American Airlines 2000 Annual Report Download - page 10

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1999 Compared to 1998 The Company’s operating
expenses increased 6.7 percent, or approximately
$1 billion. American’s cost per ASM increased by
1.5 percent to 9.39 cents. Wages, salaries and benefits
increased $327 million, or 5.6 percent, primarily due
to an increase in the average number of equivalent
employees and contractual wage rate and seniority
increases that are built into the Company’s labor con-
tracts, partially offset by a decrease in the provision for
profit-sharing. Aircraft fuel expense increased $92 mil-
lion, or 5.7 percent, due to a 5.5 percent increase in
the Company’s fuel consumption and a 0.2 percent
increase in the Company’s average price per gallon.
The increase in fuel expense is net of gains of approxi-
mately $111 million recognized during 1999 related to
the Company’s fuel hedging program. Depreciation and
amortization expense increased $52 million, or 5.0 per-
cent, due primarily to the addition of new aircraft, par-
tially offset by the change in depreciable lives and
residual values for certain types of aircraft in 1999
(see Note 1 to the consolidated financial statements).
Maintenance, materials and repairs expense increased
7.3 percent, or $68 million, due primarily to the addi-
tion of Reno and Business Express aircraft during 1999.
Commissions to agents decreased 5.2 percent, or
$64 million, despite a 1.2 percent increase in passen-
ger revenues, due to the benefit from the changes in
the international commission structure in late 1998 and
the base commission structure in October 1999, and a
decrease in the percentage of commissionable transac-
tions. Other rentals and landing fees increased 12.3 per-
cent, or $103 million, due primarily to higher facilities
rent and landing fees across American’s system 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.
OTH ER INCOME (EX PEN SE)
Other income (expense) consists of interest income and
expense, interest capitalized and miscellaneous – net.
2000 Compared to 1999 Interest income increased
$59 million, or 62.1 percent, due primarily to higher
investment balances. Interest expense increased $74 mil-
lion, or 18.8 percent, resulting primarily from financing
new aircraft deliveries. Interest capitalized increased
28.0 percent, or $33 million, due to an increase in pur-
chase deposits for flight equipment. Miscellaneous –
net increased $38 million due primarily to a $57 million
gain on the sale of the Company’s warrants to purchase
5.5 million shares of priceline common stock in the
second quarter of 2000 and a gain of approximately
$41 million from the recovery of start-up expenses
from the Canadian services agreement. During 1999,
the Company recorded a gain of approximately $75 mil-
lion from the sale of a portion of American’s interest in
Equant and a gain of approximately $40 million related
to 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 Com-
pany during 1999.
1999 Compared to 1998 Interest income decreased
$38 million, or 28.6 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
$50 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 approxi-
mately $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 set-
tlement of litigation items and the write-down of certain
investments held by the Company during 1999.