American Airlines 1997 Annual Report Download - page 42

AMR CORPORATION
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OPERATING EXPENSES
1997 Compared to 1996 Operating expenses increased
14.0 percent, or $181 million, due primarily to increases in
salaries, benefits and employee related costs and subscriber
incentive expenses. Salaries, benefits and employee related
costs increased due to an increase in the average number of
equivalent employees necessary to support The SABRE
Group’s revenue growth and wage and salary increases for
existing employees. Subscriber incentive expenses
increased in order to maintain and expand The SABRE
Group’s travel agency subscriber base.
1996 Compared to 1995 Operating expenses increased
12.7 percent, or $146 million, due primarily to increases
in salaries and benefits and subscriber incentive expenses.
Salaries and benefits increased due to an increase of
approximately eight percent in the average number of
equivalent employees necessary to support The SABRE
Group’s revenue growth and wage and salary increases for
existing employees. Subscriber incentive expenses
increased in order to maintain and grow The SABRE
Group’s customer base. Additionally, the new agreements
with American covering air travel and certain marketing
services and other changes resulting from the Reorganiza-
tion increased operating expenses in 1996.
OTHER INCOME (EXPENSE)
1997 Compared to 1996 Other income (expense)
increased $37 million due to an increase in interest
income of $17 million due to higher investment bal-
ances, an increase in other income of $14 million pri-
marily due to increased income from joint ventures, and
a decrease in interest expense of approximately $6 mil-
lion primarily due to a lower principal balance
outstanding on the subordinated debenture payable
to AMR and lower interest rates.
1996 Compared to 1995 Other income (expense)
decreased $11 million due primarily to interest expense
incurred on the $850 million subordinated debenture
payable to AMR issued in conjunction with the Reorgani-
zation, partially offset by increased interest income.
Management Services Group
Year Ended December 31,
(dollars in millions) 1997 1996 1995
Revenues $ 610 $620 $ 572
Operating Expenses 561 550 501
Operating Income 49 70 71
Other Income (Expense)
Canadian Airlines charges -(251) -
Miscellaneous - net 6 (1) (2)
6 (252) (2)
Earnings (Loss)
Before Income Taxes $ 55 $(182) $ 69
Average number of equivalent employees 14,800 14,500 13,300
REVENUES
1997 Compared to 1996 Revenues for the Management
Services Group decreased 1.6 percent, or $10 million.
This decrease was primarily the result of lower revenue
for AMR Combs due to the March 1997 sale of its aircraft
parts division, decreased telemarketing services provided
by TeleService Resources, the sale of Data Management
Services in September 1997 and the reduction in fees for
services provided to Canadian Airlines International Lim-
ited (Canadian) as agreed upon in the fourth quarter of
1996. This decrease was partially offset by higher rev-
enues for AMR Services as a result of increased airline pas-
senger, ramp and cargo handling services.
1996 Compared to 1995 Revenues for the Management
Services Group increased 8.4 percent, or $48 million. This
increase is due principally to AMR Global Services Corpo-
ration, which experienced higher revenue as a result of
increased airline passenger, ramp and cargo handling
services provided by its AMR Services division and
increased telemarketing services provided by TeleService
Resources. This increase was partially offset by a $12 million
reduction in fees for services provided to Canadian.
OPERATING EXPENSES
1997 Compared to 1996 Operating expenses increased
2.0 percent, or $11 million, due to an $18 million
increase in wages, salaries and benefits resulting from a
2.1 percent increase in the average number of equivalent
employees and wage and salary adjustments for existing
employees. This increase was partially offset by the
decrease in other operating expenses of $7 million, or 2.6
percent, commensurate with the decrease in revenues.