American Airlines 2012 Annual Report Download - page 38

Download and view the complete annual report

Please find page 38 of the 2012 American Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 123

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Chapter 11 Progress
As previously mentioned, AMR, American, and the other Debtors filed the Chapter 11 Cases on November 29, 2011. For a discussion of the Chapter 11
Cases, see Item I, "Business - Chapter 11 Proceedings" and Note 1 to the consolidated financial statements. Since the Petition Date, the Company has made
substantial progress towards transforming the Company and restoring it to industry leadership, profitability and growth, as outlined in its restructuring
business plan.
Key Achievements During 2012
•New labor agreements - American and AMR Eagle have new contracts with all of their labor groups, including the APA, APFA, AFA, ALPA, and
all seven American TWU-represented groups (Fleet Service Clerks, Dispatchers, Ground School Instructors, Maintenance Control Technicians,
Simulator Technicians, Mechanics and Related (M&R), and Stores) and AMR Eagle TWU-represented groups.
•Significant cost reductions - The Company has made substantial progress in reducing its cost structure. This included improving certain of the
financial terms of its debt and lease agreements, including many related to aircraft and real property leases, optimizing the fleet and facilities by
grounding older planes and closing certain facilities, and negotiating improved supplier contracts. These agreements on improved terms are generally
subject to certain conditions, including in some cases reaching agreement on definitive documents and the Company's successful emergence from the
Chapter 11 Cases. The Company is also implementing changes that will reduce approximately 10,500 positions across all workgroups, including
roughly 1,500 positions in management, as a result of an organizational redesign completed in 2012.
•Improved revenue performance - Consolidated passenger revenues increased $986 million, or 4.8%, in 2012 compared to prior year driven by a
strong yield environment and increased load factors. Further, the Company posted its largest annual revenue in Company history.
•Renewing and optimizing the fleet - With the aircraft commitments discussed in Note 5 and Note 17 to the consolidated financial statements, the
Company anticipates that American’s mainline jet fleet will be the youngest in North America by 2017. In the fourth quarter of 2012, the size of
American's fleet of 737-800s surpassed that of its MD-80s. In addition, American took the first delivery of its new flagship aircraft, the Boeing 777-
300ER, in December 2012 and has 59 new mainline aircraft slated for delivery in 2013.
•Customer experience enhancements - In 2012, American took several steps to enhance the customer travel experience, including redesigning the
interior of its international widebody aircraft; installing Main Cabin Extra, which offers more legroom in portions of the main cabin; and
announcing it will become the first domestic carrier to offer three-class service and fully lie-flat First and Business Class seats on transcontinental
flights. In November 2012, the Company also announced new travel options and a new booking path on AA.com.
•Strengthening the network - The Company continued to build network scale and alliances by expanding service from its hubs to the domestic and
international cities most desirable to high value customers and capitalizing on the JBAs established over the past two years with British Airways and
Iberia, JAL and Qantas. The Company continues to strengthen its Latin American network, with increased destinations and frequencies throughout
the region. In December 2012, American signed agreements to codeshare with Sao Paulo-based TAM Airlines and Bogota-based LAN Colombia.
Once approved, these new codeshare relationships will provide expanded opportunities for American to serve new markets in Brazil and Colombia.
Further, in 2012, oneworld welcomed new member Air Berlin and members-elect Malaysia Airlines, SriLankan Airlines, and Qatar Airways.
•Retirement benefits solution - The Company, in working with the Creditors' Committee and the Pension Benefit Guarantee Corporation (PBGC),
developed a solution that allowed the Company to freeze its defined benefit pension plans instead of seeking termination. The freeze of these plans
became effective on November 1, 2012, and the Pilot B Plan, a defined contribution plan, was terminated on November 30, 2012. Eligible employees
began to receive a replacement benefit under the $uper $aver 401(k) Plan on November 1, 2012. Subsidized retiree medical coverage was
discontinued for current employees November 1, 2012.
38