American Airlines 2005 Annual Report Download - page 39

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36
OPERATING EXPENSES
2005 Compared to 2004 The Company’s total operating expenses increased 10.7 percent, or $2.0 billion, to
$20.8 billion in 2005 compared to 2004. American’s mainline operating expenses per ASM in 2005 increased 7.9
percent compared to 2004 to 10.50 cents. This increase in operating expenses per ASM is due primarily to a 42.1
percent increase in American’s price per gallon of fuel (net of the impact of a fuel tax credit and fuel hedging) in
2005 relative to 2004.
(in millions)
Operating Expenses
Year ended
December 31,
2005
Change
from 2004
Percentage
Change
Wages, salaries and benefits $ 6,755 $ 36 0.5%
Aircraft fuel 5,615 1,646 41.5 (a)
Other rentals and landing fees 1,262 75 6.3
Depreciation and amortization 1,164 (128) (9.9) (b)
Commissions, booking fees and credit
card expense
1,113
6
0.5
Maintenance, materials and repairs 989 18 1.9
Aircraft rentals 591 (18) (3.0)
Food service 507 (51) (9.1)
Other operating expenses 2,809 432 18.2 (c)
Total operating expenses $ 20,805 $ 2,016 10.7%
(a) Aircraft fuel expense increased primarily due to a 42.1 percent increase in American’s price per
gallon of fuel (including the benefit of a $55 million fuel excise tax refund received in March 2005 and
the impact of fuel hedging) offset by a 2.2 percent decrease in American’s fuel consumption.
(b) Effective January 1, 2005, in order to more accurately reflect the expected useful lives of its aircraft,
the Company changed its estimate of the depreciable lives of its Boeing 737-800, Boeing 757-200
and McDonnell Douglas MD-80 aircraft from 25 to 30 years. As a result of this change, Depreciation
and amortization expense was reduced by approximately $108 million during the year and the per
share net loss was $0.65 less than it otherwise would have been.
(c) Other operating expenses increased due to a $155 million charge for the retirement of 27 MD-80
aircraft, facilities charges of $56 million as part of the Company’s restructuring initiatives and an $80
million charge for the termination of an airport construction contract. These charges were somewhat
offset by a $37 million gain related to the resolution of a debt restructuring and a $22 million credit for
the reversal of an insurance reserve. The account was also impacted by an increase in
communications charges of $53 million year-over-year due to increased international flying and
higher rates.