Special Items, Net

12 Months Ended

Dec. 31, 2016

2. Special Items, Net

Special items, net on the consolidated statements of operations consisted of the following (in millions):


	Year Ended December 31,
	2016		2015		2014
Mainline operating special items, net ⁽¹⁾	$	709	$	1,051	$	800

⁽¹⁾	The 2016 mainline operating special items totaled a net charge of $709 million, which principally included $514 million of Merger integration expenses, $177 million of fleet restructuring expenses and a $25 million net charge consisting of mark-to-market adjustments for bankruptcy obligations.

The 2015 mainline operating special items totaled a net charge of $1.1 billion, which principally included $826 million of Merger integration expenses, $210 million of fleet restructuring expenses and a $53 million net credit consisting of mark-to-market adjustments for bankruptcy obligations.

The 2014 mainline operating special items totaled a net charge of $800 million, which primarily included $732 million of Merger integration expenses, $88 million of fleet restructuring expenses, an $81 million charge to revise prior estimates of certain aircraft residual values and an $81 million net charge for bankruptcy-related items principally consisting of mark-to-market adjustments for bankruptcy obligations and professional fees. These charges were offset in part by a net $265 million gain related to the divestiture of slots.

Merger integration expenses included costs related to information technology, re-branding of aircraft, airport facilities and uniforms, alignment of labor union contracts, professional fees, relocation, training, and severance, and in 2015 and 2014, also included share-based compensation related to awards granted in connection with the Merger that fully vested in December 2015. Fleet restructuring expenses included the acceleration of aircraft depreciation, impairments, remaining lease payments and lease return costs for aircraft currently grounded or expected to be grounded earlier than planned.

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


	Year Ended December 31,
	2016		2015			2014
Regional operating special items, net ⁽¹⁾	$	14	$	29		$	24
Nonoperating special items, net ⁽²⁾		49		594			132
Income tax special items, net ⁽³⁾		—		(3,015	)		346

⁽¹⁾	The 2016 and 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 our Envoy regional subsidiary.

⁽²⁾	The 2016 nonoperating special items totaled a net charge of $49 million, which consisted of debt issuance and extinguishment costs associated with bond and term loan refinancings.

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 us 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 and $56 million of early debt extinguishment costs primarily related to the prepayment of 7.50% senior secured notes and other indebtedness.

⁽³⁾

In 2015, income tax special items totaled a net credit of $3.0 billion. In connection with the preparation of our financial statements for the fourth quarter of 2015, management determined that it was more likely than not that substantially all of our deferred tax assets, which include our net operating losses (NOLs), would be realized. Accordingly, we reversed $3.0 billion of the valuation allowance as of December 31, 2015, which resulted in a special non-cash tax benefit recorded in our consolidated statement of operations. See Note 6 for further information.

In 2014, income tax special items, net were $346 million. During 2014, we sold our portfolio of fuel hedging contracts that were scheduled to settle on or after June 30, 2014. In connection with this sale, we 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 our fuel hedging contracts. In accordance with GAAP, we retained the $330 million tax provision in OCI until the last contract was settled or terminated.

American Airlines, Inc. [Member]

Special Items, Net

2. Special Items, Net

Special items, net on the consolidated statements of operations consisted of the following (in millions):


	Year Ended December 31,
	2016		2015		2014
Mainline operating special items, net ⁽¹⁾	$	709	$	1,051	$	783

⁽¹⁾	The 2016 mainline operating special items totaled a net charge of $709 million, which principally included $514 million of Merger integration expenses, $177 million of fleet restructuring expenses and a $25 million net charge consisting of mark-to-market adjustments for bankruptcy obligations.

The 2014 mainline operating special items totaled a net charge of $783 million, which primarily included $732 million of Merger integration expenses, $88 million of fleet restructuring expenses, an $81 million charge to revise prior estimates of certain aircraft residual values and a $60 million net charge for bankruptcy-related items principally consisting of mark-to-market adjustments for bankruptcy obligations and professional fees. These charges were offset in part by a net $265 million gain related to the divestiture of slots.

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


	Year Ended December 31,
	2016		2015			2014
Regional operating special items, net ⁽¹⁾	$	13	$	18		$	5
Nonoperating special items, net ⁽²⁾		49		616			128
Income tax special items, net ⁽³⁾		—		(3,468	)		344

⁽¹⁾	The 2016, 2015 and 2014 regional operating special items, net principally related to Merger integration expenses.

⁽²⁾	The 2016 nonoperating special items totaled a net charge of $49 million, which consisted of debt issuance and extinguishment costs associated with bond and term loan refinancings.

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 and $56 million of early debt extinguishment costs primarily related to the prepayment of 7.50% senior secured notes and other indebtedness.

⁽³⁾

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 net operating losses (NOLs), would be realized. Accordingly, American reversed $3.5 billion of the valuation allowance as of December 31, 2015, which resulted in a special non-cash tax benefit recorded in the consolidated statement of operations. See Note 4 for further information.

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.