American Airlines 2008 Annual Report Download - page 69

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66
5. Leases (Continued)
Special facility revenue bonds have been issued by certain municipalities primarily to improve airport facilities and
purchase equipment. To the extent these transactions were committed to prior to May 21, 1998 (the effective date
of EITF 97-10, “The Effect of Lessee Involvement in Asset Construction”) they are accounted for as operating
leases under Financial Accounting Standards Board Interpretation 23, “Leases of Certain Property Owned by a
Governmental Unit or Authority”. Approximately $1.5 billion of these bonds (with total future payments of
approximately $3.4 billion as of December 31, 2008) are guaranteed by American, AMR, or both. Approximately
$177 million of these special facility revenue bonds contain mandatory tender provisions that require American to
make operating lease payments sufficient to repurchase the bonds at various times: $112 million in 2014 and $65
million in 2015. Although American has the right to remarket the bonds, there can be no assurance that these
bonds will be successfully remarketed. Any payments to redeem or purchase bonds that are not remarketed would
generally reduce existing rent leveling accruals or be considered prepaid facility rentals and would reduce future
operating lease commitments. The special facility revenue bonds that contain mandatory tender provisions are
listed in the table above at their ultimate maturity date rather than their mandatory tender provision date.
Rent expense, excluding landing fees, was $1.3 billion, $1.4 billion and $1.4 billion in 2008, 2007 and 2006,
respectively.
American has determined that it holds a significant variable interest in, but is not the primary beneficiary of, certain
trusts that are the lessors under 84 of its aircraft operating leases. These leases contain a fixed price purchase
option, which allows American to purchase the aircraft at a predetermined price on a specified date. However,
American does not guarantee the residual value of the aircraft. As of December 31, 2008, future lease payments
required under these leases totaled $1.7 billion.
6. Indebtedness
Long-term debt consisted of (in millions):
December 31,
2008
2007
Secured variable and fixed rate indebtedness due through 2021
(effective rates from 4.25% - 11.36% at December 31, 2008)
$ 4,783
$ 4,662
Enhanced equipment trust certificates due through 2012
(rates from 3.86% - 12.00% at December 31, 2008)
2,382
2,482
6.0% - 8.5% special facility revenue bonds due through 2036
1,674
1,688
Credit facility agreement due through 2010
(effective rate of 8.60% at December 31, 2008)
691
440
4.25% - 4.50% senior convertible notes due 2023 - 2024
314
619
9.0% - 10.20% debentures due through 2021
213
213
7.88% - 10.55% notes due through 2039
211
211
10,268
10,315
Less current maturities
1,849
902
Long-term debt, less current maturities
$ 8,419
$ 9,413
Maturities of long-term debt (including sinking fund requirements) for the next five years are: 2009 - $1.8 billion;
2010 - $1.3 billion; 2011 - $2.2 billion; 2012 - $1.0 billion, 2013 - $700 million.