[FIRST CORRESPONDENCE, SEE BELOW FOR FOLLOW-UP]
April 3, 2017
By EDGAR Transmission and FedEX
Ms. Melissa Raminpour
Branch Chief, Office of Transportation and Leisure
Division of Corporation Finance
Securities and Exchange Commission
Washington, D.C. 20549
Re: American Airlines Group Inc.
Form 10-K for Fiscal Year Ended December 31, 2016
Filed February 22, 2017
Form 8-K furnished on January 27, 2017
File No. 001-08400
Dear Ms. Raminpour:
This letter (the "Letter") responds to the comment letter of the Staff of the Division of Corporation Finance, dated March 22, 2017, regarding the annual report on Form 10-K for the fiscal year ended December 31, 2016 of American Airlines Group Inc. ("American") and the current report on Form 8-K furnished on January 27, 2017 by American. The Staff’s comments are included for reference below, along with American’s responses to the comments.
Form 10-K for Fiscal Year Ended December 31, 2016
General
1. Comment: In your letter to us dated June 3, 2013, you described contacts with Syria and Sudan and we note your website lists flights to Khartoum, Sudan. The oneworld alliance website lists flights to Sudan by partner airlines and your oneworld alliance partner, Royal Jordanian’s website includes two cities in Syria on its list of destinations. As you are aware, Syria and Sudan are designated by the State Department as state sponsors of terrorism and are subject to U.S. economic sanctions and export controls. Please describe to us the nature and extent of past, current, and anticipated contacts with Syria and Sudan since your prior letter, whether through subsidiaries, affiliates, onealliance member partners, or other direct or indirect arrangements. You should describe any products or services, you have provided to Syria and Sudan, directly or indirectly, and any agreements, commercial arrangements, or other contacts with the governments of those countries or entities they control.
It is American’s corporate policy to comply with U.S. economic sanctions laws. Accordingly, neither American nor any subsidiary or other affiliate of American:
• operates any scheduled passenger or cargo flights to or from Sudan or Syria (the "Two Countries");
• has since the date of our June 2013 letter operated any offices, facilities, equipment, sales agents or employees in either of the Two Countries; or
• has since the date of our June 2013 letter been a party to any agreements, commercial arrangements or other contacts with the governments of either of the Two Countries, or with entities known by American to be controlled by those governments.
As such, American’s contacts with the Two Countries, if any, are highly limited, and its revenues from those contacts are zero or de minimis.
U.S. law does not prohibit U.S. persons from traveling to and from Sudan or Syria.[1] Office of Foreign Assets Control of the U.S. Department of Treasury ("OFAC") regulations generally restrict the exportation and importation of services to and from Sudan, and transactions with designated nationals of Syria, but the regulations contain an exemption for travel as well as for arrangement and facilitation of travel to and from these Two Countries.[2]
Accordingly, U.S. air carriers are not prohibited from selling tickets for travel to or from the Two Countries on flights operated by other carriers.
Codeshare Agreements to Sudan and Syria
American is a party to codeshare agreements with certain foreign air carriers. Codeshare agreements are common in the air transportation industry and allow carriers to market and sell tickets and/or cargo service on each other’s flights. All of American’s codeshare relationships with foreign carriers have been reviewed and approved by the U.S. Department of Transportation ("DOT").
The United States does not have Air Transport Agreements with either of the Two Countries that provide for codeshare rights. Consequently, U.S. carriers (including American) are not allowed to codeshare to the Two Countries.
Overflight
American does not overfly the territories of the Two Countries, and does not have any relationships, formal or informal, with aviation officials or other governmental officials in either of the Two Countries.
AAdvantage Award Travel to Sudan and Syria
Under current U.S. law, frequent flyer accrual and redemption are permitted for itineraries involving the Two Countries. American has facilitated this activity with Etihad Airways, Gulf Air, Royal Jordanian and Qatar Airways for operations to/from Sudan.
Additional Information
The award chart that appears on American’s website at www.aa.com details the opportunities for AAdvantage members to redeem mileage. The oneworld and other partner award chart includes a list of zone definitions that defines which countries belong to a specified zone, with the following footnote: "If no participating carrier offers direct service between origin and destination zones, certain awards may be unavailable or multiple awards may be required."
[...]
1 OFAC’s Terrorism List Governments Sanctions Regulations do not prohibit travel to countries that have been designated as state sponsors of terrorism. 31 C.F.R. Part 596. In addition, the country-specific sanctions regulations that OFAC published pursuant to the International Emergency Economic Powers Act ("IEEPA") do not restrict travel to Sudan or Syria. See 31 C.F.R. Parts 538 and 542.
2 Id. §§ 538.212(d), and 542.206(c).
------------------------------------------------
[SECOND CORRESPONDENCE]
April 24, 2017
By EDGAR Transmission and FedEx
Ms. Melissa Raminpour
Branch Chief, Office of Transportation and Leisure
Division of Corporation Finance
Securities and Exchange Commission
Washington, D.C. 20549
Re: American Airlines Group Inc.
Form 10-K for Fiscal Year Ended December 31, 2016
Filed February 22, 2017
Form 8-K furnished on January 27, 2017
File No. 001-08400
Dear Ms. Raminpour:
This letter (the "Letter") responds to the comment letter of the Staff of the Division of Corporation Finance, dated March 22, 2017, regarding the annual report on Form 10-K for the fiscal year ended December 31, 2016 of American Airlines Group Inc. ("American") and the current report on Form 8-K furnished on January 27, 2017 by American. The Staff’s comments are included for reference below, along with American’s responses to the comments.
1. Comment: In your response to comment 1 in our letter dated March 22, 2017, you state that U.S. air carriers are not prohibited from selling tickets for travel to or from Syria or Sudan on flights operated by other carriers. However, you do not specify whether you engage, or have engaged, in such activity. Please clarify for us whether you sell tickets for travel to Syria and/or Sudan, and whether you have done so since your letter to us dated June 3, 2013. As we noted in comment 1, your website lists flights to Khartoum, Sudan.
In order to clarify our prior answer, we hereby advise you that American Airlines does not currently sell, and has not since June 3, 2013 sold, tickets to or from Syria or Sudan, whether on flights operated by American Airlines or on flights which carry the "AA" marketing code but are operated by partner airlines on a code-share basis. While we acknowledge that although Khartoum, Sudan has been displayed on our website (www.aa.com), a customer cannot create an itinerary involving Khartoum and the website produces an error message when such an itinerary is submitted. In order to avoid future confusion as to whether or not American Airlines provides service to or from Khartoum, we are in the process of taking steps to remove that destination from the distribution outlets operated by us, including www.aa.com.
Since June 3, 2013, the only involvement of American Airlines in the provision of transportation to or from Syria or Sudan has been in connection with requests to redeem miles under our loyalty program, AAdvantage. Under that program, AAdvantage members accrue and redeem mileage credits that are redeemable on flights operated by American Airlines, on flights operated by partner airlines on a code-share basis, and on flights operated solely by other airlines that participate in the AAdvantage program. During this time period, members of the AAdvantage program have redeemed a limited number of AAdvantage mileage credits for travel involving Syria and Sudan on flights operated by Etihad Airways, Gulf Air, Royal Jordanian and Qatar Airways. These transactions have been highly limited in number and deminimis in their financial significance. For example, during 2016, AAdvantage customers redeemed AAdvantage mileage accruals for only 24 tickets that involved travel on other airlines to or from Syria or Sudan.
As indicated in our prior correspondence, it is American’s policy to comply with U.S. economic sanctions laws, and our highly limited activities involving Syria and Sudan have at all times been in compliance with those laws.[1]
2. Comment: You state in your responses to comments 1 and 2 in our letter dated March 22, 2017, that your contacts with Syria or Sudan "if any" are limited. Please clarify for us whether you have had direct or indirect contacts with Syria and/or Sudan since your letter to us dated June 3, 2013, and describe to us all such contacts.
American Airlines’ officials have had no direct or indirect contacts with Syria or Sudan in any capacity since our letter to you dated June 3, 2013. The use of the phrase "if any" in our April 3, 2017 letter was intended to reference the AAdvantage accruals and redemptions on third party airlines described above to the extent that such activity could be viewed as an "indirect" contact with Syria or Sudan.
[…]
[1] We note that, pursuant to 31 CFR § 542.211(c) and 31 CFR § 538.212(d), the arrangement or facilitation of travel to or from Syria and Sudan, respectively, as well as all transactions ordinarily incident to such travel, are specifically exempted from U.S. sanctions.
[…]
[…]
1) OFAC clarifies in 031125-FACRL-IA-12 that the sale of flight tickets for travel to countries sanctioned pursuant to IEEPA-based embargoes is permissible under the Berman Amendment travel exemption.
Here, American Airlines characterizes its facilitation of travel to those countries, through the redemption of award miles on partner airlines flying to sanctioned countries, as exempt from regulation under IEEPA's Berman Amendment.
2) Concerning codesharing, see Delta Air Lines, Inc., Correspondence with the SEC Office of Global Security Risk (2007), where codeshares involving sanctioned destinations are considered within the scope of the travel exemption. Other government regulations may moot the point, however.
*See General Note on Correspondence of Publicly traded Companies with the SEC Concerning Sanctions (System Ed. Note)