AMERICAN AIRLINES, INC.

1. Basis of Presentation

(a)Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of American Airlines, Inc. (American) should be read in conjunction with the consolidated financial statements contained in American’s Annual Report on Form 10-K for the year ended December 31, 2025. American is the principal wholly-owned subsidiary of American Airlines Group Inc. (AAG). All significant intercompany transactions have been eliminated.

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

(b)Recent Accounting Pronouncements

Accounting Standards Update 2026-02: Environmental Credits and Environmental Credit Obligations (Topic 818)

This standard provides guidance for the recognition, measurement, presentation and disclosure of environmental credits and environmental credit obligations. The amendments in this update are effective for annual periods beginning after December 15, 2027 and interim periods within those annual periods, and early adoption is permitted. American is currently evaluating the impact that adoption of this standard may have on American’s consolidated financial statements and disclosures.

2. Special Items, Net

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

(1)Labor contract expenses for the nine months ended September 30, 2025 included a one-time charge resulting from adjustments to vacation accruals due to pay rate increases effective January 1, 2025, following the ratification of the contract extension in the fourth quarter of 2024 with American’s mainline maintenance and fleet service team members.

(2)Mark-to-market adjustments on equity investments, net, included unrealized gains and losses associated with certain equity investments.

(3)In the third quarter of 2026, American recorded an impairment charge related to its equity investment in Republic Airways Holdings Inc. (Republic Holdings). See Note 7 for further information on American’s equity investments.

3. Revenue Recognition

Revenue

The following are the significant categories comprising American’s operating revenues (in millions):

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

The following is American’s total passenger revenue by geographic region (in millions):

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

Contract Balances

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

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

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

(2)Mileage credits can be redeemed at any time and generally do not expire as long as the AAdvantage member has any type of qualifying activity at least every 24 months or if the AAdvantage member is the primary holder of a co-branded credit card. As of September 30, 2026, American’s current loyalty program liability was $4.4 billion and represents American’s current estimate of revenue expected to be recognized in the next 12 months based on historical trends, with the balance reflected in long-term loyalty program liability expected to be recognized as revenue in periods thereafter.

Additionally, as of September 30, 2026, American’s loyalty program liability includes a one-time cash payment associated with the extension of a partner agreement announced in 2025.

The air traffic liability principally represents tickets sold for future travel on American, its regional carriers and partner airlines. The balance in American’s air traffic liability also fluctuates with seasonal travel patterns. The contract duration of passenger tickets is generallyone year. Accordingly, any revenue associated with tickets sold for future travel will be recognized within 12 months. For the nine months ended September 30, 2026, $5.3 billion of revenue was recognized in passenger revenue that was included in American’s air traffic liability at December 31, 2025.

4. Debt

Debt included in the condensed consolidated balance sheets consisted of (in millions):

(1)Collectively referred to as the AAdvantage Financing.

As of September 30, 2026, the maximum availability under American’s revolving credit and other facilities is as follows (in millions):

(1)Includes a revolving credit facility that provides for borrowing capacity of up to $350 million. In March 2026, American elected to exercise its option to extend the maturity date of the revolving credit facility by an additional year to March 2028. American also currently has $50 million of available borrowing capacity under a cargo receivables facility that is scheduled to expire in December 2026. There areno amounts drawn under these facilities.

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

2026 Financing Activities

2013 Credit Facilities

In March 2026, American and AAG entered into the Eleventh Amendment to the Amended and Restated Credit and Guaranty Agreement, amending the Amended and Restated Credit and Guaranty Agreement, dated as of May 21, 2015, pursuant to which American terminated all then-existing revolving commitments and letter of credit commitments and established new revolving commitments in an aggregate amount of $363 million and new letter of credit commitments (which are part of, and not in addition to, the revolving credit commitments) in an aggregate amount of $155 million (the newly established revolving commitments, the 2013 Revolving Facility), which mature in March 2031. All other terms of the 2013 Revolving Facility are substantially similar to the prior revolving commitments.

2014 Credit Facilities

In March 2026, American and AAG entered into the Eleventh Amendment to the Amended and Restated Credit and Guaranty Agreement, amending the Amended and Restated Credit and Guaranty Agreement, dated as of April 20, 2015 (as amended, the Prior 2014 Credit Agreement), pursuant to which American terminated all then-existing revolving commitments and letter of credit commitments and established new revolving commitments in an aggregate amount of approximately $1.3 billion and new letter of credit commitments (which are part of, and not in addition to, the revolving credit commitments) in an aggregate amount of $195 million (the newly established revolving commitments, the 2014 Revolving Facility), which mature in March 2031. All other terms of the 2014 Revolving Facility are substantially similar to the prior revolving commitments.

In May 2026, American and AAG entered into the Twelfth Amendment to the Amended and Restated Credit and Guaranty Agreement (the Twelfth Amendment), amending the Prior 2014 Credit Agreement (as amended, the 2014 Credit Agreement), pursuant to which American refinanced in full the existing term loans under the then-existing credit agreement, which were scheduled to mature in January 2027, by incurring term loans in an aggregate principal amount of approximately $1.1 billion (the 2026 Refinancing Term Loans) and incurred incremental term loans in an aggregate principal amount of $703 million (the 2026 Incremental Term Loans and, together with the 2026 Refinancing Term Loans, the 2026 Term Loans, and such facility, the 2014 Term Loan Facility). Additionally, as a result of the Twelfth Amendment, the 2026 Term Loans bear interest at a base rate (subject to a floor of 0.00%) plus an applicable margin of 2.00% per annum or, at American’s option, the Secured Overnight Financing Rate (SOFR) for a tenor of three months (subject to a floor of 0.00%), plus an applicable margin of 3.00% per annum. The 2026 Term Loans mature in May 2033, and shall be repaid in annual installments of 1.00% of the aggregate amount of 2026 Term Loans outstanding, which is scheduled to begin in May 2027.

2023 Credit Facilities

In March 2026, American and AAG entered into the Fourth Amendment to the Credit and Guaranty Agreement, amending the Credit and Guaranty Agreement, dated as of December 4, 2023, pursuant to which American terminated all then-existing revolving commitments and established new revolving commitments in an aggregate amount of approximately $1.5 billion (the newly established revolving commitments, the 2023 Revolving Facility), which mature in March 2031. All other terms of the 2023 Revolving Facility are substantially similar to the prior revolving commitments.

2025 AAdvantage Term Loan Facility

In February 2026, American and AAdvantage Loyalty IP Ltd., a Cayman Islands exempted company incorporated with limited liability and an indirect wholly-owned subsidiary of American (together with American, the AAdvantage Issuers) entered into a fourth amendment to the term loan credit and guaranty agreement dated March 24, 2021 (the AAdvantage Fourth Amendment). As a result of the AAdvantage Fourth Amendment, the term loans outstanding under the 2025 AAdvantage Term Loan Facility were replaced with new term loans in the same principal amount. Pursuant to the AAdvantage Fourth Amendment, the 2025 AAdvantage Term Loan Facility bears interest at a base rate (subject to a floor of 0.00%) plus an applicable margin of 1.75% per annum or, at the AAdvantage Issuers’ option, the SOFR rate for a tenor of three months (subject to a floor of 0.00%), plus an applicable margin of 2.75% per annum. All other terms of the 2025 AAdvantage Term Loan Facility remain substantially similar.

2026-1 Class (B)R Aircraft EETCs

In March 2026, American entered into agreements under which it borrowed $870 million in connection with the financing of certain aircraft that had been previously delivered. Debt incurred under these agreements is junior to existing equipment notes secured by such previously delivered aircraft, matures in 2028 through 2029 and bears interest at a fixed rate of 5.61%.

2025-1 Aircraft EETCs

In November 2025, American createdtwo pass-through trusts which issued approximately $1.1 billion aggregate face amount of Series 2025-1 Class A and Class B EETCs (the 2025-1 Aircraft EETCs) in connection with the financing of 25 aircraft delivered to American from October 2025 through March 2026 (the 2025-1 Aircraft). In 2025, $978 million of the proceeds were used to purchase equipment notes issued by American in connection with the financing of 21 of the 2025-1 Aircraft. During the first nine months of 2026, approximately $127 million of proceeds were used to purchase equipment notes issued by American in connection with the financing of thefour remaining 2025-1 Aircraft. As of September 30, 2026, there were no remaining proceeds held in escrow, and all proceeds had been used to purchase equipment notes issued by American. Interest and principal payments on equipment notes issued in connection with the 2025-1 Aircraft EETCs are payable semi-annually in May and November each year, with interest payments that began in May 2026 and principal payments scheduled to begin in November 2026.

Certain information regarding the 2025-1 Aircraft EETC equipment notes, as of September 30, 2026, is set forth in the table below:

2026-1 Aircraft EETCs

In May 2026, American createdtwo pass-through trusts which issued approximately $1.1 billion aggregate face amount of Series 2026-1 Class A and Class B EETCs (the 2026-1 Aircraft EETCs) in connection with the financing of 32 aircraft delivered to American from April 2013 through September 2026 (the 2026-1 Aircraft). As of September 30, 2026, all of the proceeds received from the sale of the 2026-1 Aircraft EETCs were used to purchase equipment notes issued by American in connection with the financing of the 2026-1 Aircraft. Interest and principal payments on equipment notes issued in connection with the 2026-1 Aircraft EETCs are payable semi-annually in May and November each year, with interest and principal payments scheduled to begin in November 2026.

Certain information regarding the 2026-1 Aircraft EETC equipment notes, as of September 30, 2026, is set forth in the table below:

2026 Engine EETCs

In June 2026, American createdtwo pass-through trusts which issued $567 million aggregate face amount of Series 2026 Engine EETCs (the 2026 Engine EETCs), to refinance in full the $228 million outstanding principal amount of the 2019-1 Engine EETCs upon maturity and incur incremental borrowings in the aggregate principal amount of $339 million. The 2026 Engine EETCs have maturity dates from June 2031 to June 2033 and bear interest at fixed rates ranging from 5.46% to 6.04%.

2026-2 Aircraft EETCs

In August 2026, American createdtwo pass-through trusts which issued approximately $1.3 billion aggregate face amount of Series 2026-2 Class A and Class B EETCs (the 2026-2 Aircraft EETCs) in connection with the financing of 37 aircraft previously delivered or scheduled to be delivered to American from July 2013 through February 2027 (the 2026-2 Aircraft). As of September 30, 2026, approximately $692 million of the proceeds were used to purchase equipment notes issued by American in connection with the financing of 23 of the 2026-2 Aircraft. Interest and principal payments on equipment notes issued in connection with the 2026-2 Aircraft EETCs are payable semi-annually in February and August each year, with interest and principal payments scheduled to begin in February 2027. As of September 30, 2026, the remaining proceeds of approximately $633 million were being held in escrow with a depositary for the benefit of the holders of the 2026-2 Aircraft EETCs until such time as American issues additional equipment notes with respect to the remaining 2026-2 Aircraft to the pass-through trusts, which will purchase such additional equipment notes with the escrowed funds. These escrowed funds are not guaranteed by American and are not reported as debt on its condensed consolidated balance sheet because the proceeds held by the depositary for the benefit of the holders of the 2026-2 Aircraft EETCs are not American’s assets.

Certain information regarding the 2026-2 Aircraft EETC equipment notes, as of September 30, 2026, is set forth in the table below:

Equipment Loans and Other Notes Payable Issued in 2026

During the first nine months of 2026, American entered into agreements under which it borrowed $705 million in connection with the financing of certain aircraft. Debt incurred under these agreements matures in 2036 through 2038 and bears interest at variable rates (comprised of SOFR plus an applicable margin) averaging 5.87% as of September 30, 2026.

Other Financing Activities

During the first nine months of 2026, American paid in full $629 million of the outstanding principal amount of the senior short-term term loan facility due January 2026 and prepaid in full $1.0 billion of the outstanding principal amount of the 8.50% senior secured notes. Additionally, American prepaid $310 million of the outstanding principal amounts of equipment notes issued under EETCs, and these amounts were applied to repay the related trust certificates.

5. Income Taxes

At December 31, 2025, American had approximately $11.7 billion of gross federal net operating losses (NOLs) and $3.8 billion of other carryforwards available to reduce future federal taxable income, of which $1.8 billion will expire beginning in 2033 if unused and $13.7 billion can be carried forward indefinitely. American is a member of AAG’s consolidated federal and certain state income tax returns. American also had approximately $4.7 billion of NOL carryforwards to reduce future state taxable income at December 31, 2025, which will expire in taxable years 2025 through 2045 if unused.

American’s ability to use its NOLs and other carryforwards depends on the amount of taxable income generated in future periods. American provides a valuation allowance for its deferred tax assets, which include its NOLs and other carryforwards, when it is more likely than not that some portion, or all, of its deferred tax assets will not be realized. 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 assessment of future profitability, including conditions which are beyond its control, such as the health of the economy, the availability and price volatility of aircraft fuel and travel demand. American has determined that positive factors outweigh negative factors in the determination of the realizability of its deferred tax assets.

American has used the discrete method to calculate income taxes for the three and nine months ended September 30, 2026. At this time, American believes that the use of the discrete method is more appropriate than the estimated annual effective tax rate method due to the fact that small changes in projected full year income could cause material fluctuations in American’s annual effective tax rate applied during each quarter.

During the three and nine months ended September 30, 2026, American recorded an income tax benefit of $32 million and $26 million, respectively, which was substantially non-cash. Substantially all of American’s loss before income taxes is attributable to the United States.

6. Fair Value Measurements

Assets Measured at Fair Value on a Recurring Basis

American utilizes the market approach to measure the fair value of 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, restricted cash and restricted short-term investments classified as Level 2 utilize significant observable inputs, other than quoted prices in active markets, for valuation of these securities. No changes in valuation techniques or inputs occurred during the nine months ended September 30, 2026.

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

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

(2)American’s short-term investments mature in one year or less.

(3)Restricted cash and short-term investments primarily include collateral held to support workers’ compensation obligations, collateral associated with the payment of interest for the AAdvantage Financing and money market funds to be used to finance the cost of improvements at the overhaul and maintenance base at Tulsa International Airport. Restricted short-term investments principally mature in one year or less.

(4)Long-term investments primarily include American’s equity investment in China Southern Airlines Company Limited (China Southern Airlines). See Note 7 for further information on American’s equity investments.

Fair Value of Debt

The fair value of American’s long-term debt was estimated using quoted market prices or discounted cash flow analyses based on American’s current estimated incremental borrowing rates for similar types of borrowing arrangements.

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

7. Investments

To help expand American’s network and as part of its ongoing commitment to sustainability, American enters into various commercial relationships or other strategic partnerships, including equity investments, with other airlines and companies. American’s equity investments are reflected in other assets on its condensed consolidated balance sheets. American’s share of equity method investees’ financial results and changes in fair value are recorded in nonoperating other income (expense), net on the condensed consolidated statements of operations.

American’s equity investment ownership interests and carrying values are as follows:

(1)In the third quarter of 2026, American determined that the decline in the fair value of its equity method investment in Republic Holdings was other-than-temporary. Accordingly, American recorded a $78 million nonoperating special charge for the impairment of its equity investment in Republic Holdings and reduced the carrying value to the estimated fair value using quoted market prices.

(2)Primarily includes American’s investment in JetSMART Holdings Limited, which is accounted for under the equity method.

8. Employee Benefit Plans

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

Effective November 1, 2012, substantially all of American’s defined benefit pension plans were frozen.

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

During the first nine months of 2026, American made required contributions of $236 million and supplemental contributions of $50 million to its defined benefit pension plans.

9. Accumulated Other Comprehensive Loss

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

(1)Relates principally to pension, retiree medical and other postretirement benefits obligations that will not be recognized in net loss until the obligations are fully extinguished. Amounts reclassified from AOCI are recognized within the income tax benefit on the condensed consolidated statements of operations.

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

10. Regional Expenses

American’s regional carriers provide scheduled air transportation under the brand name “American Eagle.” The American Eagle carriers include AAG’s wholly-owned regional carriers as well as third-party regional carriers. American’s regional carrier arrangements are principally in the form of capacity purchase agreements. Expenses, excluding fuel expense, associated with American Eagle operations are classified as regional expenses on the condensed consolidated statements of operations.

Regional expenses for the three months ended September 30, 2026 and 2025 include $78 million and $75 million of depreciation and amortization, respectively, and $2 million of aircraft rent in each period. Regional expenses for the nine months ended September 30, 2026 and 2025 include $232 million and $216 million of depreciation and amortization, respectively, and $6 million and $7 million of aircraft rent, respectively.

During the three months ended September 30, 2026 and 2025, American recognized $184 million and $177 million, respectively, of expense under its capacity purchase agreement with Republic Airways Inc. (Republic). During the nine months ended September 30, 2026 and 2025, American recognized $548 million and $519 million, respectively, of expense under its capacity purchase agreement with Republic. American holds a 20.8% equity interest in Republic Holdings, the parent company of Republic.

11. Transactions with Related Parties

The following represents the net receivables (payables) from or to related parties (in millions):

(1)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.

12. Legal Proceedings

Private Party Antitrust Actions Related to the Northeast Alliance (NEA). On December 5, 2022 and December 7, 2022, two private party plaintiffs filed putative class action antitrust complaints against AAG and JetBlue Airways Corporation (JetBlue) in the U.S. District Court for the Eastern District of New York alleging that AAG and JetBlue violated U.S. antitrust law in connection with the previously disclosed NEA. These actions were consolidated on January 10, 2023. The private party plaintiffs filed an amended consolidated complaint on February 3, 2023. On February 2, 2023 and February 15, 2023, private party plaintiffs filedtwo additional putative class action antitrust complaints against AAG and JetBlue in the U.S. District Court for the District of Massachusetts and the U.S. District Court for the Eastern District of New York, respectively. In March 2023, AAG filed a motion in the U.S. District Court for the District of Massachusetts case asking to transfer the case to the U.S. District Court for the Eastern District of New York and consolidate it with the cases pending in that venue. The U.S. District Court for the District of Massachusetts granted that motion. The remaining cases were consolidated with the other actions in the Eastern District of New York. In June 2023, the private party plaintiffs filed a second amended consolidated complaint, followed by a third amended complaint filed in August 2023. In September 2023, AAG, together with JetBlue, filed a motion to dismiss the third amended complaint. In September 2024, the court denied that motion. AAG and JetBlue filed answers to the private party plaintiffs’ third amended complaint in October 2024. In July 2026, the remaining private party plaintiff filed a motion for class certification limited to purchasers of American and JetBlue flights to or from Boston from April 1, 2021 through July 28, 2023. In October 2026, AAG, together with JetBlue, filed an opposition to that motion. AAG believes these lawsuits are without merit and is defending against them vigorously.

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.