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1
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. American is the largest scheduled passenger airline in the world. At the end of 2006, 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, 2006, American Beacon was responsible for the management of approximately
$57.9 billion in assets, including direct management of approximately $28.2 billion in short-term fixed income
investments.
Recent Events
The Company recorded net earnings of $231 million in 2006 compared to a net loss of $857 million in 2005. The
Company’s 2006 results reflected an improvement in revenues somewhat offset by fuel prices and certain other
costs that were higher in 2006 compared to 2005. The Company’s revenues increased approximately $1.9 billion
in 2006 compared to 2005. American’s passenger revenues increased 7.5 percent despite a capacity (available
seat mile) decrease of 1.2 percent. While passenger yield showed significant year-over-year improvement as
American implemented fare increases to partially offset the continuing rise in the cost of fuel, passenger yield
remains low by historical standards.
The average price per gallon of fuel increased 51.9 cents from 2004 to 2005 and 27.9 cents from 2005 to 2006.
These price increases negatively impacted fuel expense by $1.6 billion and $787 million in 2005 and 2006,
respectively, as compared to the respective prior years. 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.
AMR continues to recapitalize its balance sheet and in May 2006, issued 15 million shares of common stock for
net proceeds of $400 million. On January 26, 2007, AMR issued an additional 13 million shares of common stock
for net proceeds of $497 million.
The Company’s ability to become consistently profitable and its ability to continue to fund its obligations on an
ongoing basis will depend on a number of factors, many of which are largely beyond the Company’s control.
Certain risk factors that affect the Company’s business and financial results are discussed in the Risk Factors
listed in Item 1A. In addition, four of the Company’s largest domestic competitors have filed for bankruptcy in the
last several years and have used this process to significantly reduce contractual labor and other costs. In order
to remain competitive and to improve its financial condition, the Company must continue to take steps to generate
additional revenues and to reduce its costs. Although the Company has a number of initiatives underway to
address its cost and revenue challenges, the ultimate success of these initiatives is not known at this time and
cannot be assured.