American Airlines 2009 Annual Report Download - page 32

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The Company continued to work to implement and maintain several other initiatives, including introducing plans to
focus its network by reallocating capacity to primary markets in Dallas/Fort Worth, Chicago, Miami, New York and
Los Angeles, initiating new plans to enhance its fleet to better serve customers, maintaining the range of service
charges introduced in 2008 to generate additional revenue, executing its fleet renewal and replacement plan,
implementing initiatives to improve dependability and on-time performance, and securing a total of $4.3 billion in
cash through financing transactions in 2009, which substantially bolstered the Company’s liquidity position. In
addition, the Company secured financing commitments covering all aircraft scheduled to be delivered in 2010 and
2011.
The Company continues to pursue the initiative to strengthen its global network through the application pending
with DOT for global ATI with four members of the oneworld global alliance. In 2008, American entered into a joint
business agreement and related marketing arrangements with British Airways and Iberia, providing for
commercial cooperation on flights between North America and most countries in Europe, pooling and sharing of
certain revenues and costs, expanded codesharing, enhanced frequent flyer program reciprocity, and cooperation
in other areas. In connection with the joint business agreement, American, British Airways and Iberia, along with
Finnair and Royal Jordanian, applied to DOT for ATI for their planned cooperation, and in February of 2010, DOT
tentatively granted the parties’ application for ATI subject to certain conditions, including requirements that
American and British Airways lease a total of four takeoff and landing slots at London Heathrow (two slot pairs) to
other carriers beginning in 2011, that specified provisions of the joint business agreement be amended, and that
the carriers submit reports regarding progress towards the alliance’s stated goals and the realization of public
benefits. DOT also established a procedure that allows any interested party to submit comments on its tentative
findings within the next 45 days. American is reviewing the order granting tentative approval with the other
applicant carriers, and expects to respond to DOT within the required 45 day comment period. A final decision on
the application is expected after DOT’s review of responses received from American and other interested parties
during the comment period.
In September of 2009, the European Union (EU) issued a Statement of Objection (SO) related to the proposed
joint business agreement. The SO asserts, among other things, that without remedies, the joint business
agreement would infringe certain aspects of EU competition law. The carriers have responded to the SO and
have sought to demonstrate the consumer benefits of the joint business agreement. The SO process is an
anticipated part of the process of obtaining clearance from EU competition authorities. The parties have been in
discussions and have offered a set of commitments, including offering to lease slots to competitors to serve
certain routes, to address the EU's remaining competition concerns.
Implementation of the joint business agreement and the related arrangements is subject to conditions, including final
approval from DOT and clearance from EU competition authorities as referred to above, various other U.S. and foreign
regulatory approvals, successful negotiation of certain detailed financial and commercial arrangements, and other
approvals. Following satisfaction of those conditions, American expects to begin implementing the joint business
agreement in the second half of 2010. No assurances can be given as to any arrangements that may ultimately be
implemented or any benefits the Company may derive from such arrangements.
In February 2010, American and JAL announced the decision to strengthen their relationship. The carriers, both
members of the oneworld alliance, jointly applied to DOT for ATI on certain routes, and jointly notified the MLIT in Tokyo
of the proposed cooperation. The Company believes this application will meet DOT’s pro-consumer and pro-competition
criteria for granting ATI. As a part of the application, American and JAL entered into a joint business agreement which
will enhance their scope of cooperation on routes between North America and Asia, through adjustments to their
respective networks, flight schedules, and other business activities. This, in turn, will allow both carriers to better
complement each other’s operations and to develop and offer competitive products and quality service to their
customers. The joint business agreement is subject to ATI approval and certain other conditions.
As a part of these commercial benefits, American determined that with ATI and by participating in a joint business
agreement with American, JAL could realize approximately $100 million in annual incremental revenue. American
has given JAL a guarantee to that effect covering the first three years following implementation of the joint
business agreement, subject to certain terms and conditions. The Company and other oneworld members have
also discussed various possible financing arrangements with JAL. The Company has agreed to negotiate in good
faith towards a capital investment in JAL by American, oneworld and a private investment firm in the future if
invited by JAL and the Government of Japan. To date, the Government of Japan has declined any such
investment, and the Company does not expect that any such investment will be made in the near term. Any such
investment would be on and subject to terms and conditions customary to such an arrangement. The Company
also expects that the amount of such a capital investment, if any, would not exceed $1.4 billion, with the
contribution by American and other oneworld carriers not to exceed $300 million, and the remainder to be made
by a private investment firm.