American Airlines 2005 Annual Report Download - page 14

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ITEM 1A. RISK FACTORS
Our ability to become profitable and our ability to continue to fund our obligations on an ongoing basis will depend
on a number of risk factors, many of which are largely beyond our control. Some of the factors that may have a
negative impact on us are described below:
As a result of significant losses in recent years, our financial condition has been materially weakened.
We have incurred significant losses in recent years: $861 million in 2005, $761 million in 2004, $1.2 billion in
2003, $3.5 billion in 2002 and $1.8 billion in 2001. As a result, our financial condition has been materially
weakened, and we remain vulnerable both to unexpected events (such as additional terrorist attacks or a sudden
spike in jet fuel prices) and to general declines in the operating environment (such as that resulting from a
recession or significant increased competition).
Our initiatives to generate additional revenues and significantly reduce our costs may not be adequate or
successful.
As we seek to improve our financial condition, we must continue to take steps to generate additional revenues
and to significantly reduce our costs. Although we have a number of initiatives underway to address our cost and
revenue challenges, a number of these initiatives involve significant changes to our business which we may be
unable to implement. The adequacy and ultimate success of our initiatives to generate additional revenues and
significantly reduce our costs are not known at this time and cannot be assured. Moreover, whether our initiatives
will be adequate or successful depends in large measure on factors beyond our control, notably the overall
industry environment, including passenger demand, yield and industry capacity growth, and fuel prices. It will be
very difficult, absent continued restructuring of our operations, for us to continue to fund our obligations on an
ongoing basis, or to become profitable, if the overall industry revenue environment does not continue to improve
and fuel prices remain at historically high levels for an extended period.
Our business is affected by many changing economic and other conditions beyond our control, and our
results of operations tend to be volatile.
Our business, and that of the rest of the airline industry, is affected by many changing economic and other
conditions largely outside of our control, including among others:
• actual or potential changes in international, national, regional and local economic, business and financial
conditions, including recession, inflation and higher interest rates, war, terrorist attacks or political
instability;
• changes in consumer preferences, perceptions, spending patterns or demographic trends;
• actual or potential disruptions to the air traffic control system;
• increases in costs of safety, security and environmental measures;
• outbreaks of diseases that affect travel behavior; or
• weather and natural disasters.
As a result, our results of operations tend to be volatile and subject to rapid and unexpected change. In addition,
many of the factors that can have a material impact on our business and our results of operations are beyond our
control.