KEY RATING DRIVERS

Substantial Debt Burden: The company ended 2021 with a total debt balance (including lease obligations) of $46 billion, up nearly 40% from YE 2019 and equal to roughly 5.6x 2019 levels of EBITDAR. Fitch expects American to pare down cash on hand to de-lever its balance sheet over time. Nevertheless, Fitch expects leverage to remain at levels that constrain the rating at the current level into 2023.

American maintains a public target of reducing total debt by $15 billion by YE 2025. Fitch considers this goal to be ambitious as it would require a stronger top-line recovery than what is included in its base case. The company reduced liabilities by $3.7 billion inclusive of pension obligations in 2021 and states that it is on track to reduce another $1.7 billion in 2022. American entered the coronavirus crisis with a higher debt load than competitor airlines following multiple years of heavy capex and simultaneous share repurchases.

Solid Liquidity: American maintained $12.4 billion of cash and short-term investments at YE 2021 along with full availability under its $2.8 billion in revolving credit facilities and $568 million in short-term revolvers. Fitch views current liquidity as sufficient to cover near-term needs, particularly as airline traffic has recovered to a point where the company is no longer regularly burning cash. Scheduled principal payments for 2022 are manageable at $2.6 billion.

Maturities become more substantial in 2023 and particularly in 2025 when the company's $2.5 billion secured notes and its 2013 term-loan mature. Fitch expects passenger traffic to continue to improve from pandemic lows, allowing American to address maturities through a combination of FCF, cash on hand and potential refinancing. Capital spending requirements are manageable now that American has moved past the bulk of its re-fleeting efforts.