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Fair Value Measurements and Other Investments

6 Months Ended

Jun. 30, 2020

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value Measurements and Other Investments

Assets Measured at Fair Value on a Recurring Basis

We utilize the market approach to measure the fair value of our financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. Our short-term investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No changes in valuation techniques or inputs occurred during the six months ended June 30, 2020.

Assets measured at fair value on a recurring basis are summarized below (in millions):



	Fair Value Measurements as of June 30, 2020
	Total		Level 1		Level 2		Level 3
Short-term investments ^{(1), (2)}:
Money market funds	$	7,853	$	7,853	$	—	$	—
Bank notes/certificates of deposit/time deposits	1,131		—		1,131		—
Corporate obligations	367		—		367		—
	9,351		7,853		1,498		—
Restricted cash and short-term investments ^{(1), (4)}	539		390		149		—
Long-term investments ⁽³⁾	128		128		—		—
Total	$	10,018	$	8,371	$	1,647	$	—


⁽¹⁾	All short-term investments are classified as available-for-sale and stated at fair value. Unrealized gains and losses are recorded in accumulated other comprehensive loss at each reporting period. There were no credit losses.


⁽²⁾	Our short-term investments mature in one year or less except for $484 million of bank notes/certificates of deposit/time deposits and $120 million of corporate obligations.


⁽³⁾	Long-term investments primarily include our equity investment in China Southern Airlines, in which we presently own a 1.8% equity interest, and are classified in other assets on the condensed consolidated balance sheet.


⁽⁴⁾	Restricted cash and short-term investments primarily includes money market funds to be used to finance a substantial portion of the cost of the renovation and expansion of Terminal 8 at JFK and collateral held to support workers' compensation obligations.

Fair Value of Debt

The fair value of our long-term debt was estimated using quoted market prices or discounted cash flow analyses, based on our current estimated incremental borrowing rates for similar types of borrowing arrangements. If our long-term debt was measured at fair value, it would have been classified as Level 2 in the fair value hierarchy.

The carrying value and estimated fair value of our long-term debt, including current maturities, were as follows (in millions):



	June 30, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	30,664	$	26,081	$	23,645	$	24,508

American Airlines, Inc. [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value Measurements and Other Investments

Assets Measured at Fair Value on a Recurring Basis

American utilizes the market approach to measure the fair value of its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. American’s short-term investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No changes in valuation techniques or inputs occurred during the six months ended June 30, 2020.

Assets measured at fair value on a recurring basis are summarized below (in millions):



	Fair Value Measurements as of June 30, 2020
	Total		Level 1		Level 2		Level 3
Short-term investments ^(1), (2):
Money market funds	$	7,851	$	7,851	$	—	$	—
Bank notes/certificates of deposit/time deposits	1,131		—		1,131		—
Corporate obligations	367		—		367		—
	9,349		7,851		1,498		—
Restricted cash and short-term investments ^{(1), (4)}	539		390		149		—
Long-term investments ⁽³⁾	128		128		—		—
Total	$	10,016	$	8,369	$	1,647	$	—


⁽¹⁾	All short-term investments are classified as available-for-sale and stated at fair value. Unrealized gains and losses are recorded in accumulated other comprehensive loss at each reporting period. There were no credit losses.


⁽²⁾	American’s short-term investments mature in one year or less except for $484 million of bank notes/certificates of deposit/time deposits and $120 million of corporate obligations.


⁽³⁾	Long-term investments primarily include American's equity investment in China Southern Airlines, in which American presently owns a 1.8% equity interest, and are classified in other assets on the condensed consolidated balance sheet.


⁽⁴⁾	Restricted cash and short-term investments primarily includes money market funds to be used to finance a substantial portion of the cost of the renovation and expansion of Terminal 8 at JFK and collateral held to support workers' compensation obligations.

Fair Value of Debt

The fair value of American’s long-term debt was estimated using quoted market prices or discounted cash flow analyses, based on American’s current estimated incremental borrowing rates for similar types of borrowing arrangements. If American’s long-term debt was measured at fair value, it would have been classified as Level 2 in the fair value hierarchy.

The carrying value and estimated fair value of American’s long-term debt, including current maturities, were as follows (in millions):



	June 30, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	27,307	$	23,284	$	22,372	$	23,196

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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