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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2005.
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From to .
Commission file number 1-8400.
AMR Corporation
(Exact name of registrant as specified in its charter)
Delaware 75-1825172
(State or other (I.R.S. Employer
jurisdiction Identification No.)
of incorporation or
organization)
4333 Amon Carter Blvd.
Fort Worth, Texas 76155
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (817) 963-1234
Not Applicable
(Former name, former address and former fiscal year , if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Exchange Act Rule 12b-2). Yes X No .
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, $1 par value - 161,390,494 shares as of April 15, 2005.
INDEX
AMR CORPORATION
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations -- Three months ended March
31, 2005 and 2004
Condensed Consolidated Balance Sheets -- March 31, 2005 and
December 31, 2004
Condensed Consolidated Statements of Cash Flows -- Three months
ended March 31, 2005 and 2004
Notes to Condensed Consolidated Financial Statements -- March 31, 2005
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
AMR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In millions, except per share amounts)
Three Months Ended March 31,
2005 2004
Revenues
Passenger - American Airlines $ 3,841 $ 3,678
- Regional Affiliates 451 420
Cargo 151 148
Other revenues 307 266
Total operating revenues 4,750 4,512
Expenses
Wages, salaries and benefits 1,644 1,640
Aircraft fuel 1,097 808
Other rentals and landing fees 300 305
Depreciation and amortization 290 326
Commissions, booking fees and credit
card expense 271 288
Maintenance, materials and repairs 235 231
Aircraft rentals 148 153
Food service 125 137
Other operating expenses 617 582
Total operating expenses 4,727 4,470
Operating Income 23 42
Other Income (Expense)
Interest income 36 14
Interest expense (235) (212)
Interest capitalized 23 18
Miscellaneous - net (9) (28)
(185) (208)
Loss Before Income Taxes (162) (166)
Income tax - -
Net Loss $ (162) $ (166)
Basic and Diluted Loss Per Share $(1.00) $ (1.03)
The accompanying notes are an integral part of these financial statements.
-1-
AMR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (In millions)
March 31, December 31,
2005 2004
Assets
Current Assets
Cash $ 148 $ 120
Short-term investments 2,912 2,809
Restricted cash and short-term investments 483 478
Receivables, net 1,033 836
Inventories, net 489 488
Other current assets 355 240
Total current assets 5,420 4,971
Equipment and Property
Flight equipment, net 15,276 15,292
Other equipment and property, net 2,450 2,426
Purchase deposits for flight equipment 305 319
18,031 18,037
Equipment and Property Under Capital Leases
Flight equipment, net 999 1,016
Other equipment and property, net 86 84
1,085 1,100
Route acquisition costs and airport
operating and gate lease rights, net 1,216 1,223
Other assets 3,415 3,442
$ 29,167 $ 28,773
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable $ 1,131 $ 1,003
Accrued liabilities 2,034 2,026
Air traffic liability 3,687 3,183
Current maturities of long-term debt 709 659
Current obligations under capital leases 170 147
Total current liabilities 7,731 7,018
Long-term debt, less current maturities 12,366 12,436
Obligations under capital leases, less
current obligations 1,009 1,088
Pension and postretirement benefits 4,713 4,743
Other liabilities, deferred gains and
deferred credits 4,045 4,069
Stockholders' Deficit
Preferred stock - -
Common stock 182 182
Additional paid-in capital 2,509 2,521
Treasury stock (1,295) (1,308)
Accumulated other comprehensive loss (619) (664)
Accumulated deficit (1,474) (1,312)
(697) (581)
$ 29,167 $ 28,773
The accompanying notes are an integral part of these financial statements.
-2-
AMR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In millions)
Three Months Ended March 31,
2005 2004
Net Cash Provided by Operating Activities $ 465 $ 371
Cash Flow from Investing Activities:
Capital expenditures, including purchase
deposits for flight equipment (242) (213)
Net increase in short-term investments (103) (588)
Net (increase) decrease in restricted cash and
short-term investments (5) 26
Proceeds from sale of equipment and property 3 18
Other 2 (12)
Net cash used by investing activities (345) (769)
Cash Flow from Financing Activities:
Payments on long-term debt and capital
lease obligations (235) (199)
Proceeds from:
Issuance of long-term debt 142 627
Exercise of stock options 1 2
Net cash (used) provided by
financing activities (92) 430
Net increase in cash 28 32
Cash at beginning of period 120 120
Cash at end of period $ 148 $ 152
Activities Not Affecting Cash
Capital lease obligations incurred $ 9 $ -
Flight equipment acquired through
seller financing $ - $ 18
The accompanying notes are an integral part of these financial statements.
-3-
AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, these financial
statements contain all adjustments, consisting of normal recurring
accruals, necessary to present fairly the financial position, results
of operations and cash flows for the periods indicated. Results of
operations for the periods presented herein are not necessarily
indicative of results of operations for the entire year. The
condensed consolidated financial statements include the accounts of
AMR Corporation (AMR or the Company) and its wholly owned
subsidiaries, including (i) its principal subsidiary American
Airlines, Inc. (American) and (ii) its regional airline subsidiary,
AMR Eagle Holding Corporation and its primary subsidiaries, American
Eagle Airlines, Inc., Executive Airlines, Inc. and AMR Leasing
Corporation (collectively, AMR Eagle). For further information, refer
to the consolidated financial statements and footnotes thereto
included in the AMR Annual Report on Form 10-K for the year ended
December 31, 2004 (2004 Form 10-K).
2.The Company accounts for its stock-based compensation plans in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations. Under APB 25, no compensation expense is
recognized for stock option grants if the exercise price of the
Company's stock option grants is at or above the fair market value
of the underlying stock on the date of grant. The Company has
adopted the pro forma disclosure features of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), as amended by Statement of Financial
Accounting Standards No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure." The following table
illustrates the effect on net loss and loss per share amounts if
the Company had applied the fair value recognition provisions of
SFAS 123 to stock-based employee compensation (in millions, except
per share amounts):
Three Months Ended March 31,
2005 2004
Net loss, as reported $ (162) $ (166)
Add: Stock-based employee compensation
expense included in reported net loss 6 11
Deduct: Total stock-based employee
compensation expense determined
under fair value based methods for
all awards (21) (27)
Pro forma net loss $ (177) $ (182)
Loss per share:
Basic and diluted - as reported $(1.00) $(1.03)
Basic and diluted - pro forma $(1.09) $(1.14)
In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 (revised 2004),
"Share-Based Payment" (SFAS 123(R)). SFAS 123(R) requires all
share-based payments to employees, including grants of employee
stock options, to be recognized in the financial statements based
on their fair values. SFAS 123(R) is effective for public companies
beginning with the first annual period that begins after June 15,
2005 (January 1, 2006 for AMR). Under SFAS 123(R), the Company
will recognize compensation expense for the portion of outstanding
awards for which service has not yet been rendered, based on the
grant-date fair value of those awards calculated under SFAS 123 for
pro forma disclosures. The Company has not completed its evaluation
of the impact of SFAS 123(R) on its financial statements.
-4-
AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
3.As of March 31, 2005, the Company had commitments to acquire:
11 Embraer regional jets in 2005; two Boeing 777-200ERs in 2006;
and an aggregate of 47 Boeing 737-800s and seven Boeing 777-200ERs
in 2013 through 2016. Future payments for all aircraft, including
the estimated amounts for price escalation, will approximate $189
million during the remainder of 2005, $102 million in 2006 and an
aggregate of approximately $3.1 billion in 2011 through 2016. The
Company has pre-arranged financing or backstop financing for all of
its aircraft deliveries in 2005 and 2006.
In 2003, the Company reached concessionary agreements with certain
lessors. Certain of these agreements provide that the Company's
obligations under the related leases will revert to the original
terms if certain events occur prior to December 31, 2005,
including: (i) an event of default under the related lease (which
generally occurs only if a payment default occurs); (ii) an event
of loss with respect to the related aircraft; (iii) rejection by
the Company of the lease under the provisions of Chapter 11 of the
U.S. Bankruptcy Code; or (iv) the Company's filing for bankruptcy
under Chapter 7 of the U.S. Bankruptcy Code. If any one of these
events were to occur, the Company would be responsible for
approximately $94 million in additional operating lease payments
and $119 million in additional payments related to capital leases
as of March 31, 2005. These amounts will increase by approximately
$17 million prior to the expiration of the provision on December
31, 2005. These amounts are being accounted for as contingent
rentals and will only be recognized if they become payable.
4.Accumulated depreciation of owned equipment and property at March 31,
2005 and December 31, 2004 was $9.8 billion and $9.6 billion,
respectively. Accumulated amortization of equipment and property
under capital leases at March 31, 2005 and December 31, 2004 was $994
million and $987 million, respectively.
Effective January 1, 2005, in order to more accurately reflect the
expected useful life of its aircraft, the Company changed its
estimate of the depreciable lives of its Boeing 737-800, Boeing 757-
200 and McDonnell Douglas MD-80 aircraft from 25 to 30 years. As a
result of this change, depreciation and amortization expense and
net loss were reduced by approximately $27 million and net loss per
share was reduced by $0.17 for the three months ended March 31,
2005.
5.As discussed in Note 8 to the consolidated financial statements in
the 2004 Form 10-K, the Company has a valuation allowance against
the full amount of its net deferred tax asset. The Company's
deferred tax asset valuation allowance increased $37 million during
the three months ended March 31, 2005 to $870 million as of March
31, 2005.
6.During the three-month period ended March 31, 2005, AMR Eagle
borrowed approximately $142 million (net of discount), under
various debt agreements, related to the purchase of regional jet
aircraft. These debt agreements are secured by the related
aircraft, have an effective interest rate of 5.0 percent, are
guaranteed by AMR and mature over various periods of time through
2021.
As of March 31, 2005, AMR has issued guarantees covering
approximately $928 million of American's tax-exempt bond debt and
American has issued guarantees covering approximately $1.3 billion
of AMR's unsecured debt. In addition, as of March 31, 2005, AMR
and American have issued guarantees covering approximately $447
million of AMR Eagle's secured debt and AMR has issued guarantees
covering an additional $2.7 billion of AMR Eagle's secured debt.
-5-
AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
7.The following table provides the components of net periodic
benefit cost for the three months ended March 31, 2005 and 2004 (in
millions):
Other Postretirement
Pension Benefits Benefits
2005 2004 2005 2004
Components of net periodic
benefit cost
Service cost $ 92 $ 89 $ 18 $ 19
Interest cost 152 142 50 51
Expected return on assets (165) (142) (3) (3)
Amortization of:
Prior service cost 4 4 (2) (3)
Unrecognized net loss 13 14 - 2
Net periodic benefit cost $ 96 $ 107 $ 63 $ 66
The Company expects to contribute approximately $310 million to its
defined benefit pension plans in 2005. The Company's estimate of
its defined benefit pension plan contributions reflects the
provisions of the Pension Funding Equity Act of 2004. The effect of
the Pension Funding Equity Act was to defer (to 2006 and later
years) a portion of the minimum required contributions that would
have been due for the 2004 and 2005 plan years. Of the $310 million
the Company expects to contribute to its defined benefit pension
plans in 2005, the Company contributed approximately $138 million
during the three months ended March 31, 2005.
8.During the last few years, as a result of the events of September 11,
2001, the depressed revenue environment, high fuel prices and the
Company's restructuring activities, the Company has recorded a number
of special charges. The following table summarizes the changes since
December 31, 2004 in the remaining accruals for these charges (in
millions):
Aircraft Facility Exit Employee
Charges Costs Charges Total
Remaining accrual at
December 31, 2004 $ 129 $ 26 $ 36 $ 191
Payments (9) (2) (21) (32)
Remaining accrual at
March 31, 2005 $ 120 $ 24 $ 15 $ 159
Cash outlays related to these accruals, as of March 31, 2005, for
aircraft charges, facility exit costs and employee charges will
occur through 2014, 2018 and 2005, respectively.
9.The Company includes changes in the fair value of certain
derivative financial instruments that qualify for hedge accounting,
changes in minimum pension liabilities and unrealized gains and
losses on available-for-sale securities in comprehensive loss. For
the three months ended March 31, 2005 and 2004, comprehensive loss
was $117 million and $183 million, respectively. The difference
between net loss and comprehensive loss for the three months ended
March 31, 2005 and 2004 is due primarily to the accounting for the
Company's derivative financial instruments.
-6-
AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
10.The following table sets forth the computations of basic and
diluted loss per share (in millions, except per share data):
Three Months Ended March 31,
2005 2004
Numerator:
Net loss - numerator for basic and
diluted loss per share $ (162) $ (166)
Denominator:
Denominator for basic and diluted loss
per share - weighted-average shares 161 160
Basic and diluted loss per share $(1.00) $(1.03)
For the three months ended March 31, 2005 and 2004, approximately
48 million and 58 million shares issuable upon conversion of the
Company's convertible notes or related to employee stock options
and deferred stock were not added to the denominator because
inclusion of such shares would be antidilutive.
-7-
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Forward-Looking Information
Statements in this report contain various forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which represent the Company's expectations or beliefs
concerning future events. When used in this document and in documents
incorporated herein by reference, the words "expects," "plans,"
"anticipates," "indicates," "believes," "forecast," "guidance,"
"outlook" and similar expressions are intended to identify forward-
looking statements. Forward-looking statements include, without
limitation, the Company's expectations concerning operations and
financial conditions, including changes in capacity, revenues, and
costs, future financing plans and needs, overall economic conditions,
plans and objectives for future operations, and the impact on the
Company of its results of operations in recent years and the
sufficiency of its financial resources to absorb that impact. Other
forward-looking statements include statements which do not relate
solely to historical facts, such as, without limitation, statements
which discuss the possible future effects of current known trends or
uncertainties, or which indicate that the future effects of known
trends or uncertainties cannot be predicted, guaranteed or assured.
All forward-looking statements in this report are based upon
information available to the Company on the date of this report. The
Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events, or otherwise.
Forward-looking statements are subject to a number of factors that
could cause the Company's actual results to differ materially from the
Company's expectations. The following factors, in addition to other
possible factors not listed, could cause the Company's actual results
to differ materially from those expressed in forward-looking
statements: changes in economic, business and financial conditions;
the Company's substantial indebtedness; continued high fuel prices and
the availability of fuel; further increases in the price of fuel; the
impact of events in Iraq; conflicts in the Middle East or elsewhere;
the highly competitive business environment faced by the Company, with
increasing pricing transparency and competition from low cost carriers
and financially distressed carriers; historically low fare levels and
fare simplification initiatives (both of which could result in a
further deterioration of the revenue environment); the ability of the
Company to reduce its costs further without adversely affecting
operational performance and service levels; uncertainties with respect
to the Company's international operations; changes in the Company's
business strategy; actions by U.S. or foreign government agencies; the
possible occurrence of additional terrorist attacks; another outbreak
of a disease (such as SARS) that affects travel behavior;
uncertainties with respect to the Company's relationships with
unionized and other employee work groups; the inability of the Company
to satisfy existing financial or other covenants in certain of its
credit agreements; the availability and terms of future financing; the
ability of the Company to reach acceptable agreements with third
parties; and increased insurance costs and potential reductions of
available insurance coverage. Additional information concerning these
and other factors is contained in the Company's Securities and
Exchange Commission filings, including but not limited to the 2004
Form 10-K.
Overview
The Company incurred a $162 million net loss during the first quarter
of 2005 compared to a net loss of $166 million in the same period last
year. The Company's first quarter 2005 results were impacted by the
continuing increase in fuel prices, offset by only a modest
improvement in unit revenues (passenger revenue per available seat
mile), a benefit of $69 million related to certain excise tax refunds
relating to prior years - - $55 million in aircraft fuel expense and
$14 million in interest income - - and a $27 million decrease in
depreciation expense related to a change in the depreciable lives of
certain aircraft types.
Fuel price increases resulted in a year-over-year increase of 36.6
cents per gallon for the first quarter (including the benefit of the
6.9 cents per gallon impact of the fuel excise tax refund discussed
above). This price increase negatively impacted fuel expense by $291
million (including the benefit of the $55 million fuel excise tax
refund discussed above) during the quarter based on fuel consumption
of 796 million gallons. Continuing high fuel prices, additional
increases in the price of fuel, and/or disruptions in the supply of
fuel would further adversely affect the Company's financial condition
and its results of operations.
-8-
Mainline unit revenues increased 3.7 percent for the first quarter due
to a 4.3 point load factor increase, offset by a 2.1 percent decrease
in passenger yield (passenger revenue per passenger mile) compared to
the same period in 2004. The Company believes this decline in
passenger yield is due in large part to a corresponding decline in the
Company's pricing power. The Company's reduced pricing power is the
product of several factors, including: greater cost sensitivity on the
part of travelers (particularly business travelers); greater
competition from low-cost carriers and from carriers that have
recently reorganized or are reorganizing, including under the
protection of Chapter 11 of the Bankruptcy Code; significant increases
in overall capacity during 2004 and continuing into 2005 that exceeded
economic growth; and, more recently, fare simplification efforts by
certain carriers. The Company believes that its reduced pricing power
will persist indefinitely and possibly permanently.
During the first quarter, the Company continued to work - under the
basic tenets of the Turnaround Plan - with its unions and employees to
identify and implement additional initiatives designed to increase
efficiencies and revenues and reduce costs. As part of this effort,
it recently announced jointly with Transport Workers Union leadership
from American's Maintenance and Engineering Center in Tulsa, OK an
initiative to transform the Tulsa maintenance center into a future
profit center. In addition, American and all of its unions jointly
issued a statement during the first quarter regarding defined benefit
pension plan legislation that supports a position that better protects
employees' retirement benefits by making it more flexible and
affordable for companies to fund them. The Company will continue to
work with its labor unions and employees as its business partners on
the need for continuous improvement under the Turnaround Plan.
The Company's ability to become profitable and its ability to continue
to fund its obligations on an ongoing basis will depend on a number of
factors, some of which are largely beyond the Company's control. Some
of the risk factors that affect the Company's business and financial
results are referred to under "Forward-Looking Information" above and
are discussed in the Risk Factors listed in Item 7 (on pages 35-38) in
the 2004 Form 10-K. As the Company seeks to improve its financial
condition, it must continue to take steps to generate additional
revenues and to significantly reduce its costs. Although the Company
has a number of initiatives underway to address its cost and revenue
challenges, the adequacy and ultimate success of these initiatives is
not known at this time and cannot be assured. It will be very
difficult, absent continued restructuring of its operations, for the
Company to continue to fund its obligations on an ongoing basis or to
become profitable if the overall industry revenue environment does not
improve and fuel prices remain at historically high levels for an
extended period.
LIQUIDITY AND CAPITAL RESOURCES
Significant Indebtedness and Future Financing
During 2002, 2003 and 2004, in addition to refinancing its $834
million credit facility with a new $850 million credit facility (in
December 2004), the Company raised an aggregate of approximately $6.0
billion of financing, mostly to fund capital commitments (mainly for
aircraft and facilities) and operating losses. During the three months
ended March 31, 2005, the Company raised an additional $142 million of
financing to fund capital commitments and ended the quarter with $3.1
billion of unrestricted cash and short-term investments. The Company
believes that it should have sufficient liquidity to fund its
operations for the foreseeable future, including repayment of debt and
capital leases, capital expenditures and other contractual
obligations. Nonetheless, the Company remains heavily indebted and
has significant obligations (including substantial pension funding
obligations) due in 2005 and thereafter, as described more fully under
Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the 2004 10-K. Accordingly, to maintain
sufficient liquidity as the Company continues to implement its
restructuring and cost reduction initiatives, the Company will need
access to additional funding. The Company's possible financing sources
primarily include: (i) a limited amount of additional secured aircraft
debt (a very large majority of the Company's owned aircraft, including
virtually all of the Company's Section 1110-eligible aircraft, are
encumbered) or sale-leaseback transactions involving owned aircraft;
(ii) debt secured by new aircraft deliveries; (iii) debt secured by
other assets; (iv) securitization of future operating receipts; (v)
the sale or monetization of certain assets; (vi) unsecured debt; and
(vii) equity and/or equity-like securities. However, the availability
and level of these financing sources cannot be assured, particularly
in light of the Company's and American's reduced credit ratings, high
fuel prices, historically weak revenues and the financial difficulties
being experienced in the airline industry. The inability of the
Company to obtain additional funding would have a material negative
impact on the ability of the Company to sustain its operations over
the long-term.
-9-
The Company's substantial indebtedness could have important
consequences. For example, it could: (i) limit the Company's ability
to obtain additional financing for working capital, capital
expenditures, acquisitions and general corporate purposes, or
adversely affect the terms on which such financing could be obtained;
(ii) require the Company to dedicate a substantial portion of its cash
flow from operations to payments on its indebtedness, thereby reducing
the funds available for other purposes; (iii) make the Company more
vulnerable to economic downturns; (iv) limit its ability to withstand
competitive pressures and reduce its flexibility in responding to
changing business and economic conditions; and (v) limit the Company's
flexibility in planning for, or reacting to, changes in its business
and the industry in which it operates.
Credit Facility Covenants
American has a fully drawn $850 million credit facility (the Credit
Facility) which consists of a $600 million senior secured revolving
credit facility with a final maturity on June 17, 2009 and a $250
million term loan facility with a final maturity on December 17, 2010.
The Credit Facility contains a covenant (the Liquidity Covenant)
requiring American to maintain, as defined, unrestricted cash,
unencumbered short term investments and amounts available for drawing
under committed revolving credit facilities of not less than $1.5
billion for each quarterly period through September 30, 2005 and $1.25
billion for each quarterly period thereafter. American was in
compliance with the Liquidity Covenant as of March 31, 2005 and
expects to be able to continue to comply with this covenant. In
addition, the Credit Facility contains a covenant (the EBITDAR
Covenant) requiring AMR to maintain a ratio of cash flow (defined as
consolidated net income, before interest expense (less capitalized
interest), income taxes, depreciation and amortization and rentals,
adjusted for certain gains or losses and non-cash items) to fixed
charges (comprising interest expense (less capitalized interest) and
rentals). This ratio was 0.85 to 1.00 for the four quarter period
ending March 31, 2005 and will increase gradually to 1.50 to 1.00 for
the four quarter period ending March 31, 2008 and for each four
quarter period ending on each fiscal quarter thereafter. AMR was in
compliance with the EBITDAR covenant as of March 31, 2005 and expects
to be able to continue to comply with this covenant in the near term.
Given the historically high price of fuel and the volatility of fuel
prices and revenues, it is difficult to assess whether AMR and
American will be able to continue to comply with the Liquidity
Covenant and in particular the EBITDAR Covenant, and there are no
assurances that they will be able to do so. Failure to comply with
these covenants would result in a default under the Credit Facility
which - - if the Company did not take steps to obtain a waiver of, or
otherwise mitigate, the default - - could result in a default under a
significant amount of the Company's other debt and lease obligations.
Pension Funding Obligation
The Company expects to contribute approximately $310 million to its
defined benefit pension plans in 2005. The Company's estimates of its
defined benefit pension plan contributions reflect the provisions of
the Pension Funding Equity Act of 2004. Due to uncertainties regarding
significant assumptions involved in estimating future required
contributions to its defined benefit pension plans, such as interest
rate levels, the amount and timing of asset returns, and the impact of
proposed legislation, the Company is not able to reasonably estimate
its future required contributions beyond 2005. However, based on the
current regulatory environment and market conditions, the Company
expects that its 2006 minimum required contributions will exceed its
2005 expected contributions. Of the $310 million the Company expects
to contribute to its defined benefit pension plans in 2005, the
Company contributed approximately $138 million during the three months
ended March 31, 2005.
Financing Activity
During the three-month period ended March 31, 2005, AMR Eagle borrowed
approximately $142 million (net of discount), under various debt
agreements, related to the purchase of regional jet aircraft. These
debt agreements are secured by the related aircraft, have an effective
interest rate of 5.0 percent, are guaranteed by AMR and mature over
various periods of time through 2021.
Other Operating and Investing Activities
Net cash provided by operating activities in the three-month period
ended March 31, 2005 was $465 million, an increase of $94 million over
the same period in 2004. The Company contributed $138 million to its
defined benefit pension plans in the first quarter of 2005 compared to
$213 million during the first quarter of 2004.
-10-
Capital expenditures for the first three months of 2005 were $242
million and included the acquisition of nine Embraer 145 aircraft and
the cost of improvements at New York's John F. Kennedy airport.
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 2005 and 2004
Revenues
The Company's revenues increased approximately $238 million, or 5.3
percent, to $4.8 billion in the first quarter of 2005 from the same
period last year. American's passenger revenues increased by 4.4
percent, or $163 million, on a capacity (available seat mile) (ASM)
increase of 0.6 percent. American's passenger load factor increased
4.3 points to 75.4 percent while passenger revenue yield per passenger
mile decreased by 2.1 percent to 11.88 cents. This resulted in an
increase in passenger revenue per available seat mile (RASM) of 3.7
percent to 8.96 cents. Following is additional information regarding
American's domestic and international RASM and capacity:
Three Months Ended March 31, 2005
RASM Y-O-Y ASMs Y-O-Y
(cents) Change (billions) Change
Domestic 8.87 3.9% 28.3 (4.2)%
International 9.15 3.2 14.6 11.4
Latin America 9.44 0.4 7.9 12.8
Europe 9.00 9.6 5.2 6.2
Pacific 8.08 (3.4) 1.5 24.6
Regional affiliates' passenger revenues, which are based on industry
standard proration agreements for flights connecting to American
flights, increased $31 million, or 7.4 percent, to $451 million as a
result of increased capacity and load factors. Regional affiliates'
traffic increased 22.5 percent to 1.9 billion revenue passenger miles
(RPMs), while capacity increased 18.9 percent to 2.9 billion ASMs,
resulting in a 2.0 point increase in the passenger load factor to 64.7
percent.
Operating Expenses
The Company's total operating expenses increased 5.7 percent, or $257
million, to $4.7 billion in the first quarter of 2005 compared to the
first quarter of 2004. American's mainline operating expenses per ASM
in the first quarter of 2005 increased 3.3 percent compared to the
first quarter of 2004 to 9.80 cents. These increases are due primarily
to a 35.2 percent increase in American's price per gallon of fuel in
the first quarter of 2005 (including the benefit of the 7.5 percent
impact of a $55 million fuel excise tax refund) relative to the first
quarter of 2004. The Company's operating and financial results are
significantly affected by the price of jet fuel. Continuing high fuel
prices, additional increases in the price of fuel, or disruptions in
the supply of fuel, would further adversely affect the Company's
financial condition and results of operations.
(in millions) Three Months
Ended Change Percentage
Operating Expenses March 31, 2005 from 2004 Change
Wages, salaries and benefits $ 1,644 $ 4 0.2%
Aircraft fuel 1,097 289 35.8 (a)
Other rentals and landing fees 300 (5) (1.6)
Depreciation and amortization 290 (36) (11.0)(b)
Commissions, booking fees
and credit card expense 271 (17) (5.9)
Maintenance, materials and repairs 235 4 1.7
Aircraft rentals 148 (5) (3.3)
Food service 125 (12) (8.8)
Other operating expenses 617 35 6.0
Total operating expenses $ 4,727 $ 257 5.7%
-11-
(a)Aircraft fuel expense increased primarily due to a 35.2 percent
increase in American's price per gallon of fuel (including the
benefit of the 7.5 percent impact of a $55 million fuel excise
tax refund received in March 2005 and the impact of fuel hedging)
offset by a 1.6 percent decrease in American's fuel consumption.
The Company expects to receive a small amount of additional fuel
excise tax refunds in 2005.
(b)Depreciation and amortization expense decreased primarily due to
a change in the estimate of the depreciable lives of the Company's
Boeing 737-800, Boeing 757-200 and McDonnell Douglas MD-80 aircraft
from 25 to 30 years, which decreased depreciation and amortization
expense by approximately $27 million in the first quarter of 2005.
Other Income (Expense)
Interest income increased $22 million due primarily to a $14 million
interest refund related to the fuel excise tax refund discussed above
and increases in interest rates. Interest expense increased $23
million due primarily to the increase in the Company's long-term debt
and increases in variable interest rates. Miscellaneous-net decreased
$19 million, due primarily to the accrual during the first quarter of
2004 of a $23 million award rendered by an independent arbitrator and
relating to a grievance filed by the Allied Pilots Association.
Income Tax Benefit
The Company did not record a net tax benefit associated with its first
quarter 2005 and 2004 losses due to the Company providing a valuation
allowance, as discussed in Note 5 to the condensed consolidated
financial statements.
Operating Statistics
The following table provides statistical information for American and
Regional Affiliates for the three months ended March 31, 2005 and
2004.
Three Months Ended March 31,
2005 2004
American Airlines, Inc. Mainline Jet Operations
Revenue passenger miles (millions) 32,327 30,290
Available seat miles (millions) 42,854 42,597
Cargo ton miles (millions) 539 521
Passenger load factor 75.4% 71.1%
Passenger revenue yield per passenger mile (cents) 11.88 12.14
Passenger revenue per available seat mile (cents) 8.96 8.64
Cargo revenue yield per ton mile (cents) 27.95 28.47
Operating expenses per available seat mile,
excluding Regional Affiliates (cents) (*) 9.80 9.49
Fuel consumption (gallons, in millions) 729 741
Fuel price per gallon (cents) (**) 136.6 101.0
Operating aircraft at period-end 727 759
Regional Affiliates
Revenue passenger miles (millions) 1,885 1,539
Available seat miles (millions) 2,916 2,453
Passenger load factor 64.7% 62.7%
(*) Excludes $583 million and $487 million of expense incurred
related to Regional Affiliates in 2005 and 2004, respectively.
(**) Includes the benefit of the 7.5 cents per gallon impact of a
$55 million fuel excise tax refund in 2005.
-12-
Operating aircraft at March 31, 2005, included:
American Airlines Aircraft AMR Eagle Aircraft
Airbus A300-600R 34 Bombardier CRJ-700 25
Boeing 737-800 77 Embraer 135 39
Boeing 757-200 143 Embraer 140 59
Boeing 767-200 Extended Range 16 Embraer 145 97
Boeing 767-300 Extended Range 58 Super ATR 41
Boeing 777-200 Extended Range 45 Saab 340B Plus 25
McDonnell Douglas MD-80 354 Total 286
Total 727
The average aircraft age for American's and AMR Eagle's aircraft is
12.5 years and 5.5 years, respectively.
Of the operating aircraft listed above, 18 McDonnell Douglas MD-80s -
- - 11 owned, five operating leased and two capital leased - - were in
temporary storage as of March 31, 2005.
Owned and leased aircraft not operated by the Company at March 31,
2005, included:
American Airlines Aircraft AMR Eagle Aircraft
Boeing 767-200 9 Embraer 145 10
Boeing 767-200 Extended Range 4 Saab 340B/340B Plus 59
Fokker 100 4 Total 69
McDonnell Douglas MD-80 8
Total 25
As part of the Company's fleet simplification initiative, American has
agreed to sell certain aircraft. As of March 31, 2005, remaining
owned aircraft to be delivered under these agreements include three
Boeing 767-200 Extended Range and one Boeing 767-200 aircraft.
AMR Eagle has leased its 10 owned Embraer 145s that are not operated
by AMR Eagle to Trans States Airlines, Inc.
Outlook
The Company currently expects second quarter 2005 mainline unit costs
to be approximately 10.19 cents and full year 2005 mainline unit costs
to be approximately 10.03 cents including the impact of the $55
million fuel excise tax refund.
Capacity for American's mainline jet operations is expected to
increase about 1.7 percent in the second quarter of 2005 compared to
the second quarter of 2004 and about 2.6 percent for the full year
2005 compared to 2004.
-13-
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Except as discussed below, there have been no material changes in
market risk from the information provided in Item 7A. Quantitative and
Qualitative Disclosures About Market Risk of the Company's 2004 Form
10-K.
The risk inherent in the Company's fuel related market risk sensitive
instruments and positions is the potential loss arising from adverse
changes in the price of fuel. The sensitivity analyses presented do
not consider the effects that such adverse changes may have on overall
economic activity, nor do they consider additional actions management
may take to mitigate the Company's exposure to such changes.
Therefore, actual results may differ. The Company does not hold or
issue derivative financial instruments for trading purposes.
Aircraft Fuel The Company's earnings are affected by changes in the
price and availability of aircraft fuel. In order to provide a
measure of control over price and supply, the Company trades and ships
fuel and maintains fuel storage facilities to support its flight
operations. The Company also manages the price risk of fuel costs
primarily by using jet fuel, heating oil, and crude oil hedging
contracts. Market risk is estimated as a hypothetical 10 percent
increase in the March 31, 2005 cost per gallon of fuel. Based on
projected 2005 and 2006 fuel usage through March 31, 2006, such an
increase would result in an increase to aircraft fuel expense of
approximately $545 million in the twelve months ended March 31, 2006,
inclusive of the impact of fuel hedge instruments outstanding at March
31, 2005, and assumes the Company's fuel hedging program remains
effective under Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities".
Comparatively, based on projected 2005 fuel usage, such an increase
would have resulted in an increase to aircraft fuel expense of
approximately $377 million in the twelve months ended December 31,
2005, inclusive of the impact of fuel hedge instruments outstanding at
December 31, 2004. The change in market risk is primarily due to the
increase in fuel prices.
As of March 31, 2005, the Company had hedged an insignificant
percentage of its estimated 2005, 2006 and 2007 fuel requirements with
option contracts.
Item 4. Controls and Procedures
The term "disclosure controls and procedures" is defined in Rules 13a-
15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the
Exchange Act. This term refers to the controls and procedures of a
company that are designed to ensure that information required to be
disclosed by a company in the reports that it files under the Exchange
Act is recorded, processed, summarized and reported within the time
periods specified by the Securities and Exchange Commission. An
evaluation was performed under the supervision and with the
participation of the Company's management, including the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), of the
effectiveness of the Company's disclosure controls and procedures as
of March 31, 2005. Based on that evaluation, the Company's
management, including the CEO and CFO, concluded that the Company's
disclosure controls and procedures were effective as of March 31,
2005. During the quarter ending on March 31, 2005, there was no change
in the Company's internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
-14-
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
On July 26, 1999, a class action lawsuit was filed, and in November
1999 an amended complaint was filed, against AMR Corporation, American
Airlines, Inc., AMR Eagle Holding Corporation, Airlines Reporting
Corporation, and the Sabre Group Holdings, Inc. in the United States
District Court for the Central District of California, Western
Division (Westways World Travel, Inc. v. AMR Corp., et al.). The
lawsuit alleges that requiring travel agencies to pay debit memos to
American for violations of American's fare rules (by customers of the
agencies): (1) breaches the Agent Reporting Agreement between American
and AMR Eagle and the plaintiffs; (2) constitutes unjust enrichment;
and (3) violates the Racketeer Influenced and Corrupt Organizations
Act of 1970 (RICO). On July 9, 2003, the court certified a class that
included all travel agencies who have been or will be required to pay
money to American for debit memos for fare rules violations from July
26, 1995 to the present. On February 24, 2005, the court decertified
the class. The remaining two plaintiffs seek to enjoin American from
enforcing the pricing rules in question and to recover the amounts
paid for debit memos, plus treble damages, attorneys' fees, and costs.
The Company is to vigorously defending the lawsuit. Although the
Company believes that the litigation is without merit, a final adverse
court decision could impose restrictions on the Company's
relationships with travel agencies, which could have an adverse impact
on the Company.
Between April 3, 2003 and June 5, 2003, three lawsuits were filed by
travel agents some of whom opted out of a prior class action (now
dismissed) to pursue their claims individually against American
Airlines, Inc., other airline defendants, and in one case against
certain airline defendants and Orbitz LLC. (Tam Travel et. al., v.
Delta Air Lines et. al., in the United States District Court for the
Northern District of California - San Francisco (51 individual
agencies), Paula Fausky d/b/a Timeless Travel v. American Airlines,
et. al, in the United States District Court for the Northern District
of Ohio Eastern Division (29 agencies) and Swope Travel et al. v.
Orbitz et. al. in the United States District Court for the Eastern
District of Texas Beaumont Division (6 agencies)). Collectively,
these lawsuits seek damages and injunctive relief alleging that the
certain airline defendants and Orbitz LLC: (i) conspired to prevent
travel agents from acting as effective competitors in the distribution
of airline tickets to passengers in violation of Section 1 of the
Sherman Act; (ii) conspired to monopolize the distribution of common
carrier air travel between airports in the United States in violation
of Section 2 of the Sherman Act; and that (iii) between 1995 and the
present, the airline defendants conspired to reduce commissions paid
to U.S.-based travel agents in violation of Section 1 of the Sherman
Act. These cases have been consolidated in the United States District
Court for the Northern District of Ohio Eastern Division. American is
vigorously defending these lawsuits. A final adverse court decision
awarding substantial money damages or placing restrictions on the
Company's distribution practices would have an adverse impact on the
Company.
On August 19, 2002, a class action lawsuit seeking monetary damages
was filed, and on May 7, 2003 an amended complaint was filed in the
United States District Court for the Southern District of New York
(Power Travel International, Inc. v. American Airlines, Inc., et al.)
against American, Continental Airlines, Delta Air Lines, United
Airlines, and Northwest Airlines, alleging that American and the other
defendants breached their contracts with the agency and were unjustly
enriched when these carriers at various times reduced their base
commissions to zero. The as yet uncertified class includes all travel
agencies accredited by the Airlines Reporting Corporation "whose base
commissions on airline tickets were unilaterally reduced to zero by"
the defendants. The case is stayed as to United Airlines, since it
filed for bankruptcy. American is vigorously defending the lawsuit.
Although the Company believes that the litigation is without merit, a
final adverse court decision awarding substantial money damages or
forcing the Company to pay agency commissions would have an adverse
impact on the Company.
-15-
Miami-Dade County (the County) is currently investigating and
remediating various environmental conditions at the Miami
International Airport (MIA) and funding the remediation costs through
landing fees and various cost recovery methods. American and AMR
Eagle have been named as potentially responsible parties (PRPs) for
the contamination at MIA. During the second quarter of 2001, the
County filed a lawsuit against 17 defendants, including American
Airlines, Inc., in an attempt to recover its past and future cleanup
costs (Miami-Dade County, Florida v. Advance Cargo Services, Inc., et
al. in the Florida Circuit Court). The Company is vigorously defending
the lawsuit. In addition to the 17 defendants named in the lawsuit,
243 other agencies and companies were also named as PRPs and
contributors to the contamination. The case is currently stayed while
the parties pursue an alternative dispute resolution process. The
County has proposed draft allocation models for remedial costs for the
Terminal and Tank Farm areas of MIA. While it is anticipated that
American and AMR Eagle will be allocated equitable shares of remedial
costs, the Company does not expect the allocated amounts to have a
material adverse effect on the Company.
Four cases (each being a purported class action) have been filed
against American arising from the disclosure of passenger name records
by a vendor of American. The cases are: Kimmell v. AMR, et al. (U.
S. District Court, Texas), Baldwin v. AMR, et al. (U. S. District
Court, Texas), Rosenberg v. AMR, et al. (U. S. District Court, New
York) and Anapolsky v. AMR, et al. (U.S. District Court, New York).
The Kimmell suit was filed in April 2004. The Baldwin and Rosenberg
cases were filed in May 2004. The Anapolsky suit was filed in
September 2004. The suits allege various causes of action, including
but not limited to, violations of the Electronic Communications
Privacy Act, negligent misrepresentation, breach of contract and
violation of alleged common law rights of privacy. In each case
plaintiffs seek statutory damages of $1000 per passenger, plus
additional unspecified monetary damages. The Company is vigorously
defending these suits and believes the suits are without merit.
However, a final adverse court decision awarding a maximum amount of
statutory damages would have an adverse impact on the Company.
American is defending three lawsuits, filed as class actions but not
certified as such, arising from allegedly improper failure to refund
certain governmental taxes and fees collected by the Company upon the
sale of nonrefundable tickets when such tickets are not used for
travel. The suits are: Coleman v. American Airlines, Inc., No.
101106, filed December 31, 2002, pending (on appeal) before the
Supreme Court of Oklahoma. The Coleman Plaintiffs seek actual damages
(not specified) and interest. Hayes v. American Airlines, Inc., No.
04-3231, pending in the United States District Court for the Eastern
District of New York, filed July 2, 2004. The Hayes Plaintiffs seek
unspecified damages, declaratory judgment, costs, attorneys' fees, and
interest. Harrington v. Delta Air Lines, Inc., et. al., No. 04-
12558, pending in the United States District Court for the District of
Massachusetts, filed November 4, 2004. The Harrington plaintiffs seek
unspecified actual damages (trebled), declaratory judgment, injunctive
relief, costs, and attorneys' fees. The suits assert various causes
of action, including breach of contract, conversion, and unjust
enrichment. The Company is vigorously defending the suits and
believes them to be without merit.
On March 11, 2004, a patent infringement lawsuit was filed against AMR
Corporation, American Airlines, Inc., AMR Eagle Holding Corporation,
and American Eagle Airlines, Inc. in the United States District Court
for the Eastern District of Texas (IAP Intermodal, L.L.C. v. AMR
Corp., et al.). The case was consolidated with eight similar lawsuits
filed against a number of other unaffiliated airlines, including
Continental, Northwest, British Airways, Air France, Pinnacle
Airlines, Korean Air and Singapore Airlines (as well as various
regional affiliates of the foregoing). The plaintiff alleges that the
airline defendants infringe three patents, each of which relates to a
system of scheduling vehicles based on freight and passenger
transportation requests received from remote computer terminals. The
plaintiff is seeking past and future royalties of over $30 billion
dollars, injunctive relief, costs and attorneys' fees. Although the
Company believes that the plaintiff's claims are without merit and is
vigorously defending the lawsuit, a final adverse court decision
awarding substantial money damages or placing material restrictions on
existing scheduling practices would have an adverse impact on the
Company.
-16-
On July 12, 2004, a consolidated class action complaint, that was
subsequently amended on November 30, 2004, was filed against American
Airlines, Inc. and the Association of Professional Flight Attendants
(APFA), the Union which represents the Company's flight attendants
(Ann M. Marcoux, et al., v. American Airlines Inc., et al. in the
United States District Court for the Eastern District of New York).
While a class has not yet been certified, the lawsuit seeks on behalf
of all of American's flight attendants or various subclasses to set
aside, and to obtain damages allegedly resulting from, the April 2003
Collective Bargaining Agreement referred to as the Restructuring
Participation Agreement (RPA). The RPA was one of three labor
agreements the Company successfully reached with its unions in order
to avoid filing for bankruptcy in 2003. In a related case (Sherry
Cooper, et al. v. TWA Airlines, LLC, et al., also in the United States
District Court for the Eastern District of New York), the court denied
a preliminary injunction against implementation of the RPA on June 30,
2003. The Marcoux suit alleges various claims against the Union and
American relating to the RPA and the ratification vote on the RPA by
individual Union members, including: violation of the Labor Management
Reporting and Disclosure Act (LMRDA) and the APFA's Constitution and
By-laws, violation by the Union of its duty of fair representation to
its members, violation by the Company of provisions of the Railway
Labor Act through improper coercion of flight attendants into voting
or changing their vote for ratification, and violations of the
Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO).
Although the Company believes the case against it is without merit and
both the Company and the Union are vigorously defending the lawsuit, a
final adverse court decision invalidating the RPA and awarding
substantial money damages would have an adverse impact on the Company.
-17-
Item 5. Other Information
American has announced a pay plan, funded at 1.5 percent, for all
American employees on U.S. payroll, to be effective May 1, 2005. On
April 20, 2005, the Board approved increases in the base salaries for
officers (including the executive officers of AMR and American). For
the executive officers the increase is effective May 1, 2005, and will
equal 1.5 percent of the current base salary.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
12 Computation of ratio of earnings to fixed charges for the three
months ended March 31, 2005 and 2004.
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32 Certification pursuant to Rule 13a-14(b) and section 906 of the
Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350,
chapter 63 of title 18, United States Code).
Form 8-Ks filed under Item 1.01 - Entry into a Material Definitive
Agreement and Item 9.01 Financial Statements and Exhibits
On February 4, 2005, AMR filed a report on Form 8-K to provide the
2005 Annual Incentive Plan for American.
Form 8-Ks furnished under Item 2.02 - Results of Operations and
Financial Condition and filed under Item 8.01 - Other Events and Item
9.01 - Financial Statements and Exhibits
On January 19, 2005, AMR filed a report on Form 8-K to furnish a press
release issued by AMR to announce its fourth quarter and full year
2004 results.
Form 8-Ks furnished under Item 7.01 - Regulation FD Disclosure
On January 7, 2005, AMR furnished a report on Form 8-K to announce
AMR's intent to host a conference call on January 19, 2005 with the
financial community relating to its fourth quarter and full year 2004
results.
On February 11, 2005, AMR furnished a report on Form 8-K to provide
information regarding a presentation by Gerard Arpey at the JP Morgan
2005 Airline Conference on February 17, 2005.
On March 15, 2005, AMR furnished a report on Form 8-K to provide
information regarding a presentation by Gerard Arpey at the Goldman
Sachs 20th Annual Transportation Conference on March 22, 2005.
Form 8-Ks filed under Item 8.01 - Other Events
On January 5, 2005, AMR filed a report on Form 8-K to provide a press
release issued to report December traffic for American Airlines, Inc.
On February 4, 2005, AMR filed a report on Form 8-K to provide a press
release issued to report January traffic for American Airlines, Inc.
On March 3, 2005, AMR filed a report on Form 8-K to provide a press
release issued to report February traffic for American Airlines, Inc.
On March 29, 2005, AMR furnished a report on Form 8-K to provide
actual fuel cost, unit cost and capacity and traffic information for
January and February as well as certain forecasts of unit cost,
revenue performance and fuel prices, capacity and traffic estimates,
liquidity expectations and other matters for March, the first quarter
and the full year 2005.
-18-
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AMR CORPORATION
Date: April 21, 2005 BY: /s/ James A. Beer
James A. Beer
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
-19-
Exhibit 12
AMR CORPORATION
Computation of Ratio of Earnings to Fixed Charges
(in millions)
Three Months Ended March 31,
2005 2004
Earnings (loss):
Loss before income taxes $ (162) $ (166)
Add: Total fixed charges (per below) 453 435
Less: Interest capitalized 23 18
Total earnings (loss) before income taxes $ 268 $ 251
Fixed charges:
Interest $ 220 $ 201
Portion of rental expense representative
of the interest factor 216 220
Amortization of debt expense 17 14
Total fixed charges $ 453 $ 435
Coverage deficiency $ 185 $ 184
Exhibit 31.1
I, Gerard J. Arpey, certify that:
1. I have reviewed this quarterly report on Form 10-Q of AMR Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 21, 2005 /s/ Gerard J. Arpey
Gerard J. Arpey
Chairman, President and Chief
Executive Officer
Exhibit 31.2
I, James A. Beer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of AMR
Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 21, 2005 /s/ James A. Beer
James A. Beer
Senior Vice President and Chief
Financial Officer
Exhibit 32
AMR CORPORATION
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002
(subsections (a) and (b) of section 1350, chapter 63 of title 18,
United States Code), each of the undersigned officers of AMR
Corporation, a Delaware corporation (the Company), does hereby
certify, to such officer's knowledge, that:
The Quarterly Report on Form 10-Q for the quarter ended March 31,
2005 (the Form 10-Q) of the Company fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934 and information contained in the Form 10-Q fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
Date: April 21, 2005 /s/ Gerard J. Arpey
Gerard J. Arpey
Chairman, President and Chief
Executive Officer
Date: April 21, 2005 /s/ James A. Beer
James A. Beer
Senior Vice President and Chief
Financial Officer
The foregoing certification is being furnished solely pursuant to
section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of title 18, United States Code) and
is not being filed as part of the Form 10-Q or as a separate
disclosure document.