American Airlines 2009 Annual Report Download - page 34

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Liquidity and Capital Resources
Cash, Short-Term Investments and Restricted Assets At December 31, 2009, the Company had $4.4 billion
in unrestricted cash and short-term investments and $460 million in Restricted cash and short-term investments,
both at fair value, versus $3.1 billion in unrestricted cash and short-term investments and $459 million in
Restricted cash and short-term investments in 2008.
Significant Indebtedness and Future Financing Indebtedness is a significant risk to the Company as
discussed in the Risk Factors listed in Item 1A. During 2006, 2007, 2008 and 2009, the Company raised an
aggregate of approximately $6.9 billion in financing to fund operating losses, capital commitments (mainly for
aircraft and ground properties), debt maturities, employee pension obligations and to bolster its liquidity. As of the
date of this Form 10-K, the Company believes that it should have sufficient liquidity to fund its operations,
including repayment of debt and capital leases, capital expenditures and other contractual obligations; however
there can be no assurances to that effect.
Despite the disruptions in the capital markets, in the twelve months ended December 31, 2009, the Company
raised approximately $4.3 billion in cash from the advance sale of AAdvantage miles, debt issuances, equity
issuances and sale leasebacks. In addition, the Company secured financing commitments covering all aircraft
scheduled to be delivered to the Company in 2010 and 2011. See full descriptions of these financings in Notes 4,
5, 6 and 13 to the consolidated financial statements.
In 2010, the Company will be required to make approximately $1.0 billion of principal payments on long-term debt
and approximately $90 million in principal payments on capital leases, and the Company expects to spend
approximately $2.1 billion on capital expenditures, including aircraft commitments. In addition, the global
economic downturn, rising fuel prices, the possibility of being required to post reserves under credit card
processing agreements, and the obligation to post cash collateral on fuel hedging contracts and fund pension plan
contributions, among other things, may in the future negatively impact the Company’s liquidity. To maintain
sufficient liquidity and because the Company has significant debt, lease and other obligations in the next several
years, including commitments to purchase aircraft, as well as significant pension funding obligations (refer to
Contractual Obligations in this Item 7), the Company will need access to substantial additional funding. An
inability to obtain necessary additional funding on acceptable terms would have a material adverse impact on the
Company and on its ability to sustain its operations.
The Company’s substantial indebtedness and other obligations have important consequences. For example, they: (i)
limit the Company’s ability to obtain additional funding for working capital, capital expenditures, acquisitions,
investments and general corporate purposes, and adversely affect the terms on which such funding could be obtained;
(ii) require the Company to dedicate a substantial portion of its cash flow from operations to payments on its
indebtedness and other obligations, thereby reducing the funds available for other purposes; (iii) make the
Company more vulnerable to economic downturns and catastrophic external events; and (iv) limit the Company’s
ability to withstand competitive pressures and reduce its flexibility in responding to changing business and
economic conditions.
The Company’s possible remaining financing sources primarily include: (i) a very limited amount of additional
secured aircraft debt or sale leaseback transactions involving owned aircraft; (ii) debt secured by other assets;
(iii) securitization of future operating receipts; (iv) the sale or monetization of certain assets; (v) unsecured debt;
and (vi) issuance of equity or equity-like securities. Besides unencumbered aircraft, the Company’s most likely
sources of liquidity include the financing of route authorities, takeoff and landing slots, spare parts, and the sale or
financing of certain of AMR’s business units and subsidiaries, such as AMR Eagle. The Company’s ability to
obtain future financing is limited by the value of its unencumbered assets. Almost all of the Company’s aircraft
assets (including aircraft eligible for the benefits of Section 1110 of the U.S. Bankruptcy Code) are encumbered.
Also, the market value of these aircraft assets has declined in recent years, and may continue to decline. The
Company believes it has approximately $2 billion in assets that could be used as possible financing sources as of
the date of this filing. However, many of these assets may be difficult to finance, and the availability and level of
the financing sources described above cannot be assured.