American Airlines 2009 Annual Report Download - page 35

32
As of December 31, 2009, American had 45 Boeing 737-800 purchase commitments for 2010 and eight Boeing 737-
800 purchase commitments in 2011. In addition to these aircraft, American has firm commitments for eleven Boeing
737-800 aircraft and seven Boeing 777 aircraft scheduled to be delivered in 2013-2016. AMR Eagle has firm
commitments for 22 Bombardier CRJ-700 aircraft scheduled to be delivered in 2010 and 2011. Payments for the
Company’s aircraft purchase commitments will approximate $1.6 billion in 2010, $526 million in 2011, $217 million
in 2012, $465 million in 2013, $224 million for 2014, and $248 million for 2015 and beyond. These amounts are
net of purchase deposits currently held by the manufacturers.
As a result of recent financing transactions (refer to Note 6 of the consolidated financial statements), American
does not expect to use its previously arranged backstop financing to finance any of its Boeing 737-800 aircraft
deliveries scheduled for 2010 and 2011; however, such backstop financing arrangement remains in place.
In 2008, the Company entered into a new purchase agreement with Boeing for the acquisition of 42 firm Boeing
787-9 aircraft and purchase rights to acquire up to 58 additional B787 aircraft. Per the purchase agreement, the
first such aircraft was scheduled to be delivered in 2012, and the last firm aircraft was scheduled to be delivered
in 2018 with deliveries of additional aircraft, if any, scheduled between 2015 and 2020. The Company and Boeing
are currently discussing a revised delivery schedule due to the impact of the overall Boeing 787 program delay on
American’s delivery positions. The revised delivery schedule is expected to include terms and conditions
consistent with the original agreement and to allow the Company confirmation rights both similar to those
described below.
Under the current 787-9 purchase agreement, except as described below, American will not be obligated to
purchase a 787-9 aircraft unless it gives Boeing notice confirming its election to do so at least 18 months prior to
the scheduled delivery date for that aircraft. If American does not give that notice with respect to an aircraft, the
aircraft no longer be subject to the 787-9 purchase agreement. These confirmation rights may be exercised until
a specified date, May 1, 2013 under the current agreement, provided that those rights will terminate earlier if
American reaches a collective bargaining agreement with its pilot union that includes provisions enabling
American to utilize the 787-9 to American’s satisfaction in the operations desired by American, or if American
confirms its election to purchase any of the initial 42 787-9 aircraft. While there can be no assurances, American
expects that it will have reached an agreement as described above with its pilots union prior to the first notification
date. In either of those events, American would become obligated to purchase all of the initial 42 aircraft then
subject to the purchase agreement. If neither of those events occur prior to May 1, 2013 under the current
agreement, then on that date American may elect to purchase all of the initial 42 aircraft then subject to the
purchase agreement, and if it does not elect to do so, the purchase agreement will terminate in its entirety.
Credit Ratings AMR’s and American’s credit ratings are significantly below investment grade. Additional
reductions in AMR's or American's credit ratings could further increase its borrowing or other costs and further
restrict the availability of future financing.
Credit Card Processing and Other Reserves 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 processor’s
exposure to the Company under the applicable agreement and, in the case a reserve is 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.
Cash Flow Activity The Company’s cash flow from operating activities during the year ended December 31,
2009 generated $930 million which is an increase of $2.3 billion from the same period in 2008, primarily due to
the decrease in average fuel prices in 2009 as compared to 2008.
Capital expenditures during 2009 were $1.5 billion and primarily included new aircraft and aircraft modifications.