American Airlines 2012 Annual Report Download - page 76

Download and view the complete annual report

Please find page 76 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

Table of Contents
Advertising Costs The Company expenses on a straight-line basis the costs of advertising as incurred throughout the year. Advertising expense was $153
million for the year ended December 31, 2012, $186 million for the year ended December 31, 2011 and $165 million for the year ended December 31, 2010.
Subsequent Events In connection with preparation of the consolidated financial statements and in accordance U.S. GAAP, the Company evaluated
subsequent events after the balance sheet date of December 31, 2012 and identified items as set forth in Note 17 to the consolidated financial statements.
3. Special Charges and Restructuring Activities
Employee Charges
The Company's business plan as announced on February 1, 2012 contemplates, among other things, significantly reducing the number of positions. Based
on agreements reached with various workgroups we now expect to reduce a total of approximately 10,500 positions. During the second quarter, the Company
commenced both voluntary and involuntary employee separations from the Company. Consequently, during 2012, the Company recorded charges of
approximately $360 million for severance related costs associated with the voluntary and involuntary reductions in certain work groups. The severance
charges will be paid through the end of 2013.
Aircraft Charges
In connection with the Boeing and Airbus aircraft agreements entered into by American in the second quarter of 2011, and the Company’s anticipated
acceleration of its fleet renewal and replacement plan, the Company recorded an impairment charge of $713 million in 2011 to write its Boeing 757 aircraft
and certain related long-lived assets down to their estimated fair values. For further information regarding the Boeing and Airbus agreements, see Note 17 to the
consolidated financial statements.
In 2008 and 2009, the Company announced capacity reductions due to unprecedented high fuel costs at that time and the other challenges facing the industry.
In connection with these capacity reductions, the Company incurred special charges related to aircraft and certain other charges.
The following table summarizes the components of the Company’s special charges, the remaining accruals for these charges and the capacity reduction related
charges (in millions) as of December 31, 2012:
Aircraft
Charges
Facility Exit
Costs
Employee
Charges
Total
Remaining accrual at January 1, 2010
$ 153
$20
$ —
$173
Non-cash charges
—
—
—
—
Adjustments
(8)
11
—
3
Payments
(86)
(4)
—
(90)
Remaining accrual at December 31, 2010
$59
$ 27
$ —
$86
Non-cash charges
(725)
1
—
(724)
Adjustments
751
(8)
—
743
Payments
(36)
(4)
—
(40)
Remaining accrual at December 31, 2011
$ 49
$16
$ —
$65
Special charges
11
13
360
384
Non-cash charges
(11)
(13)
—
(24)
Adjustments
(47)
(11)
—
(58)
Payments
(2)
(1)
(168)
(171)
Remaining accrual at December 31, 2012
$ —
$4
$192
$196
Cash outlays related to the accruals for facility exit costs will occur through 2017. However, these cash outlays could be modified in the Chapter 11
proceedings.
Other
As a result of the Terrorist Attacks and the subsequent liability protections provided for by the Air Transportation Safety and System Stabilization Act (the
Stabilization Act), the Company recorded a liability for the Terrorist Attacks claims equal to the related insurance receivable due to American. The
Stabilization Act provides that, notwithstanding any other provision of law, liability for all claims, whether compensatory or punitive, arising from the
Terrorist Attacks, against any air carrier shall not exceed the liability coverage maintained by the air carrier. In the second quarter of 2011, the Company
received $576 million in insurance
76