Investments and Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Investments and Fair Value Measurements

12.  Investments and Fair Value Measurements

Assets Measured at Fair Value on a Recurring Basis

The Company utilizes the market approach to measure fair value for its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The Company’s short-term investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No changes in valuation techniques or inputs occurred during the year ended December 31, 2015.

Assets measured at fair value on a recurring basis are summarized below (in millions):

	Fair Value Measurements as of December 31, 2015
	Total		Level 1		Level 2		Level 3
Short-term investments (1), (2):
Money market funds	$	1,010	$	1,010	$	—	$	—
Government agency investments		1		—		1		—
Corporate obligations		2,191		—		2,191		—
Bank notes/certificates of deposit/time deposits		2,662		—		2,662		—
		5,864		1,010		4,854		—
Restricted cash and short-term investments (1)		695		695		—		—
Total	$	6,559	$	1,705	$	4,854	$	—

(1) Unrealized gains or losses on short-term investments and restricted cash and 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. The Company’s short-term investments mature in one year or less except for $734 million of corporate obligations and $1.2 billion of bank notes/certificates of deposit/time deposits.

	Fair Value Measurements as of December 31, 2014
	Total		Level 1		Level 2		Level 3
Short-term investments (1), (2):
Money market funds	$	954	$	954	$	—	$	—
Government agency investments		101		—		101		—
Repurchase agreements		46		—		46		—
Corporate obligations		3,927		—		3,927		—
Bank notes/certificates of deposit/time deposits		1,281		—		1,281		—
		6,309		954		5,355		—
Restricted cash and short-term investments (1)		774		774		—		—
Total	$	7,083	$	1,728	$	5,355	$	—

(1) Unrealized gains or losses on short-term investments and restricted cash and 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. The Company’s short-term investments mature in one year or less except for $1.1 billion of corporate obligations and $575 million of bank notes/certificates of deposit/time deposits.

There were no Level 1 to Level 2 transfers during the years ended December 31, 2015 or 2014.

Fair Value of Debt

The fair value of the Company’s long-term debt was estimated using quoted market prices or discounted cash flow analyses, based on the Company’s current estimated incremental borrowing rates for similar types of borrowing arrangements. If the Company’s long-term debt was measured at fair value, it would have been classified as Level 2 in the fair value hierarchy.

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

	December 31, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	20,561	$	21,111	$	17,720	$	18,542

Cash and Short-term Investments

Generally, fluctuations in foreign currencies, including devaluations, cannot be predicted by the Company and can significantly affect the value of the Company’s cash and short-term investments 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 the Company’s business, results of operations and financial condition. See Part I, 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 unaudited additional discussion of this and other currency risks.

American Airlines, Inc. [Member]

Investments and Fair Value Measurements

10.  Investments and Fair Value Measurements

Assets Measured at Fair Value on a Recurring Basis

American utilizes the market approach to measure fair value for its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. American’s short-term investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No changes in valuation techniques or inputs occurred during the year ended December 31, 2015.

Assets measured at fair value on a recurring basis are summarized below (in millions):

	Fair Value Measurements as of December 31, 2015
	Total		Level 1		Level 2		Level 3
Short-term investments (1), (2):
Money market funds	$	1,008	$	1,008	$	—	$	—
Government agency investments		1		—		1		—
Corporate obligations		2,191		—		2,191		—
Bank notes/certificates of deposit/time deposits		2,662		—		2,662		—
		5,862		1,008		4,854		—
Restricted cash and short-term investments (1)		695		695		—		—
Total	$	6,557	$	1,703	$	4,854	$	—

(1) Unrealized gains or losses on short-term investments and restricted cash and 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. American’s short-term investments mature in one year or less except for $734 million of corporate obligations and $1.2 billion of bank notes/certificates of deposit/time deposits.

	Fair Value Measurements as of December 31, 2014
	Total		Level 1		Level 2		Level 3
Short-term investments (1), (2):
Money market funds	$	951	$	951	$	—	$	—
Government agency investments		101		—		101		—
Repurchase agreements		46		—		46		—
Corporate obligations		3,927		—		3,927		—
Bank notes/certificates of deposit/time deposits		1,281		—		1,281		—
		6,306		951		5,355		—
Restricted cash and short-term investments (1)		774		774		—		—
Total	$	7,080	$	1,725	$	5,355	$	—

(1) Unrealized gains or losses on short-term investments and restricted cash and 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. American’s short-term investments mature in one year or less except for $1.1 billion of corporate obligations and $575 million of bank notes/certificates of deposit/time deposits.

There were no Level 1 to Level 2 transfers during the years ended December 31, 2015 or 2014.

Fair Value of Debt

The fair value of American’s long-term debt was estimated using quoted market prices or discounted cash flow analyses, based on American’s current estimated incremental borrowing rates for similar types of borrowing arrangements. If American’s long-term debt was measured at fair value, it would have been classified as Level 2 in the fair value hierarchy.

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

	December 31, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	18,826	$	19,378	$	16,482	$	17,245

Cash and Short-term Investments

Generally, fluctuations in foreign currencies, including devaluations, cannot be predicted by American and can significantly affect the value of American’s cash and short-term investments 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 American’s business, results of operations and financial condition. See Part I, 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 unaudited additional discussion of this and other currency risks.