American Airlines 2005 Annual Report Download - page 63

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5. Leases
AMR's subsidiaries lease various types of equipment and property, primarily aircraft and airport facilities. The
future minimum lease payments required under capital leases, together with the present value of such payments,
and future minimum lease payments required under operating leases that have initial or remaining non-
cancelable lease terms in excess of one year as of December 31, 2005, were (in millions):
Year Ending December 31,
Capital
Leases
Operating
Leases
2006 $ 263 $ 1,065
2007 196 1,039
2008 236 973
2009 175 872
2010 140 815
2011 and thereafter 794 7,453
1,804 $ 12,217
(1)
Less amount representing interest 716
Present value of net minimum lease payments $ 1,088
(1) As of December 31, 2005, included in Accrued liabilities and Other liabilities and deferred credits on the accompanying
consolidated balance sheet is approximately $1.4 billion relating to rent expense being recorded in advance of future
operating lease payments.
At December 31, 2005, the Company was operating 213 jet aircraft and 27 turboprop aircraft under operating
leases and 91 jet aircraft and three turboprop aircraft under capital leases. The aircraft leases can generally be
renewed at rates based on fair market value at the end of the lease term for one to five years. Some aircraft
leases have purchase options at or near the end of the lease term at fair market value, but generally not to
exceed a stated percentage of the defined lessor's cost of the aircraft or a predetermined fixed amount.
Certain special facility revenue bonds have been issued by certain municipalities primarily to improve airport
facilities and purchase equipment. To the extent these transactions were committed to prior to May 21, 1998 (the
effective date of EITF 97-10, “The Effect of Lessee Involvement in Asset Construction”) they are accounted for as
operating leases under Financial Accounting Standards Board Interpretation 23, “Leases of Certain Property
Owned by a Governmental Unit or Authority”. Approximately $1.9 billion of these bonds (with total future
payments of approximately $4.8 billion as of December 31, 2005) are guaranteed by American, AMR, or both.
Approximately $523 million of these special facility revenue bonds contain mandatory tender provisions that
require American to make operating lease payments sufficient to repurchase the bonds at various times: $28
million in 2006, $100 million in 2007, $218 million in 2008, $112 million in 2014 and $65 million in 2015. Although
American has the right to remarket the bonds, there can be no assurance that these bonds will be successfully
remarketed. Any payments to redeem or purchase bonds that are not remarketed would generally reduce existing
rent leveling accruals or be considered prepaid facility rentals and would reduce future operating lease
commitments. The special facility revenue bonds that contain mandatory tender provisions are listed in the table
above at their ultimate maturity date rather than their mandatory tender provision date. Approximately $198
million of special facility revenue bonds with mandatory tender provisions were successfully remarketed in 2005.
They were acquired by American in 2003 under a mandatory tender provision. Thus, the receipt by American of
the proceeds from the remarketing resulted in an increase to Other liabilities and deferred credits where the
tendered bonds had been classified pending their use to offset certain future operating lease obligations.