NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES, INC. 7. Fair Value Measurements and Other Investments Assets Measured at Fair Value on a Recurring Basis Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability (i.e. an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. Accounting standards include disclosure requirements around fair values used for certain financial instruments and establish a fair value hierarchy. The hierarchy prioritizes valuation inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of three levels: When available, American uses quoted market prices to determine the fair value of its financial assets. If quoted market prices are not available, American measures fair value using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates and currency rates. American utilizes the market approach to measure the fair value of 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 year ended December 31, 2019. Assets measured at fair value on a recurring basis are summarized below (in millions): 140 • Level 1 – Observable inputs such as quoted prices in active markets; • Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and • Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Total Level 1 Level 2 Level 3 Short-term investments $^{(1),}$ $^{(2)}$: Money market funds $ 331 $ 331 $ — $ — Bank notes/certificates of deposit/time deposits 2,106 — 2,106 — Corporate obligations 1,021 — 1,021 — Repurchase agreements 85 — 85 — 3,543 331 3,212 — Restricted cash and short-term investments  (1) 158 10 148 — Long-term investments  (3) 204 204 — — Total $ 3,905 $ 545 $ 3,360 $ — Total Level 1 Level 2 Level 3 Short-term investments $^{(1)}$: Money market funds $ 14 $ 14 $ — $ — Bank notes/certificates of deposit/time deposits 2,435 — 2,435 — Corporate obligations 1,658 — 1,658 — Repurchase agreements 375 — 375 — 4,482 14 4,468 — Restricted cash and short-term investments  (1) 154 12 142 — Long-term investments  (3) 189 189 — — Total $ 4,825 $ 215 $ 4,610 $ — Fair Value Measurements as of December 31, 2018 Fair Value Measurements as of December 31, 2019