American Airlines 2007 Annual Report Download - page 14

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ITEM 1A. RISK FACTORS
Our ability to become consistently profitable and our ability to continue to fund our obligations on an ongoing
basis will depend on a number of risk factors, many of which are largely beyond our control. Some of the factors
that may have a negative impact on us are described below:
As a result of significant losses in recent years, our financial condition has been materially weakened.
We incurred significant losses in recent prior years: $857 million in 2005, $751 million in 2004, $1.2 billion in
2003, $3.5 billion in 2002 and $1.8 billion in 2001. As a result, our financial condition was materially weakened,
and although we earned a profit in 2007 and 2006, we remain vulnerable both to unexpected events (such as
additional terrorist attacks or a sudden spike in jet fuel prices) and to general declines in the operating
environment (such as that resulting from a recession or significant increased competition).
Our initiatives to generate additional revenues and to reduce our costs may not be adequate or
successful.
As we seek to improve our financial condition, we must continue to take steps to generate additional revenues
and to reduce our costs. Although we have a number of initiatives underway to address our cost and revenue
challenges, some of these initiatives involve changes to our business which we may be unable to implement. In
addition, we expect that, as time goes on, it will be progressively more difficult to identify and implement
significant revenue enhancement and cost savings initiatives. The adequacy and ultimate success of our
initiatives to generate additional revenues and reduce our costs are not known at this time and cannot be
assured. Moreover, whether our initiatives will be adequate or successful depends in large measure on factors
beyond our control, notably the overall industry environment, including passenger demand, yield and industry
capacity growth, and fuel prices. Given the competitive challenges we face and other factors, such as high fuel
prices, that are beyond our control, we must continue to aggressively pursue profit improvement initiatives to
achieve long-term success.
Our business is affected by many changing economic and other conditions beyond our control, and our
results of operations tend to be volatile and fluctuate due to seasonality.
Our business and our results of operations are affected by many changing economic and other conditions beyond
our control, including among others:
• actual or potential changes in international, national, regional and local economic, business and financial
conditions, including recession, inflation and higher interest rates, war, terrorist attacks or political
instability;
• changes in consumer preferences, perceptions, spending patterns or demographic trends;
• changes in the competitive environment due to industry consolidation and other factors;
• actual or potential disruptions to the air traffic control system;
• increases in costs of safety, security and environmental measures;
• outbreaks of diseases that affect travel behavior; and
• weather and natural disasters.
As a result, our results of operations tend to be volatile and subject to rapid and unexpected change. In addition,
due to generally greater demand for air travel during the summer, our revenues in the second and third quarters
of the year tend to be stronger than revenues in the first and fourth quarters of the year.