Retirement Benefits

12 Months Ended

Dec. 31, 2013

Defined Benefit Plan Disclosure [Line Items]

The Company sponsors defined benefit and defined contribution pension plans for eligible employees. The defined benefit plans provide benefits for participating employees based on years of service and average compensation for a specified period of time before retirement. The Company uses a December 31 measurement date for all of its defined benefit plans. In addition, the Company provides certain postemployment benefits to its employees. These benefits include disability-related and workers' compensation benefits for certain employees. The Company accrues for the cost of such benefit expenses once an appropriate triggering event has occurred.

Year End Information

The following table provides a reconciliation of the changes in the pension and retiree medical and other benefit obligations and fair value of assets for the years ended December 31, 2013 and 2012, and a statement of funded status as of December 31, 2013 and 2012 (in millions):



	Pension Benefits						Retiree Medical and Other Benefits
	2013			2012			2013			2012
Reconciliation of benefit obligation:
Obligation at January 1	$	15,895		$	14,568		$	1,412		$	3,122
Service cost	3			341			—			46
Interest cost	654			729			50			128
Actuarial (gain) loss	(1,152		)	2,345			(82		)	104
Plan amendments	—			301			—			(1,904		)
Curtailments	2			(1,841		)	—			33
Settlements	(1		)	—			—			—
Benefit payments	(575		)	(548		)	(116		)	(117		)
US Airways plan liability (Assumed)	73			—			121			—
Obligation at December 31	$	14,899		$	15,895		$	1,385		$	1,412



Reconciliation of fair value of plan assets:
Fair value of plan assets at January 1	$	9,065		$	8,132		$	211		$	205
Actual return on plan assets	1,026			1,204			41			26
Employer contributions	494			277			103			97
Settlements	(1		)	—			—			—
Benefit payments	(575		)	(548		)	(116		)	(117		)
US Airways plan assets (Assumed)	48			—			—			—
Fair value of plan assets at December 31	$	10,057		$	9,065		$	239		$	211
Funded status at December 31	$	(4,842	)	$	(6,830	)	$	(1,146	)	$	(1,201	)



Amounts recognized in the Consolidated Balance Sheets:
Current liability	$	31	$	21	$	129	$	—
Noncurrent liability	4,811		6,809		1,017		1,201
	$	4,842	$	6,830	$	1,146	$	1,201



Amounts recognized in other comprehensive loss:
Net actuarial loss (gain)	$	2,395	$	3,943	$	(176	)	$	(78	)
Prior service cost (credit)	273		301		(1,592		)	(1,844		)
	2,668		4,244		(1,768		)	(1,922		)
US Airways plan other comprehensive loss:	—		—		(12		)	—
	$	2,668	$	4,244	$	(1,780	)	$	(1,922	)



	Pension Benefits				Retiree Medical and Other Benefits
	2013		2012		2013		2012
	(in millions)
For plans with accumulated benefit obligations exceeding the fair value of plan assets:
Projected benefit obligation (PBO)	$	14,869	$	15,895	$	—	$	—
Accumulated benefit obligation (ABO)	14,858		15,866		—		—
Accumulated postretirement benefit obligation (APBO)	—		—		1,385		1,412
Fair value of plan assets	10,024		9,065		239		211
ABO less fair value of plan assets	4,834		6,801		—		—

The following tables provide the components of net periodic benefit cost for the years ended December 31, 2013, 2012 and 2011 (in millions):



	Pension Benefits									Retiree Medical and Other Benefits
	2013			2012			2011			2013			2012			2011
Components of net periodic benefit cost:
Defined benefit plans:
Service cost	$	3		$	341		$	386		$	—		$	46		$	61
Interest cost	654			729			757			50			128			174
Expected return on assets	(720		)	(676		)	(657		)	(16		)	(17		)	(20		)
Curtailments	2			58			—			—			(124		)	—
Settlements	(1		)	—			—			—			—			—
Amortization of:
Prior service cost	28			10			13			(251		)	(82		)	(28		)
Unrecognized net loss (gain)	90			211			154			(9		)	(9		)	(9		)
Net periodic benefit cost for defined benefit plans	56			673			653			(226		)	(58		)	178
Defined contribution plans	328			218			179			N/A			N/A			N/A
	$	384		$	891		$	832		$	(226	)	$	(58	)	$	178

The estimated amount of unrecognized net loss for the defined benefit pension plans that will be amortized from Accumulated Other Comprehensive Income (Loss) into net periodic benefit cost over the next fiscal year is $46 million.

The estimated amount of unrecognized net gain for the retiree medical and other postretirement plans that will be amortized from Accumulated Other Comprehensive Income (Loss) into net periodic benefit cost over the next fiscal year is $8 million.



	Pension Benefits				Retiree Medical and Other Benefits
	2013		2012		2013		2012
Weighted-average assumptions used to determine benefit obligations as of December 31:
Discount rate	5.10	%	4.20	%	4.71	%	3.80	%



	Pension Benefits				Retiree Medical and Other Benefits
	2013		2012		2013		2012
Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31:
Discount rate 1/1 - 9/30	4.20	%	5.20	%	3.80	%	4.89	%
Discount rate 10/1 - 12/31	4.20	%	4.10	%	3.80	%	3.80	%
Salary scale (ultimate) 1/1-9/30	—		3.78	%	—		—
Expected return on plan assets	8.00	%	8.25	%	8.00	%	8.25	%

As of December 31, 2013, the Company's estimate of the long-term rate of return on plan assets was 8.00% based on the target asset allocation. Expected returns on longer duration bonds are based on yields to maturity of the bonds held at year-end. Expected returns on other assets are based on a combination of long-term historical returns, actual returns on plan assets achieved over the last ten years, current and expected market conditions, and expected value to be generated through active management, currency overlay and securities lending programs. The Company's annualized ten-year rate of return on plan assets as of December 31, 2013, was approximately 8.93%.

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

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



Asset Class/Sub-Class	Allowed Range
Equity	62	%	-	72%
Public:
U.S. Value	20	%	-	35%
International Value	14	%	-	24%
Emerging Markets	5	%	-	11%
Alternative Investments	0	%	-	18%
Fixed Income	28	%	-	38%
U.S. Long Duration	26	%	-	36%
Emerging Markets	0	%	-	4%
Other	0	%	-	5%
Cash Equivalents	0	%	-	5%

Each asset class is actively managed and, historically, the plans' assets have produced returns, net of management fees, in excess of the expected rate of return over the last ten years. Public equity and emerging market fixed income securities are used to provide diversification and are expected to generate higher returns over the long-term than longer duration U.S. bonds. Public stocks are managed using a value investment approach in order to participate in the returns generated by stocks in the long-term, while reducing year-over-year volatility. Longer duration U.S. bonds are used to partially hedge the assets from declines in interest rates. Alternative (private) investments are used to provide expected returns in excess of the public markets over the long-term. Additionally, the Company engages currency overlay managers in an attempt to increase returns by protecting non-U.S. dollar denominated assets from a rise in the relative value of the U.S. dollar. The Company also participates in securities lending programs to generate additional income by loaning plan assets to borrowers on a fully collateralized basis. These programs are subject to market risk.

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

The fair value of the Company's pension plan assets at December 31, 2013 and 2012, by asset category, are as follows (in millions):



	Fair Value Measurements at December 31, 2013
	Quoted Prices in Active Markets for Identical Assets			Significant Observable Inputs		Significant Unobservable Inputs
Asset Category	(Level 1)			(Level 2)		(Level 3)		Total
Cash and cash equivalents	$	360		$	—	$	—	$	360
Equity securities:
International markets (a)(b)	2,908			—		—		2,908
Large-cap companies (b)	2,196			—		—		2,196
Mid-cap companies (b)	227			—		—		227
Small-cap companies(b)	18			—		—		18
Mutual funds - US Airways plan (g)	48			—		—		48
Fixed Income:
Corporate bonds (c)	—			2,067		—		2,067
Government securities (d)	—			1,035		—		1,035
U.S. municipal securities	—			55		—		55
Alternative investments:
Private equity partnerships (e)	—			—		848		848
Common/collective and 103-12 investment trusts (f)	—			245		—		245
Insurance group annuity contracts	—			—		2		2
Dividend and interest receivable	51			—		—		51
Due to/from brokers for sale of securities - net	(10		)	—		—		(10		)
Other assets – net	7			—		—		7
Total	$	5,805		$	3,402	$	850	$	10,057


a)	Holdings are diversified as follows: 19% United Kingdom, 10% Japan, 11% France, 7% Switzerland, 6% Germany, 5% Netherlands, 6% Republic of Korea, 15% emerging markets and the remaining 21% with no concentration greater than 5% in any one country.


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


c)	Includes approximately 76% investments in corporate debt with a Standard and Poor's (S&P) rating lower than A and 24% investments in corporate debt with an S&P rating A or higher. Holdings include 80% U.S. companies, 17% international companies and 3% emerging market companies.


d)	Includes approximately 72% investments in U.S. domestic government securities and 28% in emerging market government securities. There are no significant foreign currency risks within this classification.

Includes limited partnerships that invest primarily in U.S. (92%) and European (8%) buyout opportunities of a range of privately held companies. The Master Trust does not have the right to redeem its limited partnership investment at its net asset value. Instead, the Master Trust receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next one to ten years. Additionally, the Master Trust has future funding commitments of approximately $376 million over the next ten years.

Investment includes 74% in an emerging market 103-12 investment trust with investments in emerging country equity securities, 14% in Canadian segregated balanced value, income growth and diversified pooled funds and 12% in a common/collective trust investing in securities of smaller companies located outside the U.S., including developing markets. Requests for withdrawals must meet specific requirements with advance notice of redemption preferred.


g)	Investment includes mutual funds invested 49% in equity securities of large-cap, mid-cap and small-cap US companies, 30% in US treasuries and corporate bonds and 21% in equity securities of international companies.



	Fair Value Measurements at December 31, 2012
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs
Asset Category	(Level 1)		(Level 2)		(Level 3)		Total
Cash and cash equivalents	$	275	$	—	$	—	$	275
Equity securities
International markets (a)(b)	2,443		—		—		2,443
Large-cap companies (b)	1,601		—		—		1,601
Mid-cap companies (b)	216		—		—		216
Small-cap companies(b)	21		—		—		21
Fixed Income
Corporate bonds (c)	—		2,094		—		2,094
Government securities (d)	—		1,172		—		1,172
U.S. municipal securities	—		57		—		57
Alternative investments
Private equity partnerships (e)	—		—		914		914
Common/collective and 103-12 investment trusts (f)	—		229		—		229
Insurance group annuity contracts	—		—		2		2
Dividend and interest receivable	38		—		—		38
Due to/from brokers for sale of securities - net	1		—		—		1
Other assets – net	2		—		—		2
Total	$	4,597	$	3,552	$	916	$	9,065


a)	Holdings are diversified as follows: 20% United Kingdom, 9% Japan, 9% France, 8% Switzerland, 8% Germany, 5% Netherlands, 5% Republic of Korea, 15% emerging markets and the remaining 21% with no concentration greater than 5% in any one country.


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


c)	Includes approximately 79% investments in corporate debt with a Standard and Poor's (S&P) rating lower than A and 21% investments in corporate debt with an S&P rating A or higher. Holdings include 81% U.S. companies, 16% international companies and 3% emerging market companies.


d)	Includes approximately 88% investments in U.S. domestic government securities and 12% in emerging market government securities. There are no significant foreign currency risks within this classification.

Not included in the above tables are receivables and payables for foreign currency forward contracts and futures contracts which net to approximately $7 million and collateral held on loaned securities and the obligation to return collateral on loaned securities which effectively net to zero.

Changes in fair value measurements of Level 3 investments during the year ended December 31, 2013, were as follows (in millions):



	Private Equity Partnerships			Insurance Group Annuity Contracts
Beginning balance at December 31, 2012	$	914		$	2
Actual return on plan assets:
Relating to assets still held at the reporting date	(21		)
Relating to assets sold during the period	99
Purchases	85
Sales	(229		)
Ending balance at December 31, 2013	$	848		$	2

Changes in fair value measurements of Level 3 investments during the year ended December 31, 2012, were as follows (in millions):



	Private Equity Partnerships			Insurance Group Annuity Contracts
Beginning balance at December 31, 2011	$	920		$	2
Actual return on plan assets:
Relating to assets still held at the reporting date	20
Relating to assets sold during the period	102
Purchases	96
Sales	(224		)
Ending balance at December 31, 2012	$	914		$	2

The fair value of the Company's other postretirement benefit plan assets at December 31, 2013 by asset category, were as follows (in millions):



	Fair Value Measurements at December 31, 2013
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs
Asset Category	(Level 1)		(Level 2)		(Level 3)		Total
Money market fund	$	4	$	—	$	—	$	4
Mutual funds - AMR Class	—		235		—		235
Total	$	4	$	235	$	—	$	239

The fair value of the Company's other postretirement benefit plan assets at December 31, 2012 by asset category, were as follows (in millions):



	Fair Value Measurements at December 31, 2012
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs
Asset Category	(Level 1)		(Level 2)		(Level 3)		Total
Money market fund	$	9	$	—	$	—	$	9
Mutual funds - AMR Class	—		202		—		202
Total	$	9	$	202	$	—	$	211

Investments in the AMR Class shares of the mutual funds managed by American Beacon Advisors, Inc (ABA) are valued by quoted prices on the active market, which is fair value and represents the net asset value of the shares of such funds as of the close of business at the end of the period. AMR Class shares are offered without a sales charge to participants and have the lowest expense ratio among the Beacon Funds. Purchases are restricted to retirement benefit plans of ABA and AMR and its affiliates, resulting in a fair value classification of Level 2. Investments include approximately 27% of investments in non-U.S. common stocks in 2013 and approximately 28% of investments in non-U.S. common stocks in 2012. Net asset value is based on the fair market value of the funds' underlying assets and liabilities at the date of determination.



	2013		2012
Assumed health care trend rates at December 31
Health care cost trend rate assumed for next year	6.5	%	7.0	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.5	%	4.5	%
Year that the rate reaches the ultimate trend rate	2018		2018

A one percentage point change in the assumed health care cost trend rates would have the following effects (in millions):



	1% Increase		1% Decrease
Impact on 2013 service and interest cost	$	3	$	(3	)
Impact on postretirement benefit obligation as of December 31, 2013	65		(64		)

The Company is required to make minimum contributions to its defined benefit pension plans under the minimum funding requirements of ERISA, the Pension Funding Equity Act of 2004, the Pension Protection Act of 2006, the Pension Relief Act of 2010, and the Moving Ahead for Progress in the 21^st Century Act of 2012. In 2013 the Company contributed $489 million to its defined benefit pension plans, which covered minimum contributions for periods prior to the Company’s Chapter 11 filing and periods thereafter (see Note 2 to AAG's Consolidated Financial Statements for further information), as well as certain interest and penalty interest due with respect to contributions for pre-petition periods. On January 15, 2014, the Company contributed an additional $34 million to its defined benefit pension plans representing the final quarterly contribution for the 2013 plan year.

The Company's minimum required contribution to its pension plans for 2014 is $120 million. Currently, American's minimum funding obligation for its pension plans is subject to temporary favorable rules that are scheduled to expire at the end of 2017. Upon expiration of these rules, American's funding obligations are likely to increase materially.

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



	2014		2015		2016		2017		2018		2019-2023
Pension	$	642	$	642	$	667	$	697	$	731	$	4,252
Retiree Medical and Other	130		125		123		119		114		483

Modifications to Retirement and Life Insurance Benefits

Effective November 1, 2012, the Company's defined benefit pension plans were frozen and eligible employees began to receive a replacement benefit under the $uper $aver 401(k) Plan. The Company matches employee contributions up to 5.5% of eligible earnings and, with the ratification of a new CBA by pilots on December 7, 2012, pilots receive contributions of 14% under the same plan.

In December 2012, the Pilot A Plan, a defined benefit plan, was amended to remove the lump-sum option and the installment option forms of benefit effective December 31, 2012. A small group of American pilots is appealing the Bankruptcy Court's decision authorizing American to eliminate the lump sum option and installment option forms of benefit. This is the same group of pilots that is appealing the Bankruptcy Court's decisions authorizing American to reject the pilot CBA and approve the new pilot CBA. All of these appeals have been consolidated, and are pending in the U.S. District Court for the Southern District of New York.

The Pilot B Plan, a defined contribution plan, was terminated on November 30, 2012. With the exception of a small residual balance to cover final plan expenses, we expect all remaining funds, which represent a small group of uncashed distribution checks, to be distributed by the end of second quarter 2014.

On July 6, 2012, the Company commenced an adversary proceeding in the Bankruptcy Court seeking a determination on the issue of vesting for former employees who retired before November 1, 2012 and were eligible for certain retiree medical coverage. The Court held a hearing on January 23, 2013 and has not ruled on this matter as of the date of this report. The Company has been negotiating with the retiree committee since July 2012, seeking a consensual agreement to terminate subsidized retiree medical coverage and life insurance coverage.

As a result of the modifications to the retirement benefits as discussed above, a portion of the pension and postretirement benefits liability, primarily relating to retiree medical and other benefits, was classified as liabilities subject to compromise as of December 31, 2012. This amount was reinstated upon emergence since there was no resolution in the Chapter 11 Cases. See Note 2 to AAG's Consolidated Financial Statements for the breakout of liabilities subject to compromise, including that related to pension and postretirement benefits.

Curtailment and Plan Amendment in the Third Quarter of 2012

In accordance with ASC 715 "Retirement Benefits" (ASC 715), in the third quarter of 2012, the Company remeasured its defined benefit pension and retiree medical plans as a result of modifications to its retirement plans and reductions in certain work groups (see above and Note 2 to AAG's Consolidated Financial Statements). The Company updated its significant actuarial assumptions used for the remeasurements including the discount rate, which was lowered to 4.10% and 3.80% for the defined benefit pension plans and retiree medical plans, respectively.

The remeasurement of the defined benefit plans resulted in an actuarial loss of $1.9 billion offset by a curtailment gain of $1.8 billion. In addition, a loss of $58 million, representing unamortized prior service cost as of the remeasurement date of the frozen defined benefit plans, is included as a component of reorganization items, net.

Further, as a result of modifications to its retiree medical plans, the Company recognized a negative plan amendment of $1.9 billion, which is included as a component of actuarial gain arising in current year in other comprehensive income and will be amortized over the future service life of the active plan participants for whom the benefit was eliminated, or approximately eight years. In addition, a net credit of $124 million, representing unamortized prior service credits of $157 million offset by a curtailment loss of $33 million, is included as a component of reorganization items, net.

AA [Member]

Defined Benefit Plan Disclosure [Line Items]

Retirement Benefits

American sponsors defined benefit and defined contribution pension plans for eligible employees. The defined benefit plans provide benefits for participating employees based on years of service and average compensation for a specified period of time before retirement. American uses a December 31 measurement date for all of its defined benefit plans. In addition, American provides certain postemployment benefits to its employees. These benefits include disability-related and workers’ compensation benefits for certain employees. American accrues for the cost of such benefit expenses once an appropriate triggering event has occurred.

Year End Information



	Pension Benefits						Retiree Medical and Other Benefits
	2013			2012			2013			2012
Reconciliation of benefit obligation:
Obligation at January 1	$	15,895		$	14,568		$	1,412		$	3,122
Service cost	3			341			—			46
Interest cost	654			729			50			128
Actuarial (gain) loss	(1,152		)	2,345			(82		)	104
Plan amendments	—			301			—			(1,904		)
Curtailments	2			(1,841		)	—			33
Settlements	(1		)	—			—			—
Benefit payments	(575		)	(548		)	(116		)	(117		)
Obligation at December 31	$	14,826		$	15,895		$	1,264		$	1,412



	Pension Benefits						Retiree Medical and Other Benefits
	2013			2012			2013			2012
	(in millions)
Reconciliation of fair value of plan assets:
Fair value of plan assets at January 1	$	9,065		$	8,132		$	211		$	205
Actual return on plan assets	1,026			1,204			41			26
Employer contributions	494			277			103			97
Settlements	(1		)	—			—			—
Benefit payments	(575		)	(548		)	(116		)	(117		)
Fair value of plan assets at December 31	$	10,009		$	9,065		$	239		$	211
Funded status at December 31	$	(4,817	)	$	(6,830	)	$	(1,025	)	$	(1,201	)



Amounts recognized in the Consolidated Balance Sheets:
Current liability	$	31	$	21	$	118	$	—
Noncurrent liability	4,786		6,809		907		1,201
	$	4,817	$	6,830	$	1,025	$	1,201



Amounts recognized in other comprehensive loss:
Net actuarial loss (gain)	$	2,395	$	3,943	$	(176	)	$	(78	)
Prior service cost (credit)	273		301		(1,592		)	(1,844		)
	$	2,668	$	4,244	$	(1,768	)	$	(1,922	)



For plans with accumulated benefit obligations exceeding the fair value of plan assets:
Projected benefit obligation (PBO)	$	14,796	$	15,895	$	—	$	—
Accumulated benefit obligation (ABO)	14,788		15,866		—		—
Accumulated postretirement benefit obligation (APBO)	—		—		1,264		1,412
Fair value of plan assets	9,976		9,065		239		211
ABO less fair value of plan assets	4,812		6,801		—		—

The following tables provide the components of net periodic benefit cost for the years ended December 31, 2013, 2012 and 2011 (in millions):



	Pension Benefits									Retiree Medical and Other Benefits
	2013			2012			2011			2013			2012			2011
Components of net periodic benefit cost:
Defined benefit plans:
Service cost	$	3		$	341		$	386		$	—		$	46		$	61
Interest cost	654			729			757			50			128			174
Expected return on assets	(720		)	(676		)	(657		)	(16		)	(17		)	(20		)
Curtailments	2			58			—			—			(124		)	—
Settlements	(1		)	—			—			—			—			—
Amortization of:
Prior service cost	28			10			13			(251		)	(82		)	(28		)
Unrecognized net loss (gain)	90			211			154			(9		)	(9		)	(9		)
Net periodic benefit cost for defined benefit plans	56			673			653			(226		)	(58		)	178
Defined contribution plans	303			202			162			N/A			N/A			N/A
	$	359		$	875		$	815		$	(226	)	$	(58	)	$	178



	Pension Benefits				Retiree Medical and Other Benefits
	2013		2012		2013		2012
Weighted-average assumptions used to determine benefit obligations as of December 31:
Discount rate	5.10	%	4.20	%	4.71	%	3.80	%



Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31:
Discount rate 1/1 - 9/30	4.20	%	5.20	%	3.80	%	4.89	%
Discount rate 10/1 - 12/31	4.20	%	4.10	%	3.80	%	3.80	%
Salary scale (ultimate) 1/1-9/30	—		3.78	%	—		—
Expected return on plan assets	8.00	%	8.25	%	8.00	%	8.25	%

As of December 31, 2013, American’s estimate of the long-term rate of return on plan assets was 8.00% based on the target asset allocation. Expected returns on longer duration bonds are based on yields to maturity of the bonds held at year-end. Expected returns on other assets are based on a combination of long-term historical returns, actual returns on plan assets achieved over the last ten years, current and expected market conditions, and expected value to be generated through active management, currency overlay and securities lending programs. American’s annualized ten-year rate of return on plan assets as of December 31, 2013, was approximately 8.93%.

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



Asset Class/Sub-Class	Allowed Range
Equity	62	%	-	72%
Public:
U.S. Value	20	%	-	35%
International Value	14	%	-	24%
Emerging Markets	5	%	-	11%
Alternative Investments	0	%	-	18%
Fixed Income	28	%	-	38%
U.S. Long Duration	26	%	-	36%
Emerging Markets	0	%	-	4%
Other	0	%	-	5%
Cash Equivalents	0	%	-	5%

Each asset class is actively managed and, historically, the plans’ assets have produced returns, net of management fees, in excess of the expected rate of return over the last ten years. Public equity and emerging market fixed income securities are used to provide diversification and are expected to generate higher returns over the long-term than longer duration U.S. bonds. Public stocks are managed using a value investment approach in order to participate in the returns generated by stocks in the long-term, while reducing year-over-year volatility. Longer duration U.S. bonds are used to partially hedge the assets from declines in interest rates. Alternative (private) investments are used to provide expected returns in excess of the public markets over the long-term. Additionally, the Company engages currency overlay managers in an attempt to increase returns by protecting non-U.S. dollar denominated assets from a rise in the relative value of the U.S. dollar. American also participates in securities lending programs to generate additional income by loaning plan assets to borrowers on a fully collateralized basis. These programs are subject to market risk.

The fair values of American’s pension plan assets at December 31, 2013 and 2012, by asset category are as follows (in millions):



	Fair Value Measurements at December 31, 2013
	Quoted Prices in Active Markets for Identical Assets			Significant Observable Inputs		Significant Unobservable Inputs
Asset Category	(Level 1)			(Level 2)		(Level 3)		Total
Cash and cash equivalents	$	360		$	—	$	—	$	360
Equity securities:
International markets (a)(b)	2,908			—		—		2,908
Large-cap companies (b)	2,196			—		—		2,196
Mid-cap companies (b)	227			—		—		227
Small-cap companies(b)	18			—		—		18
Fixed Income:
Corporate bonds (c)	—			2,067		—		2,067
Government securities (d)	—			1,035		—		1,035
U.S. municipal securities	—			55		—		55
Alternative investments:
Private equity partnerships (e)	—			—		848		848
Common/collective and 103-12 investment trusts (f)	—			245		—		245
Insurance group annuity contracts	—			—		2		2
Dividend and interest receivable	51			—		—		51
Due to/from brokers for sale of securities - net	(10		)	—		—		(10		)
Other assets – net	7			—		—		7
Total	$	5,757		$	3,402	$	850	$	10,009


a)	Holdings are diversified as follows: 19% United Kingdom, 10% Japan, 11% France, 7% Switzerland, 6% Germany, 5% Netherlands, 6% Republic of Korea, 15% emerging markets and the remaining 21% with no concentration greater than 5% in any one country.


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


c)	Includes approximately 76% investments in corporate debt with a Standard and Poor’s (S&P) rating lower than A and 24% investments in corporate debt with an S&P rating A or higher. Holdings include 80% U.S. companies, 17% international companies and 3% emerging market companies.


d)	Includes approximately 72% investments in U.S. domestic government securities and 28% in emerging market government securities. There are no significant foreign currency risks within this classification.



	Fair Value Measurements at December 31, 2012
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs
Asset Category	(Level 1)		(Level 2)		(Level 3)		Total
Cash and cash equivalents	$	275	$	—	$	—	$	275
Equity securities
International markets (a)(b)	2,443		—		—		2,443
Large-cap companies (b)	1,601		—		—		1,601
Mid-cap companies (b)	216		—		—		216
Small-cap companies(b)	21		—		—		21
Fixed Income
Corporate bonds (c)	—		2,094		—		2,094
Government securities (d)	—		1,172		—		1,172
U.S. municipal securities	—		57		—		57
Alternative investments
Private equity partnerships (e)	—		—		914		914
Common/collective and 103-12 investment trusts (f)	—		229		—		229
Insurance group annuity contracts	—		—		2		2
Dividend and interest receivable	38		—		—		38
Due to/from brokers for sale of securities - net	1		—		—		1
Other assets – net	2		—		—		2
Total	$	4,597	$	3,552	$	916	$	9,065


a)	Holdings are diversified as follows: 20% United Kingdom, 9% Japan, 9% France, 8% Switzerland, 8% Germany, 5% Netherlands, 5% Republic of Korea, 15% emerging markets and the remaining 21% with no concentration greater than 5% in any one country.


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


c)	Includes approximately 79% investments in corporate debt with a Standard and Poor’s (S&P) rating lower than A and 21% investments in corporate debt with an S&P rating A or higher. Holdings include 81% U.S. companies, 16% international companies and 3% emerging market companies.


d)	Includes approximately 88% investments in U.S. domestic government securities and 12% in emerging market government securities. There are no significant foreign currency risks within this classification.

Changes in fair value measurements of Level 3 investments during the year ended December 31, 2013, were as follows (in millions):



	Private Equity Partnerships			Insurance Group Annuity Contracts
Beginning balance at December 31, 2012	$	914		$	2
Actual return on plan assets:
Relating to assets still held at the reporting date	(21		)
Relating to assets sold during the period	99
Purchases	85
Sales	(229		)	—
Ending balance at December 31, 2013	$	848		$	2

Changes in fair value measurements of Level 3 investments during the year ended December 31, 2012, were as follows (in millions):



	Private Equity Partnerships			Insurance Group Annuity Contracts
Beginning balance at December 31, 2011	$	920		$	2
Actual return on plan assets:
Relating to assets still held at the reporting date	20
Relating to assets sold during the period	102
Purchases	96
Sales	(224		)
Ending balance at December 31, 2012	$	914		$	2

The fair value of American’s other postretirement benefit plan assets at December 31, 2013 by asset category, were as follows (in millions):



	Fair Value Measurements at December 31, 2013
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs
Asset Category	(Level 1)		(Level 2)		(Level 3)		Total
Money market fund	$	4	$	—	$	—	$	4
Mutual funds - AMR Class	—		235		—		235
Total	$	4	$	235	$	—	$	239

The fair value of American’s other postretirement benefit plan assets at December 31, 2012 by asset category, were as follows (in millions):



	Fair Value Measurements at December 31, 2012
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs
Asset Category	(Level 1)		(Level 2)		(Level 3)		Total
Money market fund	$	9	$	—	$	—	$	9
Mutual funds - AMR Class	—		202		—		202
Total	$	9	$	202	$	—	$	211

Investments in the AMR Class shares of the mutual funds managed by American Beacon Advisors, Inc (ABA) are valued by quoted prices on the active market, which is fair value and represents the net asset value of the shares of such funds as of the close of business at the end of the period. AMR Class shares are offered without a sales charge to participants and have the lowest expense ratio among the Beacon Funds. Purchases are restricted to retirement benefit plans of ABA and AMR and its affiliates, resulting in a fair value classification of Level 2. Investments include approximately 27% of investments in non-U.S. common stocks in 2013 and approximately 28% of investments in non-U.S. common stocks in 2012. Net asset value is based on the fair market value of the funds’ underlying assets and liabilities at the date of determination.



	2013		2012
Assumed health care trend rates at December 31
Health care cost trend rate assumed for next year	6.5	%	7.0	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.5	%	4.5	%
Year that the rate reaches the ultimate trend rate	2018		2018

A one percentage point change in the assumed health care cost trend rates would have the following effects (in millions):



	1% Increase		1% Decrease
Impact on 2013 service and interest cost	$	2	$	(2	)
Impact on postretirement benefit obligation as of December 31, 2013	50		(53		)

American is required to make minimum contributions to its defined benefit pension plans under the minimum funding requirements of ERISA, the Pension Funding Equity Act of 2004, the Pension Protection Act of 2006, the Pension Relief Act of 2010, and the Moving Ahead for Progress in the 21^st Century Act of 2012. In 2013 American contributed $489 million to its defined benefit pension plans, which covered minimum contributions for periods prior to the American’s Chapter 11 filing and periods thereafter (see Note 2 to American's Consolidated Financial Statements for further information), as well as certain interest and penalty interest due with respect to contributions for pre-petition periods. On January 15, 2014, American contributed an additional $34 million to its defined benefit pension plans representing the final quarterly contribution for the 2013 plan year.

American's minimum required contribution to its pension plans for 2014 is $120 million. Currently, American's minimum funding obligation for its pension plans is subject to temporary favorable rules that are scheduled to expire at the end of 2017. Upon expiration of these rules, American's funding obligations are likely to increase materially.

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



	2014		2015		2016		2017		2018		2019-2023
Pension	$	640	$	639	$	664	$	694	$	728	$	4,234
Retiree Medical and Other	119		116		114		110		104		443

Modifications to Retirement and Life Insurance Benefits

Effective November 1, 2012, American's defined benefit pension plans were frozen and eligible employees began to receive a replacement benefit under the $uper $aver 401(k) Plan. American matches employee contributions up to 5.5% of eligible earnings and, with the ratification of a new CBA by pilots on December 7, 2012, pilots receive contributions of 14% under the same plan.

The Pilot B Plan, a defined contribution plan, was terminated on November 30, 2012. With the exception of a small residual balance to cover final plan expenses, American expects all remaining funds, which represent a small group of uncashed distribution checks, to be distributed by the end of second quarter 2014.

On July 6, 2012, American commenced an adversary proceeding in the Bankruptcy Court seeking a determination on the issue of vesting for former employees who retired before November 1, 2012 and were eligible for certain retiree medical coverage. The Court held a hearing on January 23, 2013 and has not ruled on this matter as of the date of this report. The Company has been negotiating with the retiree committee since July 2012, seeking a consensual agreement to terminate subsidized retiree medical coverage and life insurance coverage.

As a result of the modifications to the retirement benefits as discussed above, a portion of the pension and postretirement benefits liability, primarily relating to retiree medical and other benefits, was classified as liabilities subject to compromise as of December 31, 2012. This amount was reinstated upon emergence since there was no resolution in the Chapter 11 Cases. See Note 2 to American's Consolidated Financial Statements for the breakout of liabilities subject to compromise, including that related to pension and postretirement benefits.

Curtailment and Plan Amendment in the Third Quarter of 2012

In accordance with ASC 715 "Retirement Benefits" (ASC 715), in the third quarter of 2012, American remeasured its defined benefit pension and retiree medical plans as a result of modifications to its retirement plans and reductions in certain work groups (see above and Note 2 to American's Consolidated Financial Statements). American updated its significant actuarial assumptions used for the remeasurements including the discount rate, which was lowered to 4.10% and 3.80% for the defined benefit pension plans and retiree medical plans, respectively.

Further, as a result of modifications to its retiree medical plans, American recognized a negative plan amendment of $1.9 billion, which is included as a component of actuarial gain arising in current year in other comprehensive income and will be amortized over the future service life of the active plan participants for whom the benefit was eliminated, or approximately eight years. In addition, a net credit of $124 million, representing unamortized prior service credits of $157 million offset by a curtailment loss of $33 million, is included as a component of reorganization items, net.