Emergence From Chapter 11

12 Months Ended

Dec. 31, 2013

Overview

On November 29, 2011 (the Petition Date), AMR Corporation (AMR) (renamed American Airlines Group Inc., AAG upon closing of the Merger, AAG and, together with its consolidated subsidiaries, the Company), its principal subsidiary, American Airlines, Inc. (American), and certain of the Company's other direct and indirect domestic subsidiaries (collectively, the Debtors), filed voluntary petitions for relief (the Chapter 11 Cases) under Chapter 11 of the United States Bankruptcy Code (the 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 (the Confirmation Order) approving and confirming the Debtors' fourth amended joint plan of reorganization (as amended, the Plan).

On December 9, 2013 (the Effective Date), the Debtors consummated their reorganization pursuant to the Plan, principally through the transactions contemplated by that certain Agreement and Plan of Merger (as amended, the Merger Agreement), dated as of February 13, 2013, by and among the Company, AMR Merger Sub, Inc. (Merger Sub) and US Airways Group, Inc. (US Airways Group), pursuant to which Merger Sub merged with and into US Airways Group (the Merger), with US Airways Group surviving as a wholly-owned subsidiary of the Company following the Merger. Pursuant to the Merger Agreement, each share of common stock, par value $0.01 per share, of US Airways Group was converted into the right to receive one share of American Airlines Group common stock (AAG Common Stock), par value $0.01 per share.

From the Petition Date through the Effective Date, pursuant to automatic stay provisions under the Bankruptcy Code and orders granted by the Bankruptcy Court, all actions to enforce or otherwise effect repayment of liabilities preceding the Petition Date as well as all pending litigation against the Debtors generally were stayed. Following the Effective Date, actions to enforce or otherwise effect repayment of liabilities preceding the Petition Date generally have been permanently enjoined. Any unresolved claims will continue to be subject to the claims reconciliation process under the supervision of the U.S. Bankruptcy Court. However, certain pending litigation related to pre-petition liabilities may proceed in courts other than the U.S. Bankruptcy Court to the extent the parties to such litigation have obtained relief from the permanent injunction.

Plan of Reorganization

The Plan implements the Merger and incorporates a compromise and settlement of certain intercreditor and intercompany claim issues.

Pursuant to the Plan, all shares of AMR Corporation common stock outstanding prior to the Effective Date were canceled. The Restated Certificate of Incorporation, which was approved in connection with the Plan, authorizes the issuance of 1.75 billion new shares of AAG Common Stock, par value $0.01 per share, and 200 million shares of AAG Series A Preferred Stock, par value $0.01 per share. Of the authorized AAG Series A Preferred Stock, approximately 168 million were designated "Series A Convertible Preferred Stock", with a stated value $25.00 per share, and issued in accordance with the Plan. AAG Common Stock and AAG Series A Preferred Stock are listed on the NASDAQ Global Select Market under the symbols "AAL" and "AALCP", respectively, and began trading on December 9, 2013. In addition, pursuant to the Plan and the Merger agreement, up to 40 million shares of AAG common stock was authorized for issuance under the 2013 Incentive Award Plan (the 2013 IAP).

The Plan contains the following provisions relating to the treatment of pre-petition claims against the Debtors and other holders of allowed interests in AMR Corporation:


•	all secured claims against the Debtors have been reinstated;


•	allowed administrative claims, priority claims and convenience claims have been or will be paid in full in cash;


•	other holders of allowed pre-petition unsecured claims, holders of allowed interests and certain employees of AMR received or will receive 72% of AAG Common Stock (on a fully converted basis) authorized to be issued pursuant to the Plan and in connection with the Merger under the following provisions:

◦

all creditors holding general unsecured claims against American that are guaranteed by AAG and general unsecured claims against AAG that are guaranteed by American (Double-Dip Unsecured Claims) were treated the same under the Plan. Holders of Double-Dip Unsecured Claims received, at the Effective Date, their recovery in shares of AAG Series A Preferred Stock with a stated amount equal to the allowed amount of their claims, including post-petition interest at the non-default rate;

◦

all creditors holding Single-Dip Unsecured Claims were treated the same regardless of whether the claim was asserted against the AAG Debtors, the American Debtors, or other Debtors. As used herein, "Single-Dip Unsecured Claims" means the general unsecured claims against the Debtors that are not guaranteed by any other Debtor, other than the claims of the Debtors' labor unions representing mainline workers. Holders of Single-Dip Unsecured Claims received, at the Effective Date, a portion of their recovery in shares of AAG Series A Preferred Stock and a right, subject to the trading price of the Company's common stock during the 120 day period after the Effective Date, to receive their remaining recovery in shares of AAG Common Stock 120 days after the Effective Date;

◦

holders of certain labor-related deemed claims and certain non-management, non-union employees as specified in the Plan received, at the Effective Date, the right to receive an allocation of shares of AAG Common Stock representing 23.6% of the total number of shares of AAG Common Stock ultimately distributed to holders of pre-petition general unsecured creditors against the Debtors. On the Effective Date, pursuant to the Plan, an initial allocation of approximately 39 million shares of AAG Common Stock was made related to these labor and employee groups, of which approximately 27 million shares were distributed on the Effective Date and approximately 13 million shares of which were withheld in connection with the Company making a cash payment of approximately $300 million for certain required withholding taxes;

◦

holders of allowed interests in AMR (primarily holders of AMR common stock existing immediately prior to the Effective Date) received, at the Effective Date, a distribution of approximately 26 million shares of AAG Common Stock representing 3.5% of the total number of shares of AAG Common Stock contemplated for issuance pursuant to the Plan and, will receive additional shares of AAG Common Stock if, among other considerations, the trading price of the Company's common stock at various points during the 120 day period after the Effective Date provides for a full recovery to claimholders and other allowed priority interests; and

◦

holders of disputed claims at the Effective Date, to the extent such disputed claims become allowed Single-Dip Unsecured Claims after the Effective Date, are eligible to receive shares of AAG Common Stock held in reserve (Disputed Claims Reserve), beginning after 120 days after the Effective Date. Disputed claimholders that subsequently become Single-Dip Unsecured Claimholders will receive, subject to the availability of sufficient shares in the Disputed Claims Reserve, the number of shares of AAG Common Stock that the Disputed claimholder would have received had such claimholder been a Single-Dip Unsecured Claimholder as of the Effective Date.

The Plan contemplates the distribution of up to 756 million shares of common stock of which approximately 53 million shares were issued to the Debtors' stakeholders in connection with the Effective Date. In accordance with the Plan, the Company will issue the remaining shares of AAG Common Stock over the 120 day distribution period and as disputed claims are resolved. In addition, pursuant to the Plan approximately 197 million common shares were distributed to holders of outstanding shares of US Airways Group common stock.

Pursuant to rulings of the Bankruptcy Court, the Plan has established a disputed claim reserve to hold shares of AAG Series A Preferred Stock and AAG Common Stock reserved for issuance to disputed claimholders that ultimately become allowed Single-Dip general unsecured claimholders after emergence. The shares provided for under the Plan are determined based upon a disputed claim reserve amount of approximately $755 million, representing the maximum amount of additional allowable Single-Dip claims under the Plan's provisions. Approximately 16 million shares of AAG Series A Preferred Stock were reserved at the Effective Date for distribution to holders of disputed Single-Dip general unsecured claims whose claims ultimately become allowed. Additional new shares of AAG Common Stock will be distributed into the reserve on or about the 120th day after the Effective Date. As disputed claims are resolved, the claimants receive distributions of shares from the reserve on the same basis as if such distributions had been made on or about the Effective Date. To the extent that any of the reserved shares remain undistributed upon resolution of the remaining disputed claims, such shares will not be returned to the Company but rather will be distributed by priority first, if necessary, to satisfy unsecured claims or labor-related obligations, and then to former AMR shareholders as of the Effective Date.

We are not required to distribute additional shares above the 756 million shares contemplated by the Plan, even if the shares remaining for distribution are not sufficient to fully pay all allowed unsecured claims. However, resolution of disputed claims could have a material effect on Single-Dip creditor recoveries under the Plan and the amount of additional share distributions, if any, that are made to former AMR shareholders as the total number of shares of AAG Common Stock that remain available for distribution upon resolution of disputed claims is limited pursuant to the Plan.

In addition, as of December 31, 2013, the Company made the following cash disbursements under the Plan:


•	$385 million in cash to the Pension plans in connection with missed contributions to the pension plans during Chapter 11 and interest and penalty interest thereon;


•	$105 million to holders in partial or full satisfaction of their claims, including to holders of administrative claims, and state and local priority tax claims;


•	$196 million in cure payments to holders of secured debt; and


•	Approximately $300 million for payroll taxes associated with equity distributions to employees.

Several parties have filed appeals seeking reconsideration of the Confirmation Order. See Note 8 to AAG's Consolidated Financial Statements for more information.

As noted above, the reconciliation process with respect to the remaining claims will take considerable time post-emergence. Included in mandatorily convertible preferred stock and other bankruptcy settlement obligations on the Company's Consolidated Balance Sheet as of December 31, 2013, are the Company's estimates of the amounts of disputed claims that will ultimately become allowed Single-Dip general unsecured claims. As these claims are resolved, or where better information becomes available and is evaluated, we will make adjustments to the liabilities recorded on the Company's Consolidated Financial Statements as appropriate. Any such adjustments could be material to the Company's financial position or results of operations in any given period.

Availability and Utilization of Net Operating Losses

Upon emergence from bankruptcy, the Debtors experienced an "ownership change" as defined in Section 382 of the Internal Revenue Code which could potentially limit the ability to utilize certain tax attributes including the Debtors’ substantial NOLs. The general limitation rules for a debtor in a bankruptcy case are liberalized where the ownership change occurs upon emergence from bankruptcy. While the Debtors anticipate taking advantage of certain special rules for federal income tax purposes that would permit approximately $9.0 billion of the federal NOL Carryforwards to be utilized without regard to the annual limitation generally imposed by Section 382, there can be no assurance that these special rules will apply.

Moreover, an ownership change subsequent to the Debtors’ emergence from bankruptcy may further limit or effectively eliminate the ability to utilize the Debtors’ NOL Carryforwards and other tax attributes. To reduce the risk of a potential adverse effect on the Debtors’ ability to utilize the NOL Carryforwards, the Restated Certificate of Incorporation contains transfer restrictions applicable to certain substantial shareholders. Although the purpose of these transfer restrictions is to prevent an ownership change from occurring, there can be no assurance that an ownership change will not occur even with these transfer restrictions. A copy of the Restated Certificate of Incorporation was attached as Exhibit 3.1 to a Form 8-K filed on December 9, 2013, by the Company with the Securities and Exchange Commission.

Liabilities Subject to Compromise

Liabilities subject to compromise refers to pre-petition obligations which may be impacted by the Chapter 11 reorganization process. These amounts represent the Debtors' current estimate of known or potential pre-petition obligations to be resolved in connection with the Chapter 11 Cases.

Pursuant to the Plan, allowed pre-petition claims and estimated unresolved pre-petition claims of $5.1 billion were settled in cash, AAG Series A Preferred Stock and other bankruptcy settlement obligations on the Effective Date. The pension and postretirement benefits obligation included below was reinstated and is included in Pension and postretirement benefits in the Company's Consolidated Balance Sheets. Accordingly, there are no Liabilities Subject to Compromise at December 31, 2013.

The following table summarizes the components of liabilities subject to compromise included on the Consolidated Balance Sheet as of December 31, 2012 (in millions):



Long-term debt	$	1,198
Estimated allowed claims on aircraft lease and debt obligations and facility lease and bond obligations	3,716
Pension and postretirement benefits	1,250
Accounts payable and other accrued liabilities	442
Total liabilities subject to compromise	$	6,606

Long-term debt, including undersecured debt, classified as subject to compromise as of December 31, 2012 consisted of (in millions):



Secured variable and fixed rate indebtedness due through 2023 (effective rates from 1.00% - 13.00% at December 31, 2012)	$	172
6.00%—8.50% special facility revenue bonds due through 2036	186
6.25% senior convertible notes due 2014	460
9.0%—10.20% debentures due through 2021	214
7.88%—10.55% notes due through 2039	166
	$	1,198

Reorganization Items, Net

Reorganization items refer to revenues, expenses (including professional fees), realized gains and losses and provisions for losses that are realized or incurred in the Chapter 11 Cases. The following table summarizes the components included in reorganization items, net on the Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011 (in millions):



	2013		2012			2011
Pension and postretirement benefits	$	—	$	(66	)	$	—
Labor-related deemed claim	1,733		—			—
Aircraft and facility financing renegotiations and rejections ^{1, 2}	325		1,950			102
Fair value of conversion discount ³	218		—			—
Professional fees	199		229			14
Other	180		95			2
Total reorganization items, net	$	2,655	$	2,208		$	118

(1)

Amounts include allowed claims (claims approved by the Bankruptcy Court) and estimated allowed claims relating to (i) the rejection or modification of financings related to aircraft and (ii) entry of orders treated as unsecured claims with respect to facility agreements supporting certain issuances of special facility revenue bonds. The Debtors recorded an estimated claim associated with the rejection or modification of a financing or facility agreements when the applicable motion was filed with the Bankruptcy Court to reject or modify such financing and the Debtors believed that it was probable the motion would be approved, and there was sufficient information to estimate the claim.

(2)

Pursuant to the Plan, the Debtors agreed to allow certain post-petition unsecured claims on obligations. As a result, during the year ended December 31, 2013, the Company recorded reorganization charges to adjust estimated allowed claim amounts previously recorded on rejected special facility revenue bonds of $180 million, allowed general unsecured claims related to the 1990 and 1994 series of special facility revenue bonds that financed certain improvements at JFK and rejected bonds that financed certain improvements at ORD, which are included in the table above.


(3)	The Plan allows unsecured creditors receiving AAG Series A Preferred Stock a conversion discount of 3.5%. Accordingly, the Company recorded the fair value of such discount upon the confirmation of the Plan by the Bankruptcy Court.

AA [Member]

Reorganization [Line Items]

Emergence From Chapter 11

Overview

On November 29, 2011 (the Petition Date), AMR Corporation (renamed American Airlines Group Inc., AAG, the Company), its principal subsidiary, American Airlines, Inc. (American), and certain of the Company's other direct and indirect domestic subsidiaries (collectively, the Debtors), filed voluntary petitions for relief (the Chapter 11 Cases) under Chapter 11 of the United States Bankruptcy Code (the 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 (the Confirmation Order) approving and confirming the Debtors' fourth amended joint plan of reorganization (as amended, the Plan).

Plan of Reorganization

The Plan implements the Merger and incorporates a compromise and settlement of certain intercreditor and intercompany claim issues.

Pursuant to the Plan, all shares of AMR Corporation common stock outstanding prior to the Effective Date were canceled. The Restated Certificate of Incorporation, which was approved in connection with the Plan, authorizes the issuance of 1.75 billion new shares of AAG Common Stock, par value $0.01 per share, and 200 million shares of AAG Series A Preferred Stock, par value $0.01 per share. Of the authorized AAG Series A Preferred Stock, approximately 168 million were designated "Series A Convertible Preferred Stock", with a stated value $25.00 per share, and issued in accordance with the Plan. AAG Common Stock and AAG Series A Preferred Stock are listed on the NASDAQ Global Select Market under the symbols "AAL" and "AALCP", respectively, and began trading on December 9, 2013. In addition, pursuant to the Plan, up to 40 million shares of AAG Common Stock was authorized for issuance under the 2013 Incentive Award Plan (the 2013 IAP).

The Plan contains the following provisions relating to the treatment of pre-petition claims against the Debtors and other holders of allowed interests in the Debtors including AMR Corporation and American:


•	all secured claims against the Debtors have been reinstated;


•	allowed administrative claims, priority claims and convenience claims have been or will be paid in full in cash;


•	other holders of allowed pre-petition unsecured claims, holders of allowed interests and certain employees of AMR received or will receive 72% of AAG Common Stock (on a fully converted basis) authorized to be issued pursuant to the Plan and in connection with the Merger under the following provisions:

◦

all creditors holding Single-Dip Unsecured Claims were treated the same regardless of whether the claim was asserted against the AAG Debtors, the American Debtors, or other Debtors. As used herein, "Single-Dip Unsecured Claims" means the general unsecured claims against the Debtors that are not guaranteed by any other Debtor, other than the claims of the Debtors' labor unions. Holders of Single-Dip Unsecured Claims received, at the Effective Date, a portion of their recovery in shares of AAG Series A Preferred Stock and a right, subject to the trading price of the Company's common stock during the 120 day period after the Effective Date, to receive their remaining recovery in shares of AAG Common Stock 120 days after the Effective Date;

◦

holders of allowed interests in AMR Corporation (primarily holders of AMR Corporation common stock existing immediately prior to the Effective Date) received, at the Effective Date, a distribution of approximately 26 million shares of AAG Common Stock representing 3.5% of the total number of shares of AAG Common Stock contemplated for issuance pursuant to the Plan and, will receive additional shares of AAG Common Stock if, among other considerations, the trading price of the Company's common stock at various points during the 120 day period after the Effective Date provides for a full recovery to claimholders and other allowed priority interests; and

◦

Pursuant to rulings of the Bankruptcy Court, the Plan has established a disputed claim reserve to hold shares of AAG Series A Preferred Stock and AAG Common Stock reserved for issuance to disputed claimholders that ultimately become allowed Single-Dip general unsecured claimholders after emergence. The shares provided for under the Plan are determined based upon a disputed claim reserve amount of approximately $755 million, representing the maximum amount of additional allowable Single-Dip claims under the Plan's provisions. Approximately 16 million shares of AAG Series A Preferred Stock have been reserved at the Effective Date for distribution to holders of disputed Single-Dip general unsecured claims whose claims ultimately become allowed. Additional new shares of AAG Common Stock will be distributed into the reserve on or about the 120th day after the Effective Date. As disputed claims are resolved, the claimants receive distributions of shares from the reserve on the same basis as if such distributions had been made on or about the Effective Date. To the extent that any of the reserved shares remain undistributed upon resolution of the remaining disputed claims, such shares will not be returned to AAG but rather will be distributed by priority first, if necessary, to satisfy unsecured claims or labor-related obligations, and then to former AMR shareholders as of the Effective Date.

AAG is not required to distribute additional shares above the 756 million shares contemplated by the Plan, even if the shares remaining for distribution are not sufficient to fully pay all allowed unsecured claims. However, resolution of disputed claims could have a material effect on Single-Dip creditor recoveries under the Plan and the amount of additional share distributions, if any, that are made to former AMR shareholders as the total number of shares of AAG Common Stock that remain available for distribution upon resolution of disputed claims is limited pursuant to the Plan.

In addition, as of December 31, 2013, American made the following cash disbursements under the Plan:


•	$385 million in cash to the Pension plans in connection with missed contributions to the pension plans during Chapter 11 and interest and penalty interest thereon;


•	$105 million to holders in partial or full satisfaction of their claims, including to holders of administrative claims, and state and local priority tax claims;


•	$196 million in cure payments to holders of secured debt; and


•	Approximately $300 million for payroll taxes associated with equity distributions to employees

Several parties have filed appeals seeking reconsideration of the Confirmation Order. See Note 7 to American's Consolidated Financial Statements for more information.

As noted above, the reconciliation process with respect to the remaining claims will take considerable additional time post emergence. Included in Claim and other bankruptcy settlement obligations on American's Consolidated Balance Sheet as of December 31, 2013, are American's estimates of the amounts of disputed claims that will ultimately become allowed Single-Dip general unsecured claims. As these claims are resolved, or where better information becomes available and is evaluated, AAG will make adjustments to the liabilities recorded in American's Consolidated Financial Statements as appropriate. Any such adjustments could be material to American's financial position or results of operations in any given period.

Availability and Utilization of Net Operating Losses

Upon emergence from bankruptcy, the Company experienced an "ownership change" as defined in Section 382 of the Internal Revenue Code which could potentially limit the ability to utilize certain tax attributes including the Company’s substantial NOLs. The general limitation rules for a debtor in a bankruptcy case are liberalized where the ownership change occurs upon emergence from bankruptcy. While the Company anticipates taking advantage of certain special rules for federal income tax purposes that would permit approximately $9.5 billion of the federal NOL Carryforwards to be utilized without regard to the annual limitation generally imposed by Section 382, there can be no assurance that these special rules will apply.

Moreover, an ownership change subsequent to the Company’s emergence from bankruptcy may further limit or effectively eliminate the ability to utilize the Company’s NOL Carryforwards and other tax attributes. To reduce the risk of a potential adverse effect on the Company’s ability to utilize the NOL Carryforwards, the Restated Certificate of Incorporation contains transfer restrictions applicable to certain substantial shareholders. Although the purpose of these transfer restrictions is to prevent an ownership change from occurring, there can be no assurance that an ownership change will not occur even with these transfer restrictions. A copy of the Restated Certificate of Incorporation was attached as Exhibit 3.1 to a Form 8-K filed on December 9, 2013 by the Company with the Securities and Exchange Commission.

Liabilities Subject to Compromise

Pursuant to the Plan, American's allowed pre-petition claims and estimated unresolved pre-petition claims of $4.6 billion were settled in cash, AAG Series A Preferred Stock and other bankruptcy settlement obligations on the Effective Date. The pension and postretirement benefits obligation included below was reinstated and is included in "Pension and postretirement benefits" in American's Consolidated Balance Sheets. Accordingly there are no Liabilities Subject to Compromise at December 31, 2013.

The following table summarizes the components of liabilities subject to compromise included on the Consolidated Balance Sheet as of December 31, 2012 (in millions):



Long-term debt	$	358
Estimated allowed claims on aircraft lease and debt obligations and facility lease and bond obligations	3,716
Pension and postretirement benefits ¹	1,250
Accounts payable and other accrued liabilities	370
Other	—
Total liabilities subject to compromise	$	5,694


(1)	As a result of the modifications to the retirement benefits as discussed in Note 12 to American's Consolidated Financial Statements, a portion of the pension and postretirement benefits liability, primarily relating to retiree medical and other benefits, was classified as liabilities subject to compromise.

Long-term debt, including undersecured debt, classified as subject to compromise as of December 31, 2012 consisted of (in millions):



Secured variable and fixed rate indebtedness due through 2023 (effective rates from 1.00% - 13.00% at December 31, 2012)	$	172
6.00%—8.50% special facility revenue bonds due through 2036	186
	$	358

Reorganization Items, Net



	2013		2012			2011
Pension and postretirement benefits	$	—	$	(66	)	$	—
Labor-related deemed claim	1,733		—			—
Aircraft and facility financing renegotiations and rejections ^{1, 2}	320		1,951			102
Fair value of conversion discount ³	218		—			—
Professional fees	199		227			14
Other	170		67			—
Total reorganization items, net	$	2,640	$	2,179		$	116

(1)

Amounts include allowed claims (claims approved by the Bankruptcy Court) and estimated allowed claims relating to (i) the rejection or modification of financings related to aircraft and (ii) entry of orders treated as unsecured claims with respect to facility agreements supporting certain issuances of special facility revenue bonds. American recorded an estimated claim associated with the rejection or modification of a financing or facility agreements when the applicable motion was filed with the Bankruptcy Court to reject or modify such financing and the Debtors believed that it was probable the motion would be approved, and there was sufficient information to estimate the claim.

(2)

Pursuant to the Plan, the Debtors agreed to allow certain post-petition unsecured claims on obligations. As a result, during the year ended December 31, 2013, American recorded reorganization charges to adjust estimated allowed claim amounts previously recorded on rejected special facility revenue bonds of $180 million, allowed general unsecured claims related to the 1990 and 1994 series of special facility revenue bonds that financed certain improvements at JFK and rejected bonds that financed certain improvements at ORD, which are included in the table above.


(3)	The Plan allows unsecured creditors receiving Preferred Stock a conversion discount of 3.5%. Accordingly, American recorded the fair value of such discount upon the confirmation of the Plan by the Bankruptcy Court.

- Definition

The entire disclosure for the description and amounts of reorganization under Chapter 11 of the US Bankruptcy Code.

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