American Airlines 2003 Annual Report Download - page 26

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During 2003, the Company sold its interests in Worldspan, a computer reservations company, and Hotwire, a
discount travel website. The Company received $180 million in cash and a $39 million promissory note for its
interest in Worldspan. It received $84 million in cash, $80 million of which was recognized as a gain, for its interest
in Hotwire. In addition, during 2003, the Company sold a portion of its interest in Orbitz, a travel planning website,
in connection with an Orbitz initial public offering and a secondary offering resulting in total proceeds of $65 million,
and a gain of $70 million.
On April 9, 2001, TWA Airlines, LLC (TWA LLC), a wholly owned subsidiary of American, purchased substantially
all of the assets of Trans World Airlines, Inc. (TWA) for approximately $742 million (which was funded from the
Company’s existing cash and short-term investments) and the assumption of certain liabilities.
Working Capital
AMR (principally American) historically operates with a working capital deficit, as do most other airline companies.
In addition, the Company has historically relied heavily on external financing to fund capital expenditures. More
recently, the Company has also relied on external financing to fund operating losses.
Off Balance Sheet Arrangements
The Company has completed its evaluation of its interests in variable interest entities and determined that it holds
a significant variable interest in, but is not the primary beneficiary of, certain trusts that are the lessors under 88 of
its aircraft operating leases. These leases contain a fixed price purchase option, which allows American to
purchase the aircraft at a predetermined price on a specified date. However, American does not guarantee the
residual value of the aircraft. As of December 31, 2003, future lease payments required under these leases totaled
$3.2 billion.
Special facility revenue bonds have been issued by certain municipalities primarily to purchase equipment and
improve airport facilities that are leased by American and accounted for as operating leases. Approximately $1.8
billion of these bonds (with total future payments of approximately $4.8 billion as of December 31, 2003) are
guaranteed by American, AMR, or both. Approximately $532 million of these special facility revenue bonds contain
mandatory tender provisions that require American to make operating lease payments sufficient to repurchase the
bonds at various times: $112 million in 2004, $104 million in 2005, $28 million in 2006, $100 million in 2007 and
$188 million in 2008. Although American has the right to remarket the bonds, there can be no assurance that
these bonds will be successfully remarketed. Any payments to redeem or purchase bonds that are not
remarketed would generally reduce existing rent leveling accruals or be considered prepaid facility rentals and
would reduce future operating lease commitments.
In addition, the Company has other operating leases, primarily for aircraft, with total future lease payments of $5.4
billion as of December 31, 2003. Entering into aircraft leases allows the Company to obtain aircraft without
immediate cash outflows.