American Airlines 2008 Annual Report Download - page 84

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81
11. Intangible Assets
In April 2007, the United States and the EU approved an “open skies” air services agreement that provides airlines
from the United States and EU member states open access to each other’s markets, with freedom of pricing and
unlimited rights to fly beyond the United States and any airport in the EU including London’s Heathrow
Airport. The provisions of the agreement were effective on March 30, 2008. Under the agreement, every U.S. and
EU airline is authorized to operate between airports in the United States and Heathrow. Notwithstanding the open
skies agreement, Heathrow is a slot-controlled airport. Only three airlines besides American were previously
allowed to provide that Heathrow service. The Company has recorded route acquisition costs (including
international routes and slots) of $828 million and $846 million as of December 31, 2008 and 2007, respectively,
including a significant amount related to operations at Heathrow. The Company considers these assets indefinite
life assets under Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangibles” and as a
result, they are not amortized but instead are tested for impairment annually or more frequently if events or
changes in circumstances indicate that the asset might be impaired. The Company has completed an impairment
analysis and has concluded that no impairment exists.
The following tables provide information relating to the Company’s amortized intangible assets as of December 31
(in millions):
2008
Cost
Accumulated
Amortization
Net Book
Value
Amortized intangible assets:
Airport operating rights
$ 515
$ 302
$ 213
Gate lease rights
182
114
68
Total
$ 697
$ 416
$ 281
2007
Cost
Accumulated
Amortization
Net Book
Value
Amortized intangible assets:
Airport operating rights
$ 517
$ 282
$ 235
Gate lease rights
182
107
75
Total
$ 699
$ 389
$ 310
Airport operating and gate lease rights are being amortized on a straight-line basis over 25 years to a zero residual
value. The Company recorded amortization expense related to these intangible assets of approximately $28
million for each of the years ended December 31, 2008, 2007 and 2006, respectively. The Company expects to
record annual amortization expense of approximately $27 million in each of the next five years related to these
intangible assets.