I believe that you're misinterpreting the quote from the 10-K. Most of that $1.6 billion is the unrecognized revenue component from the sale of miles, and it is not recognized as awards are redeemed - it is recognized over a 28 month period regardless of award redemptions. It's unfortunate that AA lumps the liability for unredeemed miles together with the unrecognized revenue, but we have to deal with the facts as dealt to us by AA.

Additionally, AA recognizes no revenue when awards are redeemed. The redemption of an award removes a very tiny liability, to be sure.

When fuel was much, much cheaper, a decade ago, DL estimated that the typical domestic award cost DL approximately $25 in marginal fuel costs, and thus DL used that figure to estimate its balance sheet liability for outstanding miles. Given that fuel costs are three or four times the prevailing price of a decade ago, the typical marginal costs of an award passenger might be $75 to $100 in extra fuel burn.

AA's mainline CASM (cost per available seat mile) in the first quarter was 14.13 cents; if your fare and ancillary expenses (change fees, preferred seat fees, etc) are less than about 12-13 cents per mile, AA isn't going to be making much money on you (the difference is my rough estimate to account for AA's revenue from sale of AAdvantage miles and cargo revenue).

Regional CASM is higher, of course, and regional operations generally bring higher average fares per mile (regional jets are relatively expensive to operate per mile on their typical short segments).