American Airlines 2005 Annual Report Download - page 40

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2004 Compared to 2003 The Company’s total operating expenses increased 2.8 percent, or $505 million, to
$18.8 billion in 2004 compared to 2003. American’s mainline operating expenses per ASM in 2004 decreased 4.1
percent compared to 2003 to 9.73 cents. This decrease in operating expenses per ASM is due primarily to
American’s cost savings initiatives and occurred despite the benefit in 2003 of the receipt of a grant from the U.S.
government and a 38.5 percent increase in American’s price per gallon of fuel (net of the impact of fuel hedging)
in 2004 relative to 2003.
(in millions)
Operating Expenses
Year ended
December 31,
2004
Change
from 2003
Percentage
Change
Wages, salaries and benefits $ 6,719 $ (545) (7.5)% (a)
Aircraft fuel 3,969 1,197 43.2 (b)
Other rentals and landing fees 1,187 14 1.2
Depreciation and amortization 1,292 (85) (6.2)
Commissions, booking fees and credit
card expense 1,107 44 4.1
Maintenance, materials and repairs 971 111 12.9 (c)
Aircraft rentals 609 (78) (11.4) (d)
Food service 558 (53) (8.7)
Other operating expenses 2,377 (458) (16.2) (e)
U.S. government grant - 358 NM (f)
Total operating expenses $ 18,789 $ 505 2.8%
(a) Wages, salaries and benefits decreased due to lower wage rates and reduced headcount primarily as
a result of the Labor Agreements and Management Reductions, discussed in the Company’s 2003
Form 10-K, which became effective in the second quarter of 2003. This decrease was offset to some
degree by increased headcount related to capacity increases.
(b) Aircraft fuel expense increased due to a 38.7 percent increase in the Company’s price per gallon of
fuel (net of the impact of fuel hedging) and a 3.3 percent increase in the Company’s fuel
consumption.
(c) Maintenance, materials and repairs increased primarily due to increased aircraft utilization, the
benefit from retiring aircraft subsiding and increases in contractual rates in certain flight hour
agreements for outsourced aircraft engine maintenance.
(d) Aircraft rentals decreased primarily due to the removal of leased aircraft from the fleet in the second
half of 2003 as part of the Company’s restructuring initiatives and concessionary agreements with
certain lessors, which reduced future lease payment amounts and resulted in the conversion of 30
operating leases to capital leases in the second quarter of 2003.
(e) Included in this amount are restructuring charges for 2004 which included (i) the reversal of reserves
previously established for aircraft return costs of $20 million, facility exit costs of $21 million and
employee severance of $11 million, (ii) $21 million in aircraft charges and (iii) $42 million in employee
charges. Restructuring charges for 2003 included approximately (i) $341 million in aircraft charges
offset by a $20 million credit to adjust prior accruals, (ii) $92 million in employee charges, (iii) $62
million in facility exit costs and a (iv) $68 million gain resulting from a transaction involving 33 of the
Company’s Fokker 100 aircraft and related debt.
(f) U.S. government grant for 2003 reflects the reimbursement of security service fees from the U.S.
government under the Emergency Wartime Supplemental Appropriations Act, discussed in Note 2 to
the consolidated financial statements.