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Revenue Recognition

3 Months Ended

Mar. 31, 2020

Revenue

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



	Three Months Ended March 31,
	2020		2019
Passenger revenue:
Passenger travel	$	7,079	$	8,772
Loyalty revenue - travel ⁽¹⁾	602		886
Total passenger revenue	7,681		9,658
Cargo	147		218
Other:
Loyalty revenue - marketing services	571		578
Other revenue	116		130
Total other revenue	687		708
Total operating revenues	$	8,515	$	10,584


⁽¹⁾	Loyalty revenue included in passenger revenue is principally comprised of mileage credit redemptions, which were earned from travel or co-branded credit card and other partners.

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



	Three Months Ended March 31,
	2020		2019
Domestic	$	5,780	$	7,226
Latin America	1,180		1,371
Atlantic	523		673
Pacific	198		388
Total passenger revenue	$	7,681	$	9,658

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, 2020		December 31, 2019
	(In millions)
Loyalty program liability	$	8,851	$	8,615
Air traffic liability	5,473		4,808
Total	$	14,324	$	13,423

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, 2019	$	8,615
Deferral of revenue	887
Recognition of revenue ⁽¹⁾	(651		)
Balance at March 31, 2020 ⁽²⁾	$	8,851

⁽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, 2020, our current loyalty program liability was $3.1 billion and represents our current estimate of revenue expected to be recognized in the next 12 months based on historical trends, with the balance reflected in long-term loyalty program liability expected to be recognized as revenue in periods thereafter. Given the inherent uncertainty of the current operating environment due to COVID-19, we will continue to monitor redemption patterns and may adjust our estimates in the future.

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 generally one year. Accordingly, any revenue associated with tickets sold for future travel will be recognized within 12 months. For the three months ended March 31, 2020, $2.6 billion of revenue was recognized in passenger revenue that was included in our air traffic liability at December 31, 2019. In response to COVID-19, we extended the contract duration for certain tickets, principally those with travel scheduled March 1, 2020 through September 30, 2020. Accordingly, any revenue associated with these tickets will be recognized within 21 months. Additionally, given this change in contract duration, our estimates of revenue from unused tickets may be subject to variability and differ from historical experience.

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,
	2020		2019
Passenger revenue:
Passenger travel	$	7,079	$	8,772
Loyalty revenue - travel ⁽¹⁾	602		886
Total passenger revenue	7,681		9,658
Cargo	147		218
Other:
Loyalty revenue - marketing services	571		578
Other revenue	115		127
Total other revenue	686		705
Total operating revenues	$	8,514	$	10,581


⁽¹⁾	Loyalty revenue included in passenger revenue is principally comprised of mileage credit redemptions, which were earned from travel or co-branded credit card and other partners.

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



	Three Months Ended March 31,
	2020		2019
Domestic	$	5,780	$	7,226
Latin America	1,180		1,371
Atlantic	523		673
Pacific	198		388
Total passenger revenue	$	7,681	$	9,658

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, 2020		December 31, 2019
	(In millions)
Loyalty program liability	$	8,851	$	8,615
Air traffic liability	5,473		4,808
Total	$	14,324	$	13,423



Balance at December 31, 2019	$	8,615
Deferral of revenue	887
Recognition of revenue ⁽¹⁾	(651		)
Balance at March 31, 2020 ⁽²⁾	$	8,851

⁽¹⁾

⁽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, 2020, American's current loyalty program liability was $3.1 billion and represents American's current estimate of revenue expected to be recognized in the next 12 months based on historical trends, with the balance reflected in long-term loyalty program liability expected to be recognized as revenue in periods thereafter. Given the inherent uncertainty of the current operating environment due to COVID-19, American will continue to monitor redemption patterns and may adjust its estimates in the future.

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 generally one year. Accordingly, any revenue associated with tickets sold for future travel will be recognized within 12 months. For the three months ended March 31, 2020, $2.6 billion of revenue was recognized in passenger revenue that was included in American's air traffic liability at December 31, 2019. In response to COVID-19, American extended the contract duration for certain tickets, principally those with travel scheduled March 1, 2020 through September 30, 2020. Accordingly, any revenue associated with these tickets will be recognized within 21 months. Additionally, given this change in contract duration, American's estimates of revenue from unused tickets may be subject to variability and differ from historical experience.