Management Discussion
Management Discussion
Table of Contents
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Part I, Item 2 of this report should be read in conjunction with Part II, Item 7 of AAG's and American's Annual Report on Form 10-K for the year ended December 31, 2024 (the 2024 Form 10-K). The information contained herein is not a comprehensive discussion and analysis of the financial condition and results of operations of AAG and American, but rather updates disclosures made in the 2024 Form 10-K.
Financial Overview
Business and Macroeconomic Conditions
The Trump Administration is in the process of expanding the scope of tariffs and significantly increasing the rates on goods imported into the U.S. In response, foreign governments have imposed, and are expected to impose, retaliatory measures against the U.S.
These or additional changes in U.S. or international trade policies, along with continued uncertainty surrounding such policies, could lead to further weakened business conditions for the transportation industry, which may adversely impact our operations through increased supply chain challenges, commodity price volatility and a decline in discretionary spending and consumer confidence, among others. We continue to monitor the situation.
AAG's First Quarter 2025 Results
The selected financial data presented below is derived from AAG's unaudited condensed consolidated financial statements included in Part I, Item 1A of this report and should be read in conjunction with those financial statements and the related notes thereto.
Three Months Ended March 31,Increase(Decrease)Percent
Increase (Decrease)
20252024
(In millions, except percentage changes)
Passenger revenue$11,391 $11,458 $(67)(0.6)
Cargo revenue189 187 2 1.1
Other operating revenue971 925 46 5.0
Total operating revenues12,551 12,570 (19)(0.2)
Aircraft fuel and related taxes2,587 2,980 (393)(13.2)
Salaries, wages and benefits4,222 3,867 355 9.2
Total operating expenses12,821 12,563 258 2.1
Operating income (loss)(270)7 (277)nm(2)
Pre-tax loss(648)(413)235 56.9
Income tax benefit(175)(101)74 73.2
Net loss(473)(312)161 51.6
Pre-tax loss - GAAP$(648)$(413)$235 56.9
Adjusted for: pre-tax net special items (1)
118 116 2 2.5
Pre-tax loss excluding net special items$(530)$(297)$233 78.1
(1)See "Reconciliation of GAAP to Non-GAAP Financial Measures" below and Note 2 to AAG's Condensed Consolidated Financial Statements in Part I, Item 1A for details on the components of net special items.
(2)Not meaningful or greater than 100% change.
Pre-Tax Loss and Net Loss
Pre-tax loss and net loss were $648 million and $473 million, respectively, in the first quarter of 2025. This compares to first quarter of 2024 pre-tax loss and net loss of $413 million and $312 million, respectively. Excluding the effects of pre-tax net special items, pre-tax loss was $530 million and $297 million in the first quarters of 2025 and 2024, respectively.
The period-over-period increase in pre-tax loss on both a GAAP basis and excluding pre-tax net special items was principally driven by increases in operating expenses including salaries, wages and benefits, regional expenses and certain other operating expenses, offset in part by lower costs for aircraft fuel and related taxes.
Revenue
In the first quarter of 2025, we reported total operating revenues of $12.6 billion and passenger revenue of $11.4 billion, both of which slightly decreased as compared to the first quarter of 2024. Our passenger revenue in the first quarter of 2025 was impacted by softness in demand for domestic leisure air travel driven by economic uncertainty and the American Eagle Flight 5342 accident, offset by strong performance in international air travel, particularly in the Atlantic and Pacific regions. Atlantic and Pacific passenger revenue per available seat mile (PRASM) increased 10.5% and 4.9%, respectively, in the first quarter of 2025 as compared to the first quarter of 2024.
Other operating revenue increased $46 million, or 5.0%, in the first quarter of 2025 from the first quarter of 2024, driven primarily by higher revenue associated with our loyalty program. During the three months ended March 31, 2025 and 2024, cash payments from co-branded credit card and other partners were $1.8 billion and $1.7 billion, respectively.
Our total revenue per available seat mile (TRASM) was 17.95 cents in the first quarter of 2025, a 0.7% increase as compared to 17.83 cents in the first quarter of 2024.
Fuel
Aircraft fuel and related taxes was $2.6 billion in the first quarter of 2025, which was $393 million, or 13.2%, lower as compared to the first quarter of 2024. This was primarily due to a 13.3% decrease in the average price per gallon of aircraft fuel including related taxes to $2.48 in the first quarter of 2025 from $2.86 in the first quarter of 2024.
As of March 31, 2025, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption. Our current policy is not to enter into transactions to hedge our fuel consumption, although we review this policy from time to time based on market conditions and other factors. 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. 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 consumer demand, our operating results and liquidity" in our 2024 Form 10-K.
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: general economic conditions and the price of fuel. We continue to focus on initiatives to reengineer our business through the use of digital solutions, process enhancements and procurement transformation and we intend to continue to invest in reengineering our business through the remainder of 2025 and beyond to build an even more efficient airline and continue to manage costs while delivering a better experience for our customers and team.
Our 2025 first quarter total operating cost per available seat mile (CASM) was 18.34 cents, an increase of 2.9% from 17.82 cents in the first quarter of 2024. The increase in CASM was primarily driven by higher costs for salaries, wages and benefits, regional expenses and certain other operating expenses, offset in part by lower aircraft fuel costs.
Our 2025 first quarter CASM excluding net special items and fuel was 14.54 cents, an increase of 7.8% from 13.49 cents in the first quarter of 2024, which was primarily driven by higher costs for salaries, wages and benefits, regional expenses and certain other operating expenses.
For a reconciliation of CASM to CASM excluding net special items and fuel, see "Reconciliation of GAAP to Non-GAAP Financial Measures" below.
Liquidity
As of March 31, 2025, we had $10.8 billion in total available liquidity, consisting of $7.5 billion in unrestricted cash and short-term investments, and $3.3 billion in total undrawn capacity under revolving credit and other facilities.
During the first three months of 2025, we completed the following financing transactions (see Note 5 to AAG's Condensed Consolidated Financial Statements in Part I, Item 1A for further information on 2025 financing activities):
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•amended the AAdvantage term loan credit and guaranty agreement to reduce the applicable interest rate margin and reduce the scheduled quarterly principal amortization amount;
•provided notice to the holders of our 6.50% convertible notes due 2025 (the Convertible Notes) that we will settle our Convertible Notes at their upcoming maturity in cash (including any conversions up to a price per share of AAG common stock of approximately $22.00);
•prepaid $308 million toward portions of the outstanding principal amounts of the 10.75% senior secured IP notes (the IP Notes) and the 10.75% senior secured LGA/DCA notes (LGA/DCA Notes);
•prepaid $144 million of the outstanding principal amount of equipment notes issued under an enhanced equipment trust certificate (EETC); and
•issued $368 million of equipment loans and other notes payable in connection with the financing of certain aircraft.
American Eagle Flight 5342
On January 29, 2025, American Eagle flight 5342 was involved in a fatal accident in Washington, D.C. The Bombardier CRJ 700 aircraft operated by PSA was en route to Washington, D.C. from Wichita, Kansas when it was involved in a midair collision near Ronald Reagan Washington National Airport. We estimate that the accident reduced total operating revenues by approximately $200 million in the first quarter of 2025, of which the impacted revenue is not covered by insurance. American has industry standard insurance coverage for this incident and is continuing to assess the full impact on its business resulting from the accident.
Reconciliation of GAAP to Non-GAAP Financial Measures
We sometimes use financial measures that are derived from the condensed consolidated financial statements but that are not presented in accordance with accounting principles generally accepted in the U.S. (GAAP) to understand and evaluate our current operating performance and to allow for period-to-period comparisons. We believe these non-GAAP financial measures may also provide useful information to investors and others. These non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies, and should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. We are providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.
The following table presents the reconciliation of pre-tax loss (GAAP measure) to pre-tax loss excluding net special items (non-GAAP measure). Management uses this non-GAAP financial measure to evaluate our current operating performance and to allow for period-to-period comparisons. As net special items may vary from period-to-period in nature and amount, the adjustment to exclude net special items allows management an additional tool to understand our core operating performance.
Three Months Ended March 31,
20252024
(In millions)
Reconciliation of Pre-Tax Loss Excluding Net Special Items:
Pre-tax loss - GAAP$(648)$(413)
Pre-tax net special items (1):
Mainline operating special items, net70 70
Nonoperating special items, net48 46
Total pre-tax net special items118 116
Pre-tax loss excluding net special items$(530)$(297)
(1)See Note 2 to AAG's Condensed Consolidated Financial Statements in Part I, Item 1A for further information on net special items.
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Additionally, the table below presents the reconciliation of total operating costs (GAAP measure) to total operating costs excluding net special items and fuel (non-GAAP measure) and CASM to CASM excluding net special items and fuel. Management uses total operating costs excluding net special items and fuel and CASM excluding net special items and fuel to evaluate our current operating performance and for period-to-period comparisons. The price of fuel, over which we have no control, impacts the comparability of period-to-period financial performance. The adjustment to exclude net special items and fuel allows management an additional tool to understand and analyze our non-fuel costs and core operating performance. Amounts may not recalculate due to rounding.
Three Months Ended March 31,
20252024
Reconciliation of CASM Excluding Net Special Items and Fuel:
(In millions)
Total operating expenses - GAAP$12,821 $12,563
Operating net special items (1):
Mainline operating special items, net
(70)(70)
Aircraft fuel and related taxes(2,587)(2,980)
Total operating expenses, excluding net special items and fuel$10,164 $9,513
Total available seat miles (ASM)69,904 70,516
(In cents)
CASM18.34 17.82
Operating net special items per ASM (1):
Mainline operating special items, net (0.10)(0.10)
Aircraft fuel and related taxes per ASM(3.70)(4.23)
CASM, excluding net special items and fuel14.54 13.49
(1)See Note 2 to AAG's Condensed Consolidated Financial Statements in Part I, Item 1A for further information on net special items.
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AAG's Results of Operations
Operating Statistics
The table below sets forth selected operating data for the three months ended March 31, 2025 and 2024. Amounts may not recalculate due to rounding.
Three Months Ended March 31,Increase(Decrease)
20252024
Revenue passenger miles (millions) (a)
56,356 57,473 (1.9)%
Available seat miles (millions) (b)
69,904 70,516 (0.9)%
Passenger load factor (percent) (c)
80.6 81.5 (0.9)pts
Yield (cents) (d)
20.21 19.94 1.4%
Passenger revenue per available seat mile (cents) (e)
16.30 16.25 0.3%
Total revenue per available seat mile (cents) (f)
17.95 17.83 0.7%
Fuel consumption (gallons in millions)
1,042 1,042 0.1%
Average aircraft fuel price including related taxes (dollars per gallon)
2.48 2.86 (13.3)%
Total operating cost per available seat mile (cents) (g)
18.34 17.82 2.9%
Aircraft at end of period (h)
1,552 1,517 2.3%
Full-time equivalent employees at end of period
133,100 132,800 0.2%
(a)Revenue passenger mile (RPM) - A basic measure of sales volume. One RPM represents one passenger flown one mile.
(b)Available seat mile (ASM) - A basic measure of production. One ASM represents one seat flown one mile.
(c)Passenger load factor - The percentage of available seats that are filled with revenue passengers.
(d)Yield - A measure of airline revenue derived by dividing passenger revenue by RPMs.
(e)Passenger revenue per available seat mile (PRASM) - Passenger revenue divided by ASMs.
(f)Total revenue per available seat mile (TRASM) - Total revenues divided by ASMs.
(g)Total operating cost per available seat mile (CASM) - Total operating expenses divided by ASMs.
(h)Includes aircraft owned and leased by American as well as aircraft operated by third-party regional carriers under capacity purchase agreements. Excluded from the aircraft count above are six regional aircraft in temporary storage as of March 31, 2025 as follows: four Bombardier CRJ 900 and two Embraer 145.
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Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
Operating Revenues
Three Months Ended March 31,Increase (Decrease)Percent
Increase (Decrease)
20252024
(In millions, except percentage changes)
Passenger$11,391 $11,458 $(67)(0.6)
Cargo189 187 2 1.1
Other971 925 46 5.0
Total operating revenues$12,551 $12,570 $(19)(0.2)
This table presents our passenger revenue and the period-over-period change in certain operating statistics:
Increase (Decrease)
vs. Three Months Ended March 31, 2024
Three Months EndedMarch 31, 2025RPMsASMsLoad
Factor
Passenger
Yield
PRASM
(In millions)
Passenger revenue$11,391 (1.9)%(0.9)%(0.9)pts1.4%0.3%
Passenger revenue slightly decreased in the first quarter of 2025 from the first quarter of 2024. Our passenger revenue in the first quarter of 2025 was impacted by softness in demand for domestic leisure air travel driven by economic uncertainty and the American Eagle Flight 5342 accident, offset by strong performance in international air travel, particularly in the Atlantic and Pacific regions. Atlantic and Pacific PRASM increased 10.5% and 4.9%, respectively, in the first quarter of 2025 as compared to the first quarter of 2024.
Other operating revenue increased $46 million, or 5.0%, in the first quarter of 2025 from the first quarter of 2024, driven primarily by higher revenue associated with our loyalty program. During the three months ended March 31, 2025 and 2024, cash payments from co-branded credit card and other partners were $1.8 billion and $1.7 billion, respectively.
Operating Expenses
Three Months Ended March 31,Increase(Decrease)PercentIncrease(Decrease)
20252024
(In millions, except percentage changes)
Aircraft fuel and related taxes$2,587 $2,980 $(393)(13.2)
Salaries, wages and benefits4,222 3,867 355 9.2
Regional expenses1,351 1,201 150 12.5
Maintenance, materials and repairs922 884 38 4.2
Other rent and landing fees826 819 7 0.9
Aircraft rent297 328 (31)(9.4)
Selling expenses450 408 42 10.1
Depreciation and amortization468 470 (2)(0.4)
Mainline operating special items, net70 70 - 0.6
Other1,628 1,536 92 6.0
Total operating expenses$12,821 $12,563 $258 2.1
Aircraft fuel and related taxes decreased $393 million, or 13.2%, in the first quarter of 2025 from the first quarter of 2024, primarily due to a 13.3% decrease in the average price per gallon of aircraft fuel including related taxes to $2.48 in the first quarter of 2025 from $2.86 in the first quarter of 2024.
Salaries, wages and benefits increased $355 million, or 9.2%, in the first quarter of 2025 from the first quarter of 2024, primarily due to contractual wage rate increases and higher costs for benefit-related items associated with newly ratified and extended labor agreements reached in 2024, as well as annual contractual wage rate increases in our other labor agreements.
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Regional expenses increased $150 million, or 12.5%, in the first quarter of 2025 from the first quarter of 2024, primarily due to an increase in regional flight operations as regional capacity, as measured by ASMs, increased 15.1% in the first quarter of 2025 from the first quarter of 2024. In addition, higher maintenance, materials and repair costs driven by an increase in the volume of engine overhauls and airframe heavy checks also contributed to the increase in regional expenses.
Aircraft rent decreased $31 million, or 9.4%, in the first quarter of 2025 from the first quarter of 2024, primarily due to decreased rental payments associated with aircraft lease extensions.
Selling expenses increased $42 million, or 10.1%, in the first quarter of 2025 from the first quarter of 2024, primarily due to an increase in commissions expense, driven by higher costs resulting from renegotiated agency contracts, as well as an increase in advertising expense.
Operating Special Items, Net
Three Months Ended March 31,
20252024
(In millions)
Labor contract expenses (1)
$31 $57
Litigation reserve adjustments30 -
Severance expenses4 13
Other operating special items, net5 -
Mainline operating special items, net$70 $70
(1)Labor contract expenses for the three months ended March 31, 2025 included a one-time charge for adjustments to vacation accruals resulting from pay rate increases effective January 1, 2025, related to the ratification of the contract extension in the fourth quarter of 2024 with our mainline maintenance and fleet service team members.
Labor contract expenses for the three months ended March 31, 2024 included one-time charges resulting from the ratification of a new collective bargaining agreement with our mainline passenger service team members, including a one-time signing bonus.
Nonoperating Results
Three Months Ended March 31,Increase (Decrease)Percent Increase (Decrease)
20252024
(In millions, except percentage changes)
Interest income$94 $118 $(24)(20.2)
Interest expense, net(428)(497)69 (13.8)
Other expense, net(44)(41)(3)7.7
Total nonoperating expense, net$(378)$(420)$42 (10.0)
Interest income decreased $24 million, or 20.2%, in the first quarter of 2025 from the first quarter of 2024, primarily due to lower interest rates as well as a decrease in the balance of short-term investments subsequent to the first quarter of 2024. Interest expense, net decreased $69 million, or 13.8%, in the first quarter of 2025 from the first quarter of 2024, primarily due to lower outstanding debt subsequent to the first quarter of 2024, as we continue our efforts to strengthen the balance sheet, and lower interest rates on our variable-rate debt instruments.
In the first quarter of 2025, other nonoperating expense, net primarily included $48 million of net special charges for mark-to-market net unrealized losses associated with certain equity investments and debt refinancings and extinguishments, as well as $11 million of foreign currency losses, offset in part by $11 million of non-service related pension and other postretirement benefit plan income.
In the first quarter of 2024, other nonoperating expense, net primarily included a $46 million special charge for mark-to-market net unrealized losses associated with certain equity investments and $7 million of foreign currency losses, offset in part by $24 million of non-service related pension and other postretirement benefit plan income.
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Income Taxes
In the first quarter of 2025, we recorded an income tax benefit of $175 million. Substantially all of our loss before income taxes is attributable to the United States.
See Note 6 to AAG's Condensed Consolidated Financial Statements in Part I, Item 1A for additional information on income taxes.
American's Results of Operations
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
Operating Revenues
Three Months Ended March 31,Increase (Decrease)PercentIncrease (Decrease)
20252024
(In millions, except percentage changes)
Passenger$11,391 $11,458 $(67)(0.6)
Cargo189 187 2 1.1
Other969 924 45 4.9
Total operating revenues$12,549 $12,569 $(20)(0.2)
Passenger revenue slightly decreased in the first quarter of 2025 from the first quarter of 2024. American's passenger revenue in the first quarter of 2025 was impacted by softness in demand for domestic leisure air travel driven by economic uncertainty and the American Eagle Flight 5342 accident, offset by strong performance in international air travel, particularly in the Atlantic and Pacific regions.
Other operating revenue increased $45 million, or 4.9%, in the first quarter of 2025 from the first quarter of 2024, driven primarily by higher revenue associated with American's loyalty program. During the three months ended March 31, 2025 and 2024, cash payments from co-branded credit card and other partners were $1.8 billion and $1.7 billion, respectively.
Operating Expenses
Three Months Ended March 31,Increase(Decrease)PercentIncrease(Decrease)
20252024
(In millions, except percentage changes)
Aircraft fuel and related taxes$2,587 $2,980 $(393)(13.2)
Salaries, wages and benefits4,220 3,865 355 9.2
Regional expenses1,349 1,197 152 12.7
Maintenance, materials and repairs922 884 38 4.2
Other rent and landing fees826 819 7 0.9
Aircraft rent297 328 (31)(9.4)
Selling expenses450 408 42 10.1
Depreciation and amortization467 468 (1)(0.2)
Mainline operating special items, net70 70 - 0.6
Other1,629 1,537 92 6.0
Total operating expenses$12,817 $12,556 $261 2.1
Aircraft fuel and related taxes decreased $393 million, or 13.2%, in the first quarter of 2025 from the first quarter of 2024, primarily due to a 13.3% decrease in the average price per gallon of aircraft fuel including related taxes to $2.48 in the first quarter of 2025 from $2.86 in the first quarter of 2024.
Salaries, wages and benefits increased $355 million, or 9.2%, in the first quarter of 2025 from the first quarter of 2024, primarily due to contractual wage rate increases and higher costs for benefit-related items associated with newly ratified and extended labor agreements reached in 2024, as well as annual contractual wage rate increases in American's other labor agreements.
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Regional expenses increased $152 million, or 12.7%, in the first quarter of 2025 from the first quarter of 2024, primarily due to an increase in regional flight operations and costs at American's regional carriers.
Aircraft rent decreased $31 million, or 9.4%, in the first quarter of 2025 from the first quarter of 2024, primarily due to decreased rental payments associated with aircraft lease extensions.
Selling expenses increased $42 million, or 10.1%, in the first quarter of 2025 from the first quarter of 2024, primarily due to an increase in commissions expense, driven by higher costs resulting from renegotiated agency contracts, as well as an increase in advertising expense.
Operating Special Items, Net
Three Months Ended March 31,
20252024
(In millions)
Labor contract expenses (1)
$31 $57
Litigation reserve adjustments30 -
Severance expenses4 13
Other operating special items, net 5 -
Mainline operating special items, net$70 $70
(1)Labor contract expenses for the three months ended March 31, 2025 included a one-time charge for adjustments to vacation accruals resulting from pay rate increases effective January 1, 2025, related to the ratification of the contract extension in the fourth quarter of 2024 with American's mainline maintenance and fleet service team members.
Labor contract expenses for the three months ended March 31, 2024 included one-time charges resulting from the ratification of a new collective bargaining agreement with American's mainline passenger service team members, including a one-time signing bonus.
Nonoperating Results
Three Months Ended March 31,Increase (Decrease)Percent Increase (Decrease)
20252024
(In millions, except percentage changes)
Interest income$236 $262 $(26)(9.7)
Interest expense, net(452)(520)68 (13.0)
Other expense, net(44)(41)(3)7.1
Total nonoperating expense, net$(260)$(299)$39 (13.1)
Interest income decreased $26 million, or 9.7%, in the first quarter of 2025 from the first quarter of 2024, primarily due to lower interest rates as well as a decrease in the balance of short-term investments subsequent to the first quarter of 2024. Interest expense, net decreased $68 million, or 13.0%, in the first quarter of 2025 from the first quarter of 2024, primarily due to lower outstanding debt subsequent to the first quarter of 2024, as American continues its efforts to strengthen the balance sheet, and lower interest rates on its variable-rate debt instruments.
In the first quarter of 2025, other nonoperating expense, net primarily included $48 million of net special charges for mark-to-market net unrealized losses associated with certain equity investments and debt refinancings and extinguishments, as well as $11 million of foreign currency losses, offset in part by $11 million of non-service related pension and other postretirement benefit plan income.
In the first quarter of 2024, other nonoperating expense, net primarily included a $46 million special charge for mark-to-market net unrealized losses associated with certain equity investments and $7 million of foreign currency losses, offset in part by $24 million of non-service related pension and other postretirement benefit plan income.
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Income Taxes
American is a member of AAG's consolidated federal and certain state income tax returns.
In the first quarter of 2025, American recorded an income tax benefit of $144 million. Substantially all of American's loss before income taxes is attributable to the United States.
See Note 5 to American's Condensed Consolidated Financial Statements in Part I, Item 1B for additional information on income taxes.
Liquidity and Capital Resources
Liquidity
At March 31, 2025, AAG had $10.8 billion in total available liquidity and $647 million in restricted cash and short-term investments. Additional detail regarding our available liquidity is provided in the table below (in millions):
AAGAmerican
March 31, 2025December 31, 2024March 31, 2025December 31, 2024
Cash$835 $804 $829 $795
Short-term investments6,631 6,180 6,629 6,177
Undrawn facilities3,290 3,289 3,290 3,289
Total available liquidity$10,756 $10,273 $10,748 $10,261
In the ordinary course of our business, we or our affiliates may, at any time and from time to time, seek to prepay, retire or repurchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, prepayments, retirements or exchanges, if any, will be conducted on such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, legal and contractual restrictions and other factors. The amounts involved may be material.
Certain Covenants
Our debt agreements contain customary terms and conditions as well as various affirmative, negative and financial covenants that, among other things, may restrict our ability and that of our subsidiaries to incur additional indebtedness, pay dividends or repurchase stock. Our debt agreements also contain customary change of control provisions, which may require us to repay or redeem such indebtedness upon certain events constituting a change of control under the relevant agreement, in certain cases at a premium. Additionally, certain of our debt financing agreements (including our secured notes, term loans, revolving credit facilities and spare engine EETCs) contain loan to value (LTV) or collateral coverage ratio covenants and certain agreements require us to appraise the related collateral annually or semiannually. Pursuant to such agreements, if the applicable LTV or collateral coverage ratio exceeds or falls below a specified threshold, as the case may be, we will be required, as applicable, to pledge additional qualifying collateral (which in some cases may include cash or investment securities), withhold additional cash in certain accounts, or pay down such financing, in whole or in part, or the interest rate for the relevant financing will be increased. Additionally, a significant portion of our debt financing agreements 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, and our 5.50% senior secured notes due 2026, 5.75% senior secured notes due 2029 and AAdvantage Term Loan Facility (collectively, the AAdvantage Financing) contain a peak debt service coverage ratio, pursuant to which failure to comply with a certain threshold may result in early repayment, in whole or in part, of the AAdvantage Financing. As of the most recent applicable measurement dates, we were in compliance with each of the foregoing covenants.
Sources and Uses of Cash
AAG
Operating Activities
Our net cash provided by operating activities was $2.5 billion and $2.2 billion for the first quarter of 2025 and 2024, respectively, a $276 million period-over-period increase driven by net working capital changes, offset in part by lower profitability in the first quarter of 2025.
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Investing Activities
Our net cash used in investing activities was $1.2 billion and $1.5 billion for the first quarter of 2025 and 2024, respectively.
Our principal investing activities in the first quarter of 2025 included $824 million of capital expenditures, which primarily related to the purchase of seven Boeing 737 MAX aircraft, two Embraer 175 aircraft, two Bombardier CRJ 900 aircraft, one Airbus A321neo aircraft and four aircraft engines. Additionally, we had $457 million in net purchases of short-term investments.
Our principal investing activities in the first quarter of 2024 included $824 million of capital expenditures, which primarily related to the purchase of six Embraer 175 aircraft, two Airbus A321neo aircraft, four spare engines and aircraft purchase deposits. Additionally, we had $702 million in net purchases of short-term investments.
Financing Activities
Our net cash used in financing activities was $1.2 billion and $642 million for the first quarter of 2025 and 2024, respectively.
Our principal financing activities in the first quarter of 2025 primarily included $1.4 billion in debt and finance lease repayments, consisting of $910 million in scheduled repayments, $308 million of early repayments toward portions of the outstanding principal amounts of the IP Notes and LGA/DCA Notes and $144 million of early repayments for the outstanding principal amount of equipment notes issued under an EETC. These cash outflows were offset in part by $325 million of proceeds from the issuance of long-term debt, primarily from the issuance of equipment loans and other notes payable in connection with the financing of certain aircraft.
Our principal financing activities in the first quarter of 2024 included $873 million in scheduled repayments of debt and finance lease obligations. These cash outflows were offset in part by $248 million borrowed in connection with the financing of certain aircraft.
American
Operating Activities
American's net cash provided by operating activities was $2.3 billion and $2.2 billion for the first quarter of 2025 and 2024, respectively, a $193 million period-over-period increase driven by net working capital changes, offset in part by lower profitability in the first quarter of 2025.
Investing Activities
American's net cash used in investing activities was $1.2 billion and $1.5 billion for the first quarter of 2025 and 2024, respectively.
American's principal investing activities in the first quarter of 2025 included $805 million of capital expenditures, which primarily related to the purchase of seven Boeing 737 MAX aircraft, two Embraer 175 aircraft, two Bombardier CRJ 900 aircraft, one Airbus A321neo aircraft and four aircraft engines. Additionally, American had $457 million in net purchases of short-term investments.
American's principal investing activities in the first quarter of 2024 included $815 million of capital expenditures, which primarily related to the purchase of six Embraer 175 aircraft, two Airbus A321neo aircraft, four spare engines and aircraft purchase deposits. Additionally, American had $700 million in net purchases of short-term investments.
Financing Activities
American's net cash used in financing activities was $1.1 billion and $629 million for the first quarter of 2025 and 2024, respectively.
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American's principal financing activities in the first quarter of 2025 primarily included $1.4 billion in debt and finance lease repayments, consisting of $909 million in scheduled repayments, $308 million of early repayments toward portions of the outstanding principal amounts of the IP Notes and LGA/DCA Notes and $144 million of early repayments for the outstanding principal amount of equipment notes issued under an EETC. These cash outflows were offset in part by $325 million of proceeds from the issuance of long-term debt, primarily from the issuance of equipment loans and other notes payable in connection with the financing of certain aircraft.
American's principal financing activities in the first quarter of 2024 included $870 million in scheduled repayments of debt and finance lease obligations. These cash outflows were offset in part by $248 million borrowed in connection with the financing of certain aircraft.
Commitments
Significant Indebtedness
As of March 31, 2025, AAG had $29.2 billion in long-term debt, including current maturities of $4.6 billion. As of March 31, 2025, American had $24.4 billion in long-term debt, including current maturities of $3.6 billion. All material changes in our significant indebtedness since our 2024 Form 10-K are discussed in Note 5 to AAG's Condensed Consolidated Financial Statements in Part I, Item 1A and Note 4 to American's Condensed Consolidated Financial Statements in Part I, Item 1B.
Aircraft and Engine Purchase Commitments
As of March 31, 2025, we had definitive purchase agreements for the acquisition of the following new aircraft (1):
Remainderof 2025202620272028 and ThereafterTotal
Airbus
A320neo Family5 22 43 78 148
Boeing
737 MAX Family10 20 - 115 145
787 Family8 4 3 15 30
Embraer
1759 21 15 45 90
Total32 67 61 253 413
(1)Delivery schedule represents our best estimate as of the date of this report as described in footnote (d) to the "Contractual Obligations" table below. Actual delivery dates are subject to change, which could be material, based on various potential factors including production delays by the manufacturer and regulatory concerns. See Part I, Item 1A. Risk Factors - "We depend on a limited number of suppliers for aircraft, aircraft engines and parts. Delays in scheduled aircraft deliveries, unexpected grounding of aircraft or aircraft engines whether by regulators or by us, or other loss of anticipated fleet capacity, and failure of new aircraft to receive regulatory approval, be produced or otherwise perform as and when expected, adversely impacts our business, results of operations and financial condition" in our 2024 Form 10-K.
In addition, we have committed to purchase 10 used Bombardier CRJ 900 aircraft which are scheduled to be delivered from the second quarter of 2025 through 2026. We also have agreements for 47 spare engines to be delivered in the second quarter of 2025 and beyond. The "Contractual Obligations" table below reflects these commitments.
We intend to finance future aircraft deliveries and option exercises using long-term debt.
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.
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There have been no material changes in our off-balance sheet arrangements as discussed in our 2024 Form 10-K.
Contractual Obligations
The following table provides details of our estimated material cash requirements from contractual obligations as of March 31, 2025 (in millions). The table does not include commitments that are contingent on events or other factors that are uncertain or unknown at this time and is subject to other conventions as set forth in the applicable accompanying footnotes.
Payments Due by Period
Remainderof 202520262027202820292030 and ThereafterTotal
American
Long-term debt:
Principal amount (a), (c)
$2,401 $3,548 $4,330 $7,198 $3,917 $3,045 $24,439
Interest obligations (b), (c)
978 1,140 895 596 279 468 4,356
Finance lease obligations99 123 115 80 75 261 753
Aircraft and engine purchase commitments (d)
1,543 3,569 3,895 4,075 3,342 9,028 25,452
Operating lease commitments1,208 1,519 1,370 1,243 1,140 3,545 10,025
Regional capacity purchase agreements (e)
808 1,063 1,060 986 819 829 5,565
Minimum pension obligations (f)
- 251 157 107 81 46 642
Retiree medical and other postretirement benefits (f)
101 138 135 131 128 615 1,248
Other purchase obligations (g)
3,424 2,437 1,492 649 503 3,416 11,921
Total American Contractual Obligations10,562 13,788 13,449 15,065 10,284 21,253 84,401
AAG Parent and Other AAG Subsidiaries
Long-term debt:
Principal amount (a)
1,000 - - - - 3,746 4,746
Interest obligations (b)
92 171 202 205 209 218 1,097
Finance lease obligations5 - - - - - 5
Operating lease commitments11 13 8 7 6 40 85
Minimum pension obligations (f)
2 2 1 1 1 2 9
Other purchase obligations6 14 12 5 2 - 39
Total AAG Contractual Obligations$11,678 $13,988 $13,672 $15,283 $10,502 $25,259 $90,382
(a)Amounts represent contractual amounts due. Excludes $324 million and $4 million of unamortized debt discount, premium and issuance costs as of March 31, 2025 for American and AAG Parent, respectively. For additional information, see Note 5 and Note 4 to AAG's and American's Condensed Consolidated Financial Statements in Part I, Items 1A and 1B, respectively.
(b)For variable-rate debt, future interest obligations are estimated using the current forward rates at March 31, 2025.
(c)Includes $6.9 billion of future principal payments and $802 million of future interest payments as of March 31, 2025, related to EETCs associated with mortgage financings of certain aircraft and spare engines.
(d)See "Aircraft and Engine Purchase Commitments" above for additional information about the firm commitments for the acquisition of aircraft and engines, including the anticipated aircraft delivery schedule. Due to uncertainty surrounding the timing of delivery of certain aircraft, the amounts in the table represent our most current estimate based on contractual delivery schedules adjusted for updates and revisions to such schedules communicated to management by the applicable equipment manufacturer and certain management assumptions. However, the actual delivery schedule may differ, potentially materially, based on various potential factors including production delays by the manufacturer and regulatory concerns. Additionally, the amounts in the table exclude five Boeing 787 Family aircraft
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scheduled to be delivered in 2025, for which we have obtained committed lease financing. This financing is reflected in the operating lease commitments line above.
(e)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. Rental payments under operating leases for certain aircraft flown under these capacity purchase agreements are reflected in the operating lease commitments line above.
(f)Represents minimum pension contributions and expected contributions to our retiree medical and other postretirement plans based on actuarially determined estimates as of December 31, 2024 and is based on estimated payments through 2034. During the first three months of 2025, we made required contributions of $222 million to our defined benefit pension plans.
(g)Includes purchase commitments for aircraft fuel, flight equipment maintenance and information technology support and excludes obligations under certain fuel offtake agreements or other agreements for which the timing of the related expenditure is uncertain, or which are subject to material contingencies, such as the construction of a production facility.
Capital Raising Activity and Other Possible Actions
In light of our significant financial commitments related to, among other things, the servicing and amortization of existing debt and equipment leasing arrangements and new flight equipment, we and our subsidiaries will regularly consider, and enter into negotiations related to, capital raising and liability management activity, which may include the entry into leasing transactions and future issuances of, and transactions designed to manage the timing and amount of, secured or unsecured debt obligations or additional equity or equity-linked securities in public or private offerings or otherwise. The cash available from operations (if any) and these sources, however, may not be sufficient to cover our cash 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 governmental actions, military actions, terrorism, disease outbreaks, natural disasters or other causes could reduce the demand for air travel, which would reduce the amount of cash generated by operations. See Part I, Item 1A. Risk Factors - "Downturns in economic conditions could adversely affect our business" in our 2024 Form 10-K for additional discussion. 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, due to an increase in the cost of fuel, maintenance, aircraft, aircraft engines or parts, or due to an increase in tariffs, could decrease the amount of cash available to cover cash contractual obligations. Moreover, certain of our financing arrangements contain significant minimum cash balance or similar liquidity requirements. As a result, we cannot use all of our available cash to fund operations, capital expenditures and cash obligations without violating these requirements.
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, lease and other 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, and the amounts involved may be material.
Critical Accounting Policies and Estimates
For information regarding our critical accounting policies and estimates, see Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - "Critical Accounting Policies and Estimates" in our 2024 Form 10-K.