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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Transition Period From to .
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Commission file number 1-8400.
AMR CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 75-1825172
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
4333 Amon Carter Blvd.
Fort Worth, Texas 76155
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 963-1234
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Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No .
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $1 par value - 153,693,678 as of April 17, 2001.
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INDEX
AMR CORPORATION
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations -- Three months ended March 31,
2001 and 2000
Condensed Consolidated Balance Sheets -- March 31, 2001 and December
31, 2000
Condensed Consolidated Statements of Cash Flows -- Three months ended
March 31, 2001 and 2000
Notes to Condensed Consolidated Financial Statements -- March 31, 2001
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Part II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In millions, except per share amounts)
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Three Months Ended March 31,
----------------------------
2001 2000
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REVENUES
Passenger - American Airlines, Inc. $ 3,935 $ 3,774
- AMR Eagle 354 338
Cargo 176 167
Other revenues 295 298
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Total operating revenues 4,760 4,577
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EXPENSES
Wages, salaries and benefits 1,746 1,617
Aircraft fuel 686 553
Depreciation and amortization 313 288
Maintenance, materials and repairs 280 271
Other rentals and landing fees 257 237
Commissions to agents 224 257
Food service 184 185
Aircraft rentals 148 153
Other operating expenses 905 804
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Total operating expenses 4,743 4,365
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OPERATING INCOME 17 212
OTHER INCOME (EXPENSE)
Interest income 40 32
Interest expense (119) (119)
Interest capitalized 41 38
SFAS 133 adjustments (21) --
Miscellaneous - net (15) (6)
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(74) (55)
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INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (57) 157
Income tax provision (benefit) (14) 68
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INCOME (LOSS) FROM CONTINUING OPERATIONS (43) 89
INCOME FROM DISCONTINUED OPERATIONS, NET OF
APPLICABLE INCOME TAXES AND MINORITY INTEREST -- 43
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NET EARNINGS (LOSS) $ (43) $ 132
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Continued on next page.
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AMR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(Unaudited) (In millions, except per share amounts)
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Three Months Ended March 31,
----------------------------
2001 2000
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EARNINGS PER SHARE
Basic
Income (Loss) from Continuing Operations $ (0.28) $ 0.60
Discontinued Operations -- 0.29
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Net Earnings (Loss) $ (0.28) $ 0.89
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Diluted
Income (Loss) from Continuing Operations $ (0.28) $ 0.57
Discontinued Operations -- 0.29
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Net Earnings (Loss) $ (0.28) $ 0.86
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NUMBER OF SHARES USED IN COMPUTATION
Basic 154 149
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Diluted 154 154
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The accompanying notes are an integral part of these financial statements.
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AMR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (In millions)
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March 31, December 31,
2001 2000
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ASSETS
CURRENT ASSETS
Cash $ 172 $ 89
Short-term investments 1,386 2,144
Receivables, net 1,383 1,303
Inventories, net 727 757
Deferred income taxes 694 695
Other current assets 211 191
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Total current assets 4,573 5,179
EQUIPMENT AND PROPERTY
Flight equipment, net 14,161 13,721
Other equipment and property, net 1,753 1,671
Purchase deposits for flight equipment 1,659 1,700
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17,573 17,092
EQUIPMENT AND PROPERTY UNDER CAPITAL LEASES
Flight equipment, net 1,406 1,448
Other equipment and property, net 96 96
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1,502 1,544
Route acquisition costs and airport operating and gate lease
rights, net 1,131 1,143
Other assets, net 1,755 1,255
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$ 26,534 $ 26,213
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,261 $ 1,267
Accrued liabilities 1,827 2,231
Air traffic liability 2,960 2,696
Current maturities of long-term debt 451 569
Current obligations under capital leases 245 227
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Total current liabilities 6,744 6,990
Long-term debt, less current maturities 4,669 4,151
Obligations under capital leases, less current obligations 1,208 1,323
Deferred income taxes 2,461 2,385
Other liabilities, deferred gains, deferred
credits and postretirement benefits 4,219 4,188
STOCKHOLDERS' EQUITY
Common stock 182 182
Additional paid-in capital 2,843 2,911
Treasury stock (1,771) (1,865)
Accumulated other comprehensive income 72 (2)
Retained earnings 5,907 5,950
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7,233 7,176
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$ 26,534 $ 26,213
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The accompanying notes are an integral part of these financial statements.
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AMR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In millions)
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Three Months Ended March 31,
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2001 2000
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 19 $ 521
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures, including purchase deposits for flight equipment (847) (781)
Debtor-in-possession financing provided to Trans World Airways, Inc. (312) --
Net decrease (increase) in short-term investments 758 (187)
Proceeds from:
Dividend from Sabre Holdings Corporation -- 559
Sale of equipment and property 127 80
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Net cash used for investing activities (274) (329)
CASH FLOW FROM FINANCING ACTIVITIES:
Payments on long-term debt and capital lease obligations (291) (306)
Proceeds from:
Issuance of long-term debt 604 97
Exercise of stock options 25 8
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Net cash provided by (used for) financing activities 338 (201)
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Net increase (decrease) in cash 83 (9)
Cash at beginning of period 89 85
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Cash at end of period $ 172 $ 76
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ACTIVITIES NOT AFFECTING CASH:
Distribution of Sabre Holdings Corporation shares to AMR shareholders $ -- $ 581
The accompanying notes are an integral part of these financial statements.
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AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
these financial statements contain all adjustments, consisting of normal
recurring accruals, necessary to present fairly the financial position,
results of operations and cash flows for the periods indicated. The results
of operations and cash flows for Sabre Holdings Corporation (Sabre) have
been reflected as discontinued operations in the consolidated financial
statements for the three months ended March 31, 2000. Results of operations
for the periods presented herein are not necessarily indicative of results
of operations for the entire year. For further information, refer to the
consolidated financial statements and footnotes thereto included in the AMR
Corporation (AMR or the Company) Annual Report on Form 10-K for the year
ended December 31, 2000. Certain amounts from 2000 have been reclassified
to conform with the 2001 presentation.
2. Accumulated depreciation of owned equipment and property at March 31, 2001
and December 31, 2000, was $8.6 billion and $8.3 billion, respectively.
Accumulated amortization of equipment and property under capital leases at
March 31, 2001 and December 31, 2000, was $1.2 billion.
3. As discussed in the notes to the consolidated financial statements included
in the Company's Annual Report on Form 10-K for the year ended December 31,
2000, the Miami International Airport Authority is currently remediating
various environmental conditions at the Miami International Airport (the
Airport) and funding the remediation costs through landing fee revenues and
other cost recovery methods. Future costs of the remediation effort may be
borne by carriers operating at the Airport, including American, through
increased landing fees and/or other charges since certain of the
potentially responsible parties are no longer in business. The future
increase in landing fees and/or other charges may be material but cannot be
reasonably estimated due to various factors, including the unknown extent
of the remedial actions that may be required, the proportion of the cost
that will ultimately be recovered from the responsible parties, and
uncertainties regarding the environmental agencies that will ultimately
supervise the remedial activities and the nature of that supervision. In
addition, the Company is subject to environmental issues at various other
airport and non-airport locations. Management believes, after considering a
number of factors, that the ultimate disposition of these environmental
issues is not expected to materially affect the Company's consolidated
financial position, results of operations or cash flows. Amounts recorded
for environmental issues are based on the Company's current assessments of
the ultimate outcome and, accordingly, could increase or decrease as these
assessments change.
4. As of March 31, 2001, the Company had commitments to acquire the following
aircraft: 62 Boeing 737-800s, 23 Boeing 757-200s, 16 Boeing 777-200ERs, 145
Embraer regional jets and 25 Bombardier CRJ-700s. Deliveries of all
aircraft continue through 2006. Payments for all aircraft will approximate
$2.1 billion during the remainder of 2001, $1.7 billion in 2002, $950
million in 2003 and an aggregate of approximately $1.4 billion in 2004
through 2006.
5. On January 10, 2001, the Company announced three transactions that would
substantially increase the scope of its existing network. The first of
these transactions was consummated on April 9, 2001 when the Company
purchased substantially all of the assets of Trans World Airlines, Inc.
(TWA) for approximately $625 million in cash (subject to certain working
capital adjustments), including the satisfaction of $312 million in
debtor-in-possession financing, and assumed certain liabilities. The
Company funded the acquisition of TWA's assets with its existing cash and
short-term investments.
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AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
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As a result of the three transactions announced on January 10, 2001, and
for several other reasons, American Airlines, Inc. (American) and American
Eagle have initiated an impairment review of certain fleet types in
accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This review, which is expected to be completed
during the second quarter of 2001, could result in an impairment charge to
be taken by the Company. The size of resulting 2001 charge is not presently
known, but may be significant.
6. Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities", as amended (SFAS 133). SFAS 133 requires the Company
to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in
earnings. The adoption of SFAS 133 did not result in a cumulative effect
adjustment being recorded to net income for the change in accounting.
However, the Company recorded a transition adjustment of approximately $64
million (net of tax of $38 million) in accumulated other comprehensive
income in the first quarter of 2001.
FUEL PRICE RISK MANAGEMENT
American enters into fuel swap and option contracts to protect against
increases in jet fuel prices. These instruments generally have maturities
of up to 36 months. In accordance with SFAS 133, the Company accounts for
its fuel swap and option contracts as cash flow hedges. Upon the adoption
of SFAS 133, the Company recorded the fair value of its fuel hedging
contracts in other assets and accumulated other comprehensive income on the
consolidated balance sheets. Effective gains or losses on fuel hedging
agreements are deferred in accumulated other comprehensive income and are
recognized in earnings as a component of fuel expense when the underlying
fuel being hedged is used. The ineffective portion of the fuel hedge
agreements is calculated as the excess of the change in the fuel hedge
agreements intrinsic value relative to the change in the value of the fuel
being hedged. In calculating the ineffective portion of the fuel hedge
instrument, the Company excludes the time value component related to any
option premiums paid. The time value component related to any option
premiums is recognized in earnings during the life of the contract. Both
the ineffective portion and time value component of the fuel hedge
agreements are recognized as a component of SFAS 133 adjustments on the
consolidated statements of operations.
For the three months ended March 31, 2001, the Company recognized hedging
gains of approximately $47 million on fuel used during such period, which
are classified in fuel expense on the accompanying consolidated statements
of operations. In addition, for the three months ended March 31, 2001, the
Company recorded a $21 million loss which is classified as SFAS 133
adjustments on the accompanying consolidated statements of operations. This
amount consists of a $31 million loss relating to time value, partially
offset by a $10 million gain relating to the ineffectiveness of the fuel
hedging agreements. The fair value of the Company's fuel hedging agreements
at March 31, 2001, representing the amount the Company would receive to
terminate the agreements, totaled $202 million.
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AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
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INTEREST RATE RISK MANAGEMENT
American utilizes interest rate swap contracts to effectively convert a
portion of its fixed-rate obligations to floating-rate obligations. Under
SFAS 133, the Company accounts for its interest rate swap contracts as fair
value hedges whereby the fair value of the related interest rate swap
agreement is reflected in other assets with the corresponding liability
being recorded as a component of long-term debt on the consolidated balance
sheets. The Company has no ineffectiveness with regard to its interest rate
swap contracts as each interest rate swap agreement meets the criteria for
accounting under the short-cut method as defined in SFAS 133 for fair value
hedges of debt instruments.
FOREIGN EXCHANGE RISK MANAGEMENT
To hedge against the risk of future exchange rate fluctuations on a portion
of American's foreign cash flows, the Company enters into various currency
put option agreements on a number of foreign currencies. In accordance with
SFAS 133, the Company accounts for its currency put option agreements as
cash flow hedges. Upon the adoption of SFAS 133, the Company recorded the
fair value of its foreign currency put option agreements in other assets
and accumulated other comprehensive income on the consolidated balance
sheets. Effective gains and loss on currency put option agreements are
deferred in accumulated other comprehensive income and are recognized in
earnings as a component of passenger revenue when the underlying hedged
revenues are recognized. The time value component related to any option
premiums is recognized in earnings during the life of the contract as a
component of passenger revenue. The Company has no ineffectiveness with
regard to its currency put option agreements.
The Company has entered into Japanese yen currency exchange agreements to
effectively convert certain yen-based lease obligations into dollar-based
obligations. Under SFAS 133, the Company accounts for its Japanese yen
currency exchange agreements as cash flow hedges whereby the fair value of
the related Japanese yen currency exchange agreements is reflected in other
assets and accumulated other comprehensive income on the consolidated
balance sheets. The Company has no ineffectiveness with regard to its
Japanese yen currency exchange agreements.
7. Effective after the close of business on March 15, 2000, AMR distributed
0.722652 shares of Sabre Class A common stock for each share of AMR stock
owned by AMR's shareholders. The record date for the dividend of Sabre
stock was the close of business on March 1, 2000. In addition, on February
18, 2000, Sabre paid a special one-time cash dividend of $675 million to
shareholders of record of Sabre common stock at the close of business on
February 15, 2000. Based upon its approximate 83 percent interest in Sabre,
AMR received approximately $559 million of this dividend. The dividend of
AMR's entire ownership interest in Sabre's common stock resulted in a
reduction to AMR's retained earnings in March of 2000 equal to the carrying
value of the Company's investment in Sabre on March 15, 2000, which
approximated $581 million.
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AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
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The results of operations for Sabre have been reflected in the consolidated
statements of operations as discontinued operations. Other summarized
financial information of discontinued operations for the three months ended
March 31, 2000, is as follows (in millions):
Revenues $542
Minority interest 10
Income taxes 36
Net income 43
8. The following table sets forth the computations of basic and diluted
earnings (loss) per share (in millions, except per share data):
Three Months Ended March 31,
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2001 2000
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NUMERATOR:
Income (loss) from continuing operations - numerator for
basic and diluted earnings per share $ (43) $ 89
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DENOMINATOR:
Denominator for basic earnings (loss) per share -
weighted-average shares 154 149
Effect of dilutive securities:
Employee options and shares -- 14
Assumed treasury shares purchased -- (9)
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Dilutive potential common shares -- 5
Denominator for diluted earnings (loss) per share -
adjusted weighted-average shares 154 154
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Basic earnings (loss) per share from continuing operations
$(0.28) $0.60
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Diluted earnings (loss) per share from continuing operations
$(0.28) $0.57
====== =====
For the three months ended March 31, 2001, approximately 14 million dilutive
potential shares were not added to the denominator because inclusion of such
shares would be antidilutive.
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AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
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9. The Company includes unrealized gains and losses on available-for-sale
securities, changes in minimum pension liabilities and changes in the fair
value of certain derivative financial instruments which qualify for hedge
accounting in comprehensive income. For the three months ended March 31,
2001 and 2000, comprehensive income was $31 million and $132 million,
respectively. The difference between net loss and comprehensive income for
the three months ended March 31, 2001, is as follows (in millions):
Net loss $ (43)
Cumulative effect of adoption of SFAS 133 as of January 1,
2001, net of tax of $38 $ 64
Reclassification of derivative financial instruments into
earnings, net of tax of $20 (34)
Reclassification of SFAS 133 time value adjustments into earnings,
net of tax of $5 9
Change in fair value of derivative financial instruments, net
of tax of $20 32
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Accumulated derivative gain included in other
comprehensive income, net of tax of $42 71
Unrealized gain on available-for-sale securities, net of tax
of $1 3
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Comprehensive income $ 31
======
As of March 31, 2001, the Company estimates during the next twelve months
it will reclassify from accumulated other comprehensive income into
earnings approximately $63 million (net of tax of $38 million) relating to
its derivative financial instruments.
10. During 2001, American and American Eagle entered into various debt
agreements which are secured by aircraft. Effective interest rates on these
agreements are based on LIBOR plus a spread and mature over various periods
of time, ranging from 2013 to 2021. As of March 31, 2001, the Company had
borrowed approximately $604 million under these agreements.
11. In April 2001, the Board of Directors of American approved the guarantee by
American of AMR's existing debt obligations. As such, American will
unconditionally guarantee through the life of the related obligations
approximately $900 million of unsecured debt, approximately $700 million of
secured debt and approximately $1.6 billion of special facility revenue
bonds issued by municipalities.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
SUMMARY AMR's loss from continuing operations during the first quarter of 2001
was $43 million, or $0.28 loss per share, as compared to income from continuing
operations of $89 million, or $0.57 per share diluted, for the same period in
2000. AMR's operating income of $17 million decreased $195 million compared to
the same period in 2000.
The Company's REVENUES increased $183 million, or 4.0 percent, in the first
quarter of 2001 versus the same period last year. American's PASSENGER REVENUES
increased by 4.3 percent, or $161 million. American's YIELD (the average amount
one passenger pays to fly one mile) of 14.88 cents increased by 6.7 percent
compared to the same period in 2000. Domestic yields increased 6.6 percent from
the first quarter of 2000. International yields increased 6.8 percent, primarily
due to an increase of 7.9 percent and 7.1 percent in European and Latin American
yields, respectively, partially offset by a decrease of approximately 1.0
percent in Pacific yields. Yields were up year-over-year largely due to fare
increases enacted over the course of 2000.
American's traffic or REVENUE PASSENGER MILES (RPMs) decreased 2.1 percent to
26.5 billion miles for the quarter ended March 31, 2001. American's capacity or
AVAILABLE SEAT MILES (ASMs) of 39.0 billion miles decreased 2.6 percent compared
to the first quarter of 2000. American's domestic traffic decreased 3.7 percent
on a capacity decrease of 2.7 percent and international traffic increased 1.4
percent on a capacity decrease of 2.4 percent. The decrease in domestic traffic
was due to a slowing U.S. economy, softening the demand for air travel. The
increase in international traffic was driven by a 6.9 percent increase in
traffic to the Pacific on a capacity decrease of 3.5 percent, a 0.7 percent
increase in traffic to Europe on a capacity increase of 0.1 percent and a 0.9
percent increase in traffic to Latin America on a capacity decrease of 4.1
percent. The overall decrease in capacity was due primarily to the Company's
More Room Throughout Coach program, partially offset by an increase in the
number of aircraft.
The Company's OPERATING EXPENSES increased 8.7 percent, or $378 million.
American's cost per ASM increased 11.7 percent to 11.21 cents, partially driven
by a reduction in ASMs due to the Company's More Room Throughout Coach program.
Adjusted for this program, American's cost per ASM grew approximately 5.7
percent. WAGES, SALARIES AND BENEFITS increased 8.0 percent, or $129 million,
primarily due to an increase in the average number of equivalent employees,
contractual wage rate and seniority increases that are built into the Company's
labor contracts, partially offset by a decrease in provision for profit-sharing
of approximately $28 million. AIRCRAFT FUEL expense increased 24.1 percent, or
$133 million, due to a 21.5 percent increase in the Company's average price per
gallon and a 2.2 percent increase in the Company's fuel consumption. The
increase in fuel expense is net of gains of approximately $47 million recognized
during the first quarter of 2001 related to the Company's fuel hedging program.
COMMISSIONS TO AGENTS decreased 12.8 percent, or $33 million, despite an
increase of approximately 4.3 percent in passenger revenues, due primarily to
the continued benefit from commission structure changes implemented in 2000 and
a decrease in the percentage of commissionable transactions. Other operating
expense increased 12.6 percent, or $101 million, due primarily to increases in
external contract maintenance, outsourced services, data processing, and travel
and incidental costs.
OTHER INCOME (EXPENSE), historically a net expense, increased $19 million, or
34.5 percent, due to an increase in interest income of $8 million, or 25.0
percent, relating primarily to the Trans World Airlines, Inc. (TWA)
debtor-in-possession financing which partially offsets approximately $21 million
of SFAS 133 adjustments as a result of the Company's ineffectiveness and
time-value adjustments associated with its fuel hedging program (see Footnote 6
to the condensed consolidated financial statements) and an increase of $9
million in miscellaneous-net relating primarily to the write-down of certain
investments held by the Company.
The effective tax rates for the three months ended March 31, 2001 and 2000 were
based upon the operating results for such periods. As such, the effective tax
rates do not represent estimated annual effective tax rates.
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OPERATING STATISTICS
Three Months Ended March 31,
----------------------------
2001 2000
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AMERICAN AIRLINES
Revenue passenger miles (millions) 26,452 27,022
Available seat miles (millions) 38,977 40,020
Cargo ton miles (millions) 549 546
Passenger load factor 67.9% 67.5%
Breakeven load factor 67.7% 63.7%
Passenger revenue yield per passenger mile (cents) 14.88 13.95
Passenger revenue per available seat mile (cents) 10.10 9.42
Cargo revenue yield per ton mile (cents) 31.68 30.32
Operating expenses per available seat mile (cents) 11.21 10.04
Fuel consumption (gallons, in millions) 743 730
Fuel price per gallon (cents) 87.6 72.1
Fuel price per gallon, excluding fuel taxes (cents) 82.0 66.6
Operating aircraft at period-end 719 703
AMR EAGLE
Revenue passenger miles (millions) 860 861
Available seat miles (millions) 1,588 1,514
Passenger load factor 54.2% 56.9%
Operating aircraft at period-end 267 271
Operating aircraft at March 31, 2001, included:
AMERICAN AIRLINES AIRCRAFT: AMR EAGLE AIRCRAFT:
Airbus A300-600R 35 ATR 42 30
Boeing 727-200 58 Embraer 135 40
Boeing 737-800 58 Embraer 145 50
Boeing 757-200 102 Super ATR 43
Boeing 767-200 8 Saab 340 79
Boeing 767-200 Extended Range 22 Saab 340B Plus 25
Boeing 767-300 Extended Range 49 -----
Boeing 777-200 Extended Range 31 Total 267
Fokker 100 75 =====
McDonnell Douglas MD-11 6
McDonnell Douglas MD-80 272
McDonnell Douglas MD-90 3
-------
Total 719
=======
Average aircraft age is 10.8 years for American's aircraft and 6.3 years for AMR
Eagle aircraft.
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LIQUIDITY AND CAPITAL RESOURCES
NET CASH PROVIDED BY OPERATING ACTIVITIES in the three-month period ended March
31, 2001 was $19 million, a decrease of $502 million over the same period in
2000, due primarily to a decrease in the Company's working capital and a
decrease in income from continuing operations. Capital expenditures for the
first three months of 2001 were $847 million, and included the acquisition of
seven Boeing 737-800s, four Boeing 777-200ERs and seven Embraer 135 aircraft.
These capital expenditures were financed primarily through secured mortgage and
debt agreements.
As of March 31, 2001, the Company had commitments to acquire the following
aircraft: 62 Boeing 737-800s, 23 Boeing 757-200s, 16 Boeing 777-200ERs, 145
Embraer regional jets and 25 Bombardier CRJ-700s. Deliveries of all aircraft
continue through 2006. Payments for all aircraft will approximate $2.1 billion
during the remainder of 2001, $1.7 billion in 2002, $950 million in 2003 and an
aggregate of approximately $1.4 billion in 2004 through 2006. The Company
expects to fund its remaining 2001 capital expenditures from the Company's
existing cash and short-term investments, internally generated cash or new
financing depending upon market conditions and the Company's evolving view of
its long-term needs.
OTHER INFORMATION
On January 10, 2001, the Company announced three transactions that would
substantially increase the scope of its existing network. The first of these
transactions was consummated on April 9, 2001 when the Company purchased
substantially all of the assets of TWA for approximately $625 million in cash
(subject to certain working capital adjustments), including the satisfaction of
$312 million in debtor-in-possession financing, and assumed certain liabilities.
The Company funded the acquisition of TWA's assets with its existing cash and
short-term investments. The Company does not expect the acquisition of TWA to
have a significantly accretive or dilutive impact on the Company's 2001
earnings. Although TWA has historically reported net losses and the acquisition
of TWA will result in the incurrence of integration costs, the Company expects
to realize certain synergies from the acquisition, including, among other
things, improved passenger revenues and a reduction in rental expense from the
renegotiated lease obligations.
Secondly, the Company announced that it has agreed to acquire from United
Airlines, Inc. (United) certain key strategic assets (slots, gates and aircraft)
of US Airways Group, Inc. (US Airways) upon the consummation of the previously
announced merger between United and US Airways. In addition to the acquisition
of these assets, American will lease a number of slots and gates from United so
that American may operate half of the northeast Shuttle (New York/Washington
DC/Boston). United will operate the other half of the Shuttle. For these assets,
American will pay approximately $1.2 billion in cash to United and assume
approximately $300 million in aircraft operating leases. The consummation of
these transactions is contingent upon the closing of the proposed United/US
Airways merger, which is no longer expected to occur in the second quarter of
2001. Also, the acquisition of aircraft is dependent upon certain rights of
United to exclude aircraft from the transactions and also is generally dependent
upon a certain number of US Airways' Boeing 757 cockpit crew members
transferring to American's payroll.
Finally, American has agreed to acquire a 49 percent stake in, and to enter
into an exclusive marketing agreement with, D.C. Air, LLC (DC Air). American has
agreed to pay $82 million in cash for its ownership stake. American will have a
right of first refusal on the acquisition of the remaining 51 percent stake in
DC Air. American will also lease to DC Air a certain number of Fokker 100
aircraft with necessary crews (known in the industry as a "wet lease"). These
wet leased aircraft will be used by DC Air in its operations. DC Air is the
first significant new entrant at Ronald Reagan Washington National Airport (DCA)
in over a decade. DC Air will acquire the assets needed to begin its DCA
operations from United/US Airways upon the consummation of the merger between
the two carriers. American's investment in DC Air and the other arrangements
described above are contingent upon the consummation of the merger between
United and US Airways and upon execution of definitive documentation between DC
Air and United (which has not yet occurred).
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As a result of the above transactions, and for several other reasons,
American and American Eagle have initiated an impairment review of certain fleet
types in accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." This review, which is expected to be completed during the
second quarter of 2001, could result in an impairment charge to be taken by the
Company. The size of any resulting 2001 charge is not presently known, but may
be significant.
FORWARD-LOOKING INFORMATION
Statements in this report contain various forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which represent the
Company's expectations or beliefs concerning future events. When used in this
report, the words "expects," "plans," "anticipates," and similar expressions are
intended to identify forward-looking statements. All forward-looking statements
in this report are based upon information available to the Company on the date
of this report. The Company undertakes no obligation to publicly update or
revise any forward- looking statement, whether as a result of new information,
future events or otherwise. Forward-looking statements are subject to a number
of factors that could cause actual results to differ materially from our
expectations. Additional information concerning these and other factors is
contained in the Company's Securities and Exchange Commission filings, included
but not limited to the Form 10-K for the year ended December 31, 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk from the information provided
in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of the
Company's Annual Report on Form 10-K for the year ended December 31, 2000,
except as discussed below.
Based on projected fuel usage for the next twelve months, including the
Company's estimated fuel consumption for TWA based upon TWA's actual average
consumption for the twelve months ended September 30, 2000, a hypothetical 10
percent increase in the March 31, 2001 cost per gallon of fuel would result in
an increase to the Company's aircraft fuel expense of approximately $204 million
for the next twelve months, net of fuel hedge instruments outstanding at March
31, 2001. The change in market risk from December 31, 2000 is due primarily to
the estimated fuel consumption of TWA, partially offset by a decrease in fuel
prices. As of March 31, 2001, the Company, including the estimated fuel
consumption of TWA, has hedged approximately 40 percent of its remaining 2001
fuel requirements, 22 percent of its 2002 fuel requirements, and approximately
11 percent of its 2003 fuel requirements.
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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In connection with its frequent flyer program, American was sued in several
purported class action cases currently pending in the Circuit Court of Cook
County, Illinois. In Wolens et al. v. American Airlines, Inc. and Tucker v.
American Airlines, Inc. (hereafter, "Wolens"), plaintiffs seek money damages and
attorneys' fees claiming that a change made to American's AAdvantage program in
May 1988, which limited the number of seats available to participants traveling
on certain awards, breached American's agreement with its AAdvantage members.
(Although the Wolens complaint originally asserted several state law claims,
only the plaintiffs' breach of contract claim remains after the U.S. Supreme
Court ruled that the Airline Deregulation Act preempted the other claims). In
Gutterman et al. v. American Airlines, Inc. (hereafter, "Gutterman"), plaintiffs
also seek money damages and attorneys' fees claiming that the February 1995
increase in the award mileage required to claim a certain AAdvantage travel
award breached the agreement between American and its AAdvantage members. On
June 23, 1998, the court certified the Gutterman case as a class action.
In February 2000, American and the Wolens and Gutterman plaintiffs reached
a settlement of both lawsuits. Pursuant to the agreement, American and the
plaintiffs agreed to ask the court to consolidate the Wolens and Gutterman
lawsuits for purposes of settlement. Further, American and the Wolens plaintiffs
agreed to ask the court to certify a Wolens class of AAdvantage members who had
at least 35,000 unredeemed AAdvantage miles as of December 31, 1988. In
addition, American and the Gutterman plaintiffs agreed to ask the court to
decertify the existing Gutterman class and to certify a new Gutterman class of
AAdvantage members who as of December 31, 1993 (a) had redeemed 25,000 or 50,000
AAdvantage miles for certain AAdvantage awards and/or (b) had between 4,700 and
24,999 unredeemed miles in his or her account that were earned in 1992 or 1993.
Depending upon certain factors, Wolens and Gutterman class members will be
entitled to receive certificates entitling them to mileage off certain
AAdvantage awards or dollars off certain American fares.
As part of the settlement, American agreed to pay the Wolens and Gutterman
plaintiffs' attorneys fees and the cost of administering the settlement, which
amounts were accrued as of December 31, 1999. In consideration for the relief
provided in the settlement agreement, Wolens and Gutterman class members will
release American from all claims arising from any changes that American has made
to the AAdvantage program and reaffirming American's right to make changes to
the AAdvantage program in the future. On May 2, 2000, the court preliminarily
approved the settlement and authorized sending notice of the settlement to class
members. On September 28, 2000 and February 23, 2001, the court has held several
hearings on the fairness of the settlement and the request for fees by the
plaintiffs' attorneys. The court has not yet ruled on these issues.
On July 26, 1999, a class action lawsuit was filed, and in November 1999 an
amended complaint was filed, against AMR Corporation, American Airlines, Inc.,
AMR Eagle Holding Corporation, Airlines Reporting Corporation, and the Sabre
Group Holdings, Inc. in the United States District Court for the Central
District of California, Western Division (Westways World Travel, Inc. v. AMR
Corp., et al.). The lawsuit alleges that requiring travel agencies to pay debit
memos to American for violations of American's fare rules (by customers of the
agencies) (1) breaches the Agent Reporting Agreement between American and
American Eagle and plaintiffs, (2) constitutes unjust enrichment, and (3)
violates the Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO).
The as yet uncertified class includes all travel agencies who have been or will
be required to pay monies to American for debit memos for fare rules violations
from July 26, 1995 to the present. Plaintiffs seek to enjoin American from
enforcing the pricing rules in question and to recover the amounts paid for
debit memos, plus treble damages, attorneys' fees, and costs. Defendants' motion
to dismiss all claims is pending. American intends to vigorously defend the
lawsuit. Although the Company believes that the litigation is without merit,
adverse court decisions could impose restrictions on American's ability to
respond to competitors, and American's business may be adversely impacted.
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PART II
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
On May 13, 1999, the United States (through the Antitrust Division of the
Department of Justice) sued AMR Corporation, American Airlines, Inc., and AMR
Eagle Holding Corporation in federal court in Wichita, Kansas. The lawsuit
alleges that American unlawfully monopolized or attempted to monopolize airline
passenger service to and from Dallas/Fort Worth International Airport (DFW) by
increasing service when new competitors began flying to DFW, and by matching
these new competitors' fares. The Department of Justice seeks to enjoin American
from engaging in the alleged improper conduct and to impose restraints on
American to remedy the alleged effects of its past conduct. The case has been
set for trial on May 22, 2001. American intends to defend the lawsuit
vigorously.
Between May 14, 1999 and June 7, 1999, seven class action lawsuits were
filed against AMR Corporation, American Airlines, Inc., and AMR Eagle Holding
Corporation in the United States District Court in Wichita, Kansas seeking
treble damages under federal and state antitrust laws, as well as injunctive
relief and attorneys' fees. (King v. AMR Corp., et al.; Smith v. AMR Corp., et
al.; Team Electric v. AMR Corp., et al.; Warren v. AMR Corp., et al.; Whittier
v. AMR Corp., et al.; Wright v. AMR Corp., et al.; and Youngdahl v. AMR Corp.,
et al.). Collectively, these lawsuits allege that American unlawfully
monopolized or attempted to monopolize airline passenger service to and from DFW
by increasing service when new competitors began flying to DFW, and by matching
these new competitors' fares. Two of the suits (Smith and Wright) also allege
that American unlawfully monopolized or attempted to monopolize airline
passenger service to and from DFW by offering discounted fares to corporate
purchasers, by offering a frequent flyer program, by imposing certain conditions
on the use and availability of certain fares, and by offering override
commissions to travel agents. The suits propose to certify several classes of
consumers, the broadest of which is all persons who purchased tickets for air
travel on American into or out of DFW since 1995 to the present. On November 10,
1999, the District Court stayed all of these actions pending developments in the
case brought by the Department of Justice. As a result, to date no class has
been certified. American intends to defend these lawsuits vigorously.
On March 1, 2000, American was served with a federal grand jury subpoena
calling for American to produce documents relating to de-icing operations at DFW
since 1992. American has produced documents to the grand jury, but is not able
at this time to determine either the full scope of the grand jury's
investigation or American's role in the investigation. American intends to
cooperate fully with the government's investigation.
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PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
12 Computation of ratio of earnings to fixed charges for the three months
ended March 31, 2001 and 2000.
Form 8-Ks filed under Item 5 - Other Events
On January 10, 2001, AMR filed a report on Form 8-K relative to a press
release issued to announce that American Airlines, Inc. had agreed (i) to
purchase substantially all of the assets of Trans World Airlines, Inc., (ii) to
acquire certain key strategic US Airways, Inc. assets, and (iii) to acquire a 49
percent stake in, and to enter into an exclusive marketing agreement with, DC
Air.
On January 17, 2001, AMR filed a report on Form 8-K relative to a press
release issued to report the Company's fourth quarter and full year 2000
earnings.
On March 8, 2001, AMR filed a report on Form 8-K to announce that on
March 7, 2001, American Airlines, Inc. increased its $500 million cash offer for
certain assets of Trans World Airlines, Inc.
On March 13, 2001, AMR filed a report on Form 8-K relative to a press
release issued to announce the acceptance of American Airlines, Inc. bid for
Trans World Airways, Inc.
Form 8-Ks furnished under Item 9 - Regulation FD Disclosure
On February 1, 2001, AMR filed a report on Form 8-K to announce various
upcoming AMR senior executive speeches.
On February 21, 2001, AMR filed a report on Form 8-K relative to certain
data regarding its fleet plan, unit costs, capacity, traffic and fuel.
On March 15, 2001, AMR filed a report on Form 8-K relative to certain
data regarding its unit costs, capacity, traffic and fuel, and a monthly update.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMR CORPORATION
Date: April 23, 2001 BY: /s/ Thomas W. Horton
----------------------------------------
Thomas W. Horton
Senior Vice President and Chief Financial
Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
12 Computation of ratio of earnings to fixed charges for the three months
ended March 31, 2001 and 2000.