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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended: March 31, 1994
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________________________________
to ____________________________________
Commission file number: 1-2691
AMERICAN AIRLINES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 13-1502798
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4333 AMON CARTER BLVD.
FORT WORTH, TEXAS 76155
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (817) 963-1234
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, $1 Par Value - 1,000 shares outstanding as
of April 27, 1994
The registrant meets the conditions set forth in, and is filing
this form with the reduced disclosure format prescribed by,
General Instructions H(1)(a) and H(1)(b) of Form 10-Q.
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AMERICAN AIRLINES, INC.
INDEX
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Page
Number
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Part I: FINANCIAL INFORMATION
Consolidated Statement of Operations for the three months
ended March 31, 1994 and 1993 1
Condensed Consolidated Balance Sheet
at March 31, 1994 and December 31, 1993 2
Condensed Consolidated Statement of Cash Flows for
the three months ended March 31, 1994 and 1993 3
Notes to Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
Part II: OTHER INFORMATION
Item 2. Legal Proceedings 7
Item 6. Exhibits and Reports on Form 8-K 8
Signature 9
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PART I
Item 1. Consolidated Financial Statements
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AMERICAN AIRLINES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31,
(Unaudited) (in millions) 1994 1993
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Revenues
Passenger $3,028 $3,127
Cargo 154 150
Other 326 286
Total operating revenues 3,508 3,563
Expenses
Wages, salaries and benefits 1,241 1,205
Aircraft fuel 382 461
Commissions to agents 311 322
Depreciation and amortization 289 267
Other rentals and landing fees 193 198
Food service 161 167
Aircraft rentals 157 159
Maintenance materials and repairs 114 145
Other operating expenses 556 554
Total operating expenses 3,404 3,478
Operating Income 104 85
Other Income (Expense)
Interest income 1 1
Interest expense (97) (107)
Interest capitalized 6 17
Miscellaneous - net (9) (1)
(99) (90)
Earnings (Loss) Before Income Taxes 5 (5)
Provision for income taxes 8 1
Net Loss $ (3) $ (6)
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See accompanying notes.
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AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, December 31,
(Unaudited) (in millions) 1994 1993
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Current Assets
Cash $ 68 $ 55
Short-term investments for affiliates 660 514
Receivables, net 928 731
Receivables from affiliates 409 223
Inventories, net 616 606
Other current assets 433 399
Total current assets 3,114 2,528
Equipment and Property (Note 2)
Flight equipment, net 9,360 9,192
Purchase deposits for flight equipment 186 313
9,546 9,505
Other equipment and property, net 1,936 1,964
11,482 11,469
Equipment and Property Under
Capital Leases (Note 2)
Flight equipment, net 1,235 1,188
Other equipment and property, net 171 172
1,406 1,360
Route acquisition costs, net 1,054 1,061
Other assets, net 1,343 1,331
$ 18,399 $ 17,749
Current Liabilities
Accounts payable $ 977 $ 857
Payables to affiliates 641 479
Accrued liabilities 1,304 1,281
Air traffic liability 1,588 1,461
Short-term borrowings 400 -
Current maturities of long-term debt 64 70
Current obligations under capital leases 101 92
Total current liabilities 5,075 4,240
Long-term debt 1,514 1,453
Long-term debt due to Parent 3,710 4,045
Obligations under capital leases 1,830 1,792
Deferred income taxes 346 338
Other liabilities, deferred gains, deferred
credits and postretirement benefits 2,759 2,713
Stockholder's Equity
Common stock - -
Additional paid-in capital 1,699 1,699
Retained earnings 1,466 1,469
3,165 3,168
$ 18,399 $ 17,749
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See accompanying notes.
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AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
(Unaudited) (in millions) 1994 1993
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Net Cash Provided by Operating Activities $ 199 $ 178
Cash Flow from Investing Activities:
Capital expenditures (283) (673)
Net increase in short-term investments (146) (351)
Funds transferred from affiliates for
investment, net 146 351
Other, net 3 3
Net cash used for investing activities (280) (670)
Cash Flow from Financing Activities:
Proceeds from issuance of long-term debt 72 53
Short-term borrowings with maturities of 90
days or less, net of maturities 200 (204)
Other short-term borrowings 200 29
Payments on other short-term borrowings - (59)
Payments on long-term debt and capital
lease obligations (43) (48)
Funds transferred (to) from affiliates, net (335) 751
Net cash provided by financing activities 94 522
Net increase (decrease) in cash 13 30
Cash at beginning of period 55 45
Cash at end of period $ 68 $ 75
Cash Payments (Refunds) For:
Interest (net of amounts capitalized $ 67 $ 70
Interest on intercompany note to Parent 32 33
Income taxes 1 (96)
Financing Activities Not Affecting Cash:
Capital lease obligations incurred $ 72 $ -
See accompanying notes.
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Notes to Financial Statements
1. American Airlines, Inc. (American) is a wholly-owned subsidiary
of AMR Corporation (AMR). In the opinion of management, these
financial statements contain all adjustments, consisting of
normal recurring accruals, necessary to present fairly the
financial position, results of operations and cash flows for the
periods indicated. These financial statements and related notes
should be read in conjunction with the financial statements and
notes contained in American's Annual Report on Form 10-K for the
year ended December 31, 1993.
2. Accumulated depreciation of equipment and property at March 31,
1994 and December 31, 1993 was $4.7 billion. Accumulated
amortization of equipment and property under capital leases at
March 31, 1994 and December 31, 1993 was $733 million and $707
million, respectively.
3. American has renewed a $1.0 billion credit facility which expired
in early April 1994 in the amount of $750 million. The renewal
extends the term of the facility to 1997 and may require
collateralization under certain circumstances. No borrowings were
outstanding under this facility at March 31, 1994.
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Item 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
RESULTS OF OPERATIONS
American's results 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.
For the Three Months Ended March 31, 1994 and 1993
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 (RPMs) 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. Year over year
for the first quarter of 1994, domestic traffic decreased 2.6
percent from 16.5 billion RPMs to 16.1 billion RPMs while domestic
capacity decreased 7.0 percent to 26.9 billion miles. International
traffic grew a modest 1.1 percent, from 6.2 billion RPMs to 6.3
billion RPMs. The growth was in Latin America, where traffic
increased 11.2 percent on a 2.9 percent capacity decrease while in
Europe traffic decreased 9.1 percent and capacity decreased 14.0
percent.
Cargo revenues increased 2.7 percent to $154 million, driven by a
8.0 percent increase in cargo ton miles partially offset by a 5.1
percent decrease in revenue yield per ton mile. The increase in
cargo ton miles is attributable to volume increases in Europe, Latin
America and the Pacific combined with a strong domestic cargo
system.
Other revenues increased 14.0 percent to $326 million primarily
driven by increased booking fee revenues of Sabre Travel Information
Network resulting from a plethora of fare initiatives by various
carriers.
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RESULTS OF OPERATIONS (CONTINUED)
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 29 DC-10 aircraft and 30 727
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. Wages,
salaries and benefits rose $36 million, 3.0 percent, due primarily
to salary adjustments for existing employees offset by a reduction
of approximately 3,400 average equivalent employees or 3.7 percent.
Aircraft fuel expense decreased $79 million, 17.1 percent, due to a
9.6 percent decrease in the average price per gallon, combined with
an 8.5 percent decrease in gallons consumed. Commissions to agents
decreased 3.4 percent to $311 million, due principally to decreases
in passenger revenues. Additions to the fleet and the acquisitions
of other capital equipment raised depreciation and amortization
costs by $22 million, or 8.2 percent. Other rentals and landing
fees decreased $5 million, or 2.5 percent, due to decreased volumes
of landing fees resulting from capacity reductions. Maintenance
materials and repairs decreased $31 million, 21.4 percent due
principally to the retirement of older aircraft and increased
operational efficiencies.
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PART II
Item 2. Legal Proceedings
In December 1992, the U.S. Department of Justice filed an antitrust
lawsuit in the U.S. District Court for the District of Columbia
under Section 1 of the Sherman Act against several airlines,
including the Company, alleging price fixing based upon the
industry's exchange of fare information through the Airline Tariff
Publishing Company. In March 1994, the Company and the remaining
defendants in the case agreed to settle the lawsuit without
admitting liability by entering into a stipulated final judgment
that prohibits or restricts certain pricing practices including the
announcement of fare increases before their effective date. The
proposed final judgment is subject to approval by the Court
following a public notice and comment period prescribed by statute.
The Company does not anticipate a material financial impact from the
settlement or compliance with the stipulated judgment. Private
class action claims with similar allegations were settled by the
Company and other airlines which became final in March 1993. Prior
to the private class action settlement becoming final, the Company
and several other airlines voluntarily altered certain pricing
practices at issue in the lawsuits to avoid exposure to additional
claims.
American has been sued in two class action cases that have been
consolidated in the Circuit Court of Cook County, Illinois, in
connection with certain changes made to American's AAdvantage
frequent flyer program in May, 1988. (Wolens, et al v. American
Airlines, Inc., No. 88 CH 7554, and Tucker v. American Airlines,
Inc., No. 89 CH 199.) In both cases, the plaintiffs seek to
represent all persons who joined the AAdvantage program before May
1988. The complaints allege that, on that date, American
implemented changes that limited the number of seats available to
participants traveling on certain awards and established holiday
blackout dates during which no AAdvantage seats would be available
for certain awards. The plaintiffs allege that these changes
breached American's contracts with AAdvantage members and were in
violation of the Illinois Consumer Fraud and Deceptive Business
Practices Act (Consumer Fraud Act). Plaintiffs seek money damages
of an unspecified sum, punitive damages, costs, attorneys fees and
an injunction preventing the Company from making any future changes
that would reduce the value of AAdvantage benefits. American moved
to dismiss both complaints, asserting that the claims are preempted
by the Federal Aviation Act and barred by the Commerce Clause of the
U.S. Constitution.
The trial court denied American's preemption motions, but
certified its decision for interlocutory appeal. In December 1990,
the Illinois Appellate Court held that plaintiffs' claims for an
injunction are preempted by the Federal Aviation Act, but that
plaintiffs' claims for money damages could proceed. On March 12,
1992, the Illinois Supreme Court affirmed the decision of the
Appellate Court. American sought a writ of certiorari from the U.S.
Supreme Court; and on October 5, 1992, that Court vacated the
decision of the Illinois Supreme Court and remanded the cases for
reconsideration in light of the U.S. Supreme Court's decision in
Morales v. TWA, et al, which interpreted the preemption provisions
of the Federal Aviation Act very broadly. On December 16, 1993, the
Illinois Supreme Court rendered its decision on remand, holding that
plaintiffs' claims seeking an injunction were preempted, but that
identical claims for compensatory and punitive damages were not
preempted. On February 8, 1994, American filed petition for a writ
of certiorari in the U.S. Supreme Court. The Illinois Supreme Court
granted American's motion to stay the state court proceeding pending
disposition of American's petition in the U.S. Supreme Court. On
April 4, 1994 the U.S. Supreme Court granted American's writ of
certiorari.
AMR and American are vigorously defending all of the above
claims.
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PART II
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
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Part I - Exhibit 12:Computation of ratio of
earnings to fixed charges for
the three months ended March
31, 1994 and 1993.
(b) Reports on Form 8-K:
None
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AMERICAN AIRLINES, INC.
BY: /s/ Michael J. Durham
Michael J. Durham
Senior Vice President and
Chief Financial Officer
DATE: April 28, 1994
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PART I -
EXHIBIT 12
AMERICAN AIRLINES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
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Three Months Ended March 31,
1994 1993
(in millions of dollars)
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Earnings:
Earnings (loss) before income taxes $ 5 $ (5)
Add: Total fixed charges (per below) 244 255
Less: Interest capitalized 6 17
Total earnings $ 243 $ 233
Fixed charges:
Interest $ 97 $ 107
Portion of rental expense representative
of the interest factor 146 147
Amortization of debt expene 1 1
Total fixed charges $ 244 $ 255
Ratio of earnings to fixed charges - -
Coverage deficiency $ 1 $ 22
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