American Airlines 2007 Annual Report Download - page 62

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4. Commitments, Contingencies and Guarantees (Continued)
In certain transactions, including certain aircraft financing leases and loans and derivative transactions, the
lessors, lenders and/or other parties have rights to terminate the transaction based on changes in foreign tax law,
illegality or certain other events or circumstances. In such a case, the Company may be required to make a lump
sum payment to terminate the relevant transaction.
In its aircraft financing agreements, the Company generally indemnifies the financing parties, trustees acting on
their behalf and other relevant parties against liabilities (including certain taxes) resulting from the financing,
manufacture, design, ownership, operation and maintenance of the aircraft regardless of whether these liabilities
(or taxes) relate to the negligence of the indemnified parties.
The Company has general indemnity clauses in many of its airport and other real estate leases where the
Company as lessee indemnifies the lessor (and related parties) against liabilities related to the Company’s use of
the leased property. Generally, these indemnifications cover liabilities resulting from the negligence of the
indemnified parties, but not liabilities resulting from the gross negligence or willful misconduct of the indemnified
parties. In addition, the Company provides environmental indemnities in many of these leases for contamination
related to the Company’s use of the leased property.
Under certain contracts with third parties, the Company indemnifies the third party against legal liability arising out
of an action by the third party, or certain other parties. The terms of these contracts vary and the potential
exposure under these indemnities cannot be determined. Generally, the Company has liability insurance
protecting the Company for its obligations it has undertaken under these indemnities.
AMR and American have event risk covenants in approximately $1.3 billion of indebtedness and operating leases
as of December 31, 2007. These covenants permit the holders of such obligations to receive a higher rate of
return (between 100 and 650 basis points above the stated rate) if a designated event, as defined, should occur
and the credit ratings of such obligations are downgraded below certain levels within a certain period of time. No
designated event, as defined, had occurred as of December 31, 2007.
The Company is involved in certain claims and litigation related to its operations. In the opinion of management,
liabilities, if any, arising from these claims and litigation will not have a material adverse effect on the Company’s
consolidated financial position, results of operations, or cash flows, after consideration of available insurance.
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, 2007, were (in millions):
Year Ending December 31,
Capital
Leases
Operating
Leases
2008 $ 243 $ 1,037
2009 180 932
2010 144 866
2011 146 859
2012 97 676
2013 and thereafter 559 5,798
$ 1,369 $ 10,168 (1)
Less amount representing interest 523
Present value of net minimum lease payments $ 846
(1) As of December 31, 2007, included in Accrued liabilities and Other liabilities and deferred credits on the accompanying
consolidated balance sheet is approximately $1.3 billion relating to rent expense being recorded in advance of future
operating lease payments.