American Airlines 2012 Annual Report Download - page 19

environment (such as a significant increase in jet fuel prices, a significant decrease in travel demand, or significant increase in competition).
Our indebtedness and other obligations are and will continue to be substantial, and could adversely affect our ongoing business and liquidity.
We have, and expect to continue to have, significant amounts of indebtedness and other obligations, including pension obligations, obligations to make future
payments on aircraft equipment and property leases and obligations under aircraft purchase agreements, whether or not the Merger is consummated. Moreover,
currently all but a very limited quantity of our assets are pledged to secure our indebtedness. Although we have substantially reduced our prefiling debt and
lease obligations as a result of the Chapter 11 process, we also expect to incur substantial additional debt (including secured debt) and lease obligations in the
future, whether or not the Merger is consummated. Our substantial indebtedness and other obligations have important consequences. For example, they
currently:
•limit our 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 can be obtained;
•require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness and other obligations, thereby reducing
the funds available for other purposes;
•make us more vulnerable to economic downturns and catastrophic external events; and
•limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions.
The factors listed immediately above will likely continue to limit us after our emergence from the Chapter 11 Cases whether or not the Merger is consummated.
In addition, increases in the cost of financing could adversely affect our liquidity, business, financial condition and results of operations and limit our ability
to execute our business plan.
We have not yet secured financing for all of our scheduled aircraft deliveries.
We have not yet secured financing commitments for some of the aircraft that we have on order, commencing with certain deliveries scheduled for 2013, and we
cannot assure investors of the availability or the cost of that financing. If we are not able to arrange financing for such aircraft at customary advance rates and
on terms and conditions acceptable to us, we may need to use cash from operations to purchase such aircraft or we may seek to negotiate deferrals for such
aircraft with the aircraft manufacturers.
We could be required to maintain reserves under our credit card processing agreements, which could materially adversely impact our liquidity.
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). In certain circumstances, such reserve
could reach 100% of the applicable receivables due to American.
Under such agreements, the amount of the reserve that may be required generally is based on the processor's exposure to us 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,
2012, we were not required to maintain any reserve under such agreements. If circumstances were to occur that would allow the credit card processor to require
us to maintain a reserve, our liquidity would be negatively impacted, and could be materially adversely impacted.
Securities Risks
Trading in our securities during the pendency of our Chapter 11 Cases is speculative and could pose substantial risks.
If the Merger Agreement is terminated for any reason and the Merger does not occur, we cannot predict how much time would pass before we could file an
alternative plan of reorganization, or whether such a plan would contemplate our emergence from our Chapter 11 Cases as a subsidiary of AMR, as an
independent company, in a business combination with another party, or in some other form. If the Merger is not consummated, we could remain in the
Chapter 11 Cases for an extended period of time. For these and other reasons, trading in our securities is speculative and could pose substantial risk to
investors in our securities. We cannot assure investors that the Merger will close, or, if so, what consideration will be received in the related plan of
reorganization by holders of our securities. The Merger Agreement and related plan of reorganization will provide for distributions
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