Revenue Recognition

3 Months Ended

Mar. 31, 2019

Revenue

The following are the significant categories comprising our reported operating revenues (in millions):



	Three Months Ended March 31,
	2019		2018
Passenger revenue:
Passenger travel	$	8,772	$	8,630
Loyalty revenue - travel ⁽¹⁾	886		850
Total passenger revenue	9,658		9,480
Cargo	218		227
Other:
Loyalty revenue - marketing services	578		570
Other revenue	130		124
Total other revenue	708		694
Total operating revenues	$	10,584	$	10,401


⁽¹⁾	Loyalty revenue included in passenger revenue is principally comprised of mileage credit redemptions earned through travel and mileage credits sold to co-branded credit card and other partners. See "Loyalty Revenue" below for further discussion on these mileage credits.

The following is our total passenger revenue by geographic region (in millions):



	Three Months Ended March 31,
	2019		2018
Domestic	$	7,226	$	6,963
Latin America	1,371		1,445
Atlantic	673		669
Pacific	388		403
Total passenger revenue	$	9,658	$	9,480

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

Contract Balances

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



	March 31, 2019		December 31, 2018
	(In millions)
Loyalty program liability	$	8,568	$	8,539
Air traffic liability	5,930		4,339
Total	$	14,498	$	12,878

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



Balance at December 31, 2018	$	8,539
Deferral of revenue	963
Recognition of revenue ⁽¹⁾	(934		)
Balance at March 31, 2019 ⁽²⁾	$	8,568


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

⁽²⁾

Mileage credits can be redeemed at any time and do not expire as long as that AAdvantage member has any type of qualifying activity at least every 18 months. As of March 31, 2019, our current loyalty program liability was $3.4 billion and represents our current estimate of revenue expected to be recognized in the next twelve months based on historical trends, with the balance reflected in long-term loyalty program liability expected to be recognized as revenue in periods thereafter.

The air traffic liability principally represents tickets sold for future travel on American and partner airlines, as well as estimated future refunds and exchanges of tickets sold for past travel. The balance in our air traffic liability also fluctuates with seasonal travel patterns. The contract duration of passenger tickets is one year. Accordingly, any revenue associated with tickets sold for future travel will be recognized within twelve months. For the three months ended March 31, 2019, $2.6 billion of revenue was recognized in passenger revenue that was included in our air traffic liability at December 31, 2018.

American Airlines, Inc. [Member]

Entity Information [Line Items]

Revenue Recognition

Revenue

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



	Three Months Ended March 31,
	2019		2018
Passenger revenue:
Passenger travel	$	8,772	$	8,630
Loyalty revenue - travel ⁽¹⁾	886		850
Total passenger revenue	9,658		9,480
Cargo	218		227
Other:
Loyalty revenue - marketing services	578		570
Other revenue	127		121
Total other revenue	705		691
Total operating revenues	$	10,581	$	10,398


⁽¹⁾	Loyalty revenue included in passenger revenue is principally comprised of mileage credit redemptions earned through travel and mileage credits sold to co-branded credit card and other partners. See "Loyalty Revenue" below for further discussion on these mileage credits.

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



	Three Months Ended March 31,
	2019		2018
Domestic	$	7,226	$	6,963
Latin America	1,371		1,445
Atlantic	673		669
Pacific	388		403
Total passenger revenue	$	9,658	$	9,480

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

Contract Balances

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



	March 31, 2019		December 31, 2018
	(In millions)
Loyalty program liability	$	8,568	$	8,539
Air traffic liability	5,930		4,339
Total	$	14,498	$	12,878



Balance at December 31, 2018	$	8,539
Deferral of revenue	963
Recognition of revenue ⁽¹⁾	(934		)
Balance at March 31, 2019 ⁽²⁾	$	8,568

⁽¹⁾

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

⁽²⁾

Mileage credits can be redeemed at any time and do not expire as long as that AAdvantage member has any type of qualifying activity at least every 18 months. As of March 31, 2019, American's current loyalty program liability was $3.4 billion and represents American's current estimate of revenue expected to be recognized in the next twelve months based on historical trends, with the balance reflected in long-term loyalty program liability expected to be recognized as revenue in periods thereafter.

The air traffic liability principally represents tickets sold for future travel on American and partner airlines, as well as estimated future refunds and exchanges of tickets sold for past travel. The balance in American's air traffic liability also fluctuates with seasonal travel patterns. The contract duration of passenger tickets is one year. Accordingly, any revenue associated with tickets sold for future travel will be recognized within twelve months. For the three months ended March 31, 2019, $2.6 billion of revenue was recognized in passenger revenue that was included in American's air traffic liability at December 31, 2018.