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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934 [Fee Required]
    For fiscal year ended December 31, 1995.

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 [No Fee Required]

Commission file number 1-2691.

                             AMERICAN AIRLINES, INC.
- - --------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              Delaware                                   13-1502798
  ---------------------------------         ------------------------------------
    (State or other jurisdiction            (I.R.S. Employer Identification No.)
  of incorporation or organization)

       4333 Amon Carter Blvd.
         Fort Worth, Texas                                  76155
  -------------------------------           ------------------------------------
  (Address of principal executive                         (Zip Code)
              offices)

Registrant's telephone number, including area code    (817) 963-1234
                                                      --------------
Securities registered pursuant to Section 12(b) of the Act:

            Title of each class             Name of exchange on which registered
- - ---------------------------------------     ------------------------------------
5-1/4% Subordinated Debentures due 1998            New York Stock Exchange
6-1/4% Subordinated Debentures due 1996            New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

                                      NONE
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                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X  No    .
                                       ---    ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

American Airlines, Inc. is a wholly-owned subsidiary of AMR Corporation, and
there is no market for the registrant's common stock. As of March 18, 1996,
1,000 shares of the registrant's common stock were outstanding.

The registrant meets the conditions set forth in, and is filing this form with
the reduced disclosure format prescribed by, General Instructions J(1)(a) and
J(1)(b) of Form 10-K.

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                                     PART I

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ITEM 1.    BUSINESS

American Airlines, Inc. (American or the Company), the principal subsidiary of
AMR Corporation (AMR), was founded in 1934. For financial reporting purposes,
American's operations fall within two major lines of business: the Airline Group
and the Information Services Group.

AIRLINE GROUP

The Airline Group consists primarily of American's Passenger and Cargo
divisions.

AMERICAN'S PASSENGER DIVISION is one of the largest scheduled passenger airlines
in the world. At the end of 1995, American provided scheduled jet service to
more than 160 destinations, primarily throughout North America, the Caribbean,
Latin America, Europe and the Pacific.

AMERICAN'S CARGO DIVISION is one of the largest scheduled air freight carriers
in the world. The Cargo Division provides a full range of freight and mail
services to shippers throughout the airline's system. In addition, through
cooperative agreements with other carriers, it has the ability to transport
shipments to virtually any country in the world.

INFORMATION SERVICES GROUP

The Information Services Group consists primarily of four divisions of American:
SABRE Travel Information Network (STIN), SABRE Computer Services (SCS), SABRE
Development Services (SDS) and SABRE Interactive.

STIN markets SABRE -- one of the largest privately owned, real-time computer
systems in the world -- which provides travel distribution and information
services to nearly 30,000 travel agencies in 74 countries on six continents.

SCS manages and maintains AMR's technology infrastructure. This includes the
planning, installation and operation of AMR's data centers, as well as
technology and architectural planning for AMR units and for external customers.
SCS also provides voice and data communication services to AMR, but is currently
in negotiations with a third party to outsource this function.

SDS provides decision support systems, application software packages, systems
development and consulting services to other AMR units and to external companies
in the transportation, travel and other industries worldwide.

SABRE INTERACTIVE is a distribution strategy division formed by The SABRE Group
in 1995 to develop opportunities for consumer-direct travel distribution via
personal computer, CD-ROM, interactive television, cable television and other
media.

These business units and certain other units of AMR form The SABRE Group, one of
AMR's three major lines of business.

Additional information regarding business segments is included in Note 12 to the
consolidated financial statements.


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ROUTES AND COMPETITION

AIR TRANSPORTATION Most major air carriers have developed hub-and-spoke systems
and schedule patterns in an effort to maximize the revenue potential of their
service. American operates four hubs: Dallas/Fort Worth, Chicago O'Hare, Miami
and San Juan, Puerto Rico. In 1995, American implemented schedule reductions
which ended the airline's hub operations at Raleigh/Durham and Nashville. Delta
Air Lines and United Airlines have hub operations at American's Dallas/Fort
Worth and Chicago O'Hare hubs, respectively.

      The American Eagle carriers owned by AMR Eagle, an AMR subsidiary,
increase the number of markets AMR's Airline Group serves by providing
connections to American at its hubs and certain other major airports. The
American Eagle carriers -- Simmons Airlines, Inc., Flagship Airlines, Inc.,
Wings West Airlines, Inc. and Executive Airlines, Inc. -- serve smaller markets
through Dallas/Fort Worth, Chicago, Miami, Nashville, San Juan, Los Angeles and
New York John F. Kennedy International Airport. American's competitors also own
or have marketing agreements with regional carriers which provide service at
their major hubs.

      In addition to its extensive domestic service, American provides service
to and from cities in various other countries, across the Atlantic and Pacific,
and between the U.S. and the Caribbean, and Central and South America.
American's operating revenues from foreign operations were approximately $4.7
billion in 1995, $4.3 billion in 1994 and $3.9 billion in 1993. Additional
information about the Company's foreign operations is included in Note 11 to the
consolidated financial statements.

      Service over almost all of American's routes is highly competitive.
Currently, any carrier deemed fit by the U.S. Department of Transportation (DOT)
is free to operate scheduled passenger service between any two points within the
U.S. and its possessions. On most of its non-stop routes, American competes with
at least one, and usually more than one, major domestic airline including:
America West Airlines, Continental Airlines, Delta Air Lines, Northwest
Airlines, Southwest Airlines, Trans World Airlines, United Airlines, and USAir.
Competition is even greater between cities that require a connection, for
example, Portland, Oregon to Tampa, Florida, where eight airlines compete via
the respective hubs of each carrier. American also competes with national,
regional, all-cargo, and charter carriers and, particularly on shorter segments,
ground transportation.

      On all of its routes, pricing decisions are affected by competition from
other airlines, some of which have cost structures significantly lower than
American's and can therefore operate profitably at lower fare levels.
Approximately 40 percent of American's bookings are impacted by competition from
lower-cost carriers. American and its principal competitors use inventory
management systems that permit them to vary the number of discount seats offered
on each flight in an effort to maximize revenues, yet still be price competitive
with lower-cost carriers.

      Competition in many international markets is subject to extensive
government regulation. In these markets, American competes with foreign-investor
owned carriers, state-owned airlines and U.S. carriers that have been granted
authority to provide scheduled passenger and cargo service between the U.S. and
various overseas locations. American's operating authority in these markets is
subject to aviation agreements between the U.S. and the respective countries,
and in some cases, fares and schedules require the approval of the DOT and the
relevant foreign governments. Because international air transportation is
governed by bilateral or other agreements between the U.S. and the foreign
country or countries involved, changes in U.S. or foreign government aviation
policy could result in the alteration or termination of such agreements,
diminish the value of such route authorities, or otherwise affect American's
international operations. Bilateral agreements between the U.S. and various
foreign countries served by American are subject to frequent renegotiation.

      The major domestic carriers have some advantage over foreign competitors
in their ability to generate traffic from their extensive domestic route
systems. In many cases, however, U.S. carriers are limited in their rights to
carry passengers beyond designated gateway cities in foreign countries. Some of
American's foreign competitors are owned and subsidized by foreign governments.
To improve their access to each others' markets, various U.S. and foreign
carriers -- including American --have made substantial equity investments in, or
established marketing relationships with, other carriers. American has
well-developed code sharing programs with Canadian Airlines International,
Qantas Airways, Singapore Airlines, South African Airways, Gulf Air, and British
Midland. In the coming years, the Company expects to develop these programs
further and to evaluate new alliances with other international carriers.

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      American believes that it has several advantages relative to its
competition. Its fleet is young, efficient and quiet. It has a comprehensive
domestic and international route structure, anchored by efficient hubs, which
permit it to take full advantage of whatever traffic growth occurs. The Company
believes American's AAdvantage frequent flyer program, which is the largest
program in the industry, and its superior service also give it a competitive
advantage.

COMPUTER RESERVATION SYSTEMS The complexity of the various schedules and fares
offered by air carriers has fostered the development of electronic distribution
systems. Travel agents and other subscribers access travel information and book
airline, hotel and car rental reservations and issue airline tickets using these
systems. American developed the SABRE computer reservation system (CRS), which
is one of the largest CRSs in the world. Competition among the CRS vendors is
strong. Services similar to those offered through SABRE are offered by several
air carriers and other companies in the United States and abroad.

      The SABRE CRS has several advantages relative to its competition. SABRE
ranks first in market share among travel agents in the U.S. The SABRE CRS is
furthering its expansion into international markets and continues to be in the
forefront of technological innovation in the CRS industry.

REGULATION

GENERAL The Airline Deregulation Act of 1978 (Act) and various other statutes
amending the Act eliminated most domestic economic regulation of passenger and
freight transportation. However, the DOT and the Federal Aviation Administration
(FAA) still exercise certain regulatory authority over air carriers under the
Federal Aviation Act of 1958, as amended. The DOT maintains jurisdiction over
international route authorities and certain consumer protection matters, such as
advertising, denied boarding compensation, baggage liability, and computer
reservations systems. The DOT issued certain rules governing the CRS industry
which became effective on December 7, 1992, and expire on December 31, 1997.

      The FAA regulates flying operations generally, including establishing
personnel, aircraft and security standards. In addition, the FAA has implemented
a number of requirements that the Airline Group is incorporating into its
maintenance program. These matters relate to, among other things, inspection and
maintenance of aging aircraft, corrosion control, collision avoidance and
windshear detection. Based on its current implementation schedule, the Airline
Group expects to be in compliance with the applicable requirements within the
required time periods.

      The U.S. Department of Justice has jurisdiction over airline antitrust
matters. The U.S. Postal Service has jurisdiction over certain aspects of the
transportation of mail and related services. Labor relations in the air
transportation industry are regulated under the Railway Labor Act, which vests
in the National Mediation Board certain regulatory powers with respect to
disputes between airlines and labor unions arising under collective bargaining
agreements.

FARES Airlines are permitted to establish their own domestic fares without
governmental regulation, and the industry is characterized by substantial price
competition. The DOT maintains authority over international fares, rates and
charges. International fares and rates are also subject to the jurisdiction of
the governments of the foreign countries which American serves. While air
carriers are required to file and adhere to international fare and rate tariffs,
many international markets are characterized by substantial commissions,
overrides, and discounts to travel agents, brokers and wholesalers.

      Fare discounting by competitors has historically had a negative effect on
American's financial results because American is generally required to match
competitors' fares to maintain passenger traffic. During recent years, a number
of new low-cost airlines have entered the domestic market and several major
airlines have begun to implement efforts to lower their cost structures. Further
fare reductions, domestic and international, may occur in the future. If fare
reductions are not offset by increases in passenger traffic or changes in the
mix of traffic that improves yields, American's operating results will be
negatively impacted.

AIRPORT ACCESS In 1968, the FAA issued a rule designating New York John F.
Kennedy, New York LaGuardia, Washington National, Chicago O'Hare and Newark
airports as high density traffic airports. Newark 



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was subsequently removed from the high-density airport classification. The rule
adopted hourly take-off and landing slot allocations for each of these airports.
Currently, the FAA permits the purchasing, selling, leasing and trading of these
slots by airlines and others, subject to certain restrictions. Certain foreign
airports, including London Heathrow, a major European destination for American,
also have slot allocations.

      American currently has sufficient slot authorizations to operate its
existing flights and has generally been able to obtain slots to expand its
operations and change its schedules. There is no assurance, however, that
American will be able to obtain slots for these purposes in the future, because,
among other factors, slot allocations are subject to changes in government
policies.

ENVIRONMENTAL MATTERS The Company is subject to various laws and government
regulations concerning environmental matters and employee safety and health in
the U.S. and other countries. U.S. federal laws that have a particular impact on
the Company include the Airport Noise and Capacity Act of 1990 (ANCA), the Clean
Air Act, the Resource Conservation and Recovery Act, the Clean Water Act, the
Safe Drinking Water Act, and the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA or the Superfund Act). The Company is
also subject to the oversight of the Occupational Safety and Health
Administration (OSHA) concerning employee safety and health matters. The U.S.
Environmental Protection Agency (EPA), OSHA, and other federal agencies have
been authorized to promulgate regulations that have an impact on the Company's
operations. In addition to these federal activities, various states have been
delegated certain authorities under the aforementioned federal statutes. Many
state and local governments have adopted environmental and employee safety and
health laws and regulations, some of which are similar to federal requirements.
As a part of its continuing safety, health and environmental program, the
Company has maintained compliance with such requirements without any material
adverse effect on its business.

      For purposes of noise standards, jet aircraft are rated by categories or
"stages." The ANCA requires the phase-out by December 31, 1999, of Stage II
aircraft operations, subject to certain exceptions. Under final regulations
issued by the FAA in 1991, air carriers are required to reduce, by modification
or retirement, the number of Stage II aircraft in their fleets 25 percent by
December 31, 1994; 50 percent by December 31, 1996; 75 percent by December 31,
1998, and 100 percent by December 31, 1999. Alternatively, a carrier may satisfy
the regulations by operating a fleet that is at least 55 percent, 65 percent, 75
percent, and 100 percent Stage III by the dates set forth in the preceding
sentence, respectively. At December 31, 1995, approximately 89 percent of
American's active fleet was Stage III, the quietest and most fuel efficient
rating category.

      The ANCA recognizes the rights of airport operators with noise problems to
implement local noise abatement programs so long as they do not interfere
unreasonably with interstate or foreign commerce or the national air
transportation system. Authorities in several cities have promulgated aircraft
noise reduction programs, including the imposition of night-time curfews. The
ANCA generally requires FAA approval of local noise restrictions on Stage III
aircraft first effective after October 1990, and establishes a regulatory notice
and review process for local restrictions on Stage II aircraft first proposed
after October 1990. While American has had sufficient scheduling flexibility to
accommodate local noise restrictions imposed to date, American's operations
could be adversely affected if locally-imposed regulations become more
restrictive or widespread.

      American has been identified by the EPA as a potentially responsible party
(PRP) with respect to the following Superfund Sites: Operating Industries, Inc.,
California; Cannons, New Hampshire; Byron Barrel and Drum, New York; Palmer PSC,
Massachusetts; Frontier Chemical, New York and Duffy Brothers, Massachusetts.
American has settled the Cannons, Byron Barrel and Drum, Palmer PSC and Frontier
Chemical matters, and all that remains to complete these matters are
administrative tasks. American has signed a partial consent decree with respect
to Operating Industries, Inc. With respect to the Operating Industries, Inc.,
Palmer PSC, Frontier Chemical and Duffy Brothers sites, American is one of
several PRPs named at each site. American's alleged waste disposal volumes are
minor compared to the other PRPs.

      American, along with most other tenants at Boston Logan International
Airport, has been notified under the Massachusetts State Superfund statute of a
claim for contribution by the Massachusetts Port Authority (Massport). Massport
has claimed that American is responsible for past and future remediation costs
at the airport. American is vigorously defending against Massport's claim.



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      American, along with most other tenants at the San Francisco International
Airport, has been ordered by the California Regional Water Quality Control Board
to engage in various studies of potential environmental contamination at the
airport and to undertake remedial measures, if necessary.

      The Miami International Airport Authority is currently remediating various
environmental conditions at the Miami International Airport (Airport) and
funding the remediation costs through landing fee revenues. Some of the costs of
the remediation effort may be borne by carriers currently operating at the
Airport, including American, through increased landing fees since certain of the
potentially responsible parties are no longer in business. The future increase
in landing fees 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.

      American does not expect these matters, individually or collectively, to
have a significant impact on its financial position or liquidity.

LABOR

The airline business is labor intensive. Wages, salaries and benefits
represented 35 percent of American's consolidated operating expenses for the
year ended December 31, 1995. To improve its competitive position, American has
undertaken various steps to reduce its unit labor costs, including workforce
reductions.

      The majority of American's employees are represented by labor unions and
covered by collective bargaining agreements. American's relations with such
labor organizations are governed by the Railway Labor Act. Under this act, the
collective bargaining agreements among American and these organizations do not
expire but instead become amendable as of a stated date. If either party wishes
to modify the terms of any such agreement, it must notify the other party before
the contract becomes amendable. After receipt of such notice, the parties must
meet for direct negotiations, and if no agreement is reached, either party may
request the National Mediation Board (NMB) to appoint a federal mediator. If no
agreement is reached in mediation, the NMB may determine, at any time, that an
impasse exists, and if an impasse is declared, the NMB proffers binding
arbitration to the parties. Either party may decline to submit to arbitration.
If arbitration is rejected, a 30-day "cooling-off" period commences, following
which the labor organization may strike and the airline may resort to
"self-help," including the imposition of its proposed amendments and the hiring
of replacement workers.

      In October 1995, a panel of arbitrators issued a binding arbitration award
that resolved the remaining open issues in the labor contract between American
and the Association of Professional Flight Attendants (APFA). The arbitration
award included a one-time early retirement program, for which American recorded
a charge in the fourth quarter. American's collective bargaining agreement with
the APFA becomes amendable on November 1, 1998.

      In 1995, American reached agreements with the members of the Transport
Workers Union (TWU) on their labor contracts. The new contracts include a
one-time early retirement program, for which American recorded a charge in the
fourth quarter. American's collective bargaining agreement with the TWU becomes
amendable on March 1, 2001.

      American's collective bargaining agreement with the Allied Pilots
Association (APA) became amendable on August 31, 1994. In January 1996, the APA
filed a petition with the NMB to appoint a federal mediator. A mediator has been
appointed, and initial meetings have been held between the APA and the NMB
mediator and between American and the NMB mediator. Joint meetings began in
March 1996.


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FUEL

American's operations are significantly affected by the availability and price
of jet fuel. American's fuel costs and consumption for the years 1991 through
1995 were:



                                                               Percent of
                Gallons                       Average Price    American's
               Consumed       Total Cost       Per Gallon      Operating
   Year      (in millions)   (in millions)     (in cents)       Expenses
- - ----------   -------------   -------------    -------------    ----------
                                                       
   1991          2,527          $1,780            70.5            14.7
   1992          2,862           1,862            65.1            13.6
   1993          2,939           1,818            61.8            12.8
   1994          2,741           1,556            56.7            11.2
   1995          2,749           1,565            56.9            10.7

                                                            
      Based upon American's 1995 fuel consumption, a one-cent increase in the
average annual price-per-gallon of jet fuel would increase American's monthly
fuel costs by approximately $2.3 million, not considering the offsetting effect
of American's fuel cost hedging program.

      The impact of fuel price changes on the Company's competitors is dependent
upon various factors, including their hedging strategies. However, lower fuel
prices may be offset by increased price competition and lower revenues for all
air carriers. Conversely, there can be no assurance that American will be able
to pass fuel cost increases on to its customers by increasing fares in the
future.

      Most of American's fuel is purchased pursuant to contracts which, by their
terms, may be terminated upon short notice. While American does not anticipate a
significant reduction in fuel availability, dependency on foreign imports of
crude oil and the possibility of changes in government policy on jet fuel
production, transportation and marketing make it impossible to predict the
future availability of jet fuel. If there were major reductions in the
availability of jet fuel, American's business would be adversely affected.

FREQUENT FLYER PROGRAM

American established the AAdvantage frequent flyer program (AAdvantage) to
develop passenger loyalty by offering awards to travelers for their continued
patronage. AAdvantage members earn mileage credits for flights on American,
American Eagle and certain other participating airlines, or by utilizing
services of other program participants, including hotels, car rental companies
and bank credit card issuers. American sells mileage credits to the other
companies participating in the program. American reserves the right to change
the AAdvantage program rules, regulations, travel awards and special offers at
any time without notice. American may initiate changes impacting, for example,
participant affiliations, rules for earning mileage credit, mileage levels and
awards, blackout dates and limited seating for travel awards, and the features
of special offers. American reserves the right to end the AAdvantage program
with six months notice.

      Mileage credits can be redeemed for free, discounted or upgraded travel on
American, American Eagle or participating airlines, or for other travel industry
awards. Once a member accrues sufficient mileage for an award, the member may
request an award certificate from American. Award certificates may be redeemed
up to one year after issuance. Most travel awards are subject to blackout dates
and capacity controlled seating. All miles earned after July 1989 must be
redeemed within three years or they expire.

      American accounts for its frequent flyer obligation on an accrual basis
using the incremental cost method. American's frequent flyer liability is
accrued each time a member accumulates sufficient mileage in his or her account
to claim the lowest level of free travel award (25,000 miles) and such award is
expected to be used for free travel. American includes fuel, food, and
reservations/ticketing costs, but not a contribution to overhead or profit, in
the calculation of incremental cost. The cost for fuel is estimated based on
total fuel consumption tracked by various categories of markets, with an amount
allocated to each passenger. Food costs are tracked by market category, with an
amount allocated to each passenger. Reservation/ticketing costs are based on the
total number of passengers, including those traveling on free awards, divided
into American's total expense for 



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these costs. American defers a portion of revenues from the sale of mileage
credits to companies participating in the AAdvantage program and recognizes such
revenues over a period approximating the period during which the mileage credits
are used.

      At December 31, 1995 and 1994, American estimated that approximately 4.7
million and 4.5 million free travel awards, respectively, were eligible for
redemption. At December 31, 1995 and 1994, American estimated that approximately
4.0 million and 3.6 million free travel awards, respectively, were expected to
be redeemed for free travel. In making this estimate, American has excluded
mileage in inactive accounts, mileage related to accounts that have not yet
reached the lowest level of free travel award, and mileage in active accounts
that have reached the lowest level of free travel award but which is not
expected to ever be redeemed for free travel. The liability for the program
mileage that has reached the lowest level of free travel award and is expected
to be redeemed for free travel and deferred revenues for mileage sold to others
participating in the program was $370 million and $329 million, representing 7.0
percent and 7.9 percent of American's total current liabilities, at December 31,
1995 and 1994, respectively.

      The number of free travel awards used for travel on American during the
years ended December 31, 1995, 1994 and 1993, was approximately 2,204,000,
2,198,000, and 2,163,000, respectively, representing 8.4 percent, 8.5 percent
and 9.5 percent of total revenue passenger miles for each period, respectively.
American believes displacement of revenue passengers is insignificant given
American's load factors, its ability to manage frequent flyer seat inventory,
and the relatively low ratio of free award usage to revenue passenger miles.

OTHER MATTERS

SEASONALITY AND OTHER FACTORS American's results of operations for any interim
period are not necessarily indicative of those for the entire year, since the
air transportation business is subject to seasonal fluctuations. Higher demand
for air travel has traditionally resulted in more favorable operating results
for the second and third quarters of the year than for the first and fourth
quarters.

      The results of operations in the air transportation business have also
significantly fluctuated in the past in response to general economic conditions.
In addition, fare initiatives, fluctuations in fuel prices, labor actions and
other factors could impact this seasonal pattern. Unaudited quarterly financial
data for the two-year period ended December 31, 1995, is included in Note 14 to
the consolidated financial statements.

      No material part of the business of American and its subsidiaries is
dependent upon a single customer or very few customers. Consequently, the loss
of the Company's largest few customers would not have a materially adverse
effect upon American.

INSURANCE American carries insurance for public liability, passenger liability,
property damage and all-risk coverage for damage to its aircraft, in amounts
which, in the opinion of management, are adequate.

OTHER GOVERNMENT MATTERS In time of war or during an unlimited national
emergency or civil defense emergency, American and other major air carriers may
be required to provide airlift services to the Military Airlift Command under
the Civil Reserve Air Fleet program.


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ITEM 2.    PROPERTIES

FLIGHT EQUIPMENT

Owned and leased aircraft operated by American at December 31, 1995, included:



                                                                                              Weighted
                              Current                                                         Average
      Equipment Type          Seating                   Capital      Operating                  Age
                              Capacity       Owned       Leased       Leased        Total      (Years)
- - --------------------------    --------      -------     -------      ---------     -------    --------
                                                                              
JET AIRCRAFT
Airbus A300-600R              266/267           10           -           25           35         6
Boeing 727-200                    150           53          14            -           67        19
Boeing 757-200                    188           46           9           31           86         4
Boeing 767-200                    172            8           -            -            8        13
Boeing 767-200 Extended           172            9          13            -           22        10
  Range
Boeing 767-300 Extended           215           16           3           22           41         5
  Range
Fokker 100                         97           66           5            4           75         3
McDonnell Douglas DC-10-10    237/290           13           4            -           17        19
McDonnell Douglas DC-10-30        273            4           1            -            5        21
McDonnell Douglas MD-11       251/271           19           -            -           19         4
McDonnell Douglas MD-80           139          119          25          116          260         8
                                               ---         ---          ---          ---        --
  Total                                        363          74          198          635         8
                                               ===         ===          ===          ===        ==


      For information concerning the estimated useful lives and residual values
for owned aircraft, lease terms and amortization relating to aircraft under
capital leases, and acquisitions of aircraft, see Notes 1, 3 and 4 to the
consolidated financial statements. See Management's Discussion and Analysis for
discussion of the retirement of certain aircraft from the fleet.

      In April 1995, American announced an agreement to sell 12 of its McDonnell
Douglas MD-11 aircraft to Federal Express Corporation (FedEx), with delivery of
the aircraft between 1996 and 1999. In addition, American has the option to sell
its remaining seven MD-11 aircraft to FedEx with deliveries between 2000 and
2002.

      Lease expirations for American's leased aircraft included in the above
table as of December 31, 1995, were:



                                                                                                 2001
                                                                                                 and
Equipment Type                   1996         1997        1998         1999         2000      Thereafter
- - ---------------------------    --------     --------    --------     --------     --------    --------
                                                                             
JET AIRCRAFT
Airbus A300-600R                   -            -           -            -            -          25
Boeing 727-200                     -            -           -            2            4           8
Boeing 757-200                     -            -           -            -            2          38
Boeing 767-200 Extended            -            -           -            -            -          13
Range
Boeing 767-300 Extended            -            -           -            -            -          10
Range
Fokker 100                         -            -           -            -            -           9
McDonnell Douglas DC-10-10         3            1           -            -            -           -
McDonnell Douglas DC-10-30         -            -           1            -            -           -
McDonnell Douglas MD-80            -            -           -            -            3         138
                                  --           --          --           --           --         ---
                                   3            1           1            2            9         241
                                  ==           ==          ==           ==           ==         ===




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      The table excludes leases for 15 Boeing 767-300 Extended Range aircraft
which can be canceled with 30 days' notice during the initial 10-year lease
term. At the end of that term in 1998, the leases can be renewed for periods
ranging from 10 to 12 years.

      Substantially all of American's aircraft leases include an option to
purchase the aircraft or to extend the lease term, or both, with the purchase
price or renewal rental to be based essentially on the market value of the
aircraft at the end of the term of the lease or at a predetermined fixed rate.

GROUND PROPERTIES

American leases, or has built as leasehold improvements on leased property, most
of its airport and terminal facilities; certain corporate office, maintenance
and training facilities in Fort Worth, Texas; its principal overhaul and
maintenance base and computer facility at Tulsa International Airport, Tulsa,
Oklahoma; its regional reservation offices; and local ticket and administration
offices throughout the system. American has entered into agreements with the
Tulsa Municipal Airport Trust; the Alliance Airport Authority, Fort Worth,
Texas; and the Dallas/Fort Worth, Chicago O'Hare, Raleigh/Durham, Nashville, San
Juan, New York, and Los Angeles airport authorities to provide funds for
constructing, improving and modifying facilities and acquiring equipment which
are or will be leased to American. American also utilizes public airports for
its flight operations under lease or use arrangements with the municipalities or
governmental agencies owning or controlling them and leases certain other ground
equipment for use at its facilities.

      For information concerning the estimated lives and residual values for
owned ground properties, lease terms and amortization relating to ground
properties under capital leases, and acquisitions of ground properties, see
Notes 1, 3 and 4 to the consolidated financial statements.

ITEM 3.    LEGAL PROCEEDINGS

In January, 1985, American announced a new fare category, the "Ultimate
SuperSaver," a discount, advance purchase fare that carried a 25 percent penalty
upon cancellation. On December 30, 1985, a class action lawsuit was filed in
Circuit Court, Cook County, Illinois entitled Johnson vs. American Airlines,
Inc. The Johnson plaintiffs allege that the 10 percent federal excise
transportation tax should be excluded from the "fare" upon which the 25 percent
penalty is assessed. The case has not been certified as a class action. Summary
judgment has been granted for American and the matter is currently on appeal.
American believes the matter is without merit and is vigorously defending the
lawsuit.

        American has been sued in two class action cases that have been
consolidated in the Circuit Court of Cook County, Illinois, in connection with
certain changes made to American's AAdvantage frequent flyer program in May,
1988. (Wolens, et al v. American Airlines, Inc., No. 88 CH 7554, and Tucker v.
American Airlines, Inc., No. 89 CH 199.) In both cases, the plaintiffs seek to
represent all persons who joined the AAdvantage program before May 1988.
Currently, the plaintiffs allege that, on that date, American implemented
changes that limited the number of seats available to participants traveling on
certain awards and established blackout dates during which no AAdvantage seats
would be available for certain awards and that these changes breached American's
contracts with AAdvantage members. Plaintiffs seek money damages for such
alleged breach and attorneys' fees. Previously the plaintiffs also alleged
violation of the Illinois Consumer Fraud and Deceptive Business Practice Act
(Consumer Fraud Act) and sought punitive damages, attorneys' fees and injunctive
relief preventing American from making changes to the AAdvantage program.
American originally moved to dismiss all of the claims asserting that they were
preempted by the Federal Aviation Act and barred by the Commerce Clause of the
U.S. Constitution.

        Initially, the trial court denied American's preemption motions, but
certified its decision for interlocutory appeal. In December 1990, the Illinois
Appellate Court held that plaintiffs' claims for an injunction are preempted by
the Federal Aviation Act, but that plaintiffs' claims for money damages could
proceed. On March 12, 1992, the Illinois Supreme Court affirmed the decision of
the Appellate Court. American sought a writ of certiorari from the U.S. Supreme
Court; and on October 5, 1992, the Court vacated the decision of the Illinois
Supreme Court and remanded the cases for reconsideration in light of the U.S.
Supreme Court's decision in Morales v. TWA, et al, which interpreted the
preemption provisions of the Federal Aviation Act very broadly. On December 16,
1993, the Illinois Supreme Court rendered its decision on remand, holding that
plaintiffs' 



                                       9
   11
claims seeking an injunction are preempted, but that identical claims for
compensatory and punitive damages are not preempted. On February 8, 1994,
American filed a petition for a writ of certiorari in the U.S. Supreme Court.
The Illinois Supreme Court granted American's motion to stay the state court
proceeding pending disposition of American's petition in the U.S. Supreme Court.
The matter was argued before the U.S. Supreme Court on November 1, 1994, and on
January 18, 1995, the U.S. Supreme Court issued its opinion ending a portion of
the suit against American. The U.S. Supreme Court held that a) plaintiffs' claim
for violation of the Illinois Consumer Fraud Act is preempted by federal law --
entirely ending that part of the case and eliminating plaintiffs' claim for
punitive damages; and b) certain breach of contract claims are not preempted by
federal law.

        The Court did not determine, however, whether the contract claims
asserted by the plaintiffs are preempted, and therefore, remanded the case to
the state court for further proceedings. Subsequently, plaintiffs filed an
amended complaint seeking damages solely for a breach of contract claim. In the
event that the plaintiffs' breach of contract claim is eventually permitted to
proceed in the state court, American intends to vigorously defend the case.

        In December, 1993, American announced that the number of miles required
to claim a certain travel award under American's AAdvantage frequent flyer
program would be increased effective February 1, 1995. On February 1, 1995 a
class action lawsuit entitled Gutterman vs. American Airlines, Inc. was filed in
the Circuit Court of Cook County, Illinois. The Gutterman plaintiffs claim that
this increase in mileage level violated the terms and conditions of the
agreement between American and AAdvantage members. On February 9, 1995, a
virtually identical class action lawsuit entitled Benway vs. American Airlines,
Inc. was filed in District Court, Dallas County, Texas. After limited discovery
and prior to class certification, a summary judgment dismissing the Benway case
was entered by the Dallas County Court in July 1995. On March 11, 1996,
American's motion to dismiss the Gutterman lawsuit was denied, although
American's motion for summary judgment is still pending. No class has been
certified in the Gutterman lawsuit and to date no discovery has been undertaken.
American believes the Gutterman complaint is without merit and is vigorously
defending the lawsuit.

        On February 10, 1995, American capped travel agency commissions for
one-way and round trip domestic tickets at $25 and $50, respectively.
Immediately thereafter, numerous travel agencies, and two travel agency trade
association groups, filed class action lawsuits against American and other major
air carriers (Continental, Delta, Northwest, United, USAir and TWA) that had
independently imposed similar limits on travel agency commissions. The suits
were transferred to the United States District Court for the District of
Minnesota, and consolidated as a multi-district litigation captioned In Re:
Airline Travel Agency Commission Antitrust Litigation. The plaintiffs assert
that the airline defendants conspired to reduce travel agency commissions and to
monopolize air travel in violation of sections 1 and 2 of the Sherman Act. The
case has been certified as a class action on behalf of approximately 40,000
domestic travel agencies and two travel agency trade associations. In June 1995
after extensive, expedited discovery, the travel agents moved for a preliminary
injunction to enjoin the commission caps, and the defendants simultaneously
moved for summary judgment. On August 31, 1995, the District Court denied both
motions. Pre-trial activities against the defendants, including American, are
continuing. American is vigorously defending the lawsuit.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(c) of Form 10-K.

                                     PART II
- - --------------------------------------------------------------------------------

ITEM 5.    MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

American is a wholly-owned subsidiary of AMR Corporation and there is no market
for the Registrant's Common Stock.

ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA

Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(a) of Form 10-K.


                                       10
   12
ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS
           (Abbreviated pursuant to General Instruction J(2)(a) of Form 10-K).

American Airlines, Inc., the principal subsidiary of AMR, was founded in 1934.
For financial reporting purposes, American's operations fall within two major
lines of business:  the Airline Group and the Information Services Group.

AIRLINE GROUP

The Airline Group consists primarily of American's Passenger and Cargo 
divisions.

AMERICAN'S PASSENGER DIVISION is one of the largest scheduled passenger airlines
in the world. At the end of 1995, American provided scheduled jet service to
more than 160 destinations, primarily throughout North America, the Caribbean,
Latin America, Europe and the Pacific.

AMERICAN'S CARGO DIVISION is one of the largest scheduled air freight carriers
in the world. The Cargo Division provides a full range of freight and mail
services to shippers throughout the airline's system. In addition, through
cooperative agreements with other carriers, it has the ability to transport
shipments to virtually any country in the world.

INFORMATION SERVICES GROUP

The Information Services Group consists primarily of four divisions of American:
SABRE Travel Information Network (STIN), SABRE Computer Services (SCS), SABRE
Development Services (SDS) and SABRE Interactive.

STIN markets SABRE -- one of the largest privately owned, real-time computer
systems in the world -- which provides travel distribution and information
services to nearly 30,000 travel agencies in 74 countries on six continents.

SCS manages and maintains AMR's technology infrastructure. This includes the
planning, installation and operation of AMR's data centers, as well as
technology and architectural planning for AMR units and for external customers.
SCS also provides voice and data communication services to AMR, but is currently
in negotiations with a third party to outsource this function.

SDS provides decision support systems, application software packages, systems
development and consulting services to other AMR units and to external companies
in the transportation, travel and other industries worldwide.

SABRE INTERACTIVE is a distribution strategy division formed by The SABRE Group
in 1995 to develop opportunities for consumer-direct travel distribution via
personal computer, CD-ROM, interactive television, cable television and other
media.

These business units and certain other units of AMR form The SABRE Group, one of
AMR's three major lines of business.


                                       11
   13
HIGHLIGHTS

SUMMARY American's net income in 1995 was $208 million. During the fourth
quarter of 1995, American recorded a charge of $485 million ($302 million after
tax) related to the cost of future pension and other postretirement benefits for
voluntary early retirement programs offered in conjunction with recently
renegotiated labor contracts covering members of the Transport Workers Union
(TWU) and the Association of Professional Flight Attendants (APFA), as well as
provisions for the writedown of certain McDonnell Douglas DC-10 aircraft, and
other restructuring activities. Before the special charge, net earnings were
$510 million. In addition to the restructuring charge, the Company's 1995
earnings include a charge of $41 million ($26 million after tax) related to the
loss of an aircraft operated by American. The expiration of the airline
industry's fuel tax exemption increased the Company's costs by approximately $21
million before tax. In 1994, American recorded net income of $268 million.
During the fourth quarter of 1994, American recorded a charge of $276 million
($173 million after tax) related to the cost of future pension and other
postretirement benefits for agent and management/support staff voluntary early
retirement programs, severance and other restructuring activities. Before the
special charge, net earnings were $441 million. The Company's 1995 operating
income was $968 million, compared to operating income of $912 million in 1994.

      In response to the increasing competitive emphasis on lower costs and
lower fares, in 1993 AMR began implementing a new strategic framework, known as
the Transition Plan. The Plan has three parts, each intended to improve AMR's
results. First, make the core airline business bigger and stronger where
economically justified. Second, and conversely, shrink the airline where it
cannot compete profitably. Third, encourage and support the growth of the
profitable information and management services businesses.

      American's improved results reflect progress on each of these three
tenets, as well as strong economies in most of the markets it serves, relatively
low jet fuel prices, and a healthier pricing environment which is attributable
in part to more modest industry capacity growth.

      American continued its effort to find the most productive use for each of
its aircraft. During 1995, the Company made major changes to its schedule.
American reallocated resources to longer flights and reduced its short-haul
flying, thus improving plane miles per jet aircraft by more than four percent.
To improve the mix of traffic, American increased frequency in major markets
while simultaneously ending hub operations at Raleigh/Durham and Nashville and
reducing or eliminating jet service in 72 city pairs. On the international
front, American increased the scope of its service to Latin America and the
United Kingdom, and took advantage of the new U.S. - Canadian bilateral
agreement to open service on several new Canadian routes and expand its
code-sharing program with Canadian Airlines International (CAI).

      To reduce interest expense, the Company retired prior to maturity $139
million in face value of long-term debt, net of sinking fund balances. In
addition, $616 million in outstanding principal of certain debt and lease
obligations was refinanced during 1995. These transactions resulted in an
extraordinary loss of $21 million ($13 million after tax) in 1995.

      Meanwhile, the Company's non-airline businesses continued their strong
performances. As a result of its increased domestic booking share and the steady
pace of international growth, The Information Services Group's revenues were up
13.5 percent from 1994 and its operating margin was approximately 26 percent.


                                       12
   14
REVENUES

1995 COMPARED TO 1994 American's operating revenues increased 5.2 percent to
$15.6 billion in 1995, compared to $14.8 billion in 1994. Passenger revenues
increased 4.0 percent, $509 million. The increase in passenger revenues resulted
primarily from a 4.1 percent increase in passenger traffic, partially offset by
a 0.1 percent decrease in passenger yield (the average amount one passenger pays
to fly one mile) from 12.97 to 12.96 cents. American's average stage length
increased approximately 8.2 percent from 1994 to 1995, which contributed to the
decrease in passenger yield since per mile fares for longer trips tend to be
lower than for shorter trips. For the year, domestic yield decreased 0.9 percent
and Latin American yields decreased 4.2 percent; yield increased 8.1 percent in
Europe and 8.2 percent in the Pacific. In 1995, American derived 69.4 percent of
its passenger revenues from domestic operations and 30.6 percent from
international operations.

      American's domestic traffic increased 1.7 percent, to 71.2 billion revenue
passenger miles (RPMs), while domestic capacity, as measured by available seat
miles (ASMs), decreased 1.3 percent. International traffic grew 9.8 percent, to
31.7 billion RPMs on capacity growth of 9.6 percent. The increase in
international traffic was led by a 13.4 percent increase in Latin America on
capacity growth of 12.4 percent, and a 7.4 percent increase in Europe on
capacity growth of 7.9 percent.

      Other revenues, consisting of contract maintenance and ground handling
services, fees for passenger services such as certain ticketing charges, and
miscellaneous other revenues, increased 15.5 percent, $98 million, primarily as
a result of an increase in contract maintenance and airport ground services
performed by American for other airlines. The remaining portion of the increase
is attributable to the growth in passenger traffic.

      Information Services Group revenues increased 13.5 percent, $171 million,
primarily due to increased booking volumes, as a result of international
expansion in Europe, Latin America and Asia, booking fee price increases and
revenue generated from AMR's services agreement with CAI.

EXPENSES

1995 COMPARED TO 1994 Operating expenses in 1995 included restructuring charges
of $485 million, primarily related to the cost of future pension and other
postretirement benefits for voluntary early retirement programs offered in
conjunction with recently renegotiated labor contracts covering members of the
TWU and the APFA, as well as provisions for the writedown of certain DC-10
aircraft, and other restructuring activities. Excluding the restructuring costs,
the Company's operating expenses increased 3.7 percent, $508 million. American's
capacity increased 1.7 percent, to 155.3 billion ASMs. American's Passenger
Division cost per ASM, excluding restructuring costs, increased 1.1 percent to
8.43 cents.

      Despite a 1.5 percent decrease in the average number of equivalent
employees, wages, salaries and benefits expense rose 2.9 percent, $145 million.
The increase was due primarily to contractual wage rate and seniority increases
that are built into the Company's labor contracts and an increase in the
provision for profit sharing.

      Fuel expense increased 0.6 percent, $9 million, due to the October 1995
expiration of the fuel tax exemption for the airline industry. The expiration of
the exemption resulted in additional fuel expense of $21 million for 1995.
Absent the fuel tax, fuel expense would have decreased $12 million due primarily
to lower jet fuel prices.

      Commissions to agents decreased 2.9 percent, $37 million, due principally
to a reduction in average rates paid to agents attributable primarily to the
change in commission structure implemented in February 1995, partially offset by
commissions on increased passenger revenues.

      Maintenance materials and repairs expense increased 12.8 percent, $56
million, primarily due to reduced expense in 1994 as a result of warranty
recoveries as well as certain engine and airframe service checks that became due
for the first time in 1995.

      Other operating expenses (including communications charges, crew travel
expenses, credit card fees, advertising, purchased services, and booking fees)
increased 14.8 percent, $317 million, primarily due to costs associated with the
outsourcing of passenger and aircraft handling functions at certain airports,
costs



                                       13
   15
associated with The Information Services Group's continuing efforts to increase
product development and take further steps to preserve and enhance SABRE's
market position, and costs associated with increased contract maintenance work
that American performed for other airlines. In addition, American recognized
approximately $19 million in foreign currency exchange losses attributable to
unfavorable exchange rates, primarily in Latin America.

      Interest expense, net of amounts capitalized, increased 24.5 percent, $107
million, due primarily to a change in the terms of American's intercompany
subordinated note agreement with AMR, and also due to the effect of rising
short-term interest rates on floating rate debt and interest rate swap
agreements, partially offset by reductions due to the repurchase and retirement
of debt. Effective September 30, 1994, the subordinated promissory note bears
interest based on the weighted average rate on AMR's long-term debt and
preferred stock. Prior to September 30, 1994, interest on the subordinated note
was based on the London Interbank Offered Rate (LIBOR).

      Miscellaneous - net for 1995 includes a $41 million charge related to the
loss of an aircraft operated by American.

OTHER INFORMATION

ENVIRONMENTAL MATTERS American has been notified of potential liability with
regard to several environmental cleanup sites. At sites where remedial
litigation has commenced, potential liability is joint and several. American's
alleged volumetric contributions at the sites are minimal. American does not
expect these matters, individually or collectively, to have a significant impact
on its financial position or liquidity. Additional information is included in
Note 3 to the consolidated financial statements.

CORPORATE STRUCTURE AMR plans to more fully develop and market its distinct
information technology expertise through The SABRE Group and continues to
investigate opportunities for further enhancing the value of its information
technology businesses. In furtherance of these opportunities, AMR is taking
preliminary steps, such as obtaining certain consents, that will allow it to
proceed expeditiously should it decide that a reorganization of The SABRE Group
into one or more subsidiaries of AMR is desirable. This reorganization, if
concluded, may involve the transfer to AMR, by means of a dividend, of
American's STIN, SCS, SDS and SABRE Interactive divisions. A final decision to
proceed with a reorganization has not been made, however, and AMR could
determine that conducting the business activities of The SABRE Group within the
current corporate structure continues to be in the best interests of AMR's
shareholders.


                                       14
   16
ITEM 8.    CONSOLIDATED FINANCIAL STATEMENTS



                                                                    Page
                                                                    ----
                                                                  
Report of Independent Auditors                                       16

Consolidated Statement of Operations                                 17

Consolidated Balance Sheet                                           18

Consolidated Statement of Cash Flows                                 20

Consolidated Statement of Stockholder's Equity                       21

Notes to Consolidated Financial Statements                           22



                                       15
   17
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholder
American Airlines, Inc.

      We have audited the accompanying consolidated balance sheets of American
Airlines, Inc. as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholder's equity, and cash flows for each of the
three years in the period ended December 31, 1995. Our audits also included the
financial statement schedules listed in Item 14(a). These financial statements
and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.

      We conducted our audits in accordance with generally accepted auditing
standards. 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 American
Airlines, Inc. at December 31, 1995 and 1994, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

      As discussed in Note 9 to the consolidated financial statements,
effective January 1, 1995, the Company changed its method of accounting for the
impairment of long-lived assets to conform with Statement of Financial
Accounting Standards No. 121.

                                              ERNST & YOUNG LLP


2121 San Jacinto
Dallas, Texas  75201
January 15, 1996


                                       16
   18
AMERICAN AIRLINES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions)
- - --------------------------------------------------------------------------------



                                              Year Ended December 31,
                                         --------------------------------
                                           1995        1994        1993
                                         --------    --------    --------
                                                             
REVENUES
  Airline Group:
    Passenger                            $ 13,335    $ 12,826    $ 12,900
    Cargo                                     668         648         637
    Other                                     732         634         527
                                         --------    --------    --------
                                           14,735      14,108      14,064

  Information Services Group                1,439       1,268       1,167
  Less:  Intergroup revenues                 (564)       (539)       (494)
                                         --------    --------    --------
    Total operating revenues               15,610      14,837      14,737
                                         --------    --------    --------

EXPENSES
  Wages, salaries and benefits              5,183       5,038       4,927
  Aircraft fuel                             1,565       1,556       1,818
  Commissions to agents                     1,236       1,273       1,393
  Depreciation and amortization             1,138       1,138       1,115
  Other rentals and landing fees              802         780         787
  Food service                                675         663         693
  Aircraft rentals                            604         620         639
  Maintenance materials and repairs           494         438         542
  Other operating expenses                  2,460       2,143       2,259
  Restructuring costs                         485         276        --
                                         --------    --------    --------
    Total operating expenses               14,642      13,925      14,173
                                         --------    --------    --------
OPERATING INCOME                              968         912         564

OTHER INCOME (EXPENSE)
  Interest income                              23          13           5
  Interest expense                           (557)       (457)       (408)
  Interest capitalized                         14          21          49
  Miscellaneous - net                         (55)        (47)       (136)
                                         --------    --------    --------
                                             (575)       (470)       (490)
                                         --------    --------    --------
EARNINGS BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS                            393         442          74
Income tax provision                          172         174          51
                                         --------    --------    --------
EARNINGS BEFORE EXTRAORDINARY LOSS            221         268          23
EXTRAORDINARY LOSS, NET OF TAX BENEFIT        (13)       --          --
                                         --------    --------    --------

NET EARNINGS                             $    208    $    268    $     23
                                         ========    ========    ========


- - --------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.


                                       17
   19
AMERICAN AIRLINES, INC.
CONSOLIDATED BALANCE SHEET
(in millions)
- - --------------------------------------------------------------------------------

                                                  
                                                
                                                                 December 31,
                                                              -----------------
                                                                1995      1994
                                                              -------   -------
                                                                      
ASSETS                                                   
                                                         
CURRENT ASSETS                                           
  Cash                                                        $    70   $    13
  Short-term investments                                          816       744
  Receivables, less allowance for uncollectible          
    accounts (1995 - $13; 1994 - $14)                           1,013       877
  Inventories, less allowance for obsolescence           
    (1995 - $228; 1994 - $171)                                    516       590
  Deferred income taxes                                           310       270
  Other current assets                                            128       115
                                                              -------   -------
    Total current assets                                        2,853     2,609
                                                         
EQUIPMENT AND PROPERTY                                   
  Flight equipment, at cost                                    12,442    12,522
  Less accumulated depreciation                                 3,346     3,285
                                                              -------   -------
                                                                9,096     9,237
                                                         
  Other equipment and property, at cost                         3,911     3,765
  Less accumulated depreciation                                 2,091     1,899
                                                              -------   -------
                                                                1,820     1,866
                                                              -------   -------
                                                               10,916    11,103
                                                         
EQUIPMENT AND PROPERTY UNDER CAPITAL LEASES              
  Flight equipment                                              1,958     2,098
  Other equipment and property                                    254       267
                                                              -------   -------
                                                                2,212     2,365
  Less accumulated amortization                                   778       823
                                                              -------   -------
                                                                1,434     1,542
                                                         
OTHER ASSETS                                             
  Route acquisition costs, less accumulated amortization 
    (1995 - $153; 1994 - $124)                                  1,003     1,032
  Airport operating and gate lease rights, less          
    accumulated amortization (1995 - $89; 1994 - $72)             323       337
  Prepaid pension cost                                            268        99
  Other                                                           832       601
                                                              -------   -------
                                                                2,426     2,069
                                                              -------   -------
                                                         
TOTAL ASSETS                                                  $17,629   $17,323
                                                              =======   =======
                                                 

- - --------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.



                                       18
   20
AMERICAN AIRLINES, INC.
CONSOLIDATED BALANCE SHEET
(in millions, except shares and par value)
- - --------------------------------------------------------------------------------



                                                           December 31,
                                                       --------------------
                                                         1995        1994
                                                       --------    --------
                                                                  
LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES
  Accounts payable                                     $    742    $    831
  Payables to affiliates                                    907         266
  Accrued salaries and wages                                686         581
  Accrued liabilities                                     1,138         853
  Air traffic liability                                   1,467       1,473
  Current maturities of long-term debt                       49          49
  Current maturities of long-term debt due to parent        193        --
  Current obligations under capital leases                  101         110
                                                       --------    --------
    Total current liabilities                             5,283       4,163

LONG-TERM DEBT, LESS CURRENT MATURITIES                   1,318       1,518

LONG-TERM DEBT DUE TO PARENT                              1,676       3,196

OBLIGATIONS UNDER CAPITAL LEASES,
  LESS CURRENT OBLIGATIONS                                1,777       1,964

OTHER LIABILITIES AND CREDITS
  Deferred income taxes                                     480         268
  Deferred gains                                            696         732
  Postretirement benefits                                 1,431       1,247
  Other liabilities and deferred credits                  1,322       1,002
                                                       --------    --------
                                                          3,929       3,249

COMMITMENTS, LEASES AND CONTINGENCIES

STOCKHOLDER'S EQUITY
  Common stock - $1 par value;
    1,000 shares authorized, issued and outstanding        --          --
  Additional paid-in capital                              1,699       1,699
  Minimum pension liability adjustment                       (1)       (199)
  Retained earnings                                       1,948       1,733
                                                       --------    --------
                                                          3,646       3,233
                                                       --------    --------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY             $ 17,629    $ 17,323
                                                       ========    ========


- - --------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.


                                       19
   21
AMERICAN AIRLINES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
- - --------------------------------------------------------------------------------



                                                          Year Ended December 31,
                                                       -----------------------------
                                                         1995       1994       1993
                                                       -------    -------    -------
                                                                        
CASH FLOW FROM OPERATING ACTIVITIES:
  Net earnings                                         $   208    $   268    $    23
  Adjustments to reconcile net earnings to net cash
    provided by operating activities:
      Depreciation and amortization                      1,138      1,138      1,115
      Deferred income taxes                                 54         51         (4)
      Provision for restructuring costs                    485        276       --
      Provisions for losses                                 41       --          125
      Change in assets and liabilities:
        Decrease (increase) in receivables                (136)      (146)        11
        Increase in inventories                            (15)       (12)        (6)
        Increase (decrease) in accounts payable
         and accrued liabilities                           408         10         (6)
        Increase (decrease) in air traffic liability        (6)        13        (64)
      Other, net                                          (181)        93         79
                                                       -------    -------    -------
        Net cash provided by operating activities        1,996      1,691      1,273

CASH FLOW FROM INVESTING ACTIVITIES:
  Capital expenditures                                    (842)      (899)    (1,873)
  Net decrease (increase) in short-term investments        (72)      (238)       287
  Other, net                                                59         36         35
                                                       -------    -------    -------
        Net cash used for investing activities            (855)    (1,101)    (1,551)

CASH FLOW FROM FINANCING ACTIVITIES:
  Proceeds from:
    Issuance of long-term debt                             184        130        330
    Sale-leaseback transactions                           --          280       --
  Net short-term borrowings (repayments)
    with maturities of 90 days or less                    --         --         (350)
  Other short-term borrowings                             --          200       --
  Payments on other short-term borrowings                 --         (200)       (30)
  Payments on long-term debt and capital lease            (582)      (206)      (294)
  obligations
  Funds transferred from (to) affiliates, net             (686)      (839)       551
  Other, net                                              --            3         81
                                                       -------    -------    -------
        Net cash provided by (used for) financing       
        activities                                      (1,084)      (632)       288
                                                       -------    -------    -------
Net increase (decrease) in cash                             57        (42)        10
Cash at beginning of year                                   13         55         45
                                                       -------    -------    -------

Cash at end of year                                    $    70    $    13    $    55
                                                       =======    =======    =======


- - --------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.


                                       20
   22
AMERICAN AIRLINES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(in millions)
- - --------------------------------------------------------------------------------



                                                                  Minimum
                                                 Additional       Pension
                                    Common        Paid-in        Liability       Retained
                                    Stock         Capital       Adjustment       Earnings        Total
                                    ------       ----------     ----------       --------       -------
                                                                                     
Balance at January 1, 1993          $ --            $1,699          $--           $ 1,448       $ 3,147
Net earnings                          --              --             --                23            23
Other                                 --              --             --                (2)           (2)
                                    ------          ------          -----         -------       -------

Balance at December 31, 1993          --             1,699           --             1,469         3,168
Net earnings                          --              --             --               268           268
Adjustment for minimum
  pension liability                   --              --             (199)           --            (199)
Other                                 --              --             --                (4)           (4)
                                    ------          ------          -----         -------       -------

Balance at December 31, 1994          --             1,699           (199)          1,733         3,233
Net earnings                          --              --             --               208           208
Adjustment for minimum
  pension liability                   --              --              198            --             198
Other                                 --              --             --                 7             7
                                    ------          ------          -----         -------       -------

Balance at December 31, 1995        $ --            $1,699          $  (1)        $ 1,948       $ 3,646
                                    ======          ======          =====         =======       =======


- - --------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.


                                       21
   23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF ACCOUNTING POLICIES

BASIS OF CONSOLIDATION American Airlines, Inc. (American or the Company) is a
wholly-owned subsidiary of AMR Corporation (AMR). The consolidated financial
statements include the accounts of American and its wholly-owned subsidiaries.
All significant intercompany transactions have been eliminated. Certain amounts
from prior years have been reclassified to conform with the 1995 presentation.

USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.

TRANSACTIONS WITH AFFILIATES Transactions with affiliates are on a basis
determined by the parties.

      American invests funds, including funds of affiliates, in a combined
short-term investment portfolio and passes through interest income on such funds
at the average rate earned on the portfolio. To the extent funds transferred to
American exceed the invested portfolio, such amounts are converted to Long-Term
Debt due to Parent under a subordinated note agreement with AMR. To the extent
American invests its excess cash flows in the short-term investment portfolio,
Long-Term Debt due to Parent is reduced with a corresponding increase in
Payables to Affiliates. The subordinated promissory note bears interest based on
the weighted-average rate on AMR's long-term debt and preferred stock (8.67
percent at December 31, 1995). The interest rate is reset every six months. The
note is due September 30, 2004, unless extended. American may prepay the note
without penalty at any time. Under the provisions of such note agreement,
approximately $1.68 billion and $2.94 billion was included in Long-Term Debt due
to Parent as of December 31, 1995 and 1994, respectively.

      Interest paid to affiliates in addition to interest income passed through
on invested funds was approximately $254 million, $187 million and $132 million
for the years ended December 31, 1995, 1994 and 1993, respectively.

      Interest expense includes $17 million for the years ended December 31,
1995 and 1994 and $16 million for the year ended December 31, 1993, relating to
debentures held by AMR calculated at a 9.03 percent effective interest rate.

      American paid affiliates $137 million, $140 million and $138 million in
1995, 1994 and 1993, respectively, for ground handling services provided at
selected airports, consulting services and investment management and advisory
services with respect to short-term investments and the assets of its retirement
benefit plans.

      American issues tickets for flights on its American Eagle affiliate
regional carriers, owned by AMR Eagle, Inc., a subsidiary of AMR. As a result,
the revenue collected for such tickets is prorated between American and the AMR
Eagle carriers based on the segments flown by the respective carriers. In
addition, in 1995, 1994 and 1993, American paid fees of $201 million, $174
million and $261 million, respectively, included in Other Operating Expenses, to
AMR Eagle primarily for passengers connecting with American flights.

      American charges AMR affiliates for the use of its communications,
accounting and information processing systems, as well as for other services.

      American recognizes compensation expense associated with certain AMR
common stock-based awards for employees of American.


                                       22
   24
1.    SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

INVENTORIES Spare parts, materials and supplies relating to flight equipment are
carried at average 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. These allowances are based on management
estimates, which are subject to change.

EQUIPMENT AND PROPERTY The provision for depreciation of operating equipment and
property is computed on the straight-line method applied to each unit of
property, except that spare assemblies are depreciated on a group basis. The
depreciable lives and residual values used for the principal depreciable asset
classifications are:



                                                                                       Residual
                                                     Depreciable Life                    Value
                                                     ----------------------------      --------
                                                                                   
Boeing 727-200                                       21 years(1)                            5%
DC-10-10                                             December 31, 1998(2)                   0%
DC-10-30                                             December 31, 1999(2)                   5%
Other aircraft                                       20 years                               5%
Major rotable parts, avionics and assemblies         Life of equipment to which            10%
                                                     applicable                         
Improvements to leased flight equipment              Term of lease                        None
Buildings and improvements (principally on           10-30 years or term of lease         None
  leased land)                                                                          
Other equipment                                      3-20 years                           None


   (1)  In 1991, American changed the estimated useful lives of its Boeing
        727-200 aircraft and engines from a common retirement date of December
        31, 1994, to projected retirement dates by aircraft, which results in an
        average depreciable life of approximately 21 years.

   (2)  Approximate common retirement date.

      Equipment and property under capital leases are amortized over the term of
the leases and such amortization is included in depreciation and amortization.
Lease terms vary but are generally 10 to 25 years for aircraft and 7 to 40 years
for other leased equipment and property.

MAINTENANCE AND REPAIR COSTS Maintenance and repair costs for owned and leased
flight equipment are charged to operating expense as incurred.

INTANGIBLE ASSETS The Company continually evaluates intangible assets to
determine whether current events and circumstances warrant adjustment of the
carrying values or amortization periods.

      Route acquisition costs and airport operating and gate lease rights
represent the purchase price attributable to route authorities, airport take-off
and landing slots and airport gate leasehold rights acquired and are being
amortized on a straight-line basis over 10 to 40 years.

PASSENGER REVENUES Passenger ticket sales are initially recorded as a component
of air traffic liability. Revenue derived from ticket sales is recognized at the
time transportation 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.
Actual results could differ from those estimates.

ADVERTISING COSTS The Company expenses the costs of advertising as incurred.
Advertising expense was $187 million, $196 million, and $197 million for the
years ended December 31, 1995, 1994, and 1993.

FREQUENT FLYER PROGRAM The estimated incremental cost of providing free travel
awards is accrued when such award levels are reached. American sells mileage
credits to companies participating in its frequent flyer program. A portion of
the revenue from the sale of mileage credits is deferred and recognized over a
period approximating the period during which the mileage credits are used.


                                       23
   25
1.    SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES AMR and its eligible subsidiaries, including American, file a
consolidated federal income tax return. Deferred income taxes reflect the net
tax effects of temporary differences between the financial reporting carrying
amounts of assets and liabilities and the income tax amounts.

DEFERRED GAINS Gains on the sale and leaseback of equipment and property are
deferred and amortized over the terms of the related leases as a reduction of
rent expense.

STATEMENT OF CASH FLOWS Short-term investments, without regard to remaining
maturity at acquisition, are not considered as cash equivalents for purposes of
the statement of cash flows.

2.    SHORT-TERM INVESTMENTS

      Short-term investments consisted of (in millions):



                                                                  December 31,
                                                               -----------------
                                                               1995         1994
                                                               ----         ----
                                                                       
Overnight investments and time deposits                        $136         $324
Corporate notes                                                 457          246
Other debt securities                                           223          174
                                                               ----         ----

                                                               $816         $744
                                                               ====         ====


      Short-term investments at December 31, 1995, by contractual maturity was
(in millions):


                                                             
Due in one year or less                                        $458
Due after one year through three years                          278
Due after three years                                            80
                                                               ----

                                                               $816
                                                               ====


      All short-term investments were classified as available-for-sale and
stated at fair value.

3.    COMMITMENTS AND CONTINGENCIES

      The Company has on order four Boeing 757-200 jet aircraft scheduled for
delivery in 1996. Remaining payments for these aircraft and related equipment
will be approximately $100 million in 1996. In addition to these commitments for
aircraft, the Company has authorized expenditures of approximately $850 million
for aircraft modifications, renovations of, and additions to, airport and office
facilities and various other equipment and assets. American expects to spend
approximately $350 million of this amount in 1996.

      In April 1995, American announced an agreement to sell 12 of its McDonnell
Douglas MD-11 aircraft to Federal Express Corporation (FedEx), with delivery of
the aircraft between 1996 and 1999. In addition, American has the option to sell
its remaining seven MD-11 aircraft to FedEx with deliveries between 2000 and
2002. The carrying value of the 12 aircraft American has committed to sell was
approximately $837 million as of December 31, 1995. Included in depreciation
expense are charges related to these aircraft which totaled approximately $23
million for the year ended December 31, 1995.

      American has included an event risk covenant in approximately $2.9 billion
of lease agreements. The covenant permits the holders of such instruments to
receive a higher rate of return (between 50 and 700 basis points above the
stated rate) if a designated event, as defined, should occur and the credit
rating of the debentures or the debt obligations underlying the lease agreements
is downgraded below certain levels.


                                       24
   26
3.    COMMITMENTS AND CONTINGENCIES (CONTINUED)

      Special facility revenue bonds have been issued by certain municipalities,
primarily to purchase equipment and improve airport facilities which are leased
by American. In certain cases, the bond issue proceeds were loaned to American
and are included in long-term debt. Certain bonds have rates that are
periodically reset and are remarketed by various agents. In certain
circumstances, American may be required to purchase up to $437 million of the
special facility revenue bonds prior to maturity, in which case American has the
right to resell the bonds or to use the bonds to offset its lease or debt
obligations. American may borrow the purchase price of these bonds under standby
letter-of-credit agreements. At American's option, these letters of credit are
secured by funds held by bond trustees and by approximately $429 million of
short-term investments.

      The Miami International Airport Authority is currently remediating various
environmental conditions at the Miami International Airport (Airport) and
funding the remediation costs through landing fee revenues. Some of the costs of
the remediation effort may be borne by carriers currently operating at the
Airport, including American, through increased landing fees since certain of the
potentially responsible parties are no longer in business. The future increase
in landing fees 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. The ultimate resolution is not, however, expected to have a
significant impact on the financial position or the liquidity of American.

      American's collective bargaining agreement with the Allied Pilots
Association (APA) became amendable on August 31, 1994. In January 1996, the APA
filed a petition with the National Mediation Board (NMB) to appoint a federal
mediator. A mediator has been appointed, and initial meetings have been held
between the APA and the NMB mediator and between American and the NMB mediator.
Joint meetings began in March 1996. The outcome of these negotiations and the
impact on the Company cannot be determined at this time.

4.    LEASES

      American leases various types of equipment and property, including
aircraft, passenger terminals, equipment and various other facilities. The
future minimum lease payments required under capital leases, together with the
present value of net minimum lease 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, 1995, were (in millions):



                                                 Capital            Operating
Year Ending December 31,                          Leases              Leases
                                                 --------           ---------
                                                                    
1996                                              $   203             $   843
1997                                                  228                 892
1998                                                  224                 905
1999                                                  219                 898
2000                                                  285                 860
2001 and subsequent                                 1,704              14,353
                                                  -------             -------

                                                    2,863(1)          $18,751(2)
                                                                      =======

Less amount representing interest                     983
                                                  -------

Present value of net minimum lease payments       $ 1,880
                                                  =======


(1)   Future minimum payments required under capital leases include $205 million
      and $203 million guaranteed by AMR and American, respectively, relating to
      special facility revenue bonds issued by municipalities.

(2)   Future minimum payments required under operating leases include $6.2
      billion guaranteed by AMR relating to special facility revenue bonds
      issued by municipalities.


                                       25
   27
4.    LEASES (CONTINUED)

      At December 31, 1995, the Company had 198 jet aircraft under operating
leases and 74 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. Most 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's cost of
the aircraft. Of the aircraft American has under operating leases, 15 Boeing
767-300 Extended Range aircraft are cancelable upon 30 days' notice during the
initial 10-year lease term. At the end of that term in 1998, the leases can be
renewed for periods ranging from 10 to 12 years.

      Rent expense, excluding landing fees, was $1.2 billion for 1995, 1994 and
1993.

5.    INDEBTEDNESS

      Long-term debt (excluding amounts maturing within one year) consisted of
(in millions):



                                                                December 31,
                                                             -------------------
                                                              1995         1994
                                                             ------       ------
                                                                    
7.67% - 9.59% notes due through 2014                         $  624       $  686
Variable rate indebtedness due through 2024
(3.83% - 7.19% at December 31, 1995)                            475          578
6.0% - 9.25% bonds due through 2031                             176          181
Other                                                            43           73
                                                             ------       ------

Long-term debt, less current maturities                      $1,318       $1,518
                                                             ======       ======


      Maturities of long-term debt (including sinking fund requirements) for the
next five years are: 1996 - $49 million; 1997 - $47 million; 1998 - $55 million;
1999 - $53 million; 2000 - $57 million.

      Certain debt is secured by aircraft, engines, equipment and other assets
having a net book value of approximately $1.3 billion.

      During 1995, American retired prior to maturity $139 million in face value
of long-term debt, net of sinking fund balances. Cash from operations provided
the funding for the retirements. In addition, $616 million in outstanding
principal of certain debt and lease obligations was refinanced during 1995.
These transactions resulted in an extraordinary loss of $21 million ($13 million
after tax) for the year ended December 31, 1995.

      American has a $1.0 billion credit facility agreement which expires in
1999. Interest on the agreement is calculated at floating rates based upon the
London Interbank Offered Rate (LIBOR). At January 15, 1996, no borrowings were
outstanding and $1.0 billion was available under this facility.

      Certain of American's debt and credit facility agreements contain certain
restrictive covenants, including a cash flow coverage test, a minimum net worth
requirement and limitations on indebtedness and limitations on the declaration
of dividends. At December 31, 1995, under the most restrictive provisions of
those agreements, approximately $857 million of American's retained earnings
were available for payment of dividends to AMR.



                                      26
   28


6.    FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

      As part of the Company's risk management program, American uses a variety
of financial instruments, including interest rate swaps, fuel swaps and collars
and currency exchange agreements. The Company does not hold or issue derivative
financial instruments for trading purposes.

      NOTIONAL AMOUNTS AND CREDIT EXPOSURES OF DERIVATIVES

      The notional amounts of derivative financial instruments summarized in the
tables which follow do not represent amounts exchanged between the parties and,
therefore, are not a measure of the Company's exposure resulting from its use of
derivatives. The amounts exchanged are calculated based on the notional amounts
and other terms of the instruments, which relate to interest rates, exchange
rates or other indices.

      The Company is exposed to credit losses in the event of non-performance by
counterparties to these financial instruments, but it 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 security agreements with the majority of its counterparties
which may require the Company or the counterparty to post collateral if the
value of these instruments fall below certain mark-to-market thresholds. As of
December 31, 1995, no collateral was required under these agreements, and the
Company does not expect to post collateral in the near future.

      INTEREST RATE RISK MANAGEMENT

      American enters into interest rate swap contracts to effectively convert a
portion of its fixed-rate obligations to floating-rate obligations. These
agreements involve the exchange of amounts based on a floating interest rate for
amounts based on fixed interest rates over the life of the agreement without an
exchange of the notional amount upon which the payments are based. The
differential to be paid or received as interest rates change is accrued and
recognized as an adjustment of interest expense related to the obligation. The
related amount payable to or receivable from counterparties is included in
current liabilities or assets. The fair values of the swap agreements are not
recognized in the financial statements. Gains and losses on terminations of
interest rate swap agreements are deferred as an adjustment to the carrying
amount of the outstanding obligation and amortized as an adjustment to interest
expense related to the obligation over the remaining term of the original
contract life of the terminated swap agreement. In the event of the early
extinguishment of a designated obligation, any realized or unrealized gain or
loss from the swap would be recognized in income coincident with the
extinguishment. Because American's operating results tend to be better in
economic cycles with relatively high interest rates and its capital investments
tend to be financed with long-term fixed-rate instruments, interest rate swaps
in which American pays the floating rate and receives the fixed rate are used to
reduce the impact of economic cycles on American's net income.

      The following table indicates the notional amounts and fair values of the
Company's interest rate swap agreements (in millions):



                                                                December 31,
                                          --------------------------------------------------------
                                                   1995                            1994
                                          -------------------------      -------------------------
                                          Notional                       Notional
                                           Amount        Fair Value       Amount        Fair Value
                                          --------       ----------      --------       ----------
                                                                                 
Interest rate swap agreements              $1,980           $12           $1,980          $(174)


      The fair values represent the amount the Company would receive or pay to
terminate the agreements at December 31, 1995 and 1994, respectively.


                                       27
   29
6.    FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

      At December 31, 1995, the weighted average remaining duration of the
interest rate swap agreements in effect was 3.1 years. The weighted average
floating rates and fixed rates on the contracts outstanding were:



                                                            December 31,
                                                      -----------------------
                                                       1995             1994
                                                      ------           ------
                                                                    
Average floating rate                                 5.786%           5.720%
Average fixed rate                                    5.304%           5.207%


      Floating rates are primarily based on LIBOR and may change significantly,
affecting future cash flows. The net impact of the interest rate swap program on
interest expense was an increase of $18 million in 1995 and a decrease of $14
million in 1994. The impact on the Company's weighted-average borrowing rate for
the periods presented is immaterial.

      FUEL PRICE RISK MANAGEMENT

      American enters into fuel swap contracts to protect against increases in
jet fuel prices. Under the agreements, American receives or makes payments based
on the difference between a fixed price and a variable price for certain fuel
commodities. Gains and losses on fuel swap agreements are recognized as a
component of fuel expense when the underlying fuel being hedged is used. At
December 31, 1995, American had agreements with broker-dealers to exchange
payments on approximately 295 million gallons of fuel products, which represents
approximately 11 percent of its expected 1996 fuel needs. The Company does not
expect the fuel price hedging program to have a material effect on liquidity.
The fair value of the Company's fuel swap agreements at December 31, 1995,
representing the amount the Company would receive to terminate the agreements,
was immaterial.

      FOREIGN EXCHANGE RISK MANAGEMENT

      To hedge against the risk of future currency exchange rate fluctuations on
certain debt and lease obligations and related interest payable in foreign
currencies, the Company has entered into various foreign currency exchange
agreements. Changes in the value of the agreements due to exchange rate
fluctuations are offset by changes in the value of the foreign currency
denominated debt and lease obligations translated at the current exchange rate.
Discounts or premiums are accreted or amortized as an adjustment to interest
expense over the lives of the underlying debt or lease obligations. The related
amounts due to or from counterparties are included in other liabilities or other
assets. The net fair values of the Company's currency exchange agreements,
representing the amount American would receive to terminate the agreements,
were:



                                                December 31,
                        --------------------------------------------------------------
                                    1995                            1994
                        -----------------------------    -----------------------------
                          Notional       Fair Value        Notional       Fair Value
                           Amount       (in millions)       Amount       (in millions)
                        ------------    -------------    ------------    -------------
                                                                  
Japanese Yen            25.0 billion      $     28       25.6 billion      $   41


      The exchange rates on the Japanese Yen agreements range from 66.50 to
137.26 Yen per U.S. dollar.

      To hedge against the risk of future exchange rate fluctuations on a
portion of American's foreign cash flows, the Company entered into various
currency put option agreements during 1995 on a number of foreign currencies.
The option contracts are denominated in the same foreign currency in which the
projected foreign cash flows are expected to be denominated. These contracts are
designated and effective as hedges of probable quarterly foreign cash flows for
various periods through September 30, 1998, which otherwise would expose the
Company to foreign currency risk. Realized gains on the currency put option
agreements are recognized as a component of passenger revenue. At December 31,
1995, the notional amount related to these options totaled approximately $743
million and the fair value, representing the amount American would receive to
terminate the agreements, totaled approximately $16.5 million.


                                       28
   30
6.    FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

      FAIR VALUES OF FINANCIAL INSTRUMENTS

      The fair values of the Company'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's current incremental borrowing rates for similar types of borrowing
arrangements. The carrying amounts and fair values of the Company's long-term
debt, including current maturities, were (in millions):



                                                             December 31,
                                        -------------------------------------------------------
                                                  1995                          1994
                                        ------------------------     --------------------------
                                         Carrying        Fair         Carrying          Fair
                                           Value        Value           Value          Value
                                        ----------    ----------     ----------      ----------
                                                                                
       Long-term debt due to Parent     $    1,869    $    2,077     $    3,196      $    2,917
       7.67% - 9.59% notes                     636           718            698             641
       Variable rate indebtedness              501           501            606             605
       6.0% - 9.25% bonds                      176           183            181             187
       Other                                    54            60             82              69
                                        ----------    ----------     ----------      ----------

                                        $    3,236    $    3,539     $    4,763      $    4,419
                                        ==========    ==========     ==========      ==========


7.    INCOME TAXES

      American, as a wholly-owned subsidiary, is included in AMR's consolidated
tax return. Under the terms of American's tax sharing agreement with AMR,
American's provision for income taxes has been computed on the basis that
American files separate consolidated income tax returns with its subsidiaries.

      The significant components of the income tax provision were (in millions):



                                                                Year Ended December 31,
                                                     ----------------------------------------------
                                                        1995              1994              1993
                                                     ----------        ----------        ----------
                                                                                       
       Current                                       $      118        $      123        $       55
       Deferred                                              54                96               204
       Benefit of operating loss carryforwards                -               (45)             (208)
                                                     ----------        ----------        ----------

                                                     $      172        $      174        $       51
                                                     ==========        ==========        ==========


      The income tax provision includes a federal income tax provision of $148
million, $146 million and $43 million for the years ended December 31, 1995,
1994 and 1993, respectively.


                                       29
   31
7.    INCOME TAXES (CONTINUED)

        The income tax provision differed from amounts computed at the statutory
federal income tax rate as follows (in millions):



                                                                Year Ended December 31,
                                                     ---------------------------------------------  
                                                        1995              1994              1993
                                                     ---------         ---------         ---------  
                                                                                      
       Statutory income tax provision                $     137         $     155         $      26
       Meal expense                                         19                19                 8
       State income tax provision, net                      12                13                 3
       Other, net                                            4               (13)               14
                                                     ---------         ---------         ---------  

       Income tax provision                          $     172         $     174         $      51
                                                     =========         =========         =========  


      The components of American's deferred tax assets and liabilities were (in
millions):



                                                               December 31,
                                                           --------------------
                                                             1995         1994
                                                           -------      -------
                                                                      
Deferred tax assets:
Postretirement benefits other than pensions                $   501      $   436
Gains from lease transactions                                  253          267
Alternative minimum tax credit carryforwards                   566          456
Operating loss carryforwards                                   426          474
Other                                                          629          588
Valuation allowance                                            (10)         (10)
                                                           -------      -------
Total deferred tax assets                                    2,365        2,211
                                                           -------      -------

Deferred tax liabilities:
Accelerated depreciation and amortization                   (2,244)      (2,013)
Pensions                                                       (65)          (5)
Other                                                         (226)        (191)
                                                           -------      -------
Total deferred tax liabilities                              (2,535)      (2,209)
                                                           -------      -------

Net deferred tax asset (liability)                         $  (170)     $     2
                                                           =======      =======


      At December 31, 1995, American had available under the terms of its tax
sharing agreement with AMR approximately $566 million of alternative minimum tax
credit carryforwards available for an indefinite period, and approximately $1.2
billion of net operating loss carryforwards for regular tax purposes, which
expire as follows: 2007 - $390 million, 2008 - $572 million and 2009 - $254
million.


                                       30
   32
8.    RETIREMENT BENEFITS

      Substantially all employees of American are eligible to participate in
pension plans. 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. Airline pilots and flight engineers also
participate in defined contribution plans for which company contributions are
determined as a percentage of participant compensation.

      Total costs for all pension plans were (in millions):



                                                     Year Ended December 31,
                                                  -----------------------------
                                                    1995        1994       1993
                                                  -------      -----      -----
                                                                   
Defined benefit plans:
 Service cost - benefits earned during
  the period                                      $   162      $ 201      $ 167
 Interest cost on projected benefit                                            
  obligation                                          323        292        285
 Loss (return) on assets                           (1,288)       232       (638)
 Net amortization and deferral                      1,008       (541)       356
                                                  -------      -----      -----

 Net periodic pension cost for defined
  benefit plans                                       205        184        170

Defined contribution plans                            124        119        118
Early retirement programs(1)                          220        154       --
                                                  -------      -----      -----

Total                                             $   549      $ 457      $ 288
                                                  =======      =====      =====


(1)   In late 1995 and 1994, American offered early retirement programs to
      select groups of employees as part of its restructuring efforts. In
      accordance with Statement of Financial Accounting Standards No. 88,
      "Employers' Accounting for Settlements and Curtailments of Defined Benefit
      Pension Plans and for Termination Benefits", American recognized
      additional pension expense of $220 million and $154 million associated
      with these programs in 1995 and 1994, respectively. Of these amounts, $118
      million and $120 million were for special termination benefits and $102
      million and $34 million were for the actuarial losses resulting from the
      early retirements for 1995 and 1994, respectively.


                                       31
   33
8.    RETIREMENT BENEFITS (CONTINUED)

      The funded status and actuarial present value of benefit obligations of
the defined benefit plans were (in millions):



                                                              December 31,
                                    ----------------------------------------------------------------
                                                 1995                              1994
                                    ------------------------------    ------------------------------
                                     Plans with       Plans with       Plans with       Plans with
                                      Assets in       Accumulated       Assets in       Accumulated
                                      Excess of         Benefit         Excess of         Benefit
                                     Accumulated      Obligation       Accumulated      Obligation
                                       Benefit       in Excess of        Benefit       in Excess of
                                     Obligation         Assets         Obligation         Assets
                                    -------------    -------------    -------------    -------------
                                                                                  
Vested benefit obligation              $ 4,145            $ 42            $ 1,063         $ 2,118
                                       =======            ====            =======         =======
                                                                                          
Accumulated benefit                                                                       
obligation                             $ 4,279            $ 46            $ 1,113         $ 2,175
Effect of projected future                                                                
salary increases                           728              20                251             308
                                       -------            ----            -------         -------
Projected benefit obligation             5,007              66              1,364           2,483
                                       -------            ----            -------         -------
                                                                                          
Plan assets at fair value                4,545               6              1,161           2,144
                                                                                          
Plan assets less than                                                                     
projected benefit obligation              (462)            (60)              (203)           (339)
Unrecognized net loss                      703              19                223             719
Unrecognized prior service                                                                
cost (benefit)                              14               9                 47             (46)
Unrecognized transition
asset                                      (45)             (1)               (14)            (44)
Adjustment to record                                                                      
minimum pension liability                 --               (12)              --              (329)
                                       -------            ----            -------         -------
                                                                                          
Prepaid (accrued) pension                                                                 
cost(1)                                $   210            $(45)           $    53         $   (39)
                                       =======            ====            =======         =======


(1)   American's funding policy is to make contributions equal to, or in excess
      of, the minimum funding requirements of the Employee Retirement Income
      Security Act of 1974.

      Plan assets consist primarily of domestic and foreign government and
corporate debt securities, marketable equity securities, and money market fund
and mutual fund shares, of which approximately $119 million and $141 million of
plan assets at December 31, 1995 and 1994, respectively, were invested in shares
of mutual funds managed by a subsidiary of AMR.

      The projected benefit obligation was calculated using weighted average
discount rates of 7.25% and 8.75% at December 31, 1995 and 1994, respectively;
rates of increase for compensation of 4.20% and 4.40% at December 31, 1995 and
1994, respectively; and the 1983 Group Annuity Mortality Table. The weighted
average expected long-term rate of return on assets was 9.50% in 1995 and 1994,
and 10.50% in 1993. The vested benefit obligation and plan assets at fair value
at December 31, 1995, for plans whose benefits are guaranteed by the Pension
Benefit Guaranty Corporation were $4.1 billion and $4.5 billion, respectively.

      In addition to pension benefits, other postretirement benefits, including
certain health care and life insurance benefits, are also provided to retired
employees. The amount of health care benefits is limited to lifetime maximums as
outlined in the plan. Substantially all employees of American and employees of
certain other subsidiaries may become eligible for these benefits if they
satisfy eligibility requirements during their working lives.


                                       32
   34
8.    RETIREMENT BENEFITS (CONTINUED)

        Certain employee groups make contributions toward funding a portion of
their retiree health care benefits during their working lives. American funds
benefits as incurred and began, effective January 1993, to match employee
prefunding.

      Net other postretirement benefit cost was (in millions):



                                                        Year Ended December 31,
                                                        -----------------------
                                                         1995     1994     1993
                                                        -----    -----    -----
                                                                   
Service cost - benefits earned during the period        $  48    $  62    $  47
Interest cost on accumulated other
  postretirement benefit obligation                        99       86       86 
Return on assets                                           (2)      (1)      --
Net amortization and deferral                              (6)      (4)      (4)
                                                        -----    -----    -----

Net other postretirement benefit cost                   $ 139    $ 143    $ 129
                                                        =====    =====    =====


      In addition to net other postretirement benefit cost, in late 1995 and
1994, American offered early retirement programs to select groups of employees
as part of its restructuring efforts. In accordance with Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions," American recognized additional other postretirement
benefit expense of $93 million and $71 million associated with these programs in
1995 and 1994, respectively. Of these amounts, $26 million and $43 million were
for special termination benefits and $67 million and $28 million were for the
net actuarial losses resulting from the early retirements for 1995 and 1994,
respectively.

      The funded status of the plan, reconciled to the accrued other
postretirement benefit cost recognized in American's balance sheet, was (in
millions):



                                                                 December 31,
                                                             -------------------
                                                               1995        1994
                                                             -------      ------
                                                                       
Retirees                                                     $   705      $  542
Fully eligible active plan participants                          176         207
Other active plan participants                                   546         422
                                                             -------      ------
Accumulated other postretirement benefit obligation            1,427       1,171
Plan assets at fair value                                         28          14
                                                             -------      ------
Accumulated other postretirement benefit obligation
  in excess of plan assets                                     1,399       1,157
Unrecognized net loss                                            (29)       --
Unrecognized prior service benefit                                61          90
                                                             -------      ------

Accrued other postretirement benefit cost                    $ 1,431      $1,247
                                                             =======      ======


      Plan assets consist primarily of shares of a mutual fund managed by a
subsidiary of AMR.

      For 1995 and 1994, future benefit costs were estimated assuming per capita
cost of covered medical benefits would increase at an eight and nine percent
annual rate, respectively, decreasing gradually to a four percent annual growth
rate in 2000 and thereafter. A one percent increase in this annual trend rate
would have increased the accumulated other postretirement benefit obligation at
December 31, 1995, by approximately $128 million and 1995 other postretirement
benefit cost by approximately $18 million. The weighted average discount rate
used in estimating the accumulated other postretirement benefit obligation was
7.25% and 8.75% at December 31, 1995 and 1994, respectively.


                                       33
   35
9.    RESTRUCTURING COSTS

      In 1995 and 1994, the Company recorded $485 million and $276 million,
respectively, for restructuring costs which included (in millions):



                                                            Year Ended December 31,
                                                            -----------------------
                                                            1995               1994
                                                            ----               ----
                                                                          
Special termination benefits:                                             
  Pension                                                   $118               $120
  Other postretirement benefits                               26                 43
  Other termination benefits                                  19                --
Actuarial losses:                                                         
  Pension                                                    102                 34
  Other postretirement benefits                               67                 28
                                                            ----               ----
                                                                          
Total cost of early retirement programs                      332                225
Provisions for aircraft impairment and retirement            145                --
Severance                                                    --                  28
Other                                                          8                 23
                                                            ----               ----
                                                                          
                                                            $485               $276
                                                            ====               ====

                                                                     
      In 1995, approximately 2,100 mechanics and fleet service clerks and 300
flight attendants elected early retirement under programs offered in conjunction
with renegotiated union labor contracts, and the majority of these employees
will leave the Company's workforce during 1996. The Company recorded
restructuring costs of $332 million in 1995 related to these early retirement
programs. A large portion of the funding for the programs was done in 1995. The
remaining cash payments associated with these programs will be expended as
required for funding the appropriate pension and other postretirement benefit
plans in future years.

      The aircraft portion of the 1995 restructuring costs consists of a $145
million provision related to the writedown of certain McDonnell Douglas DC-10
aircraft. Effective January 1, 1995, American adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," which requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. In 1995, the Company
evaluated its fleet operating plan with respect to the DC-10-10 fleet and, as a
result, believes that the estimated future cash flows expected to be generated
by these aircraft will not be sufficient to recover their net book value.
Management estimated the undiscounted future cash flows utilizing models used by
the Company in making fleet and scheduling decisions. As a result of this
analysis, the Company determined that a writedown of the DC-10-10 aircraft to
the net present value of their estimated discounted future cash flows was
warranted, which resulted in a $112 million charge. In addition, the Company
recorded a $33 million charge to reflect a diminution in the estimated market
value of certain DC-10 aircraft previously grounded by the Company. No cash
costs have been incurred or are expected as a result of these DC-10 writedowns.
The writedowns are expected to reduce 1996 depreciation expense by approximately
$19 million.

      In 1994, approximately 1,700 agents and 600 management employees elected
early retirement under programs offered to select groups of employees and left
the Company's workforce during 1995. The Company recorded restructuring costs of
$225 million in 1994 related to these early retirement programs. A large portion
of the funding for these programs was done in 1994. The remaining cash payments
associated with these programs will be expended as required for funding the
appropriate pension and other postretirement benefit plans in future years.


                                       34
   36
9.    RESTRUCTURING COSTS (CONTINUED)

      The $28 million severance provision recorded in 1994 was for additional
workforce reductions affecting approximately 2,300 agent and management
personnel as a result of scheduled service reductions and improved
administrative efficiencies. Cash outlays for severance payments in 1995 totaled
approximately $22 million, with the remaining $6 million expected to occur
during 1996.

      The remaining $23 million included in the 1994 restructuring costs
represents provisions for excess leased facilities and other restructuring
activities. Cash outlays are estimated to be approximately $18 million, of which
approximately $3 million occurred in 1995.

10.   REVENUE AND OTHER EXPENSE ITEMS

      During 1994, the Company changed its estimate of the usage patterns of
miles awarded by participating companies in American's AAdvantage frequent flyer
program. The positive impact of the change in estimate on passenger revenues for
1994 was $59 million. Passenger revenues for 1993 include a $115 million
positive adjustment resulting from a change in estimate relating to certain
earned passenger revenues.

      Miscellaneous - net in 1995 includes a $41 million charge related to the
loss of an aircraft operated by American. Miscellaneous - net in 1993 includes a
$125 million charge related to the retirement of certain McDonnell Douglas DC-10
aircraft.

11.   FOREIGN OPERATIONS

      American conducts operations in various foreign countries. American's
operating revenues from foreign operations were (in millions):



                                                     Year Ended December 31,
                                                --------------------------------
                                                 1995         1994         1993
                                                ------       ------       ------
                                                                    
Latin America                                   $2,316       $2,134       $1,888
Europe                                           2,059        1,839        1,659
Pacific                                            373          347          362
                                                ------       ------       ------

Foreign operating revenues                      $4,748       $4,320       $3,909
                                                ======       ======       ======



                                       35
   37
12.   SEGMENT INFORMATION

      American's operations fall within two industry segments:  the Airline 
Group and the Information Services Group.  For a description of each of these
groups, refer to Management's Discussion and Analysis on page 11.

      The following table presents selected financial data by industry segment
(in millions):



                                                      Year Ended December 31,
                                                   -----------------------------
                                                     1995       1994       1993
                                                   -------    -------    -------
                                                                    
Airline Group:
  Revenues                                         $14,735    $14,108    $14,064
  Operating profit                                     600        570        307
  Depreciation and amortization                        974        966        949
  Restructuring costs                                  485        270       --
  Capital expenditures, including route
    acquisition costs                                  729        731      1,704
  Identifiable assets                               16,839     16,580     16,801

Information Services Group:
  Revenues                                         $ 1,439    $ 1,268    $ 1,167
  Operating profit                                     368        342        257
  Depreciation and amortization                        164        172        166
  Restructuring costs                                 --            6       --
  Capital expenditures                                 113        168        169
  Identifiable assets                                  480        473        446


      Identifiable assets are gross assets used by a business segment, including
an allocated portion of assets used jointly by more than one business segment.
General corporate and other assets not allocated to business segments were $310
million, $270 million and $279 million at December 31, 1995, 1994 and 1993,
respectively, and consist primarily of income tax assets.

      Intergroup revenues consist of revenues earned by the Information Services
Group from the Airline Group.

13.   SUPPLEMENTAL CASH FLOW INFORMATION

      Supplemental disclosures of cash flow information and non-cash activities
(in millions):



                                                       Year Ended December 31,
                                                      ------------------------
                                                      1995      1994      1993
                                                      ----      ----      ----
                                                                   
Cash payments (refunds) for:
  Interest (net of interest capitalized)              $542      $406      $ 356
  Income taxes                                          49        34         (8)

Financing activities not affecting cash:
  Capital lease obligations incurred                  $--       $280      $--



                                       36
   38
14.   QUARTERLY FINANCIAL DATA (UNAUDITED)

      Unaudited summarized financial data by quarter for 1995 and 1994 (in
millions):



                                      First       Second      Third     Fourth
                                     Quarter      Quarter    Quarter    Quarter
                                     -------      -------    -------    -------
                                                                
   1995
Operating revenues                   $ 3,679      $3,978     $4,096     $ 3,857
Operating income (loss)                  251         456        478        (217)
Earnings (loss) before
  extraordinary loss                      56         192        212        (239)
Net earnings (loss)                       56         192        212        (252)

   1994
Operating revenues                   $ 3,508      $3,763     $3,890     $ 3,676
Operating income (loss)                  104         373        471         (36)
Net earnings (loss)                       (3)        172        220        (121)



      Results for the fourth quarter of 1995 include $485 million in
restructuring costs, primarily representing the cost of early retirement
programs for Airline Group employees and provisions for the writedown of certain
DC-10 aircraft. Results for the fourth quarter of 1995 also include a $41
million charge related to the loss of an aircraft operated by American.

      Results for the fourth quarter of 1994 include $276 million in
restructuring costs, primarily representing the cost of early retirement
programs and severance for Airline Group employees. During the second quarter of
1994, the Company changed its estimate of the usage patterns of miles awarded by
participating companies in American's AAdvantage frequent flyer program. The
positive impact of the change in estimate on revenues for the second, third and
fourth quarters of 1994 was $35 million, $14 million and $10 million,
respectively, as compared to the same quarters in 1993.


                                       37
   39
ITEM 9.   DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

                                    PART III
- - -------------------------------------------------------------------------------

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(c) of Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION

Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(c) of Form 10-K.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(c) of Form 10-K.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(c) of Form 10-K.

                                     PART IV
- - -------------------------------------------------------------------------------

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  (1)  The financial statements listed in the accompanying index to
          financial statements and schedules are filed as part of this report.

     (2)  The schedules listed in the accompanying index to financial
          statements and schedules are filed as part of this report.

     (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
          American's long-term debt agreements does not exceed 10 percent of
          American's assets, pursuant to paragraph (b)(4) of Item 601 of
          Regulation S-K, in lieu of filing such as an exhibit, American hereby
          agrees to furnish to the Commission upon request a copy of any
          agreement with respect to such long-term debt.)



        EXHIBIT
        -------
                 
          3(a)      Composite of the Certificate of Incorporation of American,
                    incorporated by reference to Exhibit 3(a) to American's
                    report on Form 10-K for the year ended December 31, 1982,
                    file number 1-2691.

          3(b)      Amended Bylaws of American, incorporated by reference to
                    Exhibit 3(b) to American's report on Form 10-K for the year
                    ended December 31, 1990, file number 1-2691.

          10(a)     Purchase Agreement, dated as of February 12, 1979, between
                    American and the Boeing Company, relating to the purchase of
                    Boeing Model 767-323 aircraft, incorporated by reference to
                    Exhibit 10(b)(3) to American's Registration Statement No.
                    2-76709.

          10(b)     Description of American's Split Dollar Insurance Program,
                    dated December 28, 1977, incorporated by reference to
                    Exhibit 10(c)(1) to American's Registration Statement No.
                    2-76709.


                                       38

   40

                 
          10(c)     American's 1992 Incentive Compensation Plan incorporated by
                    refernce to Exhibit 10(c) to American's report on Form 10-K
                    for the year ended December 31, 1991, file marker 1-2691.
        

          10(d)     1979 American Airlines (AMR) Stock Option Plan, as amended,
                    incorporated by reference to Exhibit 10(d) to American's
                    report on Form 10-K for the year ended December 31, 1982,
                    file number 1-2691.

          10(e)     1979 American Airlines (AMR) Stock Option Plan, as amended,
                    incorporated by reference to Exhibit 10(e) to American's
                    report on Form 10-K for the year ended December 31, 1982,
                    file number 1-2691.

          10(f)     Form of Stock Option Agreement for Corporate Officers under
                    the 1979 American Airlines (AMR) Stock Option Plan,
                    incorporated by reference to Exhibit 10(c)(5) to American's
                    Registration Statement No. 2-76709.

          10(g)     Form of Stock Option Agreement under the 1974 and 1979
                    American Airlines (AMR) Stock Option Plans, incorporated by
                    reference to Exhibit 10(c)(6) to American's Registration
                    Statement No. 2-76709.

          10(h)     Deferred Compensation Agreement, dated April 14, 1973, as
                    amended March 1, 1975, between American and Robert L.
                    Crandall, incorporated by reference to Exhibit 10(c)(7) to
                    American's Registration Statement No. 2-76709.

          10(i)     Deferred Compensation Agreement, dated October 18, 1972, as
                    amended March 1, 1975, between American and Gene E.
                    Overbeck, incorporated by reference to Exhibit 10(c)(9) to
                    American's Registration Statement No. 2-76709.

          10(j)     Deferred Compensation Agreement, dated June 3, 1970, between
                    American and Francis H. Burr, incorporated by reference to
                    Exhibit 11(d) to American's Registration Statement No.
                    2-39380.

          10(k)     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(l)     Purchase Agreement, dated as of February 29, 1984, between
                    American and the McDonnell Douglas Corporation, relative to
                    the purchase of McDonnell Douglas Super 80 aircraft,
                    incorporated by reference to Exhibit 10(l) to American's
                    report on Form 10-K for the year ended December 31, 1983,
                    file number 1-2691.

          10(m)     Purchase Agreement, dated as of June 27, 1983, between
                    American and the McDonnell Douglas Corporation, relative to
                    the purchase of McDonnell Douglas Super 80 aircraft,
                    incorporated by reference to Exhibit 4(a)(8) to American's
                    Registration Statement No. 2-84905.

          10(n)     Form of Executive's Termination Benefits Agreement
                    incorporated by reference to Exhibit 10(p) to American's
                    report on Form 10-K for the year ended December 31, 1985,
                    file number 1-2691.

          10(o)     Amendment, dated June 4, 1986, to Purchase Agreement in
                    Exhibit 10(l) above, incorporated by reference to Exhibit
                    10(l) to American's report on Form 10-K for the year ended
                    December 31, 1986, file number 1-2691.

          10(p)     Acquisition Agreement, dated as of March 1, 1987, between
                    American and Airbus Industrie relative to the lease of
                    Airbus A300-600R aircraft, incorporated by reference to
                    Exhibit 10(p) to American's report on Form 10-K for the year
                    ended December 31, 1986, file number 1-2691.


                                       39
   41

                 
          10(q)     Acquisition Agreement, dated as of March 1, 1987, between
                    American and the Boeing Company relative to the lease of
                    Boeing 767-323ER aircraft, incorporated by reference to
                    Exhibit 10(q) to American's report on Form 10-K for the year
                    ended December 31, 1986, file number 1-2691.

          10(r)     Acquisition Agreement, dated as of July 21, 1988, between
                    American and the Boeing Company relative to the purchase of
                    Boeing Model 757-223 aircraft, incorporated by reference to
                    Exhibit 10(r) to American's report on Form 10-K for the year
                    ended December 31, 1988, file number 1-2691.

          10(s)     Acquisition Agreement, dated as of February 4, 1989, among
                    American and Delta Airlines, Inc. and others relative to
                    operation of a computerized reservations system incorporated
                    by reference to Exhibit 10(s) to American's report on Form
                    10-K for the year ended December 31, 1988, file number
                    1-2691.

          10(t)     Purchase Agreement, dated as of May 5, 1989, between
                    American and the Boeing Company relative to the purchase of
                    Boeing 757-223 aircraft, incorporated by reference to
                    Exhibit 10(t) to American's report on Form 10-K for the year
                    ended December 31, 1989, file number 1-2691.

          10(u)     Purchase Agreement, dated as of June 9, 1989, between
                    American and Fokker Aircraft U. S. A., Inc. relative to the
                    purchase of Fokker 100 aircraft, incorporated by reference
                    to Exhibit 10(u) to American's report on Form 10-K for the
                    year ended December 31, 1989, file number 1-2691.

          10(v)     Purchase Agreement, dated as of June 23, 1989, between
                    American and the Boeing Company relative to the purchase of
                    Boeing 767-323ER aircraft, incorporated by reference to
                    Exhibit 10(v) to American's report on Form 10-K for the year
                    ended December 31, 1989, file number 1-2691.

          10(w)     Purchase Agreement, dated as of August 3, 1989, between
                    American and the McDonnell Douglas Corporation relative to
                    the purchase of MD-11 aircraft, incorporated by reference to
                    Exhibit 10(w) to American's report on Form 10-K for the year
                    ended December 31, 1989, file number 1-2691.

          10(x)     Amendment, dated as of August 3, 1989, to the Purchase
                    Agreement in Exhibit 10(l) above, incorporated by reference
                    to Exhibit 10(x) to American's report on Form 10-K for the
                    year ended December 31, 1989, file number 1-2691.

          10(y)     Purchase Agreement, dated as of October 25, 1989, between
                    American and AVSA, S. A. R. L. relative to the purchase of
                    Airbus A300-600R aircraft, incorporated by reference to
                    Exhibit 10(y) to American's report on Form 10-K for the year
                    ended December 31, 1989, file number 1-2691.

          10(z)     Amendment, dated as of November 16, 1989, to Employment
                    Agreement among AMR Corporation, American Airlines and
                    Robert L. Crandall, incorporated by reference to Exhibit
                    10(z) to American's report on Form 10-K for the year ended
                    December 31, 1989, file number 1-2691.

          10(aa)    Management Severance Allowance, dated as of February 23,
                    1990, for levels 1-4 employees of American Airlines, Inc.,
                    incorporated by reference to Exhibit 10(aa) to American's
                    report on Form 10-K for the year ended December 31, 1989,
                    file number 1-2691.


                                       40
   42

                 
          10(bb)    Management Severance Allowance, dated as of February 23,
                    1990, for level 5 and above employees of American Airlines,
                    Inc., incorporated by reference to Exhibit 10(bb) to
                    American's report on Form 10-K for the year ended December
                    31, 1989, file number 1-2691.

          10(cc)    Amendment, dated as of December 3, 1990, to Employment
                    Agreement among AMR Corporation, American Airlines and
                    Robert L. Crandall incorporated by reference to Exhibit
                    10(cc) to American's report on Form 10-K for the year ended
                    December 31, 1990, file number 1-2691.

          10(dd)    Amendment, dated as of May 1, 1992, to Employment Agreement
                    among American, American Airlines and Robert L. Crandall
                    incorporated by reference to Exhibit 10(dd) to American's
                    report on Form 10-Q for the period ended June 30, 1992, file
                    number 1-2691.

          10(ee)    Aircraft Sales Agreement by and between American Airlines,
                    Inc. and Federal Express Corporation, dated April 7, 1995.

          19        The 1974 and 1979 American Airlines (AMR) Stock Option plans
                    as amended March 16, 1983, incorporated by reference to
                    Exhibit 19 to American's report on Form 10-K for the year
                    ended December 31, 1983, file number 1-2691. Refer to
                    Exhibits 10(d) and 10(e).

          23        Consent of Independent Auditors appears on page 43 hereof.


(b)   Reports on Form 8-K:

None.


                                       41
   43
                             AMERICAN AIRLINES, INC.
                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

                    COVERED BY REPORT OF INDEPENDENT AUDITORS

                                  [ITEM 14(A)]



                                                                                              Page
                                                                                            --------

                                                                                         
FINANCIAL STATEMENTS

Report of Independent Auditors                                                                  16

Consolidated Statement of Operations for the Years Ended
December 31, 1995, 1994 and 1993                                                                17

Consolidated Balance Sheet at December 31, 1995 and 1994                                     18-19

Consolidated Statement of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993                                                                20

Consolidated Statement of Stockholder's Equity for the Years Ended
December 31, 1995, 1994 and 1993                                                                21

Notes to Consolidated Financial Statements                                                   22-37

CONSOLIDATED SCHEDULES FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993

Schedule II    Valuation and Qualifying Accounts and Reserves                                44-46


All other schedules are omitted since the required information is included in
the financial statements or notes thereto, or since the required information is
either not present or not present in sufficient amounts.


                                       42
   44
                             AMERICAN AIRLINES, INC.
          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                    (DEDUCTED FROM ASSET TO WHICH APPLICABLE)
                          YEAR ENDED DECEMBER 31, 1995
                                  (IN MILLIONS)



                                                             CHARGED TO
                                                             ----------                 SALES,       BALANCE
                               BALANCE AT     OTHER     DEPREC.   RESTRUC-    NET     RETIREMENTS       AT
                               BEGINNING    OPERATING     AND      TURING    WRITE-      AND          END OF
                                 OF YEAR    EXPENSES     AMORT.     COSTS     OFF      TRANSFERS       YEAR
                                --------    --------     ------     -----     ---      ---------       ----

                                                                                
Allowance for
  uncollectible accounts          $ 14        $ 14         $ -       $ -       $(15)      $  -         $ 13


Allowance for
  obsolescence of inventories      171           -          36         9          -        (12)         228


                                       43
   45
                            AMERICAN AIRLINES, INC.
          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                   (DEDUCTED FROM ASSET TO WHICH APPLICABLE)
                          YEAR ENDED DECEMBER 31, 1994
                                 (IN MILLIONS)



                                                             CHARGED TO
                                                             ----------                 SALES,       BALANCE
                               BALANCE AT     OTHER     DEPREC.   RESTRUC-    NET     RETIREMENTS       AT
                               BEGINNING    OPERATING     AND      TURING    WRITE-      AND          END OF
                                 OF YEAR    EXPENSES     AMORT.     COSTS     OFF      TRANSFERS       YEAR
                                --------    --------     ------     -----     ---      ---------       ----

                                                                                

Allowance for
  uncollectible accounts          $ 26         $18          $ -      $ -       $(30)      $  -         $ 14


Allowance for
  obsolescence of inventories      162           -           28        -          -        (18)         171


Reserve for anticipated loss
  on fleet retirement               50           -            -        4        (34)         -           20


                                       44
   46
                            AMERICAN AIRLINES, INC.
          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                   (DEDUCTED FROM ASSET TO WHICH APPLICABLE)
                          YEAR ENDED DECEMBER 31, 1993
                                 (IN MILLIONS)



                                                             CHARGED TO
                                                             ----------                 SALES,       BALANCE
                               BALANCE AT     OTHER     DEPREC.   RESTRUC-    NET     RETIREMENTS       AT
                               BEGINNING    OPERATING     AND      TURING    WRITE-      AND          END OF
                                 OF YEAR    EXPENSES     AMORT.     COSTS     OFF      TRANSFERS       YEAR
                                --------    --------     ------     -----     ---      ---------       ----

                                                                                

Allowance for
  uncollectible accounts            $ 28       $19          $ -      $  -      $(21)      $  -         $ 26


Allowance for
  obsolescence of inventories        130         -           10         -         -         22          162


Reserve for anticipated loss
  on fleet retirement                 20         -            -       125       (83)       (12) (a)      50



(a) Transfer to Allowance for obsolescence of inventories.


                                       45
   47
                                   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.

AMERICAN AIRLINES, INC.

/s/  Robert L. Crandall
- - ---------------------------------------------
Robert L. Crandall
Chairman and Chief Executive Officer
(Principal Executive Officer)

/s/  Gerard J. Arpey
- - ---------------------------------------------
Gerard J. Arpey

Senior Vice President - Finance and Planning and
Chief Financial Officer
(Principal Financial and Accounting Officer)

Date: March 20, 1996

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:

Directors:

/s/  Howard P. Allen                        /s/  Dee J. Kelly
- - ----------------------------------          -----------------------------------
Howard P. Allen                             Dee J. Kelly


/s/  David L. Boren                         /s/  Ann D. McLaughlin
- - ----------------------------------          -----------------------------------
David L. Boren                              Ann D. McLaughlin


/s/  Edward A. Brennan                      /s/  Charles H. Pistor, Jr.
- - ----------------------------------          -----------------------------------
Edward A. Brennan                           Charles H. Pistor, Jr.


/s/  Armando M. Codina                      /s/  Joe M. Rodgers
- - ----------------------------------          -----------------------------------
Armando M. Codina                           Joe M. Rodgers


/s/  Christopher F. Edley                   /s/  Maurice Segall
- - ----------------------------------          -----------------------------------
Christopher F. Edley                        Maurice Segall


/s/  Charles T. Fisher, III                 /s/  Eugene F. Williams, Jr.
- - ----------------------------------          -----------------------------------
Charles T. Fisher, III                      Eugene F. Williams, Jr.

/s/  Earl G. Graves
- - ----------------------------------
Earl G. Graves

Date:   March 20, 1996

                                       46
   48
                               INDEX TO EXHIBIT



EXHIBIT
NUMBER                           DESCRIPTION
- - -------                          -----------

     10(ee)    Aircraft Sales Agreement by and between American Airlines,
               Inc. and Federal Express Corporation, dated April 7, 1995.

     23        Consent of Independent Auditors. 


     27        Financial Data Schedule