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26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Information
The discussions under Business, Risk Factors, Properties and Legal Proceedings and the following discussions
under Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative
and Qualitative Disclosures about Market Risk contain various forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represent the Company's expectations or beliefs concerning future events. When used in this
document and in documents incorporated herein by reference, the words "expects," "plans," "anticipates,"
“indicates,” “believes,” “forecast,” “guidance,” “outlook,” “may,” “will,” “should,” and similar expressions are
intended to identify forward-looking statements. Forward-looking statements include, without limitation, the
Company’s expectations concerning operations and financial conditions, including changes in capacity, revenues,
and costs, future financing plans and needs, overall economic conditions, plans and objectives for future
operations, and the impact on the Company of its results of operations in recent years and the sufficiency of its
financial resources to absorb that impact. Other forward-looking statements include statements which do not
relate solely to historical facts, such as, without limitation, statements which discuss the possible future effects of
current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties
cannot be predicted, guaranteed or assured. All forward-looking statements in this report are based upon
information available to the Company on the date of this report. The Company undertakes no obligation to
publicly update or revise any forward-looking statement, whether as a result of new information, future events, or
otherwise. The Risk Factors listed in Item 1A, in addition to other possible factors not listed, could cause the
Company's actual results to differ materially from historical results and from those expressed in forward-looking
statements.
Overview
The Company has incurred very large operating and net losses during the past five years, as shown in the
following table:
Year ended December 31,
(in millions) 2005 2004 2003 2002 2001
Operating loss $ (93) $ (144) $ (844) $ (3,330) $ (2,470)
Net loss (861) (761) (1,228) (3,511) (1,762)
These losses reflect, among other things, a substantial decrease in the Company's revenues in 2001 and 2002.
This revenue decrease was primarily driven by (i) a steep fall-off in the demand for air travel, particularly business
travel, primarily caused by weakness in the U.S. economy, (ii) reduced pricing power, resulting mainly from
greater cost sensitivity on the part of travelers (especially business travelers), increasing competition from LCCs,
and the use of the Internet and (iii) the aftermath of the Terrorist Attacks, which accelerated and exacerbated the
trend of decreased demand and reduced industry revenues. Subsequent to 2002, passenger traffic significantly
improved, reflecting a general economic improvement. In 2005, mainline passenger load factor increased 3.8
points year-over-year to 78.6 percent. In addition, mainline passenger revenue yield began rebounding in 2005
and increased 4.0 percent year-over-year. However, passenger revenue yield remains depressed by historical
standards. The Company believes this depressed passenger yield is the result of its reduced pricing power
resulting from the factors listed in clause (ii) above, and other factors, which the Company believes will persist
indefinitely and possibly permanently.