American Airlines 2008 Annual Report Download - page 44

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41
2007 Compared to 2006 The Company’s total operating expenses increased 2.2 percent, or $467 million, to
$22.0 billion in 2007 compared to 2006. American’s mainline operating expenses per ASM in 2007 increased 4.4
percent compared to 2006 to 11.38 cents. This increase in operating expenses per ASM is due primarily to a 5.6
percent increase in American’s price per gallon of fuel (net of the impact of fuel hedging) in 2007 relative to 2006.
(in millions)
Operating Expenses
Year ended
December 31,
2007
Change
from 2006
Percentage
Change
Wages, salaries and benefits
$ 6,770
$ (43)
(0.6)%
Aircraft fuel
6,670
268
4.2
(a)
Other rentals and landing fees
1,278
(5)
(0.4)
Depreciation and amortization
1,202
45
3.9
Maintenance, materials and repairs
1,057
86
8.9
(b)
Commissions, booking fees and credit
card expense
1,028
(47)
(4.5)
Aircraft rentals
591
(15)
(2.5)
Food service
534
26
5.1
Special charges
63
63
*
(c)
Other operating expenses
2,777
89
3.2
Total operating expenses
$ 21,970
$ 467
2.2%
* Not meaningful
(a) Aircraft fuel expense increased primarily due to a 5.6 percent increase in American’s price per gallon of
fuel (net of the impact of hedging gains of $239 million) offset by a 1.6 percent decrease in American’s
fuel consumption.
(b) Maintenance, materials and repairs expense increased primarily due to $57 million in heavier workscope
of scheduled airframe maintenance overhauls, repair costs and volume, and contractual engine repair
rates, which are driven by aircraft age.
(c) Special charges increased due to a $63 million charge for the retirement of 24 MD-80 aircraft and certain
related equipment.
Other Income (Expense)
Other income (expense) consists of interest income and expense, interest capitalized and miscellaneous - net.
2008 Compared to 2007 Decreases in both short-term investment balances and interest rates caused a decrease
in Interest income of $156 million, or 46.4 percent, to $181 million. Interest expense decreased $158 million, or
17.2 percent, to $756 million primarily as a result of a decrease in the Company’s long-term debt balance.
Miscellaneous – net includes a gain of $432 million for the sale of American Beacon.
2007 Compared to 2006 Increases in both short-term investment balances and interest rates caused an increase
in Interest income of $58 million, or 20.8 percent, to $337 million. Interest expense decreased $116 million, or 11.2
percent, to $914 million primarily as a result of prepayment and repayment of existing debt. Miscellaneous – net
includes a gain of $138 million for the sale of ARINC.
Income Tax Benefit
The Company did not record a net tax provision or benefit associated with its 2008 losses or its 2007 or 2006
earnings due to the Company providing a valuation allowance, as discussed in Note 8 to the consolidated financial
statements.