Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Measurements

7. Fair Value Measurements

Assets Measured at Fair Value on a Recurring Basis

We utilize the market approach to measure fair value for 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 three months ended March 31, 2016.

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

	Fair Value Measurements as of March 31, 2016
	Total		Level 1		Level 2		Level 3
Short-term investments (1), (2):
Money market funds	$	382	$	382	$	—	$	—
Corporate obligations		3,396		—		3,396		—
Bank notes/certificates of deposit/time deposits		2,481		—		2,481		—
Repurchase agreements		175		—		175		—
Government agency investments		1		—		1		—
		6,435		382		6,053		—
Restricted cash and short-term investments (1)		691		691		—		—
Total	$	7,126	$	1,073	$	6,053	$	—

⁽¹⁾  Unrealized gains or losses on short-term investments and restricted cash and short-term investments are recorded in accumulated other comprehensive loss at each measurement date.

⁽²⁾  All short-term investments are classified as available-for-sale and stated at fair value. Our short-term investments mature in one year or less except for $804 million of bank notes/certificates of deposit/time deposits and $373 million of corporate obligations.

There were no Level 1 to Level 2 transfers during the three months ended March 31, 2016.

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):

	March 31, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	21,744	$	22,277	$	20,561	$	21,111

Cash and Short-term Investments

Generally, fluctuations in foreign currencies, including devaluations, cannot be predicted by us and can significantly affect the value of our cash and short-term investments located outside the United States. These conditions, as well as any further delays, devaluations or imposition of more stringent repatriation restrictions, may materially adversely affect our business, results of operations and financial condition. See Part II, Item 1A. Risk Factors – “We operate a global business with international operations that are subject to economic and political instability and have been, and in the future may continue to be, adversely affected by numerous events, circumstances or government actions beyond our control” for additional discussion of this and other currency risks.

American Airlines, Inc. [Member]

Fair Value Measurements

5. Fair Value Measurements

Assets Measured at Fair Value on a Recurring Basis

American utilizes the market approach to measure fair value for 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 three months ended March 31, 2016.

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

	Fair Value Measurements as of March 31, 2016
	Total		Level 1		Level 2		Level 3
Short-term investments (1), (2):
Money market funds	$	380	$	380	$	—	$	—
Corporate obligations		3,396		—		3,396		—
Bank notes/certificates of deposit/time deposits		2,480		—		2,480		—
Repurchase agreements		175		—		175		—
Government agency investments		1		—		1		—
		6,432		380		6,052		—
Restricted cash and short-term investments (1)		691		691		—		—
Total	$	7,123	$	1,071	$	6,052	$	—

⁽¹⁾  Unrealized gains or losses on short-term investments and restricted cash and short-term investments are recorded in accumulated other comprehensive loss at each measurement date.

⁽²⁾  All short-term investments are classified as available-for-sale and stated at fair value. American’s short-term investments mature in one year or less except for $804 million of bank notes/certificates of deposit/time deposits and $373 million of corporate obligations.

There were no Level 1 to Level 2 transfers during the three months ended March 31, 2016.

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):

	March 31, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	20,008	$	20,500	$	18,826	$	19,378

Cash and Short-term Investments

Generally, fluctuations in foreign currencies, including devaluations, cannot be predicted by American and can significantly affect the value of American’s cash and short-term investments located outside the United States. These conditions, as well as any further delays, devaluations or imposition of more stringent repatriation restrictions, may materially adversely affect American’s business, results of operations and financial condition. See Part II, Item 1A. Risk Factors – “We operate a global business with international operations that are subject to economic and political instability and have been, and in the future may continue to be, adversely affected by numerous events, circumstances or government actions beyond our control” for additional discussion of this and other currency risks.