American Airlines 2003 Annual Report Download - page 62

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5. Leases (Continued)
Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities”, revised in
December 2003, (Interpretation 46), requires the primary beneficiary of a variable interest entity (VIE) to include
the assets, liabilities, and results of the activities of the VIE in its consolidated financial statements, as well as
disclosure of information about the assets and liabilities, and the nature, purpose and activities of consolidated
variable interest entities. In addition, Interpretation 46 requires disclosure of information about the nature, purpose
and activities of an unconsolidated VIE in which the Company holds a significant variable interest. The provisions
of Interpretation 46 were effective immediately for any interest in a VIE acquired after January 31, 2003 and
beginning in the fourth quarter of 2003 for any interest in a VIE commonly referred to as special-purpose entity that
was acquired before February 1, 2003. The Financial Accounting Standards Board deferred the effective date of
Interpretation 46 to the first quarter of 2004 for any other interests in a VIE acquired before February 1, 2003.
Certain entities, including entities established by municipalities for the purpose of issuing special facility revenue
bonds, are not subject to the provisions of Interpretation 46. In addition, certain entities with which the Company
has capacity purchase agreements are not considered VIEs, as they are considered businesses as defined by
Interpretation 46.
The Company has completed its evaluation of its interests in VIEs, including certain aircraft operating leases with
fixed price purchase options and certain fuel consortia arrangements. The Company has determined that it holds a
significant variable interest in, but is not the primary beneficiary of, certain trusts that are the lessor under certain of
its aircraft operating leases (discussed below). Furthermore, the Company has determined that it is neither the
primary beneficiary of, nor holds a significant variable interest in, any of its various fuel consortia arrangements.
As a result, Interpretation 46 has had no impact on the Company’s consolidated statement of operations or
balance sheet.
American has 88 aircraft operating leases where the lessor is a variable interest entity - a trust - and the lease
contains 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.
6. Indebtedness
Long-term debt consisted of (in millions):
December 31,
2003 2002
Secured variable and fixed rate indebtedness due through 2021
(effective rates from 1.61 % - 9.16% at December 31, 2003) $ 6,041 $ 5,474
Enhanced equipment trust certificates due through 2011
(rates from 1.8% - 9.1% at December 31, 2003) 3,747 3,623
6.0% - 8.5% special facility revenue bonds due through 2036 947 1,035
Credit facility agreement due in 2005
(4.68% at December 31, 2003) 834 834
9.0% - 10.20% debentures due through 2021 330 330
7.88% - 10.55% notes due through 2039 303 303
4.25% senior convertible notes due 2023 300 -
Other 22
12,504 11,601
Less current maturities 603 713
Long-term debt, less current maturities $ 11,901 $ 10,888
Maturities of long-term debt (including sinking fund requirements) for the next five years are: 2004 - $603 million;
2005 - $1.4 billion; 2006 - $1.2 billion; 2007 - $1.1 billion; 2008 - $570 million.