American Airlines 2012 Annual Report Download - page 41

and made it more difficult for travel agents to find American's fares on the Travelport system display. We believe these actions violated our agreement with
Travelport. In response, American filed counterclaims against Travelport for breach of contract, and announced that it would charge travel agencies for
bookings through Travelport in an effort to offset the booking fee increase. That surcharge was never implemented. American and Travelport subsequently
entered into short term extensions of its agreement, which also provides that neither American nor Orbitz will terminate their agency relationship during the
term of these extensions. The litigation initiated by Travelport in response to American's decision to terminate Orbitz, as described under Item 3, "Legal
Proceedings", is currently stayed as a result of the Chapter 11 filing. American's federal antitrust claims, which are pending in a different court, have not been
stayed during the pendency of the bankruptcy. We will vigorously pursue our claims and defenses in both these actions. However, there can be no assurance
that we will ultimately prevail in the lawsuit filed by Travelport or on our counterclaims, or in the lawsuit that American has filed against Travelport or
Oribtz. In addition, there can be no assurance that American, Travelport, and Orbitz will enter into acceptable long term agreements.
On February 5, 2013, Travelport filed a motion for reconsideration of the court's August 16, 2012 order granting American's motion to dismiss and to amend
its counterclaims to assert a new claim against American. The proposed new counterclaim alleges that American participated in a conspiracy with rival
airlines and Farelogix (a technology provider to American) to reduce and eliminate competition from Travelport and other GDSs and to coordinate their
negotiations with Travelport and other GDSs. Based on this new proposed counterclaim, Travelport seeks: (1) a decree that American violated, and threatens
to continue violating, 15 U.S.C. § 1; (2) a permanent injunction prohibiting American from conspiring with rival airlines regarding direct connects,
distribution strategy, or on negotiations with GDSs; (3) a permanent injunction requiring American to provides its fare information to Travelport and
prohibiting American from terminating a travel agency's ticketing authority, denying a travel agency access to American's fare information, or taking any other
punitive action against a travel agency because it chooses to use Travelport instead of American's direct connect; (4) an award of three times Travelport's actual
damages; and (5) an award of all costs in the action, including attorneys' fees and interest. Travelport does not specify the amount of its actual damages.
While we believe that some of the bookings through Orbitz and Travelport have transitioned or will transition to other distribution channels, such as other
travel agencies, metasearch sites and American's AA.com web site, it is not possible at this time to estimate what the ultimate impact would be to our business
if we are unsuccessful in resolving one or more of these matters. If as a result of these matters it becomes more difficult for our customers to find and book
flights on American, we could be put at a competitive disadvantage against our competitors and this may result in lower bookings. If we are unable to sell
American inventory through any or all of these channels, our level of bookings, business and results of operations could be materially adversely affected.
Contingencies
The Company has certain contingencies resulting from litigation and claims incident to the ordinary course of business. Management believes, after
considering a number of factors, including (but not limited to) the information currently available, the views of legal counsel, the nature of contingencies to
which the Company is subject and prior experience, that the ultimate disposition of the litigation (please see Item 3, "Legal Proceedings") and claims will not
materially affect the Company’s consolidated financial position or results of operations. When appropriate, the Company accrues for these contingencies based
on its assessments of the likely outcomes of the related matters. The amounts of these contingencies could increase or decrease in the near term, based on
revisions to those assessments. See also "Other Information" and Note 2 to the consolidated financial statements for information on the claims resolution
process.
As a result of the Chapter 11 Cases, virtually all prepetition pending litigation against the Company is stayed.
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