# Table	of	Contents

# UNITED	STATES	SECURITIES	AND	EXCHANGE	COMMISSION

# ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

For	the	Fiscal	Year	Ended	December	31,	2016

☐ TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

Commission	file	number	1-8400

# American	Airlines	Group	Inc.

(Exact	name	of	registrant	as	specified	in	its	charter)

Delaware

(State	or	other	jurisdiction	of

incorporation	or	organization)

(Address	of	principal	executive	offices,	including	zip	code)

(I.R.S.	Employer

Identification	No.)

Registrant's	telephone	number,	including	area	code

(Former	name,	former	address	and	former	fiscal	year,	if	changed	since	last	report)

Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

Common	Stock,	$0.01	par	value	per	share

# Securities	registered	pursuant	to	Section	12(g)	of	the	Act:	None

Commission	file	number	1-2691

# American	Airlines,	Inc.

# Name	of	Exchange	on	Which	Registered

NASDAQ

# Securities	registered	pursuant	to	Section	12(b)	of	the	Act:	None

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.

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.

Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	and	posted	on	its	corporate	Web	site,	if	any,	every	Interactive	Data	File	required	to	be	submitted	and	posted	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	and	post	such	files).

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	(§	229.405)	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of	registrant's	knowledge,	in

definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	or	a	non-accelerated	filer.	See	definition	of	"accelerated	filer"	and	"large	accelerated	filer"	in	Rule	12b-2 of	the	Exchange	Act.

American	Airlines	Group	Inc. ☑	Large		Accelerated	Filer ☐	Accelerated		Filer ☐	Non-accelerated	Filer ☐	Smaller		Reporting	Company

American	Airlines,	Inc. ☐	Large	Accelerated	Filer ☐	Accelerated	Filer ☑	Non-accelerated	Filer ☐	Smaller		Reporting	Company

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

Indicate	by	check	mark	whether	the	registrant	has	filed	all	documents	and	reports	required	to	be	filed	by	Section	12,	13,	or	15(d)	of	the	Securities	Exchange	Act	of	1934	subsequent	to	the	distribution

of	securities	under	a	plan	confirmed	by	a	court.

As	of	February	17,	2017,	there	were	504,154,397	shares	of	American	Airlines	Group	Inc.	common	stock	outstanding.	The	aggregate	market	value	of	the	voting	stock	held	by	non-affiliates	of	the registrant	as	of	June	30,	2016,	was	approximately	$15	billion.

As	of	February	17,	2017,	there	were	1,000	shares	of	American	Airlines,	Inc.	common	stock	outstanding,	all	of	which	were	held	by	American	Airlines	Group	Inc.

# OMISSION	OF	CERTAIN	INFORMATION

American	Airlines	Group	Inc.	and	American	Airlines,	Inc.	meet	the	conditions	set	forth	in	General	Instruction	I(1)(a)	and	(b)	of	Form	10-K	and	have	therefore	omitted	the	information	otherwise	called for	by	Items	10-13	of	Form	10-K	as	allowed	under	General	Instruction	I(2)(c).

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Portions	of	the	proxy	statement	related	to	American	Airlines	Group	Inc.'s	2017	Annual	Meeting	of	Stockholders,	which	proxy	statement	will	be	filed	under	the	Securities	Exchange	Act	of	1934	within 120	days	of	the	end	of	American	Airlines	Group	Inc.'s	fiscal	year	ended	December	31,	2016,	are	incorporated	by	reference	into	Part	III	of	this	Annual	Report	on	Form	10-K.

|  | American	Airlines	Group	Inc.<br>American	Airlines,	Inc.<br>Form	10-K<br>Year	Ended	December	31,	2016<br>Table	of	Contents<br>PART	I | Page |
| :--- | :--- | :--- |
| Item\t1. | \t Business | 4 |
| Item\t1A. | \t Risk\tFactors | 16 |
| Item\t1B. | \t Unresolved\tStaff\tComments | 36 |
| Item\t2. | \t Properties | 37 |
| Item\t3. | Legal\tProceedings | 41 |
| Item\t4. | \t Mine\tSafety\tDisclosures | 42 |
|  | PART\tII |  |
| Item\t5. | \t Market\tfor\tAmerican\tAirlines\tGroup's\tCommon\tStock,\tRelated\tStockholder\tMatters\tand\tIssuer\tPurchases\tof\tEquity\tSecurities | 43 |
| Item\t6. | \t Selected\tConsolidated\tFinancial\tData | 46 |
| Item\t7. | \t Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations | 50 |
| Item\t7A. | \t Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk | 82 |
| Item\t8A. | \t Consolidated\tFinancial\tStatements\tand\tSupplementary\tData\tof\tAmerican\tAirlines\tGroup\tInc. | 84 |
| Item\t8B. | \t Consolidated\tFinancial\tStatements\tand\tSupplementary\tData\tof\tAmerican\tAirlines,\tInc. | \t136 |
| Item\t9. | \t Changes\tIn\tand\tDisagreements\twith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure | \t187 |
| Item\t9A. | \t Controls\tand\tProcedures | \t187 |
|  | PART\tIII |  |
| Item\t10. | \t Directors,\tExecutive\tOfficers\tand\tCorporate\tGovernance | \t191 |
| Item\t11. | \t Executive\tCompensation | \t191 |
| Item\t12. | \t Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand\tRelated\tStockholder\tMatters | \t191 |
| Item\t13. | \t Certain\tRelationships\tand\tRelated\tTransactions,\tand\tDirector\tIndependence | \t191 |
| Item\t14. | \t Principal\tAccountant\tFees\tand\tServices | \t191 |
|  | PART\tIV |  |
| Item\t15. | \t Exhibits\tand\tFinancial\tStatement\tSchedules | \t192 |
| Item\t16. | Form\t10-K\tSummary | \t193 |
| SIGNATURES |  | \t194 |

This	combined	Annual	Report	on	Form	10-K	is	filed	by	American	Airlines	Group	Inc.	(formerly	named	AMR	Corporation)	(AAG)	and	its	wholly-owned subsidiary	American	Airlines,	Inc.	(American).	References	in	this	Annual	Report	on	Form	10-K	to	"we,"	"us,"	"our,"	the	"Company"	and	similar	terms	refer to	AAG	and	its	consolidated	subsidiaries.	"AMR"	or	"AMR	Corporation"	refers	to	the	Company	during	the	period	of	time	prior	to	its	emergence	from Chapter	11	and	its	acquisition	of	US	Airways	Group,	Inc.	(US	Airways	Group)	on	December	9,	2013.	References	to	"US	Airways	Group"	and	"US Airways,"	 a	 subsidiary	 of	 US	Airways	 Group,	 represent	 those	 entities	 during	 the	 period	 of	 time	 prior	 to	AAG's	 internal	 corporate	 restructuring	 on December	30,	2015.	References	 in	 this	Annual	Report	on	Form	10-K	to	"mainline"	refer	to	the	operations	of	American,	as	applicable,	and	exclude regional	operations.

# Note	Concerning	Forward-Looking	Statements

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,	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	1A.	Risk	Factors,	Part	II,	Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	and	in	our other	filings	with	the	Securities	and	Exchange	Commission	(the	SEC),	and	other	risks	and	uncertainties	listed	from	time	to	time	in	our	filings	with	the SEC.

All	of	the	forward-looking	statements	are	qualified	in	their	entirety	by	reference	to	the	factors	discussed	in	Part	I,	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.	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. Forward-looking	statements	speak	only	as	of	the	date	of	this	Annual	Report	on	Form	10-K	or	as	of	the	dates	indicated	in	the	statements.

# PART	I

# ITEM	1.		BUSINESS

# Overview

American	Airlines	Group	Inc.	(AAG),	a	Delaware	corporation,	is	a	holding	company	and	its	principal,	wholly-owned	subsidiaries	are	American	Airlines, Inc.	(American),	Envoy	Aviation	Group	Inc.	(Envoy),	PSA	Airlines,	Inc.	(PSA)	and	Piedmont	Airlines,	Inc.	(Piedmont).	AAG	was	formed	in	1982	under	the name	AMR	Corporation	(AMR)	as	the	parent	company	of	American,	which	was	founded	in	1934.	On	December	9,	2013,	a	subsidiary	of	AMR	merged	with and	into	US	Airways	Group,	Inc.	(US	Airways	Group),	a	Delaware	corporation,	which	survived	as	a	wholly-owned	subsidiary	of	AAG,	and	AAG	emerged from	Chapter	11	(the	Merger).	Upon	closing	of	the	Merger	and	emergence	from	Chapter	11,	AMR	changed	its	name	to	American	Airlines	Group	Inc.	On December	30,	2015,	in	order	to	simplify	AAG's	internal	corporate	structure,	US	Airways	Group	merged	with	and	into	AAG,	with	AAG	as	the	surviving corporation	 and,	 immediately	 thereafter,	 US	Airways,	 Inc.	 (US	Airways),	 a	 wholly-owned	 subsidiary	 of	 US	Airways	 Group,	 merged	 with	 and	 into American,	with	American	as	the	surviving	corporation.

AAG's	and	American's	principal	executive	offices	are	located	at	4333	Amon	Carter	Boulevard,	Fort	Worth,	Texas	76155	and	our	telephone	number	is 817-963-1234.

# Airline	Operations

Our	primary	business	activity	is	the	operation	of	a	major	network	carrier,	providing	scheduled	air	transportation	for	passengers	and	cargo.

Together	with	our	wholly-owned	regional	airline	subsidiaries	and	third-party	regional	carriers	operating	as	American	Eagle,	our	airline	operates	an average	of	nearly	6,700	flights	per	day	to	nearly	350	destinations	in	more	than	50	countries,	principally	from	our	hubs	in	Charlotte,	Chicago,	Dallas/Fort Worth,	Los	Angeles,	Miami,	New	York,	Philadelphia,	Phoenix	and	Washington,	D.C.	In	2016,	approximately	199	million	passengers	boarded	our	mainline and	regional	flights.	During	2016,	we	launched	new	nonstop	service	between	Los	Angeles	International	Airport	(LAX)	and	Hong	Kong	as	well	as	between LAX	and	Auckland,	New	Zealand.	We	also	launched	our	first-ever	regularly	scheduled	flights	to	Cuba	in	2016	with	non-stop	service	to	Havana	from Miami	and	Charlotte	and	to	Cienfuegos,	Holguin,	Camaguey,	Santa	Clara	and	Varadero	from	Miami,	making	us	amongst	the	top	leaders	in	air	service between	the	U.S.	and	Cuba.

As	of	December	31,	2016,	we	operated	930	mainline	aircraft	and	are	supported	by	our	regional	airline	subsidiaries	and	third-party	regional	carriers, which	operated	an	additional	606	regional	aircraft.	See	Part	I,	Item	2.	Properties	for	further	discussion	on	our	mainline	and	regional	aircraft	and	"Regional" below	for	further	discussion	on	our	regional	operations.

American	is	a	founding	member	of	the	 oneworld	alliance,	whose	members	and	members-elect	serve	more	than	1,000	destinations	with	approximately 14,250	daily	flights	to	over	150	countries.	See	"Ticket	Distribution	and	Marketing	Agreements "	below	for	further	discussion	on	the	 oneworld	alliance	and other	agreements	with	domestic	and	international	airlines.

See	Part	II,	Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	– 	"Operational	Highlights,"	"Financial Overview,"	"AAG's	Results	of	Operations"	and	"American's	Results	of	Operations"	for	further	discussion	of	AAG's	and	American's	operating	results	and operating	performance.	Also,	see	Note	13	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	Note	11	to	American's	Consolidated Financial	Statements	in	Part	II,	Item	8B	for	information	regarding	our	operating	segments	and	operating	revenue	in	principal	geographic	areas.

# Regional

We	have	arrangements	with	regional	carriers	to	provide	us	with	regional	jet	and	turboprop	service	under	the	brand	name	"American	Eagle."	The American	Eagle	carriers	include	our	wholly-owned	regional	carriers,	Envoy,	PSA	and	Piedmont,	as	well	as	third-party	regional	carriers	including	Republic Airline	Inc.	(Republic),	Mesa	Airlines,	Inc.	(Mesa),	Air	Wisconsin	Airlines	Corporation	(Air	Wisconsin),	Compass	Airlines,	LLC	(Compass),	ExpressJet Airlines,	Inc.	(ExpressJet),	SkyWest	Airlines,	Inc.	(SkyWest)	and	Trans	States	Airlines,	Inc.	(Trans	States).	These	carriers	are	an	integral	component	of our	operating	network.	We	rely	heavily	on	feeder	traffic	from	these	carriers,	which	transport	passengers	to	our	hubs	from	low-density	markets	that	are	not economical	for	us	to	serve	with	larger,	mainline	aircraft.	In	addition,	regional	carriers	offer	complementary	service	in	our	existing	mainline	markets	by operating	 flights	 during	off-peak	periods	between	mainline	 flights.	During	2016,	approximately	54	million	passengers	boarded	our	regional	carriers' planes,	approximately	44%	of	whom	connected	to	or	from	our	mainline	flights.	Of	these	passengers,	approximately	26	million	were	enplaned	by	our wholly-owned	regional	carriers	and	approximately	28	million	were	enplaned	by	third-party	regional	carriers.	All	American	Eagle	carriers	use	logos,	service marks,	aircraft	paint	schemes	and	uniforms	similar	to	our	mainline	operations.

The	American	Eagle	arrangements	are	principally	in	the	form	of	capacity	purchase	agreements.	The	capacity	purchase	agreements	provide	that	all revenues,	including	passenger,	in-flight,	ancillary,	mail	and	freight	revenues,	go	to	us.	In	return,	we	agree	to	pay	predetermined	fees	to	these	airlines	for operating	an	agreed-upon	number	of	aircraft,	without	regard	to	the	number	of	passengers	on	board.	In	addition,	these	agreements	provide	that	we reimburse	100%	of	certain	variable	costs,	such	as	airport	landing	fees	and	passenger	liability	insurance.	We	control	marketing,	scheduling,	ticketing, pricing	and	seat	inventories.

A	limited	number	of	regional	aircraft	are	operated	for	us	under	prorate	agreements,	under	which	the	regional	carriers	receive	a	prorated	share	of	ticket revenue	and	pay	certain	service	fees	to	us.	The	prorate	carriers	are	responsible	for	all	costs	incurred	operating	the	applicable	aircraft.

# Cargo

Our	cargo	division	provides	a	wide	range	of	freight	and	mail	services,	with	facilities	and	interline	connections	available	across	the	globe.	In	2016,	we were	named	the	Cargo	Airline	of	the	Year	for	the	second	year	running	and	Best	Cargo	Airline	from	the	Americas	for	the	ninth	consecutive	year	by	 Air Cargo	News.

# Ticket	Distribution	and	Marketing	Agreements

Passengers	can	purchase	tickets	for	travel	on	American	through	several	distribution	channels,	including	our	website	( www.aa.com),	our	reservations centers	and	third-party	distribution	channels,	including	those	provided	by	or	through	global	distribution	systems	(e.g.,	Amadeus,	Sabre	and	Travelport), conventional	travel	agents	and	online	travel	agents	(e.g.,	Expedia,	Orbitz	and	Travelocity).	To	remain	competitive,	we	need	to	successfully	manage	our distribution	costs	and	rights,	increase	our	distribution	flexibility	and	improve	the	functionality	of	third-party	distribution	channels,	while	maintaining	an industry-competitive	cost	structure.	For	more	discussion,	see	Part	I,	Item	1A.	Risk	Factors	–	"We	rely	on	third-party	distribution	channels	and	must manage	effectively	the	costs,	rights	and	functionality	of	these	channels."

In	general,	beyond	nonstop	city	pairs,	carriers	that	have	the	greatest	ability	to	seamlessly	connect	passengers	to	and	from	markets	have	a	competitive advantage.	In	some	cases,	however,	foreign	governments	limit	U.S.	air	carriers'	rights	to	transport	passengers	beyond	designated	gateway	cities	in foreign	countries.	In	order	to	improve	access	to	domestic	and	foreign	markets,	we	have	arrangements	with	other	airlines	including	the	oneworld	alliance, other	cooperation	agreements,	joint	business	agreements	(JBAs),	and	marketing	relationships.

# Member	of	oneworld	Alliance

American	is	a	founding	member	of	the	 oneworld	alliance,	which	includes	Air	Berlin,	British	Airways,	Cathay	Pacific	Airways,	Finnair,	Iberia,	Japan Airlines,	 LAN	Airlines,	 Malaysia	Airlines,	 Qantas	Airways,	 Qatar	Airways,	 Royal	 Jordanian,	 S7	Airlines,	 SriLankan	Airlines	 and	 TAM	Airlines.	 The oneworld	alliance	links	the	networks	of	the	member	carriers	to	enhance	customer	service	and	smooth	connections	to	the	destinations	served	by	the alliance,	including	linking	the	carriers'	loyalty	programs	and	access	to	the	carriers'	airport	lounge	facilities.

# Cooperation	and	Joint	Business	Agreements

American	is	party	to	antitrust-immunized	cooperation	agreements	with	British	Airways,	Iberia,	Finnair,	Royal	Jordanian,	Japan	Airlines,	LAN	Airlines and	LAN	Peru.	American	has	also	established	JBAs	with	British	Airways,	Iberia	and	Finnair,	and	separately	Japan	Airlines,	that	enable	the	carriers	to cooperate	on	flights	between	particular	destinations	and	allow	pooling	and	sharing	of	certain	revenues	and	costs,	enhanced	loyalty	program	reciprocity and	 cooperation	 in	 other	 areas.	American	 and	 its	 joint	 business	 partners	 received	 regulatory	 approval	 to	 enter	 into	 these	 JBAs	 and	 cooperation agreements.

We	signed	a	revised	JBA	with	Qantas	Airways	and	applied	for	antitrust	immunity	with	the	U.S.	Department	of	Transportation	(DOT)	for	the	revised relationship,	but	we	withdrew	that	application	in	November	2016	after	it	was	tentatively	denied	by	the	DOT.	However,	we	expect	that	our	existing,	more limited	cooperation	with	Qantas	will	continue,	and	we	intend	to	file	a	new	application	for	antitrust	immunity	with	the	DOT	later	this	year.	In	addition,	we have	signed	JBAs	with	certain	air	carriers	of	the	LATAM	Airlines	Group	and	have	applied	for	approval	in	the	relevant	jurisdictions	affected	by	such agreements,	which	applications	are	still	pending	before	the	relevant	regulators.

# Marketing	Relationships

To	improve	access	to	each	other's	markets,	various	U.S.	and	foreign	air	carriers,	including	American,	have	established	marketing	relationships	with other	airlines.	These	marketing	agreements	generally	provide	enhanced	customer	choice	by	means	of	an	expanded	network	with	reciprocal	loyalty program	participation	and	joint	sales	cooperation.	American	currently	has	marketing	relationships	with	Air	Berlin,	Air	Tahiti	Nui,	Alaska	Airlines,	British Airways,	Cape	Air,	Cathay	Pacific,	Dragonair,	EL	AL,	Etihad	Airways,	Fiji	Airways,	Finnair,	Gulf	Air,	Hainan	Airlines,	Hawaiian	Airlines,	Iberia,	Interjet, Japan	Airlines,	Jet	Airways,	Jetstar	Group	(includes	Jetstar	Airways	and	Jetstar	Japan),	Korean	Air,	LATAM	(includes	LAN	Airlines,	LAN	Argentina,	LAN Colombia,	LAN	Ecuador,	LAN	Peru,	TAM	Airlines	and	TAM	Mercosur),	Malaysia	Airlines,	Niki	Airlines,	Qantas	Airways,	Qatar	Airways,	Royal	Jordanian, S7	Airlines,	Seaborne	Airlines	and	WestJet.

# Loyalty	Program

Our	 loyalty	 program,	AAdvantage ®	 was	 established	 to	 develop	 passenger	 loyalty	 by	 offering	 awards	 to	 travelers	 for	 their	 continued	 patronage. AAdvantage	was	named	Best	Elite	Program	in	the	Americas	at	the	2016	Freddie	Awards.	AAdvantage	members	earn	mileage	credits	by	flying	on American,	any	oneworld	airline	or	other	partner	airlines,	or	by	using	the	services	of	over	1,000	program	participants,	such	as	the	Citi	and	Barclaycard	US co-branded	credit	cards,	hotels	and	car	rental	companies.	Mileage	credits	can	be	redeemed	for	free	or	upgraded	travel	on	American	and	participating airlines,	membership	to	our	Admirals	Club ®	or	for	other	non-travel	awards	from	our	program	participants.

All	travel	on	eligible	tickets	counts	toward	qualification	for	elite	status	in	the	AAdvantage	program.	Elite	members	can	enjoy	additional	benefits	of	the AAdvantage	program,	including	complimentary	upgrades,	mileage	bonuses,	complimentary	access	to	Preferred	Seats,	checked	bags	at	no	charge,	First and	Business	Class	check-in,	priority	security,	priority	boarding	and	priority	baggage	delivery.

Most	travel	awards	are	subject	to	capacity-controlled	seating.	A	member's	mileage	credit	does	not	expire	as	long	as	that	member	has	any	type	of qualifying	activity	at	least	once	every	18	months.	Under	our	agreements	with	AAdvantage	members	and	program	partners,	we	reserve	the	right	to	change the	AAdvantage	program	at	any	time	without	notice,	and	may	end	the	program	with	six	months'	notice.	Program	rules,	partners,	special	offers,	awards and	requisite	mileage	levels	for	awards	are	subject	to	change.

During	2016,	our	members	redeemed	approximately	10	million	awards	including	travel	redemptions	for	flights	and	upgrades	on	American	and	other	air carriers,	as	well	as	redemption	of	car	and	hotel	awards,	club	memberships	and	merchandise.	Approximately	6.3%	of	our	2016	total	revenue	passenger miles	flown	were	from	award	travel.

In	order	to	ensure	we	are	rewarding	our	most	loyal	customers,	we	announced	a	program	change	effective	in	the	second	half	of	2016	whereby	our members	began	earning	mileage	credits	based	on	dollars	spent	rather	than	distance	flown	for	travel	on	American-marketed	flights.	In	addition,	our members	earn	bonus	mileage	credits	when	elite	status	is	obtained.	For	every	dollar	spent,	non-status	members	earn	five	mileage	credits,	but	Gold, Platinum	and	Executive	Platinum	status	holders	earn	bonus	mileage	credits	of	seven,	eight	and	eleven	mileage	credits,	respectively.	Additionally,	in January	2017,	we	added	Platinum	Pro	as	a	fourth	elite	level	for	members.	Platinum	Pro	status	holders	earn	nine	mileage	credits	for	every	dollar	spent.

See	Part	II,	Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	–	" Critical	Accounting	Policies	and Estimates"	for	more	information	on	our	loyalty	program.

# Industry	Competition

# Domestic

The	markets	in	which	we	operate	are	highly	competitive.	On	most	of	our	domestic	 non-stop	routes,	we	currently	face	competing	service	from	at	least one,	and	sometimes	more	than	one,	domestic	airline,	including:	Alaska	Airlines,	Allegiant	Air,	Delta	Air	Lines,	Frontier	Airlines,	Hawaiian	Airlines,	JetBlue Airways,	Southwest	Airlines,	Spirit	Airlines,	United	Airlines	and	Virgin	America.	Competition	is	even	greater	between	cities	that	require	a	connection, where	the	major	airlines	compete	via	their	respective	hubs.	In	addition,	we	face	competition	on	some	of	our	connecting	routes	from	airlines	operating point-to-point	 service	 on	 such	 routes.	 We	 also	 compete	 with	 all-cargo	 and	 charter	 airlines	 and,	 particularly	 on	 shorter	 segments,	 ground	 and	 rail transportation.

On	all	of	our	routes,	pricing	decisions	are	affected,	in	large	part,	by	the	need	to	meet	competition	from	other	airlines.	Price	competition	occurs	on	a market-by-market	basis	through	price	discounts,	changes	in	pricing	structures,	fare	matching,	target	promotions	and	loyalty	program	initiatives.	Airlines typically	use	discount	fares	and	other	promotions	to	stimulate	traffic	during	normally	slack	travel	periods,	when	they	begin	service	to	new	cities	or	when they	have	excess	capacity,	to	generate	cash	flow,	to	maximize	revenue	per	available	seat	mile	and	to	establish,	increase	or	preserve	market	share.	We have	often	elected	to	match	discount	or	promotional	fares	initiated	by	other	air	carriers	in	certain	markets	in	order	to	compete	in	those	markets.	Most airlines	will	quickly	match	price	reductions	in	a	particular	market.	In	addition,	low-fare,	low-cost	carriers,	such	as	Southwest	Airlines	and	JetBlue	Airways, and	so-called	ultra-low-cost	carriers,	such	as	Allegiant	Air,	Frontier	Airlines	and	Spirit	Airlines,	compete	in	many	of	the	markets	in	which	we	operate	and competition	from	these	carriers	is	increasing.

In	addition	to	price	competition,	airlines	compete	for	market	share	by	increasing	the	size	of	their	route	system	and	the	number	of	markets	they	serve. The	American	Eagle	regional	carriers	increase	the	number	of	markets	we	serve	by	flying	to	lower	demand	markets	and	providing	connections	at	our hubs.	Many	of	our	competitors	also	own	or	have	agreements	with	regional	airlines	that	provide	similar	services	at	their	hubs	and	other	locations.	We	also compete	on	the	basis	of	scheduling	(frequency	and	flight	times),	availability	of	nonstop	flights,	on-time	performance,	type	of	equipment,	cabin

configuration,	amenities	provided	to	passengers,	loyalty	programs,	the	automation	of	travel	agent	reservation	systems,	onboard	products,	markets	served and	other	services.	We	compete	with	both	major	network	airlines	and	low-cost	carriers	throughout	our	network.

# International

In	addition	to	our	extensive	domestic	service,	we	provide	international	service	to	Canada,	Central	and	South	America,	Asia,	Europe,	Australia	and	New Zealand.	In	providing	international	air	transportation,	we	compete	with	U.S.	airlines,	foreign	investor-owned	airlines	and	foreign	state-owned	or	state- affiliated	airlines,	including	carriers	based	in	the	Middle	East,	the	three	largest	of	which	we	believe	benefit	from	significant	government	subsidies.	In	order to	increase	our	ability	to	compete	for	international	air	transportation	service,	which	is	subject	to	extensive	government	regulation,	U.S.	and	foreign	carriers have	 entered	 into	 marketing	 relationships,	 alliances,	 cooperation	 agreements	 and	 JBAs	 to	 exchange	 traffic	 between	 each	 other's	 flights	 and	 route networks.	See	"Ticket	Distribution	and	Marketing	Agreements"	above	for	further	discussion.

# Employees	and	Labor	Relations

The	 airline	 business	 is	 labor	 intensive. In	 2016,	 mainline	 and	 regional	 salaries,	 wages	 and	 benefits	 were	 our largest	 expense	 and	 represented approximately	35%	of	our	total	operating	expenses.

Labor	relations	in	the	air	transportation	industry	are	regulated	under	the	Railway	Labor	Act	(RLA),	which	vests	in	the	National	Mediation	Board	(NMB) certain	functions	with	respect	to	disputes	between	airlines	and	labor	unions	relating	to	union	representation	and	collective	bargaining	agreements	(CBAs). When	an	RLA	CBA	becomes	amendable,	 if	either	party	 to	 the	agreement	wishes	 to	modify	 its	 terms,	 it	must	notify	 the	other	party	 in	 the	manner prescribed	under	the	RLA	and	as	agreed	by	the	parties.	Under	the	RLA,	the	parties	must	meet	for	direct	negotiations,	and,	if	no	agreement	is	reached, either	party	may	request	the	NMB	to	appoint	a	federal	mediator.	The	RLA	prescribes	no	set	timetable	for	the	direct	negotiation	and	mediation	process.	It is	not	unusual	for	those	processes	to	last	for	many	months	and	even	for	several	years.	If	no	agreement	is	reached	in	mediation,	the	NMB	in	its	discretion may	declare	under	the	RLA	at	some	time	that	an	impasse	exists,	and	if	an	impasse	is	declared,	the	NMB	proffers	binding	arbitration	to	the	parties.	Either party	may	decline	to	submit	to	binding	arbitration.	If	arbitration	is	rejected	by	either	party,	an	initial	30-day	"cooling	off"	period	commences.	Following	the conclusion	 of	 that	30-day	"cooling	off"	period,	 if	no	agreement	has	been	reached,	"self-help"	(as	described	below)	can	begin	unless	a	Presidential Emergency	Board	(PEB)	is	established.	A	PEB	examines	the	parties'	positions	and	recommends	a	solution.	The	PEB	process	lasts	for	30	days	and	(if	no resolution	is	reached)	is	followed	by	another	"cooling	off"	period	of	30	days.	At	the	end	of	a	"cooling	off"	period	(unless	an	agreement	is	reached,	a	PEB	is established	or	action	is	taken	by	Congress),	the	labor	organization	may	exercise	"self-help,"	such	as	a	strike,	and	the	airline	may	resort	to	its	own	"self- help,"	including	the	imposition	of	any	or	all	of	its	proposed	amendments	to	the	CBA	and	the	hiring	of	new	employees	to	replace	any	striking	workers.

The	table	below	presents	our	approximate	number	of	active	full-time	equivalent	employees	as	of	December	31,	2016.

|  | Mainline<br>Operations | Wholly-owned<br>Regional	Carriers | Total |
| :--- | :--- | :--- | :--- |
| Pilots\tand\tFlight\tCrew\tTraining\tInstructors | 13,400 | 3,400 | 16,800 |
| Flight\tAttendants | 24,700 | 2,200 | 26,900 |
| Maintenance\tpersonnel | 14,900 | 2,000 | 16,900 |
| Fleet\tService\tpersonnel | 16,600 | 3,500 | 20,100 |
| Passenger\tService\tpersonnel | 15,900 | 7,100 | 23,000 |
| Administrative\tand\tother | 16,000 | 2,600 | 18,600 |
| Total | \t101,500 | 20,800 | \t122,300 |

As	of	December	31,	2016,	approximately	85%	of	our	total	active	employees	were	represented	by	various	labor	unions	and	CBAs	as	detailed	in	the table	below.

| Union | Class	or	Craft | Employees		^(1) | Amendable	Date |
| :--- | :--- | :--- | :--- |
| Mainline:\t^(2) |  |  |  |
| Allied\tPilots\tAssociation\t(APA)\nAssociation\tof\tProfessional\tFlight\tAttendants\t(APFA) | Pilots\nFlight\tAttendants | 13,100\n24,200 | 2019\n2019 |
| Airline\tCustomer\tService\tEmployee\tAssociation\t–\tCommunications |  |  |  |
| Workers\tof\tAmerica\tand\tInternational\tBrotherhood\tof\tTeamsters |  |  |  |
| (CWA-IBT) | Passenger\tService | 16,000 | 2020 |
| Transport\tWorkers\tUnion\tand\tInternational\tAssociation\tof |  |  |  |
| Machinists\t&amp;\tAerospace\tWorkers\t(TWU-IAM) | Mechanics\tand\tRelated | 12,800 | 2018 |
| TWU-IAM | Fleet\tService | 16,200 | 2018 |
| TWU-IAM | Stock\tClerks | 1,800 | 2018 |
| TWU-IAM | Simulator\tTechnicians | 100 | 2021 |
| TWU-IAM | Maintenance\tControl\tTechnicians | 100 | 2018 |
| TWU-IAM | Maintenance\tTraining\tInstructors | 50 | 2018 |
| TWU\t(Transport\tWorkers\tUnion) | Dispatchers | 400 | 2021 |
| TWU | Flight\tCrew\tTraining\tInstructors | 300 | 2021 |
| Envoy:\t^(3) |  |  |  |
| Air\tLine\tPilots\tAssociations\t(ALPA) | Pilots | 1,800 | 2024 |
| Association\tof\tFlight\tAttendants-CWA\t(AFA) | Flight\tAttendants | 1,200 | 2020 |
| TWU | Ground\tSchool\tInstructors | 10 | 2019 |
| TWU | Mechanics\tand\tRelated | 1,200 | 2020 |
| TWU | Stock\tClerks | 100 | 2020 |
| TWU | Fleet\tService\tClerks | 3,400 | 2019 |
| TWU | Dispatchers | 100 | 2019 |
| Communications\tWorkers\tof\tAmerica\t(CWA) | Passenger\tService | 3,900 | Initial\tContract\tin\tNegotiation |
| Piedmont:\t^(3) |  |  |  |
| ALPA | Pilots | 400 | 2024 |
| AFA | Flight\tAttendants | 200 | 2019 |
| International\tBrotherhood\tof\tTeamsters\t(IBT) | Mechanics | 300 | 2021 |
| IBT | Stock\tClerks | 40 | 2021 |
| CWA | Fleet\tand\tPassenger\tService | 3,200 | 2017 |
| IBT | Dispatchers | 20 | 2019 |
| ALPA | Flight\tCrew\tTraining\tInstructors | 40 | 2024 |
| PSA:\t^(3) |  |  |  |
| ALPA | Pilots | 1,100 | 2023 |
| AFA | Flight\tAttendants | 800 | 2017 |
| International\tAssociation\tof\tMachinists\t&amp;\tAerospace\tWorkers\t(IAM) | Mechanics | 300 | 2016 |
| TWU | Dispatchers | 40 | 2014 |

Approximate	number	of	active	full-time	equivalent	employees	covered	by	the	contract	as	of	December	31,	2016. (1)

Our	union-represented	mainline	employees	are	covered	by	agreements	that	are	not	currently	amendable.	Joint	collective	bargaining	agreements	(JCBAs)	have	been	reached	with	post-Merger employee	groups,	except	the	approximately	35,000	maintenance,	fleet	service,	stores	and	planner	employees	represented	by	the	TWU-IAM	who	are	covered	by	separate	CBAs	that	are	not	yet amendable.	Until	those	agreements	become	amendable,	negotiations	for	JCBAs	will	be	conducted	outside	the	traditional	RLA	bargaining	process	as	described	above,	and,	in	the	meantime,	no self-help	will	be	permissible.	In	August	2016,	we	reached	interim	agreements	with	the	TWU-IAM	to	move	the	employees	they	represent	to	new	pay	rates	and	to	provide	additional	flexibility	in assigning	work	to	these	employees.	These	new	interim	agreements	provide	immediate	and	significant	pay	increases	and	do	not	constitute	new	JCBAs,	and	negotiations	for	such	JCBAs	will continue. (2)

Among	our	wholly-owned	regional	subsidiaries,	the	Piedmont	fleet	and	passenger	service	employees	and	the	PSA	mechanics	and	dispatchers	have	agreements	that	are	now	amendable	and	are engaged	in	traditional	RLA	negotiations.	The	Envoy	passenger	service	employees	are	engaged	in	traditional	RLA	negotiations	for	an	initial	CBA. (3)

None	of	the	unions	representing	our	employees	presently	may	lawfully	engage	in	concerted	refusals	to	work,	such	as	strikes,	slow-downs,	sick-outs	or other	similar	activity,	against	us.	Nonetheless,	there	is	a	risk	that	disgruntled	employees,	either	with	or	without	union	involvement,	could	engage	in	one	or more	concerted	refusals	to	work	that	could	individually	or	collectively	harm	the	operation	of	our	airline	and	impair	our	financial	performance.

For	more	discussion,	see	Part	I,	Item	1A.	Risk	Factors	–	"Union	disputes,	employee	strikes	and	other	labor-related	disruptions	may	adversely	affect our	operations."

# Aircraft	Fuel

Our	operations	and	financial	results	are	significantly	affected	by	the	availability	and	price	of	jet	fuel.	Based	on	our	2017	forecasted	mainline	and regional	 fuel	consumption,	we	estimate	 that	a	one	cent	per	gallon	 increase	 in	aviation	 fuel	price	would	 increase	our	2017	annual	 fuel	expense	by $43	million.

The	following	table	shows	annual	aircraft	fuel	consumption	and	costs,	including	taxes,	for	our	mainline	operations	for	2016,	2015	and	2014	(gallons and	aircraft	fuel	expense	in	millions).

| Year | Gallons | Average		Price<br>per	Gallon | Aircraft		Fuel<br>Expense | Mainline	Operating<br>Expenses |
| :--- | :--- | :--- | :--- | :--- |
| 2016 | \t3,596 | $1.41 | $5,071 | 17.6% |
| 2015 | \t3,611 | 1.72 | 6,226 | 21.6% |
| 2014 | \t3,644 | 2.91 | 10,592 | 33.2% |

Total	 fuel	 expenses	 for	 our	 wholly-owned	 and	 third-party	 regional	 carriers	 operating	 under	 capacity	 purchase	 agreements	 of	 American	 were $1.1	billion,	$1.2	billion	and	$2.0	billion	for	the	years	ended	December	31,	2016,	2015	and	2014,	respectively.

As	of	December	31,	2016,	we	did	not	have	any	fuel	hedging	contracts	outstanding	to	hedge	our	fuel	consumption.	As	such,	and	assuming	we	do	not enter	into	any	future	transactions	to	hedge	our	fuel	consumption,	we	will	continue	to	be	fully	exposed	to	fluctuations	in	fuel	prices.	Our	current	policy	is not	to	enter	into	transactions	to	hedge	our	fuel	consumption,	although	we	review	that	policy	from	time	to	time	based	on	market	conditions	and	other factors.

Fuel	prices	have	fluctuated	substantially	over	the	past	several	years.	We	cannot	predict	the	future	availability,	price	volatility	or	cost	of	aircraft	fuel. Natural	disasters,	political	disruptions	or	wars	involving	oil-producing	countries,	changes	in	fuel-related	governmental	policy,	the	strength	of	the	U.S. dollar	against	foreign	currencies,	changes	in	access	to	petroleum	product	pipelines	and	terminals,	speculation	in	the	energy	futures	markets,	changes	in aircraft	fuel	production	capacity,	environmental	concerns	and	other	unpredictable	events	may	result	in	fuel	supply	shortages,	additional	fuel	price	volatility and	cost	increases	in	the	future.	See	Part	I,	Item	1A.	Risk	Factors	–	"Our	business	is	very	dependent	on	the	price	and	availability	of	aircraft	fuel. 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	our	operating	results	and	liquidity."

# Seasonality	and	Other	Factors

Due	to	the	greater	demand	for	air	travel	during	the	summer	months,	revenues	in	the	airline	industry	in	the	second	and	third	quarters	of	the	year	tend to	be	greater	than	revenues	in	the	first	and	fourth	quarters	of	the	year.	General	economic	conditions,	fears	of	terrorism	or	war,	fare	initiatives,	fluctuations in	fuel	prices,	labor	actions,	weather,	natural	disasters,	outbreaks	of	disease	and	other	factors	could	impact	this	seasonal	pattern.	Therefore,	our	quarterly results	of	operations	are	not	necessarily	indicative	of	operating	results	for	the	entire	year,	and	historical	operating	results	in	a	quarterly	or	annual	period are	not	necessarily	indicative	of	future	operating	results.

# Domestic	and	Global	Regulatory	Landscape

# General

Airlines	are	subject	to	extensive	domestic	and	international	regulatory	requirements.	Domestically,	the	DOT	and	the	Federal	Aviation	Administration (FAA)	exercise	significant	regulatory	authority	over	air	carriers.

The	DOT,	among	other	things,	oversees	domestic	and	international	codeshare	agreements,	international	route	authorities,	competition	and	consumer protection	matters	such	as	advertising,	denied	boarding	compensation	and	baggage	liability.	The	Antitrust	Division	of	the	Department	of	Justice	(DOJ) along	with	the	DOT	have	jurisdiction	over	airline	antitrust	matters.

The	FAA	similarly	exercises	safety	oversight	and	regulates	most	operational	matters	of	our	business,	including	how	we	operate	and	maintain	our aircraft.	 FAA	 requirements	 cover,	 among	 other	 things,	 required	 technology	 and	 necessary	 onboard	 equipment;	 systems,	 procedures	 and	 training necessary	to	ensure	the	continuous	airworthiness	of	our	fleet	of	aircraft;	safety	measures	and	equipment;	crew	scheduling	limitations	and	experience requirements;	and	many	other	technical	aspects	of	airline	operations.	Additionally,	the	FAA	sets	pilot	qualification	standards	and	imposes	complex	rest requirements	for	pilots,	as	well	as	stringent	duty	period	requirements	for	pilots	and	flight	attendants.

The	FAA	also	controls	the	national	airspace	system,	including	operational	rules	and	fees	for	air	traffic	control	(ATC)	services.	The	efficiency,	reliability and	capacity	of	the	ATC	network	has	a	significant	impact	on	our	costs	and	on	the	timeliness	of	our	operations.

The	U.S.	Postal	Service	has	jurisdiction	over	certain	aspects	of	the	transportation	of	mail	and	related	services.

# Airport	Access	and	Operations

Domestically,	any	U.S.	airline	authorized	by	the	DOT	is	generally	free	to	operate	scheduled	passenger	service	between	any	two	points	within	the	U.S. and	its	territories,	with	the	exception	of	certain	airports	that	require	landing	and	take-off	rights	and	authorizations	(slots)	and	other	facilities,	and	certain airports	that	impose	geographic	limitations	on	operations	or	curtail	operations	based	on	the	time	of	day.	Operations	at	three	major	domestic	airports	we serve	(John	F.	Kennedy	International	Airport	(JFK)	and	La	Guardia	Airport	(LGA)	in	New	York	City,	and	Ronald	Reagan	Washington	National	Airport (DCA)	in	Washington,	D.C.)	and	certain	foreign	airports	we	serve	(including	London	Heathrow	Airport	(LHR))	are	regulated	by	governmental	entities through	allocations	of	slots	or	similar	regulatory	mechanisms	that	limit	the	rights	of	carriers	to	conduct	operations	at	those	airports.	Each	slot	represents the	authorization	to	land	at	or	take	off	from	the	particular	airport	during	a	specified	time	period.	In	addition	to	slot	restrictions,	operations	at	LGA	and	DCA also	are	limited	based	on	the	stage	length	of	the	flight.

Our	ability	to	provide	service	can	also	be	impaired	at	airports,	such	as	Chicago	O'Hare	International	Airport	(ORD)	and	LAX,	where	the	airport	gate and	other	facilities	are	inadequate	to	accommodate	all	of	the	service	that	we	would	like	to	provide.

Existing	law	also	permits	domestic	local	airport	authorities	to	implement	procedures	and	impose	restrictions	designed	to	abate	noise,	provided	such procedures	and	restrictions	do	not	unreasonably	interfere	with	interstate	or	foreign	commerce	or	the	national	transportation	system.	In	some	instances, these	restrictions	have	caused	curtailments	in	service	or	increases	in	operating	costs.

# Airline	Fares,	Taxes	and	User	Fees

Airlines	are	permitted	to	establish	their	own	domestic	fares	without	governmental	regulation.	The	DOT	maintains	authority	over	certain	international fares,	rates	and	charges,	but	applies	this	authority	on	a	limited	basis.	In	addition,	international	fares	and	rates	are	sometimes	subject	to	the	jurisdiction	of the	governments	of	the	foreign	countries	which	we	serve.	While	air	carriers	are	required	to	file	and	adhere	to	international	fare	and	rate	tariffs,	substantial commissions,	fare	overrides	and	discounts	to	travel	agents,	brokers	and	wholesalers	characterize	many	international	markets.

Airlines	are	obligated	to	collect	a	federal	excise	tax,	commonly	referred	to	as	the	"ticket	tax,"	on	domestic	and	international	air	transportation,	and	to collect	other	taxes	and	charge	other	fees,	such	as	foreign	taxes,	security	fees	and	passenger	facility	charges.	Airlines	typically	collect	and	pass	along	the collected	amounts	to	the	appropriate	governmental	agencies.	Although	these	taxes	and	fees	are	not	our	operating	expenses,	they	represent	an	additional cost	to	our	customers.	These	taxes	and	fees	are	subject	to	increase	from	time	to	time.

# DOT	Passenger	Protection	Rules

The	DOT	regulates	airline	interactions	with	passengers	through	the	reservations	process,	at	the	airport	and	on	board	the	aircraft.	Among	other	things, these	regulations	govern	how	our	fares	are	displayed	online,	required	customer	disclosures,	access	by	disabled	passengers,	handling	of	long	onboard flight	delays	and	reporting	of	mishandled	bags.	In	addition,	the	DOT	is	likely	to	issue	a	regulation	in	2017	that	would	require	air	carriers	to	refund	checked bag	fees	in	the	event	of	certain	delays	in	delivery.

International	air	transportation	is	subject	to	extensive	government	regulation,	including	aviation	agreements	between	the	U.S.	and	other	countries	or governmental	 authorities,	 such	 as	 the	 European	 Union	 (EU).	 Moreover,	 alliances	 with	 international	 carriers	 may	 be	 subject	 to	 the	 jurisdiction	 and regulations	of	various	foreign	agencies.	The	U.S.	government	has	negotiated	"open	skies"	agreements	with	many	countries,	which	allow	unrestricted route	authority	access	between	the	U.S.	and	the	foreign	markets.	While	the	U.S.	has	worked	to	increase	the	number	of	countries	with	which	open	skies agreements	are	in	effect,	a	number	of	markets	important	to	us,	including	China,	do	not	have	open	skies	agreements.

In	addition,	foreign	countries	impose	passenger	protection	rules,	which	are	analogous	to,	and	often	meet	or	exceed	the	requirements	of,	the	DOT passenger	protection	rules	discussed	above.	In	cases	where	these	foreign	requirements	exceed	the	DOT	rules,	we	may	bear	additional	burdens	and liabilities.	Further,	various	foreign	airport	authorities	impose	noise	restrictions	at	their	local	airports.

# Security

Since	shortly	after	the	events	of	September	11,	2001,	substantially	all	aspects	of	civil	aviation	security	in	the	U.S.	or	affecting	U.S.	carriers	have	been controlled	or	regulated	by	the	Transportation	Security	Administration	(TSA).	Requirements	include	flight	deck	security;	carriage	of	federal	air	marshals	at no	charge;	enhanced	security	screening	of	passengers,	baggage,	cargo,	mail,	employees	and	vendors;	 fingerprint-based	background	checks	of	all employees	and	vendor	employees	with	access	to	secure	areas	of	airports;	and	the	provision	of	certain	passenger	data	to	the	federal	government	and other	international	border	security	authorities,	for	security	and	immigration	controls.	Funding	for	the	TSA	is	provided	by	a	combination	of	air	carrier	fees, passenger	fees	and	taxpayer	funds.	Customs	and	Border	Protection,	which,	like	the	TSA,	is	part	of	the	Department	of	Homeland

Security,	also	promulgates	requirements,	performs	services	and	collects	fees	that	impact	our	provision	of	services.	Additionally,	we	have	at	times	found	it necessary	or	desirable	to	make	significant	expenditures	to	comply	with	security-related	requirements	while	reducing	their	impact	on	our	customers,	such as	expenditures	for	automated	security	screening	lines	at	airports.

# Environmental	Matters

# Environmental	Regulation

The	airline	industry	is	subject	to	various	laws	and	government	regulations	concerning	environmental	matters	in	the	U.S.	and	other	countries.	U.S. federal	laws	that	have	a	particular	impact	on	our	operations	include	the	Airport	Noise	and	Capacity	Act	of	1990,	the	Clean	Air	Act	(CAA),	the	Resource Conservation	and	Recovery	Act,	the	Clean	Water	Act,	the	Safe	Drinking	Water	Act	and	the	Comprehensive	Environmental	Response,	Compensation	and Liability	 Act	 (Superfund	 Act).	 The	 U.S.	 Environmental	 Protection	 Agency	 (EPA)	 and	 other	 federal	 agencies	 have	 been	 authorized	 to	 promulgate regulations	that	have	an	impact	on	our	operations.	In	addition	to	these	federal	activities,	various	states	have	been	delegated	certain	authorities	under	the aforementioned	federal	statutes.	Many	state	and	local	governments	have	adopted	environmental	laws	and	regulations	which	are	similar	to	or	stricter	than federal	requirements.

Revised	underground	storage	tank	regulations	issued	by	the	EPA	in	2015	could	affect	airport	fuel	hydrant	systems,	as	certain	of	those	systems	may need	to	be	modified	in	order	to	comply	with	applicable	portions	of	the	revised	regulations.	In	addition,	related	to	the	EPA	and	state	regulations	pertaining to	stormwater	management,	several	U.S.	airport	authorities	are	actively	engaged	in	efforts	to	limit	discharges	of	deicing	fluid	into	the	environment,	often by	requiring	airlines	to	participate	in	the	building	or	reconfiguring	of	airport	deicing	facilities.

The	environmental	laws	to	which	we	are	subject	include	those	related	to	responsibility	for	potential	soil	and	groundwater	contamination.	We	are conducting	investigation	and	remediation	activities	to	address	soil	and	groundwater	conditions	at	several	sites,	including	airports	and	maintenance	bases. We	anticipate	that	the	ongoing	costs	of	such	activities	will	not	have	a	material	impact	on	our	operations.	In	addition,	we	have	been	named	as	a	potentially responsible	 party	 (PRP)	 at	 certain	 Superfund	 sites.	 Our	 alleged	 volumetric	 contributions	 at	 such	 sites	 are	 relatively	 small	 in	 comparison	 to	 total contributions	of	all	PRPs;	we	anticipate	that	any	future	payments	of	costs	at	such	sites	will	not	have	a	material	impact	on	our	operations.

# Aircraft	Emissions	and	Climate	Change	Requirements

Many	aspects	of	our	operations	are	subject	to	increasingly	stringent	environmental	regulations	and	concerns	about	climate	change	and	greenhouse gas	(GHG)	emissions.	For	example,	the	EU	has	established	the	Emissions	Trading	Scheme	(ETS)	to	regulate	GHG	emissions	in	the	EU.	The	EU adopted	a	directive	in	2008	under	which	each	EU	member	state	is	required	to	extend	the	ETS	to	aviation	operations.	However,	the	EU	ETS	has	never fully	been	 imposed,	 in	 large	part	due	 to	 the	global	effort	 to	moderate	 international	aviation	emissions	solely	 through	 the	 International	Civil	Aviation Organization	(ICAO).	The	U.S.	enacted	legislation	in	November	2012	intended	to	encourage	an	international	solution	through	ICAO,	but	which	also authorizes	the	U.S.	Secretary	of	Transportation	to	prohibit	U.S.	airlines	from	participating	in	the	ETS.

In	October	2016,	ICAO	passed	a	resolution	adopting	the	ICAO	Carbon	Offsetting	and	Reduction	Scheme	for	International	Aviation	(CORSIA),	which	is a	global,	market-based	emissions	offset	program	to	encourage	carbon-neutral	growth	beyond	2020.	The	CORSIA	applies	to	international	aviation,	and does	not	directly	impact	domestic	U.S.	flights.	The	CORSIA	was	supported	by	the	board	of	Airlines	For

America	 (the	 principal	 U.S.	 airline	 trade	 association),	 the	 International	 Airline	 Trade	 Association	 (IATA)	 (the	 principal	 international	 airline	 trade association),	and	by	American	and	many	other	U.S.	and	foreign	airlines.	The	CORSIA	will	increase	operating	costs	for	American	and	most	other	airlines, including	 other	 U.S.	 airlines	 that	 operate	 internationally,	 but	 the	 implementation	 of	 a	 global	 program,	 as	 compared	 to	 regional	 emission	 reduction schemes,	should	help	to	ensure	that	resulting	increases	in	operating	costs	will	be	more	predictable	and	more	evenly	applied	to	airlines.	The	CORSIA	is expected	to	be	implemented	in	phases,	beginning	in	2021.	Certain	details	still	need	to	be	developed	and	the	impact	of	the	CORSIA	cannot	be	fully predicted.	On	February	3,	2017,	the	European	Commission	proposed	to	extend	its	stay	on	the	extra-territorial	application	of	the	EU	ETS	until	2021,	in anticipation	of	the	implementation	of	the	ICAO	CORSIA.	The	EU	noted	its	intent	to	continue	to	apply	ETS	to	intra-EU	flights	until	at	least	2021,	but	also stated	that	this	could	be	revisited	in	light	of	the	CORSIA.	The	EU	stated	that	it	plans	to	reevaluate	ETS	again	in	2021,	in	light	of	its	assessment	of	the progress	to	implement	the	CORSIA.	The	current	EU	ETS	proposal	must	be	approved	through	the	EU	Council	and	Parliament.

The	EPA	recently	issued	an	endangerment	finding	that	aircraft	engine	GHG	emissions	cause	or	contribute	to	air	pollution,	which	is	a	precursor	to	EPA regulation	of	aircraft	engine	GHG	emission	standards.	It	is	anticipated	that	any	such	standards	established	by	EPA	would	closely	align	with	emission standards	currently	being	developed	by	ICAO.	In	February	2016,	the	ICAO	Committee	on	Aviation	Environmental	Protection	recommended	that	ICAO adopt	 carbon	 dioxide	 certification	 standards	 that	 would	 apply	 to	 new	 type	 aircraft	 certified	 beginning	 in	 2020,	 and	 would	 be	 phased	 in	 for	 newly manufactured	existing	aircraft	type	designs	starting	in	2023.

In	addition,	several	states,	including	California,	have	adopted	or	are	considering	initiatives	to	regulate	emissions	of	GHGs,	primarily	through	the planned	development	of	GHG	emissions	inventories	and/or	regional	GHG	cap	and	trade	programs.

We	have	taken	a	number	of	actions	that	mitigate	our	GHG	emissions	and	conserve	fuel	such	as:

•	 Retiring	older	aircraft	and	replacing	them	with	new,	more	fuel-efficient	aircraft

•	 Reducing	fuel	consumption	through	our	Fuel	Smart	Program,	which	is	an	 employee-led	effort	to	safely	reduce	fuel	consumption

•	 Working	with	the	FAA	and	vendors	to	facilitate	efficient	airspace	procedures,	which	also	reduces	aircraft	emissions

•	 Replacing	existing	cargo	containers	with	lightweight	versions

•	 Purchasing	new,	more	fuel-efficient	ground	support	equipment,	certain	of	which	is	alternative-fuel	and	electric	powered.

For	further	information,	see	our	annual	Corporate	Responsibility	Report,	available	on	our	website	at www.aa.com.

# Impact	of	Regulatory	Requirements	on	Our	Business

Regulatory	requirements,	including	but	not	limited	to	those	discussed	above,	could	affect	operations	and	increase	operating	costs	for	the	airline industry,	including	our	airline	subsidiaries,	and	future	regulatory	developments	may	continue	to	do	the	same	in	the	future.	See	Part	I,	Item	1A.	Risk Factors	–	"Ongoing	data	security	requirements	and	obligations	could	increase	our	costs,	and	any	significant	data	security	incident	could	disrupt	our operations	and	harm	our	reputation,	business,	results	of	operations	and	financial	condition,"	"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,"	"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,"	"The	airline	industry	is	heavily	taxed,"	"We	are	subject to	many	forms	of	environmental	and	noise	regulation	and	may	incur	substantial	costs	as	a	result"	and	"We	are	subject	to	risks	associated	with	climate change,	including	increased	regulation	to	reduce	emissions	of	greenhouse	gases"	for	additional	information.

# Available	Information

# Use	of	Websites	to	Disclose	Information

Our	website	is	located	at	www.aa.com.	We	have	made	and	expect	in	the	future	to	make	public	disclosures	to	investors	and	the	general	public	of information	regarding	AAG	and	its	subsidiaries	by	means	of	the	investor	relations	section	of	our	website	as	well	as	through	the	use	of	our	social	media sites,	including	Facebook	and	Twitter.	In	order	to	receive	notification	regarding	new	postings	to	our	website,	investors	are	encouraged	to	enroll	on	our website	to	receive	automatic	email	alerts	(see	phx.corporate-ir.net/4p0I.URL),	join	American's	circle	(@AmericanAir)	on	Twitter	and	"like"	American	on	its Facebook	page	(www.facebook.com/AmericanAirlines).	None	of	the	information	or	contents	of	our	website	or	social	media	postings	is	incorporated	into this	Annual	Report	on	Form	10-K.

# Availability	of	SEC	Reports

A	copy	of	this	Annual	Report	on	Form	 10-K,	Quarterly	Reports	on	Form	10-Q,	Current	Reports	on	Form	8-K	and	amendments	to	those	reports	are available	free	of	charge	on	our	website	as	soon	as	reasonably	practicable	after	we	electronically	file	such	material	with,	or	furnish	it	to,	the	SEC.	The	SEC also	maintains	a	website	that	contains	reports,	proxy	and	information	statements,	and	other	information	regarding	issuers	that	file	electronically	with	the SEC	at	www.sec.gov.	The	public	may	also	read	and	copy	materials	we	file	with	the	SEC	at	the	SEC's	Public	Reference	Room	at	100	F.	Street,	NE, Washington,	DC	20549.	The	public	may	obtain	information	on	the	operation	of	the	Public	Reference	Room	by	calling	the	SEC	at	1-800-SEC-0330.

# ITEM	1A.		RISKFACTORS

Below	are	certain	risk	factors	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.

# Risks	Relating	to	AAG	and	Industry-Related	Risks

# Downturns	in	economic	conditions	could	adversely	affect	our	business.

Due	to	the	discretionary	nature	of	business	and	leisure	travel	spending	and	the	highly	competitive	nature	of	the	airline	industry,	our	revenues	are heavily	influenced	by	the	condition	of	the	U.S.	economy	and	economies	in	other	regions	of	the	world.	Unfavorable	conditions	in	these	broader	economies have	resulted,	and	may	result	in	the	future,	in	decreased	passenger	demand	for	air	travel,	changes	in	booking	practices	and	related	reactions	by	our competitors,	all	of	which	in	turn	have	had,	and	may	have	in	the	future,	a	strong	negative	effect	on	our	revenues.	See	also	"The	airline	industry	is	intensely competitive	and	dynamic"	below.

Our	business	is	very	dependent	on	the	price	and	availability	of	aircraft	fuel.	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	our	operating	results	and	liquidity.

Our	operating	results	are	materially	impacted	by	changes	in	the	availability,	price	volatility	and	cost	of	aircraft	fuel,	which	represents	one	of	the	largest single	cost	items	in	our	business.	Jet	fuel	market	prices	have	fluctuated	substantially	over	the	past	several	years	and	prices	continue	to	be	highly	volatile.

Because	of	the	amount	of	fuel	needed	to	operate	our	business,	even	a	relatively	small	increase	or	decrease	in	the	price	of	fuel	can	have	a	material effect	on	our	operating	results	and	liquidity.	Due	to	the	competitive	nature	of	the	airline	industry	and	unpredictability	of	the	market	for	air	travel,	we	can offer	no	assurance	that	we	may	be	able	to	increase	our	fares,	impose	fuel	surcharges	or	otherwise	increase	revenues	sufficiently	to	offset	fuel	price increases.	Similarly,	we	cannot	predict	the	effect	or	the	actions	of	our	competitors	if	the	current	low	fuel	prices	remain	in	place	for	a	significant	period	of time	or	fuel	prices	decrease	in	the	future.

Although	we	are	currently	able	to	obtain	adequate	supplies	of	aircraft	fuel,	we	cannot	predict	the	future	availability,	price	volatility	or	cost	of	aircraft	fuel. Natural	disasters,	political	disruptions	or	wars	involving	oil-producing	countries,	changes	in	fuel-related	governmental	policy,	the	strength	of	the	U.S. dollar	against	foreign	currencies,	changes	in	access	to	petroleum	product	pipelines	and	terminals,	speculation	in	the	energy	futures	markets,	changes	in aircraft	fuel	production	capacity,	environmental	concerns	and	other	unpredictable	events	may	result	in	fuel	supply	shortages,	additional	fuel	price	volatility and	cost	increases	in	the	future.

Our	aviation	fuel	purchase	contracts	generally	do	not	provide	meaningful	price	protection	against	increases	in	fuel	costs.	Prior	to	the	closing	of	the Merger,	we	sought	to	manage	the	risk	of	fuel	price	increases	by	using	derivative	contracts.	Our	current	policy	is	not	to	enter	into	transactions	to	hedge our	fuel	consumption,	although	we	review	that	policy	from	time	to	time	based	on	market	conditions	and	other	factors.	Accordingly,	as	of	December	31, 2016,	we	did	not	have	any	fuel	hedging	contracts	outstanding.	As	such,	and	assuming	we	do	not	enter	into	any	future	transactions	to	hedge	our	fuel consumption,	we	will	continue	to	be	fully	exposed	to	fluctuations	in	fuel	prices.

If	in	the	future	we	enter	into	derivative	contracts	to	hedge	our	fuel	consumption,	there	can	be	no	assurance	that,	at	any	given	time,	we	will	have derivatives	in	place	to	provide	any	particular	level	of	protection	against	increased	fuel	costs	or	that	our	counterparties	will	be	able	to	perform	under	our derivative	contracts.	To	the	extent	we	use	derivative	contracts	that	have	the	potential	to	create	an	obligation	to	pay	upon	settlement	if	prices	decline significantly,	such	derivative	contracts	may	limit	our	ability	to	benefit	from	lower	fuel	costs	in	the	future.	Also,	a	rapid	decline	in	the	projected	price	of	fuel at	a	time	when	we	have	fuel	hedging	contracts	in	place	could	materially	adversely	impact	our	short-term	liquidity,	because	hedge	counterparties	could require	that	we	post	collateral	in	the	form	of	cash	or	letters	of	credit.	See	also	the	discussion	in	Part	II,	Item	7A.	Quantitative	and	Qualitative	Disclosures About	Market	Risk	–	"Aircraft	Fuel."

# The	airline	industry	is	intensely	competitive	and	dynamic.

Our	competitors	include	other	major	domestic	airlines	and	foreign,	regional	and	new	entrant	airlines,	as	well	as	joint	ventures	formed	by	some	of	these airlines,	many	of	which	have	more	financial	or	other	resources	and/or	lower	cost	structures	than	ours,	as	well	as	other	forms	of	transportation,	including rail	and	private	automobiles.	In	many	of	our	markets	we	compete	with	at	least	one	low-cost	air	carrier.	Our	revenues	are	sensitive	to	the	actions	of	other carriers	in	many	areas	including	pricing,	scheduling,	capacity,	amenities	and	promotions,	which	can	have	a	substantial	adverse	impact	not	only	on	our revenues,	but	on	overall	industry	revenues.	These	factors	may	become	even	more	significant	in	periods	when	the	industry	experiences	large	losses,	as airlines	under	financial	stress,	or	in	bankruptcy,	may	institute	pricing	structures	intended	to	achieve	near-term	survival	rather	than	long-term	viability.

Low-cost	carriers,	including	so-called	ultra-low-cost	carriers,	have	a	profound	impact	on	industry	revenues.	Using	the	advantage	of	low	unit	costs, these	carriers	offer	lower	fares	in	order	to	shift	demand	from	larger,	more	established	airlines,	and	represent	significant	competitors,	particularly	for customers	 who	 fly	 infrequently	 and	 are	 price	 sensitive	 and	 tend	 not	 to	 be	 loyal	 to	 any	 one	 particular	 carrier.	A	 number	 of	low-cost	 carriers	 have announced	growth	strategies	including	commitments	to	acquire	significant	numbers	of	aircraft	for	delivery	in	the	next	few	years.	These	low-cost	carriers are	attempting	to	continue	to	increase	their	market	share	through	growth	and,	potentially,	consolidation,	and	could	continue	to	have	an	impact	on	our revenues	and	overall	performance.	For	example,	as	a	result	of	divestitures	completed	in	connection	with	gaining	regulatory	approval	for	the	Merger, low-fare,	low-cost	carriers	have	gained	additional	access	in	a	number	of	markets,	including	DCA,	a	slot-controlled	airport.	In	addition,	we	and	several other	large	network	carriers	have	announced	"basic	economy"	fares	designed	to	compete	against	low-cost	carriers	and	we	cannot	predict	whether	these initiatives	will	be	successful	or	the	competitive	reaction	of	the	low-cost	carriers.	The	actions	of	the	 low-cost	carriers,	including	those	described	above, could	have	a	material	adverse	effect	on	our	operations	and	financial	performance.

Our	presence	in	international	markets	is	not	as	extensive	as	that	of	some	of	our	competitors.	In	providing	international	air	transportation,	we	compete	to provide	scheduled	passenger	and	cargo	service	between	the	U.S.	and	various	overseas	locations	with	U.S.	airlines,	foreign	investor-owned	airlines	and foreign	state-owned	or	state-affiliated	airlines,	including	carriers	based	in	the	Middle	East,	the	three	largest	of	which	we	believe	benefit	from	significant government	subsidies.	Our	international	service	exposes	us	to	foreign	economies	and	the	potential	for	reduced	demand,	such	as	we	have	recently experienced	in	Brazil	and	Venezuela,	when	any	foreign	countries	we	serve	suffer	adverse	local	economic	conditions.	In	addition,	open	skies	agreements with	an	increasing	number	of	countries	around	the	world	provide	international	airlines	with	open	access	to	U.S.	markets.	See	also	"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."

Certain	airline	alliances,	 joint	ventures	and	 joint	businesses	have	been,	or	may	 in	 the	 future	be,	granted	 immunity	 from	antitrust	regulations	by governmental	 authorities	 for	 specific	 areas	 of	 cooperation,	 such	 as	 joint	 pricing	 decisions.	 To	 the	 extent	 alliances	 formed	 by	 our	 competitors	 can undertake	activities	that	are	not	available	to	us,	our	ability	to	effectively	compete	may	be	hindered.	Our	ability	to	attract	and	retain	customers	is	dependent upon,	among	other	things,	our	ability	to	offer	our	customers	convenient	access	to	desired	markets.	Our	business	could	be	adversely	affected	if	we	are unable	to	maintain	or	obtain	alliance	and	marketing	relationships	with	other	air	carriers	in	desired	markets.

We	are	party	to	antitrust-immunized	cooperation	agreements	with	British	Airways,	Iberia,	Finnair,	Royal	Jordanian,	Japan	Airlines,	LAN	Airlines	and LAN	Peru.	As	part	of	the	antitrust-immunized	relationships,	we	have	also	established	JBAs	with	British	Airways,	Iberia	and	Finnair,	and	separately	with Japan	Airlines.	We	signed	a	revised	JBA	with	Qantas	Airways	and	applied	for	antitrust	immunity	with	the	DOT	for	the	revised	relationship,	but	we withdrew	that	application	in	November	2016	after	it	was	tentatively	denied	by	the	DOT.	However,	we	expect	that	our	existing,	more	limited	cooperation with	Qantas	will	continue,	and	we	intend	to	file	a	new	application	for	antitrust	immunity	with	the	DOT	this	year.	In	addition,	we	have	signed	JBAs	with certain	 air	 carriers	 of	 the	 LATAM	Airlines	 Group	 and	 have	 applied	 for	 approval	 in	 the	 relevant	 jurisdictions	 affected	 by	 such	 agreements,	 which applications	are	still	pending	before	the	relevant	regulators.	The	foregoing	arrangements	are	important	aspects	of	our	international	network	and	we	are dependent	on	the	performance	of	the	other	airlines	party	to	those	agreements.	No	assurances	can	be	given	as	to	any	benefits	that	we	may	derive	from such	arrangements	or	any	other	arrangements	that	may	ultimately	be	implemented.

Additional	 mergers	 and	 other	 forms	 of	 industry	 consolidation,	 including	 antitrust	 immunity	 grants,	 may	 take	 place	 and	 may	 not	 involve	 us	 as	 a participant.	Depending	on	which	carriers	combine	and	which	assets,	if	any,	are	sold	or	otherwise	transferred	to	other	carriers	in	connection	with	any	such combinations,	our	competitive	position	relative	to	the	post-combination	carriers	or	other	carriers	that	acquire	such	assets	could	be	harmed.	In	addition,	as carriers	combine	through	traditional	mergers	or	antitrust	immunity	grants,	their	route	networks	will	grow,	and	that	growth	will	result	in	greater	overlap	with our	network,	which	in	turn	could	result	in	lower	overall	market	share	and	revenues	for	us.	Such	consolidation	is	not	limited	to	the	U.S.,	but	could	include further	consolidation	among	international	carriers	in	Europe	and	elsewhere.

# Ongoing	data	security	requirements	and	obligations	could	increase	our	costs,	and	any	significant	data	security	incident	could	disrupt	our operations	and	harm	our	reputation,	business,	results	of	operations	and	financial	condition.

Our	business	requires	the	appropriate	and	secure	utilization	of	customer,	employee,	business	partner	and	other	sensitive	information,	and	confidence in	the	networks	and	systems	that	allow	us	to	operate.	We	cannot	be	certain	that	we	will	not	be	the	target	of	attacks	on	our	networks	and	intrusions	into our	data,	particularly	given	recent	advances	 in	 technical	capabilities,	and	 increased	 financial	and	political	motivations	 to	carry	out	cyber-attacks	on physical	 systems,	 gain	 unauthorized	 access	 to	 information,	 and	 make	 information	 unavailable	 for	 use	 through,	 for	 example,	 ransomware	 or denial-of-service	attacks,	and	otherwise	exploit	new	and	existing	vulnerabilities	in	our	infrastructure.	The	risk	of	a	data	security	incident	or	disruption, particularly	 through	cyber-attack	or	cyber	 intrusion,	 including	by	computer	hackers,	 foreign	governments	and	cyber	 terrorists,	has	 increased	as	 the number,	intensity	and	sophistication	of	attempted	attacks	and	intrusions	from	around	the	world	have	increased.	Furthermore,	in	response	to	these	threats there	has	been	heightened	legislative	and	regulatory	focus	on	attacks	on	critical	infrastructures,	including	those	in	the	transportation	sector,	and	on	data security	in	the	U.S.	and	abroad	(particularly	in	the	EU),	including	requirements	for	varying	levels	of	data	subject	notification	in	the	event	of	a	data	security incident.

In	addition,	many	of	our	commercial	partners,	including	credit	card	companies,	have	imposed	data	security	standards	that	we	must	meet.	In	particular, we	are	required	by	the	Payment	Card	Industry	Security	Standards	Council,	founded	by	the	credit	card	companies,	to	comply	with	their	highest	level	of data	security	standards.	While	we	continue	our	efforts	to	meet	these	standards,	new	and	revised	standards	may	be	imposed	that	may	be	difficult	for	us	to meet	and	could	increase	our	costs.

A	significant	data	security	incident	or	our	failure	to	comply	with	applicable	U.S.	or	foreign	data	security	regulations	or	other	data	security	standards	may impact	our	brand	and	expose	us	to	litigation	and	regulatory	enforcement	actions,	resulting	in	fines,	sanctions	or	other	penalties.	Such	actions	could	further harm	our	reputation,	adversely	impact	our	relationship	with	our	customers,	employees,	and	stockholders,	result	in	material	financial	impact,	and	disrupt business	operations.	Failure	to	appropriately	address	these	issues	could	also	give	rise	to	similar	legal	risks	and	damages.

# 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	amounts	of	 indebtedness	and	other	obligations,	 including	pension	obligations,	obligations	 to	make	 future	payments	on	 flight equipment	and	property	leases,	and	substantial	non-cancelable	obligations	under	aircraft	and	related	spare	engine	purchase	agreements.	Moreover, currently	a	substantial	portion	of	our	assets	are	pledged	to	secure	our	indebtedness.	Our	substantial	indebtedness	and	other	obligations	could	have important	consequences.	For	example,	they:

•	 may	make	it	more	difficult	for	us	to	satisfy	our	obligations	under	our	indebtedness;

•	 may	limit	our	ability	to	obtain	additional	funding	for	working	capital,	capital	expenditures,	acquisitions,	investments,	integration	costs,	and	general corporate	purposes,	and	adversely	affect	the	terms	on	which	such	funding	can	be	obtained;

•require	us	to	dedicate	a	substantial	portion	of	our	cash	flow	from	operations	to	payments	on	our	indebtedness	and	other	obligations,	thereby reducing	the	funds	available	for	other	purposes;

•	 make	us	more	vulnerable	to	economic	downturns,	industry	conditions	and	catastrophic	external	events,	particularly	relative	to	competitors	with lower	relative	levels	of	financial	leverage;

•contain	covenants	requiring	us	to	maintain	an	aggregate	of	at	least	$2.0	billion	of	unrestricted	cash	and	cash	equivalents	and	amounts	available to	be	drawn	under	revolving	credit	facilities;

•contain	restrictive	covenants	that	could:

•limit	our	ability	to	merge,	consolidate,	sell	assets,	incur	additional	indebtedness,	issue	preferred	stock,	make	investments	and	pay	dividends;

•significantly	 constrain	 our	 ability	 to	 respond,	 or	 respond	 quickly,	 to	 unexpected	 disruptions	 in	 our	 own	 operations,	 the	 U.S.	 or	 global economies,	or	the	businesses	in	which	we	operate,	or	to	take	advantage	of	opportunities	that	would	improve	our	business,	operations,	or competitive	position	versus	other	airlines;

•limit	our	ability	to	withstand	competitive	pressures	and	reduce	our	flexibility	in	responding	to	changing	business	and	economic	conditions; and

•result	in	an	event	of	default	under	our	indebtedness.

Further,	a	substantial	portion	of	our	indebtedness	bears	interest	at	fluctuating	interest	rates,	primarily	based	on	the	London	interbank	offered	rate	for deposits	of	U.S.	dollars	(LIBOR).	LIBOR	tends	to	fluctuate	based	on	general	economic	conditions,	general	interest	rates,	rates	set	by	the	Federal

Reserve	and	other	central	banks,	and	the	supply	of	and	demand	for	credit	in	the	London	interbank	market.	We	have	not	hedged	our	interest	rate exposure	with	respect	to	our	floating	rate	debt.	Accordingly,	our	interest	expense	for	any	particular	period	will	fluctuate	based	on	LIBOR	and	other variable	interest	rates.	To	the	extent	these	interest	rates	increase,	our	interest	expense	will	increase,	in	which	event	we	may	have	difficulties	making interest	payments	and	funding	our	other	fixed	costs,	and	our	available	cash	flow	for	general	corporate	requirements	may	be	adversely	affected.	See	also the	discussion	of	interest	rate	risk	in	Part	II,	Item	7A.	Quantitative	and	Qualitative	Disclosures	About	Market	Risk	–	"Interest."

These	obligations	also	impact	our	ability	to	obtain	additional	financing,	if	needed,	and	our	flexibility	in	the	conduct	of	our	business,	and	could	materially adversely	affect	our	liquidity,	results	of	operations	and	financial	condition.

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

Our	business	plan	contemplates	significant	investments	in	modernizing	our	fleet.	Significant	capital	resources	will	be	required	to	execute	this	plan.	We estimate	that,	based	on	our	commitments	as	of	December	31,	2016,	our	planned	aggregate	expenditures	for	aircraft	purchase	commitments	and	certain engines	on	a	consolidated	basis	for	calendar	years	2017-2021	would	be	approximately	$15.5	billion.	Accordingly,	we	will	need	substantial	financing	or other	capital	resources	to	finance	such	aircraft.	If	we	are	unable	to	arrange	financing	for	such	aircraft	at	customary	advance	rates	and	on	terms	and conditions	acceptable	to	us,	we	may	need	to	use	cash	from	operations	or	cash	on	hand	to	purchase	such	aircraft	or	may	seek	to	negotiate	deferrals	for such	aircraft	with	the	aircraft	manufacturers.	Depending	on	numerous	factors,	many	of	which	are	out	of	our	control,	such	as	the	state	of	the	domestic	and global	economies,	the	capital	and	credit	markets'	view	of	our	prospects	and	the	airline	industry	in	general,	and	the	general	availability	of	debt	and	equity capital	at	the	time	we	seek	capital,	the	financing	or	other	capital	resources	that	we	will	need	may	not	be	available	to	us,	or	may	be	available	only	on onerous	terms	and	conditions.	There	can	be	no	assurance	that	we	will	be	successful	in	obtaining	financing	or	other	needed	sources	of	capital	to	operate successfully.	An	inability	to	obtain	necessary	financing	on	acceptable	terms	would	have	a	material	adverse	impact	on	our	business,	results	of	operations and	financial	condition.

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

Our	pension	funding	obligations	are	significant.	The	amount	of	these	obligations	will	depend	on	the	performance	of	investments	held	in	trust	by	the pension	plans,	interest	rates	for	determining	liabilities	and	actuarial	experience.	Currently,	our	minimum	funding	obligation	for	our	pension	plans	is	subject to	favorable	temporary	funding	rules	that	are	scheduled	to	expire	at	the	end	of	2017.	Our	minimum	pension	funding	obligations	are	likely	to	increase materially	beginning	 in	2019,	when	we	will	be	required	 to	make	contributions	relating	 to	 the	2018	 fiscal	year.	 In	addition,	we	may	have	significant obligations	for	other	postretirement	benefits,	the	ultimate	amount	of	which	depends	on,	among	other	things,	the	outcome	of	an	adversary	proceeding related	to	retiree	medical	and	other	postretirement	benefits	and	life	insurance	obligations	filed	in	the	Chapter	11	Cases.

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

We	have	agreements	with	companies	that	process	customer	credit	card	transactions	for	the	sale	of	air	travel	and	other	services.	These	agreements allow	these	processing	companies,	under	certain	conditions	(including,	with	respect	to	certain	agreements,	the	failure	of	American	to	maintain	certain levels	of	liquidity)	to	hold	an	amount	of	our	cash	(a	holdback)	equal	to	some	or	all	of	the	advance	ticket

sales	that	have	been	processed	by	that	credit	card	processor,	but	for	which	we	have	not	yet	provided	the	air	transportation.	We	are	not	currently	required to	maintain	any	holdbacks	pursuant	to	these	requirements.	These	holdback	requirements	can	be	modified	at	the	discretion	of	the	credit	card	processing companies	upon	the	occurrence	of	specific	events,	including	material	adverse	changes	in	our	financial	condition.	An	increase	in	the	current	holdbacks,	up to	and	including	100%	of	relevant	advanced	ticket	sales,	could	materially	reduce	our	liquidity.	Likewise,	other	of	our	commercial	agreements	contain provisions	that	allow	other	entities	to	impose	less-favorable	terms,	including	the	acceleration	of	amounts	due,	in	the	event	of	material	adverse	changes	in our	financial	condition.

# Union	disputes,	employee	strikes	and	other	labor-related	disruptions	may	adversely	affect	our	operations.

Relations	between	air	carriers	and	labor	unions	in	the	U.S.	are	governed	by	the	Railway	Labor	Act	(RLA).	Under	the	RLA,	collective	bargaining agreements	(CBAs)	generally	contain	"amendable	dates"	rather	than	expiration	dates,	and	the	RLA	requires	that	a	carrier	maintain	the	existing	terms	and conditions	of	employment	 following	 the	amendable	date	 through	a	multi-stage	and	usually	 lengthy	series	of	bargaining	processes	overseen	by	 the National	Mediation	Board	(NMB).	For	the	dates	that	the	CBAs	with	our	major	work	groups	become	amendable	under	the	RLA,	see	Part	I,	Item	1. Business	–	"Employees	and	Labor	Relations."

In	the	case	of	a	CBA	that	is	amendable	under	the	RLA,	if	no	agreement	is	reached	during	direct	negotiations	between	the	parties,	either	party	may request	that	the	NMB	appoint	a	federal	mediator.	The	RLA	prescribes	no	timetable	for	the	direct	negotiation	and	mediation	processes,	and	it	is	not unusual	for	those	processes	to	last	for	many	months	or	even	several	years.	If	no	agreement	is	reached	in	mediation,	the	NMB	in	its	discretion	may declare	that	an	impasse	exists	and	proffer	binding	arbitration	to	the	parties.	Either	party	may	decline	to	submit	to	arbitration,	and	if	arbitration	is	rejected by	either	party,	a	30-day	"cooling	off"	period	commences.	During	or	after	that	period,	a	Presidential	Emergency	Board	(PEB)	may	be	established,	which examines	the	parties'	positions	and	recommends	a	solution.	The	PEB	process	lasts	for	30	days	and	is	followed	by	another	30-day	"cooling	off"	period.	At the	end	of	a	"cooling	off"	period,	unless	an	agreement	is	reached	or	action	is	taken	by	Congress,	the	labor	organization	may	exercise	"self-help,"	such	as a	strike,	which	could	materially	adversely	affect	our	business,	results	of	operations	and	financial	condition.

None	of	the	unions	representing	our	employees	presently	may	lawfully	engage	in	concerted	refusals	to	work,	such	as	strikes,	slow-downs,	sick-outs	or other	similar	activity,	against	us.	Nonetheless,	there	is	a	risk	that	disgruntled	employees,	either	with	or	without	union	involvement,	could	engage	in	one	or more	concerted	refusals	to	work	that	could	individually	or	collectively	harm	the	operation	of	our	airline	and	impair	our	financial	performance.	See	also	Part I,	Item	1.	Business	–	"Employees	and	Labor	Relations."

# The	inability	to	maintain	labor	costs	at	competitive	levels	would	harm	our	financial	performance.

Currently,	we	believe	our	labor	costs	are	competitive	relative	to	the	other	large	network	carriers.	However,	we	cannot	provide	assurance	that	labor costs	going	forward	will	remain	competitive	because	some	of	our	agreements	are	amendable	now	and	others	may	become	amendable,	competitors	may significantly	reduce	their	labor	costs	or	we	may	agree	to	higher-cost	provisions	in	our	current	or	future	labor	negotiations,	such	as	the	employee	profit sharing	program	we	instituted	effective	January	1,	2016.	As	of	December	31,	2016,	approximately	85%	of	our	employees	were	represented	for	collective bargaining	purposes	by	labor	unions.	Some	of	our	unions	have	brought	and	may	continue	to	bring	grievances	to	binding	arbitration,	including	those related	to	wages.	Unions	may	also	bring	court	actions	and	may	seek	to	compel	us	to	engage	in	bargaining	processes	where	we	believe	we	have	no	such 21

obligation.	If	successful,	there	is	a	risk	these	judicial	or	arbitral	avenues	could	create	material	additional	costs	that	we	did	not	anticipate.

# Interruptions	or	disruptions	in	service	at	one	of	our	hub	airports	could	have	a	material	adverse	impact	on	our	operations.

We	operate	principally	through	hubs	in	Charlotte,	Chicago,	Dallas/Fort	Worth,	Los	Angeles,	Miami,	New	York,	Philadelphia,	Phoenix	and	Washington, D.C.	Substantially	all	of	our	flights	either	originate	in	or	fly	into	one	of	these	locations.	A	significant	interruption	or	disruption	in	service	at	one	of	our	hubs resulting	from	air	traffic	control	(ATC)	delays,	weather	conditions,	natural	disasters,	growth	constraints,	relations	with	third-party	service	providers,	failure of	computer	systems,	facility	disruptions,	labor	relations,	power	supplies,	fuel	supplies,	terrorist	activities,	or	otherwise	could	result	in	the	cancellation	or delay	of	a	significant	portion	of	our	flights	and,	as	a	result,	could	have	a	severe	impact	on	our	business,	results	of	operations	and	financial	condition.

# 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.

In	order	to	operate	our	existing	and	proposed	flight	schedule	and,	where	desirable,	add	service	along	new	or	existing	routes,	we	must	be	able	to maintain	and/or	obtain	adequate	gates,	check-in	counters,	operations	areas	and	office	space.	As	airports	around	the	world	become	more	congested,	we are	not	always	able	to	ensure	that	our	plans	for	new	service	can	be	implemented	in	a	commercially	viable	manner,	given	operating	constraints	at	airports throughout	our	network,	including	due	to	inadequate	facilities	at	desirable	airports.	Further,	our	operating	costs	at	airports	at	which	we	operate,	including our	hubs,	may	increase	significantly	because	of	capital	improvements	at	such	airports	that	we	may	be	required	to	fund,	directly	or	indirectly.	In	some circumstances,	such	costs	could	be	imposed	by	the	relevant	airport	authority	without	our	approval.

In	addition,	operations	at	three	major	domestic	airports,	certain	smaller	domestic	airports	and	certain	foreign	airports	served	by	us	are	regulated	by governmental	entities	through	the	use	of	slots	or	similar	regulatory	mechanisms	which	limit	the	rights	of	carriers	to	conduct	operations	at	those	airports. Each	slot	represents	the	authorization	to	land	at	or	take	off	from	the	particular	airport	during	a	specified	time	period	and	may	have	other	operational restrictions	as	well.	In	the	U.S.,	the	FAA	currently	regulates	the	allocation	of	slots	or	slot	exemptions	at	DCA	and	two	New	York	City	airports:	JFK	and LGA.	In	addition	to	slot	restrictions,	operations	at	LGA	and	DCA	are	also	limited	based	on	the	stage	length	of	the	flight.	Our	operations	at	these	airports generally	require	the	allocation	of	slots	or	similar	regulatory	authority.	Similarly,	our	operations	at	international	airports	in	Beijing,	Frankfurt,	London Heathrow,	Paris,	Tokyo	and	other	airports	outside	the	U.S.	are	regulated	by	local	slot	authorities	pursuant	to	the	IATA	Worldwide	Scheduling	Guidelines and	applicable	local	law.	We	currently	have	sufficient	slots	or	analogous	authorizations	to	operate	our	existing	flights	and	we	have	generally,	but	not always,	been	able	to	obtain	the	rights	to	expand	our	operations	and	to	change	our	schedules.	However,	there	is	no	assurance	that	we	will	be	able	to obtain	sufficient	slots	or	analogous	authorizations	in	the	future	or	as	to	the	cost	of	acquiring	such	rights	because,	among	other	reasons,	such	allocations are	often	sought	after	by	other	airlines	and	are	subject	to	changes	in	governmental	policies.	We	cannot	provide	any	assurance	that	regulatory	changes regarding	the	allocation	of	slots	or	similar	regulatory	authority	will	not	have	a	material	adverse	impact	on	our	operations.

Our	ability	to	provide	service	can	also	be	impaired	at	airports,	such	as	ORD	and	LAX,	where	the	airport	gate	and	other	facilities	are	inadequate	to accommodate	all	of	the	service	that	we	would	like	to	provide,	or	airports	such	as	Dallas	Love	Field	Airport	where	we	have	no	access	to	gates	at	all.

Any	limitation	on	our	ability	to	acquire	or	maintain	adequate	gates,	ticketing	facilities,	operations	areas,	slots	(where	applicable),	or	office	space	could have	a	material	adverse	effect	on	our	business,	results	of	operations	and	financial	condition.

# 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.

A	significant	portion	of	our	regional	operations	are	conducted	by	third-party	operators	on	our	behalf,	primarily	under	capacity	purchase	agreements. Due	to	our	reliance	on	third	parties	to	provide	these	essential	services,	we	are	subject	to	the	risks	of	disruptions	to	their	operations,	which	may	result	from many	of	the	same	risk	factors	disclosed	in	this	report,	such	as	the	impact	of	adverse	economic	conditions,	the	inability	of	third	parties	to	hire	or	retain necessary	personnel,	 including	 in	particular	pilots,	and	other	risk	 factors,	such	as	an	out-of-court	or	bankruptcy	restructuring	of	any	of	our	regional operators.	Many	of	these	third-party	regional	operators	provide	significant	regional	capacity	that	we	would	be	unable	to	replace	in	a	short	period	of	time should	that	operator	fail	to	perform	its	obligations	to	us.	Volatility	in	fuel	prices,	disruptions	to	capital	markets	and	adverse	economic	conditions	in	general have	subjected	certain	of	these	third-party	regional	operators	to	significant	financial	pressures,	which	have	led	to	several	bankruptcies	among	these operators.	For	example,	one	of	our	significant	third-party	operators	of	regional	capacity,	Republic	Airways	Holdings	Inc.	(Republic),	commenced	a	Chapter 11	bankruptcy	case	on	February	25,	2016.	As	part	of	Republic's	restructuring	process	and	with	bankruptcy	court	approval,	we	entered	into	an	amendment to	our	contractual	relationship	with	Republic	that,	among	other	things,	provided	for	the	reduction	in	the	number	of	aircraft	operated	by	Republic	on	our behalf	to	76	E175	aircraft	(a	reduction	of	20	E170	and	nine	E175	aircraft).	In	addition,	we	have	reached	a	settlement	with	Republic	that	has	resulted	in the	allowance	of	an	unsecured	claim	on	behalf	of	American	in	the	amount	of	$250	million,	to	compensate	us	in	part	for	losses	and	damages	that	we incurred	under	the	existing	contract	with	Republic,	which	is	expected	to	be	settled	in	the	form	of	common	stock	of	the	restructured	company.	It	is	not possible,	at	this	point,	however,	to	quantify	the	value	of	a	recovery	on	such	claim.	We	may	also	experience	disruption	to	our	regional	operations	if	we terminate	the	capacity	purchase	agreement	with	one	or	more	of	our	current	operators	and	transition	the	services	to	another	provider.	Any	significant disruption	to	our	regional	operations	would	have	a	material	adverse	effect	on	our	business,	results	of	operations	and	financial	condition.

In	addition,	our	reliance	upon	others	to	provide	essential	services	on	behalf	of	our	operations	may	result	in	our	relative	inability	to	control	the	efficiency and	 timeliness	 of	 contract	 services.	 We	 have	 entered	 into	 agreements	 with	 contractors	 to	 provide	 various	 facilities	 and	 services	 required	 for	 our operations,	 including	 distribution	 and	 sale	 of	 airline	 seat	 inventory,	 provision	 of	 information	 technology	 and	 services,	 regional	 operations,	 aircraft maintenance,	ground	services	and	facilities,	reservations	and	baggage	handling.	Similar	agreements	may	be	entered	into	in	any	new	markets	we	decide to	serve.	These	agreements	are	generally	subject	to	termination	after	notice	by	the	third-party	service	provider.	We	are	also	at	risk	should	one	of	these service	providers	cease	operations,	and	there	is	no	guarantee	that	we	could	replace	these	providers	on	a	timely	basis	with	comparably	priced	providers, or	at	all.	Any	material	problems	with	the	efficiency	and	timeliness	of	contract	services,	resulting	from	financial	hardships	or	otherwise,	could	have	a material	adverse	effect	on	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.

We	rely	on	third-party	distribution	channels,	including	those	provided	by	or	through	global	distribution	systems	(GDSs)	(e.g.,	Amadeus,	Sabre	and Travelport),	 conventional	 travel	 agents	 and	 online	 travel	 agents	 (OTAs)	 (e.g.,	 Expedia,	 including	 its	 booking	 sites	 Orbitz	 and	Travelocity,	 and	The Priceline

Group),	to	distribute	a	significant	portion	of	our	airline	tickets,	and	we	expect	in	the	future	to	continue	to	rely	on	these	channels	and	hope	to	expand	their ability	to	distribute	and	collect	revenues	for	ancillary	products	(e.g.,	fees	for	selective	seating).	These	distribution	channels	are	more	expensive	and	at present	have	less	functionality	in	respect	of	ancillary	product	offerings	than	those	we	operate	ourselves,	such	as	our	call	centers	and	our	website.	Certain of	these	distribution	channels	also	effectively	restrict	the	manner	in	which	we	distribute	our	products	generally.	To	remain	competitive,	we	will	need	to manage	successfully	our	distribution	costs	and	rights,	increase	our	distribution	flexibility	and	improve	the	functionality	of	third-party	distribution	channels, while	maintaining	an	industry-competitive	cost	structure.	These	imperatives	may	affect	our	relationships	with	GDSs	and	OTAs,	including	as	consolidation of	OTAs	continues	or	is	proposed	to	continue,	and	require	us	to	make	significant	investments	in	potential	new	distribution	technologies.	Any	inability	to manage	our	third-party	distribution	costs,	rights	and	functionality	at	a	competitive	level	or	any	material	diminishment	or	disruption	in	the	distribution	of	our tickets	could	have	a	material	adverse	effect	on	our	business,	results	of	operations	and	financial	condition.

# 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.

Airlines	are	subject	to	extensive	domestic	and	international	regulatory	requirements.	In	the	last	several	years,	Congress	has	passed	laws,	and	the DOT,	the	FAA,	the	TSA	and	the	Department	of	Homeland	Security	have	issued	a	number	of	directives	and	other	regulations,	that	affect	the	airline industry.	These	requirements	impose	substantial	costs	on	us	and	restrict	the	ways	we	may	conduct	our	business.

For	example,	the	FAA	from	time	to	time	issues	directives	and	other	regulations	relating	to	the	maintenance	and	operation	of	aircraft	that	require significant	expenditures	or	operational	restrictions.	These	requirements	can	be	issued	with	little	or	no	notice,	or	can	otherwise	impact	our	ability	to efficiently	or	fully	utilize	our	aircraft.	Additionally,	our	failure	to	comply	with	such	requirements	has	in	the	past	and	may	in	the	future	result	in	fines	and other	enforcement	actions	by	the	FAA	or	other	regulators.	In	the	future,	new	regulatory	requirements	could	have	a	material	adverse	effect	on	us	and	the industry.

DOT	consumer	rules	that	took	effect	in	2010	require	procedures	for	customer	handling	during	long	onboard	delays,	further	regulate	airline	interactions with	passengers	through	the	reservations	process,	at	the	airport,	and	onboard	the	aircraft,	and	require	disclosures	concerning	airline	fares	and	ancillary fees	such	as	baggage	fees.	The	DOT	has	been	aggressively	investigating	alleged	violations	of	these	rules.	Other	DOT	rules	apply	to	post-ticket	purchase price	increases	and	an	expansion	of	tarmac	delay	regulations	to	international	airlines.

The	Aviation	 and	Transportation	 Security	Act	 mandates	 the	 federalization	 of	 certain	 airport	 security	 procedures	 and imposes	 additional	 security requirements	on	airports	and	airlines,	most	of	which	are	funded	by	a	per-ticket	tax	on	passengers	and	a	tax	on	airlines.

The	results	of	our	operations,	demand	for	air	travel,	and	the	manner	in	which	we	conduct	business	each	may	be	affected	by	changes	in	law	and	future actions	taken	by	governmental	agencies,	including:

•changes	in	law	which	affect	the	services	that	can	be	offered	by	airlines	in	particular	markets	and	at	particular	airports,	or	the	types	of	fees	that can	be	charged	to	passengers;

•the	 granting	 and	 timing	 of	 certain	 governmental	 approvals	 (including	 antitrust	 or foreign	 government	 approvals)	 needed for	 codesharing alliances,	joint	businesses	and	other	arrangements	with	other	airlines;

•restrictions	on	competitive	practices	(for	example,	court	orders,	or	agency	regulations	or	orders,	that	would	curtail	an	airline's	ability	to	respond	to a	competitor);

•the	adoption	of	new	passenger	security	standards	or	regulations	that	impact	customer	service	standards	(for	example,	a	"passenger	bill	of rights");

•restrictions	on	airport	operations,	such	as	restrictions	on	the	use	of	slots	at	airports	or	the	auction	or	reallocation	of	slot	rights	currently	held	by us;	and

•the	adoption	of	more	restrictive	locally-imposed	noise	restrictions.

Each	additional	regulation	or	other	form	of	regulatory	oversight	increases	costs	and	adds	greater	complexity	to	airline	operations	and,	in	some	cases, may	reduce	the	demand	for	air	travel.	There	can	be	no	assurance	that	our	compliance	with	new	rules,	anticipated	rules	or	other	forms	of	regulatory oversight	will	not	have	a	material	adverse	effect	on	us.

Any	significant	reduction	in	air	traffic	capacity	at	and	in	the	airspace	serving	key	airports	in	the	U.S.	or	overseas	could	have	a	material	adverse	effect on	 our	 business,	 results	 of	 operations	 and	 financial	 condition.	 In	 addition,	 the	 United	 States	 National	Airspace	 System	 (the	ATC	 system)	 is	 not successfully	managing	the	growing	demand	for	U.S.	air	travel.	Air	traffic	controllers	rely	on	outdated	procedures	and	technologies	that	are	routinely overwhelmed	and	compel	airlines	to	fly	inefficient	routes	or	take	significant	delays	on	the	ground.	The	ATC	system's	inability	to	handle	existing	travel demand	has	led	government	agencies	to	implement	short-term	capacity	constraints	during	peak	travel	periods	or	adverse	weather	conditions	in	certain markets,	resulting	in	delays	and	disruptions	of	air	traffic.	The	outdated	technologies	also	cause	the	ATC	to	be	less	resilient	in	the	event	of	a	failure.	For example,	in	2014	the	ATC	systems	in	Chicago	took	weeks	to	recover	following	a	fire	in	the	ATC	tower	at	ORD,	which	resulted	in	thousands	of	cancelled flights.

The	FAA	has	embarked	on	transforming	the	national	airspace	system,	to	include	migration	from	the	current	radar-based	air	traffic	control	system	to	a GPS-based	 system.	This	ATC	 modernization,	 generally	 referred	 to	 as	 "NextGen,"	 has	 been	 plagued	 by	 delays	 and	 cost	 overruns,	 and	 it	 remains uncertain	when	the	full	array	of	benefits	expected	from	ATC	modernization	will	be	available	to	the	public	and	the	airlines.	Failure	to	update	the	ATC system	in	a	timely	manner	and	the	substantial	funding	requirements	that	may	be	imposed	on	airlines	of	a	modernized	ATC	system	may	have	a	material adverse	effect	on	our	business.	We	support	legislative	efforts	that	would	establish	a	nimble	not-for-profit	entity	better	suited	to	manage	the	long-term investments	in	technology	and	provide	a	governance	structure	needed	to	successfully	implement	NextGen	and	improve	the	operation	of	the	air	traffic control	system.

Our	operating	authority	in	international	markets	is	subject	to	aviation	agreements	between	the	U.S.	and	the	respective	countries	or	governmental authorities,	such	as	the	EU,	and	in	some	cases,	fares	and	schedules	require	the	approval	of	the	DOT	and/or	the	relevant	foreign	governments.	Moreover, alliances	with	international	carriers	may	be	subject	to	the	jurisdiction	and	regulations	of	various	foreign	agencies.	Bilateral	and	multilateral	agreements among	 the	 U.S.	 and	 various	 foreign	 governments	 of	 countries	 we	 serve	 are	 subject	 to	 periodic	 renegotiation.	 We	 currently	 operate	 a	 number	 of international	routes	under	government	arrangements	that	limit	the	number	of	airlines	permitted	to	operate	on	the	route,	the	capacity	of	the	airlines providing	services	on	the	route,	or	the	number	of	airlines	allowed	access	to	particular	airports.	If	an	open	skies	policy	were	to	be	adopted	for	any	of	these routes,	such	an	event	could	have	a	material	adverse	impact	on	us	and	could	result	in	the	impairment	of	material	amounts	of	our	related	tangible	and intangible	assets.	In	addition,	competition	from	revenue-sharing	joint	ventures,	JBAs,	and	other	alliance	arrangements	by	and	among	other	airlines	could impair	the	value	of	our	business	and	assets	on	the	open	skies	routes.	For	example,	the	open	skies	air	services	agreement	between	the	U.S.	and	the	EU, which	took	effect	in	March	2008,

provides	airlines	from	the	U.S.	and	EU	member	states	open	access	to	each	other's	markets,	with	freedom	of	pricing	and	unlimited	rights	to	fly	from	the U.S.	to	any	airport	in	the	EU,	including	LHR.	As	a	result	of	the	agreement,	we	face	increased	competition	in	these	markets,	including	LHR.	Changes	in U.S.	or	foreign	government	aviation	policies	could	result	in	the	alteration	or	termination	of	such	agreements,	diminish	the	value	of	route	authorities,	slots or	other	assets	located	abroad,	or	otherwise	adversely	affect	our	international	operations.	The	U.S.	government	has	negotiated	"open	skies"	agreements with	many	countries,	which	allow	unrestricted	route	authority	access	between	the	U.S.	and	the	foreign	markets.	While	the	U.S.	has	worked	to	increase the	number	of	countries	with	which	open	skies	agreements	are	in	effect,	a	number	of	markets	important	to	us,	including	China,	do	not	have	open	skies agreements.

# The	airline	industry	is	heavily	taxed.

The	airline	industry	is	subject	to	extensive	government	fees	and	taxation	that	negatively	impact	our	revenue	and	profitability.	The	U.S.	airline	industry	is one	of	the	most	heavily	taxed	of	all	industries.	These	fees	and	taxes	have	grown	significantly	in	the	past	decade	for	domestic	flights,	and	various	U.S. fees	and	taxes	also	are	assessed	on	international	flights.	For	example,	as	permitted	by	federal	legislation,	most	major	U.S.	airports	impose	a	passenger facility	charge	per	passenger	on	us.	In	addition,	the	governments	of	foreign	countries	in	which	we	operate	impose	on	U.S.	airlines,	including	us,	various fees	and	taxes,	and	these	assessments	have	been	increasing	in	number	and	amount	in	recent	years.	Moreover,	we	are	obligated	to	collect	a	federal excise	tax,	commonly	referred	to	as	the	"ticket	tax,"	on	domestic	and	international	air	transportation.	We	collect	the	excise	tax,	along	with	certain	other U.S.	and	foreign	taxes	and	user	fees	on	air	transportation	(such	as	passenger	security	fees),	and	pass	along	the	collected	amounts	to	the	appropriate governmental	agencies.	Although	these	taxes	and	fees	are	not	operating	expenses,	they	represent	an	additional	cost	to	our	customers.	There	are continuing	efforts	in	Congress	and	in	other	countries	to	raise	different	portions	of	the	various	taxes,	fees,	and	charges	imposed	on	airlines	and	their passengers,	and	we	may	not	be	able	to	recover	all	of	these	charges	from	our	customers.	Increases	in	such	taxes,	fees	and	charges	could	negatively impact	our	business,	results	of	operations	and	financial	condition.

Under	DOT	regulations,	all	governmental	taxes	and	fees	must	be	included	in	the	prices	we	quote	or	advertise	to	our	customers.	Due	to	the	competitive revenue	environment,	many	increases	in	these	fees	and	taxes	have	been	absorbed	by	the	airline	industry	rather	than	being	passed	on	to	the	customer. Further	increases	in	fees	and	taxes	may	reduce	demand	for	air	travel,	and	thus	our	revenues.

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

We	have	recently	 instituted,	and	 intend	 to	 institute	 in	 the	 future,	changes	 to	our	business	model	 to	 increase	revenues	and	offset	costs.	These measures	include	premium	economy	service,	basic	economy	service	and	charging	separately	for	services	that	had	previously	been	included	within	the price	of	a	ticket	and	increasing	other	pre-existing	fees.	We	may	introduce	additional	initiatives	in	the	future;	however,	as	time	goes	on,	we	expect	that	it will	be	more	difficult	to	identify	and	implement	additional	initiatives.	We	cannot	assure	you	that	these	measures	or	any	future	initiatives	will	be	successful in	 increasing	 our	 revenues.	 Additionally,	 the	 implementation	 of	 these	 initiatives	 may	 create	 logistical	 challenges	 that	 could	 harm	 the	 operational performance	of	our	airline.	Also,	any	new	and	increased	fees	might	reduce	the	demand	for	air	travel	on	our	airline	or	across	the	industry	in	general, particularly	if	weakened	economic	conditions	make	our	customers	more	sensitive	to	increased	travel	costs	or	provide	a	significant	competitive	advantage to	other	carriers	that	determine	not	to	institute	similar	charges.

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

We	believe	 that	our	 future	success	will	depend	 in	 large	part	on	our	ability	 to	retain	or	attract	highly	qualified	management,	 technical	and	other personnel.	We	may	not	be	successful	in	retaining	key	personnel	or	in	attracting	other	highly	qualified	personnel.	Any	inability	to	retain	or	attract	significant numbers	 of	 qualified	 management	 and	 other	 personnel	 would	 have	 a	 material	 adverse	 effect	 on	 our	 business,	 results	 of	 operations	 and	 financial condition.

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

Acts	of	terrorism	or	fear	of	such	attacks,	including	elevated	national	threat	warnings,	wars	or	other	military	conflicts,	may	depress	air	travel,	particularly on	international	routes,	and	cause	declines	in	revenues	and	increases	in	costs.	The	attacks	of	September	11,	2001	and	continuing	terrorist	threats, attacks	and	attempted	attacks	materially	impacted	and	continue	to	impact	air	travel.	Increased	security	procedures	introduced	at	airports	since	the attacks	of	September	11,	2001	and	any	other	such	measures	that	may	be	introduced	in	the	future	generate	higher	operating	costs	for	airlines.	The Aviation	and	Transportation	Security	Act	mandated	improved	flight	deck	security,	deployment	of	federal	air	marshals	on	board	flights,	improved	airport perimeter	access	security,	airline	crew	security	training,	enhanced	security	screening	of	passengers,	baggage,	cargo,	mail,	employees	and	vendors, enhanced	training	and	qualifications	of	security	screening	personnel,	additional	provision	of	passenger	data	to	the	U.S.	Customs	and	Border	Protection Agency	and	enhanced	background	checks.	A	concurrent	increase	in	airport	security	charges	and	procedures,	such	as	restrictions	on	carry-on	baggage, has	also	had	and	may	continue	to	have	a	disproportionate	impact	on	short-haul	travel,	which	constitutes	a	significant	portion	of	our	flying	and	revenue. Implementation	of	and	compliance	with	increasingly-complex	security	and	customs	requirements	will	continue	to	result	in	increased	costs	for	us	and	our passengers,	and	have	caused	and	likely	will	continue	to	cause	periodic	service	disruptions	and	delays.	We	have	at	times	found	it	necessary	or	desirable to	 make	 significant	 expenditures	 to	 comply	 with	 security-related	 requirements	 while	 seeking	 to	 reduce	 their	 impact	 on	 our	 customers,	 such	 as expenditures	 for	 automated	 security	 screening	 lines	 at	 airports.	As	 a	 result	 of	 competitive	 pressure,	 and	 the	 need	 to	 improve	 security	 screening throughput	to	support	the	pace	of	our	operations,	it	is	unlikely	that	we	will	be	able	to	capture	all	security-related	costs	through	increased	fares.	In	addition, we	cannot	forecast	what	new	security	requirements	may	be	imposed	in	the	future,	or	their	impact	on	our	business.

# 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	operate	a	global	business	with	operations	outside	of	the	U.S.	Our	current	international	activities	and	prospects	have	been	and	in	the	future	could be	adversely	affected	by	reversals	or	delays	in	the	opening	of	foreign	markets,	increased	competition	in	international	markets,	the	performance	of	our alliance,	joint	business	and	codeshare	partners	in	a	given	market,	exchange	controls	or	other	restrictions	on	repatriation	of	funds,	currency	and	political risks	 (including	 changes	 in	 exchange	 rates	 and	 currency	 devaluations),	 environmental	 regulation,	 increases	 in	 taxes	 and	 fees	 and	 changes	 in international	 government	 regulation	 of	 our	 operations,	 including	 the	 inability	 to	 obtain	 or	 retain	 needed	 route	 authorities	 and/or	 slots.	 In	 particular, fluctuations	in	foreign	currencies,	including	devaluations,	exchange	controls	and	other	restrictions	on	the	repatriation	of	funds,	have	significantly	affected and	may	continue	to	significantly	affect	our	operating	performance,	liquidity	and	the	value	of	any	cash	held	outside	the	U.S.	in	local	currency.

Generally,	fluctuations	in	foreign	currencies,	including	devaluations,	cannot	be	predicted	by	us	and	can	significantly	affect	the	value	of	our	assets 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	our	business,	results	of	operations	and	financial	condition.

The	United	Kingdom	held	a	referendum	in	June	2016	regarding	its	membership	in	the	EU	in	which	a	majority	of	the	United	Kingdom	electorate	voted in	favor	of	the	British	government	taking	the	necessary	action	for	the	United	Kingdom	to	leave	the	EU.	At	this	time,	it	is	not	certain	what	steps	will	need	to be	taken	to	facilitate	the	United	Kingdom's	exit	from	the	EU	or	the	length	of	time,	expected	to	be	measured	in	years,	that	this	may	take.	The	referendum was	advisory,	and	the	terms	of	any	withdrawal	are	subject	to	a	negotiation	period	that	could	last	at	least	two	years	after	the	government	of	the	United Kingdom	 formally	 initiates	a	withdrawal	process.	The	 implications	of	 the	United	Kingdom	withdrawing	 from	 the	EU	are	similarly	unclear	at	present because	it	is	unclear	what	relationship	the	United	Kingdom	will	have	with	the	EU	after	withdrawal.	We	face	risks	associated	with	the	uncertainty	following the	referendum	and	the	consequences	that	may	flow	from	the	decision	to	exit	the	EU.	Among	other	things,	the	exit	of	the	United	Kingdom	from	the	EU could	adversely	affect	European	or	worldwide	economic	or	market	conditions	and	could	contribute	to	further	instability	in	global	financial	markets.	In addition,	the	exit	of	the	United	Kingdom	from	the	EU	could	lead	to	legal	and	regulatory	uncertainty	and	potentially	divergent	treaties,	laws	and	regulations as	 the	 United	 Kingdom	 determines	 which	 EU	 treaties,	 laws	 and	 regulations	 to	 replace	 or	 replicate,	 including	 those	 governing	 aviation,	 labor, environmental,	data	protection/privacy,	competition	and	other	matters	applicable	to	the	provision	of	air	transportation	services	by	us	or	our	alliance,	joint business	or	codeshare	partners.	The	impact	on	our	business	of	any	treaties,	laws	and	regulations	that	replace	the	existing	EU	counterparts	cannot	be predicted.	Any	of	 these	effects,	and	others	we	cannot	anticipate,	could	materially	adversely	affect	our	business,	results	of	operations	and	 financial condition.

# We	are	subject	to	many	forms	of	environmental	and	noise	regulation	and	may	incur	substantial	costs	as	a	result.

We	are	subject	to	increasingly	stringent	federal,	state,	local	and	foreign	laws,	regulations	and	ordinances	relating	to	the	protection	of	the	environment and	 noise	 reduction,	 including	 those	 relating	 to	 emissions	 to	 the	 air,	 discharges	 to	 surface	 and	 subsurface	 waters,	 safe	 drinking	 water,	 and	 the management	 of	 hazardous	 substances,	 oils	 and	 waste	 materials.	 Compliance	 with	 environmental	 laws	 and	 regulations	 can	 require	 significant expenditures,	and	violations	can	lead	to	significant	fines	and	penalties.

We	are	also	subject	to	other	environmental	laws	and	regulations,	including	those	that	require	us	to	investigate	and	remediate	soil	or	groundwater	to meet	certain	remediation	standards.	Under	federal	law,	generators	of	waste	materials,	and	current	and	former	owners	or	operators	of	facilities,	can	be subject	to	liability	for	investigation	and	remediation	costs	at	locations	that	have	been	identified	as	requiring	response	actions.	Liability	under	these	laws may	be	strict,	joint	and	several,	meaning	that	we	could	be	liable	for	the	costs	of	cleaning	up	environmental	contamination	regardless	of	fault	or	the amount	of	waste	directly	attributable	to	us.	We	have	liability	for	investigation	and	remediation	costs	at	various	sites,	although	such	costs	currently	are	not expected	to	have	a	material	adverse	effect	on	our	business.

We	have	various	leases	and	agreements	with	respect	to	real	property,	tanks	and	pipelines	with	airports	and	other	operators.	Under	these	leases	and agreements,	we	have	agreed	to	indemnify	the	lessor	or	operator	against	environmental	liabilities	associated	with	the	real	property	or	operations	described under	the	agreement,	in	some	cases	even	if	we	are	not	the	party	responsible	for	the	initial	event	that	caused	the	environmental	damage.	We	also participate	in	leases	with	other	airlines	in	fuel	consortiums	and	fuel	committees	at	airports,	where	such	indemnities	are	generally	joint	and	several	among the	participating	airlines.

Governmental	authorities	in	several	U.S.	and	foreign	cities	are	also	considering,	or	have	already	implemented,	aircraft	noise	reduction	programs, including	 the	 imposition	 of	 nighttime	 curfews	 and	 limitations	 on	 daytime	 take	 offs	 and	 landings.	 We	 have	 been	 able	 to	 accommodate	 local	 noise restrictions	imposed	to	date,	but	our	operations	could	be	adversely	affected	if	locally-imposed	regulations	become	more	restrictive	or	widespread.

# We	are	subject	to	risks	associated	with	climate	change,	including	increased	regulation	to	reduce	emissions	of	greenhouse	gases.

There	is	increasing	global	regulatory	focus	on	climate	change	and	GHG	emissions.	For	example,	in	October	2016,	ICAO	passed	a	resolution	adopting the	CORSIA,	which	is	a	global,	market-based	emissions	offset	program	to	encourage	carbon-neutral	growth	beyond	2020.	The	CORSIA	was	supported by	the	board	of	Airlines	For	America	(the	principal	U.S.	airline	trade	association)	and	IATA	(the	principal	international	airline	trade	association),	and	by American	and	many	other	U.S.	and	foreign	airlines.	The	CORSIA	will	increase	operating	costs	for	American	and	most	other	airlines,	including	other	U.S. airlines	that	operate	internationally,	but	the	implementation	of	a	global	program,	as	compared	to	regional	emission	reduction	schemes,	should	help	to ensure	that	these	costs	will	be	more	predictable	and	more	evenly	applied	to	American	and	its	competitors.	The	CORSIA	is	expected	to	be	implemented	in phases,	beginning	in	2021.	Certain	details	still	need	to	be	developed	and	the	impact	of	the	CORSIA	cannot	be	fully	predicted.	While	we	do	not	anticipate any	significant	emissions	allowance	expenditures	in	2017,	compliance	with	the	CORSIA	or	similar	emissions-related	requirements	could	significantly increase	 our	 operating	 costs	 beyond	 2017.	 Further,	 the	 potential	 impact	 of	 the	 CORSIA	 or	 other	 emissions-related	 requirements	 on	 our	 costs	 will ultimately	depend	on	a	number	of	factors,	including	baseline	emissions,	the	price	of	emission	allowances	or	offsets	and	the	number	of	future	flights subject	to	such	emissions-related	requirements.	These	costs	have	not	been	completely	defined	and	could	fluctuate.

In	addition,	in	December	2015,	at	the	21st	Conference	of	the	Parties	to	the	United	Nations	Framework	Convention	on	Climate	Change	(UNFCCC's COP21),	over	190	countries,	including	the	United	States,	reached	an	agreement	to	reduce	global	greenhouse	gas	emissions.	While	there	is	no	express reference	to	aviation	in	this	international	agreement,	to	the	extent	the	United	States	and	other	countries	implement	this	agreement	or	impose	other climate	change	regulations,	either	with	respect	to	the	aviation	industry	or	with	respect	to	related	industries	such	as	the	aviation	fuel	industry,	it	could	have an	adverse	direct	or	indirect	effect	on	our	business.

The	EPA	recently	issued	an	endangerment	finding	that	aircraft	engine	GHG	emissions	cause	or	contribute	to	air	pollution	that	may	reasonably	be anticipated	to	endanger	public	health	or	welfare,	which	is	a	precursor	to	EPA	regulation	of	aircraft	engine	GHG	emission	standards.	It	is	anticipated	that any	such	standards	established	by	the	EPA	would	closely	align	with	emission	standards	currently	being	developed	by	ICAO.	In	February	2016,	the	ICAO Committee	on	Aviation	Environmental	Protection	recommended	that	ICAO	adopt	carbon	dioxide	certification	standards	that	would	apply	to	new	type aircraft	certified	beginning	in	2020,	and	would	be	phased	in	for	newly	manufactured	existing	aircraft	type	designs	starting	in	2023.

In	addition,	several	states	have	adopted	or	are	considering	initiatives	to	regulate	emissions	of	GHGs,	primarily	through	the	planned	development	of GHG	emissions	inventories	and/or	regional	GHG	cap	and	trade	programs.	Depending	on	the	scope	of	such	regulation,	certain	of	our	facilities	and operations,	or	the	operations	of	our	suppliers,	may	be	subject	to	additional	operating	and	other	permit	requirements,	likely	resulting	in	increased	operating costs.

These	regulatory	efforts,	both	internationally	and	in	the	U.S.	at	the	federal	and	state	levels,	are	still	developing,	and	we	cannot	yet	determine	what	the final	regulatory	programs	or	their	impact	will	be	in

the	U.S.,	the	EU	or	in	other	areas	in	which	we	do	business.	However,	such	climate	change-related	regulatory	activity	in	the	future	may	adversely	affect our	business	and	financial	results	by	requiring	us	to	reduce	our	emissions,	purchase	allowances	or	otherwise	pay	for	our	emissions.	Such	activity	may also	impact	us	indirectly	by	increasing	our	operating	costs,	including	fuel	costs.

# 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.

We	are	highly	dependent	on	technology	and	automated	systems	to	operate	our	business.	These	technologies	and	systems	include	our	computerized airline	reservation	system,	flight	operations	systems,	financial	planning,	management	and	accounting	systems,	telecommunications	systems,	website, maintenance	 systems	 and	check-in	 kiosks.	 In	 order	 for	 our	 operations	 to	 work	 efficiently,	 our	 website	 and	 reservation	 system	 must	 be	 able	 to accommodate	a	high	volume	of	traffic,	maintain	secure	information	and	deliver	flight	information,	as	well	as	issue	electronic	tickets	and	process	critical financial	information	in	a	timely	manner.	Substantially	all	of	our	tickets	are	issued	to	passengers	as	electronic	tickets.	We	depend	on	our	reservation system,	which	is	hosted	and	maintained	under	a	long-term	contract	by	a	third-party	service	provider,	to	be	able	to	issue,	track	and	accept	these	electronic tickets.	If	our	automated	systems	are	not	functioning	or	if	our	third-party	service	providers	were	to	fail	to	adequately	provide	technical	support,	system maintenance	or	timely	software	upgrades	for	any	one	of	our	key	existing	systems,	we	could	experience	service	disruptions	or	delays,	which	could	harm our	business	and	result	in	the	loss	of	important	data,	increase	our	expenses	and	decrease	our	revenues.	In	the	event	that	one	or	more	of	our	primary technology	or	systems	vendors	goes	 into	bankruptcy,	ceases	operations	or	 fails	 to	perform	as	promised,	replacement	services	may	not	be	readily available	on	a	timely	basis,	at	competitive	rates	or	at	all,	and	any	transition	time	to	a	new	system	may	be	significant.

Our	automated	systems	cannot	be	completely	protected	against	other	events	that	are	beyond	our	control,	including	natural	disasters,	power	failures, terrorist	attacks,	cyber-attacks,	data	theft,	equipment	and	software	failures,	computer	viruses	or	telecommunications	failures.	Substantial	or	sustained system	failures	could	cause	service	delays	or	failures	and	result	in	our	customers	purchasing	tickets	from	other	airlines.	We	cannot	assure	you	that	our security	measures,	change	control	procedures	or	disaster	recovery	plans	are	adequate	to	prevent	disruptions	or	delays.	Disruption	in	or	changes	to	these systems	could	result	in	a	disruption	to	our	business	and	the	loss	of	important	data.	Any	of	the	foregoing	could	result	in	a	material	adverse	effect	on	our business,	results	of	operations	and	financial	condition.

# We	face	challenges	in	integrating	our	computer,	communications	and	other	technology	systems.

Among	the	principal	risks	of	integrating	our	businesses	and	operations	are	the	risks	relating	to	integrating	various	computer,	communications	and	other technology	 systems	 that	 will	 be	 necessary	 to	 operate	 US	Airways	 and	American	 as	 a	 single	 airline	 and	 to	 achieve	 cost	 synergies	 by	 eliminating redundancies	in	the	businesses.	While	we	have	to	date	successfully	integrated	several	of	our	systems,	including	our	customer	reservations	system	and our	pilot	and	fleet	scheduling	system,	we	still	have	to	complete	several	additional	important	system	integration	projects.	The	integration	of	these	systems in	a	number	of	prior	airline	mergers	has	taken	longer,	been	more	disruptive	and	cost	more	than	originally	forecast.	The	implementation	process	to integrate	these	various	systems	will	involve	a	number	of	risks	that	could	adversely	impact	our	business,	results	of	operations	and	financial	condition.	New systems	 will	 replace	 multiple	 legacy	 systems	 and	 the	 related	 implementation	 will	 be	 a	 complex	 and	 time-consuming	 project	 involving	 substantial expenditures	for	implementation	consultants,	system	hardware,	software	and	implementation	activities,	as	well	as	the	transformation	of	business	and financial	processes.

We	cannot	assure	you	that	our	security	measures,	change	control	procedures	or	disaster	recovery	plans	will	be	adequate	to	prevent	disruptions	or delays	in	connection	with	systems	integration	or	replacement.	Disruptions	in	or	changes	to	these	systems	could	result	in	a	disruption	to	our	business	and the	loss	of	important	data.	Any	of	the	foregoing	could	result	in	a	material	adverse	effect	on	our	business,	results	of	operations	and	financial	condition.

# We	are	at	risk	of	losses	and	adverse	publicity	stemming	from	any	accident	involving	our	aircraft	or	the	aircraft	of	our	regional	or	codeshare operators.

If	one	of	our	aircraft,	an	aircraft	that	is	operated	under	our	brand	by	one	of	our	regional	operators,	or	an	aircraft	that	is	operated	by	an	airline	with	which we	have	a	marketing	alliance,	joint	business	or	codeshare	relationship	were	to	be	involved	in	an	accident,	incident	or	catastrophe,	we	could	be	exposed to	significant	tort	liability.	The	insurance	we	carry	to	cover	damages	arising	from	any	future	accidents	may	be	inadequate.	In	the	event	that	our	insurance is	not	adequate,	we	may	be	forced	to	bear	substantial	losses	from	an	accident.	In	addition,	any	accident,	incident	or	catastrophe	involving	an	aircraft operated	by	us,	operated	under	our	brand	by	one	of	our	regional	operators	or	operated	by	one	of	our	codeshare	partners	could	create	a	public	perception that	our	aircraft	or	those	of	our	regional	operators	or	codeshare	partners	are	not	safe	or	reliable,	which	could	harm	our	reputation,	result	in	air	travelers being	reluctant	to	fly	on	our	aircraft	or	those	of	our	regional	operators	or	codeshare	partners,	and	adversely	impact	our	business,	results	of	operations	and financial	condition.

# 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.

The	success	of	our	business	depends	on,	among	other	things,	effectively	managing	the	number	and	types	of	aircraft	we	operate.	In	many	cases,	the aircraft	we	intend	to	operate	are	not	yet	in	our	fleet,	but	we	have	contractual	commitments	to	purchase	or	lease	them.	If	for	any	reason	we	were	unable	to accept	or	secure	deliveries	of	new	aircraft	on	contractually	scheduled	delivery	dates,	this	could	have	a	negative	impact	on	our	business,	results	of operations	and	financial	condition.	Our	failure	to	integrate	newly	purchased	aircraft	into	our	fleet	as	planned	might	require	us	to	seek	extensions	of	the terms	for	some	leased	aircraft	or	otherwise	delay	the	exit	of	certain	aircraft	from	our	fleet.	Such	unanticipated	extensions	or	delays	may	require	us	to operate	existing	aircraft	beyond	the	point	at	which	it	is	economically	optimal	to	retire	them,	resulting	in	increased	maintenance	costs.	If	new	aircraft	orders are	 not	 filled	 on	 a	 timely	 basis,	 we	 could	 face	 higher	 operating	 costs	 than	 planned.	 In	 addition,	 if	 the	 aircraft	 we	 receive	 do	 not	 meet	 expected performance	or	quality	standards,	including	with	respect	to	fuel	efficiency	and	reliability,	our	business,	results	of	operations	and	financial	condition	could be	adversely	impacted.

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

We	depend	on	a	limited	number	of	suppliers	for	aircraft,	aircraft	engines	and	many	aircraft	and	engine	parts.	As	a	result,	we	are	vulnerable	to	any problems	associated	with	the	supply	of	those	aircraft,	parts	and	engines,	including	design	defects,	mechanical	problems,	contractual	performance	by	the suppliers,	or	adverse	perception	by	the	public	that	would	result	in	customer	avoidance	or	in	actions	by	the	FAA	resulting	in	an	inability	to	operate	our aircraft.

# 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.

Our	 business,	 results	 of	 operations	 and financial	 condition	 have	 been	 and	 will	 continue to	 be	 affected	 by	 many	 changing	 economic	 and	 other conditions	beyond	our	control,	including,	among	others:

•actual	 or	 potential	 changes	 in	 international,	 national,	 regional	 and local	 economic,	 business	 and financial	 conditions, including recession, inflation,	higher	interest	rates,	wars,	terrorist	attacks	and	political	instability;

•changes	in	consumer	preferences,	perceptions,	spending	patterns	and	demographic	trends;

•changes	in	the	competitive	environment	due	to	industry	consolidation,	changes	in	airline	alliance	affiliations,	and	other	factors;

•actual	or	potential	disruptions	to	the	ATC	systems;

•increases	in	costs	of	safety,	security,	and	environmental	measures;

•outbreaks	of	diseases	that	affect	travel	behavior;	and

•	 weather	and	natural	disasters.

In	particular,	an	outbreak	of	a	contagious	disease	such	as	the	Ebola	virus,	Middle	East	Respiratory	Syndrome,	Severe	Acute	Respiratory	Syndrome, H1N1	influenza	virus,	avian	flu,	Zika	virus	or	any	other	similar	illness,	if	it	were	to	become	associated	with	air	travel	or	persist	for	an	extended	period, could	materially	affect	the	airline	industry	and	us	by	reducing	revenues	and	adversely	impacting	our	operations	and	passengers'	travel	behavior.	As	a result	of	these	or	other	conditions	beyond	our	control,	our	results	of	operations	could	be	volatile	and	subject	to	rapid	and	unexpected	change.	In	addition, due	to	generally	weaker	demand	for	air	travel	during	the	winter,	our	revenues	in	the	first	and	fourth	quarters	of	the	year	could	be	weaker	than	revenues	in the	second	and	third	quarters	of	the	year.

# A	higher	than	normal	number	of	pilot	retirements,	more	stringent	duty	time	regulations,	increased	flight	hour	requirements	for	commercial airline	pilots	and	other	factors	have	caused	a	shortage	of	pilots	which	could	materially	adversely	affect	our	business.

We	currently	have	a	higher	than	normal	number	of	pilots	eligible	for	retirement.	Among	other	things,	the	extension	of	pilot	careers	facilitated	by	the FAA's	2007	modification	of	the	mandatory	retirement	age	from	age	60	to	age	65	has	now	been	fully	implemented,	resulting	in	large	numbers	of	pilots	in the	industry	approaching	the	revised	mandatory	retirement	age.	Further,	in	July	2013,	the	FAA	issued	regulations	that	increased	the	flight	hours	required for	pilots	working	for	airlines	certificated	under	Part	121	of	the	Federal	Aviation	Regulations.	In	addition,	on	January	4,	2014,	more	stringent	pilot	flight	and duty	time	requirements	under	Part	117	of	the	Federal	Aviation	Regulations	took	effect.	These	and	other	factors,	including	reductions	in	the	number	of military	pilots	being	trained	by	the	U.S.	armed	forces	and	available	as	commercial	pilots	upon	their	retirement	from	military	service,	have	contributed	to	a shortage	of	qualified,	entry-level	pilots	and	increased	compensation	costs,	particularly	for	our	regional	subsidiaries	and	our	other	regional	partners	who are	being	required	by	market	conditions	to	pay	significantly	increased	wages	and	large	signing	bonuses	to	their	pilots	in	an	attempt	to	achieve	desired staffing	levels.	The	foregoing	factors	have	also	led	to	increased	competition	from	large,	mainline	carriers	to	hire	pilots	to	replace	retiring	pilots.	We	believe that	this	industry-wide	pilot	shortage	is	becoming	an	increasing	problem	for	airlines	in	the	United	States.	Our	regional	partners	have	recently	been	unable to	hire	adequate	numbers	of	pilots	to	meet	their	needs,	resulting	in	a	reduction	in	the	number	of	flights	offered,	disruptions,	increased	costs	of	operations, financial	difficulties	and	other	adverse	effects,	and	these	circumstances	may	become	more	severe	in	the	future	and	thereby	cause	a	material	adverse effect	on	our	business.

# Increases	in	insurance	costs	or	reductions	in	insurance	coverage	may	adversely	impact	our	operations	and	financial	results.

The	terrorist	attacks	of	September	11,	2001	led	to	a	significant	increase	in	insurance	premiums	and	a	decrease	in	the	insurance	coverage	available	to commercial	air	carriers.	Accordingly,	our	insurance	costs	increased	significantly,	and	our	ability	to	continue	to	obtain	insurance	even	at	current	prices remains	uncertain.	If	we	are	unable	to	maintain	adequate	insurance	coverage,	our	business	could	be	materially	and	adversely	affected.	Additionally, severe	disruptions	in	the	domestic	and	global	financial	markets	could	adversely	impact	the	claims	paying	ability	of	some	insurers.	Future	downgrades	in the	ratings	of	enough	 insurers	could	adversely	 impact	both	 the	availability	of	appropriate	 insurance	coverage	and	 its	cost.	Because	of	competitive pressures	in	our	industry,	our	ability	to	pass	along	additional	insurance	costs	to	passengers	is	limited.	As	a	result,	further	increases	in	insurance	costs	or reductions	in	available	insurance	coverage	could	have	an	adverse	impact	on	our	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.

From	time	to	time,	we	are	a	party	to	or	otherwise	involved	in	legal	proceedings,	claims	and	government	inspections	or	investigations	and	other	legal matters,	both	inside	and	outside	the	United	States,	arising	in	the	ordinary	course	of	our	business	or	otherwise.	We	are	currently	involved	in	various	legal proceedings	and	claims	that	have	not	yet	been	fully	resolved,	and	additional	claims	may	arise	in	the	future.	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. Litigation	is	subject	to	significant	uncertainty	and	may	be	expensive,	time-consuming,	and	disruptive	to	our	operations.	Although	we	will	vigorously	defend ourselves	in	such	legal	proceedings,	their	ultimate	resolution	and	potential	financial	and	other	impacts	on	us	are	uncertain.	For	these	and	other	reasons, we	may	choose	to	settle	legal	proceedings	and	claims,	regardless	of	their	actual	merit.	If	a	legal	proceeding	is	resolved	against	us,	it	could	result	in significant	compensatory	damages,	and	in	certain	circumstances	punitive	or	trebled	damages,	disgorgement	of	revenue	or	profits,	remedial	corporate measures	or	injunctive	relief	imposed	on	us.	If	our	existing	insurance	does	not	cover	the	amount	or	types	of	damages	awarded,	or	if	other	resolution	or actions	taken	as	a	result	of	the	legal	proceeding	were	to	restrain	our	ability	to	operate	or	market	our	services,	our	consolidated	financial	position,	results	of operations	or	cash	flows	could	be	materially	adversely	affected.	In	addition,	legal	proceedings,	and	any	adverse	resolution	thereof,	can	result	in	adverse publicity	and	damage	to	our	reputation,	which	could	adversely	impact	our	business.	Additional	information	regarding	certain	legal	matters	in	which	we	are involved	can	be	found	in	Part	I,	Item	3.	Legal	Proceedings.

# Our	ability	to	utilize	our	NOL	Carryforwards	may	be	limited.

Under	the	Internal	Revenue	Code	of	1986,	as	amended	(the	Code),	a	corporation	is	generally	allowed	a	deduction	for	net	operating	losses	(NOLs) carried	over	from	prior	taxable	years	(NOL	Carryforwards).	As	of	December	31,	2016,	we	had	available	NOL	Carryforwards	of	approximately	$10.5	billion for	regular	federal	income	tax	purposes	which	will	expire,	if	unused,	beginning	in	2022,	and	approximately	$3.7	billion	for	state	income	tax	purposes which	will	expire,	if	unused,	between	2017	and	2036.	Our	NOL	Carryforwards	are	subject	to	adjustment	on	audit	by	the	Internal	Revenue	Service	and	the respective	state	taxing	authorities.

A	corporation's	ability	to	deduct	its	federal	NOL	Carryforwards	and	to	utilize	certain	other	available	tax	attributes	can	be	substantially	constrained under	the	general	annual	limitation	rules	of	Section	382	of	the	Code	(Section	382)	if	it	undergoes	an	"ownership	change"	as	defined	in	Section	382 (generally	 where	 cumulative	 stock	 ownership	 changes	 among	 material	 stockholders	 exceed	 50	 percent	 during	 a	 rolling	 three-year	 period).	 We experienced	an	ownership	change	in	connection	with	our	emergence

from	the	Chapter	11	Cases	and	US	Airways	Group	experienced	an	ownership	change	in	connection	with	the	Merger.	The	general	limitation	rules	for	a debtor	in	a	bankruptcy	case	are	liberalized	where	the	ownership	change	occurs	upon	emergence	from	bankruptcy.	We	elected	to	be	covered	by	certain special	rules	for	federal	income	tax	purposes	that	permitted	approximately	$9.0	billion	(with	$8.9	billion	of	unlimited	NOL	still	remaining	at	December	31, 2016)	of	our	federal	NOL	Carryforwards	to	be	utilized	without	regard	to	the	annual	limitation	generally	imposed	by	Section	382.	If	the	special	rules	are determined	not	to	apply,	our	ability	to	utilize	such	federal	NOL	Carryforwards	may	be	subject	to	limitation.	Substantially	all	of	our	remaining	federal	NOL Carryforwards	(attributable	to	US	Airways	Group	and	its	subsidiaries)	are	subject	to	limitation	under	Section	382	as	a	result	of	the	Merger;	however,	our ability	to	utilize	such	NOL	Carryforwards	is	not	anticipated	to	be	effectively	constrained	as	a	result	of	such	limitation.	Similar	limitations	may	apply	for	state income	tax	purposes.

Notwithstanding	the	foregoing,	an	ownership	change	subsequent	to	our	emergence	from	the	Chapter	11	Cases	may	severely	limit	or	effectively eliminate	our	ability	to	utilize	our	NOL	Carryforwards	and	other	tax	attributes.	To	reduce	the	risk	of	a	potential	adverse	effect	on	our	ability	to	utilize	our NOL	Carryforwards,	our	Restated	Certificate	of	Incorporation	(Certificate	of	Incorporation)	contains	transfer	restrictions	applicable	to	certain	substantial stockholders.	These	restrictions	may	adversely	affect	the	ability	of	certain	holders	of	AAG	common	stock	to	dispose	of	or	acquire	shares	of	AAG	common stock.	Although	 the	 purpose	 of	 these	 transfer	 restrictions	 is	 to	 prevent	 an	 ownership	 change	 from	 occurring,	 no	 assurance	 can	 be	 given	 that	 an ownership	change	will	not	occur	even	with	these	restrictions	in	place.

Our	ability	to	use	our	NOL	Carryforwards	also	will	depend	on	the	amount	of	taxable	income	generated	in	future	periods.	The	NOL	Carryforwards	may expire	before	we	can	generate	sufficient	taxable	income	to	use	them.

# 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.

Goodwill	is	not	amortized,	but	is	assessed	for	impairment	at	least	annually.	In	accordance	with	applicable	accounting	standards,	we	are	required	to assess	our	indefinite-lived	intangible	assets	for	impairment	on	an	annual	basis,	or	more	frequently	if	conditions	indicate	that	an	impairment	may	have occurred.	In	addition,	we	are	required	to	assess	certain	of	our	other	long-lived	assets	for	impairment	if	conditions	indicate	that	an	impairment	may	have occurred.

Future	impairment	of	goodwill	or	other	long-lived	assets	could	be	recorded	in	results	of	operations	as	a	result	of	changes	in	assumptions,	estimates,	or circumstances,	some	of	which	are	beyond	our	control.	There	can	be	no	assurance	that	a	material	impairment	charge	of	goodwill	or	tangible	or	intangible assets	will	be	avoided.	The	value	of	our	aircraft	could	be	impacted	in	future	periods	by	changes	in	supply	and	demand	for	these	aircraft.	Such	changes	in supply	and	demand	for	certain	aircraft	types	could	result	from	grounding	of	aircraft	by	us	or	other	airlines.	An	impairment	charge	could	have	a	material adverse	effect	on	our	business,	results	of	operations	and	financial	condition.

# The	price	of	AAG	common	stock	has	recently	been	and	may	in	the	future	be	volatile.

The	market	price	of	AAG	common	stock	may	fluctuate	substantially	due	to	a	variety	of	factors,	many	of	which	are	beyond	our	control,	including:

•	 AAG's	operating	and	financial	results	failing	to	meet	the	expectations	of	securities	analysts	or	investors;

•changes	in	financial	estimates	or	recommendations	by	securities	analysts;

•	 material	announcements	by	us	or	our	competitors;

•	 movements	in	fuel	prices;

•expectations	regarding	our	capital	deployment	program,	including	our	share	repurchase	program	and	any	future	dividend	payments	that	may	be declared	by	our	Board	of	Directors;

•new	regulatory	pronouncements	and	changes	in	regulatory	guidelines;

•general	and	industry-specific	economic	conditions;

•the	success	or	failure	of	AAG's	integration	efforts;

•changes	in	our	key	personnel;

•distributions	of	shares	of	AAG	common	stock	pursuant	to	the	Plan,	including	distributions	from	the	disputed	claims	reserve	established	under	the plan	of	reorganization	upon	the	resolution	of	the	underlying	claims;

•public	sales	of	a	substantial	number	of	shares	of	AAG	common	stock	or	issuances	of	AAG	common	stock	upon	the	exercise	or	conversion	of convertible	securities,	options,	warrants,	restricted	stock	unit	awards,	stock	appreciation	rights,	or	similar	rights;

•increases	or	decreases	in	reported	holdings	by	insiders	or	other	significant	stockholders;

•fluctuations	in	trading	volume;	and

•changes	in	market	values	of	airline	companies	as	well	as	general	market	conditions.

# We	cannot	guarantee	that	we	will	repurchase	our	common	stock	pursuant	to	our	share	repurchase	programs	or	continue	to	pay	dividends on	our	common	stock	or	that	our	capital	deployment	program	will	enhance	long-term	stockholder	value.	Our	capital	deployment	program could	increase	the	volatility	of	the	price	of	our	common	stock	and	diminish	our	cash	reserves.

Since	July	2014	and	through	December	31,	2016,	as	part	of	our	capital	deployment	program,	we	expended	an	aggregate	of	$9.0	billion	to	repurchase shares	of	our	common	stock	under	several	share	repurchase	programs	approved	by	our	Board	of	Directors,	and	in	January	2017,	our	Board	of	Directors authorized	a	new	$2.0	billion	share	repurchase	program	that	expires	on	December	31,	2018.	Share	repurchases	under	our	share	repurchase	programs may	be	made	through	a	variety	of	methods,	which	may	include	open	market	purchases,	privately	negotiated	transactions,	block	trades	or	accelerated share	repurchase	transactions.	These	share	repurchase	programs	do	not	obligate	us	to	acquire	any	specific	number	of	shares	or	to	repurchase	any specific	number	of	shares	for	any	fixed	period,	and	may	be	suspended	at	any	time	at	our	discretion.	The	timing	and	amount	of	repurchases,	if	any,	will	be subject	 to	 market	 and	 economic	 conditions,	 applicable	 legal	 requirements	 and	 other	 relevant	 factors.	 The	 repurchase	 programs	 may	 be	 limited, suspended	or	discontinued	at	any	time	without	prior	notice.

Although	our	Board	of	Directors	commenced	declaring	quarterly	cash	dividends	in	July	2014	as	part	of	our	capital	deployment	program,	any	future dividends	that	may	be	declared	and	paid	from	time	to	time	will	be	subject	to	market	and	economic	conditions,	applicable	legal	requirements	and	other relevant	factors.	We	are	not	obligated	to	continue	a	dividend	for	any	fixed	period,	and	payment	of	dividends	may	be	suspended	at	any	time	at	our discretion.	We	will	continue	to	retain	future	earnings	to	develop	our	business,	as	opportunities	arise,	and	evaluate	on	a	quarterly	basis	the	amount	and timing	of	future	dividends	based	on	our	operating	results,	financial	condition,	capital	requirements	and	general	business	conditions.	The	amount	and timing	of	any	future	dividends	may	vary,	and	the	payment	of	any	dividend	does	not	assure	that	we	will	be	able	to	pay	dividends	in	the	future.

In	addition,	repurchases	of	AAG	common	stock	pursuant	to	our	share	repurchase	programs	and	any	future	dividends	could	affect	our	stock	price	and increase	its	volatility.	The	existence	of	a	share

repurchase	program	and	any	future	dividends	could	cause	our	stock	price	to	be	higher	than	it	would	otherwise	be	and	could	potentially	reduce	the	market liquidity	for	our	stock.	Additionally,	our	share	repurchase	programs	and	any	future	dividends	will	diminish	our	cash	reserves,	which	may	impact	our	ability to	finance	future	growth	and	to	pursue	possible	future	strategic	opportunities	and	acquisitions.	Further,	our	share	repurchase	programs	may	fluctuate such	that	our	cash	flow	may	be	insufficient	to	fully	cover	our	share	repurchases.	Although	our	share	repurchase	programs	are	intended	to	enhance	long- term	stockholder	value,	there	is	no	assurance	that	it	will	do	so	because	the	market	price	of	our	common	stock	may	decline	below	the	levels	at	which	we repurchased	shares	of	stock	and	short-term	stock	price	fluctuations	could	reduce	the	program's	effectiveness.

# Certain	provisions	of	AAG's	Certificate	of	Incorporation	and	Bylaws	make	it	difficult	for	stockholders	to	change	the	composition	of	our Board	of	Directors	and	may	discourage	takeover	attempts	that	some	of	our	stockholders	might	consider	beneficial.

Certain	 provisions	 of	 our	 Certificate	 of	 Incorporation	 and	 Second	Amended	 and	 Restated	 Bylaws	 (Bylaws)	 may	 have	 the	 effect	 of	 delaying	 or preventing	changes	in	control	if	our	Board	of	Directors	determines	that	such	changes	in	control	are	not	in	our	best	interest	and	the	best	interest	of	our stockholders.	These	provisions	include,	among	other	things,	the	following:

•advance	notice	procedures	for	stockholder	proposals	to	be	considered	at	stockholders'	meetings;

•the	ability	of	our	Board	of	Directors	to	fill	vacancies	on	the	board;

•a	prohibition	against	stockholders	taking	action	by	written	consent;

•a	prohibition	against	stockholders	calling	special	meetings	of	stockholders;

•a	requirement	that	holders	of	at	least	80%	of	the	voting	power	of	the	shares	entitled	to	vote	in	the	election	of	directors	approve	any	amendment of	our	Bylaws	submitted	to	stockholders	for	approval;	and

•super-majority	voting	requirements	to	modify	or	amend	specified	provisions	of	our	Certificate	of	Incorporation.

These	provisions	are	not	intended	to	prevent	a	takeover,	but	are	intended	to	protect	and	maximize	the	value	of	the	interests	of	our	stockholders.	While these	provisions	have	the	effect	of	encouraging	persons	seeking	to	acquire	control	of	our	company	to	negotiate	with	our	Board	of	Directors,	they	could enable	our	Board	of	Directors	to	prevent	a	transaction	that	some,	or	a	majority,	of	our	stockholders	might	believe	to	be	in	their	best	interest	and,	in	that case,	may	prevent	or	discourage	attempts	to	remove	and	replace	incumbent	directors.	In	addition,	we	are	subject	to	the	provisions	of	Section	203	of	the Delaware	 General	 Corporation	 Law,	 which	 prohibits	 business	 combinations	 with	 interested	 stockholders.	 Interested	 stockholders	 do	 not	 include stockholders	whose	acquisition	of	our	securities	is	approved	by	the	Board	of	Directors	prior	to	the	investment	under	Section	203.

# AAG's	Certificate	of	Incorporation	and	Bylaws	include	provisions	that	limit	voting	and	acquisition	and	disposition	of	our	equity	interests.

Our	Certificate	of	Incorporation	and	Bylaws	include	certain	provisions	that	limit	voting	and	ownership	and	disposition	of	our	equity	interests.	These restrictions	may	adversely	affect	the	ability	of	certain	holders	of	AAG	common	stock	and	our	other	equity	interests	to	vote	such	interests	and	adversely affect	the	ability	of	persons	to	acquire	shares	of	AAG	common	stock	and	our	other	equity	interests.

# ITEM	1B.		UNRESOLVED	STAFF	COMMENTS

The	Company	had	no	unresolved	Securities	and	Exchange	Commission	staff	comments	at	December	31,	2016.

# ITEM	2.		PROPERTIES

# Flight	Equipment	and	Fleet	Renewal

As	of	December	31,	2016,	American	operated	a	mainline	fleet	of	930	aircraft.	In	2016,	we	continued	our	extensive	fleet	renewal	program,	which	has provided	us	with	the	youngest	fleet	of	the	major	U.S.	network	carriers.	During	2016,	American	took	delivery	of	55	new	mainline	aircraft	and	retired	71 aircraft.	We	are	supported	by	our	wholly-owned	and	third-party	regional	carriers	that	fly	under	capacity	purchase	agreements	operating	as	American Eagle.	As	of	December	31,	2016,	American	Eagle	operated	606	regional	aircraft.	During	2016,	we	increased	our	regional	fleet	by	61	regional	aircraft,	we removed	and	placed	in	temporary	storage	one	Embraer	ERJ	140	aircraft	and	retired	41	other	regional	aircraft.

# Mainline

As	of	December	31,	2016,	American's	mainline	fleet	consisted	of	the	following	aircraft:

|  | Average<br>Seating<br>Capacity | Average<br>Age<br>(Years) | Owned | Leased | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Airbus\tA319 | 128 | 12.8 | 19 | 106 | \t125 |
| Airbus\tA320 | 150 | 15.5 | 10 | 41 | 51 |
| Airbus\tA321 | 178 | 4.9 | 153 | 46 | \t199 |
| Airbus\tA330-200 | 258 | 5.0 | 15 | — | 15 |
| Airbus\tA330-300 | 291 | 16.4 | 4 | 5 | 9 |
| Boeing\t737-800 | 160 | 7.7 | 123 | 161 | \t284 |
| Boeing\t757-200 | 179 | 17.9 | 39 | 12 | 51 |
| Boeing\t767-300ER | 211 | 19.5 | 28 | 3 | 31 |
| Boeing\t777-200ER | 263 | 16.0 | 44 | 3 | 47 |
| Boeing\t777-300ER | 310 | 2.8 | 18 | 2 | 20 |
| Boeing\t787-8 | 226 | 1.3 | 17 | — | 17 |
| Boeing\t787-9 | 285 | 0.2 | 4 | — | 4 |
| Embraer\t190 | 99 | 9.2 | 20 | — | 20 |
| McDonnell\tDouglas\tMD-80 | 140 | 22.0 | 25 | 32 | 57 |
| Total |  | 10.3 | 519 | 411 | \t930 |

As	of	December	31,	2016,	the	fleet	of	our	wholly-owned	and	third-party	regional	carriers	operating	as	American	Eagle	consisted	of	the	following aircraft:

|  | Average |  |  | by |  |  | Number	of |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Seating |  |  | Regional |  | Operating\tRegional | Aircraft |
|  | Capacity | Owned | Leased | Carrier | Total | Carrier | Operated |
| Bombardier\tCRJ\t200 | 50 | 12 | 23 | 85 | \t120 | Air\tWisconsin | 65 |
|  |  |  |  |  |  | PSA | 35 |
|  |  |  |  |  |  | ExpressJet | 11 |
|  |  |  |  |  |  | SkyWest | 9 |
|  |  |  |  |  |  | Total | 120 |
| Bombardier\tCRJ\t700 | 66 | 54 | 7 | 18 | 79 | Envoy | 35 |
|  |  |  |  |  |  | PSA | 26 |
|  |  |  |  |  |  | SkyWest | 18 |
|  |  |  |  |  |  | Total | 79 |
| Bombardier\tCRJ\t900 | 77 | 54 | — | 64 | \t118 | Mesa | 64 |
|  |  |  |  |  |  | PSA | 54 |
|  |  |  |  |  |  | Total | 118 |
| De\tHavilland\tDash\t8-100 | 37 | 23 | — | — | 23 | Piedmont | 23 |
| De\tHavilland\tDash\t8-300 | 48 | — | 11 | — | 11 | Piedmont | 11 |
| Embraer\tERJ\t175 | 77 | 48 | — | 76 | \t124 | Republic | 76 |
|  |  |  |  |  |  | Envoy | 28 |
|  |  |  |  |  |  | Compass | 20 |
|  |  |  |  |  |  | Total | 124 |
| Embraer\tERJ\t140\t^(1) | 44 | 13 | — | — | 13 | Envoy | 13 |
| Embraer\tERJ\t145 | 50 | 118 | — | — | \t118 | Envoy | 77 |
|  |  |  |  |  |  | Trans\tStates | 15 |
|  |  |  |  |  |  | ExpressJet | 14 |
|  |  |  |  |  |  | Piedmont | 12 |
|  |  |  |  |  |  | Total | 118 |
| Total |  | 322 | 41 | 243 | \t606 |  | 606 |

Excluded	from	the	total	operating	aircraft	count	above	are	46	owned	Embraer	ERJ	140s	that	are	being	held	in	temporary	storage.

See	Note	11	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	Note	9	to	American's	Consolidated	Financial	Statements	in	Part	II, Item	8B	for	additional	information	on	our	capacity	purchase	agreements	with	third-party	regional	carriers.

# Aircraft	and	Engine	Purchase	Commitments

As	of	December	31,	2016,	we	had	definitive	purchase	agreements	with	Airbus,	Boeing	and	Embraer	for	the	acquisition	of	the	following	mainline	and regional	aircraft:

|  | 2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Airbus |  |  |  |  |  |  |  |
| A320\tFamily | \t 20 | \t — | \t — | \t — | \t — | — | 20 |
| A320neo\tFamily | \t — | \t — | \t 25 | \t 25 | \t 25 | 25 | \t100 |
| A350\tXWB | \t — | 2 | 5 | 5 | 5 | 5 | 22 |
| Boeing |  |  |  |  |  |  |  |
| 737-800 | \t 20 | \t — | \t — | \t — | \t — | — | 20 |
| 737\tMAX\tFamily | 4 | \t 16 | \t 20 | \t 20 | \t 20 | 20 | \t100 |
| 787\tFamily | \t 13 | 8 | \t — | \t — | \t — | — | 21 |
| Embraer |  |  |  |  |  |  |  |
| ERJ175\t^(1) | \t 12 | \t — | \t — | \t — | \t — | — | 12 |
| Total | \t 69 | \t 26 | \t 50 | \t 50 | \t 50 | 50 | \t295 |

These	aircraft	may	be	operated	by	wholly-owned	regional	subsidiaries	or	leased	to	third-party	regional	carriers	which	would	operate	the	aircraft under	capacity	purchase	arrangements.

We	also	have	agreements	for	42	spare	engines	to	be	delivered	in	2017	and	beyond.

We	do	not	have	financing	commitments	for	the	following	aircraft	currently	on	order	and	scheduled	to	be	delivered	through	2017:	12	Boeing 737-800 aircraft,	nine	Airbus	A320	family	aircraft,	eight	Boeing	787	family	aircraft	and	four	Boeing	737	MAX	family	aircraft.	In	addition,	we	do	not	have	financing commitments	in	place	for	substantially	all	aircraft	currently	on	order	and	scheduled	to	be	delivered	in	2018	and	beyond.	See	Part	I,	Item	1A.	Risk Factors	–"We	will	need	to	obtain	sufficient	financing	or	other	capital	to	operate	successfully" 	for	additional	discussion.

See	Note	11	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	Note	9	to	American's	Consolidated	Financial	Statements	in	Part	II, Item	8B	for	additional	information	on	aircraft	and	engine	acquisition	commitments.

# Other	Information

For	information	concerning	the	estimated	useful	lives	and	residual	values	for	owned	aircraft	and	terms	for	leased	aircraft,	see	Note	1	and	Note	11	to AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	Note	1	and	Note	9	to	American's	Consolidated	Financial	Statements	in	Part	II,	Item	8B.

# Ground	Properties

At	each	airport	where	we	conduct	flight	operations,	we	lease	passenger,	operations	and	baggage	handling	space,	generally	from	the	airport	operator, but	in	some	cases	on	a	subleased	basis	from	other	airlines.	Our	agreements	with	airports	also	provide	for	the	non-exclusive	use	of	runways,	taxiways and	other	improvements	and	facilities;	landing	fees	under	these	agreements	typically	are	based	on	the	number	of	landings	and	weight	of	aircraft.	These leases	and	use	agreements	generally	contain	provisions	for	periodic	adjustments	of	lease	rates,	landing	fees	and	other	charges	applicable	under	that type	of	agreement.	Additionally,	our	main	operational	facilities	are	associated	with	our	hubs.	At	these	locations	and	in	other	cities	we	serve,	we	maintain administrative	offices,	catering,	cargo,	training,	maintenance	and	other	facilities,	in	each	case	as	necessary	to	support	our	operations	in	the	particular	city.

We	own	our	corporate	headquarters	buildings	in	Fort	Worth,	Texas.	We	lease	or	have	built	on	leased	property	our	training	facilities	in	Fort	Worth, Texas,	our	principal	overhaul	and	maintenance	base	in	Tulsa,	Oklahoma,	our	regional	reservation	offices	and	administrative	offices	throughout	the	U.S. and	abroad.	In	2016,	we	broke	ground	on	our	new	headquarters	campus	in	Fort	Worth,	Texas,	which	will	be	named	after	former	American	Chairman	and Chief	Executive	Officer,	Robert	Crandall.

For	 information	 concerning	 the	 estimated	 lives	 for	 owned	 ground	 properties	 and	 terms	 for	 lease	 properties,	 see	 Note	 1	 and	 Note	 11 to	AAG's Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	Note	1	and	Note	9	to	American's	Consolidated	Financial	Statements	in	Part	II,	Item	8B.

# ITEM	3.		LEGALPROCEEDINGS

Chapter	11	Cases.	On	November	29,	2011,	AMR,	American,	and	certain	of	AMR's	other	direct	and	indirect	domestic	subsidiaries	(the	Debtors)	filed voluntary	petitions	for	relief	under	Chapter	11	of	the	United	States	Bankruptcy	Code	in	the	United	States	Bankruptcy	Court	for	the	Southern	District	of New	York	(the	Bankruptcy	Court).	On	October	21,	2013,	the	Bankruptcy	Court	entered	an	order	approving	and	confirming	the	Debtors'	fourth	amended joint	plan	of	reorganization	(as	amended,	the	Plan).	On	the	Effective	Date,	December	9,	2013,	the	Debtors	consummated	their	reorganization	pursuant	to the	Plan	and	completed	the	Merger.

Pursuant	to	rulings	of	the	Bankruptcy	Court,	the	Plan	established	the	Disputed	Claims	Reserve	to	hold	shares	of	AAG	common	stock	reserved	for issuance	 to	 disputed	 claimholders	 at	 the	 Effective	 Date	 that	 ultimately	 become	 holders	 of	 allowed	 claims.	As	 of	 December	 31,	 2016,	 there	 were approximately	25.2	million	shares	of	AAG	common	stock	remaining	in	the	Disputed	Claims	Reserve.	As	disputed	claims	are	resolved,	the	claimants	will receive	distributions	of	shares	from	the	Disputed	Claims	Reserve	on	the	same	basis	as	if	such	distributions	had	been	made	on	or	about	the	Effective Date.	However,	we	are	not	required	to	distribute	additional	shares	above	the	limits	contemplated	by	the	Plan,	even	if	the	shares	remaining	for	distribution are	not	sufficient	to	fully	pay	any	additional	allowed	unsecured	claims.	To	the	extent	that	any	of	the	reserved	shares	remain	undistributed	upon	resolution of	all	remaining	disputed	claims,	such	shares	will	not	be	returned	to	us	but	rather	will	be	distributed	to	former	AMR	stockholders.

There	is	also	pending	in	the	Bankruptcy	Court	an	adversary	proceeding	relating	to	an	action	brought	by	American	to	seek	a	determination	that	certain non-pension,	postemployment	benefits	are	not	vested	benefits	and	thus	may	be	modified	or	terminated	without	liability	to	American.	On	April	18,	2014, the	Bankruptcy	Court	granted	American's	motion	for	summary	judgment	with	respect	to	certain	non-union	employees,	concluding	that	their	benefits	were not	vested	and	could	be	terminated.	The	summary	judgment	motion	was	denied	with	respect	to	all	other	retirees.	The	Bankruptcy	Court	has	not	yet scheduled	a	trial	on	the	merits	concerning	whether	those	retirees'	benefits	are	vested,	and	American	cannot	predict	whether	it	will	receive	relief	from obligations	to	provide	benefits	to	any	of	those	retirees.	Our	financial	statements	presently	reflect	these	retirement	programs	without	giving	effect	to	any modification	or	termination	of	benefits	that	may	ultimately	be	implemented	based	upon	the	outcome	of	this	proceeding.

DOJ	Antitrust	Civil	Investigative	Demand. 	In	June	2015,	we	received	a	Civil	Investigative	Demand	(CID)	from	the	DOJ	as	part	of	an	investigation	into whether	there	have	been	illegal	agreements	or	coordination	of	air	passenger	capacity.	The	CID	seeks	documents	and	other	information	from	us,	and other	airlines	have	announced	that	they	have	received	similar	requests.	We	are	cooperating	fully	with	the	DOJ	investigation.	In	addition,	subsequent	to announcement	of	the	delivery	of	CIDs	by	the	DOJ,	we,	along	with	Delta	Air	Lines,	Inc.,	Southwest	Airlines	Co.,	United	Airlines,	Inc.	and,	in	the	case	of litigation	filed	in	Canada,	Air	Canada,	have	been	named	as	defendants	in	approximately	100	putative	class	action	lawsuits	alleging	unlawful	agreements with	respect	to	air	passenger	capacity.	The	U.S.	lawsuits	have	been	consolidated	in	the	Federal	District	Court	for	the	District	of	Columbia.	On	October	28, 2016,	the	Court	denied	a	motion	by	the	airline	defendants	to	dismiss	all	claims	in	the	class	actions.	Both	the	DOJ	investigation	and	these	lawsuits	are	in their	relatively	early	stages	and	we	intend	to	defend	these	matters	vigorously.

Private	Party	Antitrust	Action.	On	July	2,	2013,	a	lawsuit	captioned	Carolyn	Fjord,	et	al.,	v.	US	Airways	Group,	Inc.,	et	al.,	was	filed	in	the	United	States District	Court	for	the	Northern	District	of	California.	The	complaint	named	as	defendants	US	Airways	Group	and	US	Airways,	alleged	that	the	effect	of	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	August	6, 2013,	the	plaintiffs	re-filed	their	complaint

in	the	Bankruptcy	Court,	adding	AMR	and	American	as	defendants.	On	November	27,	2013,	the	Bankruptcy	Court	denied	plaintiffs'	motion	to	preliminarily enjoin	the	Merger.	On	August	19,	2015,	after	three	previous	largely	unsuccessful	attempts	to	amend	their	complaint,	plaintiffs	filed	a	fourth	motion	for leave	to	file	an	amended	and	supplemental	complaint	to	add	a	claim	for	damages	and	demand	for	jury	trial,	as	well	as	claims	similar	to	those	in	the putative	class	action	lawsuits	regarding	air	passenger	capacity.	Thereafter,	plaintiffs	filed	a	request	with	the	Judicial	Panel	on	Multidistrict	Litigation	to consolidate	the	Fjord	matter	with	the	putative	class	action	lawsuits,	which	was	denied	on	October	15,	2015.	A	jointly	proposed	schedule	for	the	remainder of	the	case	was	submitted	on	September	7,	2016,	which	has	not	yet	been	accepted	by	the	Bankruptcy	Court.	We	believe	this	lawsuit	is	without	merit	and intend	to	vigorously	defend	against	the	allegations.

DOJ	Investigation	Related	to	the	United	States	Postal	Service .	In	April	2015,	the	DOJ	informed	us	of	an	inquiry	regarding	American's	2009	and	2011 contracts	with	the	United	States	Postal	Service	for	the	international	transportation	of	mail	by	air.	In	October	2015,	we	received	a	CID	from	the	DOJ seeking	certain	information	relating	to	these	contracts	and	the	DOJ	has	also	sought	information	concerning	certain	of	the	airlines	that	transport	mail	on	a codeshare	basis.	The	DOJ	has	indicated	it	is	investigating	potential	violations	of	the	False	Claims	Act	or	other	statutes.	We	are	cooperating	fully	with	the DOJ	with	regard	to	its	investigation.

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.	See	Part	I,	Item 1A.	Risk	Factors	–"We	may	be	a	party	to	litigation	in	the	normal	course	of	business	or	otherwise,	which	could	affect	our	financial	position	and	liquidity "	for additional	discussion.

# ITEM	4.		MINESAFETY	DISCLOSURES

Not	Applicable.

# PART	II

# ITEM	5.		MARKET	FOR	AMERICAN	AIRLINES	GROUP'S	COMMON	STOCK,	RELATED	STOCKHOLDER	MATTERS	AND	ISSUER	PURCHASES

# OF	EQUITY	SECURITIES

# Stock	Exchange	Listing

Our	common	stock	is	listed	on	the	NASDAQ	Global	Select	Market	(NASDAQ)	under	the	symbol	"AAL."	There	is	no	trading	market	for	the	common stock	of	American,	which	is	a	wholly-owned	subsidiary	of	AAG.

Information	on	securities	authorized	for	issuance	under	our	equity	compensation	plans	will	be	set	forth	in	our	Proxy	Statement	for	the	2017	Annual Meeting	 of	 Stockholders	 of	American	Airlines	 Group	 Inc.	 (the	 Proxy	 Statement)	 under	 the	 caption	 "Equity	 Compensation	 Plan	 Information"	 and	 is incorporated	by	reference	into	this	Annual	Report	on	Form	10-K.

# Market	Prices	and	Dividends	of	Common	Stock

The	following	table	sets	forth,	for	the	periods	indicated,	the	high	and	low	sale	prices	of	our	common	stock	on	NASDAQ	and	cash	dividends	declared	by our	Board	of	Directors:

| December	31 | Period | High | Low | Declared	(Per	share) |
| :--- | :--- | :--- | :--- | :--- |
| 2016 | Fourth\tQuarter | $50.64 | $36.33 | $0.10 |
|  | Third\tQuarter | 39.52 | 27.12 | 0.10 |
|  | Second\tQuarter | 41.76 | 24.85 | 0.10 |
|  | First\tQuarter | 43.78 | 34.76 | 0.10 |
| 2015 | Fourth\tQuarter | $47.09 | $37.42 | $0.10 |
|  | Third\tQuarter | 44.59 | 34.10 | 0.10 |
|  | Second\tQuarter | 53.47 | 38.45 | 0.10 |
|  | First\tQuarter | 56.20 | 45.95 | 0.10 |

In	January	2017,	we	announced	that	our	Board	of	Directors	had	declared	a	$0.10	per	share	dividend	for	stockholders	of	record	on	February	13,	2017, and	payable	on	February	27,	2017.

The	total	cash	payment	for	dividends	during	the	years	ended	December	31,	2016	and	2015	was	$224	million	and	$278	million,	respectively.	Any	future dividends	that	may	be	declared	and	paid	from	time	to	time	will	be	subject	to	market	and	economic	conditions,	applicable	legal	requirements	and	other relevant	factors.	We	are	not	obligated	to	continue	a	dividend	for	any	fixed	period,	and	payment	of	dividends	may	be	suspended	at	any	time	at	our discretion.

# Stock	Performance	Graph

The	following	stock	performance	graph	and	related	information	shall	not	be	deemed	"soliciting	material"	or	"filed"	with	the	Securities	and	Exchange Commission,	nor	shall	such	information	be	incorporated	by	reference	into	any	future	filings	under	the	Securities	Act	of	1933	or	the	Exchange	Act,	each	as amended,	except	to	the	extent	that	we	specifically	incorporate	it	by	reference	into	such	filing.

The	following	stock	performance	graph	compares	our	cumulative	total	stockholder	returns	of	our	common	stock	to	the	Standard	and	Poor's	(S&P)	500 Stock	Index	and	the	New	York	Stock	Exchange

(NYSE)	ARCA	Airline	Index	from	December	9,	2013	(the	first	trading	day	of	our	common	stock,	AAL)	through	December	31,	2016.	The	comparison assumes	$100	was	invested	on	December	9,	2013	in	our	common	stock	and	in	each	of	the	foregoing	indices	and	assumes	that	all	dividends	were reinvested.	The	stock	performance	shown	on	the	following	graph	represents	historical	stock	performance	and	is	not	necessarily	indicative	of	future	stock price	performance.

|  | 12/9/2013 | 12/31/2013 | 12/31/2014 | 12/31/2015 | 12/31/2016 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| American\tAirlines\tGroup\tInc.\t(AAL) | $100 | $103 | $219 | $175 | $194 |
| NYSE\tARCA\tAirline\tIndex\t(XAL) | 100 | 102 | 152 | 127 | 162 |
| S&amp;P\t500\tIndex\t(GSPC) | 100 | 102 | 114 | 113 | 124 |

# Purchases	of	Equity	Securities	by	the	Issuer	and	Affiliated	Purchasers

During	the	year	ended	December	31,	2016,	we	repurchased	119.8	million	shares	of	AAG	common	stock	for	$4.4	billion	at	a	weighted	average	cost	per share	of	$36.86.	During	the	year	ended	December	31,	2015,	we	repurchased	85.1	million	shares	of	AAG	common	stock	for	$3.6	billion	at	a	weighted average	cost	per	share	of	$42.09.	Since	the	inception	of	the	share	repurchase	programs	in	July	2014,	we	have	repurchased	228.4	million	shares	of	AAG common	stock	for	$9.0	billion	at	a	weighted	average	cost	per	share	of	$39.41.

The	following	table	displays	information	with	respect	to	our	purchases	of	shares	of	AAG	common	stock	during	the	three	months	ended	December	31, 2016:

|  | Total |  | Total	number	of	shares | shares	that	may	be |
| :--- | :--- | :--- | :--- | :--- |
|  | number\t\tof | Average | purchased\tas\tpart\tof | purchased\tunder\tthe\tplan\tor |
| Period | shares\npurchased | \t\t\t\tprice\tpaid\nper\tshare | publicly\nannounced\tplan\tor\tprogram | program\n(in\tmillions) |
| October\t2016 | \t2,220,838 | $38.96 | 2,220,838 | $468 |
| November\t2016 | \t3,451,282 | $45.20 | 3,451,282 | $312 |
| December\t2016 | \t6,496,015 | $48.02 | 6,496,015 | $— |

As	of	December	31,	2016,	there	was	no	remaining	authority	to	repurchase	shares	under	our	existing	share	repurchase	programs.	However,	in	January 2017,	our	Board	of	Directors	authorized	a	new	$2.0	billion	share	repurchase	program	that	expires	on	December	31,	2018,	bringing	the	total	amount authorized	for	share	repurchase	programs	since	July	2014	to	$11.0	billion.

Share	repurchases	under	the	repurchase	programs	may	be	made	through	a	variety	of	methods,	which	may	include	open	market	purchases,	privately negotiated	transactions,	block	trades	or	accelerated	share	repurchase	transactions.	Any	such	repurchases	will	be	made	from	time	to	time	subject	to market	and	economic	conditions,	applicable	legal	requirements	and	other	relevant	factors.	The	programs	do	not	obligate	us	to	repurchase	any	specific number	of	shares	and	may	be	suspended	at	any	time	at	our	discretion.

Separate	from	our	share	repurchase	programs,	during	2016,	we	also	withheld	approximately	1.4	million	shares	of	AAG	common	stock	and	paid approximately	$56	million	in	satisfaction	of	certain	tax	withholding	obligations	associated	with	employee	equity	awards.

# Ownership	Restrictions

AAG's	Certificate	of	Incorporation	and	Bylaws	provide	that,	consistent	with	the	requirements	of	Subtitle	VII	of	Title	49	of	the	United	States	Code,	as amended	(the	Aviation	Act),	any	persons	or	entities	who	are	not	a	"citizen	of	the	United	States"	(as	defined	under	the	Aviation	Act	and	administrative interpretations	issued	by	the	DOT,	its	predecessors	and	successors,	from	time	to	time),	including	any	agent,	trustee	or	representative	of	such	persons	or entities	(a	non-citizen),	shall	not,	in	the	aggregate,	own	(beneficially	or	of	record)	and/or	control	more	than	(a)	24.9%	of	the	aggregate	votes	of	all	of	our outstanding	equity	securities	or	(b)	49.0%	of	our	outstanding	equity	securities.	Our	Certificate	of	Incorporation	and	Bylaws	further	specify	that	it	is	the	duty of	each	stockholder	who	is	a	non-citizen	to	register	his,	her	or	its	equity	securities	on	our	foreign	stock	record	and	provide	for	remedies	applicable	to stockholders	that	exceed	the	voting	and	ownership	caps	described	above.

In	addition,	to	reduce	the	risk	of	a	potential	adverse	effect	on	our	ability	to	use	our	NOL	Carryforwards	and	certain	other	tax	attributes	for	federal income	tax	purposes,	our	Certificate	of	Incorporation	contains	certain	restrictions	on	the	acquisition	and	disposition	of	our	common	stock	by	substantial stockholders	(generally	holders	of	more	than	4.75%).

See	Part	I,	Item	1A.	Risk	Factors	–	"AAG's	Certificate	of	Incorporation	and	Bylaws	include	provisions	that	limit	voting	and	acquisition	and	disposition	of our	equity interests."	Also	see	AAG's	Certification	of	Incorporation	and	Bylaws,	which	are	filed	as	Exhibits	3.1	and	3.2	hereto,	for	the	full	text	of	the foregoing	restrictions.

# ITEM	6.		SELECTED	CONSOLIDATED	FINANCIAL	DATA

# Selected	Consolidated	Financial	Data	of	AAG

The	 selected	 consolidated	 financial	 data	 presented	 below	 under	 the	 captions	 "Consolidated	 Statements	 of	 Operations	 data"	 and	 "Consolidated Balance	Sheet	data"	 for	 the	years	ended	December	31,	2016,	2015,	2014,	2013	and	2012	are	derived	 from	AAG's	audited	consolidated	 financial statements.	On	December	9,	2013,	a	subsidiary	of	AMR	merged	with	and	into	US	Airways	Group,	which	survived	as	a	wholly-owned	subsidiary	of	AAG. Therefore,	AAG's	consolidated	financial	data	provided	in	the	tables	below	includes	the	results	of	US	Airways	Group	beginning	on	December	9,	2013,	the effective	date	of	the	Merger.	In	addition,	AAG	emerged	from	bankruptcy	on	December	9,	2013.	Accordingly,	AAG's	consolidated	financial	information	for periods	prior	to	December	9,	2013	is	not	directly	comparable	to	consolidated	financial	information	for	periods	subsequent	to	December	9,	2013.

|  |  |  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 | 2013 | 2012 |
|  |  | (In\tmillions,\texcept\tshare\tand\tper\tshare\tdata) | (In\tmillions,\texcept\tshare\tand\tper\tshare\tdata) | (In\tmillions,\texcept\tshare\tand\tper\tshare\tdata) |  |
| Consolidated\tStatements\tof\tOperations\tdata: |  |  |  |  |  |
| Total\toperating\trevenues | $40,180 | $40,990 | $42,650 | $26,743 | $24,855 |
| Total\toperating\texpenses | 34,896 | 34,786 | 38,401 | 25,344 | 24,707 |
| Operating\tincome | 5,284 | 6,204 | 4,249 | 1,399 | 148 |
| Reorganization\titems,\tnet\t^(1) | — | — | — | (2,655) | (2,208) |
| Net\tincome\t(loss) | 2,676 | 7,610 | 2,882 | (1,834) | (1,876) |
| Earnings\t(loss)\tper\tcommon\tshare:\t^(2) |  |  |  |  |  |
| Basic | $4.85 | $11.39 | $4.02 | $(6.54) | $(7.52) |
| Diluted | 4.81 | 11.07 | 3.93 | (6.54) | (7.52) |
| Shares\tused\tfor\tcomputation\t(in\tthousands):\t^(2) |  |  |  |  |  |
| Basic | \t 552,308 | \t 668,393 | \t 717,456 | \t 280,213 | \t 249,490 |
| Diluted | \t 556,099 | \t 687,355 | \t 734,016 | \t 280,213 | \t 249,490 |
| Cash\tdividends\tdeclared\tper\tcommon\tshare | $0.40 | $0.40 | $0.20 | $—\t\t\t $— | $—\t\t\t $— |
| Consolidated\tBalance\tSheet\tdata\t(at\tend\tof\tperiod): |  |  |  |  |  |
| Total\tassets | $51,274 | $48,415 | $43,225 | $41,741 | $23,396 |
| Long-term\tdebt\tand\tcapital\tleases,\tnet\tof\tcurrent\tmaturities | 22,489 | 18,330 | 16,043 | 15,212 | 7,019 |
| Pension\tand\tpostretirement\tbenefits\t^(3) | 7,842 | 7,450 | 7,562 | 5,828 | 6,780 |
| Liabilities\tsubject\tto\tcompromise | — | — | — | — | 6,606 |
| Stockholders'\tequity\t(deficit) | 3,785 | 5,635 | 2,021 | (2,731) | (7,987) |

Reorganization	items	refer	to	revenues,	expenses	(including	professional	fees),	realized	gains	and	losses	and	provisions	for	losses	that	were realized	or	incurred	as	a	direct	result	of	bankruptcy.

Former	holders	of	AMR	common	stock	as	of	December	9,	2013,	the	effective	date	of	the	plan	of	reorganization,	may	in	the	future	receive	additional distributions	of	AAG	common	stock	dependent	upon	the	ultimate	distribution	of	shares	of	AAG	common	stock	to	holders	of	disputed	claims.	Thus, the	shares	and	related	earnings	per	share	calculations	prior	to	December	9,	2013	may	change	in	the	future	to	reflect	these	distributions.

Substantially	all	defined	benefit	pension	plans	were	frozen	effective	November	1,	2012.	See	Note	9	to	AAG's	consolidated	financial	statements	in Part	II,	Item	8A	for	further	information	on	pension	and	postretirement	benefits.

# Reconciliation	of	GAAP	to	Non-GAAP	Financial	Measures

We	are	providing	disclosure	of	the	reconciliation	of	reported	 non-GAAP	financial	measures	to	their	comparable	financial	measures	on	a	GAAP	basis.

The	following	table	presents	the	components	of	our	total	special	items	and	the	reconciliation	of	 pre-tax	income	and	net	income	(GAAP	measures)	to pre-tax	 income	 excluding	 special	 items	 and	 net	 income	 excluding	 special	 items	 (non-GAAP	 measures).	 We	 believe	 that	 the	non-GAAP	 financial measures	provide	investors	the	ability	to	measure	financial	performance	excluding	special	items,	which	is	more	indicative	of	our	ongoing	performance and	is	more	comparable	to	measures	reported	by	other	major	airlines.

|  |  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- | :--- |
|  |  | 2016 | 2015 | 2014 |
|  |  |  | (In\tmillions) |  |
| Components\tof\tTotal\tSpecial\tItems,\tNet:\t^(1) |  |  |  |  |
| Merger\tintegration\tcosts\t^(2) |  | $526 | $848 | $739 |
| Fleet\trestructuring\tcosts\t^(3) | Fleet\trestructuring\tcosts\t^(3) | 177 | 210 | 88 |
| Mark-to-market\tadjustments\tfor\tbankruptcy\tobligations\tand\tother | Mark-to-market\tadjustments\tfor\tbankruptcy\tobligations\tand\tother | 25 | (53) | 81 |
| Net\tgain\ton\tslot\ttransactions | Net\tgain\ton\tslot\ttransactions | — | — | (265) |
| Charge\tto\trevise\testimates\tof\tcertain\taircraft\tresidual\tvalues | Charge\tto\trevise\testimates\tof\tcertain\taircraft\tresidual\tvalues | — | — | 81 |
| Other\toperating\tcharges\t(credits),\tnet | Other\toperating\tcharges\t(credits),\tnet | (5) | 75 | 100 |
| Operating\tspecial\titems,\tnet | Operating\tspecial\titems,\tnet | 723 | 1,080 | 824 |
| Venezuela\tforeign\tcurrency\tlosses | Venezuela\tforeign\tcurrency\tlosses | — | 592 | 43 |
| Debt\textinguishment\tand\trefinancing\tcharges |  | 49 | 24 | 56 |
| Other\tnonoperating\tcharges\t(credits),\tnet | Other\tnonoperating\tcharges\t(credits),\tnet | — | (22) | 33 |
| Nonoperating\tspecial\titems,\tnet | Nonoperating\tspecial\titems,\tnet | 49 | 594 | 132 |
| Pre-tax\tspecial\titems,\tnet | Pre-tax\tspecial\titems,\tnet | 772 | 1,674 | 956 |
| Release\tof\tdeferred\ttax\tvaluation\tallowance |  | — | (3,040) | — |
| Income\ttax\tprovision\tfrom\tgains\tin\tother\tcomprehensive\tincome\t(OCI) | Income\ttax\tprovision\tfrom\tgains\tin\tother\tcomprehensive\tincome\t(OCI) | — | — | 330 |
| Other\ttax\tcharges |  | — | 25 | 16 |
| Income\ttax\tspecial\titems | Income\ttax\tspecial\titems | — | (3,015) | 346 |
| Total\tspecial\titems,\tnet |  | $772 | $(1,341) | $1,302 |
| Reconciliation\tof\tPre-Tax\tIncome\tExcluding\tSpecial\tItems: |  |  |  |  |
| Pre-tax\tincome\t–\tGAAP |  | $4,299 | $4,616 | $3,212 |
| Adjusted\tfor:\tPre-tax\tspecial\titems,\tnet | Adjusted\tfor:\tPre-tax\tspecial\titems,\tnet | 772 | 1,674 | 956 |
| Pre-tax\tincome\texcluding\tspecial\titems |  | $5,071 | $6,290 | $4,168 |
| Reconciliation\tof\tNet\tIncome\tExcluding\tSpecial\tItems: |  |  |  |  |
| Net\tincome\t–\tGAAP |  | $2,676 | $7,610 | $2,882 |
| Adjusted\tfor:\tTotal\tspecial\titems,\tnet | Adjusted\tfor:\tTotal\tspecial\titems,\tnet | 772 | (1,341) | \t 1,302 |
| Adjusted\tfor:\tNet\ttax\teffect\tof\tspecial\titems | (4) | (275) | — | — |
| Net\tincome\texcluding\tspecial\titems | Net\tincome\texcluding\tspecial\titems | $3,173 | $6,269 | $4,184 |

See	Note	2	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	for	further	information	on	special	items.

Merger	integration	costs	for	our	mainline	and	regional	operations	included	charges	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	costs	 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.

In	2014	and	2015,	there	was	no	net	tax	effect	associated	with	special	items.	During	2014	and	2015,	our	net	deferred	tax	asset,	which	includes	our NOLs,	was	subject	to	a	full	valuation	allowance.	Accordingly,	our	NOLs	offset	our	taxable	income	and	resulted	in	the	release	of	a	corresponding portion	of	valuation	allowance,	which	offset	the	tax	provision	dollar	for	dollar.

The	following	table	presents	the	reconciliation	of	mainline	operating	expenses	(GAAP	measure)	to	mainline	operating	costs	excluding	special	items and	fuel	(non-GAAP	measure).	We	believe	that	the	presentation	of	mainline	costs	per	available	seat	mile	(CASM)	excluding	fuel	is	useful	to	investors	as both	the	cost	and	availability	of	fuel	are	subject	to	many	economic	and	political	factors	beyond	our	control.	The	exclusion	of	special	items	from	mainline CASM	 provides	 investors	 the	 ability	 to	 measure	 financial	 performance	 in	 a	 way	 that	 is	 more	 indicative	 of	 our	 ongoing	 performance	 and	 is	 more comparable	to	measures	reported	by	other	major	airlines.	Management	uses	mainline	CASM	excluding	special	items	and	fuel	to	evaluate	its	operating performance.	Amounts	may	not	recalculate	due	to	rounding.

|  | 2016 | Year	Ended	December	31,<br>2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Reconciliation\tof\tMainline\tCASM\tExcluding\tSpecial\tItems\tand\tFuel: |  |  |  |
| (In\tmillions) |  |  |  |
| Total\toperating\texpenses\t–\tGAAP | $34,896 | $34,786 | $38,401 |
| Less\tregional\texpenses: |  |  |  |
| Fuel\tand\trelated\ttaxes. | (1,109) | (1,230) | (2,009) |
| Other | (4,935) | (4,753) | (4,507) |
| Total\tmainline\toperating\texpenses | 28,852 | 28,803 | 31,885 |
| Adjusted\tfor:\tSpecial\titems,\tnet\n(1) | (709) | (1,051) | (800) |
| Adjusted\tfor:\tAircraft\tfuel\tand\trelated\ttaxes | (5,071) | (6,226) | (10,592) |
| Mainline\toperating\texpenses\texcluding\tspecial\titems\tand\tfuel | $23,072 | $21,526 | $20,493 |
| (In\tmillions) |  |  |  |
| Available\tSeat\tMiles\t(ASM) | \t 241,734 | \t 239,375 | \t 237,522 |
| (In\tcents) |  |  |  |
| Mainline\tCASM | 11.94 | 12.03 | 13.42 |
| Adjusted\tfor:\tSpecial\titems,\tnet\tper\tASM | (0.29) | (0.44) | (0.34) |
| Adjusted\tfor:\tAircraft\tfuel\tand\trelated\ttaxes\tper\tASM | (2.10) | (2.60) | (4.46) |
| Mainline\tCASM\texcluding\tspecial\titems\tand\tfuel | 9.54 | 8.99 | 8.63 |

# Selected	Consolidated	Financial	Data	of	American

The	 selected	 consolidated	 financial	 data	 presented	 below	 under	 the	 captions	 "Consolidated	 Statements	 of	 Operations	 data"	 and	 "Consolidated Balance	Sheet	data"	for	the	years	ended	December	31,	2016,	2015,	2014,	2013	and	2012	are	derived	from	American's	audited	consolidated	financial statements.	On	December	30,	2015,	US	Airways	merged	with	and	into	American,	with	American	as	the	surviving	corporation.	For	financial	reporting purposes,	this	transaction	constituted	a

transfer	of	assets	between	entities	under	common	control	and	is	reflected	in	American's	consolidated	financial	statements	as	though	the	transaction	had occurred	on	December	9,	2013,	when	a	subsidiary	of	AMR	merged	with	and	into	US	Airways	Group,	which	represents	the	earliest	date	that	American and	US	Airways	were	under	common	control.	Therefore,	American's	consolidated	financial	data	provided	in	the	tables	below	includes	the	results	of	US Airways	beginning	on	December	9,	2013.	In	addition,	American	emerged	from	bankruptcy	on	December	9,	2013.	Accordingly,	American's	consolidated financial	information	for	periods	prior	to	December	9,	2013	is	not	directly	comparable	to	consolidated	financial	information	for	periods	subsequent	to December	9,	2013.

|  | 2016 | 2015 | 2014 | 2013 | 2012 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | (In\tmillions) |  |  |
| Consolidated\tStatements\tof\tOperations\tdata: |  |  |  |  |  |
| Total\toperating\trevenues | $40,163 | $40,938 | $42,676 | $26,701 | $24,825 |
| Total\toperating\texpenses | \t 34,859 | \t 34,749 | \t 38,410 | \t 25,341 | \t 24,743 |
| Operating\tincome | 5,304 | 6,189 | 4,266 | 1,360 | 82 |
| Reorganization\titems,\tnet\t^(1) | — | — | — | (2,640) | (2,179) |
| Net\tincome\t(loss) | 2,781 | 8,120 | 2,948 | (1,717) | (1,926) |
| Consolidated\tBalance\tSheet\tdata\t(at\tend\tof\tperiod): |  |  |  |  |  |
| Total\tassets | $58,092 | $50,439 | $42,787 | $41,699 | $23,150 |
| Long-term\tdebt\tand\tcapital\tleases,\tnet\tof\tcurrent\tmaturities | \t 20,718 | \t 16,592 | \t 14,804 | \t 14,718 | 7,046 |
| Pension\tand\tpostretirement\tbenefits\t^(2) | 7,800 | 7,410 | 7,522 | 5,802 | 6,780 |
| Liabilities\tsubject\tto\tcompromise | — | — | — | — | 5,694 |
| Stockholder's\tequity\t(deficit) | \t 12,649 | 9,698 | 1,406 | (4,398) | (9,962) |

Substantially	 all	 defined	 benefit	 pension	 plans	 were	 frozen	 effective	 November	 1,	 2012.	 See	 Note	 7 to	 American's	 consolidated financial statements	in	Part	II,	Item	8B	for	further	information	on	pension	and	postretirement	benefits.

# ITEM	7.		MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF	FINANCIAL	CONDITION	AND	RESULTS	OF	OPERATIONS

# Background

Together	with	our	wholly-owned	regional	airline	subsidiaries	and	third-party	regional	carriers	operating	as	American	Eagle,	our	airline	operates	an average	of	nearly	6,700	flights	per	day	to	nearly	350	destinations	in	more	than	50	countries,	principally	from	our	hubs	in	Charlotte,	Chicago,	Dallas/Fort Worth,	Los	Angeles,	Miami,	New	York,	Philadelphia,	Phoenix	and	Washington,	D.C.	In	2016,	approximately	199	million	passengers	boarded	our	mainline and	regional	flights.

We	are	committed	to	consistently	delivering	safe,	reliable	and	convenient	service	to	our	customers	in	every	aspect	of	our	operation,	to	building	the	best employee	relations	in	the	industry	and	to	providing	returns	for	our	stockholders.	In	January	2017,	we	were	named	the	2017	Airline	of	the	Year	by	Air Transport	World,	which	cited	the	integration	work	related	to	the	Merger,	our	operational	and	customer	service	improvements	and	the	investments	we	are making	in	our	product.

# Operational	Highlights

During	2016,	we	made	significant	investments	related	to	our	integration	and	to	continue	to	improve	our	product	offerings	and	operational	performance.

# Integration	Accomplishments

•Integrated	all	mainline	pilots	and	our	mainline	fleet	into	a	single	scheduling	system,	allowing	us	to	schedule	pilots	and	aircraft	seamlessly	across the	network	regardless	of	which	pre-Merger	airline	they	came	from

•	 Reached	interim	agreements	with	the	TWU-IAM	that	allows	our	mainline	mechanics	and	ramp	personnel	to	be	able	to	work	together	and	be cross-utilized.	Additionally,	 we	 ratified	 five-year	 JCBAs	 for	 dispatchers,	 flight	 crew	 training	 instructors,	 simulator	 pilot	 instructors	 and	 flight simulator	engineers

•	 Completed	the	painting	of	all	US	Airways	mainline	aircraft	in	the	American	livery.	Repainting	of	former	US	Airways	Express	regional	jets	is expected	to	be	finished	in	mid-2017

# Investments	in	Our	Product	and	Operations

•Invested	approximately	$4.4	billion	in	new	aircraft,	including	55	new	mainline	and	42	new	regional	aircraft.	As	a	result	of	our	ongoing	fleet renewal	program,	we	have	the	youngest	fleet	of	the	major	U.S.	network	carriers

•	 Hired	additional	personnel	and	invested	in	new	equipment	and	technology	to	support	our	operations.	In	the	fourth	quarter	of	2016,	we	achieved our	best	monthly	completion	factor,	on-time	performance,	and	baggage	handling	performance	since	the	Merger

•	 Redesigned	our	AAdvantage ®	loyalty	program	to	award	mileage	credits	based	on	the	price	of	tickets	purchased,	enabling	elite	members	to	earn even	more	miles	based	on	their	status	level.	During	2016,	the	AAdvantage ®	program	was	named	Best	Elite	Program	in	the	Americas	by	the Freddie	Awards

•Introduced	Premium	Economy,	a	new	class	of	service	on	international	flights	with	more	legroom,	wider	seats,	and	enhanced	meal	service	and amenity	kits

•	 Made	 several	 other	 customer	 experience	 improvements	 including	 the	 reintroduction	 of	 free snacks in the	 main cabin, the launch of complimentary	in-flight	entertainment	and	the	redesign	and	upgrade	of	many	Admirals	Club	lounges

# Investments	in	our	People

•Instituted	a	profit	sharing	program	across	all	of	our	workgroups	that	pays	5%	of	our pre-tax	profit	excluding	special	items	($314	million	was accrued	in	2016)

•	 Announced	industry-leading	pay	packages	for	pilots	at	our	wholly-owned	regional	airlines	Envoy,	PSA	and	Piedmont	in	order	to	attract	and	retain the	best	pilots

# Financial	Overview

# The	U.S.	Airline	Industry

In	2016,	the	U.S.	airline	industry	benefited	from	lower	fuel	prices.	However,	the	reductions	in	fuel	costs	were	offset	by	year-over-year	declines	in revenue.	 Both	 domestic	 and	 international	 markets	 were	 impacted	 by	 competitive	 capacity	 growth.	 International	 markets	 were	 also	 impacted	 by macroeconomic	softness	and	foreign	currency	weakness.

Jet	fuel	prices	closely	follow	the	price	of	Brent	crude	oil.	On	average,	the	price	of	Brent	crude	oil	per	barrel	was	approximately	17%	lower	in	2016	as compared	to	2015.	The	average	daily	spot	price	for	Brent	crude	oil	during	2016	was	$44	per	barrel	as	compared	to	an	average	daily	spot	price	of	$52	per barrel	during	2015.	On	a	daily	basis,	Brent	crude	oil	prices	fluctuated	during	2016	between	a	high	of	$55	per	barrel	to	a	low	of	$26	per	barrel,	and	closed the	year	on	December	31,	2016	at	$55	per	barrel.

While	jet	fuel	prices	have	declined	year-over-year	as	described	above,	uncertainty	exists	regarding	the	economic	conditions	driving	these	declines. See	Part	I,	Item	1A.	Risk	Factors	–	"Downturns	in	economic	conditions	could	adversely	affect	our	business" 	and	"Our	business	is	very	dependent	on	the price	and	availability	of	aircraft	fuel.	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	our	operating	results	and	liquidity."

The	selected	financial	data	presented	below	is	derived	from	AAG's	audited	consolidated	financial	statements	included	in	Part	II,	Item	8A	of	this	report and	should	be	read	in	conjunction	with	those	financial	statements	and	the	related	notes	thereto.

|  | Year	Ended |  |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, |  | Increase | Increase |
|  | 2016 | 2015 | (Decrease) | (Decrease) |
|  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Mainline\tand\tregional\tpassenger\trevenues | $34,579 | $35,512 | $(933) | (2.6) |
| Cargo\tand\tother\toperating\trevenues | 5,601 | 5,478 | 123 | 2.3 |
| Total\toperating\trevenues | \t 40,180 | \t 40,990 | (810) | (2.0) |
| Mainline\tand\tregional\taircraft\tfuel\tand\trelated\ttaxes | 6,180 | 7,456 | (1,276) | (17.1) |
| Salaries,\twages\tand\tbenefits | \t 10,890 | 9,524 | 1,366 | 14.4 |
| Total\toperating\texpenses | \t 34,896 | \t 34,786 | 110 | 0.3 |
| Operating\tincome | 5,284 | 6,204 | (920) | (14.8) |
| Pre-tax\tincome | 4,299 | 4,616 | (317) | (6.9) |
| Income\ttax\tprovision\t(benefit) | 1,623 | (2,994) | 4,617 | nm |
| Net\tincome | 2,676 | 7,610 | (4,934) | (64.8) |
| Pre-tax\tincome | $4,299 | $4,616 | $(317) | (6.9) |
| Adjusted\tfor:\tTotal\tpre-tax\tspecial\titems\t^(1) | 772 | 1,674 | (902) | (53.9) |
| Pre-tax\tincome\texcluding\tspecial\titems | $5,071 | $6,290 | $(1,219) | (19.4) |

See	Part	II,	Item	6.	Selected	Consolidated	Financial	Data	– 	"Reconciliation	of	GAAP	to	 Non-GAAP	Financial	Measures"	and	Note	2	to	AAG's consolidated	financial	statements	in	Part	II,	Item	8A	for	details	on	the	components	of	special	items.

# Net	Income	and	Pre-Tax	Income

We	realized	net	income	of	$2.7	billion	in	2016.	This	compares	to	$7.6	billion	of	net	income	in	2015,	which	included	a	special	$3.0	billion	 non-cash	tax benefit,	as	we	reversed	the	valuation	allowance	on	our	deferred	tax	assets,	which	include	our	federal	and	state	NOLs.	As	a	result	of	the	reversal	of	the valuation	allowance,	we	recorded	a	$1.6	billion	provision	 for	 income	 taxes	 in	2016,	which	 is	substantially	non-cash	due	 to	 the	utilization	of	NOLs. Accordingly,	amounts	reported	in	2016	for	income	tax	provision	and	net	income	are	not	comparable	to	2015.	Therefore,	pre-tax	 income	 and	pre-tax income	excluding	special	items	provides	a	more	meaningful	year-over-year	comparison.	The	exclusion	of	special	items	provides	investors	the	ability	to measure	financial	performance	in	a	way	that	is	more	indicative	of	our	ongoing	performance	and	is	more	comparable	to	financial	measures	presented	by other	major	airlines.	Management	uses	pre-tax	income	excluding	special	items	to	evaluate	our	financial	performance.

We	realized	pre-tax	income	of	$4.3	billion	and	$4.6	billion	in	2016	and	2015,	respectively.	Excluding	the	effects	of	 pre-tax	special	items,	pre-tax	income was	$5.1	billion	and	$6.3	billion	in	2016	and	2015,	respectively.	Our	2016	pre-tax	results	on	both	a	GAAP	basis	and	excluding	 pre-tax	net	special	items were	impacted	by	a	decline	in	revenues	due	to	lower	yields.	Salaries,	wages	and	benefits	costs	were	higher	in	2016,	driven	by	our	new	labor	contracts and	the	addition	of	an	employee	profit	sharing	program;	however,	these	increases	were	substantially	offset	by	a	year-over-year	decline	in	fuel	costs.

For	reconciliation	of	pre-tax	and	net	income	excluding	special	items	to	their	comparable	measures	on	a	GAAP	basis,	see	Part	II,	Item	6.	Selected Consolidated	Financial	Data	–	"Reconciliation	of	GAAP	to	Non-GAAP	Financial	Measures."

# Revenue

In	2016,	we	reported	operating	revenues	of	$40.2	billion,	a	decrease	of	$810	million,	or	2.0%,	as	compared	to	2015.	Mainline	and	regional	passenger revenues	were	$34.6	billion,	a	decrease	of	$933	million,	or	2.6%,	as	compared	to	2015.	The	decline	in	mainline	and	regional	passenger	revenues	was due	to	lower	yields	driven	by	competitive	capacity	growth,	macroeconomic	softness	outside	of	the	United	States	and	foreign	currency	weakness.	This decline	was	offset	in	part	by	an	increase	in	other	operating	revenues	primarily	due	to	our	new	co-branded	credit	card	agreements	which	became	effective in	the	third	quarter	of	2016.	Our	mainline	and	regional	total	revenue	per	available	seat	mile	(TRASM)	was	14.70	cents	in	2016,	a	3.7%	decrease	as compared	to	15.25	cents	in	2015.

# Other	Costs

We	remain	committed	to	actively	managing	our	cost	structure,	which	we	believe	is	necessary	in	an	industry	whose	economic	prospects	are	heavily dependent	upon	two	variables	we	cannot	control:	the	health	of	the	economy	and	the	price	of	fuel.

Our	2016	mainline	CASM	was	11.94	cents,	a	decrease	of	0.8%,	from	12.03	cents	in	2015.	The	decrease	was	primarily	driven	by	lower	fuel	costs, offset	in	part	by	higher	salaries,	wages	and	benefits	associated	with	new	labor	contracts	and	the	addition	of	an	employee	profit	sharing	program.

Our	2016	mainline	CASM	excluding	special	items	and	fuel	was	9.54	cents,	an	increase	of	6.1%,	from	8.99	cents	in	2015,	which	was	primarily	driven by	higher	salaries,	wages	and	benefits	as	described	above.

For	a	reconciliation	of	mainline	CASM	excluding	special	items	and	fuel,	see	Part	II,	Item	6.	Selected	Consolidated	Financial	Data	– 	"Reconciliation	of GAAP	to	Non-GAAP	Financial	Measures."

# Liquidity	and	Stockholder	Returns

As	of	December	31,	2016,	we	had	approximately	$8.8	billion	in	total	available	liquidity,	consisting	of	$6.4	billion	in	unrestricted	cash	and	investments and	$2.4	billion	in	undrawn	revolving	credit	facilities.	We	also	had	approximately	$638	million	in	restricted	cash.

During	2016,	we	returned	$4.6	billion	to	our	stockholders,	including	quarterly	dividend	payments	of	$224	million	and	the	repurchase	of	$4.4	billion	of common	 stock,	 or	 119.8	 million	 shares.	 Since	 our	 capital	 return	 program	 commenced	 in	mid-2014,	 we	 have	 returned	 more	 than	 $9.6	 billion	 to stockholders	including	$646	million	in	quarterly	dividends	and	$9.0	billion	in	share	repurchases,	or	228.4	million	shares.	In	January	2017,	our	Board	of Directors	approved	a	new	$2.0	billion	share	repurchase	authorization	that	will	expire	December	31,	2018	and	declared	a	dividend	of	$0.10	per	share	to	be paid	to	stockholders	of	record	as	of	February	13,	2017.

We	have	taken	advantage	of	historically	low	interest	rates	to	finance	our	fleet	renewal	program.	During	2016	to	finance	new	aircraft	deliveries,	we issued	an	aggregate	principal	amount	of	$2.8	billion	in	Enhanced	Equipment	Trust	Certificate	(EETC)	equipment	notes	at	an	average	fixed	interest	rate	of 3.63%,	as	well	as	$1.8	billion	in	other	equipment	notes,	which	bear	interest	at	fixed	and	variable	rates	of	LIBOR	plus	margin,	averaging	2.96%	at December	31,	2016.	Additionally,	we	refinanced	certain	higher	cost	debt.	See	Note	5	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	for additional	information	on	our	debt	obligations.

As	a	result	of	the	foregoing	factors,	we	currently	have	a	higher	debt	level	and	fewer	unencumbered	assets	than	our	peers.	Accordingly,	we	believe	it	is important	to	retain	liquidity	levels	higher	than	our	network	peers	given	our	overall	leverage	as	well	as	to	protect	against	an	adverse	economic	shock.	Our current	plan	is	to	maintain	minimum	total	available	liquidity	of	$7.0	billion.	We	were	well	above	that	minimum	level	at	December	31,	2016.

# AAG's	Results	of	Operations

# Operating	Statistics

The	table	below	sets	forth	selected	operating	data	for	the	years	ended	December	31,	2016,	2015	and	2014.

|  | 2016 | Year	Ended	December	31,<br>2015 | 2014 | Increase<br>(Decrease)<br>2016-2015 | Increase<br>(Decrease)<br>2015-2014 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Mainline |  |  |  |  |  |
| Revenue\tpassenger\tmiles\t(millions)\t^(a) | \t199,014 | \t199,467 | \t195,651 | (0.2)% | 2.0% |
| Available\tseat\tmiles\t(millions)\t^(b) | \t241,734 | \t239,375 | \t237,522 | 1.0% | 0.8% |
| Passenger\tload\tfactor\t(percent)\t^(c) | 82.3 | 83.3 | 82.4 | (1.0)pts | 0.9pts |
| Yield\t(cents)\t^(d) | 14.02 | 14.56 | 15.74 | (3.7)% | (7.5)% |
| Passenger\trevenue\tper\tavailable\tseat\tmile\t(cents)\t^(e) | 11.55 | 12.13 | 12.97 | (4.8)% | (6.5)% |
| Operating\tcost\tper\tavailable\tseat\tmile\t(cents)\n(f) | 11.94 | 12.03 | 13.42 | (0.8)% | (10.4)% |
| Aircraft\tat\tend\tof\tperiod | 930 | 946 | 983 | (1.7)% | (3.8)% |
| Fuel\tconsumption\t(gallons\tin\tmillions) | 3,596 | 3,611 | 3,644 | (0.4)% | (0.9)% |
| Average\taircraft\tfuel\tprice\tincluding\trelated\ttaxes\t(dollars\tper\tgallon) | 1.41 | 1.72 | 2.91 | (18.2)% | (40.7)% |
| Full-time\tequivalent\temployees\tat\tend\tof\tperiod | \t101,500 | 98,900 | 94,400 | 2.6% | 4.8% |
| Total\tMainline\tand\tRegional |  |  |  |  |  |
| Revenue\tpassenger\tmiles\t(millions)\t^(a) | \t223,477 | \t223,010 | \t217,870 | 0.2% | 2.4% |
| Available\tseat\tmiles\t(millions)\t^(b) | \t273,410 | \t268,736 | \t265,657 | 1.7% | 1.2% |
| Passenger\tload\tfactor\t(percent)\t^(c) | 81.7 | 83.0 | 82.0 | (1.3)pts | 1.0pts |
| Yield\t(cents)\t^(d) | 15.47 | 15.92 | 17.04 | (2.8)% | (6.5)% |
| Passenger\trevenue\tper\tavailable\tseat\tmile\t(cents)\t^(e) | 12.65 | 13.21 | 13.97 | (4.3)% | (5.4)% |
| Total\trevenue\tper\tavailable\tseat\tmile\t(cents)\n(g) | 14.70 | 15.25 | 16.05 | (3.7)% | (5.0)% |
| Aircraft\tat\tend\tof\tperiod | 1,536 | 1,533 | 1,549 | 0.2% | (1.0)% |
| Fuel\tconsumption\t(gallons\tin\tmillions) | 4,347 | 4,323 | 4,332 | 0.5% | (0.2)% |
| Average\taircraft\tfuel\tprice\tincluding\trelated\ttaxes\t(dollars\tper\tgallon) | 1.42 | 1.72 | 2.91 | (17.6)% | (40.7)% |
| Full-time\tequivalent\temployees\tat\tend\tof\tperiod\n(h) | \t122,300 | \t118,500 | \t113,300 | 3.2% | 4.6% |

Revenue	passenger	mile	(RPM)	–	A	basic	measure	of	sales	volume.	One	RPM	represents	one	passenger	flown	one	mile.

Available	seat	mile	(ASM)	–	A	basic	measure	of	production.	One	ASM	represents	one	seat	flown	one	mile.

Passenger	load	factor	–	The	percentage	of	available	seats	that	are	filled	with	revenue	passengers.

Yield	–	A	measure	of	airline	revenue	derived	by	dividing	passenger	revenue	by	RPMs.

Passenger	revenue	per	available	seat	mile	(PRASM)	–	Passenger	revenues	divided	by	ASMs.

Operating	cost	per	available	seat	mile	(CASM)	–	Operating	expenses	divided	by	ASMs.

Total	revenue	per	available	seat	mile	(TRASM)	–	Total	revenues	divided	by	total	mainline	and	regional	ASMs.

Regional	full-time	equivalent	employees	only	include	our	wholly-owned	regional	airline	subsidiaries,	Envoy,	Piedmont	and	PSA.

We	realized	net	income	of	$2.7	billion	in	2016.	This	compares	to	$7.6	billion	of	net	income	in	2015,	which	included	a	special	$3.0	billion	 non-cash	tax benefit	as	we	reversed	the	valuation	allowance	on	our	deferred	tax	assets,	which	include	our	federal	and	state	NOLs.	As	a	result	of	the	reversal	of	the valuation	allowance,	we	recorded	a	$1.6	billion	provision	 for	 income	 taxes	 in	2016,	which	 is	substantially	non-cash	due	 to	 the	utilization	of	NOLs. Accordingly,	amounts	reported	in	2016	for	income	tax	provision	and	net	income	are	not	comparable	to	2015.

We	realized	pre-tax	income	of	$4.3	billion	and	$4.6	billion	in	2016	and	2015,	respectively.	Excluding	the	effects	of	 pre-tax	net	special	items,	pre-tax income	was	$5.1	billion	and	$6.3	billion	in	2016	and	2015,	respectively.	For	reconciliation	of	pre-tax	and	net	income	excluding	special	items	to	their comparable	measures	on	a	GAAP	basis,	see	Part	II,	Item	6.	Selected	Consolidated	Financial	Data	–"Reconciliation	of	GAAP	to	Non-GAAP	Financial Measures."

Our	2016	pre-tax	results	on	both	a	GAAP	basis	and	excluding	 pre-tax	net	special	items	were	impacted	by	a	decline	in	revenues	due	to	lower	yields. Salaries,	wages	and	benefits	costs	were	higher	in	2016,	driven	by	our	new	labor	contracts	and	the	addition	of	an	employee	profit	sharing	program; however,	these	increases	were	substantially	offset	by	a	year-over-year	decline	in	fuel	costs.

# Operating	Revenues

|  | Year	Ended |  |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, |  | Increase | Increase |
|  | 2016 | 2015 | (Decrease) | (Decrease) |
|  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Mainline\tpassenger | $27,909 | $29,037 | $(1,128) | (3.9) |
| Regional\tpassenger | 6,670 | 6,475 | 195 | 3.0 |
| Cargo | 700 | 760 | (60) | (7.9) |
| Other | 4,901 | 4,718 | 183 | 3.9 |
| Total\toperating\trevenues | $40,180 | $40,990 | $(810) | (2.0) |

Total	operating	revenues	in	2016	decreased	$810	million,	or	2.0%,	from	2015	driven	by	lower	passenger	revenues	offset	in	part	by	higher	other revenue.	Our	mainline	and	regional	TRASM	was	14.70	cents	in	2016,	a	3.7%	decrease	as	compared	to	15.25	cents	in	2015.

|  | Year	Ended<br>December	31,<br>2016 | Passenger<br>Revenue | RPMs | ASMs | Load<br>Factor | Passenger<br>Yield | PRASM |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | (In\tmillions) |  |  |  |  |  |  |
| Mainline\tpassenger | $27,909 | (3.9)% | \t(0.2)% | 1.0% | (1.0)pts | (3.7)% | (4.8)% |
| Regional\tpassenger | 6,670 | 3.0% | 3.9% | 7.9% | (3.0)pts | (0.9)% | (4.5)% |
| Total\tpassenger\trevenues | $34,579 | (2.6)% | 0.2% | 1.7% | (1.3)pts | (2.8)% | (4.3)% |

Total	passenger	revenues	declined	$933	million,	or	2.6%,	in	2016	from	2015	driven	by	a	2.8%	decrease	in	yield	due	to	competitive	capacity	growth, macroeconomic	softness	outside	of	the	United	States	and	foreign	currency	weakness.

Cargo	revenue	decreased	$60	million,	or	7.9%,	in	2016	from	2015	driven	primarily	by	a	decrease	in	domestic	and	international	freight	yields.

Other	revenue	primarily	includes	revenue	associated	with	our	loyalty	program,	baggage	fees,	ticketing	change	fees,	airport	clubs	and	inflight	services. Other	revenue	increased	$183	million,	or	3.9%,	in	2016	from	2015	driven	by	an	increase	in	loyalty	program	revenue.	In	2016	and	2015,	other	revenues associated	with	our	loyalty	program	were	$2.1	billion	and	$1.9	billion,	respectively,	of	which	$1.9	billion	and	$1.7	billion,	respectively,	related	to	the marketing	component	of	mileage	sales	and	other	marketing	related	payments.	This	year-over-year	increase	was	due	to	our	new	co-branded	credit	card agreements	which	became	effective	in	the	third	quarter	of	2016.	See	Note	1(i)	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	for additional	information	on	the	loyalty	program.

# Operating	Expenses

|  | Year	Ended |  |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, |  | Increase | Increase |
|  | 2016 | 2015 | (Decrease) | (Decrease) |
|  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Aircraft\tfuel\tand\trelated\ttaxes | $5,071 | $6,226 | $(1,155) | (18.5) |
| Salaries,\twages\tand\tbenefits | \t 10,890 | 9,524 | 1,366 | 14.4 |
| Maintenance,\tmaterials\tand\trepairs | 1,834 | 1,889 | (55) | (2.9) |
| Other\trent\tand\tlanding\tfees | 1,772 | 1,731 | 41 | 2.4 |
| Aircraft\trent | 1,203 | 1,250 | (47) | (3.8) |
| Selling\texpenses | 1,323 | 1,394 | (71) | (5.0) |
| Depreciation\tand\tamortization | 1,525 | 1,364 | 161 | 11.8 |
| Special\titems,\tnet | 709 | 1,051 | (342) | (32.6) |
| Other | 4,525 | 4,374 | 151 | 3.4 |
| Total\tmainline\toperating\texpenses | \t 28,852 | \t 28,803 | 49 | 0.2 |
| Regional\texpenses: |  |  |  |  |
| Fuel | 1,109 | 1,230 | (121) | (9.8) |
| Other | 4,935 | 4,753 | 182 | 3.8 |
| Total\tregional\toperating\texpenses | 6,044 | 5,983 | 61 | 1.0 |
| Total\toperating\texpenses | $34,896 | $34,786 | $110 | 0.3 |

Total	operating	expenses	were	$34.9	billion	in	2016,	an	increase	of	$110	million,	or	0.3%,	from	2015.	The	increase	in	operating	expenses	was	due	to higher	salaries,	wages	and	benefits	driven	by	new	labor	contracts	and	the	addition	of	an	employee	profit	sharing	program;	however,	these	costs	were substantially	offset	by	a	year-over-year	decline	in	fuel	costs.	See	detailed	explanations	below	relating	to	changes	in	mainline	operating	costs	per	ASM.

# Mainline	Operating	Costs	per	ASM

The	table	below	sets	forth	the	major	components	of	our	total	mainline	CASM	and	our	mainline	CASM	excluding	special	items	and	aircraft	fuel	and related	taxes	for	the	years	ended	December	31,	2016	and	2015:

| Aircraft	fuel	and	related	taxes | 2.10 | 2.60 | (19.3) |
| :--- | :--- | :--- | :--- |
| Salaries,\twages\tand\tbenefits | 4.51 | 3.98 | 13.2 |
| Maintenance,\tmaterials\tand\trepairs | 0.76 | 0.79 | (3.9) |
| Other\trent\tand\tlanding\tfees | 0.73 | 0.72 | 1.4 |
| Aircraft\trent | 0.50 | 0.52 | (4.7) |
| Selling\texpenses | 0.55 | 0.58 | (6.0) |
| Depreciation\tand\tamortization | 0.63 | 0.57 | 10.7 |
| Special\titems,\tnet | 0.29 | 0.44 | (33.2) |
| Other | 1.87 | 1.83 | 2.4 |
| Total\tmainline\tCASM | 11.94 | 12.03 | (0.8) |
| Special\titems,\tnet | (0.29) | (0.44) | (33.2) |
| Aircraft\tfuel\tand\trelated\ttaxes | (2.10) | (2.60) | (19.3) |
| Mainline\toperating\tcosts\tper\tASM,\texcluding\tspecial\titems\tand\taircraft\tfuel\tand\trelated\ttaxes |  |  |  |
| (1) | 9.54 | 8.99 | 6.1 |

We	believe	that	the	presentation	of	mainline	CASM	excluding	fuel	is	useful	to	investors	because	both	the	cost	and	availability	of	fuel	are	subject	to many	economic	and	political	factors	beyond	our	control,	and	the	exclusion	of	special	items	provides	investors	the	ability	to	measure	financial performance	in	a	way	that	is	more	indicative	of	our	ongoing	performance	and	that	is	more	comparable	to	measures	reported	by	other	major	airlines. Management	uses	mainline	CASM	excluding	special	items	and	fuel	to	evaluate	our	operating	performance.	Amounts	may	not	recalculate	due	to rounding.

Significant	changes	in	the	components	of	mainline	operating	cost	per	ASM	are	as	follows:

•	 Aircraft	fuel	and	related	taxes	per	ASM	decreased	19.3%	primarily	due	to	an	18.2%	decrease	in	the	average	price	per	gallon	of	fuel	to	$1.41	in 2016	from	an	average	price	per	gallon	of	$1.72	in	2015.

•	 Salaries,	wages	and	benefits	per	ASM	increased	13.2%	primarily	due	to	increased	costs	associated	with	new	labor	contracts	and	the	addition	of an	employee	profit	sharing	program.

•	 Selling	expenses	per	ASM	decreased	6.0%	primarily	due	to	lower	credit	card	and	booking	fees.

•	 Depreciation	and	amortization	per	ASM	increased	10.7%	primarily	due	to	the	effect	of	purchased	aircraft	deliveries	in	connection	with	our	fleet renewal	program.

# Operating	Special	Items,	Net

|  | Year	Ended	December	31,<br>2016 | 2015 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Merger\tintegration\tcosts\t^(1) | $514 | $826 |
| Fleet\trestructuring\tcosts\t^(2) | 177 | 210 |
| Mark-to-market\tadjustments\tfor\tbankruptcy\tobligations\tand\tother | 25 | (53) |
| Other\toperating\tcharges\t(credits),\tnet | (7) | 68 |
| Total\tmainline\toperating\tspecial\titems,\tnet | 709 | 1,051 |
| Regional\toperating\tspecial\titems,\tnet\t^(3) | 14 | 29 |
| Total\toperating\tspecial\titems,\tnet | $723 | $1,080 |

Merger	integration	costs	included	charges	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,	also	included	share-based	compensation	related	to	awards granted	in	connection	with	the	Merger	that	fully	vested	in	December	2015.

Regional	operating	special	items,	net	are	included	within	other	regional	operating	expenses	and	principally	related	to	Merger	integration	costs.

# Regional	Operating	Expenses

Total	 regional	 expenses	 increased	 $61	 million,	 or	 1.0%,	 in	 2016	 as	 compared	 to	 2015.	 The	 year-over-year	 increase	 was	 primarily	 due	 to	 a $182	million,	or	3.8%,	increase	in	other	regional	operating	expenses	driven	by	increased	capacity.	This	was	offset	in	part	by	a	$121	million,	or	9.8%, decrease	in	fuel	costs.	The	decrease	in	fuel	costs	was	driven	primarily	by	a	14.5%	decline	in	the	average	price	per	gallon	of	fuel	to	$1.48	in	2016	from $1.73	in	2015,	offset	in	part	by	a	5.5%	increase	in	gallons	of	fuel	consumed.	See	Note	1	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A for	further	information	on	regional	expenses.

# Nonoperating	Results

|  | Year	Ended	December	31, |  |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Increase | Increase |
|  | \t\t\t\t2016 | \t\t\t\t2015 | (Decrease) | (Decrease) |
|  |  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Interest\tincome | $63 | $39 | $24 | 60.9 |
| Interest\texpense,\tnet\tof\tcapitalized\tinterest | (991) | (880) | (111) | 12.6 |
| Other,\tnet | (57) | (747) | 690 | (92.4) |
| Total\tnonoperating\texpense,\tnet | $(985) | $(1,588) | $603 | (38.1) |

Our	short-term	investments	in	each	period	consisted	of	highly	liquid	investments	that	provided	nominal	returns.	Interest	income	increased	$24	million, or	60.9%,	principally	due	to	a	50	basis	point	increase	in	average	yields	in	2016	as	compared	to	2015.

Interest	expense,	net	of	capitalized	interest	increased	in	2016	primarily	due	to	issuances	of aircraft-related	financings	associated	with	our	fleet	renewal program.

In	2016,	other	nonoperating	expense,	net	primarily	included	$49	million	of	net	special	charges	consisting	of	debt	issuance	and	extinguishment	costs associated	with	bond	and	term	loan	refinancings.	Net	foreign	currency	gains	were	nominal	in	2016.

In	2015,	other	nonoperating	expense,	net	primarily	included	a	$592	million	special	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.	We	also	incurred	$159	million	of	net	foreign	currency	losses. The	foreign	currency	losses	in	2015	were	driven	primarily	by	the	strengthening	of	the	U.S.	dollar	relative	to	other	currencies,	principally	in	Latin	American and	European	markets.

# Income	Taxes

In	2016,	we	recorded	a	$1.6	billion	provision	for	income	taxes	at	an	effective	rate	of	approximately	38%,	which	was	substantially	 non-cash	as	we utilized	our	NOLs.	Substantially	all	of	our	income	before	income	taxes	is	attributable	to	the	United	States.	At	December	31,	2016,	we	had	approximately $10.5	billion	of	gross	NOLs	to	reduce	future	federal	taxable	income,	substantially	all	of	which	are	expected	to	be	available	for	use	in	2017.

In	2015,	we	reversed	$3.0	billion	of	the	valuation	allowance	on	our	deferred	tax	assets,	which	resulted	in	a	special non-cash	tax	benefit	recorded	in our	consolidated	statement	of	operations.

See	Note	6	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	for	additional	information	on	income	taxes.

We	realized	net	income	of	$7.6	billion	in	2015,	which	included	a	special	$3.0	billion	 non-cash	tax	benefit	as	we	reversed	the	valuation	allowance	on our	deferred	tax	assets,	which	include	our	federal	and	state	NOLs.	We	realized	net	income	of	$2.9	billion	in	2014.	As	a	result	of	the	valuation	allowance reversal,	amounts	reported	in	2015	for	income	tax	benefit	and	net	income	are	not	comparable	to	2014.

Our	2015	pre-tax	results	on	both	a	GAAP	basis	and	excluding	 pre-tax	net	special	items	were	impacted	by	substantially	lower	fuel	costs	in	2015	as compared	to	2014,	offset	in	part	by	a	decline	in	revenues	driven	by	lower	yields.

|  | Year	Ended	December	31, | Year	Ended	December	31, |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Increase | Increase |
|  | \t\t\t\t2015 | \t\t\t\t2014 | (Decrease) | (Decrease) |
|  |  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Mainline\tpassenger | $29,037 | $30,802 | $(1,765) | (5.7) |
| Regional\tpassenger | 6,475 | 6,322 | 153 | 2.4 |
| Cargo | 760 | 875 | (115) | (13.1) |
| Other | 4,718 | 4,651 | 67 | 1.4 |
| Total\toperating\trevenues | $40,990 | $42,650 | $(1,660) | (3.9) |

|  |  |  |  | Increase	(Decrease) | Increase	(Decrease) |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | vs.\tYear\tEnded\tDecember\t31,\t2014 | vs.\tYear\tEnded\tDecember\t31,\t2014 |  |  |
|  | Year\tEnded\nDecember\t31,\t2015 | Passenger\nRevenue | RPMs | ASMs | Load\nFactor | Passenger\nYield | PRASM |
|  | (In\tmillions) |  |  |  |  |  |  |
| Mainline\tpassenger | $29,037 | (5.7)% | 2.0% | 0.8% | \t0.9\tpts | (7.5)% | (6.5)% |
| Regional\tpassenger | 6,475 | 2.4% | 6.0% | 4.4% | \t1.2\tpts | (3.3)% | (1.9)% |
| Total\tpassenger\trevenues | $35,512 | (4.3)% | 2.4% | 1.2% | \t1.0\tpts | (6.5)% | (5.4)% |

Total	passenger	revenues	declined	$1.6	billion,	or	4.3%,	in	2015	from	2014	driven	by	a	6.5%	decrease	in	yield	due	to	competitive	growth	in	certain domestic	markets,	including	Dallas/Fort	Worth,	international	weakness	resulting	from	foreign	currency	devaluation	relative	to	the	U.S.	dollar,	lower	fuel surcharges	and	economic	softness	in	Latin	America,	particularly	in	Brazil	and	Venezuela.

Cargo	revenue	decreased	$115	million,	or	13.1%,	in	2015	from	2014	driven	primarily	by	a	decrease	in	international	freight	yields.

Other	revenue	primarily	includes	revenue	associated	with	our	loyalty	program,	baggage	fees,	ticketing	change	fees,	airport	clubs	and	inflight	services. In	2015	and	2014,	other	revenues	associated	with	our	loyalty	program	were	each	$1.9	billion	and	$1.9	billion,	respectively,	of	which	$1.7	billion	and	$1.6 billion,	respectively,	related	to	the	marketing	component	of	mileage	sales	and	other	marketing	related	payments.	See	Note	1(i)	to	AAG's	Consolidated Financial	Statements	in	Part	II,	Item	8A	for	additional	information	on	the	loyalty	program.

|  | Year	Ended	December	31, | Year	Ended	December	31, |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Increase | Increase |
|  | \t\t\t\t\t\t2015 | \t\t\t\t\t\t2014 | (Decrease) | (Decrease) |
|  |  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Aircraft\tfuel\tand\trelated\ttaxes | $6,226 | $10,592 | $(4,366) | (41.2) |
| Salaries,\twages\tand\tbenefits | 9,524 | 8,508 | 1,016 | 11.9 |
| Maintenance,\tmaterials\tand\trepairs | 1,889 | 2,051 | (162) | (7.9) |
| Other\trent\tand\tlanding\tfees | 1,731 | 1,727 | 4 | 0.2 |
| Aircraft\trent | 1,250 | 1,250 | — | — |
| Selling\texpenses | 1,394 | 1,544 | (150) | (9.8) |
| Depreciation\tand\tamortization | 1,364 | 1,295 | 69 | 5.4 |
| Special\titems,\tnet | 1,051 | 800 | 251 | 31.3 |
| Other | 4,374 | 4,118 | 256 | 6.2 |
| Total\tmainline\toperating\texpenses | 28,803 | 31,885 | (3,082) | (9.7) |
| Regional\texpenses: |  |  |  |  |
| Fuel | 1,230 | 2,009 | (779) | (38.8) |
| Other | 4,753 | 4,507 | 246 | 5.4 |
| Total\tregional\toperating\texpenses | 5,983 | 6,516 | (533) | (8.2) |
| Total\toperating\texpenses | $34,786 | $38,401 | $(3,615) | (9.4) |

Total	operating	expenses	were	$34.8	billion	in	2015,	a	decrease	of	$3.6	billion,	or	9.4%,	from	2014.	The	decrease	in	operating	expenses	was	primarily due	to	substantially	lower	aircraft	fuel	costs,	offset

in	part	by	higher	salaries,	wages	and	benefits	driven	by	new	labor	contracts.	See	detailed	explanations	below	relating	to	changes	in	mainline	operating costs	per	ASM.

| Aircraft	fuel	and	related	taxes | 2.60 | 4.46 | (41.7) |
| :--- | :--- | :--- | :--- |
| Salaries,\twages\tand\tbenefits | 3.98 | 3.58 | 11.1 |
| Maintenance,\tmaterials\tand\trepairs | 0.79 | 0.86 | (8.6) |
| Other\trent\tand\tlanding\tfees | 0.72 | 0.73 | (0.5) |
| Aircraft\trent | 0.52 | 0.53 | (0.8) |
| Selling\texpenses | 0.58 | 0.65 | (10.5) |
| Depreciation\tand\tamortization | 0.57 | 0.55 | 4.6 |
| Special\titems,\tnet | 0.44 | 0.34 | 30.3 |
| Other | 1.83 | 1.73 | 5.4 |
| Total\tmainline\tCASM | 12.03 | 13.42 | (10.4) |
| Special\titems,\tnet | (0.44) | (0.34) | 30.3 |
| Aircraft\tfuel\tand\trelated\ttaxes | (2.60) | (4.46) | (41.7) |
| Mainline\toperating\tcosts\tper\tASM,\texcluding\tspecial\titems\tand\taircraft\tfuel\tand\trelated\ttaxes |  |  |  |
| (1) | 8.99 | 8.63 | 4.2 |

•	 Aircraft	fuel	and	related	taxes	per	ASM	decreased	41.7%	primarily	due	to	a	40.7%	decrease	in	the	average	price	per	gallon	of	fuel	to	$1.72	in 2015	from	an	average	price	per	gallon	of	$2.91	in	2014.

•	 Salaries,	wages	and	benefits	per	ASM	increased	11.1%	primarily	due	to	increased	costs	associated	with	new	pilot,	flight	attendant	and	customer service	and	reservation	agent	joint	collective	bargaining	agreements.

•	 Maintenance,	materials	and	repairs	per	ASM	decreased	8.6%	primarily	due	to	fewer	engine	overhauls	in	2015,	driven	by	our	fleet	renewal program.

•	 Selling	expenses	per	ASM	decreased	10.5%	primarily	due	to	lower	contractually	negotiated	rates	for	certain	commissions	and	booking	fees	as well	as	lower	revenues	in	2015.

•	 Other	 operating	 expenses	 per	ASM	 increased	 5.4%	 in	 2015	 as	 compared	 to	 2014	 primarily	 due to increases in	 crew travel	 and	 certain information	technology	projects,	as	well	as	enhancements	to	our	aircraft	food	and	catering	offerings.

|  | Year	Ended	December	31,<br>2015 | 2014 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Merger\tintegration\tcosts\t^(1) | $826 | $732 |
| Fleet\trestructuring\tcosts\t^(2) | 210 | 88 |
| Mark-to-market\tadjustments\tfor\tbankruptcy\tobligations\tand\tother | (53) | 81 |
| Net\tgain\ton\tslot\ttransactions | — | (265) |
| Charge\tto\trevise\testimates\tof\tcertain\taircraft\tresidual\tvalues | — | 81 |
| Other\toperating\tcharges,\tnet | 68 | 83 |
| Total\tmainline\toperating\tspecial\titems,\tnet | 1,051 | 800 |
| Regional\toperating\tspecial\titems,\tnet\t^(3) | 29 | 24 |
| Total\toperating\tspecial\titems,\tnet | $1,080 | $824 |

Merger	integration	costs	included	charges	related	to	information	technology,	alignment	of	labor	union	contracts,	professional	fees,	severance, relocation	and	training,	re-branding	of	aircraft,	airport	facilities	and	uniforms	and	share-based	compensation	related	to	awards	granted	in	connection with	the	Merger	that	fully	vested	in	December	2015.

Regional	operating	special	items,	net	are	included	within	other	regional	operating	expenses	and	consisted	primarily	of	a	$24	million	charge	due	to	a new	pilot	labor	contract	at	our	Envoy	regional	subsidiary.

Total	 regional	 expenses	 decreased	 $533	 million,	 or	 8.2%,	 in	 2015	 as	 compared	 to	 2014.	The	 year-over-year	 decrease	 was	 primarily	 due	 to	 a $779	million,	or	38.8%,	decrease	in	fuel	costs,	offset	in	part	by	a	$246	million,	or	5.4%,	increase	in	other	regional	operating	expenses.	The	average	price per	gallon	of	fuel	decreased	40.9%	to	$1.73	in	2015	from	$2.92	in	2014.	The	increase	in	other	regional	operating	expenses	was	principally	due	to increased	flying	under	capacity	purchase	agreements.	See	Note	1	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	for	further	information on	regional	expenses.

|  | Year	Ended	December	31, |  |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Increase | Increase |
|  | \t\t\t\t2015 | \t\t\t\t2014 | (Decrease) | (Decrease) |
|  |  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Interest\tincome | $39 | $31 | $8 | 26.0 |
| Interest\texpense,\tnet\tof\tcapitalized\tinterest | (880) | (887) | 7 | (0.8) |
| Other,\tnet | (747) | (181) | (566) | nm |
| Total\tnonoperating\texpense,\tnet | $(1,588) | $(1,037) | $(551) | 53.1 |

Our	short-term	investments	in	each	period	consisted	of	highly	liquid	investments	that	provided	nominal	returns.

In	2015,	other	nonoperating	expense,	net	primarily	included	a	$592	million	special	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.	We	also	incurred	$159	million	of	net	foreign

currency	losses.	The	foreign	currency	losses	in	2015	were	driven	primarily	by	the	strengthening	of	the	U.S.	dollar	relative	to	other	currencies,	principally	in Latin	American	and	European	markets.

In	2014,	other	nonoperating	expense,	net	primarily	included	$114	million	of	net	foreign	currency	losses,	including	a	$43	million	special	charge	for Venezuelan	foreign	currency	losses	and	$56	million	of	special	charges	primarily	due	to	early	debt	extinguishment	costs	related	to	the	prepayment	of	our 7.50%	senior	secured	notes	and	other	indebtedness.	The	foreign	currency	losses	in	2014	were	driven	primarily	by	the	strengthening	of	the	U.S.	dollar relative	to	other	currencies,	principally	in	the	Latin	American	market.

In	2014,	we	recorded	a	$330	million	provision	for	income	taxes,	which	included	$346	million	of	special	tax	charges.	During	2014,	we	sold	our	portfolio of	fuel	hedging	contracts	that	were	scheduled	to	settle	on	or	after	June	30,	2014.	As	a	result,	a	special	$330	million	non-cash	tax	provision	was	recorded, which	is	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.

# American's	Results	of	Operations

American	realized	net	income	of	$2.8	billion	in	2016.	This	compares	to	$8.1	billion	of	net	income	in	2015,	which	included	a	special	$3.5	billion non-cash	tax	benefit	as	American	reversed	the	valuation	allowance	on	its	deferred	tax	assets,	which	include	its	federal	and	state	NOLs.	As	a	result	of	the reversal	of	the	valuation	allowance,	American	recorded	a	$1.7	billion	provision	for	income	taxes	in	2016,	which	is	substantially	non-cash	due	to	the utilization	of	NOLs.	Accordingly,	amounts	reported	in	2016	for	income	tax	provision	and	net	income	are	not	comparable	to	2015.

American	realized	pre-tax	income	of	$4.4	billion	and	$4.7	billion	in	2016	and	2015,	respectively.	American's	2016	 pre-tax	income	was	impacted	by	a decline	in	revenues	due	to	lower	yields.	Salaries,	wages	and	benefits	costs	were	higher	in	2016,	driven	by	American's	new	labor	contracts	and	the addition	of	an	employee	profit	sharing	program;	however,	these	increases	were	substantially	offset	by	a	year-over-year	decline	in	fuel	costs.

|  | Year	Ended	December	31, | Year	Ended	December	31, |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Increase | Increase |
|  | \t\t\t\t\t\t2016 | \t\t\t\t\t\t2015 | (Decrease) | (Decrease) |
|  |  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Mainline\tpassenger | $27,909 | $29,037 | $(1,128) | (3.9) |
| Regional\tpassenger | 6,670 | 6,475 | 195 | 3.0 |
| Cargo | 700 | 760 | (60) | (7.9) |
| Other | 4,884 | 4,666 | 218 | 4.7 |
| Total\toperating\trevenues | $40,163 | $40,938 | $(775) | (1.9) |

Total	operating	revenues	in	2016	decreased	$775	million,	or	1.9%,	from	2015	driven	by	lower	passenger	revenues	offset	in	part	by	higher	other revenue.

Other	revenue	primarily	includes	revenue	associated	with	American's	loyalty	program,	baggage	fees,	ticketing	change	fees,	airport	clubs	and	inflight services.	Other	revenue	increased	$218	million,	or	4.7%,	in	2016	from	2015	driven	by	an	increase	in	loyalty	program	revenue.	In	2016	and	2015,	other revenues	associated	with	American's	loyalty	program	were	$2.1	billion	and	$1.9	billion,	respectively,	of	which	$1.9	billion	and	$1.7	billion,	respectively, related	to	the	marketing	component	of	mileage	sales	and	other	marketing	related	payments.	This	year-over-year	increase	was	due	to	American's	new	co- branded	credit	card	agreements	which	became	effective	in	the	third	quarter	of	2016.	See	Note	1(i)	to	American's	Consolidated	Financial	Statements	in Part	II,	Item	8B	for	additional	information	on	the	loyalty	program.

|  | Year	Ended |  |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, |  | Increase | Increase |
|  | \t\t\t\t2016 | \t\t\t\t2015 | (Decrease) | (Decrease) |
|  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Aircraft\tfuel\tand\trelated\ttaxes | $5,071 | $6,226 | $(1,155) | (18.5) |
| Salaries,\twages\tand\tbenefits | \t 10,881 | 9,514 | 1,367 | 14.4 |
| Maintenance,\tmaterials\tand\trepairs | 1,834 | 1,889 | (55) | (2.9) |
| Other\trent\tand\tlanding\tfees | 1,772 | 1,731 | 41 | 2.4 |
| Aircraft\trent | 1,203 | 1,250 | (47) | (3.8) |
| Selling\texpenses | 1,323 | 1,394 | (71) | (5.0) |
| Depreciation\tand\tamortization | 1,525 | 1,364 | 161 | 11.8 |
| Special\titems,\tnet | 709 | 1,051 | (342) | (32.6) |
| Other | 4,532 | 4,378 | 154 | 3.5 |
| Total\tmainline\toperating\texpenses | \t 28,850 | \t 28,797 | 53 | 0.2 |
| Regional\texpenses: |  |  |  |  |
| Fuel | 1,109 | 1,230 | (121) | (9.8) |
| Other | 4,900 | 4,722 | 178 | 3.8 |
| Total\tregional\toperating\texpenses | 6,009 | 5,952 | 57 | 1.0 |
| Total\toperating\texpenses | $34,859 | $34,749 | $110 | 0.3 |

Total	operating	expenses	were	$34.9	billion	in	2016,	an	increase	of	$110	million,	or	0.3%,	from	2015.	The	increase	in	operating	expenses	was	due	to higher	salaries,	wages	and	benefits	driven	by	new	labor	contracts	and	the	addition	of	an	employee	profit	sharing	program;	however,	these	costs	were substantially	offset	by	a	year-over-year	decline	in	fuel	costs.

Significant	changes	in	the	components	of	mainline	operating	expenses	are	as	follows:

•	 Aircraft	fuel	and	related	taxes	decreased	18.5%	primarily	due	to	an	18.2%	decrease	in	the	average	price	per	gallon	of	fuel	to	$1.41	in	2016	from an	average	price	per	gallon	of	$1.72	in	2015.

•	 Salaries,	wages	and	benefits	increased	14.4%	primarily	due	to	increased	costs	associated	with	new	labor	contracts	and	the	addition	of	an employee	profit	sharing	program.

•	 Selling	expenses	decreased	5.0%	primarily	due	to	lower	credit	card	and	booking	fees.

•	 Depreciation	and	amortization	increased	11.8%	primarily	due	to	the	effect	of	purchased	aircraft	deliveries	in	connection	with	American's	fleet renewal	program.

|  | Year	Ended	December	31,<br>								2016 | 2015 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Merger\tintegration\tcosts\t^(1) | $514 | $826 |
| Fleet\trestructuring\tcosts\t^(2) | 177 | 210 |
| Mark-to-market\tadjustments\tfor\tbankruptcy\tobligations\tand\tother | 25 | (53) |
| Other\toperating\tcharges\t(credits),\tnet | (7) | 68 |
| Total\tmainline\toperating\tspecial\titems,\tnet | 709 | 1,051 |
| Regional\toperating\tspecial\titems,\tnet\t^(3) | 13 | 18 |
| Total\toperating\tspecial\titems,\tnet | $722 | $1,069 |

Total	 regional	 expenses	 increased	 $57	 million,	 or	 1.0%,	 in	 2016	 as	 compared	 to	 2015.	 The	 year-over-year	 increase	 was	 primarily	 due	 to	 a $178	million,	or	3.8%,	increase	in	other	regional	operating	expenses	driven	by	increased	capacity.	This	was	offset	in	part	by	a	$121	million,	or	9.8%, decrease	in	fuel	costs.	The	decrease	in	fuel	costs	was	driven	primarily	by	a	14.5%	decline	in	the	average	price	per	gallon	of	fuel	to	$1.48	in	2016	from $1.73	in	2015,	offset	in	part	by	a	5.5%	increase	in	gallons	of	fuel	consumed.	See	Note	1	to	American's	Consolidated	Financial	Statements	in	Part	II, Item	8B	for	further	information	on	regional	expenses.

|  | Year	Ended |  |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, |  | Increase | Increase |
|  | \t\t\t\t2016 | \t\t\t\t2015 | (Decrease) | (Decrease) |
|  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Interest\tincome | $104 | $49 | $55 | nm |
| Interest\texpense,\tnet\tof\tcapitalized\tinterest | (906) | (796) | (110) | 13.8 |
| Other,\tnet | (59) | (774) | 715 | (92.4) |
| Total\tnonoperating\texpense,\tnet | $(861) | $(1,521) | $660 | (43.4) |

American's	short-term	investments	in	each	period	consisted	of	highly	liquid	investments	that	provided	nominal	returns.	Interest	income	increased $55	million	principally	due	to	a	50	basis	point	increase	in	average	yields	in	2016	as	compared	to	2015.

Interest	expense,	net	of	capitalized	interest	increased	in	2016	primarily	due	to	issuances	of	aircraft-related	financings	associated	with	American's	fleet renewal	program.

In	2015,	other	nonoperating	expense,	net	primarily	included	a	$592	million	special	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.	American	also	incurred	$159	million	of	net	foreign currency	losses.	The	foreign	currency	losses	in	2015	were	driven	primarily	by	the	strengthening	of	the	U.S.	dollar	relative	to	other	currencies,	principally	in Latin	American	and	European	markets.

In	2016,	American	recorded	a	$1.7	billion	provision	for	income	taxes	at	an	effective	rate	of	approximately	37%,	which	was	substantially	 non-cash	as American	utilized	its	NOLs.	Substantially	all	of	American's	income	before	income	taxes	is	attributable	to	the	United	States.	At	December	31,	2016, American	had	approximately	$11.3	billion	of	gross	NOLs	to	reduce	future	federal	taxable	income,	substantially	all	of	which	are	expected	to	be	available	for use	in	2017.

In	2015,	American	reversed	$3.5	billion	of	the	valuation	allowance	on	its	deferred	tax	assets,	which	resulted	in	a	special non-cash	tax	benefit	recorded in	American's	consolidated	statement	of	operations.

See	Note	4	to	American's	Consolidated	Financial	Statements	in	Part	II,	Item	8B	for	additional	information	on	income	taxes.

American	realized	net	income	of	$8.1	billion	in	2015,	which	included	a	special	$3.5	billion	 non-cash	tax	benefit	as	American	reversed	the	valuation allowance	on	its	deferred	tax	assets,	which	include	its	federal	and	state	NOLs.	American	realized	net	income	of	$2.9	billion	in	2014.	As	a	result	of	the valuation	allowance	reversal,	amounts	reported	in	2015	for	income	tax	benefit	and	net	income	are	not	comparable	to	2014.

American	realized	pre-tax	income	of	$4.7	billion	and	$3.3	billion	in	2015	and	2014,	respectively.	American's	2015 pre-tax	income	was	impacted	by substantially	lower	fuel	costs	in	2015	as	compared	to	2014,	offset	in	part	by	a	decline	in	revenues	driven	by	lower	yields.

|  | Year	Ended |  |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, |  | Increase | Increase |
|  | \t\t\t\t2015 | \t\t\t\t2014 | (Decrease) | (Decrease) |
|  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Mainline\tpassenger | $29,037 | $30,802 | $(1,765) | (5.7) |
| Regional\tpassenger | 6,475 | 6,322 | 153 | 2.4 |
| Cargo | 760 | 875 | (115) | (13.1) |
| Other | 4,666 | 4,677 | (11) | (0.2) |
| Total\toperating\trevenues | $40,938 | $42,676 | $(1,738) | (4.1) |

Total	operating	revenues	in	2015	decreased	$1.7	billion,	or	4.1%,	from	2014	principally	driven	by	lower	passenger	revenues.

Other	revenue	primarily	includes	revenue	associated	with	American's	loyalty	program,	baggage	fees,	ticketing	change	fees,	airport	clubs	and	inflight services.	In	2015	and	2014,	other	revenues	associated	with	American's	loyalty	program	were	$1.9	billion	and	$1.9	billion,	respectively,	of	which	$1.7 billion	and	$1.6	billion,	respectively,	related	 to	 the	marketing	component	of	mileage	sales	and	other	marketing	related	payments.	See	Note	1(i)	 to American's	Consolidated	Financial	Statements	in	Part	II,	Item	8B	for	additional	information	on	the	loyalty	program.

|  | Year	Ended |  |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, |  | Increase | Increase |
|  | \t\t\t\t2015 | \t\t\t\t2014 | (Decrease) | (Decrease) |
|  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Aircraft\tfuel\tand\trelated\ttaxes | $6,226 | $10,592 | $(4,366) | (41.2) |
| Salaries,\twages\tand\tbenefits | 9,514 | 8,499 | 1,015 | 11.9 |
| Maintenance,\tmaterials\tand\trepairs | 1,889 | 2,051 | (162) | (7.9) |
| Other\trent\tand\tlanding\tfees | 1,731 | 1,727 | 4 | 0.2 |
| Aircraft\trent | 1,250 | 1,250 | — | — |
| Selling\texpenses | 1,394 | 1,544 | (150) | (9.8) |
| Depreciation\tand\tamortization | 1,364 | 1,301 | 63 | 4.8 |
| Special\titems,\tnet | 1,051 | 783 | 268 | 34.2 |
| Other | 4,378 | 4,186 | 192 | 4.6 |
| Total\tmainline\toperating\texpenses | \t 28,797 | \t 31,933 | (3,136) | (9.8) |
| Regional\texpenses: |  |  |  |  |
| Fuel | 1,230 | 2,009 | (779) | (38.8) |
| Other | 4,722 | 4,468 | 254 | 5.7 |
| Total\tregional\toperating\texpenses | 5,952 | 6,477 | (525) | (8.1) |
| Total\toperating\texpenses | $34,749 | $38,410 | $(3,661) | (9.5) |

Total	operating	expenses	were	$34.7	billion	in	2015,	a	decrease	of	$3.7	billion,	or	9.5%,	from	2014.	The	decrease	in	operating	expenses	was	primarily due	to	substantially	lower	aircraft	fuel	costs,	offset	in	part	by	higher	salaries,	wages	and	benefits	driven	by	new	labor	contracts.

•	 Aircraft	fuel	and	related	taxes	decreased	41.2%	primarily	due	to	a	40.7%	decrease	in	the	average	price	per	gallon	of	fuel	to	$1.72	in	2015	from an	average	price	per	gallon	of	$2.91	in	2014.

•	 Salaries,	wages	and	benefits	increased	11.9%	primarily	due	to	increased	costs	associated	with	new	pilot,	flight	attendant	and	customer	service and	reservation	agent	joint	collective	bargaining	agreements.

•	 Maintenance,	 materials	 and	 repairs	 decreased	 7.9%	 primarily	 due to fewer	 engine	 overhauls in	 2015,	 driven	 by	American's fleet	 renewal program.

•	 Selling	expenses	decreased	9.8%	primarily	due	to	lower	contractually	negotiated	rates	for	certain	commissions	and	booking	fees	as	well	as lower	revenues	in	2015.

|  | Year	Ended	December	31,<br>								2015 | 2014 |
| :--- | :--- | :--- |
|  | (In\tmillions) |  |
| Merger\tintegration\tcosts\t^(1) | $826 | $732 |
| Fleet\trestructuring\tcosts\t^(2) | 210 | 88 |
| Mark-to-market\tadjustments\tfor\tbankruptcy\tobligations\tand\tother | (53) | 60 |
| Net\tgain\ton\tslot\ttransactions | — | (265) |
| Charge\tto\trevise\testimates\tof\tcertain\taircraft\tresidual\tvalues | — | 81 |
| Other\toperating\tcharges,\tnet | 68 | 87 |
| Total\tmainline\toperating\tspecial\titems,\tnet | 1,051 | 783 |
| Regional\toperating\tspecial\titems,\tnet\t^(3) | 18 | 5 |
| Total\toperating\tspecial\titems,\tnet | $1,069 | $788 |

Total	 regional	 expenses	 decreased	 $525	 million,	 or	 8.1%,	 in	 2015	 as	 compared	 to	 2014.	The	 year-over-year	 decrease	 was	 primarily	 due	 to	 a $779	million,	or	38.8%,	decrease	in	fuel	costs,	offset	in	part	by	a	$254	million,	or	5.7%,	increase	in	other	regional	operating	expenses.	The	average	price per	gallon	of	fuel	decreased	40.9%	to	$1.73	in	2015	from	$2.92	in	2014.	The	increase	in	other	regional	operating	expenses	was	principally	due	to increased	 flying	under	capacity	purchase	agreements.	See	Note	1	 to	American's	Consolidated	Financial	Statements	 in	Part	 II,	 Item	 8B	 for	 further information	on	regional	expenses.

|  | Year	Ended |  |  | Percent |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, |  | Increase | Increase |
|  | \t\t\t\t2015 | \t\t\t\t2014 | (Decrease) | (Decrease) |
|  | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) | (In\tmillions,\texcept\tpercentage\tchanges) |  |
| Interest\tincome | $49 | $32 | $17 | 51.7 |
| Interest\texpense,\tnet\tof\tcapitalized\tinterest | (796) | (847) | 51 | (6.1) |
| Other,\tnet | (774) | (183) | (591) | nm |
| Total\tnonoperating\texpense,\tnet | $(1,521) | $(998) | $(523) | 52.4 |

American's	short-term	investments	in	each	period	consisted	of	highly	liquid	investments	that	provided	nominal	returns.

In	2014,	other	nonoperating	expense,	net	primarily	included	$114	million	of	net	foreign	currency	losses,	including	a	$43	million	special	charge	for Venezuelan	foreign	currency	losses	and	$56	million	of	special	charges	primarily	due	to	early	debt	extinguishment	costs	related	to	the	prepayment	of American's	7.50%	senior	secured	notes	and	other	indebtedness.	The	foreign	currency	losses	in	2014	were	driven	primarily	by	the	strengthening	of	the U.S.	dollar	relative	to	other	currencies,	principally	in	the	Latin	American	market.

In	2014,	American	recorded	a	$320	million	provision	for	income	taxes,	which	included	$344	million	of	special	tax	charges.	During	2014,	American	sold its	portfolio	of	fuel	hedging	contracts	that	were	scheduled	to	settle	on	or	after	June	30,	2014.	As	a	result,	a	special	$328	million	non-cash	tax	provision was	recorded,	which	is	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.

# Liquidity	and	Capital	Resources

# Liquidity

As	 of	 December	 31,	 2016,	 AAG	 had	 approximately	 $8.8	 billion	 in	 total	 available liquidity	 and	 $638	 million in restricted	 cash	 and	 short-term investments.	Additional	detail	of	our	available	liquidity	is	provided	in	the	table	below	(in	millions):

|  | AAG | AAG | American | American |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, | December\t31, | December\t31, | December\t31, |
|  | 2016 | 2015 | 2016 | 2015 |
| Cash | $322 | $390 | $310 | $364 |
| Short-term\tinvestments. | \t 6,037 | \t 5,864 | \t 6,034 | 5,862 |
| Undrawn\trevolving\tcredit\tfacilities | \t 2,425 | \t 2,425 | \t 2,425 | 2,425 |
| Total\tavailable\tliquidity | $8,784 | $8,679 | $8,769 | $8,651 |

# Sources	and	Uses	of	Cash

# AAG	and	American

# Operating	Activities

AAG's	net	cash	provided	by	operating	activities	was	$6.5	billion	and	$6.2	billion	in	2016	and	2015,	respectively.	While	AAG's	profitability	was	lower	in 2016	 as	 compared	 to	 2015,	 cash	 provided	 by	 operating	 activities	 increased	 $275	 million	 driven	 by	 certain	 payments	 received	 related	 to	 our	 new co-branded	credit	card	agreements	that	became	effective	in	the	third	quarter	of	2016.

American's	net	cash	provided	by	operating	activities	was	$1.8	billion	and	$2.6	billion	in	2016	and	2015,	respectively,	a	year-over-year	decrease	of $837	million.	We	have	the	ability	to	move	funds	freely	between	our	subsidiaries	to	support	our	cash	requirements.	The	decline	in	American's	operating cash	flows	from	2016	to	2015	was	primarily	due	to	intercompany	transfers	of	cash	from	American	to	AAG	in	order	to	fund	higher	share	repurchases	in 2016.	Additionally,	in	2015,	American's	operating	cash	flows	included	the	proceeds	from	the	$500	million	issuance	of	AAG's	4.625%	senior	notes,	which also	contributed	to	the	year-over-year	decline	in	operating	cash	flows.	These	declines	were	offset	in	part	by	the	cash	payments	related	to	credit	card agreements	discussed	above.

# Investing	Activities

AAG's	net	cash	used	in	investing	activities	was	$5.7	billion	and	$5.6	billion	in	2016	and	2015,	respectively.	American's	net	cash	used	in	investing activities	was	$5.6	billion	in	each	of	2016	and	2015.

AAG	and	American's	principal	investing	activities	in	2016	each	included	expenditures	of	$5.7	billion	for	property	and	equipment,	primarily	97	newly delivered	aircraft,	including	25	Airbus	A321	aircraft,	24	Embraer	175	aircraft,	20	Boeing	737-800	aircraft,	18	Bombardier	CRJ900	aircraft,	eight	Boeing 787	aircraft	and	two	Boeing	777	aircraft.	We	also	had	net	purchases	of	$149	million	of	short-term	investments.

AAG	 and	American's	 principal	 investing	 activities	 in	 2015	 included	 expenditures	 of	 $6.2	 billion	 and	 $6.1	 billion,	 respectively,	 for	 property	 and equipment,	 primarily	 114	 newly	 delivered	 aircraft	 and	 eight	 spare	 engines,	 including	 38	Airbus	A320	 family	 aircraft,	 24	 Embraer	 175	 aircraft,	 20 Bombardier	CRJ900	aircraft,	17	Boeing	737-800	aircraft,	13	Boeing	787	aircraft	and	two	Boeing	777	aircraft	and	the	purchase	of	five	Boeing	757	aircraft previously	being	leased.	These	cash	outflows	were	offset	in	part	by	$391	million	in	net	sales	of	short-term	investments.

# Financing	Activities

AAG's	net	cash	used	 in	 financing	activities	was	$894	million	and	$1.3	billion in	2016	and	2015,	respectively.	American's	net	cash	provided	by financing	activities	was	$3.8	billion	and	$2.4	billion	in	2016	and	2015,	respectively.

AAG	and	American's	principal	financing	activities	in	2016	each	included	proceeds	of	$7.7	billion	from	the	issuance	of	debt,	including	the	$2.8	billion issuance	of	EETCs	by	American,	the	$2.3	billion	provided	under	the	April	2016	and	December	2016	Credit	Facilities,	the	issuance	of	$844	million	of special	facility	revenue	refunding	bonds	related	to	JFK	and	an	additional	$1.8	billion	borrowed	in	connection	with	the	financing	of	certain	aircraft.	These cash	inflows	were	offset	in	part	by	debt	repayments	of	$3.8	billion	by	AAG	and	American,	primarily	including	the	repayment	of	approximately	$588	million and	$970	million	in	remaining	principal	of	the	2013	Citicorp	Credit	Facility	Tranche	B-2	and	Tranche	 B-1	term	loans,	respectively,	and	the	refunding	of approximately	$1.0	billion	of	special	facility	revenue	bonds	related	to	JFK.	In	addition,	AAG	had	cash	outflows	of	$4.5	billion	in	share	repurchases	and $224	million	in	dividend	payments.

AAG	and	American's	principal	financing	activities	in	2015	included	proceeds	from	the	issuance	of	debt	of	$5.0	billion	and	$4.5	billion,	respectively, including	the	$2.3	billion	issuance	of	EETCs	by	American,	the	$500	million	issuance	of	4.625%	senior	notes	by	AAG	and	other	aircraft-related	financings. These	cash	inflows	were	offset	in	part	by	debt	repayments	of	$2.2	billion	by	AAG	and	American,	including	the	$400	million	repayment	of	American's AAdvantage	loan	with	Citibank.	In	addition,	AAG	had	cash	outflows	of	$3.8	billion	in	share	repurchases	and	$278	million	in	dividend	payments.

AAG's	net	cash	provided	by	operating	activities	was	$6.2	billion	and	$3.1	billion	in	2015	and	2014,	respectively.	The	increase	was	primarily	due	to increased	profitability	driven	by	substantially	lower	fuel	costs.	In	addition,	a	decrease	in	pension	contributions	from	$810	million	in	2014	to	$6	million	in 2015	contributed	to	increased	operating	cash	flows.	Our	2015	profitability	was	negatively	affected	by	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.

American's	net	cash	provided	by	operating	activities	was	$2.6	billion	in	each	of	2015	and	2014.	Cash	flows	were	generated	from	increased	profitability, driven	 by	 substantially	 lower	 fuel	 costs	 and	 a	 decrease	 in	 pension	 contributions,	 which	 were	 offset	 in	 part	 by	American's	 funding	 of	AAG's	 share repurchase	activities.	American's	2015	profitability	was	negatively	affected	by	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.

Net	cash	used	in	investing	activities	was	$5.6	billion	and	$2.9	billion	in	2015	and	2014,	respectively,	for	both	AAG	and	American.

AAG	 and	American's	 principal	 investing	 activities	 in	 2015	 included	 expenditures	 of	 $6.2	 billion	 and	 $6.1	 billion,	 respectively,	 for	 property	 and equipment,	 primarily	 114	 newly	 delivered	 aircraft	 and	 eight	 spare	 engines,	 including	 38	Airbus	A320	 family	 aircraft,	 24	 Embraer	 175	 aircraft,	 20 Bombardier	CRJ900	aircraft,	17	Boeing	737-800	aircraft,	13	Boeing	787	aircraft	and	two	Boeing	777	aircraft	and	five	Boeing	757	aircraft	previously	being leased.	These	cash	outflows	were	offset	in	part	by	$391	million	in	net	sales	of	short-term	investments.

AAG	and	American's	principal	investing	activities	in	2014	each	included	expenditures	of	$5.3	billion	for	property	and	equipment,	primarily	70	newly delivered	aircraft,	including	25	Airbus	A320	family	aircraft,	20	Boeing	737-800	aircraft,	16	Bombardier	CRJ900	aircraft,	six	Boeing	777	aircraft,	and	three Airbus	A330	aircraft,	the	purchase	of	aircraft	previously	leased,	including	nine	Airbus	A320	family	aircraft,	three	Airbus	A330	aircraft	and	three	Boeing	777 aircraft,	as	well	as	pre-delivery	deposits	for	certain	aircraft	on	order.	These	cash	outflows	were	offset	in	part	by	$1.8	billion	in	net	sales	of	short-term investments	and	$307	million	in	proceeds	from	the	sale	of	DCA	slots.

AAG's	net	cash	used	 in	 financing	activities	was	$1.3	billion	and	$315	million in	2015	and	2014,	respectively.	American's	net	cash	provided	by financing	activities	was	$2.4	billion	and	$143	million	in	2015	and	2014,	respectively.

AAG	and	American's	principal	financing	activities	in	2014	included	proceeds	from	the	issuance	of	debt	of	$3.3	billion	and	$2.6	billion,	respectively, including	the	$1.5	billion	issuance	of	EETCs	by	American,	$1.5	billion	of	proceeds	from	the	issuance	of	the	5.50%	senior	notes	by	AAG	and	the	term 71

loan	under	the	2014	Credit	Facilities,	as	well	as	$811	million	of	proceeds	from	sale-leaseback	transactions	related	to	the	financing	of	20	Boeing	737-800 aircraft.	These	cash	 inflows	were	offset	 in	part	by	debt	repayments	of	$3.1	billion	by	AAG	and	$3.0	billion	by	American,	 including	 the	$1.0	billion prepayment	of	American's	7.50%	senior	secured	notes	and	the	$366	million	prepayment	of	certain	airport	facility	revenue	bonds.	In	addition,	AAG	had cash	outflows	of	$1.1	billion	in	share	repurchases	and	$144	million	in	dividend	payments.

# Credit	Ratings

The	following	table	details	our	credit	ratings	as	of	December	31,	2016:

* The	credit	agency	does	not	rate	this	category	for	this	entity.

A	decrease	in	our	credit	ratings	could	cause	our	borrowing	costs	to	increase,	which	would	increase	our	interest	expense	and	could	affect	our	net income,	and	our	credit	ratings	could	adversely	affect	our	ability	to	obtain	additional	financing.	If	our	financial	performance	or	industry	conditions	worsen, we	may	face	future	downgrades,	which	could	negatively	impact	our	borrowing	costs	and	the	prices	of	our	equity	or	debt	securities.	In	addition,	any downgrade	of	our	credit	ratings	may	indicate	a	decline	in	our	business	and	in	our	ability	to	satisfy	our	obligations	under	our	indebtedness.

# Commitments

For	further	information	regarding	our	commitments,	see	the	Notes	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	the	Notes	to American's	Consolidated	Financial	Statements	in	Part	II,	Item	8B	at	the	referenced	footnotes	below.

# Off-Balance	Sheet	Arrangements

An	off-balance	sheet	arrangement	is	any	transaction,	agreement	or	other	contractual	arrangement	involving	an	unconsolidated	entity	under	which	a company	has	(1)	made	guarantees,	(2)	a	retained	or	a	contingent	interest	in	transferred	assets,	(3)	an	obligation	under	derivative	instruments	classified as	equity	or	(4)	any	obligation	arising	out	of	a	material	variable	interest	in	an	unconsolidated	entity	that	provides	financing,	liquidity,	market	risk	or	credit risk	support	to	us,	or	that	engages	in	leasing,	hedging	or	research	and	development	arrangements	with	us.

We	have	no	off-balance	sheet	arrangements	of	the	types	described	in	the	first	three	categories	above	that	we	believe	may	have	a	material	current	or future	effect	on	financial	condition,	liquidity	or	results	of	operations.	Certain	guarantees	that	we	do	not	expect	to	have	a	material	current	or	future	effect	on our	financial	condition,	liquidity	or	results	of	operations	are	disclosed	in	Note	11	to	AAG's	Consolidated	Financial	Statements	included	in	Part	II,	Item	8A and	Note	9	to	American's	Consolidated	Financial	Statements	in	Part	II,	Item	8B.

# Special	Facility	Revenue	Bonds

We	guarantee	the	payment	of	principal	and	interest	of	certain	special	facility	revenue	bonds	issued	by	municipalities	primarily	to	build	or	improve airport	facilities	and	purchase	equipment	which	are	leased	to	us.	Under	such	leases,	we	are	required	to	make	rental	payments	through	2035,	sufficient	to pay	maturing	principal	and	interest	payments	on	the	related	bonds.	As	of	December	31,	2016,	the	remaining	lease	payments	guaranteeing	the	principal and	interest	on	these	bonds	are	$605	million,	which	are	accounted	for	as	operating	leases.

# Pass-Through	Trusts

We	have	financed	certain	aircraft	and	engines	with	EETCs,	issued	by	pass-through	trusts.	These	trusts	are	 off-balance	sheet	entities,	the	primary purpose	of	which	is	to	finance	the	acquisition	of	flight	equipment.	Rather	than	finance	each	aircraft	separately	when	such	aircraft	is	purchased,	delivered or	refinanced,	these	trusts	allow	American	to	raise	the	financing	for	a	number	of	aircraft	at	one	time	and,	if	applicable,	place	such	funds	in	escrow pending	a	future	purchase,	delivery	or	refinancing	of	the	relevant	aircraft.	The	trusts	were	also	structured	to	provide	for	certain	credit	enhancements,	such as	liquidity	facilities	to	cover	certain	interest	payments,	that	reduce	the	risks	to	the	purchasers	of	the	trust	certificates	and,	as	a	result,	reduce	the	cost	of aircraft	financing	to	American.

Each	trust	covers	a	set	number	of	aircraft	scheduled	to	be	delivered	or	refinanced	upon	the	issuance	of	the	EETC	or	within	a	specific	period	of	time thereafter.	At	the	time	of	each	covered	aircraft	financing,	the	relevant	trust	used	the	proceeds	of	the	issuance	of	the	EETC	(which	may	have	been available	at	the	time	of	issuance	thereof	or	held	in	escrow	until	financing	of	the	applicable	aircraft	following	its	delivery)	to	purchase	equipment	notes relating	to	the	financed	aircraft.	The	equipment	notes	are	issued,	at	American's	election,	in	connection	with	a	mortgage	financing	of	the	aircraft	or,	in certain	cases,	by	a	separate	owner	trust	in	connection	with	a	leveraged	lease	financing	of	the	aircraft.	In	the	case	of	a	leveraged	lease	financing,	the owner	trust	then	leases	the	aircraft	to	American.	In	both	cases,	the	equipment	notes	are	secured	by	a	security	interest	in	the	aircraft.	The	pass-through trust	certificates	are	not	direct	obligations	of,	nor	are	they	guaranteed	by,	AAG	or	American.	However,	in	the	case	of	mortgage	financings,	the	equipment notes	 issued	 to	 the	 trusts	are	direct	obligations	of	American	and,	 in	certain	 instances,	have	been	guaranteed	by	AAG.	As	of	December	31,	2016, $10.9	billion	associated	with	these	mortgage	financings	is	reflected	as	debt	in	the	accompanying	consolidated	balance	sheet.

With	respect	to	leveraged	leases,	American	evaluated	whether	the	leases	had	characteristics	of	a	variable	interest	entity.	American	concluded	the leasing	entities	met	the	criteria	for	variable	interest	entities.	American	generally	is	not	the	primary	beneficiary	of	the	leasing	entities	if	the	lease	terms	are consistent	with	market	terms	at	the	inception	of	the	lease	and	do	not	include	a	residual	value	guarantee,	fixed-price	purchase	option	or	similar	feature that	obligates	American	to	absorb	decreases	in	value	or	entitles	American	to	participate	in	increases	in	the	value	of	the	aircraft.	American	does	not provide	residual	value	guarantees	to	the	bondholders	or	equity	participants	in	the	trusts.	Some	leases	have	a	fair	market	value	or	a	fixed	price	purchase option	that	allows	American	to	purchase	the	aircraft	at	or	near	the	end	of	the	lease	term.	However,	the	option	price	approximates	an	estimate	of	the aircraft's	fair	value	at	the	option	date.	Under	this	feature,	American	does	not	participate	in	any	increases	in	the	value	of	the	aircraft.	American	concluded it	is	not	the	primary	beneficiary	under	these	arrangements.	Therefore,	American	accounts	for	its	EETC	leveraged	lease	financings	as	operating	leases. American's	total	future	obligations	under	these	leveraged	lease	financings	are	$1.5	billion	as	of	December	31,	2016.

# Contractual	Obligations

The	following	table	provides	details	of	our	future	cash	contractual	obligations	as	of	December	31,	2016.	The	table	does	not	include	commitments	that are	contingent	on	events	or	other	factors	that	are	uncertain	or	unknown	at	this	time.

|  |  | 2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| American\t^(1) |  |  |  |  |  |  |  |  |
| Debt\tand\tcapital\tlease\tobligations\t^(2) | ,\t(4)\n\t(See\tNote\t3) | $1,899 | $1,954 | $2,008 | $3,416 | $2,679 | $10,837 | $ 22,793 |
| Interest\tobligations\t^(3)\n,\t(4) |  | 913 | 879 | 814 | 703 | 566 | 1,572 | 5,447 |
| Aircraft\tand\tengine\tpurchase\tcommitments\t^(5) | \t(See\tNote\t9) | 4,064 | \t 2,192 | 3,113 | 3,133 | 2,948 | 2,553 | 18,003 |
| Operating\tlease\tcommitments\t^(6) \t(See\tNote\t9) |  | 2,242 | \t 2,010 | 1,813 | 1,638 | 1,213 | 3,785 | 12,701 |
| Regional\tcapacity\tpurchase\tagreements\t^(7) \t(See\tNote\t9) | Regional\tcapacity\tpurchase\tagreements\t^(7) \t(See\tNote\t9) | 1,710 | \t 1,421 | 1,283 | 1,048 | 855 | 2,738 | 9,055 |
| Minimum\tpension\tobligations\t^(8) \t(See\tNote\t7) |  | 279 | 62 | 1,136 | 800 | 793 | 3,082 | 6,152 |
| Retiree\tmedical\tand\tother\tpostretirement\tbenefits\tand\tother |  |  |  |  |  |  |  |  |
| obligations\t^(8) \t(See\tNote\t7\tand\tNote\t9) |  | 483 | 388 | 229 | 126 | 98 | 320 | 1,644 |
| Total\tAmerican\tContractual\tObligations | Total\tAmerican\tContractual\tObligations | $11,590 | $8,906 | $10,396 | $10,864 | $9,152 | $24,887 | $ 75,795 |
| AAG\tParent\tand\tOther\tAAG\tSubsidiaries\t^(1) |  |  |  |  |  |  |  |  |
| Debt\tand\tcapital\tlease\tobligations\t^(2) | \t(See\tNote\t5) | $— | $500 | $750 | $506 | $2 | $22 | $1,780 |
| Interest\tobligations\t^(3) |  | 97 | 82 | 67 | 14 | 2 | 8 | 270 |
| Operating\tlease\tcommitments | Operating\tlease\tcommitments | 8 | 6 | 2 | 1 | 1 | 8 | 26 |
| Total\tAAG\tContractual\tObligations |  | $11,695 | $9,494 | $11,215 | $11,385 | $9,157 | $24,925 | $ 77,871 |

For	additional	information,	see	the	Notes	to	AAG's	and	American's	Consolidated	Financial	Statements	in	Part	II,	Items	8A	and	8B	referenced	in	the table	above.

Amounts	represent	contractual	amounts	due.	Excludes	$216	million	and	$13	million	of	unamortized	debt	discount,	debt	premium	and	debt	issuance costs	as	of	December	31,	2016	for	American	and	AAG,	respectively.

For	variable-rate	debt,	future	interest	obligations	are	estimated	using	the	current	forward	rates	at	December	31,	2016.

Includes	$10.9	billion	of	future	principal	payments	and	$2.6	billion	of	future	interest	payments,	respectively,	as	of	December	31,	2016,	related	to EETCs	associated	with	mortgage	financings	for	the	purchase	of	certain	aircraft.

See	Part	I,	Item	2.	Properties	–	"Aircraft	and	Engine	Purchase	Commitments"	for	additional	information	about	the	firm	commitment	aircraft	delivery schedule.

Includes	$1.5	billion	of	future	minimum	lease	payments	related	to	EETC	leverage	leased	financings	of	certain	aircraft	as	of	December	31,	2016.

Represents	minimum	payments	under	capacity	purchase	agreements	with	third-party	regional	carriers.	These	commitments	are	estimates	of	costs based	on	assumed	minimum	levels	of	flying	under	the	capacity	purchase	agreements	and	our	actual	payments	could	differ	materially.

Includes	minimum	pension	contributions	based	on	actuarially	determined	estimates	and	retiree	medical	and	other	postretirement	benefit	payments and	is	based	on	estimated	payments	through	2026.	The	total	pension	contribution	of	$279	million	in	2017	assumes	a	supplemental	contribution	of $254	million	in	addition	to	the	$25	million	minimum	required	contribution.	See	Note	9	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A and	Note	7	to	American's	Consolidated	Financial	Statements	in	Part	II,	Item	8B	for	additional	information	on	our	minimum	pension	obligations.

# Capital	Raising	Activity	and	Other	Possible	Actions

In	light	of	our	significant	financial	commitments	related	to,	among	other	things,	new	aircraft	and	the	servicing	and	amortization	of	existing	debt	and equipment	leasing	arrangements,	we	and	our	subsidiaries	will	regularly	consider,	and	enter	into	negotiations	related	to,	capital	raising	activity,	which	may include	the	entry	into	leasing	transactions	and	future	issuances	of	secured	or	unsecured	debt	obligations	or	additional	equity	securities	in	public	or	private offerings	or	otherwise.	The	cash	available	from	operations	and	these	sources,	however,	may	not	be	sufficient	to	cover	cash	contractual	obligations because	economic	factors	may	reduce	the	amount	of	cash	generated	by	operations	or	increase	costs.	For	instance,	an	economic	downturn	or	general global	instability	caused	by	military	actions,	terrorism,	disease	outbreaks	or	natural	disasters	could	reduce	the	demand	for	air	travel,	which	would	reduce the	amount	of	cash	generated	by	operations.	An	increase	in	costs,	either	due	to	an	increase	in	borrowing	costs	caused	by	a	reduction	in	credit	ratings	or a	general	increase	in	interest	rates,	or	due	to	an	increase	in	the	cost	of	fuel,	maintenance,	or	aircraft,	aircraft	engines	or	parts,	could	decrease	the	amount of	cash	available	 to	cover	cash	contractual	obligations.	Moreover,	certain	of	our	 financing	arrangements	contain	significant	minimum	cash	balance requirements.	As	a	result,	we	cannot	use	all	of	our	available	cash	to	fund	operations,	capital	expenditures	and	cash	obligations	without	violating	these requirements.	See	Note	5	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	Note	3	to	American's	Consolidated	Financial	Statements	in Part	II,	Item	8B	for	information	regarding	our	financing	arrangements.

In	the	past,	we	have	from	time	to	time	refinanced,	redeemed	or	repurchased	our	debt	and	taken	other	steps	to	reduce	or	otherwise	manage	the aggregate	amount	and	cost	of	our	debt	or	lease	obligations	or	otherwise	improve	our	balance	sheet.	Going	forward,	depending	on	market	conditions,	our cash	position	and	other	considerations,	we	may	continue	to	take	such	actions.

# Basis	of	Presentation

See	Note	1	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	Note	1	to	American's	Consolidated	Financial	Statements	in	Part	II, Item	8B	for	information	regarding	the	basis	of	presentation.

# Critical	Accounting	Policies	and	Estimates

The	preparation	of	financial	statements	in	accordance	with	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.	We	believe	our	estimates	and	assumptions	are	reasonable;	however,	actual	results	could	differ	from	those	estimates.	Critical	accounting policies	are	defined	as	those	that	are	reflective	of	significant	judgments	and	uncertainties	and	could	potentially	result	in	materially	different	results	under

different	assumptions	and	conditions.	We	have	identified	the	following	critical	accounting	policies	that	impact	the	preparation	of	our	consolidated	financial statements.	 See	 the	 "Basis	 of	 Presentation	 and	 Summary	 of	 Significant	Accounting	 Policies"	 included	 in	 Note	 1	 to	AAG's	 Consolidated	 Financial Statements	in	Part	II,	Item	8A	and	Note	1	to	American's	Consolidated	Financial	Statements	in	Part	II,	Item	8B	for	additional	discussion	of	the	application of	these	estimates	and	other	accounting	policies.

# Passenger	Revenue

Passenger	revenue	is	recognized	when	transportation	is	provided.	Ticket	sales	for	transportation	that	has	not	yet	been	provided	are	initially	deferred and	recorded	as	air	traffic	liability	on	the	consolidated	balance	sheets.	The	air	traffic	liability	represents	tickets	sold	for	future	travel	dates	and	estimated future	refunds	and	exchanges	of	tickets	sold	for	past	travel	dates.	The	balance	in	the	air	traffic	liability	fluctuates	throughout	the	year	based	on	seasonal travel	patterns	and	fare	sale	activity.	Our	air	traffic	liability	was	$3.9	billion	and	$3.7	billion	as	of	December	31,	2016	and	2015,	respectively.

The	majority	of	tickets	sold	are	nonrefundable.	A	small	percentage	of	tickets,	some	of	which	are	partially	used	tickets,	expire	unused.	Due	to	complex pricing	structures,	refund	and	exchange	policies,	and	interline	agreements	with	other	airlines,	certain	amounts	are	recognized	in	passenger	revenue	using estimates	regarding	both	the	timing	of	the	revenue	recognition	and	the	amount	of	revenue	to	be	recognized.	These	estimates	are	generally	based	on	the analysis	of	our	historical	data.	We	and	other	airline	industry	participants	have	consistently	applied	this	accounting	method	to	estimate	revenue	from forfeited	 tickets	 at	 the	 date	 of	 travel.	 Estimated	 future	 refunds	 and	 exchanges	 included	 in	 the	 air	 traffic	 liability	 are	 routinely	 evaluated	 based	 on subsequent	activity	to	validate	the	accuracy	of	our	estimates.	Any	adjustments	resulting	from	periodic	evaluations	of	the	estimated	air	traffic	liability	are included	in	passenger	revenue	during	the	period	in	which	the	evaluations	are	completed.

We	currently	operate	the	loyalty	program,	AAdvantage.	This	program	awards	mileage	credits	to	passengers	who	fly	on	American,	any	 oneworld	airline or	other	partner	airlines,	or	by	using	the	services	of	other	program	participants,	such	as	the	Citi	and	Barclaycard	US	co-branded	credit	cards,	hotels	and car	rental	companies.	Mileage	credits	can	be	redeemed	for	travel	on	American	or	other	participating	partner	airlines.

We	use	the	incremental	cost	method	to	account	for	the	portion	of	our	loyalty	program	liability	incurred	when	AAdvantage	members	earn	mileage credits	by	flying	on	American,	any	oneworld	airline	or	other	partner	airlines.	We	have	an	obligation	to	provide	future	travel	when	these	mileage	credits	are redeemed	and	therefore	have	recorded	a	liability	for	mileage	credits	outstanding.

The	 incremental	cost	 liability	 includes	all	mileage	credits,	even	mileage	credits	 for	members	whose	account	balances	have	not	yet	reached	 the minimum	level	required	to	redeem	an	award.	Mileage	credits	are	subject	to	expiration.	The	liability	for	outstanding	mileage	credits	is	valued	based	on	the estimated	incremental	cost	of	carrying	one	additional	passenger.	The	estimated	incremental	cost	primarily	includes	unit	costs	incurred	for	fuel,	food	and insurance	as	well	as	fees	incurred	when	travel	awards	are	redeemed	on	partner	airlines.	In	calculating	the	liability,	we	estimate	how	many	mileage	credits will	never	be	redeemed	for	travel	and	exclude	those	mileage	credits	from	the	estimate	of	the	liability.	Estimates	are	also	made	for	the	number	of	miles that	will	be	used	per	award	redemption	and	the	number	of	travel	awards	that	will	be	redeemed	on	partner	airlines.	These	costs	and	estimates	are	based on	 our	 historical	 program	 experience	 as	 well	 as	 consideration	 of	 enacted	 program	 changes,	 as	 applicable.	 Changes	 in	 the	 liability	 resulting	 from members	earning	additional	mileage	credits	or	changes	in	estimates	are	recorded	in	the	consolidated	statements	of	operations	as	a	part	of	passenger revenue.

As	of	December	31,	2016	and	2015,	the	liability	for	outstanding	mileage	credits	accounted	for	under	the	incremental	cost	method	was	$669	million and	$657	million,	respectively,	and	is	included	on	the	consolidated	balance	sheets	within	loyalty	program	liability.

A	change	to	certain	estimates	used	in	the	calculation	of	incremental	cost	could	have	a	material	impact	on	the	liability.	A	one	percentage	point	increase or	 decrease	 in	 the	 percentage	 of	 travel	 awards	 redeemed	 on	 partner	 airlines	 would	 have	 an	 approximate	 $38	 million	 impact	 on	 the	 liability	 as	 of December	31,	2016.	A	10%	increase	or	decrease	in	the	assumed	price	per	gallon	of	fuel	would	have	an	approximate	$9	million	impact	on	the	liability	as of	December	31,	2016.

Additionally,	we	applied	the	acquisition	method	of	accounting	in	connection	with	the	Merger	in	December	2013	and	recorded	a	liability	for	outstanding US	Airways'	mileage	credits	at	fair	value,	an	amount	significantly	in	excess	of	incremental	cost.	At	December	31,	2016,	all	the	mileage	credits	associated with	this	liability	have	been	recognized	in	passenger	revenue.	At	December	31,	2015,	this	liability	was	$296	million	and	was	included	on	the	consolidated balance	sheet	within	the	loyalty	program	liability.

We	also	sell	loyalty	program	mileage	credits	to	participating	airline	partners	and	 non-airline	business	partners.	Sales	of	mileage	credits	to	non-airline business	partners	is	comprised	of	two	components,	transportation	and	marketing.	We	account	for	mileage	sales	under	our	agreements	with	non-airline business	 partners	 in	 accordance	 with	Accounting	 Standards	 Update	 (ASU)	No.	2009-13,	 "Revenue	 Recognition	 (Topic	 605)	 –	 Multiple-Deliverable Revenue	Arrangements."	In	accordance	with	Topic	605,	we	allocate	the	consideration	received	from	the	sale	of	mileage	credits	based	on	the	relative selling	price	of	each	product	or	service	delivered.

In	2016,	American	entered	into	new	 co-branded	credit	card	program	agreements	with	Citi	and	Barclaycard	US.	We	identified	the	following	revenue elements	in	these	co-branded	credit	card	agreements:	the	transportation	component;	the	use	of	the	American	brand	including	access	to	loyalty	program member	lists,	advertising	and	other	travel	related	benefits	(collectively,	the	marketing	component).

The	transportation	component	represents	the	estimated	selling	price	of	future	travel	awards	and	is	determined	using	historical	transaction	information, including	 information	 related	 to	 customer	 redemption	 patterns.	The	 transportation	 component	 is	 deferred	 based	 on	 its	 relative	 selling	 price	 and	 is amortized	into	passenger	revenue	on	a	straight-line	basis	over	the	period	in	which	the	mileage	credits	are	expected	to	be	redeemed	for	travel.	As	of December	31,	2016	and	2015,	we	had	$2.1	billion	and	$1.5	billion,	respectively,	in	deferred	revenue	from	the	sale	of	mileage	credits	recorded	within loyalty	program	liability	on	our	consolidated	balance	sheets.

A	change	to	certain	estimates	used	in	the	allocation	of	consideration	received	from	the	sale	of	mileage	credits	could	have	a	material	impact	on	the liability.	A	10%	increase	or	decrease	in	the	relative	selling	price	of	the	transportation	component	would	have	an	approximate	$81	million	impact	on	the liability	as	of	December	31,	2016.

The	services	under	the	marketing	component	are	provided	periodically,	but	no	less	than	monthly.	Accordingly,	the	marketing	component	is	considered earned	and	recognized	in	other	revenues	in	the	period	of	the	mileage	sale.	For	the	years	ended	December	31,	2016,	2015	and	2014,	the	marketing component	of	mileage	sales	and	other	marketing	related	payments	included	in	other	revenues	was	approximately	$1.9	billion,	$1.7	billion	and	$1.6	billion, respectively.

# Long-lived	Assets

Long-lived	assets	consist	of	flight	equipment,	as	well	as	other	fixed	assets	and	finite-lived	intangible	assets	such	as	certain	domestic	airport	slots, customer	relationships,	marketing	agreements,

tradenames	and	airport	gate	leasehold	rights.	In	addition	to	the	original	cost,	the	recorded	value	of	our	fixed	assets	is	impacted	by	a	number	of	estimates made,	including	estimated	useful	lives,	salvage	values	and	our	determination	as	to	whether	aircraft	are	temporarily	or	permanently	grounded.	Finite-lived intangible	assets	are	originally	recorded	at	their	acquired	fair	values	and	are	subsequently	amortized	over	their	estimated	useful	lives.	See	Note	1	to AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	Note	1	to	American's	Consolidated	Financial	Statements	in	Part	II,	Item	8B	for	further information.

We	record	impairment	charges	on	long-lived	assets	used	in	operations	when	events	and	circumstances	indicate	that	the	assets	may	be	impaired.	An asset	or	group	of	assets	is	considered	impaired	when	the	undiscounted	cash	flows	estimated	to	be	generated	by	the	assets	are	less	than	the	carrying amount	of	the	assets	and	the	net	book	value	of	the	assets	exceeds	their	estimated	fair	value.

If	such	assets	are	considered	to	be	impaired,	the	impairment	to	be	recognized	is	measured	by	the	amount	by	which	the	carrying	amount	of	the	assets exceeds	the	fair	value	of	the	assets.	Estimates	of	fair	value	represent	management's	best	estimate	based	on	appraisals,	industry	trends	and	reference	to market	rates	and	transactions.

The	majority	of	American's	fleet	types	are	depreciated	over	 25-30	years.	It	is	possible	that	the	ultimate	lives	of	our	aircraft	will	be	significantly	different than	the	current	estimate	due	to	unforeseen	events	in	the	future	that	impact	our	fleet	plan,	including	positive	or	negative	developments	in	the	areas described	above.	For	example,	operating	the	aircraft	for	a	longer	period	will	result	in	higher	maintenance,	fuel	and	other	operating	costs	than	if	we replaced	the	aircraft.

# Goodwill	and	Indefinite-lived	Assets

Goodwill	represents	the	excess	of	the	purchase	price	over	the	fair	value	of	the	net	assets	acquired	and	liabilities	assumed.	Goodwill	is	not	amortized but	assessed	for	impairment	annually	on	October	1 	or	more	frequently	if	events	or	circumstances	indicate	that	goodwill	may	be	impaired.	We	have	one consolidated	reporting	unit. Indefinite-lived	intangible	assets	other	than	goodwill	include	certain	domestic	airport	slots	at	our	hubs	and	international	slots	and	route	authorities. Indefinite-lived	intangible	assets	are	not	amortized	but	instead	are	assessed	for	impairment	annually	on	October	1 	or	more	frequently	if	events	or circumstances	indicate	that	the	asset	may	be	impaired. st st

Goodwill	and	indefinite-lived	intangible	assets	are	measured	for	impairment	by	initially	performing	a	qualitative	assessment.	Under	the	qualitative approach,	we	analyze	the	following	factors	to	determine	if	events	and	circumstances	have	affected	the	fair	value	of	goodwill	and	indefinite-lived	intangible assets:	(1)	negative	trends	in	our	market	capitalization,	(2)	an	increase	in	fuel	prices,	(3)	declining	per	mile	passenger	yields,	(4)	lower	passenger demand	as	a	result	of	a	weakened	U.S.	and	global	economy	and	(5)	changes	to	the	regulatory	environment.

If	we	determine	that	it	is	more	likely	than	not	that	the	asset	value	may	be	impaired,	we	use	the	quantitative	approach	to	assess	the	asset's	fair	value and	the	amount	of	the	impairment.	Under	the	quantitative	approach,	we	calculate	the	fair	value	of	the	asset	using	the	following	assumptions:	(1)	our projected	revenues,	expenses	and	cash	flows,	(2)	an	estimated	weighted	average	cost	of	capital,	(3)	assumed	discount	rates	depending	on	the	asset, (4)	a	tax	rate	and	(5)	market	prices	for	comparable	assets.	These	assumptions	are	consistent	with	those	which	hypothetical	market	participants	would use.	If	the	asset's	carrying	value	exceeds	its	fair	value	calculated	using	the	quantitative	approach,	we	will	record	an	impairment	charge	for	the	difference in	fair	value	and	carrying	value.

Based	upon	our	annual	assessment,	there	were	no	impairments	of	our	goodwill	and	indefinite-lived	assets	in	2016.

# Pensions	and	Retiree	Medical	and	Other	Postretirement	Benefits

We	recognize	the	funded	status	(i.e.	the	difference	between	the	fair	value	of	plan	assets	and	the	projected	benefit	obligations)	of	our	pension	and retiree	 medical	 and	 other	 postretirement	 benefits	 plans	 in	 the	 consolidated	 balance	 sheets	 with	 a	 corresponding	 adjustment	 to	 accumulated	 other comprehensive	income	(loss).

Our	 pension	 and	 retiree	 medical	 and	 other	 postretirement	 benefits	 costs	 and	 liabilities	 are	 calculated	 using	 various	 actuarial	 assumptions	 and methodologies.	We	use	certain	assumptions	including,	but	not	limited	to,	the	selection	of	 the:	(i)	discount	rate;	(ii)	expected	return	on	plan	assets; (iii)	expected	health	care	cost	trend	rate	and	(iv)	the	estimated	age	of	pilot	retirement	(as	discussed	below).	These	assumptions	as	of	December	31	were:

|  |  | 2016 | 2015 |
| :--- | :--- | :--- | :--- |
| Pension\tweighted\taverage\tdiscount\trate\t^(1) | Pension\tweighted\taverage\tdiscount\trate\t^(1) | \t4.30% | \t4.70% |
| Retiree\tmedical\tand\tother\tpostretirement\tbenefits\tweighted\taverage\tdiscount\trate | (1) | \t4.10% | \t4.42% |
| Expected\trate\tof\treturn\ton\tplan\tassets\t^(2)\nWeighted\taverage\thealth\tcare\tcost\ttrend\trate\tassumed\tfor\tnext\tyear\n:\n(3) | Expected\trate\tof\treturn\ton\tplan\tassets\t^(2)\nWeighted\taverage\thealth\tcare\tcost\ttrend\trate\tassumed\tfor\tnext\tyear\n:\n(3) | \t8.00% | \t8.00% |
| Initial | Initial | \t4.25% | \t5.21% |
| Ultimate\t(2024) |  | \t3.77% | \t4.56% |
| Pilot\tRetirement\tAge | Pilot\tRetirement\tAge | 62 | 62 |

When	establishing	our	discount	rate	to	measure	our	obligations,	we	match	high	quality	corporate	bonds	available	in	the	marketplace	whose	cash flows	approximate	our	projected	benefit	disbursements.	Lowering	the	discount	rate	by	50	basis	points	as	of	December	31,	2016	would	increase	our pension	and	retiree	medical	and	other	postretirement	benefits	obligations	by	approximately	$1.2	billion	and	$44	million,	respectively,	and	increase estimated	 2017	 pension	 expense	 by	 $4	 million	 and	 decrease	 estimated	 2017	 retiree	 medical	 and	 other	 postretirement	 benefits	 expense	 by $1	million.

The	expected	rate	of	return	on	plan	assets	is	based	upon	an	evaluation	of	our	historical	trends	and	experience,	taking	into	account	current	and expected	market	conditions	and	our	target	asset	allocation	of	30%	U.S.	stocks,	22%	developed	international	stocks,	20%	long	duration	corporate and	U.S.	government/agency	bonds,	20%	alternative	(private)	investments	and	8%	emerging	market	stocks.	The	expected	rate	of	return	on	plan assets	component	of	our	net	periodic	benefit	cost	is	calculated	based	on	the	fair	value	of	plan	assets	and	our	target	asset	allocation.	Lowering	the expected	long-term	rate	of	return	on	plan	assets	by	50	basis	points	as	of	December	31,	2016	would	increase	estimated	2017	pension	expense	and retiree	medical	and	other	postretirement	benefits	expense	by	approximately	$51	million	and	$1	million,	respectively.

The	assumed	health	care	cost	trend	rate	is	based	upon	an	evaluation	of	our	historical	trends	and	experience,	taking	into	account	current	and expected	market	conditions.	Increasing	the	assumed	health	care	cost	trend	rate	by	100	basis	points	would	increase	estimated	2017	retiree	medical and	other	postretirement	benefits	expense	by	$5	million.

During	2016,	we	revised	our	mortality	assumptions	to	incorporate	the	new	mortality	improvement	scale	issued	by	the	Society	of	Actuaries.	This resulted	in	a	decrease	in	the	projected	benefit	obligations	of	our	pension	and	retiree	medical	and	other	postretirement	benefits	plans	of	$146	million	and $5	million,	respectively.	We	also	reviewed	and	revised	certain	other	economic	and	demographic	assumptions	including	the	pension	and	retiree	medical and	other	postretirement	benefits	discount	rates

and	health	care	cost	and	trend	rates.	The	net	effect	of	changing	these	assumptions	for	the	pension	plans	resulted	in	an	increase	of	$891	million	in	the projected	benefit	obligation	at	December	31,	2016.	The	net	effect	of	changing	these	assumptions	for	retiree	medical	and	other	postretirement	benefits plans	resulted	in	a	decrease	of	$65	million	in	the	projected	benefit	obligation	at	December	31,	2016.

See	Note	9	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	Note	7	to	American's	Consolidated	Financial	Statements	in	Part	II, Item	8B	for	additional	information	regarding	our	employee	benefit	plans.

Income	 taxes	 are	 accounted	 for	 under	 the	 asset	 and	 liability	 method.	 Deferred	 tax	 assets	 and	 liabilities	 are	 recognized	 for	 the	 future	 tax consequences	attributable	to	differences	between	the	financial	statement	carrying	amounts	of	existing	assets	and	liabilities	and	their	respective	tax	bases and	operating	loss	and	tax	credit	carryforwards.	Deferred	tax	assets	and	liabilities	are	recorded	net	as	noncurrent	deferred	income	taxes.

We	provide	a	valuation	allowance	for	our	deferred	tax	assets	when	it	is	more	likely	than	not	that	some	portion,	or	all	of	our	deferred	tax	assets,	will	not be	realized.	The	ultimate	realization	of	deferred	tax	assets	is	dependent	upon	the	generation	of	future	taxable	income.	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	projections	of	future	profitability,	including	risks	associated	with	remaining	Merger	integration	activities	as	well	as	other	conditions	which	are	beyond our	control,	such	as	the	health	of	the	economy,	the	level	and	volatility	of	fuel	prices	and	travel	demand.

In	connection	with	the	preparation	of	our	financial	statements	at	the	end	of	2015,	we	determined	that	after	considering	all	positive	and	negative evidence,	including	the	completion	of	certain	critical	Merger	integration	milestones	as	well	as	our	financial	performance,	it	was	more	likely	than	not	that substantially	all	of	our	deferred	income	tax	assets,	which	include	our	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	the	consolidated	statement	of	operations	for	2015.

# Recent	Accounting	Pronouncements

In	May	2014,	the	Financial	Accounting	Standards	Board	(FASB)	issued	ASU	 2014-09,	"Revenue	from	Contracts	with	Customers	(Topic	606)."	ASU 2014-09	completes	the	joint	effort	by	the	FASB	and	International	Accounting	Standards	Board	(IASB)	to	improve	financial	reporting	by	creating	common revenue	recognition	guidance	for	GAAP	and	International	Financial	Reporting	Standards	(IFRS).	Subsequently,	the	FASB	has	issued	several	additional ASUs	to	clarify	the	implementation.	The	new	revenue	standard	applies	to	all	companies	that	enter	into	contracts	with	customers	to	transfer	goods	or services	and	is	effective	for	public	entities	for	interim	and	annual	reporting	periods	beginning	after	December	15,	2017.	Early	adoption	is	permitted; however,	we	currently	expect	to	adopt	the	new	revenue	standard	effective	January	1,	2018.	Entities	have	the	choice	to	apply	the	new	revenue	standard either	retrospectively	to	each	reporting	period	presented	or	by	recognizing	the	cumulative	effect	of	applying	the	new	revenue	standard	at	the	date	of	initial application	and	not	adjusting	comparative	information.	We	currently	expect	to	adopt	the	new	revenue	standard	using	the	full	retrospective	method.

We	are	still	in	the	process	of	evaluating	how	the	adoption	of	the	new	revenue	standard	will	impact	our	consolidated	financial	statements.	We	currently expect	that	the	new	revenue	standard	will

materially	impact	our	liability	for	outstanding	mileage	credits	earned	by	AAdvantage	loyalty	program	members	when	flying	on	American.	We	currently	use the	incremental	cost	method	to	account	for	this	portion	of	our	loyalty	program	 liability,	which	values	 these	mileage	credits	based	on	 the	estimated incremental	cost	of	carrying	one	additional	passenger	(see	Note	1	(i)	Loyalty	Program	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and Note	1	(i)	Loyalty	Program	to	American's	Consolidated	Financial	Statements	in	Part	II,	Item	8B).	The	new	revenue	standard	will	require	us	to	change	our policy	and	apply	a	relative	selling	price	approach	whereby	a	portion	of	each	passenger	ticket	sale	attributable	to	mileage	credits	earned	will	be	deferred and	recognized	in	passenger	revenue	upon	future	mileage	redemption.	The	carrying	value	of	the	earned	mileage	credits	recognized	in	loyalty	program liability	 is	 expected	 to	 be	 materially	 greater	 under	 the	 relative	 selling	 price	 approach	 than	 the	 value	 attributed	 to	 these	 mileage	 credits	 under	 the incremental	cost	method.	The	new	revenue	standard	will	also	require	us	to	reclassify	certain	ancillary	fees	to	passenger	revenue,	which	are	currently included	within	other	operating	revenue.

# Leases

In	 February	 2016,	 the	 FASB	 issued	 ASU	 2016-02,	 "Leases	 (Topic	 842)."	 ASU	 2016-02	 requires	 lessees	 to	 recognize	 a	 lease	 liability	 and	 a right-of-use	asset	on	 the	balance	sheet	and	aligns	many	of	 the	underlying	principles	of	 the	new	 lessor	model	with	 those	 in	Accounting	Standards Codification	Topic	606,	Revenue	from	Contracts	with	Customers.	ASU	2016-02	is	effective	for	fiscal	years	beginning	after	December	15,	2018,	including interim	periods	within	those	fiscal	years.	Early	adoption	is	permitted.	Entities	are	required	to	adopt	the	new	lease	standard	using	a	modified	retrospective approach	for	all	leases	existing	at	or	commencing	after	the	date	of	initial	application	with	an	option	to	use	certain	practical	expedients.	We	are	currently evaluating	how	the	adoption	of	the	new	lease	standard	will	impact	our	consolidated	financial	statements.	Interpretations	are	on-going	and	could	have	a material	impact	on	our	implementation.	Currently,	we	expect	that	the	adoption	of	the	new	lease	standard	will	have	a	material	impact	on	our	consolidated balance	sheet	due	to	the	recognition	of	right-of-use	assets	and	lease	liabilities	principally	for	certain	leases	currently	accounted	for	as	operating	leases.

See	Note	1	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	Note	1	to	American's	Consolidated	Financial	Statements	in	Part	II,	Item 8B	for	further	information	on	recent	accounting	pronouncements.

# ITEM	7A.	QUANTITATIVE	AND	QUALITATIVE	DISCLOSURES	ABOUT	MARKET	RISK

The	risk	inherent	in	our	market	risk	sensitive	instruments	and	positions	is	the	potential	loss	arising	from	adverse	changes	in	the	price	of	fuel,	foreign currency	exchange	rates	and	 interest	rates	as	discussed	below.	The	sensitivity	analyses	presented	do	not	consider	 the	 effects	 that	 such	 adverse changes	 may	 have	 on	 overall	 economic	 activity,	 nor	 do	 they	 consider	 additional	 actions	 we	 may	 take	 to	 mitigate	 our	 exposure	 to	 such	 changes. Therefore,	actual	results	may	differ.	See	Note	7	to	AAG's	Consolidated	Financial	Statements	in	Part	II,	Item	8A	and	Note	5	to	American's	Consolidated Financial	Statements	in	Part	II,	Item	8B	for	additional	discussion	regarding	risk	management	matters.

Our	operating	results	are	materially	impacted	by	changes	in	the	availability,	price	volatility	and	cost	of	aircraft	fuel,	which	represents	one	of	the	largest single	cost	items	in	our	business.	Because	of	the	amount	of	fuel	needed	to	operate	our	airlines,	even	a	relatively	small	increase	or	decrease	in	the	price of	fuel	can	have	a	material	effect	on	our	costs	and	liquidity.	Jet	fuel	market	prices	have	fluctuated	substantially	over	the	past	several	years	with	market spot	prices	ranging	from	a	low	of	approximately	$0.80	per	gallon	to	a	high	of	approximately	$3.34	per	gallon	during	the	period	from	January	1,	2012	to December	31,	2016.

As	of	December	31,	2016,	we	did	not	have	any	fuel	hedging	contracts	outstanding	to	hedge	our	fuel	consumption.	As	such,	and	assuming	we	do	not enter	into	any	future	transactions	to	hedge	our	fuel	consumption,	we	will	continue	to	be	fully	exposed	to	fluctuations	in	fuel	prices.	Our	current	policy	is not	to	enter	into	transactions	to	hedge	our	fuel	consumption,	although	we	review	that	policy	from	time	to	time	based	on	market	conditions	and	other factors.	Our	2017	forecasted	mainline	and	regional	fuel	consumption	is	approximately	4.3	billion	gallons,	and	based	on	this	forecast,	a	one	cent	per	gallon increase	in	aviation	fuel	price	would	result	in	a	$43	million	increase	in	annual	expense.

# Foreign	Currency

We	are	exposed	to	the	effect	of	foreign	exchange	rate	fluctuations	on	the	U.S.	dollar	value	of	foreign	currency-denominated	operating	revenues	and expenses.	Our	largest	exposure	comes	from	the	British	pound,	Euro,	Canadian	dollar	and	various	Latin	American	currencies,	primarily	the	Brazilian	real. We	do	not	currently	have	a	foreign	currency	hedge	program.	A	uniform	10%	relative	strengthening	in	the	value	of	the	U.S.	dollar	from	2016	levels	relative to	 each	 of	 the	 currencies	 in	 which	 we	 have	 foreign	 currency	 exposure	 would	 have	 resulted	 in	 an	 increase	 in	 total	 nonoperating	 expense,	 net	 of approximately	$193	million	for	the	year	ended	December	31,	2016,	and	does	not	address	any	exposure	to	foreign	currency	held	on	our	consolidated balance	sheet.

Generally,	fluctuations	in	foreign	currencies,	including	devaluations,	cannot	be	predicted	by	us	and	can	significantly	affect	the	value	of	our	assets 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	our	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	additional	discussion	of	this	and	other	currency	risks.

# Interest

Our	earnings	and	cash	flow	are	also	affected	by	changes	in	interest	rates	due	to	the	impact	those	changes	have	on	our	interest	income	from	short- term	investments,	and	our	interest	expense	from	variable-rate	debt	instruments.

Our	largest	exposure	with	respect	to	variable	rate	debt	comes	from	changes	in	the	London	Interbank	Offered	Rate	(LIBOR).	We	had	variable	rate	debt instruments	representing	approximately	40%	of	our	total	long-term	debt	at	December	31,	2016	for	both	AAG	and	American.	We	currently	do	not	have	an interest	rate	hedge	program.	 If	 interest	rates	had	 increased	100	basis	points	 in	2016,	 interest	expense	on	variable-rate	debt	 for	2016	would	have increased	 by	 approximately	 $96	 million	 and	 the	 fair	 value	 of	 fixed-rate	 debt	 would	 have	 decreased	 by	 approximately	 $708	 million	 for	 AAG	 and $668	million	for	American	at	December	31,	2016. 83

# ITEM	8A.	CONSOLIDATED	FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY	DATA	OF	AMERICAN	AIRLINES	GROUP	INC.

# Report	of	Independent	Registered	Public	Accounting	Firm

# The	Board	of	Directors	and	Stockholders

We	have	audited	the	accompanying	consolidated	balance	sheets	of	American	Airlines	Group	Inc.	and	subsidiaries	(the	Company)	as	of	December	31, 2016	and	2015,	and	the	related	consolidated	statements	of	operations,	comprehensive	income,	cash	flows,	and	stockholders'	equity	(deficit)	for	each	of the	 years	 in	 the	 three-year	 period	 ended	 December	 31,	 2016.	 These	 consolidated	 financial	 statements	 are	 the	 responsibility	 of	 the	 Company's management.	Our	responsibility	is	to	express	an	opinion	on	these	consolidated	financial	statements	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement.	An	audit includes	examining,	on	a	test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements.	An	audit	also	includes	assessing	the accounting	principles	used	and	significant	estimates	made	by	management,	as	well	as	evaluating	the	overall	financial	statement	presentation.	We	believe that	our	audits	provide	a	reasonable	basis	for	our	opinion.

In	our	opinion,	the	consolidated	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	financial	position	of	American	Airlines Group	Inc.	and	subsidiaries	as	of	December	31,	2016	and	2015,	and	the	results	of	their	operations	and	their	cash	flows	for	each	of	the	years	in	the	three- year	period	ended	December	31,	2016,	in	conformity	with	U.S.	generally	accepted	accounting	principles.

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	Company's	internal control	over	financial	reporting	as	of	December	31,	2016,	based	on	criteria	established	in	Internal	Control	–	Integrated	Framework	(2013)	issued	by	the Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO),	and	our	report	dated	February	22,	2017	expressed	an	unqualified	opinion on	the	effectiveness	of	the	Company's	internal	control	over	financial	reporting.

Dallas,	Texas

# CONSOLIDATED	STATEMENTS	OF	OPERATIONS

# (In	millions,	except	shares	and	per	share	amounts)

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Operating\trevenues: |  |  |  |
| Mainline\tpassenger | $27,909 | $29,037 | $30,802 |
| Regional\tpassenger | 6,670 | 6,475 | 6,322 |
| Cargo | 700 | 760 | 875 |
| Other | 4,901 | 4,718 | 4,651 |
| Total\toperating\trevenues | 40,180 | 40,990 | 42,650 |
| Operating\texpenses: |  |  |  |
| Aircraft\tfuel\tand\trelated\ttaxes | 5,071 | 6,226 | 10,592 |
| Salaries,\twages\tand\tbenefits | 10,890 | 9,524 | 8,508 |
| Regional\texpenses | 6,044 | 5,983 | 6,516 |
| Maintenance,\tmaterials\tand\trepairs | 1,834 | 1,889 | 2,051 |
| Other\trent\tand\tlanding\tfees | 1,772 | 1,731 | 1,727 |
| Aircraft\trent | 1,203 | 1,250 | 1,250 |
| Selling\texpenses | 1,323 | 1,394 | 1,544 |
| Depreciation\tand\tamortization | 1,525 | 1,364 | 1,295 |
| Special\titems,\tnet | 709 | 1,051 | 800 |
| Other | 4,525 | 4,374 | 4,118 |
| Total\toperating\texpenses | 34,896 | 34,786 | 38,401 |
| Operating\tincome | 5,284 | 6,204 | 4,249 |
| Nonoperating\tincome\t(expense): |  |  |  |
| Interest\tincome | 63 | 39 | 31 |
| Interest\texpense,\tnet\tof\tcapitalized\tinterest | (991) | (880) | (887) |
| Other,\tnet | (57) | (747) | (181) |
| Total\tnonoperating\texpense,\tnet | (985) | (1,588) | (1,037) |
| Income\tbefore\tincome\ttaxes | 4,299 | 4,616 | 3,212 |
| Income\ttax\tprovision\t(benefit) | 1,623 | (2,994) | 330 |
| Net\tincome | $2,676 | $7,610 | $2,882 |
| Earnings\tper\tcommon\tshare: |  |  |  |
| Basic | $4.85 | $11.39 | $4.02 |
| Diluted | $4.81 | $11.07 | $3.93 |
| Weighted\taverage\tshares\toutstanding\t(in\tthousands): |  |  |  |
| Basic | \t 552,308 | \t 668,393 | \t 717,456 |
| Diluted | \t 556,099 | \t 687,355 | \t 734,016 |
| Cash\tdividends\tdeclared\tper\tcommon\tshare | $0.40 | $0.40 | $0.20 |

See	accompanying	notes	to	consolidated	financial	statements.

# CONSOLIDATED	STATEMENTS	OF	COMPREHENSIVE	INCOME

# (In	millions)

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Net\tincome | $2,676 | $7,610 | $2,882 |
| Other\tcomprehensive\tincome\t(loss),\tnet\tof\ttax: |  |  |  |
| Pension,\tretiree\tmedical\tand\tother\tpostretirement\tbenefits: |  |  |  |
| Amortization\tof\tactuarial\tloss\tand\tprior\tservice\tcost | (65) | (108) | (163) |
| Current\tyear\tchange | (293) | (51) | (2,633) |
| Derivative\tfinancial\tinstruments: |  |  |  |
| Change\tin\tfair\tvalue | — | — | (54) |
| Reclassification\tinto\tearnings | — | (9) | (4) |
| Unrealized\tgain\t(loss)\ton\tinvestments: |  |  |  |
| Net\tchange\tin\tvalue | 7 | (5) | (3) |
| Reversal\tof\tnon-cash\ttax\tbenefit | — | — | 330 |
| Total\tother\tcomprehensive\tloss,\tnet\tof\ttax | (351) | (173) | (2,527) |
| Total\tcomprehensive\tincome | $2,325 | $7,437 | $355 |

# CONSOLIDATED	BALANCE	SHEETS

# (In	millions,	except	shares	and	par	value)

|  | 2016 | 2015 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Current\tassets |  |  |
| Cash | $322 | $390 |
| Short-term\tinvestments | 6,037 | 5,864 |
| Restricted\tcash\tand\tshort-term\tinvestments | 638 | 695 |
| Accounts\treceivable,\tnet | 1,594 | 1,425 |
| Aircraft\tfuel,\tspare\tparts\tand\tsupplies,\tnet | 1,094 | 863 |
| Prepaid\texpenses\tand\tother | 639 | 748 |
| Total\tcurrent\tassets | 10,324 | 9,985 |
| Operating\tproperty\tand\tequipment |  |  |
| Flight\tequipment | 37,028 | 33,185 |
| Ground\tproperty\tand\tequipment | 7,116 | 6,402 |
| Equipment\tpurchase\tdeposits | 1,209 | 1,067 |
| Total\tproperty\tand\tequipment,\tat\tcost | 45,353 | 40,654 |
| Less\taccumulated\tdepreciation\tand\tamortization | (14,194) | (13,144) |
| Total\tproperty\tand\tequipment,\tnet | 31,159 | 27,510 |
| Other\tassets |  |  |
| Goodwill | 4,091 | 4,091 |
| Intangibles,\tnet\tof\taccumulated\tamortization\tof\t$578\tand\t$502,\trespectively | 2,173 | 2,249 |
| Deferred\ttax\tasset | 1,498 | 2,477 |
| Other\tassets | 2,029 | 2,103 |
| Total\tother\tassets | 9,791 | 10,920 |
| Total\tassets | $ 51,274 | $ 48,415 |
| LIABILITIES\tAND\tSTOCKHOLDERS'\tEQUITY |  |  |
| Current\tliabilities |  |  |
| Current\tmaturities\tof\tlong-term\tdebt\tand\tcapital\tleases | $1,855 | $2,231 |
| Accounts\tpayable | 1,592 | 1,563 |
| Accrued\tsalaries\tand\twages | 1,516 | 1,205 |
| Air\ttraffic\tliability | 3,912 | 3,747 |
| Loyalty\tprogram\tliability | 2,789 | 2,525 |
| Other\taccrued\tliabilities | 2,208 | 2,334 |
| Total\tcurrent\tliabilities | 13,872 | 13,605 |
| Noncurrent\tliabilities |  |  |
| Long-term\tdebt\tand\tcapital\tleases,\tnet\tof\tcurrent\tmaturities | 22,489 | 18,330 |
| Pension\tand\tpostretirement\tbenefits | 7,842 | 7,450 |
| Deferred\tgains\tand\tcredits,\tnet | 526 | 667 |
| Other\tliabilities | 2,760 | 2,728 |
| Total\tnoncurrent\tliabilities | 33,617 | 29,175 |
| Commitments\tand\tcontingencies\t(Note\t11) |  |  |
| Stockholders'\tequity |  |  |
| December\t31,\t2016;\t624,622,381\tshares\tissued\tand\toutstanding\tat\tDecember\t31,\t2015 | 5 | 6 |
| Additional\tpaid-in\tcapital | 7,223 | 11,591 |
| Accumulated\tother\tcomprehensive\tloss | (5,083) | (4,732) |
| Retained\tearnings\t(deficit) | 1,640 | (1,230) |
| Total\tstockholders'\tequity | 3,785 | 5,635 |
| Total\tliabilities\tand\tstockholders'\tequity | $ 51,274 | $ 48,415 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

|  | 2016 | December	31,<br>2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |
| Net\tincome | $2,676 | $7,610 | $2,882 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization | 1,818 | 1,609 | 1,513 |
| Debt\tdiscount\tand\tlease\tamortization | (119) | (122) | (171) |
| Special\titems,\tnon-cash | 270 | 273 | 52 |
| Pension\tand\tpostretirement | (68) | (193) | (163) |
| Deferred\tincome\ttax\tprovision\t(benefit) | 1,611 | (3,014) | 346 |
| Share-based\tcompensation | 100 | 284 | 304 |
| Other,\tnet | (18) | (12) | 3 |
| Changes\tin\toperating\tassets\tand\tliabilities: |  |  |  |
| Decrease\t(increase)\tin\taccounts\treceivable | (160) | 352 | (160) |
| Increase\tin\tother\tassets | (184) | (27) | (168) |
| Increase\tin\taccounts\tpayable\tand\taccrued\tliabilities | 307 | 173 | 110 |
| Increase\t(decrease)\tin\tair\ttraffic\tliability | 164 | (505) | (97) |
| Increase\t(decrease)\tin\tloyalty\tprogram\tliability | 264 | (295) | (229) |
| Contributions\tto\tpension\tplans | (32) | (6) | (810) |
| Increase\t(decrease)\tin\tother\tliabilities | (105) | 122 | (332) |
| Net\tcash\tprovided\tby\toperating\tactivities | 6,524 | 6,249 | 3,080 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |
| Capital\texpenditures\tand\taircraft\tpurchase\tdeposits | (5,731) | (6,151) | (5,311) |
| Purchases\tof\tshort-term\tinvestments | (6,241) | (8,126) | (5,380) |
| Sales\tof\tshort-term\tinvestments | 6,092 | 8,517 | 7,179 |
| Decrease\tin\trestricted\tcash\tand\tshort-term\tinvestments | 57 | 79 | 261 |
| Net\tproceeds\tfrom\tslot\ttransaction | — | — | 307 |
| Proceeds\tfrom\tsale\tof\tan\tinvestment | — | 52 | — |
| Proceeds\tfrom\tsale\tof\tproperty\tand\tequipment | 123 | 35 | 33 |
| Other\tinvesting\tactivities | 2 | — | — |
| Net\tcash\tused\tin\tinvesting\tactivities | (5,698) | (5,594) | (2,911) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |
| Payments\ton\tlong-term\tdebt\tand\tcapital\tleases | (3,827) | (2,153) | (3,132) |
| Proceeds\tfrom\tissuance\tof\tlong-term\tdebt | 7,701 | 5,009 | 3,302 |
| Deferred\tfinancing\tcosts | (77) | (87) | (106) |
| Sale-leaseback\ttransactions | 5 | 43 | 811 |
| Exercise\tof\tstock\toptions | — | — | 10 |
| Treasury\tstock\trepurchases | (4,500) | (3,846) | (1,062) |
| Dividend\tpayments | (224) | (278) | (144) |
| Other\tfinancing\tactivities | 28 | 53 | 6 |
| Net\tcash\tused\tin\tfinancing\tactivities | (894) | (1,259) | (315) |
| Net\tdecrease\tin\tcash | (68) | (604) | (146) |
| Cash\tat\tbeginning\tof\tyear | 390 | 994 | 1,140 |
| Cash\tat\tend\tof\tyear | $322 | $390 | $994 |

# CONSOLIDATED	STATEMENTS	OF	STOCKHOLDERS'	EQUITY	(DEFICIT)

# (In	millions,	except	share	amounts)

|  | Common<br>Stock | Additional<br>Paid-in<br>Capital | Accumulated<br>Other<br>Comprehensive<br>Income	(Loss) | Retained<br>Earnings<br>(Deficit) | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tat\tDecember\t31,\t2013 | $5 | $10,592 | $(2,032) | $(11,296) | $(2,731) |
| Net\tincome | — | — | — | 2,882 | 2,882 |
| Changes\tin\tpension,\tretiree\tmedical\tand\tother\tpostretirement\tbenefits |  |  |  |  |  |
| liability | — | — | (2,796) | — | (2,796) |
| Net\tchanges\tin\tfair\tvalue\tof\tderivative\tfinancial\tinstruments | — | — | (58) | — | (58) |
| Reversal\tof\tnon-cash\ttax\tbenefit | — | — | 330 | — | 330 |
| Cash\ttax\twithholding\ton\tshares\tissued | — | (110) | — | — | (110) |
| Purchase\tand\tretirement\tof\t23,406,472\tof\tAAG\tcommon\tstock | — | (1,000) | — | — | (1,000) |
| Dividends\tdeclared\ton\tcommon\tstock\t($0.20\tper\tshare) | — | — | — | (148) | (148) |
| US\tAirways\tGroup\tconvertible\tdebt\tsettled\twith\tcash | — | (154) | — | — | (154) |
| Issuance\tof\t5,701,776\tshares\tof\tcommon\tstock\tpursuant\tto\temployee |  |  |  |  |  |
| stock\tplans | — | 10 | — | — | 10 |
| Issuance\tof\t57,393,096\tshares\tof\tpost-reorganization\tcommon\tstock | 1 | 1,604 | — | — | 1,605 |
| Issuance\tof\t130,980,613\tshares\tfor\toptional\tconversion\tof\tpreferred |  |  |  |  |  |
| shares | 1 | 3,889 | — | — | 3,890 |
| Share-based\tcompensation\texpense | — | 304 | — | — | 304 |
| Change\tin\tunrealized\tloss\ton\tinvestments | — | — | (3) | — | (3) |
| Balance\tat\tDecember\t31,\t2014 | 7 | 15,135 | (4,559) | (8,562) | 2,021 |
| Net\tincome | — | — | — | 7,610 | 7,610 |
| Changes\tin\tpension,\tretiree\tmedical\tand\tother\tpostretirement\tbenefits |  |  |  |  |  |
| liability | — | — | (159) | — | (159) |
| Net\tchanges\tin\tfair\tvalue\tof\tderivative\tfinancial\tinstruments | — | — | (9) | — | (9) |
| Cash\ttax\twithholding\ton\tshares\tissued | — | (306) | — | — | (306) |
| Purchase\tand\tretirement\tof\t85,141,691\tshares\tof\tAAG\tcommon\tstock | (1) | (3,585) | — | — | (3,586) |
| Dividends\tdeclared\ton\tcommon\tstock\t($0.40\tper\tshare) | — | — | — | (278) | (278) |
| Issuance\tof\t12,289,537\tshares\tof\tcommon\tstock\tpursuant\tto\temployee |  |  |  |  |  |
| stock\tplans | — | — | — | — | — |
| Settlement\tof\tsingle-dip\tunsecured\tclaims\theld\tin\tdistributed\tclaims |  |  |  |  |  |
| reserve | — | 63 | — | — | 63 |
| Share-based\tcompensation\texpense | — | 284 | — | — | 284 |
| Change\tin\tunrealized\tloss\ton\tinvestments | — | — | (5) | — | (5) |
| Balance\tat\tDecember\t31,\t2015 | 6 | 11,591 | (4,732) | (1,230) | 5,635 |
| Net\tincome | — | — | — | 2,676 | 2,676 |
| Changes\tin\tpension,\tretiree\tmedical\tand\tother\tpostretirement\tbenefits |  |  |  |  |  |
| liability | — | — | (564) | — | (564) |
| Non-cash\ttax\tbenefit | — | — | 203 |  | 203 |
| Cash\ttax\twithholding\ton\tshares\tissued | — | (56) | — | — | (56) |
| Purchase\tand\tretirement\tof\t119,823,621\tshares\tof\tAAG\tcommon\tstock | (1) | (4,415) | — | — | (4,416) |
| Dividends\tdeclared\ton\tcommon\tstock\t($0.40\tper\tshare) | — | — | — | (224) | (224) |
| Issuance\tof\t2,506,067\tshares\tof\tcommon\tstock\tpursuant\tto\temployee |  |  |  |  |  |
| stock\tplans | — | — | — | — | — |
| Settlement\tof\tsingle-dip\tunsecured\tclaims\theld\tin\tdistributed\tclaims |  |  |  |  |  |
| reserve | — | 3 | — | — | 3 |
| Share-based\tcompensation\texpense | — | 100 | — | — | 100 |
| Impact\tof\tadoption\tof\tAccounting\tStandards\tUpdate\t(ASU)\t 2016-09\t(See |  |  |  |  |  |
| Note\t1\t(r)) | — | — | — | 418 | 418 |
| Change\tin\tunrealized\tloss\ton\tinvestments | — | — | 10 | — | 10 |
| Balance\tat\tDecember\t31,\t2016 | $5 | $7,223 | $(5,083) | $1,640 | $3,785 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS	OF	AMERICAN	AIRLINES	GROUP	INC.

# 1.		Basis	of	Presentation	and	Summary	of	Significant	Accounting	Policies

# (a)	Basis	of	Presentation

American	Airlines	Group	Inc.	(we,	us,	our	and	similar	terms,	or	AAG),	a	Delaware	corporation,	is	a	holding	company	whose	primary	business	activity	is the	operation	of	a	major	network	air	carrier,	providing	scheduled	air	transportation	for	passengers	and	cargo	through	its	mainline	operating	subsidiary, American	 Airlines,	 Inc.	 (American)	 and	 its	 wholly-owned	 regional	 airline	 subsidiaries,	 Envoy	 Aviation	 Group	 Inc.	 (Envoy),	 Piedmont	 Airlines,	 Inc. (Piedmont)	and	PSA	Airlines,	Inc.	(PSA)	that	operate	under	capacity	purchase	agreements	as	American	Eagle.	On	December	9,	2013,	a	subsidiary	of AMR	merged	with	and	into	US	Airways	Group,	Inc.	(US	Airways	Group),	a	Delaware	corporation,	which	survived	as	a	wholly-owned	subsidiary	of	AAG, and	AAG	emerged	from	Chapter	11	(the	Merger).	Upon	closing	of	the	Merger	and	emergence	from	Chapter	11,	AMR	changed	its	name	to	American Airlines	Group	Inc.

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,	impairment	of	goodwill,	impairment	of	long-lived	and	intangible	assets,	the	loyalty	program, valuation	allowance	for	deferred	tax	assets,	as	well	as	pensions	and	retiree	medical	and	other	postretirement	benefits.	Certain	prior	year	amounts	have been	reclassified	to	conform	to	the	current	year	presentation.

# (b)	Short-term	Investments

Short-term	investments	are	classified	as	available-for-sale	and	stated	at	fair	value.	Realized	gains	and	losses	are	recorded	in	nonoperating	expense on	the	consolidated	statement	of	operations.	Unrealized	gains	and	losses	are	recorded	in	accumulated	other	comprehensive	loss	on	the	consolidated balance	sheet.

# (c)	Restricted	Cash	and	Short-term	Investments

We	have	restricted	cash	and	short-term	investments	related	primarily	to	collateral	held	to	support	workers'	compensation	obligations.

# (d)	Aircraft	Fuel,	Spare	Parts,	and	Supplies,	Net

Aircraft	fuel	is	recorded	on	a	first-in,	first-out	basis.	Spare	parts	and	supplies	are	recorded	at	net	realizable	value	based	on	average	costs.	These items	are	expensed	when	used.	An	allowance	for	obsolescence	is	established	for	spare	parts	and	supplies.

# (e)	Operating	Property	and	Equipment

Operating	property	and	equipment	is	recorded	at	cost	and	depreciated	or	amortized	to	residual	values	over	the	asset's	estimated	useful	life	or	the lease	term,	whichever	is	less,	using	the	straight-line	method.	Residual	values	for	aircraft,	engines,	and	related	rotable	parts	are	generally	5%	to	10%	of original	cost.	Costs	of	major	improvements	that	enhance	the	usefulness	of	the	asset	are	capitalized	and	depreciated	or	amortized	over	the	estimated useful	life	of	the	asset	or	the	lease	term,	whichever	is	less.	The	estimated	useful	lives	for	the	principal	property	and	equipment	classifications	are	as follows:

We	record	impairment	charges	on	operating	property	and	equipment	when	events	and	circumstances	indicate	that	the	assets	may	be	impaired.	An asset	or	group	of	assets	is	considered	impaired	when	the	undiscounted	cash	flows	estimated	to	be	generated	by	the	assets	are	less	than	the	carrying amount	of	 the	assets	and	 the	 net	 book	 value	 of	 the	 assets	 exceeds	 their	 estimated	 fair	 value.	 If	 such	 assets	 are	 considered	 to	 be	 impaired,	 the impairment	to	be	recognized	is	measured	by	the	amount	by	which	the	carrying	amount	of	the	assets	exceeds	the	fair	value	of	the	assets.	Assets	to	be disposed	of	are	reported	at	the	lower	of	the	carrying	amount	or	fair	value	less	the	cost	to	sell.

# (f)	Income	Taxes

# (g)	Goodwill

Goodwill	represents	the	excess	of	the	purchase	price	over	the	fair	value	of	the	net	assets	acquired	and	liabilities	assumed.	Goodwill	is	not	amortized but	assessed	for	impairment	annually	on	October	1 	or	more	frequently	if	events	or	circumstances	indicate	that	goodwill	may	be	impaired.	We	have	one consolidated	reporting	unit. st

Goodwill	is	measured	for	impairment	by	initially	performing	a	qualitative	assessment	and,	if	necessary,	then	comparing	the	fair	value	of	the	reporting unit	to	its	carrying	value,	including	goodwill.	If	the	fair	value	of	the	reporting	unit	is	less	than	the	carrying	value,	a	second	step	is	performed	to

determine	the	implied	fair	value	of	goodwill.	If	the	implied	fair	value	of	goodwill	is	lower	than	its	carrying	value,	an	impairment	charge	equal	to	the difference	 is	recorded.	Based	upon	our	annual	assessment,	 there	was	no	goodwill	 impairment	 in	2016.	The	carrying	value	of	 the	goodwill	on	our consolidated	balance	sheets	was	$4.1	billion	as	of	December	31,	2016	and	2015.

# (h)	Other	Intangibles,	Net

Intangible	assets	consist	primarily	of	domestic	airport	slots,	customer	relationships,	marketing	agreements,	international	slots	and	route	authorities, airport	gate	leasehold	rights	and	tradenames.

# Finite-Lived	Intangible	Assets

Finite-lived	intangible	assets	are	amortized	over	their	respective	estimated	useful	lives	and	reviewed	for	impairment	whenever	events	or	changes	in circumstances	indicate	that	the	carrying	value	may	not	be	recoverable.

The	following	table	provides	information	relating	to	our	amortizable	intangible	assets	as	of	December	31,	2016	and	2015	(in	millions):

|  | December	31, |  |
| :--- | :--- | :--- |
|  | 2016 | 2015 |
| Domestic\tairport\tslots | $ 365 | $ 365 |
| Customer\trelationships | 300 | 300 |
| Marketing\tagreements | 105 | 105 |
| Tradenames | 35 | 35 |
| Airport\tgate\tleasehold\trights | 137 | 137 |
| Accumulated\tamortization | (578) | (502) |
| Total | $ 364 | $ 440 |

Certain	domestic	airport	slots	and	airport	gate	leasehold	rights	are	amortized	on	a	straight-line	basis	over	25	years.	The	customer	relationships	and marketing	agreements	were	identified	as	intangible	assets	subject	to	amortization	and	are	amortized	on	a	straight-line	basis	over	approximately	nine years	and	30	years,	respectively.	Tradenames	are	fully	amortized.

We	recorded	amortization	expense	related	to	these	intangible	assets	of	$76	million,	$55	million	and	$81	million	for	the	years	ended	December	31, 2016,	2015	and	2014,	respectively.	We	expect	to	record	annual	amortization	expense	for	these	intangible	assets	as	follows	(in	millions):

# Indefinite-Lived	Intangible	Assets

Indefinite-lived	 intangible	 assets	 include	 certain	 domestic	 airport	 slots	 at	 our	 hubs	 and international	 slots	 and route	 authorities. Indefinite-lived intangible	assets	are	not	amortized	but	instead	are

assessed	 for	 impairment	 annually	 on	 October	 1 	 or	 more	 frequently	 if	 events	 or	 circumstances	 indicate	 that	 the	 asset	 may	 be impaired.	 As	 of December	31,	2016	and	2015,	we	had	$1.8	billion	of	indefinite-lived	intangible	assets	on	our	consolidated	balance	sheets. st

Indefinite-lived	intangible	assets	are	reviewed	for	impairment	by	initially	performing	a	qualitative	assessment	to	determine	whether	we	believe	it	is more	 likely	 than	 not	 that	 an	 asset	 has	 been	 impaired.	 If	 we	 believe	 impairment	 has	 occurred,	 we	 then	 evaluate	 for	 impairment	 by	 comparing	 the estimated	fair	value	of	assets	to	the	carrying	value.	An	impairment	charge	is	recognized	if	the	asset's	estimated	fair	value	is	less	than	its	carrying	value. Based	upon	our	annual	assessment,	there	was	no	indefinite-lived	intangible	asset	impairment	in	2016.

# (i)	Loyalty	Program

We	also	sell	loyalty	program	mileage	credits	to	participating	airline	partners	and	 non-airline	business	partners.	Sales	of	mileage	credits	to	non-airline business	partners	is	comprised	of	two	components,

transportation	and	marketing.	We	account	for	mileage	sales	under	our	agreements	with	non-airline	business	partners	in	accordance	with	Accounting Standards	Update	(ASU)	No.	2009-13,	"Revenue	Recognition	(Topic	605)	–	Multiple-Deliverable	Revenue	Arrangements."	In	accordance	with	Topic	605, we	allocate	the	consideration	received	from	the	sale	of	mileage	credits	based	on	the	relative	selling	price	of	each	product	or	service	delivered.

# (j)	Revenue

We	have	arrangements	with	regional	carriers	to	provide	us	with	regional	jet	and	turboprop	service	under	the	brand	name	"American	Eagle."	The American	Eagle	carriers	include	our	wholly-owned

regional	carriers,	Envoy,	PSA	and	Piedmont,	as	well	as	third-party	regional	carriers	including	Republic	Airline	Inc.	(Republic),	Mesa	Airlines,	Inc.	(Mesa), Air	Wisconsin	Airlines	Corporation	(Air	Wisconsin),	Compass	Airlines,	LLC	(Compass),	ExpressJet	Airlines,	Inc.	(ExpressJet),	SkyWest	Airlines,	Inc. (SkyWest)	and	Trans	States	Airlines,	Inc.	(Trans	States).	We	classify	revenues	generated	from	transportation	on	these	carriers	as	regional	passenger revenues.	Liabilities	related	to	tickets	sold	by	us	for	travel	on	these	air	carriers	is	also	included	in	our	air	traffic	liability	and	are	subsequently	recognized	as revenue	in	the	same	manner	as	described	above.

# Passenger	Taxes	and	Fees

Various	taxes	and	fees	assessed	on	the	sale	of	tickets	to	end	customers	are	collected	by	us	as	an	agent	and	remitted	to	taxing	authorities.	These taxes	and	fees	have	been	presented	on	a	net	basis	in	the	accompanying	consolidated	statements	of	operations	and	recorded	as	a	liability	until	remitted to	the	appropriate	taxing	authority.

# Cargo	Revenue

Cargo	revenue	is	recognized	when	we	provide	the	transportation.

# Other	Revenue

Other	revenue	includes	revenue	associated	with	marketing	services	provided	to	our	business	partners	as	part	of	our	loyalty	program,	baggage	fees, ticketing	change	fees,	airport	clubs	and	inflight	services.	The	accounting	and	recognition	for	the	loyalty	program	marketing	services	are	discussed	in	Note 1(i)	above.	Baggage	fees,	ticketing	change	fees,	airport	clubs	and	inflight	service	revenues	are	recognized	when	we	provide	the	service.

# (k)	Maintenance,	Materials	and	Repairs

Maintenance	 and	 repair	 costs	 for	 owned	 and	 leased	 flight	 equipment	 are	 charged	 to	 operating	 expense	 as	 incurred,	 except	 costs	 incurred for maintenance	and	repair	under	flight	hour	maintenance	contract	agreements,	which	are	accrued	based	on	contractual	terms	when	an	obligation	exists.

# (l)	Selling	Expenses

Selling	expenses	include	credit	card	fees,	commissions,	computerized	reservations	systems	fees	and	advertising.	Advertising	costs	are	expensed	as incurred.	Advertising	expense	was	$116	million,	$110	million	and	$92	million	for	the	years	ended	December	31,	2016,	2015	and	2014,	respectively.

# (m)	Share-based	Compensation

We	account	for	our	share-based	compensation	expense	based	on	the	fair	value	of	the	stock	award	at	the	time	of	grant,	which	is	recognized	ratably over	the	vesting	period	of	the	stock	award.	Certain	awards	have	performance	conditions	that	must	be	achieved	prior	to	vesting	and	are	expensed	based on	the	expected	achievement	at	each	reporting	period.	The	fair	value	of	stock	options	and	stock	appreciation	rights	(SARs)	is	estimated	using	a	Black- Scholes	option	pricing	model.	The	fair	value	of	restricted	stock	units	(RSUs)	is	based	on	the	market	price	of	the	underlying	shares	of	common	stock	on the	date	of	grant.	See	Note	14	for	further	discussion	of	share-based	compensation.

# (n)	Deferred	Gains	and	Credits,	Net

Included	within	deferred	gains	and	credits,	net	are	amounts	deferred	and	amortized	into	future	periods	associated	with	the	adjustment	of	leases	to	fair value	in	connection	with	the	application	of	acquisition	accounting,	deferred	gains	on	the	sale-leaseback	of	aircraft	and	certain	vendor	incentives.	We periodically	receive	vendor	incentives	in	connection	with	acquisition	of	aircraft	and	engines.	These	credits	are	deferred	until	aircraft	and	engines	are delivered	and	then	applied	as	a	reduction	to	the	cost	of	the	related	equipment.

# (o)	Foreign	Currency	Gains	and	Losses

Foreign	currency	gains	and	losses	are	recorded	as	part	of	other	nonoperating	expense,	net	in	our	consolidated	statements	of	operations.	Foreign currency	gains	for	2016	were	$1	million.	Foreign	currency	losses	for	2015	and	2014	were	$751	million	and	$114	million,	respectively.	Included	in	2015 was	a	$592	million	nonoperating	special	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.

# (p)	Other	Operating	Expenses

Other	 operating	 expenses	 includes	 costs	 associated	 with	 ground	 and	 cargo	 handling,	 crew	 travel, aircraft food and catering, passenger accommodation,	airport	security,	international	navigation	fees	and	certain	general	and	administrative	expenses.

# (q)	Regional	Expenses

Expenses	associated	with	our	wholly-owned	regional	airlines	and	third-party	regional	carriers	operating	under	the	brand	name	American	Eagle	are classified	as	regional	expenses	on	the	consolidated	statements	of	operations.	Regional	expenses	consist	of	the	following	(in	millions):

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Aircraft\tfuel\tand\trelated\ttaxes | $1,109 | $1,230 | $2,009 |
| Salaries,\twages\tand\tbenefits | \t 1,333 | \t 1,187 | 1,140 |
| Capacity\tpurchases\tfrom\tthird-party\tregional\tcarriers\t^(1) | \t 1,538 | \t 1,651 | 1,494 |
| Maintenance,\tmaterials\tand\trepairs | 345 | 323 | 367 |
| Other\trent\tand\tlanding\tfees | 564 | 504 | 444 |
| Aircraft\trent | 36 | 34 | 35 |
| Selling\texpenses | 347 | 333 | 307 |
| Depreciation\tand\tamortization | 301 | 252 | 217 |
| Special\titems,\tnet | 14 | 29 | 24 |
| Other | 457 | 440 | 479 |
| Total\tregional\texpenses | $6,044 | $5,983 | $6,516 |

For	the	years	ended	December	31,	2016,	2015	and	2014,	the	component	of	capacity	purchase	expenses	related	to	aircraft	deemed	to	be	leased was	approximately	$405	million,	$492	million	and	$447	million,	respectively.

# (r)	Recent	Accounting	Pronouncements

In	May	2014,	the	Financial	Accounting	Standards	Board	(FASB)	issued	ASU 2014-09,	"Revenue	from	Contracts	with	Customers	(Topic	606)."	ASU 2014-09	completes	the	joint	effort	by	the	FASB	and

International	Accounting	 Standards	 Board	 (IASB)	 to	 improve	 financial	 reporting	 by	 creating	 common	 revenue	 recognition	 guidance	 for	 GAAP	 and International	Financial	Reporting	Standards	(IFRS).	Subsequently,	the	FASB	has	issued	several	additional	ASUs	to	clarify	the	implementation.	The	new revenue	standard	applies	to	all	companies	that	enter	into	contracts	with	customers	to	transfer	goods	or	services	and	is	effective	for	public	entities	for interim	and	annual	reporting	periods	beginning	after	December	15,	2017.	Early	adoption	is	permitted;	however,	we	currently	expect	to	adopt	the	new revenue	standard	effective	January	1,	2018.	Entities	have	the	choice	to	apply	the	new	revenue	standard	either	retrospectively	to	each	reporting	period presented	or	by	recognizing	the	cumulative	effect	of	applying	the	new	revenue	standard	at	the	date	of	initial	application	and	not	adjusting	comparative information.	We	currently	expect	to	adopt	the	new	revenue	standard	using	the	full	retrospective	method.

We	are	still	in	the	process	of	evaluating	how	the	adoption	of	the	new	revenue	standard	will	impact	our	consolidated	financial	statements.	We	currently expect	that	the	new	revenue	standard	will	materially	impact	our	liability	for	outstanding	mileage	credits	earned	by	AAdvantage	loyalty	program	members when	flying	on	American.	We	currently	use	the	incremental	cost	method	to	account	for	this	portion	of	our	loyalty	program	liability,	which	values	these mileage	credits	based	on	 the	estimated	 incremental	cost	of	carrying	one	additional	passenger	(see	(i)	Loyalty	Program	 above).	The	 new	 revenue standard	will	require	us	to	change	our	policy	and	apply	a	relative	selling	price	approach	whereby	a	portion	of	each	passenger	ticket	sale	attributable	to mileage	credits	earned	will	be	deferred	and	recognized	in	passenger	revenue	upon	future	mileage	redemption.	The	carrying	value	of	the	earned	mileage credits	recognized	in	loyalty	program	liability	is	expected	to	be	materially	greater	under	the	relative	selling	price	approach	than	the	value	attributed	to these	mileage	credits	under	the	incremental	cost	method.	The	new	revenue	standard	will	also	require	us	to	reclassify	certain	ancillary	fees	to	passenger revenue,	which	are	currently	included	within	other	operating	revenue.

# Share-based	Compensation

In	 March	 2016,	 the	 FASB	 issued	 ASU	 2016-09,	 "Compensation	 –	 Stock	 Compensation	 (Topic	 718):	 Improvements	 to	 Employee	 Share-Based Payment	Accounting."	ASU	2016-09	simplifies	the	accounting	for	share-based	payment	award	transactions	including	the	financial	statement	presentation of	excess	tax	benefits	and	deficiencies,	classification	of	awards	as	either	equity	or	liabilities,	accounting	for	forfeitures	and	classification	on	the	statement of	cash	flows.	ASU	2016-09	is	effective	for	fiscal	years	beginning	after	December	15,	2016,	including	interim	periods	within	those	fiscal	years.	Early 97

adoption	is	permitted.	We	early	adopted	this	standard	during	the	second	quarter	of	2016.	The	adoption	of	this	standard	resulted	in	the	recognition	of $418	million	of	previously	unrecognized	excess	tax	benefits	in	deferred	tax	assets	and	an	increase	to	retained	earnings	on	the	consolidated	balance sheet	as	of	the	beginning	of	the	current	year,	and	the	recognition	of	$15	million	of	excess	tax	benefits	in	the	income	tax	provision	for	the	year	ended December	31,	2016.

# Fair	Value	Measurement

In	May	2015,	the	FASB	issued	ASU	 2015-07,	"Fair	Value	Measurement	(Topic	820):	Disclosures	for	Investments	in	Certain	Entities	that	Calculate	Net Asset	Value	per	Share	(or	its	Equivalent)."	ASU	2015-07	requires	that	investments	using	the	practical	expedient	to	measure	fair	value	at	net	asset	value per	share	(or	its	equivalent)	be	excluded	from	the	fair	value	hierarchy.	Although	the	investments	are	not	characterized	within	the	fair	value	hierarchy,	the amount	of	investments	measured	using	the	practical	expedient	must	still	be	disclosed	to	allow	for	reconciliation	of	the	total	investments	in	the	fair	value hierarchy	 to	 total	 investments	 in	 the	 notes	 to	 the	 consolidated	 financial	 statements.	 ASU	2015-07	 is	 effective	 for	 fiscal	 years	 beginning	 after December	15,	2015.	We	adopted	this	standard	retrospectively	during	the	year	ended	December	31,	2016.	The	adoption	impacted	the	fair	value	hierarchy disclosures	of	our	benefit	plan	assets,	see	Note	9	for	further	discussion.

# Statement	of	Cash	Flows

In	November	2016,	the	FASB	issued	ASU	 2016-18,	"Statement	of	Cash	Flows	(Topic	230):	Restricted	Cash."	ASU	 2016-18	requires	that	the	change in	total	cash,	cash	at	beginning	of	period	and	cash	at	end	of	period	on	the	statement	of	cash	flows	include	restricted	cash	and	restricted	cash	equivalents. ASU	2016-18	also	requires	companies	who	report	cash	and	restricted	cash	separately	on	the	balance	sheet	to	reconcile	those	amounts	to	the	statement of	cash	flows.	This	standard	is	to	be	applied	retrospectively	to	each	period	presented	and	is	effective	for	public	entities	for	fiscal	years	beginning	after December	15,	2017,	and	interim	periods	within	those	fiscal	years.	Early	adoption	is	permitted.	This	standard	is	not	expected	to	have	a	material	impact	on our	consolidated	financial	statements.

# 2.		Special	Items,	Net

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

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, |  |
| :--- | :--- | :--- | :--- |
|  | \t2016 | \t2015 | \t2014 |
| Regional\toperating\tspecial\titems,\tnet\t^(1) | $14 | $29 | $24 |
| Nonoperating\tspecial\titems,\tnet\t^(2) | 49 | 594 | 132 |
| Income\ttax\tspecial\titems,\tnet\t^(3) | — | (3,015) | 346 |

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.

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.

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.

# 3.		Earnings	Per	Common	Share

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

|  | 2016 | Year	Ended	December	31,<br>2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Basic\tEPS: |  |  |  |
| Net\tincome | $2,676 | $7,610 | $2,882 |
| Weighted\taverage\tcommon\tshares\toutstanding\t(in\tthousands) | \t 552,308 | \t 668,393 | \t 717,456 |
| Basic\tEPS | $4.85 | $11.39 | $4.02 |
| Diluted\tEPS: |  |  |  |
| Net\tincome | $2,676 | $7,610 | $2,882 |
| (a) | — | — | 3 |
| Net\tincome\tfor\tpurposes\tof\tcomputing\tdiluted\tEPS | $2,676 | $7,610 | $2,885 |
| Share\tcomputation\tfor\tdiluted\tEPS\t(in\tthousands): |  |  |  |
| Basic\tweighted\taverage\tcommon\tshares\toutstanding | \t 552,308 | \t 668,393 | \t 717,456 |
| Dilutive\teffect\tof\tstock\tawards | 3,791 | 18,962 | 15,603 |
| Assumed\tconversion\tof\tconvertible\tsenior\tnotes | — | — | 957 |
| Diluted\tweighted\taverage\tcommon\tshares\toutstanding | \t 556,099 | \t 687,355 | \t 734,016 |
| Diluted\tEPS | $4.81 | $11.07 | $3.93 |
| The\tfollowing\twere\texcluded\tfrom\tthe\tcalculation\tof\tdiluted\tEPS\t(in\tthousands):\nStock\toptions,\tSARs\tand\tRSUs\tbecause\tinclusion\twould\tbe\tantidilutive | 1,429 | 764 | 226 |

In	March	2014,	we	notified	the	holders	of	the	7.25%	convertible	senior	notes	that	we	had	elected	to	settle	all	future	conversions	solely	in	cash instead	of	shares	of	AAG	common	stock	in	accordance	with	the	related	indenture.	Thus,	the	diluted	shares	include	the	weighted	average	impact	of the	7.25%	convertible	senior	notes	only	for	the	period	from	January	1,	2014	to	March	12,	2014.	In	addition,	under	GAAP,	we	must	adjust	the numerator	for	purposes	of	calculating	diluted	EPS	by	the	change	in	fair	value	of	the	conversion	feature	from	March	12,	2014	to	May	15,	2014, which	increased	GAAP	net	income	for	purposes	of	computing	diluted	EPS	by	$3	million	for	the	year	ended	December	31,	2014.

# 4.		Share	Repurchase	Programs	and	Dividends

Since	July	2014,	our	Board	of	Directors	has	approved	several	share	repurchase	programs	aggregating	$9.0	billion	of	authority.	As	of	December	31, 2016,	there	was	no	remaining	authority	to	repurchase	shares	under	our	existing	share	repurchase	programs.	However,	in	January	2017,	our	Board	of Directors	authorized	a	new	$2.0	billion	share	repurchase	program	that	expires	on	December	31,	2018.

During	the	year	ended	December	31,	2016,	we	repurchased	119.8	million	shares	of	AAG	common	stock	for	$4.4	billion	at	a	weighted	average	cost	per share	of	$36.86.	During	the	year	ended	December	31,	2015,	we	repurchased	85.1	million	shares	of	AAG	common	stock	for	$3.6	billion	at	a	weighted average	cost	per	share	of	$42.09.	During	the	year	ended	December	31,	2014,	we

repurchased	23.4	million	shares	of	AAG	common	stock	for	$1.0	billion	at	a	weighted	average	cost	per	share	of	$42.72.	Since	the	inception	of	the	share repurchase	programs	in	July	2014,	we	have	repurchased	228.4	million	shares	of	AAG	common	stock	for	$9.0	billion	at	a	weighted	average	cost	per	share of	$39.41.

Our	Board	of	Directors	declared	the	following	cash	dividends:

Any	future	dividends	that	may	be	declared	and	paid	from	time	to	time	will	be	subject	to	market	and	economic	conditions,	applicable	legal	requirements and	other	relevant	factors.	We	are	not	obligated	to	continue	a	dividend	for	any	fixed	period,	and	payment	of	dividends	may	be	suspended	at	any	time	at our	discretion.

Long-term	debt	and	capital	lease	obligations	included	in	the	consolidated	balance	sheets	consisted	of	(in	millions):

|  | December	31,<br>2016 | 2015 |
| :--- | :--- | :--- |
| Secured |  |  |
| 2013\tCredit\tFacilities,\tvariable\tinterest\trate\tof\t3.26%,\tinstallments\tthrough |  |  |
| 2020\t^(a) | \t\t $1,843\t\t\t $ | 1,867 |
| 2014\tCredit\tFacilities,\tvariable\tinterest\trate\tof\t3.25%,\tinstallments\tthrough |  |  |
| 2021\t^(a) | 735 | 743 |
| (a) | 1,000 | — |
| (a) | 1,250 | — |
| 2013\tCiticorp\tCredit\tFacility\tTranche\tB-1\t^(b) | — | 980 |
| 2013\tCiticorp\tCredit\tFacility\tTranche\tB-2\t^(b) | — | 588 |
| 2028\t^(c) | \t 10,912 | 8,693 |
| 2028\t^(d) | 5,343 | 4,183 |
| (e) | 891 | 1,080 |
|  | 849 | 923 |
|  | \t 22,823 | \t 19,057 |
| Unsecured |  |  |
| 5.50%\tsenior\tnotes,\tinterest\tonly\tpayments\tuntil\tdue\tin\t2019\n(f) | 750 | 750 |
| 6.125%\tsenior\tnotes,\tinterest\tonly\tpayments\tuntil\tdue\tin\t2018\n(f) | 500 | 500 |
| 4.625%\tsenior\tnotes,\tinterest\tonly\tpayments\tuntil\tdue\tin\t2020\n(f) | 500 | 500 |
|  | 1,750 | 1,750 |
| Total\tlong-term\tdebt\tand\tcapital\tlease\tobligations | \t 24,573 | \t 20,807 |
| Less:\tTotal\tunamortized\tdebt\tdiscount,\tdebt\tpremium\tand\tdebt\tissuance\tcosts | 229 | 246 |
| Less:\tCurrent\tmaturities | 1,855 | 2,231 |
| Long-term\tdebt\tand\tcapital\tlease\tobligations,\tnet\tof\tcurrent\tmaturities | \t\t $22,489\t\t\t $18,330 | \t\t $22,489\t\t\t $18,330 |
| The\ttable\tbelow\tshows\tavailability\tunder\trevolving\tcredit\tfacilities,\tall\tof\twhich\twere\tundrawn,\tas\tof\tDecember\t31,\t2016\t(in\tmillions): |  |  |
| 2013\tRevolving\tFacility | 2013\tRevolving\tFacility | $1,400 |
| 2014\tRevolving\tFacility |  | \t 1,025 |
| Total | Total | $2,425 |

The	April	2016	and	December	2016	Credit	Facilities	each	provide	for	a	revolving	credit	facility	that	may	be	established	in	the	future.

Secured	financings	are	collateralized	by	assets,	primarily	aircraft,	engines,	simulators,	aircraft	spare	parts,	airport	leasehold	rights,	route	authorities and	airport	slots.	At	December	31,	2016,	we	were	operating	34	aircraft	under	capital	leases.	Leases	can	generally	be	renewed	at	rates	based	on	fair market	value	at	the	end	of	the	lease	term	for	a	number	of	additional	years.

At	December	31,	2016,	the	maturities	of	long-term	debt	and	capital	lease	obligations	are	as	follows	(in	millions):

Certain	details	of	our	2013,	2014,	April	2016	and	December	2016	Credit	Facilities	(collectively	referred	to	as	the	Credit	Facilities)	are	shown	in	the table	below	as	of	December	31,	2016:

LIBOR	margin	is	subject	to	a	floor	of	0.75%.

As	AAG's	corporate	credit	rating	was	Ba3	or	higher	from	Moody's	and	 BB-	or	higher	from	Standard	and	Poor's	(S&P)	as	of	December	31,	2016,	the applicable	LIBOR	margin	is	2.50%	for	the	2013	Term	Loan;	otherwise,	the	LIBOR	margin	would	be	2.75%.

The	Term	Loans	are	repayable	in	annual	installments	in	an	amount	equal	to	1.00%	of	the	principal	amount,	with	any	unpaid	balance	due	on	the respective	maturity	dates.	Voluntary	prepayments	may	be	made	by	American	at	any	time.

The	proceeds	from	the	April	2016	Term	Loan	and	the	December	2016	Term	Loan	were	used	to	repay	$588	million	and	$970	million,	respectively,	in remaining	principal	plus	accrued	and	unpaid	interest	of	the	2013	Citicorp	Credit	Facility	tranche	B-2	term	loan	(Tranche	 B-2)	and	tranche	B-1	term	loan (Tranche	B-1),	respectively,	with	the	remainder	of	the	proceeds	to	be	used	for	general	corporate	purposes.

The	2013	and	2014	Revolving	Facilities	provide	that	American	may	from	time	to	time	borrow,	repay	and	reborrow	loans	thereunder	and	have	the	ability to	issue	letters	of	credit	thereunder	in	an	aggregate

amount	outstanding	at	any	 time	up	 to	$300	million.	The	2013	and	2014	Revolving	Facilities	are	each	subject	 to	an	undrawn	 fee	of	0.75%.	As	of December	31,	2016,	there	were	no	borrowings	or	letters	of	credit	outstanding	under	the	2013	or	2014	Revolving	Facilities.	The	April	2016	and	December 2016	Credit	Facilities	each	provide	for	a	revolving	credit	facility	that	may	be	established	in	the	future.

Subject	to	certain	limitations	and	exceptions,	the	Credit	Facilities	are	secured	by	certain	collateral,	including	spare	parts,	certain	slots,	route	authorities and	airport	gate	leasehold	rights.	American	has	the	ability	to	make	future	modifications	to	the	collateral	pledged,	subject	to	certain	restrictions.	American's obligations	under	the	Credit	Facilities	are	guaranteed	by	AAG.	American	is	required	to	maintain	a	certain	minimum	ratio	of	appraised	value	of	 the collateral	to	the	outstanding	loans	as	further	described	below	in	"Collateral-Related	Covenants."

The	Credit	Facilities	contain	events	of	default	customary	 for	similar	 financings,	 including	cross	default	 to	other	material	 indebtedness.	Upon	 the occurrence	of	an	event	of	default,	the	outstanding	obligations	may	be	accelerated	and	become	due	and	payable	immediately.	In	addition,	if	a	"change	of control"	occurs,	American	will	(absent	an	amendment	or	waiver)	be	required	 to	repay	at	par	 the	 loans	outstanding	under	 the	Credit	Facilities	and terminate	the	2013	and	2014	Revolving	Facilities	and	any	revolving	credit	facilities	established	under	the	April	2016	or	December	2016	Credit	Facilities. The	Credit	Facilities	also	include	covenants	that,	among	other	things,	require	AAG	to	maintain	a	minimum	aggregate	liquidity	(as	defined	in	the	Credit Facilities)	of	not	less	than	$2.0	billion,	and	limit	the	ability	of	AAG	and	its	restricted	subsidiaries	to	pay	dividends	and	make	certain	other	payments,	make certain	investments,	incur	additional	indebtedness,	incur	liens	on	the	collateral,	dispose	of	the	collateral,	enter	into	certain	affiliate	transactions	and engage	in	certain	business	activities,	in	each	case	subject	to	certain	exceptions.

# (b)	2013	Citicorp	Credit	Facility

On	May	23,	2013,	American	entered	into	a	term	loan	credit	facility	(as	amended,	the	2013	Citicorp	Credit	Facility)	with	Citicorp	North	America,	Inc.,	as administrative	agent,	and	certain	lenders.	The	2013	Citicorp	Credit	Facility	consisted	of	Tranche	B-1	and	Tranche	B-2	that	were	repaid	and	terminated	in 2016	in	connection	with	American's	entry	into	the	April	2016	and	December	2016	Credit	Facilities	discussed	above.

In	January	2016,	American	created	three	pass-through	trusts	which	issued	approximately	$1.1	billion	aggregate	principal	amount	of	Series	 2016-1 Class	AA,	Class	A	and	Class	B	EETCs	(the	2016-1	EETCs)	in	connection	with	the	financing	of	22	aircraft	owned	by	American	(the	 2016-1	EETC	Aircraft). All	of	the	proceeds	received	from	the	sale	of	the	2016-1	EETCs	have	been	used	to	purchase	equipment	notes	issued	by	American.	Interest	and	principal payments	on	the	equipment	notes	are	payable	semi-annually	in	January	and	July	of	each	year,	which	began	in	July	2016.	These	equipment	notes	are secured	by	liens	on	the	2016-1	EETC	Aircraft.

The	details	of	the	2016-1	EETC	equipment	notes	issued	by	American	in	three	series	are	reflected	in	the	table	below	as	of	December	31,	2016:

|  | Series	AA | Series	A | Series	B |
| :--- | :--- | :--- | :--- |
| Aggregate\tprincipal\tissued | $584\tmillion | $262\tmillion | $228\tmillion |
| Fixed\tinterest\trate\tper\tannum | 3.575% | 4.10% | 5.25% |
| Maturity\tdate | January\t2028 | January\t2028 | January\t2024 |

In	May	and	July	2016,	American	created	three	pass-through	trusts	which	issued	approximately	$1.1	billion	aggregate	principal	amount	of	Series 2016-2	Class	AA,	Class	A	and	Class	B	EETCs	(the	 2016-2	EETCs)	in	connection	with	the	financing	of	22	aircraft	owned	by	American	(the	 2016-2	EETC Aircraft).	All	of	the	proceeds	received	from	the	sale	of	the	2016-2	EETCs	have	been	used	to	purchase	equipment	notes	issued	by	American.	Interest	and principal	 payments	 on	 the	 equipment	 notes	 are	 payable	 semi-annually	 in	 June	 and	 December	 of	 each	 year,	 with	 interest	 payments	 that	 began	 in December	2016	and	principal	payments	beginning	in	June	2017.	These	equipment	notes	are	secured	by	liens	on	the	2016-2	EETC	Aircraft.

|  | Series	AA | Series	A | Series	B |
| :--- | :--- | :--- | :--- |
| Aggregate\tprincipal\tissued | $567\tmillion | $261\tmillion | $227\tmillion |
| Fixed\tinterest\trate\tper\tannum | 3.20% | 3.65% | 4.375% |
| Maturity\tdate | June\t2028 | June\t2028 | June\t2024 |

In	October	2016,	American	created	two	pass-through	trusts	which	issued	approximately	$814	million	aggregate	principal	amount	of	Series	 2016-3 Class	AA	and	Class	A	EETCs	(the	2016-3	EETCs)	in	connection	with	the	financing	of	25	aircraft	owned	by	American	or	originally	scheduled	to	be delivered	to	American	through	January	2017	(the	2016-3	EETC	Aircraft).	A	portion	of	the	proceeds	received	from	the	sale	of	the	 2016-3	EETCs	has	been used	to	acquire	Series	AA	and	A	equipment	notes	issued	by	American	to	the	pass-through	trusts	and	the	balance	of	such	proceeds	is	being	held	in escrow	for	the	benefit	of	the	holders	of	the	2016-3	EETCs	until	such	time	as	American	issues	additional	Series	AA	and	A	equipment	notes	to	the	pass- through	trusts,	which	will	purchase	the	notes	with	escrowed	funds.	These	escrowed	funds	are	not	guaranteed	by	American	and	are	not	reported	as	debt on	our	consolidated	balance	sheet	because	the	proceeds	held	by	the	depository	are	not	American's	assets.

As	of	December	31,	2016,	approximately	$705	million	of	the	escrowed	proceeds	from	the	 2016-3	EETCs	have	been	used	to	purchase	equipment notes	issued	by	American.	Interest	and	principal	payments	on	the	equipment	notes	are	payable	semi-annually	in	April	and	October	of	each	year,	with interest	payments	beginning	in	April	2017	and	principal	payments	beginning	in	October	2017.	These	equipment	notes	are	secured	by	liens	on	the	2016-3 EETC	Aircraft.	The	remaining	escrowed	proceeds	of	$109	million	will	be	used	to	purchase	equipment	notes	as	new	aircraft	are	financed	following	their delivery.

The	details	of	the	2016-3	EETC	equipment	notes	issued	by	American	in	two	series	are	reflected	in	the	table	below	as	of	December	31,	2016:

|  | 2016-3	EETCs |  |
| :--- | :--- | :--- |
|  | Series\tAA | Series\tA |
| Aggregate\tprincipal\tissued | $558\tmillion | $256\tmillion |
| Remaining\tescrowed\tproceeds | $75\tmillion | $34\tmillion |
| Fixed\tinterest\trate\tper\tannum | 3.00% | 3.25% |
| Maturity\tdate | October\t2028 | October\t2028 |

# (d)	Equipment	Loans	and	Other	Notes	Payable	Issued	in	2016

In	2016,	American	entered	into	loan	agreements	to	borrow	$1.8	billion	in	connection	with	the	financing	of	certain	aircraft.	Debt	incurred	under	these loan	agreements	matures	in	2021	through	2028	and	bears	interest	at	fixed	and	variable	rates	of	LIBOR	plus	an	applicable	margin	averaging	2.96%	at December	31,	2016.

# (e)	Special	Facility	Revenue	Bonds

# 2016	Financing	Activity

In	June	2016,	the	New	York	Transportation	Development	Corporation	(NYTDC)	issued	approximately	$844	million	of	special	facility	revenue	refunding bonds	(the	2016	JFK	Bonds)	on	behalf	of	American.	The	net	proceeds	from	the	2016	JFK	Bonds	generally	were	used	to	provide	a	portion	of	the	funds	to refinance	$1.0	billion	of	special	facility	revenue	bonds	(Prior	JFK	Bonds),	the	net	proceeds	of	which	partially	financed	the	construction	of	a	terminal	(the Terminal)	used	by	American	at	John	F.	Kennedy	International	Airport	(JFK).

American	is	required	to	pay	debt	service	on	the	2016	JFK	Bonds	through	payments	under	a	loan	agreement	with	NYTDC,	and	American	and	AAG guarantee	the	2016	JFK	Bonds.	American's	and	AAG's	obligations	under	these	guarantees	are	secured	by	a	mortgage	on	American's	lease	of	the Terminal	and	related	property	from	the	Port	Authority	of	New	York	and	New	Jersey.

The	2016	JFK	Bonds,	in	aggregate,	were	priced	at	approximately	107%	of	par	value.	The	gross	proceeds	from	the	issuance	of	the	2016	JFK	Bonds were	approximately	$907	million.	Of	this	amount,	approximately	$895	million	was	used	to	partially	fund	the	redemption	of	the	Prior	JFK	Bonds.	The	2016 JFK	Bonds	bear	interest	at	5.0%	per	annum	and	are	comprised	of	$212	million	of	serial	bonds,	portions	of	which	mature	annually	from	August	1,	2017	to August	1,	2021,	and	$632	million	of	term	bonds,	$278	million	of	which	matures	on	August	1,	2026	and	$354	million	of	which	matures	on	August	1,	2031. In	connection	with	the	refinancing	of	the	Prior	JFK	Bonds,	American	recorded	a	special	nonoperating	charge	of	$36	million	consisting	of	non-cash	write offs	of	unamortized	bond	discounts	and	issuance	costs	as	well	as	payments	of	redemption	premiums	and	fees.

# (f)	Senior	Notes

The	5.50%	senior	notes	and	the	4.625%	senior	notes	are	senior	unsecured	obligations	of	AAG.	The	6.125%	senior	notes	are	general	unsecured senior	obligations	of	AAG.	The	senior	notes	are	fully	and	unconditionally	guaranteed	by	American.	The	indentures	for	the	senior	notes	contain	covenants and	events	of	default	generally	customary	for	similar	financings.	In	addition,	if	we	experience	specific	kinds	of	changes	of	control,	we	must	offer	to repurchase	the	senior	notes	at	a	price	of	101%	of	the	principal	amount	plus	accrued	and	unpaid	interest,	if	any,	to	(but	not	including)	the	repurchase	date. Upon	the	occurrence	of	certain	events	of	default,	the	senior	notes	may	be	accelerated	and	become	due	and	payable.

# Guarantees

As	of	December	31,	2016,	AAG	had	issued	guarantees	covering	approximately	$844	million	of	American's	special	facility	revenue	bonds	(and	interest thereon)	and	$9.3	billion	of	American's	secured	debt	(and	interest	thereon),	including	the	Credit	Facilities	and	certain	EETC	financings.

# Collateral-Related	Covenants

Certain	of	our	debt	 financing	agreements	contain	 loan	 to	value	(LTV)	ratio	covenants	and	require	us	 to	annually	appraise	 the	related	collateral. Pursuant	to	such	agreements,	if	the	LTV	ratio	exceeds	a	specified	threshold,	we	are	required,	as	applicable,	to	pledge	additional	qualifying	collateral (which	in	some	cases	may	include	cash	collateral),	or	pay	down	such	financing,	in	whole	or	in	part.

   Specifically,	we	are	required	to	meet	certain	collateral	coverage	tests	on	an	annual	basis	for	four	credit	facilities,	as	described	below:

At	December	31,	2016,	we	were	in	compliance	with	the	applicable	collateral	coverage	tests	as	of	the	most	recent	measurement	dates.

The	significant	components	of	the	income	tax	provision	(benefit)	were	(in	millions):

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Current\tincome\ttax\tprovision\t(benefit): |  |  |  |
| Federal | $— | $— | $ (25) |
| State\tand\tLocal | 12 | 20 | 9 |
| Current\tincome\ttax\tprovision\t(benefit) | 12 | 20 | (16) |
| Deferred\tincome\ttax\tprovision\t(benefit): |  |  |  |
| Federal | \t 1,508 | (2,884) | \t 345 |
| State\tand\tLocal | 103 | (130) | 1 |
| Deferred\tincome\ttax\tprovision\t(benefit) | \t 1,611 | (3,014) | \t 346 |
| Total\tincome\ttax\tprovision\t(benefit) | $1,623 | $(2,994) | $330 |

The	income	tax	provision	(benefit)	differed	from	amounts	computed	at	the	statutory	federal	income	tax	rate	as	follows	(in	millions):

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Statutory\tincome\ttax\tprovision | $1,505 | $1,616 | $1,123 |
| State\tincome\ttax\tprovision,\tnet\tof\tfederal\ttax\teffect | 63 | 72 | 75 |
| Book\texpenses\t(benefits)\tnot\tdeductible\tfor\ttax\tpurposes | 34 | 57 | (1) |
| Bankruptcy\tadministration\texpenses | 1 | 3 | 95 |
| Alternative\tminimum\ttax\t(AMT)\tcredit\trefund | — | — | (24) |
| Change\tin\tvaluation\tallowance | 7 | (4,742) | (1,323) |
| Income\ttax\tprovision\tresulting\tfrom\tOCI\tallocation | — | — | 330 |
| Other,\tnet | 13 | — | 55 |
| Income\ttax\tprovision\t(benefit) | $1,623 | $(2,994) | $330 |

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.	The	ultimate	realization	of	deferred	tax	assets	is	dependent	upon	the	generation	of	future	taxable	income.	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	projections	of	future	profitability,	including	risks	associated	with	remaining	Merger	integration	activities	as	well	as other	conditions	which	are	beyond	our	control,	such	as	the	health	of	the	economy,	the	level	and	volatility	of	fuel	prices	and	travel	demand.

In	connection	with	the	preparation	of	our	financial	statements	at	the	end	of	2015,	we	determined	that	after	considering	all	positive	and	negative evidence,	including	the	completion	of	certain	critical	Merger	integration	milestones	as	well	as	our	financial	performance,	it	was	more	likely	than	not	that substantially	all	of	our	deferred	income	tax	assets,	which	include	our	NOLs,	would	be	realized.	Accordingly,	we	reversed	$3.0	billion	of	the	valuation allowance,	which	resulted	in	a	special	non-cash	tax	benefit	recorded	in	the	consolidated	statement	of	operations.

For	the	year	ended	December	31,	2014,	we	recorded	a	$330	million	tax	provision.	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	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.

In	addition	to	the	changes	in	the	valuation	allowance	from	operations	described	in	the	table	above,	the	valuation	allowance	was	also	impacted	by	the changes	in	the	components	of	accumulated	other	comprehensive	income	(loss),	described	in	Note	10.	The	total	increase	in	the	valuation	allowance	was $7	million	in	2016.	The	total	decrease	in	the	valuation	allowance	was	$4.8	billion	and	$197	million	in	2015	and	2014,	respectively.

The	components	of	our	deferred	tax	assets	and	liabilities	were	(in	millions):

|  | 2016 | 2015 |
| :--- | :--- | :--- |
| Deferred\ttax\tassets: |  |  |
| Operating\tloss\tcarryforwards | $3,853 | $2,558 |
| Pensions | 2,610 | 2,436 |
| Loyalty\tprogram\tliability | 485 | 590 |
| Alternative\tminimum\ttax\tcredit\tcarryforwards | 344 | 346 |
| Postretirement\tbenefits\tother\tthan\tpensions | 291 | 340 |
| Rent\texpense | 256 | 134 |
| Gains\tfrom\tlease\ttransactions | 213 | 262 |
| Reorganization\titems | 53 | 57 |
| Other | 972 | 1,200 |
| Total\tdeferred\ttax\tassets | 9,077 | 7,923 |
| Valuation\tallowance | (29) | (22) |
| Net\tdeferred\ttax\tassets | 9,048 | 7,901 |
| Deferred\ttax\tliabilities: |  |  |
| Accelerated\tdepreciation\tand\tamortization | (7,216) | (5,158) |
| Other | (345) | (266) |
| Total\tdeferred\ttax\tliabilities | (7,561) | (5,424) |
| Net\tdeferred\ttax\tasset | $1,487 | $2,477 |

At	December	31,	2016,	we	had	approximately	$10.5	billion	of	gross	NOL	Carryforwards	to	reduce	future	federal	taxable	income,	substantially	all	of which	are	expected	to	be	available	for	use	in	2017.	The	federal	NOL	Carryforwards	will	expire	beginning	in	2022	if	unused.	We	also	had	approximately $3.7	billion	of	NOL	Carryforwards	to	reduce	future	state	taxable	income	at	December	31,	2016,	which	will	expire	in	years	2017	through	2036	if	unused. Our	ability	to	deduct	our	NOL	Carryforwards	and	to	utilize	certain	other	available	tax	attributes	can	be	substantially	constrained	under	the	general	annual limitation	rules	of	Section	382	where	an	"ownership	change"	has	occurred.	Substantially	all	of	our	remaining	federal	NOL	Carryforwards	(attributable	to US	Airways	Group)	are	subject	to	limitation	under	Section	382;	however,	our	ability	to	utilize	such	NOL	Carryforwards	is	not	anticipated	to	be	effectively constrained	as	a	result	of	such	limitation.	We	elected	to	be	covered	by	certain	special	rules	for	federal	income	tax	purposes	that	permitted	approximately $9.0	billion	(with	$8.9	billion	of	unlimited	NOL	still	remaining	at	December	31,	2016)	of	our	federal	NOL	Carryforwards	to	be	utilized	without	regard	to	the annual	limitation	generally	imposed	by	Section	382.	Similar	limitations	may	apply	for	state	income	tax	purposes.	Our	ability	to	utilize	any	new	NOL Carryforwards	arising	after	the	ownership	changes	is	not	affected	by	the	annual	limitation	rules	imposed	by	Section	382	unless	another	future	ownership change	occurs.	Under	the	Section	382	limitation,	cumulative	stock	ownership	changes	among	material	stockholders	exceeding	50%	during	a	rolling three-year	period	can	potentially	limit	a	company's	future	use	of	NOLs	and	tax	credits.	See	Part	I,	Item	1A.	Risk	Factors	–	"Our	ability	to	utilize	our	NOL Carryforwards	may	be	limited"	for	unaudited	additional	discussion	of	this	risk.

At	December	31,	2016,	we	had	an	AMT	credit	carryforward	of	approximately	$339	million	available	for	federal	income	tax	purposes,	which	is	available for	an	indefinite	period.

In	2016,	we	recorded	an	income	tax	provision	with	an	effective	rate	of	approximately	38%,	which	was	substantially non-cash	as	we	utilized	our	NOLs described	above.	Substantially	all	of	our	income	before	income	taxes	is	attributable	to	the	United	States.

We	file	our	tax	returns	as	prescribed	by	the	tax	laws	of	the	jurisdictions	in	which	we	operate.	Our	2013	through	2015	tax	years	are	still	subject	to examination	by	the	Internal	Revenue	Service.	Various	state	and	foreign	jurisdiction	tax	years	remain	open	to	examination	and	we	are	under	examination, in	administrative	appeals,	or	engaged	in	tax	litigation	in	certain	jurisdictions.	We	believe	that	the	effect	of	any	assessments	will	not	be	material	to	our consolidated	financial	statements.

The	amount	of,	and	changes	to,	our	uncertain	tax	positions	were	not	material	in	any	of	the	years	presented.	We	accrue	interest	and	penalties	related to	unrecognized	tax	benefits	in	interest	expense	and	operating	expense,	respectively.

# 7.		Risk	Management

Our	economic	prospects	are	heavily	dependent	upon	two	variables	we	cannot	control:	the	health	of	the	economy	and	the	price	of	fuel.

Due	to	the	discretionary	nature	of	business	and	leisure	travel	spending,	airline	industry	revenues	are	heavily	influenced	by	the	condition	of	the	U.S. economy	and	economies	in	other	regions	of	the	world.	Unfavorable	conditions	in	these	broader	economies	have	resulted,	and	may	result	in	the	future,	in decreased	passenger	demand	for	air	travel	and	changes	in	booking	practices,	both	of	which	in	turn	have	had,	and	may	have	in	the	future,	a	strong negative	effect	on	our	revenues.	In	addition,	during	challenging	economic	times,	actions	by	our	competitors	to	increase	their	revenues	can	have	an adverse	impact	on	our	revenues.

Our	operating	results	are	materially	impacted	by	changes	in	the	availability,	price	volatility	and	cost	of	aircraft	fuel,	which	represents	one	of	the	largest single	cost	items	in	our	business.	Jet	fuel	market	prices	have	fluctuated	substantially	over	the	past	several	years	and	prices	continue	to	be	highly	volatile. Because	of	the	amount	of	fuel	needed	to	operate	our	business,	even	a	relatively	small	increase	or	decrease	in	the	price	of	fuel	can	have	a	material	effect on	our	operating	results	and	liquidity.

These	additional	factors	could	impact	our	results	of	operations,	financial	performance	and	liquidity:

# (a)	Credit	Risk

Most	of	our	receivables	relate	to	tickets	sold	to	individual	passengers	through	the	use	of	major	credit	cards	or	to	tickets	sold	by	other	airlines	and	used by	passengers	on	American.	These	receivables	are	short-term,	mostly	settled	within	seven	days	after	sale.	Bad	debt	losses,	which	have	been	minimal	in the	past,	have	been	considered	in	establishing	allowances	for	doubtful	accounts.	We	do	not	believe	we	are	subject	to	any	significant	concentration	of credit	risk.

# (b)	Interest	Rate	Risk

We	have	exposure	to	market	risk	associated	with	changes	in	interest	rates	related	primarily	to	our	variable	rate	debt	obligations.	Interest	rates	on $9.6	billion	principal	amount	of	long-term	debt	as	of	December	31,	2016	are	subject	to	adjustment	to	reflect	changes	in	floating	interest	rates.	The weighted	average	effective	interest	rate	on	our	variable	rate	debt	was	3.1%	at	December	31,	2016.	We	do	not	currently	have	an	interest	rate	hedge program.

# (c)	Foreign	Currency	Risk

We	are	exposed	to	the	effect	of	foreign	exchange	rate	fluctuations	on	the	U.S.	dollar	value	of	foreign	currency-denominated	operating	revenues	and expenses.	Our	largest	exposure	comes	from	the	British	pound,	Euro,	Canadian	dollar	and	various	Latin	American	currencies,	primarily	the	Brazilian	real. We	do	not	currently	have	a	foreign	currency	hedge	program.	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	risk.

# 8.		Fair	Value	Measurements

# Assets	Measured	at	Fair	Value	on	a	Recurring	Basis

Fair	value	is	defined	as	the	price	that	would	be	received	from	the	sale	of	an	asset	or	paid	to	transfer	a	liability	(i.e.	an	exit	price)	on	the	measurement date	in	an	orderly	transaction	between	market	participants	in	the	principal	or	most	advantageous	market	for	the	asset	or	liability.	Accounting	standards include	disclosure	requirements	around	fair	values	used	for	certain	financial	instruments	and	establish	a	fair	value	hierarchy.	The	hierarchy	prioritizes valuation	 inputs	 into	 three	 levels	 based	 on	 the	 extent	 to	 which	 inputs	 used	 in	 measuring	 fair	 value	 are	 observable	 in	 the	 market.	 Each	 fair	 value measurement	is	reported	in	one	of	three	levels:

•Level	1	–	Observable	inputs	such	as	quoted	prices	in	active	markets;

•Level	2	–	Inputs,	other	than	quoted	prices	in	active	markets,	that	are	observable	either	directly	or	indirectly;	and

•Level	3	–	Unobservable	inputs	in	which	there	is	little	or	no	market	data,	which	require	the	reporting	entity	to	develop	its	own	assumptions.

When	available,	we	use	quoted	market	prices	to	determine	the	fair	value	of	our	financial	assets.	If	quoted	market	prices	are	not	available,	we	measure fair	value	using	valuation	techniques	that	use,	when	possible,	current	market-based	or	independently-sourced	market	parameters,	such	as	interest	rates and	currency	rates.

We	utilize	 the	market	approach	 to	measure	 fair	value	 for	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	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, 2016.

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

|  |  | Fair	Value	Measurements	as	of	December	31,	2016 | Fair	Value	Measurements	as	of	December	31,	2016 |  |
| :--- | :--- | :--- | :--- | :--- |
| Short-term\tinvestments\t^(1)\n,\t(2)\n: | \t\t\t\tTotal | \t\t\t\tLevel\t1 | \t\t\t\tLevel\t2 | \t\t\t\tLevel\t3 |
| Money\tmarket\tfunds | $589 | $589 | $— | $— |
| Corporate\tobligations | 2,550 | — | 2,550 | — |
| Bank\tnotes/certificates\tof\tdeposit/time\tdeposits | 2,898 | — | 2,898 | — |
|  | 6,037 | 589 | 5,448 | — |
| Restricted\tcash\tand\tshort-term\tinvestments\t^(1) | 638 | 638 | — | — |
| Total | $6,675 | $1,227 | $5,448 | $— |

Unrealized	 gains	 or	 losses	 on	 short-term	 investments	 and restricted	 cash	 and	 short-term investments	 are recorded in	 accumulated	 other comprehensive	income	(loss)	at	each	measurement	date.

All	short-term	investments	are	classified	as	available-for-sale	and	stated	at	fair	value.	Our	short-term	investments	mature	in	one	year	or	less	except for	$385	million	of	bank	notes/certificates	of	deposit/time	deposits	and	$230	million	of	corporate	obligations.

|  |  | Fair	Value	Measurements	as	of	December	31,	2015 | Fair	Value	Measurements	as	of	December	31,	2015 |  |
| :--- | :--- | :--- | :--- | :--- |
| Short-term\tinvestments\t^(1)\n,\t(2)\n: | \t\t\t\tTotal | \t\t\t\tLevel\t1 | \t\t\t\tLevel\t2 | \t\t\t\tLevel\t3 |
| Money\tmarket\tfunds | $1,010 | $1,010 | $— | $— |
| Government\tagency\tinvestments | 1 | — | 1 | — |
| Corporate\tobligations | 2,191 | — | 2,191 | — |
| Bank\tnotes/certificates\tof\tdeposit/time\tdeposits | 2,662 | — | 2,662 | — |
|  | 5,864 | 1,010 | 4,854 | — |
| Restricted\tcash\tand\tshort-term\tinvestments\t^(1) | 695 | 695 | — | — |
| Total | $6,559 | $1,705 | $4,854 | $— |

All	short-term	investments	are	classified	as	available-for-sale	and	stated	at	fair	value.	Our	short-term	investments	mature	in	one	year	or	less	except for	$1.2	billion	of	bank	notes/certificates	of	deposit/time	deposits	and	$734	million	of	corporate	obligations.

There	were	no	Level	1	to	Level	2	transfers	during	the	years	ended	December	31,	2016	or	2015.

# 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	in	the	fair	value	hierarchy.

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

|  | December	31,	2016 | December	31,	2016 | December	31,	2015 | December	31,	2015 |
| :--- | :--- | :--- | :--- | :--- |
|  | Carrying\nValue | Fair\nValue | Carrying\nValue | Fair\nValue |
| Long-term\tdebt,\tincluding\tcurrent\tmaturities | $24,344 | $24,983 | $20,561 | $ 21,111 |

# 9.		Employee	Benefit	Plans

We	sponsor	defined	benefit	and	defined	contribution	pension	plans	for	eligible	employees.	The	defined	benefit	pension	plans	provide	benefits	for participating	employees	based	on	years	of	service	and	average	compensation	for	a	specified	period	of	time	before	retirement.	Effective	November	1,

2012,	substantially	all	of	our	defined	benefit	pension	plans	were	frozen	and	we	began	providing	enhanced	benefits	under	our	defined	contribution	pension plans	for	certain	groups.	We	use	a	December	31	measurement	date	for	all	of	our	defined	benefit	pension	plans.	We	also	provide	certain	retiree	medical and	other	postretirement	benefits,	including	health	care	and	life	insurance	benefits,	to	retired	employees.	Effective	November	1,	2012,	we	modified	our retiree	medical	and	other	postretirement	benefits	plans	to	eliminate	the	company	subsidy	for	employees	who	retire	on	or	after	November	1,	2012.	As	a result	of	modifications	to	our	retiree	medical	and	other	postretirement	benefits	plans	in	2012,	we	recognized	a	negative	plan	amendment	of	$1.9	billion, which	is	included	as	a	component	of	actuarial	gain	in	OCI	and	will	be	amortized	over	the	future	service	life	of	the	active	plan	participants	for	whom	the benefit	was	eliminated,	or	approximately	eight	years.	As	of	December	31,	2016,	$871	million	of	actuarial	gain	remains	to	be	amortized.

# Benefit	Obligations,	Fair	Value	of	Plan	Assets	and	Funded	Status

The	following	tables	provide	a	reconciliation	of	the	changes	in	the	pension	and	retiree	medical	and	other	postretirement	benefits	obligations,	fair	value of	plan	assets	and	a	statement	of	funded	status	as	of	December	31,	2016	and	2015:

|  | Pension	Benefits |  | Retiree	Medical	and	Other<br>Postretirement	Benefits | Retiree	Medical	and	Other<br>Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | \t\t\t\t\t\t2016 | \t\t\t\t\t\t2015 |
|  |  | (In\tmillions) |  |  |
| Benefit\tobligation\tat\tbeginning\tof\tperiod | $16,395 | $17,594 | $1,131 | $1,325 |
| Service\tcost | 2 | 2 | 3 | 3 |
| Interest\tcost | 749 | 737 | 47 | 50 |
| Actuarial\t(gain)\tloss\t^(1)\t(2) | 729 | (1,159) | (105) | (177) |
| Plan\tamendments | — | — | 7 | — |
| Settlements | (2) | (3) | — | — |
| Benefit\tpayments | (635) | (776) | (92) | (94) |
| Other | — | — | — | 24 |
| Benefit\tobligation\tat\tend\tof\tperiod | $17,238 | $16,395 | $991 | $1,131 |
| Fair\tvalue\tof\tplan\tassets\tat\tbeginning\tof\tperiod | $9,707 | $10,986 | $253 | $244 |
| Actual\treturn\ton\tplan\tassets | 915 | (506) | 22 | (10) |
| Employer\tcontributions | 32 | 6 | 83 | 89 |
| Settlements | (2) | (3) | — | — |
| Benefit\tpayments | (635) | (776) | (92) | (94) |
| Other\t^(3) | — | — | — | 24 |
| Fair\tvalue\tof\tplan\tassets\tat\tend\tof\tperiod | $10,017 | $9,707 | $266 | $253 |
| Funded\tstatus\tat\tend\tof\tperiod | $ (7,221) | $ (6,688) | $(725) | $(878) |

The	December	31,	2016	and	2015	pension	actuarial	(gain)	loss	primarily	relates	to	weighted	average	discount	rate	assumption	changes	and changes	to	our	mortality	assumptions.

The	December	31,	2016	and	2015	retiree	medical	and	other	postretirement	benefits	actuarial	gain	primarily	relates	to	medical	trend	and	cost assumption	changes,	favorable	plan	experience	adjustments	and	weighted	average	discount	rate	assumption	changes.

At	December	31,	2015,	certain	trust	assets	totaling	approximately	$24	million,	were	added	to	the	retiree	medical	and	other	postretirement	benefits plans	asset	values	that	were	previously	offset	against	the	benefit	obligation.

# Balance	Sheet	Position

|  |  |  | Retiree	Medical	and	Other | Retiree	Medical	and	Other |
| :--- | :--- | :--- | :--- | :--- |
|  | Pension\tBenefits | Pension\tBenefits | Postretirement\tBenefits | Postretirement\tBenefits |
|  | 2016 | 2015 | \t\t\t\t\t\t2016 | \t\t\t\t\t\t2015 |
|  |  |  | (In\tmillions) |  |
| As\tof\tDecember\t31, |  |  |  |  |
| Current\tliability | $7 | $7 | $97 | $109 |
| Noncurrent\tliability\t^(1) | \t 7,214 | \t 6,681 | 628 | 769 |
| Total\tliabilities | $7,221 | $6,688 | $725 | $878 |
| Net\tactuarial\tloss\t(gain) | $5,484 | $5,047 | $(430) | $(339) |
| Prior\tservice\tcost\t(benefit)\t^(1) | 188 | 216 | (837) | (1,084) |
| Total\taccumulated\tother\tcomprehensive\tloss\t(income),\t pre-tax | $5,672 | $5,263 | $(1,267) | $(1,423) |

The	2016	noncurrent	liability	does	not	include	$20	million	of	other	postretirement	benefits	or	$1	million	of	prior	service	cost.	The	2015	noncurrent liability	does	not	include	$17	million	of	other	postretirement	benefits	or	$1	million	of	prior	service	cost.

# Plans	with	Accumulated	Benefit	Obligations	Exceeding	Fair	Value	of	Plan	Assets

|  | Pension	Benefits |  | Retiree	Medical	and	Other<br>Postretirement	Benefits | Retiree	Medical	and	Other<br>Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | \t\t\t\t\t\t2016 | \t\t\t\t\t\t2015 |
|  |  |  | (In\tmillions) |  |
| Projected\tbenefit\tobligation\t(PBO) | $17,209 | $16,369 | $— | $— |
| Accumulated\tbenefit\tobligation\t(ABO) | \t 17,197 | \t 16,357 | — | — |
| Accumulated\tpostretirement\tbenefit\tobligation\t(APBO) | — | — | 990 | 1,129 |
| Fair\tvalue\tof\tplan\tassets | 9,986 | 9,677 | 266 | 253 |
| ABO\tless\tfair\tvalue\tof\tplan\tassets | 7,211 | 6,680 | — | — |

# Net	Periodic	Benefit	Cost	(Income)

|  |  |  |  |  | Retiree	Medical	and |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Pension\tBenefits |  | Other\tPostretirement\tBenefits | Other\tPostretirement\tBenefits |  |
|  | 2016 | 2015 | 2014 | \t\t\t\t2016 | \t\t\t\t2015 | \t\t\t\t2014 |
|  |  |  | (In\tmillions) |  |  |  |
| Defined\tbenefit\tplans: |  |  |  |  |  |  |
| Service\tcost | $2 | $2 | $3 | $3 | $3 | $1 |
| Interest\tcost | 749 | 737 | 746 | 47 | 50 | 61 |
| Expected\treturn\ton\tassets | (750) | (851) | (786) | (20) | (19) | (19) |
| Settlements | — | 1 | 4 | — | — | — |
| Amortization\tof: |  |  |  |  |  |  |
| Prior\tservice\tcost\t(benefit)\t^(1) | 28 | 28 | 28 | (240) | (243) | (244) |
| Unrecognized\tnet\tloss\t(gain) | 126 | 112 | 43 | (17) | (9) | (8) |
| Net\tperiodic\tbenefit\tcost\t(income) | 155 | 29 | 38 | (227) | (218) | (209) |
| Defined\tcontribution\tplan\tcost | 766 | 662 | 546 | N/A | N/A | N/A |
| Total\tcost\t(income) | $ 921 | $ 691 | $ 584 | $(227) | $(218) | $(209) |

The	2016,	2015	and	2014	prior	service	cost	does	not	include	amortization	of	$1	million,	$3	million	and	$14	million,	respectively,	related	to	other postretirement	benefits.

The	estimated	amount	of	unrecognized	net	loss	for	the	defined	benefit	pension	plans	that	will	be	amortized	from	accumulated	other	comprehensive income	(loss)	into	net	periodic	benefit	cost	over	the	next	fiscal	year	is	$144	million.

The	 estimated	 amount	 of	 unrecognized	 net	 gain	 for	 the	 retiree	 medical	 and	 other	 postretirement	 benefits	 plans that	 will	 be	 amortized from accumulated	other	comprehensive	income	(loss)	into	net	periodic	benefit	cost	over	the	next	fiscal	year	is	$23	million.

# Assumptions

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

The	weighted	average	health	care	cost	trend	rate	at	December	31,	2016	is	assumed	to	decline	gradually	to	3.77%	by	2024	and	remain	level thereafter.

As	of	December	31,	2016,	our	estimate	of	the	long-term	rate	of	return	on	plan	assets	was	8%	based	on	the	target	asset	allocation.	Expected	returns on	long	duration	bonds	are	based	on	yields	to	maturity	of	the	bonds	held	at	year-end.	Expected	returns	on	other	assets	are	based	on	a	combination	of long-term	historical	returns,	actual	returns	on	plan	assets	achieved	over	the	last	ten	years,	current	and	expected	market	conditions,	and	expected	value to	be	generated	through	active	management,	currency	overlay	and	securities	lending	programs.

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

# Minimum	Contributions

We	are	required	to	make	minimum	contributions	to	our	defined	benefit	pension	plans	under	the	minimum	funding	requirements	of	the	Employee Retirement	Income	Security	Act	of	1974	and	various	other	laws	for	U.S.	based	plans	as	well	as	under	funding	rules	specific	to	countries	where	we maintain	defined	benefit	plans.	Based	on	current	funding	assumptions,	we	have	minimum	required	contributions	of	$25	million	for	2017.	We	expect	to make	supplemental	contributions	of	$254	million	to	our	U.S.	based	defined	benefit	plans	in	2017.	Currently,	the	minimum	funding	obligation	for	our	U.S. based	defined	benefit	pension	plans	 is	subject	 to	 temporary	 favorable	rules	 that	are	scheduled	 to	expire	at	 the	end	of	2017.	Our	pension	 funding obligations	are	likely	to	increase	materially	following	expiration	of	the	temporary	funding	rules,	when	we	will	be	required	to	make	contributions	relating	to the	2018	fiscal	year.	The	amount	of	these	obligations	will	depend	on	the	performance	of	our	investments	held	in	trust	by	the	pension	plans,	interest	rates for	determining	liabilities,	the	amount	of	and	timing	of	any	supplemental	contributions	and	our	actuarial	experience.

# Benefit	Payments

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

|  | 2017 | 2018 | 2019 | 2020 | 2021 | 2022-2026 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Pension | $688 | $722 | $762 | $804 | $845 | $4,819 |
| Retiree\tmedical\tand\tother\tpostretirement\tbenefits | 97 | 93 | 88 | 79 | 73 | 312 |

# Plan	Assets

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

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

Public	equity	and	emerging	market	fixed	income	securities	are	used	to	provide	diversification	and	are	expected	to	generate	higher	returns	over	the long-term	than	U.S.	long	duration	bonds.	Public

stocks	are	managed	using	a	value	investment	approach	in	order	to	participate	in	the	returns	generated	by	stocks	in	the	long-term,	while	reducing	year- over-year	volatility.	U.S.	long	duration	bonds	are	used	to	partially	hedge	the	assets	from	declines	in	interest	rates.	Alternative	(private)	investments	are used	to	provide	expected	returns	in	excess	of	the	public	markets	over	the	long-term.	Additionally,	the	pension	plan's	master	trust	engages	currency overlay	managers	in	an	attempt	to	increase	returns	by	protecting	non-U.S.	dollar	denominated	assets	from	a	rise	in	the	relative	value	of	the	U.S.	dollar. The	pension	plan's	master	trust	also	participates	in	securities	lending	programs	to	generate	additional	income	by	loaning	plan	assets	to	borrowers	on	a fully	collateralized	basis.	These	programs	are	subject	to	market	risk.

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

# Benefit	Plan	Assets	Measured	at	Fair	Value	on	a	Recurring	Basis

The	fair	value	of	our	pension	plan	assets	at	December	31,	2016	and	2015,	by	asset	category,	are	as	follows	(in	millions):

| Asset	Category |  | Active	Markets<br>for	Identical<br>Assets<br>(Level	1) | Significant<br>Observable<br>Inputs<br>(Level	2) | Significant<br>Unobservable<br>Inputs<br>(Level	3) | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Cash\tand\tcash\tequivalents | Cash\tand\tcash\tequivalents | $573 | $— | $— | $573 |
| Equity\tsecurities: |  |  |  |  |  |
| International\tmarkets\t^(a)\n,\t(b) |  | 3,232 | — | — | 3,232 |
| Large-cap\tcompanies\t^(b) |  | 2,253 | — | — | 2,253 |
| Mid-cap\tcompanies\t^(b) | Mid-cap\tcompanies\t^(b) | 371 | — | — | 371 |
| Small-cap\tcompanies\t^(b) |  | 6 | — | — | 6 |
| Mutual\tfunds\t^(c) | Mutual\tfunds\t^(c) | 49 | — | — | 49 |
| Fixed\tincome: |  |  |  |  |  |
| Corporate\tbonds\t^(d) | Corporate\tbonds\t^(d) | — | 2,337 | — | 2,337 |
| Government\tsecurities\t^(e) |  | — | 150 | — | 150 |
| U.S.\tmunicipal\tsecurities | U.S.\tmunicipal\tsecurities | — | 37 | — | 37 |
| Alternative\tinstruments: |  |  |  |  |  |
| Private\tequity\tpartnerships\t^(f) | Private\tequity\tpartnerships\t^(f) | — | — | 21 | 21 |
| Private\tequity\tpartnerships\tmeasured\tat\tnet\tasset\tvalue | (f)\t(h) | — | — | — | 703 |
| Common/collective\ttrusts\t^(g) | Common/collective\ttrusts\t^(g) | — | 32 | — | 32 |
| Common/collective\ttrusts\tand\t103-12\tInvestment\tTrust\tmeasured |  |  |  |  |  |
| at\tnet\tasset\tvalue\t^(g)\t(h) | at\tnet\tasset\tvalue\t^(g)\t(h) | — | — | — | 227 |
| Insurance\tgroup\tannuity\tcontracts | Insurance\tgroup\tannuity\tcontracts | — | — | 2 | 2 |
| Dividend\tand\tinterest\treceivable |  | 40 | — | — | 40 |
| Due\tto/from\tbrokers\tfor\tsale\tof\tsecurities\t–\tnet | Due\tto/from\tbrokers\tfor\tsale\tof\tsecurities\t–\tnet | (9) | — | — | (9) |
| Other\tliabilities\t–\tnet |  | (7) | — | — | (7) |
| Total | Total | $6,508 | $2,556 | $23 | $10,017 |

Holdings	are	diversified	as	follows:	15%	United	Kingdom,	12%	Japan,	10%	France,	7%	Switzerland,	6%	Netherlands,	17%	of	other	emerging markets	and	the	remaining	33%	with	no	concentration	greater	than	5%	in	any	one	country.

There	are	no	significant	concentrations	of	holdings	by	company	or	industry.

Investment	includes	mutual	funds	invested	42%	in	equity	securities	of large-cap,	mid-cap	and	small-cap	U.S.	companies,	33%	in	U.S.	treasuries and	corporate	bonds	and	25%	in	equity	securities	of	international	companies.

Includes	approximately	74%	investments	in	corporate	debt	with	a	S&P	rating	lower	than	A	and	26%	investments	in	corporate	debt	with	a	S&P rating	A	or	higher.	Holdings	include	86%	U.S.	companies,	12%	international	companies	and	2%	emerging	market	companies.

Includes	approximately	61%	investments	in	U.S.	domestic	government	securities	and	39%	in	emerging	market	government	securities.	There	are	no significant	foreign	currency	risks	within	this	classification.

Includes	limited	partnerships	that	invest	primarily	in	U.S.	(95%)	and	European	(5%)	buyout	opportunities	of	a	range	of	privately	held	companies. The	pension	plan's	master	trust	does	not	have	the	right	to	redeem	its	limited	partnership	investment	at	its	net	asset	value,	but	rather	receives distributions	as	the	underlying	assets	are	liquidated.	It	is	estimated	that	the	underlying	assets	of	these	funds	will	be	gradually	liquidated	over	the next	one	to	ten	years.	Additionally,	the	pension	plan's	master	trust	has	future	funding	commitments	of	approximately	$456	million	over	the	next	ten years.

Investment	includes	73%	in	an	emerging	market	 103-12	Investment	Trust	with	investments	in	emerging	country	equity	securities,	12%	in	Canadian segregated	balanced	value,	income	growth	and	diversified	pooled	funds	and	15%	in	a	common/collective	trust	investing	in	securities	of	smaller companies	located	outside	the	U.S.,	including	developing	markets.	Requests	for	withdrawals	must	meet	specific	requirements	with	advance	notice of	redemption	preferred.

In	accordance	with	ASU	2015-07,	certain	investments	that	are	measured	using	net	asset	value	per	share	(or	its	equivalent)	as	a	practical	expedient for	fair	value	have	not	been	classified	in	the	fair	value	hierarchy.	The	fair	value	amounts	presented	in	this	table	are	intended	to	permit	reconciliation of	the	fair	value	hierarchy	to	the	amounts	presented	in	the	notes	to	the	consolidated	financial	statements.

| Asset	Category |  |  | Active	Markets<br>for	Identical<br>Assets<br>(Level	1) | Significant<br>Observable<br>Inputs<br>(Level	2) | Significant<br>Unobservable<br>Inputs<br>(Level	3) | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Cash\tand\tcash\tequivalents | Cash\tand\tcash\tequivalents | Cash\tand\tcash\tequivalents | $287 | $— | $— | $287 |
| Equity\tsecurities: |  |  |  |  |  |  |
| International\tmarkets\t^(a) | ,\t(b) |  | 2,873 | — | — | \t 2,873 |
| Large-cap\tcompanies\t^(b) |  |  | 1,999 | — | — | \t 1,999 |
| Mid-cap\tcompanies\t^(b) | Mid-cap\tcompanies\t^(b) | Mid-cap\tcompanies\t^(b) | 361 | — | — | 361 |
| Small-cap\tcompanies\t^(b) |  |  | 18 | — | — | 18 |
| Mutual\tfunds\t^(c) | Mutual\tfunds\t^(c) | Mutual\tfunds\t^(c) | 47 | — | — | 47 |
| Fixed\tincome: |  |  |  |  |  |  |
| Corporate\tbonds\t^(d) | Corporate\tbonds\t^(d) | Corporate\tbonds\t^(d) | — | 2,204 | — | \t 2,204 |
| Government\tsecurities\t^(e) | Government\tsecurities\t^(e) |  | — | 917 | — | 917 |
| U.S.\tmunicipal\tsecurities | U.S.\tmunicipal\tsecurities | U.S.\tmunicipal\tsecurities | — | 48 | — | 48 |
| Alternative\tinstruments: |  |  |  |  |  |  |
| Private\tequity\tpartnerships\t^(f) | Private\tequity\tpartnerships\t^(f) | Private\tequity\tpartnerships\t^(f) | — | — | 16 | 16 |
| Private\tequity\tpartnerships\tmeasured\tat\tnet\tasset\tvalue | Private\tequity\tpartnerships\tmeasured\tat\tnet\tasset\tvalue | (f)\t(h) | — | — | — | 706 |
| Common/collective\ttrusts\t^(g) | Common/collective\ttrusts\t^(g) | Common/collective\ttrusts\t^(g) | — | 30 | — | 30 |
| Common/collective\ttrusts\tand\t103-12\tInvestment\tTrust\tmeasured |  |  |  |  |  |  |
| at\tnet\tasset\tvalue | (g)\t(h) |  | — | — | — | 189 |
| Insurance\tgroup\tannuity\tcontracts | Insurance\tgroup\tannuity\tcontracts | Insurance\tgroup\tannuity\tcontracts | — | — | 2 | 2 |
| Dividend\tand\tinterest\treceivable | Dividend\tand\tinterest\treceivable |  | 50 | — | — | 50 |
| Due\tto/from\tbrokers\tfor\tsale\tof\tsecurities\t–\tnet | Due\tto/from\tbrokers\tfor\tsale\tof\tsecurities\t–\tnet | Due\tto/from\tbrokers\tfor\tsale\tof\tsecurities\t–\tnet | 23 | — | — | 23 |
| Other\tassets\t–\tnet |  |  | 8 | — | — | 8 |
| Other\tliabilities\t–\tnet | Other\tliabilities\t–\tnet | Other\tliabilities\t–\tnet | (71) | — | — | (71) |
| Total |  |  | $5,595 | $3,199 | $18 | $9,707 |

Holdings	are	diversified	as	follows:	16%	United	Kingdom,	12%	Japan,	10%	France,	7%	Switzerland,	7%	Netherlands,	6%	Republic	of	Korea,	11% of	other	emerging	markets	and	the	remaining	31%	with	no	concentration	greater	than	5%	in	any	one	country.

Investment	includes	mutual	funds	invested	40%	in	equity	securities	of large-cap,	mid-cap	and	small-cap	U.S.	companies,	35%	in	U.S.	treasuries and	corporate	bonds	and	25%	in	equity	securities	of	international	companies.

Changes	in	fair	value	measurements	of	Level	3	investments	during	the	year	ended	December	31,	2016,	were	as	follows	(in	millions):

|  | Private<br>Equity<br>Partnerships | Insurance<br>Group<br>Annuity<br>Contracts |
| :--- | :--- | :--- |
| Beginning\tbalance\tat\tDecember\t31,\t2015 | $16 | $2 |
| Actual\treturn\ton\tplan\tassets: |  |  |
| Relating\tto\tassets\tsold\tduring\tthe\tperiod | 7 | — |
| Purchases | 7 | — |
| Sales | (9) | — |
| Ending\tbalance\tat\tDecember\t31,\t2016 | $21 | $2 |

|  | Private<br>Equity<br>Partnerships | Insurance<br>Group<br>Annuity<br>Contracts |
| :--- | :--- | :--- |
| Beginning\tbalance\tat\tDecember\t31,\t2014 | $17 | $2 |
| Actual\treturn\ton\tplan\tassets: |  |  |
| Relating\tto\tassets\tstill\theld\tat\tthe\treporting\tdate | (1) | — |
| Ending\tbalance\tat\tDecember\t31,\t2015 | $16 | $2 |

The	fair	value	of	our	retiree	medical	and	other	postretirement	benefits	plans	assets	at	December	31,	2016	by	asset	category,	were	as	follows	(in millions):

|  | Quoted	Prices	in |  |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Active\tMarkets | Significant | Significant |  |
|  | for\tIdentical | Observable | Unobservable |  |
| Asset\tCategory | Assets\n(Level\t1) | Inputs\n(Level\t2) | Inputs\n(Level\t3) | Total |
| Money\tmarket\tfund | $5 | $— | $— | $5 |
| Mutual\tfunds\t–\tInstitutional\tClass | 261 | — | — | \t 261 |
| Total | $266 | $— | $— | $266 |

|  | Active	Markets | Significant | Significant |  |
| :--- | :--- | :--- | :--- | :--- |
|  | for\tIdentical | Observable | Unobservable |  |
| Asset\tCategory | Assets\n(Level\t1) | Inputs\n(Level\t2) | Inputs\n(Level\t3) | Total |
| Money\tmarket\tfund | $4 | $— | $— | $4 |
| Mutual\tfunds\t–\tInstitutional\tClass | 19 | — | — | 19 |
| Mutual\tfunds\t–\tAMR\tClass | — | 230 | — | \t 230 |
| Total | $23 | $230 | $— | $253 |

Investments	in	the	retiree	medical	and	other	postretirement	benefits	plans'	mutual	funds	are	valued	by	quoted	prices	on	the	active	market,	which	is	fair value	and	represents	the	net	asset	value	of	the	shares	of	such	funds	as	of	the	close	of	business	at	the	end	of	the	period.	AMR	Class	shares	are	offered without	a	sales	charge	to	participants.	Purchases	are	restricted	to	certain	retirement	benefit	plans,	including	our	retiree	medical	and	other	postretirement benefits	plans,	resulting	in	a	fair	value	classification	of	Level	2.	Investments	include	approximately	27%	of	investments	in	non-U.S.	common	stocks	in each	of	2016	and	2015.	Net	asset	value	is	based	on	the	fair	market	value	of	the	funds'	underlying	assets	and	liabilities	at	the	date	of	determination.

# Profit	Sharing	Program

We	instituted	an	employee	profit	sharing	program	effective	on	January	1,	2016	and	accrue	5%	of	our	 pre-tax	income	excluding	special	items	to distribute	to	employees	in	early	2017.	For	the	year	ended	December	31,	2016,	we	accrued	$314	million	for	this	program.

# 10.		Accumulated	Other	Comprehensive	Income	(Loss)

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

|  | Medical	and<br>Other<br>Postretirement<br>Benefits | Derivative<br>Financial<br>Instruments | Unrealized<br>Gain	(Loss)<br>on<br>Investments | Income	Tax<br>Benefit<br>(Provision)	^(1) | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tat\tDecember\t31,\t2014 | $(3,683) | $9 | $(5) | $(880) | $(4,559) |
| Other\tcomprehensive\tloss\tbefore\treclassifications | (51) | — | (6) | — | (57) |
| Amounts\treclassified\tfrom\taccumulated\tother |  |  |  |  |  |
| comprehensive\tincome\t(loss) | (108) | (9) | 1 | — | (116) |
| Net\tcurrent-period\tother\tcomprehensive\tloss | (159) | (9) | (5) | — | (173) |
| Balance\tat\tDecember\t31,\t2015 | (3,842) | — | (10) | (880) | (4,732) |
| Other\tcomprehensive\tincome\t(loss)\tbefore |  |  |  |  |  |
| reclassifications | (462) | — | 10 | 166 | (286) |
| Amounts\treclassified\tfrom\taccumulated\tother |  |  |  |  |  |
| comprehensive\tincome\t(loss) | (102) | — | — | 37^(2) | (65) |
| Net\tcurrent-period\tother\tcomprehensive\tincome |  |  |  |  |  |
| (loss) | (564) | — | 10 | 203 | (351) |
| Balance\tat\tDecember\t31,\t2016 | $(4,406) | $— | $— | $(677) | $(5,083) |

Relates	principally	to	pension,	retiree	medical	and	other	postretirement	benefits	obligations	that	will	not	be	recognized	in	net	income	until	the obligations	are	fully	extinguished.

Relates to	 pension, retiree	 medical	 and	 other	 postretirement	 benefits	 obligations	 and is recognized	 within the income tax	 provision	 on the consolidated	statement	of	operations.

Reclassifications	out	of	AOCI	for	the	years	ended	December	31,	2016	and	2015	are	as	follows	(in	millions):

| AOCI	Components | 2016 | 2015 | operations |
| :--- | :--- | :--- | :--- |
| Amortization\tof\tpension,\tretiree\tmedical\tand\tother |  |  |  |
| postretirement\tbenefits: |  |  |  |
| Prior\tservice\tbenefit | $(134) | $(212) | Salaries,\twages\tand\tbenefits |
| Actuarial\tloss | 69 | 104 | Salaries,\twages\tand\tbenefits |
| Derivative\tfinancial\tinstruments: |  |  |  |
| Cash\tflow\thedges | — | (9) | Aircraft\tfuel\tand\trelated\ttaxes |
| Net\tunrealized\tchange\ton\tinvestments: |  |  |  |
| Net\tchange\tin\tvalue | — | 1 | Other\tnonoperating,\tnet |
| Total\treclassifications\tfor\tthe\tperiod,\tnet\tof\ttax | $(65) | $(116) |  |

Amounts	allocated	to	OCI	for	income	taxes	as	further	described	in	Note	6	will	remain	in	AOCI	until	we	cease	all	related	activities,	such	as	termination of	the	pension	plan.

# 11.		Commitments,	Contingencies	and	Guarantees

# (a)	Aircraft	and	Engine	Purchase	Commitments

Under	all	of	our	aircraft	and	engine	purchase	agreements,	our	total	future	commitments	as	of	December	31,	2016	are	expected	to	be	as	follows (approximately,	in	millions):

These	amounts	are	net	of	purchase	deposits	currently	held	by	the	manufacturers	and	include	all	commitments	for	regional	aircraft.	American	has granted	 a	 security	 interest	 in	 its	 purchase	 deposits	 with	 Boeing.	 Our	 purchase	 deposits	 held	 by	 all	 manufacturers	 totaled	 $1.2	 billion	 as	 of December	31,	2016.

# (b)	Facility	and	support	commitments

We	have	contracts	related	to	facility	construction	or	improvement	projects,	primarily	at	airport	locations,	as	well	as	information	technology	support.	The contractual	obligations	related	to	these	contracts	are	presented	in	the	table	below	(approximately,	in	millions):

|  | 2017 | 2018 | 2019 | 2020 | 2021 | 2022	and<br>Thereafter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Facility\tconstruction\tor\timprovement\tcontracts | $182 | $126 | $13 | $— | $— | $— | $321 |
| Information\ttechnology\tcontracts | \t 205 | \t 168 | \t 128 | \t 47 | \t 24 | 8 | \t 580 |

# (c)	Capacity	Purchase	Agreements	with	Third-Party	Regional	Carriers

American	has	capacity	purchase	agreements	with	third-party	regional	carriers.	The	capacity	purchase	agreements	provide	that	all	revenues,	including passenger,	in-flight,	ancillary,	mail	and	freight	revenues,	go	to	American.	In	return,	American	agrees	to	pay	predetermined	fees	to	these	airlines	for operating	an	agreed-upon	number	of	aircraft,	without	regard	to	the	number	of	passengers	on	board.	In	addition,	these	agreements	provide	that	American reimburses	100%	of	certain	variable	costs,	such	as	airport	landing	fees	and	passenger	liability	insurance.	American	controls	marketing,	scheduling, ticketing,	pricing	and	seat	inventories.

As	of	December	31,	2016,	American's	capacity	purchase	agreements	with	third-party	regional	carriers	had	expiration	dates	ranging	from	2017	to	2027, with	rights	of	American	to	extend	the	respective	terms	of	certain	agreements.	See	Part	I,	Item	2.	Properties	for	unaudited	information	on	the	aircraft operated	by	third-party	regional	carriers	under	such	capacity	purchase	agreements.

As	of	December	31,	2016,	American's	minimum	fixed	obligations	under	its	capacity	purchase	agreements	with	third-party	regional	carriers	are	as follows	(approximately,	in	millions):

| 2017 | 2018 | 2019 | 2020 | 2021 | 2022	and<br>Thereafter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $1,710 | $1,421 | $1,283 | $1,048 | $855 | $2,738 | $9,055 |

Represents	minimum	payments	under	capacity	purchase	agreements	with	third-party	regional	carriers.	These	commitments	are	estimates	of	costs based	on	assumed	minimum	levels	of	flying	under	the	capacity	purchase	agreements	and	American's	actual	payments	could	differ	materially. These	obligations	also	include	the	portion	of	American's	future	obligations	related	to	aircraft	deemed	to	be	leased	in	the	amount	of	approximately $434	million	in	2017,	$370	million	in	2018,	$349	million	in	2019,	$317	million	in	2020,	$280	million	in	2021	and	$927	million	in	2022	and	thereafter.

# (d)	Operating	Leases

We	lease	certain	aircraft,	engines	and	ground	equipment,	in	addition	to	the	majority	of	our	ground	facilities	and	terminal	space.	As	of	December	31, 2016,	we	had	419	aircraft	under	operating	leases,	with	remaining	terms	ranging	from	three	months	to	approximately	11	years.	Airports	are	utilized	for flight	operations	under	lease	arrangements	with	the	municipalities	or	agencies	owning	or	controlling	such	airports.	Substantially	all	leases	provide	that the	lessee	must	pay	taxes,	maintenance,	insurance	and	certain	other	operating	expenses	applicable	to	the	leased	property.	Some	leases	also	include renewal	and	purchase	options.

As	of	December	31,	2016,	obligations	under	noncancellable	operating	leases	for	future	minimum	lease	payments	are	as	follows	(approximately,	in millions):

Mainline	and	regional	rent	expense,	excluding	landing	fees,	was	$2.8	billion	in	each	of	2016,	2015	and	2014.

# (e)	Off-Balance	Sheet	Arrangements

# Aircraft

American	currently	operates	346	owned	aircraft	and	138	leased	aircraft	which	were	financed	with	EETCs	issued	by	pass-through	trusts.	These	trusts are	off-balance	sheet	entities,	the	primary	purpose	of	which	is	to	finance	the	acquisition	of	flight	equipment.	Rather	than	finance	each	aircraft	separately when	such	aircraft	is	purchased,	delivered	or	refinanced,	these	trusts	allow	American	to	raise	the	financing	for	a	number	of	aircraft	at	one	time	and,	if applicable,	place	such	funds	in	escrow	pending	a	future	purchase,	delivery	or	refinancing	of	the	relevant	aircraft.	The	trusts	were	also	structured	to provide	for	certain	credit	enhancements,	such	as	liquidity	facilities	to	cover	certain	interest	payments,	that	reduce	the	risks	to	the	purchasers	of	the	trust certificates	and,	as	a	result,	reduce	the	cost	of	aircraft	financing	to	American.

Each	trust	covers	a	set	number	of	aircraft	scheduled	to	be	delivered	or	refinanced	upon	the	issuance	of	the	EETC	or	within	a	specific	period	of	time thereafter.	At	the	time	of	each	covered	aircraft	financing,	the	relevant	trust	used	the	proceeds	of	the	issuance	of	the	EETC	(which	may	have	been available	at	the	time	of	issuance	thereof	or	held	in	escrow	until	financing	of	the	applicable	aircraft	following	its	delivery)	to	purchase	equipment	notes relating	to	the	financed	aircraft.	The	equipment	notes	are	issued,	at	American's	election,	in	connection	with	a	mortgage	financing	of	the	aircraft	or,	in certain	cases,	by	a	separate	owner	trust	in	connection	with	a	leveraged	lease	financing	of	the	aircraft.	In	the

case	of	a	leveraged	lease	financing,	the	owner	trust	then	leases	the	aircraft	to	American.	In	both	cases,	the	equipment	notes	are	secured	by	a	security interest	in	the	aircraft.	The	pass-through	trust	certificates	are	not	direct	obligations	of,	nor	are	they	guaranteed	by,	AAG	or	American.	However,	in	the case	of	mortgage	financings,	the	equipment	notes	issued	to	the	trusts	are	direct	obligations	of	American	and,	in	certain	instances,	have	been	guaranteed by	AAG.	As	of	December	31,	2016,	$10.9	billion	associated	with	these	mortgage	financings	is	reflected	as	debt	in	the	accompanying	consolidated balance	sheet.

With	respect	to	leveraged	leases,	American	evaluated	whether	the	leases	had	characteristics	of	a	variable	interest	entity.	American	concluded	the leasing	entities	met	the	criteria	for	variable	interest	entities.	American	generally	is	not	the	primary	beneficiary	of	the	leasing	entities	if	the	lease	terms	are consistent	with	market	terms	at	the	inception	of	the	lease	and	do	not	include	a	residual	value	guarantee,	fixed-price	purchase	option	or	similar	feature that	obligates	American	to	absorb	decreases	in	value	or	entitles	American	to	participate	in	increases	in	the	value	of	the	aircraft.	American	does	not provide	residual	value	guarantees	to	the	bondholders	or	equity	participants	in	the	trusts.	Some	leases	have	a	fair	market	value	or	a	fixed	price	purchase option	that	allows	American	to	purchase	the	aircraft	at	or	near	the	end	of	the	lease	term.	However,	the	option	price	approximates	an	estimate	of	the aircraft's	fair	value	at	the	option	date.	Under	this	feature,	American	does	not	participate	in	any	increases	in	the	value	of	the	aircraft.	American	concluded it	is	not	the	primary	beneficiary	under	these	arrangements.	Therefore,	American	accounts	for	its	EETC	leveraged	lease	financings	as	operating	leases. American's	total	future	obligations	under	these	leveraged	lease	financings	are	$1.5	billion	as	of	December	31,	2016,	which	are	included	in	the	future minimum	lease	payments	table	above.

AAG	guarantees	the	payment	of	principal	and	interest	of	certain	special	facility	revenue	bonds	issued	by	municipalities	primarily	to	build	or	improve airport	facilities	and	purchase	equipment	which	is	leased	to	American.	Under	such	leases,	American	is	required	to	make	rental	payments	through	2035, sufficient	to	pay	maturing	principal	and	interest	payments	on	the	related	bonds.	As	of	December	31,	2016,	the	remaining	lease	payments	guaranteeing the	principal	and	interest	on	these	bonds	are	$605	million,	which	are	accounted	for	as	operating	leases.

# (f)	Legal	Proceedings

Pursuant	to	rulings	of	the	Bankruptcy	Court,	the	Plan	established	the	Disputed	Claims	Reserve	to	hold	shares	of	AAG	common	stock	reserved	for issuance	 to	 disputed	 claimholders	 at	 the	 Effective	 Date	 that	 ultimately	 become	 holders	 of	 allowed	 claims.	As	 of	 December	 31,	 2016,	 there	 were approximately	25.2	million	shares	of	AAG	common	stock	remaining	in	the	Disputed	Claims	Reserve.	As	disputed	claims	are	resolved,	the	claimants	will receive	distributions	of	shares	from	the	Disputed	Claims	Reserve	on	the	same	basis	as	if	such	distributions	had	been	made	on	or	about	the	Effective Date.	However,	we	are	not	required	to	distribute	additional	shares	above	the	limits	contemplated	by	the	Plan,	even	if	the	shares	remaining	for	distribution are	not	sufficient	to	fully	pay	any	additional	allowed

unsecured	claims.	To	the	extent	that	any	of	the	reserved	shares	remain	undistributed	upon	resolution	of	all	remaining	disputed	claims,	such	shares	will not	be	returned	to	us	but	rather	will	be	distributed	to	former	AMR	stockholders.

DOJ	Antitrust	Civil	Investigative	Demand.	In	June	2015,	we	received	a	Civil	Investigative	Demand	(CID)	from	the	United	States	Department	of	Justice (DOJ)	as	part	of	an	investigation	into	whether	there	have	been	illegal	agreements	or	coordination	of	air	passenger	capacity.	The	CID	seeks	documents and	other	information	from	us,	and	other	airlines	have	announced	that	they	have	received	similar	requests.	We	are	cooperating	fully	with	the	DOJ investigation.	In	addition,	subsequent	to	announcement	of	the	delivery	of	CIDs	by	the	DOJ,	we,	along	with	Delta	Air	Lines,	Inc.,	Southwest	Airlines	Co., United	Airlines,	Inc.	and,	in	the	case	of	litigation	filed	in	Canada,	Air	Canada,	have	been	named	as	defendants	in	approximately	100	putative	class	action lawsuits	alleging	unlawful	agreements	with	respect	to	air	passenger	capacity.	The	U.S.	lawsuits	have	been	consolidated	in	the	Federal	District	Court	for the	District	of	Columbia.	On	October	28,	2016,	the	Court	denied	a	motion	by	the	airline	defendants	to	dismiss	all	claims	in	the	class	actions.	Both	the	DOJ investigation	and	these	lawsuits	are	in	their	relatively	early	stages	and	we	intend	to	defend	these	matters	vigorously.

Private	Party	Antitrust	Action.	On	July	2,	2013,	a	lawsuit	captioned	Carolyn	Fjord,	et	al.,	v.	US	Airways	Group,	Inc.,	et	al.,	was	filed	in	the	United	States District	Court	for	the	Northern	District	of	California.	The	complaint	named	as	defendants	US	Airways	Group	and	US	Airways,	Inc.,	alleged	that	the	effect of	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 August	6,	2013,	the	plaintiffs	re-filed	their	complaint	in	the	Bankruptcy	Court,	adding	AMR	and	American	as	defendants.	On	November	27,	2013,	the Bankruptcy	Court	denied	plaintiffs'	motion	to	preliminarily	enjoin	the	Merger.	On	August	19,	2015,	after	three	previous	largely	unsuccessful	attempts	to amend	their	complaint,	plaintiffs	filed	a	fourth	motion	for	leave	to	file	an	amended	and	supplemental	complaint	to	add	a	claim	for	damages	and	demand for	jury	trial,	as	well	as	claims	similar	to	those	in	the	putative	class	action	lawsuits	regarding	air	passenger	capacity.	Thereafter,	plaintiffs	filed	a	request with	the	Judicial	Panel	on	Multidistrict	Litigation	to	consolidate	the	Fjord	matter	with	the	putative	class	action	lawsuits,	which	was	denied	on	October	15, 2015.	A	 jointly	 proposed	 schedule	 for	 the	 remainder	 of	 the	 case	 was	 submitted	 on	 September	 7,	 2016,	 which	 has	 not	 yet	 been	 accepted	 by	 the Bankruptcy	Court.	We	believe	this	lawsuit	is	without	merit	and	intend	to	vigorously	defend	against	the	allegations.

DOJ	Investigation	Related	to	the	United	States	Postal	Service .	In	April	2015,	the	DOJ	informed	us	of	an	inquiry	regarding	American's	2009	and	2011 contracts	with	the	United	States	Postal	Service	for	the	international	transportation	of	mail	by	air.	In	October	2015,	we	received	a	CID	from	the	DOJ seeking	certain	information	relating	to	these	contracts	and	the	DOJ	has	also	sought	information	concerning	certain	of	the	airlines	that	transport	mail	on	a codeshare	basis.	The	DOJ	has	indicated	it	is

investigating	potential	violations	of	the	False	Claims	Act	or	other	statutes.	We	are	cooperating	fully	with	the	DOJ	with	regard	to	its	investigation.

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.	See	Part	I,	Item 1A.	Risk	Factors	–"We	may	be	a	party	to	litigation	in	the	normal	course	of	business	or	otherwise,	which	could	affect	our	financial	position	and	liquidity" 	for unaudited	additional	discussion.

# (g)	Guarantees	and	Indemnifications

We	are	party	to	many	routine	contracts	in	which	we	provide	general	indemnities	in	the	normal	course	of	business	to	third	parties	for	various	risks.	We are	not	able	to	estimate	the	potential	amount	of	any	liability	resulting	from	the	indemnities.	These	indemnities	are	discussed	in	the	following	paragraphs.

In	our	aircraft	financing	agreements,	we	generally	indemnify	the	financing	parties,	trustees	acting	on	their	behalf	and	other	relevant	parties	against liabilities	(including	certain	taxes)	resulting	from	the	financing,	manufacture,	design,	ownership,	operation	and	maintenance	of	the	aircraft	regardless	of whether	these	liabilities	(or	taxes)	relate	to	the	negligence	of	the	indemnified	parties.

Our	loan	agreements	and	other	LIBOR-based	financing	transactions	(including	certain	leveraged	aircraft	leases)	generally	obligate	us	to	reimburse	the applicable	lender	for	incremental	costs	due	to	a	change	in	law	that	imposes	(i)	any	reserve	or	special	deposit	requirement	against	assets	of,	deposits	with or	credit	extended	by	such	lender	related	to	the	loan,	(ii)	any	tax,	duty	or	other	charge	with	respect	to	the	loan	(except	standard	income	tax)	or	(iii)	capital adequacy	requirements.	In	addition,	our	loan	agreements	and	other	financing	arrangements	typically	contain	a	withholding	tax	provision	that	requires	us to	pay	additional	amounts	to	the	applicable	lender	or	other	financing	party,	generally	if	withholding	taxes	are	imposed	on	such	lender	or	other	financing party	as	a	result	of	a	change	in	the	applicable	tax	law.

These	 increased	cost	and	withholding	 tax	provisions	continue	 for	 the	entire	 term	of	 the	applicable	 transaction,	and	 there	 is	no	 limitation	on	 the maximum	additional	amounts	we	could	be	obligated	to	pay	under	such	provisions.	Any	failure	to	pay	amounts	due	under	such	provisions	generally	would trigger	an	event	of	default	and,	in	a	secured	financing	transaction,	would	entitle	the	lender	to	foreclose	on	the	collateral	to	realize	the	amount	due.

In	certain	transactions,	including	certain	aircraft	financing	leases	and	loans,	the	lessors,	lenders	and/or	other	parties	have	rights	to	terminate	the transaction	based	on	changes	in	foreign	tax	law,	illegality	or	certain	other	events	or	circumstances.	In	such	a	case,	we	may	be	required	to	make	a	lump sum	payment	to	terminate	the	relevant	transaction.

We	have	general	indemnity	clauses	in	many	of	our	airport	and	other	real	estate	leases	where	we	as	lessee	indemnify	the	lessor	(and	related	parties) against	 liabilities	 related	 to	 our	 use	 of	 the	 leased	 property.	 Generally,	 these	 indemnifications	 cover	 liabilities	 resulting	 from	 the	 negligence	 of	 the indemnified	 parties,	 but	 not	 liabilities	 resulting	 from	 the	 gross	 negligence	 or	 willful	 misconduct	 of	 the	 indemnified	 parties.	 In	 addition,	 we	 provide environmental	indemnities	in	many	of	these	leases	for	contamination	related	to	our	use	of	the	leased	property.

Under	certain	contracts	with	third	parties,	we	indemnify	the	third-party	against	legal	liability	arising	out	of	an	action	by	the	third-party,	or	certain	other parties.	The	 terms	 of	 these	 contracts	 vary	 and	 the	 potential	 exposure	 under	 these	 indemnities	 cannot	 be	 determined.	 We	 have	 liability	 insurance protecting	us	for	some	of	the	obligations	we	have	undertaken	under	these	indemnities.

We	are	involved	in	certain	claims	and	litigation	related	to	our	operations.	We	are	also	subject	to	regulatory	assessments	in	the	ordinary	course	of business.	We	establish	reserves	for	litigation	and	regulatory	matters	when	those	matters	present	loss	contingencies	that	are	both	probable	and	can	be reasonably	estimated.	In	the	opinion	of	management,	liabilities,	if	any,	arising	from	these	regulatory	matters,	claims	and	litigation	will	not	have	a	material adverse	effect	on	our	consolidated	financial	position,	results	of	operations,	or	cash	flows,	after	consideration	of	available	insurance.

# (h)	Credit	Card	Processing	Agreements

We	have	agreements	with	companies	that	process	customer	credit	card	transactions	for	the	sale	of	air	travel	and	other	services.	Our	agreements	allow these	processing	companies,	under	certain	conditions,	to	hold	an	amount	of	our	cash	(referred	to	as	a	holdback)	equal	to	a	portion	of	advance	ticket	sales that	have	been	processed	by	that	company,	but	for	which	we	have	not	yet	provided	the	air	transportation.	Additional	holdback	requirements	in	the	event of	material	adverse	changes	in	our	financial	condition	will	reduce	our	liquidity	in	the	form	of	unrestricted	cash	by	the	amount	of	the	holdbacks.	We	are	not currently	required	to	maintain	any	holdbacks	pursuant	to	these	requirements.

# (i)	Labor	Negotiations

As	of	December	31,	2016,	we	employed	approximately	122,300	active	full-time	equivalent	employees,	of	which	20,800	were	employed	by	our	regional operations.	Approximately	85%	of	employees	are	covered	by	collective	bargaining	agreements	with	various	labor	unions.	Negotiations	for	joint	collective bargaining	agreements	covering	our	mainline	maintenance,	fleet	service,	stores	and	planner	employees	as	well	as	for	certain	employee	groups	at	our wholly-owned	regional	subsidiaries	are	continuing.	There	 is	no	assurance	 that	a	successful	or	 timely	resolution	of	 these	 labor	 negotiations	 will	 be achieved.

# (j)	Other

As	a	result	of	the	terrorist	attacks	of	September	11,	2001	and	the	subsequent	liability	protections	provided	for	by	the	Air	Transportation	Safety	and System	Stabilization	Act	(the	Stabilization	Act),	we	recorded	a	liability	for	these	terrorist	attacks	claims	equal	to	the	related	insurance	receivable	due	to us.	The	Stabilization	Act	provides	that,	notwithstanding	any	other	provision	of	law,	liability	for	all	claims,	whether	compensatory	or	punitive,	arising	from these	terrorist	attacks,	against	any	air	carrier	shall	not	exceed	the	liability	coverage	maintained	by	the	air	carrier.	As	of	December	31,	2016,	the	remaining liability	and	the	amount	of	the	offsetting	receivable	were	each	$974	million.

# 12.		Supplemental	Cash	Flow	Information

Supplemental	disclosure	of	cash	flow	information	and	non-cash	investing	and	financing	activities	are	as	follows	(in	millions):

|  | 2016 | Year	Ended	December	31,<br>	2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Non-cash\tinvesting\tand\tfinancing\tactivities: |  |  |  |
| Settlement\tof\tbankruptcy\tobligations | $3 | $63 | $5,495 |
| Capital\tlease\tobligations | — | 5 | 747 |
| Supplemental\tinformation: |  |  |  |
| Interest\tpaid,\tnet\tof\tamounts\tcapitalized | \t 964 | 873 | 814 |
| Income\ttaxes\tpaid | 16 | 20 | 7 |

# 13.		Operating	Segments	and	Related	Disclosures

We	are	managed	as	a	single	business	unit	that	provides	air	transportation	for	passengers	and	cargo.	This	allows	us	to	benefit	from	an	integrated revenue	 pricing	 and	 route	 network	 that	 includes	American	 and	 our	 wholly-owned	 and	 third-party	 regional	 carriers	 that	 fly	 under	 capacity	 purchase agreements	operating	as	American	Eagle.	The	flight	equipment	of	all	these	carriers	is	combined	to	form	one	fleet	that	is	deployed	through	a	single	route scheduling	system.	When	making	resource	allocation	decisions,	the	chief	operating	decision	maker	evaluates	flight	profitability	data,	which	considers aircraft	type	and	route	economics,	but	gives	no	weight	to	the	financial	impact	of	the	resource	allocation	decision	on	an	individual	carrier	basis.	The objective	in	making	resource	allocation	decisions	is	to	maximize	consolidated	financial	results,	not	the	individual	results	of	American	or	American	Eagle.

Our	operating	revenues	by	geographic	region	as	defined	by	the	United	States	Department	of	Transportation	(DOT)	are	summarized	below	(in	millions):

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| DOT\tDomestic | $28,620 | $28,761 | $ 28,568 |
| DOT\tLatin\tAmerica | 4,995 | 5,539 | 6,964 |
| DOT\tAtlantic | 4,769 | 5,146 | 5,652 |
| DOT\tPacific | 1,796 | 1,544 | 1,466 |
| Total\toperating\trevenues | $40,180 | $40,990 | $ 42,650 |

We	attribute	operating	revenues	by	geographic	region	based	upon	the	origin	and	destination	of	each	flight	segment.	Our	tangible	assets	consist primarily	of	flight	equipment,	which	are	mobile	across	geographic	markets	and,	therefore,	have	not	been	allocated.

The	2013	AAG	Incentive	Award	Plan	(the	2013	Plan)	provides	that	awards	may	be	in	the	form	of	an	option,	restricted	stock	award,	restricted	stock	unit award,	performance	award,	dividend	equivalent	award,	deferred	stock	award,	deferred	stock	unit	award,	stock	payment	award	or	stock	appreciation	right. The	2013	Plan	authorizes	the	grant	of	awards	for	the	issuance	of	40	million	shares.	Any	shares	underlying	awards	granted	under	the	2013	Plan,	or	any pre-existing	US	Airways	Group	plan,	that	are	forfeited,	terminate	or	are	settled	in	cash	(in	whole	or	in	part)	without	the	delivery	of	shares	will	again	be available	for	grant.

Our	net	income	for	the	years	ended	December	31,	2016,	2015	and	2014	included	$102	million,	$274	million	and	$381	million,	respectively,	of	share- based	compensation	costs.	Of	the	2015	and	2014	amounts,	$198	million	and	$224	million,	respectively,	were	related	to	awards	granted	to	certain employees	in	connection	with	the	Merger	and	recorded	in	special	items,	net	on	the	accompanying	consolidated	statements	of	operations.

During	2016,	2015	and	2014,	we	withheld	approximately	1.4	million,	7.0	million	and	1.7	million	shares	of	AAG	common	stock,	respectively,	and	paid approximately	$56	million,	$306	million	and	$62	million,	respectively,	in	satisfaction	of	certain	tax	withholding	obligations	associated	with	employee	equity awards.

# (a)	Restricted	Stock	Unit	Awards	(RSUs)

We	have	granted	RSUs	with	service	conditions	(time	vested	primarily	over	three	years)	and	performance	conditions.	The	grant-date	fair	value	of RSUs	is	equal	to	the	market	price	of	the	underlying	shares	of	common	stock	on	the	date	of	grant.	For	time	vested	awards,	the	expense	is	recognized	on a	straight-line	basis	over	the	vesting	period	for	the	entire	award.	For	awards	with	performance	conditions,	the	expense	is	recognized	based	on	the expected	achievement	at	each	reporting	period.	Stock-settled	RSUs	are	classified	as	equity	awards	as	the	vesting	results	in	the	issuance	of	shares	of AAG	common	stock.	Cash-settled	restricted	stock	unit	awards	(CRSUs)	are	classified	as	liability	awards	as	the	vesting	results	in	payment	of	cash.

Stock-settled	RSU	award	activity	for	all	plans	for	the	years	ended	December	31,	2016,	2015	and	2014	is	as	follows	(shares	in	thousands):

| Outstanding	at	December	31,	2013 | 23,879 | $24.33 |
| :--- | :--- | :--- |
| Granted | 3,467 | 37.07 |
| Vested\tand\treleased | (4,193) | 23.84 |
| Forfeited | (1,811) | 25.10 |
| Outstanding\tat\tDecember\t31,\t2014 | 21,342 | $26.43 |
| Granted | 2,213 | 46.62 |
| Vested\tand\treleased | (17,163) | 25.20 |
| Forfeited | (785) | 27.12 |
| Outstanding\tat\tDecember\t31,\t2015 | 5,607 | $38.08 |
| Granted | 2,655 | 41.34 |
| Vested\tand\treleased | (2,754) | 34.83 |
| Forfeited | (321) | 40.15 |
| Outstanding\tat\tDecember\t31,\t2016 | 5,187 | $41.48 |

As	of	December	31,	2016,	there	was	$116	million	of	unrecognized	compensation	cost	related	to	stock-settled	RSUs.	These	costs	are	expected	to	be recognized	over	a	weighted	average	period	of	one	year.	The	total	fair	value	of	stock-settled	RSUs	vested	during	the	years	ended	December	31,	2016, 2015	and	2014	was	$107	million,	$750	million	and	$154	million,	respectively.

# (b)	Stock	Options	and	Stock	Appreciation	Rights

We	assumed	US	Airways	Group's	outstanding	stock	options	and	stock	appreciation	rights	in	connection	with	the	Merger	using	an	exchange	ratio	of one	to	one.	These	stock	options	and	stock	appreciation	rights	were	granted	with	an	exercise	price	equal	to	the	underlying	common	stock's	fair	value	at the	date	of	each	grant,	have	service	conditions,	become	exercisable	over	a	three-year	vesting	period	and	expire	if	unexercised	at	the	end	of	their	term, which	ranges	from	seven	to	ten	years.	Stock	options	and	stock-settled	stock	appreciation	rights	(SARs)	are	classified	as	equity	awards	as	the	exercise results	in	the	issuance	of	shares	of	AAG	common	stock.	Cash-settled	stock	appreciation	rights	(CSARs)	are	classified	as	liability	awards	as	the	exercise results	in	payment	of	cash.	Compensation	costs	were	expensed	on	a	straight-line	basis	over	the	vesting	period	for	the	entire	award.	There	are	no unrecognized	compensation	costs	as	all	awards	outstanding	are	vested.

Stock	option	and	SAR	award	activity	for	all	plans	for	the	years	ended	December	31,	2016,	2015	and	2014	is	as	follows	(stock	options	and	SARs	in thousands):

| thousands): |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Weighted |  |
|  |  | Weighted | Average |  |
|  | Stock\tOptions | Average | Remaining | Aggregate |
|  | and | Exercise | Contractual | Intrinsic |
|  | SARs | Price | Term | Value |
|  | (In\tthousands) |  | (In\tyears) | (In\tmillions) |
| Balance\tat\tDecember\t31,\t2013 | 11,158 | $12.84 |  |  |
| Granted | — | — |  |  |
| Exercised | (4,109) | 10.74 |  |  |
| Forfeited | — | — |  |  |
| Expired | (42) | 41.73 |  |  |
| Balance\tat\tDecember\t31,\t2014 | 7,007 | $13.90 |  |  |
| Granted | — | — |  |  |
| Exercised | (2,985) | 12.09 |  |  |
| Forfeited | — | — |  |  |
| Expired | (9) | 45.75 |  |  |
| Balance\tat\tDecember\t31,\t2015 | 4,013 | $15.17 |  |  |
| Granted | — | — |  |  |
| Exercised | (1,738) | 14.49 |  |  |
| Forfeited | — | — |  |  |
| Expired | (180) | 46.19 |  |  |
| Balance\tat\tDecember\t31,\t2016 | 2,095 | $13.08 | 1.6 | $70 |

The	total	intrinsic	value	of	stock	options	and	SARs	exercised	during	the	years	ended	December	31,	2016,	2015	and	2014	was	$49	million,	$102	million and	$105	million,	respectively.	All	stock	options	and	SARs	outstanding	at	December	31,	2016	are	vested	and	exercisable.

CSAR	award	activity	for	all	plans	for	the	years	ended	December	31,	2016,	2015	and	2014	is	as	follows	(CSARs	in	thousands):

|  |  |  | Weighted |  |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Weighted | Average |  |
|  |  | Average | Remaining | Aggregate |
|  |  | Exercise | Contractual | Intrinsic |
|  | CSARs | Price | Term | Value |
|  | (In\tthousands) |  | (In\tyears) | (In\tmillions) |
| Balance\tat\tDecember\t31,\t2013 | 2,865 | $6.26 |  |  |
| Granted | — | — |  |  |
| Exercised | (1,254) | 6.18 |  |  |
| Forfeited | — | — |  |  |
| Expired | — | — |  |  |
| Balance\tat\tDecember\t31,\t2014 | 1,611 | $6.33 |  |  |
| Granted | — | — |  |  |
| Exercised | (760) | 6.31 |  |  |
| Forfeited | — | — |  |  |
| Expired | — | — |  |  |
| Balance\tat\tDecember\t31,\t2015 | 851 | $6.35 |  |  |
| Granted | — | — |  |  |
| Exercised | (501) | 5.24 |  |  |
| Forfeited | — | — |  |  |
| Expired | — | — |  |  |
| Balance\tat\tDecember\t31,\t2016 | 350 | $7.94 | 1.0 | $14 |

As	of	December	31,	2016,	the	weighted	average	fair	value	of	outstanding	CSARs	was	$38.57	per	share	and	the	related	liability	was	$13	million.	These CSARs	are	fully	vested	and	exercisable	and	will	continue	to	be	remeasured	at	fair	value	at	each	reporting	date	until	all	awards	are	settled.	Total	cash	paid for	CSARs	exercised	during	the	years	ended	December	31,	2016,	2015	and	2014	was	$18	million,	$31	million	and	$42	million,	respectively.

# 15.		Valuation	and	Qualifying	Accounts	(in	millions)

|  | Balance	at<br>Beginning	of<br>Year | Charged	to<br>Statement	of<br>Operations<br>Accounts | Write-offs<br>(Net	of<br>Recoveries) | Sales,<br>Retirements<br>and<br>Transfers | Balance<br>at	End<br>of	Year |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Allowance\tfor\tobsolescence\tof\tinventories |  |  |  |  |  |
| Year\tended\tDecember\t31,\t2016 | $728 | $37 | $(3) | $3 | $765 |
| Year\tended\tDecember\t31,\t2015 | 673 | 50 | (4) | 9 | 728 |
| Year\tended\tDecember\t31,\t2014 | 547 | 142 | (4) | (12) | 673 |
| Allowance\tfor\tuncollectible\taccounts |  |  |  |  |  |
| Year\tended\tDecember\t31,\t2016 | $41 | $47 | $(52) | $— | $36 |
| Year\tended\tDecember\t31,\t2015 | 17 | 46 | (22) | — | 41 |
| Year\tended\tDecember\t31,\t2014 | 41 | 6 | (30) | — | 17 |

# 16.		Quarterly	Financial	Data	(Unaudited)

Unaudited	summarized	financial	data	by	quarter	for	2016	and	2015	(in	millions,	except	share	and	per	share	amounts):

|  | First<br>Quarter | Second<br>Quarter | Third<br>Quarter | Fourth<br>Quarter |
| :--- | :--- | :--- | :--- | :--- |
| 2016 |  |  |  |  |
| Operating\trevenues | $9,435 | $10,363 | $10,594 | $9,789 |
| Operating\texpenses | 8,100 | 8,612 | 9,163 | 9,022 |
| Operating\tincome | 1,335 | 1,751 | 1,431 | 767 |
| Net\tincome | 700 | 950 | 737 | 289 |
| Earnings\tper\tshare: |  |  |  |  |
| Basic | $1.15 | $1.69 | $1.40 | $0.56 |
| Diluted | $1.14 | $1.68 | $1.40 | $0.56 |
| Shares\tused\tfor\tcomputation\t(in\tthousands): |  |  |  |  |
| Basic | \t 606,245 | \t 563,000 | \t 525,415 | \t 514,571 |
| Diluted | \t 611,488 | \t 566,040 | \t 528,510 | \t 518,358 |
| 2015 |  |  |  |  |
| Operating\trevenues | $9,827 | $10,827 | $10,706 | $9,630 |
| Operating\texpenses | 8,611 | 8,906 | 8,707 | 8,562 |
| Operating\tincome | 1,216 | 1,921 | 1,999 | 1,068 |
| Net\tincome | 932 | 1,704 | 1,693 | 3,281 |
| Earnings\tper\tshare: |  |  |  |  |
| Basic | $1.34 | $2.47 | $2.56 | $5.24 |
| Diluted | $1.30 | $2.41 | $2.49 | $5.09 |
| Shares\tused\tfor\tcomputation\t(in\tthousands): |  |  |  |  |
| Basic | \t 696,415 | \t 688,727 | \t 661,869 | \t 626,559 |
| Diluted | \t 716,930 | \t 707,611 | \t 680,739 | \t 644,140 |

Our	fourth	quarter	2016	results	include	$273	million	of	total	net	special	charges	consisting	principally	of	$121	million	of	Merger	integration	expenses, $104	million	of	fleet	restructuring	expenses	and	a	$47	million	net	charge	consisting	of	mark-to-market	adjustments	for	bankruptcy	obligations.

Our	fourth	quarter	2015	results	include	$2.0	billion	of	total	net	special	credits	consisting	principally	of	a	$3.0	billion	 non-cash	tax	benefit	recorded	in connection	with	the	reversal	of	our	tax	valuation	allowance,	offset	in	part	by	a	nonoperating	net	special	charge	of	$592	million	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	and	$450	million	in	total operating	special	charges	primarily	consisting	of	Merger	integration	expenses	and	fleet	restructuring	expenses.

# 17.		Subsequent	Events

In	January	2017,	American	created	three	pass-through	trusts	which	issued	approximately	$983	million	aggregate	principal	amount	of	Series	 2017-1 Class	AA,	Class	A	and	Class	B	EETCs	(the	2017-1	EETCs)	in	connection	with	the	financing	of	24	aircraft	scheduled	to	be	delivered	to	American	between January	2017	and	May	2017	(the	2017-1	Aircraft).	A	portion	of	the	proceeds	received	from	the	sale	of	the	 2017-1	EETCs	has	been	used	to	acquire	Series AA,	A	and	B	equipment	notes	issued	by	American	to	the	pass-through	trusts	and	the	balance	of	such	proceeds	is	being	held	in	escrow	for 134

the	benefit	of	the	holders	of	the	2017-1	EETCs	until	such	time	as	American	issues	additional	Series	AA,	A	and	B	equipment	notes	to	the	pass-through trusts,	which	will	purchase	the	equipment	notes	with	escrowed	funds.	These	escrowed	funds	are	not	guaranteed	by	American	and	are	not	reported	as debt	on	our	consolidated	balance	sheet	because	the	proceeds	held	by	the	depository	are	not	American's	assets.

Series	AA	equipment	notes	bear	interest	at	3.65%	per	annum,	Series	A	equipment	notes	bear	interest	at	4.00%	per	annum	and	Series	B	equipment notes	bear	interest	at	4.95%	per	annum.	Interest	and	principal	payments	on	the	equipment	notes	will	be	payable	semi-annually	in	February	and	August	of each	year,	with	interest	payments	beginning	in	August	2017	and	principal	payments	beginning	in	February	2018.	The	final	payments	on	the	Series	AA and	Series	A	equipment	notes	are	due	in	February	2029	and	the	final	payment	on	the	Series	B	equipment	notes	is	due	in	February	2025.	The	equipment notes	are	secured	by	liens	on	the	2017-1	Aircraft.

# Share	Repurchase	Program	and	Dividend	Declaration

In	January	2017,	we	announced	that	our	Board	of	Directors	had	authorized	a	new	$2.0	billion	share	repurchase	program	that	expires	on	December	31, 2018.	Share	repurchases	under	our	share	repurchase	programs	may	be	made	through	a	variety	of	methods,	which	may	include	open	market	purchases, privately	negotiated	transactions,	block	trades	or	accelerated	share	repurchase	transactions.	Any	such	repurchases	will	be	made	from	time	to	time subject	to	market	and	economic	conditions,	applicable	legal	requirements	and	other	relevant	factors.	Our	share	repurchase	programs	do	not	obligate	us to	repurchase	any	specific	number	of	shares	and	may	be	suspended	at	any	time	at	our	discretion.

Also	in	January	2017,	we	announced	that	our	Board	of	Directors	had	declared	a	$0.10	per	share	dividend	for	stockholders	of	record	on	February	13, 2017,	and	payable	on	February	27,	2017.	Any	future	dividends	that	may	be	declared	and	paid	from	time	to	time	will	be	subject	to	market	and	economic conditions,	applicable	legal	requirements	and	other	relevant	factors.	We	are	not	obligated	to	continue	a	dividend	for	any	fixed	period,	and	payment	of dividends	may	be	suspended	at	any	time	at	our	discretion.

# ITEM	8B.	CONSOLIDATED	FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY	DATA	OF	AMERICAN	AIRLINES,	INC.

# The	Board	of	Directors	and	Stockholder

We	have	audited	the	accompanying	consolidated	balance	sheets	of	American	Airlines,	Inc.	and	subsidiaries	(American)	as	of	December	31,	2016	and 2015,	and	the	related	consolidated	statements	of	operations,	comprehensive	income,	cash	flows,	and	stockholder's	equity	(deficit)	for	each	of	the	years	in the	 three-year	 period	 ended	 December	 31,	 2016.	 These	 consolidated	 financial	 statements	 are	 the	 responsibility	 of	American's	 management.	 Our responsibility	is	to	express	an	opinion	on	these	consolidated	financial	statements	based	on	our	audits.

In	our	opinion,	the	consolidated	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	financial	position	of	American	Airlines, Inc.	and	subsidiaries	as	of	December	31,	2016	and	2015,	and	the	results	of	their	operations	and	their	cash	flows	for	each	of	the	years	in	the	three-year period	ended	December	31,	2016,	in	conformity	with	U.S.	generally	accepted	accounting	principles.

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	American's	internal	control over	 financial	 reporting	 as	 of	 December	 31,	 2016,	 based	 on	 criteria	 established in	Internal	Control	– Integrated	 Framework (2013) issued	 by	 the Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO),	and	our	report	dated	February	22,	2017	expressed	an	unqualified	opinion on	the	effectiveness	of	American's	internal	control	over	financial	reporting.

/s/	KPMG	LLP

|  | 2016 | Year	Ended	December	31,<br>2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Operating\trevenues: |  |  |  |
| Mainline\tpassenger | $27,909 | $29,037 | $30,802 |
| Regional\tpassenger | 6,670 | 6,475 | 6,322 |
| Cargo | 700 | 760 | 875 |
| Other | 4,884 | 4,666 | 4,677 |
| Total\toperating\trevenues | \t 40,163 | \t 40,938 | \t 42,676 |
| Operating\texpenses: |  |  |  |
| Aircraft\tfuel\tand\trelated\ttaxes | 5,071 | 6,226 | \t 10,592 |
| Salaries,\twages\tand\tbenefits | \t 10,881 | 9,514 | 8,499 |
| Regional\texpenses | 6,009 | 5,952 | 6,477 |
| Maintenance,\tmaterials\tand\trepairs | 1,834 | 1,889 | 2,051 |
| Other\trent\tand\tlanding\tfees | 1,772 | 1,731 | 1,727 |
| Aircraft\trent | 1,203 | 1,250 | 1,250 |
| Selling\texpenses | 1,323 | 1,394 | 1,544 |
| Depreciation\tand\tamortization | 1,525 | 1,364 | 1,301 |
| Special\titems,\tnet | 709 | 1,051 | 783 |
| Other | 4,532 | 4,378 | 4,186 |
| Total\toperating\texpenses | \t 34,859 | \t 34,749 | \t 38,410 |
| Operating\tincome | 5,304 | 6,189 | 4,266 |
| Nonoperating\tincome\t(expense): |  |  |  |
| Interest\tincome | 104 | 49 | 32 |
| Interest\texpense,\tnet\tof\tcapitalized\tinterest | (906) | (796) | (847) |
| Other,\tnet | (59) | (774) | (183) |
| Total\tnonoperating\texpense,\tnet | (861) | (1,521) | (998) |
| Income\tbefore\tincome\ttaxes | 4,443 | 4,668 | 3,268 |
| Income\ttax\tprovision\t(benefit) | 1,662 | (3,452) | 320 |
| Net\tincome | $2,781 | $8,120 | $2,948 |

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Net\tincome | $2,781 | $8,120 | $2,948 |
| Other\tcomprehensive\tincome\t(loss),\tnet\tof\ttax: |  |  |  |
| Pension,\tretiree\tmedical\tand\tother\tpostretirement\tbenefits: |  |  |  |
| Amortization\tof\tactuarial\tloss\tand\tprior\tservice\tcost | (65) | (109) | (163) |
| Current\tyear\tchange | (292) | (51) | (2,621) |
| Derivative\tfinancial\tinstruments: |  |  |  |
| Change\tin\tfair\tvalue | — | — | (52) |
| Reclassification\tinto\tearnings | — | (9) | (4) |
| Unrealized\tgain\t(loss)\ton\tinvestments: |  |  |  |
| Net\tchange\tin\tvalue | 6 | (6) | (4) |
| Reversal\tof\tnon-cash\ttax\tbenefit | — | — | 328 |
| Total\tother\tcomprehensive\tloss,\tnet\tof\ttax | (351) | (175) | (2,516) |
| Total\tcomprehensive\tincome | $2,430 | $7,945 | $432 |

|  | December	31,<br>2016 | 2015 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Current\tassets |  |  |
| Cash | $310 | $364 |
| Short-term\tinvestments | 6,034 | 5,862 |
| Restricted\tcash\tand\tshort-term\tinvestments | 638 | 695 |
| Accounts\treceivable,\tnet | 1,599 | 1,420 |
| Receivables\tfrom\trelated\tparties,\tnet | 6,810 | 1,981 |
| Aircraft\tfuel,\tspare\tparts\tand\tsupplies,\tnet | 1,032 | 796 |
| Prepaid\texpenses\tand\tother | 633 | 740 |
| Total\tcurrent\tassets | 17,056 | 11,858 |
| Operating\tproperty\tand\tequipment |  |  |
| Flight\tequipment | 36,671 | 32,838 |
| Ground\tproperty\tand\tequipment | 6,910 | 6,224 |
| Equipment\tpurchase\tdeposits | 1,209 | 1,067 |
| Total\tproperty\tand\tequipment,\tat\tcost | 44,790 | 40,129 |
| Less\taccumulated\tdepreciation\tand\tamortization | (13,909) | (12,893) |
| Total\tproperty\tand\tequipment,\tnet | 30,881 | 27,236 |
| Other\tassets |  |  |
| Goodwill | 4,091 | 4,091 |
| Intangibles,\tnet\tof\taccumulated\tamortization\tof\t$578\tand\t$502,\trespectively | 2,173 | 2,249 |
| Deferred\ttax\tasset | 1,912 | 2,932 |
| Other\tassets | 1,979 | 2,073 |
| Total\tother\tassets | 10,155 | 11,345 |
| Total\tassets | $ 58,092 | $ 50,439 |
| LIABILITIES\tAND\tSTOCKHOLDER'S\tEQUITY |  |  |
| Current\tliabilities |  |  |
| Current\tmaturities\tof\tlong-term\tdebt\tand\tcapital\tleases | $1,859 | $2,234 |
| Accounts\tpayable | 1,546 | 1,517 |
| Accrued\tsalaries\tand\twages | 1,460 | 1,156 |
| Air\ttraffic\tliability | 3,912 | 3,747 |
| Loyalty\tprogram\tliability | 2,789 | 2,525 |
| Other\taccrued\tliabilities | 2,106 | 2,198 |
| Total\tcurrent\tliabilities | 13,672 | 13,377 |
| Noncurrent\tliabilities |  |  |
| Long-term\tdebt\tand\tcapital\tleases,\tnet\tof\tcurrent\tmaturities | 20,718 | 16,592 |
| Pension\tand\tpostretirement\tbenefits | 7,800 | 7,410 |
| Deferred\tgains\tand\tcredits,\tnet | 526 | 667 |
| Other\tliabilities | 2,727 | 2,695 |
| Total\tnoncurrent\tliabilities | 31,771 | 27,364 |
| Commitments\tand\tcontingencies\t(Note\t9) |  |  |
| Stockholder's\tequity |  |  |
|  | — | — |
| Additional\tpaid-in\tcapital | 16,624 | 16,521 |
| Accumulated\tother\tcomprehensive\tloss | (5,182) | (4,831) |
| Retained\tearnings\t(deficit) | 1,207 | (1,992) |
| Total\tstockholder's\tequity | 12,649 | 9,698 |
| Total\tliabilities\tand\tstockholder's\tequity | $ 58,092 | $ 50,439 |

|  | 2016 | December	31,<br>2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |
| Net\tincome | $2,781 | $8,120 | $2,948 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization | 1,762 | 1,560 | 1,469 |
| Debt\tdiscount\tand\tlease\tamortization | (124) | (126) | (171) |
| Special\titems,\tnon-cash | 270 | 295 | 91 |
| Pension\tand\tpostretirement | (70) | (194) | (163) |
| Deferred\tincome\ttax\tprovision\t(benefit) | 1,652 | (3,467) | 344 |
| Share-based\tcompensation | 100 | 284 | 300 |
| Other,\tnet | (16) | (21) | 7 |
| Changes\tin\toperating\tassets\tand\tliabilities: |  |  |  |
| Decrease\t(increase)\tin\taccounts\treceivable | (169) | 354 | (176) |
| Increase\tin\tother\tassets | (205) | (22) | (191) |
| Increase\tin\taccounts\tpayable\tand\taccrued\tliabilities | 336 | 214 | 74 |
| Increase\t(decrease)\tin\tair\ttraffic\tliability | 164 | (505) | (97) |
| Increase\tin\treceivables\tfrom\trelated\tparties,\tnet | (4,862) | (3,695) | (527) |
| Increase\t(decrease)\tin\tloyalty\tprogram\tliability | 264 | (295) | (229) |
| Contributions\tto\tpension\tplans | (32) | (6) | (809) |
| Increase\t(decrease)\tin\tother\tliabilities | (101) | 91 | (292) |
| Net\tcash\tprovided\tby\toperating\tactivities | 1,750 | 2,587 | 2,578 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |
| Capital\texpenditures\tand\taircraft\tpurchase\tdeposits | (5,657) | (6,075) | (5,256) |
| Purchases\tof\tshort-term\tinvestments | (6,241) | (8,126) | (5,380) |
| Sales\tof\tshort-term\tinvestments | 6,092 | 8,517 | 7,179 |
| Decrease\tin\trestricted\tcash\tand\tshort-term\tinvestments | 57 | 79 | 261 |
| Net\tproceeds\tfrom\tslot\ttransaction | — | — | 307 |
| Proceeds\tfrom\tsale\tof\tproperty\tand\tequipment | 113 | 26 | 20 |
| Other\tinvesting\tactivities | 2 | — | — |
| Net\tcash\tused\tin\tinvesting\tactivities | (5,634) | (5,579) | (2,869) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |
| Payments\ton\tlong-term\tdebt\tand\tcapital\tleases | (3,827) | (2,153) | (2,955) |
| Proceeds\tfrom\tissuance\tof\tlong-term\tdebt | 7,701 | 4,509 | 2,552 |
| Deferred\tfinancing\tcosts | (77) | (80) | (95) |
| Sale-leaseback\ttransactions | 5 | 43 | 811 |
| Funds\ttransferred\tfrom\t(to)\taffiliates,\tnet | — | — | (176) |
| Other\tfinancing\tactivities | 28 | 53 | 6 |
| Net\tcash\tprovided\tby\tfinancing\tactivities | 3,830 | 2,372 | 143 |
| Net\tdecrease\tin\tcash | (54) | (620) | (148) |
| Cash\tat\tbeginning\tof\tyear | 364 | 984 | 1,132 |
| Cash\tat\tend\tof\tyear | $310 | $364 | $984 |

|  | Common<br>Stock | Additional<br>Paid-in<br>Capital | Accumulated<br>Other<br>Comprehensive<br>Income	(Loss) | Retained<br>Earnings<br>(Deficit) | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tat\tDecember\t31,\t2013 | $— | $10,802 | $(2,140) | $(13,060) | $ (4,398) |
| Net\tincome | — | — | — | 2,948 | 2,948 |
| Changes\tin\tpension,\tretiree\tmedical\tand\tother\tpostretirement\tbenefits |  |  |  |  |  |
| liability | — | — | (2,784) | — | (2,784) |
| Net\tchanges\tin\tfair\tvalue\tof\tderivative\tfinancial\tinstruments | — | — | (56) | — | (56) |
| Reversal\tof\tnon-cash\ttax\tbenefit | — | — | 328 | — | 328 |
| Share-based\tcompensation\texpense | — | 300 | — | — | 300 |
| Intercompany\tequity\ttransfer | — | 5,072 | — | — | 5,072 |
| Change\tin\tunrealized\tloss\ton\tinvestments | — | — | (4) | — | (4) |
| Balance\tat\tDecember\t31,\t2014 | — | 16,174 | (4,656) | (10,112) | 1,406 |
| Net\tincome | — | — | — | 8,120 | 8,120 |
| Changes\tin\tpension,\tretiree\tmedical\tand\tother\tpostretirement\tbenefits |  |  |  |  |  |
| liability | — | — | (160) | — | (160) |
| Net\tchanges\tin\tfair\tvalue\tof\tderivative\tfinancial\tinstruments | — | — | (9) | — | (9) |
| Share-based\tcompensation\texpense | — | 284 | — | — | 284 |
| Intercompany\tequity\ttransfer | — | 63 | — | — | 63 |
| Change\tin\tunrealized\tloss\ton\tinvestments | — | — | (6) | — | (6) |
| Balance\tat\tDecember\t31,\t2015 | — | 16,521 | (4,831) | (1,992) | 9,698 |
| Net\tincome | — | — | — | 2,781 | 2,781 |
| Changes\tin\tpension,\tretiree\tmedical\tand\tother\tpostretirement\tbenefits |  |  |  |  |  |
| liability | — | — | (563) | — | (563) |
| Non-cash\ttax\tbenefit | — | — | 203 | — | 203 |
| Share-based\tcompensation\texpense | — | 100 | — | — | 100 |
| Impact\tof\tadoption\tof\tAccounting\tStandards\tUpdate\t(ASU)\t 2016-09\t(See |  |  |  |  |  |
| Note\t1\t(r)) | — | — | — | 418 | 418 |
| Intercompany\tequity\ttransfer | — | 3 | — | — | 3 |
| Change\tin\tunrealized\tloss\ton\tinvestments | — | — | 9 | — | 9 |
| Balance\tat\tDecember\t31,\t2016 | $— | $16,624 | $(5,182) | $1,207 | $12,649 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS	OF	AMERICAN	AIRLINES,	INC.

American	Airlines,	Inc.	(American)	is	a	Delaware	corporation	whose	primary	business	activity	is	the	operation	of	a	major	network	air	carrier.	American is	a	wholly-owned	subsidiary	of	American	Airlines	Group	Inc.	(AAG),	which	owns	all	of	American's	outstanding	common	stock,	par	value	$1.00	per	share. On	December	9,	2013,	a	subsidiary	of	AMR	merged	with	and	into	US	Airways	Group,	Inc.	(US	Airways	Group),	a	Delaware	corporation,	which	survived as	a	wholly-owned	subsidiary	of	AAG,	and	AAG	emerged	from	Chapter	11	(the	Merger).	Upon	closing	of	the	Merger	and	emergence	from	Chapter	11, AMR	changed	its	name	to	American	Airlines	Group	Inc.	On	December	30,	2015,	in	order	to	simplify	AAG's	internal	corporate	structure,	US	Airways,	Inc. (US	Airways),	a	wholly-owned	subsidiary	of	US	Airways	Group,	merged	with	and	into	American,	with	American	as	the	surviving	corporation.

American	has	restricted	cash	and	short-term	investments	related	primarily	to	collateral	held	to	support	workers'	compensation	obligations.

American	records	impairment	charges	on	operating	property	and	equipment	when	events	and	circumstances	indicate	that	the	assets	may	be	impaired. An	asset	or	group	of	assets	is	considered	impaired	when	the	undiscounted	cash	flows	estimated	to	be	generated	by	the	assets	are	less	than	the	carrying amount	of	 the	assets	and	 the	 net	 book	 value	 of	 the	 assets	 exceeds	 their	 estimated	 fair	 value.	 If	 such	 assets	 are	 considered	 to	 be	 impaired,	 the impairment	to	be	recognized	is	measured	by	the	amount	by	which	the	carrying	amount	of	the	assets	exceeds	the	fair	value	of	the	assets.	Assets	to	be disposed	of	are	reported	at	the	lower	of	the	carrying	amount	or	fair	value	less	the	cost	to	sell.

American	provides	a	valuation	allowance	for	its	deferred	tax	assets	when	it	is	more	likely	than	not	that	some	portion,	or	all	of	its	deferred	tax	assets, will	not	be	realized.	The	ultimate	realization	of	deferred	tax	assets	is	dependent	upon	the	generation	of	future	taxable	income.	American	considers	all available	positive	and	negative	evidence	and	makes	certain	assumptions	 in	evaluating	 the	realizability	of	 its	deferred	 tax	assets.	Many	 factors	are considered	that	impact	American's	projections	of	future	profitability,	including	risks	associated	with	remaining	Merger	integration	activities	as	well	as	other conditions	which	are	beyond	American's	control,	such	as	the	health	of	the	economy,	the	level	and	volatility	of	fuel	prices	and	travel	demand.

Goodwill	represents	the	excess	of	the	purchase	price	over	the	fair	value	of	the	net	assets	acquired	and	liabilities	assumed.	Goodwill	is	not	amortized but	assessed	for	impairment	annually	on	October	1 	or	more	frequently	if	events	or	circumstances	indicate	that	goodwill	may	be	impaired.	American	has one	consolidated	reporting	unit. st

determine	the	implied	fair	value	of	goodwill.	If	the	implied	fair	value	of	goodwill	is	lower	than	its	carrying	value,	an	impairment	charge	equal	to	the difference	is	recorded.	Based	upon	American's	annual	assessment,	there	was	no	goodwill	impairment	in	2016.	The	carrying	value	of	the	goodwill	on American's	consolidated	balance	sheets	was	$4.1	billion	as	of	December	31,	2016	and	2015.

The	following	table	provides	information	relating	to	American's	amortizable	intangible	assets	as	of	December	31,	2016	and	2015	(in	millions):

|  | December	31, |  |
| :--- | :--- | :--- |
|  | 2016 | 2015 |
| Domestic\tairport\tslots | $ 365 | $ 365 |
| Customer\trelationships | 300 | 300 |
| Marketing\tagreements | 105 | 105 |
| Tradenames | 35 | 35 |
| Airport\tgate\tleasehold\trights | 137 | 137 |
| Accumulated\tamortization | (578) | (502) |
| Total | $ 364 | $ 440 |

American	 recorded	 amortization	 expense	 related	 to	 these	 intangible	 assets	 of	 $76	 million,	 $55	 million	 and	 $81	 million	 for	 the	 years	 ended December	31,	2016,	2015	and	2014,	respectively.	American	expects	to	record	annual	amortization	expense	for	these	intangible	assets	as	follows	(in millions):

Indefinite-lived	intangible	assets	include	certain	domestic	airport	slots	at	American's	hubs	and	international	slots	and	route	authorities.	Indefinite-lived intangible	assets	are	not	amortized	but	instead	are	assessed	for	impairment	annually	on	October	1 	or	more	frequently	if	events	or	circumstances indicate	 that	 the	asset	may	be impaired.	As	of	December	31,	2016	and	2015,	American	had	$1.8	billion	of indefinite-lived	 intangible	assets	on	 its consolidated	balance	sheets. st

Indefinite-lived	intangible	assets	are	reviewed	for	impairment	by	initially	performing	a	qualitative	assessment	to	determine	whether	American	believes it	is	more	likely	than	not	that	an	asset	has	been	impaired.	If	American	believes	impairment	has	occurred,	American	then	evaluates	for	impairment	by comparing	the	estimated	fair	value	of	assets	to	the	carrying	value.	An	impairment	charge	is	recognized	if	the	asset's	estimated	fair	value	is	less	than	its carrying	value.	Based	upon	American's	annual	assessment,	there	was	no	indefinite-lived	intangible	asset	impairment	in	2016.

American	 currently	 operates	 the	 loyalty	 program,	AAdvantage.	 This	 program	 awards	 mileage	 credits	 to	 passengers	 who	 fly	 on	American,	 any oneworld	airline	or	other	partner	airlines,	or	by	using	the	services	of	other	program	participants,	such	as	the	Citi	and	Barclaycard	US co-branded	credit cards,	hotels	and	car	rental	companies.	Mileage	credits	can	be	redeemed	for	travel	on	American	or	other	participating	partner	airlines.

American	uses	the	incremental	cost	method	to	account	for	the	portion	of	its	loyalty	program	liability	incurred	when	AAdvantage	members	earn	mileage credits	by	flying	on	American,	any	oneworld	airline	or	other	partner	airlines.	American	has	an	obligation	to	provide	future	travel	when	these	mileage credits	are	redeemed	and	therefore	have	recorded	a	liability	for	mileage	credits	outstanding.

The	 incremental	cost	 liability	 includes	all	mileage	credits,	even	mileage	credits	 for	members	whose	account	balances	have	not	yet	reached	 the minimum	level	required	to	redeem	an	award.	Mileage	credits	are	subject	to	expiration.	The	liability	for	outstanding	mileage	credits	is	valued	based	on	the estimated	incremental	cost	of	carrying	one	additional	passenger.	The	estimated	incremental	cost	primarily	includes	unit	costs	incurred	for	fuel,	food	and insurance	as	well	as	fees	incurred	when	travel	awards	are	redeemed	on	partner	airlines.	In	calculating	the	liability,	American	estimates	how	many	mileage credits	will	never	be	redeemed	for	travel	and	excludes	those	mileage	credits	from	the	estimate	of	the	liability.	Estimates	are	also	made	for	the	number	of miles	that	will	be	used	per	award	redemption	and	the	number	of	travel	awards	that	will	be	redeemed	on	partner	airlines.	These	costs	and	estimates	are based	on	American's	historical	program	experience	as	well	as	consideration	of	enacted	program	changes,	as	applicable.	Changes	in	the	liability	resulting from	 members	 earning	 additional	 mileage	 credits	 or	 changes	 in	 estimates	 are	 recorded	 in	 the	 consolidated	 statements	 of	 operations	 as	 a	 part	 of passenger	revenue.

Additionally,	American	applied	the	acquisition	method	of	accounting	in	connection	with	AAG's	Merger	in	December	2013	and	recorded	a	liability	for outstanding	US	Airways'	mileage	credits	at	fair	value,	an	amount	significantly	in	excess	of	incremental	cost.	At	December	31,	2016,	all	the	mileage credits	associated	with	this	liability	have	been	recognized	in	passenger	revenue.	At	December	31,	2015,	this	liability	was	$296	million	and	was	included on	the	consolidated	balance	sheet	within	the	loyalty	program	liability.

American	also	sells	loyalty	program	mileage	credits	to	participating	airline	partners	and	 non-airline	business	partners.	Sales	of	mileage	credits	to non-airline	business	partners	is	comprised	of	two	components,	transportation	and	marketing.	American	accounts	for	mileage	sales	under	its	agreements with	non-airline	business	partners	in	accordance	with	Accounting	Standards	Update	(ASU)	 No.	2009-13,	"Revenue	Recognition	(Topic	605)	—	Multiple- Deliverable	Revenue	Arrangements."	In	accordance	with	Topic	605,	American	allocates	the	consideration	received	from	the	sale	of	mileage	credits based	on	the	relative	selling	price	of	each	product	or	service	delivered.

In	2016,	American	entered	into	new	 co-branded	credit	card	program	agreements	with	Citi	and	Barclaycard	US.	American	identified	the	following revenue	elements	in	these	co-branded	credit	card	agreements:	the	transportation	component;	the	use	of	the	American	brand	including	access	to	loyalty program	member	lists,	advertising	and	other	travel	related	benefits	(collectively,	the	marketing	component).

The	transportation	component	represents	the	estimated	selling	price	of	future	travel	awards	and	is	determined	using	historical	transaction	information, including	 information	 related	 to	 customer	 redemption	 patterns.	The	 transportation	 component	 is	 deferred	 based	 on	 its	 relative	 selling	 price	 and	 is amortized	into	passenger	revenue	on	a	straight-line	basis	over	the	period	in	which	the	mileage	credits	are	expected	to	be	redeemed	for	travel.	As	of December	31,	2016	and	2015,	American	had	$2.1	billion	and	$1.5	billion,	respectively,	in	deferred	revenue	from	the	sale	of	mileage	credits	recorded within	loyalty	program	liability	on	its	consolidated	balance	sheets.

Passenger	revenue	is	recognized	when	transportation	is	provided.	Ticket	sales	for	transportation	that	has	not	yet	been	provided	are	initially	deferred and	recorded	as	air	traffic	liability	on	the	consolidated	balance	sheets.	The	air	traffic	liability	represents	tickets	sold	for	future	travel	dates	and	estimated future	refunds	and	exchanges	of	tickets	sold	for	past	travel	dates.	The	balance	in	the	air	traffic	liability	fluctuates	throughout	the	year	based	on	seasonal travel	patterns	and	fare	sale	activity.	American's	air	traffic	liability	was	$3.9	billion	and	$3.7	billion	as	of	December	31,	2016	and	2015,	respectively.

The	majority	of	tickets	sold	are	nonrefundable.	A	small	percentage	of	tickets,	some	of	which	are	partially	used	tickets,	expire	unused.	Due	to	complex pricing	structures,	refund	and	exchange	policies,	and	interline	agreements	with	other	airlines,	certain	amounts	are	recognized	in	passenger	revenue	using estimates	regarding	both	the	timing	of	the	revenue	recognition	and	the	amount	of	revenue	to	be	recognized.	These	estimates	are	generally	based	on	the analysis	of	American's	historical	data.	American	and	other	airline	industry	participants	have	consistently	applied	this	accounting	method	to	estimate revenue	from	forfeited	tickets	at	the	date	of	travel.	Estimated	future	refunds	and	exchanges	included	in	the	air	traffic	liability	are	routinely	evaluated	based on	subsequent	activity	to	validate	the	accuracy	of	American's	estimates.	Any	adjustments	resulting	from	periodic	evaluations	of	the	estimated	air	traffic liability	are	included	in	passenger	revenue	during	the	period	in	which	the	evaluations	are	completed.

American	has	arrangements	with	regional	carriers	to	provide	it	with	regional	jet	and	turboprop	service	under	the	brand	name	"American	Eagle."	The American	Eagle	carriers	include	AAG's	wholly-owned	regional	carriers,	Envoy,	PSA	and	Piedmont,	as	well	as	third-party	regional	carriers	including Republic	Airline	 Inc.	(Republic),	Mesa	Airlines,	 Inc.	(Mesa),	Air	Wisconsin	Airlines	Corporation	(Air	Wisconsin),	Compass	Airlines,	LLC	(Compass), ExpressJet	Airlines,	Inc.	(ExpressJet),	SkyWest	Airlines,	Inc.	(SkyWest)	and	Trans	States	Airlines,	Inc.	(Trans	States).	American	classifies	revenues generated	from	transportation	on	these	carriers	as	regional	passenger	revenues.	Liabilities	related	to	tickets	sold	by	American	for	travel	on	these	air carriers	are	also	included	in	American's	air	traffic	liability	and	are	subsequently	recognized	as	revenue	in	the	same	manner	as	described	above.

Various	taxes	and	fees	assessed	on	the	sale	of	tickets	to	end	customers	are	collected	by	American	as	an	agent	and	remitted	to	taxing	authorities. These	taxes	and	fees	have	been	presented	on	a	net	basis	in	the	accompanying	consolidated	statements	of	operations	and	recorded	as	a	liability	until remitted	to	the	appropriate	taxing	authority.

Cargo	revenue	is	recognized	when	American	provides	the	transportation.

Other	revenue	includes	revenue	associated	with	marketing	services	provided	to	American's	business	partners	as	part	of	its	loyalty	program,	baggage fees,	ticketing	change	fees,	airport	clubs	and	inflight	services.	The	accounting	and	recognition	for	the	loyalty	program	marketing	services	are	discussed	in Note	1(i)	above.	Baggage	fees,	ticketing	change	fees,	airport	clubs	and	inflight	service	revenues	are	recognized	when	American	provides	the	service.

American	accounts	for	its	share-based	compensation	expense	based	on	the	fair	value	of	the	stock	award	at	the	time	of	grant,	which	is	recognized ratably	over	the	vesting	period	of	the	stock	award.	Certain	awards	have	performance	conditions	that	must	be	achieved	prior	to	vesting	and	are	expensed based	on	the	expected	achievement	at	each	reporting	period.	The	fair	value	of	stock	options	and	stock	appreciation	rights	(SARs)	is	estimated	using	a Black-Scholes	option	pricing	model.	The	fair	value	of	restricted	stock	units	(RSUs)	is	based	on	the	market	price	of	the	underlying	shares	of	common stock	on	the	date	of	grant.	See	Note	12	for	further	discussion	of	share-based	compensation.

Included	within	deferred	gains	and	credits,	net	are	amounts	deferred	and	amortized	into	future	periods	associated	with	the	adjustment	of	leases	to	fair value	 in	 connection	 with	 the	 application	 of	 acquisition	 accounting,	 deferred	 gains	 on	 the	 sale-leaseback	 of	 aircraft	 and	 certain	 vendor	 incentives. American	periodically	receives	vendor	incentives	in	connection	with	acquisition	of	aircraft	and	engines.	These	credits	are	deferred	until	aircraft	and engines	are	delivered	and	then	applied	as	a	reduction	to	the	cost	of	the	related	equipment.

Foreign	currency	gains	and	losses	are	recorded	as	part	of	other	nonoperating	expense,	net	in	American's	consolidated	statements	of	operations. Foreign	currency	gains	for	2016	were	$1	million.	Foreign	currency	losses	for	2015	and	2014	were	$751	million	and	$114	million,	respectively.	Included	in 2015	was	a	$592	million	nonoperating	special	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.

Expenses	 associated	 with	 American's	 third-party	 regional	 carriers	 operating	 under	 the	 brand	 name	 American	 Eagle	 are	 classified	 as regional expenses	on	the	consolidated	statements	of	operations.	Regional	expenses	consist	of	the	following	(in	millions):

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Aircraft\tfuel\tand\trelated\ttaxes | $1,109 | $1,230 | $2,009 |
| Salaries,\twages\tand\tbenefits | 327 | 276 | 228 |
| Capacity\tpurchases\tfrom\tthird-party\tregional\tcarriers\t^(1) | \t 3,186 | \t 3,137 | 2,858 |
| Maintenance,\tmaterials\tand\trepairs | 4 | 4 | 6 |
| Other\trent\tand\tlanding\tfees | 487 | 434 | 386 |
| Aircraft\trent | 28 | 28 | 27 |
| Selling\texpenses | 347 | 333 | 307 |
| Depreciation\tand\tamortization | 237 | 197 | 168 |
| Special\titems,\tnet | 13 | 18 | 5 |
| Other | 271 | 295 | 483 |
| Total\tregional\texpenses | $6,009 | $5,952 | $6,477 |

In	May	2014,	the	Financial	Accounting	Standards	Board	(FASB)	issued	ASU	 2014-09,	"Revenue	from	Contracts	with	Customers	(Topic	606)."	ASU 2014-09	completes	the	joint	effort	by	the	FASB	and	International	Accounting	Standards	Board	(IASB)	to	improve	financial	reporting	by	creating	common revenue	recognition	guidance	for	GAAP	and	International	Financial	Reporting	Standards	(IFRS).	Subsequently,	the	FASB	has	issued	several	additional ASUs	to	clarify	the	implementation.	The	new	revenue	standard	applies	to	all	companies	that	enter	into	contracts	with	customers	to	transfer	goods	or services	and	is	effective	for	public	entities	for	interim	and	annual	reporting	periods	beginning	after	December	15,	2017.	Early	adoption	is	permitted; however,	American	currently	expects	to	adopt	the	new	revenue	standard	effective	January	1,	2018.	Entities	have	the	choice	to	apply	the	new	revenue standard	either	retrospectively	to	each	reporting	period	presented	or	by	recognizing	the	cumulative	effect	of	applying	the	new	revenue	standard	at	the date	 of	 initial	 application	 and	 not	 adjusting	 comparative	 information.	American	 currently	 expects	 to	 adopt	 the	 new	 revenue	 standard	 using	 the	 full retrospective	method.

American	is	still	in	the	process	of	evaluating	how	the	adoption	of	the	new	revenue	standard	will	impact	its	consolidated	financial	statements.	American currently	expects	that	the	new	revenue	standard	will	materially	impact	its	liability	for	outstanding	mileage	credits	earned	by	AAdvantage	loyalty	program members	when	flying	on	American.	American	currently	uses	the	incremental	cost	method	to	account	for	this	portion	of	its	loyalty	program	liability,	which values	these	mileage	credits	based	on	the	estimated	incremental	cost	of	carrying	one	additional	passenger	(see	(i)	Loyalty	Program	above).	The	new revenue	standard	will	require	American	to	change	its	policy	and	apply	a	relative	selling	price	approach	whereby	a	portion	of	each	passenger	ticket	sale attributable	to	mileage	credits	earned	will	be	deferred	and	recognized	in	passenger	revenue	upon	future	mileage	redemption.	The	carrying	value	of	the earned	mileage	credits	recognized	in	loyalty	program	liability	is	expected	to	be	materially	greater	under	the	relative	selling	price	approach	than	the	value attributed	to	these	mileage	credits	under	the	incremental	cost	method.	The	new	revenue	standard	will	also	require	American	to	reclassify	certain	ancillary fees	to	passenger	revenue,	which	are	currently	included	within	other	operating	revenue.

In	 February	 2016,	 the	 FASB	 issued	 ASU	 2016-02,	 "Leases	 (Topic	 842)."	 ASU	 2016-02	 requires	 lessees	 to	 recognize	 a	 lease	 liability	 and	 a right-of-use	asset	on	 the	balance	sheet	and	aligns	many	of	 the	underlying	principles	of	 the	new	 lessor	model	with	 those	 in	Accounting	Standards Codification	Topic	606,	Revenue	from	Contracts	with	Customers.	ASU	2016-02	is	effective	for	fiscal	years	beginning	after	December	15,	2018,	including interim	periods	within	those	fiscal	years.	Early	adoption	is	permitted.	Entities	are	required	to	adopt	the	new	lease	standard	using	a	modified	retrospective approach	for	all	leases	existing	at	or	commencing	after	the	date	of	initial	application	with	an	option	to	use	certain	practical	expedients.	American	is currently	evaluating	how	the	adoption	of	the	new	lease	standard	will	impact	its	consolidated	financial	statements.	Interpretations	are	on-going	and	could have	a	material	impact	on	American's	implementation.	Currently,	American	expects	that	the	adoption	of	the	new	lease	standard	will	have	a	material impact	on	its	consolidated	balance	sheet	due	to	the	recognition	of	right-of-use	assets	and	lease	liabilities	principally	for	certain	leases	currently	accounted for	as	operating	leases.

accounting	 for	 share-based	 payment	 award	 transactions	 including	 the	 financial	 statement	 presentation	 of	 excess	 tax	 benefits	 and	 deficiencies, classification	of	awards	as	either	equity	or	liabilities,	accounting	for	forfeitures	and	classification	on	the	statement	of	cash	flows.	ASU	2016-09	is	effective for	 fiscal	years	beginning	after	December	15,	2016,	 including	 interim	periods	within	 those	 fiscal	years.	Early	adoption	 is	permitted.	American	early adopted	 this	 standard	 during	 the	 second	 quarter	 of	 2016.	 The	 adoption	 of	 this	 standard	 resulted	 in	 the	 recognition	 of	 $418	 million	 of	 previously unrecognized	excess	tax	benefits	in	deferred	tax	assets	and	an	increase	to	retained	earnings	on	the	consolidated	balance	sheet	as	of	the	beginning	of the	current	year,	and	the	recognition	of	$15	million	of	excess	tax	benefits	in	the	income	tax	provision	for	the	year	ended	December	31,	2016.

In	May	2015,	the	FASB	issued	ASU	 2015-07,	"Fair	Value	Measurement	(Topic	820):	Disclosures	for	Investments	in	Certain	Entities	that	Calculate	Net Asset	Value	per	Share	(or	its	Equivalent)."	ASU	2015-07	requires	that	investments	using	the	practical	expedient	to	measure	fair	value	at	net	asset	value per	share	(or	its	equivalent)	be	excluded	from	the	fair	value	hierarchy.	Although	the	investments	are	not	characterized	within	the	fair	value	hierarchy,	the amount	of	investments	measured	using	the	practical	expedient	must	still	be	disclosed	to	allow	for	reconciliation	of	the	total	investments	in	the	fair	value hierarchy	 to	 total	 investments	 in	 the	 notes	 to	 the	 consolidated	 financial	 statements.	 ASU	2015-07	 is	 effective	 for	 fiscal	 years	 beginning	 after December	15,	2015.	American	adopted	this	standard	retrospectively	during	the	year	ended	December	31,	2016.	The	adoption	impacted	the	fair	value hierarchy	disclosures	of	American's	benefit	plan	assets,	see	Note	7	for	further	discussion.

In	November	2016,	the	FASB	issued	ASU	 2016-18,	"Statement	of	Cash	Flows	(Topic	230):	Restricted	Cash."	ASU	 2016-18	requires	that	the	change in	total	cash,	cash	at	beginning	of	period	and	cash	at	end	of	period	on	the	statement	of	cash	flows	include	restricted	cash	and	restricted	cash	equivalents. ASU	2016-18	also	requires	companies	who	report	cash	and	restricted	cash	separately	on	the	balance	sheet	to	reconcile	those	amounts	to	the	statement of	cash	flows.	This	standard	is	to	be	applied	retrospectively	to	each	period	presented	and	is	effective	for	public	entities	for	fiscal	years	beginning	after December	15,	2017,	and	interim	periods	within	those	fiscal	years.	Early	adoption	is	permitted.	This	standard	is	not	expected	to	have	a	material	impact	on American's	consolidated	financial	statements.

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.

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | \t\t2016 | \t\t2015 | \t\t2014 |
| Regional\toperating\tspecial\titems,\tnet\t^(1) | $13 | $18 | $5 |
| Nonoperating\tspecial\titems,\tnet\t^(2) | 49 | 616 | 128 |
| Income\ttax\tspecial\titems,\tnet\t^(3) | — | (3,468) | 344 |

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

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.

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.

Secured	financings	are	collateralized	by	assets,	primarily	aircraft,	engines,	simulators,	aircraft	spare	parts,	airport	leasehold	rights,	route	authorities and	airport	slots.	At	December	31,	2016,	American	was

operating	34	aircraft	under	capital	leases.	Leases	can	generally	be	renewed	at	rates	based	on	fair	market	value	at	the	end	of	the	lease	term	for	a	number of	additional	years.

Certain	details	of	American's	2013,	2014,	April	2016	and	December	2016	Credit	Facilities	(collectively	referred	to	as	the	Credit	Facilities)	are	shown	in the	table	below	as	of	December	31,	2016:

In	October	2016,	American	created	two	pass-through	trusts	which	issued	approximately	$814	million	aggregate	principal	amount	of	Series	 2016-3 Class	AA	and	Class	A	EETCs	(the	2016-3	EETCs)	in	connection	with	the	financing	of	25	aircraft	owned	by	American	or	originally	scheduled	to	be delivered	to	American	through	January	2017	(the	2016-3	EETC	Aircraft).	A	portion	of	the	proceeds	received	from	the	sale	of	the	 2016-3	EETCs	has	been used	to	acquire	Series	AA	and	A	equipment	notes	issued	by	American	to	the	pass-through	trusts	and	the	balance	of	such	proceeds	is	being	held	in escrow	for	the	benefit	of	the	holders	of	the	2016-3	EETCs	until	such	time	as	American	issues	additional	Series	AA	and	A	equipment	notes	to	the	pass- through	trusts,	which	will	purchase	the	notes	with	escrowed	funds.	These	escrowed	funds	are	not	guaranteed	by	American	and	are	not	reported	as	debt on	its	consolidated	balance	sheet	because	the	proceeds	held	by	the	depository	are	not	American's	assets.

|  | 2016-3	EETCs |  |
| :--- | :--- | :--- |
|  | Series\tAA | Series\tA |
| Aggregate\tprincipal\tissued | $558\tmillion | $256\tmillion |
| Remaining\tescrowed\tproceeds | $75\tmillion | $34\tmillion |
| Fixed\tinterest\trate\tper\tannum | 3.00% | 3.25% |
| Maturity\tdate | October\t2028 | October\t2028 |

As	of	December	31,	2016,	American	had	issued	guarantees	covering	AAG's	$750	million	aggregate	principal	amount	of	5.50%	senior	notes	due	2019, $500	million	aggregate	principal	amount	of	6.125%	senior	notes	due	2018	and	$500	million	aggregate	principal	amount	of	4.625%	senior	notes	due	2020.

Certain	of	American's	debt	financing	agreements	contain	loan	to	value	(LTV)	ratio	covenants	and	require	American	to	annually	appraise	the	related collateral.	Pursuant	to	such	agreements,	if	the	LTV

ratio	exceeds	a	specified	threshold,	American	is	required,	as	applicable,	to	pledge	additional	qualifying	collateral	(which	in	some	cases	may	include	cash collateral),	or	pay	down	such	financing,	in	whole	or	in	part.

Specifically,	American	is	required	to	meet	certain	collateral	coverage	tests	on	an	annual	basis	for	four	credit	facilities,	as	described	below:

At	December	31,	2016,	American	was	in	compliance	with	the	applicable	collateral	coverage	tests	as	of	the	most	recent	measurement	dates.

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Current\tincome\ttax\tprovision\t(benefit): |  |  |  |
| Federal | $—\t\t\t\t $— | $—\t\t\t\t $— | $ (30) |
| State\tand\tLocal | 10 | 15 | 6 |
| Current\tincome\ttax\tprovision\t(benefit) | 10 | 15 | (24) |
| Deferred\tincome\ttax\tprovision\t(benefit): |  |  |  |
| Federal | \t 1,559 | (3,407) | \t 342 |
| State\tand\tLocal | 93 | (60) | 2 |
| Deferred\tincome\ttax\tprovision\t(benefit) | \t 1,652 | (3,467) | \t 344 |
| Total\tincome\ttax\tprovision\t(benefit) | $1,662 | $(3,452) | $320 |

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Statutory\tincome\ttax\tprovision | $1,555 | $1,635 | $1,144 |
| State\tincome\ttax\tprovision,\tnet\tof\tfederal\ttax\teffect | 67 | 71 | 81 |
| Book\texpenses\tnot\tdeductible\tfor\ttax\tpurposes | 32 | 55 | 4 |
| Bankruptcy\tadministration\texpenses | 1 | 3 | 86 |
| Alternative\tminimum\ttax\t(AMT)\tcredit\trefund | — | — | (29) |
| Change\tin\tvaluation\tallowance | (1) | (5,216) | (1,285) |
| Income\ttax\tprovision\tresulting\tfrom\tOCI\tallocation | — | — | 328 |
| Other,\tnet | 8 | — | (9) |
| Income\ttax\tprovision\t(benefit) | $1,662 | $(3,452) | $320 |

American	provides	a	valuation	allowance	for	its	deferred	tax	assets,	which	include	the	NOLs,	when	it	is	more	likely	than	not	that	some	portion,	or	all	of its	 deferred	 tax	 assets,	 will	 not	 be	 realized.	 The	 ultimate	 realization	 of	 deferred	 tax	 assets	 is	 dependent	 upon	 the	 generation	 of	 future	 taxable income.	American	considers	all	available	positive	and	negative	evidence	and	makes	certain	assumptions	in	evaluating	the	realizability	of	its	deferred	tax assets.	Many	factors	are	considered	that	impact	American's	projections	of	future	profitability,	including	risks	associated	with	remaining	Merger	integration activities	as	well	as	other	conditions	which	are	beyond	its	control,	such	as	the	health	of	the	economy,	the	level	and	volatility	of	fuel	prices	and	travel demand.

In	connection	with	the	preparation	of	American's	financial	statements	at	the	end	of	2015,	American	determined	that	after	considering	all	positive	and negative	evidence,	including	the	completion	of	certain	critical	Merger	integration	milestones	as	well	as	its	financial	performance,	it	was	more	likely	than not	that	substantially	all	of	its	deferred	income	tax	assets,	which	include	its	NOLs,	would	be	realized.	Accordingly,	American	reversed	$3.5	billion	of	the valuation	allowance,	which	resulted	in	a	special	non-cash	tax	benefit	recorded	in	the	consolidated	statement	of	operations.

For	the	year	ended	December	31,	2014,	American	recorded	a	$320	million	tax	provision.	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	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	addition	to	the	changes	in	the	valuation	allowance	from	operations	described	in	the	table	above,	the	valuation	allowance	was	also	impacted	by	the changes	in	the	components	of	accumulated	other	comprehensive	income	(loss),	described	in	Note	8.	The	total	decrease	in	the	valuation	allowance	was $1	million,	$5.2	billion	and	$525	million	in	2016,	2015	and	2014,	respectively.

The	components	of	American's	deferred	tax	assets	and	liabilities	were	(in	millions):

|  | 2016 | 2015 |
| :--- | :--- | :--- |
| Deferred\ttax\tassets: |  |  |
| Operating\tloss\tcarryforwards | $4,087 | $2,818 |
| Pensions | 2,595 | 2,420 |
| Loyalty\tprogram\tliability | 485 | 590 |
| Alternative\tminimum\ttax\tcredit\tcarryforwards | 456 | 458 |
| Postretirement\tbenefits\tother\tthan\tpensions | 291 | 340 |
| Rent\texpense | 256 | 134 |
| Gains\tfrom\tlease\ttransactions | 213 | 261 |
| Reorganization\titems | 53 | 57 |
| Other | 911 | 1,123 |
| Total\tdeferred\ttax\tassets | 9,347 | 8,201 |
| Valuation\tallowance | (13) | (14) |
| Net\tdeferred\ttax\tassets | 9,334 | 8,187 |
| Deferred\ttax\tliabilities: |  |  |
| Accelerated\tdepreciation\tand\tamortization | (7,101) | (5,011) |
| Other | (335) | (244) |
| Total\tdeferred\ttax\tliabilities | (7,436) | (5,255) |
| Net\tdeferred\ttax\tasset | $1,898 | $2,932 |

At	December	31,	2016,	American	had	approximately	$11.3	billion	of	gross	NOL	Carryforwards	to	reduce	future	federal	taxable	income,	substantially	all of	which	are	expected	to	be	available	for	use	in	2017.	American	is	a	member	of	AAG's	consolidated	federal	and	certain	state	income	tax	returns.	The amount	of	federal	NOL	Carryforwards	available	in	those	returns	is	$10.5	billion,	substantially	all	of	which	is	expected	to	be	available	for	use	in	2017.	The federal	NOL	Carryforwards	will	expire	beginning	in	2022	if	unused.	American	also	had	approximately	$3.4	billion	of	NOL	Carryforwards	to	reduce	future state	taxable	income	at	December	31,	2016,	which	will	expire	in	years	2017	through	2034	if	unused.	American's	ability	to	deduct	its	NOL	Carryforwards and	to	utilize	certain	other	available	tax	attributes	can	be	substantially	constrained	under	the	general	annual	limitation	rules	of	Section	382	where	an "ownership	change"	has	occurred.	Substantially	all	of	American's	remaining	federal	NOL	Carryforwards	(attributable	to	US	Airways	Group)	are	subject	to limitation	under	Section	382;	however,	American's	ability	to	utilize	such	NOL	Carryforwards	is	not	anticipated	to	be	effectively	constrained	as	a	result	of such	limitation.	American	elected	to	be	covered	by	certain	special	rules	for	federal	income	tax	purposes	that	permitted	approximately	$9.5	billion	(with $9.3	billion	of	unlimited	NOL	still	remaining	at	December	31,	2016)	of	its	federal	NOL	Carryforwards	to	be	utilized	without	regard	to	the	annual	limitation generally	imposed	by	Section	382.	Similar	limitations	may	apply	for	state	income	tax	purposes.	American's	ability	to	utilize	any	new	NOL	Carryforwards arising	after	the	ownership	changes	is	not	affected	by	the	annual	limitation	rules	imposed	by	Section	382	unless	another	future	ownership	change occurs.	Under	the	Section	382	limitation,	cumulative	stock	ownership	changes	among	material	stockholders	exceeding	50%	during	a	rolling	three-year period	 can	 potentially	 limit	 a	 company's	 future	 use	 of	 NOLs	 and	 tax	 credits.	 See	 Part	 I,	 Item	 1A.	 Risk	 Factors	 –	"Our	 ability to	 utilize	 our	 NOL Carryforwards	may	be	limited"	for	unaudited	additional	discussion	of	this	risk.

At	December	31,	2016,	American	had	an	AMT	credit	carryforward	of	approximately	$452	million	available	for	federal	income	tax	purposes,	which	is available	for	an	indefinite	period.

In	2016,	American	recorded	an	income	tax	provision	with	an	effective	rate	of	approximately	37%,	which	was	substantially non-cash	as	American utilized	the	NOLs	described	above.	Substantially	all	of	American's	income	before	income	taxes	is	attributable	to	the	United	States.

American	files	its	tax	returns	as	prescribed	by	the	tax	laws	of	the	jurisdictions	in	which	it	operates.	American's	2013	through	2015	tax	years	are	still subject	to	examination	by	the	Internal	Revenue	Service.	Various	state	and	foreign	jurisdiction	tax	years	remain	open	to	examination	and	American	is under	examination,	in	administrative	appeals,	or	engaged	in	tax	litigation	in	certain	jurisdictions.	American	believes	that	the	effect	of	any	assessments	will not	be	material	to	its	consolidated	financial	statements.

The	amount	of,	and	changes	to,	American's	uncertain	tax	positions	were	not	material	in	any	of	the	years	presented.	American	accrues	interest	and penalties	related	to	unrecognized	tax	benefits	in	interest	expense	and	operating	expense,	respectively.

American's	economic	prospects	are	heavily	dependent	upon	two	variables	it	cannot	control:	the	health	of	the	economy	and	the	price	of	fuel.

Due	to	the	discretionary	nature	of	business	and	leisure	travel	spending,	airline	industry	revenues	are	heavily	influenced	by	the	condition	of	the	U.S. economy	and	economies	in	other	regions	of	the	world.	Unfavorable	conditions	in	these	broader	economies	have	resulted,	and	may	result	in	the	future,	in decreased	passenger	demand	for	air	travel	and	changes	in	booking	practices,	both	of	which	in	turn	have	had,	and	may	have	in	the	future,	a	strong negative	effect	on	American's	revenues.	In	addition,	during	challenging	economic	times,	actions	by	its	competitors	to	increase	their	revenues	can	have an	adverse	impact	on	American's	revenues.

American's	operating	results	are	materially	impacted	by	changes	in	the	availability,	price	volatility	and	cost	of	aircraft	fuel,	which	represents	one	of	the largest	single	cost	items	in	American's	business.	Jet	fuel	market	prices	have	fluctuated	substantially	over	the	past	several	years	and	prices	continue	to	be highly	volatile.	Because	of	the	amount	of	fuel	needed	to	operate	American's	business,	even	a	relatively	small	increase	or	decrease	in	the	price	of	fuel can	have	a	material	effect	on	American's	operating	results	and	liquidity.

These	additional	factors	could	impact	American's	results	of	operations,	financial	performance	and	liquidity:

Most	of	American's	receivables	relate	to	tickets	sold	to	individual	passengers	through	the	use	of	major	credit	cards	or	to	tickets	sold	by	other	airlines and	used	by	passengers	on	American.	These	receivables	are	short-term,	mostly	settled	within	seven	days	after	sale.	Bad	debt	losses,	which	have	been minimal	in	the	past,	have	been	considered	in	establishing	allowances	for	doubtful	accounts.	American	does	not	believe	it	is	subject	to	any	significant concentration	of	credit	risk.

American	has	exposure	to	market	risk	associated	with	changes	in	interest	rates	related	primarily	to	its	variable	rate	debt	obligations.	Interest	rates	on $9.6	billion	principal	amount	of	long-term	debt	as	of

December	31,	2016	are	subject	to	adjustment	to	reflect	changes	in	floating	interest	rates.	The	weighted	average	effective	interest	rate	on	American's variable	rate	debt	was	3.1%	at	December	31,	2016.	American	does	not	currently	have	an	interest	rate	hedge	program.

American	is	exposed	to	the	effect	of	foreign	exchange	rate	fluctuations	on	the	U.S.	dollar	value	of	foreign	currency-denominated	operating	revenues and	expenses.	American's	largest	exposure	comes	from	the	British	pound,	Euro,	Canadian	dollar	and	various	Latin	American	currencies,	primarily	the Brazilian	real.	American	does	not	currently	have	a	foreign	currency	hedge	program.	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	risk.

When	available,	American	uses	quoted	market	prices	to	determine	the	fair	value	of	its	financial	assets.	If	quoted	market	prices	are	not	available, American	measures	fair	value	using	valuation	techniques	that	use,	when	possible,	current	market-based	or	independently-sourced	market	parameters, such	as	interest	rates	and	currency	rates.

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,	2016.

|  |  | Fair	Value	Measurements	as	of | Fair	Value	Measurements	as	of |  |
| :--- | :--- | :--- | :--- | :--- |
| Short-term\tinvestments\t^(1)\n,\t(2)\n: | Total | December\t31,\t2016\nLevel\t1 | Level\t2 | Level\t3 |
| Money\tmarket\tfunds | $587 | $587 | $—\t\t\t\t $— | $—\t\t\t\t $— |
| Corporate\tobligations | \t 2,550 | — | \t 2,550 | — |
| Bank\tnotes/certificates\tof\tdeposit/time\tdeposits | \t 2,897 | — | \t 2,897 | — |
|  | \t 6,034 | 587 | \t 5,447 | — |
| Restricted\tcash\tand\tshort-term\tinvestments\t^(1) | 638 | 638 | — | — |
| Total | $6,672 | $1,225 | $5,447 | $— |

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	$385	million	of	bank	notes/certificates	of	deposit/time	deposits	and	$230	million	of	corporate	obligations.

|  |  | Fair	Value	Measurements	as	of | Fair	Value	Measurements	as	of |  |
| :--- | :--- | :--- | :--- | :--- |
| Short-term\tinvestments\t^(1)\n,\t(2)\n: | Total | December\t31,\t2015\nLevel\t1 | Level\t2 | Level\t3 |
| Money\tmarket\tfunds | $1,008 | $1,008 | $—\t\t\t\t $— | $—\t\t\t\t $— |
| Government\tagency\tinvestments | 1 | — | 1 | — |
| Corporate\tobligations | \t 2,191 | — | \t 2,191 | — |
| Bank\tnotes/certificates\tof\tdeposit/time\tdeposits | \t 2,662 | — | \t 2,662 | — |
|  | \t 5,862 | \t 1,008 | \t 4,854 | — |
| Restricted\tcash\tand\tshort-term\tinvestments\t^(1) | 695 | 695 | — | — |
| Total | $6,557 | $1,703 | $4,854 | $— |

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	$1.2	billion	of	bank	notes/certificates	of	deposit/time	deposits	and	$734	million	of	corporate	obligations.

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,	2016 | December	31,	2016 | December	31,	2015 | December	31,	2015 |
| :--- | :--- | :--- | :--- | :--- |
|  | Carrying\nValue | Fair\nValue | Carrying\nValue | Fair\nValue |
| Long-term\tdebt,\tincluding\tcurrent\tmaturities | $22,577 | $23,181 | $18,826 | $19,378 |

American	sponsors	defined	benefit	and	defined	contribution	pension	plans	for	eligible	employees.	The	defined	benefit	pension	plans	provide	benefits for	participating	employees	based	on	years	of	service	and	average	compensation	for	a	specified	period	of	time	before	retirement.	Effective	November	1, 2012,	substantially	all	of	American's	defined	benefit	pension	plans	were	frozen	and	American	began	providing	enhanced	benefits	under	its	defined contribution	pension	plans	for	certain	groups.	American	uses	a	December	31	measurement	date	for	all	of	its	defined	benefit	pension	plans.	American also	provides	certain	retiree	medical	and	other	postretirement	benefits,	including	health	care	and	life	insurance	benefits,	to	retired	employees.	Effective November	1,	2012,	American	modified	its	retiree	medical	and	other	postretirement	benefits	plans	to	eliminate	the	company	subsidy	for	employees	who retire	 on	 or	 after	 November	 1,	 2012.	As	 a	 result	 of	 modifications	 to	 its	 retiree	 medical	 and	 other	 postretirement	 benefits	 plans	 in	 2012,	American recognized	a	negative	plan	amendment	of	$1.9	billion,	which	is	included	as	a	component	of	actuarial	gain	in	OCI	and	will	be	amortized	over	the	future service	life	of	the	active	plan	participants	for	whom	the	benefit	was	eliminated,	or	approximately	eight	years.	As	of	December	31,	2016,	$871	million	of actuarial	gain	remains	to	be	amortized.

|  | Pension	Benefits |  | Retiree	Medical	and	Other<br>Postretirement	Benefits |  |
| :--- | :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2016 | 2015 |
|  |  |  | (In\tmillions) |  |
| Benefit\tobligation\tat\tbeginning\tof\tperiod | $16,310 | $17,504 | $1,129 | $1,324 |
| Service\tcost | 2 | 2 | 3 | 3 |
| Interest\tcost | 746 | 733 | 47 | 50 |
| Actuarial\t(gain)\tloss\t^(1)\t(2) | 725 | (1,153) | (104) | (178) |
| Plan\tamendments | — | — | 7 | — |
| Settlements | (2) | (3) | — | — |
| Benefit\tpayments | (633) | (773) | (92) | (94) |
| Other | — | — | — | 24 |
| Benefit\tobligation\tat\tend\tof\tperiod | $17,148 | $16,310 | $990 | $1,129 |
| Fair\tvalue\tof\tplan\tassets\tat\tbeginning\tof\tperiod | $9,660 | $10,935 | $253 | $244 |
| Actual\treturn\ton\tplan\tassets | 911 | (505) | 22 | (10) |
| Employer\tcontributions | 32 | 6 | 83 | 89 |
| Settlements | (2) | (3) | — | — |
| Benefit\tpayments | (633) | (773) | (92) | (94) |
| Other\t^(3) | — | — | — | 24 |
| Fair\tvalue\tof\tplan\tassets\tat\tend\tof\tperiod | $9,968 | $9,660 | $266 | $253 |
| Funded\tstatus\tat\tend\tof\tperiod | $ (7,180) | $ (6,650) | $(724) | $(876) |

The	December	31,	2016	and	2015	pension	actuarial	(gain)	loss	primarily	relates	to	weighted	average	discount	rate	assumption	changes	and changes	to	American's	mortality	assumptions.

|  | Pension	Benefits<br>2016 | 2015 | Postretirement	Benefits<br>2016 | 2015 |
| :--- | :--- | :--- | :--- | :--- |
|  |  | (In\tmillions) |  |  |
| As\tof\tDecember\t31, |  |  |  |  |
| Current\tliability | $7 | $7 | $97 | $109 |
| Noncurrent\tliability\t^(1) | \t 7,173 | \t 6,643 | 627 | 767 |
| Total\tliabilities | $7,180 | $6,650 | $724 | $876 |
| Net\tactuarial\tloss\t(gain) | $5,472 | $5,036 | $(429) | $(339) |
| Prior\tservice\tcost\t(benefit)\t^(1) | 188 | 216 | (837) | (1,084) |
| Total\taccumulated\tother\tcomprehensive\tloss\t(income),\t pre-tax | $5,660 | $5,252 | $(1,266) | $(1,423) |

|  | Pension	Benefits |  | Postretirement	Benefits | Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2016 | 2015 |
|  |  | (In\tmillions) |  |  |
| Projected\tbenefit\tobligation\t(PBO) | $17,119 | $16,283 | $— | $— |
| Accumulated\tbenefit\tobligation\t(ABO) | \t 17,108 | \t 16,272 | — | — |
| Accumulated\tpostretirement\tbenefit\tobligation\t(APBO) | — | — | \t 990 | \t 1,129 |
| Fair\tvalue\tof\tplan\tassets | 9,936 | 9,630 | \t 266 | 253 |
| ABO\tless\tfair\tvalue\tof\tplan\tassets | 7,172 | 6,642 | — | — |

|  |  | Pension	Benefits |  | Other	Postretirement	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 | \t\t\t\t2016 | \t\t\t\t2015 | \t\t\t\t2014 |
|  |  |  |  | (In\tmillions) |  |  |
| Defined\tbenefit\tplans: |  |  |  |  |  |  |
| Service\tcost | $2 | $1 | $2 | $3 | $3 | $1 |
| Interest\tcost | 746 | 733 | 742 | 47 | 50 | 61 |
| Expected\treturn\ton\tassets | (747) | (848) | (783) | (20) | (19) | (19) |
| Settlements | — | 1 | 4 | — | — | — |
| Amortization\tof: |  |  |  |  |  |  |
| Prior\tservice\tcost\t(benefit)\t^(1) | 28 | 28 | 28 | (240) | (243) | (244) |
| Unrecognized\tnet\tloss\t(gain) | 125 | 111 | 43 | (16) | (9) | (8) |
| Net\tperiodic\tbenefit\tcost\t(income) | 154 | 26 | 36 | (226) | (218) | (209) |
| Defined\tcontribution\tplan\tcost | 761 | 657 | 527 | N/A | N/A | N/A |
| Total\tcost\t(income) | $ 915 | $ 683 | $ 563 | $(226) | $(218) | $(209) |

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

As	of	December	31,	2016,	American's	estimate	of	the	long-term	rate	of	return	on	plan	assets	was	8%	based	on	the	target	asset	allocation.	Expected returns	 on	 long	 duration	 bonds	 are	 based	 on	 yields	 to	 maturity	 of	 the	 bonds	 held	 at	year-end.	 Expected	 returns	 on	 other	 assets	 are	 based	 on	 a combination	of	long-term	historical	returns,	actual	returns	on	plan	assets	achieved	over	the	last	ten	years,	current	and	expected	market	conditions,	and expected	value	to	be	generated	through	active	management,	currency	overlay	and	securities	lending	programs.

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

American	is	required	to	make	minimum	contributions	to	its	defined	benefit	pension	plans	under	the	minimum	funding	requirements	of	the	Employee Retirement	Income	Security	Act	of	1974	and	various	other	laws	for	U.S.	based	plans	as	well	as	under	funding	rules	specific	to	countries	where	American maintains	defined	benefit	plans.	Based	on	current	funding	assumptions,	American	has	minimum	required	contributions	of	$25	million	for	2017.	American expects	to	make	supplemental	contributions	of	$254	million	to	its	U.S.	based	defined	benefit	plans	in	2017.	Currently,	the	minimum	funding	obligation	for American's	U.S.	based	defined	benefit	pension	plans	is	subject	to	temporary	favorable	rules	that	are	scheduled	to	expire	at	the	end	of	2017.	American's pension	funding	obligations	are	likely	to	increase	materially	following	expiration	of	the	temporary	funding	rules,	when	American	will	be	required	to	make contributions	relating	to	the	2018	fiscal	year.	The	amount	of	these	obligations	will	depend	on	the	performance	of	American's	investments	held	in	trust	by the	 pension	 plans,	 interest	 rates	 for	 determining	 liabilities,	 the	 amount	 of	 and	 timing	 of	 any	 supplemental	 contributions	 and	American's	 actuarial experience.

|  | 2017 | 2018 | 2019 | 2020 | 2021 | 2022-2026 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Pension | $685 | $719 | $758 | $800 | $841 | $4,797 |
| Retiree\tmedical\tand\tother\tpostretirement\tbenefits | 97 | 93 | 88 | 79 | 73 | 312 |

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

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

The	fair	value	of	American's	pension	plan	assets	at	December	31,	2016	and	2015,	by	asset	category,	are	as	follows	(in	millions):

|  |  | Fair	Value	Measurements	as	of	December	31,	2016 | Fair	Value	Measurements	as	of	December	31,	2016 |  |
| :--- | :--- | :--- | :--- | :--- |
| Asset\tCategory | Quoted\tPrices\tin\nActive\tMarkets\tfor\nIdentical\tAssets\n(Level\t1) | Significant\nObservable\nInputs\n(Level\t2) | Significant\nUnobservable\nInputs\n(Level\t3) | Total |
| Cash\tand\tcash\tequivalents | $573 | $— | $— | $573 |
| Equity\tsecurities: |  |  |  |  |
| International\tmarkets\t^(a)\n,\t(b) | 3,232 | — | — | \t 3,232 |
| Large-cap\tcompanies\t^(b) | 2,253 | — | — | \t 2,253 |
| Mid-cap\tcompanies\t^(b) | 371 | — | — | 371 |
| Small-cap\tcompanies\t^(b) | 6 | — | — | 6 |
| Fixed\tincome: |  |  |  |  |
| Corporate\tbonds\t^(c) | — | 2,337 | — | \t 2,337 |
| Government\tsecurities\t^(d) | — | 150 | — | 150 |
| U.S.\tmunicipal\tsecurities | — | 37 | — | 37 |
| Alternative\tinstruments: |  |  |  |  |
| Private\tequity\tpartnerships\t^(e) | — | — | 21 | 21 |
| Private\tequity\tpartnerships\tmeasured\tat\tnet\tasset\tvalue\t^(e)\t(g) | — | — | — | 703 |
| Common/collective\ttrusts\t^(f) | — | 32 | — | 32 |
| Common/collective\ttrusts\tand\t103-12\tInvestment\tTrust\tmeasured |  |  |  |  |
| at\tnet\tasset\tvalue\t^(f)\t(g) | — | — | — | 227 |
| Insurance\tgroup\tannuity\tcontracts | — | — | 2 | 2 |
| Dividend\tand\tinterest\treceivable | 40 | — | — | 40 |
| Due\tto/from\tbrokers\tfor\tsale\tof\tsecurities\t–\tnet | (9) | — | — | (9) |
| Other\tliabilities\t–\tnet | (7) | — | — | (7) |
| Total | $6,459 | $2,556 | $23 | $9,968 |

Includes	limited	partnerships	that	invest	primarily	in	U.S.	(95%)	and	European	(5%)	buyout	opportunities	of	a	range	of	privately	held	companies. The	pension	plan's	master	trust	does	not	have	the	right	to	redeem	its	limited	partnership	investment	at	its	net	asset	value,	but	rather

receives	distributions	as	the	underlying	assets	are	liquidated.	It	is	estimated	that	the	underlying	assets	of	these	funds	will	be	gradually	liquidated over	the	next	one	to	ten	years.	Additionally,	the	pension	plan's	master	trust	has	future	funding	commitments	of	approximately	$456	million	over	the next	ten	years.

|  |  |  |  | Fair	Value	Measurements	as	of	December	31,	2015 | Fair	Value	Measurements	as	of	December	31,	2015 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Asset\tCategory |  |  | Quoted\tPrices\tin\nActive\tMarkets\tfor\nIdentical\tAssets\n(Level\t1) | Significant\nObservable\nInputs\n(Level\t2) | Significant\nUnobservable\nInputs\n(Level\t3) | Total |
| Cash\tand\tcash\tequivalents |  |  | $287 | $— | $— | $287 |
| Equity\tsecurities: |  |  |  |  |  |  |
| International\tmarkets\t^(a) | ,\t(b) |  | 2,873 | — | — | \t 2,873 |
| Large-cap\tcompanies\t^(b) | Large-cap\tcompanies\t^(b) | Large-cap\tcompanies\t^(b) | 1,999 | — | — | \t 1,999 |
| Mid-cap\tcompanies\t^(b) |  |  | 361 | — | — | 361 |
| Small-cap\tcompanies\t^(b) | Small-cap\tcompanies\t^(b) | Small-cap\tcompanies\t^(b) | 18 | — | — | 18 |
| Fixed\tincome: |  |  |  |  |  |  |
| Corporate\tbonds\t^(c) | Corporate\tbonds\t^(c) | Corporate\tbonds\t^(c) | — | 2,204 | — | \t 2,204 |
| Government\tsecurities\t^(d) | Government\tsecurities\t^(d) |  | — | 917 | — | 917 |
| U.S.\tmunicipal\tsecurities | U.S.\tmunicipal\tsecurities | U.S.\tmunicipal\tsecurities | — | 48 | — | 48 |
| Alternative\tinstruments: |  |  |  |  |  |  |
| Private\tequity\tpartnerships\t^(e) | Private\tequity\tpartnerships\t^(e) | Private\tequity\tpartnerships\t^(e) | — | — | 16 | 16 |
| Private\tequity\tpartnerships\tmeasured\tat\tnet\tasset\tvalue | Private\tequity\tpartnerships\tmeasured\tat\tnet\tasset\tvalue | (e)\t(g) | — | — | — | 706 |
| Common/collective\ttrusts\t^(f) | Common/collective\ttrusts\t^(f) | Common/collective\ttrusts\t^(f) | — | 30 | — | 30 |
| Common/collective\ttrusts\tand\t103-12\tInvestment\tTrust\tmeasured |  |  |  |  |  |  |
| at\tnet\tasset\tvalue | (f)\t(g) |  | — | — | — | 189 |
| Insurance\tgroup\tannuity\tcontracts | Insurance\tgroup\tannuity\tcontracts | Insurance\tgroup\tannuity\tcontracts | — | — | 2 | 2 |
| Dividend\tand\tinterest\treceivable | Dividend\tand\tinterest\treceivable |  | 50 | — | — | 50 |
| Due\tto/from\tbrokers\tfor\tsale\tof\tsecurities\t–\tnet | Due\tto/from\tbrokers\tfor\tsale\tof\tsecurities\t–\tnet | Due\tto/from\tbrokers\tfor\tsale\tof\tsecurities\t–\tnet | 23 | — | — | 23 |
| Other\tassets\t–\tnet |  |  | 8 | — | — | 8 |
| Other\tliabilities\t–\tnet | Other\tliabilities\t–\tnet | Other\tliabilities\t–\tnet | (71) | — | — | (71) |
| Total |  |  | $5,548 | $3,199 | $18 | $9,660 |

|  | Private<br>Equity<br>Partnerships | Insurance<br>Group<br>Annuity<br>Contracts |
| :--- | :--- | :--- |
| Beginning\tbalance\tat\tDecember\t31,\t2014 | $17 | $2 |
| Actual\treturn\ton\tplan\tassets: |  |  |
| Relating\tto\tassets\tstill\theld\tat\tthe\treporting\tdate | (1) | — |
| Ending\tbalance\tat\tDecember\t31,\t2015 | $16 | $2 |

The	fair	value	of	American's	retiree	medical	and	other	postretirement	benefits	plans	assets	at	December	31,	2016	by	asset	category,	were	as	follows (in	millions):

|  |  | Fair	Value	Measurements	as	of	December	31,	2016 | Fair	Value	Measurements	as	of	December	31,	2016 |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Quoted\tPrices\tin | Significant | Significant |  |
|  | Active\tMarkets\tfor | Observable | Unobservable |  |
| Asset\tCategory | Identical\tAssets\n(Level\t1) | Inputs\n(Level\t2) | Inputs\n(Level\t3) | Total |
| Money\tmarket\tfund | $5 | $— | $— | $5 |
| Mutual\tfunds\t–\tInstitutional\tClass | 261 | — | — | \t 261 |
| Total | $266 | $— | $— | $266 |

|  |  | Fair	Value	Measurements	as	of	December	31,	2015 | Fair	Value	Measurements	as	of	December	31,	2015 |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Quoted\tPrices\tin | Significant | Significant |  |
|  | Active\tMarkets\tfor | Observable | Unobservable |  |
| Asset\tCategory | Identical\tAssets\n(Level\t1) | Inputs\n(Level\t2) | Inputs\n(Level\t3) | Total |
| Money\tmarket\tfund | $4 | $— | $— | $4 |
| Mutual\tfunds\t–\tInstitutional\tClass | 19 | — | — | 19 |
| Mutual\tfunds\t–\tAMR\tClass | — | 230 | — | \t 230 |
| Total | $23 | $230 | $— | $253 |

Investments	in	the	retiree	medical	and	other	postretirement	benefits	plans'	mutual	funds	are	valued	by	quoted	prices	on	the	active	market,	which	is	fair value	and	represents	the	net	asset	value	of	the	shares	of	such	funds	as	of	the	close	of	business	at	the	end	of	the	period.	AMR	Class	shares	are	offered without	 a	 sales	 charge	 to	 participants.	 Purchases	 are	 restricted	 to	 certain	 retirement	 benefit	 plans,	 including	American's	 retiree	 medical	 and	 other postretirement	 benefits	 plans,	 resulting	 in	 a	 fair	 value	 classification	 of	 Level	 2.	 Investments	 include	 approximately	 27%	 of	 investments	 in	non-U.S. common	stocks	in	each	of	2016	and	2015.	Net	asset	value	is	based	on	the	fair	market	value	of	the	funds'	underlying	assets	and	liabilities	at	the	date	of determination.

American	instituted	an	employee	profit	sharing	program	effective	on	January	1,	2016	and	accrues	5%	of	its	 pre-tax	income	excluding	special	items	to distribute	to	employees	in	early	2017.	For	the	year	ended	December	31,	2016,	American	accrued	$314	million	for	this	program.

# 8.		Accumulated	Other	Comprehensive	Income	(Loss)

|  | Medical	and<br>Other<br>Postretirement<br>Benefits | Derivative<br>Financial<br>Instruments | Unrealized<br>Gain	(Loss)<br>on<br>Investments | Income<br>Tax	Benefit<br>(Provision)	^(1) | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tat\tDecember\t31,\t2014 | $(3,671) | $9 | $(3) | $(991) | $(4,656) |
| Other\tcomprehensive\tloss\tbefore\treclassifications | (51) | — | (7) | — | (58) |
| Amounts\treclassified\tfrom\taccumulated\tother |  |  |  |  |  |
| comprehensive\tincome\t(loss) | (109) | (9) | 1 | — | (117) |
| Net\tcurrent-period\tother\tcomprehensive\tloss | (160) | (9) | (6) | — | (175) |
| Balance\tat\tDecember\t31,\t2015 | (3,831) | — | (9) | (991) | (4,831) |
| Other\tcomprehensive\tincome\t(loss)\tbefore |  |  |  |  |  |
| reclassifications | (461) | — | 9 | 166 | (286) |
| Amounts\treclassified\tfrom\taccumulated\tother |  |  |  |  |  |
| comprehensive\tincome\t(loss) | (102) | — | — | 37\t^(2) | (65) |
| Net\tcurrent-period\tother\tcomprehensive\tincome |  |  |  |  |  |
| (loss) | (563) | — | 9 | 203 | (351) |
| Balance\tat\tDecember\t31,\t2016 | $(4,394) | $— | $— | $(788) | $(5,182) |

Amounts	allocated	to	OCI	for	income	taxes	as	further	described	in	Note	4	will	remain	in	AOCI	until	American	ceases	all	related	activities,	such	as termination	of	the	pension	plan.

Under	all	of	American's	aircraft	and	engine	purchase	agreements,	its	total	future	commitments	as	of	December	31,	2016	are	expected	to	be	as	follows (approximately,	in	millions):

These	amounts	are	net	of	purchase	deposits	currently	held	by	the	manufacturers	and	include	all	commitments	for	regional	aircraft.	American	has granted	a	security	interest	in	its	purchase	deposits	with	Boeing.	American's	purchase	deposits	held	by	all	manufacturers	totaled	$1.2	billion	as	of December	31,	2016.

American	has	contracts	related	to	facility	construction	or	improvement	projects,	primarily	at	airport	locations,	as	well	as	information	technology	support. The	contractual	obligations	related	to	these	contracts	are	presented	in	the	table	below	(approximately,	in	millions):

|  | 2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Facility\tconstruction\tor\timprovement\tcontracts | $182 | $126 | $13 | $— | $— | $— | $321 |
| Information\ttechnology\tcontracts | \t 205 | \t 168 | \t 128 | \t 47 | \t 24 | 8 | \t 580 |

American	has	capacity	purchase	agreements	with	third-party	regional	carriers.	The	capacity	purchase	agreements	provide	that	all	revenues,	including passenger,	in-flight,	ancillary,	mail	and

freight	revenues,	go	to	American.	In	return,	American	agrees	to	pay	predetermined	fees	to	these	airlines	for	operating	an	agreed-upon	number	of	aircraft, without	regard	to	the	number	of	passengers	on	board.	In	addition,	these	agreements	provide	that	American	reimburses	100%	of	certain	variable	costs, such	as	airport	landing	fees	and	passenger	liability	insurance.	American	controls	marketing,	scheduling,	ticketing,	pricing	and	seat	inventories.

American	 leases	 certain	 aircraft,	 engines	 and	 ground	 equipment,	 in	 addition	 to	 the	 majority	 of	 its	 ground	 facilities	 and	 terminal	 space.	 As	 of December	31,	2016,	American	had	408	aircraft	under	operating	leases,	with	remaining	terms	ranging	from	three	months	to	approximately	11	years. Airports	are	utilized	for	flight	operations	under	lease	arrangements	with	the	municipalities	or	agencies	owning	or	controlling	such	airports.	Substantially all	leases	provide	that	the	lessee	must	pay	taxes,	maintenance,	insurance	and	certain	other	operating	expenses	applicable	to	the	leased	property.	Some leases	also	include	renewal	and	purchase	options.

Mainline	and	regional	rent	expense,	excluding	landing	fees,	was	$2.7	billion	in	each	of	2016	and	2015	and	$2.8	billion	in	2014.

American	guarantees	the	payment	of	principal	and	interest	of	certain	special	facility	revenue	bonds	issued	by	municipalities	primarily	to	build	or improve	airport	facilities	and	purchase	equipment	which	is	leased	to	American.	Under	such	leases,	American	is	required	to	make	rental	payments	through 2035,	 sufficient	 to	 pay	 maturing	 principal	 and	 interest	 payments	 on	 the	 related	 bonds.	As	 of	 December	 31,	 2016,	 the	 remaining	 lease	 payments guaranteeing	the	principal	and	interest	on	these	bonds	are	$605	million,	which	are	accounted	for	as	operating	leases.

Pursuant	to	rulings	of	the	Bankruptcy	Court,	the	Plan	established	the	Disputed	Claims	Reserve	to	hold	shares	of	AAG	common	stock	reserved	for issuance	 to	 disputed	 claimholders	 at	 the	 Effective	 Date	 that	 ultimately	 become	 holders	 of	 allowed	 claims.	As	 of	 December	 31,	 2016,	 there	 were approximately	25.2	million	shares	of	AAG	common	stock	remaining	in	the	Disputed	Claims	Reserve.	As	disputed	claims	are	resolved,	the	claimants	will receive	distributions	of	shares	from	the	Disputed	Claims	Reserve	on	the	same	basis	as	if	such	distributions	had	been	made	on	or	about	the	Effective Date.	However,	American	is	not	required	to	distribute	additional	shares	above	the	limits	contemplated	by	the	Plan,	even	if	the	shares	remaining	for distribution	are	not	sufficient	to	fully	pay	any	additional	allowed	unsecured	claims.	To	the	extent	that	any	of	the	reserved	shares	remain	undistributed upon	resolution	of	all	remaining	disputed	claims,	such	shares	will	not	be	returned	to	American	but	rather	will	be	distributed	to	former	AMR	stockholders.

There	is	also	pending	in	the	Bankruptcy	Court	an	adversary	proceeding	relating	to	an	action	brought	by	American	to	seek	a	determination	that	certain non-pension,	postemployment	benefits	are	not	vested	benefits	and	thus	may	be	modified	or	terminated	without	liability	to	American.	On	April	18,	2014, the	Bankruptcy	Court	granted	American's	motion	for	summary	judgment	with	respect	to	certain	non-union	employees,	concluding	that	their	benefits	were not	vested	and	could	be	terminated.	The	summary	judgment	motion	was	denied	with	respect	to	all	other	retirees.	The	Bankruptcy	Court	has	not	yet scheduled	a	trial	on	the	merits	concerning	whether	those	retirees'	benefits	are	vested,	and	American	cannot	predict	whether	it	will	receive	relief	from obligations	to	provide	benefits	to	any	of	those	retirees.	American's	financial	statements	presently	reflect	these	retirement	programs	without	giving	effect	to any	modification	or	termination	of	benefits	that	may	ultimately	be	implemented	based	upon	the	outcome	of	this	proceeding.

DOJ	Antitrust	Civil	Investigative	Demand .	In	June	2015,	American	received	a	Civil	Investigative	Demand	(CID)	from	the	United	States	Department	of Justice	(DOJ)	as	part	of	an	investigation	into	whether	there	have	been	illegal	agreements	or	coordination	of	air	passenger	capacity.	The	CID	seeks documents	and	other	information	from	American,	and	other	airlines	have	announced	that	they	have	received	similar	requests.	American	is	cooperating fully	with	the	DOJ	investigation.	In	addition,	subsequent	to	announcement	of	the	delivery	of	CIDs	by	the	DOJ,	American,	along	with	Delta	Air	Lines,	Inc., Southwest	Airlines	Co.,	United	Airlines,	Inc.	and,	in	the	case	of	litigation	filed	in	Canada,	Air	Canada,	have	been	named	as	defendants	in	approximately 100	putative	class	action	lawsuits	alleging	unlawful	agreements	with	respect	to	air	passenger	capacity.	The	U.S.	lawsuits	have	been	consolidated	in	the Federal	District	Court	for	the	District	of	Columbia.	On	October	28,	2016,	the	Court	denied	a	motion	by	the	airline	defendants	to	dismiss	all	claims	in	the class	actions.	Both	the	DOJ	investigation	and	these	lawsuits	are	in	their	relatively	early	stages	and	American	intends	to	defend	these	matters	vigorously.

Private	Party	Antitrust	Action.	On	July	2,	2013,	a	lawsuit	captioned	Carolyn	Fjord,	et	al.,	v.	US	Airways	Group,	Inc.,	et	al.,	was	filed	in	the	United	States District	Court	for	the	Northern	District	of

California.	The	complaint	named	as	defendants	US	Airways	Group	and	US	Airways,	Inc.,	alleged	that	the	effect	of	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	August	6,	2013,	the	plaintiffs	re-filed	their complaint	in	the	Bankruptcy	Court,	adding	AMR	and	American	as	defendants.	On	November	27,	2013,	the	Bankruptcy	Court	denied	plaintiffs'	motion	to preliminarily	enjoin	the	Merger.	On	August	19,	2015,	after	three	previous	largely	unsuccessful	attempts	to	amend	their	complaint,	plaintiffs	filed	a	fourth motion	for	leave	to	file	an	amended	and	supplemental	complaint	to	add	a	claim	for	damages	and	demand	for	jury	trial,	as	well	as	claims	similar	to	those	in the	putative	class	action	lawsuits	regarding	air	passenger	capacity.	Thereafter,	plaintiffs	filed	a	request	with	the	Judicial	Panel	on	Multidistrict	Litigation	to consolidate	the	Fjord	matter	with	the	putative	class	action	lawsuits,	which	was	denied	on	October	15,	2015.	A	jointly	proposed	schedule	for	the	remainder of	the	case	was	submitted	on	September	7,	2016,	which	has	not	yet	been	accepted	by	the	Bankruptcy	Court.	American	believes	this	lawsuit	is	without merit	and	intends	to	vigorously	defend	against	the	allegations.

DOJ	Investigation	Related	to	the	United	States	Postal	Service .	In	April	2015,	the	DOJ	informed	American	of	an	inquiry	regarding	American's	2009	and 2011	contracts	with	the	United	States	Postal	Service	for	the	international	transportation	of	mail	by	air.	In	October	2015,	American	received	a	CID	from	the DOJ	seeking	certain	information	relating	to	these	contracts	and	the	DOJ	has	also	sought	information	concerning	certain	of	the	airlines	that	transport	mail on	a	codeshare	basis.	The	DOJ	has	indicated	it	is	investigating	potential	violations	of	the	False	Claims	Act	or	other	statutes.	American	is	cooperating	fully with	the	DOJ	with	regard	to	its	investigation.

General.	In	addition	to	the	specifically	identified	legal	proceedings,	American	and	its	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	American's	control.	Therefore,	although	American	will	vigorously	defend	itself	in	each	of	the	actions described	above	and	such	other	legal	proceedings,	their	ultimate	resolution	and	potential	financial	and	other	impacts	on	American	are	uncertain	but	could be	material.	See	Part	I,	Item	1A.	Risk	Factors	—"We	may	be	a	party	to	litigation	in	the	normal	course	of	business	or	otherwise,	which	could	affect	our financial	position	and	liquidity"	for	unaudited	additional	discussion.

American	is	a	party	to	many	routine	contracts	in	which	it	provides	general	indemnities	in	the	normal	course	of	business	to	third	parties	for	various	risks. American	is	not	able	to	estimate	the	potential	amount	of	any	liability	resulting	from	the	indemnities.	These	indemnities	are	discussed	in	the	following paragraphs.

In	its	aircraft	financing	agreements,	American	generally	indemnifies	the	financing	parties,	trustees	acting	on	their	behalf	and	other	relevant	parties against	 liabilities	 (including	 certain	 taxes)	 resulting	 from	 the	 financing,	 manufacture,	 design,	 ownership,	 operation	 and	 maintenance	 of	 the	 aircraft regardless	of	whether	these	liabilities	(or	taxes)	relate	to	the	negligence	of	the	indemnified	parties.

American's	loan	agreements	and	other	LIBOR-based	financing	transactions	(including	certain	leveraged	aircraft	leases)	generally	obligate	American	to reimburse	the	applicable	lender	for	incremental	costs	due	to	a	change	in	law	that	imposes	(i)	any	reserve	or	special	deposit	requirement	against	assets of,	deposits	with	or	credit	extended	by	such	lender	related	to	the	loan,	(ii)	any	tax,	duty	or	other	charge	with	respect	to	the	loan	(except	standard	income tax)	or	(iii)	capital	adequacy	requirements.	In	addition,	American's	loan	agreements	and	other	financing	arrangements	typically

contain	a	withholding	 tax	provision	 that	requires	American	 to	pay	additional	amounts	 to	 the	applicable	 lender	or	other financing	party,	generally if withholding	taxes	are	imposed	on	such	lender	or	other	financing	party	as	a	result	of	a	change	in	the	applicable	tax	law.

These	 increased	cost	and	withholding	 tax	provisions	continue	 for	 the	entire	 term	of	 the	applicable	 transaction,	and	 there	 is	no	 limitation	on	 the maximum	additional	amounts	American	could	be	obligated	to	pay	under	such	provisions.	Any	failure	to	pay	amounts	due	under	such	provisions	generally would	trigger	an	event	of	default	and,	in	a	secured	financing	transaction,	would	entitle	the	lender	to	foreclose	on	the	collateral	to	realize	the	amount	due.

In	certain	transactions,	including	certain	aircraft	financing	leases	and	loans,	the	lessors,	lenders	and/or	other	parties	have	rights	to	terminate	the transaction	based	on	changes	in	foreign	tax	law,	illegality	or	certain	other	events	or	circumstances.	In	such	a	case,	American	may	be	required	to	make	a lump	sum	payment	to	terminate	the	relevant	transaction.

American	has	general	indemnity	clauses	in	many	of	its	airport	and	other	real	estate	leases	where	American	as	lessee	indemnifies	the	lessor	(and related	parties)	against	liabilities	related	to	American's	use	of	the	leased	property.	Generally,	these	indemnifications	cover	liabilities	resulting	from	the negligence	of	the	indemnified	parties,	but	not	liabilities	resulting	from	the	gross	negligence	or	willful	misconduct	of	the	indemnified	parties.	In	addition, American	provides	environmental	indemnities	in	many	of	these	leases	for	contamination	related	to	American's	use	of	the	leased	property.

Under	certain	contracts	with	third	parties,	American	indemnifies	the	third-party	against	legal	liability	arising	out	of	an	action	by	the	third-party,	or	certain other	 parties.	The	 terms	 of	 these	 contracts	 vary	 and	 the	 potential	 exposure	 under	 these	 indemnities	 cannot	 be	 determined.	American	 has	 liability insurance	protecting	American	for	some	of	the	obligations	it	has	undertaken	under	these	indemnities.

American	is	involved	in	certain	claims	and	litigation	related	to	its	operations.	American	is	also	subject	to	regulatory	assessments	in	the	ordinary	course of	business.	American	establishes	reserves	for	litigation	and	regulatory	matters	when	those	matters	present	loss	contingencies	that	are	both	probable	and can	be	reasonably	estimated.	In	the	opinion	of	management,	liabilities,	if	any,	arising	from	these	regulatory	matters,	claims	and	litigation	will	not	have	a material	adverse	effect	on	American's	consolidated	financial	position,	results	of	operations,	or	cash	flows,	after	consideration	of	available	insurance.

American	has	agreements	with	companies	that	process	customer	credit	card	transactions	for	the	sale	of	air	travel	and	other	services.	American's agreements	allow	these	processing	companies,	under	certain	conditions,	to	hold	an	amount	of	its	cash	(referred	to	as	a	holdback)	equal	to	a	portion	of advance	ticket	sales	that	have	been	processed	by	that	company,	but	for	which	American	has	not	yet	provided	the	air	transportation.	Additional	holdback requirements	in	the	event	of	material	adverse	changes	in	American's	financial	condition	will	reduce	its	liquidity	in	the	form	of	unrestricted	cash	by	the amount	of	the	holdbacks.	American	is	not	currently	required	to	maintain	any	holdbacks	pursuant	to	these	requirements.

As	of	December	31,	2016,	American	employed	approximately	101,500	active	full-time	equivalent	employees.	Approximately	84%	of	employees	are covered	by	collective	bargaining	agreements	with	various	 labor	unions.	Negotiations	 for	 joint	collective	bargaining	agreements	covering	American's maintenance,	fleet	service,	stores	and	planner	employees	are	continuing.	There	is	no	assurance	that	a	successful	or	timely	resolution	of	these	labor negotiations	will	be	achieved.

As	a	result	of	the	terrorist	attacks	of	September	11,	2001	and	the	subsequent	liability	protections	provided	for	by	the	Air	Transportation	Safety	and System	Stabilization	Act	(the	Stabilization	Act),	American	recorded	a	liability	for	these	terrorist	attacks	claims	equal	to	the	related	insurance	receivable due	to	American.	The	Stabilization	Act	provides	that,	notwithstanding	any	other	provision	of	law,	liability	for	all	claims,	whether	compensatory	or	punitive, arising	from	these	terrorist	attacks,	against	any	air	carrier	shall	not	exceed	the	liability	coverage	maintained	by	the	air	carrier.	As	of	December	31,	2016, the	remaining	liability	and	the	amount	of	the	offsetting	receivable	were	each	$974	million.

# 10.		Supplemental	Cash	Flow	Information

|  | 2016 | Year	Ended	December	31,<br>2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Non-cash\tinvesting\tand\tfinancing\tactivities: |  |  |  |
| Settlement\tof\tbankruptcy\tobligations | $3 | $63 | $5,131 |
| Capital\tlease\tobligations | — | 5 | 747 |
| Supplemental\tinformation: |  |  |  |
| Interest\tpaid,\tnet\tof\tamounts\tcapitalized | \t 867 | \t 787 | 780 |
| Income\ttaxes\tpaid | 14 | 19 | 4 |

American	is	managed	as	a	single	business	unit	that	provides	air	transportation	for	passengers	and	cargo.	This	allows	it	to	benefit	from	an	integrated revenue	pricing	and	route	network	that	includes	American	and	AAG's	wholly-owned	and	third-party	regional	carriers	that	fly	under	capacity	purchase agreements	operating	as	American	Eagle.	The	flight	equipment	of	all	these	carriers	is	combined	to	form	one	fleet	that	is	deployed	through	a	single	route scheduling	system.	When	making	resource	allocation	decisions,	the	chief	operating	decision	maker	evaluates	flight	profitability	data,	which	considers aircraft	type	and	route	economics,	but	gives	no	weight	to	the	financial	impact	of	the	resource	allocation	decision	on	an	individual	carrier	basis.	The objective	in	making	resource	allocation	decisions	is	to	maximize	consolidated	financial	results,	not	the	individual	results	of	American	or	American	Eagle.

American's	operating	revenues	by	geographic	region	as	defined	by	the	United	States	Department	of	Transportation	(DOT)	are	summarized	below	(in millions):

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| DOT\tDomestic | $28,603 | $28,709 | $28,584 |
| DOT\tLatin\tAmerica | 4,995 | 5,539 | 6,974 |
| DOT\tAtlantic | 4,769 | 5,146 | 5,652 |
| DOT\tPacific | 1,796 | 1,544 | 1,466 |
| Total\toperating\trevenues | $40,163 | $40,938 | $42,676 |

American	attributes	operating	revenues	by	geographic	region	based	upon	the	origin	and	destination	of	each	flight	segment.	American's	tangible	assets consist	primarily	of	flight	equipment,	which	are	mobile	across	geographic	markets	and,	therefore,	have	not	been	allocated.

American's	net	income	for	the	years	ended	December	31,	2016,	2015	and	2014	included	$102	million,	$274	million	and	$381	million,	respectively,	of share-based	compensation	costs.	Of	the	2015	and	2014	amounts,	$198	million	and	$224	million,	respectively,	were	related	to	awards	granted	to	certain employees	in	connection	with	the	Merger	and	recorded	in	special	items,	net	on	the	accompanying	consolidated	statements	of	operations.

During	2016,	2015	and	2014,	AAG	withheld	approximately	1.4	million,	7.0	million	and	1.7	million	shares	of	AAG	common	stock,	respectively,	and	paid approximately	$56	million,	$306	million	and	$62	million,	respectively,	in	satisfaction	of	certain	tax	withholding	obligations	associated	with	employee	equity awards.

AAG	has	granted	RSUs	with	service	conditions	(time	vested	primarily	over	three	years)	and	performance	conditions.	The	grant-date	fair	value	of RSUs	is	equal	to	the	market	price	of	the	underlying	shares	of	common	stock	on	the	date	of	grant.	For	time	vested	awards,	the	expense	is	recognized	on a	straight-line	basis	over	the	vesting	period	for	the	entire	award.	For	awards	with	performance	conditions,	the	expense	is	recognized	based	on	the expected	achievement	at	each	reporting	period.	Stock-settled	RSUs	are	classified	as	equity	awards	as	the	vesting	results	in	the	issuance	of	shares	of AAG	common	stock.	Cash-settled	restricted	stock	unit	awards	(CRSUs)	are	classified	as	liability	awards	as	the	vesting	results	in	payment	of	cash	by AAG.

|  | Number	of	Shares | Value |
| :--- | :--- | :--- |
|  | (In\tthousands) |  |
| Outstanding\tat\tDecember\t31,\t2013 | 23,879 | $24.33 |
| Granted | 3,467 | 37.07 |
| Vested\tand\treleased | (4,193) | 23.84 |
| Forfeited | (1,811) | 25.10 |
| Outstanding\tat\tDecember\t31,\t2014 | 21,342 | $26.43 |
| Granted | 2,213 | 46.62 |
| Vested\tand\treleased | (17,163) | 25.20 |
| Forfeited | (785) | 27.12 |
| Outstanding\tat\tDecember\t31,\t2015 | 5,607 | $38.08 |
| Granted | 2,655 | 41.34 |
| Vested\tand\treleased | (2,754) | 34.83 |
| Forfeited | (321) | 40.15 |
| Outstanding\tat\tDecember\t31,\t2016 | 5,187 | $41.48 |

As	of	December	31,	2016,	AAG	had	a	nominal	amount	of	CRSUs	outstanding.	The	 total	cash	paid for	CRSUs	vested	during the	years	ended December	31,	2016,	2015	and	2014	was	less	than	$1	million,	$10	million	and	$12	million,	respectively.

AAG	assumed	US	Airways	Group's	outstanding	stock	options	and	stock	appreciation	rights	in	connection	with	the	Merger	using	an	exchange	ratio	of one	to	one.	These	stock	options	and	stock	appreciation	rights	were	granted	with	an	exercise	price	equal	to	the	underlying	common	stock's	fair	value	at the	date	of	each	grant,	have	service	conditions,	become	exercisable	over	a	three-year	vesting	period	and	expire	if	unexercised	at	the	end	of	their	term, which	ranges	from	seven	to	ten	years.	Stock	options	and	stock-settled	stock	appreciation	rights	(SARs)	are	classified	as	equity	awards	as	the	exercise results	in	the	issuance	of	shares	of	AAG	common	stock.	Cash-settled	stock	appreciation	rights	(CSARs)	are	classified	as	liability	awards	as	the	exercise results	in	payment	of	cash	by	AAG.	Compensation	costs	were	expensed	on	a	straight-line	basis	over	the	vesting	period	for	the	entire	award.	There	are no	unrecognized	compensation	costs	as	all	awards	outstanding	are	vested.

|  | Stock	Options | Weighted | Weighted	Average |  |
| :--- | :--- | :--- | :--- | :--- |
|  | and | Average | Remaining | Aggregate |
|  | SARs | Exercise\tPrice | Contractual\tTerm | Intrinsic\tValue |
|  | (In\tthousands) |  | (In\tyears) | (In\tmillions) |
| Balance\tat\tDecember\t31,\t2013 | 11,158 | $12.84 |  |  |
| Granted | — | — |  |  |
| Exercised | (4,109) | 10.74 |  |  |
| Forfeited | — | — |  |  |
| Expired | (42) | 41.73 |  |  |
| Balance\tat\tDecember\t31,\t2014 | 7,007 | $13.90 |  |  |
| Granted | — | — |  |  |
| Exercised | (2,985) | 12.09 |  |  |
| Forfeited | — | — |  |  |
| Expired | (9) | 45.75 |  |  |
| Balance\tat\tDecember\t31,\t2015 | 4,013 | $15.17 |  |  |
| Granted | — | — |  |  |
| Exercised | (1,738) | 14.49 |  |  |
| Forfeited | — | — |  |  |
| Expired | (180) | 46.19 |  |  |
| Balance\tat\tDecember\t31,\t2016 | 2,095 | $13.08 | 1.6 | $70 |

|  | CSARs | Weighted<br>Average<br>Exercise	Price | Weighted	Average<br>Remaining<br>Contractual	Term | Aggregate<br>Intrinsic<br>Value |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | (In |
|  | (In\tthousands) |  | (In\tyears) | millions) |
| Balance\tat\tDecember\t31,\t2013 | 2,865 | $6.26 |  |  |
| Granted | — | — |  |  |
| Exercised | (1,254) | 6.18 |  |  |
| Forfeited | — | — |  |  |
| Expired | — | — |  |  |
| Balance\tat\tDecember\t31,\t2014 | 1,611 | $6.33 |  |  |
| Granted | — | — |  |  |
| Exercised | (760) | 6.31 |  |  |
| Forfeited | — | — |  |  |
| Expired | — | — |  |  |
| Balance\tat\tDecember\t31,\t2015 | 851 | $6.35 |  |  |
| Granted | — | — |  |  |
| Exercised | (501) | 5.24 |  |  |
| Forfeited | — | — |  |  |
| Expired | — | — |  |  |
| Balance\tat\tDecember\t31,\t2016 | 350 | $7.94 | 1.0 | $14 |

|  | Balance	at<br>Beginning	of<br>Year | Charged	to<br>Statement	of<br>Operations<br>Accounts | Write-offs<br>(Net	of<br>Recoveries) | Sales,<br>Retirements<br>and<br>Transfers | Balance<br>at	End<br>of	Year |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Allowance\tfor\tobsolescence\tof\tinventories |  |  |  |  |  |
| Year\tended\tDecember\t31,\t2016 | $689 | $28 | $— | $3 | $720 |
| Year\tended\tDecember\t31,\t2015 | 638 | 42 | — | 9 | 689 |
| Year\tended\tDecember\t31,\t2014 | 504 | 135 | (2) | 1 | 638 |
| Allowance\tfor\tuncollectible\taccounts |  |  |  |  |  |
| Year\tended\tDecember\t31,\t2016 | $37 | $47 | $(49) | $— | $35 |
| Year\tended\tDecember\t31,\t2015 | 14 | 45 | (22) | — | 37 |
| Year\tended\tDecember\t31,\t2014 | 40 | 3 | (29) | — | 14 |

Unaudited	summarized	financial	data	by	quarter	for	2016	and	2015	(in	millions):

|  | First	Quarter | Second	Quarter | Third	Quarter | Fourth	Quarter |
| :--- | :--- | :--- | :--- | :--- |
| 2016 |  |  |  |  |
| Operating\trevenues | $9,427 | $10,360 | $10,591 | $9,786 |
| Operating\texpenses | 8,104 | 8,603 | 9,159 | 8,995 |
| Operating\tincome | 1,323 | 1,757 | 1,432 | 791 |
| Net\tincome | 710 | 972 | 758 | 341 |
| 2015 |  |  |  |  |
| Operating\trevenues | $9,811 | $10,814 | $10,694 | $9,619 |
| Operating\texpenses | 8,610 | 8,893 | 8,691 | 8,555 |
| Operating\tincome | 1,201 | 1,921 | 2,003 | 1,064 |
| Net\tincome | 937 | 1,709 | 1,723 | 3,751 |

American's	fourth	quarter	2016	results	include	$273	million	of	total	net	special	charges	consisting	principally	of	$121	million	of	Merger	integration expenses,	$104	million	of	fleet	restructuring	expenses	and	a	$47	million	net	charge	consisting	of	mark-to-market	adjustments	for	bankruptcy	obligations.

American's	fourth	quarter	2015	results	include	$2.5	billion	of	total	net	special	credits	consisting	principally	of	a	$3.5	billion	 non-cash	 tax	benefit recorded	in	connection	with	the	reversal	of	American's	tax	valuation	allowance,	offset	in	part	by	a	nonoperating	net	special	charge	of	$592	million	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 and	$447	million	in	total	operating	special	charges	primarily	consisting	of	Merger	integration	expenses	and	fleet	restructuring	expenses.

# 15.		Transactions	with	Related	Parties

The	following	represents	the	net	receivables	(payables)	to	related	parties	(in	millions):

|  | December	31, |  |
| :--- | :--- | :--- |
|  | 2016 | 2015 |
| AAG\t^(1) | $8,981 | $4,489 |
| AAG's\twholly-owned\tsubsidiaries\t^(2) | (2,171) | (2,508) |
| Total | $6,810 | $1,981 |

The	 increase	 in	American's	 net	 related	 party	 receivable from	AAG is	 primarily	 due to	American	 providing the	 cash funding for	AAG's	 share repurchase	and	dividend	programs.

The	net	payable	to	AAG's	wholly-owned	subsidiaries	consists	primarily	of	amounts	due	under	regional	capacity	purchase	agreements	with	AAG's wholly-owned	regional	airlines	operating	under	the	brand	name	of	American	Eagle.

Pursuant	to	a	capacity	purchase	agreement	between	American	and	AAG's	wholly-owned	regional	airlines	operating	as	American	Eagle,	American purchases	all	of	the	capacity	from	these	carriers	and	recognizes	passenger	revenue	from	flights	operated	by	American	Eagle.	In	2016,	2015	and	2014, American	recognized	expense	of	approximately	$1.5	billion,	$1.2	billion	and	$1.2	billion,	respectively,	related	to	wholly-owned	regional	airline	capacity purchase	agreements.

In	January	2017,	American	created	three	pass-through	trusts	which	issued	approximately	$983	million	aggregate	principal	amount	of	Series	 2017-1 Class	AA,	Class	A	and	Class	B	EETCs	(the	2017-1	EETCs)	in	connection	with	the	financing	of	24	aircraft	scheduled	to	be	delivered	to	American	between January	2017	and	May	2017	(the	2017-1	Aircraft).	A	portion	of	the	proceeds	received	from	the	sale	of	the	 2017-1	EETCs	has	been	used	to	acquire	Series AA,	A	and	B	equipment	notes	issued	by	American	to	the	pass-through	trusts	and	the	balance	of	such	proceeds	is	being	held	in	escrow	for	the	benefit	of the	holders	of	the	2017-1	EETCs	until	such	time	as	American	issues	additional	Series	AA,	A	and	B	equipment	notes	to	the	pass-through	trusts,	which	will purchase	 the	equipment	notes	with	escrowed	 funds.	These	escrowed	 funds	are	not	guaranteed	by	American	and	are	not	reported	as	debt	on	 its consolidated	balance	sheet	because	the	proceeds	held	by	the	depository	are	not	American's	assets.

# ITEM	9.		CHANGES	IN	AND	DISAGREEMENTS	WITH	ACCOUNTANTS	ON	ACCOUNTING	AND	FINANCIAL	DISCLOSURE

None.

# ITEM	9A.		CONTROLSAND	PROCEDURES

# Management's	Evaluation	of	Disclosure	Controls	and	Procedures

The	term	"disclosure	controls	and	procedures"	is	defined	in	Rules	 13a-15(e)	and	15d-15(e)	of	the	Exchange	Act.	This	term	refers	to	the	controls	and procedures	of	a	company	that	are	designed	to	ensure	that	information	required	to	be	disclosed	by	a	company	in	the	reports	that	it	files	under	the Exchange	Act	is	recorded,	processed,	summarized	and	reported	within	the	time	periods	specified	by	the	SEC.	An	evaluation	of	the	effectiveness	of	AAG's and	American's	disclosure	controls	and	procedures	as	of	December	31,	2016	was	performed	under	the	supervision	and	with	the	participation	of	AAG's and	 American's	 management,	 including	 AAG's	 and	 American's	 Chief	 Executive	 Officer	 (CEO)	 and	 Chief	 Financial	 Officer	 (CFO).	 Based	 on	 that evaluation,	AAG's	and	American's	management,	including	AAG's	and	American's	CEO	and	CFO,	concluded	that	AAG's	and	American's	disclosure controls	and	procedures	were	effective	as	of	December	31,	2016.

# Changes	in	Internal	Control	over	Financial	Reporting

On	December	9,	2013,	AAG	acquired	US	Airways	Group	and	its	subsidiaries.	We	are	still	in	the	process	of	integrating	certain	processes,	technology and	operations	for	the	post-Merger	combined	company,	and	we	will	continue	to	evaluate	the	impact	of	any	related	changes	to	our	internal	control	over financial	reporting.	For	the	year	ended	December	31,	2016,	there	has	been	no	change	in	AAG's	or	American's	internal	control	over	financial	reporting	that has	materially	affected,	or	is	reasonably	likely	to	materially	affect,	AAG's	and	American's	internal	control	over	financial	reporting.

# Limitation	on	the	Effectiveness	of	Controls

We	believe	that	a	controls	system,	no	matter	how	well	designed	and	operated,	cannot	provide	absolute	assurance	that	the	objectives	of	the	controls system	are	met,	and	no	evaluation	of	controls	can	provide	absolute	assurance	that	all	control	issues	and	instances	of	fraud,	if	any,	within	a	company have	been	detected.	Our	disclosure	controls	and	procedures	are	designed	to	provide	reasonable	assurance	of	achieving	their	objectives,	and	the	CEO and	 CFO	 of	 AAG	 and	 American	 believe	 that	 our	 disclosure	 controls	 and	 procedures	 were	 effective	 at	 the	 "reasonable	 assurance"	 level	 as	 of December	31,	2016.

# Management's	Annual	Report	on	Internal	Control	over	Financial	Reporting

Management	of	AAG	and	American	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting	as	defined	in Rules	13a-15(f)	and	15d-15(f)	under	the	Exchange	Act.	AAG's	and	American's	internal	control	over	financial	reporting	is	designed	to	provide	reasonable assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	GAAP. AAG's	and	American's	internal	control	over	financial	reporting	includes	policies	and	procedures	that:

•pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of AAG	or	American,	respectively;

•provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with GAAP,	and	that	receipts	and	expenditures	of	AAG	or	American	are	being	made	only	in	accordance	with	authorizations	of	management	and directors	of	AAG	or	American,	respectively;	and

•provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use	or	disposition	of	AAG's	or	American's assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation of	effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of compliance	with	the	policies	or	procedures	may	deteriorate.

Management	assessed	the	effectiveness	of	AAG's	and	American's	internal	control	over	financial	reporting	as	of	December	31,	2016.	In	making	this assessment,	management	used	the	criteria	set	forth	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	in	its	Internal	Control	– Integrated	Framework	(2013	Framework).

Based	 on	 our	 assessment	 and	 those	 criteria,	AAG's	 and	American's	 management	 concludes that	AAG	 and	American,	 respectively,	 maintained effective	internal	control	over	financial	reporting	as	of	December	31,	2016.

AAG's	and	American's	independent	registered	public	accounting	firm	has	issued	an	attestation	report	on	the	effectiveness	of	AAG's	and	American's internal	control	over	financial	reporting.	That	report	has	been	included	herein.

We	have	audited	American	Airlines	Group	Inc.'s	(the	Company)	internal	control	over	financial	reporting	as	of	December	31,	2016,	based	on	criteria established	 in	Internal	Control	 –	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	 the	Treadway	Commission (COSO).	The	Company's	management	is	responsible	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the effectiveness	of	internal	control	over	financial	reporting,	included	in	the	accompanying	Management's	Annual	Report	on	Internal	Control	over	Financial Reporting.	Our	responsibility	is	to	express	an	opinion	on	the	Company's	internal	control	over	financial	reporting	based	on	our	audit.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial	reporting	was	maintained	in	all material	respects.	Our	audit	included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness exists,	 and	 testing	 and	 evaluating	 the	 design	 and	 operating	 effectiveness	 of	 internal	 control	 based	 on	 the	 assessed	 risk.	 Our	 audit	 also	 included performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We	believe	that	our	audit	provides	a	reasonable	basis	for	our opinion.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's	internal control	over	financial	reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are	recorded	as necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures of	 the	company	are	being	made	only	 in	accordance	with	authorizations	of	management	and	directors	of	 the	company;	and	(3)	provide	reasonable assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that	could	have	a	material effect	on	the	financial	statements.

In	our	opinion,	American	Airlines	Group	Inc.	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	December	31, 2016,	based	on	criteria	established	in	Internal	Control	 –	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	the Treadway	Commission	(COSO).

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	consolidated	balance sheets	of	the	Company	as	of	December	31,	2016	and	2015,	and	the	related	consolidated	statements	of	operations,	comprehensive	income,	cash	flows, and	stockholders'	equity	(deficit)	for	each	of	the	years	in	the	three-year	period	ended	December	31,	2016,	and	our	report	dated	February	22,	2017 expressed	an	unqualified	opinion	on	those	consolidated	financial	statements.

We	have	audited	American	Airlines,	Inc.'s	(American)	internal	control	over	financial	reporting	as	of	December	31,	2016,	based	on	criteria	established	in Internal	Control	–	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO).	American's management	is	responsible	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control over	financial	reporting,	included	in	the	accompanying	Management's	Annual	Report	on	Internal	Control	over	Financial	Reporting.	Our	responsibility	is	to express	an	opinion	on	American's	internal	control	over	financial	reporting	based	on	our	audit.

In	our	opinion,	American	Airlines,	Inc.	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	December	31,	2016, based	on	criteria	established	in	Internal	Control	–	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway Commission	(COSO).

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	consolidated	balance sheets	of	American	as	of	December	31,	2016	and	2015,	and	the	related	consolidated	statements	of	operations,	comprehensive	income,	cash	flows,	and stockholder's	equity	(deficit)	for	each	of	the	years	in	the	three-year	period	ended	December	31,	2016,	and	our	report	dated	February	22,	2017	expressed an	unqualified	opinion	on	those	consolidated	financial	statements.

# PART	III

# ITEM	10.		DIRECTORS,EXECUTIVE	OFFICERS	AND	CORPORATE	GOVERNANCE

Except	as	stated	below,	the	information	required	by	this	Item	will	be	set	forth	in	the	Proxy	Statement	under	the	captions	"Proposal	1	–	Election	of Directors,"	"Executive	Officers,"	"Section	16(a)	Beneficial	Ownership	Reporting	Compliance"	and	"Information	About	the	Board	of	Directors	and	Corporate Governance"	and	is	incorporated	by	reference	into	this	Annual	Report	on	Form	10-K.

American	Airlines	Group	and	American	have	adopted	Standards	of	Business	Conduct	(the	Ethics	Standards)	within	the	meaning	of	Item	406(b)	of Regulation	S-K.	The	Ethics	Standards	apply	to	all	officers	and	employees	of	American	Airlines	Group	Inc.	and	its	subsidiaries,	including	American.	The Ethics	 Standards	 are	 available	 on	 our	 website	 at	www.aa.com.	 If	we	make	substantive	amendments	 to	 the	Ethics	Standards	or	grant	any	waiver, including	any	implicit	waiver,	to	our	principal	executive	officer,	principal	financial	officer,	principal	accounting	officer	or	controller,	or	persons	performing similar	functions,	we	will	disclose	the	nature	of	such	amendment	or	waiver	on	our	website	or	in	a	Current	Report	on	Form	8-K	 in	accordance	with applicable	rules	and	regulations.

# ITEM	11.		EXECUTIVE	COMPENSATION

The	information	required	by	this	Item	will	be	set	forth	in	the	Proxy	Statement	under	the	captions	"Risk	Assessment	with	Respect	to	Compensation Practices,"	"Director	Compensation,"	"Compensation	Discussion	and	Analysis,"	"Executive	Compensation"	and	"Compensation	Committee	Report"	and	is incorporated	by	reference	into	this	Annual	Report	on	Form	10-K.

# ITEM	12.		SECURITY	OWNERSHIP	OF	CERTAIN	BENEFICIAL	OWNERS	AND	MANAGEMENT	AND	RELATED	STOCKHOLDER	MATTERS

Except	as	stated	below,	the	information	required	by	this	Item	will	be	set	forth	in	the	Proxy	Statement	under	the	captions	"Security	Ownership	of Certain	Beneficial	Owners	and	Management"	and	"Equity	Compensation	Plan	Information"	and	is	incorporated	by	reference	into	this	Annual	Report	on Form	10-K.

# ITEM	13.		CERTAIN	RELATIONSHIPS	AND	RELATED	TRANSACTIONS,	AND	DIRECTOR	INDEPENDENCE

The	 information	 required	 by	 this	 Item	 will	 be	 set	 forth	 in	 the	 Proxy	 Statement	 under	 the	 captions	 "Certain	 Relationships	 and	 Related	 Party Transactions"	and	"Information	About	the	Board	of	Directors	and	Corporate	Governance"	and	is	incorporated	by	reference	into	this	Annual	Report	on Form	10-K.

# ITEM	14.		PRINCIPAL	ACCOUNTANT	FEES	AND	SERVICES

The	 information	 required	 by	 this	 Item	 will	 be	 set	 forth	 in	 the	 Proxy	 Statement	 under	 the	 caption	 "Proposal	 2	 –	 Ratification	 of	Appointment	 of Independent	Registered	Public	Accounting	Firm"	and	is	incorporated	by	reference	into	this	Annual	Report	on	Form	10-K.

# PART	IV

# ITEM	15.		EXHIBITSAND	FINANCIAL	STATEMENT	SCHEDULES

# Consolidated	Financial	Statements

The	following	consolidated	financial	statements	of	American	Airlines	Group	Inc.	and	Independent	Auditors'	Report	are	filed	as	part	of	this	report:

|  | Page |
| :--- | :--- |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm | 84 |
| Consolidated\tStatements\tof\tOperations\tfor\tthe\tYears\tEnded\tDecember\t31,\t2016,\t2015\tand\t2014 | 85 |
| Consolidated\tStatements\tof\tComprehensive\tIncome\tfor\tthe\tYears\tEnded\tDecember\t\t31,\t2016,\t2015\tand\t2014 | 86 |
| Consolidated\tBalance\tSheets\tat\tDecember\t31,\t2016\tand\t2015 | 87 |
| Consolidated\tStatements\tof\tCash\tFlows\tfor\tthe\tYears\tEnded\tDecember\t31,\t\t2016,\t2015\tand\t2014 | 88 |
| Consolidated\tStatements\tof\tStockholders'\tEquity\t(Deficit)\tfor\tthe\tYears\tEnded\tDecember\t\t31,\t2016,\t2015\tand\t2014 | 89 |
| Notes\tto\tConsolidated\tFinancial\tStatements | 90 |

   The	following	consolidated	financial	statements	of	American	Airlines,	Inc.	and	Independent	Auditors'	Report	are	filed	as	part	of	this	report:

| The	following	consolidated	financial	statements	of	American	Airlines,	Inc.	and	Independent	Auditors'	Report	are	filed	as	part	of	this	report: |  |
| :--- | :--- |
|  | Page |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm | \t136 |
| Consolidated\tStatements\tof\tOperations\tfor\tthe\tYears\tEnded\tDecember\t31,\t2016,\t2015\tand\t2014 | \t137 |
| Consolidated\tStatements\tof\tComprehensive\tIncome\tfor\tthe\tYears\tEnded\tDecember\t\t31,\t2016,\t2015\tand\t2014 | \t138 |
| Consolidated\tBalance\tSheets\tat\tDecember\t31,\t2016\tand\t2015 | \t139 |
| Consolidated\tStatements\tof\tCash\tFlows\tfor\tthe\tYears\tEnded\tDecember\t31,\t2016,\t2015\tand\t2014 | \t140 |
| Consolidated\tStatements\tof\tStockholder's\tEquity\t(Deficit)\tfor\tthe\tYears\tEnded\tDecember\t\t31,\t2016,\t2015\tand\t2014 | \t141 |
| Notes\tto\tConsolidated\tFinancial\tStatements | \t142 |

Schedules	not	included	have	been	omitted	because	they	are	not	applicable	or	because	the	required	information	is	included	in	the	Consolidated Financial	Statements	or	notes	thereto.

# Exhibits

The	exhibits	listed	in	the	Exhibit	Index	following	the	signature	pages	to	this	report	are	filed	as	part	of,	or	incorporated	by	reference	into,	this	report.

Exhibits	required	to	be	filed	by	Item	601	of	Regulation	 S-K:	Where	the	amount	of	securities	authorized	to	be	issued	under	any	of	our	long-term	debt agreements	does	not	exceed	10	percent	of	our	assets,	pursuant	to	paragraph	(b)(4)	of	Item	601	of	Regulation	S-K,	in	lieu	of	filing	such	as	an	exhibit,	we hereby	agree	to	furnish	to	the	Commission	upon	request	a	copy	of	any	agreement	with	respect	to	such	long-term	debt.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on its	behalf	by	the	undersigned,	thereunto	duly	authorized.

	 W.	Douglas	Parker

Chairman	and	Chief	Executive	Officer

(Principal	Executive	Officer)

Chairman	and	Chief	Executive	Officer (Principal	Executive	Officer)

KNOW	ALL	PERSONS	BY	THESE	PRESENTS,	that	each	individual	whose	signature	appears	below	constitutes	and	appoints	W.	Douglas	Parker	and Derek	J.	Kerr	and	each	or	any	of	them,	his	or	her	true	and	lawful	attorneys	and	agents,	with	full	power	of	substitution	and	resubstitution,	for	him	or	her	and in	his	or	her	name,	place	and	stead,	in	any	and	all	capacities,	to	sign	any	and	all	amendments	to	the	Registrants'	Annual	Report	on	Form	10-K	for	the fiscal	year	ended	December	31,	2016,	and	to	file	the	same	with	all	exhibits	thereto,	and	all	other	documents	in	connection	therewith,	with	the	Securities and	Exchange	Commission,	granting	unto	said	attorneys	and	agents,	and	each	or	any	of	them,	full	power	and	authority	to	do	and	perform	each	and	every act	and	thing	requisite	and	necessary	to	be	done,	as	fully	to	all	intents	and	purposes	as	he	or	she	might	or	could	do	in	person,	hereby	ratifying	and confirming	all	that	said	attorneys	and	agents,	and	each	of	them,	or	his	substitute	or	substitutes,	may	lawfully	do	or	cause	to	be	done	by	virtue	hereof.

Pursuant	 to	 the	requirements	of	 the	Securities	Exchange	Act	of	1934, this	report	has	been	signed	below	by the following	persons	on	behalf	of American	Airlines	Group	Inc.	and	in	the	capacities	and	on	the	dates	noted:

/s/				Michael	J.	Embler Michael	J.	Embler,	Director

/s/				Matthew	J.	Hart Matthew	J.	Hart,	Director

/s/				Alberto	Ibargüen Alberto	Ibargüen,	Director

/s/				Richard	C.	Kraemer Richard	C.	Kraemer,	Director 195

/s/				Susan	D.	Kronick Susan	D.	Kronick,	Director

Pursuant to the	requirements	of the	Securities	Exchange	Act	of	1934, this	report	has	been	signed	below	by the following	persons	on	behalf	of American	Airlines,	Inc.	and	in	the	capacities	and	on	the	dates	noted:

# EXHIBIT	INDEX

		4.27 Trust	Supplement	No.	2014-1B,	dated	as	of	September	16,	2014,	between	American	Airlines,	Inc.	and	Wilmington	Trust	Company,	as Trustee,	to	the	Pass	Through	Trust	Agreement,	dated	as	of	September	16,	2014	(incorporated	by	reference	to	Exhibit	4.3	to	American's Current	Report	on	Form	8-K	filed	on	September	17,	2014	(Commission	File	No.	1-2691)).

		4.45 Note	Purchase	Agreement,	dated	as	of	March	16,	2015,	among	American	Airlines,	Inc.,	Wilmington	Trust	Company,	as	Pass	Through Trustee	under	each	of	the	Pass	Through	Trust	Agreements,	Wilmington	Trust	Company,	as	Subordination	Agent,	Wilmington	Trust, National	Association,	as	Escrow	Agent,	and	Wilmington	Trust	Company,	as	Paying	Agent	(incorporated	by	reference	to	Exhibit	4.9	to American's	Current	Report	on	Form	8-K	filed	on	March	16,	2015	(Commission	File	 No.	1-2691)).

		4.63 Revolving	Credit	Agreement	(2015-2A),	dated	as	of	September	24,	2015,	between	Wilmington	Trust	Company,	as	Subordination	Agent, as	agent	and	trustee	for	the	trustee	of	the	American	Airlines	Pass	Through	Trust	2015-2A,	as	Borrower,	and	Crédit	Agricole	Corporate and	Investment	Bank,	acting	through	its	New	York	Branch,	as	Liquidity	Provider	(incorporated	by	reference	to	Exhibit	4.13	to	American's Current	Report	on	Form	8-K	filed	on	September	24,	2015	(Commission	File	 No.	1-2691)).

		4.71 Amended	and	Restated	Guarantee,	dated	as	of	March	31,	2014,	from	US	Airways	Group,	Inc.	and	American	Airlines	Group	Inc.,	relating to	obligations	of	US	Airways	under	the	equipment	notes	relating	to	its	Series	2013-1	Pass	Through	Certificates	(incorporated	by reference	to	Exhibit	10.5	to	AAG's	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	March	31,	2014	(Commission	File	 No.	1-8400)).

		4.99 Revolving	Credit	Agreement	(2016-1A),	dated	as	of	January	19,	2016,	between	Wilmington	Trust	Company,	as	Subordination	Agent,	as agent	and	trustee	for	the	trustee	of	the	American	Airlines	Pass	Through	Trust	2016-1A,	as	Borrower,	and	KfW	IPEX-Bank	GmbH,	as Liquidity	Provider	(incorporated	by	reference	to	Exhibit	4.13	to	American's	Current	Report	on	Form	8-K	filed	on	January	21,	2016 (Commission	File	No.	1-2691)).

				4.107 Escrow	and	Paying	Agent	Agreement	(Class	A),	dated	as	of	May	16,	2016,	among	Wilmington	Trust,	National	Association,	as	Escrow Agent,	Credit	Suisse	Securities	(USA)	LLC	and	Deutsche	Bank	Securities	Inc.,	for	themselves	and	on	behalf	of	the	several	Underwriters, Wilmington	Trust	Company,	not	in	its	individual	capacity,	but	solely	as	Pass	Through	Trustee	for	and	on	behalf	of	American	Airlines Pass	Through	Trust	2016-2A,	and	Wilmington	Trust	Company,	as	Paying	Agent	(incorporated	by	reference	to	Exhibit	4.8	to	American's Current	Report	on	Form	8-K	filed	on	May	17,	2016	(Commission	File	No.	1-2691)).

		4.124 Form	of	Pass	Through	Trust	Certificate,	Series	 2016-2B	(included	in	Exhibit	A	to	Exhibit	4.2	to	AAG's	Quarterly	Report	on	Form 10-Q	for the	quarter	ended	September	30,	2016	(Commission	File	Nos.	1-8400)).

		4.132 Escrow	and	Paying	Agent	Agreement	(Class	A),	dated	as	of	October	3,	2016,	among	Wilmington	Trust,	National	Association,	as	Escrow Agent,	Morgan	Stanley	&	Co.	LLC	and	Goldman,	Sachs	&	Co.,	for	themselves	and	on	behalf	of	the	several	Underwriters,	Wilmington Trust	Company,	not	in	its	individual	capacity,	but	solely	as	Pass	Through	Trustee	for	and	on	behalf	of	American	Airlines	Pass	Through Trust	2016-3A,	and	Wilmington	Trust	Company,	as	Paying	Agent	(incorporated	by	reference	to	Exhibit	4.8	to	American's	Current	Report on	Form	8-K	filed	on	October	4,	2016	(Commission	 File	No.	1-2691)).

10.1 Amended	and	Restated	Credit	and	Guaranty	Agreement,	dated	as	of	December	15,	2016,	amending	the	Loan	Agreement,	dated	as	of May	23,	2013,	among	American	Airlines,	Inc.	(as	successor	in	interest	to	US	Airways,	Inc.,	as	borrower),	as	the	borrower,	American Airlines	Group	Inc.,	as	parent	and	guarantor	(as	successor	in	interest	to	US	Airways	Group,	Inc.,	as	parent	and	guarantor),	the	lenders from	time	to	time	party	thereto,	Citibank	N.A.,	as	administrative	agent	and	collateral	agent	(as	successor	in	interest	to	Citicorp	North America	Inc.,	as	administrative	agent	and	collateral	agent),	and	certain	other	parties	thereto.

10.44 Amendment	No.	8,	dated	as	of	July	18,	2016,	to	the	Amended	and	Restated	Airbus	A350	XWB	Purchase	Agreement,	dated	as	of October	2,	2007,	between	American	Airlines,	Inc.	and	Airbus	S.A.S	(incorporated	by	reference	to	Exhibit	10.4	to	AAG's	Quarterly	Report on	Form	10-Q	for	the	quarter	ended	September	30,	2016	(Commission	File	 No.	1-8400)).*

10.67 2014	Short-Term	Incentive	Program	Under	2013	Incentive	Award	Plan	(incorporated	by	reference	to	Exhibit	10.8	to	AAG's	Quarterly Report	on	Form	10-Q	for	the	quarter	ended	June	30,	2014	(Commission	File	 No.	1-8400)).†

10.80 Credit	and	Guaranty	Agreement,	dated	as	of	April	29,	2016,	among	American	Airlines,	Inc.	as	borrower,	American	Airlines	Group	Inc.,	as parent	and	guarantor,	certain	other	subsidiaries	of	American	Airlines	Group	Inc.,	as	guarantors,	the	lenders	party	thereto,	Barclays	Bank PLC,	as	administrative	agent	and	collateral	agent,	and	certain	other	parties	thereto	(incorporated	by	reference	to	Exhibit	10.2	to	AAG's Quarterly	Report	on	Form	10-Q	filed	on	July	22,	2016	(Commission	File	 No.	1-8400)).#

		# Pursuant	to	Item	601(b)(2)	of	Regulation	 S-K	promulgated	by	the	Securities	and	Exchange	Commission,	certain	exhibits	and	schedules	to	this agreement	have	been	omitted.	Such	exhibits	and	schedules	are	described	in	the	referenced	agreement.	AAG	and	American	hereby	agree	to furnish	to	the	Securities	and	Exchange	Commission,	upon	its	request,	any	or	all	of	such	omitted	exhibits	or	schedules.

		* Confidential	treatment	has	been	granted	with	respect	to	certain	portions	of	this	agreement.

		** Confidential	treatment	has	been	requested	with	respect	to	certain	portions	of	this	agreement.

		† Management	contract	or	compensatory	plan	or	arrangement.


what is the ratio of the total flight attendants to total maintenance personnel
  flight_attendants_to_maintenance = 26900 / 16900
answer = flight_attendants_to_maintenance