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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

The Consolidated Financial Statements as of and for the years ended December 31, 2013, 2012 and 2011 include the accounts of the Company and its wholly-owned subsidiaries. As a result of the Merger, the Consolidated Financial Statements presented include the results of AMR and its wholly-owned subsidiaries, American and AMR Eagle, for periods ended prior to December 9, 2013 and consolidated results of AAG, which includes American, AMR Eagle and US Airways Group, for periods ending on or after December 9, 2013. Accordingly, the Consolidated Financial Statements for the year ended December 31, 2013 include the accounts of US Airways Group for the 23 days ended December 31, 2013. Certain prior period amounts have been reclassified to conform to the current year financial statement presentation. All significant intercompany transactions have been eliminated.

Chapter 11 Matters

In accordance with GAAP, the Debtors applied ASC 852 "Reorganizations" (ASC 852), in preparing the Consolidated Financial Statements. ASC 852 requires that the financial statements, for periods subsequent to the Chapter 11 Cases, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain revenues, expenses (including professional fees), realized gains and losses and provisions for losses that are realized or incurred in the Chapter 11 Cases are recorded in Reorganization Items, Net on the accompanying Consolidated Statement of Operations. In addition, pre-petition obligations that may be impacted by the Chapter 11 reorganization process as of December 31, 2012 were classified on the Consolidated Balance Sheet in Liabilities Subject to Compromise.

Certain of AMR's non-U.S. subsidiaries were not part of the Chapter 11 Cases. Since these non-US subsidiaries do not have significant transactions, AAG does not separately disclose the combined financial statements of such non-U.S. subsidiaries in accordance with the requirements of reorganization accounting.

In accordance with ASC 852, AAG did not meet the criteria for and will not adopt "fresh start" accounting as the reorganization value of AMR's assets, as determined based upon an estimate of the fair value of AMR's equity using the trading market price of US Airways Group and the amount of post-petition liabilities as of the Effective Date was greater than total pre-petition liabilities and expected allowed claims. As a result, AAG's assets and liabilities were not adjusted to fair value.

Summary of Reclassifications Between Financial Statement Line Items to Conform to New Financial Statement Presentation

The following table summarizes the historical and revised financial statement amounts for AAG (in millions).



	Year Ended December 31,
	2012						2011
	As Reclassified			Historical			As Reclassified			Historical
Operating revenues:
Mainline passenger	$	18,743		$	18,743		$	17,947		$	17,947
Regional passenger	2,914			2,914			2,724			2,724
Cargo	675			669			709			703
Other	2,523			2,529			2,599			2,605
Total operating revenues	24,855			24,855			23,979			23,979
Operating expenses:
Aircraft fuel and related taxes	7,705			8,717			7,358			8,304
Salaries, wages and benefits	6,217			6,897			6,361			7,053
Regional expenses	3,028			—			3,009			—
Maintenance, materials and repairs	1,158			1,400			1,039			1,284
Other rent and landing fees	1,083			1,304			1,194			1,432
Aircraft rent	553			550			645			662
Selling expenses	1,058			1,050			1,102			1,062
Depreciation and amortization	845			1,015			915			1,086
Special items, net	386			387			756			725
Other	2,674			3,428			2,637			3,425
Total operating expenses	24,707			24,748			25,016			25,033
Operating income (loss)	148			107			(1,037		)	(1,054		)
Nonoperating income (expense):
Interest income	26			26			26			26
Interest expense, net of capitalized interest	(632		)	(612		)	(811		)	(786		)
Other, net	221			242			(39		)	(47		)
Total nonoperating expense, net	$	(385	)	$	(344	)	$	(824	)	$	(807	)

New Accounting Pronouncements

Effective January 1, 2013, the Company adopted revised guidance on the Comprehensive Income topic of the FASB Codification which requires an entity to present, either parenthetically on the face of the financial statements or in the notes, significant amounts reclassified from each component of accumulated other comprehensive income (loss) and the income statement line items affected by the reclassification. The adoption did not have any impact on the Company’s financial position, results of operations or cash flows.

Effective January 1, 2013, the Company adopted revised guidance on Balance Sheet topic of the FASB Codification, which clarifies the scope of disclosures about offsetting assets and liabilities. The clarification applies only to derivatives, repurchase agreements and reverse purchase agreements, and to certain securities borrowing and securities lending transactions, and not to ordinary trade receivables and payables. The adoption did not have any impact on the Company’s financial position, results of operations or cash flows.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the accompanying Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates.

Restricted Cash and Short-term Investments

The Company has restricted cash and short-term investments related primarily to collateral held to support projected workers' compensation obligations, credit card processing holdback requirements.

Aircraft Fuel, Spare Parts, and Supplies, Net

Aircraft fuel, spare parts, and supplies, net

Aircraft fuel, spare parts, and supplies, are recorded at net realizable value based on average costs. These items are expensed when used. An allowance for obsolescence is provided for aircraft spare parts and supplies.

Maintenance, Materials and Repairs

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

Goodwill

Goodwill represents the excess of the purchase price over the net fair value of the assets acquired and liabilities assumed by AAG on December 9, 2013, in connection with the Merger. Goodwill will not be amortized but tested for impairment annually.

Other Intangibles, Net

Other Intangibles, net

Intangible assets consist primarily of airport take-off and landing rights (Slots), customer relationships, market partners, international route authorities, and tradenames. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

In connection with the application of acquisition accounting as of December 9, 2013, the intangible assets acquired from US Airways were measured at fair value using the market and income approaches. The Company utilized the market approach to value airport Slots, when sufficient market information was available, and included prices and other relevant information generated by market transactions involving comparable assets as well as pricing guides and other sources. The Company utilized the income approach to value the customer relationships and marketing agreements, certain international route authorities and the US Airways tradenames. The income approach indicates value for a subject asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required market rate of return that reflects the relative risk of achieving the cash flows and the time value of money.

The following table provides information relating to the Company's amortized intangible assets as of December 31, 2013 and 2012 (in millions):



	2013			2012
Airport Slots	$	332		$	515
Customer relationships	300			—
Marketing agreements	105			—
Tradenames	35			—
Airport gate leasehold rights	155			155
Accumulated amortization	(373		)	(509		)
Total	$	554		$	161

Airport operating and gate lease rights are being amortized on a straight-line basis over 25 years to a zero residual value. The customer relationships, marketing agreements and tradenames were identified as intangible assets subject to amortization and will be amortized over approximately nine years, 30 years and 15 months, respectively.

The Company recorded amortization expense related to these intangible assets of approximately $20 million, $25 million, and $27 million for the years ended December 31, 2013, 2012 and 2011, respectively. The Company expects to record annual amortization expense for the aforementioned definite-life intangible assets as follows (in millions):



	2014		2015		2016		2017		2018
Amortization expense	$	79	$	54	$	48	$	44	$	40

The Company's indefinite-lived assets include certain international route authorities and domestic airport take-off and landing slots. Indefinite-lived assets are not amortized but instead are reviewed for impairment annually and more frequently if events or circumstances indicate that the asset may be impaired. As of December 31, 2013, and 2012, the Company had $1.8 billion and $708 million, respectively, of indefinite-lived intangible assets on its Consolidated Balance Sheet.

Operating Property and Equipment

Operating property and equipment are recorded at cost. Interest expense related to the acquisition of certain property and equipment, including aircraft purchase deposits, is capitalized as an additional cost of the asset. Interest capitalized for the years ended December 31, 2013, 2012 and 2011 was $47 million, $50 million and $40 million, respectively. Property and equipment is depreciated and amortized to residual values over the estimated useful lives or the lease term, whichever is less, using the straight-line method. Costs of major improvements that enhance the usefulness of the asset are capitalized and depreciated over the estimated useful life of the asset or the modifications, whichever is less. The depreciable lives used for the principal depreciable asset classifications are:



Principal Depreciable Asset Classification		Depreciable Life
Jet aircraft and engines		16- 30 years
Other regional aircraft and engines		25 years
Major rotable parts, avionics and assemblies		Fleet end date
Improvements to leased flight equipment		Shorter of asset/leasehold improvement or lease end date
Buildings and improvements		Lesser of 5 - 30 years or lease term
Furniture, fixtures and other equipment		3-10 years: Ranges from computer hardware to furniture
Capitalized software		Lesser of 5 years or lease term

Residual values for aircraft, engines, major rotable parts, avionics and assemblies are generally 5% to 10%, except when guaranteed by a third-party for a different amount.

Equipment and property under capital leases are amortized over the term of the leases or, in the case of certain aircraft, over their expected useful lives. Lease terms vary but are generally 16 to 30 years for aircraft and three to 30 years for other leased equipment and property.

The Company records impairment charges on long-lived assets used in operations when events and circumstances indicate that the assets may be impaired. An asset or group of assets is considered impaired when the undiscounted cash flows estimated to be generated by the asset are less than the carrying amount of the asset and the net book value of the asset exceeds its estimated fair value. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.

Passenger Revenue

Passenger ticket sales are initially recorded as a component of Air traffic liability. Revenue derived from ticket sales is recognized at the time service is provided. However, due to various factors, including the complex pricing structure and interline agreements throughout the industry, certain amounts are recognized in revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized, including breakage. These estimates are generally based upon the evaluation of historical trends, including the use of regression analysis and other methods to model the outcome of future events based on the Company's historical experience, and are recorded at the scheduled time of departure.

The Company purchases capacity, or ASMs, generated by the Company's wholly-owned regional air carriers and the capacity of Air Wisconsin Airlines Corporation (Air Wisconsin), Republic Airways Holdings' subsidiaries Republic Airlines (Republic) and Chautauqua Airlines (Chautauqua), Mesa Airlines, Inc. (Mesa), and SkyWest Airlines, Inc.'s subsidiaries Sky West Airlines (SkyWest) and ExpressJet Airlines (ExpressJet) in certain markets. The Company's wholly-owned regional air carriers and Air Wisconsin, Chautauqua, ExpressJet, Republic, Mesa, and SkyWest operate regional aircraft in these markets as part of either American Eagle carriers or US Airways Express. The Company classifies revenues generated from transportation on these carriers as regional passenger revenues. Liabilities related to tickets sold by the Company for travel on these air carriers are also included in the Company's air traffic liability and are subsequently relieved in the same manner as described above.

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

Frequent Flyer Programs

The Company currently operates two frequent traveler programs, American's AAdvantage and US Airways' Dividend Miles. These programs award mileage credits to passengers who fly on American and oneworld carriers and US Airways and Star Alliance carriers, respectively, as well as certain other partner airlines that participate in the programs. Effective March 31, 2014, US Airways will join the oneworld alliance and exit the Star Alliance. At that point, frequent travel reciprocity will be discontinued for many Star Alliance airlines. Mileage credits can also be earned through purchases from other non-airline partners that participate in our respective loyalty programs. Mileage credits can be redeemed for travel on American, US Airways or other participating partner airlines, in which case the Company pays a fee.

The Company uses the incremental cost method to account for the portion of our frequent flyer liability incurred when AAdvantage and Dividend Miles members earn mileage credits by flying on American, US Airways or its regional affiliates. The Company has an obligation to provide future travel when these mileage credits are redeemed and therefore has recorded a liability for mileage credits outstanding.

The incremental cost liability includes all mileage credits that are expected to be redeemed, including mileage credits earned by members whose mileage account balances have not yet reached the minimum mileage credit level required to redeem an award. Additionally, outstanding mileage credits are subject to expiration if unused. In calculating the liability, the Company estimates how many mileage credits will never be redeemed for travel and excludes those mileage credits from the estimate of the liability. Estimates are also made for the number of miles that will be used per award redemption and the number of travel awards that will be redeemed on partner airlines. These estimates are based on historical program experience as well as consideration of enacted program changes, as applicable. Changes in the liability resulting from members earning additional mileage credits or changes in estimates are recorded in the statement of operations as a part of passenger revenue.

The liability for outstanding mileage credits is valued based on the estimated incremental cost of carrying one additional passenger. Incremental cost primarily includes unit costs incurred for fuel, food, and insurance as well as fees incurred when travel awards are redeemed on partner airlines. In addition, the Company also includes in the determination of incremental cost the amount of certain fees related to redemptions expected to be collected from AAdvantage and Dividend Miles members. These redemption fees reduce incremental cost. No profit or overhead margin is included in the accrual of incremental cost. These estimates are generally updated based upon our 12-month historical average of such costs.

The Company applied the acquisition method of accounting in connection with the Merger and therefore recorded the liability for outstanding US Airways mileage credits at fair value. As of December 31, 2013, the liability for outstanding mileage credits expected to be redeemed for future travel awards for US Airways under the Dividend Miles program was $932 million and is included on the consolidated balance sheets within Frequent flyer liability. This liability will be reduced as miles are redeemed and new miles earned will be recorded as a liability based on the incremental cost method discussed above.

As of December 31, 2013 the liability for outstanding mileage credits for the AAdvantage program was $580 million and is included on the consolidated balance sheets within Frequent flyer liability.

American and US Airways also sell frequent flyer program mileage credits to participating airline partners and non-airline business partners. Sales of mileage credits to business partners is comprised of two components, transportation and marketing. Historically, American and US Airways have used the residual method of accounting to determine the values of each component as there had not been a material modification to any significant agreements since our adoption of Accounting Standards Update (ASU) No. 2009-13, "Revenue Recognition (Topic 605) - Multiple-Deliverable Revenue Arrangements" on January 1, 2011.

During the fourth quarter, American and Citibank amended their current AAdvantage co-branded credit card agreement which resulted in a material modification of the terms of the arrangement. Also, in connection with the acquisition of US Airways on December 9, 2013, a material modification occurred on all of US Airways' agreements in connection with the merger. Therefore, subsequent to the amendments of these arrangements, AAG will apply the relative selling price method to determine the values of each deliverable. Under the relative selling price approach, American and US Airways identified five revenue elements for the co-branded credit card agreement with Citibank and Dividend Miles co-branded credit card agreement with Barclays: the transportation component; use of the American and US Airways’ brand including access to frequent flyer member lists; advertising; lounge access; and baggage services (together excluding "the transportation component", the "marketing component").

The transportation component represents the estimated selling price of future travel awards and is determined using historical transaction information, including information related to customer redemption patterns. The transportation component is deferred based on its relative selling price and amortized into passenger revenue on a straight-line basis over the period in which the mileage credits are expected to be redeemed for travel.

The marketing component represents services provided to the Company's business partners and relates primarily to the use of American’s and US Airways’ logo and tradenames along with access to customers lists of AAdvantage and Dividend Miles members. The marketing services are provided periodically, but no less than monthly. Accordingly, the marketing component is considered earned and recognized in other revenues in the period of the mileage sale.

Upon application of the relative selling price method in the fourth quarter for American’s Citibank modification, American reduced its travel component liability and recorded Other Revenue of approximately $31 million. As a result of the change in the marketing component value when the relative selling price method is applied, American and US Airways now defer less revenue per mile sold.

For American’s agreements where there has not been a material modification, it continues to apply the residual method.

As of December 31, 2013 and 2012, the Company had $1.5 billion and $1.2 billion, respectively in deferred revenue from the sale of mileage credits (recorded as Frequent flyer liability on the consolidated balance sheets). For the years ended December 31, 2013, 2012 and 2011, the marketing component of mileage sales recognized at the time of sale in other revenues was approximately $834 million, $725 million and $761 million, respectively.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. A valuation allowance is established, if necessary, for the amount of any tax benefits that, based on available evidence, are not expected to be realized.

Selling Expenses

Selling expenses include commissions, credit card fees, computerized reservations systems fees and advertising. Advertising expenses are expensed on a straight-line basis as incurred throughout the year. Advertising expense was $166 million, $153 million and $186 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Deferred Gains and Credits, Net

Deferred Gains and Credits, net

Included within deferred gains and credits, net are amounts deferred and amortized into future periods associated with the adjustment of leases to fair value in connection with the application of acquisition accounting and certain vendor incentives.

Share-based Compensation

The Company accounts for its share-based compensation expense based on the fair value of the stock award at the time of grant, which is recognized ratably over the vesting period of the stock award. The fair value of stock options and stock appreciation rights is estimated using a Black-Scholes option pricing model. The fair value of restricted stock units is based on the market price of the underlying shares of common stock on the date of grant. See Note 12 for further discussion of share-based compensation.

Foreign Currency Gains and Losses

Foreign currency gains and losses are recorded as part of other nonoperating expense, net in AAG's Consolidated Statements of Operations. Foreign currency losses for 2013, 2012 and 2011 were $56 million, $41 million and $17 million, respectively.

Subsequent Events

In connection with preparation of the Consolidated Financial Statements and in accordance U.S. GAAP, the Company evaluated subsequent events after the balance sheet date of December 31, 2013 and identified items as set forth in Note 20 to AAG's Consolidated Financial Statements.

AA [Member]

Accounting Policies [Line Items]

Basis of Presentation - Consolidation

The Consolidated Financial Statements as of and for the years ended December 31, 2013, 2012 and 2011 include the accounts of American. Certain prior period amounts have been reclassified to conform to the current year financial statement presentation. All significant intercompany transactions have been eliminated.

Chapter 11 Matters

Certain of American's non-U.S. subsidiaries are not part of the Chapter 11 Cases. Since these non-US subsidiaries do not have significant transactions, American does not separately disclose the combined financial statements of such non-U.S. subsidiaries in accordance with the requirements of reorganization accounting.

In accordance with ASC 852, American did not meet the criteria for and will not adopt "fresh start" accounting as the reorganization value of American's assets, as determined based upon an estimate of the fair value of AMR's equity using the trading market price of US Airways Group, the amount of post-petition liabilities as of the Effective Date was significantly greater than the total pre-petition liabilities and expected allowed claims. As a result, our assets and liabilities were not adjusted to fair value; but rather liabilities compromised by the Plan are stated at present values of amounts to be paid.

Business Combinations Policy [Policy Text Block]

Reclassifications

Certain prior period amounts have been reclassified between various financial statement line items to conform to the new AAG financial statement presentation. These reclassifications do not impact the historic net income and are comprised principally of the following items:


•	Reclassifications between various operating income line items to confirm the presentation of Cargo and Other revenues.


•	Reclassifications between various operating expense line items to conform the presentation of regional airline expenses.


•	Reclassifications between other nonoperating income (expense), net and operating expenses to conform the presentation of foreign currency gains and losses.

The following table summarizes the historical and revised financial statement amounts for American (in millions).



	Year Ended December 31,
	2012						2011
	As Reclassified			Historical			As Reclassified			Historical
Operating revenues:
Mainline passenger	$	18,743		$	18,743		$	17,947		$	17,947
Regional passenger	2,914			2,914			2,724			2,724
Cargo	675			669			709			703
Other	2,493			2,499			2,577			2,583
Total operating revenues	24,825			24,825			23,957			23,957
Operating expenses:
Aircraft fuel and related taxes	7,705			8,717			7,358			7,434
Salaries, wages and benefits	6,208			6,242			6,353			6,385
Regional expenses	3,049			1,142			3,099			2,418
Maintenance, materials and repairs	1,158			1,133			1,038			1,020
Other rent and landing fees	1,083			1,286			1,194			1,305
Aircraft rent	554			550			645			673
Selling expenses	1,059			1,050			1,103			1,062
Depreciation and amortization	845			999			915			950
Special items, net	386			386			756			725
Other	2,696			3,279			2,650			3,155
Total operating expenses	24,743			24,784			25,111			25,127
Operating income (loss)	82			41			(1,154		)	(1,170		)
Nonoperating income (expense):
Interest income	25			25			25			25
Interest expense, net of capitalized interest	(633		)	(612		)	(672		)	(649		)
Related-party interest	(13		)	(13		)	(14		)	(14		)
Other, net	223			243			(34		)	(41		)
Total nonoperating expense, net	$	(398	)	$	(357	)	$	(695	)	$	(679	)

Additionally, the Company reclassified approximately $292 million from current to noncurrent liabilities as of December 31, 2012.

Summary of Reclassifications Between Financial Statement Line Items to Conform to New Financial Statement Presentation

The following table summarizes the historical and revised financial statement amounts for American (in millions).



	Year Ended December 31,
	2012						2011
	As Reclassified			Historical			As Reclassified			Historical
Operating revenues:
Mainline passenger	$	18,743		$	18,743		$	17,947		$	17,947
Regional passenger	2,914			2,914			2,724			2,724
Cargo	675			669			709			703
Other	2,493			2,499			2,577			2,583
Total operating revenues	24,825			24,825			23,957			23,957
Operating expenses:
Aircraft fuel and related taxes	7,705			8,717			7,358			7,434
Salaries, wages and benefits	6,208			6,242			6,353			6,385
Regional expenses	3,049			1,142			3,099			2,418
Maintenance, materials and repairs	1,158			1,133			1,038			1,020
Other rent and landing fees	1,083			1,286			1,194			1,305
Aircraft rent	554			550			645			673
Selling expenses	1,059			1,050			1,103			1,062
Depreciation and amortization	845			999			915			950
Special items, net	386			386			756			725
Other	2,696			3,279			2,650			3,155
Total operating expenses	24,743			24,784			25,111			25,127
Operating income (loss)	82			41			(1,154		)	(1,170		)
Nonoperating income (expense):
Interest income	25			25			25			25
Interest expense, net of capitalized interest	(633		)	(612		)	(672		)	(649		)
Related-party interest	(13		)	(13		)	(14		)	(14		)
Other, net	223			243			(34		)	(41		)
Total nonoperating expense, net	$	(398	)	$	(357	)	$	(695	)	$	(679	)

New Accounting Pronouncements

Effective January 1, 2013, American adopted revised guidance on the Comprehensive Income topic of the FASB Codification which requires an entity to present either parenthetically on the face of the financial statements or in the notes, significant amounts reclassified from each component of accumulated other comprehensive income (loss) and the income statement line items affected by the reclassification. The adoption did not have any impact on American’s financial position, results of operations or cash flows.

Effective January 1, 2013, American adopted revised guidance on Balance Sheet topic of the FASB Codification, which clarifies the scope of disclosures about offsetting assets and liabilities. The clarification applies only to derivatives, repurchase agreements and reverse purchase agreements, and to certain securities borrowing and securities lending transactions, and not to ordinary trade receivables and payables. The adoption did not have any impact on the American’s financial position, results of operations or cash flows.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates.

Restricted Cash and Short-term Investments

Restricted and Short-term Investments

American has restricted cash and short-term investments related primarily to collateral held to support projected workers' compensation obligations and funds held for certain tax obligations.

Aircraft Fuel, Spare Parts, and Supplies, Net

Aircraft fuel, spare parts, and supplies, net

Maintenance, Materials and Repairs

Other Intangibles, Net

Other Intangibles, net

Intangible assets consist primarily of airport take-off and landing rights (Slots). Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Indefinite-lived intangible assets (route acquisition costs and international Slots) are tested for impairment annually on December 31, rather than amortized, or when a triggering event occurs, in accordance with U.S. GAAP. Such triggering events may include significant changes to the Company's network or capacity, or the implementation of open skies agreements in countries where the Company operates flights.

As there is minimal market activity for the valuation of routes and international Slots, the Company measures fair value with inputs using the income approach. The income approach uses valuation techniques, such as future cash flows, to convert future amounts to a single present discounted amount. The inputs utilized for these valuations are unobservable and reflect the Company's assumptions about market participants and what they would use to value the routes and accordingly are considered Level 3 in the fair value hierarchy. The Company's unobservable inputs are developed based on the best information available as of December 31, 2013.

The following table provides information relating to the Company's amortized intangible assets as of December 31, 2013 and 2012 (in millions):



	2013			2012
Airport Slots	$	277		$	515
Airport gate leasehold rights	155			155
Accumulated amortization	(375		)	(509		)
Total	$	57		$	161

Airport operating and gate lease rights are being amortized on a straight-line basis over 25 years to a zero residual value. The Dividend Miles customer relationships, marketing agreements and trademarks were identified as intangible assets subject to amortization and will be amortized over approximately 9 years, 30 years and 15 months, respectively.

American recorded amortization expense related to these intangible assets of approximately $18 million, $25 million, and $27 million for the years ended December 31, 2013, 2012 and 2011, respectively. American expects to record annual amortization expense for the aforementioned definite-life intangible assets as follows (in millions):



	2014		2015		2016		2017		2018
Amortization expense	$	12	$	10	$	9	$	5	$	1

The Company's indefinite-lived assets include certain international route authorities and domestic airport take-off and landing slots. Indefinite-lived assets are not amortized but instead are reviewed for impairment annually and more frequently if events or circumstances indicate that the asset may be impaired. As of December 31, 2013, and 2012, the Company had $755 million and $708 million, respectively, of indefinite-lived intangible assets on its Consolidated Balance Sheet.

Operating Property and Equipment

Equipment and Property

Property and equipment are recorded at cost. Interest expense related to the acquisition of certain property and equipment, including aircraft purchase deposits, is capitalized as an additional cost of the asset. Interest capitalized for the years ended December 31, 2013, 2012 and 2011 was $47 million, $50 million and $40 million, respectively. Property and equipment is depreciated and amortized to residual values over the estimated useful lives or the lease term, whichever is less, using the straight-line method. Costs of major improvements that enhance the usefulness of the asset are capitalized and depreciated over the estimated useful life of the asset or the modifications, whichever is less. The depreciable lives used for the principal depreciable asset classifications are:



Principal Depreciable Asset Classification		Depreciable Life
American jet aircraft and engines		16- 30 years
Other regional aircraft and engines		25 years
Major rotable parts, avionics and assemblies		Fleet end date
Improvements to leased flight equipment		Shorter of asset/leasehold improvement or lease end date
Buildings and improvements (principally on leased land)		Lesser of 5 - 30 years or lease term
Furniture, fixtures and other equipment		3-10 years: Ranges from computer hardware to furniture
Capitalized software		Lesser of 5 years or lease term

Residual values for aircraft, engines, major rotable parts, avionics and assemblies are generally 5% to 10%, except when guaranteed by a third-party for a different amount.

Passenger Revenue

Passenger ticket sales are initially recorded as a component of Air traffic liability. Revenue derived from ticket sales is recognized at the time service is provided. However, due to various factors, including the complex pricing structure and interline agreements throughout the industry, certain amounts are recognized in revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized, including breakage. These estimates are generally based upon the evaluation of historical trends, including the use of regression analysis and other methods to model the outcome of future events based on American's historical experience, and are recorded at the scheduled time of departure.

American purchases capacity, or ASMs, generated by the Company's wholly-owned regional air carriers and the capacity of Republic Airways Holdings' subsidiaries Republic Airlines (Republic) and Chautauqua Airlines (Chautauqua), and SkyWest Airlines, Inc.'s subsidiaries Sky West Airlines (SkyWest) and ExpressJet Airlines (ExpressJet) in certain markets. American's wholly-owned regional air carriers and Chautauqua, ExpressJet, Republic, and SkyWest operate regional aircraft in these markets as part of American Eagle carriers. American classifies revenues generated from transportation on these carriers as regional passenger revenues. Liabilities related to tickets sold by American for travel on these air carriers are also included in American's air traffic liability and are subsequently relieved in the same manner as described above

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

Frequent Flyer Programs

American currently operates the AAdvantage frequent flyer program. This program awards mileage credits to passengers who fly on American and oneworld carriers, as well as certain other partner airlines that participate in the programs. Mileage credits can also be earned through purchases from other non-airline partners that participate in American's loyalty program. Mileage credits can be redeemed for travel on American, US Airways or other participating partner airlines, in which case American pays a fee.

American uses the incremental cost method to account for the portion of our frequent flyer liability incurred when AAdvantage members earn mileage credits by flying on American or its regional affiliates. The Company has an obligation to provide future travel when these mileage credits are redeemed and therefore has recorded a liability for mileage credits outstanding.

The incremental cost liability includes all mileage credits that are expected to be redeemed, including mileage credits earned by members whose mileage account balances have not yet reached the minimum mileage credit level required to redeem an award. Additionally, outstanding mileage credits are subject to expiration if unused. In calculating the liability, American estimates how many mileage credits will never be redeemed for travel and excludes those mileage credits from the estimate of the liability. Estimates are also made for the number of miles that will be used per award redemption and the number of travel awards that will be redeemed on partner airlines. These estimates are based on historical program experience as well as consideration of enacted program changes, as applicable. Changes in the liability resulting from members earning additional mileage credits or changes in estimates are recorded in the statement of operations as a part of passenger revenue.

The liability for outstanding mileage credits is valued based on the estimated incremental cost of carrying one additional passenger. Incremental cost primarily includes unit costs incurred for fuel, food, and insurance as well as fees incurred when travel awards are redeemed on partner airlines. In addition, American also includes in the determination of incremental cost the amount of certain fees related to redemptions expected to be collected from AAdvantage members. These redemption fees reduce incremental cost. No profit or overhead margin is included in the accrual of incremental cost. These estimates are generally updated based upon our 12-month historical average of such costs.

As of December 31, 2013 the liability for outstanding mileage credits for the AAdvantage program was $580 million and is included on the consolidated balance sheets within frequent flyer liability.

American also sells frequent flyer program mileage credits to participating airline partners and non-airline business partners. Sales of mileage credits to business partners is comprised of two components, transportation and marketing. Historically, American has used the residual method of accounting to determine the values of each component as there had not been a material modification to any significant agreements since our adoption of Accounting Standards Update (ASU) No. 2009-13, "Revenue Recognition (Topic 605) - Multiple-Deliverable Revenue Arrangements" on January 1, 2011.

During the fourth quarter, American and Citibank amended their current AAdvantage co-branded credit card agreement which resulted in a material modification of the terms of the arrangement. Therefore, subsequent to the amendment of the arrangement, American will apply the relative selling price method to determine the values of each deliverable. Under the relative selling price approach, American identified five revenue elements for the co-branded credit card agreements with Citibank: the transportation component; use of the American’s brand including access to frequent flyer member lists; advertising; lounge access; and baggage services (together excluding "the transportation component", the "marketing component").

The marketing component represents services provided to American's business partners and relates primarily to the use of American’s logo and tradename along with access to customers lists of AAdvantage members. The marketing services are provided periodically, but no less than monthly. Accordingly, the marketing component is considered earned and recognized in other revenues in the period of the mileage sale.

For American’s agreements where there has not been a material modification, it continues to apply the residual method.

As of December 31, 2013 and 2012, American had $1.2 billion in deferred revenue from the sale of mileage credits (recorded as Frequent flyer liability on the consolidated balance sheets). For the years ended December 31, 2013, 2012 and 2011, the marketing component of mileage sales recognized at the time of sale in other revenues was approximately $816 million, $725 million and $761 million, respectively.

Income Taxes

Selling Expenses

Share-based Compensation

The Company accounts for its share-based compensation expense based on the fair value of the stock award at the time of grant, which is recognized ratably over the vesting period of the stock award. The fair value of stock options and stock appreciation rights is estimated using a Black-Scholes option pricing model. The fair value of restricted stock units is based on the market price of the underlying shares of common stock on the date of grant. See Note 11 for further discussion of share-based compensation.

Foreign Currency Gains and Losses

Foreign currency gains and losses are recorded as part of other nonoperating expense, net in American's consolidated statements of operations. Foreign currency losses for 2013, 2012 and 2011 were $55 million, $41 million and $17 million, respectively.

Subsequent Events