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Special Items, Net (Tables)
 12 Months Ended
Dec. 31, 2015
Components of Company's Special Items, Net Included in Consolidated Statements of Operations

The Company’s special items, net on the consolidated statements of operations are as follows (in millions):

 

     Year Ended December 31,  
       2015          2014          2013    

Mainline operating special items, net (1)

    $ 1,051       $ 800       $ 559   

 

(1)

The 2015 mainline operating special items totaled a net charge of $1.1 billion, which principally included $1.0 billion of merger integration expenses related to information technology, alignment of labor union contracts, professional fees, severance, share-based compensation, fleet restructuring, re-branding of aircraft and airport facilities, relocation and training.

The 2014 mainline operating special items totaled a net charge of $800 million, which principally included $810 million of merger integration expenses related to information technology, alignment of labor union contracts, professional fees, severance and retention, share-based compensation, divestiture of London Heathrow slots, fleet restructuring, re-branding of aircraft and airport facilities, relocation and training. In addition, the Company recorded a net charge of $81 million for bankruptcy related items principally consisting of fair value adjustments for bankruptcy settlement obligations and an $81 million charge to revise prior estimates of certain aircraft residual values and other spare parts asset impairments. These charges were offset in part by a $309 million gain on the sale of slots at DCA.

The 2013 mainline operating special items, net principally included $443 million of merger related expenses related to the alignment of labor union contracts, professional fees, severance, share-based compensation and fees for US Airways to exit the Star Alliance and its codeshare agreement with United Airlines. In addition, the Company recorded a $107 million charge related to American’s pilot long-term disability obligation, a $43 million charge for workers’ compensation claims and a $33 million aircraft impairment charge. These charges were offset in part by a $67 million gain on the sale of slots at LGA.

The following additional amounts are also included in the consolidated statements of operations as follows (in millions):

 

     Year Ended December 31,  
     2015     2014      2013  

Other revenue special item, net (1)

    $ —      $ —       $ (31 ) 

Regional operating special items, net (2)

      29        24         8   

Nonoperating special items, net (3)

      594        132         211   

Reorganization items, net (4)

      —        —         2,655   

Income tax special items, net (5)

      (3,015 )      346         (324 ) 

 

(1)

The 2013 other revenue special item, net included a credit to other revenues related to a change in accounting method resulting from the modification of American’s AAdvantage miles agreement with Citibank.

 

(2)

The 2015 regional operating special items, net principally related to merger integration expenses.

 

The 2014 regional operating special items, net consisted primarily of a $24 million charge due to a new pilot labor contract at the Company’s Envoy regional subsidiary, as well as $7 million of merger integration expenses, offset in part by an $8 million gain on the sale of certain spare parts.

 

(3)

The 2015 nonoperating special items totaled a net charge of $594 million, which principally included a $592 million charge to write off all of the value of Venezuelan bolivars held by the Company due to continued lack of repatriations and deterioration of economic conditions in Venezuela.

The 2014 nonoperating special items totaled a net charge of $132 million, which principally included a $43 million charge for Venezuelan foreign currency losses, $56 million of early debt extinguishment costs primarily related to the prepayment of 7.50% senior secured notes and other indebtedness and $33 million of non-cash interest accretion on bankruptcy settlement obligations.

The 2013 nonoperating special items, net consisted of interest charges of $138 million primarily to recognize post-petition interest expense on unsecured obligations pursuant to the Plan and penalty interest related to 10.5% secured notes and 7.50% senior secured notes, a $54 million charge related to the premium on tender for existing enhanced equipment trust certificates (EETC) financings and the write-off of debt issuance costs and $19 million in charges related to the repayment of existing EETC financings.

 

(4)

In 2013, the Company recognized reorganization expenses as a result of the filing of voluntary petitions for relief under Chapter 11. These amounts consisted primarily of estimated allowed claim amounts and professional fees.

 

(5)

In 2015, income tax special items totaled a net credit of $3.0 billion. In connection with the preparation of the Company’s financial statements for the fourth quarter of 2015, management determined that it was more likely than not that substantially all of its deferred tax assets, which include its NOLs, would be realized. Accordingly, the Company reversed $3.0 billion of the valuation allowance as of December 31, 2015, which resulted in a special $3.0 billion non-cash tax benefit recorded in the consolidated statement of operations for 2015.

In 2014, income tax special items, net were $346 million. During 2014, the Company sold its portfolio of fuel hedging contracts that were scheduled to settle on or after June 30, 2014. In connection with this sale, the Company recorded a special non-cash tax provision of $330 million in the second quarter of 2014 that reversed the non-cash tax provision which was recorded in other comprehensive income (OCI), a subset of stockholders’ equity, principally in 2009. This provision represents the tax effect associated with gains recorded in OCI principally in 2009 due to a net increase in the fair value of the Company’s fuel hedging contracts. In accordance with GAAP, the Company retained the $330 million tax provision in OCI until the last contract was settled or terminated.

In 2013, income tax special items, net included a $538 million non-cash income tax benefit from continuing operations. The Company is required to consider all items (including items recorded in OCI) in determining the amount of tax benefit that results from a loss from continuing operations and that should be allocated to continuing operations. As a result, the Company recorded a tax benefit on the loss from continuing operations for the year, which was exactly offset by income tax expense on OCI. However, while the income tax benefit from continuing operations is reported on the income statement, the income tax expense on OCI is recorded directly to accumulated other comprehensive income (loss), which is a component of stockholders’ equity. Because the income tax expense on OCI is equal to the income tax benefit from continuing operations, the Company’s year-end net deferred tax position is not impacted by this tax allocation. The 2013 tax benefit was offset in part by a $214 million tax charge attributable to additional valuation allowance required to reduce deferred tax assets to the amount the Company believed was more likely than not to be realized.
American Airlines, Inc. [Member]  
Components of Company's Special Items, Net Included in Consolidated Statements of Operations

American’s special items, net on the consolidated statements of operations are as follows (in millions):

 

     Year Ended December 31,  
       2015          2014          2013    

Mainline operating special items, net (1)

    $ 1,051       $ 783       $ 559   

 

(1)

The 2015 mainline operating special items totaled a net charge of $1.1 billion, which principally included $1.0 billion of merger integration expenses related to information technology, alignment of labor union contracts, professional fees, severance, share-based compensation, fleet restructuring, re-branding of aircraft and airport facilities, relocation and training.

The 2014 mainline operating special items totaled a net charge of $783 million, which principally included $807 million of merger integration expenses related to information technology, alignment of labor union contracts, professional fees, severance and retention, share-based compensation, divestiture of London Heathrow slots, fleet restructuring, re-branding of aircraft and airport facilities, relocation and training. In addition, American recorded a net charge of $60 million for bankruptcy related items principally consisting of fair value adjustments for bankruptcy settlement obligations and an $81 million charge to revise prior estimates of certain aircraft residual values and other spare parts asset impairments. These charges were offset in part by a $309 million gain on the sale of slots at DCA.

The 2013 mainline operating special items, net principally included $443 million of merger related expenses related to the alignment of labor union contracts, professional fees, severance, share-based compensation and fees for US Airways to exit the Star Alliance and its codeshare agreement with United Airlines. In addition, American recorded a $107 million charge related to American’s pilot long-term disability obligation, a $43 million charge for workers’ compensation claims and a $33 million aircraft impairment charge. These charges were offset in part by a $67 million gain on the sale of slots at LGA.

The following additional amounts are also included in the consolidated statements of operations as follows (in millions):

 

     Year Ended December 31,  
     2015     2014      2013  

Other revenue special item, net (1)

    $ —      $ —       $ (31 ) 

Regional operating special items, net (2)

      18        5         —   

Nonoperating special items, net (3)

      616        128         121   

Reorganization items, net (4)

      —        —         2,640   

Income tax special items, net (5)

      (3,468 )      344         (324 ) 

 

(1)

The 2013 other revenue special item, net included a credit to other revenues related to a change in accounting method resulting from the modification of American’s AAdvantage miles agreement with Citibank.

 

(2)

The 2015 and 2014 regional operating special items, net principally related to merger integration expenses.

 

(3)

The 2015 nonoperating special items totaled a net charge of $616 million, which principally included a $592 million charge to write off all of the value of Venezuelan bolivars held by American due to continued lack of repatriations and deterioration of economic conditions in Venezuela.

 

The 2014 nonoperating special items totaled a net charge of $128 million, which principally included a $43 million charge for Venezuelan foreign currency losses, $56 million of early debt extinguishment costs primarily related to the prepayment of 7.50% senior secured notes and other indebtedness and $29 million of non-cash interest accretion on bankruptcy settlement obligations.

The 2013 nonoperating special items, net consisted of interest charges of $48 million primarily to recognize post-petition interest expense on unsecured obligations pursuant to the Plan and penalty interest related to 10.5% secured notes and 7.50% senior secured notes, a $54 million charge related to the premium on tender for existing enhanced equipment trust certificates (EETC) financings and the write-off of debt issuance costs and $19 million in charges related to the repayment of existing EETC financings.

 

(4)

In 2013, American recognized reorganization expenses as a result of the filing of voluntary petitions for relief under Chapter 11. These amounts consisted primarily of estimated allowed claim amounts and professional fees.

 

(5)

In 2015, income tax special items totaled a net credit of $3.5 billion. In connection with the preparation of American’s financial statements for the fourth quarter of 2015, management determined that it was more likely than not that substantially all of its deferred tax assets, which include its NOLs, would be realized. Accordingly, American reversed $3.5 billion of the valuation allowance as of December 31, 2015, which resulted in a special $3.5 billion non-cash tax benefit recorded in the consolidated statement of operations for 2015.

In 2014, income tax special items, net were $344 million. During 2014, American sold its portfolio of fuel hedging contracts that were scheduled to settle on or after June 30, 2014. In connection with this sale, American recorded a special non-cash tax provision of $328 million in the second quarter of 2014 that reversed the non-cash tax provision which was recorded in other comprehensive income (OCI), a subset of stockholder’s equity, principally in 2009. This provision represents the tax effect associated with gains recorded in OCI principally in 2009 due to a net increase in the fair value of American’s fuel hedging contracts. In accordance with GAAP, American retained the $328 million tax provision in OCI until the last contract was settled or terminated.

In 2013, income tax special items, net included a $538 million non-cash income tax benefit from continuing operations. American is required to consider all items (including items recorded in OCI) in determining the amount of tax benefit that results from a loss from continuing operations and that should be allocated to continuing operations. As a result, American recorded a tax benefit on the loss from continuing operations for the year, which was exactly offset by income tax expense on OCI. However, while the income tax benefit from continuing operations is reported on the income statement, the income tax expense on OCI is recorded directly to accumulated other comprehensive income (loss), which is a component of stockholder’s equity. Because the income tax expense on OCI is equal to the income tax benefit from continuing operations, American’s year-end net deferred tax position is not impacted by this tax allocation. The 2013 tax benefit was offset in part by a $214 million tax charge attributable to additional valuation allowance required to reduce deferred tax assets to the amount American believed was more likely than not to be realized.