American Airlines 2009 Annual Report Download - page 63

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60
4. Commitments, Contingencies and Guarantees
As of December 31, 2009, American had 45 Boeing 737-800 purchase commitments for 2010 and eight Boeing 737-
800 aircraft 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. American previously announced plans
(subject to certain reconfirmation rights) to acquire 42 Boeing 787-9 aircraft, with the right to acquire an additional
58 Boeing 787-9 aircraft. American has selected GE Aviation as the exclusive provider of engines for its
expected order of Boeing 787-9 aircraft.
In December 2009, AMR Eagle entered into an agreement to exercise options to purchase 22 Bombardier CRJ-
700 series jet aircraft from Bombardier Inc. AMR Eagle has also entered into agreements with Export
Development Canada (EDC) to provide financing, and with another party to complement EDC’s financing
support. The Company expects the purchase to be fully financed. The obligations of AMR Eagle under those
financing agreements will be guaranteed by the Company. Delivery of the Bombardier CRJ-700 aircraft is
anticipated to begin in June 2010 continuing through April 2011.
As of December 31, 2009, payments for the above purchase commitments will approximate $1.6 billion in 2010,
$526 million in 2011, $217 million in 2012, $465 million in 2013, $224 million in 2014, and $248 million for 2015
and beyond. These amounts are net of purchase deposits currently held by the manufacturers. American has
granted Boeing a security interest in American’s purchase deposits with Boeing. The Company’s purchase
deposits totaled $639 million and $671 million at December 31, 2009 and 2008, respectively.
On December 18, 2007, the European Commission issued a SO against 26 airlines, including the Company. The
SO alleges that these carriers participated in a conspiracy to set surcharges on cargo shipments in violation of EU
law. The SO states that, in the event that the allegations in the SO are affirmed, the Commission will impose fines
against the Company. The Company intends to vigorously contest the allegations and findings in the SO under
EU laws, and it intends to cooperate fully with all other pending investigations. Based on the information to date,
the Company has not recorded any reserve for this exposure for the year ended December 31, 2009. In the event
that the SO is affirmed or other investigations uncover violations of the U.S. antitrust laws or the competition laws
of some other jurisdiction, or if the Company were named and found liable in any litigation based on these
allegations, such findings and related legal proceedings could have a material adverse impact on the Company.
The Company has contracts related to facility construction or improvement projects, primarily at airport locations.
The contractual obligations related to these projects totaled approximately $55 million as of December 31, 2009.
The Company expects to make payments of $43 million and $10 million in 2010 and 2011, respectively. In
addition, the Company has an information technology support related contract that requires minimum annual
payments of $150 million through 2013.
American has a capacity purchase agreement with Chautauqua Airlines, Inc. to provide Embraer -140 regional jet
services to certain markets under the brand AmericanConnection®. Under these arrangements, the Company
pays the AmericanConnection® carrier a fee per block hour to operate the aircraft. The block hour fees are
designed to cover the AmericanConnection® carrier’s fully allocated costs plus a margin. Assumptions for certain
costs such as fuel, landing fees, insurance, and aircraft ownership are trued up to actual values on a pass through
basis. In consideration for these payments, the Company retains all passenger and other revenues resulting from
the operation of the AmericanConnection® regional jets. Minimum payments under the contracts are $55 million
in 2010 and $73 million over the two years 2011 and 2012. In addition, if the Company terminates the
Chautauqua contract without cause, Chautauqua has the right to put its 15 Embraer aircraft to the Company. If
this were to happen, the Company would take possession of the aircraft and become liable for lease obligations
totaling approximately $21 million per year with lease expirations in 2018 and 2019.
The Company is a party to many routine contracts in which it provides general indemnities in the normal course of
business to third parties for various risks. The Company is not able to estimate the potential amount of any liability
resulting from the indemnities. These indemnities are discussed in the following paragraphs.
In its aircraft financing agreements, the Company generally indemnifies the financing parties, trustees acting on
their behalf and other relevant parties against liabilities (including certain taxes) resulting from the financing,
manufacture, design, ownership, operation and maintenance of the aircraft regardless of whether these liabilities
(or taxes) relate to the negligence of the indemnified parties.