American Airlines 2009 Annual Report Download - page 64

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61
4. Commitments, Contingencies and Guarantees (Continued)
The Company’s loan agreements and other London Interbank Offered Rate (LIBOR)-based financing transactions
(including certain leveraged aircraft leases) generally obligate the Company to reimburse the applicable lender for
incremental costs due to a change in law that imposes (i) any reserve or special deposit requirement against
assets of, deposits with or credit extended by such lender related to the loan, (ii) any tax, duty or other charge
with respect to the loan (except standard income tax) or (iii) capital adequacy requirements. In addition, the
Company’s loan agreements, derivative contracts and other financing arrangements typically contain a
withholding tax provision that requires the Company to pay additional amounts to the applicable lender or other
financing party, generally if withholding taxes are imposed on such lender or other financing party as a result of a
change in the applicable tax law.
These increased cost and withholding tax provisions continue for the entire term of the applicable transaction, and
there is no limitation on the maximum additional amounts the Company could be obligated to pay under such
provisions. Any failure to pay amounts due under such provisions generally would trigger an event of default and,
in a secured financing transaction, would entitle the lender to foreclose on the collateral to realize the amount due.
In certain transactions, including certain aircraft financing leases and loans and derivative transactions, the
lessors, lenders and/or other parties have rights to terminate the transaction based on changes in foreign tax law,
illegality or certain other events or circumstances. In such a case, the Company may be required to make a lump
sum payment to terminate the relevant transaction.
The Company has general indemnity clauses in many of its airport and other real estate leases where the
Company as lessee indemnifies the lessor (and related parties) against liabilities related to the Company’s use of
the leased property. Generally, these indemnifications cover liabilities resulting from the negligence of the
indemnified parties, but not liabilities resulting from the gross negligence or willful misconduct of the indemnified
parties. In addition, the Company provides environmental indemnities in many of these leases for contamination
related to the Company’s use of the leased property.
Under certain contracts with third parties, the Company indemnifies the third party against legal liability arising out
of an action by the third party, or certain other parties. The terms of these contracts vary and the potential
exposure under these indemnities cannot be determined. Generally, the Company has liability insurance
protecting the Company for the obligations it has undertaken under these indemnities.
The Company is involved in certain claims and litigation related to its operations. In the opinion of management,
liabilities, if any, arising from these claims and litigation will not have a material adverse effect on the Company’s
consolidated financial position, results of operations, or cash flows, after consideration of available insurance.
5. Leases
AMR's subsidiaries lease various types of equipment and property, primarily aircraft and airport facilities. The
future minimum lease payments required under capital leases, together with the present value of such payments,
and future minimum lease payments required under operating leases that have initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 2009, were (in millions):
Year Ending December 31,
Capital
Leases
Operating
Leases
2010
$ 181
$ 1,057
2011
184
1,032
2012
134
848
2013
119
755
2014
98
614
2015 and thereafter
436
5,021
$ 1,152
$ 9,327
(1)
Less amount representing interest
463
Present value of net minimum lease payments
$ 689
(1) As of December 31, 2009, included in Accrued liabilities and Other liabilities and deferred credits on the accompanying
consolidated balance sheet is approximately $1.2 billion relating to rent expense being recorded in advance of future
operating lease payments.