American Airlines 2012 Annual Report Download - page 45

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Our indebtedness and our ability to obtain sufficient financing are significant risks to the Company as discussed more fully in the Risk Factors included
under Item 1A.
The Chapter 11 petitions triggered defaults on substantially all debt obligations of the Debtors. However, under section 362 of the Bankruptcy Code, the
commencement of a Chapter 11 case automatically stays most creditor actions against the Debtors’ estates.
The Company currently has financing commitments that, subject to certain conditions, cover (1) 77 of the 86 of the Boeing 737 aircraft scheduled to be
delivered to it through 2016 (and the Company is currently seeking to arrange financing for the remainder of those aircraft) and (2) all of the 110 Airbus A320
Family aircraft scheduled to be delivered to it through 2016. In addition, the Company has arranged up to $750 million of financing that it may apply to any
of up to eight Boeing 787 aircraft scheduled to be delivered to it, including the 26 Boeing 787 aircraft scheduled to be delivered to it through 2016, and the
Company expects that it may seek to arrange alternative or additional financing for those aircraft. The Company does not have committed financing for any
of the Boeing 777-300ER aircraft scheduled to be delivered to it (all of which are scheduled to be delivered during 2013-2016), and plans to finance these
aircraft in the future.
In 2013, including liabilities subject to compromise, the Company will be contractually required to make approximately $1.5 billion of principal payments on
long-term debt and approximately $42 million in principal payments on capital leases, and the Company expects to spend approximately $3.1 billion on
capital expenditures, including aircraft commitments.
As discussed above, under “Chapter 11 Progress”, we have been using the benefits afforded by the Bankruptcy Code to restructure the terms of much of our
indebtedness. We cannot predict at this time the outcome of our efforts to restructure our indebtedness. It is possible that holders of our unsecured indebtedness
may lose all or a substantial portion of their investment in our unsecured indebtedness upon the implementation of any plan of reorganization that is ultimately
accepted by the requisite majority of creditors and approved by the Bankruptcy Court.
See Note 5 and Note 17 to the consolidated financial statements for further information on the Company’s aircraft acquisition commitments, payments,
options, and financing arrangements.
Credit Ratings
AMR’s and American’s credit ratings are significantly below investment grade. The outcome of the Chapter 11 Cases, which cannot be determined at this
time, could further increase the Company’s borrowing or other costs and further restrict the availability of future financing.
Credit Card Processing and Other Reserves
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 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).
Under such agreements, the amount of the reserve that may be required generally is based on the processor’s exposure to the Company under the applicable
agreement and, in the case a reserve is required because of AMR's failure to maintain a certain level of liquidity, the amount of such liquidity. As of
December 31, 2012, the Company was not required to maintain any reserve under such agreements. If circumstances were to occur that would allow the credit
card processor to require the Company to maintain a reserve, the Company’s liquidity would be negatively impacted.
Pension Funding Obligation
The Company is required to make minimum contributions to its defined benefit pension plans under the minimum funding requirements of ERISA, the
Pension Funding Equity Act of 2004, the Pension Protection Act of 2006, and the Pension Relief Act of 2010.
As a result of the Chapter 11 Cases, AMR contributed $272 million to its defined benefit pension plans in 2012 to cover post-petition periods. As a result of
only contributing the post-petition portion of the required contribution, the PBGC filed a lien against certain assets of the Company. The Company’s 2013
contribution to its defined benefit pension plans is subject to the Chapter 11 proceedings.
Cash Flow Activity
At December 31, 2012, the Company had $3.9 billion in unrestricted cash and short-term investments, which is a decrease of $112 million from the balance
as of December 31, 2011. Net cash provided by operating activities during the year ended December 31,
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