American Airlines 2005 Annual Report Download - page 32

Download and view the complete annual report

Please find page 32 of the 2005 American Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

29
LIQUIDITY AND CAPITAL RESOURCES
Cash, Short-Term Investments and Restricted Assets
At December 31, 2005, the Company had $3.8 billion in unrestricted cash and short-term investments and $510
million in restricted cash and short-term investments.
Significant Indebtedness and Future Financing
Substantial indebtedness is a significant risk to the Company as discussed in the Risk Factors listed in Item 1A.
During 2003, 2004 and 2005, in addition to refinancing its Credit Facility and certain debt with an institutional
investor (see Note 6 to the consolidated financial statements), the Company raised an aggregate of approximately
$4.5 billion of financing to fund capital commitments (mainly for aircraft and ground properties) and operating
losses and to bolster its liquidity. As of the date of this Form 10-K, the Company believes that it should have
sufficient liquidity to fund its operations for the foreseeable future, including repayment of debt and capital leases,
capital expenditures and other contractual obligations. However, to maintain sufficient liquidity as the Company
continues to implement its restructuring and cost reduction initiatives, and because the Company has significant
debt, lease and other obligations in the next several years, as well as substantial pension funding obligations
(refer to Contractual Obligations in this Item 7), the Company will need access to additional funding. The
Company’s possible financing sources primarily include: (i) a limited amount of additional secured aircraft debt (a
very large majority of the Company’s owned aircraft, including virtually all of the Company’s Section 1110-eligible
aircraft, are encumbered) or sale-leaseback transactions involving owned aircraft, (ii) debt secured by new aircraft
deliveries, (iii) debt secured by other assets, (iv) securitization of future operating receipts, (v) the sale or
monetization of certain assets, (vi) unsecured debt and (vii) equity and/or equity-like securities. However, the
availability and level of these financing sources cannot be assured, particularly in light of the Company’s and
American’s recent financial results, substantial indebtedness, reduced credit ratings, high fuel prices, historically
weak revenues and the financial difficulties being experienced in the airline industry. The inability of the Company
to obtain additional funding on acceptable terms would have a material adverse impact on the ability of the
Company to sustain its operations over the long-term.
Credit Ratings
AMR’s and American’s credit ratings are significantly below investment grade. Additional reductions in AMR's or
American's credit ratings could further increase its borrowing or other costs and further restrict the availability of
future financing.
Credit Facility Covenants
American has a credit facility consisting of a fully drawn $540 million senior secured revolving credit facility, with a
final maturity on June 17, 2009, and a fully drawn $248 million term loan facility, with a final maturity on December
17, 2010 (the Revolving Facility and the Term Loan Facility, respectively, and collectively, the Credit Facility).
American’s obligations under the Credit Facility are guaranteed by AMR.