American Airlines 1999 Annual Report Download - page 31

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and the addition of Reno and Business Express. Food service
increased $65 million, or 9.6 percent, due primarily to rate
increases and the addition of Reno. Aircraft rentals increased $61
million, up 10.7 percent, primarily due to the addition of Reno
and Business Express aircraft. Other operating expenses increased
$342 million, or 12.0 percent, due primarily to increases in
outsourced services, travel and incidental costs and booking fees.
1998 Compared to 1997 The Company’s operating expenses of
$15.5 billion in 1998 were up $166 million, or 1.1 percent,
versus 1997. American’s cost per ASM decreased 0.2 percent to
9.25 cents. Wages, salaries and benefits increased $282 million,
or 5.1 percent, due primarily to an increase in the average
number of equivalent employees, contractual wage rate and
seniority increases that are built into the Company’s labor
contracts and an increase in the provision for profit-sharing. Fuel
expense decreased $319 million, or 16.6 percent, due to an 18.2
percent decrease in American’s average price per gallon, partially
offset by a 1.9 percent increase in American’s fuel consumption.
Commissions to agents decreased 4.1 percent, or $52 million,
despite a 3.2 percent increase in passenger revenues, due to the
continued benefit from the commission rate reduction initiated
in September 1997. Maintenance, materials and repairs expense
increased 8.5 percent, or $73 million, due to an increase in
airframe and engine maintenance volumes at American’s mainte-
nance bases as a result of the maturing of its fleet. Other
operating expenses increased $192 million, or 7.2 percent, due
primarily to spending on the Company’s Year 2000 Readiness
program, an increase in outsourced services and higher costs
resulting from higher passenger revenues, such as credit card fees.
OTHER I NCOME (EXPENSE)
Other income (expense) consists of interest income and expense,
interest capitalized and miscellaneous – net.
1999 Compared to 1998 Interest income decreased $25 million,
or 21.9 percent, due primarily to lower investment balances
throughout most of 1999. Interest expense increased $21 million,
or 5.6 percent, resulting primarily from an increase in long-term
debt. Interest capitalized increased 13.5 percent, or $14 million,
due to an increase in purchase deposits for flight equipment
throughout most of 1999. Miscellaneous – net increased $37
million due primarily to the sale of a portion of American’s
interest in Equant in 1999, which resulted in an approximate $75
million gain, and a gain of approximately $40 million from the
sale of the Company’s investment in the preferred stock of
Canadian. These gains were partially offset by the provision for
the settlement of litigation items and the write-down of certain
investments held by the Company during 1999.
1998 Compared to 1997 Interest expense decreased
$49 million, or 11.6 percent, due primarily to scheduled debt
repayments of approximately $400 million in 1998. Interest
capitalized increased $84 million, to $104 million, due primarily
to the increase in purchase deposits for flight equipment.