Income Taxes

6 Months Ended

Jun. 30, 2025

Income Taxes [Line Items]

Income Taxes

Income Taxes

At December 31, 2024, we had approximately $12.9 billion of gross federal net operating losses (NOLs) and $5.9 billion of other carryforwards available to reduce future federal taxable income, of which $2.6 billion will expire beginning in 2033 if unused and $16.2 billion can be carried forward indefinitely. We also had approximately $5.2 billion of NOL carryforwards to reduce future state taxable income at December 31, 2024, which will expire in taxable years 2024 through 2044 if unused.

Our ability to use our NOLs and other carryforwards depends on the amount of taxable income generated in future periods. We provide a valuation allowance for our deferred tax assets, which include our NOLs and other carryforwards, when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized. We consider all available positive and negative evidence and make certain assumptions in evaluating the realizability of our deferred tax assets. Many factors are considered that impact our assessment of future profitability, including conditions which are beyond our control, such as the health of the economy, the availability and price volatility of aircraft fuel and travel demand. We have determined that positive factors outweigh negative factors in the determination of the realizability of our deferred tax assets.

We have historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full year to income or loss for the reporting period. We have changed to use the discrete method to calculate taxes for the three and six months ended June 30, 2025. At this time, we believe that the use of the discrete method for the three and six months ended June 30, 2025 is more appropriate than the estimated annual effective tax rate method due to the fact that small changes in projected full year income could cause material fluctuations in our annual effective tax rate applied during each quarter.

During the three and six months ended June 30, 2025, we recorded an income tax provision of $239 million and $63 million, respectively, which was substantially non-cash due to the utilization of the NOLs described above. Substantially all of our income before income taxes is attributable to the United States.

On July 4, 2025, H.R. 1, the “One Big Beautiful Bill Act” (the OBBBA) was signed into law in the U.S. Among other changes, the OBBBA modifies key business tax provisions, including by restoring 100% bonus depreciation under Section 168(k), reverting to the higher, EBITDA-based, business interest expense limitation under Section 163(j) and changing the computation of taxes related to international operations. Based on our current analysis of these provisions, we do not believe these provisions will have a material impact on our consolidated financial statements.

American Airlines, Inc.

Income Taxes [Line Items]

Income Taxes

Income Taxes

At December 31, 2024, American had approximately $12.8 billion of gross federal net operating losses (NOLs) and $4.2 billion of other carryforwards available to reduce future federal taxable income, of which $2.9 billion will expire beginning in 2033 if unused and $14.1 billion can be carried forward indefinitely. American is a member of AAG’s consolidated federal and certain state income tax returns. American also had approximately $5.0 billion of NOL carryforwards to reduce future state taxable income at December 31, 2024, which will expire in taxable years 2024 through 2044 if unused.

American’s ability to use its NOLs and other carryforwards depends on the amount of taxable income generated in future periods. American provides a valuation allowance for its deferred tax assets, which include its NOLs and other carryforwards, when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. American considers all available positive and negative evidence and makes certain assumptions in evaluating the realizability of its deferred tax assets. Many factors are considered that impact American’s assessment of future profitability, including conditions which are beyond its control, such as the health of the economy, the availability and price

volatility of aircraft fuel and travel demand. American has determined that positive factors outweigh negative factors in the determination of the realizability of its deferred tax assets.

American has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full year to income or loss for the reporting period. American has changed to use the discrete method to calculate taxes for the three and six months ended June 30, 2025. At this time, American believes that the use of the discrete method for the three and six months ended June 30, 2025 is more appropriate than the estimated annual effective tax rate method due to the fact that small changes in projected full year income could cause material fluctuations in American’s annual effective tax rate applied during each quarter.

During the three and six months ended June 30, 2025, American recorded an income tax provision of $267 million and $123 million, respectively, which was substantially non-cash due to the utilization of the NOLs described above. Substantially all of American’s income before income taxes is attributable to the United States.

On July 4, 2025, H.R. 1, the “One Big Beautiful Bill Act” (the OBBBA) was signed into law in the U.S. Among other changes, the OBBBA modifies key business tax provisions, including by restoring 100% bonus depreciation under Section 168(k), reverting to the higher, EBITDA-based, business interest expense limitation under Section 163(j) and changing the computation of taxes related to international operations. Based on American’s current analysis of these provisions, American does not believe these provisions will have a material impact on its consolidated financial statements.