November 1, 2012, substantially all of American’s defined benefit pension plans were frozen and American began providing enhanced benefits under its defined contribution pension plans for certain employee groups. American uses a December 31 measurement date for all of its defined benefit pension plans. American also provides certain retiree medical and other postretirement benefits, including health care and life insurance benefits, to retired employees. Effective November 1, 2012, American modified its retiree medical and other postretirement benefits plans to eliminate the company subsidy for employees who retire on or after November 1, 2012. As a result of modifications to its retiree medical and other postretirement benefits plans in 2012, American recognized a negative plan amendment of $1.9 billion, which is included as a component of prior service benefit in accumulated other comprehensive income (loss) (AOCI) and will be amortized over the future service life of the active plan participants for whom the benefit was eliminated, or approximately eight years. As of December 31, 2018, $390 million of prior service benefit remains to be amortized.

Benefit Obligations, Fair Value of Plan Assets and Funded Status



	Pension Benefits						Retiree Medical and Other Postretirement Benefits
	2018			2017			2018			2017
	(In millions)
Benefit obligation at beginning of period	$	18,175		$	17,148		$	1,010		$	990
Service cost	2			2			5			4
Interest cost	670			717			35			39
Actuarial (gain) loss ^{(1) (2)}	(1,905		)	1,007			(132		)	49
Settlements	(4		)	(4		)	—			—
Benefit payments	(659		)	(723		)	(81		)	(80		)
Other	3			28			—			8
Benefit obligation at end of period	$	16,282		$	18,175		$	837		$	1,010



Fair value of plan assets at beginning of period	$	11,340		$	9,968		$	295		$	266
Actual return on plan assets	(1,148		)	1,788			(24		)	37
Employer contributions ⁽³⁾	472			286			35			72
Settlements	(4		)	(4		)	—			—
Benefit payments	(659		)	(723		)	(81		)	(80		)
Other	—			25			—			—
Fair value of plan assets at end of period	$	10,001		$	11,340		$	225		$	295
Funded status at end of period	$	(6,281	)	$	(6,835	)	$	(612	)	$	(715	)


⁽¹⁾	The December 31, 2018 and 2017 pension actuarial (gain) loss primarily relates to changes in American’s weighted average discount rate and mortality assumptions and, in 2018, changes to American’s retirement rate assumptions.


⁽²⁾	The December 31, 2018 and 2017 retiree medical and other postretirement benefits actuarial (gain) loss primarily relates to weighted average discount rate assumption changes and, in 2018, changes to American’s medical trend and per capita claim assumptions.


⁽³⁾	During 2018, American contributed $472 million to its defined benefit pension plans, including supplemental contributions of $433 million in addition to a $39 million minimum required contribution. During 2017, American contributed $286 million to its defined benefit pension plans, including supplemental contributions of $261 million in addition to a $25 million minimum required contribution.

Balance Sheet Position



	Pension Benefits				Retiree Medical and Other Postretirement Benefits
	2018		2017		2018		2017
	(In millions)
As of December 31,
Current liability	$	7	$	10	$	23	$	88
Noncurrent liability	6,274		6,825		589		627
Total liabilities	$	6,281	$	6,835	$	612	$	715



Net actuarial loss (gain)	$	5,341	$	5,337	$	(452	)	$	(388	)
Prior service cost (benefit)	131		159		(362		)	(600		)
Total accumulated other comprehensive loss (income), pre-tax	$	5,472	$	5,496	$	(814	)	$	(988	)

Plans with Accumulated Benefit Obligations Exceeding Fair Value of Plan Assets



	Pension Benefits				Retiree Medical and Other Postretirement Benefits
	2018		2017		2018		2017
	(In millions)
Projected benefit obligation	$	16,254	$	18,144	$	—	$	—
Accumulated benefit obligation (ABO)	16,246		18,135		—		—
Accumulated postretirement benefit obligation	—		—		837		1,010
Fair value of plan assets	9,971		11,307		225		295
ABO less fair value of plan assets	6,275		6,828		—		—

Net Periodic Benefit Cost (Income)



	Pension Benefits									Retiree Medical and Other Postretirement Benefits
	2018			2017			2016			2018			2017			2016
	(In millions)
Defined benefit plans:
Service cost	$	2		$	2		$	2		$	5		$	4		$	3
Interest cost	670			717			746			35			39			47
Expected return on assets	(901		)	(786		)	(747		)	(24		)	(21		)	(20		)
Settlements	—			1			—			—			—			—
Amortization of:
Prior service cost (benefit)	28			28			28			(236		)	(237		)	(240		)
Unrecognized net loss (gain)	140			144			125			(21		)	(23		)	(16		)
Net periodic benefit cost (income)	$	(61	)	$	106		$	154		$	(241	)	$	(238	)	$	(226	)

The components of net periodic benefit income other than the service cost component are included in nonoperating other income, net in American’s consolidated statements of operations.

Assumptions

The following actuarial assumptions were used to determine American’s benefit obligations and net periodic benefit cost for the periods presented:



	Pension Benefits		Retiree Medical and Other Postretirement Benefits
	2018	2017	2018	2017
Benefit obligations:
Weighted average discount rate	4.40%	3.80%	4.30%	3.60%



	Pension Benefits			Retiree Medical and Other Postretirement Benefits
	2018	2017	2016	2018	2017	2016
Net periodic benefit cost:
Weighted average discount rate	3.80%	4.30%	4.70%	3.60%	4.10%	4.42%
Weighted average expected rate of return on plan assets	8.00%	8.00%	8.00%	8.00%	8.00%	8.00%
Weighted average health care cost trend rate assumed for next year ⁽¹⁾	N/A	N/A	N/A	3.91%	4.19%	4.25%


⁽¹⁾	The weighted average health care cost trend rate at December 31, 2018 is assumed to decline gradually to 3.45% by 2026 and remain level thereafter.

As of December 31, 2018, American’s estimate of the long-term rate of return on plan assets was 8% based on the target asset allocation. Expected returns on long duration bonds are based on yields to maturity of the bonds held at year-end. Expected returns on other assets are based on a combination of long-term historical returns, actual returns on plan assets achieved over the last ten years, current and expected market conditions, and expected value to be generated through active management and securities lending programs.

A one percentage point change in the assumed health care cost trend rates would have the following effects on American’s retiree medical and other postretirement benefits plans (in millions):



	1% Increase		1% Decrease
Increase (decrease) on 2018 service and interest cost	$	2	$	(2	)
Increase (decrease) on benefit obligation as of December 31, 2018	47		(43		)

Minimum Contributions

American is required to make minimum contributions to its defined benefit pension plans under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and various other laws for U.S. based plans as well as underfunding rules specific to countries where American maintains defined benefit plans. Based on current funding assumptions, American has minimum required contributions of $780 million for 2019. American expects to make supplemental contributions of $21 million to its U.S. based defined benefit pension plans in 2019. American’s funding obligations will depend on the performance of American’s investments held in trust by the pension plans, interest rates for determining liabilities, the amount of and timing of any supplemental contributions and American’s actuarial experience.

Benefit Payments

The following benefit payments, which reflect expected future service as appropriate, are expected to be paid (approximately, in millions):



	2019		2020		2021		2022		2023		2024-2028
Pension benefits	$	717	$	754	$	793	$	831	$	872	$	4,891
Retiree medical and other postretirement benefits	84		75		71		66		64		280

Plan Assets

The objectives of American’s investment policies are to: maintain sufficient income and liquidity to pay retirement benefits; produce a long-term rate of return that meets or exceeds the assumed rate of return for plan assets; limit the volatility of asset performance and funded status; and diversify assets among asset classes and investment managers.



Asset Class/Sub-Class	Allowed Range
Equity	60% - 85%
Public:
U.S. Large	20% - 50%
U.S. Small/Mid	0% - 10%
International	17% - 27%
Emerging Markets	5% - 11%
Alternative Investments	5% - 20%
Fixed Income	15% - 40%
Public:
U.S. Long Duration	15% - 30%
High Yield and Emerging Markets	0% - 10%
Private Income	0% - 10%
Cash Equivalents	0% - 5%

Benefit Plan Assets Measured at Fair Value on a Recurring Basis

The fair value of American’s pension plan assets at December 31, 2018 and 2017, by asset category, are as follows (in millions):



	Fair Value Measurements as of December 31, 2018
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash and cash equivalents	$	23		$	—	$	—	$	23
Equity securities:
International markets ^{(a) (b)}	3,181			—		—		3,181
Large-cap companies ^(b)	2,021			—		—		2,021
Mid-cap companies ^(b)	583			—		—		583
Small-cap companies ^(b)	122			—		—		122
Fixed income:
Corporate debt ^(c)	—			2,116		—		2,116
Government securities ^(d)	—			228		—		228
U.S. municipal securities	—			40		—		40
Alternative instruments:
Private market partnerships ^(e)	—			—		7		7
Private market partnerships measured at net asset value ^{(e) (g)}	—			—		—		1,188
Common/collective trusts ^(f)	—			218		—		218
Common/collective trusts and 103-12 Investment Trust measured at net asset value ^{(f) (g)}	—			—		—		227
Insurance group annuity contracts	—			—		2		2
Dividend and interest receivable	47			—		—		47
Due to/from brokers for sale of securities – net	5			—		—		5
Other liabilities – net	(7		)	—		—		(7		)
Total	$	5,975		$	2,602	$	9	$	10,001


^(a)	Holdings are diversified as follows: 17% United Kingdom, 10% Japan, 8% France, 7% Switzerland, 6% Ireland, 17% emerging markets and the remaining 35% with no concentration greater than 5% in any one country.


^(b)	There are no significant concentrations of holdings by company or industry.


^(c)	Includes approximately 77% investments in corporate debt with a S&P rating lower than A and 23% investments in corporate debt with a S&P rating A or higher. Holdings include 85% U.S. companies, 12% international companies and 3% emerging market companies.


^(d)	Includes approximately 32% investments in U.S. domestic government securities, 37% in emerging market government securities and 31% in international government securities. There are no significant foreign currency risks within this classification.

^(e)

^(f)


^(g)	Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.



	Fair Value Measurements as of December 31, 2017
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash and cash equivalents	$	28		$	—	$	—	$	28
Equity securities:
International markets ^{(a) (b)}	3,837			—		—		3,837
Large-cap companies ^(b)	2,451			—		—		2,451
Mid-cap companies ^(b)	744			—		—		744
Small-cap companies ^(b)	125			—		—		125
Fixed income:
Corporate bonds ^(c)	—			2,344		—		2,344
Government securities ^(d)	—			238		—		238
U.S. municipal securities	—			39		—		39
Alternative instruments:
Private market partnerships ^(e)	—			—		14		14
Private market partnerships measured at net asset value ^{(e) (g)}	—			—		—		879
Common/collective trusts ^(f)	—			315		—		315
Common/collective trusts and 103-12 Investment Trust measured at net asset value ^{(f) (g)}	—			—		—		283
Insurance group annuity contracts	—			—		2		2
Dividend and interest receivable	44			—		—		44
Due to/from brokers for sale of securities – net	3			—		—		3
Other liabilities – net	(6		)	—		—		(6		)
Total	$	7,226		$	2,936	$	16	$	11,340


^(a)	Holdings are diversified as follows: 17% United Kingdom, 11% Japan, 9% France, 6% Switzerland, 16% emerging markets and the remaining 41% with no concentration greater than 5% in any one country.


^(b)	There are no significant concentrations of holdings by company or industry.


^(c)	Includes approximately 76% investments in corporate debt with a S&P rating lower than A and 24% investments in corporate debt with a S&P rating A or higher. Holdings include 85% U.S. companies, 12% international companies and 3% emerging market companies.


^(d)	Includes approximately 27% investments in U.S. domestic government securities, 43% in emerging market government securities and 30% in international government securities. There are no significant foreign currency risks within this classification.

^(e)

^(f)


^(g)	Certain investments that are measured using net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the notes to the consolidated financial statements.

Changes in fair value measurements of Level 3 investments during the year ended December 31, 2018, were as follows (in millions):



	Private Market Partnerships			Insurance Group Annuity Contracts
Beginning balance at December 31, 2017	$	14		$	2
Actual loss on plan assets:
Relating to assets still held at the reporting date	(2		)	—
Purchases	1			—
Sales	(6		)	—
Ending balance at December 31, 2018	$	7		$	2

Changes in fair value measurements of Level 3 investments during the year ended December 31, 2017, were as follows (in millions):



	Private Market Partnerships			Insurance Group Annuity Contracts
Beginning balance at December 31, 2016	$	21		$	2
Actual loss on plan assets:
Relating to assets still held at the reporting date	(4		)	—
Purchases	1			—
Sales	(1		)	—
Transfers out	(3		)	—
Ending balance at December 31, 2017	$	14		$	2

The fair value of American’s retiree medical and other postretirement benefits plans assets at December 31, 2018 by asset category, were as follows (in millions):



	Fair Value Measurements as of December 31, 2018
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Money market fund	$	4	$	—	$	—	$	4
Mutual funds – AAL Class	—		221		—		221
Total	$	4	$	221	$	—	$	225

The fair value of American’s retiree medical and other postretirement benefits plans assets at December 31, 2017 by asset category, were as follows (in millions):



	Fair Value Measurements as of December 31, 2017
Asset Category	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Money market fund	$	5	$	—	$	—	$	5
Mutual funds – AAL Class	—		290		—		290
Total	$	5	$	290	$	—	$	295

Defined Contribution Plans

American contributed $856 million, $844 million and $761 million to its defined contribution plans for the years ended December 31, 2018, 2017 and 2016, respectively.

Profit Sharing Program

American accrues 5% of its pre-tax income excluding special items for its profit sharing program. For the year ended December 31, 2018, American accrued $175 million for this program, which will be distributed to employees in the first quarter of 2019.