American Airlines 2008 Annual Report Download - page 68

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65
4. Commitments, Contingencies and Guarantees (Continued)
AMR and American have event risk covenants in approximately $1.2 billion of indebtedness and operating leases
as of December 31, 2008. 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, 2008.
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, 2008, were (in millions):
Year Ending December 31,
Capital
Leases
Operating
Leases
2009
$ 182
$ 998
2010
143
932
2011
146
922
2012
97
739
2013
83
652
2014 and thereafter
476
4,944
$ 1,127
$ 9,187
(1)
Less amount representing interest
438
Present value of net minimum lease payments
$ 689
(1) As of December 31, 2008, included in Accrued liabilities and Other liabilities and deferred credits on the accompanying
consolidated balance sheet is approximately $1.1 billion relating to rent expense being recorded in advance of future
operating lease payments.
At December 31, 2008, the Company was operating 181 jet aircraft and 39 turboprop aircraft and under operating
leases and 76 jet 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.
During 2008, the Company raised $354 million through sale leasebacks of certain aircraft, including regional
aircraft. The gain on sale of $92 million is being amortized over the respective remaining lease terms. American
leases all 39 Super ATR regional aircraft from a third party (guaranteed by AMR) and in turn, subleases those
aircraft to AMR Eagle for operation.