American Airlines Group Inc. (AAL)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Part I, Item 2 of this report should be read in conjunction with Part II, Item 7 of AAG’s and American’s Annual Report on Form 10-K for the year ended December 31, 2025 (2025 Form 10-K). The information contained herein is not a comprehensive discussion and analysis of the financial condition and results of operations of AAG and American, but rather updates disclosures made in the 2025 Form 10-K.

Financial Overview

Business and Macroeconomic Conditions

Worldwide macroeconomic, political and military events, including war, terrorist activity, and conflict in the Middle East (particularly if it intensifies or is prolonged) and in Ukraine, have contributed, and are likely to continue to contribute, to oil and natural gas price volatility. These factors, along with changes in U.S. or international trade policies and continued uncertainty surrounding such policies, could lead to weakened business conditions for the transportation industry, which may adversely impact our operations through increased supply chain challenges, commodity price volatility and a decline in discretionary spending and consumer confidence, among others.

Our operating results are materially impacted by changes in the availability, price volatility and cost of aircraft fuel, which represents one of the largest single cost items in our business. Because of the amount of fuel needed to operate our business, even a relatively small increase or decrease in the price of aircraft fuel can have a material effect on our operating results and liquidity. Market prices for aircraft fuel have fluctuated substantially during the first six months of 2026 and prices continue to be highly volatile, with market spot prices ranging from a low of approximately $1.86 per gallon to a high of approximately $4.78 per gallon during the first six months of 2026.

AAG’s Second Quarter 2026 Results

The selected financial data presented below is derived from AAG’s unaudited condensed consolidated financial statements included in Part I, Item 1A of this report and should be read in conjunction with those financial statements and the related notes thereto.

(1)See “Reconciliation of GAAP to Non-GAAP Financial Measures” below and Note 2 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for details on the components of net special items.

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Pre-Tax Income and Net Income

Pre-tax income and net income were $107 million and $71 million, respectively, in the second quarter of 2026. This compares to second quarter of 2025 pre-tax income and net income of $838 million and $599 million, respectively. Excluding the effects of pre-tax net special items, pre-tax income was $144 million and $869 million in the second quarters of 2026 and 2025, respectively.

The period-over-period decrease in pre-tax income on both a GAAP basis and excluding pre-tax net special items was principally driven by increases in certain operating expenses including aircraft fuel and related taxes, salaries, wages and benefits and other operating expenses, offset in part by an increase in passenger revenue.

Revenue

In the second quarter of 2026, we reported total operating revenues of $16.7 billion, an increase of $2.3 billion, or 16.3%, from the second quarter of 2025. Passenger revenue was $15.2 billion in the second quarter of 2026, an increase of $2.1 billion, or 15.9%, from the second quarter of 2025. Passenger revenue performance improved in the second quarter of 2026, primarily due to strong domestic and international demand for air travel. Passenger revenue per available seat mile (PRASM) increased 10.0% compared to the second quarter of 2025, primarily driven by higher passenger yield, which increased 11.9% year over year.

Cargo revenue increased $62 million, or 29.7%, in the second quarter of 2026 from the second quarter of 2025, primarily due to a 22.5% increase in cargo ton miles and a 5.8% increase in cargo yield.

Other operating revenue increased $190 million, or 17.9%, in the second quarter of 2026 from the second quarter of 2025, driven primarily by higher revenue associated with our loyalty program. During the three months ended June 30, 2026 and 2025, cash payments from co-branded credit card and other partners were $1.8 billion and $1.4 billion, respectively.

Our total revenue per available seat mile (TRASM) was 20.45 cents in the second quarter of 2026, a 10.3% increase as compared to 18.54 cents in the second quarter of 2025.

Fuel

Aircraft fuel and related taxes was $4.9 billion in the second quarter of 2026, which was $2.2 billion, or 83.3%, higher as compared to the second quarter of 2025. This was primarily due to a 77.1% increase in the average price per gallon of aircraft fuel including related taxes to $4.05 in the second quarter of 2026 compared to $2.29 in the second quarter of 2025 and a 3.5% increase in gallons of fuel consumed due to increased capacity.

As of June 30, 2026, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption. Our current policy is not to enter into transactions to hedge our fuel consumption, although we review this policy from time to time based on market conditions and other factors. As such, and assuming we do not enter into any future transactions to hedge our fuel consumption, we will continue to be fully exposed to fluctuations in fuel prices. See Part I, Item 1A. Risk Factors – “Our business is very dependent on the price and availability of aircraft fuel. Continued periods of high volatility in fuel costs, increased fuel prices or significant disruptions in the supply of aircraft fuel could have a significant negative impact on consumer demand, our operating results and liquidity” in our 2025 Form 10-K.

Other Costs

We remain committed to actively managing our cost structure, which we believe is necessary in an industry whose economic prospects are heavily dependent upon two variables we cannot control: general economic conditions and the price of fuel. Additionally, we continue to focus on initiatives to reengineer our business through the use of digital solutions, process enhancements and procurement transformation and we intend to continue to invest in reengineering our business through the remainder of 2026 and beyond to build an even more efficient airline and continue to manage costs while delivering a better experience for our customers and team.

Our 2026 second quarter total operating cost per available seat mile (CASM) was 19.90 cents, an increase of 16.5% compared to 17.08 cents in the second quarter of 2025. The increase in CASM was primarily driven by higher costs for aircraft fuel, maintenance, materials and repairs and other operating expenses.

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Our 2026 second quarter CASM excluding net special items, fuel and profit sharing was 13.93 cents, an increase of 2.9% compared to 13.53 cents in the second quarter of 2025, which was primarily driven by higher costs for maintenance, materials and repairs and other operating expenses.

For a reconciliation of CASM to CASM excluding net special items, fuel and profit sharing see “Reconciliation of GAAP to Non-GAAP Financial Measures” below.

Liquidity

As of June 30, 2026, we had $11.3 billion in total available liquidity, consisting of $7.8 billion in unrestricted cash and short-term investments, and $3.5 billion in total undrawn capacity under revolving credit and other facilities.

During the first six months of 2026, we completed the following financing transactions (see Note 5 to AAG’s Condensed Consolidated Financial Statements in Part I, Item 1A for further information on 2026 financing activities):

•repaid in full $629 million of the outstanding principal amount of the senior short-term term loan facility;

•prepaid in full $1.0 billion of the outstanding principal amount of the 8.50% senior secured notes;

•amended the terms of the 2025 AAdvantage Term Loan Facility to reduce the applicable interest rate margin;

•increased the aggregate revolving commitments under the 2013 Revolving Facility, the 2014 Revolving Facility and the 2023 Revolving Facility from $3.0 billion to $3.1 billion and extended the maturity of each facility from June 2029 to March 2031;

•extended the maturity date of a revolving credit facility that provides for borrowing capacity of up to $350 million by an additional year to March 2028;

•extended the maturity date of the term loans under the 2014 Credit Agreement from January 2027 to May 2033, refinanced in full the existing term loans of approximately $1.1 billion and incurred incremental term loans of $703 million;

•prepaid $310 million of the outstanding principal amounts of certain equipment notes issued under enhanced equipment trust certificates (EETCs);

•repaid all outstanding fuel financing obligations, including $914 million of repayments; and

•received approximately $2.7 billion in proceeds from EETCs, equipment loans and other notes payable in connection with the financing of certain aircraft and spare engines.

Reconciliation of GAAP to Non-GAAP Financial Measures

We sometimes use financial measures that are derived from the condensed consolidated financial statements but that are not presented in accordance with accounting principles generally accepted in the U.S. (GAAP) to understand and evaluate our current operating performance and to allow for period-to-period comparisons. We believe these non-GAAP financial measures may also provide useful information to investors and others. These non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies, and should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. We are providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.

The following table presents the reconciliation of pre-tax income (loss) (GAAP measure) to pre-tax income (loss) excluding net special items (non-GAAP measure). Management uses this non-GAAP financial measure to evaluate our current operating performance and to allow for period-to-period comparisons. As net special items may vary from period-to-period in nature and amount, the adjustment to exclude net special items provides management with an additional tool to understand our core operating performance.

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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2025 Financial Overview

Business and Macroeconomic Conditions

Starting in the first quarter of 2025, the U.S. Government has promoted and implemented plans to place additional tariffs on goods imported into the U.S. from numerous countries and has pursued other trade policies intended to restrict imports and, in response, multiple nations have countered with reciprocal tariffs and other actions.

These or additional changes in U.S. or international trade policies, along with continued uncertainty surrounding such policies, could lead to further weakened business conditions for the transportation industry, which may adversely impact our operations through increased supply chain challenges, commodity price volatility and a decline in discretionary spending and consumer confidence, among others. We continue to monitor the situation.

Many aspects of our airline operations depend on the U.S. Government, and in the fourth quarter of 2025, the prolonged government shutdown led to mandated schedule reductions, strained air traffic control and security screening resources, reduced air traffic capacity at key U.S. airports, and increased delays and cancellations. Additionally, the government shutdown-related uncertainty temporarily impacted customer bookings in the fourth quarter of 2025 and negatively impacted our revenue by approximately $325 million.

AAG’s 2025 Financial Results

The selected financial data presented below is derived from AAG’s audited consolidated financial statements included in Part II, Item 8A of this report and should be read in conjunction with those financial statements and the related notes thereto.

(1)See Part II, Item 6. Selected Consolidated Financial Data – “Reconciliation of GAAP to Non-GAAP Financial Measures” and Note 2 to AAG’s Consolidated Financial Statements in Part II, Item 8A for details on the components of pre-tax net special items.

Pre-Tax Income and Net Income

Pre-tax income and net income were $190 million and $111 million, respectively, in 2025. This compares to 2024 pre-tax income and net income of $1.2 billion and $846 million, respectively.

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Pre-tax income on a GAAP basis decreased in 2025 as compared to 2024. This decrease was driven primarily by increases in certain operating expenses including salaries, wages and benefits, regional expenses and other operating expenses, offset in part by lower costs for aircraft fuel and related taxes, a decrease in pre-tax net special items and higher revenues.

Excluding the effects of pre-tax net special items, pre-tax income was $352 million and $1.8 billion in 2025 and 2024, respectively. The year-over-year decrease in our pre-tax income excluding pre-tax net special items was principally driven by certain operating expenses as mentioned above, offset in part by lower costs for aircraft fuel and related taxes and higher revenues.

Revenue

In 2025, we reported total operating revenues of $54.6 billion, an increase of $422 million, or 0.8%, as compared to 2024. Passenger revenue was $49.6 billion and remained relatively flat as compared to 2024. Our passenger revenue in 2025 was impacted by the American Eagle flight 5342 accident and softness in domestic demand for air travel in the first half of the year, offset by strength in international travel, particularly in the Atlantic and Pacific regions, and recovery in domestic travel in the second half of the year despite the negative revenue impact from the temporary shutdown of the U.S. Government in the fourth quarter of 2025.

Other operating revenue increased $330 million, or 8.7%, in 2025 as compared to 2024, driven primarily by higher revenue associated with our loyalty program. During 2025 and 2024, cash payments from co-branded credit card and other partners were $6.2 billion and $6.1 billion, respectively. Cash remuneration in 2024 included a one-time cash payment related to the new co-branded credit card agreement announced in December 2024. This one-time cash payment will be amortized over the life of the new agreement beginning in 2026.

Our total revenue per available seat mile (TRASM) was 18.25 cents in 2025, a 1.4% decrease as compared to 18.51 cents in 2024.

Fuel

In 2025, aircraft fuel expense totaled $10.7 billion, a decrease of $700 million, or 6.1%, as compared to 2024. This decrease was primarily driven by an 8.2% decrease in the average price per gallon of aircraft fuel including related taxes to $2.39 in 2025 from $2.60 in 2024, offset in part by a 2.2% increase in gallons of fuel consumed due to increased capacity.

As of December 31, 2025, we did not have any fuel hedging contracts outstanding to hedge our fuel consumption. Our current policy is not to enter into transactions to hedge our fuel consumption, although we review this policy from time to time based on market conditions and other factors. As such, and assuming we do not enter into any future transactions to hedge our fuel consumption, we will continue to be fully exposed to fluctuations in fuel prices. See Part I, Item 1A. Risk Factors – “Our business is very dependent on the price and availability of aircraft fuel. Continued periods of high volatility in fuel costs, increased fuel prices or significant disruptions in the supply of aircraft fuel could have a significant negative impact on consumer demand, our operating results and liquidity.”

Other Costs

We remain committed to actively managing our cost structure, which we believe is necessary in an industry whose economic prospects are heavily dependent upon two variables we cannot control: general economic conditions and the price of fuel. Additionally, we continue to focus on initiatives to reengineer our business through the use of digital solutions, process enhancements and procurement transformation and we intend to continue to invest in reengineering our business through 2026 and beyond to build an even more efficient airline and continue to manage costs while delivering a better experience for our customers and team.

Our 2025 CASM was 17.76 cents, an increase of 0.8%, from 17.61 cents in 2024. This increase in CASM was primarily driven by higher costs for salaries, wages and benefits, regional expenses and other operating expenses, offset in part by lower aircraft fuel costs as well as a decrease in mainline operating special items, net.

Our 2025 CASM excluding net special items and fuel was 14.12 cents, an increase of 4.6%, from 13.50 cents in 2024, which was primarily driven by higher costs for salaries, wages and benefits, regional expenses and other operating expenses.

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For a reconciliation of total operating CASM to total operating CASM excluding net special items and fuel, see Part II, Item 6. Selected Consolidated Financial Data – “Reconciliation of GAAP to Non-GAAP Financial Measures.”

Liquidity

As of December 31, 2025, we had $9.2 billion in total available liquidity, consisting of $5.8 billion in unrestricted cash and short-term investments and $3.4 billion in total undrawn capacity under revolving credit and other facilities.

During 2025, we completed the following financing transactions (see Notes 1, 4 and 11 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information):

•amended the AAdvantage term loan credit and guaranty agreement to reduce the applicable interest rate margin and to reduce the scheduled quarterly principal amortization amount;

•issued $1.0 billion of incremental term loans pursuant to the AAdvantage term loan credit guaranty agreement (2025 AAdvantage Term Loan Facility), as amended;

•prepaid $487 million of the outstanding principal amounts of certain equipment notes issued under enhanced equipment trust certificates (EETCs);

•increased the aggregate revolving commitments under the 2013, 2014 and 2023 Revolving Facilities from approximately $2.9 billion to $3.0 billion;

•received $432 million of gross proceeds pursuant to special facility revenue bonds issued by the Tulsa Municipal Airport Trust (TMAT), of which a portion was used to fund the redemption of other bonds related to TMAT and the remaining amount will be used to finance the cost of improvements at American’s overhaul and maintenance base at Tulsa International Airport;

•prepaid in full $937 million of the outstanding principal amounts of the 10.75% senior secured IP notes (the IP Notes) and the 10.75% senior secured LGA/DCA notes (LGA/DCA Notes and together with the IP Notes, the 10.75% Senior Secured Notes);

•borrowed $629 million under a senior unsecured short-term term loan facility due in January 2026;

•received approximately $978 million in proceeds from EETCs;

•received $840 million in net proceeds from fuel financing transactions; and

•issued $1.2 billion of equipment loans and other notes payable in connection with the financing of certain aircraft.

American Eagle Flight 5342

On January 29, 2025, American Eagle flight 5342 was involved in a fatal accident in Washington, D.C. The Bombardier CRJ700 aircraft operated by PSA was en route to Washington, D.C. from Wichita, Kansas when it was involved in a midair collision near Ronald Reagan Washington National Airport. We estimate that the accident reduced first quarter 2025 total operating revenues by approximately $200 million, of which the impacted revenue is not covered by insurance. Beginning on September 24, 2025, multiple wrongful death and survival actions have been filed against the U.S. Government, PSA and American seeking unspecified damages, and we expect that additional lawsuits will be filed. While we cannot predict the outcome of these lawsuits, American has industry standard insurance coverage for this incident and we believe these lawsuits are without merit and are defending against them vigorously.

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AAG’s Results of Operations

For a comparison of the 2024 to 2023 reporting periods, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – “AAG’s Results of Operations” of our 2024 Form 10-K.

Operating Statistics

The table below sets forth selected operating data for the years ended December 31, 2025 and 2024.

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