American Airlines 2005 Annual Report Download - page 4

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PART I
ITEM 1. BUSINESS
AMR Corporation (AMR or the Company) was incorporated in October 1982. AMR’s operations fall almost
entirely in the airline industry. AMR's principal subsidiary, American Airlines, Inc. (American), was founded in
1934. On April 9, 2001, American (through a wholly owned subsidiary, TWA Airlines LLC (TWA LLC)) purchased
substantially all of the assets and assumed certain liabilities of Trans World Airlines, Inc. (TWA), the eighth largest
U.S. carrier at the time of the transaction.
American is the largest scheduled passenger airline in the world. At the end of 2005, American provided
scheduled jet service to approximately 150 destinations throughout North America, the Caribbean, Latin America,
Europe and Asia. American is also one of the largest scheduled air freight carriers in the world, providing a wide
range of freight and mail services to shippers throughout its system.
In addition, AMR Eagle Holding Corporation (AMR Eagle), a wholly-owned subsidiary of AMR, owns two regional
airlines which do business as "American Eagle” -- American Eagle Airlines, Inc. and Executive Airlines, Inc.
(Executive) (collectively, the American Eagle® carriers). American also contracts with three independently owned
regional airlines, which do business as the “American Connection” (the American Connection® carriers). The
American Eagle carriers and the American Connection carriers provide connecting service from eight of
American's high-traffic cities to smaller markets throughout the United States, Canada, Mexico and the Caribbean.
American Beacon Advisors, Inc. (American Beacon), a wholly-owned subsidiary of AMR, is responsible for the
investment and oversight of assets of AMR’s U.S. employee benefit plans, as well as AMR’s short-term
investments. It also serves as the investment manager of the American Beacon Funds, a family of mutual funds
with both institutional and retail shareholders, and provides customized fixed income portfolio management
services. As of December 31, 2005, American Beacon was responsible for the management of approximately
$42.7 billion in assets, including direct management of approximately $18.8 billion in short-term fixed income
investments.
Recent Events
The Company incurred an $861 million net loss in 2005 compared to a net loss of $761 million in 2004. The
Company’s results were impacted by the continuing increase in fuel prices and certain other costs, somewhat
offset by an improvement in revenues and productivity improvements and other cost reductions resulting from
progress under the Turnaround Plan.
The average price per gallon of fuel increased 33.9 cents from 2003 to 2004 and 51.9 cents from 2004 to 2005.
These price increases negatively impacted fuel expense by $1.1 billion and $1.7 billion in 2004 and 2005,
respectively. Continuing high fuel prices, additional increases in the price of fuel, and/or disruptions in the supply
of fuel would further adversely affect the Company’s financial condition and its results of operations.
In order to fund its losses and limited capital spending during 2005 and to bolster its liquidity, the Company
completed several financing transactions during the year.
• American re-marketed $198 million of Dallas-Fort Worth International Airport Facility Improvement
Corporation Revenue Refunding Bonds, Series 2000A, due May 1, 2029.
• The New York City Industrial Development Agency issued $800 million of special facility revenue bonds on
behalf of American, and $491 million of bond proceeds was paid to American to reimburse prior construction
costs.
• American sold and leased back 89 spare engines for net proceeds of $133 million.