American Airlines 2000 Annual Report Download - page 24

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The Company has agreed to sell its McDonnell
Douglas MD-11 aircraft to FedEx Corporation (FedEx).
No significant gain or loss is expected to be recognized
as a result of this transaction. As of December 31, 2000,
the carrying value of the remaining aircraft American
has committed to sell was approximately $462 million.
AMR and American have included event risk
covenants in approximately $2.2 billion of indebted-
ness. These covenants permit the holders of such
indebtedness to receive a higher rate of return (bet-
ween 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 within a certain period of time following
the event.
Special facility revenue bonds have been issued
by certain municipalities, primarily to purchase equip-
ment 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
circumstances, American may be required to purchase
up to $544 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 bor-
row the purchase price of these bonds under standby
letter of credit agreements. At American’s option, certain
letters of credit are secured by funds held by bond
trustees and by approximately $540 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 such payments, and future minimum lease pay-
ments required under operating leases that have initial
or remaining non-cancelable lease terms in excess of
one year as of December 31, 2000, were (in millions):
Capital Operating
Year Ending December 31, Leases Leases
2001 $ 320 $ 984
2002 276 921
2003 195 931
2004 246 913
2005 178 900
2006 and subsequent 867 11,306
2,0821$ 15,9552
Less amount representing interest 532
Present value of net minimum lease payments $ 1,550
1Includes $191 million guaranteed by AMR relating to special facility revenue
bonds issued by municipa lities.
2Includes $6.4 billion guaranteed by AMR relating to specia l facility revenue
bonds issued by municipa lities.
At December 31, 2000, the Company had 201 jet
aircraft and 39 turboprop aircraft under operating
leases, and 65 jet aircraft and 57 turboprop 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 or at a predetermined fixed amount.
During 1996, American made prepayments on the
cancelable operating leases it had on 12 of its Boeing
767-300 aircraft. Upon the expiration of the amended
leases, American can purchase the aircraft for a nominal
amount. As a result, the aircraft were recorded as flight
equipment under capital leases. During 2000 and 1999,
the Company exercised its option to purchase six and
two of the Boeing 767-300 aircraft for a nominal fee,
respectively. As such, these aircraft were reclassified
from flight equipment under capital leases to owned
flight equipment.
Rent expense, excluding landing fees, was
$1.3 billion for 2000 and 1999, and $1.1 billion for 1998.