American Airlines 2009 Annual Report Download - page 15

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Our ability to obtain future financing is limited by the value of our unencumbered assets. Almost all of our aircraft
assets (including aircraft eligible for the benefits of Section 1110) are encumbered as a result of financing activity
in recent years. This financing activity has significantly reduced the quantity of our assets which could be used as
collateral in future financing. Also, the market value of our aircraft assets has declined in recent years, and may
continue to decline. In addition, many of the other financing sources traditionally available to us may be difficult to
access, and no assurance can be given as to the amount of financing available to us.
Since the Terrorist Attacks, our credit ratings have been lowered to significantly below investment grade. These
reductions have increased our borrowing costs and otherwise adversely affected borrowing terms, and limited
borrowing options. Additional reductions in our credit ratings might have other effects on us, such as further
increasing borrowing or other costs or further restricting our ability to raise funds.
A number of other factors, including our financial results in recent years, our substantial indebtedness, the difficult
revenue environment we face, our reduced credit ratings, recent historically high fuel prices, and the financial
difficulties experienced in the airline industry, adversely affect the availability and terms of funding for us. In
addition, the global economic downturn and recent severe disruptions in the capital markets and other sources of
funding have resulted in greater volatility, less liquidity, widening of credit spreads, and substantially more limited
availability of funding. As a result of these and other factors, although we believe we have or can access
sufficient liquidity to fund our operations and obligations, there can be no assurances to that effect. An inability to
obtain necessary additional funding on acceptable terms would have a material adverse impact on us and on our
ability to sustain our operations.
We could be required to maintain reserves under our credit card processing agreements, which could
materially adversely impact our liquidity.
American has agreements with a number of credit card companies and processors to accept credit cards for the
sale of air travel and other services. Under certain of these agreements, the related credit card processor may
hold back a reserve from American’s credit card receivables following the occurrence of certain events, including
the failure of American to maintain certain levels of liquidity (as specified in each agreement).
Under such agreements, the amount of the reserve that may be required generally is based on the credit card
processor’s exposure to the Company under the applicable agreement and, in the case of a reserve required
because of American’s failure to maintain a certain level of liquidity, the amount of such liquidity. As of December
31, 2009, the Company was not required to maintain any reserve under such agreements. If circumstances were
to occur that would allow the credit card processor to require the Company to maintain a reserve, the Company’s
liquidity would be negatively impacted.
Our initiatives to generate additional revenues and to reduce our costs may not be adequate or
successful.
As we seek to improve our financial condition, we must continue to take steps to generate additional revenues
and to reduce our costs. Although we have a number of initiatives underway to address our cost and revenue
challenges, some of these initiatives involve changes to our business which we may be unable to implement. In
addition, it has become increasingly difficult to identify and implement significant revenue enhancement and cost
savings initiatives. The adequacy and ultimate success of our initiatives to generate additional revenues and
reduce our costs cannot be assured. Moreover, whether our initiatives will be adequate or successful depends in
large measure on factors beyond our control, notably the overall industry environment, including passenger
demand, yield and industry capacity growth, and fuel prices. It will be very difficult for us to continue to fund our
obligations on an ongoing basis, and to return to profitability, if the overall industry revenue environment does not
improve substantially or if fuel prices were to increase and persist for an extended period at high levels.