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FORM			10-Q

☒			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)

Delaware

75-1825172

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1 Skyview Drive,

Fort Worth,

Texas

76155

(682)

278-9000

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code)

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

Delaware

13-1502798

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1 Skyview Drive,

Fort Worth,

Texas

76155

(682)

278-9000

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code)

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

Preferred Stock Purchase Rights

—

(1)

(1) Attached to the Common Stock

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

American Airlines Group Inc.

☒

Yes

☐

No

American Airlines, Inc.

☒

Yes

☐

No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 

American Airlines Group Inc.

☒

Yes

☐

No

American Airlines, Inc.

☒

Yes

☐

No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

American Airlines Group Inc.			☐
American Airlines, Inc.			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

American Airlines Group Inc.

☐

Yes

☒

No

American Airlines, Inc.

☐

Yes

☒

No

As of October 14, 2022, there were 1,000 shares of American Airlines, Inc. common stock outstanding, all of which were held by American Airlines Group Inc.

						Page
PART I: FINANCIAL INFORMATION
Item 1A.			Condensed Consolidated Financial Statements of American Airlines Group Inc.			11
			Condensed Consolidated Statements of Operations			11
			Condensed Consolidated Statements of Comprehensive Income (Loss)			12
			Condensed Consolidated Balance Sheets			13
			Condensed Consolidated Statements of Cash Flows			14
			Condensed Consolidated Statements of Stockholders' Deficit			15
			Notes to the Condensed Consolidated Financial Statements			17
Item 1B.			Condensed Consolidated Financial Statements of American Airlines, Inc.			29
			Condensed Consolidated Statements of Operations			29
			Condensed Consolidated Statements of Comprehensive Income (Loss)			30
			Condensed Consolidated Balance Sheets			31
			Condensed Consolidated Statements of Cash Flows			32
			Condensed Consolidated Statements of Stockholder's Equity			33
			Notes to the Condensed Consolidated Financial Statements			34
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			45
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			66
Item 4.			Controls and Procedures			67
PART II: OTHER INFORMATION
Item 1.			Legal Proceedings			69
Item 1A.			Risk Factors			69
Item 6.			Exhibits			99
SIGNATURES						100

This report is filed by American Airlines Group Inc. (AAG) and its wholly-owned subsidiary American Airlines, Inc. (American). References in this report to “we,” “us,” “our,” the “Company” and similar terms refer to AAG and its consolidated subsidiaries. References in this report to “mainline” refer to the operations of American only and exclude regional operations.

For the convenience of the reader, the definitions of certain capitalized industry and other terms used in this report have been consolidated into a glossary beginning on page 5.

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, the continuing availability of borrowings under revolving lines of credit, 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. In particular, the consequences of the coronavirus (COVID-19) outbreak and subsequent volatility in demand for air travel due to economic conditions and the travel industry in general and our financial position and operating results in particular have been material, are changing rapidly, and cannot be predicted. 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. Any forward-looking statements speak only as of the date of this report or as of the dates indicated in the statements.

Our business is subject to a number of risks and uncertainties 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. These risks are more fully described in Part II, Item 1A. Risk Factors. These risks include, among others, the following:

Risks Related to our Business

•The outbreak and global spread of COVID-19 and government-imposed measures to prevent or reduce its spread have resulted in significant volatility in demand for air travel, the impacts of which have adversely impacted our business, operating results, financial condition and liquidity.

•Downturns in economic conditions could adversely affect our business.

•We will need to obtain sufficient financing or other capital to operate successfully.

•Our high level of debt and other obligations may limit our ability to fund general corporate requirements and obtain additional financing, may limit our flexibility in responding to competitive developments and cause our business to be vulnerable to adverse economic and industry conditions.

•We have significant pension and other postretirement benefit funding obligations, which may adversely affect our liquidity, results of operations and financial condition.

•If our financial condition worsens, provisions in our credit card processing and other commercial agreements may adversely affect our liquidity.

•The loss of key personnel upon whom we depend to operate our business or the inability to attract and develop additional qualified personnel could adversely affect our business.

•Our business has been and will continue to be affected by many changing economic and other conditions beyond our control, including global events that affect travel behavior, and our results of operations could be volatile and fluctuate due to seasonality.

•Union disputes, employee strikes and other labor-related disruptions, or our inability to otherwise maintain labor costs at competitive levels may adversely affect our operations and financial performance.

•If we encounter problems with any of our third-party regional operators or third-party service providers, our operations could be adversely affected by a resulting decline in revenue or negative public perception about our services.

•Any damage to our reputation or brand image could adversely affect our business or financial results.

•Changes to our business model that are designed to increase revenues may not be successful and may cause operational difficulties or decreased demand.

•Our intellectual property rights, particularly our branding rights, are valuable, and any inability to protect them may adversely affect our business and financial results.

•We may be a party to litigation in the normal course of business or otherwise, which could affect our financial position and liquidity.

•Our ability to utilize our NOLs and other carryforwards may be limited.

•We have a significant amount of goodwill, which is assessed for impairment at least annually. In addition, we may never realize the full value of our intangible assets or long-lived assets, causing us to record material impairment charges.

Risks Related to the Airline Industry

•The airline industry is intensely competitive and dynamic.

•The commercial relationships that we have with other companies, including any related equity investments, may not produce the returns or results we expect.

•Our business is very dependent on the price and availability of aircraft fuel and continued periods of high volatility in fuel costs, increased fuel prices or significant disruptions in the supply of aircraft fuel could have a significant negative impact on consumer demand, our operating results and liquidity.

•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.

•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.

•We may be adversely affected by conflicts overseas or terrorist attacks; the travel industry continues to face ongoing security concerns.

•We are subject to risks associated with climate change, including increased regulation of our CO2 emissions, changing consumer preferences and the potential increased impacts of severe weather events on our operations and infrastructure.

•A shortage of pilots or other personnel could materially adversely affect our business.

•We depend on a limited number of suppliers for aircraft, aircraft engines and parts.

•Delays in scheduled aircraft deliveries or other loss of anticipated fleet capacity, and failure of new aircraft to perform as expected, may adversely impact our business, results of operations and financial condition.

•We rely heavily on technology and automated systems to operate our business, and any failure of these technologies or systems could harm our business, results of operations and financial condition.

•Evolving data security and privacy requirements could increase our costs, and any significant data security or privacy incident could disrupt our operations, harm our reputation, expose us to legal risks and otherwise materially adversely affect our business, results of operations and financial condition.

•We rely on third-party distribution channels and must manage effectively the costs, rights and functionality of these channels.

•If we are unable to obtain and maintain adequate facilities and infrastructure throughout our system and, at some airports, adequate slots, we may be unable to operate our existing flight schedule and to expand or change our route network in the future, which may have a material adverse impact on our operations.

“AAdvantage” means the AAdvantage® frequent flyer program.

This report on Form 10-Q is filed by both AAG and American and includes the Condensed Consolidated Financial Statements of each company in Item 1A and Item 1B, respectively.

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Operating revenues:
Passenger			$	12,396					$	7,957					$	32,438					$	17,682
Cargo			279						332						970						973
Other			787						680						2,375						1,800
Total operating revenues			13,462						8,969						35,783						20,455
Operating expenses:
Aircraft fuel and related taxes			3,847						1,952						10,369						4,596
Salaries, wages and benefits			3,384						3,018						9,773						8,611
Regional expenses			1,174						887						3,298						2,148
Maintenance, materials and repairs			685						548						1,949						1,383
Other rent and landing fees			710						694						2,081						1,950
Aircraft rent			347						358						1,045						1,064
Selling expenses			495						318						1,331						745
Depreciation and amortization			491						480						1,486						1,439
Special items, net			37						(990)						189						(3,986)
Other			1,362						1,109						4,037						2,784
Total operating expenses			12,532						8,374						35,558						20,734
Operating income (loss)			930						595						225						(279)
Nonoperating income (expense):
Interest income			70						5						107						13
Interest expense, net			(499)						(476)						(1,430)						(1,332)
Other income, net			157						82						274						241
Total nonoperating expense, net			(272)						(389)						(1,049)						(1,078)
Income (loss) before income taxes			658						206						(824)						(1,357)
Income tax provision (benefit)			175						37						(148)						(296)
Net income (loss)			$	483					$	169					$	(676)					$	(1,061)
Earnings (loss) per common share:
Basic			$	0.74					$	0.26					$	(1.04)					$	(1.65)
Diluted			$	0.69					$	0.25					$	(1.04)					$	(1.65)
Weighted average shares outstanding (in thousands):
Basic			650,586						648,564						650,145						642,432
Diluted			715,985						721,142						650,145						642,432

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Net income (loss)			$	483					$	169					$	(676)					$	(1,061)
Other comprehensive income (loss), net of tax:
Pension, retiree medical and other postretirement benefits			29						40						85						146
Investments			(1)						—						(5)						—
Total other comprehensive income, net of tax			28						40						80						146
Total comprehensive income (loss)			$	511					$	209					$	(596)					$	(915)

			September 30, 2022						December 31, 2021
			(Unaudited)
ASSETS
Current assets
Cash			$	332					$	273
Short-term investments			10,900						12,158
Restricted cash and short-term investments			953						990
Accounts receivable, net			1,991						1,505
Aircraft fuel, spare parts and supplies, net			2,215						1,795
Prepaid expenses and other			986						615
Total current assets			17,377						17,336
Operating property and equipment
Flight equipment			39,154						37,856
Ground property and equipment			9,696						9,335
Equipment purchase deposits			643						517
Total property and equipment, at cost			49,493						47,708
Less accumulated depreciation and amortization			(19,506)						(18,171)
Total property and equipment, net			29,987						29,537
Operating lease right-of-use assets			7,549						7,850
Other assets
Goodwill			4,091						4,091
Intangibles, net of accumulated amortization of $816 and $786, respectively			2,069						1,988
Deferred tax asset			3,679						3,556
Other assets			1,900						2,109
Total other assets			11,739						11,744
Total assets			$	66,652					$	66,467
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Current maturities of long-term debt and finance leases			$	2,749					$	2,489
Accounts payable			2,117						1,772
Accrued salaries and wages			1,662						1,489
Air traffic liability			8,161						6,087
Loyalty program liability			3,006						2,896
Operating lease liabilities			1,467						1,507
Other accrued liabilities			2,808						2,766
Total current liabilities			21,970						19,006
Noncurrent liabilities
Long-term debt and finance leases, net of current maturities			34,185						35,571
Pension and postretirement benefits			4,601						5,053
Loyalty program liability			6,141						6,239
Operating lease liabilities			6,281						6,610
Other liabilities			1,367						1,328
Total noncurrent liabilities			52,575						54,801
Commitments and contingencies
Stockholders’ equity (deficit)
Common stock, $0.01 par value; 1,750,000,000 shares authorized, 649,863,026 shares issued and outstanding at September 30, 2022; 647,727,595 shares issued and outstanding at December 31, 2021			6						6
Additional paid-in capital			7,277						7,234
Accumulated other comprehensive loss			(5,862)						(5,942)
Retained deficit			(9,314)						(8,638)
Total stockholders’ deficit			(7,893)						(7,340)
Total liabilities and stockholders’ equity (deficit)			$	66,652					$	66,467

			Nine Months Ended September 30,
			2022						2021
Net cash provided by operating activities			$	2,331					$	1,904
Cash flows from investing activities:
Capital expenditures, net of aircraft purchase deposit returns			(1,860)						(25)
Airport construction projects, net of reimbursements			(274)						(110)
Proceeds from sale-leaseback transactions			46						168
Proceeds from sale of property and equipment			37						181
Sales of short-term investments			13,412						7,540
Purchases of short-term investments			(12,113)						(15,159)
Decrease (increase) in restricted short-term investments			41						(330)
Purchase of equity investments			(205)						—
Other investing activities			—						14
Net cash used in investing activities			(916)						(7,721)
Cash flows from financing activities:
Payments on long-term debt and finance leases			(2,038)						(6,639)
Proceeds from issuance of long-term debt			699						12,096
Shares withheld for taxes pursuant to employee stock plans			(16)						(13)
Deferred financing costs			(2)						(176)
Proceeds from issuance of equity			—						460
Other financing activities			10						121
Net cash provided by (used in) financing activities			(1,347)						5,849
Net increase in cash and restricted cash			68						32
Cash and restricted cash at beginning of period			408						399
Cash and restricted cash at end of period (1)			$	476					$	431
Non-cash transactions:
Right-of-use (ROU) assets acquired through operating leases			$	840					$	914
Property and equipment acquired through finance leases			121						127
Operating lease conversion to finance lease			42						102
Equity investments			12						—
Finance lease conversion to operating lease			4						—
Supplemental information:
Interest paid, net			1,478						1,306
Income taxes paid			2						2

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

Cash			$	332					$	293
Restricted cash included in restricted cash and short-term investments			144						138
Total cash and restricted cash			$	476					$	431

			Common Stock						Additional Paid-in Capital						Accumulated Other Comprehensive Loss						Retained Deficit						Total
Balance at December 31, 2021			$	6					$	7,234					$	(5,942)					$	(8,638)					$	(7,340)
Net loss			—						—						—						(1,635)						(1,635)
Other comprehensive income, net			—						—						26						—						26
Issuance of 1,770,173 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes			—						(14)						—						—						(14)
Share-based compensation expense			—						23						—						—						23
Balance at March 31, 2022			6						7,243						(5,916)						(10,273)						(8,940)
Net income			—						—						—						476						476
Other comprehensive income, net			—						—						26						—						26
Issuance of 281,593 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes			—						(2)						—						—						(2)
Share-based compensation expense			—						18						—						—						18
Balance at June 30, 2022			6						7,259						(5,890)						(9,797)						(8,422)
Net income			—						—						—						483						483
Other comprehensive income, net			—						—						28						—						28
Issuance of 83,665 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes			—						—						—						—						—
Share-based compensation expense			—						18						—						—						18
Balance at September 30, 2022			$	6					$	7,277					$	(5,862)					$	(9,314)					$	(7,893)

			Common Stock						Additional Paid-in Capital						Accumulated Other Comprehensive Loss						Retained Deficit						Total
Balance at December 31, 2020			$	6					$	6,894					$	(7,103)					$	(6,664)					$	(6,867)
Net loss			—						—						—						(1,250)						(1,250)
Other comprehensive income, net			—						—						67						—						67
Impact of adoption of Accounting Standards Update 2020-06 related to convertible instruments			—						(320)						—						19						(301)
Issuance of 18,194,573 shares of AAG common stock pursuant to an at-the-market offering, net of offering costs			—						316						—						—						316
Issuance of PSP2 Warrants			—						65						—						—						65
Issuance of 1,700,380 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes			—						(13)						—						—						(13)
Share-based compensation expense			—						38						—						—						38
Balance at March 31, 2021			6						6,980						(7,036)						(7,895)						(7,945)
Net income			—						—						—						19						19
Other comprehensive income, net			—						—						39						—						39
Issuance of 5,956,191 shares of AAG common stock pursuant to an at-the-market offering, net of offering costs			—						144						—						—						144
Issuance of PSP2 and PSP3 Warrants			—						56						—						—						56
Issuance of 115,833 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes			—						—						—						—						—
Share-based compensation expense			—						20						—						—						20
Balance at June 30, 2021			6						7,200						(6,997)						(7,876)						(7,667)
Net income			—						—						—						169						169
Other comprehensive income, net			—						—						40						—						40
Issuance of 30,970 shares of AAG common stock pursuant to employee stock plans net of shares withheld for cash taxes			—						—						—						—						—
Share-based compensation expense			—						21						—						—						21
Balance at September 30, 2021			$	6					$	7,221					$	(6,957)					$	(7,707)					$	(7,437)

(a) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of American Airlines Group Inc. (we, us, our and similar terms, or AAG) should be read in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2021. The accompanying unaudited condensed consolidated financial statements include the accounts of AAG and its wholly-owned subsidiaries. AAG’s principal subsidiary is American Airlines, Inc. (American). All significant intercompany transactions have been eliminated.

Management believes that all adjustments necessary for the fair presentation of results, consisting of normally recurring items, have been included in the unaudited condensed consolidated financial statements for the interim periods presented. The preparation of financial statements in accordance with accounting principles generally accepted in the United States (GAAP) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The most significant areas of judgment relate to passenger revenue recognition, the loyalty program, deferred tax assets, as well as pension and retiree medical and other postretirement benefits.

(b) Impact of Coronavirus (COVID-19)

COVID-19 has been declared a global health pandemic by the World Health Organization. COVID-19 has surfaced in nearly all regions of the world, which has driven the implementation of significant, government-imposed measures to prevent or reduce its spread. Ongoing global vaccination efforts and the corresponding lifting of government restrictions in and between many markets resulted in a significant and rapid recovery in demand for air travel which continued into the third quarter of 2022. The continued impact of the COVID-19 pandemic, including any increases in infection rates, new variants and renewed governmental action to slow the spread of COVID-19 cannot be estimated. We will continue to match our forward capacity with observed booking trends for future travel and make further adjustments to our capacity as needed.

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Fleet impairment (1)			$	—					$	—					$	149					$	—
Litigation reserve adjustments			37						—						37						—
PSP Financial Assistance (2)			—						(992)						—						(4,162)
Severance expenses (3)			—						—						—						168
Mark-to-market adjustments on bankruptcy obligations, net			—						(1)						—						5
Other operating special items, net			—						3						3						3
Mainline operating special items, net			37						(990)						189						(3,986)
PSP Financial Assistance (2)			—						(128)						—						(539)
Regional pilot retention program (4)			—						61						—						61
Fleet impairment (1)			—						—						—						27
Severance expenses (3)			—						—						—						2
Other operating special items, net			2						—						2						—
Regional operating special items, net			2						(67)						2						(449)
Operating special items, net			39						(1,057)						191						(4,435)
Mark-to-market adjustments on equity and other investments, net (5)			(57)						16						32						3
Debt refinancing, extinguishment and other, net			—						2						2						28
Nonoperating special items, net			(57)						18						34						31
Income tax special items, net			—						—						(9)						—

(1)Fleet impairment for the nine months ended September 30, 2022 included a non-cash impairment charge to write down the carrying value of our retired Airbus A330 fleet to the estimated fair value due to the market conditions for certain used aircraft. We retired our Airbus A330 fleet in 2020 as a result of the decline in demand for air travel due to the COVID-19 pandemic.

Fleet impairment for the nine months ended September 30, 2021 included a non-cash impairment charge to write down regional aircraft resulting from the retirement of the remaining Embraer 140 fleet earlier than planned.

(2)The PSP Financial Assistance represents recognition of a portion of the financial assistance received from the U.S. Department of Treasury (Treasury) pursuant to the payroll support program established under the PSP Extension Law (PSP2) and the American Rescue Plan Act of 2021 (ARP) (PSP3).

(3)Severance expenses include salary and medical costs primarily associated with certain team members who opted into voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic. Cash payments related to our voluntary early retirement programs for the three and nine months ended September 30, 2022 were approximately $40 million and $180 million, respectively, and approximately $190 million and $480 million for the three and nine months ended September 30, 2021, respectively.

(4)Our regional pilot retention program provides for, among other things, a cash retention bonus paid in the fourth quarter of 2021 to eligible captains at our wholly-owned regional carriers included on the pilot seniority list as of September 1, 2021.

(5)Mark-to-market adjustments on equity and other investments, net principally included net unrealized gains and losses associated with our equity investments in GOL Linhas Aéreas Inteligentes S.A. (GOL), Vertical Aerospace Ltd. (Vertical) and China Southern Airlines Company Limited (China Southern Airlines).

The following table sets forth the computation of basic and diluted earnings (loss) per common share (EPS) (in millions, except share and per share amounts):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Basic EPS:
Net income (loss)			$	483					$	169					$	(676)					$	(1,061)
Weighted average common shares outstanding (in thousands)			650,586						648,564						650,145						642,432
Basic EPS			$	0.74					$	0.26					$	(1.04)					$	(1.65)
Diluted EPS:
Net income (loss)			$	483					$	169					$	(676)					$	(1,061)
Interest expense on 6.50% convertible senior notes			14						14						—						—
Net income (loss) for purposes of computing diluted EPS			$	497					$	183					$	(676)					$	(1,061)
Share computation for diluted EPS (in thousands):
Basic weighted average common shares outstanding			650,586						648,564						650,145						642,432
Dilutive effect of stock awards			1,778						2,264						—						—
Dilutive effect of warrants			1,893						8,586						—						—
Assumed conversion of 6.50% convertible senior notes			61,728						61,728						—						—
Diluted weighted average common shares outstanding			715,985						721,142						650,145						642,432
Diluted EPS			$	0.69					$	0.25					$	(1.04)					$	(1.65)

Securities which were excluded from the calculation of diluted EPS because inclusion of such shares would be antidilutive, are as follows (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
6.50% convertible senior notes			—						—						61,728						61,728
Restricted stock unit awards			4,490						1,172						5,400						3,272
PSP1 Warrants (1)			—						—						2,887						5,555
Treasury Loan Warrants (2)			—						—						902						1,731
PSP2 Warrants (3)			—						—						304						1,329
PSP3 Warrants (4)			—						—						—						—

(1)Pursuant to the payroll support program established under the CARES Act (PSP1), AAG issued to Treasury warrants (PSP1 Warrants) to purchase up to an aggregate of approximately 14.0 million shares of AAG common stock for an exercise price of $12.51 per share, subject to adjustment.

(2)Pursuant to the Loan and Guarantee Agreement with Treasury (the Treasury Loan Agreement), AAG issued to Treasury warrants (Treasury Loan Warrants) to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock for an exercise price of $12.51 per share, subject to adjustment.

(3)Pursuant to PSP2, AAG issued to Treasury warrants (PSP2 Warrants) to purchase up to an aggregate of approximately 6.6 million shares of AAG common stock for an exercise price of $15.66 per share, subject to adjustment.

(4)Pursuant to PSP3, AAG issued to Treasury warrants (PSP3 Warrants) to purchase up to an aggregate of approximately 4.4 million shares of AAG common stock for an exercise price of $21.75 per share, subject to adjustment.

The following are the significant categories comprising our operating revenues (in millions):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Passenger revenue:
Passenger travel			$	11,536					$	7,287					$	30,150					$	16,177
Loyalty revenue - travel (1)			860						670						2,288						1,505
Total passenger revenue			12,396						7,957						32,438						17,682
Cargo			279						332						970						973
Other:
Loyalty revenue - marketing services (2)			655						585						1,991						1,571
Other revenue			132						95						384						229
Total other revenue			787						680						2,375						1,800
Total operating revenues			$	13,462					$	8,969					$	35,783					$	20,455

(1)Loyalty revenue included in passenger revenue is principally comprised of mileage credit redemptions, which were earned from travel or co-branded credit card and other partners.

(2)During the three months ended September 30, 2022 and 2021, cash payments from co-branded credit card and other partners were $1.0 billion and $835 million, respectively. During the nine months ended September 30, 2022 and 2021, cash payments from co-branded credit card and other partners were $3.4 billion and $2.6 billion, respectively.

The following is our total passenger revenue by geographic region (in millions):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Domestic			$	8,786					$	6,547					$	23,966					$	14,646
Latin America			1,596						957						4,357						2,375
Atlantic			1,901						408						3,848						555
Pacific			113						45						267						106
Total passenger revenue			$	12,396					$	7,957					$	32,438					$	17,682

We attribute passenger revenue by geographic region based upon the origin and destination of each flight segment.

Our significant contract liabilities are comprised of (1) outstanding loyalty program mileage credits that may be redeemed for future travel and other non-air travel awards, reported as loyalty program liability on the condensed consolidated balance sheets and (2) ticket sales for transportation that has not yet been provided, reported as air traffic liability on the condensed consolidated balance sheets.

			September 30, 2022						December 31, 2021
			(In millions)
Loyalty program liability			$	9,147					$	9,135
Air traffic liability			8,161						6,087
Total			$	17,308					$	15,222

The balance of the loyalty program liability fluctuates based on seasonal patterns, which impact the volume of mileage credits issued through travel or sold to co-branded credit card and other partners (deferral of revenue) and mileage credits redeemed (recognition of revenue). Changes in loyalty program liability are as follows (in millions):

Balance at December 31, 2021			$	9,135
Deferral of revenue			2,367
Recognition of revenue (1)			(2,355)
Balance at September 30, 2022 (2)			$	9,147

(1)Principally relates to revenue recognized from the redemption of mileage credits for both air and non-air travel awards. Mileage credits are combined in one homogenous pool and are not separately identifiable. As such, the revenue is comprised of miles that were part of the loyalty program deferred revenue balance at the beginning of the period, as well as miles that were issued during the period.

(2)Mileage credits can be redeemed at any time and generally do not expire as long as that AAdvantage member has any type of qualifying activity at least every 24 months or if the AAdvantage member is the primary holder of a co-branded credit card. As of September 30, 2022, our current loyalty program liability was $3.0 billion and represents our current estimate of revenue expected to be recognized in the next 12 months based on historical as well as projected trends, with the balance reflected in long-term loyalty program liability expected to be recognized as revenue in periods thereafter. Given the inherent uncertainty of the current operating environment due to the continued impact of the COVID-19 pandemic, we will continue to monitor redemption patterns and may adjust our estimates in the future.

The air traffic liability principally represents tickets sold for future travel on American and partner airlines, as well as estimated future refunds and exchanges of tickets sold for past travel. The balance in our air traffic liability also fluctuates with seasonal travel patterns. The contract duration of passenger tickets is generally one year. Accordingly, any revenue associated with tickets sold for future travel will be recognized within 12 months. For the nine months ended September 30, 2022, $4.4 billion of revenue was recognized in passenger revenue that was included in our air traffic liability at December 31, 2021. In response to the COVID-19 pandemic, we extended the contract duration for certain tickets to September 30, 2022, principally those tickets which were issued in 2020 and 2021. Additionally, we extended the contract duration to December 31, 2022 for tickets to certain international destinations. We also have eliminated change fees for most domestic and international tickets providing more flexibility for customers to change travel plans. Given this flexibility offered to our customers and the uncertainty surrounding the future demand for air travel, our estimates of revenue that will be recognized from the air traffic liability for future flown or unused tickets as well as our estimates of refunds may be subject to variability and differ from historical experience.

Long-term debt included in the condensed consolidated balance sheets consisted of (in millions):

			September 30, 2022						December 31, 2021
Secured
2013 Term Loan Facility, variable interest rate of 4.83%, installments through 2025			$	1,752					$	1,770
2014 Term Loan Facility, variable interest rate of 4.87%, installments through 2027			1,196						1,208
December 2016 Term Loan Facility, variable interest rate of 4.82%, installments through 2023			1,188						1,188
11.75% senior secured notes, interest only payments until due in July 2025			2,500						2,500
10.75% senior secured IP notes, interest only payments until due in February 2026			1,000						1,000
10.75% senior secured LGA/DCA notes, interest only payments until due in February 2026			200						200
5.50% senior secured notes, installments beginning in July 2023 until due in April 2026 (1)			3,500						3,500
5.75% senior secured notes, installments beginning in July 2026 until due in April 2029 (1)			3,000						3,000
AAdvantage Term Loan Facility, variable interest rate of 7.46%, installments beginning in July 2023 through April 2028 (1)			3,500						3,500
Enhanced equipment trust certificates (EETCs), fixed interest rates ranging from 2.88% to 7.13%, averaging 3.76%, maturing from 2022 to 2034			9,352						9,357
Equipment loans and other notes payable, fixed and variable interest rates ranging from 3.21% to 6.29%, averaging 4.45%, maturing from 2022 to 2032			3,075						3,433
Special facility revenue bonds, fixed interest rates ranging from 2.25% to 5.38%, maturing from 2026 to 2036			1,050						1,129
			31,313						31,785
Unsecured
PSP1 Promissory Note, interest only payments until due in April 2030			1,757						1,765
PSP2 Promissory Note, interest only payments until due in January 2031			1,030						1,035
PSP3 Promissory Note, interest only payments until due in April 2031			959						946
6.50% convertible senior notes, interest only payments until due in July 2025			1,000						1,000
3.75% senior notes, interest only payments until due in March 2025			500						500
5.000% senior notes			—						750
			5,246						5,996
Total long-term debt			36,559						37,781
Less: Total unamortized debt discount, premium and issuance costs			401						458
Less: Current maturities			2,560						2,315
Long-term debt, net of current maturities			$	33,598					$	35,008

(1)Collectively referred to as the AAdvantage Financing.

As of September 30, 2022, the maximum availability under our revolving credit and other facilities is as follows (in millions):

2013 Revolving Facility			$	750
2014 Revolving Facility			1,643
April 2016 Revolving Facility			450
Short-term Revolving and Other Facilities			220
Total			$	3,063

American has an undrawn $150 million short-term revolving credit facility, which was set to expire at the beginning of January 2022 but which has been extended through the beginning of January 2023. American also currently has $70 million of available borrowing base under a cargo receivables facility that was entered into in December 2020 and is set to expire in December 2022. The December 2016 Credit Facilities provide for a revolving credit facility that may be established thereunder in the future.

Secured financings, including revolving credit and other facilities, are collateralized by assets, consisting primarily of aircraft, engines, simulators, aircraft spare parts, airport gate leasehold rights, route authorities, airport slots, certain receivables, certain intellectual property and certain loyalty program assets.

6.50% Convertible Senior Notes

At September 30, 2022, the if-converted value of the 6.50% convertible senior notes due 2025 (the Convertible Notes) did not exceed the principal amount. The last reported sale price per share of our common stock (as defined in the indenture governing our Convertible Notes, the Convertible Notes Indenture) did not exceed 130% of the conversion price of the Convertible Notes for at least 20 of the 30 consecutive trading days ending on September 30, 2022. Accordingly, pursuant to the terms of the Convertible Notes Indenture, the holders of the Convertible Notes cannot convert at their option at any time during the quarter ending December 31, 2022. Each $1,000 principal amount of Convertible Notes is convertible at a rate of 61.7284 shares of our common stock, subject to adjustment as provided in the Convertible Notes Indenture. We may settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

2022 Financing Activities

2021-1 Aircraft EETCs

In November 2021, American created two pass-through trusts which issued $960 million aggregate face amount of Series 2021-1 Class A and Class B EETCs (the 2021-1 Aircraft EETCs) in connection with the financing of 26 aircraft previously delivered or originally scheduled to be delivered to American through September 2022 (the 2021-1 Aircraft). In 2021, $94 million of the proceeds had been used to purchase equipment notes issued by American in connection with the financing of five aircraft under the 2021-1 Aircraft EETCs, all of which was used to repay existing indebtedness. During the nine months ended September 30, 2022, $699 million of proceeds had been used to purchase equipment notes issued by American in connection with the financing of 17 aircraft under the 2021-1 Aircraft EETCs. Interest and principal payments on equipment notes issued in connection with the 2021-1 Aircraft EETCs are payable semi-annually in January and July of each year. Interest payments began in July 2022 and principal payments are scheduled to begin in January 2023. The remaining proceeds of $167 million as of September 30, 2022 were being held in escrow with a depositary for the benefit of the holders of the 2021-1 Aircraft EETCs until such time as American issues additional equipment notes with respect to the remaining 2021-1 Aircraft to the pass-through trusts, which will purchase such additional equipment notes with the escrowed funds. These escrowed funds are not guaranteed by American and are not reported as debt on its condensed consolidated balance sheets because the proceeds held by the depositary for the benefit of the holders of the 2021-1 Aircraft EETCs are not American’s assets.

Certain information regarding the 2021-1 Aircraft EETC equipment notes, as of September 30, 2022, is set forth in the table below.

			2021-1 Aircraft EETCs
			Series A						Series B
Aggregate principal issued			$758 million						$202 million
Remaining escrowed proceeds			$133 million						$34 million
Fixed interest rate per annum			2.875%						3.95%
Maturity date			July 2034						July 2030

Other Financing Activities

During the nine months ended September 30, 2022, we repurchased $349 million of unsecured notes on the open market.

At December 31, 2021, we had approximately $17.2 billion of gross federal net operating losses (NOLs) and $3.0 billion of other carryforwards available to reduce future federal taxable income, of which $6.9 billion will expire beginning in 2024 if unused and $13.3 billion can be carried forward indefinitely. We also had approximately $6.0 billion of NOL carryforwards to reduce future state taxable income at December 31, 2021, which will expire in taxable years 2021 through 2041 if unused.

Our ability to use our NOLs and other carryforwards depends on the amount of taxable income generated in future periods. We provide a valuation allowance for our deferred tax assets, which include our NOLs, when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized. We consider all available positive and negative evidence and make certain assumptions in evaluating the realizability of our deferred tax assets. Many factors are considered that impact our assessment of future profitability, including conditions which are beyond our control, such as the health of the economy, the availability and price volatility of aircraft fuel and travel demand. We presently have a $34 million valuation allowance on certain net deferred tax assets related to state NOL carryforwards. There can be no assurance that an additional valuation allowance on our net deferred tax assets will not be required. Such valuation allowance could be material.

On August 16, 2022, the Inflation Reduction Act (the IRA) was signed into law in the U.S. Among other changes, the IRA introduced a corporate minimum tax on certain corporations with average adjusted financial statement income over a three-tax year period in excess of $1.0 billion and an excise tax on certain stock repurchases by certain covered corporations for taxable years beginning after December 31, 2022 and several tax incentives to promote clean energy. Based on our current analysis and pending future guidance to be issued by Treasury, we do not believe these provisions will have a material impact on our consolidated financial statements.

During the three and nine months ended September 30, 2022, we recorded an income tax provision of $175 million and an income tax benefit of $148 million, respectively.

Assets Measured at Fair Value on a Recurring Basis

We utilize the market approach to measure the fair value of our financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. Our short-term investments, restricted cash and restricted 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 nine months ended September 30, 2022.

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

			Fair Value Measurements as of September 30, 2022
			Total						Level 1						Level 2						Level 3
Short-term investments (1), (2):
Money market funds			$	281					$	281					$	—					$	—
Corporate obligations			5,719						—						5,719						—
Bank notes/certificates of deposit/time deposits			3,860						—						3,860						—
Repurchase agreements			1,040						—						1,040						—
			10,900						281						10,619						—
Restricted cash and short-term investments (1), (3)			953						546						407						—
Long-term investments (4)			284						284						—						—
Total			$	12,137					$	1,111					$	11,026					$	—

(1)All short-term investments are classified as available-for-sale and stated at fair value. Unrealized gains and losses are recorded in accumulated other comprehensive loss at each reporting period. There were no credit losses.

(2)Our short-term investments mature in one year or less.

(3)Restricted cash and short-term investments primarily include collateral held to support workers' compensation obligations, collateral associated with the payment of interest for the AAdvantage Financing and money market funds to be used to finance a substantial portion of the cost of the renovation and expansion of Terminal 8 at John F. Kennedy International Airport.

(4)Long-term investments include our equity investments in China Southern Airlines, Vertical and GOL. These investments are reflected in other assets on the condensed consolidated balance sheets.

Fair Value of Debt

The fair value of our long-term debt was estimated using quoted market prices or discounted cash flow analyses based on our current estimated incremental borrowing rates for similar types of borrowing arrangements. If our long-term debt was measured at fair value, it would have been classified as Level 2 except for $3.7 billion as of September 30, 2022 and December 31, 2021, which would have been classified as Level 3 in the fair value hierarchy. The fair value of the Convertible Notes, which would have been classified as Level 2, was $1.0 billion and $1.4 billion as of September 30, 2022 and December 31, 2021, respectively.

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

			September 30, 2022												December 31, 2021
			Carrying Value						Fair Value						Carrying Value						Fair Value
Long-term debt, including current maturities			$	36,158					$	33,139					$	37,323					$	38,567

Other Investments

An important part of our strategy to expand our network has been to initiate or expand our commercial relationships with other airlines, such as by entering into global alliances, joint business and codeshare relationships, and, in certain instances, by making an equity investment in another airline or other companies.

GOL

In April 2022, we completed our definitive investment agreement with GOL and invested $200 million in 22.2 million of newly issued preferred shares, representing a 5.3% economic interest in GOL. The total consideration of $200 million has been allocated as follows based on relative fair values: $81 million to the preferred shares and $119 million to the indefinite-lived intangible asset derived from the related commercial agreements. The ownership interest is accounted for at fair value based on GOL’s stock price and mark-to-market adjustments are recorded to nonoperating other income, net on the condensed consolidated statements of operations.

The following table provides the components of net periodic benefit cost (income) (in millions):

						Pension Benefits												Retiree Medical and Other Postretirement Benefits
Three Months Ended September 30,						2022						2021						2022						2021
Service cost						$	1					$	1					$	3					$	2
Interest cost						140						132						7						8
Expected return on assets						(284)						(269)						(3)						(3)
Amortization of:
Prior service cost (benefit)						7						7						(3)						(3)
Unrecognized net loss (gain)						39						54						(6)						(6)
Net periodic benefit income						$	(97)					$	(75)					$	(2)					$	(2)
						Pension Benefits												Retiree Medical and Other Postretirement Benefits
Nine Months Ended September 30,						2022						2021						2022						2021
Service cost						$	3					$	3					$	11					$	7
Interest cost						416						394						22						23
Expected return on assets						(853)						(813)						(9)						(9)
Special termination benefits						—						—						—						139
Amortization of:
Prior service cost (benefit)						21						21						(10)						(10)
Unrecognized net loss (gain)						117						159						(19)						(17)
Net periodic benefit cost (income)						$	(296)					$	(236)					$	(5)					$	133

Effective November 1, 2012, substantially all of our defined benefit pension plans were frozen.

The service cost component of net periodic benefit cost (income) is included in operating expenses, the cost for the special termination benefits is included in special items, net and the other components of net periodic benefit cost (income) are included in nonoperating other income, net in the condensed consolidated statements of operations.

During the first quarter of 2021, we remeasured our retiree medical and other postretirement benefits to account for enhanced healthcare benefits provided to eligible team members who opted into voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic. For the nine months ended September 30, 2021, we recognized a $139 million special charge for these enhanced healthcare benefits and increased our postretirement benefits obligation by $139 million.

On March 11, 2021, the ARP was enacted, which included funding relief provisions benefiting single employer qualified retirement benefit pension plans such as those sponsored by us. Based on the ARP provisions applicable to our pension plans, we will have no additional funding requirements until 2023.

The components of accumulated other comprehensive loss (AOCI) are as follows (in millions):

			Pension, Retiree Medical and Other Postretirement Benefits						Unrealized Loss on Investments						Income Tax Benefit (Provision) (1)						Total
Balance at December 31, 2021			$	(4,736)					$	(2)					$	(1,204)					$	(5,942)
Other comprehensive income (loss) before reclassifications			—						(6)						1						(5)
Amounts reclassified from AOCI			109						—						(24)			(2)			85
Net current-period other comprehensive income (loss)			109						(6)						(23)						80
Balance at September 30, 2022			$	(4,627)					$	(8)					$	(1,227)					$	(5,862)

(1)Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net income (loss) 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 (benefit) on the condensed consolidated statements of operations.

Reclassifications out of AOCI are as follows (in millions):

						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,
						2022						2021						2022						2021
Amortization of pension, retiree medical and other postretirement benefits:
Prior service cost						$	3					$	3					$	9					$	9					Nonoperating other income, net
Actuarial loss						26						37						76						110						Nonoperating other income, net
Total reclassifications for the period, net of tax						$	29					$	40					$	85					$	119

Our regional carriers provide scheduled air transportation under the brand name “American Eagle.” The American Eagle carriers include our wholly-owned regional carriers as well as third-party regional carriers. Substantially all of our regional carrier arrangements are in the form of capacity purchase agreements. Expenses associated with American Eagle operations are classified as regional expenses on the condensed consolidated statements of operations.

Regional expenses for the three months ended September 30, 2022 and 2021 include $81 million and $78 million of depreciation and amortization, respectively, and $1 million of aircraft rent. Regional expenses for the nine months ended September 30, 2022 and 2021 include $240 million and $236 million of depreciation and amortization, respectively, and $4 million and $5 million of aircraft rent, respectively.

During the three months ended September 30, 2022 and 2021, we recognized $152 million and $125 million, respectively, of expense under our capacity purchase agreement with Republic Airways Inc. (Republic). During the nine months ended September 30, 2022 and 2021, we recognized $462 million and $343 million, respectively, of expense under our capacity purchase agreement with Republic. We hold a 25% equity interest in Republic Airways Holdings Inc., the parent company of Republic.

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, were named as defendants in approximately 100 putative class action lawsuits alleging unlawful agreements with respect to air passenger capacity. The U.S. lawsuits were consolidated in the Federal District Court for the District of Columbia (the DC Court). On June 15, 2018, we reached a settlement agreement with the plaintiffs in the amount of $45 million to resolve all class claims in the U.S. lawsuits. That settlement was approved by the DC Court on May 13, 2019, however 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 United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court). The complaint named as defendants US Airways Group, US Airways, Inc., AMR Corporation and American, alleged that the effect of the merger of US Airways Group and AMR Corporation (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 and the parties submitted proposed findings of fact and conclusions of law and made closing arguments in April 2019. On January 29, 2021, the Bankruptcy Court published its decision finding in our favor. On March 25, 2022, the U.S. District Court for the Southern District of New York entered judgment affirming the Bankruptcy Court's decision. Plaintiffs have appealed that decision to the United States Court of Appeals for the Second Circuit, and filed their opening brief on August 3, 2022. We believe this lawsuit is without merit and intend to continue to vigorously defend against it, including against any further appeals by plaintiffs.

Government Antitrust Action Related to the Northeast Alliance. On September 21, 2021, the United States Department of Justice (DOJ), joined by Attorneys General from six states and the District of Columbia, filed an antitrust complaint against American and JetBlue Airways Corporation (JetBlue) alleging that American and JetBlue violated U.S. antitrust laws in connection with the previously disclosed Northeast Alliance arrangement (NEA). The parties are currently presenting their respective cases in a bench trial that commenced on September 27, 2022. We believe the complaint is without merit and are defending against it vigorously.

Also on September 21, 2021, the United States Department of Transportation (DOT) published a Clarification Notice relating to the agreement that had been reached between the DOT, American, and JetBlue in January 2021, at the conclusion of the DOT’s review of the NEA (DOT Agreement). The DOT Clarification Notice stated, among other things, that the DOT Agreement remains in force during the pendency of the DOJ action against the NEA and, while the DOT retains independent statutory authority to prohibit unfair methods of competition in air transportation, the DOT intends to defer to DOJ to resolve the antitrust concerns that DOJ has identified with respect to the NEA. The DOT simultaneously published a Notice Staying Proceeding in relation to a complaint by Spirit Airlines, Inc. regarding the NEA, pending resolution of the DOJ action described above. On September 30, 2022, the DOT issued a further statement referencing the prior Clarification Notice and, among other things, indicating its intention to continue working with the DOJ in its efforts to resolve the ongoing proceedings regarding the Northeast Alliance.

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.

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Operating revenues:
Passenger			$	12,396					$	7,957					$	32,438					$	17,682
Cargo			279						332						970						973
Other			786						679						2,370						1,799
Total operating revenues			13,461						8,968						35,778						20,454
Operating expenses:
Aircraft fuel and related taxes			3,847						1,952						10,369						4,596
Salaries, wages and benefits			3,382						3,017						9,768						8,607
Regional expenses			1,172						789						3,253						2,053
Maintenance, materials and repairs			685						548						1,949						1,383
Other rent and landing fees			710						694						2,081						1,950
Aircraft rent			347						358						1,045						1,064
Selling expenses			495						318						1,331						745
Depreciation and amortization			488						480						1,480						1,439
Special items, net			37						(990)						189						(3,986)
Other			1,363						1,109						4,039						2,785
Total operating expenses			12,526						8,275						35,504						20,636
Operating income (loss)			935						693						274						(182)
Nonoperating income (expense):
Interest income			111						8						162						26
Interest expense, net			(482)						(435)						(1,342)						(1,214)
Other income, net			156						82						274						239
Total nonoperating expense, net			(215)						(345)						(906)						(949)
Income (loss) before income taxes			720						348						(632)						(1,131)
Income tax provision (benefit)			180						68						(115)						(247)
Net income (loss)			$	540					$	280					$	(517)					$	(884)