<PAGE> 1
Information contained in this preliminary prospectus supplement is subject
to completion or amendment. These securities may not be sold nor may offers
to buy be accepted prior to the time that a final prospectus supplement is
delivered. This preliminary prospectus supplement and the accompanying
prospectus shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be a sale of these securities in any State in
which such offer, solicitation or sale shall be unlawful prior to
registration or qualification under the securities laws of any such State.
PROSPECTUS SUPPLEMENT (Subject to Completion, dated May 5, 1994)
(To Prospectus dated June 5, 1992)
Pursuant to Rule 424(b)(5)
File No. 33-42998
$
American Airlines
1994-A Pass Through Trusts
PASS THROUGH CERTIFICATES, SERIES 1994-A
AMERICANAIRLINES
------------------------
Each Pass Through Certificate offered hereby will represent a fractional
undivided interest in one of the five American Airlines 1994-A Pass Through
Trusts (the "Trusts") to be formed pursuant to a pass through trust agreement
and five separate trust supplements between American Airlines, Inc. ("American")
and State Street Bank and Trust Company of Connecticut, National Association, as
trustee of each Trust. The property of the Trusts will consist of equipment
notes (the "Equipment Notes") issued on a nonrecourse basis by certain trustees
of separate owner trusts (each, an "Owner Trustee") pursuant to three separate
leveraged lease transactions to refinance not more than 80% of the equipment
cost of one Boeing 767-323ER aircraft and two Boeing 757-223 aircraft
(collectively, the "Aircraft") which have been leased to American.
The Equipment Notes in respect of each Aircraft will be issued in five
series. Each Trust will purchase one series of the Equipment Notes issued with
respect to each of the three Aircraft such that all of the Equipment Notes held
in each Trust will have an interest rate corresponding to the interest rate
applicable to such Trust. The maturity dates of the Equipment Notes acquired by
each Trust will occur on or before the final distribution date applicable to the
Pass Through Certificates issued by such Trust. The Equipment Notes issued with
respect to each Aircraft will be secured by a security interest in such Aircraft
and by the Lease relating thereto, including the right to receive rentals
payable in respect of such Aircraft by American. Although neither the Pass
Through Certificates nor the Equipment Notes are direct obligations of, or
guaranteed by, American, the amounts unconditionally payable by American for
lease of the Aircraft will be sufficient to pay in full when due all payments
required to be made on the Equipment Notes held in the Trusts.
Interest paid on the Equipment Notes held in each Trust will be passed
through to the Certificateholders of such Trust on May 26 and November 26 of
each year, commencing November 26, 1994, at the rate per annum set forth below
for such Trust until the final distribution date for such Trust. Principal paid
on the Equipment Notes held in Trusts 1994-A1, 1994-A2 and 1994-A3 will be
passed through to the Certificateholders of each such Trust in full at their
respective maturity dates. Principal payments on the Equipment Notes held in
Trusts 1994-A4 and 1994-A5 will be passed through to the Certificateholders of
each such Trust in scheduled amounts on May 26 or November 26, or both,
commencing on the initial scheduled principal distribution date for such Trust
set forth below, until the final distribution date for such Trust.
The Pass Through Certificates may not be purchased by any employee benefit
plan subject to Title I of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or individual retirement account or employee benefit plan
subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code") (each, an "ERISA Plan") or by any entity whose assets constitute assets
of an ERISA Plan. Certain governmental plans and non-electing church plans,
however, are not subject to Title I of ERISA or Section 4975 of the Code and,
therefore, may purchase the Pass Through Certificates. Each investor must
determine whether it is permitted to purchase Pass Through Certificates. The
purchase by any person of any Pass Through Certificate constitutes a
representation by such person to American, the related owner participants, the
Owner Trustees, the loan trustees and the trustee that such person is not an
ERISA Plan and that such person is not acquiring, and has not acquired, such
Pass Through Certificate with assets of an ERISA Plan.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
INITIAL SCHEDULED
PASS THROUGH PRINCIPAL INTEREST PRINCIPAL FINAL DISTRIBUTION PRICE TO
CERTIFICATES AMOUNT RATE DISTRIBUTION DATE DATE PUBLIC(1)(2)
- ------------ ------------- -------- ------------------ ------------------ ------------
<S> <C> <C> <C> <C> <C>
1994-A1 $ % , 199 , 199 100%
1994-A2 , 199 , 199 100
1994-A3 , 199 , 199 100
1994-A4 100
1994-A5 100
</TABLE>
- ---------------
(1) Plus accrued interest, if any, at the applicable interest rate from May 26,
1994.
(2) The underwriting commission varies by Trust and aggregates $ , which
constitutes 0. % of the principal amount of the Pass Through Certificates.
The underwriting commissions, and certain other expenses estimated at
$ , will be payable ratably by the owner participants in the leveraged
lease transactions (other than certain expenses to be paid directly by
American). The proceeds from the sale of the Pass Through Certificates will
be used to purchase the Equipment Notes from the Owner Trustees.
------------------------
The Pass Through Certificates offered hereby are offered by the
Underwriters, subject to prior sale, when, as and if accepted by the
Underwriters and subject to approval of certain legal matters by Shearman &
Sterling, counsel for the Underwriters. It is expected that delivery of the Pass
Through Certificates in book-entry form will be made on or about May 26, 1994
through the facilities of The Depository Trust Company, against payment therefor
in immediately available funds.
------------------------
MORGAN STANLEY & CO.
Incorporated
LEHMAN BROTHERS
SALOMON BROTHERS INC
PRYOR, McCLENDON, COUNTS & CO., INC.
May , 1994
<PAGE> 2
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AMERICAN OR
BY THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF AMERICAN SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary......................................................... S-3
The Company........................................................................... S-7
Ratio of Earnings to Fixed Charges.................................................... S-7
Selected Consolidated Financial Data.................................................. S-8
Recent Operating Results and Developments............................................. S-9
Use of Proceeds....................................................................... S-11
Description of the Pass Through Certificates.......................................... S-11
Description of the Equipment Notes.................................................... S-14
Federal Income Tax Consequences....................................................... S-26
Certain Connecticut Taxes............................................................. S-26
ERISA Considerations.................................................................. S-27
Underwriting.......................................................................... S-27
Legal Opinions........................................................................ S-28
PROSPECTUS
Available Information................................................................. 3
Reports to Certificateholders by the Trustee.......................................... 3
Documents Incorporated by Reference................................................... 3
Prospectus Summary.................................................................... 4
The Company........................................................................... 8
Ratio of Earnings to Fixed Charges.................................................... 8
Formation of the Trusts............................................................... 9
Use of Proceeds....................................................................... 9
Diagram of Payments................................................................... 10
Description of the Pass Through Certificates.......................................... 11
Description of the Equipment Notes.................................................... 21
Federal Income Tax Consequences....................................................... 24
Certain Connecticut Taxes............................................................. 27
ERISA Considerations.................................................................. 27
Plan of Distribution.................................................................. 27
Legal Opinions........................................................................ 29
Experts............................................................................... 29
Glossary of Certain Terms.........................................................Appendix I
</TABLE>
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
The following summary should be read in conjunction with the Prospectus
Summary on page 4 of the accompanying Prospectus. Such summary does not purport
to be complete and is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus.
THE COMPANY
American, the principal subsidiary of AMR Corporation ("AMR"), was founded
in 1934. American's passenger division is one of the largest scheduled passenger
airlines in the world. As of December 31, 1993, American provided scheduled jet
service to 106 cities on the U.S. mainland and in Hawaii, 28 in Latin America,
14 in Europe and 24 other destinations worldwide, including service to six
cities provided through cooperative agreements with other airlines. American's
cargo division provides a full range of freight and mail services to shippers
throughout the airline's system. In addition, through cooperative agreements
with other carriers, it has the ability to transport shipments to virtually any
country in the world. American's SABRE Travel Information Network ("STIN")
division provides travel reservation services through its computer reservation
system, SABRE, one of the largest privately owned, real-time computer systems in
the world; the SABRE Computer Services ("SCS") division manages AMR's data
processing centers, voice and data communications networks and local-area
computer networks worldwide; and the SABRE Development Services ("SDS") division
provides applications development, software solutions, consulting, and other
technology services to other AMR units. For a discussion of certain recent
operating results and developments affecting American, see "Recent Operating
Results and Developments."
THE OFFERING
Glossary.................. Included at the end of the accompanying Prospectus as
Appendix I is a Glossary of certain of the
significant defined terms used herein and in the
Prospectus.
Trusts.................... Each of the five American Airlines 1994-A Pass
Through Trusts (the "Trusts") is to be formed
pursuant to one of the five separate Pass Through
Trust Supplements (each, a "Trust Supplement") to be
entered into pursuant to the Pass Through Trust
Agreement, as amended and restated as of February 1,
1992 (the "Basic Agreement"), between American
Airlines, Inc. ("American") and State Street Bank
and Trust Company of Connecticut, National
Association, as trustee under each Trust (the
"Trustee"). Each Trust will be a separate entity.
Trust Property............ The property of each Trust will consist of Equipment
Notes (the "Equipment Notes") issued on a
nonrecourse basis by the owner trustees (each an
"Owner Trustee") in each of three separate leveraged
lease transactions to refinance not more than 80% of
the equipment cost to the Owner Trustees of one
Boeing 767-323ER aircraft and two Boeing 757-223
aircraft (collectively, the "Aircraft"). The Boeing
767-323ER aircraft was leased to American in May
1992 and the two Boeing 757-223 aircraft were leased
to American in July 1991. The Equipment Notes will
be issued in five series with respect to each of the
Aircraft. Each Trust will acquire, pursuant to
certain Refunding Agreements (each, a "Refunding
Agreement"), those Equipment Notes having an
interest rate equal to the interest rate applicable
to the Pass Through Certificates, Series 1994-A (the
"Pass Through Certificates") that will be issued by
such Trust. The maturity dates of the Equipment
Notes acquired by each Trust will occur on or before
the final distribution date applicable to the Pass
Through
S-3
<PAGE> 4
Certificates issued by such Trust. The aggregate
principal amount of the Equipment Notes held in each
Trust will be the same as the aggregate principal
amount of the Pass Through Certificates issued by
such Trust.
Pass Through Certificates
Offered; Book-Entry
Registration............ The Pass Through Certificates will be issued in fully
registered form and will be registered in the name
of Cede & Co. as the nominee of The Depository Trust
Company. No person acquiring an interest in the Pass
Through Certificates will be entitled to receive a
definitive certificate representing such person's
interest in the related Trust, unless definitive
certificates are issued, which will only occur under
limited circumstances. See "Description of the Pass
Through Certificates -- Payments and Distributions"
in this Prospectus Supplement and "Description of
the Pass Through Certificates -- Book-Entry
Registration" in the accompanying Prospectus.
Regular Distribution
Dates................... May 26 and November 26 of each year.
Special Distribution
Dates................... Any Business Day on which a Special Payment is to be
distributed.
Record Dates.............. The fifteenth day preceding a Regular or Special
Distribution Date.
Initial Average Life
Dates................... Trusts 1994-A1 through 1994-A3 will hold Equipment
Notes whose principal is payable in full at their
respective maturity dates. The initial average life
dates for Pass Through Certificates issued by Trusts
1994-A4 and 1994-A5 are as follows:
<TABLE>
<CAPTION>
TRUST DATE
-------- -------------------
<S> <C> <C>
1994-A4
1994-A5
</TABLE>
The average life dates for Pass Through Certificates
issued by Trusts 1994-A4 and 1994-A5 will change
after principal repayments of the related underlying
Equipment Notes commence.
Distributions............. All payments of principal, premium, if any, and
interest received by the Trustee on the Equipment
Notes held in each Trust will be distributed by the
Trustee to the Certificateholders of such Trust on
the dates referred to below except in certain cases
where such Equipment Notes are in default. Payments
of interest or, in certain cases, principal and
interest on the Equipment Notes held in each Trust
are scheduled to be received by the Trustee of such
Trust on May 26 and November 26, commencing November
26, 1994, and to be distributed to the
Certificateholders of such Trust on the
corresponding Regular Distribution Date. Payments of
principal, premium, if any, and interest on the
Equipment Notes held in each Trust resulting from
the early redemption thereof, if any, will be
distributed on the date of such redemption, which
will be a Special Distribution Date. The Trustee
will provide not less than 20 days' notice of such
distribution to the Certificateholders of such
Trust. For a discussion of distributions upon an
Event of Default, see "Description of the Pass
Through Certificates -- Events of Default" and
"Description of the Pass Through
Certificates -- Certain Rights Upon an Event of
Default" in the accompanying Prospectus.
Equipment Notes:
Principal................. The Equipment Notes purchased by Trusts 1994-A1,
1994-A2 and 1994-A3 will pay interest only until
they mature on , 199 ,
S-4
<PAGE> 5
, 199 and , 199 ,
respectively. Trusts 1994-A4 and 1994-A5 will hold
Equipment Notes whose principal is payable in
scheduled amounts on May 26 or November 26, or both,
of each year, commencing , in the case
of Trust 1994-A4 and , in the case of
Trust 1994-A5 in accordance with the principal
repayment schedule set forth below under
"Description of the Equipment Notes -- Principal
Payments."
Equipment Notes:
Interest.................. Interest will be payable on the Equipment Notes on
the unpaid principal amount thereof on May 26 and
November 26 of each year commencing on November 26,
1994.
Equipment Notes:
Redemption; Purchase.... (a) All the Equipment Notes issued with respect to
any Aircraft will be redeemed in whole at a price
equal to the aggregate unpaid principal amount
thereof, together with accrued interest thereon to,
but not including, the date of redemption, but
without premium, on a Special Distribution Date upon
the occurrence of an Event of Loss to such Aircraft
if such Aircraft is not replaced.
(b) All the Equipment Notes issued with respect to
any Aircraft, or all the Equipment Notes held in any
Trust, may be redeemed prior to maturity on a
Special Distribution Date at a price equal to the
aggregate unpaid principal amount thereof, together
with accrued interest thereon to, but not including,
the date of redemption, plus, if such redemption is
made prior to the maturity date for such Equipment
Notes (in the case of Equipment Notes held by Trusts
1994-A1 through 1994-A3 and Trust 1994-A5), or
, (in the case of Equipment Notes held
by Trust 1994-A4) (each, a "Premium Termination
Date"), a Make-Whole Premium, if any. See
"Description of the Equipment Notes -- Redemption"
for a description of the manner of computing the
Make-Whole Premium.
(c) If under any Indenture (i) a Lease Event of
Default shall have occurred and be continuing for a
period of 180 days or more or (ii) the Equipment
Notes relating thereto shall have been accelerated,
the applicable Owner Trustee may elect to redeem or
purchase on a Special Distribution Date all of the
then outstanding Equipment Notes issued under such
Indenture at a price equal to the aggregate unpaid
principal amount thereof, together with accrued
interest thereon to, but not including, the date of
redemption or purchase, but without premium.
See "Description of the Equipment
Notes -- Redemption."
Equipment Notes:
Security.................. The Equipment Notes issued with respect to each
Aircraft will be secured by a security interest in
such Aircraft and an assignment to the related Loan
Trustee of certain of the related Owner Trustee's
rights under the Lease with respect to such
Aircraft, including, with certain exceptions, the
right to receive rentals and other amounts payable
thereunder by American in respect of such Aircraft.
The Equipment Notes are not cross-collateralized, and
consequently the Equipment Notes issued in respect
of one Aircraft are not secured by any of the other
Aircraft or the Leases related thereto. There are no
cross-default provisions in the Indentures, and
consequently events resulting in any Indenture
Default under any particular Indenture may not
result in an
S-5
<PAGE> 6
Indenture Default occurring under the other
Indentures. If the Equipment Notes issued in respect
of one or more Aircraft are in default, the
Equipment Notes issued in respect of the remaining
Aircraft may not be in default and, if not in
default, no remedies will be exercisable under the
Indentures with respect to such remaining Aircraft.
See "Description of the Equipment Notes -- Indenture
Defaults, Notice and Waiver" and "Description of the
Equipment Notes -- Remedies" in this Prospectus
Supplement and "Description of the Equipment
Notes -- Indenture Defaults and Remedies" in the
accompanying Prospectus.
Although the Equipment Notes are not obligations of,
or guaranteed by, American, the amounts
unconditionally payable by American for lease of the
Aircraft will be sufficient to pay in full when due
all payments required to be made on the Equipment
Notes. See "Description of the Equipment
Notes -- General" in this Prospectus Supplement and
"Description of the Equipment Notes -- General" in
the accompanying Prospectus.
Federal Income Tax
Consequences............ Each Trust should be classified as a grantor trust
for federal income tax purposes, and each person
acquiring an interest in a Certificate issued by
such Trust should be treated as the owner of a pro
rata undivided interest in each of the Equipment
Notes and any other property held in such Trust and
should report on its federal income tax return its
pro rata share of income from such Equipment Notes
and such other property in accordance with such
Certificateholder's method of accounting. See
"Federal Income Tax Consequences" in this Prospectus
Supplement and "Federal Income Tax Consequences" in
the accompanying Prospectus.
ERISA Considerations...... The Pass Through Certificates may not be purchased by
any employee benefit plan subject to Title I of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or individual retirement account
or employee benefit plan subject to Section 4975 of
the Internal Revenue Code of 1986, as amended (the
"Code") (each, an "ERISA Plan") or by any entity
whose assets constitute assets of an ERISA Plan.
Certain governmental plans and non-electing church
plans, however, are not subject to Title I of ERISA
or Section 4975 of the Code and, therefore, may
purchase the Pass Through Certificates. Each
investor must determine whether it is permitted to
purchase Pass Through Certificates. The purchase by
any person of any Pass Through Certificate
constitutes a representation by such person to
American, the related Owner Participants, the Owner
Trustees, the Loan Trustees and the Trustee that
such person is not an ERISA Plan and that such
person is not acquiring, and has not acquired, such
Pass Through Certificate with assets of an ERISA
Plan.
S-6
<PAGE> 7
THE COMPANY
American is the principal subsidiary of AMR. American's passenger division
is one of the largest scheduled passenger airlines in the world. As of December
31, 1993, American provided scheduled jet service to 106 cities on the U.S.
mainland and in Hawaii, 28 in Latin America, 14 in Europe and 24 other
destinations worldwide, including service to six cities provided through
cooperative agreements with other airlines. American's cargo division provides a
full range of freight and mail services to shippers throughout the airline's
system. In addition, through cooperative agreements with other carriers, it has
the ability to transport shipments to virtually any country in the world.
American's SABRE Travel Information Network ("STIN") division provides travel
reservation services through its computer reservation system, SABRE, one of the
largest privately owned, real-time computer systems in the world; the SABRE
Computer Services ("SCS") division manages AMR's data processing centers, voice
and data communications networks and local-area computer networks worldwide; and
the SABRE Development Services ("SDS") division provides applications
development, software solutions, consulting, and other technology services to
other AMR units.
The postal address for American's principal executive offices is P.O. Box
619616, Dallas/Fort Worth Airport, Texas 75261-9616 (Telephone: 817-963-1234).
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
American for the periods indicated. Earnings represent consolidated earnings
(loss) before income taxes and the cumulative effect of accounting changes and
fixed charges (excluding interest capitalized). Fixed charges consist of
interest and the portion of rental expense deemed representative of the interest
factor.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
------------------------------------ --------------
1989 1990 1991 1992 1993 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio................................ 2.22 (a) (a) (a) 1.03 (a) (a)
</TABLE>
- ---------------
(a) Earnings were inadequate to cover fixed charges by $211 million for the year
ended December 31, 1990, by $382 million for the year ended December 31,
1991 and by $494 million for the year ended December 31, 1992. Earnings were
inadequate to cover fixed charges by $22 million for the three months ended
March 31, 1993 and by $1 million for the three months ended March 31, 1994.
S-7
<PAGE> 8
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data in the table below for each of the
five years in the period ended December 31, 1993 have been derived from audited
consolidated financial statements of American previously filed with the
Securities and Exchange Commission (the "Commission"). The selected consolidated
financial data in the table below as of March 31, 1994 and for the three months
ended March 31, 1993 and 1994 are unaudited but in the opinion of management
include all adjustments, consisting of normal recurring accruals, necessary for
a fair presentation. The following information should be read in conjunction
with the consolidated financial statements and related notes of American
included in its reports filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that are incorporated by reference herein. See
"Documents Incorporated by Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------- ---------------
1989 1990 1991 1992(1) 1993 1993 1994
------- ------- ------- ------- ------- ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Consolidated Operating
Data:
Total operating revenues........ $ 9,961 $11,009 $12,098 $13,581 $14,737 $3,563 $3,508
Total operating expenses........ 9,230 10,941 12,080 13,658 14,173 3,478 3,404
Operating income (loss)......... 731 68 18 (77) 564 85 104
Earnings (loss) before
cumulative effect of
accounting changes........... 423 (77) (165) (274) 23 (6) (3)
Net earnings (loss)............. 423 (77) (165) (735) 23 (6) (3)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH
----------------------------------------------- 31,
1989 1990 1991 1992(1) 1993 1994
------- ------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Selected Consolidated Balance Sheet Data:
Total assets........................... $10,230 $12,568 $15,180 $17,442 $17,749 $18,399
Long-term debt, less current
maturities.......................... 472 478 627 1,282 1,453 1,514
Long-term debt due to AMR.............. 169 172 1,950 3,236 4,045 3,710
Obligations under capital leases, less
current obligations................. 1,485 1,587 1,721 1,866 1,792 1,830
Common stockholder's equity............ 3,118 3,038 3,872 3,147 3,168 3,165
</TABLE>
- ---------------
(1) The results for the year ended December 31, 1992 include a cumulative effect
charge of $593 million (net of tax benefit) relating to a change in
accounting for postretirement medical and life insurance benefits and a
cumulative effect benefit of $132 million relating to a change in
accounting for income taxes.
S-8
<PAGE> 9
RECENT OPERATING RESULTS AND DEVELOPMENTS
American's results for the first quarter of 1994 were adversely affected by
continued fare discounting throughout the airline industry and by the impact of
1994's unusually severe winter. American's yield decreased 1.7 percent while
cost per available seat mile for American's passenger division increased 3.1
percent. American's net loss for the first quarter of 1994 was $3 million. This
compares to a net loss of $6 million in the first quarter of 1993. American's
operating income was $104 million in the 1994 first quarter compared to $85
million in the 1993 first quarter. American's operating revenues decreased 1.5
percent to $3.51 billion in the 1994 first quarter compared to $3.56 billion in
the 1993 quarter. Passenger revenues decreased by 3.2 percent to $3.03 billion
from $3.13 billion in 1993. Yield (the average amount one passenger pays to fly
one mile) of 13.53 cents decreased by 1.7 percent compared to the same period of
1993. Traffic or revenue passenger miles decreased 1.5 percent to 22.4 billion
miles for the quarter ended March 31, 1994. The decrease is primarily due to
reductions in capacity. Other revenues increased 14.0 percent to $326 million
primarily driven by increased booking fee revenues of American's STIN division
resulting from a plethora of fare initiatives by various carriers.
Capacity or available passenger seat miles ("ASMs") decreased 6.3 percent
to 36.7 billion miles in the first quarter of 1994 primarily as a result of the
retirement of certain McDonnell Douglas DC-10 and Boeing 727 aircraft. Operating
expenses decreased $74 million, or 2.1 percent, from first quarter 1993 to first
quarter 1994. Passenger division cost per ASM increased by 3.1 percent to 8.66
cents.
For further information, see American's Annual Report on Form 10-K for the
year ended December 31, 1993 and its Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994.
During 1993, AMR completed a comprehensive review of the competitive
realities of its businesses and determined that it must change significantly to
generate sufficient earnings. The fundamental problems of the
airline -- increasing competition from low-cost, low-fare carriers, its
inability to reduce labor costs to competitive levels, and the changing values
of its customers -- demand new solutions. As an initial response to that need,
AMR created and began implementing a new strategic framework known as the
Transition Plan. The plan has three parts, each intended to improve AMR's
results. First, make the core airline business bigger and stronger where
economically justified. Second, and conversely, shrink the airline where it
cannot compete profitably. Third, reallocate resources and effort to the growing
information and management services businesses, which are more profitable than
the airline.
An integral part of the Transition Plan is the expansion of the business
activities of The SABRE Group. The SABRE Group was formed as a business unit
during 1993, integrating reporting relationships among American's STIN, SCS and
SDS divisions and AMR's other information technology businesses. AMR plans to
more fully develop and market its distinct information technology expertise
through The SABRE Group and continues to investigate opportunities for further
expanding its information technology businesses. These opportunities may include
the combination of marketing and/or developmental functions of The SABRE Group
businesses and/or a formal reorganization of The SABRE Group into one or more
subsidiaries of AMR. This formal reorganization, if concluded, would likely
involve the transfer to AMR, by means of a dividend, of American's STIN, SCS and
SDS divisions. In addition, a formal reorganization would also result in the
Company's compliance with a recent directive from the European Community Council
of Ministers that, in effect, requires that a computer reservation system
operating in the European Community have a legal status that is separate and
apart from its affiliated airline.
Further, the Transition Plan recognizes the unfavorable and uncertain
economics which have characterized the core airline business in recent years,
acknowledges the airline cost problem and seeks to maximize the contribution of
the Company's more profitable businesses. In 1994, AMR is continuing the course
of change initiated in 1993 under the Transition Plan. Over the long term, AMR
will continue its best efforts to reduce airline costs and to restore the
airline operations to profitability. Based on the success or failure of those
efforts, AMR will make ongoing determinations as to the appropriate degree of
reallocation of resources from the airline operations to its other businesses,
which may include, if the airline cannot be run profitably, the disposition or
termination, over the long term, of a substantial part or all of the airline
operations.
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<PAGE> 10
During 1993, American closed its hub and dramatically reduced operations at
San Jose, California, and expanded its Dallas/Fort Worth and Miami hubs. The
airline will continue to reduce or eliminate service where it cannot operate
profitably. American's regional airline affiliates, subsidiaries of AMR Eagle,
have added turboprop service on some routes where jet service has been
cancelled, and they will continue to pursue these opportunities in 1994.
In 1993, American removed 21 McDonnell Douglas DC-10 and 28 Boeing 727
aircraft from service. In 1994, an additional 14 DC-10s and 31 727s will be
retired. As a result, in 1994 American's ASMs are expected to decrease by almost
five percent. Domestic capacity will drop by almost seven percent, while
international capacity will increase slightly. The capacity reduction will be
the first at American since 1981.
Aircraft retirements have necessitated the furlough of about 3,700 American
employees since late 1992. The Company anticipates further workforce reductions
in 1994 and, accordingly, made a provision for the cost of these reductions in
1993. Fewer aircraft deliveries will also translate into lower capital spending.
American's revenue plan for 1994 reflects continued emphasis on producing
premium yields by attracting more full fare passengers than its competitors. As
part of this plan, American will expand its successful three-class domestic
transcontinental service, add more first class seats on some narrowbody aircraft
and increase frequencies in business-oriented markets. In addition, American
will seek to grow its cargo revenues again in 1994.
In 1993, American's passenger division cost per ASM declined by 2.0
percent, largely due to a 4.9 percent drop in the cost of jet fuel. In 1994,
though American will continue its rigorous program of cost control, it expects
units costs, excluding fuel, to rise modestly. This increase will be driven by
higher unit labor costs due to pay scale and average seniority escalations.
On August 10, 1993, the Omnibus Budget Reconciliation Act was signed into
law, imposing a new 4.3 cents per gallon tax on commercial aviation jet fuel for
use in domestic operations. The new tax will become effective October 1, 1995,
and is scheduled to continue until October 1, 1998. American estimates the
resulting annual increase in fuel taxes will be approximately $90 million.
AMR instituted a program in the latter half of 1993 to reduce interest
costs. At year-end interest rates, American anticipates that this program, which
involves such things as interest rate swaps, will produce significant interest
cost savings. This savings is expected to largely offset the additional interest
cost of new financings in 1994.
In November 1993, American endured a five-day strike by its flight
attendants' union; the strike ended when both sides agreed to binding
arbitration. The arbitration process is expected to be complex and will likely
not be decided for several months. While the ultimate outcome is uncertain, the
new contract will likely result in higher unit labor costs in 1994.
American's labor contract with its pilots' union becomes amendable in
August 1994. The Company and the union leadership are pursuing opportunities to
streamline the negotiation and settlement process. The ultimate outcome of these
negotiations cannot be estimated at this time.
The integration of AMR's information services businesses will continue in
1994 with the integration of American Airlines Decision Technologies, which is a
subsidiary of AMR, SDS and other units in The SABRE Group into SABRE Decision
Technologies ("SDT"). SDT will develop and market The SABRE Group's expanding
array of information systems products and services to a growing list of airline
and other customers throughout the world.
STIN will seek to sustain its revenue growth through continued geographical
expansion of the SABRE computerized reservation system and the sale of its
leading-edge automated reservations products such as SABRExpress, SABRExpress
Ticketing and SABRE TravelBase, a new travel agency accounting system.
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<PAGE> 11
USE OF PROCEEDS
The Pass Through Certificates offered hereby are being issued in connection
with the refinancing of three separate leveraged lease transactions entered into
by American, as lessee, with respect to one Boeing 767-323ER aircraft and two
Boeing 757-223 aircraft. The Boeing 767-323ER aircraft was delivered new from
its manufacturer to American in May 1992, and the two Boeing 757-223 aircraft
were delivered new from their manufacturer to American in July 1991. Each
Aircraft was sold by American to the related Owner Trustee and leased back to
American. The debt currently outstanding under the leveraged lease transactions
with respect to the Aircraft consists of $125,206,389 in aggregate principal
amount of variable interest rate amortizing loan certificates having a stated
maturity during the year 2012. The proceeds from the sale of the Pass Through
Certificates offered hereby will be used by the Trustee on behalf of each Trust
to purchase, pursuant to the Refunding Agreements, all of the Equipment Notes
issued by the related Owner Trustee at par, to refinance not more than 80% of
the equipment cost to such Owner Trustees of each Aircraft.
The Equipment Notes with respect to each Aircraft will be issued under
separate Amended and Restated Trust Indenture and Security Agreements (each, an
"Indenture"), each such Indenture being between State Street Bank and Trust
Company of Connecticut, National Association, as trustee thereunder (in such
capacity, the "Loan Trustee"), and, in the case of the Boeing 767-323ER
aircraft, Meridian Trust Company and, in the case of the two Boeing 757-223
aircraft, Wilmington Trust Company, in each case not in such company's
individual capacity, but solely as Owner Trustee of a trust established by a
Trust Agreement pursuant to which such Owner Trustee acts as trustee for the
benefit of an Owner Participant (each, a "Trust Agreement"). Each Owner
Participant provided from its own funds at least 20% of the equipment cost to
the related Owner Trustee of the related Aircraft and beneficially owns the
related Aircraft. No Owner Participant, however, will be personally liable for
any amount payable under the related Indenture or the Equipment Notes issued
thereunder.
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
The Pass Through Certificates offered hereby will be issued pursuant to
five separate Trust Supplements to be entered into between American and the
Trustee pursuant to the terms of the Basic Agreement. Each Trust Supplement will
contain substantially the same terms and conditions, except that the interest
rate and maturity date applicable to the Equipment Notes held in each Trust, the
aggregate principal amount of Equipment Notes held in each Trust, and the final
distribution date applicable to each Trust will differ. The following summary of
the particular terms of the Pass Through Certificates offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Pass Through Certificates set forth
in the accompanying Prospectus under the caption "Description of the Pass
Through Certificates." The statements under this caption are a summary and do
not purport to be complete. The summary makes use of terms defined in and is
qualified in its entirety by reference to all of the provisions of the Basic
Agreement, a form of which has been filed as an exhibit to the Registration
Statement of which the accompanying Prospectus is a part, and to all of the
provisions of the Trust Supplements which, together with the forms of the
related Note Purchase Agreements (which are described herein as the
Participation Agreements and the Refunding Agreements), Indentures, Leases and
Trust Agreements, will be filed by American with the Commission as exhibits to a
Current Report on Form 8-K. Except as otherwise indicated, the following
summaries relate to the Basic Agreement, the five Trust Supplements and the
Trusts formed thereby and the Pass Through Certificates issued by each such
Trust.
PAYMENTS AND DISTRIBUTIONS
The Pass Through Certificates will be issued in fully registered form and
will be registered in the name of Cede & Co., as the nominee of The Depository
Trust Company. No person acquiring an interest in the Pass Through Certificates
will be entitled to receive a definitive certificate representing such person's
interest in the related Trust unless definitive certificates are issued under
the limited circumstances described in the accompanying Prospectus under the
caption "Description of the Pass Through Certificates -- Book-Entry
Registration."
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<PAGE> 12
Payments of principal, premium, if any, and interest with respect to the
Equipment Notes held in each Trust will be distributed by the Trustee to
Certificateholders of such Trust on the date receipt of such payment is
confirmed by the Trustee, except in certain cases when some or all of such
Equipment Notes are in default. See "Description of the Pass Through
Certificates -- Events of Default and Certain Rights Upon an Event of Default"
in the accompanying Prospectus. Interest paid on the Equipment Notes held in
each Trust will be passed through to the Certificateholders of such Trust on May
26 and November 26 of each year commencing on November 26, 1994 at the
applicable rate per annum for such Trust until the final distribution date for
such Trust. The Equipment Notes purchased by Trusts 1994-A1, 1994-A2 and 1994-A3
will pay interest only until they mature on , 199 , ,
199 and , 199 , respectively. Payments of principal on the
Equipment Notes held in Trusts 1994-A4 and 1994-A5 are scheduled to be received
by the Trustee on May 26 or November 26, or both, in certain years depending
upon the terms of the Equipment Notes held in such Trust commencing ,
in the case of Trust 1994-A4 and , in the case of Trust
1994-A5 (such scheduled payments of principal and interest on the Equipment
Notes are herein referred to as "Scheduled Payments," and May 26 or November 26
of each year are herein referred to as "Regular Distribution Dates"). Scheduled
Payments of principal on the Equipment Notes held in each Trust are set forth
below under "Description of the Equipment Notes -- Principal Payments."
The Trustee of each Trust will distribute on each Regular Distribution Date
to the Certificateholders of such Trust all Scheduled Payments the receipt of
which is confirmed by the Trustee on such Regular Distribution Date. Each
Certificateholder of each Trust will be entitled to receive a pro rata share of
any distribution in respect of Scheduled Payments of principal and interest made
on the Equipment Notes held in such Trust. Each such distribution in respect of
Scheduled Payments will be made by the Trustee to the holders of record of the
Certificates of the applicable Trust on the fifteenth day preceding such Regular
Distribution Date, subject to certain exceptions. If a Scheduled Payment is not
received by the Trustee on a Regular Distribution Date but is received within
five days thereafter, it will be distributed on the date received to such
holders of record. If it is received after such five day period, it will be
treated as a Special Payment (as defined below) and distributed as described
below.
Payments of principal, premium, if any, and interest received by the
Trustee on account of the early redemption, if any, of the Equipment Notes
relating to one or more Aircraft held in a Trust, and payments received by the
Trustee following a default in respect of the Equipment Notes relating to one or
more Aircraft held in a Trust (including payments received by the Trustee on
account of the purchase by the related Owner Trustee of such Equipment Notes,
the sale by the Trustee of such Equipment Notes, or the exercise of remedies
under the related Indenture by the Trustee) ("Special Payments") will be
distributed on, in the case of an early redemption or a purchase, the date of
such early redemption or purchase, which shall be a Business Day, and otherwise,
except as described in the next paragraph, 25 days after the Trustee has
confirmed receipt of the funds for such Special Payment (or the next Business
Day after such 25th day if such date is not a Business Day) (each, a "Special
Distribution Date"). The Trustee will mail notice to the Certificateholders of
the applicable Trust not less than 20 days prior to the Special Distribution
Date on which any Special Payment is scheduled to be distributed by the Trustee
stating such anticipated Special Distribution Date. Each distribution of a
Special Payment, other than a final distribution, on a Special Distribution Date
for any Trust will be made by the Trustee to the Certificateholders of record of
such Trust on the fifteenth day next preceding such Special Distribution Date.
See "Description of the Equipment Notes -- Redemption" in this Prospectus
Supplement and "Description of the Pass Through Certificates -- Events of
Default and Certain Rights Upon an Event of Default" in the accompanying
Prospectus.
In the event that, on the delivery date with respect to any Pass Through
Certificates, all of the proceeds from the sale of such Pass Through
Certificates are not used to purchase the Equipment Notes contemplated to be
held in the related Trust, such Equipment Notes may be purchased by the Trustee
at any time on or prior to July , 1994. In such event, the Trustee will hold
the proceeds from the sale of such Pass Through Certificates not used to
purchase Equipment Notes in an escrow account pending the purchase of the
Equipment Notes not so purchased. Such proceeds will be invested in Specified
Investments having maturity dates in no event later than August , 1994 at the
direction and risk of, and for the account of, American. American will be
responsible for any losses. To the extent that any amount of the proceeds from
the sale of
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<PAGE> 13
any Pass Through Certificates held in the escrow account referred to above is
not used to purchase Equipment Notes on or prior to July , 1994, an amount
equal to the unused proceeds will be distributed by the Trustee to the holders
of record of such Pass Through Certificates on a pro rata basis upon not less
than 20 days' prior notice to them as a Special Payment on a Special
Distribution Date not later than August , 1994 together with interest thereon
at a rate equal to the rate applicable to such Pass Through Certificates, but
without premium, and American will pay to the Trustee on such date an amount
equal to such interest.
POOL FACTORS
As of the date of sale by the Trustee of the Pass Through Certificates and
assuming that all proceeds are used to purchase Equipment Notes on or before
July , 1994 and that no early redemption, default or purchase of any Equipment
Notes shall occur, (i) payments on Trusts 1994-A1, 1994-A2 and 1994-A3 will be
interest only, and accordingly the Pool Factor for Trusts 1994-A1, 1994-A2 and
1994-A3 will not decline until the single payment of principal of Equipment
Notes held in each such Trust is distributed on the final distribution date
applicable to such Trust and (ii) the aggregate scheduled repayment of principal
on the Equipment Notes to be held in Trusts 1994-A4 and 1994-A5 and the
resulting Pool Factors for such Trusts after taking into account each such
repayment are set forth below:
<TABLE>
<CAPTION>
TRUST TRUST
1994-A4 1994-A5
EQUIPMENT EQUIPMENT
NOTES TRUST NOTES TRUST
REGULAR SCHEDULED 1994-A4 SCHEDULED 1994-A5
DISTRIBUTION PAYMENTS OF POOL PAYMENTS OF POOL
DATE PRINCIPAL FACTOR PRINCIPAL FACTOR
- --------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
</TABLE>
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<PAGE> 14
DESCRIPTION OF THE EQUIPMENT NOTES
The following summary of the particular terms and provisions of the
Equipment Notes supplements, and to the extent inconsistent therewith replaces,
the description of the general terms and provisions of the Equipment Notes set
forth in the accompanying Prospectus under the heading "Description of the
Equipment Notes." The statements under this caption are summaries and do not
purport to be complete. The summaries make use of terms defined in and are
qualified in their entirety by reference to all of the provisions of the
Equipment Notes, the Indentures, the Leases, the Participation Agreements, the
Trust Agreements and the Refunding Agreements, the forms of which will be filed
by American with the Commission as exhibits to a Current Report on Form 8-K. The
summaries should be read in conjunction with the statements under the heading
"Description of the Equipment Notes" in the accompanying Prospectus. Except as
otherwise indicated, the following summaries relate to the Equipment Notes, the
Indenture, the Lease, the Participation Agreement, the Trust Agreement and the
Refunding Agreement relating to each Aircraft.
GENERAL
The Equipment Notes will be issued in five series with respect to each
Aircraft. The Equipment Notes with respect to each Aircraft will be issued under
a separate Indenture between either Meridian Trust Company or Wilmington Trust
Company, as Owner Trustee of a trust for the benefit of the Owner Participant
who is the beneficial owner of such Aircraft, and State Street Bank and Trust
Company of Connecticut, National Association, as Loan Trustee.
The related Owner Trustee leases each Aircraft to American pursuant to a
separate Lease between such Owner Trustee and American with respect to such
Aircraft. American is obligated to make or cause to be made rental and other
payments to the related Loan Trustee on behalf of the related Owner Trustee in
amounts that will be at least sufficient to pay in full when due all payments
required to be made on the Equipment Notes issued with respect to such Aircraft.
The Equipment Notes are not, however, direct obligations of, or guaranteed by,
American. American's rental obligations under each Lease are general obligations
of American.
PRINCIPAL PAYMENTS
The aggregate principal amounts of the Equipment Notes issued with respect
to each Aircraft, as such Equipment Notes will be held in each of the Trusts,
are as follows:
<TABLE>
<CAPTION>
TRUST TRUST TRUST TRUST TRUST
1994-A1 1994-A2 1994-A3 1994-A4 1994-A5
% % % % %
AIRCRAFT EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT
NO.* NOTES NOTES NOTES NOTES NOTES TOTAL
- -------------------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
1................. $ $ $ $ $ $
2.................
3.................
--------- --------- --------- --------- --------- -----------
Total............... $ $ $ $ $ $
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
</TABLE>
- ---------------
* Aircraft 1 and 2 are Boeing 757-223 aircraft. Aircraft 3 is a Boeing 767-323ER
aircraft.
Interest will be payable on each Equipment Note at the rate applicable to
such Equipment Note on the unpaid principal amount thereof on May 26 and
November 26 in each year, commencing November 26, 1994. Such interest will be
computed on the basis of a 360-day year of twelve 30-day months.
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<PAGE> 15
The principal of each Equipment Note purchased by Trusts 1994-A1, 1994-A2
and 1994-A3 will be paid in full at maturity on , 199 ,
, 199 and , 199 , respectively. The principal of
each Equipment Note held in Trusts 1994-A4 and 1994-A5 will be payable as set
forth below:
TRUST 1994-A4
% EQUIPMENT NOTES
<TABLE>
<CAPTION>
PAYMENT AIRCRAFT AIRCRAFT AIRCRAFT
DATES NO. 1 NO. 2 NO. 3 TOTAL
------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
.................. $ $ $ $
..................
..................
..................
..................
..................
..................
..................
..................
..................
..................
..................
..................
..................
..................
----------- ----------- ----------- -----------
Total............................ $ $ $ $
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
TRUST 1994-A5
% EQUIPMENT NOTES
<TABLE>
<CAPTION>
PAYMENT AIRCRAFT AIRCRAFT AIRCRAFT
DATES NO. 1 NO. 2 NO. 3 TOTAL
------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
.................. $ $ $ $
..................
..................
..................
----------- ----------- ----------- -----------
Total............................ $ $ $ $
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
If any date scheduled for any payment of principal, premium, if any, or
interest with respect to the Equipment Notes is not a Business Day, such payment
will be made on the next succeeding Business Day without any additional
interest. (Indentures, Section 12.04)
REDEMPTION
The Equipment Notes issued with respect to any Aircraft will be redeemed,
in whole, at a price equal to the aggregate unpaid principal amount thereof,
together with accrued interest thereon to, but not including, the date of
redemption, but without premium, on a Special Distribution Date upon the
occurrence of an Event of Loss to such Aircraft if such Aircraft is not
replaced. (Indentures, Section 6.01(a))
If American exercises its right to terminate a Lease or to purchase the
Aircraft leased thereunder (without assuming the rights and obligations of the
related Owner Trustee with respect to the Equipment Notes issued with respect
thereto), the Equipment Notes relating to such Aircraft will be redeemed, in
whole, on a Special Distribution Date at a price equal to the aggregate unpaid
principal amount thereof, together with accrued interest thereon to, but not
including, the date of redemption, plus, if such redemption is made prior to the
maturity date for such Equipment Notes (in the case of Notes held by Trusts
1994-A1 through 1994-A3
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<PAGE> 16
and Trust 1994-A5), or , (in the case of Notes held by Trust
1994-A4) (such maturity date or , , as the case may be, for
each Trust being the "Premium Termination Date" for such Trust), a Make-Whole
Premium (as defined below), if any, and if such redemption is made on or after
the related Premium Termination Date, without premium. (Indentures, Section
6.01(b)(1)) If the proposed sale of an Aircraft (as described in "Description of
the Equipment Notes -- The Leases -- Termination") on a lease termination date
is not completed, the corresponding redemption will not take place and any
notice of redemption will be deemed revoked. (Indentures, Section 6.03)
The Equipment Notes with respect to any Aircraft may be redeemed or
purchased, in whole, on any Special Distribution Date by the related Owner
Trustee, with the consent of American (except that such consent shall be
unnecessary if a Lease Event of Default shall have occurred and be continuing).
The redemption price will be equal to the aggregate unpaid principal amount
thereof, together with accrued interest thereon to, but not including, the date
of redemption, plus, if such redemption is made prior to the related Premium
Termination Date, a Make-Whole Premium, if any, and if such redemption is made
on or after the related Premium Termination Date, without premium. (Indentures,
Section 6.01(b)(2)) If notice of such a redemption shall have been given in
connection with a refinancing of such Equipment Notes, such notice may be
revoked not later than three days prior to the proposed redemption date.
(Indentures, Section 6.03)
The Owner Trustees with the consent of American may also redeem all, but
not less than all, the Equipment Notes held in any Trust at a price equal to the
aggregate unpaid principal amount thereof, together with accrued interest
thereon to, but not including, the date of redemption, plus, if such redemption
is made prior to the related Premium Termination Date, a Make-Whole Premium, if
any, and if such redemption is made on or after the related Premium Termination
Date, without premium. (Indentures, Section 6.01(b)(3)) If notice of such a
redemption shall have been given in connection with a refinancing of such
Equipment Notes, such notice may be revoked not later than three days prior to
the proposed redemption date. (Indentures, Section 6.03)
If under any Indenture (i) a Lease Event of Default shall have occurred and
be continuing for a period of 180 days or more or (ii) the Equipment Notes
relating thereto shall have been accelerated, the related Owner Trustee may
elect to redeem or purchase all of the then outstanding Equipment Notes issued
under such Indenture at a price equal to the aggregate unpaid principal amount
thereof, together with accrued interest thereon to, but not including, the date
of redemption or purchase, but without premium. (Indentures, Section 6.02)
The "Make-Whole Premium," if any, on the Equipment Notes issued under a
particular Indenture will be determined by an independent investment banking
institution of national standing selected by American. The Make-Whole Premium
shall be determined as of the fourth Business Day prior to the redemption date
and shall equal the excess, if any, of (i) the sum of the present values of all
of the remaining scheduled payments of principal and interest from the
redemption date to maturity of such Equipment Note, discounted semi-annually on
each interest payment date at a rate equal to the Treasury Rate, based on a
360-day year of twelve 30-day months, over (ii) the aggregate unpaid principal
amount of such Equipment Note plus accrued but unpaid interest on such Equipment
Note (but not any accrued interest in default).
The "Treasury Rate" means, with respect to each Equipment Note to be
redeemed or purchased, a per annum rate (expressed as a semiannual equivalent
and as a decimal and, in the case of United States Treasury bills, converted to
a bond equivalent yield), determined to be the per annum rate equal to the
semiannual yield to maturity of United States Treasury securities maturing on
the Average Life Date (as defined below) of such Equipment Note, as determined
by interpolation between the most recent weekly average yields to maturity for
two series of United States Treasury securities, (A) one maturing as close as
possible to, but earlier than, the Average Life Date of such Equipment Note and
(B) the other maturing as close as possible to, but later than, the Average Life
Date of such Equipment Note, in each case as published in the most recent
H.15(519) (or, if a weekly average yield to maturity of United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
in the most recent H.15(519), as published in H.15(519)). "H.15(519)" means
"Statistical Release H.15(519), Selected Interest Rates," or any successor
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<PAGE> 17
publication, published by the Board of Governors of the Federal Reserve System.
The most recent H.15(519) means the latest H.15(519) which is published prior to
the close of business on the fourth Business Day preceding the redemption date.
The "Average Life Date" for each Equipment Note to be redeemed shall be the
date which follows the redemption date by a period equal to the Remaining
Weighted Average Life at the redemption date of such Equipment Note. The
"Remaining Weighted Average Life" of such Equipment Note, at the redemption date
of such Equipment Note, shall be the number of days equal to the quotient
obtained by dividing (a) the sum of the products obtained by multiplying (i) the
amount of each then remaining installment of principal, including the payment
due on the maturity date of such Equipment Note, by (ii) the number of days from
and including the redemption date to but excluding the scheduled payment date of
such principal installment; by (b) the then unpaid principal amount of such
Equipment Note.
In the event of the redemption of all of the Equipment Notes held in any
one Trust, one or more new series of Equipment Notes may be issued under the
related Indentures; provided that if, after such redemption any Equipment Notes
remain outstanding under any such Indenture, the new series of Equipment Notes
to be issued under such Indenture: (i) shall be denominated and payable in
United States dollars and shall not be in a principal amount greater than the
Equipment Notes redeemed; (ii) shall not rank senior in any respect to the
Equipment Notes that remain outstanding under such Indenture; and (iii) shall
not mature after or have a weighted average life longer than the Equipment Notes
redeemed if any of the Equipment Notes that remain outstanding under such
Indenture have a maturity date after or concurrent with the maturity date of the
Equipment Notes redeemed; and, provided further, that prior to the
authentication of such new series of Equipment Notes the Loan Trustee shall have
received (a) written evidence from Standard & Poor's Corporation and Moody's
Investors Service, Inc. to the effect that issuance of such new series would not
by itself result in the downgrading of the credit rating assigned to the Pass
Through Certificates then outstanding and (b) an opinion of counsel for American
reasonably satisfactory to the related Loan Trustee to the effect that the
protection afforded by Section 1110 of the Bankruptcy Code to the existing
holders of Equipment Notes under such Indenture would not be adversely affected
by the issuance of such new series of Equipment Notes to the extent such holders
were then entitled to the benefits afforded by such Section 1110. For a
description of Section 1110 of the Bankruptcy Code, see "Description of the
Equipment Notes -- Remedies." (Indentures, Section 14.01)
SECURITY
The Equipment Notes issued with respect to each Aircraft are secured by (i)
an assignment by the related Owner Trustee to the related Loan Trustee of such
Owner Trustee's rights, except for certain limited rights, under the Lease with
respect to the related Aircraft, including the right to receive payments of rent
thereunder, (ii) a mortgage by such Owner Trustee to such Loan Trustee of such
Aircraft, subject to the rights of American under such Lease, and (iii) an
assignment by such Owner Trustee to such Loan Trustee of certain of the rights
assigned to such Owner Trustee by American under the purchase agreement between
American and the related manufacturer of the Aircraft. (Indentures, Granting
Clause) The Equipment Notes are not cross-collateralized, and, consequently, the
Equipment Notes issued in respect of any one Aircraft are not secured by any of
the other Aircraft or replacement aircraft (as described in "Description of the
Equipment Notes -- The Leases -- Events of Loss") or the Lease related thereto.
See "Description of the Equipment Notes -- Security" in the accompanying
Prospectus.
INDENTURE DEFAULTS, NOTICE AND WAIVER
Indenture Defaults under each Indenture include: (a) failure to pay any
interest or principal or premium, if any, when due, continued for more than
fifteen days, (b) the occurrence of any Lease Event of Default under the related
Lease (other than the failure to make certain indemnity payments and other
payments to the related Owner Trustee or Owner Participant), (c) failure by the
related Owner Trustee or Owner Participant to perform or observe any covenant,
condition or agreement to be performed or observed by it under such Indenture or
certain related documents, continued after notice and specified cure periods, if
any, (d) any representation or warranty made by the related Owner Trustee or
Owner Participant in the Indenture, the
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<PAGE> 18
Participation Agreement or certain related documents furnished to the Loan
Trustee pursuant thereto being false or incorrect when made and continuing to be
materially adverse to the holders of the Equipment Notes and remaining
unremedied after notice and specified cure periods, (e) the occurrence of
certain events of bankruptcy, reorganization or insolvency of the related Owner
Trustee or Owner Participant, (f) the failure by the related Owner Participant
or Owner Trustee to discharge certain liens, continued after notice and
specified cure periods, (g) the related Owner Participant's transfer or
purported transfer of its interest in, among other things, the related Aircraft
or certain related documents, without a good faith attempt to comply with
relevant provisions of the Participation Agreement, (h) as to two Aircraft, any
time when the Aircraft is registered under the laws of a country other than the
United States of America, as a result of the gross negligence or willful
misconduct of the related Owner Trustee or Owner Participant, the lien of the
Indenture ceases to be a valid and perfected lien, and (i) at any time any Owner
Participant Guaranty ceases to be a valid and enforceable obligation of the
Owner Participant Guarantor. (Indentures, Section 8.01) There are no cross-
default provisions in the Indentures and, consequently, events resulting in an
Indenture Default under any particular Indenture may not result in an Indenture
Default occurring under any other Indenture.
In the event American fails to make any semiannual basic rental payment
after the same shall become due under any Lease, within a specified period after
such failure the applicable Owner Participant or the applicable Owner Trustee
may furnish to the Loan Trustee under the Indenture relating to such Lease the
amount of such rental payment, together with any interest thereon on account of
the delayed payment thereof, in which event the Loan Trustee and the holders of
outstanding Equipment Notes issued under such Indenture may not exercise any
remedies otherwise available under such Indenture or such Lease as the result of
such failure to make such rental payment, unless American has failed to make a
rental payment when due on the three or more immediately preceding semiannual
basic rental payment dates or on any six or more previous semiannual basic
rental payment dates. The applicable Owner Participant or the Owner Trustee
also, subject to certain restrictions, may cure any other default by American in
the performance of its obligations under any Lease which can be cured with the
payment of money. (Indentures, Section 8.03(e)(i))
The holders of a majority in principal amount of the outstanding Equipment
Notes issued with respect to any Aircraft, by notice to the Loan Trustee, may on
behalf of all of the holders waive any existing event of default or default and
its consequences under the Indenture with respect to such Aircraft, except a
default in the payment of the principal of or interest on any such Equipment
Notes or a default in respect of any covenant or provision of such Indenture
that cannot be modified or amended without the consent of each holder of
Equipment Notes affected thereby. (Indentures, Section 8.05)
American is required to furnish annually to the Trustee a statement as to
the fulfillment of its covenants under the Basic Agreement, the Trust
Supplements and the Leases, and to each Loan Trustee as to the fulfillment of
its covenants under the Leases, during the preceding year.
REMEDIES
If an Indenture Default occurs and is continuing under an Indenture, the
related Loan Trustee or the holders of at least 25% in aggregate principal
amount of the Equipment Notes outstanding under such Indenture may declare the
principal of all such Equipment Notes issued thereunder immediately due and
payable, together with all accrued but unpaid interest thereon. The holders of a
majority in principal amount of Equipment Notes outstanding under such Indenture
may rescind any such declaration at any time prior to the sale of the related
Aircraft pursuant to the exercise of remedies under the Indenture after such an
Indenture Default if (i) there has been paid to or deposited with the related
Loan Trustee an amount sufficient to pay all principal, interest, and premium,
if any, on any such Equipment Notes, to the extent such amounts have become due
otherwise than by such declaration of acceleration, (ii) the rescission would
not conflict with any judgment or decree, and (iii) all other Indenture Defaults
and potential Indenture Defaults under such Indenture have been cured or waived.
(Indentures, Section 8.02)
Each Indenture provides that if an Indenture Default under such Indenture
has occurred and is continuing, the related Loan Trustee may exercise certain
rights or remedies available to it under such Indenture or under applicable law,
including (if the corresponding Lease has been declared in default) one or
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more of the remedies under such Indenture or such Lease with respect to the
Aircraft subject to such Lease. The related Loan Trustee's right to exercise
remedies under such Indenture is subject with certain exceptions to its having
proceeded to exercise one or more of the remedies under the Lease with respect
to such Aircraft. See "Description of the Equipment Notes -- The Leases -- Lease
Events of Default." Such remedies may be exercised by the related Loan Trustee
to the exclusion of the related Owner Trustee and, subject to the terms of such
Lease, American. Any Aircraft sold in the exercise of such remedies will be free
and clear of any rights of those parties, including the rights of American under
the Lease with respect to such Aircraft; provided that no exercise of any
remedies by the related Loan Trustee may affect the rights of American under any
Lease unless a Lease Event of Default has occurred and is continuing.
(Indentures, Section 8.03; Leases, Section 15)
If the Equipment Notes issued in respect of one or more Aircraft are in
default, the Equipment Notes issued in respect of the remaining Aircraft may not
be in default, and, if not, no remedies will be exercisable under the Indenture
with respect to such remaining Aircraft.
Section 1110 of the Federal Bankruptcy Code (the "Bankruptcy Code")
provides that the right of lessors, conditional vendors and holders of purchase
money equipment security interests with respect to aircraft used by air carriers
operating under certificates issued under Section 401 or 418 of the Aviation Act
to take possession of such aircraft in compliance with the provisions of a
lease, conditional sale contract or purchase money equipment security agreement,
as the case may be, is not affected by (a) the automatic stay provision of the
Bankruptcy Code, which provision enjoins repossessions by creditors for the
duration of the reorganization period, (b) the provision of the Bankruptcy Code
allowing the trustee in reorganization to use property of the debtor during the
reorganization period and (c) any power of the bankruptcy court to enjoin a
repossession. Section 1110 provides, however, that the right of a lessor,
conditional vendor or holder of a purchase money equipment security interest to
take possession of an aircraft in the event of an event of default may not be
exercised for 60 days following the date of commencement of the reorganization
proceedings (unless specifically permitted by the bankruptcy court) and may not
be exercised at all if, within such 60-day period, the debtor in possession or
trustee in reorganization agrees to perform the debtor's obligations that become
due on or after such date and cures all existing defaults (other than defaults
resulting solely from the financial condition, bankruptcy, insolvency or
reorganization of the debtor).
American has been advised by its counsel, Debevoise & Plimpton, that,
assuming that each Lease is regarded, for purposes of Section 1110 of the
Bankruptcy Code, as a "true" lease (as opposed to a lease that is in effect a
security interest), with respect to each Lease, the related Owner Trustee, as
Lessor under such Lease, and the related Loan Trustee, as assignee of such Owner
Trustee's rights under such Lease pursuant to the Indenture corresponding to
such Lease, would be entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the Aircraft initially delivered under such Lease and
subjected to the related Indenture. Since no reliable standard for the analysis
of a "true" lease has evolved from the many conflicting judicial decisions on
the question, Debevoise & Plimpton is not opining on whether the Leases
constitute "true" leases under Section 1110. If American were the subject of a
proceeding for reorganization under Chapter 11 of the Bankruptcy Code and such
Lease were determined not to constitute a "true" lease for purposes of the
Bankruptcy Code, the benefits of Section 1110 may not be available with respect
to such Aircraft. If the special benefits of Section 1110 were not available to
the related Owner Trustee and the related Loan Trustee as to any Lease in a
Chapter 11 proceeding involving American, the Certificateholders as
beneficiaries of the Trusts holding the Equipment Notes relating to such Lease
would continue to have the benefit of such Loan Trustee's perfected security
interest in the Aircraft under the related Indenture and the rights available to
such Loan Trustee as a secured creditor under the Bankruptcy Code.
The opinion of Debevoise & Plimpton will not address the possible
replacement of an Aircraft after an Event of Loss in the future, the
consummation of which is conditioned upon the contemporaneous delivery of an
opinion of counsel to the effect that the related Loan Trustee's entitlement to
Section 1110 benefits should not be diminished as a result of such replacement.
See "Description of the Equipment Notes -- the Leases -- Events of Loss."
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The holders of a majority in aggregate unpaid principal amount of the
Equipment Notes outstanding under any Indenture may direct the time, method and
place of conducting any proceeding for any remedy available to the related Loan
Trustee or exercising any trust or power conferred on such Loan Trustee by such
Indenture, but in such event such Loan Trustee may refuse to follow any
direction that (a) conflicts with law, the related Lease or such Indenture, (b)
is unduly prejudicial to the rights of the affected holders, or (c) would
subject the Loan Trustee to personal liability. (Indentures, Sections 8.06)
The right of any holder of Equipment Notes to institute action for any
remedy under the Indenture pursuant to which such Equipment Notes are issued
(except the right to enforce payment of the principal, interest and premium, if
any, with respect to its Equipment Notes when due) is subject to certain
conditions precedent, including a written request to the related Loan Trustee by
the holders of not less than 25% in aggregate principal amount of such Equipment
Notes outstanding to take action, an offer to such Loan Trustee of satisfactory
indemnification against liabilities incurred by it in so doing and the Loan
Trustee failing to comply with the request within 60 days after receipt of such
request and the offer of indemnification. (Indentures, Section 8.07)
If an Indenture Default under any Indenture occurs and is continuing, any
sums held or received by the related Loan Trustee may be applied to reimburse
such Loan Trustee for any tax, expense or other loss incurred by it and to pay
any other amounts due to such Loan Trustee prior to any payments to holders of
the Equipment Notes issued under such Indenture. (Indentures, Sections 3.05 and
9.05)
In the event of bankruptcy, insolvency, receivership or like proceedings
involving an Owner Participant, it is possible that, notwithstanding that the
applicable Aircraft is owned by the related Owner Trustee in trust, such
Aircraft and the related Lease and Equipment Notes might become part of such
proceeding. In such event, payments under such Lease or on such Equipment Notes
might be interrupted and the ability of the related Loan Trustee to exercise its
remedies under the related Indenture might be restricted, although such Loan
Trustee would retain its status as a secured creditor in respect of the related
Lease and the related Aircraft.
MODIFICATION OF INDENTURES AND LEASES
Without the consent of holders of a majority in principal amount of the
Equipment Notes outstanding under any Indenture, the provisions of such
Indenture and the Lease, the Participation Agreement and the Trust Agreement
corresponding thereto may not be amended or modified, except to the extent
indicated below.
Certain provisions of any Indenture, and of the Lease (so long as no
Indenture Default has occurred and is continuing), the Participation Agreement,
and the Trust Agreement related thereto, may be amended or modified by the
parties thereto without the consent of any holders of the Equipment Notes
outstanding under such Indenture. In the case of each Lease, such provisions
include, among others, provisions relating to (i) rental payments and other
payments, except that no such amendment or modification may reduce the amount of
such rental payments or other payments below that necessary in order for the
related Owner Trustee to pay the principal and interest on the Equipment Notes
issued under the related Indenture, (ii) the return to the related Owner Trustee
of the related Aircraft at the end of the term of such Lease and (iii) the
renewal of such Lease and the option of American at the end of the term of such
Lease to purchase the related Aircraft. (Indentures, Sections 11.01 and 11.06)
Without the consent of the holder of each Equipment Note outstanding under
any Indenture affected thereby, no amendment or modification of such Indenture
may (a) reduce the principal amount of, or premium, if any, or interest payable
on, any Equipment Notes issued under such Indenture or change the date on which
any principal or premium, if any, or interest is due and payable, (b) create any
security interest with respect to the property subject to the lien of such
Indenture ranking prior to or on a parity with the security interest created by
such Indenture, except as provided in such Indenture, or deprive any holder of
an Equipment Note issued under such Indenture of the lien of such Indenture upon
the property subject thereto, (c) reduce the percentage in principal amount of
outstanding Equipment Notes issued under such Indenture necessary to modify or
amend any provision of such Indenture or to waive compliance therewith or (d)
modify
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any of the provisions relating to the rights of holders in respect of defaults
or events of default in the payment of principal and interest, or certain other
specified provisions. (Indentures, Section 11.02)
DEFEASANCE OF THE INDENTURES AND THE EQUIPMENT NOTES IN CERTAIN CIRCUMSTANCES
Each Indenture provides that such Indenture and the obligations of the
related Owner Trustee and Loan Trustee thereunder shall be deemed to have been
discharged in full (except for certain obligations, including the obligation to
hold money for payment in trust) on the 91st day after the date of irrevocable
deposit with such Loan Trustee of money or certain obligations of the United
States which will provide money in an aggregate amount sufficient to pay when
due all of the Equipment Notes issued thereunder in accordance with the terms of
such Indenture. Such discharge may occur only if, among other things, the
Internal Revenue Service has published a ruling to the effect that holders of
such Equipment Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amounts and in the same manner and at
the same times as would have been the case if such deposit, defeasance and
discharge had not occurred. (Indentures, Sections 10.01 and 10.02)
Upon such defeasance, or upon payment in full of all Equipment Notes issued
under an Indenture or deposit with the related Loan Trustee of money sufficient
therefor no earlier than one year prior to the maturity or redemption thereof,
the holders of such Equipment Notes will have no beneficial interest in or other
rights with respect to the related Aircraft or other assets subject to the lien
of such Indenture and such lien shall terminate. (Indentures, Section 10.01)
ASSUMPTION OF OBLIGATIONS BY AMERICAN
Upon the voluntary termination of a Lease in connection with the exercise
by American of any of its options to purchase the Aircraft subject to such Lease
prior to the end of the term of such Lease, American may assume on a full
recourse basis all of the rights and obligations of the related Owner Trustee
(other than its obligations and liabilities in its individual capacity) under
the related Indenture, including the obligations to make payments in respect of
the Equipment Notes issued thereunder. In such event, certain relevant
provisions of the related Lease, including (among others) provisions relating to
maintenance, possession and use of the related Aircraft, liens, insurance and
events of default, will be incorporated into such Indenture, and the Equipment
Notes issued under such Indenture will not be redeemed and will continue to be
secured by such Aircraft. It is a condition to such assumption that an opinion
of counsel be delivered at the time of such assumption substantially to the
effect that the Loan Trustee under such Indenture should, immediately following
such assumption, be entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to such Aircraft (including the engines related thereto), but
such opinion need not be delivered to the extent that the benefits of such
Section 1110 are not available to such Loan Trustee with respect to such
Aircraft or any engine related thereto immediately prior to such assumption.
(Indentures, Section 7.03)
THE LEASES
Term and Rent. Each Aircraft has been leased separately by the related
Owner Trustee to American for a term commencing on the delivery date thereof to
such Owner Trustee and expiring on a date not earlier than the latest maturity
date of the Equipment Notes issued with respect to such Aircraft, unless
previously terminated as permitted by the related Lease. The semiannual basic
rent payments by American under each Lease will be payable on each May 26 and
November 26, and have been assigned by the related Owner Trustee to the Loan
Trustee under the related Indenture to provide the funds necessary to make
payments of principal and interest due from the related Owner Trustee on the
Equipment Notes issued under the related Indenture. (Leases, Section 3;
Indentures, Granting Clause and Section 3.03) Although in certain cases the
semiannual basic rent payments under the Leases may be adjusted, under no
circumstances will rent or other payments that American is unconditionally
obligated to make or cause to be made under any Lease be less than the scheduled
payments of principal and interest on the Equipment Notes issued under the
Indenture relating to such Lease. The balance of any semiannual basic rent
payments under each Lease, after payment of the scheduled principal and interest
on the Equipment Notes issued under the Indenture relating to such
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Lease, will be paid over to the related Owner Trustee for distribution to the
related Owner Participant. American's obligation to pay rent is a general
obligation of American. (Leases, Section 3)
Possession, Sublease and Transfer. American may sublease any Aircraft to
the United States government or any instrumentality or agency thereof, to any
United States certificated air carrier or to certain foreign air carriers (such
United States and foreign air carriers being "Permitted Air Carriers") so long
as the term of the sublease does not continue beyond the end of the term of the
related Lease. In addition, subject to certain limitations, American may
transfer possession of any Aircraft other than by sublease, including transfers
in connection with normal interchange and pooling arrangements with Permitted
Air Carriers, "wet leases," transfers to the United States government or any
instrumentality or agency thereof and transfers in connection with maintenance
or modifications. If an Aircraft is subleased or the possession thereof is
otherwise transferred, such Aircraft will remain subject to the related Lease
and to the lien of the related Indenture. (Leases, Section 7(b)) The Aircraft
may be operated by American or under sublease or interchange arrangements in
countries that are not parties to the Convention on the International
Recognition of Rights in Aircraft (the "Convention"), and the extent to which
the related Loan Trustee's security interest would be recognized in any
jurisdiction other than the United States, whether or not such jurisdiction
adheres to the Convention, is uncertain. See "Description of the Equipment
Notes -- Security" in the accompanying Prospectus.
Registration. The Aircraft will initially be registered in the name of the
related Owner Trustee under the laws of the United States. American, at its
expense, may, under certain circumstances, register any of the Aircraft in the
name of the related Owner Trustee or, if required by applicable law, in
American's or some other person's name in a jurisdiction other than the United
States. If an Aircraft is registered in a foreign jurisdiction, the extent to
which the related Loan Trustee's security interest would be recognized in any
jurisdiction, whether or not such jurisdiction adheres to the Convention, is
uncertain. See "Description of the Equipment Notes -- Security" in the
accompanying Prospectus. (Leases, Section 7(a))
Liens. Each Aircraft will be maintained free of any liens, other than the
respective rights of American, the related Owner Participant, the related Owner
Trustee, the related Loan Trustee and the holders of the Equipment Notes issued
with respect thereto arising under the related Lease, the related Indenture, the
related Participation Agreement, the related Refunding Agreement, the Basic
Agreement, the Trust Supplements or the related Trust Agreement, and other than,
in the case of each Aircraft, certain limited liens permitted under the Lease
and Indenture relating thereto, including liens for taxes either not yet due and
payable or being contested in good faith; materialmen's, mechanics' and other
similar liens arising in the ordinary course of business and either not yet due
and payable or being contested in good faith; liens arising out of judgments or
awards that are being appealed in good faith and whose enforcement has been
stayed pending such appeal; and salvage or similar rights of insurers under
insurance policies maintained pursuant to the related Lease. (Leases, Section 6)
Insurance. American will, at its expense, maintain insurance against losses
of or damage to each Aircraft that is of the type and in substantially the
amount usually carried by corporations engaged in the same or similar business
and similarly situated with American; provided that such insurance shall at all
times be in an amount not less than the stipulated loss value of each Aircraft
(which shall be an amount at least equal to the aggregate unpaid principal of,
and unpaid interest on, the outstanding Equipment Notes related to such Aircraft
on the date of payment thereof (the "Stipulated Loss Value")). All policies
covering loss of or damage to each Aircraft shall be made payable to the related
Loan Trustee for any loss in excess of a specified amount (the greatest such
amount for any Aircraft being $10,000,000) up to the Stipulated Loss Value for
such Aircraft. American may self-insure a portion of these risks by means of
deductible or premium adjustment provisions in insurance policies, but in no
case will the self-insurance (including the self-insurance for public liability
and property damage referred to below) with respect to all of the aircraft and
engines in American's fleet (including the Aircraft) exceed, for any 12-month
policy year, the lesser of 50% of the largest replacement value of any single
aircraft in American's fleet at the time or 1 1/2% of the average aggregate
insurable value (for the preceding year) of all aircraft on which American
carries insurance; provided that if there is a material adverse change in the
financial condition of American from that at December 31, 1982, upon notice from
the related Owner Trustee, American shall, until American's financial condition
is restored
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at least to that at December 31, 1982, reduce the permitted self-insurance to
such reasonable amount as such Owner Trustee may require. American is also
permitted a deductible per occurrence not in excess of the amount customarily
allowed as a deductible in the industry.
In addition, American will, at its expense, maintain public liability and
property damage insurance (exclusive of manufacturer's product liability
insurance) with respect to each Aircraft (i) in amounts that are not less than
the public liability and property damage insurance applicable to similar
aircraft and engines that comprise American's fleet on which American carries
insurance; (ii) of the type usually carried by corporations engaged in the same
or similar business, similarly situated with American and owning or operating
similar equipment and covering risks of the kind customarily insured against by
American; and (iii) which is maintained in effect with insurers of recognized
responsibility. American may also self-insure a portion of these risks by means
of deductible or premium adjustment provisions in insurance policies subject to
the same limitations described above for insurance for risks of loss of or
damage to the Aircraft. American is also permitted a deductible per occurrence
not in excess of the amount customarily allowed as a deductible in the industry.
The related Loan Trustee, the Trustee, the related Owner Trustee, the related
Owner Participant and American will be named as insured parties as their
respective interests may appear under all liability insurance policies required
with respect to each of the Aircraft. In addition, the insurance policies
maintained under the Lease with respect to each Aircraft will provide that, in
respect of the respective interests of the related Loan Trustee, the Trustee,
the related Owner Trustee and the related Owner Participant, the insurance shall
not be invalidated by any action or inaction of American. American may not
operate or locate any Aircraft (i) in any area excluded from coverage by any
insurance required by the Lease related thereto, unless requisitioned for use by
the government (including any instrumentality or agency thereof) of the United
States or the government of one of certain other countries specified in the
applicable Leases (the government of the United States and of such other
specified countries each being a "Permitted Government") and such Permitted
Government provides indemnification in lieu of such insurance coverage or (ii)
in any war zone or recognized or, in American's judgment, threatened area of
hostilities, unless such Aircraft is covered by war risk insurance or operated
or used under contract with a Permitted Government, pursuant to which such
Permitted Government assumes liability for damage, loss, destruction or failure
to return possession of such Aircraft at the end of the term of such contract,
or for injury to persons or damage to property of others. (Leases, Sections 7(a)
and 11)
Termination. Subject to certain conditions, American may terminate each
Lease commencing on various dates, the earliest of which for any Aircraft is
July 2, 1996. American will be required to give to the related Owner Trustee and
the related Loan Trustee notice of its intention to terminate such Lease a
specified number of days (90 days as to two Aircraft and 180 days as to one
Aircraft) prior to the proposed date of termination of the Lease, but, unless a
prospective purchaser shall have entered into a contract for the purchase of
such Aircraft at least 30 days before the proposed termination date, such notice
will be withdrawn. In connection with a termination, in the event the related
Owner Trustee elects or is deemed to have elected to sell the Aircraft, American
may act as non-exclusive agent for the related Owner Trustee in obtaining bids
for such Aircraft. The related Owner Trustee may also seek bids for such
Aircraft. The related Owner Trustee shall sell such Aircraft to the purchaser
designated in such contract of purchase (or such other purchaser as may be
agreed upon by American and such Owner Trustee) on the termination date
specified in American's notice of termination. The proceeds of such sale shall
be paid to the related Owner Trustee. If the net proceeds received from such
sale are less than the termination value for such Aircraft (which shall be an
amount at least equal to the aggregate unpaid principal of, and unpaid interest
on, the outstanding Equipment Notes related to such Aircraft on the date of such
sale (the "Termination Value")), American shall pay the related Owner Trustee an
amount equal to the difference between such proceeds and such Termination Value,
together with certain other amounts. All funds to be paid to or deposited with
the related Owner Trustee as described in this paragraph shall, so long as the
related Indenture shall not have been discharged, be deposited directly with the
related Loan Trustee. Amounts in excess of the outstanding principal amount of
the Equipment Notes issued under such Indenture, any applicable premium thereon,
and the then accrued and unpaid interest thereon will be distributed by the
related Loan Trustee to the related Owner Trustee for the benefit of the related
Owner Participant. The lien of such Indenture shall terminate after the full
Termination Value has been received by the related Loan Trustee and, if all
amounts due such Owner Participant have also been paid, the related
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Lease shall terminate and the obligation of American thereafter to make rental
payments under such Lease shall cease. In the event any Aircraft is not sold by
its proposed termination date, the Lease relating thereto, including all of
American's obligations thereunder, shall continue in effect. (Leases, Section 9;
Indentures, Sections 3.02, 6.01 and 6.04)
In connection with a termination of a Lease, American also has the option
to purchase the Aircraft under certain circumstances specified in such Lease. In
the event American exercises such option, the purchase price therefor is an
amount to be calculated pursuant to the terms of such Lease. Unless American
elects to assume the related Equipment Notes as described below, such purchase
price and certain other amounts payable under the related Lease shall, in any
case, be sufficient to pay the redemption price of the related Equipment Notes.
American may elect either to pay such redemption price to the Loan Trustee under
the related Indenture and acquire the Aircraft free of the lien of such
Indenture or to assume on a full recourse basis all of such Owners Trustee's
obligations in respect of such Equipment Notes and acquire the Aircraft subject
to the lien of the Indenture. (Leases, Section 9(e); Indentures, Sections 6.01,
7.03). See "Description of the Equipment Notes -- Assumption of Obligations by
American."
The related Owner Trustee shall have the option to retain an Aircraft with
respect to which American has given a notice of termination. In such event, the
related Owner Trustee shall pay, or cause to be paid, to the related Loan
Trustee funds in an amount equal to the aggregate outstanding principal of and
accrued interest on the Equipment Notes with respect to such Aircraft, together
with all other sums due and payable to the holders thereof on the termination
date (other than premium, if any, which American shall pay to the related Loan
Trustee). (Leases, Section 9)
Purchase Option. American has the right at the end of the term of each
Lease to purchase the Aircraft subject thereto for an amount to be calculated
pursuant to the terms of such Lease. (Leases, Section 20).
American also has the option, as to any Aircraft, exercisable irrevocably
upon not less than 120 days prior written notice to the applicable Owner
Trustee, to purchase the Aircraft on certain specified dates. In the event
American exercises such option, without assuming the related Equipment Notes as
described below, the purchase price for the Aircraft and certain other amounts
payable under the related Lease shall be sufficient to pay the redemption price
of the related Equipment Notes. American may elect either to pay such redemption
price to the Loan Trustee under the related Indenture and acquire the Aircraft
free of the lien of such Indenture or to assume on a full recourse basis all of
such Owner Trustee's obligations in respect of such Equipment Notes and acquire
the Aircraft subject to the lien of the Indentures. (Leases, Section 20(b);
Indentures, Sections 6.01, 7.03). See "Description of the Equipment
Notes -- Assumption of Obligations by American."
Events of Loss. If an Event of Loss occurs with respect to an Aircraft,
American shall pay to the related Owner Trustee the Stipulated Loss Value of
such Aircraft, together with certain additional amounts, or shall replace such
Aircraft. In the event American elects to replace such Aircraft, it must do so
within a specified number of days (120 days as to two Aircraft and 180 days as
to one Aircraft) with a passenger aircraft having a value and utility at least
equal to, and in as good operating condition as, the Aircraft subject to the
Event of Loss immediately prior to the occurrence of such Event of Loss,
assuming such Aircraft was in the condition and repair required by the related
Lease. If American pays the Stipulated Loss Value of an Aircraft subject to an
Event of Loss, together with certain additional amounts, which in all
circumstances will be at least sufficient to pay in full as of the date of
payment thereof the aggregate unpaid principal of the outstanding Equipment
Notes issued with respect to such Aircraft, together with all unpaid interest
thereon accrued and to accrue to the date on which such amount is paid, the lien
of the Indenture and the Lease relating to such Aircraft shall terminate with
respect to such Aircraft, title thereto shall be transferred to American and the
obligation of American thereafter to make rental payments with respect thereto
shall cease. The Stipulated Loss Value and other payments made by American shall
be deposited with the related Loan Trustee. Amounts in excess of the outstanding
principal amount of the Equipment Notes issued with respect to such Aircraft and
the then accrued and unpaid interest thereon will be distributed by the related
Loan Trustee to the related Owner Trustee for the benefit of the related Owner
Participant. (Leases, Section 10(a); Indentures, Section 3.02)
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If an Event of Loss occurs with respect to an Engine alone, American shall
replace such Engine with another engine of a comparable or an improved model of
the same or another manufacturer and suitable for installation and use on the
applicable Aircraft and compatible for use on such Aircraft with the other
Engine subject to the Lease thereof, and having a value and utility at least
equal to, and in as good operating condition as, the Engine subject to the Event
of Loss, assuming such Engine was of the value and utility and in the condition
and repair required by the related Lease immediately prior to the occurrence of
such Event of Loss. (Leases, Section 10(b))
An Event of Loss with respect to any property means any of the following
events: (i) the loss of such property or the use thereof due to theft,
disappearance, destruction, damage beyond repair or rendition of such property
permanently unfit for normal use for any reason whatsoever (in the case of theft
or disappearance as to one Aircraft, the continuation thereof for a period of
not less than 180 days); (ii) any damage to such property that results in an
insurance settlement with respect to such property on the basis of total loss or
a constructive total loss; (iii) the condemnation, confiscation or seizure of,
or requisition of title to, such property or certain requisitions for use of
such property; (iv) as a result of any rule, regulation, order or other action
by the Federal Aviation Administration, the Department of Transportation or
other governmental body of the United States or other country of registry having
jurisdiction, the use of such property in the normal course of air
transportation of persons shall have been prohibited for specified periods; or
(v) the operation or location of any Aircraft while under requisition for use by
any Permitted Government, in any area excluded from coverage by any insurance
policy required by the terms of the Lease in effect with respect to such
Aircraft, unless American shall have obtained indemnity in lieu thereof from
such Permitted Government. (Leases, Section 1)
Lease Events of Default. Events of default (each, a "Lease Event of
Default") under each Lease include, among other things: (a) failure by American
to make any payment of basic rent, Stipulated Loss Value or Termination Value
within 15 days after such payment shall have become due or of supplemental rent
(with certain exceptions) within a specified number of days after written notice
of such failure, (b) failure by American to maintain insurance on or with
respect to the Aircraft in accordance with the provisions of such Lease, (c)
American's operation of the Aircraft subject to such Lease at a time when public
liability insurance required by the provisions of such Lease shall not be in
effect, (d) failure by American to perform or observe any covenant, condition or
agreement to be performed or observed by it under such Lease or certain related
documents, continued after notice and specified cure periods, (e) any material
representation or warranty made by American in such Lease or certain related
documents being incorrect in any material respect at the time made and such
incorrectness continuing to be material and unremedied after notice and
specified cure periods and (f) the occurrence of certain events of bankruptcy,
reorganization or insolvency of American. There are no cross-default provisions
in the Leases and, consequently, events resulting in a Lease Event of Default
under any particular Lease may not result in a Lease Event of Default occurring
under any other Lease. (Leases, Section 14)
If a Lease Event of Default under a Lease has occurred and is continuing,
and such Lease has been declared to be in default, the related Loan Trustee, as
assignee of the related Owner Trustee's rights under such Lease, may exercise
one or more of the remedies provided in such Lease with respect to the Aircraft
subject thereto. These remedies include the right to repossess and use or
operate such Aircraft, to sell or re-lease such Aircraft free and clear of
American's rights and retain the proceeds and to require American to pay as
liquidated damages any unpaid rent plus an amount equal to the excess of the
Termination Value of such Aircraft over, at the related Loan Trustee's option,
any of (i) the discounted fair market rental value thereof for the remainder of
the term for such Aircraft, (ii) the fair market sales value thereof or (iii) if
such Aircraft or any Engine has been sold, the net sales proceeds. (Leases,
Section 15)
THE PARTICIPATION AGREEMENTS
American will be required to indemnify the Loan Trustee, the respective
Owner Participants, the Owner Trustee and the Trustee for certain losses, claims
and other matters. American will be required under certain circumstances to
indemnify each Owner Participant against the loss of depreciation deductions and
certain other benefits allowable for certain income tax purposes with respect to
the related Aircraft. Each Owner
S-25
<PAGE> 26
Participant will be required to indemnify the Loan Trustee and the holders of
the Equipment Notes issued with respect to the Aircraft in which such Owner
Participant has an interest for certain losses that may be suffered as a result
of the failure of such Owner Participant to discharge certain liens or claims on
or against the assets subject to the lien of the related Indenture. Subject to
certain restrictions, each Owner Participant may transfer its interest in the
related Aircraft.
FEDERAL INCOME TAX CONSEQUENCES
Prospective investors should consult the section entitled "Federal Income
Tax Consequences" in the accompanying Prospectus together with the discussion of
certain subsequent developments below, for a discussion of the anticipated
material federal income tax consequences of the purchase, ownership and
disposition of Pass Through Certificates.
FINAL TREASURY REGULATIONS
On January 27, 1994, the Internal Revenue Service issued final regulations
regarding original issue discount and certain related matters (the "Final
Regulations"). Based on the Final Regulations, it is anticipated that, subject
to the possible application to certain investors of the aggregation rules
discussed below, and except as described below under "Special Rules for Trust
1994-Al", the Equipment Notes will not be issued with original issue discount.
The Final Regulations contain certain aggregation rules which, depending on all
the facts and circumstances, could require that where one investor purchases
Pass Through Certificates issued by more than one Trust certain of that
investor's interests in the Equipment Notes in those Trusts must be treated as a
single debt instrument for purposes of calculating and amortizing any original
issue discount. If the aggregation rules were applicable to such an investor,
such Equipment Notes could be treated with respect to such investor as having
been issued with original issue discount. Generally, a holder of a debt
instrument issued with original issue discount that is not de minimis must
include such original issue discount in income as it accrues, in advance of the
receipt of the cash attributable to such income, under a method that takes into
account the compounding of interest.
Certificateholders are urged to consult their own tax advisors regarding
the application of the aggregation rules, certain accrual elections with respect
to debt instruments and other aspects of the Final Regulations.
SPECIAL RULES FOR TRUST 1994-A1
An obligation with a term that is not more than one year from the date of
issue (such as the Equipment Notes in Trust 1994-Al) is treated as having been
issued with original issue discount in an amount equal to the difference between
the total principal and interest payments and the issue price of such
obligation. In general, a holder of such an obligation using the cash method of
accounting is not required to accrue original issue discount with respect to
such obligation unless it elects to do so. Holders using an accrual method of
accounting and certain other holders, including banks and dealers in securities,
are required to accrue original issue discount (or, if the holder so elects,
"acquisition discount" in an amount equal to the difference between the total
principal and interest payments and the holder's basis) with respect to such
obligation. For this purpose, original issue discount accrues on a straight-line
basis unless an election is made to use the constant yield method (based on
daily compounding). Holders who are not required and do not elect to accrue
original issue discount with respect to such an obligation will be required to
defer, until such obligation is sold or otherwise disposed of, the deduction of
a portion of the interest on any indebtedness incurred or continued to purchase
or carry such obligation.
BACKUP WITHHOLDING
The "backup" withholding tax rate has been increased to 31%.
CERTAIN CONNECTICUT TAXES
The Trustee is a national banking association with its corporate trust
office in Connecticut. Bingham, Dana & Gould, current counsel to the Trustee,
will render the advice described under the caption "Certain Connecticut Taxes"
in the accompanying Prospectus.
S-26
<PAGE> 27
ERISA CONSIDERATIONS
The Pass Through Certificates may not be purchased by any ERISA Plan or by
any entity whose assets constitute assets of an ERISA Plan. Certain governmental
plans and non-electing church plans, however, are not subject to Title I of
ERISA or Section 4975 of the Code and, therefore, may purchase the Pass Through
Certificates. Each investor must determine whether it is permitted to purchase
Pass Through Certificates. In making such determination, insurance companies
that expect to use general account assets to acquire Pass Through Certificates
must consider whether, under the decision of the United States Supreme Court in
John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 114 S.
Ct. 517 (1993), such general account assets may be deemed to constitute assets
of one or more ERISA Plans for purposes of Section 406 of ERISA or Section 4975
of the Code. The purchase by any person of any Pass Through Certificate
constitutes a representation by such person to American, the related Owner
Participants, the Owner Trustees, the Loan Trustees and the Trustee that such
person is not an ERISA Plan and that such person is not acquiring, and has not
acquired, such Pass Through Certificate with assets of an ERISA Plan.
UNDERWRITING
Under the terms of and subject to the conditions contained in the
Underwriting Agreement, Morgan Stanley & Co. Incorporated, Lehman Brothers Inc.,
Salomon Brothers Inc and Pryor, McClendon, Counts & Co., Inc. (the
"Underwriters") have agreed to purchase from the Trustee the percentage of the
Pass Through Certificates of each Trust and the aggregate principal amount of
Pass Through Certificates, in each such case as set forth opposite its name
below.
<TABLE>
<CAPTION>
PERCENTAGE OF AGGREGATE TOTAL AGGREGATE
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT
UNDERWRITER EACH SERIES OF CERTIFICATES
- ----------- ----------------------- ----------------
<S> <C> <C>
Morgan Stanley & Co. Incorporated......................... % $
Lehman Brothers Inc. .....................................
Salomon Brothers Inc......................................
Pryor, McClendon, Counts & Co., Inc. .....................
------ ----------------
Total........................................... 100% $
------ ----------------
------ ----------------
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Pass Through Certificates is subject to,
among other things, the approval of certain legal matters by counsel and certain
other conditions. The Underwriters are obligated to take and pay for all of the
Pass Through Certificates to be purchased by them if any are taken.
The Underwriters initially propose to offer all or part of the Pass Through
Certificates directly to the public at the public offering prices per Pass
Through Certificate designation set forth on the cover page of this Prospectus
Supplement and may offer a portion of the Pass Through Certificates to dealers
at a price which represents a concession not in excess of the amounts set forth
below for the respective designations of the Pass Through Certificates. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of the amounts set forth below for the respective designations of the Pass
Through Certificates to certain other dealers. After the initial public
offering, the public offering prices and such concessions may from time to time
be varied by the Underwriters.
<TABLE>
<CAPTION>
PASS THROUGH CONCESSION REALLOWANCE
CERTIFICATE DESIGNATION TO DEALERS CONCESSION
- ----------------------- ---------- -----------
<S> <C> <C>
1994-A1.................................................. % %
1994-A2.................................................. % %
1994-A3.................................................. % %
1994-A4.................................................. % %
1994-A5.................................................. % %
</TABLE>
S-27
<PAGE> 28
American has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933.
American does not intend to apply for listing of the Pass Through
Certificates on a national securities exchange but has been advised by the
Underwriters that the Underwriters presently intend to make a market in the Pass
Through Certificates, as permitted by applicable laws and regulations. No
Underwriter is obligated, however, to make a market in the Pass Through
Certificates and any such market making may be discontinued at any time at the
sole discretion of such Underwriter. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Pass Through Certificates.
The Underwriters and certain of their respective affiliates perform
investment banking, financial advisory, commercial banking and other financial
services for AMR, American and certain of their affiliates.
LEGAL OPINIONS
The validity of the Pass Through Certificates is being passed upon for
American by Debevoise & Plimpton, New York, New York, and for the Underwriters
by Shearman & Sterling, New York, New York. Both Debevoise & Plimpton and
Shearman & Sterling will rely on the opinion of Bingham, Dana & Gould, Hartford,
Connecticut, counsel for State Street Bank and Trust Company of Connecticut,
National Association, as Trustee, as to matters relating to the authorization,
execution and delivery of the Pass Through Certificates under the Basic
Agreement and the Trust Supplements.
S-28
<PAGE> 29
PROSPECTUS
AMERICAN AIRLINES
Pass Through Trusts
PASS THROUGH CERTIFICATES
------------------------
Up to $500,000,000 aggregate principal amount of Pass Through Certificates
may be offered for sale from time to time pursuant to this Prospectus and
related Prospectus Supplements. Pass Through Certificates may be issued in one
or more series in amounts, at prices and on terms to be determined at the time
of the offering. In respect of each offering of Pass Through Certificates, a
separate American Airlines Pass Through Trust for each series of Pass Through
Certificates being offered (each, a "Trust") will be formed pursuant to the Pass
Through Trust Agreement (the "Basic Agreement") and the supplement thereto (a
"Trust Supplement") relating to such Trust between American Airlines, Inc.
("American") and State Street Bank and Trust Company of Connecticut, National
Association (the "Trustee"), as trustee under each Trust. Each Pass Through
Certificate in a series will represent a fractional undivided interest in the
related Trust and will have no rights, benefits or interest in respect of any
other Trust. The property of each Trust will consist of equipment notes (the
"Equipment Notes") (a) issued with recourse by American to finance or refinance
all or a portion of the equipment cost of aircraft, including engines, which
have been or will be purchased by American (each, an "Owned Aircraft") or (b)
issued on a nonrecourse basis by one or more owner trustees pursuant to separate
leveraged lease transactions to finance or refinance a portion of the equipment
cost of aircraft, including engines, which have been or will be leased to
American (each, a "Leased Aircraft" and together with the Owned Aircraft, the
"Aircraft"). The Equipment Notes issued in respect of the Leased Aircraft will
not be direct obligations of, or guaranteed by, American, but the amounts
unconditionally payable by American for the lease of such Aircraft will be
sufficient to pay in full when due all payments required to be made on such
Equipment Notes. The Equipment Notes issued in respect of the Owned Aircraft
will be direct obligations of American. The Prospectus Supplement relating to
each offering of Pass Through Certificates will describe certain terms of the
Pass Through Certificates being offered, the Trust or Trusts relating thereto,
the Equipment Notes to be purchased by such Trust or Trusts, Aircraft relating
to such Equipment Notes and the leveraged lease transactions, if any, relating
thereto.
Equipment Notes may be issued in respect of an Aircraft in one or more
series, each series having a different interest rate and final maturity date. A
separate Trust will purchase one or more series of the Equipment Notes issued
with respect to each of one or more Aircraft. All of the Equipment Notes held in
such Trust will have an interest rate equal to the interest rate applicable to
the Pass Through Certificates issued by such Trust and maturity dates occurring
on or before the final distribution date applicable to such Pass Through
Certificates. The Equipment Notes issued with respect to each Aircraft will be
secured by a security interest in such Aircraft and, in the case of the Leased
Aircraft, in the Lease relating thereto, including the right to receive rentals
payable in respect of such Aircraft by American.
Interest paid on the Equipment Notes held in each Trust will be passed
through to the holders of the Pass Through Certificates relating to such Trust
on the dates and at the rate per annum set forth in the Prospectus Supplement
relating to such Pass Through Certificates until the final distribution date for
such Trust. Principal paid on the Equipment Notes held in each Trust will be
passed through to the holders of the Pass Through Certificates relating to such
Trust in scheduled amounts on the dates set forth in the Prospectus Supplement
relating to such Pass Through Certificates until the final distribution date for
such Trust.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------------------
The Pass Through Certificates may be sold through underwriters, dealers or
agents or directly to purchasers. See "Plan of Distribution." The accompanying
Prospectus Supplement sets forth the names of any underwriters, dealers or
agents involved in the sale of the Pass Through Certificates in respect of which
this Prospectus is being delivered and any applicable fee, commission or
discount arrangements with them. See "Plan of Distribution" for information
concerning secondary trading of the Pass Through Certificates.
This Prospectus may not be used to consummate sales of Pass Through
Certificates unless accompanied by a Prospectus Supplement.
June 5, 1992
<PAGE> 30
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY AMERICAN OR BY ANY UNDERWRITERS, AGENTS OR DEALERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF AMERICAN SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Available Information........................................................... 3
Reports to Certificateholders by the Trustee.................................... 3
Documents Incorporated by Reference............................................. 3
Prospectus Summary.............................................................. 4
The Company..................................................................... 8
Ratio of Earnings to Fixed Charges.............................................. 8
Formation of the Trusts......................................................... 9
Use of Proceeds................................................................. 9
Diagram of Payments............................................................. 10
Description of the Pass Through Certificates.................................... 11
Description of the Equipment Notes.............................................. 21
Federal Income Tax Consequences................................................. 24
Certain Connecticut Taxes....................................................... 27
ERISA Considerations............................................................ 27
Plan of Distribution............................................................ 27
Legal Opinions.................................................................. 29
Experts......................................................................... 29
Glossary of Certain Terms....................................................... Appendix I
</TABLE>
2
<PAGE> 31
AVAILABLE INFORMATION
American is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information concerning
American may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, Room 1024; Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; and 75 Park Place, New York,
New York 10007, 14th Floor. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such material can also be inspected
and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement") filed
by American with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all of the information
included in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is made
to such Registration Statement and to the exhibits relating thereto for further
information with respect to American and the securities offered hereby.
REPORTS TO CERTIFICATEHOLDERS BY THE TRUSTEE
State Street Bank and Trust Company of Connecticut, National Association,
as Trustee for the holders of the Pass Through Certificates, will provide to
such holders certain periodic statements concerning distributions made with
respect to each Trust. See "Description of the Pass Through
Certificates -- Statements to Certificateholders".
DOCUMENTS INCORPORATED BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
1. American's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991;
2. American's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1992; and
3. American's Current Report on Form 8-K dated February 19, 1992.
All documents filed by American pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of, or deregistration of, the Pass Through
Certificates offered hereby shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
and superseded, to constitute a part of this Prospectus.
American will provide without charge to each person to whom this Prospectus
is delivered, upon the request of such person, a copy of any or all of the
foregoing documents relating to it incorporated herein by reference (other than
exhibits). Requests for such documents should be directed to the Corporate
Secretary of American at P.O. Box 619616, Mail Drop 5675, Dallas/Fort Worth
Airport, Texas 75261-9616 (Telephone: 817-963-1234).
3
<PAGE> 32
PROSPECTUS SUMMARY
In connection with each offering of Pass Through Certificates, one or more
separate Trusts (as defined below) will be formed for the purpose of purchasing
specific Equipment Notes (as defined below) issued in respect of one or more
aircraft purchased or to be purchased by American or leased or to be leased to
American pursuant to certain leveraged lease transactions, all as described in
the Prospectus Supplement relating to the specific Pass Through Certificates
being offered. The following summary describes terms that will be separately
applicable to each offering of Pass Through Certificates and the Trust or Trusts
formed in connection therewith.
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information contained in the Prospectus Supplement relating to the Pass
Through Certificates being offered thereby, and should be read only in
conjunction with the entire Prospectus and the applicable Prospectus Supplement.
THE COMPANY
American is one of the largest United States airlines based upon revenue
passenger miles and available passenger seat miles. As of December 31, 1991,
American served airports in 40 states and the District of Columbia, as well as
numerous airports in Canada, the Caribbean, Mexico and certain other countries
in Western Europe, Latin America and Asia.
THE OFFERING
GLOSSARY................. Included at the end of this Prospectus as Appendix I
is a Glossary of certain of the significant defined
terms used herein.
TRUSTS................... Each of the American Airlines Pass Through Trusts
(the "Trusts") is to be formed pursuant to a Pass
Through Trust Supplement (a "Trust Supplement")
between American Airlines, Inc. ("American") and
State Street Bank and Trust Company of Connecticut,
National Association (the "Trustee") which will be
entered into pursuant to the terms of the Pass
Through Trust Agreement (the "Basic Agreement"),
amended and restated as of February 1, 1992, between
American and the Trustee. Each Trust will be a
separate trust.
TRUST PROPERTY........... The property of each Trust will consist of equipment
notes (a) issued with recourse by American (the
"Owned Aircraft Notes") to finance or refinance all
or a portion of the equipment cost of aircraft,
including engines, which have been or will be
purchased by American (each, an "Owned Aircraft") or
(b) issued on a nonrecourse basis by one or more
Owner Trustees (the "Leased Aircraft Notes" and,
together with the Owned Aircraft Notes, the
"Equipment Notes") in separate leveraged lease
transactions to finance or refinance all or a
portion of the equipment cost of aircraft, including
engines therefor leased or to be leased by the
related Owner Trustee to American (each, a "Leased
Aircraft" and together with Owned Aircraft, the
"Aircraft"). Equipment Notes will be issued with
respect to each Aircraft in one or more series. Each
Trust will acquire Equipment Notes having an
interest rate equal to the interest rate applicable
to the Pass Through Certificates (the "Pass Through
Certificates") that will be issued by such Trust.
The maturity dates of the Equipment Notes acquired
by each Trust will occur on or before the final
distribution date applicable to the Pass Through
Certificates issued by such Trust. The aggregate
principal amount of the Equipment Notes held in each
Trust will be the same as the aggregate principal
amount of the Pass Through Certificates issued by
such Trust.
PASS THROUGH
CERTIFICATES OFFERED;
4
<PAGE> 33
BOOK-ENTRY REGISTRATION.. All Pass Through Certificates issued by each Trust
will be issued as a separate series under the Basic
Agreement as supplemented by the related Trust
Supplement, will represent fractional undivided
interests in the related Trust, and will have no
rights, benefits or interest in respect of any other
Trust. Pass Through Certificates will be issued in
fully registered form only. See "Description of the
Pass Through Certificates -- General". Except as
otherwise provided in the applicable Trust
Supplement, Pass Through Certificates will be
registered in the name of Cede & Co. ("Cede"), as
the nominee of The Depository Trust Company ("DTC"),
and no person acquiring an interest in the Pass
Through Certificates (a "Certificate Owner") will be
entitled to receive a definitive certificate
representing such person's interest in the related
Trust, unless definitive certificates are issued
under the limited circumstances described herein.
See "Description of the Pass Through
Certificates -- Book-Entry Registration".
DENOMINATIONS............ Except as otherwise specified in the applicable
Prospectus Supplement, Pass Through Certificates
will be issued in minimum denominations of $1,000
and any integral multiple of $1,000. The
denomination signifies a Certificateholder's pro
rata share of the aggregate principal amount of the
Equipment Notes held in such Trust. See "Description
of the Pass Through Certificates -- General".
REGULAR DISTRIBUTION
DATES.................. Scheduled Payments will be made on the dates
specified as Regular Distribution Dates in the
applicable Prospectus Supplement.
SPECIAL DISTRIBUTION
DATES.................. Special Payments will be made on the dates specified
as Special Distribution Dates in the applicable
Prospectus Supplement.
RECORD DATES............. The fifteenth day preceding a Regular or Special
Distribution Date.
DISTRIBUTIONS............ All payments of principal, premium, if any, and
interest received by the Trustee on the Equipment
Notes held in each Trust will be distributed by the
Trustee to the Certificateholders of such Trust on
the dates specified in the applicable Prospectus
Supplement except in certain cases where such
Equipment Notes are in default. For a discussion of
distributions upon an Event of Default, see
"Description of the Pass Through
Certificates -- Events of Default and Certain Rights
Upon an Event of Default".
SPECIAL DISTRIBUTION
UPON UNAVAILABILITY
OF AIRCRAFT.............. To the extent, due to a casualty to, or other event
causing the unavailability of, one or more Aircraft,
that any proceeds from the sale of Pass Through
Certificates have not been applied by the Trustee by
the date specified in the applicable Prospectus
Supplement to the purchase of the related Equipment
Notes that were contemplated to be held in the
related Trust, such proceeds shall be distributed on
the date specified in the applicable Prospectus
Supplement or an earlier Special Distribution Date
to the holders of such Pass Through Certificates on
a pro rata basis, together with accrued interest
thereon, but without premium. See "Description of
the Pass Through Certificates -- Special
Distribution Upon Unavailability of Aircraft".
METHOD OF DISTRIBUTIONS.. So long as Pass Through Certificates are registered
in the name of Cede as nominee of DTC, distributions
by the Trustee will be made in same day funds to
DTC, which will in turn make distributions to
participants in DTC ("DTC Participants") in
clearing-house or next-day funds, and which will at
the end of the month of payment reimburse such DTC
Participant for the cost of obtaining same-day
funds. The final distribution
5
<PAGE> 34
of principal with respect to Pass Through
Certificates will be made by DTC to DTC Participants
in same day funds. Responsibility for distributions
by DTC Participants to beneficial owners of Pass
Through Certificates will be the responsibility of
such DTC Participants and will be made in accordance
with customary industry practices. See "Description
of the Pass Through Certificates -- Payments and
Distributions". At such time, if any, as the Pass
Through Certificates are issued in definitive form
and not registered in the name of Cede, as nominee
for DTC, distributions by the Trustee to
Certificateholders, other than the final
distribution, will be made by check mailed to each
Certificateholder of record on the applicable record
date at its address appearing on the register. The
final distribution with respect to any Pass Through
Certificates will be made only upon surrender and
presentation thereof at the office or agency of the
Trustee. See "Description of the Pass Through
Certificates -- Payments and Distributions".
INTEREST................. Interest paid on the Equipment Notes held in each
Trust will be passed through to the
Certificateholders of such Trust on the dates and at
the rate per annum set forth in the applicable
Prospectus Supplement until the final distribution
date for such Trust. Interest will be calculated on
the basis of a 360-day year consisting of twelve
30-day months. See "Description of the Pass Through
Certificates -- Payments and Distributions".
PRINCIPAL................ Principal paid on the Equipment Notes held in each
Trust will be passed through to the
Certificateholders of such Trust in scheduled
amounts on the dates set forth in the applicable
Prospectus Supplement until the final distribution
date for such Trust. See "Description of the Pass
Through Certificates -- Payments and Distributions".
EQUIPMENT NOTES:
REDEMPTION............. The circumstances under which Equipment Notes of any
series will be redeemed or purchased, whether
voluntarily or involuntarily, the premium (if any)
related to such redemptions or purchases and other
terms applying to redemptions or purchases will be
described in the applicable Prospectus Supplement.
EQUIPMENT NOTES:
SECURITY............... The Owned Aircraft Notes issued with respect to each
Owned Aircraft will be secured by a security
interest in such Aircraft. The Leased Aircraft Notes
issued with respect to each Leased Aircraft will be
secured by a security interest in such Aircraft and
an assignment to the related Loan Trustee of certain
of the related Owner Trustee's rights under the
related Lease, including the right to receive
rentals and other amounts payable thereunder, with
certain exceptions, in respect of such Aircraft by
American. Because the values of aircraft fluctuate
in accordance with market forces, no assurance can
be given as to the market value of any Aircraft at
any particular date in the future. The Equipment
Notes will not be cross-collateralized and,
consequently, the Equipment Notes issued in respect
of any one Aircraft will not be secured by any other
Aircraft or the Leases, if any, related thereto.
There will be no cross-default provisions in the
Indentures and, consequently, events resulting in an
Indenture Default under any particular Indenture may
not result in an Indenture Default occurring under
any other Indenture. If the Equipment Notes issued
in respect of one or more Aircraft are in default,
the Equipment Notes issued in respect of any other
Aircraft may not be in default and, if not in
default, no remedies will be exercisable under the
Indentures with respect to such other Aircraft. See
"Description of the
6
<PAGE> 35
Pass Through Certificates -- Events of Default and
Certain Rights Upon an Event of Default" and
"Description of the Equipment Notes -- Security". If
specified in a Prospectus Supplement, American will
have (a) the right to arrange for a sale leaseback
of one or more Owned Aircraft referred to in such
Prospectus Supplement and the assumption by an Owner
Trustee of the related Owned Aircraft Notes, or (b)
the right to substitute other aircraft or U.S.
government securities or a combination thereof in
place of the Owned Aircraft securing the related
Owned Aircraft Notes, all as described in such
Prospectus Supplement.
Leased Aircraft Notes will not be direct obligations
of, or guaranteed by, American, but the amounts
unconditionally payable by American for lease of the
related Aircraft will be sufficient to pay in full
when due all payments required to be made on the
Leased Aircraft Notes. The Owned Aircraft Notes are
direct obligations of American. See "Description of
the Equipment Notes -- General".
USE OF PROCEEDS.......... The proceeds from the sale of the Pass Through
Certificates will be used to purchase Owned Aircraft
Notes or Leased Aircraft Notes. The Owned Aircraft
Notes will be issued with recourse by American in
order to finance or refinance all or a portion of
the equipment cost of Aircraft purchased or to be
purchased by American, and the Leased Aircraft Notes
will be issued on a nonrecourse basis by one or more
Owner Trustees in order to finance or refinance all
or a portion of the equipment cost of Aircraft
purchased or to be purchased by such Owner Trustees
and leased to American. See "Use of Proceeds".
TRUSTEE.................. State Street Bank and Trust Company of Connecticut,
National Association will act as trustee and, unless
otherwise described in the applicable Prospectus
Supplement with respect to the Pass Through
Certificates of a particular series, as paying agent
and registrar for the Pass Through Certificates of
each series. Unless otherwise specified in the
applicable Prospectus Supplement, State Street Bank
and Trust Company of Connecticut, National
Association will also act as Loan Trustee for each
issue of Equipment Notes.
FEDERAL INCOME TAX
CONSEQUENCES........... Each Trust should be classified as a grantor trust
for federal income tax purposes, and each
Certificate Owner of the series issued by such Trust
should be treated as the owner of a pro rata
undivided interest in each of the Equipment Notes
and any other property held in such Trust and should
report on its federal income tax return its pro rata
share of income from such Equipment Notes and such
other property in accordance with such Certificate
Owner's method of accounting. See "Federal Income
Tax Consequences".
ERISA CONSIDERATIONS..... Except as otherwise described in the applicable
Prospectus Supplement, the Pass Through
Certificates, with certain exceptions, are eligible
for purchase by employee benefit plans. See "ERISA
Considerations".
7
<PAGE> 36
THE COMPANY
American is the principal subsidiary of AMR Corporation ("AMR") and
accounted for approximately 94% of AMR's assets and operating revenues and
expenses in 1991. American is one of the largest United States airlines based
upon revenue passenger miles and available passenger seat miles. As of December
31, 1991, American served airports in 40 states and the District of Columbia, as
well as numerous airports in Canada, the Caribbean, Mexico and certain other
countries in Western Europe, Latin America and Asia.
The postal address for American's principal executive offices is P.O. Box
619616, Dallas/Fort Worth Airport, Texas 75261-9616 (Telephone: 817-963-1234).
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
American for the periods indicated. Earnings represent consolidated earnings
(loss) before income taxes and fixed charges (excluding interest capitalized).
Fixed charges consist of interest and the portion of rental expense deemed
representative of the interest factor.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- --------------
1987 1988 1989 1990 1991 1991 1992
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio.................................... 2.10 2.63 2.22 (a) (a) (a) 1.07
</TABLE>
- ---------------
(a) Earnings were inadequate to cover fixed charges by $211 million for the year
ended December 31, 1990, by $382 million for the year ended December 31,
1991 and $332 million for the three months ended March 31, 1991.
8
<PAGE> 37
FORMATION OF THE TRUSTS
In respect of each offering of Pass Through Certificates, one or more
Trusts will be formed, and the related Pass Through Certificates will be issued,
pursuant to separate Trust Supplements to be entered into between the Trustee
and American in accordance with the terms of the Basic Agreement. All Pass
Through Certificates with respect to each Trust will represent fractional
undivided interests in such Trust and the property held in such Trust, and will
have no rights, benefits or interest in respect of any other Trust or the
property held therein. Concurrently with the execution and delivery of each
Trust Supplement, the Trustee, on behalf of the Trust formed thereby, will enter
into one or more financing or refinancing agreements (each such agreement being
herein referred to as a "Note Purchase Agreement") relating to one or more
Aircraft described in the applicable Prospectus Supplement. Pursuant to the
applicable Note Purchase Agreement or Note Purchase Agreements, the Trustee, on
behalf of such Trust, will purchase the Equipment Notes issued with respect to
such Aircraft so that all of the Equipment Notes held in such Trust will have an
interest rate equal to the interest rate applicable to the Pass Through
Certificates issued by such Trust. The maturity dates of the Equipment Notes
acquired by each Trust will occur on or before the final distribution date
applicable to the Pass Through Certificates issued with respect to such Trust.
The Trustee will distribute the amount of payments of principal, premium, if
any, and interest received by it as holder of the Equipment Notes to the
Certificateholders of the Pass Through Certificates with respect to the Trust in
which such Equipment Notes are held. See "Description of the Pass Through
Certificates" and "Description of the Equipment Notes".
USE OF PROCEEDS
As more fully described in the applicable Prospectus Supplement, the Pass
Through Certificates will be issued in order to facilitate the financing or
refinancing of all or a portion of the equipment cost of Owned Aircraft
described in such Prospectus Supplement or the financing or refinancing of all
or a portion of the debt component of one or more separate leveraged lease
transactions entered into by American, as lessee, with respect to Leased
Aircraft described therein. The proceeds from the sale of such Pass Through
Certificates will be used by the Trustee on behalf of the applicable Trust or
Trusts to purchase, at par, the Owned Aircraft Notes issued by American to
finance or refinance all or a portion of the equipment cost of Owned Aircraft
purchased or to be purchased by American or Leased Aircraft Notes issued by the
respective Owner Trustee or Owner Trustees to finance or refinance all or a
portion of the equipment cost of such Leased Aircraft. Simultaneously with the
acquisition of each such Leased Aircraft, the respective Owner Trustee leased or
will lease such Leased Aircraft to American. Any portion of the proceeds from
the sale of Pass Through Certificates not used by the Trustee to purchase
Equipment Notes on or prior to the date specified therefor in the applicable
Prospectus Supplement will be distributed on a Special Distribution Date to the
applicable Certificateholders, together with interest, but without premium. See
"Description of the Pass Through Certificates -- Special Distribution Upon
Unavailability of Aircraft".
The Equipment Notes with respect to each Aircraft will be issued under a
separate Trust Indenture and Security Agreement (each, an "Indenture") between a
bank or trust company as trustee thereunder (each, a "Loan Trustee") and (a)
with respect to the Owned Aircraft, American or (b) with respect to the Leased
Aircraft, an owner trustee, not in its individual capacity (except as expressly
set forth therein) but solely as trustee (each, an "Owner Trustee"), of a
separate trust for the benefit of one or more institutional or corporate
investors (each, an "Owner Participant"). In the case of Leased Aircraft, each
Owner Participant will provide, from sources other than the Equipment Notes, at
least, unless otherwise specified in the applicable Prospectus Supplement, a
portion of the equipment cost of the related Aircraft. No Owner Participant,
however, will be personally liable for any amount payable under the related
Indenture or the Leased Aircraft Notes issued thereunder.
9
<PAGE> 38
DIAGRAM OF PAYMENTS
The following diagram illustrates certain aspects of the payment flows in a
possible transaction for Leased Aircraft among American, the Owner Trustees, the
Loan Trustees, the Trusts and the holders of the Pass Through Certificates and a
possible transaction for Owned Aircraft among American, the Loan Trustees, the
Trusts and the holders of the Pass Through Certificates on the assumptions that
two series of Equipment Notes are issued in respect of each Aircraft to two
separate Trusts. Equipment Notes with different interest rates and different
maturity dates will be issued in separate series; the number of series to be
issued in any offering will be described in the applicable Prospectus
Supplement.
In a Leased Aircraft transaction, American will lease each Leased Aircraft
from the related Owner Trustee under a separate Lease. The Leased Aircraft Notes
in respect of each such Leased Aircraft will be issued in two series by the
related Owner Trustee and will be secured by such Aircraft and by an assignment
of certain rights of such Owner Trustee under the related Lease. Rent is payable
under each Lease to the applicable Owner Trustee; however, as a result of the
assignment of the Leases, American will make rental payments for each Aircraft
directly to the related Loan Trustee. From these rental payments the related
Loan Trustee will on behalf of the related Owner Trustee first make payments to
the Trustee for each of the Trusts on such Leased Aircraft Notes held in such
Trust and will pay the remaining balance to such Owner Trustee for the benefit
of the related Owner Participant. The Trustee for each Trust will distribute to
the Certificateholders of such Trust payments received on the Leased Aircraft
Notes held in such Trust.
In an Owned Aircraft transaction, the Owned Aircraft Notes in respect of
each Owned Aircraft will be issued in two series by American and will be secured
by such Aircraft. American will make payments on the Owned Aircraft Notes to the
related Loan Trustee. From these payments the related Loan Trustee will make
payments to the Trustee for each of the Trusts on such Owned Aircraft Notes held
in such Trust. The Trustee for each Trust will distribute to the
Certificateholders of such Trust payments received on the Owned Aircraft Notes
held in such Trust.
In connection with any particular offering of Pass Through Certificates,
one or more series of Equipment Notes may be issued in respect of each of one or
more Aircraft to one or more separate Trusts, all as described in the applicable
Prospectus Supplement.
<TABLE>
<CAPTION>
<S> <C> <C>
LEASED AIRCRAFT OWNED AIRCRAFT
----------------------------------- ------------------------------------
American Airlines, Inc. American Airlines, Inc.
----------------------------------- ------------------------------------
LEASE RENTAL EQUIPMENT NOTE
PAYMENTS PAYMENTS
--------------- ---------------
EXCESS Loan Trustee Loan Trustee
PAYMENTS for for
Leased Aircraft* Owned Aircraft+
- --------------- --------------- ---------------
Owner Trustee
for
Leased
Aircraft*
- --------------- --------------------- ---------------------
EQUIPMENT NOTE EQUIPMENT NOTE
PAYMENTS PAYMENTS
--------------- ------------- --------------- ---------------
Pass Through Pass Through Pass Through Pass Through
EXCESS Trustee Trustee Trustee Trustee
PAYMENTS for for for for
Trust 1992-A1 Trust 1992-A Trust 1992-A1 Trust 1992-A2
--------------- ------------- --------------- ---------------
- ---------------
Owner
Participant CERTIFICATE CERTIFICATE
for DISTRIBUTIONS DISTRIBUTIONS
Leased
Aircraft*
- --------------- --------------- ------------- --------------- ---------------
Holders of Holders of Holders of Holders of
Pass Through Pass Through Pass Through Pass Through
Certificates Certificates Certificates Certificates
Series 1992-A1 Series 1992-A2 Series 1992-A1 Series 1992-A2
(Due ) (Due ) (Due ) (Due )
--------------- --------------- --------------- ---------------
(*) MULTIPLE AIRCRAFT WILL BE SUBJECT TO SEPARATE LEASES (+) MULTIPLE AIRCRAFT WILL BE SUBJECT TO
AND INDENTURES. SEPARATE INDENTURES.
</TABLE>
<PAGE> 39
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
In connection with each offering of Pass Through Certificates, one or more
separate trusts will be formed, and one or more series of Pass Through
Certificates will be issued, pursuant to the Basic Agreement and one or more
separate Trust Supplements to be entered into between American and the Trustee.
The following summary relates to the Basic Agreement and each of the Trust
Supplements, the Trusts to be formed thereby and the Pass Through Certificates
to be issued by each Trust except to the extent, if any, described in the
applicable Prospectus Supplement. Citations to the relevant sections of the
Basic Agreement appear below in parentheses unless otherwise indicated. The
statements under this caption are a summary and do not purport to be complete.
The summary makes use of terms defined in and is qualified in its entirety by
reference to all of the provisions of the Basic Agreement, the form of which has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part. The Trust Supplement relating to each series of Pass Through
Certificates and the forms of the Leases, if any, Note Purchase Agreements and
Indentures relating thereto will be filed as exhibits to a report by American on
Form 8-K, 10-Q, or 10-K, as applicable, to be filed with the Commission
following the issuance of such series of Pass Through Certificates.
GENERAL
The Pass Through Certificates of each Trust will be issued in fully
registered form only. Each Pass Through Certificate will represent a fractional
undivided interest in the separate Trust created by the Trust Supplement
pursuant to which such Pass Through Certificate is issued. The property of each
Trust will include the Equipment Notes held in such Trust, all monies at any
time paid thereon and all monies due and to become due thereunder and funds from
time to time deposited with the Trustee in accounts relating to such Trust. Each
Pass Through Certificate will correspond to a pro rata share of the outstanding
principal amount of the Equipment Notes and other property held in the related
Trust and will be issued in minimum denominations of $1,000 or any integral
multiple of $1,000. (Sections 2.01, 2.02 and 3.01)
Except as otherwise provided in the applicable Trust Supplement, Pass
Through Certificates will be registered in the name of Cede & Co. ("Cede") as
the nominee of The Depository Trust Company ("DTC") and no person acquiring an
interest in Pass Through Certificates ("Certificate Owner") will be entitled to
receive a certificate representing such person's interest in the related Trust
unless "Definitive Certificates" are issued as described below. Unless
Definitive Certificates are issued, all references to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
DTC Participants (as defined below), and all references herein to distributions,
notices, reports and statements to Certificateholders shall refer, as the case
may be, to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Pass Through Certificates, or to DTC Participants for
distribution to Certificate Owners in accordance with DTC procedures. See
"Description of the Pass Through Certificates -- Book-Entry Registration".
(Section 3.09)
Interest will be passed through to Certificateholders of each Trust at the
rate per annum set forth on the cover page of the applicable Prospectus
Supplement and will be calculated on the basis of a 360-day year of twelve
30-day months.
The Pass Through Certificates of each series represent interests only in
the related Trust and all payments and distributions shall be made only from the
related Trust Property. (Section 3.08) The Pass Through Certificates do not
represent an interest in or obligation of American, the Trustee, any Owner
Trustee with respect to any Leased Aircraft, in its individual capacity, or any
affiliate of any thereof.
The Basic Agreement does not and, except as otherwise described in the
applicable Prospectus Supplement, the Indentures will not, include financial
covenants or "event risk" provisions specifically designed to afford
Certificateholders protection in the event of a highly leveraged transaction
affecting American. However, the Certificateholders of each series will have the
benefit of a lien on the specific Aircraft securing the related Equipment Notes
held in the related Trust, as discussed under the caption "Description of the
Equipment Notes -- Security".
11
<PAGE> 40
If specified in a Prospectus Supplement, American will have the right to
surrender Pass Through Certificates to the Trustee. In such event, the Trustee
will transfer to American an equal principal amount of Equipment Notes relating
to a particular Aircraft designated by American and will cancel the surrendered
Pass Through Certificates.
BOOK-ENTRY REGISTRATION
Except as otherwise described in the applicable Prospectus Supplement, Pass
Through Certificates will be subject to the provisions described under this
caption for book-entry registration with DTC.
DTC. DTC has advised American that it is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to Section
17A of the Exchange Act. DTC was created to hold securities for its participants
("DTC Participants") and to facilitate the clearance and settlement of
securities transactions between DTC Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to the DTC system
also is available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a DTC Participant
either directly or indirectly ("Indirect Participants").
Certificate Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Pass Through Certificates may do so only through DTC Participants
and Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest from the Trustee through DTC
Participants or Indirect Participants, as the case may be. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, since such payments will be forwarded by the Trustee to Cede, as
nominee for DTC. DTC will forward such payments to DTC Participants, which
thereafter will forward them to Indirect Participants or Certificate Owners, as
the case may be, in accordance with customary industry practices. The forwarding
of such distributions to the Certificate Owners will be the responsibility of
such DTC Participants. The only "Certificateholder" will be Cede, as nominee of
DTC. Certificate Owners will not be recognized by the Trustee as
Certificateholders, as such term is used in the Basic Agreement, and Certificate
Owners will be permitted to exercise the rights of Certificateholders only
indirectly through DTC and DTC Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Pass Through Certificates among DTC Participants on whose behalf it acts with
respect to the Pass Through Certificates and to receive and transmit
distributions of principal of, premium, if any, and interest on the Pass Through
Certificates. DTC Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Pass Through Certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificate Owners. Accordingly, although Certificate
Owners will not possess Pass Through Certificates, the Rules provide a mechanism
by which Certificate Owners will receive payments and will be able to transfer
their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
Pass Through Certificates to persons or entities that do not participate in the
DTC system, or to otherwise act with respect to such Pass Through Certificates,
may be limited due to the lack of a physical certificate for such Pass Through
Certificates.
DTC has advised American that it will take any action permitted to be taken
by Certificateholders only at the direction of one or more DTC Participants to
whose accounts with DTC the Pass Through Certificates are credited.
Additionally, DTC has advised American that it will take such actions with
respect to any percentage of the beneficial interest of Certificateholders held
in each Trust only at the direction of and on behalf of DTC Participants whose
holders include undivided interests that satisfy any such percentage. DTC may
take conflicting actions with respect to other undivided interests to the extent
that such actions are taken on behalf of DTC Participants whose holders include
such undivided interests.
12
<PAGE> 41
Neither American nor the Trustee will have any liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interest of the Pass Through Certificates held by Cede, as nominee for DTC, or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Definitive Certificates. With respect to each Trust, the related Pass
Through Certificates will be issued in fully registered, certificated form
("Definitive Certificates") to Certificate Owners or their nominees, rather than
to DTC or its nominee, only if (i) American advises the Trustee in writing that
DTC is no longer willing or able to discharge properly its responsibilities as
depository with respect to such Pass Through Certificates and American is unable
to locate a qualified successor, (ii) American, at its option, elects to
terminate the book-entry system through DTC or (iii) after the occurrence of an
Event of Default Certificate Owners representing an aggregate percentage
interest in such Trust of not less than a majority advise the Trustee through
DTC in writing that the continuation of a book-entry system through DTC (or a
successor thereto) is no longer in the Certificate Owners' best interest.
(Section 3.09)
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify all affected Certificate
Owners through DTC Participants of the availability of Definitive Certificates.
Upon surrender by DTC of the certificates representing the Pass Through
Certificates and receipt of instructions for re-registration, the Trustee will
reissue the Pass Through Certificates as Definitive Certificates to Certificate
Owners. (Section 3.09)
Distributions of principal of, premium, if any, and interest on the Pass
Through Certificates will thereafter be made by the Trustee in accordance with
the procedures set forth in the Basic Agreement and the applicable Trust
Supplements, directly to holders of Definitive Certificates in whose names such
Definitive Certificates were registered at the close of business on the Record
Date. Such distributions will be made by check mailed to the address of each
such holder as it appears on the register maintained with respect to the
applicable Trust. The final payment on any Pass Through Certificate, however,
will be made only upon presentation and surrender of such Pass Through
Certificate at the office or agency specified in the notice of final
distribution to Certificateholders. (Section 4.02)
Definitive Certificates will be freely transferable and exchangeable at the
office of the Trustee upon compliance with the requirements set forth in the
Basic Agreement and the applicable Trust Supplements. No service charge will be
imposed for any registration of transfer or exchange, but payment of a sum
sufficient to cover any tax or other governmental charge shall be required.
(Section 3.09)
Same-Day Settlement and Payment. All payments made by American to the Loan
Trustees under the Leases or Owned Aircraft Notes, as the case may be, will be
in immediately available funds and will be passed through to DTC in immediately
available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Pass
Through Certificates will trade in DTC's Same Day Funds Settlement System until
maturity, and secondary market trading activity in the Pass Through Certificates
will therefore be required by DTC to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Pass Through Certificates.
PAYMENTS AND DISTRIBUTIONS
Payments of principal of, premium, if any, and interest on the Equipment
Notes held in each Trust received by the Trustee will be distributed by the
Trustee to the Certificateholders of such Trust on the date such receipt is
confirmed, except in certain cases when some or all of such Equipment Notes are
in default. See "Description of the Pass Through Certificates -- Events of
Default and Certain Rights Upon an Event of Default".
Payments of principal of, and interest on the unpaid principal amount of,
the Equipment Notes held in each Trust will be scheduled to be received by the
Trustee on the dates specified in the applicable Prospectus Supplement (such
scheduled payments of principal of, and interest on, the Equipment Notes are
herein referred to as "Scheduled Payments", and the dates specified therefor in
the applicable Prospectus Supplement are herein referred to as "Regular
Distribution Dates"). The Trustee of each Trust will distribute
13
<PAGE> 42
on each Regular Distribution Date to the Certificateholders of such Trust all
Scheduled Payments the receipt of which is confirmed by the Trustee on such
Regular Distribution Date. Each such distribution of Scheduled Payments will be
made by the Trustee to the holders of record of the Pass Through Certificates of
such Trust on the fifteenth day next preceding such Regular Distribution Date,
subject to certain exceptions. (Sections 4.01 and 4.02) If a Scheduled Payment
is not received by the Trustee on a Regular Distribution Date but is received
within five days thereafter, it will be distributed on the date received to such
holders of record. If it is received after such five day period, it will be
treated as a Special Payment and distributed as described below.
Each Trust will hold the Equipment Notes which have scheduled repayments of
principal on the dates specified in the applicable Prospectus Supplement. Each
Certificateholder of each Trust will be entitled to receive a pro rata share of
any distribution in respect of Scheduled Payments of principal and interest made
on the Equipment Notes held in such Trust. Scheduled Payments of principal on
the Equipment Notes held in each Trust will be set forth in the applicable
Prospectus Supplement. After an early redemption or default in respect of some
or all of such Equipment Notes, a Certificateholder should refer to the
information with respect to the Pool Balance and the Pool Factor for such Trust
reported periodically by the Trustee. See "Description of the Pass Through
Certificates -- Pool Factors" and "Description of the Pass Through
Certificates -- Statements to Certificateholders".
Payments of principal, premium, if any, and interest received by the
Trustee on account of the early redemption, if any, of the Equipment Notes
relating to one or more Aircraft held in a Trust, and payments received by the
Trustee following a default in respect of the Equipment Notes relating to one or
more Aircraft held in a Trust (including payments received by the Trustee on
account of the sale of such Equipment Notes by the Trustee or payments received
by the Trustee with respect to the Leased Aircraft Notes on account of the
purchase of such Notes by the related Owner Trustee) ("Special Payments") will
be distributed on the dates determined pursuant to the applicable Prospectus
Supplement (a "Special Distribution Date"). The Trustee will mail notice to the
Certificateholders of record of any Trust not less than 20 days prior to the
Special Distribution Date on which any Special Payment is scheduled to be
distributed by the Trustee stating such anticipated Special Distribution Date.
(Section 4.02) Each distribution of a Special Payment, other than a final
distribution, on a Special Distribution Date for any Trust will be made by the
Trustee to the holders of record of the Pass Through Certificates of such Trust
on the fifteenth day next preceding such Special Distribution Date. See
"Description of the Equipment Notes -- Redemption" and "Description of the Pass
Through Certificates -- Events of Default and Certain Rights Upon an Event of
Default".
The Basic Agreement requires that the Trustee establish and maintain, for
each Trust and for the benefit of the Certificateholders of such Trust, one or
more non-interest bearing accounts (the "Certificate Account") for the deposit
of payments representing Scheduled Payments on the Equipment Notes held in such
Trust. The Basic Agreement also requires that the Trustee establish and
maintain, for each Trust and for the benefit of the Certificateholders of such
Trust, one or more non-interest bearing accounts (the "Special Payments
Account") for the deposit of payments representing Special Payments. (Section
4.01)
Pursuant to the terms of the Basic Agreement, the Trustee is required to
deposit any Scheduled Payments relating to the applicable Trust received by it
in the Certificate Account of such Trust and to deposit any Special Payments so
received by it in the Special Payments Account of such Trust. (Section 4.01) All
amounts so deposited will be distributed by the Trustee on a Regular
Distribution Date or a Special Distribution Date as appropriate. (Section 4.02)
At such time, if any, as the Pass Through Certificates of any Trust are
issued in the form of Definitive Certificates and not to Cede, as nominee for
DTC, distributions by the Trustees from the Certificate Account or the Special
Payments Account of such Trust on a Regular Distribution Date or a Special
Distribution Date will be made by check mailed to each Certificateholder of such
Trust of record on the applicable record date at its address appearing on the
register maintained with respect to such Trust. (Section 4.02) The final
distribution for each Trust, however, will be made only upon presentation and
surrender of the Pass Through Certificates for such Trust at the office or
agency of the Trustee specified in the notice given by the Trustee of such final
distribution. The Trustee will mail such notice of the final distribution to the
Certificateholders of such Trust, specifying the date set for such final
distribution and the amount of such distribution. (Section 11.01) See
"Description of the Pass Through Certificates -- Termination of the Trusts".
14
<PAGE> 43
If any Regular Distribution Date or Special Distribution Date is not a
Business Day, distributions scheduled to be made on such Regular Distribution
Date or Special Distribution Date may be made on the next succeeding Business
Day without additional interest.
POOL FACTORS
Unless there has been a surrender of Pass Through Certificates or an early
redemption or purchase, or a default, in respect of one or more issues of the
Equipment Notes held in a Trust, as described in the applicable Prospectus
Supplement or below in "Description of the Pass Through Certificates -- Events
of Default and Certain Rights Upon an Event of Default", the Pool Factor for
such Trusts will decline in proportion to the scheduled repayments of principal
on the Equipment Notes held in such Trust as described in the applicable
Prospectus Supplement. In the event of such surrender, redemption, purchase or
default, the Pool Factor and the Pool Balance of each Trust so affected will be
recomputed after giving effect thereto and notice thereof will be mailed to
Certificateholders of such Trust. Each Trust will have a separate Pool Factor.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Balance" for each Trust indicates, as of any date, the aggregate unpaid
principal amount of the Equipment Notes held in such Trust on such date plus any
amounts in respect of principal on such Equipment Notes held by the Trustee and
not yet distributed. The Pool Balance for each Trust as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes held in such
Trust and distribution thereof to be made on that date.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Factor" for each Trust as of any Regular Distribution Date or Special
Distribution Date is the quotient (rounded to the seventh decimal place)
computed by dividing (i) the Pool Balance, by (ii) the aggregate original
principal amount of the Equipment Notes held in such Trust. The Pool Factor for
each Trust as of any Regular Distribution Date or Special Distribution Date
shall be computed after giving effect to the payment of principal, if any, on
the Equipment Notes held in such Trust and distribution thereof to be made on
that date. The Pool Factor for each Trust will initially be 1.0000000;
thereafter, the Pool Factor for each Trust will decline as described above to
reflect reductions in the Pool Balance of such Trust. The amount of a
Certificateholder's pro rata share of the Pool Balance of a Trust can be
determined by multiplying the original denomination of the Certificateholder's
Pass Through Certificate of such Trust by the Pool Factor for such Trust as of
the applicable Regular Distribution Date or Special Distribution Date. The Pool
Factor and the Pool Balance for each Trust will be mailed to Certificateholders
of record of such Trust on each Regular Distribution Date and Special
Distribution Date.
STATEMENTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date and Special Distribution Date, the
Trustee will include with each distribution of a Scheduled Payment or Special
Payment to Certificateholders of record of the related Trust a statement, giving
effect to such distribution to be made on such Regular Distribution Date or
Special Distribution Date, setting forth the following information (per $1,000
in aggregate principal amount of Pass Through Certificates for such Trust, as to
(i) and (ii) below):
(i) the amount of such distribution allocable to principal and the
amount allocable to premium if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor for such Trust.
So long as the Pass Through Certificates of any Trust are registered in the
name of Cede, as nominee for DTC, on the Record Date prior to each Regular
Distribution Date and Special Distribution Date, the Trustee will request from
DTC a Securities Position Listing setting forth the names of all DTC
Participants reflected on DTC's books as holding interests in the Pass Through
Certificates of such Trust on such Record Date. On each Regular Distribution
Date and Special Distribution Date, the Trustee will mail to each such DTC
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Participant the statement described above, and will make available additional
copies as requested by such DTC Participant, to be available for forwarding to
Certificate Owners.
In addition, after the end of each calendar year, the Trustee will prepare
for each Certificateholder of record of each Trust at any time during the
preceding calendar year a report containing the sum of the amounts determined
pursuant to clauses (i) and (ii) above with respect to the Trust for such
calendar year or, in the event such person was a Certificateholder of record
during a portion of such calendar year for the applicable portion of such
calendar year, and such other items as are readily available to the Trustee and
which a Certificateholder shall reasonably request as necessary for the purpose
of such Certificateholder's preparation of its federal income tax returns.
(Section 4.03) Such report and such other items shall be prepared on the basis
of information supplied to the Trustee by the DTC Participants, and shall be
delivered by the Trustee to such DTC Participants to be available for forwarding
by such DTC Participants to Certificate Owners in the manner described above.
At such time, if any, as the Pass Through Certificates of a Trust are
issued in the form of Definitive Certificates, the Trustee will prepare and
deliver the information described above to each Certificateholder of record of
such Trust as the name and period of record ownership of such Certificateholder
appears on the records of the Registrar of the Pass Through Certificates.
VOTING OF EQUIPMENT NOTES
The Trustee, as holder of the Equipment Notes held in each Trust, has the
right to vote and give consents and waivers in respect of such Equipment Notes
under the related Indentures. The Basic Agreement sets forth the circumstances
in which the Trustee shall direct any action or cast any vote as the holder of
the Equipment Notes held in the applicable Trust at its own discretion and the
circumstances in which the Trustee shall seek instructions from the
Certificateholders of such Trust. Prior to an Event of Default (as defined
below) with respect to any Trust, the principal amount of the Equipment Notes
held in such Trust directing any action or being voted for or against any
proposal shall be in proportion to the principal amount of Pass Through
Certificates held by the Certificateholders of such Trust taking the
corresponding position. (Sections 6.01 and 10.01)
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
The Basic Agreement defines an event of default with respect to a Trust (an
"Event of Default") as the occurrence and continuance of an event of default
under one or more of the related Indentures (an "Indenture Default"). The
Indenture Defaults under an Indenture will be described in the applicable
Prospectus Supplement and in the case of Leased Aircraft Notes, will include
events of default under the related Lease. Since the Equipment Notes issued
under an Indenture may be held in more than one Trust, a continuing Indenture
Default under such Indenture would result in an Event of Default with respect to
each such Trust. There will be, however, no cross-default provisions in the
Indentures and events resulting in an Indenture Default under any particular
Indenture will not necessarily result in an Indenture Default occurring under
any other Indenture. If an Indenture Default occurs in fewer than all of the
Indentures related to a Trust, the Equipment Notes issued pursuant to the
related Indentures with respect to which an Indenture Default has not occurred
will continue to be held in such Trust and payments of principal and interest on
such Equipment Notes will continue to be distributed to the holders of the Pass
Through Certificates of such Trust as originally scheduled.
In the case of Leased Aircraft, the Owner Trustee and the Owner Participant
under each Indenture each will have the right under certain circumstances to
cure an Indenture Default that results from the occurrence of a Lease Event of
Default under the related Lease. If the Owner Trustee or the Owner Participant
chooses to exercise such cure right, the Indenture Default and consequently the
Event of Default with respect to the related Trust or Trusts will be deemed to
be cured.
The Basic Agreement provides that, as long as an Indenture Default under
any Indenture relating to Equipment Notes held in a Trust shall have occurred
and be continuing, the Trustee of such Trust may vote all of the Equipment Notes
issued under such Indenture that are held in such Trust, and upon the direction
of
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the holders of Pass Through Certificates evidencing fractional undivided
interests aggregating not less than a majority in interest of such Trust shall
vote not less than a corresponding majority of such Equipment Notes in favor of
directing the related Loan Trustee to declare the unpaid principal amount of all
Equipment Notes issued under such Indenture and any accrued and unpaid interest
thereon to be due and payable. The Basic Agreement also provides that, if an
Indenture Default under any Indenture relating to Equipment Notes held in a
Trust shall have occurred and be continuing, the Trustee of such Trust may, and
upon the direction of the holders of Pass Through Certificates evidencing
fractional undivided interests aggregating not less than a majority in interest
of such Trust shall, vote all of the Equipment Notes issued under such Indenture
that are held in such Trust in favor of directing the related Loan Trustee as to
the time, method and place of conducting any proceeding for any remedy available
to such Loan Trustee or of exercising any trust or power conferred on such Loan
Trustee under such Indenture. (Sections 6.01 and 6.04)
The ability of the holders of the Pass Through Certificates issued with
respect to any one Trust to cause the Loan Trustee with respect to any Equipment
Notes held in such Trust to accelerate the payment on such Equipment Notes under
the related Indenture or to direct the exercise of remedies by such Loan Trustee
under the related Indenture will depend, in part, upon the proportion between
the aggregate principal amount of the Equipment Notes outstanding under such
Indenture and held in such Trust and the aggregate principal amount of all
Equipment Notes outstanding under such Indenture. Each Trust will hold Equipment
Notes with different terms from those of the Equipment Notes held in the other
Trusts and therefore the Certificateholders of a Trust may have divergent or
conflicting interests from those of the Certificateholders of the other Trusts
holding Equipment Notes relating to the same Aircraft. In addition, so long as
the same institution acts as Trustee of each Trust, in the absence of
instructions from the Certificateholders of any such Trust, the Trustee for such
Trust could for the same reason be faced with a potential conflict of interest
upon an Indenture Default.
As an additional remedy, if an Indenture Default under an Indenture shall
have occurred and be continuing, the Basic Agreement provides that the Trustee
of a Trust holding Equipment Notes issued under such Indenture may, and upon the
direction of the holders of Pass Through Certificates evidencing fractional
undivided interests aggregating not less than a majority in interest of such
Trust shall, sell all or part of such Equipment Notes for cash to any person.
(Sections 6.01 and 6.02) Any proceeds received by the Trustee upon any such sale
shall be deposited in the Special Payments Account for such Trust and shall be
distributed to the Certificateholders of such Trust on a Special Distribution
Date. (Sections 4.01 and 4.02) The market for Equipment Notes in default may be
very limited and there can be no assurance that they could be sold for a
reasonable price. Furthermore, so long as the same institution acts as Trustee
of each Trust, it may be faced with a conflict in deciding from which Trust to
sell Equipment Notes to available buyers. If the Trustee sells any such
Equipment Notes with respect to which an Indenture Default exists for less than
their outstanding principal amount, the Certificateholders of such Trust will
receive a smaller amount of principal distributions than anticipated and will
not have any claim for the shortfall against American, the related Owner Trustee
in the case of any Leased Aircraft or the Trustee. Neither the Trustee nor the
Certificateholders of such Trust, furthermore, could take any action with
respect to any remaining Equipment Notes held in such Trust so long as no
Indenture Defaults existed with respect thereto.
Any amount distributed to the Trustee of any Trust by the Loan Trustee
under any Indenture on account of the Equipment Notes held in such Trust
following an Indenture Default under such Indenture shall be deposited in the
Special Payments Account for such Trust and shall be distributed to the
Certificateholders of such Trust on a Special Distribution Date. In addition,
if, following an Indenture Default under any Indenture relating to Leased
Aircraft, the related Owner Trustee exercises its option, if any, to redeem or
purchase the outstanding Leased Aircraft Notes issued under such Indenture as
described in the related Prospectus Supplement, the price paid by such Owner
Trustee to the Trustee of any Trust for the Leased Aircraft Notes issued under
such Indenture and held in such Trust shall be deposited in the Special Payments
Account for such Trust and shall be distributed to the Certificateholders of
such Trust on a Special Distribution Date. (Sections 4.01 and 4.02)
Any funds representing payments received with respect to any Equipment
Notes held in a Trust in default, or the proceeds from the sale by the Trustee
of any such Equipment Notes, held by the Trustee in the
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Special Payments Account for such Trust shall, to the extent practicable, be
invested and reinvested by the Trustee in Permitted Investments pending the
distribution of such funds on a Special Distribution Date. Permitted Investments
are defined as being obligations of the United States maturing in not more than
60 days or such lesser time as is required for the distribution of any such
funds on a Special Distribution Date. (Sections 1.01 and 4.04)
The Basic Agreement provides that the Trustee of each Trust shall, within
90 days after the occurrence of a default (as defined below) in respect of such
Trust, give to the Certificateholders of such Trust notice, transmitted by mail,
of all uncured or unwaived defaults with respect to such Trust known to it:
provided that, except in the case of default in the payment of principal of,
premium, if any, or interest on any of the Equipment Notes held in such Trust,
the Trustee shall be protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the interests of such
Certificateholders. The term "default", for the purpose of the provision
described in this paragraph only, shall mean the occurrence of any Event of
Default with respect to a Trust as specified above, except that in determining
whether any such Event of Default has occurred any grace period or notice in
connection therewith shall be disregarded. (Section 7.01)
The Basic Agreement contains a provision entitling the Trustee of each
Trust, subject to the duty of the Trustee during a default to act with the
required standard of care, to be indemnified by the holders of the Pass Through
Certificates of such Trust before proceeding to exercise any right or power
under such Agreement at the request of such Certificateholders. (Section 7.02)
In certain cases, the holders of Pass Through Certificates of a Trust
evidencing fractional undivided interests aggregating not less than a majority
in interest of such Trust may on behalf of the holders of all Pass Through
Certificates of such Trust waive any past default or Event of Default with
respect to such Trust and thereby annul any direction given by such holders to
the related Loan Trustee with respect thereto, except (i) a default in payment
of the principal of, premium, if any, or interest on any of the Equipment Notes
held in such Trust and (ii) a default in respect of any covenant or provision of
the Basic Agreement or the related Trust Supplement that cannot be modified or
amended without the consent of each Certificateholder of such Trust affected
thereby. (Section 6.05) Each Indenture will provide that, with certain
exceptions, the holders of a majority in aggregate unpaid principal amount of
the Equipment Notes issued thereunder may on behalf of all such holders waive
any past default or Indenture Default thereunder. In the event of a waiver with
respect to a Trust as described above, the principal amount of the Equipment
Notes issued under the related Indenture held in such Trust shall be counted as
waived in the determination of the majority in aggregate unpaid principal amount
of Equipment Notes required to waive a default or an Indenture Default under
such Indenture. Therefore, if the Certificateholders of a Trust or Trusts waive
a past default or Event of Default such that the principal amount of the
Equipment Notes held either individually in such Trust or in the aggregate in
such Trusts constitutes the required majority in aggregate unpaid principal
amount under the applicable Indenture, such past default or Indenture Default
under such Indenture shall be waived. For a discussion of waivers of Indenture
Defaults under the Indentures, see "Description of the Equipment
Notes -- Indenture Defaults and Remedies".
MODIFICATIONS OF THE AGREEMENTS
The Basic Agreement contains provisions permitting American and the Trustee
of each Trust to enter into a supplemental agreement, without the consent of the
holders of any of the Pass Through Certificates of such Trust, (i) to evidence
the succession of another corporation to American and the assumption by such
corporation of American's obligations under the Basic Agreement and the
applicable Trust Supplement, (ii) to add to the covenants of American for the
benefit of the holders of such Pass Through Certificates, (iii) to correct or
supplement any defective or inconsistent provision of such Basic Agreement, the
applicable Trust Supplement or any supplemental trust agreement, or to make any
other provisions with respect to matters or questions arising thereunder,
provided such action shall not adversely affect the interest of the holders of
such Pass Through Certificates, (iv) to cure any ambiguity or correct any
mistake, (v) to evidence and provide for a successor Trustee for some or all of
the Trusts, or (vi) to make any other amendments or modifications
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which shall only apply to Pass Through Certificates of one or more series to be
issued thereafter. (Section 9.01)
The Basic Agreement also contains provisions permitting American and the
Trustee of each Trust, with the consent of the Certificateholders of such Trust
evidencing fractional undivided interests aggregating not less than a majority
in interest of such Trust, and, in the case of Leased Aircraft, with the consent
of the Owner Trustees (such consent not to be unreasonably withheld), to execute
supplemental agreements adding any provisions to or changing or eliminating any
of the provisions of the Basic Agreement, to the extent relating to such Trust,
and the applicable Trust Supplement, or modifying the rights of such
Certificateholders, except that no such supplemental trust agreement may,
without the consent of the holder of each such Pass Through Certificate so
affected, (a) reduce in any manner the amount of, or delay the timing of, any
receipt by the Trustee of payments on the Equipment Notes held in such Trust, or
distributions in respect of any Pass Through Certificate of such Trust, or make
distributions payable in coin or currency other than that provided for in such
Pass Through Certificates, or impair the right of any Certificateholder of such
Trust to institute suit for the enforcement of any such payment when due, (b)
permit the disposition of any Equipment Note held in such Trust, except as
provided in the Basic Agreement or the applicable Trust Supplement, or (c)
reduce the percentage of the aggregate fractional undivided interests of the
Trust provided for in the Basic Agreement or the applicable Trust Supplement,
the consent of the holders of which is required for any such supplemental trust
agreement or for any waiver provided for in the Basic Agreement or such Trust
Supplement. (Section 9.02)
MODIFICATION AND CONSENTS AND WAIVERS UNDER THE INDENTURE AND RELATED AGREEMENTS
In the event that the Trustee, as the holder of any Equipment Notes held in
a Trust, receives a request for its consent to any amendment, modification or
waiver under the Indenture, Lease, if any, or other document relating to such
Equipment Notes, the Trustee shall mail a notice of such proposed amendment,
modification or waiver to each Certificateholder of such Trust as of the date of
such notice. The Trustee shall request instructions from the Certificateholders
of such Trust as to whether or not to consent to such amendment, modification or
waiver. The Trustee shall vote or consent with respect to such Equipment Notes
in such Trust in the same proportion as the Pass Through Certificates of such
Trust were actually voted by the holders thereof by a certain date.
Notwithstanding the foregoing, if an Event of Default in respect of such Trust
shall have occurred and be continuing, the Trustee may in its own discretion
consent to such amendment, modification or waiver, and may so notify the Loan
Trustee to which such consent relates. (Section 10.01)
TERMINATION OF THE TRUSTS
The obligations of American and the Trustee with respect to a Trust will
terminate upon the distribution to Certificateholders of such Trust of all
amounts required to be distributed to them pursuant to the Basic Agreement and
the applicable Trust Supplement and the disposition of all property held in such
Trust. The Trustee will mail to each Certificateholder of record of such Trust
notice of the termination of such Trust, the amount of the proposed final
payment and the proposed date for the distribution of such final payment for
such Trust. The final distribution to any Certificateholder of such Trust will
be made only upon surrender of such Certificateholder's Pass Through
Certificates at the office or agency of the Trustee specified in such notice of
termination. (Section 11.01)
DELAYED PURCHASE
In the event that, on the delivery date of any Pass Through Certificates,
all of the proceeds from the sale of such Pass Through Certificates are not used
to purchase the Equipment Notes contemplated to be held in the related Trust,
such Equipment Notes may be purchased by the Trustee at any time on or prior to
the date specified in the applicable Prospectus Supplement. In such event, the
Trustee will hold the proceeds from the sale of such Pass Through Certificates
not used to purchase Equipment Notes in an escrow account pending the purchase
of the Equipment Notes not so purchased. Such proceeds will be invested in
Specified Investments at the direction and risk of, and for the account of,
American. Earnings on Specified Investments in the escrow account for each Trust
will be paid to American periodically, and American will be responsible for any
losses. (Section 2.02(b))
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On the Regular Distribution Date occurring on the date specified in the
applicable Prospectus Supplement, American will pay to the Trustee an amount
equal to the interest that would have accrued on any Equipment Notes purchased
after the date of the issuance of such Pass Through Certificates from the date
of the issuance of such Pass Through Certificates to, but excluding, the date of
the purchase of such Equipment Notes by the Trustee. (Section 2.02(b))
SPECIAL DISTRIBUTION UPON UNAVAILABILITY OF AIRCRAFT
To the extent, due to a casualty to, or other event causing the
unavailability of, one or more Aircraft, that the full amount of the proceeds
from the sale of any Pass Through Certificates held in the escrow account
referred to above is not used to purchase Equipment Notes on or prior to the
date specified in the applicable Prospectus Supplement, an amount equal to the
unused proceeds will be distributed by the Trustee to the holders of record of
such Pass Through Certificates on a pro rata basis upon not less than 20 days
prior notice to them as a Special Distribution on the date specified in the
applicable Prospectus Supplement or on an earlier Special Distribution Date
together with interest thereon at a rate equal to the rate applicable to such
Pass Through Certificates, but without premium, and American will pay to the
Trustee on such date an amount equal to such interest. (Section 2.02(b))
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
American will be prohibited from consolidating with or merging into any
other corporation or transferring substantially all of its assets as an entirety
to any other corporation unless, in the case of a merger or consolidation where
American is not the surviving corporation or in the case of the transfer of
substantially all of American's assets, the successor or transferee corporation
shall be a corporation organized and existing under the laws of the United
States or any State or the District of Columbia and shall expressly assume all
the obligations of American contained in the Basic Agreement. (Section 5.02(a))
THE TRUSTEE
State Street Bank and Trust Company of Connecticut, National Association
will be the Trustee for each of the Trusts. The Trustee and any of its
affiliates may hold Pass Through Certificates in their own names. (Section 7.04)
With certain exceptions, the Trustee makes no representations as to the validity
or sufficiency of the Basic Agreement, the Trust Supplements, the Pass Through
Certificates, the Equipment Notes, the Indentures, the Leases, if any, or other
related documents. (Section 7.03) Unless otherwise specified in a Prospectus
Supplement State Street Bank and Trust Company of Connecticut, National
Association will also be the Loan Trustee of the Indentures under which the
Equipment Notes are issued. It also serves as indenture trustee and as pass
through trustee in numerous other aircraft financing transactions involving
American.
The Trustee may resign with respect to any or all of the Trusts at any
time, in which event American will be obligated to appoint a successor trustee.
If the Trustee ceases to be eligible to continue as Trustee with respect to a
Trust or becomes incapable of acting as Trustee or becomes insolvent, American
may remove such Trustee, or any holder of Pass Through Certificates of such
Trust for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of such
Trustee and the appointment of a successor trustee. Any resignation or removal
of the Trustee with respect to a Trust and appointment of the successor trustee
for such Trust does not become effective until acceptance of the appointment by
the successor trustee. (Section 7.08) Pursuant to such resignation and successor
trustee provisions, it is possible that a different trustee could be appointed
to act as the successor trustee with respect to each Trust. All references in
this Prospectus to the Trustee are to the trustee acting in such capacity under
each of the Trusts and should be read to take into account the possibility that
each of the Trusts could have a different successor trustee in the event of such
a resignation or removal.
The Basic Agreement provides that American will pay the Trustee's fees and
expenses. The Basic Agreement further provides that the Trustee will be entitled
to indemnification by American for, and will be held harmless against, any loss,
liability or expenses incurred by the Trustee (other than through its own wilful
misconduct, bad faith or negligence or by reason of a breach of any of its
representations or warranties set
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forth in the Basic Agreement or the applicable Trust Supplement or related
documents), except to the extent that such loss, liability or expense is for or
with respect to taxes, in which case the Trustee may be entitled to be
reimbursed by the applicable Trust. (Section 7.06)
DESCRIPTION OF THE EQUIPMENT NOTES
The statements under this caption are summaries and do not purport to be
complete. Except as otherwise indicated below or as described in the applicable
Prospectus Supplement, the following summaries will apply to the Equipment
Notes, the Indenture, the Lease, if any, and the Note Purchase Agreement
relating to each Aircraft. Additional provisions with respect to the Equipment
Notes, the Indentures, the Leases, if any, and the Note Purchase Agreements
relating to any particular offering of Pass Through Certificates will be
described in the applicable Prospectus Supplement.
GENERAL
Each Equipment Note issued under the same Indenture will relate to a single
Aircraft. The Equipment Notes with respect to each Aircraft will be issued under
a separate Indenture between the related Loan Trustee and American (in the case
of Owned Aircraft Notes) or the related Loan Trustee and the Owner Trustee (in
the case of Leased Aircraft Notes) of a trust for the benefit of the Owner
Participant who is the beneficial owner of such Leased Aircraft.
American's obligations under each Indenture relating to an Owned Aircraft
and under the related Owned Aircraft Notes will be direct obligations of
American. The Leased Aircraft Notes will be nonrecourse obligations of the Owner
Trustee. They will not be direct obligations of, or guaranteed by, American.
However, American is obligated to make or cause to be made rental and other
payments to the related Owner Trustee under the Lease of the related Leased
Aircraft in amounts that will be at least sufficient to pay when due all
payments required to be made on the Leased Aircraft Notes issued with respect to
such Leased Aircraft. American's rental obligations under each Lease will be
general obligations of American.
If specified in a Prospectus Supplement, American will have (a) the right
to arrange a sale leaseback of one or more Owned Aircraft referred to in such
Prospectus Supplement and the assumption of the related Owned Aircraft Notes by
an Owner Trustee or (b) the right to substitute other aircraft or U.S.
government securities or a combination thereof in place of the Owned Aircraft
securing the related Owned Aircraft Notes. The terms and conditions of any such
sale leaseback or substitution will be described in the applicable Prospectus
Supplement.
PRINCIPAL AND INTEREST PAYMENTS
Interest paid on the Equipment Notes held in each Trust will be passed
through to the Certificateholders of such Trust on the dates and at the rate per
annum set forth in the applicable Prospectus Supplement until the final
distribution date for such Trust. Principal paid on the Equipment Notes held in
each Trust will be passed through to the Certificateholders of such Trust in
scheduled amounts on the dates set forth in the applicable Prospectus Supplement
until the final distribution date for such Trust.
If any date scheduled for any payment of principal of, premium, if any, or
interest on the Equipment Notes is not a Business Day, such payment may be made
on the next succeeding Business Day without any additional interest.
REDEMPTION
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the related Equipment Notes will
be redeemed or purchased, the premium (if any) related to certain redemptions or
purchases and other terms applying to redemptions or purchases of such Equipment
Notes.
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SECURITY
The Owned Aircraft Notes will be secured by a mortgage from American to the
Loan Trustee of the related Owned Aircraft and an assignment by American to such
Loan Trustee of certain of American's rights under the purchase agreement
between American and the related manufacturer. The Leased Aircraft Notes will be
secured by (i) an assignment by the related Owner Trustee to the related Loan
Trustee of such Owner Trustee's rights (except for certain limited rights
described below) under the Lease with respect to the related Leased Aircraft,
including the right to receive payments of rent thereunder, (ii) a mortgage to
such Loan Trustee of such Aircraft, subject to the rights of American under such
Lease, and (iii) an assignment to such Loan Trustee of certain of such Owner
Trustee's rights under the purchase agreement between American and the related
manufacturer. Unless and until an Indenture Default with respect to a Leased
Aircraft has occurred and is continuing, the Loan Trustee may not exercise the
rights of the Owner Trustee under the related Lease, except the right to receive
payments of rent due thereunder. The assignment by the Owner Trustee to the Loan
Trustee of its rights under the related Lease will exclude rights of such Owner
Trustee and the related Owner Participant relating to indemnification by
American for certain matters, insurance proceeds payable to such Owner Trustee
in its individual capacity and to such Owner Participant under liability
insurance maintained by American under such Lease or by such Owner Trustee or
such Owner Participant, insurance proceeds payable to such Owner Trustee in its
individual capacity or to such Owner Participant under certain casualty
insurance maintained by such Owner Trustee or such Owner Participant under such
Lease and certain reimbursement payments made by American to such Owner Trustee.
The Equipment Notes will not be cross-collateralized and consequently the
Equipment Notes issued in respect of any one Aircraft will not be secured by any
of the other Aircraft (or any of the other security related thereto). American
will be required, except under certain circumstances, to keep each Aircraft
registered under the Aviation Act and to record, or maintain the recordation of,
the Indenture and the Lease, if any, among other documents, with respect to each
Aircraft under the Aviation Act. Such recordation of the Indenture, the Lease,
if any, and other documents with respect to each Aircraft will give the related
Loan Trustee a first priority perfected security interest in the related
Aircraft whenever it is located in the United States or any of its territories
and possessions and, with certain limited exceptions, in those jurisdictions
that have ratified or adhered to the Convention on the International Recognition
of Rights in Aircraft (the "Convention"). Although American has no current
intention to do so, American will have the right, subject to certain conditions,
at its own expense to register each Aircraft in countries other than the United
States. Prior to any such change in the jurisdiction of registry, the related
Loan Trustee shall have received an opinion of American's counsel that, among
other things, confirms the perfected status of the lien of the related Indenture
subject, in certain cases, to certain filings, recordations or other actions and
in the case of Leased Aircraft confirms the validity and enforceability of the
related Lease in such jurisdiction. Each Aircraft may also be operated by
American or under lease or sublease or interchange arrangements in countries
that are not parties to the Convention. The extent to which the related Loan
Trustee's security interest would be recognized in an Aircraft located in a
country that is not a party to the Convention, and the extent to which such
security interest would be recognized in a jurisdiction adhering to the
Convention if the Aircraft is registered in a jurisdiction not a party to the
Convention, is uncertain. Moreover, in the case of an Indenture Default, the
ability of the related Loan Trustee to realize upon its security interest in an
Aircraft could be adversely affected as a legal or practical matter if such
Aircraft were registered or located outside the United States.
Funds, if any, held from time to time by the Loan Trustee with respect to
any Aircraft, including funds held as the result of an Event of Loss to such
Aircraft or termination of the Lease, if any, relating thereto, will be invested
and reinvested by such Loan Trustee, at the direction of American (except in the
case of certain Events of Default), in investments described in the related
Indenture. American will pay the amount of any loss resulting from any such
investment directed by it.
LIMITATION OF LIABILITY
The Owned Aircraft Notes will be direct obligations of American. The Leased
Aircraft Notes will not be direct obligations of, or guaranteed by, American or
the Owner Trustees. None of the Owner Trustees, the Owner Participants or the
Loan Trustees, or any affiliates thereof, shall be personally liable to any
holder of a
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Leased Aircraft Note or, in the case of the Owner Trustees and the Owner
Participants, to the Loan Trustees for any amounts payable under the Leased
Aircraft Notes or, except as provided in each Indenture, for any liability under
such Indenture. All payments of principal of, premium, if any, and interest on
the Equipment Notes issued with respect to any Aircraft (other than payments
made in connection with an optional redemption or purchase of Leased Aircraft
Notes by the related Owner Trustee or the related Owner Participant) will be
made only from the assets subject to the lien of the Indenture with respect to
such Aircraft or the income and proceeds received by the related Loan Trustee
therefrom (including, in the case of a Leased Aircraft, rent payable by American
under the Lease with respect to such Leased Aircraft).
Except as otherwise provided in the Indentures, each Owner Trustee in its
individual capacity shall not be answerable or accountable under the Indentures
or under the Leased Aircraft Notes under any circumstances except for its own
wilful misconduct or gross negligence. None of the Owner Participants will have
any duty or responsibility under any of the Indentures or the Leased Aircraft
Notes to the Loan Trustees or to any holder of any Leased Aircraft Note.
INDENTURE DEFAULTS AND REMEDIES
The applicable Prospectus Supplement will describe the Indenture Defaults
under the related Indentures, the remedies that the Loan Trustee may exercise
with respect to the related Aircraft, either at its own initiative or upon
instruction from holders of the related Equipment Notes, and other provisions
relating to the occurrence of an Indenture Default and the exercise of remedies.
There will be no cross-default provisions in the Indentures and events resulting
in an Indenture Default under any particular Indenture will not necessarily
result in an Indenture Default under any other Indenture.
LEASED AIRCRAFT LEASES
Each Leased Aircraft will be leased separately by the related Owner Trustee
to American pursuant to a "net lease" for a term commencing on the delivery date
thereof to such Owner Trustee and expiring on a date not earlier than the latest
maturity date of the Leased Aircraft Notes issued with respect to such Leased
Aircraft unless previously terminated as permitted by the related Lease. The
basic rent payments by American under each Lease will be payable on the dates
specified in the applicable Prospectus Supplement, and will be assigned by the
Owner Trustee under the related Indenture to provide the funds necessary to make
payments of principal and interest due from such Owner Trustee on the Leased
Aircraft Notes issued under such Indenture. Although in certain cases the basic
rent payments under the Leases may be adjusted, under no circumstances will rent
payments that American will be unconditionally obligated to make or cause to be
made under any Lease be less than the scheduled payments of principal and
interest on the Leased Aircraft Notes issued under the Indenture relating to
such Lease. The balance of any basic rent payments under each Lease, after
payment of the scheduled principal and interest on the Leased Aircraft Notes
issued under the Indenture relating to such Lease, will be paid over to the
related Owner Trustee. American's obligation to pay rent and to cause other
payments to be made under each Lease will be a general obligation of American.
The applicable Prospectus Supplement will describe the Lease Events of Default
under the related Leases, the remedies that the Owner Trustee may exercise with
respect to the related Leased Aircraft, and other provisions relating to the
occurrence of a Lease Event of Default and the exercise of remedies.
COVENANTS RELATING TO AIRCRAFT
Pursuant to the applicable Indenture or Lease, American will be obligated,
at its expense, to cause each Aircraft to be duly registered, to pay all costs
of operating each Aircraft and to maintain, service and repair each Aircraft so
as to keep each Aircraft in as good operating condition as when delivered to
American, ordinary wear and tear excepted, and in such condition as may be
necessary to enable the airworthiness certification thereof to be maintained in
good standing at all times (other than during temporary periods of storage or
grounding) under the Aviation Act or, in certain cases, if an Aircraft is
registered under laws of certain other jurisdictions, the laws of the applicable
jurisdiction. American will be obligated, at its expense, to replace all parts
(other than severable parts added at the option of American and obsolete or
unsuitable parts that American is permitted to remove to the extent described
below) that may from time to time be
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incorporated or installed in or attached to any Aircraft and that may become
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
rendered permanently unfit for use. American will have the right to make
alterations and modifications in and additions to (including removal of parts
from) each Aircraft as American deems desirable, provided that no such
alteration, modification, addition or removal shall materially diminish the
value or utility of such Aircraft or impair the airworthiness thereof.
Notwithstanding the foregoing, the value (but not the utility, condition or
airworthiness) of any Aircraft may be reduced by the value of parts that
American deems obsolete or no longer suitable or appropriate; provided that the
aggregate value of all such parts removed from any Aircraft and not replaced
shall not exceed an amount specified in the applicable Lease or Indenture.
THE NOTE PURCHASE AGREEMENTS
American will be required to indemnify each Loan Trustee and, in the case
of Leased Aircraft, each Owner Participant and Owner Trustee for certain losses,
claims and other matters. In the case of Leased Aircraft, American will be
required under certain circumstances to indemnify each Owner Participant against
the loss of depreciation deductions and certain other benefits allowable for
certain income tax purposes with respect to the related Leased Aircraft. Each
Owner Participant will be required to indemnify the related Loan Trustee and the
holders of the Leased Aircraft Notes issued with respect to the Leased Aircraft
in which such Owner Participant has an interest for certain losses that may be
suffered as a result of the failure of such Owner Participant to discharge
certain liens or claims on or against the assets subject to the lien of the
related Indenture. Subject to certain restrictions, each Owner Participant may
transfer its interest in the related Leased Aircraft.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion by American of the anticipated
material federal income tax consequences of the purchase, ownership and
disposition of Pass Through Certificates and should be read in conjunction with
any additional discussion of federal income tax consequences included in the
applicable Prospectus Supplement. The discussion is based on laws, regulations,
rulings and decisions in effect as of the date hereof, all of which are subject
to change or different interpretation. The discussion does not purport to
address federal income tax consequences applicable to particular categories of
investors, some of which (for example, insurance companies and foreign
investors) may be subject to special rules. The statements of law and legal
conclusion set forth herein are based upon the opinion of Debevoise & Plimpton,
counsel to American. Investors should consult their own tax advisors in
determining the federal, state, local and any other tax consequences to them of
the purchase, ownership and disposition of Pass Through Certificates, including
the advisability of making any election discussed below. The Trusts are not
indemnified for any federal income taxes that may be imposed upon them, and the
imposition of any such taxes on a Trust could result in a reduction in the
amounts available for distribution to the Certificate Owners of such Trust.
GENERAL
Based upon an interpretation of analogous authorities under currently
applicable law, the Trusts should not be classified as associations taxable as
corporations, but, rather, each should be classified as a grantor trust under
subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as
amended (the "Code"), and each Certificate Owner should be treated as the owner
of a pro rata undivided interest in each of the Equipment Notes and any other
property held in the related Trust.
Each Certificate Owner should be required to report on its federal income
tax return its pro rata share of the entire income from each of the Equipment
Notes and any other property held in the related Trust, in accordance with such
Certificate Owner's method of accounting. A Certificate Owner using the cash
method of accounting must take into account its pro rata share of income as and
when received by the Trustee. A Certificate Owner using an accrual method of
accounting must take into account its pro rata share of income as it accrues or
is received by the Trustee, whichever is earlier.
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A purchaser of a Pass Through Certificate should be treated as purchasing
an interest in each Equipment Note and any other property in the related Trust
at a price determined by allocating the purchase price paid for the Pass Through
Certificate among such Equipment Notes and other property in proportion to their
fair market values at the time of purchase of the Pass Through Certificate.
Unless otherwise indicated in a Prospectus Supplement, American anticipates that
when all the Equipment Notes have been acquired by the related Trust the
purchase price paid for a Pass Through Certificate of such Trust by an original
purchaser of such Pass Through Certificate should be allocated among the
Equipment Notes held in such Trust in proportion to their respective principal
amounts.
SALES OF PASS THROUGH CERTIFICATES
A Certificate Owner that sells a Pass Through Certificate should recognize
gain or loss (in the aggregate) equal to the difference between its adjusted tax
basis in the Pass Through Certificate and the amount realized on the sale
(except to the extent attributable to accrued interest, which should be taxable
as interest income). Subject to the market discount provisions of the Code
(described below), any such gain or loss will be capital gain or loss if the
Pass Through Certificate was held as a capital asset and will be long-term
capital gain or loss if the Pass Through Certificate was held for more than one
year. Net capital gains of individuals are, under certain circumstances, taxed
at lower rates than items of ordinary income.
MARKET DISCOUNT
A Certificate Owner should be considered to have acquired an interest in an
Equipment Note at a "market discount" to the extent the remaining principal
amount of the Equipment Note allocable to such Certificate Owner's Pass Through
Certificate exceeds such Certificate Owner's tax basis allocable to such
Equipment Note, unless the excess does not exceed a prescribed de minimis
amount. In the event such excess exceeds the de minimis amount, the Certificate
Owner should be subject to the market discount rules of sections 1276 to 1278 of
the Code with regard to its interest in the Equipment Note.
In the case of a sale or certain other dispositions of indebtedness subject
to the market discount rules, section 1276 of the Code requires that gain, if
any, from such sale or disposition be treated as ordinary income to the extent
such gain represents market discount that has accrued during the period in which
such indebtedness was held.
In the case of a partial principal payment on indebtedness subject to the
market discount rules, section 1276 of the Code requires that such payment be
included in gross income as ordinary income to the extent such payment does not
exceed the market discount that has accrued during the period such indebtedness
was held. The amount of any accrued market discount later required to be
included in gross income as ordinary income upon a sale or disposition or
subsequent partial principal payment will be reduced by the amount of accrued
market discount previously so included.
Generally, market discount accrues under a straight line method, or, at the
election of the taxpayer, a constant interest method. However, in the case of
Equipment Notes that constitute installment obligations, the manner in which
market discount is to be accrued has been left to Treasury regulations not yet
issued. Until such Treasury regulations are issued, the explanatory Conference
Committee Report to the Tax Reform Act of 1986 (the "Conference Report")
indicates that holders of installment obligations with market discount may elect
to accrue market discount either on the basis of a constant interest rate or as
follows: the amount of market discount that is deemed to accrue is the amount of
market discount that bears the same ratio to the total amount of remaining
market discount that the amount of stated interest paid in the accrual period
bears to the total amount of stated interest remaining to be paid on the
installment obligation as of the beginning of such period.
Under section 1277 of the Code, if in any taxable year interest paid or
accrued on indebtedness incurred or continued to purchase or carry indebtedness
subject to the market discount rules exceeds the interest currently includible
in income with respect to such indebtedness, deduction of the excess interest
must be deferred to the extent of the market discount allocable to the taxable
year. The deferred portion of any interest
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expense will generally be deductible when such market discount is included in
income upon the sale or other disposition (including repayment) of the
indebtedness.
Section 1278 of the Code allows a taxpayer to make an election to include
market discount in his gross income currently. If such election is made, the
rules of sections 1276 and 1277 (described above) will not apply to the
taxpayer.
PREMIUM
A Certificate Owner should generally be considered to have acquired an
interest in an Equipment Note at a premium to the extent such Certificate
Owner's tax basis allocable to such Equipment Note exceeds the remaining
principal amount of the Equipment Note allocable to such Certificate Owner's
Pass Through Certificate. In that event, a Certificate Owner that holds such
Pass Through Certificate as a capital asset may elect to amortize such premium
as an offset to interest income under section 171 of the Code with corresponding
reductions in such Certificate Owner's tax basis in such Equipment Note.
Generally, such amortization is on a constant yield basis. However, in the case
of installment obligations (such as certain or all of the Equipment Notes), the
Conference Report indicates a Congressional intent that amortization will be in
accordance with the same rules that will apply to the accrual of market discount
on installment obligations. See "Federal Income Tax Consequences -- Market
Discount".
If Equipment Notes may be called at a premium prior to maturity,
amortizable premium may be determined by reference to an early call date. Due to
the complexities of the amortizable premium rules, particularly where there is
more than one possible call date and the amount of any premium is uncertain,
Certificate Owners are urged to consult their own tax advisors as to the amount
of any such amortizable premium.
ORIGINAL ISSUE DISCOUNT
It is anticipated that, subject to the proposed aggregation rules discussed
below, the Equipment Notes will not be issued with original issue discount.
Proposed Treasury regulations (the "Proposed Regulations") have been issued
which contain certain aggregation rules which could be interpreted to require
that where one investor purchases Pass Through Certificates issued by more than
one Trust certain of that investor's interests in the Equipment Notes in those
Trusts must be treated together as a single debt instrument, which, for purposes
of calculating and amortizing any original issue discount, has a single issue
price, maturity date, stated redemption price at maturity, and yield to
maturity. If the Proposed Regulations were applicable in this way, such
Equipment Notes could be treated with respect to such investor as having been
issued with original issue discount. Generally, a holder of a debt instrument
issued with original issue discount that is not de minimis must include such
original issue discount in income for federal income tax purposes as it accrues,
in advance of the receipt of the cash attributable to such income, under a
method that takes into account the compounding of interest. Certificate Owners
are urged to consult their own tax advisors regarding the application of the
proposed aggregation rules.
BACKUP WITHHOLDING
Payments made on Pass Through Certificates, and proceeds from the sale of
Pass Through Certificates to or through certain brokers, may be subject to a
"backup" withholding tax of 20% unless a Certificate Owner complies with certain
reporting procedures or is an exempt recipient under section 6049(b)(4) of the
Code. Any such withheld amounts will be allowed as a credit against the
Certificate Owner's federal income tax.
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CERTAIN CONNECTICUT TAXES
The Trustee is a national banking association with its corporate trust
office in Connecticut. Day, Berry & Howard, counsel to the Trustee, has advised
American that, in its opinion, under currently applicable law, assuming that
each Trust will not be taxable as a corporation for federal income tax purposes,
but, rather, will be classified as a grantor trust under subpart E, Part I of
Subchapter J of the Code, (i) the Trusts will not be subject to any tax
(including, without limitation, net or gross income, tangible or intangible
property, net worth, capital, franchise or doing business tax), fee or other
governmental charge under the laws of the State of Connecticut or any political
subdivision thereof and (ii) Certificate Owners that are not residents of or
otherwise subject to tax in Connecticut will not be subject to any tax
(including, without limitation, net or gross income, tangible or intangible
property, net worth, capital, franchise or doing business tax), fee or other
governmental charge under the laws of the State of Connecticut or any political
subdivision thereof as a result of purchasing, owning (including receiving
payments with respect to) or selling a Pass Through Certificate. Neither the
Trusts nor the Certificate Owners will be indemnified for any state or local
taxes imposed on them, and the imposition of any such taxes on a Trust could
result in a reduction in the amounts available for distribution to the
Certificate Owners of such Trust. In general, should a Certificate Owner or a
Trust be subject to any state or local tax which would not be imposed if the
Trustee were located in a different jurisdiction in the United States, the
Trustee will resign and a new Trustee in such other jurisdiction will be
appointed.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable Prospectus Supplement, Pass
Through Certificates may be purchased by an employee benefit plan (a "Plan")
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). A fiduciary of a Plan must determine that the purchase of a Pass
Through Certificate is consistent with its fiduciary duties under ERISA and does
not result in a non-exempt prohibited transaction as defined in Section 406 of
ERISA or Section 4975 of the Code. Employee benefit plans which are governmental
plans (as defined in Section 3(32) of ERISA) and certain church plans (as
defined in Section 3(33) of ERISA) are not subject to the fiduciary
responsibility provisions of ERISA.
PLAN OF DISTRIBUTION
The Pass Through Certificates being offered hereby may be sold in any one
or more of the following ways from time to time: (i) through agents; (ii) to or
through underwriters; (iii) through dealers; and (iv) directly to other
purchasers.
The distribution of the Pass Through Certificates may be effected from time
to time in one or more transactions at a fixed price or prices, which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
Offers to purchase Pass Through Certificates may be solicited by agents
designated by American from time to time. Any such agent involved in the offer
or sale of the Pass Through Certificates in respect of which this Prospectus is
delivered will be named, and any commissions payable by American to such agent
will be set forth, in the applicable Prospectus Supplement. Unless otherwise
indicated in such Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment. Any such agent may be deemed to
be an underwriter, as that term is defined in the Securities Act, of the Pass
Through Certificates so offered and sold.
If Pass Through Certificates are sold by means of an underwritten offering,
American will execute an underwriting agreement with an underwriter or
underwriters at the time an agreement for such sale is reached, and the names of
the specific managing underwriter or underwriters, as well as any other
underwriters, and the terms of the transaction, including commissions, discounts
and any other compensation of the underwriters and dealers, if any, will be set
forth in the Prospectus Supplement which will be used by the underwriters to
make resales of the Pass Through Certificates in respect of which this
Prospectus is delivered to the public. If underwriters are utilized in the sale
of the Pass Through Certificates in respect of which this Prospectus is
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delivered, the Pass Through Certificates will be acquired by the underwriters
for their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at fixed public offering prices
or at varying prices determined by the underwriters at the time of sale. Pass
Through Certificates may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by the managing
underwriters. If any underwriter or underwriters are utilized in the sale of the
Pass Through Certificates, unless otherwise indicated in the Prospectus
Supplement, the underwriting agreement will provide that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of Pass Through Certificates will be
obligated to purchase all such Pass Through Certificates if any are purchased.
American does not intend to apply for listing of the Pass Through Certificates
on a national securities exchange. If the Pass Through Certificates are sold by
means of an underwritten offering, the underwriters may make a market in the
Pass Through Certificates as permitted by applicable laws and regulations. No
underwriter would be obligated, however, to make a market in the Pass Through
Certificates and any such market-making could be discontinued at any time at the
sole discretion of such underwriter. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Pass Through Certificates.
If a dealer is utilized in the sale of the Pass Through Certificates in
respect of which this Prospectus is delivered, such Pass Through Certificates
will be sold by the Trustee to the dealer as principal. The dealer may then
resell such Pass Through Certificates to the public at varying prices to be
determined by such dealer at the time of resale. Any such dealer may be deemed
to be an underwriter, as such term is defined in the Securities Act, of the Pass
Through Certificates so offered and sold. The name of the dealer and the terms
of the transaction will be set forth in the Prospectus Supplement relating
thereto.
Offers to purchase Pass Through Certificates may be solicited directly and
the sale thereof may be made directly to institutional investors or others, who
may be deemed to be underwriters within the meaning of the Securities Act with
respect to any resale thereof. The terms of any such sales will be described in
the Prospectus Supplement relating thereto.
Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by American against certain liabilities,
including liabilities under the Securities Act.
Agents, underwriters and dealers may be customers of, engage in
transactions with, or perform services for, AMR, American and AMR's other
subsidiaries in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, agents,
underwriters or dealers may be authorized to solicit offers by certain
institutions to purchase Pass Through Certificates at the public offering prices
set forth in the applicable Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on a specified date
or dates. A commission indicated in the applicable Prospectus Supplement will be
paid to agents, underwriters and dealers soliciting purchases of Pass Through
Certificates pursuant to Contracts accepted by American.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Pass Through Certificates offered hereby will be passed upon for
American by Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022 and
for any agents, underwriters or dealers by Shearman & Sterling, 599 Lexington
Avenue, New York, New York 10022.
EXPERTS
The consolidated financial statements and schedules of American Airlines,
Inc. appearing in American's Annual Report (Form 10-K) for the year ended
December 31, 1991 have been audited by Ernst & Young, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements and schedules are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
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APPENDIX I
GLOSSARY OF CERTAIN TERMS
The following is a glossary of certain terms used in this Prospectus. The
definitions of terms used in this glossary that are also used in the Basic
Agreement, Trust Supplements, Indentures, Leases or Note Purchase Agreements are
qualified in their entirety by reference to the definitions of such terms
contained therein. Additional terms or changes in the terms defined below may
appear in the applicable Prospectus Supplement.
"Aircraft" means Leased Aircraft and Owned Aircraft.
"Aviation Act" means the Federal Aviation Act of 1958, as amended, and the
applicable regulations thereunder.
"Basic Agreement" means the Pass Through Trust Agreement, Amended and
Restated as of February 1, 1992, between American and the Trustee.
"Business Day", when used with respect to the Pass Through Certificates of
any series, means any day other than a Saturday, a Sunday, or a day on which
banking institutions in New York, Dallas, Texas or a city and state in which the
Trustee or any related Loan Trustee maintains its Corporate Trust office or
disburses funds are authorized or obligated by law, regulation or executive
order to be closed.
"Certificate Account" means the one or more non-interest-bearing accounts
established and maintained by the Trustee pursuant to the Basic Agreement on
behalf of the Certificateholders of each Trust for the deposit of payments
representing Scheduled Payments on the Equipment Notes held in such Trust.
"Certificateholder" means the Person in whose name a Pass Through
Certificate is registered.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Engine" means each of the engines relating to an Aircraft.
"Equipment Notes" means the Owned Aircraft Notes and the Leased Aircraft
Notes.
"Event of Default" means, with respect to the Equipment Notes held in any
Trust, the occurrence and continuance of an Indenture Default under one or more
of the related Indentures.
"Indenture" means each of the separate trust indenture and security
agreements entered into from time to time between (a) American and a Loan
Trustee with respect to the issuance of Owned Aircraft Notes or (b) an Owner
Trustee and a Loan Trustee with respect to the issuance of Leased Aircraft Notes
and any indenture having substantially the same terms and conditions as any such
trust indenture and security agreement and which relates to a substitute
aircraft, as each such agreement may hereafter be amended or supplemented in
accordance with its respective terms.
"Indenture Default" means each of the events designated as an event of
default in an Indenture, as described in the applicable Prospectus Supplement.
"Lease" means each of the Lease Agreements entered into with respect to a
Leased Aircraft between an Owner Trustee and American, as each such Lease
Agreement may from time to time be amended or supplemented.
"Lease Event of Default" means each of the events designated as an event of
default in a Lease, as described in the applicable Prospectus Supplement.
"Leased Aircraft" means each aircraft, including its Engines, leased by an
Owner Trustee to American pursuant to a Lease.
APPENDIX I
<PAGE> 58
"Leased Aircraft Notes" means the equipment notes issued on a nonrecourse
basis by the Owner Trustees pursuant to the Indentures relating to Leased
Aircraft.
"Loan Trustee", when used with respect to any Equipment Note or the
Indenture applicable thereto, means the bank or trust company designated as loan
trustee under such Indenture, and any successor to such Loan Trustee as such
trustee.
"Note Purchase Agreement" when used with respect to any Equipment Note,
means the note purchase, participation or similar agreement or agreements
referred to in the related Indenture, providing for, among other things, the
purchase of Equipment Notes by the Trustee.
"Owned Aircraft" means each aircraft, including its Engines, that is
security for the obligations of American under the Owned Aircraft Notes.
"Owned Aircraft Notes" means the equipment notes issued with recourse by
American pursuant to the Indentures relating to Owned Aircraft.
"Owner Participant" means each of the owner participants for whose benefit
an Owner Trustee owns a Leased Aircraft leased to American pursuant to a Lease
and its permitted successors and assigns.
"Owner Trustee", when used with respect to any Leased Aircraft Note or the
Indenture applicable thereto or the Lease related thereto, means the "Owner
Trustee" referred to in the applicable Indenture, not in its individual capacity
but solely as trustee; and each other Person which may from time to time be
acting as Owner Trustee in accordance with the provisions of the applicable
Indenture, Lease or Purchase Agreement Assignment (as defined in such Lease).
"Pass Through Certificate" means each of the Pass Through Certificates to
be issued by each of the Trusts pursuant to the Basic Agreement.
"Pool Balance" means, for each Trust, as of any date, the aggregate unpaid
principal amount of the Equipment Notes held in such Trust on such date plus any
amounts in respect of principal on such Equipment Notes held by the Trustee and
not yet distributed. The Pool Balance for each Trust as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes held in such
Trust and distribution thereof to be made on that date.
"Pool Factor" means, for each Trust, as of any date, the quotient (rounded
to the seventh decimal place) computed by dividing (i) the Pool Balance by (ii)
the aggregate original principal amount of such Equipment Notes held in such
Trust. The Pool Factor for each Trust as of any Regular Distribution Date or
Special Distribution Date shall be computed after giving effect to the payment
of principal, if any, on the Equipment Notes held in such Trust and distribution
thereof to be made on that date.
"Regular Distribution Date" means the dates specified in the applicable
Prospectus Supplement.
"Scheduled Payment" means each payment of interest or principal on an
Equipment Note scheduled to be received by the Trustee on the Regular
Distribution Dates specified in the applicable Prospectus Supplement.
"Special Distribution Date" means each date on which a Special Payment will
be distributed, as specified in the applicable Prospectus Supplement.
"Special Payment" means (i) any payment of principal, premium, if any, and
interest resulting from the redemption or purchase of an Equipment Note held in
a Trust, (ii) any payment of principal and interest (including any interest
accruing upon default) on or any other amount in respect of an Equipment Note
held in a Trust upon an Indenture Default in respect of, or upon acceleration
relating to, such Equipment Note, (iii) any payment of principal, premium, if
any, and interest on an Equipment Note which is not in fact paid within five
days of a Regular Distribution Date, (iv) any proceeds from the sale of any
Equipment Note upon an Event of Default, or (v) the amounts available for
distribution from a Trust as a result of the failure to
APPENDIX I
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apply such amounts to the purchase of Equipment Notes on or prior to the date
specified in the applicable Prospectus Supplement.
"Special Payments Account" means the one or more non-interest-bearing
accounts established and maintained by the Trustee pursuant to the Basic
Agreement on behalf of the Certificateholders of each Trust for the deposit of
payments representing Special Payments.
"Specified Investments" when used with respect to any Trust, means, unless
otherwise specified in the related Prospectus Supplement, (i) direct obligations
of the United States of America and agencies thereof for which the full faith
and credit of the United States of America is pledged, (ii) obligations fully
guaranteed by the United States of America, (iii) certificates of deposit issued
by, or bankers' acceptances of, or time deposits (including overnight deposits)
with, any bank, trust company or national banking association incorporated or
doing business under the laws of the United States of America or one of the
states thereof having combined capital and surplus and retained earnings of at
least $500,000,000 (including any Loan Trustee or Owner Trustee if such
conditions are met) and (iv) repurchase agreements with any financial
institution described in clause (iii) above having a combined capital and
surplus of at least $750,000,000 fully collateralized by obligations of the type
described in clauses (i) through (iii) above; provided that if all of the above
investments are unavailable, the entire amounts to be invested may be used to
purchase Federal Funds from an entity described in clause (iii) above; and
provided further that no investment shall be eligible as a "Specified
Investment" unless the final maturity or date of return of such investment is on
or before the date applicable to the particular Trust, as specified in the
related Prospectus Supplement.
"Trust" means each of the American Airlines Pass Through Trusts to be
formed pursuant to the Basic Agreement and a Trust Supplement.
"Trust Supplement" means each of the Pass Through Trust Supplements between
American and the Trustee, pursuant to each of which one Trust is formed and one
series of Pass Through Certificates is issued to evidence fractional undivided
ownership interests in the Trust Property held in such Trust.
"Trust Property" means the Equipment Notes held as the property of a Trust
and all funds from time to time deposited in the related Certificate Account,
the related Special Payments Account and any other account maintained as a part
of such Trust, including any proceeds from the sale by the Trustee of any such
Equipment Note in connection with an Event of Default.
"Trustee" means State Street Bank and Trust Company of Connecticut,
National Association, a national banking association, in its capacity as Trustee
under each Trust, and each other person which may from time to time act as
successor Trustee under such Trust.
APPENDIX I
3
