American Airlines 1999 Annual Report Download - page 47

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The Miami International Airport Authority is currently remedi-
ating various environmental conditions at the Miami International
Airport (the Airport) and funding the remediation costs through
landing fee revenues. Future costs of the remediation effort may
be borne by carriers operating at the Airport, including American,
through increased landing fees and/or other charges since certain
of the potentially responsible parties are no longer in business.
The future increase in landing fees and/or other charges may be
material but cannot be reasonably estimated due to various
factors, including the unknown extent of the remedial actions
that may be required, the proportion of the cost that will ulti-
mately be recovered from the responsible parties, and uncertainties
regarding the environmental agencies that will ultimately supervise
the remedial activities and the nature of that supervision. In addition,
the Company is subject to environmental issues at various other
airport and non-airport locations. Management believes, after
considering a number of factors, that the ultimate disposition of
these environmental issues is not expected to materially affect the
Company’s consolidated financial position, results of operations,
or cash flows. Amounts recorded for environmental issues are
based on the Company’s current assessments of the ultimate
outcome and, accordingly, could increase or decrease as these
assessments change.
In April 1995, American announced an agreement to sell 12
of its 19 McDonnell Douglas MD-11 aircraft to Federal Express
Corporation (FedEx). In March 1998, the Company exercised its
option to sell its remaining seven MD-11 aircraft to FedEx. No
significant gain or loss is expected to be recognized as a result of
these transactions. Eight aircraft had been delivered as of
December 31, 1999. The remaining 11 aircraft will be delivered
between 2000 and 2002. The carrying value of the 11 remaining
aircraft American has committed to sell was approximately $690
million as of December 31, 1999.
AMR and American have included event risk covenants in
approximately $3.0 billion of indebtedness. These covenants
permit the holders of such indebtedness to receive a higher rate
of return (between 75 and 650 basis points above the stated
rate) if a designated event, as defined, should occur and the
credit rating of such indebtedness is downgraded below certain
levels. The Company’s March 15, 2000 distribution of its
ownership interest in Sabre represents a designated event under
these debt covenants. However, the Company has not received
indication that the credit rating on any such indebtedness will be
downgraded.
Special facility revenue bonds have been issued by certain
municipalities, primarily to purchase equipment and improve
airport facilities that 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 circum-
stances, American may be required to purchase up to $437
million of the special facility revenue bonds prior to scheduled
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 $489 million of short-term investments.
4. LEASES
AMR’s subsidiaries lease various types of equipment and property,
including aircraft and airport and off-airport facilities. The future
minimum lease payments required under capital leases, together
with the present value of net minimum lease payments, and