1.
| | | | (1) | | Certain special facility revenue bonds issued by municipalities -— which are supported by operating leases executed by American -— are guaranteed by AMR and/or American. The special facility revenue bonds with mandatory tender provisions discussed above are included in this table based on lease payment terms rather than their mandatory tender provision date. See Note 5 to the consolidated financial statements for additional information. |
2. | (2) | | As of December 31, 2009,2010, the Company had firm commitments to acquire 4515 Boeing737-800s in 20102011 and eight28 Boeing737-800 aircraft in 2011. In2012, and in addition to these aircraft,those commitments, the Company hashad firm commitments for eleven Boeing737-800 aircraft and seven Boeing 777 aircraft scheduled to be delivered in 2013 -— 2016. AMR Eagle has firm commitments for 228 Bombardier CRJ-700 aircraft scheduled to be delivered in 2010 and 2011. Future payments for all aircraft, including the estimated amounts for price escalation, are currently estimated to be approximately $3.3$2.9 billion, with the majority occurring in 20102011 through 2013. Additional information about the Company’s obligations is included in Note 4 to the consolidated financial statements. |
3. | (3) | | The table reflects minimum required payments under the capacity purchase agreement between American and a regional airline, Chautauqua Airlines, Inc. (Chautauqua). If the Company terminates its contract with Chautauqua without cause, Chautauqua has the right to put its 15 Embraer aircraft to the Company. If this were to happen, the Company would take possession of the aircraft and become liable for lease obligations totaling approximately $21 million per year with lease expirations in 2018 and 2019. These lease obligations are not included in the table above. See Note 4 to the consolidated financial statements for additional information. |
4. | (4) | | Amounts represent contractual amounts due, including interest. Interest on variable rate debt was estimated based on the current rate at December 31, 2009.2010. |
5. | (5) | | Includes noncancelable commitments to purchase goods or services, primarily information technology related support. The Company has made estimates as to the timing of certain payments primarily for construction related costs. The actual timing of payments may vary from these estimates. Substantially all of the Company’s purchase orders issued for other purchases in the ordinary course of business contain a30-day cancellation clause that allows the Company to cancel an order with 30 days notice. |
6. | (6) | | Includes minimum pension contributions based on actuarially determined estimates and other postretirement benefit payments based on estimated payments through 2019.2020. See Note 10 to the consolidated financial statements. |
7. | (7) | | Total contractual obligations do not include long-term contracts that represent a variable expense (based on levels of operation) or where short-term cancellation provisions exist. |
36
Pension Obligations The Company is required to make minimum contributions to its defined benefit pension plans under the minimum funding requirements of the Employee Retirement Income Security Act (ERISA), the Pension Funding Equity Act of 2004, and the Pension Protection Act of 2006.2006, and the Pension Relief Act of 2010. The Company estimates its 20102011 required contribution to its defined benefit pension plans to be approximately $525$520 million under the provisions of these acts.
The Company’s obligation for pension and retiree medical and other benefits increased from $6.6 billion at December 31, 2008 to $7.4 billion at December 31, 2009 to $7.9 billion at December 31, 2010, largely the result of a lower discount rate associated with declining interest rates in the bond markets in 2009.2010. A significant portion of this increase is recorded in Accumulated other comprehensive loss, a component of stockholders’ equity. Consequently, Results of Operations The Company recorded a net loss of $471 million in 2010 compared to a net loss of $1.5 billion in 2009. The Company’s smaller net loss in 2010 reflects a strengthening of the revenue environment in a weak global economy which led to higher passenger revenues, partially offset by higher fuel prices. In addition to higher fuel expenses, the Company’s 2010 pension expense will be slightly higher thanresults were negatively impacted by $81 million in 2009. special items. The special items consist of $53 million related to the Venezuelan currency remeasurement in January 2010 and a $28 million non-cash impairment of certain routes in Latin America. Results of Operations
The Company recorded a net loss of $1.5 billion in 2009 compared to a net loss of $2.1 billion in 2008. The Company’s 2009 loss iswas primarily attributable to a significant decrease in passenger revenue due to lower traffic and passenger yield. The 2009 results were also negatively impacted by a net amount of $107 million in special items, restructuring charges and a non-cash tax item. Special2009 special items of $184 million includeincluded the impairment of certain route and slot authorities, primarily in Latin America, and losses on certain sale leaseback transactions. Restructuring charges for 2009 were $171 million and related to announced capacity reductions, including the grounding of the Airbus A300 fleet and the impairment of certain Embraer RJ-135 aircraft. Also included in 2009 results is a $248 million non-cash tax benefit resulting from the allocation of the tax expense to other comprehensive income items recognized during 2009. The 2009 restructuring charges, the 2009 non-cash tax item and the 2010 and 2009 route impairmentimpairments are described in NoteNotes 2, 8 and 11, respectively, to the consolidated financial statements.
The Company recorded a net loss of $2.1 billion in 2008 compared to net earnings of $456 million in 2007.2008. The Company’s 2008 results includeincluded an impairment charge of $1.1 billion to write the McDonnell Douglas MD-80 and Embraer RJ-135 fleets and certain related long-lived assets down to their estimated fair values, a $71 million accrual for employee severance cost and a $33 million expense related to the grounding of leased Airbus A300 aircraft prior to lease expiration, all in connection with announced capacity reductions and included in Special charges in the Consolidated Statements of Operations. In addition, the Company’s 2008 results includeincluded the sale of American Beacon for a net gain of $432 million included inMiscellaneous-net on the Consolidated Statements of Operations and the impact of a pension settlement charge of $103 million for one of the Company’s defined benefit plans included in Wages, salaries and benefits on the Consolidated Statements of Operations.
Revenues 2010 Compared to 2009The Company’s 2007 results reflectedrevenues increased approximately $2.3 billion, or 11.3 percent, to $22.2 billion in 2010 compared to 2009 due to increased traffic and higher average fares. American’s passenger revenues increased by 11.5 percent, or $1.7 billion, on a capacity (ASM) increase of 1.0 percent. American’s passenger load factor increased approximately 1.2 points to 81.9 percent and passenger revenue yield per passenger mile increased 8.7 percent to 13.36 cents. This resulted in an improvementincrease in passenger revenue per available seat mile (RASM) of 10.4 percent to 10.94 cents. In 2010, American derived approximately 60 percent of its passenger revenues somewhat offset by fuel pricesfrom domestic operations and approximately 40 percent from international operations (flights serving 37
international destinations). Following is additional information regarding American’s domestic and international RASM and capacity: | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2010 | | | RASM
| | Y-O-Y
| | ASMs
| | Y-O-Y
| | | (Cents) | | Change | | (Billions) | | Change | | DOT Domestic | | | 10.80 | | | | 9.5 | % | | | 93.2 | | | | 0.2 | % | International | | | 11.14 | | | | 11.8 | | | | 60.0 | | | | 2.2 | | DOT Latin America | | | 11.80 | | | | 8.1 | | | | 29.4 | | | | 3.7 | | DOT Atlantic | | | 10.58 | | | | 15.9 | | | | 23.2 | | | | (1.9 | ) | DOT Pacific | | | 10.29 | | | | 15.7 | | | | 7.4 | | | | 9.8 | |
Regional Affiliates’ passenger revenues, which are based on industry standard proration agreements for flights connecting to American flights, increased $315 million or 15.7 percent as a result of passenger yield increase of 8.4 percent. Regional Affiliates’ traffic increased 6.7 percent to 8.8 billion revenue passenger miles (RPMs), while capacity increased 5.3 percent to 12.2 billion ASMs, resulting in a 1.0 point increase in passenger load factor to 72.4 percent. Cargo revenues increased 16.3 percent, or $94 million, primarily as a result of increased volume, particularly in the Latin America and Pacific regions. Other revenues increased 5.3 percent, or $121 million, to $2.4 billion due to increases in certain other costs. The 2007 results were impacted by productivity improvementspassenger service charge volumes and by cost reductionsfees and the impact of several items including: a $138 million gain onincreased revenue associated with the sale of AMR’s stakemileage credits in ARINC included in Other Income, Miscellaneous – net, a $39 million gain to reflect the positive impact of the change to an 18-month expiration of AAdvantage miles included in Passenger revenue, and a $63 million charge associated with the retirement and planned disposal of 24 McDonnell Douglas MD-80 aircraft and certain other equipment that previously had been temporarily stored included in Other operating expenses.frequent flyer program. Revenues
2009 Compared to 2008The Company’s revenues decreased approximately $3.8 billion, or 16.2 percent, to $19.9 billion in 2009 compared to 2008. American’s passenger revenues decreased by 17.5 percent, or $3.2 billion, on a capacity decrease of approximately 7.2 percent year over year. Mainline passenger load factor increased approximately 0.1 points to 80.7 percent and passenger revenue yield per passenger mile decreased 11.2 percent to 12.28 cents. This resulted in a decrease in passenger revenue per available seat mile (RASM) of 11.1 percent to 9.91 cents. In 2009, American derived approximately 60 percent of its passenger revenues from domestic operations and approximately 40 percent from international operations (flights serving international destinations). Following is additional information regarding American’s domestic and international RASM and capacity: | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2009 | | | Year Ended December 31, 2009 | | | RASM
| | Y-O-Y
| | ASMs
| | Y-O-Y
| | | RASM (cents) | | | Y-O-Y Change | | | ASMs (billions) | | | Y-O-Y Change | | | (Cents) | | Change | | (Billions) | | Change | | | | | | | | | | | | | | DOT Domestic | | | 9.87 | | | (8.7)% | | | 93.0 | | | (8.7)% | | | | 9.87 | | | | (8.7 | )% | | | 93.0 | | | | (8.7 | )% | International | | 9.96 | | | (14.9) | | | 58.8 | | | (4.7) | | | | 9.96 | | | | (14.9 | ) | | | 58.8 | | | | (4.7 | ) | DOT Latin America | | 10.91 | | | (12.5) | | | 28.4 | | | (6.5) | | | | 10.91 | | | | (12.5 | ) | | | 28.4 | | | | (6.5 | ) | DOT Atlantic | | 9.13 | | | (16.7) | | | 23.7 | | | (3.7) | | | | 9.13 | | | | (16.7 | ) | | | 23.7 | | | | (3.7 | ) | DOT Pacific | | 8.90 | | | (19.4) | | | 6.7 | | | 0.1 | | | | 8.90 | | | | (19.4 | ) | | | 6.7 | | | | 0.1 | |
Regional Affiliates’ passenger revenues, which are based on industry standard proration agreements for flights connecting to American flights, decreased by $474 million, or 19.1 percent, to $2.0 billion as a result of a reduction in capacity, decreased passenger traffic and lower yield. Regional Affiliates’ traffic decreased 6.7 percent to 8.3 billion revenue passenger miles (RPMs), while capacity decreased 8.2 percent to 11.6 billion ASMs, resulting in a 1.2 point increase in passenger load factor to 71.4 percent.
Cargo revenues decreased by 33.9 percent, or $296 million, primarily due to decreases in advertising mail and freight traffic resulting from the current economic downturn.
Other revenues increased 5.4 percent, or $118 million, to $2.3 billion due to increases in certain passenger service charges instituted throughout the year in 2008. 38
Operating Expenses
2010 Compared to 2009 The Company’s total operating expenses increased 4.5 percent, or $941 million, to $21.9 billion in 2010 compared to 2009. American’s mainline operating expenses per ASM in 2010 increased 3.2 percent compared to 2009 to 12.62 cents. The increase in operating expense was largely due to ayear-over-year increase in fuel prices from $2.01 per gallon in 2009 to $2.32 per gallon in 2010, including the impact of fuel hedging. Fuel expense was the Company’s second largest single expense category in 2010 and the price increase resulted in $847 million in incrementalyear-over-year fuel expense in 2010 (based on theyear-over-year increase in the average price per gallon multiplied by gallons consumed, inclusive of the impact of fuel hedging). A return to the recent historically high fuel pricesand/or disruptions in the supply of fuel would further materially adversely affect the Company’s financial condition and results of operations. The remaining increase in operating expense was primarily due to revenue related expenses, such as credit card fees and booking fees and commissions, and increased aircraft rent related to the Company’s fleet renewal plan. | | | | | | | | | | | | | | | Year Ended
| | | Change
| | | | | | | December 31,
| | | from
| | | Percentage
| | Operating Expenses | | 2010 | | | 2009 | | | Change | | | | (In millions) | | | Wages, salaries and benefits | | $ | 6,847 | | | $ | 40 | | | | 0.6 | % | Aircraft fuel | | | 6,400 | | | | 847 | | | | 15.3 | (a) | Other rentals and landing fees | | | 1,418 | | | | 65 | | | | 4.8 | | Depreciation and amortization | | | 1,093 | | | | (11 | ) | | | (1.0 | ) | Maintenance, materials and repairs | | | 1,329 | | | | 49 | | | | 3.8 | | Commissions, booking fees and credit card expense | | | 976 | | | | 123 | | | | 14.5 | (b) | Aircraft rentals | | | 580 | | | | 75 | | | | 14.9 | (c) | Food service | | | 490 | | | | 3 | | | | 0.6 | | Special charges | | | — | | | | (171 | ) | | | | *(d) | Other operating expenses | | | 2,729 | | | | (79 | ) | | | (2.8 | ) | | | | | | | | | | | | | | Total operating expenses | | $ | 21,862 | | | $ | 941 | | | | 4.5 | % | | | | | | | | | | | | | |
2008 Compared to 2007 The Company’s revenues increased approximately $831 million, or 3.6 percent, to $23.8 billion in 2008 compared to 2007. American’s passenger revenues increased by 3.3 percent, or $583 million, despite a significant capacity (ASM) decrease of 3.8 percent. American’s passenger load factor decreased approximately one point to 80.6 percent and passenger revenue yield per passenger mile increased 8.6 percent to 13.84 cents. This resulted in an increase in passenger revenue per available seat mile (RASM) of 7.3 percent to 11.15 cents. In 2008, American derived approximately 60 percent of its passenger revenues from domestic operations and approximately 40 percent from international operations (flights serving international destinations). Following is additional information regarding American’s domestic and international RASM and capacity:
| | Year Ended December 31, 2008 | | | | RASM (cents) | | | Y-O-Y Change | | | ASMs (billions) | | | Y-O-Y Change | | | | | | | | | | | | | | | DOT Domestic | | | 10.81 | | | | 5.5% | | | | 101.9 | | | | (6.1)% | | International | | | 11.71 | | | | 10.1 | | | | 61.7 | | | | 0.5 | | DOT Latin America | | | 12.47 | | | | 11.9 | | | | 30.4 | | | | 2.2 | | DOT Atlantic | | | 10.96 | | | | 6.6 | | | | 24.6 | | | | (1.4) | | DOT Pacific | | | 11.04 | | | | 13.2 | | | | 6.7 | | | | (0.4) | |
Regional Affiliates’ passenger revenues, which are based on industry standard proration agreements for flights connecting to American flights, remained flat at $2.5 billion. Regional Affiliates’ traffic decreased 10.2 percent to 8.8 billion revenue passenger miles (RPMs), while capacity decreased 6.0 percent to 12.6 billion ASMs, resulting in a 3.2 point decrease in passenger load factor to 70.2 percent.
Cargo revenues increased 5.9 percent, or $49 million, primarily as a result of increased fuel surcharges.
Other revenues increased 9.2 percent, or $183 million, to $2.2 billion due to increases in certain passenger service charges.
| | | (a) | | Aircraft fuel expense increased primarily due to a 15.2 percent increase in the Company’s price per gallon of fuel (net of the impact of hedging losses of $142 million). | | (b) | | Commissions, booking fees and credit card expenses increased due to an 11.3 percent increase in operating revenues. | | (c) | | Aircraft rental expense increased principally due to new aircraft deliveries in 2009 and 2010. | | (d) | | Special charges in 2009 related to announced capacity reductions, the grounding of the Airbus A300 fleet and the write down of certain Embraer RJ-135 aircraft to their estimated fair values. |
Operating Expenses
. 2009 Compared to 2008The Company’s total operating expenses decreased 18.5 percent, or $4.7 billion, to $20.9 billion in 2009 compared to 2008. American’s mainline operating expenses per ASM in 2009 decreased 11.9 percent compared to 2008 to 12.22 cents. The decrease in operating expense was largely due to ayear-over-year decrease in AMR’s fuel prices from $3.03 per gallon in 2008 to $2.01 per gallon in 2009, including the impact of fuel hedging. Although fuel prices have abated considerably from the record high prices recorded in July 2008, they have steadily increased since the first quarter of 2009 and remain high and extremely volatile by historical standards. A return to the recent historically high fuel prices and/or disruptions in the supply of fuel would further materially adversely affect the Company’s financial condition and results of operations. The Company’s unit costs excluding fuel and special charges were greater for the year ended December 31, 2009 than the year ended December 31, 2008. Factors driving the increase include increased defined benefit pension expenses (due to the stock market decline in 2008), higher airport rent and landing fees and 39
cost pressures associated with the Company’s capacity reductions announced in 2008 and 2009 and dependability initiatives.
| | | | | | | | | | | | | | | Year Ended
| | | Change
| | | | | | | December 31,
| | | from
| | | Percentage
| | Operating Expenses | | 2009 | | | 2008 | | | Change | | | | (In millions) | | | Wages, salaries and benefits | | $ | 6,807 | | | $ | 152 | | | | 2.3 | % | Aircraft fuel | | | 5,553 | | | | (3,461 | ) | | | (38.4 | )(a) | Other rentals and landing fees | | | 1,353 | | | | 55 | | | | 4.2 | | Depreciation and amortization | | | 1,104 | | | | (103 | ) | | | (8.5 | ) | Maintenance, materials and repairs | | | 1,280 | | | | 43 | | | | 3.5 | | Commissions, booking fees and credit card expense | | | 853 | | | | (144 | ) | | | (14.4 | )(b) | Aircraft rentals | | | 505 | | | | 13 | | | | 2.6 | | Food service | | | 487 | | | | (31 | ) | | | (6.0 | ) | Special charges | | | 171 | | | | (1,042 | ) | | | (85.9 | )(c) | Other operating expenses | | | 2,808 | | | | (216 | ) | | | (7.1 | )(d) | | | | | | | | | | | | | | Total operating expenses | | $ | 20,921 | | | $ | (4,734 | ) | | | (18.5 | )% | | | | | | | | | | | | | |
(in millions) Operating Expenses | | Year ended December 31, 2009 | | | Change from 2008 | | | Percentage Change | | | | | | | | | | | | | | Wages, salaries and benefits | | $ | 6,807 | | | $ | 152 | | | | 2.3 | % | | Aircraft fuel | | | 5,553 | | | | (3,461 | ) | | | (38.4 | ) | (a) | Other rentals and landing fees | | | 1,353 | | | | 55 | | | | 4.2 | | | Depreciation and amortization | | | 1,104 | | | | (103 | ) | | | (8.5 | ) | | Maintenance, materials and repairs | | | 1,280 | | | | 43 | | | | 3.5 | | | Commissions, booking fees and credit card expense | | | 853 | | | | (144 | ) | | | (14.4 | ) | (b) | Aircraft rentals | | | 505 | | | | 13 | | | | 2.6 | | | Food service | | | 487 | | | | (31 | ) | | | (6.0 | ) | | Special charges | | | 171 | | | | (1,042 | ) | | | (85.9 | ) | (c) | Other operating expenses | | | 2,808 | | | | (216 | ) | | | (7.1 | ) | (d) | Total operating expenses | | $ | 20,921 | | | $ | (4,734 | ) | | | (18.5 | )% | |
| | | (a) | | Aircraft fuel expense decreased primarily due to a 33.7 percent decrease in the Company’s price per gallon of fuel (net of the impact of fuel hedging) and a 7.0 percent decrease in the Company’s fuel consumption. The Company recorded $651 million in net losses and $380 million in net gains on its fuel hedging contracts for the years ended December 31, 2009 and 2008, respectively. |
| (b) | | Commissions, booking fees and credit card expense decreased in conjunction with the 16.2 percent decrease in the Company’s revenues. |
| (c) | | Special charges in 2008 are related to an impairment charge of $1.1 billion to write down the Company’s McDonnell Douglas MD-80 and Embraer RJ-135 fleets and certain related long-lived assets to their estimated fair values. Special charges in 2009 relate to announced capacity reductions, the grounding of the Airbus A300 fleet and the write down of certain Embraer RJ-135 aircraft to their estimated fair values. |
| (d) | | Other operating expenses in 2009 include $184 million for the impairment of certain route and slot authorities, primarily in Latin America, and losses on certain sale leaseback transactions. |
2008 Compared to 2007 The Company’s total operating expenses increased 16.8 percent, or $3.7 billion, to $25.7 billion in 2008 compared to 2007. American’s mainline operating expenses per ASM in 2008 increased 21.9 percent compared to 2007 to 13.87 cents. The increase in operating expense was largely due to a dramatic year-over-year increase in fuel prices from $2.13 per gallon in 2007 to $3.03 per gallon in 2008, including the impact of fuel hedging. Fuel expense was the Company’s largest single expense category and the price increase resulted in $2.7 billion in incremental year-over-year fuel expense in 2008 (based on the year-over-year increase in the average price per gallon multiplied by gallons consumed, inclusive of the impact of fuel hedging). The remaining increase in operating expense was due to the second quarter 2008 impairment charge of $1.2 billion to write the McDonnell Douglas MD-80 and Embraer RJ-135 fleets and certain related long-lived assets down to their estimated fair values and certain other special charges and employee charges.
(in millions) Operating Expenses | | Year ended December 31, 2008 | | | Change from 2007 | | | Percentage Change | | | | | | | | | | | | | | Wages, salaries and benefits | | $ | 6,655 | | | $ | (115 | ) | | | (1.7 | )% | | Aircraft fuel | | | 9,014 | | | | 2,344 | | | | 35.1 | | (a) | Other rentals and landing fees | | | 1,298 | | | | 20 | | | | 1.6 | | | Depreciation and amortization | | | 1,207 | | | | 5 | | | | 0.4 | | | Maintenance, materials and repairs | | | 1,237 | | | | 180 | | | | 17.0 | | (b) | Commissions, booking fees and credit card expense | | | 997 | | | | (31 | ) | | | (3.0 | ) | | Aircraft rentals | | | 492 | | | | (99 | ) | | | (16.8 | ) | (c) | Food service | | | 518 | | | | (16 | ) | | | (3.0 | ) | | Special charges | | | 1,213 | | | | 1,150 | | | | * | | (d) | Other operating expenses | | | 3,024 | | | | 247 | | | | 8.9 | | (e) | Total operating expenses | | $ | 25,655 | | | $ | 3,685 | | | | 16.8 | % | |
* Not meaningful
(a) | Aircraft fuel expense increased primarily due to a 42.4 percent increase in the Company’s price per gallon of fuel (net of the impact of hedging gains of $380 million) offset by a 5.1 percent decrease in the Company’s fuel consumption, primarily due to reductions in available seat miles. |
(b) | Maintenance, materials and repairs expense increased due to a heavier workscope of scheduled and unscheduled airframe maintenance overhauls, dependability initiatives, repair costs and volume, and contractual engine repair rates, which are driven by aircraft age. |
(c) | Aircraft rental expense decreased principally due to lease expirations of Boeing 757 and McDonnell Douglas MD-80 aircraft. |
(d) | Special charges are related to an impairment charge in the second quarter of 2008 of $1.1 billion to write down the Company’s McDonnell Douglas MD-80 and Embraer RJ-135 fleets and certain related long-lived assets to their estimated fair values. This impairment charge was triggered by the record increase in fuel prices over the preceding twelve months. In addition, the Company accrued $71 million for severance costs and $33 million related to the grounding of leased Airbus A300 aircraft prior to lease expiration, both related to the capacity reductions. |
(e) | Other operating expenses increased due in part to an increase in foreign exchange losses of $70 million. |
Other Income (Expense) Other income (expense) consists of Interest income and expense, Interest capitalized and Miscellaneous -— net.
2010 Compared to 2009 Decreases in both short-term investment balances and interest rates caused a decrease in Interest income of $8 million, or 23.1 percent, to $26 million. Interest expense increased $79 million, or 10.7 percent, to $823 million primarily as a result of an increase in the Company’s long-term debt balance. 2009 Compared to 2008Decreases in both short-term investment balances throughout most of 2009 and decreases in interest rates caused a decrease in Interest income of $147 million, or 81.2 percent, to $34 million. Interest expense decreased $59 million, or 7.3 percent, to $744 million primarily as a result of a decrease in the Company’s long-term debt balance throughout most of 2009 and decreases in interest rates on variable rate debt.
2008 Compared to 2007 Income Tax BenefitDecreases
The Company has recorded in both short-term investment balances2010 and interest rates caused a decrease in Interest2009 an income tax expense credit of $156approximately $30 million or 46.4 percent, to $181 million. Interest expense decreased $159and $36 million, or 16.5 percent, to $803 million primarily as a result of a decrease inrespectively, resulting from the Company’s long-term debt balance. Miscellaneous – net includes a gainanticipated election under applicable sections of $432 million for the saleTax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and Section 3081 of the Housing and Economic Recovery Act of 2008 (as extended by the American BeaconRecovery and Reinvestment Act of 2009), 40
allowing corporations to accelerate utilization of certain research and alternative minimum tax (AMT) credit carryforwards in 2008 and $138 million for the salelieu of ARINC in 2007.applicable bonus depreciation on certain qualifying capital investments. The Company did not record a net tax provision (benefit) associated with 2008 net loss due to the Company providing a valuation allowance, as discussed in Note 8 to the consolidated financial statements. However, during 2009, the Company generated a pre-tax loss of $1.8 billion and other comprehensive income of approximately $701 million. In accordance with accounting standards, the net zero tax provision is required to be allocated between Operating loss and Accumulated other comprehensive income. Application of this guidance during 2009 resulted in a non-cash income tax benefit of $248 million, offset by a $248 million charge to other comprehensive income related to such items being recognized in 2009. See Note 8 for additional information regarding the allocation of income tax benefit to Operating income and Accumulated other comprehensive income.
The Company has also recorded an income tax expense credit of approximately $36 million in 2009 resulting from the Company’s anticipated election under Section 3081 of the Housing and Economic Recovery Act of 2008 (as extended by Section 1201(b) of the American Recovery and Reinvestment Act of 2009), allowing corporations a refund of certain research and alternative minimum tax (AMT) credit carryforwards in lieu of applicable bonus depreciation on certain qualifying capital investments.
Operating Statistics
The following table provides statistical information for American and Regional Affiliates for the years ended December 31, 2010, 2009 2008 and 2007.2008.
| | | | | | | | | | | | | | | Year Ended December 31, | | | 2010 | | 2009 | | 2008 | | American Airlines, Inc. Mainline Jet Operations | | | | | | | | | | | | | Revenue passenger miles (millions) | | | 125,486 | | | | 122,418 | | | | 131,757 | | Available seat miles (millions) | | | 153,241 | | | | 151,774 | | | | 163,532 | | Cargo ton miles (millions) | | | 1,886 | | | | 1,656 | | | | 2,005 | | Passenger load factor | | | 81.9 | % | | | 80.7 | % | | | 80.6 | % | Passenger revenue yield per passenger mile (cents) | | | 13.36 | | | | 12.28 | | | | 13.84 | | Passenger revenue per available seat mile (cents) | | | 10.94 | | | | 9.91 | | | | 11.15 | | Cargo revenue yield per ton mile (cents) | | | 35.65 | | | | 34.91 | | | | 43.59 | | Operating expenses per available seat mile, excluding Regional Affiliates (cents)(*) | | | 12.62 | | | | 12.22 | | | | 13.87 | | Fuel consumption (gallons, in millions) | | | 2,481 | | | | 2,499 | | | | 2,694 | | Fuel price per gallon (cents) | | | 231.0 | | | | 200.7 | | | | 302.6 | | Operating aircraft at year-end | | | 620 | | | | 610 | | | | 626 | | Regional Affiliates | | | | | | | | | | | | | Revenue passenger miles (millions) | | | 8,812 | | | | 8,255 | | | | 8,846 | | Available seat miles (millions) | | | 12,179 | | | | 11,566 | | | | 12,603 | | Passenger load factor | | | 72.4 | % | | | 71.4 | % | | | 70.2 | % |
| | Year Ended December 31, | | | | 2009 | | | 2008 | | | 2007 | | | | | | | | | | | | American Airlines, Inc. Mainline Jet Operations | | | | | | | | | | Revenue passenger miles (millions) | | | 122,418 | | | | 131,757 | | | | 138,453 | | Available seat miles (millions) | | | 151,774 | | | | 163,532 | | | | 169,906 | | Cargo ton miles (millions) | | | 1,656 | | | | 2,005 | | | | 2,122 | | Passenger load factor | | | 80.7 | % | | | 80.6 | % | | | 81.5 | % | Passenger revenue yield per passenger mile (cents) (^) | | | 12.28 | | | | 13.84 | | | | 12.75 | | Passenger revenue per available seat mile (cents) (^) | | | 9.91 | | | | 11.15 | | | | 10.39 | | Cargo revenue yield per ton mile (cents) | | | 34.91 | | | | 43.59 | | | | 38.86 | | Operating expenses per available seat mile, excluding Regional Affiliates (cents) (*) | | | 12.22 | | | | 13.87 | | | | 11.38 | | Fuel consumption (gallons, in millions) | | | 2,499 | | | | 2,694 | | | | 2,834 | | Fuel price per gallon (cents) | | | 200.7 | | | | 302.6 | | | | 212.1 | | Operating aircraft at year-end | | | 610 | | | | 626 | | | | 655 | | | | | | | | | | | | | | | Regional Affiliates | | | | | | | | | | | | | Revenue passenger miles (millions) | | | 8,255 | | | | 8,846 | | | | 9,848 | | Available seat miles (millions) | | | 11,566 | | | | 12,603 | | | | 13,414 | | Passenger load factor | | | 71.4 | % | | | 70.2 | % | | | 73.4 | % |
| | | (*) | | Excludes $2.7 billion, $2.5 billion $3.1 billion and $2.8$3.1 billion of expense incurred related to Regional Affiliates in 2010, 2009 and 2008, andrespectively |
(^) Reflects the impact of the reclassification of certain 2007 passenger revenues to conform with the current presentation.
The Company currently expects capacity for American’s mainline jet operations to decreaseincrease by approximately three percent3.8% in the first quarter of 20102011 versus first quarter 2009.2010. American’s mainline capacity for the full year 20102011 is expected to increase approximately one percent3.6% from 20092010 with half of a percent decrease1% increase in domestic capacity and nearly three percenta 7.7% growth in international capacity.
The Company expects first quarter 20102011 mainline unit costs to increase approximately 9.21.6 percent year over year. The first quarter 2010 and full year 20102011 unit cost expectations reflect the increase in the cost of fuel during the second half of 20092010 and projected fuel prices in 2010,2011. Despite anticipated higher revenue-related expenses (such as booking fees and commissions) and financing costs related to the Company’s new Boeing737-800 and other aircraft, deliveries. Due to these cost pressures, the Company expects first quarter mainline unit costs excluding fuel to also be modestly higher3.2% lower than the prior year periods. 41
The Company’s results are significantly affected by the price of jet fuel, which is in turn affected by a number of factors beyond the Company’s control. Although fuel prices have abated considerably from the record high prices recorded in July 2008, they have steadily increased since the first quarter of 2009, particularly recently, and remain high and extremely volatile by historical standards.
The Company is experiencing very weak demand for air travel driven by the severe downturn in the global economy. The Company initially implemented capacity reductions in 2008 and again in the first half of 2009 in response to record high fuel prices in 2008 and a rapidly deteriorating economy. Those capacity reductions have somewhat mitigated this weakening of demand. However, if the global economic downturn persists or worsens, demand for air travel may continue to weaken. No assurance can be given that capacity reductions or other steps the Company may take will be adequate to offset the effects of reduced demand. In addition, fare discounting has recently been both broader and deeper than usual, and the Company expects downward pressure on passenger yields into 2010.Other Information
Other Information
Critical Accounting Policies and EstimatesThe preparation of the Company’s financial statements in conformity with U.S. Generally Accepted Accounting Principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company believes its estimates and assumptions are reasonable; however, actual results and the timing of the recognition of such amounts could differ from those estimates. The Company has identified the following critical accounting policies and estimates used by management in the preparation of the Company’s financial statements: long-lived assets, routes, passenger revenue, frequent flyer program, stock compensation, pensions and retiree medical and other benefits, income taxes and derivatives accounting.
Long-lived assets – — The Company has approximately $16 billion of long-lived assets as of December 31, 2009,2010, including approximately $15 billion related to flight equipment and other fixed assets. In addition to the original cost of these assets, the recorded value of the Company’s fixed assets is impacted by a number of estimates made by the Company, including estimated useful lives, salvage values and the Company’s determination as to whether aircraft are temporarily or permanently grounded. In accordance with U.S. GAAP, the Company records impairment charges on long-lived assets used in operations when events and circumstances indicate that the assets may be impaired, the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets and the net book value of the assets exceeds their estimated fair value. In making these determinations, the Company uses certain assumptions, including, but not limited to: (i) estimated fair value of the assets; and (ii) estimated future cash flows expected to be generated by the assets, generally evaluated at a fleet level, which are based on additional assumptions such as asset utilization, length of service and estimated salvage values. A change in the Company'sCompany’s fleet plan has been the primary indicator that has resulted in an impairment charge in the past. The majority of American’s fleet types are depreciated over 30 years. It is possible that the ultimate lives of the Company’s aircraft will be significantly different than the current estimate due to unforeseen events in the future that impact the Company’s fleet plan, including positive or negative developments in the areas described above. For example, operating the aircraft for a longer period will result in higher maintenance, fuel and other operating costs than if the Company replaced the aircraft. At some point in the future, higher operating costs, including higher fuel expense,and/or improvement in the Company’s economic condition, could change the Company’s analysis of the impact of retaining aircraft versus replacing them with new aircraft. In the fourth quarter of 2009, due to the continuing severe downturn in the global economy and weakness in the regional jet aircraft market, the Company’s plan to sell certain of its Embraer RJ-135 aircraft was no longer feasible at the amount for which these aircraft had been valued. Consequently, the Company reclassified these aircraft from held for sale to held for use, tested them for impairment and concluded the carrying values of certain of its Embraer RJ-135 aircraft were no longer recoverable. The Company has recorded impairment charges in the fourth quarter of 2009, and will now resume recording depreciation on these aircraft prospectively. See Note 2 to the consolidated financial statements for more information. In the second quarter of 2008, due to the Company’s capacity reduction announcement, the Company concluded a triggering event had occurred and required that fixed assets be tested for impairment. As a result of that testing, the Company recorded impairment charges related to its McDonnell Douglas MD-80 aircraft and Embraer RJ-135 aircraft. See Note 2 to the consolidated financial statements for more information.
International Slots and Route Authorities – — AMR performs annual impairment tests on its international slots and route authorities, which are indefinite life intangible assets and as a result they are not amortized. As discussed above, the Company also performs impairment tests when events and circumstances indicate that the assets might be impaired. These tests are primarily based on estimates of discounted future cash flows, using assumptions based on historical results adjusted to reflect the Company’s best estimate of future market and operating conditions.conditions and also consideration of markets for these assets. The net carrying value of assets not recoverable is reduced to fair 42
value. The Company'sCompany’s estimates of fair value represent its best estimate based on industry trends and reference to market rates and transactions.
During 2009, the Company adopted guidance on measuring the fair value of assets and liabilities. The guidance introduces a framework for measuring fair value primarily based on exit prices and expands required disclosure about fair value measurements of assets and liabilities. The Company had recorded international slots and route authorities of $736$708 million as of December 31, 2009.2010. The Company estimates the fair value of these assets based on market information and estimated future cash flows. The Company believes its estimates and assumptions are reasonable; however, given the significant uncertainty regarding how open skies agreements will ultimately affect the Company’s operations at Heathrow and Narita, and other international locations that are evaluating “open skies”, as well as volatility in the revenue and fuel environment, the actual results could differ from those estimates. Further, as a part of the annual impairment test, it was determined that the fair value of certain routes (primarily in Latin America)America was less than the carrying value, and therefore, the Company recorded an impairment charge. See Note 11 to the consolidated financial statements for additional information regarding the valuation of the Company’s routes.
| Passenger revenue – Passenger revenue — Passenger ticket sales are initially recorded as a component of Air traffic liability. Revenue derived from ticket sales is recognized at the time service is provided. However, due to various factors, including the industry’s pricing structure and interline agreements throughout the industry, certain amounts are recognized in revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized, including breakage. These estimates are generally based upon the evaluation of historical trends, including the use of regression analysis and other methods to model the outcome of future events based on the Company’s historical experience, and are recognized at the scheduled time of departure. The Company’s estimation techniques have been applied consistently from year to year. However, due to changes in the Company’s ticket refund policy and changes in the travel profile of customers, historical trends may not be representative of future results.
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Frequent flyer program – — American uses the incremental cost method to account for the portion of its frequent flyer liability incurred when AAdvantage members earn mileage credits by flying on American or its regional affiliates.
The Company considers breakage in its incremental cost calculation and recognizes breakage on AAdvantage miles sold over the estimated period of usage for sold miles that are ultimately redeemed. The Company calculates its breakage estimate using separate breakage rates for miles earned by flying on American and miles earned through other companies who have purchased AAdvantage miles for distribution to their customers, due to differing behavior patterns. Management considers historical patterns of account breakage to be a useful indicator when estimating future breakage. Future program redemption opportunities can significantly alter customer behavior from historical patterns with respect to inactive accounts. Such changes may result in material changes to the deferred revenue balance,frequent flyer liability, as well as recognized revenues from the program.
American includes fuel, food, and passenger insurance and reservations/ticketing costs in the calculation of incremental cost. These estimates are generally updated based upon the Company’s12-month historical average of such costs. American also accrues a frequent flyer liability for the mileage credits expected to be used for travel on participating airlines based on historical usage patterns and contractual rates.
Revenue earned from selling AAdvantage miles to other companies is recognized in two components. The first component represents the revenue for air transportation sold and is valued at fair value. This revenue is deferred along with revenue related to expected breakage of sold miles and recognized over the period the mileage is expected to be used, which is currently estimated to be 28 months. The second revenue component, based on the residual method and representing the marketing services sold, is recognized as related services are provided.
The Company’s total liability for future AAdvantage award redemptions for free, discounted or upgraded travel on American, American Eagle or participating airlines, as well as unrecognized revenue from selling AAdvantage miles to other companies, was approximately $1.5$1.4 billion and $1.7$1.5 billion at December 31, 20092010 and 2008,2009, respectively (and is recorded as a component of Air traffic liability in the consolidated balance sheets), 43
representing 16.3 percent and 19.2 percent and 18.2 percent of AMR'sAMR’s total current liabilities, at December 31, 20092010 and 2008,2009, respectively.
The approximate number of free travel awards used for travel on American and American Eagle was 5.6 million one-way travel awards in 2010 (or 2.8 million round trip awards) and 5.2 million one-way travel awards in 2009 (or 2.6 million round trip awards) and 6.2 million one-way travel awards in 2008 (or 3.1 million round trip travel awards) representing approximately 8.98.8 and 9.78.9 percent of passengers boarded in each year, respectively. The Company believes displacement of revenue passengers is minimal given the Company’s load factors, its ability to manage frequent flyer seat inventory, and the relatively low ratio of free award usage to total passengers boarded. Changes to the percentage of the amount of revenue deferred, deferred recognition period, percentage of awards expected to be redeemed for travel on participating airlines, breakage or cost per mile estimates could have a significant impact on the Company’s revenues or incremental cost accrual in the year of the change as well as in future years.
Stock Compensation– — The Company grants awards under its various share based payment plans and utilizes option pricing models or fair value models to estimate the fair value of its awards. Certain awards contain a market performance condition, which is taken into account in estimating the fair value on the date of grant. The fair value of those awards is calculated by multiplying the stock price on the date of grant by the expected payout percentage and the number of shares granted. The Company accounts for these awards over the three year term of the award based on the grant date fair value, provided adequate shares are available to settle the awards. For awards where adequate shares are not anticipated to be available or that only permit settlement in cash, the fair value is re-measured each reporting period.
Pensions and retiree medical and other benefits – — The Company recognizes the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of its pension and postretirement plans in the consolidated balance sheet with a corresponding adjustment to Accumulated other comprehensive income (loss).
The Company’s pension and other postretirement benefit costs and liabilities are calculated using various actuarial assumptions and methodologies. The Company uses certain assumptions including, but not limited to, the selection of the: (i) discount rate; (ii) expected return on plan assets; and (iii) expected health care cost trend rate and, starting in 2007 (iv) the (iv) estimated age of pilot retirement (as discussed below).
These assumptions as of December 31 were: | | | 2009 | | | 2008 | | | Discount rate (cost/liability) | | | 6.50% / 6.10% | | | | 6.50% / 6.50% | | | Expected return on plan assets | | | 8.50% | | | | 8.75% | | | Expected health care cost trend rate: | | | | | | | | | | Pre-65 individuals | | | | | | | | | | Initial | | | 7.5% | | | | 7.5% | | | Ultimate | | | 4.5% | | | | 4.5% | | | Post-65 individuals | | | | | | | | | | Initial | | | 7.5% | | | | 7.5% | | | Ultimate (2010) | | | 4.5% | | | | 4.5% | | | Pilot Retirement Age | | | 63 | | | | 63 | |
| | | | | | | 2010 | | 2009 | | Discount rate (cost/liability) | | 6.10%/5.80% | | 6.50%/6.10% | Expected return on plan assets | | 8.50% | | 8.50% | Expected health care cost trend rate: | | | | | Pre-65 individuals | | | | | Initial | | 8.0% | | 7.0% | Ultimate | | 4.5% | | 4.5% | Post-65 individuals | | | | | Initial | | 8.0% | | 7.5% | Ultimate (2010) | | 4.5% | | 4.5% | Pilot Retirement Age | | 63 | | 63 |
The Company’sWhen establishing our discount rate, is determined based upon the review of year-endto measure our obligations, we match high quality corporate bond rates.bonds available in the marketplace whose cash flows approximate our projected benefit disbursements. Lowering the discount rate by 50 basis points as of December 31, 20092010 would increase the Company’s pension and postretirement benefits obligations by approximately $727$850 million and $153$170 million, respectively, and increase estimated 20102011 pension and postretirement benefits expense by $76$80 million and less than $1 million, respectively.
The expected return on plan assets is based upon an evaluation of the Company'sCompany’s historical trends and experience taking into account current and expected market conditions and the Company’s target asset allocation of 44
35 percent longer duration corporate and U.S. government/agency bonds, 2528 percent U.S. value stocks, 20 percent developed international stocks, 56 percent emerging markets stocks and bonds and 1511 percent alternative (private) investments. The expected return on plan assets component of the Company’s net periodic benefit cost is calculated based on the fair value of plan assets and the Company’s target asset allocation. The Company monitors its actual asset allocation and believes that its long-term asset allocation will continue to approximate its target allocation. The Company’s historical annualized ten-year rate of return on plan assets, calculated using a geometric compounding of monthly returns, is approximately 7.967.7 percent as of December 31, 2009.2010. Lowering the expected long-term rate of return on plan assets by 50 basis points as of December 31, 20092010 would increase estimated 20102011 pension expense by approximately $35$40 million.
The health care cost trend rate is based upon an evaluation of the Company'sCompany’s historical trends and experience taking into account current and expected market conditions. Increasing the assumed health care cost trend rate by 100 basis points would increase estimated 20102011 postretirement benefits expense by $3$22 million. Income taxes – — The Company generally believes that the positions taken on previously filed income tax returns are more likely than not to be sustained by the taxing authorities. The Company has recorded income tax and related interest liabilities where the Company believes its position may not be sustained or where the full income tax benefit will not be recognized. The effects of potential income tax benefits resulting from the Company’s unrecognized tax positions are not reflected in the tax balances of the financial statements. Recognized and unrecognized tax positions are reviewed and adjusted as events occur that affect the Company’s judgment about the recognizability of income tax benefits, such as lapsing of applicable statutes of limitations, conclusion of tax audits, release of administrative guidance, or rendering of a court decision affecting a particular tax position. The Company records a deferred tax asset valuation allowance when it is more likely than not that some portion or all of its deferred tax assets will not be realized. The Company considers its historical earnings, trends, and outlook for future years in making this determination. The Company had a deferred tax valuation allowance of $2.9$3.0 billion and $2.7$2.9 billion, respectively, at December 31, 20092010 and 2008.2009. See Note 8 to the consolidated financial statements for additional information.
Derivatives – — As required by U.S. GAAP, the Company assesses, both at the inception of each hedge and on an ongoing basis, whether the derivatives that are used in its hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. In doing so, the Company uses a regression model to determine the correlation of the change in prices of the commodities used to hedge jet fuel (e.g., NYMEX Heating oil) to the change in the price of jet fuel. The Company also monitors the actual dollar offset of the hedges’ market values as compared to hypothetical jet fuel hedges. The fuel hedge contracts are generally deemed to be “highly effective” if the R-squared is greater than 80 percent and the dollar offset correlation is within 80 percent to 125 percent. The Company discontinues hedge accounting prospectively if it determines that a derivative is no longer expected to be highly effective as a hedge or if it decides to discontinue the hedging relationship. The fair value of the Company’s hedging contracts is recorded in Current Assets or Current Liabilities in the accompanying consolidated balance sheets and is recorded gross of the collateral posted and on a trade basis. As of December 31, 2009,2010, the Company had derivative contracts in a netan asset position at fair value of $55$269 million including a liability related to contracts that settled in December. A deferred lossgain of $63$153 million was recorded in Accumulated other comprehensive income (OCI) at December 31, 20092010 and will be recognized in future periods as contracts settle.
New Accounting Pronouncements
In June 2009, the FASB issued guidance to change financial reporting by enterprises involved with variable interest entities (VIEs). The standard replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a VIE with an approach focused on identifying which enterprise has the power to direct the activities of a VIE and the obligation to absorb losses of the entity or the right to receive the entity’s residual returns. This accounting standard is effective for fiscal years beginning after November 15, 2009. The Company has evaluated the impact of the adoption of this pronouncement on its consolidated financial statements and has determined the impact of adoption to be immaterial based on its current structures with VIEs.
In November of 2009, the FASBFinancial Accounting Standards Board (FASB) issued new guidance that significantly changes the accounting for revenue in arrangements with multiple deliverables by requiring entities to separately account for individual deliverables in more of these arrangements and estimate the fair value of each component individually on a pro-rata basis. The guidance removes the criterion that entities must use vendor-specific objective and reliable evidence of fair value when separately accounting for deliverables, allowing for the recognition of revenue in a manner that more closely aligns with the economics of certain arrangements, based on management’s estimate of the selling price. The standard must be applied prospectively to revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. In addition, the FASB significantly expanded the disclosures related to multiple deliverable revenue arrangements. Although the Company continues to evaluate the impact of the adoption of this standard on its consolidated financial statements, the 45
Company believes the impact of adoption will not be material in 2011, but could have a significant impact on future results as new or materially modified revenue arrangements with certain partners are established in the normal course of business.
Glossary of Defined Terms ASM — Available Seat Mile. A measure of capacity. ASMs equal the total number of seats available for transporting passengers during a reporting period multiplied by the total number of miles flown during that period.
ITEM 7(A).QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKCASM — (Operating) Cost per Available Seat Mile. The amount of operating cost incurred per ASM during a reporting period, also referred to as “unit cost.”
Passenger Load Factor — A measure of utilized available seating capacity calculated by dividing RPMs by ASMs for a reporting period. Passenger Mile Yield or Yield — The amount of passenger revenue earned per RPM during a reporting period. RASM— Passenger Revenue per ASM. The amount of passenger revenue earned per ASM during a reporting period. Passenger RASM is also referred to as “unit revenue.” RPM — Revenue Passenger Mile. One revenue-paying passenger transported one mile. RPMs equal the number of revenue passengers during a reporting period multiplied by the number of miles flown by those passengers during that during that period. RPMs are also referred to as “traffic.” | | ITEM 7(A). | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Market Risk Sensitive Instruments and Positions
The risk inherent in the Company’s market risk sensitive instruments and positions is the potential loss arising from adverse changes in the price of fuel, foreign currency exchange rates and interest rates as discussed below. 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. See Note 7 to the consolidated financial statements for accounting policies and additional information regarding derivatives.
Aircraft Fuel The Company’s earnings are substantially 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 and heating oil hedging contracts. Market risk is estimated as a hypothetical 10 percent increase in the December 31, 20092010 and 20082009 cost per gallon of fuel. Based on projected 20102011 fuel usage, such an increase would result in an increase to Aircraft fuel expense of approximately $499$502 million in 2010,2011, inclusive of the impact of effective fuel hedge instruments outstanding at December 31, 2009,2010, and assumes the Company’s fuel hedging program remains effective. Such an increase would have resulted in an increase to projected Aircraft fuel expense of approximately $399$499 million in 2009,2010, inclusive of the impact of fuel hedge instruments outstanding at December 31, 2008.2009. As of January 2010,2011, the Company had cash flow hedges, with collars and options, covering approximately 2435 percent of its estimated 20102011 fuel requirements. Comparatively, as of December 31, 2008,2009, the Company had hedged, with collars and options, approximately 3524 percent of its estimated 20092010 fuel requirements. The consumption hedged for 20102011 by cash flow hedges is capped at an average price of approximately $2.48$2.52 per gallon of jet fuel, and the Company’s collars have an average floor price of approximately $1.80$1.92 per gallon of jet fuel (both the capped and floor price exclude taxes and transportation costs). The Company’s collars represent approximately 2230 percent of its estimated 20102011 fuel requirements. A deterioration of the Company’s financial position could negatively affect the Company’s ability to hedge fuel in the future.
Ineffectiveness is inherent in hedging jet fuel with derivative positions based in crude oil or other crude oil related commodities. The Company assesses, both at the inception of each hedge and on an ongoing basis, whether the derivatives that are used in its hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. In doing so, the Company uses a regression model to determine the correlation of the change in prices 46
of the commodities used to hedge jet fuel (e.g., NYMEX Heating oil) to the change in the price of jet fuel. The Company also monitors the actual dollar offset of the hedges’ market values as compared to hypothetical jet fuel hedges. The fuel hedge contracts are generally deemed to be “highly effective” if the R-squared is greater than 80 percent and the dollar offset correlation is within 80 percent to 125 percent. The Company discontinues hedge accounting prospectively if it determines that a derivative is no longer expected to be highly effective as a hedge or if it decides to discontinue the hedging relationship.
Foreign Currency The Company is exposed to the effect of foreign exchange rate fluctuations on the U.S. dollar value of foreign currency-denominated operating revenues and expenses. The Company’s largest exposure comes from the British pound, Euro, Canadian dollar, Japanese yen and various Latin American currencies. The Company does not currently have a foreign currency hedge program related to its foreign currency-denominated ticket sales. A uniform 10 percent strengthening in the value of the U.S. dollar from December 31, 20092010 and 20082009 levels relative to each of the currencies in which the Company has foreign currency exposure would result in a decrease in operating income of approximately $136$170 million and $146$136 million for the years ending December 31, 20092010 and 2008,2009, respectively, due to the Company’s foreign-denominated revenues exceeding its foreign-denominated expenses. This sensitivity analysis was prepared based upon projected 20102011 and 20092010 foreign currency-denominated revenues and expenses as of December 31, 2010 and 2009, and 2008, respectively.
On January 11, 2010, the Venezuelan Government devalued its currency from 2.15 bolivars per U.S. dollar to 4.30 bolivars per U.S. dollar and the currency was designated as hyperinflationary. As a result, the Company recognized a loss of $53 million related to the currency remeasurement in January 2010. The Company does not expect any significant ongoing impact of the currency devaluation on its operations in Venezuela, but there can be no assurances to that effect. Interest The Company’s earnings are also affected by changes in interest rates due to the impact those changes have on its interest income from cash and short-term investments, and its interest expense from variable-rate debt instruments. The Company’s largest exposure with respect to variable rate debt comes from changes in the London Interbank Offered Rate (LIBOR). The Company had variable rate debt instruments representing approximately 23 percent and 28 percent of its total long-term debt at December 31, 20092010 and 2008, respectively.2009. If the Company’s interest rates average 10 percent more in 2011 than they did at December 31, 2010, the Company’s interest expense would increase by approximately $7 million and interest income from cash and short-term investments would increase by approximately $3 million. In comparison, at December 31, 2009, the Company estimated that if interest rates averaged 10 percent more in 2010 than they did at December 31, 2009, the Company’s interest expense would increase by approximately $8 million and interest income from cash and short-term investments would increase by approximately $1 million. In comparison, at December 31, 2008, the Company estimated that if interest rates averaged 10 percent more in 2009 than they did at December 31, 2008, the Company’s interest expense would have increased by approximately $13$8 million and interest income from cash and short-term investments would have increased by approximately $7$1 million. These amounts are determined by considering the impact of the hypothetical interest rates on the Company’s variable rate long-term debt and cash and short-term investment balances at December 31, 20092010 and 2008.2009.
Market risk for fixed rate long-term debt is estimated as the potential increase in fair value resulting from a hypothetical 10 percent decrease in interest rates and amounts to approximately $316$237 million and $297$316 million as of December 31, 20092010 and 2008,2009, respectively. The fair values of the Company’s long-term debt were estimated using quoted market prices or discounted future cash flows based on the Company’s incremental borrowing rates for similar types of borrowing arrangements. ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders AMR Corporation We have audited the accompanying consolidated balance sheets of AMR Corporation as of December 31, 20092010 and 2008,2009, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2009.2010. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These consolidated financial statements and schedule are the responsibility of AMR Corporation'sCorporation’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AMR Corporation at December 31, 20092010 and 20082009 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009,2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), AMR Corporation’s internal control over financial reporting as of December 31, 2009,2010, based on criteria established in Internal Control—Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 201016, 2011 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP
Dallas, Texas February 17, 201016, 2011 49
AMR CORPORATION
(in millions, except per share amounts) | | | | | | | | Year Ended December 31, | | | | 2009 | | | 2008 | | | 2007 | | Revenues | | | | | | | | | | | | | | | | | | | | Passenger - American Airlines | | $ | 15,037 | | | $ | 18,234 | | | $ | 17,651 | | - Regional Affiliates | | | 2,012 | | | | 2,486 | | | | 2,470 | | Cargo | | | 578 | | | | 874 | | | | 825 | | Other revenues | | | 2,290 | | | | 2,172 | | | | 1,989 | | Total operating revenues | | | 19,917 | | | | 23,766 | | | | 22,935 | | | | | | | | | | | | | | | Expenses | | | | | | | | | | | | | Wages, salaries and benefits | | | 6,807 | | | | 6,655 | | | | 6,770 | | Aircraft fuel | | | 5,553 | | | | 9,014 | | | | 6,670 | | Other rentals and landing fees | | | 1,353 | | | | 1,298 | | | | 1,278 | | Depreciation and amortization | | | 1,104 | | | | 1,207 | | | | 1,202 | | Maintenance, materials and repairs | | | 1,280 | | | | 1,237 | | | | 1,057 | | Commissions, booking fees and credit card expense | | | 853 | | | | 997 | | | | 1,028 | | Aircraft rentals | | | 505 | | | | 492 | | | | 591 | | Food service | | | 487 | | | | 518 | | | | 534 | | Special charges | | | 171 | | | | 1,213 | | | | 63 | | Other operating expenses | | | 2,808 | | | | 3,024 | | | | 2,777 | | Total operating expenses | | | 20,921 | | | | 25,655 | | | | 21,970 | | | | | | | | | | | | | | | Operating Income (Loss) | | | (1,004 | ) | | | (1,889 | ) | | | 965 | | | | | | | | | | | | | | | Other Income (Expense) | | | | | | | | | | | | | Interest income | | | 34 | | | | 181 | | | | 337 | | Interest expense | | | (744 | ) | | | (803 | ) | | | (962 | ) | Interest capitalized | | | 42 | | | | 33 | | | | 20 | | Miscellaneous – net | | | (80 | ) | | | 360 | | | | 96 | | | | | (748 | ) | | | (229 | ) | | | (509 | ) | Income (Loss) Before Income Taxes | | | (1,752 | ) | | | (2,118 | ) | | | 456 | | Income tax (benefit) | | | (284 | ) | | | - | | | | - | | Net Earnings (Loss) | | $ | (1,468 | ) | | $ | (2,118 | ) | | $ | 456 | | | | | | | | | | | | | | | | | Earnings (Loss) Per Share | | | | | | | | | | | | | Basic | | $ | (4.99 | ) | | $ | (8.16 | ) | | $ | 1.86 | | Diluted | | $ | (4.99 | ) | | $ | (8.16 | ) | | $ | 1.71 | |
The accompanying notes are an integral part of these financial statements.
| | | | | | | | | | | | | | | Year Ended December 31, | | | | 2010 | | | 2009 | | | 2008 | | | | (In millions, except per share amounts) | | | Revenues | | | | | | | | | | | | | Passenger — American Airlines | | $ | 16,760 | | | $ | 15,037 | | | $ | 18,234 | | — Regional Affiliates | | | 2,327 | | | | 2,012 | | | | 2,486 | | Cargo | | | 672 | | | | 578 | | | | 874 | | Other revenues | | | 2,411 | | | | 2,290 | | | | 2,172 | | | | | | | | | | | | | | | Total operating revenues | | | 22,170 | | | | 19,917 | | | | 23,766 | | | | | | | | | | | | | | | Expenses | | | | | | | | | | | | | Wages, salaries and benefits | | | 6,847 | | | | 6,807 | | | | 6,655 | | Aircraft fuel | | | 6,400 | | | | 5,553 | | | | 9,014 | | Other rentals and landing fees | | | 1,418 | | | | 1,353 | | | | 1,298 | | Depreciation and amortization | | | 1,093 | | | | 1,104 | | | | 1,207 | | Maintenance, materials and repairs | | | 1,329 | | | | 1,280 | | | | 1,237 | | Commissions, booking fees and credit card expense | | | 976 | | | | 853 | | | | 997 | | Aircraft rentals | | | 580 | | | | 505 | | | | 492 | | Food service | | | 490 | | | | 487 | | | | 518 | | Special charges | | | — | | | | 171 | | | | 1,213 | | Other operating expenses | | | 2,729 | | | | 2,808 | | | | 3,024 | | | | | | | | | | | | | | | Total operating expenses | | | 21,862 | | | | 20,921 | | | | 25,655 | | | | | | | | | | | | | | | Operating Income (Loss) | | | 308 | | | | (1,004 | ) | | | (1,889 | ) | Other Income (Expense) | | | | | | | | | | | | | Interest income | | | 26 | | | | 34 | | | | 181 | | Interest expense | | | (823 | ) | | | (744 | ) | | | (803 | ) | Interest capitalized | | | 31 | | | | 42 | | | | 33 | | Miscellaneous — net | | | (48 | ) | | | (80 | ) | | | 360 | | | | | | | | | | | | | | | | | | (814 | ) | | | (748 | ) | | | (229 | ) | | | | | | | | | | | | | | Income (Loss) Before Income Taxes | | | (506 | ) | | | (1,752 | ) | | | (2,118 | ) | Income tax (benefit) | | | (35 | ) | | | (284 | ) | | | — | | | | | | | | | | | | | | | Net Earnings (Loss) | | $ | (471 | ) | | $ | (1,468 | ) | | $ | (2,118 | ) | | | | | | | | | | | | | | Earnings (Loss) Per Share | | | | | | | | | | | | | Basic | | $ | (1.41 | ) | | $ | (4.99 | ) | | $ | (8.16 | ) | | | | | | | | | | | | | | Diluted | | $ | (1.41 | ) | | $ | (4.99 | ) | | $ | (8.16 | ) | | | | | | | | | | | | | |
AMR CORPORATION
CONSOLIDATED BALANCE SHEETS
|
(in millions, except shares and par value) | | | | | | | | December 31, | | | | 2009 | | | 2008 | | Assets | | | | | | | | | | | | | | Current Assets | | | | | | | Cash | | $ | 153 | | | $ | 191 | | Short-term investments | | | 4,246 | | | | 2,916 | | Restricted cash and short-term investments | | | 460 | | | | 459 | | Receivables, less allowance for uncollectible accounts (2009 - $58; 2008 - $49) | | | 768 | | | | 811 | | Inventories, less allowance for obsolescence (2009 - $509; 2008 - $488) | | | 557 | | | | 525 | | Fuel derivative contracts | | | 135 | | | | 188 | | Fuel derivative collateral deposits | | | 14 | | | | 575 | | Other current assets | | | 309 | | | | 270 | | Total current assets | | | 6,642 | | | | 5,935 | | | | | | | | | | | Equipment and Property | | | | | | | | | Flight equipment, at cost | | | 19,647 | | | | 19,601 | | Less accumulated depreciation | | | 7,382 | | | | 7,147 | | | | | 12,265 | | | | 12,454 | | | | | | | | | | | Purchase deposits for flight equipment | | | 639 | | | | 671 | | | | | | | | | | | Other equipment and property, at cost | | | 5,158 | | | | 5,132 | | Less accumulated depreciation | | | 2,881 | | | | 2,762 | | | | | 2,277 | | | | 2,370 | | | | | 15,181 | | | | 15,495 | | | | | | | | | | | Equipment and Property Under Capital Leases | | | | | | | | | Flight equipment | | | 651 | | | | 561 | | Other equipment and property | | | 215 | | | | 215 | | | | | 866 | | | | 776 | | Less accumulated amortization | | | 571 | | | | 536 | | | | | 295 | | | | 240 | | | | | | | | | | | Other Assets | | | | | | | | | International slots and route authorities | | | 736 | | | | 828 | | Domestic slots and airport operating and gate lease rights, less accumulated amortization (2009 - $445; 2008 - $416) | | | 252 | | | | 281 | | Other assets | | | 2,332 | | | | 2,396 | | | | | 3,320 | | | | 3,505 | | | | | | | | | | | Total Assets | | $ | 25,438 | | | $ | 25,175 | |
The accompanying notes are an integral part of these financial statements.
AMR CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except shares and par value) | | | | | | | | December 31, | | | | 2009 | | | 2008 | | Liabilities and Stockholders' Equity (Deficit) | | | | | | | | | | | | | | Current Liabilities | | | | | | | Accounts payable | | $ | 1,064 | | | $ | 952 | | Accrued salaries and wages | | | 488 | | | | 519 | | Fuel derivative liability | | | 80 | | | | 716 | | Accrued liabilities | | | 1,551 | | | | 1,523 | | Air traffic liability | | | 3,431 | | | | 3,708 | | Current maturities of long-term debt | | | 1,024 | | | | 1,845 | | Current obligations under capital leases | | | 90 | | | | 107 | | Total current liabilities | | | 7,728 | | | | 9,370 | | | | | | | | | | | Long-Term Debt, Less Current Maturities | | | 9,984 | | | | 8,423 | | | | | | | | | | | | | | | | | | | | Obligations Under Capital Leases, Less Current Obligations | | | 599 | | | | 582 | | | | | | | | | | | | | | | | | | | | Other Liabilities and Credits | | | | | | | | | Deferred gains | | | 272 | | | | 297 | | Pension and postretirement benefits | | | 7,397 | | | | 6,614 | | Other liabilities and deferred credits | | | 2,947 | | | | 2,824 | | | | | 10,616 | | | | 9,735 | | | | | | | | | | | Commitments and Contingencies | | | | | | | | | | | | | | | | | | Stockholders' Equity (Deficit) | | | | | | | | | Preferred stock - 20,000,000 shares authorized; None issued | | | - | | | | - | | Common stock - $1 par value; 750,000,000 shares authorized; shares issued: 2009 – 338,564,327; 2008 - 284,888,845 | | | 339 | | | | 285 | | Additional paid-in capital | | | 4,399 | | | | 3,992 | | Treasury shares at cost: 2009 and 2008 - 5,940,399 | | | (367 | ) | | | (367 | ) | Accumulated other comprehensive loss | | | (2,724 | ) | | | (3,177 | ) | Accumulated deficit | | | (5,136 | ) | | | (3,668 | ) | | | | (3,489 | ) | | | (2,935 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Liabilities and Stockholders' Equity (Deficit) | | $ | 25,438 | | | $ | 25,175 | |
The accompanying notes are an integral part of these financial statements.
AMR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) | | | | Year Ended December 31, | | | | 2009 | | | 2008 | | | 2007 | | Cash Flow from Operating Activities: | | | | | | | | | | Net earnings (loss) | | $ | (1,468 | ) | | $ | (2,118 | ) | | $ | 456 | | Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: | | | | | | | | | | | | | Depreciation | | | 979 | | | | 1,055 | | | | 1,036 | | Amortization | | | 125 | | | | 152 | | | | 166 | | Equity based stock compensation | | | 61 | | | | 53 | | | | 133 | | Special charges | | | 171 | | | | 1,317 | | | | 63 | | Pension and postretirement | | | 657 | | | | 279 | | | | 27 | | Gain on sale of investments/subsidiaries | | | - | | | | (432 | ) | | | (138 | ) | Redemption payments under operating leases for special facility revenue bonds | | | - | | | | (188 | ) | | | (100 | ) | Change in assets and liabilities: | | | | | | | | | | | | | Decrease (increase) in receivables | | | 43 | | | | 217 | | | | (41 | ) | Decrease (increase) in inventories | | | (79 | ) | | | 5 | | | | (128 | ) | Decrease (increase) in derivative collateral and unwound derivative contracts | | | 561 | | | | (940 | ) | | | 164 | | Increase (decrease) in accounts payable and accrued liabilities | | | (75 | ) | | | (421 | ) | | | 248 | | Increase (decrease) in air traffic liability | | | (277 | ) | | | (277 | ) | | | 203 | | Increase (decrease) in other liabilities and deferred credits | | | 220 | | | | (101 | ) | | | (162 | ) | Other, net | | | 12 | | | | 5 | | | | 8 | | Net cash provided by (used in) operating activities | | | 930 | | | | (1,394 | ) | | | 1,935 | | | | | | | | | | | | | | | Cash Flow from Investing Activities: | | | | | | | | | | | | | Capital expenditures, including purchase deposits on flight equipment | | | (1,521 | ) | | | (876 | ) | | | (714 | ) | Net decrease (increase) in short-term investments | | | (1,330 | ) | | | 1,471 | | | | 207 | | Net decrease (increase) in restricted cash and short-term investments | | | (1 | ) | | | (31 | ) | | | 40 | | Proceeds from sale of equipment, property and investments/subsidiaries | | | 76 | | | | 480 | | | | 228 | | Other | | | 53 | | | | 11 | | | | 5 | | Net cash provided by (used in) investing activities | | | (2,723 | ) | | | 1,055 | | | | (234 | ) | | | | | | | | | | | | | | Cash Flow from Financing Activities: | | | | | | | | | | | | | Payments on long-term debt and capital lease obligations | | | (2,416 | ) | | | (1,092 | ) | | | (2,321 | ) | Proceeds from: | | | | | | | | | | | | | Issuance of common stock, net of issuance costs | | | 412 | | | | 294 | | | | 497 | | Reimbursement from construction reserve account | | | - | | | | - | | | | 59 | | Exercise of stock options | | | 1 | | | | 1 | | | | 90 | | Issuance of long-term debt | | | 2,990 | | | | 825 | | | | - | | Sale leaseback transactions | | | 768 | | | | 354 | | | | - | | Net cash provided by (used in) financing activities | | | 1,755 | | | | 382 | | | | (1,675 | ) | | | | | | | | | | | | | | Net increase (decrease) in cash | | | (38 | ) | | | 43 | | | | 27 | | Cash at beginning of year | | | 191 | | | | 148 | | | | 121 | | Cash at end of year | | $ | 153 | | | $ | 191 | | | $ | 148 | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
AMR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) |
(in millions, except share amounts) |
| | Common Stock | | | Additional Paid-in Capital | | | Treasury Stock | | | Accumulated Other Comprehensive Income (loss) | | | Accumulated Deficit | | | Total | | Balance at January 1, 2007 | | $ | 228 | | | $ | 2,925 | | | $ | (367 | ) | | $ | (1,291 | ) | | $ | (2,006 | ) | | $ | (511 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net earnings | | | - | | | | - | | | | - | | | | - | | | | 456 | | | | 456 | | Changes in pension, retiree medical and other liability | | | | | | | | | | | | | | | 1,744 | | | | - | | | | 1,744 | | Net changes in fair value of derivative financial instruments | | | - | | | | - | | | | - | | | | 223 | | | | - | | | | 223 | | Unrealized loss on investments | | | - | | | | - | | | | - | | | | (6 | ) | | | - | | | | (6 | ) | Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | 2,417 | | | | | | | | | | | | | | | | | | | | | | | | | | | Reclassification and amortization of stock compensation plans | | | - | | | | 211 | | | | - | | | | - | | | | - | | | | 211 | | Issuance of 13,000,000 shares | | | 13 | | | | 484 | | | | - | | | | - | | | | - | | | | 497 | | Issuance of 14,173,610 shares to employees pursuant to stock option and deferred stock incentive plans | | | 14 | | | | 76 | | | | - | | | | - | | | | - | | | | 90 | | Balance at December 31, 2007 | | | 255 | | | | 3,696 | | | | (367 | ) | | | 670 | | | | (1,550 | ) | | | 2,704 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss | | | - | | | | - | | | | - | | | | - | | | | (2,118 | ) | | | (2,118 | ) | Changes in pension, retiree medical and other liability | | | - | | | | - | | | | - | | | | (2,724 | ) | | | - | | | | (2,724 | ) | Net changes in fair value of derivative financial instruments | | | - | | | | - | | | | - | | | | (1,116 | ) | | | - | | | | (1,116 | ) | Unrealized loss on investments | | | - | | | | - | | | | - | | | | (7 | ) | | | - | | | | (7 | ) | Total comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | (5,965 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Reclassification and amortization of stock compensation plans | | | - | | | | 30 | | | | - | | | | - | | | | - | | | | 30 | | Issuance of 27,057,554 shares | | | 27 | | | | 267 | | | | - | | | | - | | | | - | | | | 294 | | Issuance of 2,492,860 shares to employees pursuant to stock option and deferred stock incentive plans | | | 3 | | | | (1 | ) | | | - | | | | - | | | | - | | | | 2 | | Balance at December 31, 2008 | | $ | 285 | | | $ | 3,992 | | | $ | (367 | ) | | $ | (3,177 | ) | | $ | (3,668 | ) | | $ | (2,935 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss | | | - | | | | - | | | | - | | | | - | | | | (1,468 | ) | | | (1,468 | ) | Changes in pension, retiree medical and other liability | | | - | | | | - | | | | - | | | | (117 | ) | | | - | | | | (117 | ) | Net changes in fair value of derivative financial instruments | | | - | | | | - | | | | - | | | | 813 | | | | - | | | | 813 | | Non-cash tax provision | | | - | | | | - | | | | - | | | | (248 | ) | | | - | | | | (248 | ) | Unrealized gain on investments | | | - | | | | - | | | | - | | | | 5 | | | | - | | | | 5 | | Total comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | (1,015 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Reclassification and amortization of stock compensation plans | | | - | | | | 48 | | | | - | | | | - | | | | - | | | | 48 | | Issuance of 52,269,849 shares | | | 52 | | | | 360 | | | | - | | | | - | | | | - | | | | 412 | | Issuance of 1,399,833 shares to employees pursuant to stock option and deferred stock incentive plans | | | 2 | | | | (1 | ) | | | - | | | | - | | | | - | | | | 1 | | Balance at December 31, 2009 | | $ | 339 | | | $ | 4,399 | | | $ | (367 | ) | | $ | (2,724 | ) | | $ | (5,136 | ) | | $ | (3,489 | ) |
The accompanying notes are an integral part of these financial statements. 50
AMR CORPORATION
| | | | | | | | | | | December 31, | | | | 2010 | | | 2009 | | | | (In millions, except
| | | | shares and par value) | | | ASSETS | Current Assets | | | | | | | | | Cash | | $ | 168 | | | $ | 153 | | Short-term investments | | | 4,328 | | | | 4,246 | | Restricted cash and short-term investments | | | 450 | | | | 460 | | Receivables, less allowance for uncollectible accounts (2010 — $58; 2009 — $58) | | | 738 | | | | 768 | | Inventories, less allowance for obsolescence (2010 — $530; 2009 — $509) | | | 594 | | | | 557 | | Fuel derivative contracts | | | 269 | | | | 135 | | Fuel derivative collateral deposits | | | — | | | | 14 | | Other current assets | | | 291 | | | | 309 | | | | | | | | | | | Total current assets | | | 6,838 | | | | 6,642 | | Equipment and Property | | | | | | | | | Flight equipment, at cost | | | 20,345 | | | | 19,647 | | Less accumulated depreciation | | | 8,081 | | | | 7,382 | | | | | | | | | | | | | | 12,264 | | | | 12,265 | | Purchase deposits for flight equipment | | | 375 | | | | 639 | | Other equipment and property, at cost | | | 5,173 | | | | 5,158 | | Less accumulated depreciation | | | 2,974 | | | | 2,881 | | | | | | | | | | | | | | 2,199 | | | | 2,277 | | | | | | | | | | | | | | 14,838 | | | | 15,181 | | Equipment and Property Under Capital Leases | | | | | | | | | Flight equipment | | | 605 | | | | 651 | | Other equipment and property | | | 219 | | | | 215 | | | | | | | | | | | | | | 824 | | | | 866 | | Less accumulated amortization | | | 580 | | | | 571 | | | | | | | | | | | | | | 244 | | | | 295 | | Other Assets | | | | | | | | | International slots and route authorities | | | 708 | | | | 736 | | Domestic slots and airport operating and gate lease rights, less accumulated amortization (2010 — $473; 2009 —$445) | | | 224 | | | | 252 | | Other assets | | | 2,236 | | | | 2,332 | | | | | | | | | | | | | | 3,168 | | | | 3,320 | | | | | | | | | | | Total Assets | | $ | 25,088 | | | $ | 25,438 | | | | | | | | | | |
51
CONSOLIDATED BALANCE SHEETS — (Continued) | | | | | | | | | | | December 31, | | | | 2010 | | | 2009 | | | | (In millions, except
| | | | shares and par value) | | | LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | Current Liabilities | | | | | | | | | Accounts payable | | $ | 1,156 | | | $ | 1,064 | | Accrued salaries and wages | | | 498 | | | | 488 | | Fuel derivative liability | | | — | | | | 80 | | Accrued liabilities | | | 1,587 | | | | 1,551 | | Air traffic liability | | | 3,656 | | | | 3,431 | | Current maturities of long-term debt | | | 1,776 | | | | 1,024 | | Current obligations under capital leases | | | 107 | | | | 90 | | | | | | | | | | | Total current liabilities | | | 8,780 | | | | 7,728 | | Long-Term Debt, Less Current Maturities | | | 8,756 | | | | 9,984 | | Obligations Under Capital Leases, Less Current Obligations | | | 497 | | | | 599 | | Other Liabilities and Credits | | | | | | | | | Deferred gains | | | 270 | | | | 272 | | Pension and postretirement benefits | | | 7,877 | | | | 7,397 | | Other liabilities and deferred credits | | | 2,853 | | | | 2,947 | | | | | | | | | | | | | | 11,000 | | | | 10,616 | | Commitments and Contingencies | | | | | | | | | Stockholders’ Equity (Deficit) | | | | | | | | | Preferred stock — 20,000,000 shares authorized; None issued | | | — | | | | — | | Common stock — $1 par value; 750,000,000 shares authorized; shares issued: 2010 — 339,389,724; 2009 — 338,564,327 | | | 339 | | | | 339 | | Additional paid-in capital | | | 4,445 | | | | 4,399 | | Treasury shares at cost: 2010 and 2009 — 5,940,399 | | | (367 | ) | | | (367 | ) | Accumulated other comprehensive loss | | | (2,755 | ) | | | (2,724 | ) | Accumulated deficit | | | (5,607 | ) | | | (5,136 | ) | | | | | | | | | | | | | (3,945 | ) | | | (3,489 | ) | | | | | | | | | | Total Liabilities and Stockholders’ Equity (Deficit) | | $ | 25,088 | | | $ | 25,438 | | | | | | | | | | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | The accompanying notes are an integral part of these financial statements. 52
AMR CORPORATION
| | | | | | | | | | | | | | | Year Ended December 31, | | | | 2010 | | | 2009 | | | 2008 | | | | (In millions) | | | Cash Flow from Operating Activities: | | | | | | | | | | | | | Net earnings (loss) | | | (471 | ) | | $ | (1,468 | ) | | $ | (2,118 | ) | Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: | | | | | | | | | | | | | Depreciation | | | 967 | | | | 979 | | | | 1,055 | | Amortization | | | 126 | | | | 125 | | | | 152 | | Equity based stock compensation | | | 43 | | | | 61 | | | | 53 | | Special charges | | | — | | | | 171 | | | | 1,317 | | Pension and postretirement | | | 236 | | | | 657 | | | | 279 | | Gain on sale of subsidiary | | | — | | | | — | | | | (432 | ) | Redemption payments under operating leases for special facility revenue bonds | | | — | | | | — | | | | (188 | ) | Change in assets and liabilities: | | | | | | | | | | | | | Decrease (increase) in receivables | | | 29 | | | | 43 | | | | 217 | | Decrease (increase) in inventories | | | (81 | ) | | | (79 | ) | | | 5 | | Decrease (increase) in derivative collateral and unwound derivative contracts | | | 87 | | | | 561 | | | | (940 | ) | Increase (decrease) in accounts payable and accrued liabilities | | | (19 | ) | | | (75 | ) | | | (421 | ) | Increase (decrease) in air traffic liability | | | 225 | | | | (277 | ) | | | (277 | ) | Increase (decrease) in other liabilities and deferred credits | | | 144 | | | | 220 | | | | (101 | ) | Other, net | | | (45 | ) | | | 12 | | | | 5 | | | | | | | | | | | | | | | Net cash provided by (used in) operating activities | | | 1,241 | | | | 930 | | | | (1,394 | ) | Cash Flow from Investing Activities: | | | | | | | | | | | | | Capital expenditures, including purchase deposits on flight equipment | | | (1,962 | ) | | | (1,521 | ) | | | (876 | ) | Net decrease (increase) in short-term investments | | | (82 | ) | | | (1,330 | ) | | | 1,471 | | Net decrease (increase) in restricted cash and short-term investments | | | 10 | | | | (1 | ) | | | (31 | ) | Proceeds from sale of equipment, property and investments/subsidiaries | | | 4 | | | | 76 | | | | 480 | | Other | | | — | | | | 53 | | | | 11 | | | | | | | | | | | | | | | Net cash provided by (used in) investing activities | | | (2,030 | ) | | | (2,723 | ) | | | 1,055 | | Cash Flow from Financing Activities: | | | | | | | | | | | | | Payments on long-term debt and capital lease obligations | | | (1,154 | ) | | | (2,416 | ) | | | (1,092 | ) | Proceeds from: | | | | | | | | | | | | | Issuance of common stock, net of issuance costs | | | — | | | | 412 | | | | 294 | | Reimbursement from construction reserve account | | | 7 | | | | — | | | | — | | Exercise of stock options | | | 1 | | | | 1 | | | | 1 | | Issuance of long-term debt | | | 542 | | | | 2,990 | | | | 825 | | Sale leaseback transactions | | | 1,408 | | | | 768 | | | | 354 | | Net cash provided by (used in) financing activities | | | 804 | | | | 1,755 | | | | 382 | | | | | | | | | | | | | | | Net increase (decrease) in cash | | | 15 | | | | (38 | ) | | | 43 | | Cash at beginning of year | | | 153 | | | | 191 | | | | 148 | | | | | | | | | | | | | | | Cash at end of year | | $ | 168 | | | $ | 153 | | | $ | 191 | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements. 53
AMR CORPORATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated
| | | | | | | | | | | | | Additional
| | | | | | Other
| | | | | | | | | | Common
| | | Paid-in
| | | Treasury
| | | Comprehensive
| | | Accumulated
| | | | | | | Stock | | | Capital | | | Stock | | | Income (loss) | | | Deficit | | | Total | | | | (In millions, except share amounts) | | | Balance at January 1, 2008 | | $ | 255 | | | $ | 3,696 | | | $ | (367 | ) | | $ | 670 | | | $ | (1,550 | ) | | $ | 2,704 | | Net loss | | | — | | | | — | | | | — | | | | — | | | | (2,118 | ) | | | (2,118 | ) | Changes in pension, retiree medical and other liability | | | — | | | | — | | | | — | | | | (2,724 | ) | | | — | | | | (2,724 | ) | Net changes in fair value of derivative financial instruments | | | — | | | | — | | | | — | | | | (1,116 | ) | | | — | | | | (1,116 | ) | Unrealized loss on investments | | | — | | | | — | | | | — | | | | (7 | ) | | | — | | | | (7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | (5,965 | ) | Reclassification and amortization of stock compensation plans | | | — | | | | 30 | | | | — | | | | — | | | | — | | | | 30 | | Issuance of 27,057,554 shares | | | 27 | | | | 267 | | | | — | | | | — | | | | — | | | | 294 | | Issuance of 2,492,860 shares to employees pursuant to stock option and deferred stock incentive plans | | | 3 | | | | (1 | ) | | | — | | | | — | | | | — | | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2008 | | | 285 | | | | 3,992 | | | | (367 | ) | | | (3,177 | ) | | | (3,668 | ) | | | (2,935 | ) | Net loss | | | — | | | | — | | | | — | | | | — | | | | (1,468 | ) | | | (1,468 | ) | Changes in pension, retiree medical and other liability | | | — | | | | — | | | | — | | | | (117 | ) | | | — | | | | (117 | ) | Net changes in fair value of derivative financial instruments | | | — | | | | — | | | | — | | | | 813 | | | | — | | | | 813 | | Non-cash tax provision | | | — | | | | — | | | | — | | | | (248 | ) | | | — | | | | (248 | ) | Unrealized gain on investments | | | — | | | | — | | | | — | | | | 5 | | | | — | | | | 5 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | (1,015 | ) | Reclassification and amortization of stock compensation plans | | | — | | | | 48 | | | | — | | | | — | | | | — | | | | 48 | | Issuance of 52,269,849 shares | | | 52 | | | | 360 | | | | — | | | | — | | | | — | | | | 412 | | Issuance of 1,399,833 shares to employees pursuant to stock option and deferred stock incentive plans | | | 2 | | | | (1 | ) | | | — | | | | — | | | | — | | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2009 | | | 339 | | | | 4,399 | | | | (367 | ) | | | (2,724 | ) | | | (5,136 | ) | | | (3,489 | ) | Net loss | | | — | | | | — | | | | — | | | | — | | | | (471 | ) | | | (471 | ) | Changes in pension, retiree medical and other liability | | | — | | | | — | | | | — | | | | (247 | ) | | | — | | | | (247 | ) | Net changes in fair value of derivative financial instruments | | | — | | | | — | | | | — | | | | 216 | | | | — | | | | 216 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | (502 | ) | Reclassification and amortization of stock compensation plans | | | — | | | | 48 | | | | — | | | | — | | | | — | | | | 48 | | Issuance of 825,397 shares to employees pursuant to stock option and deferred stock incentive plans | | | — | | | | (2 | ) | | | — | | | | — | | | | — | | | | (2 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2010 | | | 339 | | | | 4,445 | | | | (367 | ) | | | (2,755 | ) | | | (5,607 | ) | | | (3,945 | ) | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements. 54
AMR CORPORATION
1. Summary of Accounting Policies
Basis of PresentationThe accompanying consolidated financial statements as of December 31, 20092010 and for the three years ended December 31, 20092010 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. and Executive Airlines, Inc. (collectively, AMR Eagle). The consolidated financial statements as of and for the years ended December 31, 2010, 2009 2008 and 20072008 include the accounts of the Company and its wholly owned subsidiaries as well as VIEs for which the Company is the primary beneficiary. All significant intercompany transactions have been eliminated.
New Accounting Pronouncements In accordance with U.S. GAAP, the Company has adopted new fair value measurements guidance as it applies to non-financial assets and liabilities, including the Company’s routes. U.S. GAAP defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance was applied in the fourth quarter of 2009, in conjunction with the Company’s annual impairment testing on routes, at which time the net carrying value of the routes was reassessed for recoverability. It was determined through this annual impairment testing that the fair value of certain routes was less than the carrying value, and the Company adjusted the value of these route assets to their respective fair values. See Note 11 to the consolidated financial statements for more information regarding the route impairment and supplementary disclosure as required under the standard.
The Company adopted new accounting guidance related to its accounting for convertible debt instruments as of January 1, 2009. The adoption impacted the historical accounting certain senior convertible notes that were retired as of December 31, 2009. The Company filed a Current Report on Form 8-K on April 21, 2009 to reflect the retrospective adoption of the new accounting guidance on the 2008, 2007 and 2006 financial statements.
In December 2008, the Financial Accounting Standards Board (FASB) issued new guidance requiring additional disclosures about assets held in an employer’s defined benefit pension or other postretirement plan, primarily related to categories and fair value measurements of plan assets. The Company has adopted the new standard effective December 31, 2009. The only impact to the Company was to require additional disclosures related to the Company’s pension assets. See Note 10 to the consolidated financial statements for the required disclosure.
In June 2009, the FASB issued guidance to change financial reporting by enterprises involved with VIEs. The standard replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a VIE with an approach focused on identifying which enterprise has the power to direct the activities of a VIE and the obligation to absorb losses of the entity or the right to receive the entity’s residual returns. This accounting standard is effective for fiscal years beginning after November 15, 2009. The Company has evaluated the impact of the adoption of this pronouncement on its consolidated financial statements and has determined the impact of adoption to be immaterial.
In November of 2009, the FASB issued new guidance that significantly changes the accounting for revenue in arrangements with multiple deliverables by requiring entities to separately account for individual deliverables in more of these arrangements. The guidance removes the criterion that entities must use vendor-specific objective and reliable evidence of fair value when separately accounting for deliverables, allowing for the recognition of revenue in a manner that more closely aligns with the economics of certain arrangements based on management’s estimate of the selling price. The standard must be applied prospectively to revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. In addition, the FASB significantly expanded the disclosures related to multiple deliverable revenue arrangements. Although the Company continues to evaluate the impact of the adoption of this standard on its consolidated financial statements, the Company believes the impact of adoption will not be material in 2011, but could have a significant impact on future results as new or materially modified revenue arrangements with certain partners are established in the normal course of business.
Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and accompanying notes. Actual results could differ from those estimates. 1. Summary of Accounting Policies (Continued)
Restricted Cash and Short-term InvestmentsThe Company has restricted cash and short-term investments related primarily to collateral held to support projected workers’ compensation obligations.
InventoriesSpare parts, materials and supplies relating to flight equipment are carried at average acquisition cost and are expensed when used in operations. Allowances for obsolescence are provided -— over the estimated useful life of the related aircraft and engines -— for spare parts expected to be on hand at the date aircraft are retired from service. Allowances are also provided for spare parts currently identified as excess and obsolete. These allowances are based on management estimates, which are subject to change.
Maintenance and Repair CostsMaintenance and repair costs for owned and leased flight equipment are charged to operating expense as incurred, except costs incurred for maintenance and repair under flight hour maintenance contract agreements, which are accrued based on contractual terms when an obligation exists.
Intangible AssetsRoute acquisition costs and airport operating and gate lease rights represent the purchase price attributable to route authorities (including international airport take-off and landing slots), domestic airport take-off and landing slots and airport gate leasehold rights acquired. Indefinite-lived intangible assets (route acquisition costs and international slots and related international take-off and landing slots) are tested for impairment annually on December 31, rather than amortized, or when a triggering event occurs, in accordance with U.S. GAAP. Such triggering events may include significant changes to the Company’s network or capacity, or the implementation of open skies agreements in countries where the Company operates flights. Airport operating and gate lease rights are being amortized on a straight-line basis over 25 years to a zero residual value.
Statements of Cash FlowsShort-term investments, without regard to remaining maturity at acquisition, are not considered as cash equivalents for purposes of the statements of cash flows. 55
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Measurement of Asset ImpairmentsThe Company records impairment charges on long-lived assets used in operations when events and circumstances indicate that the assets may be impaired. An asset or group of assets is considered impaired when the undiscounted cash flows estimated to be generated by the asset are less than the carrying amount of the asset and the net book value of the asset exceeds its estimated fair value. In making these determinations, the Company uses certain assumptions, including, but not limited to: (i) estimated fair value of the asset; and (ii) estimated future cash flows expected to be generated by the asset, which are based on additional assumptions such as asset utilization, length of service the asset will be used in the Company’s operations and estimated salvage values.
Equipment and PropertyThe provision for depreciation of operating equipment and property is computed on the straight-line method applied to each unit of property, except that major rotable parts, avionics and assemblies are depreciated on a group basis. The depreciable lives used for the principal depreciable asset classifications are: | Depreciable Life
| | | | Depreciable Life | | American jet aircraft and engines | | 20 -— 30 years | Other regional aircraft and engines | | 16 -— 20 years | Major rotable parts, avionics and assemblies | | Life of equipment to which applicable | Improvements to leased flight equipment | | Lesser of remaining lease term or expected useful life | Buildings and improvements (principally on leased land) | | 5 -— 30 years or term of lease, including estimated renewal options when renewal is economically compelled at key airports | Furniture, fixtures and other equipment | | 3 -— 10 years | Capitalized software | 3 - | 5 — 10 years |
Residual values for aircraft, engines, major rotable parts, avionics and assemblies are generally five to ten percent, except when guaranteed by a third party for a different amount.
1. Summary of Accounting Policies (Continued)
Equipment and property under capital leases are amortized over the term of the leases or, in the case of certain aircraft, over their expected useful lives. Lease terms vary but are generally tensix to 25 years for aircraft and seven to 40 years for other leased equipment and property.
Regional Affiliates Revenue from ticket sales is generally recognized when service is provided. Regional Affiliates revenues for flights connecting to American flights are based on industry standard proration agreements.
Passenger Revenue Passenger ticket sales are initially recorded as a component of Air traffic liability. Revenue derived from ticket sales is recognized at the time service is provided. However, due to various factors, including the complex pricing structure and interline agreements throughout the industry, certain amounts are recognized in revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized, including breakage. These estimates are generally based upon the evaluation of historical trends, including the use of regression analysis and other methods to model the outcome of future events based on the Company’s historical experience, and are recorded at the scheduled time of departure.
Various taxes and fees assessed on the sale of tickets to end customers are collected by the Company as an agent and remitted to taxing authorities. These taxes and fees have been presented on a net basis in the accompanying consolidated statement of operations and recorded as a liability until remitted to the appropriate taxing authority.
Frequent Flyer ProgramThe estimated incremental cost of providing free travel awards is accrued for mileage credits earned by using American’s service that are expected to be redeemed in the future. American also accrues a frequent flyer liability for the mileage credits that are expected to be used for travel on participating airlines based on historical usage patterns and contractual rates. American sells mileage credits and related services 56
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) to companies participating in its frequent flyer program. The portion of the revenue related to the sale of mileage credits, representing the revenue for air transportation sold, is valued at fair value and is deferred and amortized over 28 months, which approximates the expected period over which the mileage credits are used. Breakage of sold miles is recognized over the estimated period of usage. The remaining portion of the revenue, representing the marketing services sold and administrative costs associated with operating the AAdvantage program, is recognized upon sale as a component of Other revenues, as the related services have been provided. The Company’s total liability for future AAdvantage award redemptions for free, discounted or upgraded travel on American, American Eagle or participating airlines as well as unrecognized revenue from selling AAdvantage miles was approximately $1.5$1.4 billion (and is recorded as a component of Air traffic liability on the accompanying consolidated balance sheets) at December 31, 20092010 and $1.7$1.5 billion as of December 31, 2008.2009.
Income Taxes The Company generally believes that the positions taken on previously filed income tax returns are more likely than not to be sustained by the taxing authorities. The Company has recorded income tax and related interest liabilities where the Company believes its position may not be sustained or where the full income tax benefit will not be recognized. Thus, the effects of potential income tax benefits resulting from the Company’s unrecognized tax positions are not reflected in the tax balances of the financial statements. Recognized and unrecognized tax positions are reviewed and adjusted as events occur that affect the Company’s judgment about the recognizability of income tax benefits, such as lapsing of applicable statutes of limitations, conclusion of tax audits, release of administrative guidance, or rendering of a court decision affecting a particular tax position.
Advertising CostsThe Company expenses on a straight-line basis the costs of advertising as incurred throughout the year. Advertising expense was $153$165 million $153 millionfor the year ended December 31, 2010, and $162$153 million for the years ended December 31, 2009 2008 and 2007, respectively.December 31, 2008.
Subsequent Events In connection with preparation of the consolidated financial statements and in accordance with the recently issued guidance by the FASB,U.S. GAAP, the Company evaluated subsequent events after the balance sheet date of December 31, 2009 through February 17, 2010.
2. Special Charges2010 and Restructuring Activitiesdetermined that no additional disclosure to that presented in thisForm 10-K was necessary.
| | 2. | Special Charges and Restructuring Activities |
As a result of the revenue environment, high fuel prices and the Company’s restructuring activities, including its capacity reductions, the Company has recorded a number of charges during the last few years. In 2008 and 2009, the Company announced capacity reductions due to unprecedented high fuel costs at that time and the other challenges facing the industry. In connection with these capacity reductions, the Company incurred special charges related to aircraft, employee reductions and certain other charges. Aircraft Charges As part of these capacity reductions, the Company grounded its leased Airbus A300 aircraft prior to lease expiration. In 2009, the Company incurred approximately $94 million in net present value of future lease payments and lease return costs related to the grounding of the leased Airbus A300 fleet. The Company estimates that virtually all of these charges will result in future cash expenditures. Further, the Company also wrote down its owned Airbus A300 aircraft and related inventory to estimated salvage value in the fourth quarter of 2009, resulting in a non-cash expense of $20 million. All Airbus A300 aircraft arewere permanently retired as of December 31, 2009.
In the fourth quarter of 2009, due to the continuing severe downturn in the global economy and weakness in the regional jet aircraft market, the Company’s plan to sell certain of its Embraer RJ-135 aircraft was no longer feasible at the amount for which these aircraft had been valued. Consequently, the Company reclassified these aircraft from held for sale to held for use, tested them for impairment and concluded the carrying values of certain of its Embraer RJ-135 aircraft were no longer recoverable. Therefore, during the fourth quarter of 2009, the Company recorded an impairment charge of $42 million to write these aircraft down to their estimated fair values. In addition, these aircraft will now resume depreciation prospectively. In determining the fair values of these aircraft, the Company 57
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) considered recent transactions for sales of similar aircraft and the value of the underlying engines. No portion of the impairment charge will result in future cash expenditures.
Employee Charges In conjunction with the capacity reductions announced in 2008, the Company reduced its workforce commensurate with the announced system-wide capacity reductions. This reduction in workforce was accomplished through various measures, including voluntary programs, part-time work schedules, furloughs in accordance with collective bargaining agreements, and other reductions.
The following table summarizes the components of the Company’s special charges, the remaining accruals for these charges and the capacity reduction related charges (in millions) as of December 31, 2009:2010:
| | | | | | | | | | | | | | | | | | | | | | | Aircraft
| | | Facility Exit
| | | Employee
| | | | | | | | | | Charges | | | Costs | | | Charges | | | Other | | | Total | | | Remaining accrual at January 1, 2008 | | $ | 126 | | | $ | 18 | | | $ | — | | | $ | — | | | $ | 144 | | Capacity reduction charges | | | 1,117 | | | | — | | | | 71 | | | | 25 | | | | 1,213 | | Non-cash charges | | | (1,103 | ) | | | — | | | | — | | | | (25 | ) | | | (1,128 | ) | Adjustments | | | 1 | | | | (2 | ) | | | — | | | | — | | | | (1 | ) | Payments | | | (31 | ) | | | — | | | | (55 | ) | | | — | | | | (86 | ) | | | | | | | | | | | | | | | | | | | | | | Remaining accrual at December 31, 2008 | | $ | 110 | | | $ | 16 | | | $ | 16 | | | $ | — | | | $ | 142 | | Capacity reduction charges | | | 164 | | | | 7 | | | | — | | | | — | | | | 171 | | Non-cash charges | | | (68 | ) | | | — | | | | — | | | | — | | | | (68 | ) | Adjustments | | | (2 | ) | | | — | | | | — | | | | — | | | | (2 | ) | Payments | | | (49 | ) | | | (3 | ) | | | (16 | ) | | | — | | | | (68 | ) | | | | | | | | | | | | | | | | | | | | | | Remaining accrual at December 31, 2009 | | $ | 155 | | | $ | 20 | | | $ | — | | | $ | — | | | $ | 175 | | Non-cash charges | | | | | | | | | | | | | | | | | | | | | Adjustments | | | (8 | ) | | | 11 | | | | | | | | | | | | 3 | | Payments | | | (88 | ) | | | (4 | ) | | | | | | | | | | | (92 | ) | | | | | | | | | | | | | | | | | | | | | | Remaining accrual at December 31, 2010 | | $ | 59 | | | $ | 27 | | | $ | — | | | $ | — | | | $ | 86 | |
| | Aircraft Charges | | | Facility Exit Costs | | | Employee Charges | | | Other | | | Total | | Remaining accrual at January 1, 2007 | | $ | 128 | | | $ | 19 | | | $ | - | | | $ | - | | | $ | 147 | | Restructuring charges | | | 63 | | | | - | | | | - | | | | - | | | | 63 | | Non-cash charges | | | (53 | ) | | | - | | | | - | | | | - | | | | (53 | ) | Payments | | | (12 | ) | | | (1 | ) | | | - | | | | - | | | | (13 | ) | Remaining accrual at December 31, 2007 | | $ | 126 | | | $ | 18 | | | $ | - | | | $ | - | | | $ | 144 | | Capacity reduction charges | | | 1,117 | | | | - | | | | 71 | | | | 25 | | | | 1,213 | | Non-cash charges | | | (1,103 | ) | | | - | | | | - | | | | (25 | ) | | | (1,128 | ) | Adjustments | | | 1 | | | | (2 | ) | | | - | | | | - | | | | (1 | ) | Payments | | | (31 | ) | | | - | | | | (55 | ) | | | - | | | | (86 | ) | Remaining accrual at December 31, 2008 | | $ | 110 | | | $ | 16 | | | $ | 16 | | | $ | - | | | $ | 142 | | Capacity reduction charges | | | 164 | | | | 7 | | | | - | | | | - | | | | 171 | | Non-cash charges | | | (68 | ) | | | - | | | | - | | | | - | | | | (68 | ) | Adjustments | | | (2 | ) | | | - | | | | - | | | | - | | | | (2 | ) | Payments | | | (49 | ) | | | (3 | ) | | | (16 | ) | | | - | | | | (68 | ) | Remaining accrual at December 31, 2009 | | $ | 155 | | | $ | 20 | | | $ | - | | | $ | - | | | $ | 175 | | | | | | | | | | | | | | | | | | | | | | |
Cash outlays related to the accruals for aircraft charges and facility exit costs will occur through 2017 and 2018, respectively. 2. Special Charges and Restructuring Activities (Continued)Other
Other
On September 22, 2001, the Air Transportation Safety and System Stabilization Act (the Stabilization Act) was signed into law. The Stabilization Act provides that, notwithstanding any other provision of law, liability for all claims, whether compensatory or punitive, arising from the Terrorist Attacks, against any air carrier shall not exceed the liability coverage maintained by the air carrier. Based upon estimates provided by the Company’s insurance providers, the Company initially recorded a liability of approximately $2.3 billion for claims arising from the Terrorist Attacks, after considering the liability protections provided for by the Stabilization Act. The receivable and the liability, recorded in the accompanying consolidated balance sheet as Other assets and Other liabilities and deferred credits, respectively, was $1.6 billion and $1.7 billion at both December 31, 2010 and 2009, and 2008.respectively. 58
AMR CORPORATION
3. Investments and Fair Value MeasurementsNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | 3. | Investments and Fair Value Measurements |
Short-term investments consisted of (in millions): | | December 31, | | | | | | | | | | | | 2009 | | | 2008 | | | December 31, | | Overnight investments and time deposits | | $ | 1,415 | | | $ | 1,574 | | | | | | 2010 | | 2009 | | | | Overnight investments, time deposits and Repurchase agreements | | | $ | 844 | | | $ | 1,415 | | Corporate and bank notes | | | 2,527 | | | | 1,016 | | | | 2,685 | | | | 2,527 | | U. S. government agency notes | | | 300 | | | | 322 | | | U. S. government agency mortgages | | | | 605 | | | | — | | U.S. government agency notes | | | | — | | | | 300 | | Commingled funds | | | | 190 | | | | — | | Other | | | 4 | | | | 4 | | | | 4 | | | | 4 | | | | $ | 4,246 | | | $ | 2,916 | | | | | | | | | | $ | 4,328 | | | $ | 4,246 | | | | | | | | |
Short-term investments at December 31, 2009,2010, by contractual maturity included (in millions):
| | | | | Due in one year or less | | $ | 2,609 | | Due between one year and three years | | | 1,114 | | Due after three years | | | 605 | | | | | | | | | $ | 4,328 | | | | | | |
Due in one year or less | | $ | 3,946 | | Due between one year and three years | | | 300 | | Due after three years | | | - | | | | $ | 4,246 | |
All short-term investments are classified asavailable-for-sale and stated at fair value. Unrealized gains and losses are reflected as a component of Accumulated other comprehensive income (loss).
The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The Company’s short-term investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. The Company’s fuel derivative contracts, which consist of commodity collars and calls, are valued using energy and commodity market data which is derived by combining raw inputs with quantitative models and processes to generate forward curves and volatilities. No changes in valuation techniques or inputs occurred during the year ended December 31, 2010. 59
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Assets and liabilities measured at fair value on a recurring basis are summarized below:
| | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2010 | | | | | | | Quoted Prices in
| | | | | | Significant
| | | | | | | Active Markets for
| | | Significant
| | | Unobservable
| | | | | | | Identical Assets
| | | Observable Inputs
| | | Inputs
| | Description | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | | | (In millions) | | | Short-term investments(1,2) | | | | | | | | | | | | | | | | | Money market funds | | $ | 198 | | | $ | 198 | | | $ | — | | | $ | — | | Government agency investments | | | 605 | | | | — | | | | 605 | | | | — | | Repurchase investments | | | 831 | | | | — | | | | 831 | | | | — | | Short-term obligations | | | 1,580 | | | | — | | | | 1,580 | | | | — | | Corporate obligations | | | 647 | | | | — | | | | 647 | | | | — | | Bank notes/Certificates of deposit/Time deposits | | | 467 | | | | — | | | | 467 | | | | — | | | | | | | | | | | | | | | | | | | | | | 4,328 | | | | 198 | | | | 4,130 | | | | — | | Restricted cash and short-term investments(1) | | | | | | | | | | | | | | | | | Money market funds | | | 450 | | | | 450 | | | | — | | | | — | | Fuel derivative contracts(1) | | | 269 | | | | — | | | | 269 | | | | — | | | | | | | | | | | | | | | | | | | Total | | $ | 5,047 | | | $ | 648 | | | $ | 4,399 | | | $ | — | | | | | | | | | | | | | | | | | | |
(in millions) | Fair Value Measurements as of December 31, 2009 | | Description | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | | | | | | | | | | | | | Short term investments 1 | | $ | 4,246 | | | $ | 499 | | | $ | 3,747 | | | $ | - | | Restricted cash and short-term investments 1 | | | 460 | | | | 460 | | | | - | | | | - | | Fuel derivative contracts 1 | | | 135 | | | | | | | | 135 | | | | | | Fuel derivative liability 1 | | | (80 | ) | | | - | | | | (80 | ) | | | - | | Total | | $ | 4,761 | | | $ | 959 | | | $ | 3,802 | | | $ | - | |
1 Unrealized gains or losses on short term investments, restricted cash and short-term investments and derivatives qualifying for hedge accounting are recorded in Accumulated other comprehensive income (loss) at each measurement date.
| | | (1) | | Unrealized gains or losses on short-term investments, restricted cash and short-term investments and derivatives qualifying for hedge accounting are recorded in Accumulated other comprehensive income (loss) (OCI) at each measurement date. | | (2) | | The majority of the Company’s short-term investments mature in one year or less except for $467 million of Bank notes/Certificates of deposit/Time deposits, $605 million of U.S. Government agency investments and $647 million of Corporate obligations which have maturity dates exceeding one year. |
No significant transfers between Level 1 and Level 2 occurred during the year ended December 31, 2010. The Company’s policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period. | | 4. | Commitments, Contingencies and Guarantees |
4. Commitments, Contingencies and Guarantees
As of December 31, 2009,2010, American had 4515 Boeing737-800 aircraft purchase commitments in 2011 and 28 Boeing737-800 aircraft purchase commitments in 2012 and, in addition to those commitments, American had firm purchase commitments for 2010 and eight Boeing 737-800 aircraft in 2011. In addition to these aircraft, American has firm commitments for eleven Boeing737-800 aircraft and seven Boeing 777 aircraft scheduled to be delivered in 2013-2016.2013 through 2016. American also previously announced plans (subject to certain reconfirmation rights) to acquire 42 Boeing787-9 aircraft, with the right to acquire an additional 58 Boeing787-9 aircraft. American has selected GE Aviation as the exclusive provider of engines for its expected order of Boeing787-9 aircraft.
In As of December 2009,31, 2010, AMR Eagle entered into an agreement to exercise options tohad firm purchase 22 Bombardier CRJ-700 series jet aircraft from Bombardier Inc. AMR Eagle has also entered into agreements with Export Development Canada (EDC) to provide financing, and with another party to complement EDC’s financing support. The Company expects the purchase to be fully financed. The obligations of AMR Eagle under those financing agreements will be guaranteed by the Company. Delivery of thecommitments for 8 Bombardier CRJ-700 aircraft is anticipatedscheduled to beginbe delivered in June 2010 continuing through April 2011.
As of December 31, 2009,2010, payments for the above purchase commitments will approximate $1.6 billion in 2010, $526$884 million in 2011, $217$951 million in 2012, $465$491 million in 2013, $224$291 million in 2014, $169 million in 2015 and $248$79 million for 2015 and beyond.2016. These amounts are net of purchase deposits currently held by the manufacturers. American has granted Boeing a security interest in American’s purchase deposits with Boeing. The Company’s purchase deposits totaled $639$375 million and $671$639 million at December 31, 2010 and 2009, respectively. 60
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) On January 14, 2011, the Company entered into an amendment to Purchase Agreement No. 1980 with the Boeing Company to exercise rights to acquire two Boeing777-300ER aircraft for delivery in 2012. The Company’s total purchase commitments are expected to be approximately $2.8 billion at the end of the first quarter 2011, reflecting this transaction and 2008, respectively.aircraft purchase deposits paid during that period.
On December 18, 2007, the European Commission issued a SOStatement of Objection (SO) against 26 airlines, including the Company. The SO alleges that these carriers participated in a conspiracy to set surcharges on cargo shipments in violation of European Union (EU) law. During 2010 the EU law.notified the Company it was dismissing its investigation against the Company. On August 26, 2010, the Federal Aviation Administration (FAA) proposed a $24.2 million civil penalty against American, claiming that American failed to properly perform certain portions of an FAA Airworthiness Directive concerning certain wiring to the McDonnell Douglas MD-80 aircraft auxiliary hydraulic pump. American plans to challenge the proposed civil penalty. The SO states that, in the eventCompany has concluded that the allegations inamount of the SO are affirmed, the Commission will impose fines against the Company. The Company intends to vigorously contest the allegations and findings in the SO under EU laws, and it intends to cooperate fully with all other pending investigations. Based on the information to date, the Company haspenalty, if any, that may be paid is not recorded any reserve for this exposure for the year endedestimable at December 31, 2009. In the event that the SO is affirmed or other investigations uncover violations of the U.S. antitrust laws or the competition laws of some other jurisdiction, or if the Company were named and found liable in any litigation based on these allegations, such findings and related legal proceedings could have a material adverse impact on the Company. 2010.
The Company has contracts related to facility construction or improvement projects, primarily at airport locations. The contractual obligations related to these projects totaled approximately $55$73 million as of December 31, 2009.2010. The Company expects to make payments of $43$60 million and $10$5 million in 20102011 and 2011,2012, respectively. In addition, the Company has an information technology support related contract that requires minimum annual payments of $150$100 million in 2011 and declining to $70 million in 2014 through 2013.2019.
American has a capacity purchase agreement with Chautauqua Airlines, Inc. to provide Embraer -140 regional jet services to certain markets under the brand AmericanConnection®AmericanConnection®. Under these arrangements, the Company pays the AmericanConnection®AmericanConnection® carrier a fee per block hour to operate the aircraft. The block hour fees are designed to cover the AmericanConnection®AmericanConnection® carrier’s fully allocated costs plus a margin. Assumptions for certain costs such as fuel, landing fees, insurance, and aircraft ownership are trued up to actual values on a pass through basis. In consideration for these payments, the Company retains all passenger and other revenues resulting from the operation of the AmericanConnection®AmericanConnection® regional jets. Minimum payments under the contracts are $55$56 million in 20102011 and $73$15 million over the two years 2011 andin 2012. In addition, if the Company terminates the Chautauqua contract without cause, Chautauqua has the right to put its 15 Embraer aircraft to the Company. If this were to happen, the Company would take possession of the aircraft and become liable for lease obligations totaling approximately $21 million per year with lease expirations in 2018 and 2019.
The Company is a party to many routine contracts in which it provides general indemnities in the normal course of business to third parties for various risks. The Company is not able to estimate the potential amount of any liability resulting from the indemnities. These indemnities are discussed in the following paragraphs.
In its aircraft financing agreements, the Company generally indemnifies the financing parties, trustees acting on their behalf and other relevant parties against liabilities (including certain taxes) resulting from the financing, manufacture, design, ownership, operation and maintenance of the aircraft regardless of whether these liabilities (or taxes) relate to the negligence of the indemnified parties. 4. Commitments, Contingencies and Guarantees (Continued)
The Company’s loan agreements and other London Interbank Offered Rate (LIBOR)-based financing transactions (including certain leveraged aircraft leases) generally obligate the Company to reimburse the applicable lender for incremental costs due to a change in law that imposes (i) any reserve or special deposit requirement against assets of, deposits with or credit extended by such lender related to the loan, (ii) any tax, duty or other charge with respect to the loan (except standard income tax) or (iii) capital adequacy requirements. In addition, the Company’s loan agreements, derivative contracts and other financing arrangements typically contain a withholding tax provision that requires the Company to pay additional amounts to the applicable lender or other financing party, generally if withholding taxes are imposed on such lender or other financing party as a result of a change in the applicable tax law.
These increased cost and withholding tax provisions continue for the entire term of the applicable transaction, and there is no limitation on the maximum additional amounts the Company could be obligated to pay under such 61
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) provisions. Any failure to pay amounts due under such provisions generally would trigger an event of default and, in a secured financing transaction, would entitle the lender to foreclose on the collateral to realize the amount due.
In certain transactions, including certain aircraft financing leases and loans and derivative transactions, the lessors, lendersand/or other parties have rights to terminate the transaction based on changes in foreign tax law, illegality or certain other events or circumstances. In such a case, the Company may be required to make a lump sum payment to terminate the relevant transaction.
The Company has general indemnity clauses in many of its airport and other real estate leases where the Company as lessee indemnifies the lessor (and related parties) against liabilities related to the Company’s use of the leased property. Generally, these indemnifications cover liabilities resulting from the negligence of the indemnified parties, but not liabilities resulting from the gross negligence or willful misconduct of the indemnified parties. In addition, the Company provides environmental indemnities in many of these leases for contamination related to the Company’s use of the leased property.
Under certain contracts with third parties, the Company indemnifies the third party against legal liability arising out of an action by the third party, or certain other parties. The terms of these contracts vary and the potential exposure under these indemnities cannot be determined. Generally, theThe Company has liability insurance protecting the Company for some of the obligations it has undertaken under these indemnities.
AMR and American have event risk covenants in approximately $1 billion of indebtedness and operating leases as of December 31, 2010. These covenants permit the holders of such obligations to receive a higher rate of return (between 100 and 600 basis points above the state rate) if a designated event, as defined, should occur and the credit ratings of such obligations are downgraded below certain levels within a certain period of time. No designated event, as defined, had occurred as of December 31, 2010. The Company is involved in certain claims and litigation related to its operations. The Company is also subject to regulatory assessments in the ordinary course of business. AMR establishes reserves for litigation and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably estimated. In the opinion of management, liabilities, if any, arising from these claims and litigation will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows, after consideration of available insurance.
5. Leases
AMR'sAMR’s subsidiaries lease various types of equipment and property, primarily aircraft and airport facilities. The future minimum lease payments required under capital leases, together with the present value of such payments, and future minimum lease payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2009,2010, were (in millions):
| | | | | | | | | | | | | Capital
| | Operating
| | Year Ending December 31, | | Capital Leases | | | Operating Leases | | | | Leases | | Leases | | 2010 | | $ | 181 | | | $ | 1,057 | | | | | | 2011 | | | 184 | | | | 1,032 | | | | $ | 186 | | | $ | 1,254 | | 2012 | | | 134 | | | | 848 | | | | | 136 | | | | 1,068 | | 2013 | | | 119 | | | | 755 | | | | | 120 | | | | 973 | | 2014 | | | 98 | | | | 614 | | | | | 98 | | | | 831 | | 2015 and thereafter | | | 436 | | | | 5,021 | | | | 2015 | | | | 87 | | | | 672 | | 2016 and thereafter | | | | 349 | | | | 6,006 | | | | | | | | | | | | | | | | | | | | $ | 976 | | | $ | 10,804 | (1) | | | $ | 1,152 | | | $ | 9,327 | (1) | | | | | Less amount representing interest | | | 463 | | | | | | | | | 372 | | | | | | | | | | | Present value of net minimum lease payments | | $ | 689 | | | | | | | | $ | 604 | | | | | | | | | | |
(1)
| | | | (1) | | As of December 31, 2009,2010, included in Accrued liabilities and Other liabilities and deferred credits on the accompanying consolidated balance sheet is approximately $1.2$1.1 billion relating to rent expense being recorded in advance of future operating lease payments. |
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5. LeasesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At December 31, 2009,2010, the Company was operating 181202 jet aircraft and 39 turboprop aircraft under operating leases and 8070 jet aircraft under capital leases. The aircraft leases can generally be renewed at rates based on fair market value at the end of the lease term for one to five years. Some aircraft leases have purchase options at or near the end of the lease term at fair market value, but generally not to exceed a stated percentage of the defined lessor'slessor’s cost of the aircraft or a predetermined fixed amount.
During 2009,2010, the Company raised $768 millionfinanced 36 deliveries of Boeing737-800 aircraft through sale leasebacks of certain aircraftleaseback transactions resulting in gains which have lease terms of six to seven years. Gains of $28 million on sale leasebacks are being amortized over the respective remaining lease terms, whileterms. During 2009 non-recurring charges related to losses on certain sale leasebacks of vintage aircraft of $88 million were realized in 2009 and included in Other operating income.
Special facility revenue bonds have been issued by certain municipalities primarily to improve airport facilities and purchase equipment. To the extent these transactions were committed to prior to May 21, 1998, they are accounted for as operating leases under U.S. GAAP. Approximately $1.5 billion of these bonds (with total future payments of approximately $3.3$3.2 billion as of December 31, 2009)2010) are guaranteed by American, AMR, or both. Approximately $177 million of these special facility revenue bonds contain mandatory tender provisions that require American to make operating lease payments sufficient to repurchase the bonds at various times: $112 million in 2014 and $65 million in 2015. Although American has the right to remarket the bonds, there can be no assurance that these bonds will be successfully remarketed. Any payments to redeem or purchase bonds that are not remarketed would generally reduce existing rent leveling accruals or be considered prepaid facility rentals and would reduce future operating lease commitments. The special facility revenue bonds that contain mandatory tender provisions are listed in the table above at their ultimate maturity date rather than their mandatory tender provision date.
Rent expense, excluding landing fees, was $1.3$1.5 billion, $1.3 billion and $1.4$1.3 billion in 2010, 2009 2008 and 2007,2008, respectively.
American has determined that it holds a significant variable interest in, but is not the primary beneficiary of, certain trusts that are the lessors under 8483 of its aircraft operating leases. These leases contain a fixed price purchase option, which allows American to purchase the aircraft at a predetermined price on a specified date. However, American does not guarantee the residual value of the aircraft. As of December 31, 2009,2010, future lease payments required under these leases totaled $1.4$1.1 billion.
6. Indebtedness
Long-term debt consisted of (in millions): | | December 31, | | | | 2009 | | | 2008 | | | | | | | | | Secured variable and fixed rate indebtedness due through 2021 (effective rates from 2.28% - 13.00% at December 31, 2009) | | $ | 5,553 | | | $ | 4,783 | | Enhanced equipment trust certificates due through 2019 (rates from 3.85% - 12.00% at December 31, 2009) | | | 2,022 | | | | 2,382 | | 6.00% - 8.50% special facility revenue bonds due through 2036 | | | 1,658 | | | | 1,674 | | AAdvantage Miles advance purchase (net of discount of $110 million) (effective rate 8.30%) | | | 890 | | | | - | | Credit facility agreement due through 2010 | | | - | | | | 691 | | 6.25% senior convertible notes due 2014 | | | 460 | | | | - | | 4.50% senior convertible notes due 2024 | | | - | | | | 314 | | 9.00% - 10.20% debentures due through 2021 | | | 214 | | | | 213 | | 7.88% - 10.55% notes due through 2039 | | | 211 | | | | 211 | | | | | 11,008 | | | | 10,268 | | | | | | | | | | | Less current maturities | | | 1,024 | | | | 1,845 | | | | | | | | | | | Long-term debt, less current maturities | | $ | 9,984 | | | $ | 8,423 | | | | | | | | | | |
| | | | | | | | | | | December 31, | | | | 2010 | | | 2009 | | | Secured variable and fixed rate indebtedness due through 2021 (effective rates from 1.00% — 13.00% at December 31, 2010) | | $ | 5,114 | | | $ | 5,553 | | Enhanced equipment trust certificates due through 2019 (rates from 5.10% — 12.00% at December 31, 2010) | | | 2,002 | | | | 2,022 | | 6.00% — 8.50% special facility revenue bonds due through 2036 | | | 1,641 | | | | 1,658 | | AAdvantage Miles advance purchase (net of discount of $110 million) (effective rate 8.30)% | | | 890 | | | | 890 | | 6.25% senior convertible notes due 2014 | | | 460 | | | | 460 | | 9.00% — 10.20% debentures due through 2021 | | | 214 | | | | 214 | | 7.88% — 10.55% notes due through 2039 | | | 211 | | | | 211 | | | | | 10,532 | | | | 11,008 | | Less current maturities | | | 1,776 | | | | 1,024 | | | | | | | | | | | Long-term debt, less current maturities | | $ | 8,756 | | | $ | 9,984 | | | | | | | | | | |
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AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)6. Indebtedness (Continued)
MaturitiesPayments of long-term debt (including sinking fund requirements) for the next five years are: 2010 - $1.0 billion; 2011 - $2.3— $2.4 billion; 2012 -— $1.7 billion; 2013 - $957— $990 million; 2014 — $1.4 billion, 2015 — $713 million. The 2011 amount includes approximately $600 million 2014 - $1.4 billion.that was refinanced in January 2011 as described below and thus is excluded from current maturities.
As of December 31, 2009,2010, AMR had issued guarantees covering approximately $1.6 billion of American’s tax-exempt bond debt (and interest thereon) and $450$459 million of American’s secured debt (and interest thereon). American had issued guarantees covering approximately $885 million of AMR’s unsecured debt (and interest thereon). In addition, as of December 31, 2009,2010, AMR and American had issued guarantees covering approximately $262$216 million of AMR Eagle’s secured debt (and interest thereon) and AMR has issued additional guarantees covering $2.0$2.1 billion of AMR Eagle’s secured debt (and interest thereon). AMR also guarantees $186$145 million of American’s leases of certain Super ATR aircraft, which are subleased to AMR Eagle.
In the first quarter of 2009, AMR retired, by purchasing with cash $318 million principal amount of its 4.50 Notes. Virtually all of the holders of the 4.50 Notes exercised their elective put rights and the Company purchased and retired these notes at a price equal to 100 percent of their principal amount. Under the terms of the 4.50 Notes, the Company had the option to pay the purchase price with cash, stock, or a combination of cash and stock, and the Company elected to pay for the 4.50 Notes solely with cash.
On July 7, 2009,January 25, 2011, American closed on a $520$657 million Pass Through Trust Certificates (the Certificates) financing covering four. The equipment notes expected to be held by each pass through trust will be issued for each of (a) 15 Boeing 777-200ER737-823 aircraft owneddelivered new to American from 1999 to 2001, (b) six Boeing757-223 aircraft delivered new to American in 1999 and 2001, (c) two Boeing767-323ER aircraft delivered new to American in 1999 and (d) seven Boeing777-223ER aircraft delivered new to American from 1999 to 2000. At closing, 27 of the aircraft were encumbered by American and 16either private mortgages or by liens to secure debt incurred in connection with the issuance of American’s Boeing 737-800 deliveries. Equipment notes underlying the Certificates bear interest at 10.375 percent per annum and principal and interest on the notes are payableenhanced equipment trust certificates in semi-annual installments with2001, all of which mature in 2011. As a balloon payment at maturity in 2019. Approximately $314 million ofresult, the proceeds from the sale of the Certificates were received by American as of December 31, 2009 in exchange for equipment notes secured by the four Boeing 777-200ER aircraft and the delivery and financing of seven Boeing 737-800 aircraft. The remainder of the proceeds is beingeach trust will initially be held in escrow forwith a depositary, pending the benefitfinancing of holders ofeach aircraft under an indenture relating to the Certificates. When American finances eachInterest of 5.25% and 7.00% per annum on the remaining nine Boeing 737-800 aircraft under this arrangement, an allocable portion of the proceedsissued and outstanding Series A equipment notes and Series B equipment notes, respectively, will be released to American in exchange forpayable semiannually on January 31 and July 31 of each year, commencing on July 31, 2011, and principal on such equipment notes secured byis scheduled for payment on January 31 and July 31 of certain years, commencing on July 31, 2011. The payment obligations of American under the individual aircraft and such debtequipment notes will be recordedfully and unconditionally guaranteed by American. American currently expects that it will use the escrowed proceeds of the Certificates to finance nine Boeing 737-800 aircraft scheduled to be delivered to American between February 2010 and April 2010, but American could elect to use this financing on any nine of its next 37 Boeing 737-800 aircraft deliveries currently scheduled for delivery between February 2010 and October 2010.AMR Corporation. In addition, a third party is holding collateral from American to cover interest distributable on the Certificates prior to when the remaining nine Boeing 737-800 aircraft are delivered and the related equipment notes are issued. Any collateral not remitted to the holders for interest will be returned to the Company. Once fully issued, American will hold variable interests in the pass through trusts created for the Certificates, but is not expected to be the primary beneficiary of the trust.
On July 31, 2009, American closed a $276 million private placement offering of senior secured notes due 2016 (2009-2 Secured Notes), which were priced at par to yield 13 percent. The purpose of the offering was to refinance, in part, the outstanding $401 million principal amount of the Company’s 1999-1 enhanced equipment trust certificates (1999 EETC). Following the payment of the 1999 EETC at maturity on October 15, 2009, twelve of the 15 aircraft that previously secured the 1999 EETC were pledged to secure the 2009-2 Secured Notes, and the cash collateral was released to the Company. The other three aircraft were pledged to secure the 2009 Loan Facility referred to below.
On September 16, 2009, American entered into an arrangement under which Citibank paid to American $1.0 billion in order to pre-purchase AAdvantage Miles (the Advance Purchase Miles) under American’s AAdvantage frequent flier loyalty program (the Advance Purchase). Approximately $890 million of the Advance Purchase proceeds is accounted for as a loan from Citibank with the remaining $110 million recorded as Deferred Revenue in Other liabilities and deferred credits.
To effect the Advance Purchase, American and Citibank entered into an Amended and Restated AAdvantage Participation Agreement (as so amended and restated, the Amended Participation Agreement). Under the Amended Participation Agreement, American agreed that it would apply in equal monthly installments, over a five year period beginning on January 1, 2012, the Advance Purchase Miles to Citibank cardholders’ AAdvantage accounts. 6. Indebtedness (Continued)
Pursuant to the Advance Purchase, Citibank has been granted a first-priority lien in certain of American’s AAdvantage program assets, and a lien in certain of American’s Heathrow and Narita routes and slots that would be subordinated to any subsequent first lien. Commencing on December 31, 2011, American has the right to repurchase, without premium or penalty, any or all of the Advance Purchase Miles that have not then been posted to Citibank cardholders’ accounts. American is also obligated, in certain circumstances (including certain specified termination events under the Amended Participation Agreement, certain cross defaults and cross acceleration events, and if any Advance Purchase Miles remain at the end of the term) to repurchase for cash all of the Advance Purchase Miles that have not then been used by Citibank.
The Amended Participation Agreement includes provisions that grant Citibank the right to use Advance Purchase Miles on an accelerated basis under specified circumstances. American also has the right under certain circumstances to release, or substitute other comparable collateral for, the Heathrow and Narita route and slot related collateral. 64
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) During 2009, American closed a $520 million Pass Through Trust Certificates (the Certificates) financing covering four Boeing777-200ER aircraft owned by American and 16 of American’s Boeing737-800 deliveries. Equipment notes underlying the Certificates bear interest at 10.375 percent per annum and principal and interest on the notes are payable in semi-annual installments with a balloon payment at maturity in 2019. Approximately $890$200 million of the Advance Purchase proceeds is accounted for as a loan from Citibank, with the remaining $110 million related to certain other commitments with respect to the co-branding relationship and recorded as Deferred revenue in Other liabilities and deferred credits. The loan was determined using an effective interest rate of 8.3 percent and will be amortized under the interest method with imputed interest included in Interest expense. The deferred revenue will be amortized straight line over the lifesale of the agreement.Certificates were used by American during 2010 for the delivery and financing of Boeing737-800 aircraft.
Also on September 16,in 2009, American entered into two financing transactions with GECAS. The financing transactions consist of (1) the 2009 Loan Facility in the amount of $282 million to be secured by 13 owned assorted Boeing aircraft; and (2) Salea sale leaseback financing provided bytransaction with GECAS for Boeing737-800 aircraft (the 2009 Sale Leaseback) delivered in 2010 and certain Boeing737-800 aircraft deliveries scheduled to be delivered in 2010 and 2011 for an aggregate commitment of $1.6 billion. The 2009 Loan Facility bears interest at LIBOR plus a specified margin and will mature on September 16, 2017.
The terms of the 2009 Sale Leaseback are based on previous transactions with GECAS. The 2009 Sale Leasebacksale leaseback is subject to certain terms and conditions, including a condition to the effect that, at the time of entering into the sale and leaseback of a particular Boeing737-800 aircraft, American has at least a certain amount of unrestricted cash and short term investments. See Note 5 to the consolidated financial statements.
As a condition to entering into the 2009 Loan Facility and the 2009 Sale Leaseback, American entered into certain cross-default and cross-collateralization arrangements for the benefit of GECAS involving, among other things, the 2009 Loan Facility, the 2009 Sale Leaseback and certain previously-existing debt and lease financings involving GECAS with respect to more than 50 aircraft.
On September 28, 2009,At December 31, 2010, the Company issuedhad outstanding $460 million principal amount of its 6.25 percent senior convertible notes due 2014. Each note is convertible by holders into shares of AMR common stock at an initial conversion rate of 101.0101 shares per $1,000 principal amount of notes (which represents an equivalent initial conversion price of approximately $9.90 per share), subject to adjustment upon the occurrence of certain events, at any time prior to the close of business on the business day immediately preceding the maturity date of the notes. The Company must pay the conversion price of the notes in common stock. If the holders of the notes do not convert prior to maturity, the Company will retire the debt in cash. These notes are guaranteed by American.
On October 9, 2009, American completed the offering of $450 million aggregate principal amount of its 10.5 percent senior secured notes due 2012 (the Senior Notes) which are guaranteed by AMR. The Senior Notes are secured by certain of American’s aircraft, and proceeds from the offering of the notes were used to refinance American’s $432 million term loan credit facility which had a scheduled maturity of December 17, 2010 and which was retired early on September 28, 2009. |
In additionCertain of the Company’s debt financing agreements contain loan to the transactions described above, during the year ended December 31, 2009,value ratio covenants and require the Company raised approximately $320 million under other loans secured by various aircraft. The loans generally bear interest atto periodically appraise the collateral. Pursuant to such agreements, if the loan to value ratio exceeds a LIBOR-based variable ratespecified threshold, we may be required to subject additional qualifying collateral (which in some cases may include cash collateral) or, in the alternative, to pay down such financing, in whole or in part, with a fixed margin which resets quarterly and are due in installments through 2019.premium (if any).
Almost all of the Company’s aircraft assets (including aircraft eligible for the benefits of Section 1110 of the U.S. Bankruptcy Code) are encumbered.
Cash payments for interest, net of capitalized interest, were $735 million, $631 million and $685 million for 2010, 2009 and $861 million for 2009, 2008, and 2007, respectively. | | 7. | Financial Instruments and Risk Management |
7. Financial Instruments and Risk Management
Fuel Price Risk ManagementAs part of the Company'sCompany’s risk management program, it uses a variety of financial instruments, primarily heating oil option and collar contracts, as cash flow hedges to mitigate commodity price risk. The Company does not hold or issue derivative financial instruments for trading purposes. As of December 31, 2009,2010, the Company had fuel derivative contracts outstanding covering 2031 million barrels of jet fuel that will be settled over the next 24 months. A deterioration of the Company’s liquidity position may negatively affect the Company’s ability to hedge fuel in the future.
In accordance with U.S. GAAP, the Company assesses, both at the inception of each hedge and on an ongoing basis, whether the derivatives that are used in its hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. Derivatives that meet the requirements are granted special hedge accounting treatment, and the Company’s hedges generally meet these requirements. Accordingly, the Company’s fuel derivative contracts are accounted for as cash flow hedges, and the fair value of the Company’s hedging contracts is recorded in Current Assets or Current Liabilities in the accompanying consolidated balance sheets until the underlying jet fuel is purchased. The Company determines the ineffective portion of its fuel hedge contracts by comparing the cumulative change in the total value of the fuel hedge contract, or group of fuel hedge contracts, to the cumulative change in a hypothetical jet fuel hedge. If the total cumulative change in value of the fuel hedge contract more than offsets the total cumulative change in a hypothetical jet fuel hedge, the difference is considered ineffective and is immediately recognized as a component of Aircraft fuel expense. Effective gains or losses on fuel 65
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) hedging contracts are deferred in Accumulated other comprehensive income (loss) and are recognized in earnings as a component of Aircraft fuel expense when the underlying jet fuel being hedged is used.
Ineffectiveness is inherent in hedging jet fuel with derivative positions based in crude oil or other crude oil related commodities. In assessing effectiveness, the Company uses a regression model to determine the correlation of the change in prices of the commodities used to hedge jet fuel (e.g., NYMEX Heating oil) to the change in the price of jet fuel. The Company also monitors the actual dollar offset of the hedges’ market values as compared to hypothetical jet fuel hedges. The fuel hedge contracts are generally deemed to be “highly effective” if the R-squared is greater than 80 percent and dollar offset correlation is within 80 percent to 125 percent. The Company discontinues hedge accounting prospectively if it determines that a derivative is no longer expected to be highly effective as a hedge or if it decides to discontinue the hedging relationship. Subsequently, any changes in the fair value of these derivatives are marked to market through earnings in the period of change.
For the years ended December 31, 2010, 2009 2008 and 2007,2008, the Company recognized net gains (losses) of approximately ($142) million, ($651) million $380 million and $239$380 million, respectively, as a component of Aircraft fuel expense on the accompanying consolidated statements of operations related to its fuel hedging agreements, including the ineffective portion of the hedges. The fair value of the Company’s fuel hedging agreements at December 31, 20092010 and 2008,2009, representing the amount the Company would receive (pay) upon termination of the agreements, totaled $57$257 million and ($450)$57 million, respectively, which excludes a payable for both years related to contracts that settled in December of each year. As of December 31, 2009,2010, the Company estimates that during the next twelve months it will reclassify from Accumulated other comprehensive loss into earnings approximately $74$121 million in net lossesgains (based on prices as of December 31, 2009)2010) related to its fuel derivative hedges, including losses from terminated contracts with a bankrupt counterparty in 2008.hedges.
The impact of cash flow hedges on the Company’s consolidated financial statements for the years ending December 31, 20092010 and 2008,2009, respectively, is depicted below (in millions):
Fair Value of Aircraft Fuel Derivative Instruments (all cash flow hedges) | | Asset Derivatives as of December 31, | | Liability Derivatives as of December 31, | | 2009 | | 2008 | | 2009 | | 2008 | | Balance Sheet Location | | Fair Value | | Balance Sheet Location | | Fair Value | | Balance Sheet Location | | Fair Value | | Balance Sheet Location | | Fair Value | | Fuel derivative contracts | | $ | 126 | | Fuel derivative contracts | | $ | - | | Fuel derivative liability | | $ | 71 | | Fuel derivative liability | | $ | 528 | |
Fair Value of Aircraft Fuel Derivative Instruments (all cash flow hedges)
| | | | | | | | | | | | | | | Asset Derivatives as of December 31, | | Liability Derivatives as of December 31, | 2010 | | 2009 | | 2010 | | 2009 | Balance
| | | | Balance
| | | | Balance
| | | | Balance
| | | Sheet
| | Fair
| | Sheet
| | Fair
| | Sheet
| | Fair
| | Sheet
| | Fair
| Location | | Value | | Location | | Value | | Location | | Value | | Location | | Value | | Fuel derivative contracts | | $269 | | Fuel derivative contracts | | $126 | | Fuel derivative liability | | $— | | Fuel derivative liability | | $71 |
Effect of Aircraft Fuel Derivative Instruments on Statements of Operations (all cash flow hedges) | | | | | | | | | | | | | | | | | | | | | Amount of Gain
| | | | | | | Amount of Gain
| | | | (Loss)
| | | | | | | (Loss)
| | Location of Gain
| | Reclassified
| | Location of Gain
| | Amount of Gain (Loss)
| Recognized in
| | (Loss) Reclassified from
| | from Accumulated
| | (Loss) Recognized
| | Recognized in Income on
| OCI on Derivative(1) | | Accumulated OCI
| | OCI into Income(1) | | in Income on
| | Derivative(2) | 2010 | | 2009 | | into Income(1) | | 2010 | | 2009 | | Derivative(2) | | 2010 | | 2009 | | $72 | | $151 | | Aircraft Fuel | | $(144) | | $(662) | | Aircraft Fuel | | $2 | | $11 |
7. Financial Instruments and Risk Management (Continued)
Effect of Aircraft Fuel Derivative Instruments on Statements of Operations (all cash flow hedges) | | Amount of Gain (Loss) Recognized in OCI on Derivative 1 | | Location of Gain (Loss) Reclassified from Accumulated OCI into Income 1 | | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income 1 | | Location of Gain (Loss) Recognized in Income on Derivative 2 | | Amount of Gain (Loss) Recognized in Income on Derivative 2 | | 2009 | | | 2008 | | | 2009 | | | 2008 | | | 2009 | | | 2008 | | | | | | | | | | | | | | | | | | | | | $ | 151 | | | $ | (738) | | Aircraft Fuel | | $ | (662 | ) | | $ | 378 | | Aircraft Fuel | | $ | 11 | | | $ | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | 1 Effective portion of gain (loss) | | | | | | | | | | | | | | | | | | 2 Ineffective portion of gain (loss) | | | | | |
| | | (1) | | Effective portion of gain (loss) | | (2) | | Ineffective portion of gain (loss) |
The Company is also exposed to credit losses in the event of non-performance by counterparties to these financial instruments, and although no assurances can be given, the Company does not expect any of the counterparties to fail to meet its obligations. The credit exposure related to these financial instruments is represented by the fair value of contracts with a positive fair value at the reporting date, reduced by the effects of master netting agreements. To manage credit risks, the Company selects counterparties based on credit ratings, limits its exposure to a single counterparty under defined guidelines, and monitors the market position of the program and its relative market position with each counterparty. The Company also maintains industry-standard 66
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) security agreements with a number of its counterparties which may require the Company or the counterparty to post collateral if the value of selected instruments exceed specifiedmark-to-market thresholds or upon certain changes in credit ratings.
As of December 31, 2009, the aggregate fair value of all qualifying cash flow derivatives with credit-risk-related contingent features that are in a net liability position is $71 million, for which2010, the Company had postedreceived collateral of $14 million.$73 million which is included in short-term investments.
In addition to the Company’s qualifying cash flow hedges, American has hedges that were effectively unwound in 20082009 that were recorded as assets and liabilities on the balance sheet. Fair value of these offsetting positions not designated as hedges as of December 31, 2009 was a $9 million asset recorded in Fuel derivative contracts and a $9 million liability recorded in Fuel derivative liability. In January 2010, all of these contracts were settled with a net zero impact to the Company’s financial statements.
Fair Values of Financial Instruments The fair values of the Company'sCompany’s long-term debt were estimated using quoted market prices where available. For long-term debt not actively traded, fair values were estimated using discounted cash flow analyses, based on the Company'sCompany’s current incremental borrowing rates for similar types of borrowing arrangements.
7. Financial Instruments and Risk Management (Continued)
The carrying value and estimated fair values of the Company'sCompany’s long-term debt, including current maturities, were (in millions): | | December 31, | | | | 2009 | | | 2008 | | | | Carrying Value | | | Fair Value | | | Carrying Value | | | Fair Value | | | | | | | | | | | | | | | Secured variable and fixed rate indebtedness | | $ | 5,553 | | | $ | 4,310 | | | $ | 4,783 | | | $ | 2,534 | | Enhanced equipment trust certificates | | | 2,022 | | | | 1,999 | | | | 2,382 | | | | 1,885 | | 6.00% - 8.50% special facility revenue bonds | | | 1,658 | | | | 1,600 | | | | 1,674 | | | | 1,001 | | Credit facility agreement | | | - | | | | - | | | | 691 | | | | 545 | | AAdvantage Miles advance purchase | | | 890 | | | | 893 | | | | - | | | | - | | 4.50% - 6.25% senior convertible notes | | | 460 | | | | 476 | | | | 314 | | | | 308 | | 9.00% - 10.20% debentures | | | 214 | | | | 158 | | | | 213 | | | | 105 | | 7.88% - 10.55% notes | | | 211 | | | | 181 | | | | 211 | | | | 96 | | | | $ | 11,008 | | | $ | 9,617 | | | $ | 10,268 | | | $ | 6,474 | |
| | | | | | | | | | | | | | | | | | | December 31, | | | | 2010 | | | 2009 | | | | Carrying
| | | Fair
| | | Carrying
| | | Fair
| | | | Value | | | Value | | | Value | | | Value | | | Secured variable and fixed rate indebtedness | | $ | 5,114 | | | $ | 4,562 | | | $ | 5,553 | | | $ | 4,310 | | Enhanced equipment trust certificates | | | 2,002 | | | | 2,127 | | | | 2,022 | | | | 1,999 | | 6.00% — 8.50% special facility revenue bonds | | | 1,641 | | | | 1,657 | | | | 1,658 | | | | 1,600 | | AAdvantage Miles advance purchase | | | 890 | | | | 903 | | | | 890 | | | | 893 | | 4.50% — 6.25% senior convertible notes | | | 460 | | | | 526 | | | | 460 | | | | 476 | | 9.00% — 10.20% debentures | | | 214 | | | | 207 | | | | 214 | | | | 158 | | 7.88% — 10.55% notes | | | 211 | | | | 209 | | | | 211 | | | | 181 | | | | | | | | | | | | | | | | | | | | | $ | 10,532 | | | $ | 10,191 | | | $ | 11,008 | | | $ | 9,617 | | | | | | | | | | | | | | | | | | |
8. Income TaxesThe Company has an unrecognized tax benefit of approximately $6 million, which did not change during the twelve months ended December 31, 2010. Changes in the unrecognized tax benefit have no impact on the effective tax rate due to the existence of the valuation allowance. Accrued interest on tax positions is recorded as a component of interest expense but was not significant at December 31, 2010.
The reconciliation of the beginning and ending amounts of unrecognized tax benefit are (in millions): | | | | | | | | | | | 2010 | | | 2009 | | | Unrecognized Tax Benefit at January 1 | | $ | 6 | | | $ | 24 | | Decreases due to settlements with taxing authority | | | 0 | | | | (18 | ) | | | | | | | | | | Unrecognized Tax Benefit at December 31 | | $ | 6 | | | $ | 6 | | | | | | | | | | |
The Company estimates that the unrecognized tax benefit will not significantly change within the next twelve months. 67
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company’s 2004 through 2009 tax years are still subject to examination by the Internal Revenue Service. Various state and foreign jurisdiction tax years remain open to examination and the Company is under examination, in administrative appeals, or engaged in tax litigation in certain jurisdictions. The Company believes that the effect of any additional assessment(s) will be immaterial to its consolidated financial statements. The significant components of the income tax provision (benefit) were (in millions); | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2010 | | | 2009 | | | 2008 | | | Current | | $ | (5 | ) | | $ | (36 | ) | | $ | 0 | | Deferred | | | (30 | ) | | | (248 | ) | | | 0 | | | | | | | | | | | | | | | Income tax benefit | | $ | (35 | ) | | $ | (284 | ) | | $ | — | | | | | | | | | | | | | | |
The income tax expense (benefit) differed from amounts computed at the statutory federal income tax rate as follows (in millions): | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2010 | | | 2009 | | | 2008 | | | Statutory income tax provision expense/(benefit) | | $ | (177 | ) | | $ | (613 | ) | | $ | (741 | ) | State income tax expense/(benefit), net of federal tax effect | | | (1 | ) | | | (41 | ) | | | (49 | ) | Meal expense | | | 7 | | | | 7 | | | | 8 | | Change in valuation allowance | | | 121 | | | | 597 | | | | 807 | | Tax benefit resulting from OCI allocation | | | | | | | (248 | ) | | | — | | Other, net | | | 15 | | | | 14 | | | | (25 | ) | | | | | | | | | | | | | | Income tax benefit | | $ | (35 | ) | | $ | (284 | ) | | $ | — | | | | | | | | | | | | | | |
The change in the valuation allowance reflects the recording by the Company in 2010 and 2009 of an income tax expense credit of approximately $30 million and $36 million, respectively, resulting from the Company’s elections under applicable sections of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and the Housing and Economic Recovery Act of 2008 (as extended by the American Recovery and Reinvestment Act of 2009), allowing corporations to accelerate utilization of certain research and alternative minimum tax (AMT) credit carryforwards in lieu of applicable bonus depreciation on certain qualifying capital investments. In addition to the changes in the valuation allowance from operations described in the table above, the valuation allowance was also impacted by the changes in the components of Accumulated other comprehensive income (loss), described in Note 12 to the consolidated financial statements. The total increase in the valuation allowance was $121 million, $135 million, and $2.1 billion in 2010, 2009, and 2008, respectively. The Company recorded a $248 million non-cash income tax benefit from continuing operations during the fourth quarter of 2009. Under current accounting rules, the Company is required to consider all items (including items recorded in other comprehensive income) in determining the amount of tax benefit that results from a loss from continuing operations and that should be allocated to continuing operations. As a result, the Company recorded a tax benefit on the loss from continuing operations for the year, which will be exactly offset by income tax expense on other comprehensive income. However, while the income tax benefit from continuing operations is reported on the income statement, the income tax expense on other comprehensive income is recorded directly to Accumulated other comprehensive income, which is a component of stockholders'stockholders’ equity. Because the income tax expense on other comprehensive income is equal to the income tax benefit from continuing operations, the Company'sCompany’s year-end net deferred tax position is not impacted by this tax allocation. 68
AMR CORPORATION
The change in the valuation allowance reflects the recording by the Company in 2009 of an income tax expense credit of approximately $36 million resulting from the Company’s anticipated election under Section 3081 of the Housing and Economic Recovery Act of 2008 (as extended by Section 1201(b) of the American Recovery and Reinvestment Act of 2009), allowing corporations to accelerate utilization of certain research and alternative minimum tax (AMT) credit carryforwards in lieu of applicable bonus depreciation on certain qualifying capital investments.
The Company has an unrecognized tax benefit of approximately $6 million, which decreased $18 million during the twelve months ended December 31, 2009 from resolution of an Internal Revenue Service Appeals process. Changes in the unrecognized tax benefit have no impact on the effective tax rate due to the existence of the valuation allowance. Accrued interest on tax positions is recorded as a component of interest expense but is not significant at December 31, 2009.
The reconciliation of the beginning and ending amounts of unrecognized tax benefit are (in millions): |
| | 2009 | | | 2008 | | Unrecognized Tax Benefit at January 1 | | $ | 24 | | | $ | 40 | | Decreases due to settlements with taxing authority | | | (18 | ) | | | (16 | ) | Unrecognized Tax Benefit at December 31 | | $ | 6 | | | $ | 24 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
8. Income Taxes (Continued)
The Company estimates that the unrecognized tax benefit will not significantly change within the next twelve months.
The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company’s 2004 through 2008 tax years are still subject to examination by the Internal Revenue Service. Various state and foreign jurisdiction tax years remain open to examination as well, though the Company believes that the effect of any additional assessment(s) will be immaterial to its consolidated financial statements.
The significant components of the income tax provision (benefit) were (in millions);
| | Year Ended December 31, | | | | 2009 | | | 2008 | | | 2007 | | | | | | | | | | | | Current | | $ | (36 | ) | | $ | - | | | $ | - | | Deferred | | | (248 | ) | | | - | | | | - | | Income tax benefit | | $ | (284 | ) | | $ | - | | | $ | - | |
The income tax expense (benefit) differed from amounts computed at the statutory federal income tax rate as follows (in millions):
| | Year Ended December 31, | | | | 2009 | | | 2008 | | | 2007 | | | | | | | | | | | | Statutory income tax provision expense/(benefit) | | $ | (613 | ) | | $ | (741 | ) | | $ | 160 | | State income tax expense/(benefit), net of federal tax effect | | | (41 | ) | | | (49 | ) | | | 10 | | Meal expense | | | 7 | | | | 8 | | | | 9 | | Change in valuation allowance | | | 597 | | | | 807 | | | | (164 | ) | Tax benefit resulting from OCI allocation | | | (248 | ) | | | - | | | | - | | Other, net | | | 14 | | | | (25 | ) | | | (15 | ) | Income tax benefit | | $ | (284 | ) | | $ | - | | | $ | - | |
In addition to the changes in the valuation allowance from operations described in the table above, the valuation allowance was also impacted by the changes in the components of Accumulated other comprehensive income (loss), described in Note 12 to the consolidated financial statements. The total increase (decrease) in the valuation allowance was $135 million, $2,127 million, and ($678) million in 2009, 2008, and 2007, respectively.
The Company provides a valuation allowance for deferred tax assets when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion, or all of the deferred tax assets, will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income (including reversals of deferred tax liabilities) during the periods in which those temporary differences will become deductible. The components of AMR’s deferred tax assets and liabilities were (in millions): | | | | | | | | | | | December 31, | | | | 2010 | | | 2009 | | | Deferred tax assets: | | | | | | | | | Postretirement benefits other than pensions | | $ | 1,056 | | | $ | 971 | | Rent expense | | | 333 | | | | 331 | | Alternative minimum tax credit carryforwards | | | 392 | | | | 397 | | Operating loss carryforwards | | | 2,271 | | | | 2,276 | | Pensions | | | 1,865 | | | | 1,686 | | Frequent flyer obligation | | | 630 | | | | 669 | | Gains from lease transactions | | | 55 | | | | 90 | | Other | | | 583 | | | | 787 | | | | | | | | | | | Total deferred tax assets | | | 7,185 | | | | 7,207 | | Valuation allowance | | | (2,990 | ) | | | (2,869 | ) | | | | | | | | | | Net deferred tax assets | | | 4,195 | | | | 4,338 | | | | | | | | | | | Deferred tax liabilities: | | | | | | | | | Accelerated depreciation and amortization | | | (3,985 | ) | | | (4,152 | ) | Other | | | (185 | ) | | | (186 | ) | | | | | | | | | | Total deferred tax liabilities | | | (4,170 | ) | | | (4,338 | ) | | | | | | | | | | Net deferred tax asset | | $ | 25 | | | $ | — | | | | | | | | | | |
8. Income Taxes (Continued)
The components of AMR's deferred tax assets and liabilities were (in millions): |
| | December 31, | | | | 2009 | | | 2008 | | Deferred tax assets: | | | | | | | Postretirement benefits other than pensions | | $ | 971 | | | $ | 1,168 | | Rent expense | | | 331 | | | | 437 | | Alternative minimum tax credit carryforwards | | | 397 | | | | 410 | | Operating loss carryforwards | | | 2,276 | | | | 2,268 | | Pensions | | | 1,686 | | | | 1,533 | | Frequent flyer obligation | | | 669 | | | | 338 | | Gains from lease transactions | | | 90 | | | | 98 | | Other | | | 787 | | | | 1,056 | | Total deferred tax assets | | | 7,207 | | | | 7,308 | | Valuation allowance | | | (2,869 | ) | | | (2,734 | ) | Net deferred tax assets | | | 4,338 | | | | 4,574 | | | | | | | | | | | Deferred tax liabilities: | | | | | | | | | Accelerated depreciation and amortization | | | (4,152 | ) | | | (4,400 | ) | Other | | | (186 | ) | | | (174 | ) | Total deferred tax liabilities | | | (4,338 | ) | | | (4,574 | ) | Net deferred tax liability | | $ | - | | | $ | - | |
At December 31, 2009,2010, the Company had available for federal income tax purposes an alternative minimum tax credit carryforward of approximately $397$392 million, which is available for an indefinite period, and federal net operating losses of approximately $6.7 billion for regular tax purposes, which will expire, if unused, beginning in 2022. These net operating losses include an unrealized benefit of approximately $649$666 million related to the implementation of share-based compensation accounting guidance that will be recorded in equity when realized. The Company had available for state income tax purposes net operating losses of $3.9$3.7 billion, which expire, if unused, in years 20102011 through 2027. The amount that will expire in 20102011 is $82$25 million.
Cash payments (refunds) for income taxes were ($32) million, $6 million ($14) million and $7$(14) million for 2010, 2009 2008 and 2007,2008, respectively.
Under special tax rules (the Section 382 Limitation), cumulative stock ownership changes among material shareholders exceeding 50 percent during a3-year period can potentially limit a company’s future use of net operating losses and tax credits (NOL’s)(NOLs). The Section 382 Limitation may be increased by certain “built-in gains,” as provided by current IRS guidance. guidance. Based on available information, the Company believes it is not currently subject to the Section 382 Limitation. If triggered under current conditions, the Section 382 Limitation is not expected to significantly impact the recorded value of deferred taxes or timing of utilization of the Company’s NOL's.NOLs. 69
AMR CORPORATION
9. Share Based CompensationNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | 9. | Share Based Compensation |
AMR grants, or has granted, stock compensation under three plans: the 1998 Long Term Incentive Plan (the 1998 Plan), the 2003 Employee Stock Incentive Plan (the 2003 Plan) and the 2009 Long Term Incentive Plan (the 2009 Plan). Collectively, the 1998 Plan and the 2009 Plan are referred to as the LTIP Plans.
Under the LTIP Plans, officers and key employees of AMR and its subsidiaries may be granted certain types of stock or performance based awards. At December 31, 2009,2010, the Company had stock option/settledoption awards, stock appreciation right (SSAR)(SAR) awards, performance share awards, deferred share awards and other awards outstanding under these plans. The total number of common shares authorized for distribution under the 1998 Plan and the 2009 Plan is 23,700,000 and 4,000,000 shares, respectively. The 1998 Plan expired by its terms in 2008.
The Company established the 2003 Plan to provide equity awards to employees. Under the 2003 Plan, employees may be granted stock options, restricted stock and deferred stock. At December 31, 2009,2010, the Company had stock options and deferred awards outstanding under this plan. The total number of shares authorized for distribution under the 2003 Plan is 42,680,000 shares. 9. Share Based Compensation (Continued)
In 2010, 2009 2008 and 2007,2008 the total charge for share-based compensation expense included in Wages, salaries and benefits expense was $53 million, $61 million $53 million and $131$53 million, respectively. In 2010, 2009 2008 and 2007,2008, the amount of cash used to settle equity instruments granted under share-based compensation plans was $2 million, $1 million $24 million and $11$24 million, respectively.
Stock Options/SSARsSARs During 2006, the AMR Board of Directors approved an amendment covering all of the outstanding stock options previously granted under the 1998 Plan. The amendment added to each of the outstanding options an additional SSARSAR in tandem with each of the then outstanding stock options. The addition of the SSARSAR did not impact the fair value of the stock options, but simply allowed the Company to settle the exercise of the option by issuing the net number of shares equal to thein-the-money value of the option. This amendment is estimated to make available enough shares to permit the Company to settle all outstanding performance and deferred share awards in stock under the 1998 Plan in stock rather than cash.
Options/SSARsSARs granted under the LTIP Plans and the 2003 Plan are awarded with an exercise price equal to the fair market value of the stock on date of grant, become exercisable in equal annual installments over periods ranging from twothree to five years and expire no later than ten years from the date of grant. Expense for the options is recognized on a straight-line basis. The fair value of each award is estimated on the date of grant using the modified Black-Scholes option valuation model and the assumptions noted in the following table. Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock, and other factors. The Company uses historical employee exercise data to estimate the expected term of awards granted used in the valuation model. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is assumed to be zero based on the Company’s history and expectation of not paying dividends. | | | | | | | | | | | | | | | | | | | | | | | | | 2010 | | 2009 | | 2008 | | | | 2009 | | | 2008 | | | 2007 | | Expected volatility | | 73.6% to 76.7% | | | 53.0% to 55.9% | | | 49.7% to 51.6% | | | | 74.4% to 75.9% | | | | 73.6% to 76.7% | | | | 53.0% to 55.9% | | Expected term (in years) | | | 4.0 | | | | 4.0 | | | | 4.0 | | | | 4.0 | | | | 4.0 | | | | 4.0 | | Risk-free rate | | 2.33% to 2.46% | | | 2.98% to 3.15% | | | 4.43% to 5.03% | | | | 1.18% to 2.58% | | | | 2.33% to 2.46% | | | | 2.98% to 3.15% | | Annual forfeiture rate | | | 10.0% | | | | 10.0% | | | | 10.0% | | | | 10.0% | | | | 10.0% | | | | 10.0% | |
70
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A summary of stock option/SSARsSARs activity under the LTIP Plans and the 2003 Plan as of December 31, 2009,2010, and changes during the year then ended is presented below: | | | | | | | | | | | | | | | | | | | | | LTIP Plans | | The 2003 Plan | | | | | | | Weighted
| | | | Weighted
| | | | | | | Average
| | | | Average
| | | | | | | | | | | | | | | | | | Exercise
| | | | Exercise
| | | | LTIP Plans | | | The 2003 Plan | | | Options/SARs | | Price | | Options | | Price | | | | Options/SSARs | | | Weighted Average Exercise Price | | | Options | | | Weighted Average Exercise Price | | Outstanding at January 1 | | | 13,805,948 | | | $ | 23.88 | | | | 13,809,992 | | | $ | 5.66 | | | | 15,892,528 | | | $ | 19.02 | | | | 13,526,670 | | | $ | 5.66 | | Granted | | | 3,733,760 | | | | 4.53 | | | | - | | | | - | | | | 3,165,950 | | | | 7.07 | | | | — | | | | — | | Exercised | | | - | | | | - | | | | (107,273 | ) | | | 5.23 | | | | (100,366 | ) | | | 4.86 | | | | (211,575 | ) | | | 5.00 | | Forfeited or Expired | | | (1,647,180 | ) | | | 26.92 | | | | (176,049 | ) | | | 6.11 | | | | (3,573,824 | ) | | | 30.51 | | | | (106,712 | ) | | | 6.94 | | | | | | | | | Outstanding at December 31 | | | 15,892,528 | | | $ | 19.02 | | | | 13,526,670 | | | $ | 5.66 | | | | 15,384,288 | | | $ | 13.99 | | | | 13,208,383 | | | $ | 5.66 | | | | | | | | | | | | | Exercisable at December 31 | | | 9,213,522 | | | $ | 26.89 | | | | 13,440,095 | | | $ | 5.61 | | | | 7,290,070 | | | $ | 21.32 | | | | 13,206,599 | | | $ | 5.66 | | | | | | | | | | | | | Weighted Average Remaining Contractual Term of Options Outstanding (in years) | | | 5.1 | | | | | | | | 3.4 | | | | | | | | 6.2 | | | | | | | | 2.4 | | | | | | | | | | | | | Aggregate Intrinsic Value of Options Outstanding | | $ | 12,034,486 | | | | | | | $ | 32,941,559 | | | | | | | $ | 14,155,359 | | | | | | | $ | 32,871,830 | | | | | | | | | | | | |
9. Share Based Compensation (Continued)
The aggregate intrinsic value of all vested options/SSARsSARs is $33$35 million and those options have an average remaining contractual life of 3.02.8 years. The weighted-average grant date fair value of options/SSARsSARs granted during 2010, 2009 and 2008 was $3.97, $2.54 and 2007 was $2.54, $3.78, and $12.63, respectively. The total intrinsic value of options/SSARsSARs exercised during 2010, 2009 and 2008 and 2007 was $1 million, less than $1 million $2 million and $193$2 million, respectively.
A summary of the status of the Company’s non-vested options/SSARsSARs under all plans as of December 31, 2009,2010, and changes during the year ended December 31, 2009,2010, is presented below: | | | | | | | | | | | | | | | Weighted
| | | | | | | Average
| | | | | | | Grant Date Fair
| | | | | | | Weighted | | | Options/SARs | | Value | | | | Options/SSARs | | | Average Grant Date Fair Value | | Outstanding at January 1 | | | 4,409,987 | | | $ | 5.87 | | | | 6,765,581 | | | $ | 4.02 | | Granted | | | 3,733,760 | | | | 2.54 | | | | 3,165,950 | | | | 3.97 | | Vested | | | (1,311,554 | ) | | | 5.98 | | | | (1,743,271 | ) | | | 4.82 | | Forfeited | | | (66,612 | ) | | | 5.29 | | | | (92,258 | ) | | | 3.82 | | | | | | | Outstanding at December 31 | | | 6,765,581 | | | $ | 4.02 | | | | 8,096,002 | | | $ | 3.83 | | | | | | | | |
As of December 31, 2009,2010, there was $14 million of total unrecognized compensation cost related to non-vested stock options/SSARsSARs granted under the LTIP Plans and the 2003 Plan that is expected to be recognized over a weighted-average period of 3.33.4 years. The total fair value of stock options/SSARsSARs vested during the years ended December 31, 2010, 2009 and 2008, and 2007, was $10$11 million, $9$10 million and $9 million, respectively.
Cash received by the Company from exercise of stock options for the years ended December 31, 2010, 2009 2008 and 2007,2008, was $1 million $1 million and $90 million, respectively.for each of those years. No tax benefit was realized as a result of stock options/SSARsSARs exercised in 20092010 due to the tax valuation allowance discussed in Note 8.
Performance Share Awards Performance share awards are granted under the LTIP Plans, generally vest pursuant to a three year measurement period and are settled on the vesting date. The number of awards ultimately issued under performance share awards is contingent on AMR’s relative stock price performance compared to certain of its competitors over a three year period and can range from zero to 175 percent of the awards granted. The 71
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) fair value of performance awards is calculated by multiplying the stock price on the date of grant by the expected payout percentage and the number of shares granted.
Activity during 20092010 for performance awards accounted for as equity awards was: | | | | | | | | | | | | | | | | | | Weighted
| | | | | | | | | | Average
| | | | | | | | | | Remaining
| | | | | | | | | | Contractual
| | | Aggregate
| | | | Awards | | | Term | | | Intrinsic Value | | | Outstanding at January 1 | | | 7,863,455 | | | | | | | | | | Granted | | | 3,057,630 | | | | | | | | | | Settled | | | (324,462 | ) | | | | | | | | | Forfeited or Expired | | | (1,306,177 | ) | | | | | | | | | | | | | | | | | | | | | | Outstanding at December 31 | | | 9,290,446 | | | | 1.3 | | | $ | 72,372,574 | | | | | | | | | | | | | | |
| | Awards | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value | | | | | | | | Outstanding at January 1 | | | 5,766,253 | | | | | Granted | | | 3,792,575 | | | | | Settled | | | (1,152,197 | ) | | | | Forfeited or Expired | | | (543,176 | ) | | | | Outstanding at December 31 | | | 7,863,455 | | 1.5 | | $ 60,784,507 |
9. Share Based Compensation (Continued)
The aggregate intrinsic value represents the Company’s current estimate of the number of shares (7,863,455(9,290,446 shares at December 31, 2009)2010) that will ultimately be distributed for outstanding awards computed using the market value of the Company’s common stock at December 31, 2009.2010. The weighted-average grant date fair value per share of performance share awards granted during 2010, 2009, and 2008 was $7.01, $4.53 and 2007 was $4.53, $8.20, and $28.52, respectively. The total fair value of equity awards settled during the year ended December 31, 20092010 was $6$2 million. As of December 31, 2009,2010, there was $26$23 million of total unrecognized compensation cost related to performance share awards that is expected to be recognized over a period of 1.61.7 years.
Deferred Share Awards The distribution of deferred share awards granted under the LTIP Plans is based solely on a requisite service period (generally 36 months). Career equity awards granted to certain employees of the Company vest upon the retirement of those individuals. The fair value of each deferred award is based on AMR’s stock price on the measurement date.
Activity during 20092010 for deferred awards accounted for as equity awards was:
| | | | | | | | | | | | | | | | | | Weighted
| | | | | | | | | | Average
| | | | | | | | | | Remaining
| | | | | | | | | | Contractual
| | | Aggregate
| | | | Shares | | | Term | | | Intrinsic Value | | | Outstanding at January 1 | | | 6,887,268 | | | | | | | | | | Granted | | | 2,722,330 | | | | | | | | | | Settled | | | (628,270 | ) | | | | | | | | | Forfeited or Expired | | | (256,769 | ) | | | | | | | | | | | | | | | | | | | | | | Outstanding at December 31 | | | 8,724,559 | | | | 2.2 | | | $ | 67,964,316 | | | | | | | | | | | | | | |
| Shares | | Remaining Contractual Term | | Aggregate Intrinsic Value | | | | | | | Outstanding at January 1 | 4,047,878 | | | | | Granted | 3,586,061 | | | | | Settled | (631,180) | | | | | Forfeited or Expired | (115,491) | | | | | Outstanding at December 31 | 6,887,268 | | 2.9 | | $53,238,583 |
The weighted-average grant date fair value per share of deferred awards granted during 2010, 2009 and 2008 was $7.05, $4.57 and 2007 was $4.57, $8.23, and $28.54, respectively. The total fair value of awards settled during the years ended December 31, 2010, 2009 2008 and 20072008 was $3 million, $6$3 million and $24$6 million, respectively. As of December 31, 2009,2010, there was $26$27 million of total unrecognized compensation cost related to deferred awards that is expected to be recognized over a weighted average period of 3.02.6 years.
Other Awards As of December 31, 2009,2010, certain performance share agreements and deferred share award agreements were accounted for as a liability, or as equity, as appropriate, in the consolidated balance sheet as the plans only permit settlement in cash or the awards required that the employee meet certain performance conditions which were not subject to market measurement. As a result, awards under these agreements are marked to current market value. As of December 31, 2009,2010, the aggregate intrinsic value of these awards was $5$4 million and the 72
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) weighted average remaining contractual term of these awards was 2.42.8 years. The total fair value of awards settled during the years ended December 31, 2010, 2009 and 2008 and 2007 was $2 million, $1 million, $24 million, and $11$24 million respectively. As of December 31, 2009,2010, there was $3$2 million of total unrecognized compensation cost related to other awards that is expected to be recognized over a weighted average period of 3.83.5 years.
10. Retirement Benefits
All employees of the Company may participate in pension plans if they meet the plans’ eligibility requirements. The defined benefit plans provide benefits for participating employees based on years of service and average compensation for a specified period of time before retirement. The Company uses a December 31 measurement date for all of its defined benefit plans. American’s pilots also participate in a defined contribution plan for which Company contributions are determined as a percentage (11 percent) of participant compensation. Certain non-contract employees (including all new non-contract employees) participate in a defined contribution plan in which the Company will match the employees’ before-tax contribution on adollar-for-dollar basis, up to 5.5 percent of their pensionable pay. 10. Retirement Benefits (Continued)
In addition to pension benefits, retiree medical and other postretirement benefits, including certain health care and life insurance benefits (which provide secondary coverage to Medicare), are provided to retired employees. The amount of health care benefits is limited to lifetime maximums as outlined in the plan. Certain employees of American and employees of certain other subsidiaries may become eligible for these benefits if they satisfy eligibility requirements during their working lives.
Certain employee groups make contributions toward funding a portion of their retiree health care benefits during their working lives. The Company funds benefits as incurred and makes contributions to match employee prefunding.
The following table provides a reconciliation of the changes in the pension and retiree medical and other benefit obligations and fair value of assets for the years ended December 31, 20092010 and 2008,2009, and a statement of funded status as of December 31, 20092010 and 20082009 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | Retiree Medical and
| | | | Pension Benefits | | | Other Benefits | | | | 2010 | | | 2009 | | | 2010 | | | 2009 | | | Reconciliation of benefit obligation | | | | | | | | | | | | | | | | | Obligation at January 1 | | $ | 12,003 | | | $ | 10,884 | | | $ | 2,827 | | | $ | 2,779 | | Service cost | | | 366 | | | | 333 | | | | 60 | | | | 59 | | Interest cost | | | 737 | | | | 712 | | | | 165 | | | | 179 | | Actuarial (gain) loss | | | 442 | | | | 675 | | | | 263 | | | | 67 | | Plan amendments | | | 1 | | | | — | | | | (78 | ) | | | (101 | ) | Benefit payments | | | (581 | ) | | | (601 | ) | | | (140 | ) | | | (156 | ) | | | | | | | | | | | | | | | | | | Obligation at December 31 | | $ | 12,968 | | | $ | 12,003 | | | $ | 3,097 | | | $ | 2,827 | | | | | | | | | | | | | | | | | | | Reconciliation of fair value of plan assets | | | | | | | | | | | | | | | | | Fair value of plan assets at January 1 | | $ | 7,051 | | | $ | 6,714 | | | $ | 206 | | | $ | 161 | | Actual return on plan assets | | | 837 | | | | 928 | | | | 17 | | | | 34 | | Employer contributions | | | 466 | | | | 10 | | | | 151 | | | | 167 | | Benefit payments | | | (581 | ) | | | (601 | ) | | | (140 | ) | | | (156 | ) | | | | | | | | | | | | | | | | | | Fair value of plan assets at December 31 | | $ | 7,773 | | | $ | 7,051 | | | $ | 234 | | | $ | 206 | | | | | | | | | | | | | | | | | | | Funded status at December 31 | | $ | (5,195 | ) | | $ | (4,952 | ) | | $ | (2,863 | ) | | $ | (2,621 | ) | | | | | | | | | | | | | | | | | |
73
| | Pension Benefits | | | Retiree Medical and Other Benefits | | | | 2009 | | | 2008 | | | 2009 | | | 2008 | | | | | | | | | | | | | | | Reconciliation of benefit obligation | | | | | | | | | | | | | Obligation at January 1 | | $ | 10,884 | | | $ | 10,451 | | | $ | 2,779 | | | $ | 2,672 | | Service cost | | | 333 | | | | 324 | | | | 59 | | | | 54 | | Interest cost | | | 712 | | | | 684 | | | | 179 | | | | 172 | | Actuarial (gain) loss | | | 675 | | | | 254 | | | | 67 | | | | 22 | | Plan amendments | | | - | | | | (14 | ) | | | (101 | ) | | | - | | Benefit payments | | | (601 | ) | | | (815 | ) | | | (156 | ) | | | (141 | ) | | | | | | | | | | | | | | | | | | Obligation at December 31 | | $ | 12,003 | | | $ | 10,884 | | | $ | 2,827 | | | $ | 2,779 | | | | | | | | | | | | | | | | | | | Reconciliation of fair value of plan assets | | | | | | | | | | | | | | | | | Fair value of plan assets at January 1 | | $ | 6,714 | | | $ | 9,099 | | | $ | 161 | | | $ | 224 | | Actual return on plan assets | | | 928 | | | | (1,659 | ) | | | 34 | | | | (75 | ) | Employer contributions | | | 10 | | | | 89 | | | | 167 | | | | 153 | | Benefit payments | | | (601 | ) | | | (815 | ) | | | (156 | ) | | | (141 | ) | | | | | | | | | | | | | | | | | | Fair value of plan assets at December 31 | | $ | 7,051 | | | $ | 6,714 | | | $ | 206 | | | $ | 161 | | | | | | | | | | | | | | | | | | | Funded status at December 31 | | $ | (4,952 | ) | | $ | (4,170 | ) | | $ | (2,621 | ) | | $ | (2,618 | ) | | | | | | | | | | | | | | | | | | Amounts recognized in the consolidated balance sheets | | | | | | | | | | | | | | | | | Current liability | | $ | 9 | | | $ | 11 | | | $ | 167 | | | $ | 163 | | Noncurrent liability | | | 4,943 | | | | 4,159 | | | | 2,454 | | | | 2,455 | | | | $ | 4,952 | | | $ | 4,170 | | | $ | 2,621 | | | $ | 2,618 | | Amounts recognized in other comprehensive loss | | | | | | | | | | | | | | | | | Net actuarial loss (gain) | | $ | 3,008 | | | $ | 2,839 | | | $ | (402 | ) | | $ | (458 | ) | Prior service cost (credit) | | | 94 | | | | 108 | | | | (147 | ) | | | (53 | ) | | | | | | | | | | | | | | | | | | | | $ | 3,102 | | | $ | 2,947 | | | $ | (549 | ) | | $ | (511 | ) |
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) | | | | | | | | | | | | | | | | | | | | | | | | | Retiree Medical and
| | | | Pension Benefits | | | Other Benefits | | | | 2010 | | | 2009 | | | 2010 | | | 2009 | | | Amounts recognized in the consolidated balance sheets | | | | | | | | | | | | | | | | | Current liability | | $ | 8 | | | $ | 9 | | | $ | 173 | | | $ | 167 | | Noncurrent liability | | | 5,187 | | | | 4,943 | | | | 2,690 | | | | 2,454 | | | | | | | | | | | | | | | | | | | | | $ | 5,195 | | | $ | 4,952 | | | $ | 2,863 | | | $ | 2,621 | | | | | | | | | | | | | | | | | | | Amounts recognized in other comprehensive loss | | | | | | | | | | | | | | | | | Net actuarial loss (gain) | | $ | 3,052 | | | $ | 3,008 | | | $ | (128 | ) | | $ | (402 | ) | Prior service cost (credit) | | | 81 | | | | 94 | | | | (205 | ) | | | (147 | ) | | | | | | | | | | | | | | | | | | | | $ | 3,133 | | | $ | 3,102 | | | $ | (333 | ) | | $ | (549 | ) | | | | | | | | | | | | | | | | | | For plans with accumulated benefit obligations exceeding the fair value of plan assets | | | | | | | | | | | | | | | | | Projected benefit obligation (PBO) | | $ | 12,968 | | | $ | 11,977 | | | $ | — | | | $ | — | | Accumulated benefit obligation (ABO) | | | 11,508 | | | | 10,558 | | | | — | | | | — | | Accumulated postretirement benefit obligation (APBO) | | | — | | | | — | | | | 3,097 | | | | 2,827 | | Fair value of plan assets | | | 7,773 | | | | 7,027 | | | | 234 | | | | 206 | | | | | | | | | | | | | | | | | | | ABO less fair value of plan assets | | | 3,735 | | | | 3,531 | | | | — | | | | — | | | | | | | | | | | | | | | | | | |
10. Retirement Benefits (Continued)
For plans with accumulated benefit obligations exceeding the fair value of plan assets | | Pension Benefits | | | Retiree Medical and Other Benefits | | | | 2009 | | | 2008 | | | 2009 | | | 2008 | | Projected benefit obligation (PBO) | | $ | 11,977 | | | $ | 10,884 | | | $ | - | | | $ | - | | Accumulated benefit obligation (ABO) | | | 10,558 | | | | 9,656 | | | | - | | | | - | | Accumulated postretirement benefit obligation (APBO) | | | - | | | | - | | | | 2,827 | | | | 2,779 | | Fair value of plan assets | | | 7,027 | | | | 6,714 | | | | 206 | | | | 161 | | ABO less fair value of plan assets | | | 3,531 | | | | 2,942 | | | | - | | | | - | |
At December 31, 20092010 and 2008,2009, pension benefit plan assets of $145$264 million and $460$145 million, respectively, and retiree medical and other benefit plan assets of $204$232 million and $158$204 million, respectively, were invested in shares of certain mutual funds.
The following tables provide the components of net periodic benefit cost for the years ended December 31, 2010, 2009 2008 and 20072008 (in millions):
| | | | | | | | | | | | | | | Pension Benefits | | | | 2010 | | | 2009 | | | 2008 | | | Components of net periodic benefit cost | | | | | | | | | | | | | Defined benefit plans: | | | | | | | | | | | | | Service cost | | $ | 366 | | | $ | 333 | | | $ | 324 | | Interest cost | | | 737 | | | | 712 | | | | 684 | | Expected return on assets | | | (593 | ) | | | (566 | ) | | | (789 | ) | Amortization of: | | | | | | | | | | | | | Prior service cost | | | 13 | | | | 13 | | | | 16 | | Settlement | | | — | | | | — | | | | 103 | | Unrecognized net loss | | | 154 | | | | 145 | | | | 3 | | | | | | | | | | | | | | | Net periodic benefit cost for defined benefit plans | | | 677 | | | | 637 | | | | 341 | | Defined contribution plans | | | 168 | | | | 168 | | | | 170 | | | | | | | | | | | | | | | | | $ | 845 | | | $ | 805 | | | $ | 511 | | | | | | | | | | | | | | |
| | Pension Benefits | | | | 2009 | | | 2008 | | | 2007 | | Components of net periodic benefit cost | | | | | | | | | | Defined benefit plans: | | | | | | | | | | Service cost | | $ | 333 | | | $ | 324 | | | $ | 370 | | Interest cost | | | 712 | | | | 684 | | | | 672 | | Expected return on assets | | | (566 | ) | | | (789 | ) | | | (747 | ) | Amortization of: | | | | | | | | | | | | | Prior service cost | | | 13 | | | | 16 | | | | 16 | | Settlement | | | - | | | | 103 | | | | - | | Unrecognized net loss | | | 145 | | | | 3 | | | | 25 | | | | | | | | | | | | | | | Net periodic benefit cost for defined benefit plans | | | 637 | | | | 341 | | | | 336 | | | | | | | | | | | | | | | Defined contribution plans | | | 168 | | | | 170 | | | | 166 | | | | | | | | | | | | | | | | | $ | 805 | | | $ | 511 | | | $ | 502 | |
74
AMR CORPORATION
| | Retiree Medical and Other Benefits | | | | 2009 | | | 2008 | | | 2007 | | Components of net periodic benefit cost | | | | | | | | | | Service cost | | $ | 59 | | | $ | 54 | | | $ | 70 | | Interest cost | | | 179 | | | | 172 | | | | 194 | | Expected return on assets | | | (14 | ) | | | (20 | ) | | | (18 | ) | Amortization of: | | | | | | | | | | | | | Prior service cost | | | (8 | ) | | | (13 | ) | | | (13 | ) | Unrecognized net loss (gain) | | | (14 | ) | | | (22 | ) | | | (7 | ) | | | | | | | | | | | | | | Net periodic benefit cost | | $ | 202 | | | $ | 171 | | | $ | 226 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | | | | | | | | | | | | | | Retiree Medical and Other Benefits | | | | 2010 | | | 2009 | | | 2008 | | | Components of net periodic benefit cost | | | | | | | | | | | | | Service cost | | $ | 60 | | | $ | 59 | | | $ | 54 | | Interest cost | | | 165 | | | | 179 | | | | 172 | | Expected return on assets | | | (18 | ) | | | (14 | ) | | | (20 | ) | Amortization of: | | | | | | | | | | | | | Prior service cost | | | (19 | ) | | | (8 | ) | | | (13 | ) | Unrecognized net loss (gain) | | | (10 | ) | | | (14 | ) | | | (22 | ) | | | | | | | | | | | | | | Net periodic benefit cost | | $ | 178 | | | $ | 202 | | | $ | 171 | | | | | | | | | | | | | | |
The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from Accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $154 million and $13 million, respectively. The estimated net gain and prior service credit for the retiree medical and other postretirement plans that will be amortized from Accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $10$9 million and $19$29 million, respectively. | | | | | | | | | | | | | | | | | | | | | | | Retiree Medical and Other
| | | Pension Benefits | | Benefits | | | 2010 | | 2009 | | 2010 | | 2009 | | Weighted-average assumptions used to determine benefit obligations as of December 31 | | | | | | | | | | | | | | | | | Discount rate | | | 5.80 | % | | | 6.10 | % | | | 5.69 | % | | | 5.90 | % | Salary scale (ultimate) | | | 3.78 | | | | 3.78 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | Retiree Medical and Other
| | | Pension Benefits | | Benefits | | | 2010 | | 2009 | | 2010 | | 2009 | | Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31 | | | | | | | | | | | | | | | | | Discount rate | | | 6.10 | % | | | 6.50 | % | | | 5.90 | % | | | 6.50 | % | Salary scale (ultimate) | | | 3.78 | | | | 3.78 | | | | — | | | | — | | Expected return on plan assets | | | 8.50 | | | | 8.75 | | | | 8.50 | | | | 8.75 | |
10. Retirement Benefits (Continued)
| | Pension Benefits | | | Retiree Medical and Other Benefits | | | | 2009 | | | 2008 | | | 2009 | | | 2008 | | Weighted-average assumptions used to determine benefit obligations as of December 31 | | | | | | | | | | | | | Discount rate | | | 6.10 | % | | | 6.50 | % | | | 5.90 | % | | | 6.50 | % | Salary scale (ultimate) | | | 3.78 | | | | 3.78 | | | | - | | | | - | |
| | Pension Benefits | | | Retiree Medical and Other Benefits | | | | 2009 | | | 2008 | | | 2009 | | | 2008 | | Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31 | | | | | | | | | | | | | Discount rate | | | 6.50 | % | | | 6.50 | % | | | 6.50 | % | | | 6.00 | % | Salary scale (ultimate) | | | 3.78 | | | | 3.78 | | | | - | | | | - | | Expected return on plan assets | | | 8.75 | | | | 8.75 | | | | 8.75 | | | | 8.75 | |
As of December 31, 2009,2010, the Company’s estimate of the long-term rate of return on plan assets was 8.50 percent based on the target asset allocation. Expected returns on longer duration bonds are based on yields to maturity of the bonds held at year-end. Expected returns on other assets are based on a combination of long-term historical returns, actual returns on plan assets achieved over the last ten years, current and expected market conditions, and expected value to be generated through active management, currency overlay and securities lending programs. The Company’s annualized ten-year rate of return on plan assets as of December 31, 2009,2010, was approximately 7.967.74 percent.
The objectives of the Company’s investment policies are to: maintain sufficient income and liquidity to pay retirement benefits; produce a long-term rate of return that meets or exceeds the assumed rate of return for plan assets; limit the volatility of asset performance and funded status; and diversify assets among asset classes and investment managers. 75
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Based on these investment objectives, a long-term strategic asset allocation has been established. This strategic allocation seeks to balance the potential benefit of improving funded position with the potential risk that the funded position would decline. The current strategic target asset allocation is as follows:
| | | Asset Class/Sub-Class | | Allowed Range | | | | | | Equity | | | 58%60% - 68% | 70% | Public: | | | | | U.S. Value | | | 20%18% - 35% | 33% | International Value | | | 15%14% - 25% | 24% | Emerging Markets | | | 0%5% - 6% | 11% | Alternative Investments | | | 0% - 18% | | Fixed Income | | | 32%30% - 42% | 40% | U.S. Long Duration | | | 30% - 40% | | Emerging Markets | | | 0% - 4% | | Other | | | 0% - 5% | | Cash Equivalents | | | 0% - 5% | |
10. Retirement Benefits (Continued)
Each asset class is actively managed and, historically, the plans’ assets have produced returns, net of management fees, in excess of the expected rate of return over the last ten years. Stocks and emerging market bonds are used to provide diversification and are expected to generate higher returns over the long-term than longer duration U.S. bonds. Public stocks are managed using a value investment approach in order to participate in the returns generated by stocks in the long-term, while reducingyear-over-year volatility. Longer duration U.S. bonds are used to partially hedge the assets from declines in interest rates. Alternative (private) investments are used to provide expected returns in excess of the public markets over the long-term. Additionally, the Company engages currency overlay managers in an attempt to increase returns by protectingnon-U.S. dollar denominated assets from a rise in the relative value of the U.S. dollar. The Company also participates in securities lending programs to generate additional income by loaning plan assets to borrowers on a fully collateralized basis. These programs are subject to market risk.
Investments in securities traded on recognized securities exchanges are valued at the last reported sales price on the last business day of the year. Securities traded in theover-the-counter market are valued at the last bid price. The money market fund is valued at fair value which represents the net asset value of the shares of such fund as of the close of business at the end of the period. Investments in limited partnerships are carried at estimated net asset value as determined by and reported by the general partners of the partnerships and represent the proportionate share of the estimated fair value of the underlying assets of the limited partnerships. Common/collective trusts are valued at net asset value based on the fair values of the underlying investments of the trusts as determined by the sponsor of the trusts. The103-12 investment trust is valued at net asset value which is determined by the issuer at the end of each month and is based on the aggregate fair value of trust assets less liabilities, divided by the number of units outstanding. Investments in segregated funds are carried at net asset value, which is based on the fair market value of the underlying asset. No changes in valuation techniques or inputs occurred during the period. 76
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The fair values of the Company’s pension plan assets at December 31, 2010 and 2009, by asset category are as follows: | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2010 | | | | Quoted Prices in
| | | | | | Significant
| | | | | | | Active Markets
| | | Significant
| | | Unobservable
| | | | | | | for Identical
| | | Observable
| | | Inputs
| | | | | | | Assets (Level 1) | | | Inputs (Level 2) | | | (Level 3) | | | Total | | | | (In millions) | | | Asset Category | | | | | | | | | | | | | | | | | Cash and cash equivalents | | $ | 269 | | | $ | — | | | $ | — | | | $ | 269 | | Equity securities | | | | | | | | | | | | | | | | | International markets(a)(b) | | | 2,025 | | | | — | | | | — | | | | 2,025 | | Large-cap companies(b) | | | 1,557 | | | | — | | | | — | | | | 1,557 | | Mid-cap companies(b) | | | 152 | | | | — | | | | — | | | | 152 | | Small-cap companies(b) | | | 37 | | | | — | | | | — | | | | 37 | | Fixed Income | | | | | | | | | | | | | | | | | Corporate bonds(c) | | | — | | | | 1,593 | | | | — | | | | 1,593 | | Government securities(d) | | | — | | | | 1,194 | | | | — | | | | 1,194 | | U.S. municipal securities | | | — | | | | 39 | | | | — | | | | 39 | | Alternative investments | | | | | | | | | | | | | | | | | Private equity partnerships(e) | | | — | | | | — | | | | 795 | | | | 795 | | Common/collective and103-12 investment trusts(f) | | | — | | | | 145 | | | | — | | | | 145 | | Interest rate swap contracts — net(g) | | | — | | | | (74 | ) | | | — | | | | (74 | ) | Insurance group annuity contracts | | | — | | | | — | | | | 3 | | | | 3 | | Dividend and interest receivable | | | 37 | | | | — | | | | — | | | | 37 | | Due to/from brokers for sale of securities — net | | | (11 | ) | | | — | | | | — | | | | (11 | ) | Swap income receivable | | | 8 | | | | — | | | | — | | | | 8 | | Other assets — net | | | 4 | | | | — | | | | — | | | | 4 | | | | | | | | | | | | | | | | | | | Total | | $ | 4,078 | | | $ | 2,897 | | | $ | 798 | | | $ | 7,773 | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements at December 31, 2009 (in millions) | | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total | | Asset Category | | | | | | | | | | | | | Cash and cash equivalents | | $ | 162 | | | $ | – | | | $ | – | | | $ | 162 | | Equity securities | | | | | | | | | | | | | | | | | International markets (a)(e) | | | 1,410 | | | | – | | | | – | | | | 1,410 | | Large-cap companies (b)(e) | | | 1,431 | | | | – | | | | – | | | | 1,431 | | Mid-cap companies (c)(e) | | | 241 | | | | – | | | | – | | | | 241 | | Small-cap companies(d)(e) | | | 49 | | | | – | | | | – | | | | 49 | | Fixed Income | | | | | | | | | | | | | | | | | Corporate bonds (f) | | | -- | | | | 2,023 | | | | -- | | | | 2,023 | | Government securities (g) | | | -- | | | | 793 | | | | -- | | | | 793 | | U.S. municipal securities | | | -- | | | | 40 | | | | -- | | | | 40 | | Alternative investments | | | | | | | | | | | | | | | | | Private equity funds (h) | | | – | | | | - | | | | 744 | | | | 744 | | Common/collective and 103-12 investment trusts (i) | | | – | | | | 115 | | | | – | | | | 115 | | Insurance group annuity contracts | | | – | | | | – | | | | 3 | | | | 3 | | Dividend and interest receivable | | | 40 | | | | – | | | | – | | | | 40 | | Total | | $ | 3,333 | | | $ | 2,971 | | | $ | 747 | | | $ | 7,051 | |
| | | (a) | | Holdings are diversified as follows: 20 percent United Kingdom, 14 percent Japan, 9 percent France, 8 percent Switzerland, 7 percent Germany, 5 percent Netherlands, 11 percent emerging markets and the remaining 26 percent with no concentration greater than 5 percent in any one country. | | (b) | | There are no significant concentration of holdings by company or industry. | | (c) | | Includes approximately 82 percent investments in corporate debt with a Standard and Poor’s (S&P) rating lower than A and 18 percent investments in corporate debt with an S&P rating A or higher. Holdings include 81 percent U.S. companies, 16 percent international companies and 3 percent emerging market companies. | | (d) | | Includes approximately 87 percent investments in domestic government securities and 13 percent in emerging market government securities. There are no significant foreign currency risks within this classification. | | (e) | | Includes limited partnerships that invest primarily in U.S. (92%) and European (8%) buyout opportunities of a range of privately held companies. The Master Trust does not have the right to redeem its limited partnership investment at its net asset value. Instead, the Master Trust receives distributions as the underlying assets are liquidated. It is estimated that the underlying assets of these funds will be gradually liquidated over the next 1 to |
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AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 10. Retirement Benefits (Continued)
| | | | | 10 years. Additionally, the Master Trust has future funding commitments of approximately $389 million over the next 10 years. | | (f) | | Investment includes 64% in an emerging market103-12 investment trust with investments in emerging country equity securities, 19% in Canadian segregated balanced value, income growth and diversified pooled funds and 17% in a common/collective trust investing in securities of smaller companies located outside the U.S., including developing markets. Requests for withdrawals must meet specific requirements with advance notice of redemption preferred. | | (g) | | Includes four interest rate swap agreements with notional value of $760 million and fair value of $75 million representing 99% of the balance. |
| | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2009 | | | | Quoted Prices in
| | | | | | Significant
| | | | | | | Active Markets
| | | Significant
| | | Unobservable
| | | | | | | for Identical
| | | Observable
| | | Inputs
| | | | | | | Assets (Level 1) | | | Inputs (Level 2) | | | (Level 3) | | | Total | | | | (In millions) | | | Asset Category | | | | | | | | | | | | | | | | | Cash and cash equivalents | | $ | 162 | | | $ | — | | | $ | — | | | $ | 162 | | Equity securities | | | | | | | | | | | | | | | | | International markets(a)(e) | | | 1,410 | | | | — | | | | — | | | | 1,410 | | Large-cap companies(b)(e) | | | 1,431 | | | | — | | | | — | | | | 1,431 | | Mid-cap companies(c)(e) | | | 241 | | | | — | | | | — | | | | 241 | | Small-cap companies(d)(e) | | | 49 | | | | — | | | | — | | | | 49 | | Fixed Income | | | | | | | | | | | | | | | | | Corporate bonds(f) | | | — | | | | 2,023 | | | | — | | | | 2,023 | | Government securities(g) | | | — | | | | 793 | | | | — | | | | 793 | | U.S. municipal securities | | | — | | | | 40 | | | | — | | | | 40 | | Alternative investments | | | | | | | | | | | | | | | | | Private equity partnerships(h) | | | — | | | | — | | | | 744 | | | | 744 | | Common/collective and103-12 investment trusts(i) | | | — | | | | 115 | | | | — | | | | 115 | | Insurance group annuity contracts | | | — | | | | — | | | | 3 | | | | 3 | | Dividend and interest receivable | | | 40 | | | | — | | | | — | | | | 40 | | | | | | | | | | | | | | | | | | | Total | | $ | 3,333 | | | $ | 2,971 | | | $ | 747 | | | $ | 7,051 | | | | | | | | | | | | | | | | | | |
| | | (a) | | Holdings are diversified as follows: 20 percent United Kingdom, 14 percent Japan, 12 percent France, 10 percent Germany, 9 percent Switzerland, 6 percent Netherlands, 6 percent emerging markets and the remaining 23 percent with no concentration greater than 5 percent in any one country. |
| (b) | | Holdings include 85 percent U.S. companies, 11 percent international companies and 4 percent emerging market companies traded in the U.S. markets. |
| (c) | | Holdings include 85 percent U.S. companies, 13 percent international companies and 2 percent emerging market companies traded in the U.S. markets. |
| (d) | | Holdings include 92 percent U.S. companies, 5 percent international companies and 3 percent emerging market companies traded in the U.S. markets. |
| (e) | | There are no significant concentration of holdings by company or industry. |
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AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) | | | (f) | | Includes approximately 76 percent investments in corporate debt orwith a Standard and Poor’s (S&P) rating lower than A and 24 percent investments in corporate debt ofwith an S&P rating A or higher. Holdings include 81 percent U.S. companies, 17 percent international companies and 2 percent emerging market companies. |
| (g) | | Includes approximately 80 percent investments in domestic government securities, 19 percent in emerging market government securities and 1 percent in other international government securities. There are no significant foreign currency risks within this classification. |
| (h) | | Includes limited partnerships that invest primarily in U.S. (93 percent) and European (7 percent) buyout opportunities. |
| (i) | | Includes investments in emerging markets, global small companies and Canadian segregated funds. |
Not included in the above tabletables are receivables and payables for foreign currency forward contracts and futures contracts which net to less thanapproximately $3 million and collateral held on loaned securities and the obligation to return collateral on loaned securities which effectively net to zero.
Changes in fair value measurements of Level 3 investments during the year ended December 31, 2010, were as follows: | | | | | | | | | | | Private Equity
| | | Insurance Group
| | | | Partnerships | | | Annuity Contracts | | | Beginning balance at December 31, 2009 | | $ | 744 | | | $ | 3 | | Actual return on plan assets: | | | | | | | | | Relating to assets still held at the reporting date | | | 1 | | | | — | | Relating to assets sold during the period | | | 69 | | | | — | | Purchases, sales, settlements (net) | | | (19 | ) | | | — | | | | | | | | | | | Ending balance at December 31, 2010 | | $ | 795 | | | $ | 3 | | | | | | | | | | |
Changes in fair value measurements of Level 3 investments during the year ended December 31, 2009, were as follows: | | | | | | | | | | | Private Equity
| | | Insurance Group
| | | | Partnerships | | | Annuity Contracts | | | Beginning balance at December 31, 2008 | | $ | 613 | | | $ | 3 | | Actual return on plan assets: | | | | | | | | | Relating to assets still held at the reporting date | | | 47 | | | | — | | Relating to assets sold during the period | | | 1 | | | | — | | Purchases, sales, settlements (net) | | | 83 | | | | — | | | | | | | | | | | Ending balance at December 31, 2009 | | $ | 744 | | | $ | 3 | | | | | | | | | | |
| | Private Equity Partnerships | | | Insurance Group Annuity Contracts | | Beginning balance at December 31, 2008 | | $ | 613 | | | $ | 3 | | Actual return on plan assets: Relating to assets still held at the reporting date | | | 47 | | | | - | | Relating to assets sold during the period | | | 1 | | | | - | | Purchases, sales, settlements (net) | | | 83 | | | | - | | Ending balance at December 31, 2009 | | $ | 744 | | | $ | 3 | |
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AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The fair values of the Company’s other postretirement benefit plan assets at December 31, 2010 by asset category were as follows: | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2010 | | | | Quoted Prices in
| | | | | | Significant
| | | | | | | Active Markets for
| | | Significant
| | | Unobservable
| | | | | | | Identical Assets
| | | Observable
| | | Inputs
| | | | | | | (Level 1) | | | Inputs (Level 2) | | | (Level 3) | | | Total | | | | (In millions) | | | Asset Category | | | | | | | | | | | | | | | | | Money market fund | | $ | 4 | | | $ | — | | | $ | — | | | $ | 4 | | Unitized mutual funds | | | — | | | | 230 | | | | — | | | | 230 | | | | | | | | | | | | | | | | | | | Total | | $ | 4 | | | $ | 230 | | | $ | — | | | $ | 234 | | | | | | | | | | | | | | | | | | |
The fair values of the Company’s other postretirement benefit plan assets at December 31, 2009 by asset category were as follows: | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2009 | | | | | Quoted Prices in
| | | | | | | | | | | Active Markets for
| | Significant
| | Significant
| | | | | | | Identical Assets
| | Observable
| | Unobservable
| | | | | | | (Level 1) | | Inputs (Level 2) | | Inputs (Level 3) | | Total | | | | Fair Value Measurements at December 31, 2009 (in millions) | | | (In millions) | | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total | | Asset Category | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Money market fund | | $ | 4 | | | $ | – | | | $ | – | | | $ | 4 | | | $ | 4 | | | $ | — | | | $ | — | | | $ | 4 | | Unitized mutual funds | | | – | | | | 202 | | | | – | | | | 202 | | | | — | | | | 202 | | | | — | | | | 202 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 4 | | | $ | 202 | | | $ | – | | | $ | 206 | | | $ | 4 | | | $ | 202 | | | $ | — | | | $ | 206 | | | | | | | | | | | | |
Investments in the unitized mutual funds are carried at the per share net asset value and include approximately 27 percent of investments innon-U.S. common stocks in 2010 and approximately 25 percent of investments innon-U.S. common stocks. stocks in 2009. Net asset value is based on the fair market value of the funds’ underlying assets and liabilities at the date of determination. Investments in the money market fund are valued at fair value which represents the net assets value of the shares of such fund as of the close of business at the end of the period. | | | | | | | | | | | 2010 | | 2009 | | Assumed health care trend rates at December 31 | | | | | | | | | Health care cost trend rate assumed for next year | | | 8.0 | % | | | 7.0 | % | Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) | | | 4.5 | % | | | 4.5 | % | Year that the rate reaches the ultimate trend rate | | | 2018 | | | | 2015 | |
10. Retirement Benefits (Continued)
| | 2009 | | | 2008 | | Assumed health care trend rates at December 31 | | | | | | | Health care cost trend rate assumed for next year | | | 7.0% | | | | 7.5% | | Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) | | | 4.5% | | | | 4.5% | | Year that the rate reaches the ultimate trend rate | | | 2015 | | | | 2015 | |
A one percentage point change in the assumed health care cost trend rates would have the following effects (in millions):
| | | | | | | | | | | One Percent
| | One Percent
| | | Increase | | Decrease | | Impact on 2010 service and interest cost | | | 22 | | | | (22 | ) | Impact on postretirement benefit obligation as of December 31, 2010 | | | 235 | | | | (231 | ) |
| | One Percent Increase | | | One Percent Decrease | | | | | | | | | Impact on 2009 service and interest cost | | | 23 | | | | (22) | | Impact on postretirement benefit obligation as of December 31, 2009 | | | 232 | | | | (228) | | | | | | | | | | |
The Company is required to make minimum contributions to its defined benefit pension plans under the minimum funding requirements of ERISA, the Pension Funding Equity Act of 2004 and the Pension Protection Act of 2006. The Company estimates its 20102011 required contribution to its defined benefit pension plans to be approximately $525$520 million under the provisions of these acts.acts which reflects the Preservation of Access to Care for Medical Beneficiaries and Pension Relief Act of 2010 (the Relief Act), H.R. 3962. The Relief Act provides for 80
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) temporary, targeted funding relief (subject to certain terms and conditions) for single employer and multiemployer pension plans that suffered significant losses in asset value due to the steep market slide in 2008. Under the Relief Act, the Company’s 2010 minimum required contribution to its defined benefit pension plans was reduced from $525 million to approximately $460 million The following benefit payments, which reflect expected future service as appropriate, are expected to be paid:
| | | | | | | | | | | | | Retiree Medical
| | | Pension | | and Other | | 2011 | | | 574 | | | | 173 | | 2012 | | | 602 | | | | 170 | | 2013 | | | 665 | | | | 169 | | 2014 | | | 729 | | | | 170 | | 2015 | | | 785 | | | | 173 | | 2016 — 2020 | | | 4,959 | | | | 989 | |
| | | Pension | | | Retiree Medical and Other | | 2010 | | | | 550 | | | | 167 | | 2011 | | | | 572 | | | | 169 | | 2012 | | | | 603 | | | | 167 | | 2013 | | | | 678 | | | | 168 | | 2014 | | | | 738 | | | | 170 | | 2015 – 2019 | | | | 4,633 | | | | 971 | |
During 2008, AMR recorded a settlement charge totaling $103 million related to lump sum distributions from the Company’s defined benefit pension plans to pilots who retired. Pursuant to U.S. GAAP, the use of settlement accounting is required if, for a given year, the cost of all settlements exceeds, or is expected to exceed, the sum of the service cost and interest cost components of net periodic pension expense for a plan. Under settlement accounting, unrecognized plan gains or losses must be recognized immediately in proportion to the percentage reduction of the plan'splan’s projected benefit obligation. 11. Intangible Assets
The Company has recorded international slot and route authorities of $736$708 million and $828$736 million as of December 31, 20092010 and 2008,2009, respectively. The Company considers these assets indefinite life assets and as a result, they are not amortized but instead are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Such triggering events may include significant changes to the Company’s network or capacity, or the implementation of open skies agreements in countries where the Company operates flights.
In the fourth quarter of 2009,2010, the Company performed its annual impairment testing on international slots and routes, at which time the net carrying value was reassessed for recoverability. It was determined through this annual impairment testing that the fair value of certain international slots and routes in Latin America was less than the carrying value. Thus, the Company adjusted the value of these respective international slots and routes. The majority of these assets were route authorities in Latin American countries. The Company incurred an impairment charge of $96$28 million to write down the values of these and certain other routesslots and slots to a fair value of $28 million.routes.
In 2009, the Company implemented fair value accounting guidance on non-financial assets and liabilities as it relates to its routes, which considers whether there is a market for such assets. As there is minimal market activity for the valuation of routes and international slots and landing rights, the Company measures fair value with inputs using the income approach. The income approach uses valuation techniques, such as future cash flows, to convert future amounts to a single present discounted amount. The inputs utilized for these valuations are unobservable and reflect the Company’s assumptions about market participants and what they would use to value the routes and accordingly are considered Level 3 in the fair value hierarchy. The Company’s unobservable inputs are developed based on the best information available as of December 31, 2009.2010.
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AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following tables provide information relating to the Company’s amortized intangible assets as of December 31 (in (in millions):
| | | | | | | | | | | | | | | | | 2010 | | | | | | | Accumulated
| | Net Book
| | | | 2009 | | | Cost | | Amortization | | Value | | | | Cost | | | Accumulated Amortization | | | Net Book Value | | Amortized intangible assets: | | | | | | | | | | | | | | | | | | | | | | Airport operating rights | | $ | 515 | | | $ | 323 | | | $ | 192 | | | $ | 515 | | | $ | 344 | | | $ | 171 | | Gate lease rights | | | 182 | | | | 122 | | | | 60 | | | | 182 | | | | 129 | | | | 53 | | | | | | | | | | | Total | | $ | 697 | | | $ | 445 | | | $ | 252 | | | $ | 697 | | | $ | 473 | | | $ | 224 | | | | | | | | | | |
| | | | | | | | | | | | | | | 2009 | | | | | | | Accumulated
| | | Net Book
| | | | Cost | | | Amortization | | | Value | | | Amortized intangible assets: | | | | | | | | | | | | | Airport operating rights | | $ | 515 | | | $ | 323 | | | $ | 192 | | Gate lease rights | | | 182 | | | | 122 | | | | 60 | | | | | | | | | | | | | | | Total | | $ | 697 | | | $ | 445 | | | $ | 252 | | | | | | | | | | | | | | |
| | 2008 | | | | Cost | | | Accumulated Amortization | | | Net Book Value | | Amortized intangible assets: | | | | | | | | | | Airport operating rights | | $ | 515 | | | $ | 302 | | | $ | 213 | | Gate lease rights | | | 182 | | | | 114 | | | | 68 | | Total | | $ | 697 | | | $ | 416 | | | $ | 281 | |
Airport operating and gate lease rights are being amortized on a straight-line basis over 25 years to a zero residual value. The Company recorded amortization expense related to these intangible assets of approximately $28 million for each of the years ended December 31, 2010, 2009 2008 and 2007,2008, respectively. The Company expects to record annual amortization expense averaging approximately $26$24 million in each of the next five years related to these intangible assets. 82
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) | | 12. | Accumulated Other Comprehensive Income (Loss) |
12. Accumulated Other Comprehensive Income (Loss)
The components of Accumulated other comprehensive income (loss) are as follows (in millions): | | | | | | | | | | | | | | | | | | | | | | | Pension
| | | | | | | | | | | | | | | | and
| | | Unrealized
| | | | | | Income
| | | | | | | Retiree
| | | Gain/(Loss)
| | | Derivative
| | | Tax
| | | | | | | Medical
| | | on
| | | Financial
| | | Benefit/
| | | | | | | Liability | | | Investments | | | Instruments | | | (Expense) | | | Total | | | Balance at January 1, 2008 | | $ | 288 | | | $ | (3 | ) | | $ | 240 | | | $ | 145 | | | $ | 670 | | Current year change | | | (2,707 | ) | | | (7 | ) | | | — | | | | — | | | | (2,714 | ) | Amortization of actuarial loss and prior service cost | | | (17 | ) | | | — | | | | — | | | | — | | | | (17 | ) | Reclassification of derivative financial instruments into earnings | | | — | | | | — | | | | (378 | ) | | | — | | | | (378 | ) | Change in fair value of derivative financial instruments | | | — | | | | — | | | | (738 | ) | | | — | | | | (738 | ) | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2008 | | $ | (2,436 | ) | | $ | (10 | ) | | $ | (876 | ) | | $ | 145 | | | $ | (3,177 | ) | Current year change | | | (253 | ) | | | 5 | | | | — | | | | — | | | | (248 | ) | Amortization of actuarial loss and prior service cost | | | 136 | | | | — | | | | — | | | | — | | | | 136 | | Reclassification of derivative financial instruments into earnings | | | — | | | | — | | | | 662 | | | | — | | | | 662 | | Non-cash tax provision | | | — | | | | — | | | | — | | | | (248 | ) | | | (248 | ) | Change in fair value of derivative financial instruments | | | — | | | | — | | | | 151 | | | | — | | | | 151 | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2009 | | $ | (2,553 | ) | | $ | (5 | ) | | $ | (63 | ) | | $ | (103 | ) | | $ | (2,724 | ) | Current year change | | | (385 | ) | | | — | | | | | | | | | | | | (385 | ) | Amortization of actuarial loss and prior service cost | | | 138 | | | | — | | | | — | | | | — | | | | 138 | | Reclassification of derivative financial instruments into earnings | | | — | | | | — | | | | 144 | | | | — | | | | 144 | | Change in fair value of derivative financial instruments | | | — | | | | — | | | | 72 | | | | — | | | | 72 | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2010 | | $ | (2,800 | ) | | | (5 | ) | | | 153 | | | $ | (103 | ) | | $ | (2,755 | ) | | | | | | | | | | | | | | | | | | | | | |
| | Pension and Retiree Medical Liability | | | Unrealized Gain/(Loss) on Investments | | | Derivative Financial Instruments | | | Income Tax Benefit/ (Expense) | | | Total | | | | | | | | | | | | | | | | | | Balance at January 1, 2007 | | $ | (1,456 | ) | | $ | 3 | | | $ | 17 | | | $ | 145 | | | $ | (1,291 | ) | Current year net change | | | 1,723 | | | | (6 | ) | | | - | | | | - | | | | 1,717 | | Amortization of actuarial loss and prior service cost | | | 21 | | | | | | | | | | | | | | | | 21 | | Reclassification of derivative financial instruments into earnings | | | - | | | | - | | | | (158 | ) | | | - | | | | (158 | ) | Change in fair value of derivative financial instruments | | | - | | | | - | | | | 381 | | | | - | | | | 381 | | Balance at December 31, 2007 | | $ | 288 | | | $ | (3 | ) | | $ | 240 | | | $ | 145 | | | $ | 670 | | Current year change | | | (2,707 | ) | | | (7 | ) | | | - | | | | - | | | | (2,714 | ) | Amortization of actuarial loss and prior service cost | | | (17 | ) | | | - | | | | - | | | | - | | | | (17 | ) | Reclassification of derivative financial instruments into earnings | | | - | | | | - | | | | (378 | ) | | | - | | | | (378 | ) | Change in fair value of derivative financial instruments | | | - | | | | - | | | | (738 | ) | | | - | | | | (738 | ) | Balance at December 31, 2008 | | $ | (2,436 | ) | | $ | (10 | ) | | $ | (876 | ) | | $ | 145 | | | $ | (3,177 | ) | Current year change | | | (253 | ) | | | 5 | | | | - | | | | - | | | | (248 | ) | Amortization of actuarial loss and prior service cost | | | 136 | | | | - | | | | - | | | | - | | | | 136 | | Reclassification of derivative financial instruments into earnings | | | - | | | | - | | | | 662 | | | | - | | | | 662 | | Non-cash tax provision | | | - | | | | - | | | | - | | | | (248 | ) | | | (248 | ) | Change in fair value of derivative financial instruments | | | - | | | | - | | | | 151 | | | | - | | | | 151 | | Balance at December 31, 2009 | | $ | (2,553 | ) | | $ | (5 | ) | | $ | (63 | ) | | $ | (103 | ) | | $ | (2,724 | ) |
As of December 31, 2009,2010, the Company estimates that during the next twelve months it will reclassify from Accumulated other comprehensive loss into earnings approximately $74$121 million in net lossesgains (based on prices as of December 31, 2009)2010) related to its fuel derivative hedges.
The difference between Net earnings (loss) and other comprehensive income (loss) for the twelve month periods ended December 31, 20092010 and 20082009 is due primarily to the accounting for the Company’s derivative financial instruments and the actuarial loss on the pension benefit obligation of the Company’s pension plans.
Amounts allocated to other comprehensive income for income taxes as further described in Note 8 will remain in Accumulated other comprehensive income until the Company ceases all related activities, such as termination of the pension plan. 83
AMR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) | | 13. | Earnings (Loss) Per Share |
13. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted earnings (loss) per share (in millions, except per share amounts):
| | | | | | | | | | | | | | | Year Ended December 31, | | | | 2010 | | | 2009 | | | 2008 | | | Numerator: | | | | | | | | | | | | | Net earnings (loss) — numerator for basic earnings (loss) per share | | $ | (471 | ) | | $ | (1,468 | ) | | $ | (2,118 | ) | Denominator: | | | | | | | | | | | | | Denominator for basic earnings (loss) per share — weighted average shares | | | 333 | | | | 294 | | | | 259 | | Effect of dilutive securities: | | | | | | | | | | | | | Employee options and shares | | | — | | | | — | | | | — | | Assumed treasury shares purchased | | | — | | | | — | | | | — | | | | | | | | | | | | | | | Diluted potential common shares | | | — | | | | — | | | | — | | Denominator for diluted earnings loss per share — weighted-average shares | | | 333 | | | | 294 | | | | 259 | | | | | | | | | | | | | | | Basic earnings (loss) per share | | $ | (1.41 | ) | | $ | (4.99 | ) | | $ | (8.16 | ) | | | | | | | | | | | | | | Diluted earnings (loss) per share | | $ | (1.41 | ) | | $ | (4.99 | ) | | $ | (8.16 | ) | | | | | | | | | | | | | | The following were excluded from the calculation: | | | | | | | | | | | | | Convertible notes, employee stock options and deferred stock because inclusion would be anti-dilutive | | | 57 | | | | 19 | | | | 36 | | Employee stock options because the options’ exercise price was greater than the average market price of the shares | | | 12 | | | | 18 | | | | 13 | |
| | Year Ended December 31, | | | | 2009 | | | 2008 | | | 2007 | | Numerator: | | | | | | | | | | Net earnings (loss) – numerator for basic earnings (loss) per share | | $ | (1,468 | ) | | $ | (2,118 | ) | | $ | 456 | | | | | | | | | | | | | | | Denominator: | | | | | | | | | | | | | Denominator for basic earnings (loss) per share – weighted average shares | | | 294 | | | | 259 | | | | 245 | | | | | | | | | | | | | | | Effect of dilutive securities: | | | | | | | | | | | | | Employee options and shares | | | - | | | | - | | | | 34 | | Assumed treasury shares purchased | | | - | | | | - | | | | (12 | ) | Diluted potential common shares | | | - | | | | - | | | | 22 | | | | | | | | | | | | | | | Denominator for diluted earnings loss per share – weighted-average shares | | | 294 | | | | 259 | | | | 267 | | | | | | | | | | | | | | | Basic earnings (loss) per share | | $ | (4.99 | ) | | $ | (8.16 | ) | | $ | 1.86 | | | | | | | | | | | | | | | Diluted earnings (loss) per share | | $ | (4.99 | ) | | $ | (8.16 | ) | | $ | 1.71 | | | | | | | | | | | | | | | The following were excluded from the calculation: | | | | | | | | | | | | | Convertible notes, employee stock options and deferred stock because inclusion would be anti-dilutive | | | 19 | | | | 36 | | | | 32 | | Employee stock options because the options’ exercise price was greater than the average market price of the shares | | | 18 | | | | 13 | | | | 7 | |
In September of 2009, AMR completed a public offering of approximately 52 million shares of its common stock. The Company realized $412 million from the offering.
14. Segment Reporting
The Company'sCompany’s operations of American and AMR Eagle are treated as an integrated route network and the route scheduling system maximizes the operating results of the Company. The Company'sCompany’s chief operating decision maker makes resource allocation decisions to maximize the Company'sCompany’s consolidated financial results. Based on the way the Company treats the network and the manner in which resource allocation decisions are made, the Company has only one operating segment for financial reporting purposes consisting of the operations of American and AMR Eagle.
American, AMR Eagle and the AmericanConnection®AmericanConnection® airline serve approximatelymore than 250 cities in 40approximately 50 countries with, on average, more than 3,400 daily flights. The combined network fleet numbers approximately 900 aircraft. American is also one of the largest scheduled air freight carriers in the world, providing a wide range of freight and mail services to shippers throughout its system onboard American’s passenger fleet. AMR Eagle owns two regional airlines, which do business as "American“American Eagle” -— American Eagle Airlines, Inc. and Executive Airlines, Inc. The American Eagle®Eagle® carriers provide service from throughout the U.S., Canada, Mexico and the Caribbean.
Revenues from other segments are below the quantitative threshold for determining reportable segments and consist primarily of revenues from American Beacon Advisors, Inc. (divested in 2008) and Americas Ground Services, Inc. The difference between the financial information of the Company’s one reportable segment and the financial information included in the accompanying consolidated statements of operations and balance sheets as a result of these entities is not material. 84
14. Segment Reporting
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s operating revenues by geographic region (as defined by DOT) are summarized below (in millions): | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2010 | | | 2009 | | | 2008 | | | DOT Domestic | | $ | 13,081 | | | $ | 11,974 | | | $ | 14,135 | | DOT Latin America | | | 4,619 | | | | 4,114 | | | | 4,927 | | DOT Atlantic | | | 3,365 | | | | 2,973 | | | | 3,671 | | DOT Pacific | | | 1,105 | | | | 856 | | | | 1,033 | | | | | | | | | | | | | | | Total consolidated revenues | | $ | 22,170 | | | $ | 19,917 | | | $ | 23,766 | | | | | | | | | | | | | | |
| | Year Ended December 31, | | | | 2009 | | | 2008 | | | 2007 | | | | | | | | | | | | DOT Domestic | | $ | 11,974 | | | $ | 14,135 | | | $ | 14,179 | | DOT Latin America | | | 4,114 | | | | 4,927 | | | | 4,268 | | DOT Atlantic | | | 2,973 | | | | 3,671 | | | | 3,556 | | DOT Pacific | | | 856 | | | | 1,033 | | | | 932 | | Total consolidated revenues | | $ | 19,917 | | | $ | 23,766 | | | $ | 22,935 | |
The Company attributes operating revenues by geographic region based upon the origin and destination of each flight segment. The Company’s tangible assets consist primarily of flight equipment, which are mobile across geographic markets and, therefore, have not been allocated.
| | 15. | Quarterly Financial Data (Unaudited) |
15. Quarterly Financial Data (Unaudited)
Unaudited summarized financial data by quarter for 20092010 and 20082009 (in millions, except per share amounts):
| | | | | | | | | | | | | | | | | | | First
| | Second
| | Third
| | Fourth
| | | Quarter | | Quarter | | Quarter | | Quarter | | 2010 | | | | | | | | | | | | | | | | | Operating revenues | | $ | 5,068 | | | $ | 5,674 | | | $ | 5,842 | | | $ | 5,586 | | Operating income (loss) | | | (298 | ) | | | 196 | | | | 342 | | | | 68 | | Net earnings (loss) | | | (505 | ) | | | (11 | ) | | | 143 | | | | (97 | ) | Earnings (loss) per share: | | | | | | | | | | | | | | | | | Basic | | | (1.52 | ) | | | (0.03 | ) | | | 0.43 | | | | (0.29 | ) | Diluted | | | (1.52 | ) | | | (0.03 | ) | | | 0.39 | | | | (0.29 | ) | 2009 | | | | | | | | | | | | | | | | | Operating revenues | | $ | 4,839 | | | $ | 4,889 | | | $ | 5,127 | | | $ | 5,062 | | Operating income (loss) | | | (194 | ) | | | (226 | ) | | | (194 | ) | | | (390 | ) | Net earnings (loss) | | | (375 | ) | | | (390 | ) | | | (359 | ) | | | (344 | ) | Earnings (loss) per share: | | | | | | | | | | | | | | | | | Basic | | | (1.35 | ) | | | (1.39 | ) | | | (1.26 | ) | | | (1.03 | ) | Diluted | | | (1.35 | ) | | | (1.39 | ) | | | (1.26 | ) | | | (1.03 | ) |
| | First Quarter | | | Second Quarter | | | Third Quarter | | | Fourth Quarter | | 2009 | | | | | | | | | | | | | Operating revenues | | $ | 4,839 | | | $ | 4,889 | | | $ | 5,127 | | | $ | 5,062 | | Operating income (loss) | | | (194 | ) | | | (226 | ) | | | (194 | ) | | | (390 | ) | Net earnings (loss) | | | (375 | ) | | | (390 | ) | | | (359 | ) | | | (344 | ) | Earnings (loss) per share: | | | | | | | | | | | | | | | | | Basic | | | (1.35 | ) | | | (1.39 | ) | | | (1.26 | ) | | | (1.03 | ) | Diluted | | | (1.35 | ) | | | (1.39 | ) | | | (1.26 | ) | | | (1.03 | ) | | | | | | | | | | | | | | | | | | 2008 | | | | | | | | | | | | | | | | | Operating revenues | | $ | 5,697 | | | $ | 6,179 | | | $ | 6,421 | | | $ | 5,469 | | Operating income (loss) | | | (187 | ) | | | (1,290 | ) | | | (216 | ) | | | (196 | ) | Net earnings (loss) | | | (341 | ) | | | (1,461 | ) | | | 31 | | | | (347 | ) | Earnings (loss) per share: | | | | | | | | | | | | | | | | | Basic | | | (1.37 | ) | | | (5.83 | ) | | | 0.12 | | | | (1.24 | ) | Diluted | | | (1.37 | ) | | | (5.83 | ) | | | 0.12 | | | | (1.24 | ) |
The second quarter 2008 results include an impairment charge of $1.1 billion to write the McDonnell Douglas MD-80 and Embraer RJ-135 fleets and certain related long-lived assets down to their estimated fair values, and a $55 million accrual for employee severance costs.
The Company’s third quarter 2008 results include the sale of American Beacon for total proceeds of $442 million with a net gain of $432 million and $27 million of special charges due to continued capacity reduction effects.
The results of the fourth quarter of 2008 were impacted by a pension settlement charge of $103 million for one of the Company’s defined benefit plans.
The first, second and third quarter 2009 results include the impact of approximately $13 million, $70 million and $94 million, respectively, in charges related to the sale leaseback of certain aircraft and the grounding of leased Airbus A300 aircraft prior to lease expiration.
The results for the fourth quarter of 2009 include an impairment charge of approximately $138 million to write down certain route and slot authorities, primarily in Latin America, and certain Embraer RJ-135 aircraft to their estimated fair values, as well as $30 million in charges associated with the grounding of the Airbus A300 fleet and the sale leaseback of certain aircraft. Also included in 2009 results is a $248 million non-cash tax benefit resulting from the allocation of the tax expense to other comprehensive income items recognized during 2009. The first quarter 2010 results include a loss of $53 million related to a currency remeasurement due to the devaluation of Venezuelan currency from 2.15 bolivars per U.S. dollar to 4.30 bolivars per U.S. dollar. The Company’s fourth quarter 2010 performance includes an impairment charge of approximately $28 million to write down certain route and slot authorities in Latin America. 85
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
| | ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
FINANCIAL DISCLOSURE
None.
| | ITEM 9A. | CONTROLS AND PROCEDURES |
ITEM 9A. CONTROLS AND PROCEDURES
Management’s Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures” is defined inRules 13a-15(e) and15d-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 December 31, 2009.2010. 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 December 31, 2009.2010. During the quarter ending on December 31, 2009,2010, 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.
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined inRule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed 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.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 20092010 using the criteria set forth inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Commission. Based on this assessment, management believes that, as of December 31, 2009,2010, the Company’s internal control over financial reporting was effective based on those criteria.
The effectiveness of internal control over financial reporting as of December 31, 2009,2010, has been audited by Ernst & Young LLP, the independent registered public accounting firm who also audited the Company’s consolidated financial statements. Ernst & Young LLP’s attestation report on the effectiveness of the Company’s internal control over financial reporting appears below.
/s/ Gerard J. Arpey Gerard J. Arpey Chairman President and Chief Executive Officer
/s/ Thomas W. HortonIsabella D. Goren Thomas W. Horton
ExecutiveIsabella D. Goren
Senior Vice President and Chief Financial Officer
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders AMR Corporation
We have audited AMR Corporation’s internal control over financial reporting as of December 31, 2009,2010, based on criteria established in Internal Control—Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). AMR Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based upon the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, AMR Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009,2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of AMR Corporation as of December 31, 20092010 and 2008,2009, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 20092010 of AMR Corporation and our report dated February 17, 201016, 2011 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Dallas, Texas February 17, 201016, 2011 87
PART III | | ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference from the Company'sCompany’s definitive proxy statement for the annual meeting of stockholders on May 19, 2010.18, 2011. Information concerning the executive officers is included in Part I of this report on page 2524 and information concerning the Company’s code of ethics inis included in Part I of this report on page 10.9. Information concerning the audit committee and audit committee financial experts of the Company and Section 16(a) beneficial ownership reporting compliance, is incorporated by reference herein by reference.
| | ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company'sCompany’s definitive proxy statement for the annual meeting of stockholders on May 19, 2010.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT18, 2011.
| | ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
Equity Compensation Plan Information | | | | | | | | | | | | | | | | | | | | | Number of
| | | | | | | | | Securities Remaining
| | | | | | | | | Available for Future
| | | | | Number of
| | | | Issuance Under
| | | | | Securities to be
| | | | Equity
| | | | | Issued Upon
| | Weighted-Average
| | Compensation Plans
| | | | | Exercise of
| | Exercise Price of
| | (Excluding
| | | | | Outstanding Options,
| | Outstanding Options,
| | Securities Reflected
| | | | | Warrants and Rights | | Warrants and Rights | | in the First Column) | | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | | Weighted-average exercise price of outstanding options, warrants and rights | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) | | Equity compensation plans approved by security holders | | | 15,892,528 | | | $ | 19.02 | | | | - | * | | | 15,384,288 | | | $ | 13.99 | | | | — | | | | | | | | | | | | | | | | Equity compensation plans not approved by security holders | | | 13,526,670 | | | $ | 5.66 | | | | 734,298 | | | | 13,208,383 | | | $ | 5.66 | | | | 841,915 | | | | | | | | | | | | | | | | | | | | | | Total | | | 29,419,198 | | | $ | 12.88 | | | | 734,298 | | | | 28,592,671 | | | $ | 10.14 | | | | 841,915 | | | | | | | | | | |
| | | * | | Additional shares may become available for future use per the terms of the LTIP Plans. |
See Note 9 to the consolidated financial statements for additional information regarding the equity compensation plans included above.
The information required by Item 403 ofRegulation S-K is incorporated herein by reference from the Company'sCompany’s definitive proxy statement for the annual meeting of stockholders on May 19, 2010.18, 2011.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
| | ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
Incorporated herein by reference from the Company'sCompany’s definitive proxy statement for the annual meeting of stockholders on May 19, 2010.18, 2011.
| | ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated herein by reference from the Company'sCompany’s definitive proxy statement for the annual meeting of stockholders on May 19, 2010.18, 2011. 88
PART IV
ITEM 15.
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | |
(a) (1) The following financial statements and Independent Auditors’ Report are filed as part of this report: (a) | (1) | The following financial statements and Independent Auditors’ Report are filed as part of this report: |
| | Page | | | | | | | | Page | | Report of Independent Registered Public Accounting Firm | | | 49 | | Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008 | | | 50 | | Consolidated Balance Sheets at December 31, 2010 and 2009 | | | 51-52 | | Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008 | | | 53 | | Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2010, 2009 and 2008 | | | 54 | | Notes to Consolidated Financial Statements | | | 55-85 | |
(2) The following financial statement schedule is filed as part of this report: | | | | | | | | | | | Page | Consolidated Statements of Operations for the Years Ended
December 31, 2009, 2008
| Schedule II | | Valuation and 2007Qualifying Accounts and Reserves | | | 50102 | |
Schedules not included have been omitted because they are not applicable or because the required information is included in the consolidated financial statements or notes thereto. (3) Exhibits required to be filed by Item 601 ofRegulation S-K. (Where the amount of securities authorized to be issued under any of AMR’s long-term debt agreements does not exceed 10 percent of AMR’s assets, pursuant to paragraph (b)(4) of Item 601 of Regulation S-K, in lieu of filing such as an exhibit, AMR hereby agrees to furnish to the Commission upon request a copy of any agreement with respect to such long-term debt.) | | | | | Exhibit | | | | | 3 | .1 | | Restated Certificate of Incorporation of AMR, incorporated by reference to AMR’s Registration Statement on Form S-4, file number 33-55191. | | 3 | .2 | | Bylaws of AMR Corporation, amended and restated as of January 20, 2009, incorporated by reference to Exhibit 3.2 to AMR’s report on Form 8-K dated January 23, 2009. | | 3 | .3 | | Amendments to the AMR Corporation Certificate of Incorporation, incorporated by reference to AMR’s report on Form 10-Q for the quarterly period ended September 30, 2003. | | 10 | .1 | | Description of informal arrangement relating to deferral of payment of directors’ fees, incorporated by reference to Exhibit 10(c)(11) to American’s Registration Statement No. 2-76709. | | 10 | .2 | | AMR Corporation 2004 Directors Unit Incentive Plan, as amended, incorporated by reference to Exhibit 10.5 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2005; the successor to the AMR Corporation 1994 Directors Stock Incentive Plan, as amended, incorporated by reference to Exhibit 10.9 to AMR’s report on Form 10-K for the year ended December 31, 1996, and the AMR Corporation 1999 Directors’ Stock Appreciation Rights Plan, incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended March 31, 1999. | | 10 | .3 | | First Amendment to AMR Corporation 2004 Directors Unit Incentive Plan, dated as of January 1, 2005, incorporated by reference to Exhibit 10.4 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .4 | | Deferred Compensation Agreement, dated as of December 18, 2001 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.5 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2002, as filed on July 19, 2002. | | 10 | .5 | | Deferred Compensation Agreement, dated as of November 16, 2002 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.27 to AMR’s report on Form 10-K for the year ended December 31, 2002. | | 10 | .6 | | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.5 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
89
| | | | | Exhibit | | | | | 10 | .7 | | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.7 to AMR’s report on Form 10-K for the year ended December 31, 2004. | | 10 | .8 | | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.8 to AMR’s report on Form 10-K for the year ended December 31, 2005. | | 10 | .9 | | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.9 to AMR’s report on Form 10-K for the year ended December 31, 2006. | | 10 | .10 | | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.10 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .11 | | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.12 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .12 | | Deferred Compensation Agreement, dated as of December 4, 2009 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.12 to AMR’s report on Form 10-K for the year ended December 31, 2009. | | 10 | .13 | | Deferred Compensation Agreement, dated as of December 10, 2010 between AMR and John W. Bachmann. | | 10 | .14 | | Deferred Compensation Agreement, dated as of April 30, 2003 between AMR and David L. Boren, incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended March 31, 2003. | | 10 | .15 | | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and David L. Boren, incorporated by reference to Exhibit 10.13 to AMR’s report on Form 10-K for the year ended December 31, 2003. | | 10 | .16 | | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and David L. Boren, incorporated by reference to Exhibit 10.17 to AMR’s report on Form 10-K for the year ended December 31, 2004. | | 10 | .17 | | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and David L. Boren, incorporated by reference to Exhibit 10.20 to AMR’s report on Form 10-K for the year ended December 31, 2005. | | 10 | .18 | | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and David L. Boren, incorporated by reference to Exhibit 10.23 to AMR’s report on Form 10-K for the year ended December 31, 2006. | | 10 | .19 | | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and David L. Boren, incorporated by reference to Exhibit 10.16 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .20 | | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and David L. Boren, incorporated by reference to Exhibit 10.19 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .21 | | Deferred Compensation Agreement, dated as of February 19, 1998, between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.15 to AMR’s report on Form 10-K for the year ended December 31, 1997. | | 10 | .22 | | Deferred Compensation Agreement, dated as of January 13, 1999, between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.19 to AMR’s report on Form 10-K for the year ended December 31, 1998. | | 10 | .23 | | Deferred Compensation Agreement, dated as of January 12, 2000, between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.20 to AMR’s report on Form 10-K for the year ended December 31, 1999. | | 10 | .24 | | Deferred Compensation Agreement, dated as of January 22, 2001, between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.20 to AMR’s report on Form 10-K for the year ended December 31, 2000. |
90
| | | | | Exhibit | | | | | 10 | .25 | | Deferred Compensation Agreement, dated as of December 18, 2001 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.6 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2002, as filed on July 19, 2002. | | 10 | .26 | | Deferred Compensation Agreement, dated as of December 13, 2002 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.28 to AMR’s report on Form 10-K for the year ended December 31, 2002. | | 10 | .27 | | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.20 to AMR’s report on Form 10-K for the year ended December 31, 2003. | | 10 | .28 | | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.25 to AMR’s report on Form 10-K for the year ended December 31, 2004. | | 10 | .29 | | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.29 to AMR’s report on Form 10-K for the year ended December 31, 2005. | | 10 | .30 | | Deferred Compensation Agreement, dated as of December 21, 2006 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.33 to AMR’s report on Form 10-K for the year ended December 31, 2006. | | 10 | .31 | | Deferred Compensation Agreement, dated as of December 21, 2006 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.34 to AMR’s report on Form 10-K for the year ended December 31, 2006. | | 10 | .32 | | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.28 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .33 | | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.32 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .34 | | Deferred Compensation Agreement, dated as of December 4, 2009, between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.33 to AMR’s report on Form 10-K for the year ended December 31, 2009. | | 10 | .35 | | Deferred Compensation Agreement, dated as of December 14, 2010, between AMR and Armando M. Codina. | | 10 | .36 | | Deferred Compensation Agreement, dated as of April 30, 2003 between AMR and Ann M. Korologos, incorporated by reference to Exhibit 10.3 to AMR’s report on Form 10-Q for the quarterly period ended March 31, 2003. | | 10 | .37 | | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Ann M. Korologos, incorporated by reference to Exhibit 10.24 to AMR’s report on Form 10-K for the year ended December 31, 2003. | | 10 | .38 | | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Ann M. Korologos, incorporated by reference to Exhibit 10.31 to AMR’s report on Form 10-K for the year ended December 31, 2004. | | 10 | .39 | | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Ann M. Korologos, incorporated by reference to Exhibit 10.37 to AMR’s report on Form 10-K for the year ended December 31, 2005. | | 10 | .40 | | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Ann M. Korologos incorporated by reference to Exhibit 10.44 to AMR’s report on Form 10-K for the year ended December 31, 2006. | | 10 | .41 | | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Ann M. Korologos, incorporated by reference to Exhibit 10.40 to AMR’s report on Form 10-K for the year ended December 31, 2007. |
91
| | | | | Exhibit | | | | | 10 | .42 | | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Ann M. Korologos, incorporated by reference to Exhibit 10.39 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .43 | | Deferred Compensation Agreement, dated as of April 30, 2003 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.4 to AMR’s report on Form 10-Q for the quarterly period ended March 31, 2003. | | 10 | .44 | | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.26 to AMR’s report on Form 10-K for the year ended December 31, 2003. | | 10 | .45 | | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.34 to AMR’s report on Form 10-K for the year ended December 31, 2004. | | 10 | .46 | | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.41 to AMR’s report on Form 10-K for the year ended December 31, 2005. | | 10 | .47 | | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.49 to AMR’s report on Form 10-K for the year ended December 31, 2006. | | 10 | .48 | | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.46 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .49 | | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.46 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .50 | | Deferred Compensation Agreement, dated as of January 19, 2001, between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.26 to AMR’s report on Form 10-K for the year ended December 31, 2000. | | 10 | .51 | | Deferred Compensation Agreement, dated as of December 18, 2001 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.7 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2002, as filed on July 19, 2002. | | 10 | .52 | | Deferred Compensation Agreement, dated as of November 15, 2002 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.29 to AMR’s report on Form 10-K for the year ended December 31, 2002. | | 10 | .53 | | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.30 to AMR’s report on Form 10-K for the year ended December 31, 2003. | | 10 | .54 | | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.39 to AMR’s report on Form 10-K for the year ended December 31, 2004. | | 10 | .55 | | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.47 to AMR’s report on Form 10-K for the year ended December 31, 2005. | | 10 | .56 | | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.56 to AMR’s report on Form 10-K for the year ended December 31, 2006. | | 10 | .57 | | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.54 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .58 | | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.55 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
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| | | | | Exhibit | | | | | 10 | .59 | | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Ray M. Robinson, incorporated by reference to Exhibit 10.48 to AMR’s report on Form 10-K for the year ended December 31, 2005. | | 10 | .60 | | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Ray M. Robinson, incorporated by reference to Exhibit 10.58 to AMR’s report on Form 10-K for the year ended December 31, 2006. | | 10 | .61 | | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Ray M. Robinson, incorporated by reference to Exhibit 10.57 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .62 | | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Ray M. Robinson, incorporated by reference to Exhibit 10.59 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .63 | | Deferred Compensation Agreement, dated as of July 16, 1997, between AMR and Judith Rodin, incorporated by reference to Exhibit 10.22 to AMR’s report on Form 10-K for the year ended December 31, 1997. | | 10 | .64 | | Deferred Compensation Agreement, dated as of February 19, 1998, between AMR and Judith Rodin, incorporated by reference to Exhibit 10.23 to AMR’s report on Form 10-K for the year ended December 31, 1997. | | 10 | .65 | | Deferred Compensation Agreement, dated as of January 7, 1999, between AMR and Judith Rodin, incorporated by reference to Exhibit 10.30 to AMR’s report on Form 10-K for the year ended December 31, 1998. | | 10 | .66 | | Deferred Compensation Agreement, dated as of January 12, 2000, between AMR and Judith Rodin, incorporated by reference to Exhibit 10.29 to AMR’s report on Form 10-K for the year ended December 31, 1999. | | 10 | .67 | | Deferred Compensation Agreement, dated as of January 22, 2001, between AMR and Judith Rodin, incorporated by reference to Exhibit 10.25 to AMR’s report on Form 10-K for the year ended December 31, 2000. | | 10 | .68 | | Deferred Compensation Agreement, dated as of December 18, 2001 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.4 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2002, as filed on July 19, 2002. | | 10 | .69 | | Deferred Compensation Agreement, dated as of November 20, 2002 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.26 to AMR’s report on Form 10-K for the year ended December 31, 2002. | | 10 | .70 | | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.42 to AMR’s report on Form 10-K for the year ended December 31, 2003. | | 10 | .71 | | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.53 to AMR’s report on Form 10-K for the year ended December 31, 2004. | | 10 | .72 | | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.64 to AMR’s report on Form 10-K for the year ended December 31, 2005. | | 10 | .73 | | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.69 to AMR’s report on Form 10-K for the year ended December 31, 2006. | | 10 | .74 | | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.69 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .75 | | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.72 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
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| | | | | Exhibit | | | | | 10 | .76 | | Deferred Compensation Agreement, dated as of December 4, 2009, between AMR and Judith Rodin, incorporated by reference to Exhibit 10.74 to AMR’s report on Form 10-K for the year ended December 31, 2009. | | 10 | .77 | | Deferred Compensation Agreement, dated as of December 13, 2010, between AMR and Judith Rodin. | | 10 | .78 | | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Matthew K. Rose, incorporated by reference to Exhibit 10.65 to AMR’s report on Form 10-K for the year ended December 31, 2005. | | 10 | .79 | | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Matthew K. Rose, incorporated by reference to Exhibit 10.66 to AMR’s report on Form 10-K for the year ended December 31, 2005. | | 10 | .80 | | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Matthew K. Rose, incorporated by reference to Exhibit 10.72 to AMR’s report on Form 10-K for the year ended December 31, 2006. | | 10 | .81 | | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Matthew K. Rose, incorporated by reference to Exhibit 10.73 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .82 | | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Matthew K. Rose, incorporated by reference to Exhibit 10.77 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .83 | | Deferred Compensation Agreement, dated as of December 18, 2001 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2002, as filed on July 19, 2002. | | 10 | .84 | | Deferred Compensation Agreement, dated as of November 18, 2002 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.23 to AMR’s report on Form 10-K for the year ended December 31, 2002. | | 10 | .85 | | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.45 to AMR’s report on Form 10-K for the year ended December 31, 2003. | | 10 | .86 | | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.57 to AMR’s report on Form 10-K for the year ended December 31, 2004. | | 10 | .87 | | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.71 to AMR’s report on Form 10-K for the year ended December 31, 2005. | | 10 | .88 | | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.78 to AMR’s report on Form 10-K for the year ended December 31, 2006. | | 10 | .89 | | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.80 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .90 | | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.85 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .91 | | Deferred Compensation Agreement, dated as of January 15, 2008 between AMR and Rajat K. Gupta, incorporated by reference to Exhibit 10.81 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .92 | | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Rajat K. Gupta, incorporated by reference to Exhibit 10.87 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
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| | | | | Exhibit | | | | | 10 | .93 | | Deferred Compensation Agreement, dated as of December 4, 2009, between AMR and Rajat K. Gupta, incorporated by reference to Exhibit 10.90 to AMR’s report on Form 10-K for the year ended December 31, 2009. | | 10 | .94 | | Deferred Compensation Agreement, dated as of December 20, 2010, between AMR and Rajat K. Gupta. | | 10 | .95 | | Deferred Compensation Agreement, dated as of January 15, 2008 between AMR and Alberto Ibargüen, incorporated by reference to Exhibit 10.82 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .96 | | Deferred Compensation Agreement, dated as of December 4, 2008, between AMR and Alberto Ibargüen, incorporated by reference to Exhibit 10.89 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .97 | | Deferred Compensation Agreement, dated as of December 4, 2009, between AMR and Alberto Ibargüen, incorporated by reference to Exhibit 10.39 to AMR’s report on Form 10-K for the year ended December 31, 2009. | | 10 | .98 | | Deferred Compensation Agreement, dated as of December 10, 2010, between AMR and Alberto Ibargüen. | | 10 | .99 | | Current form of 2003 Stock Option Agreement under the 1998 Long Term Incentive Plan, as amended, incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended September 30, 2003. | | 10 | .100 | | Current form of 2004 Stock Option Agreement under the 1998 Long Term Incentive Plan, as amended, incorporated by reference to Exhibit 10.64 to AMR’s report on Form 10-K for the year ended December 31, 2004. | | 10 | .101 | | Current form of 2005 Stock Option Agreement under the 1998 Long Term Incentive Plan, as amended, incorporated by reference to Exhibit 10.3 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2005. | | 10 | .102 | | Current form of 2003 Stock Option Agreement under the 2003 Employee Stock Incentive Plan, incorporated by reference to Exhibit 10.49 to AMR’s report on Form 10-K for the year ended December 31, 2003. | | 10 | .103 | | Current form of 2004 Stock Option Agreement under the 2003 Employee Stock Incentive Plan, incorporated by reference to Exhibit 10.66 to AMR’s report on Form 10-K for the year ended December 31, 2004. | | 10 | .104 | | Current form of 2005 Stock Option Agreement under the 2003 Employee Stock Incentive Plan, incorporated by reference to Exhibit 10.4 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2005. | | 10 | .105 | | Current form of Amendment of Stock Option Agreements under the 1998 Long Term Incentive Plan to Add Stock Appreciation Rights, incorporated by reference to Exhibit 10.1 AMR’s report on Form 10-Q for the quarterly period ended September 30, 2006. | | 10 | .106 | | Career Performance Shares, Deferred Stock Award Agreement between AMR Corporation and Gerard J. Arpey dated as of July 25, 2005, incorporated by reference to Exhibit 10.6 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2005. | | 10 | .107 | | Current form of Career Equity Program Deferred Stock Award Agreement for Corporate Officers under the AMR 1998 Long Term Incentive Plan, incorporated by reference to Exhibit 10.41 to AMR’s report on Form 10-K for the year ended December 31, 1998. | | 10 | .108 | | Current form of Career Equity Program Deferred Stock Award Agreement for non-officers under the AMR 1998 Long Term Incentive Plan, incorporated by reference to Exhibit 10.42 to AMR’s report on Form 10-K for the year ended December 31, 1998. | | 10 | .109 | | Current form of Career Equity Program Deferred Stock Award Agreement for Senior Officers under the AMR 1998 Long Term Incentive Plan, incorporated by reference to Exhibit 10.42(a) to AMR’s report on Form 10-K for the year ended December 31, 1998. | | 10 | .110 | | Current form of Career Equity Program Deferred Stock Award Agreement for Employees under the AMR 1998 Long Term Incentive Plan, incorporated by reference to Exhibit 10.44 to AMR’s report on Form 10-K for the year ended December 31, 1999. |
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| | | | | Exhibit | | | | | 10 | .111 | | Form of amendment to Career Equity Program Deferred Stock Award Agreement for Employees and Senior Officers dated as of January 1, 2005, incorporated by reference to Exhibit 10.105 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .112 | | Form of amendment to Career Equity Program Deferred Stock Award Agreement for Employees and Senior Officers dated as of January 1, 2005, incorporated by reference to Exhibit 10.106 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .113 | | Current form of 2008 Deferred Share Award Agreement (with awards to executive officers noted), incorporated by reference to Exhibit 99.2 to AMR’s report on Form 8-K dated May 22, 2008. | | 10 | .114 | | Current form of 2009 Deferred Share Award Agreement (with awards to executive officers noted), incorporated by reference to Exhibit 10.2 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2009. | | 10 | .115 | | Current form of 2010 Deferred Share Award Agreement (with awards to executive officers noted), incorporated by reference to AMR’s current report on Form 8-K dated May 21, 2010. | | 10 | .116 | | Current form of 2006 Stock Appreciation Right Agreement under the 1998 Long Term Incentive Plan, as Amended (with awards to executive officers noted), incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2006. | | 10 | .117 | | Current form of 2007 Stock Appreciation Right Agreement under the 1998 Long Term Incentive Plan, as Amended (with awards to executive officers noted), incorporated by reference to Exhibit 10.2 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2007. | | 10 | .118 | | Current form of 2008 Stock Appreciation Right Agreement under the 1998 Long Term Incentive Plan, as Amended (with awards to executive officers noted), incorporated by reference to Exhibit 99.1 to AMR’s report on Form 8-K dated on May 22, 2008. | | 10 | .119 | | Current form of 2009 Stock Appreciation Right Agreement under the 1998 Long Term Incentive Plan, as Amended (with awards to executive officers noted), incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2009. | | 10 | .120 | | Current form of 2010 Stock Appreciation Right Agreement under the 2009 Long Term Incentive Plan, as Amended (with awards to executive officers noted), incorporated by reference to AMR’s current report on Form 8-K dated May 21, 2010. | | 10 | .121 | | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Gerard J. Arpey, dated May 21, 1998, incorporated by reference to Exhibit 10.61 to AMR’s report on Form 10-K for the year ended December 31, 1998. | | 10 | .122 | | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Daniel P. Garton, dated May 21, 1998, incorporated by reference to Exhibit 10.66 to AMR’s report on Form 10-K for the year ended December 31, 1998. | | 10 | .123 | | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Monte E. Ford, dated November 15, 2000, incorporated by reference to Exhibit 10.74 to AMR’s report on Form 10-K for the year ended December 31, 2000. | | 10 | .124 | | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and William K. Ris, Jr., dated October 20, 1999, incorporated by reference to Exhibit 10.79 to AMR’s report on Form 10-K for the year ended December 31, 1999. | | 10 | .125 | | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Gary F. Kennedy dated February 3, 2003, incorporated by reference to Exhibit 10.55 to AMR’s report on Form 10-K for the year ended December 31, 2002. | | 10 | .126 | | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Robert W. Reding dated May 20, 2003, incorporated by reference to Exhibit 10.71 to AMR’s report on Form 10-K for the year ended December 31, 2003. | | 10 | .127 | | Employment agreement between AMR, American Airlines and William K. Ris, Jr. dated November 11, 1999, incorporated by reference to Exhibit 10.73 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
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| | | | | Exhibit | | | | | 10 | .128 | | Employment agreement between AMR, American Airlines and Robert W. Reding dated May 21, 2003, incorporated by reference to Exhibit 10.94 to AMR’s report on Form 10-K for the year ended December 31, 2004. | | 10 | .129 | | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Jeffrey J. Brundage dated April 1, 2004, incorporated by reference to Exhibit 10.5 to AMR’s report on Form 10-Q for the quarterly period ended March 31, 2004. | | 10 | .130 | | Executive Termination Benefits Agreement between AMR, American Airlines and Isabella D. Goren dated as of March 25, 2008 and Form of Amendment to the Executive Termination Benefits Agreement dated as of November 17, 2008. | | 10 | .131 | | Form of Amendment to Executive Termination Benefits Agreement dated as of January 1, 2005, incorporated by reference to Exhibit 10.124 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .132 | | Employment agreement between AMR, American Airlines and Thomas W. Horton dated March 29, 2006, incorporated by reference to Exhibit 10.1 to AMR’s current report on Form 8-K dated March 31, 2006. | | 10 | .133 | | Amendment of employment agreement between AMR, American Airlines and Thomas W. Horton dated July 15, 2008, incorporated by reference to Exhibit 10.5 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2008. | | 10 | .134 | | Employment agreement between AMR, American Airlines, AMR Eagle Holding Corporation, and Daniel P. Garton dated June 10, 2010, incorporated by reference to AMR’s current report on Form 8-K dated June 11, 2010. | | 10 | .135 | | Supplemental Executive Retirement Program for Officers of American Airlines, Inc., as amended and restated as of January 1, 2005, incorporated by reference to Exhibit 10.127 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .136 | | Trust Agreement Under Supplemental Retirement Program for Officers of American Airlines, Inc., as amended and restated as of June 1, 2007, incorporated by reference to Exhibit 10.128 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .137 | | Trust Agreement Under Supplemental Executive Retirement Program for Officers of American Airlines, Inc. Participating in the $uper $aver Plus Plan, as amended and restated as of June 1, 2007, incorporated by reference to Exhibit 10.129 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .138 | | Aircraft Purchase Agreement by and between American Airlines, Inc. and The Boeing Company, dated October 31, 1997, incorporated by reference to Exhibit 10.48 to AMR’s report on Form 10-K for the year ended December 31, 1997. Confidential treatment was granted as to a portion of this document. | | 10 | .139 | | Letter Agreement dated November 17, 2004 and Purchase Agreement Supplements dated January 11, 2005 between the Boeing Company and American Airlines, Inc., incorporated by reference to Exhibit 10.99 to AMR’s report on Form 10-K for the year ended December 31, 2004. Confidential treatment was granted as to a portion of these agreements. | | 10 | .140 | | Letter Agreement between the Boeing Company and American Airlines, Inc. dated May 5, 2005, incorporated by reference to Exhibit 10.7 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2005. Confidential treatment was granted as to a portion of this agreement. | | 10 | .141 | | Aircraft Purchase Agreement by and between AMR Eagle Holding Corporation and Bombardier Inc., dated January 31, 1998, incorporated by reference to Exhibit 10.49 to AMR’s report on Form 10-K for the year ended December 31, 1997. Confidential treatment was granted as to a portion of this agreement. | | 10 | .142 | | AMR Corporation Procedures for Deferral of Board Retainers and Fees (an amendment and restatement of the Directors Stock Equivalent Purchase Plan), as amended and restated as of January 1, 2005, incorporated by reference to Exhibit 10.135 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .143 | | 2010 Annual Incentive Plan for American, incorporated by reference to Exhibit 99.1 to AMR’s current report on Form 8-K dated January 22, 2010. | | 10 | .144 | | 2011 Annual Incentive Plan for American, incorporated by reference to Exhibit 99.1 to AMR’s current report on Form 8-K dated January 21, 2011. |
97
| | | | | Exhibit | | | | | 10 | .145 | | Purchase Agreement No. 3219 between American Airlines, Inc. and The Boeing Company, dated as of October 15, 2008. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.29 to American Airlines, Inc.’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .146 | | Form of 2008-2010 Performance Share Agreement (with awards to executive officers noted), and 2008-2010 Performance Share Plan for Officers and Key Employees, incorporated by reference to Exhibit 99.3 to AMR’s current report on Form 8-K dated May 22, 2008. | | 10 | .147 | | Form of 2009-2011 Performance Share Agreement (with awards to executive officers noted), and 2009-2011 Performance Share Plan for Officers and Key Employees, incorporated by reference to Exhibit 10.2 to AMR’s current report on Form 10-Q for the quarterly period ended June 30, 2009. | | 10 | .148 | | Form of 2010-2012 Performance Share Agreement (with awards to executive officers noted), and 2010-2012 Performance Share Plan for Officers and Key Employees dated May 19, 2010, incorporated by reference to AMR’s current report on Form 8-K dated May 21, 2010. | | 10 | .149 | | AMR Corporation 1998 Long Term Incentive Plan, as Amended and Restated as of January 1, 2005, incorporated by reference to Exhibit 10.142 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .150 | | AMR Corporation 2009 Long Term Incentive Plan, incorporated by reference to Exhibit 10.4 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2009. | | 10 | .151 | | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated August 17, 2007. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.133 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .152 | | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated November 20, 2007. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended,incorporated by reference to Exhibit 10.134 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .153 | | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated December 10, 2007. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.135 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .154 | | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated January 20, 2008. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.136 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .155 | | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated February 11, 2008. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.137 to AMR’s report on Form 10-K for the year ended December 31, 2007. | | 10 | .156 | | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated as of June 9, 2009. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.5 to AMR’s report on Form10-QA for the quarter ended June 30, 2009. |
98
| | | | | Exhibit | | | | | 10 | .157 | | Purchase Agreement Supplement by and between AMR Eagle Holding Corporation and Bombardier Inc., dated December 2, 2009. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.150 to AMR’s report on Form 10-K for the year ended December 31, 2009. | | 10 | .158 | | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated December 18, 2009. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.151 to AMR’s report on Form 10-K for the year ended December 31, 2009. | | 10 | .159 | | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated January 14, 2011. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended. | | 10 | .160 | | Supplemental Agreement No. 34 to Purchase Agreement No. 1977 by and between American Airlines, Inc. and The Boeing Company dated as of July 21, 2010. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-QA for the quarter ended June 30, 2010. | | 10 | .161 | | Supplemental Agreement No. 2 to Purchase Agreement No. 3219 by and between American Airlines, Inc. and The Boeing Company dated as of July 21, 2010. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.2 to AMR’s report on Form 10-QA for the quarter ended June 30, 2010. | | 10 | .162 | | AMR Corporation Amended and Restated Directors Pension Benefits Plan, effective as of January 1, 2005, incorporated by reference to Exhibit 10.149 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .163 | | Amended and Restated Air Transportation Plan for Non-Employee Directors of AMR Corporation, effective as of January 1, 2005, incorporated by reference to Exhibit 10.150 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .164 | | AMR Corporation 2003 Employee Stock Incentive Plan, as amended as of January 1, 2005, incorporated by reference to Exhibit 10.151 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .165 | | First Amendment to AMR Corporation 1994 Directors Stock Incentive Plan, dated as of January 1, 2005, incorporated by reference to Exhibit 10.152 to AMR’s report on Form 10-K for the year ended December 31, 2008. | | 10 | .166 | | AMR Eagle Holding Corporation 2011 Incentive Compensation Plan for Employees of Subsidiaries of AMR Eagle Holding Corporation, effective as of January 1, 2011. | | 12 | | | Computation of ratio of earnings to fixed charges for the years ended December 31, 2010, 2009, 2008, 2007 and 2006. | | 21 | | | Significant subsidiaries of the registrant as of December 31, 2010. | | 23 | | | Consent of Independent Registered Public Accounting Firm. | | 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). |
99
| | | | | Consolidated Balance Sheets at December 31, 2009 and 2008
| | | 51-52 | | | | Exhibit | | | Consolidated Statements of Cash Flows for the Years Ended
December 31, 2009, 2008 and 2007
| | 101 | | | 53 | | | | | | | Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended
December 31, 2009, 2008 and 2007
| | | 54 | | | | | | | Notes to Consolidated Financial Statements
| | | 55-82 | |
| (2) | The following financial statement schedule is filed as part of this report: |
| | Page | | | | | | Schedule II Valuation and Qualifying Accounts and Reserves
| | | 100 | |
| Schedules not included have been omitted because they are not applicable or because the required information is included in the consolidated financial statements or notes thereto. |
| (3) | Exhibits required to be filed by Item 601 of Regulation S-K. (Where the amount of securities authorized to be issued under any of AMR's long-term debt agreements does not exceed 10 percent of AMR's assets, pursuant to paragraph (b)(4) of Item 601 of Regulation S-K, in lieu of filing such as an exhibit,materials from AMR hereby agrees to furnish to the Commission upon request a copy of any agreement with respect to such long-term debt.) |
| 3.1 | Restated Certificate of Incorporation of AMR, incorporated by reference to AMR’s Registration Statement on Form S-4, file number 33-55191. |
3.2 | Bylaws of AMR Corporation, amended and restated as of January 20, 2009, incorporated by reference to Exhibit 3.2 to AMR’s report on Form 8-K on January 23, 2009. |
3.3 | Amendments to the AMR Corporation Certificate of Incorporation, incorporated by reference to AMR’s report on Form 10-Q for the quarterly period ended September 30, 2003. |
10.1 | Description of informal arrangement relating to deferral of payment of directors' fees, incorporated by reference to Exhibit 10(c)(11) to American's Registration Statement No. 2-76709. |
10.2 | AMR Corporation 2004 Directors Unit Incentive Plan, as amended, incorporated by reference to Exhibit 10.5 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2005; the successor to the AMR Corporation 1994 Directors Stock Incentive Plan, as amended, incorporated by reference to Exhibit 10.9 to AMR’s reportCorporation’s Annual Report on Form 10-K for the year ended December 31, 1996,2010, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Shareholders’ Equity (Deficit) and the AMR Corporation 1999 Directors’ Stock Appreciation Rights Plan, incorporated by reference(v) Notes to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended March 31, 1999.Consolidated Financial Statements, tagged as blocks of text.* |
10.3 | First Amendment to AMR Corporation 2004 Directors Unit Incentive Plan, dated as of January 1, 2005, incorporated by reference to Exhibit 10.4 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.4 | Deferred Compensation Agreement, dated as of December 18, 2001 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.5 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2002, as filed on July 19, 2002. |
10.5 | Deferred Compensation Agreement, dated as of November 16, 2002 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.27 to AMR’s report on Form 10-K for the year ended December 31, 2002. |
10.6 | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.5 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
10.7 | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.7 to AMR’s report on Form 10-K for the year ended December 31, 2004. |
10.8 | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.8 to AMR’s report on Form 10-K for the year ended December 31, 2005. |
10.9 | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.9 to AMR’s report on Form 10-K for the year ended December 31, 2006. |
10.10 | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.10 to AMR’s report on Form 10-K for the year ended December 31, 2007. |
10.11 | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and John W. Bachmann, incorporated by reference to Exhibit 10.12 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.12 | Deferred Compensation Agreement, dated as of December 4, 2009 between AMR and John W. Bachmann. |
10.13 | Deferred Compensation Agreement, dated as of April 30, 2003 between AMR and David L. Boren, incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended March 31, 2003. |
10.14 | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and David L. Boren, incorporated by reference to Exhibit 10.13 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
10.15 | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and David L. Boren, incorporated by reference to Exhibit 10.17 to AMR’s report on Form 10-K for the year ended December 31, 2004. |
10.16 | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and David L. Boren, incorporated by reference to Exhibit 10.20 to AMR’s report on Form 10-K for the year ended December 31, 2005. |
10.17 | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and David L. Boren, incorporated by reference to Exhibit 10.23 to AMR’s report on Form 10-K for the year ended December 31, 2006. |
10.18 | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and David L. Boren, incorporated by reference to Exhibit 10.16 to AMR’s report on Form 10-K for the year ended December 31, 2007. |
10.19 | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and David L. Boren, incorporated by reference to Exhibit 10.19 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.20 | Deferred Compensation Agreement, dated as of February 19, 1998, between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.15 to AMR’s report on Form 10-K for the year ended December 31, 1997. |
10.21 | Deferred Compensation Agreement, dated as of January 13, 1999, between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.19 to AMR’s report on Form 10-K for the year ended December 31, 1998. |
10.22 | Deferred Compensation Agreement, dated as of January 12, 2000, between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.20 to AMR’s report on Form 10-K for the year ended December 31, 1999. |
10.23 | Deferred Compensation Agreement, dated as of January 22, 2001, between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.20 to AMR’s report on Form 10-K for the year ended December 31, 2000. |
10.24 | Deferred Compensation Agreement, dated as of December 18, 2001 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.6 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2002, as filed on July 19, 2002. |
10.25 | Deferred Compensation Agreement, dated as of December 13, 2002 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.28 to AMR’s report on Form 10-K for the year ended December 31, 2002. |
10.26 | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.20 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
10.27 | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.25 to AMR’s report on Form 10-K for the year ended December 31, 2004. |
10.28 | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.29 to AMR’s report on Form 10-K for the year ended December 31, 2005. |
10.29 | Deferred Compensation Agreement, dated as of December 21, 2006 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.33 to AMR’s report on Form 10-K for the year ended December 31, 2006. |
10.30 | Deferred Compensation Agreement, dated as of December 21, 2006 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.34 to AMR’s report on Form 10-K for the year ended December 31, 2006. |
10.31 | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.28 to AMR’s report on Form 10-K for the year ended December 31, 2007. |
10.32 | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Armando M. Codina, incorporated by reference to Exhibit 10.32 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.33 | Deferred Compensation Agreement, dated as of December 4, 2009, between AMR and Armando M. Codina. |
10.34 | Deferred Compensation Agreement, dated as of April 30, 2003 between AMR and Ann M. Korologos, incorporated by reference to Exhibit 10.3 to AMR’s report on Form 10-Q for the quarterly period ended March 31, 2003. |
10.35 | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Ann M. Korologos, incorporated by reference to Exhibit 10.24 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
10.36 | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Ann M. Korologos, incorporated by reference to Exhibit 10.31 to AMR’s report on Form 10-K for the year ended December 31, 2004. |
10.37 | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Ann M. Korologos, incorporated by reference to Exhibit 10.37 to AMR’s report on Form 10-K for the year ended December 31, 2005. |
10.38 | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Ann M. Korologos incorporated by reference to Exhibit 10.44 to AMR’s report on Form 10-K for the year ended December 31, 2006. |
10.39 | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Ann M. Korologos, incorporated by reference to Exhibit 10.40 to AMR’s report on Form 10-K for the year ended December 31, 2007. |
10.40 | Deferred Compensation Agreement, dated as | | * | | Pursuant to Rule 406T of December 4, 2008 between AMR and Ann M. Korologos, incorporated by reference toRegulation S-T, the Interactive Data Files on Exhibit 10.39 to AMR’s report on Form 10-K101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the year ended December 31, 2008. |
10.41 | Deferred Compensation Agreement, dated asSecurities Act of April 30, 2003 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.4 to AMR’s report on Form 10-Q for the quarterly period ended March 31, 2003. |
10.42 | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.26 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
10.43 | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.34 to AMR’s report on Form 10-K for the year ended December 31, 2004. |
10.44 | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.41 to AMR’s report on Form 10-K for the year ended December 31, 2005. |
10.45 | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.49 to AMR’s report on Form 10-K for the year ended December 31, 2006. |
10.46 | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.46 to AMR’s report on Form 10-K for the year ended December 31, 2007 |
10.47 | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Michael A. Miles, incorporated by reference to Exhibit 10.46 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.48 | Deferred Compensation Agreement, dated as of January 19, 2001, between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.26 to AMR’s report on Form 10-K for the year ended December 31, 2000. |
10.49 | Deferred Compensation Agreement, dated as of December 18, 2001 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.7 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2002, as filed on July 19, 2002. |
10.50 | Deferred Compensation Agreement, dated as of November 15, 2002 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.29 to AMR’s report on Form 10-K for the year ended December 31, 2002. |
10.51 | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.30 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
10.52 | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.39 to AMR’s report on Form 10-K for the year ended December 31, 2004. |
10.53 | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.47 to AMR’s report on Form 10-K for the year ended December 31, 2005. |
10.54 | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.56 to AMR’s report on Form 10-K for the year ended December 31, 2006. |
10.55 | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.54 to AMR’s report on Form 10-K for the year ended December 31, 2007. |
10.56 | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Philip J. Purcell, incorporated by reference to Exhibit 10.55 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.57 | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Ray M. Robinson, incorporated by reference to Exhibit 10.48 to AMR’s report on Form 10-K for the year ended December 31, 2005. |
10.58 | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Ray M. Robinson, incorporated by reference to Exhibit 10.58 to AMR’s report on Form 10-K for the year ended December 31, 2006. |
10.59 | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Ray M. Robinson, incorporated by reference to Exhibit 10.57 to AMR’s report on Form 10-K for the year ended December 31, 2007. |
10.60 | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Ray M. Robinson, incorporated by reference to Exhibit 10.59 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.61 | Deferred Compensation Agreement, dated as of July 16, 1997, between AMR and Judith Rodin, incorporated by reference to Exhibit 10.22 to AMR’s report on Form 10-K for the year ended December 31, 1997. |
10.62 | Deferred Compensation Agreement, dated as of February 19, 1998, between AMR and Judith Rodin, incorporated by reference to Exhibit 10.23 to AMR’s report on Form 10-K for the year ended December 31, 1997. |
10.63 | Deferred Compensation Agreement, dated as of January 7, 1999, between AMR and Judith Rodin, incorporated by reference to Exhibit 10.30 to AMR’s report on Form 10-K for the year ended December 31, 1998. |
10.64 | Deferred Compensation Agreement, dated as of January 12, 2000, between AMR and Judith Rodin, incorporated by reference to Exhibit 10.29 to AMR’s report on Form 10-K for the year ended December 31, 1999. |
10.65 | Deferred Compensation Agreement, dated as of January 22, 2001, between AMR and Judith Rodin, incorporated by reference to Exhibit 10.25 to AMR’s report on Form 10-K for the year ended December 31, 2000. |
10.66 | Deferred Compensation Agreement, dated as of December 18, 2001 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.4 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2002, as filed on July 19, 2002. |
10.67 | Deferred Compensation Agreement, dated as of November 20, 2002 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.26 to AMR’s report on Form 10-K for the year ended December 31, 2002. |
10.68 | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.42 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
10.69 | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.53 to AMR’s report on Form 10-K for the year ended December 31, 2004. |
10.70 | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.64 to AMR’s report on Form 10-K for the year ended December 31, 2005. |
10.71 | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.69 to AMR’s report on Form 10-K for the year ended December 31, 2006. |
10.72 | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.69 to AMR’s report on Form 10-K for the year ended December 31, 2007. |
10.73 | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Judith Rodin, incorporated by reference to Exhibit 10.72 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.74 | Deferred Compensation Agreement, dated as of December 4, 2009, between AMR and Judith Rodin. |
10.75 | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Matthew K. Rose, incorporated by reference to Exhibit 10.65 to AMR’s report on Form 10-K for the year ended December 31, 2005. |
10.76 | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Matthew K. Rose, incorporated by reference to Exhibit 10.66 to AMR’s report on Form 10-K for the year ended December 31, 2005. |
10.77 | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Matthew K. Rose, incorporated by reference to Exhibit 10.72 to AMR’s report on Form 10-K for the year ended December 31, 2006. |
10.78 | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Matthew K. Rose, incorporated by reference to Exhibit 10.73 to AMR’s report on Form 10-K for the year ended December 31, 2007. |
10.79 | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Matthew K. Rose, incorporated by reference to Exhibit 10.77 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.80 | Deferred Compensation Agreement, dated as of December 18, 2001 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2002, as filed on July 19, 2002. |
10.81 | Deferred Compensation Agreement, dated as of November 18, 2002 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.23 to AMR’s report on Form 10-K for the year ended December 31, 2002. |
10.82 | Deferred Compensation Agreement, dated as of January 12, 2004 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.45 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
10.83 | Deferred Compensation Agreement, dated as of December 8, 2004 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.57 to AMR’s report on Form 10-K for the year ended December 31, 2004. |
10.84 | Deferred Compensation Agreement, dated as of November 29, 2005 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.71 to AMR’s report on Form 10-K for the year ended December 31, 2005. |
10.85 | Deferred Compensation Agreement, dated as of November 29, 2006 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.78 to AMR’s report on Form 10-K for the year ended December 31, 2006. |
10.86 | Deferred Compensation Agreement, dated as of December 4, 2007 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.80 to AMR’s report on Form 10-K for the year ended December 31, 2007. |
10.87 | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Roger T. Staubach, incorporated by reference to Exhibit 10.85 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.88 | Deferred Compensation Agreement, dated as of January 15, 2008 between AMR and Rajat K. Gupta, incorporated by reference to Exhibit 10.81 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.89 | Deferred Compensation Agreement, dated as of December 4, 2008 between AMR and Rajat K. Gupta, incorporated by reference to Exhibit 10.87 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.90 | Deferred Compensation Agreement, dated as of December 4, 2009, between AMR and Rajat K. Gupta. |
10.91 | Deferred Compensation Agreement, dated as of January 15, 2008 between AMR and Alberto Ibargüen, incorporated by reference to Exhibit 10.82 to AMR’s report on Form 10-K for the year ended December 31, 2008.
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10.92 | Deferred Compensation Agreement, dated as of December 4, 2008, between AMR and Alberto Ibargüen, incorporated by reference to Exhibit 10.89 to AMR’s report on Form 10-K for the year ended December 31, 2008.
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10.93 | Deferred Compensation Agreement, dated as of Decmeber 4, 2009, between AMR and Alberto Ibargüen.
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10.94 | Current form of 2003 Stock Option Agreement under the 1998 Long Term Incentive Plan,1933, as amended, incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Qare deemed not filed for the quarterly period ended September 30, 2003. |
10.95 | Current formpurposes of 2004 Stock Option Agreement under the 1998 Long Term Incentive Plan, as amended, incorporated by reference to Exhibit 10.64 to AMR’s report on Form 10-K for the year ended December 31, 2004. |
10.96 | Current form of 2005 Stock Option Agreement under the 1998 Long Term Incentive Plan, as amended, incorporated by reference to Exhibit 10.3 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2005. |
10.97 | Current form of 2003 Stock Option Agreement under the 2003 Employee Stock Incentive Plan, incorporated by reference to Exhibit 10.49 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
10.98 | Current form of 2004 Stock Option Agreement under the 2003 Employee Stock Incentive Plan, incorporated by reference to Exhibit 10.66 to AMR’s report on Form 10-K for the year ended December 31, 2004. |
10.99 | Current form of 2005 Stock Option Agreement under the 2003 Employee Stock Incentive Plan, incorporated by reference to Exhibit 10.4 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2005. |
10.100 | Current form of Amendment of Stock Option Agreements under the 1998 Long Term Incentive Plan to Add Stock Appreciation Rights, incorporated by reference to Exhibit 10.1 AMR’s report on Form 10-Q for the quarterly period ended September 30, 2006. |
10.101 | Career Performance Shares, Deferred Stock Award Agreement between AMR Corporation and Gerard J. Arpey dated as of July 25, 2005, incorporated by reference to Exhibit 10.6 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2005.
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10.102 | Current form of Career Equity Program Deferred Stock Award Agreement for Corporate Officers under the AMR 1998 Long Term Incentive Plan, incorporated by reference to Exhibit 10.41 to AMR’s report on Form 10-K for the year ended December 31, 1998. |
10.103 | Current form of Career Equity Program Deferred Stock Award Agreement for non-officers under the AMR 1998 Long Term Incentive Plan, incorporated by reference to Exhibit 10.42 to AMR’s report on Form 10-K for the year ended December 31, 1998. |
10.104 | Current form of Career Equity Program Deferred Stock Award Agreement for Senior Officers under the AMR 1998 Long Term Incentive Plan, incorporated by reference to Exhibit 10.42(a) to AMR’s report on Form 10-K for the year ended December 31, 1998. |
10.105 | Current form of Career Equity Program Deferred Stock Award Agreement for Employees under the AMR 1998 Long Term Incentive Plan, incorporated by reference to Exhibit 10.44 to AMR’s report on Form 10-K for the year ended December 31, 1999. |
10.106 | Form of amendment to Career Equity Program Deferred Stock Award Agreement for Employees and Senior Officers dated as of January 1, 2005, incorporated by reference to Exhibit 10.105 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.107 | Form of amendment to Career Equitey Program Deferred Stock Award Agreement for Employees and Senior Officers dated as of January 1, 2005, incorporated by reference to Exhibit 10.106 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.108 | Current form of 2007 Deferred Share Award Agreement (with awards to executive officers noted), incorporated by reference to Exhibit 10.3 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2007 |
10.109 | Current form of 2008 Deferred Share Award Agreement (with awards to executive officers noted), incorporated by reference to Exhibit 99.2 to AMR’s report on Form 8-K on May 22, 2008. |
10.110 | Current form of 2009 Deferred Share Award Agreement (with awards to executive officers noted), incorporated by reference to Exhibit 10.2 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2009. |
10.111 | Current form of 2006 Stock Appreciation Right Agreement under the 1998 Long Term Incentive Plan, as Amended (with awards to executive officers noted), incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2006. |
10.112 | Current form of 2007 Stock Appreciation Right Agreement under the 1998 Long Term Incentive Plan, as Amended (with awards to executive officers noted), incorporated by reference to Exhibit 10.2 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2007. |
10.113 | Current form of 2008 of Stock Appreciation Right Agreement under the 1998 Long Term Incentive Plan, as Amended (with awards to executive officers noted), incorporated by reference to Exhibit 99.1 to AMR’s report on Form 8-K for on May 22, 2008. |
10.114 | Current form of 2009 of Stock Appreciation Right Agreement under the 1998 Long Term Incentive Plan, as Amended (with awards to executive officers noted), incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2009. |
10.115 | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Gerard J. Arpey, dated May 21, 1998, incorporated by reference to Exhibit 10.61 to AMR’s report on Form 10-K for the year ended December 31, 1998. |
10.116 | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Peter M. Bowler, dated May 21, 1998, incorporated by reference to Exhibit 10.63 to AMR’s report on Form 10-K for the year ended December 31, 1998. |
10.117 | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Daniel P. Garton, dated May 21, 1998, incorporated by reference to Exhibit 10.66 to AMR’s report on Form 10-K for the year ended December 31, 1998. |
10.118 | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Monte E. Ford, dated November 15, 2000, incorporated by reference to Exhibit 10.74 to AMR’s report on Form 10-K for the year ended December 31, 2000. |
10.119 | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and William K. Ris, Jr., dated October 20, 1999, incorporated by reference to Exhibit 10.79 to AMR’s report on Form 10-K for the year ended December 31, 1999. |
10.120 | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Gary F. Kennedy dated February 3, 2003, incorporated by reference to Exhibit 10.55 to AMR’s report on Form 10-K for the year ended December 31, 2002. |
10.121 | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Robert W. Reding dated May 20, 2003, incorporated by reference to Exhibit 10.71 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
10.122 | Employment agreement between AMR, American Airlines and William K. Ris, Jr. dated November 11, 1999, incorporated by reference to Exhibit 10.73 to AMR’s report on Form 10-K for the year ended December 31, 2003. |
10.123 | Employment agreement between AMR, American Airlines and Robert W. Reding dated May 21, 2003, incorporated by reference to Exhibit 10.94 to AMR’s report on Form 10-K for the year ended December 31, 2004. |
10.124 | Amended and Restated Executive Termination Benefits Agreement between AMR, American Airlines and Jeffrey J. Brundage dated April 1, 2004, incorporated by reference to Exhibit 10.5 to AMR’s report on Form 10-Q for the quarterly period ended March 31, 2004. |
10.125 | Form of Amendment to Executive Termination Benefits Agreement dated as of January 1, 2005, incorporated by reference to Exhibit 10.124 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.126 | Employment agreement between AMR, American Airlines and Thomas W. Horton dated March 29, 2006, incorporated by reference to Exhibit 10.1 to AMR’s current report on Form 8-K dated March 31, 2006. |
10.127 | Amendment of employment agreement between AMR, American Airlines and Thomas W. Horton dated July 15, 2008, incorporated by reference to Exhibit 10.5 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2008. |
10.128 | Supplemental Executive Retirement Program for Officers of American Airlines, Inc., as amended and restated as of January 1, 2005, incorporated by reference to Exhibit 10.127 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.129 | Trust Agreement Under Supplemental Retirement Program for Officers of American Airlines, Inc., as amended and restated as of June 1, 2007, incorporated by reference to Exhibit 10.128 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.130 | Trust Agreement Under Supplemental Executive Retirement Program for Officers of American Airlines, Inc. Participating in the $uper $aver Plus Plan, as amended and restated as of June 1, 2007, incorporated by reference to Exhibit 10.129 to AMR’s report on Form 10-K for the year ended December 31, 2008.
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10.131 | Aircraft Purchase Agreement by and between American Airlines, Inc. and The Boeing Company, dated October 31, 1997, incorporated by reference to Exhibit 10.48 to AMR’s report on Form 10-K for the year ended December 31, 1997. Confidential treatment was granted as to a portion of this document. |
10.132 | Letter Agreement dated November 17, 2004 and Purchase Agreement Supplements dated January 11, 2005 between the Boeing Company and American Airlines, Inc., incorporated by reference to Exhibit 10.99 to AMR’s report on Form 10-K for the year ended December 31, 2004. Confidential treatment was granted as to a portion of these agreements. |
10.133 | Letter Agreement between the Boeing Company and American Airlines, Inc. dated May 5, 2005, incorporated by reference to Exhibit 10.7 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2005. Confidential treatment was granted as to a portion of this agreement. |
10.134 | Aircraft Purchase Agreement by and between AMR Eagle Holding Corporation and Bombardier Inc., dated January 31, 1998, incorporated by reference to Exhibit 10.49 to AMR’s report on Form 10-K for the year ended December 31, 1997. Confidential treatment was granted as to a portion of this agreement. |
10.135 | AMR Corporation Procedures for Deferral of Board Retainers and Fees (an amendment and restatement of the Directors Stock Equivalent Purchase Plan), as amended and restated as of January 1, 2005, incorporated by reference to Exhibit 10.135 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.136 | 2009 Annual Incentive Plan for American, incorporated by reference to Exhibit 99.1 to AMR’s current report on Form 8-K dated February 3, 2009. |
10.137 | 2010 Annual Incentive Plan for American, incorporated by reference to Exhibit 99.1 to AMR’s current report on Form 8-K dated January 22, 2010. |
10.138 | Purchase Agreement No. 3219 between American Airlines, Inc. and The Boeing Company, dated as of October 15, 2008. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2Section 18 of the Securities and Exchange Act of 1934, as amended, incorporated by referenceand otherwise are not subject to Exhibit 10.29 to American Airlines, Inc.’s report on Form 10-K for the year ended December 31, 2008.liability under those sections. |
100
10.139 | Form of 2007-2009 Performance Share Agreement (with awards to executive officers noted), and 2007-2009 Performance Share Plan for Officers and Key Employees, incorporated by reference to Exhibit 10.1 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2007.
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10.140 | Form of 2008-2010 Performance Share Agreement (with awards to executive officers noted), and 2008-2010 Performance Share Plan for Officers and Key Employees, incorporated by reference to Exhibit 99.3 to AMR’s current report on Form 8-K dated May 22, 2008. |
10.141 | Form of 2009-2011 Performance Share Agreement (with awards to executive officers noted), and 2009-2011 Performance Share Plan for Officers and Key Employees, incorporated by reference to Exhibit 10.2 to AMR’s current report Form 10-Q for the quarterly period ended June 30, 2009. |
10.142 | AMR Corporation 1998 Long Term Incentive Plan, as Amended and Restated as of January 1, 2005, incorporated by reference to Exhibit 10.142 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.143 | AMR Corporation 2009 Long Term Incentive Plan, incorporated by reference to Exhibit 10.4 to AMR’s report on Form 10-Q for the quarterly period ended June 30, 2009. |
10.144 | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated August 17, 2007. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.133 to AMR’s report on Form 10-K for the year ended December 31, 2007.
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10.145 | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated November 20, 2007. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.134 to AMR’s report on Form 10-K for the year ended December 31, 2007.
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10.146 | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated December 10, 2007. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.135 to AMR’s report on Form 10-K for the year ended December 31, 2007.
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10.147 | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated January 20, 2008. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.136 to AMR’s report on Form 10-K for the year ended December 31, 2007.
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10.148 | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated February 11, 2008. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.137 to AMR’s report on Form 10-K for the year ended December 31, 2007.
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10.149 | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated as of June 9, 2009. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, incorporated by reference to Exhibit 10.5 to AMR’s report on Form 10-QA for the quarter ended June 30, 2009.
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10.150 | Purchase Agreement Supplement by and between AMR Eagle Holding Corporation and Bombardier Inc., dated December 2, 2009. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended. |
10.151 | Purchase Agreement Supplement by and between American Airlines, Inc. and The Boeing Company, dated December 18, 2009. Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended. |
10.152 | AMR Corporation Amended and Restated Directors Pension Benefits Plan, effective as of January 1, 2005, incorporated by reference to Exhibit 10.149 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.153 | Amended and Restated Air Transportation Plan for Non-Employee Directors of AMR Corporation, effective as of January 1, 2005, incorporated by reference to Exhibit 10.150 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.154 | AMR Corporation 2003 Employee Stock Incentive Plan, as amended as of January 1, 2005, incorporated by reference to Exhibit 10.151 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
10.155 | First Amendment to AMR Corporation 1994 Directors Stock Incentive Plan, dated as of January 1, 2005, incorporated by reference to Exhibit 10.152 to AMR’s report on Form 10-K for the year ended December 31, 2008. |
12 | Computation of ratio of earnings to fixed charges for the years ended December 31, 2008, 2007,
2006, 2005 and 2004.
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21 | Significant subsidiaries of the registrant as of December 31, 2009. |
23 | Consent of Independent Registered Public Accounting Firm. |
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). |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
| | | | By: | /s/ Gerard J. Arpey | | | Gerard J. Arpey | | | Chairman, President and Chief Executive Officer | | | (Principal Executive Officer) | | | | |
Gerard J. Arpey Chairman and Chief Executive Officer (Principal Executive Officer) Date: February 17, 2010 16, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates noted: | | | /s/ Gerard J. Arpey | | /s/ Thomas W Horton | Gerard J. Arpey | | Thomas W. Horton | Director, Chairman and Chief Executive Officer (Principal Executive Officer) | | Executive/s/ Isabella D. Goren Isabella D. Goren Senior Vice President and Chief Financial Officer | (Principal Executive Officer) | | (Principal Financial and Accounting Officer) |
| | | /s/ John W. Bachmann | | /s/ Michael A. Miles | John W. Bachmann, Director | | /s/ Michael A. Miles Michael A. Miles, Director | | | | | | | /s/ David L. Boren | | /s/ Philip J. Purcell | David L. Boren, Director | | /s/ Philip J. Purcell Philip J. Purcell, Director | | | | | | | /s/ Armando M. Codina | | /s/ Ray M. Robinson | Armando M. Codina, Director | | /s/ Ray M. Robinson Ray M. Robinson, Director | | | | | | | /s/ Rajat K. Gupta | | /s/ Judith Rodin | Rajat K. Gupta, Director | | /s/ Judith Rodin Judith Rodin, Director | /s/ Alberto Ibargüen Alberto Ibargüen, Director | | | | | | /s/ Alberto Ibargüen
| | /s/ Matthew K. Rose Matthew K. Rose, Director | Alberto Ibargüen, Director
| | Matthew K. Rose, Director | | | | | | | /s/ Ann McLaughlin Korologos | | /s/ Roger T. Staubach | Ann McLaughlin Korologos, Director | | /s/ Roger T. Staubach Roger T. Staubach, Director | | | | | | | | | | | | | Date: February 17, 2010 | | | | | |
Date: February 16, 2011 101
Schedule AMR CORPORATION
Schedule II -— Valuation and Qualifying Accounts and Reserves
(in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Changes
| | | | | | | | | | | | | Charged to
| | | | | | Sales,
| | | | | Balance at
| | Statement of
| | | | Write-Offs
| | Retirements
| | Balance at
| | | Beginning
| | Operations
| | | | (Net of
| | and
| | End of
| | | of Year | | Accounts | | Payments | | Recoveries) | | Transfers | | Year | | | (In millions) | | Year ended December 31, 2010 | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for obsolescence of inventories | | $ | 509 | | | $ | 32 | | | $ | — | | | $ | — | | | $ | (11 | ) | | $ | 530 | | Allowance for uncollectible accounts | | | 58 | | | | 5 | | | | — | | | | (5 | ) | | | — | | | | 58 | | Reserves for environmental remediation costs | | | 18 | | | | — | | | | (1 | ) | | | — | | | | — | | | | 17 | | Year ended December 31, 2009 | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for obsolescence of inventories | | $ | 488 | | | $ | 40 | | | $ | — | | | $ | — | | | $ | (19 | ) | | $ | 509 | | Allowance for uncollectible accounts | | | 49 | | | | 6 | | | | — | | | | 3 | | | | — | | | | 58 | | Reserves for environmental remediation costs | | | 18 | | | | 1 | | | | (1 | ) | | | — | | | | — | | | | 18 | | Year ended December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for obsolescence of inventories | | $ | 424 | | | $ | 101 | | | $ | — | | | $ | — | | | $ | (37 | ) | | $ | 488 | | Allowance for uncollectible accounts | | | 41 | | | | 6 | | | | — | | | | 2 | | | | — | | | | 49 | | Reserves for environmental remediation costs | | | 21 | | | | 2 | | | | (5 | ) | | | — | | | | — | | | | 18 | |
102
| | Balance at beginning of year | | | Changes charged to statement of operations accounts | | | Payments | | | Write-offs (net of recoveries) | | | Sales, retire- ments and transfers | | | Balance at end of year | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2009 | | | | | | | | | | | | | | Allowance for obsolescence of inventories | | $ | 488 | | | $ | 40 | | | $ | - | | | $ | - | | | $ | (19 | ) | | $ | 509 | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for uncollectible accounts | | | 49 | | | | 6 | | | | - | | | | 3 | | | | - | | | | 58 | | | | | | | | | | | | | | | | | | | | | | | | | | | Reserves for environmental remediation costs | | | 18 | | | | 1 | | | | (1 | ) | | | - | | | | - | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | Allowance for obsolescence of inventories | | $ | 424 | | | $ | 101 | | | $ | - | | | $ | - | | | $ | (37 | ) | | $ | 488 | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for uncollectible accounts | | | 41 | | | | 6 | | | | | | | | 2 | | | | | | | | 49 | | | | | | | | | | | | | | | | | | | | | | | | | | | Reserves for environmental remediation costs | | | 21 | | | | 2 | | | | (5 | ) | | | - | | | | - | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2007 | | | | | | | | | | | | | | | | | | | | | | Allowance for obsolescence of inventories | | $ | 411 | | | $ | 27 | | | $ | - | | | $ | - | | | $ | (14 | ) | | $ | 424 | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for uncollectible accounts | | | 45 | | | | (1 | ) | | | | | | | (3 | ) | | | | | | | 41 | | | | | | | | | | | | | | | | | | | | | | | | | | | Reserves for environmental remediation costs | | | 33 | | | | - | | | | (7 | ) | | | (5 | ) | | | - | | | | 21 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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