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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For fiscal year ended December 31, 1995.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
Commission file number 1-2691.
AMERICAN AIRLINES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-1502798
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
4333 Amon Carter Blvd.
Fort Worth, Texas 76155
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (817) 963-1234
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
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5-1/4% Subordinated Debentures due 1998 New York Stock Exchange
6-1/4% Subordinated Debentures due 1996 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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(Title of Class)
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 .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
American Airlines, Inc. is a wholly-owned subsidiary of AMR Corporation, and
there is no market for the registrant's common stock. As of March 18, 1996,
1,000 shares of the registrant's common stock were outstanding.
The registrant meets the conditions set forth in, and is filing this form with
the reduced disclosure format prescribed by, General Instructions J(1)(a) and
J(1)(b) of Form 10-K.
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PART I
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ITEM 1. BUSINESS
American Airlines, Inc. (American or the Company), the principal subsidiary of
AMR Corporation (AMR), was founded in 1934. For financial reporting purposes,
American's operations fall within two major lines of business: the Airline Group
and the Information Services Group.
AIRLINE GROUP
The Airline Group consists primarily of American's Passenger and Cargo
divisions.
AMERICAN'S PASSENGER DIVISION is one of the largest scheduled passenger airlines
in the world. At the end of 1995, American provided scheduled jet service to
more than 160 destinations, primarily throughout North America, the Caribbean,
Latin America, Europe and the Pacific.
AMERICAN'S CARGO DIVISION is one of the largest scheduled air freight carriers
in the world. The 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.
INFORMATION SERVICES GROUP
The Information Services Group consists primarily of four divisions of American:
SABRE Travel Information Network (STIN), SABRE Computer Services (SCS), SABRE
Development Services (SDS) and SABRE Interactive.
STIN markets SABRE -- one of the largest privately owned, real-time computer
systems in the world -- which provides travel distribution and information
services to nearly 30,000 travel agencies in 74 countries on six continents.
SCS manages and maintains AMR's technology infrastructure. This includes the
planning, installation and operation of AMR's data centers, as well as
technology and architectural planning for AMR units and for external customers.
SCS also provides voice and data communication services to AMR, but is currently
in negotiations with a third party to outsource this function.
SDS provides decision support systems, application software packages, systems
development and consulting services to other AMR units and to external companies
in the transportation, travel and other industries worldwide.
SABRE INTERACTIVE is a distribution strategy division formed by The SABRE Group
in 1995 to develop opportunities for consumer-direct travel distribution via
personal computer, CD-ROM, interactive television, cable television and other
media.
These business units and certain other units of AMR form The SABRE Group, one of
AMR's three major lines of business.
Additional information regarding business segments is included in Note 12 to the
consolidated financial statements.
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ROUTES AND COMPETITION
AIR TRANSPORTATION Most major air carriers have developed hub-and-spoke systems
and schedule patterns in an effort to maximize the revenue potential of their
service. American operates four hubs: Dallas/Fort Worth, Chicago O'Hare, Miami
and San Juan, Puerto Rico. In 1995, American implemented schedule reductions
which ended the airline's hub operations at Raleigh/Durham and Nashville. Delta
Air Lines and United Airlines have hub operations at American's Dallas/Fort
Worth and Chicago O'Hare hubs, respectively.
The American Eagle carriers owned by AMR Eagle, an AMR subsidiary,
increase the number of markets AMR's Airline Group serves by providing
connections to American at its hubs and certain other major airports. The
American Eagle carriers -- Simmons Airlines, Inc., Flagship Airlines, Inc.,
Wings West Airlines, Inc. and Executive Airlines, Inc. -- serve smaller markets
through Dallas/Fort Worth, Chicago, Miami, Nashville, San Juan, Los Angeles and
New York John F. Kennedy International Airport. American's competitors also own
or have marketing agreements with regional carriers which provide service at
their major hubs.
In addition to its extensive domestic service, American provides service
to and from cities in various other countries, across the Atlantic and Pacific,
and between the U.S. and the Caribbean, and Central and South America.
American's operating revenues from foreign operations were approximately $4.7
billion in 1995, $4.3 billion in 1994 and $3.9 billion in 1993. Additional
information about the Company's foreign operations is included in Note 11 to the
consolidated financial statements.
Service over almost all of American's routes is highly competitive.
Currently, any carrier deemed fit by the U.S. Department of Transportation (DOT)
is free to operate scheduled passenger service between any two points within the
U.S. and its possessions. On most of its non-stop routes, American competes with
at least one, and usually more than one, major domestic airline including:
America West Airlines, Continental Airlines, Delta Air Lines, Northwest
Airlines, Southwest Airlines, Trans World Airlines, United Airlines, and USAir.
Competition is even greater between cities that require a connection, for
example, Portland, Oregon to Tampa, Florida, where eight airlines compete via
the respective hubs of each carrier. American also competes with national,
regional, all-cargo, and charter carriers and, particularly on shorter segments,
ground transportation.
On all of its routes, pricing decisions are affected by competition from
other airlines, some of which have cost structures significantly lower than
American's and can therefore operate profitably at lower fare levels.
Approximately 40 percent of American's bookings are impacted by competition from
lower-cost carriers. American and its principal competitors use inventory
management systems that permit them to vary the number of discount seats offered
on each flight in an effort to maximize revenues, yet still be price competitive
with lower-cost carriers.
Competition in many international markets is subject to extensive
government regulation. In these markets, American competes with foreign-investor
owned carriers, state-owned airlines and U.S. carriers that have been granted
authority to provide scheduled passenger and cargo service between the U.S. and
various overseas locations. American's operating authority in these markets is
subject to aviation agreements between the U.S. and the respective countries,
and in some cases, fares and schedules require the approval of the DOT and the
relevant foreign governments. Because international air transportation is
governed by bilateral or other agreements between the U.S. and the foreign
country or countries involved, changes in U.S. or foreign government aviation
policy could result in the alteration or termination of such agreements,
diminish the value of such route authorities, or otherwise affect American's
international operations. Bilateral agreements between the U.S. and various
foreign countries served by American are subject to frequent renegotiation.
The major domestic carriers have some advantage over foreign competitors
in their ability to generate traffic from their extensive domestic route
systems. In many cases, however, U.S. carriers are limited in their rights to
carry passengers beyond designated gateway cities in foreign countries. Some of
American's foreign competitors are owned and subsidized by foreign governments.
To improve their access to each others' markets, various U.S. and foreign
carriers -- including American --have made substantial equity investments in, or
established marketing relationships with, other carriers. American has
well-developed code sharing programs with Canadian Airlines International,
Qantas Airways, Singapore Airlines, South African Airways, Gulf Air, and British
Midland. In the coming years, the Company expects to develop these programs
further and to evaluate new alliances with other international carriers.
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American believes that it has several advantages relative to its
competition. Its fleet is young, efficient and quiet. It has a comprehensive
domestic and international route structure, anchored by efficient hubs, which
permit it to take full advantage of whatever traffic growth occurs. The Company
believes American's AAdvantage frequent flyer program, which is the largest
program in the industry, and its superior service also give it a competitive
advantage.
COMPUTER RESERVATION SYSTEMS The complexity of the various schedules and fares
offered by air carriers has fostered the development of electronic distribution
systems. Travel agents and other subscribers access travel information and book
airline, hotel and car rental reservations and issue airline tickets using these
systems. American developed the SABRE computer reservation system (CRS), which
is one of the largest CRSs in the world. Competition among the CRS vendors is
strong. Services similar to those offered through SABRE are offered by several
air carriers and other companies in the United States and abroad.
The SABRE CRS has several advantages relative to its competition. SABRE
ranks first in market share among travel agents in the U.S. The SABRE CRS is
furthering its expansion into international markets and continues to be in the
forefront of technological innovation in the CRS industry.
REGULATION
GENERAL The Airline Deregulation Act of 1978 (Act) and various other statutes
amending the Act eliminated most domestic economic regulation of passenger and
freight transportation. However, the DOT and the Federal Aviation Administration
(FAA) still exercise certain regulatory authority over air carriers under the
Federal Aviation Act of 1958, as amended. The DOT maintains jurisdiction over
international route authorities and certain consumer protection matters, such as
advertising, denied boarding compensation, baggage liability, and computer
reservations systems. The DOT issued certain rules governing the CRS industry
which became effective on December 7, 1992, and expire on December 31, 1997.
The FAA regulates flying operations generally, including establishing
personnel, aircraft and security standards. In addition, the FAA has implemented
a number of requirements that the Airline Group is incorporating into its
maintenance program. These matters relate to, among other things, inspection and
maintenance of aging aircraft, corrosion control, collision avoidance and
windshear detection. Based on its current implementation schedule, the Airline
Group expects to be in compliance with the applicable requirements within the
required time periods.
The U.S. Department of Justice has jurisdiction over airline antitrust
matters. The U.S. Postal Service has jurisdiction over certain aspects of the
transportation of mail and related services. Labor relations in the air
transportation industry are regulated under the Railway Labor Act, which vests
in the National Mediation Board certain regulatory powers with respect to
disputes between airlines and labor unions arising under collective bargaining
agreements.
FARES Airlines are permitted to establish their own domestic fares without
governmental regulation, and the industry is characterized by substantial price
competition. The DOT maintains authority over international fares, rates and
charges. International fares and rates are also subject to the jurisdiction of
the governments of the foreign countries which American serves. While air
carriers are required to file and adhere to international fare and rate tariffs,
many international markets are characterized by substantial commissions,
overrides, and discounts to travel agents, brokers and wholesalers.
Fare discounting by competitors has historically had a negative effect on
American's financial results because American is generally required to match
competitors' fares to maintain passenger traffic. During recent years, a number
of new low-cost airlines have entered the domestic market and several major
airlines have begun to implement efforts to lower their cost structures. Further
fare reductions, domestic and international, may occur in the future. If fare
reductions are not offset by increases in passenger traffic or changes in the
mix of traffic that improves yields, American's operating results will be
negatively impacted.
AIRPORT ACCESS In 1968, the FAA issued a rule designating New York John F.
Kennedy, New York LaGuardia, Washington National, Chicago O'Hare and Newark
airports as high density traffic airports. Newark
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was subsequently removed from the high-density airport classification. The rule
adopted hourly take-off and landing slot allocations for each of these airports.
Currently, the FAA permits the purchasing, selling, leasing and trading of these
slots by airlines and others, subject to certain restrictions. Certain foreign
airports, including London Heathrow, a major European destination for American,
also have slot allocations.
American currently has sufficient slot authorizations to operate its
existing flights and has generally been able to obtain slots to expand its
operations and change its schedules. There is no assurance, however, that
American will be able to obtain slots for these purposes in the future, because,
among other factors, slot allocations are subject to changes in government
policies.
ENVIRONMENTAL MATTERS The Company is subject to various laws and government
regulations concerning environmental matters and employee safety and health in
the U.S. and other countries. U.S. federal laws that have a particular impact on
the Company include the Airport Noise and Capacity Act of 1990 (ANCA), the Clean
Air Act, the Resource Conservation and Recovery Act, the Clean Water Act, the
Safe Drinking Water Act, and the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA or the Superfund Act). The Company is
also subject to the oversight of the Occupational Safety and Health
Administration (OSHA) concerning employee safety and health matters. The U.S.
Environmental Protection Agency (EPA), OSHA, and other federal agencies have
been authorized to promulgate regulations that have an impact on the Company's
operations. In addition to these federal activities, various states have been
delegated certain authorities under the aforementioned federal statutes. Many
state and local governments have adopted environmental and employee safety and
health laws and regulations, some of which are similar to federal requirements.
As a part of its continuing safety, health and environmental program, the
Company has maintained compliance with such requirements without any material
adverse effect on its business.
For purposes of noise standards, jet aircraft are rated by categories or
"stages." The ANCA requires the phase-out by December 31, 1999, of Stage II
aircraft operations, subject to certain exceptions. Under final regulations
issued by the FAA in 1991, air carriers are required to reduce, by modification
or retirement, the number of Stage II aircraft in their fleets 25 percent by
December 31, 1994; 50 percent by December 31, 1996; 75 percent by December 31,
1998, and 100 percent by December 31, 1999. Alternatively, a carrier may satisfy
the regulations by operating a fleet that is at least 55 percent, 65 percent, 75
percent, and 100 percent Stage III by the dates set forth in the preceding
sentence, respectively. At December 31, 1995, approximately 89 percent of
American's active fleet was Stage III, the quietest and most fuel efficient
rating category.
The ANCA recognizes the rights of airport operators with noise problems to
implement local noise abatement programs so long as they do not interfere
unreasonably with interstate or foreign commerce or the national air
transportation system. Authorities in several cities have promulgated aircraft
noise reduction programs, including the imposition of night-time curfews. The
ANCA generally requires FAA approval of local noise restrictions on Stage III
aircraft first effective after October 1990, and establishes a regulatory notice
and review process for local restrictions on Stage II aircraft first proposed
after October 1990. While American has had sufficient scheduling flexibility to
accommodate local noise restrictions imposed to date, American's operations
could be adversely affected if locally-imposed regulations become more
restrictive or widespread.
American has been identified by the EPA as a potentially responsible party
(PRP) with respect to the following Superfund Sites: Operating Industries, Inc.,
California; Cannons, New Hampshire; Byron Barrel and Drum, New York; Palmer PSC,
Massachusetts; Frontier Chemical, New York and Duffy Brothers, Massachusetts.
American has settled the Cannons, Byron Barrel and Drum, Palmer PSC and Frontier
Chemical matters, and all that remains to complete these matters are
administrative tasks. American has signed a partial consent decree with respect
to Operating Industries, Inc. With respect to the Operating Industries, Inc.,
Palmer PSC, Frontier Chemical and Duffy Brothers sites, American is one of
several PRPs named at each site. American's alleged waste disposal volumes are
minor compared to the other PRPs.
American, along with most other tenants at Boston Logan International
Airport, has been notified under the Massachusetts State Superfund statute of a
claim for contribution by the Massachusetts Port Authority (Massport). Massport
has claimed that American is responsible for past and future remediation costs
at the airport. American is vigorously defending against Massport's claim.
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American, along with most other tenants at the San Francisco International
Airport, has been ordered by the California Regional Water Quality Control Board
to engage in various studies of potential environmental contamination at the
airport and to undertake remedial measures, if necessary.
The Miami International Airport Authority is currently remediating various
environmental conditions at the Miami International Airport (Airport) and
funding the remediation costs through landing fee revenues. Some of the costs of
the remediation effort may be borne by carriers currently operating at the
Airport, including American, through increased landing fees since certain of the
potentially responsible parties are no longer in business. The future increase
in landing fees may be material but cannot be reasonably estimated due to
various factors, including the unknown extent of the remedial actions that may
be required, the proportion of the cost that will ultimately be recovered from
the responsible parties, and uncertainties regarding the environmental agencies
that will ultimately supervise the remedial activities and the nature of that
supervision.
American does not expect these matters, individually or collectively, to
have a significant impact on its financial position or liquidity.
LABOR
The airline business is labor intensive. Wages, salaries and benefits
represented 35 percent of American's consolidated operating expenses for the
year ended December 31, 1995. To improve its competitive position, American has
undertaken various steps to reduce its unit labor costs, including workforce
reductions.
The majority of American's employees are represented by labor unions and
covered by collective bargaining agreements. American's relations with such
labor organizations are governed by the Railway Labor Act. Under this act, the
collective bargaining agreements among American and these organizations do not
expire but instead become amendable as of a stated date. If either party wishes
to modify the terms of any such agreement, it must notify the other party before
the contract becomes amendable. After receipt of such notice, the parties must
meet for direct negotiations, and if no agreement is reached, either party may
request the National Mediation Board (NMB) to appoint a federal mediator. If no
agreement is reached in mediation, the NMB may determine, at any time, that an
impasse exists, and if an impasse is declared, the NMB proffers binding
arbitration to the parties. Either party may decline to submit to arbitration.
If arbitration is rejected, a 30-day "cooling-off" period commences, following
which the labor organization may strike and the airline may resort to
"self-help," including the imposition of its proposed amendments and the hiring
of replacement workers.
In October 1995, a panel of arbitrators issued a binding arbitration award
that resolved the remaining open issues in the labor contract between American
and the Association of Professional Flight Attendants (APFA). The arbitration
award included a one-time early retirement program, for which American recorded
a charge in the fourth quarter. American's collective bargaining agreement with
the APFA becomes amendable on November 1, 1998.
In 1995, American reached agreements with the members of the Transport
Workers Union (TWU) on their labor contracts. The new contracts include a
one-time early retirement program, for which American recorded a charge in the
fourth quarter. American's collective bargaining agreement with the TWU becomes
amendable on March 1, 2001.
American's collective bargaining agreement with the Allied Pilots
Association (APA) became amendable on August 31, 1994. In January 1996, the APA
filed a petition with the NMB to appoint a federal mediator. A mediator has been
appointed, and initial meetings have been held between the APA and the NMB
mediator and between American and the NMB mediator. Joint meetings began in
March 1996.
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FUEL
American's operations are significantly affected by the availability and price
of jet fuel. American's fuel costs and consumption for the years 1991 through
1995 were:
<TABLE>
<CAPTION>
Percent of
Gallons Average Price American's
Consumed Total Cost Per Gallon Operating
Year (in millions) (in millions) (in cents) Expenses
- - ---------- ------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
1991 2,527 $1,780 70.5 14.7
1992 2,862 1,862 65.1 13.6
1993 2,939 1,818 61.8 12.8
1994 2,741 1,556 56.7 11.2
1995 2,749 1,565 56.9 10.7
</TABLE>
Based upon American's 1995 fuel consumption, a one-cent increase in the
average annual price-per-gallon of jet fuel would increase American's monthly
fuel costs by approximately $2.3 million, not considering the offsetting effect
of American's fuel cost hedging program.
The impact of fuel price changes on the Company's competitors is dependent
upon various factors, including their hedging strategies. However, lower fuel
prices may be offset by increased price competition and lower revenues for all
air carriers. Conversely, there can be no assurance that American will be able
to pass fuel cost increases on to its customers by increasing fares in the
future.
Most of American's fuel is purchased pursuant to contracts which, by their
terms, may be terminated upon short notice. While American does not anticipate a
significant reduction in fuel availability, dependency on foreign imports of
crude oil and the possibility of changes in government policy on jet fuel
production, transportation and marketing make it impossible to predict the
future availability of jet fuel. If there were major reductions in the
availability of jet fuel, American's business would be adversely affected.
FREQUENT FLYER PROGRAM
American established the AAdvantage frequent flyer program (AAdvantage) to
develop passenger loyalty by offering awards to travelers for their continued
patronage. AAdvantage members earn mileage credits for flights on American,
American Eagle and certain other participating airlines, or by utilizing
services of other program participants, including hotels, car rental companies
and bank credit card issuers. American sells mileage credits to the other
companies participating in the program. American reserves the right to change
the AAdvantage program rules, regulations, travel awards and special offers at
any time without notice. American may initiate changes impacting, for example,
participant affiliations, rules for earning mileage credit, mileage levels and
awards, blackout dates and limited seating for travel awards, and the features
of special offers. American reserves the right to end the AAdvantage program
with six months notice.
Mileage credits can be redeemed for free, discounted or upgraded travel on
American, American Eagle or participating airlines, or for other travel industry
awards. Once a member accrues sufficient mileage for an award, the member may
request an award certificate from American. Award certificates may be redeemed
up to one year after issuance. Most travel awards are subject to blackout dates
and capacity controlled seating. All miles earned after July 1989 must be
redeemed within three years or they expire.
American accounts for its frequent flyer obligation on an accrual basis
using the incremental cost method. American's frequent flyer liability is
accrued each time a member accumulates sufficient mileage in his or her account
to claim the lowest level of free travel award (25,000 miles) and such award is
expected to be used for free travel. American includes fuel, food, and
reservations/ticketing costs, but not a contribution to overhead or profit, in
the calculation of incremental cost. The cost for fuel is estimated based on
total fuel consumption tracked by various categories of markets, with an amount
allocated to each passenger. Food costs are tracked by market category, with an
amount allocated to each passenger. Reservation/ticketing costs are based on the
total number of passengers, including those traveling on free awards, divided
into American's total expense for
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these costs. American defers a portion of revenues from the sale of mileage
credits to companies participating in the AAdvantage program and recognizes such
revenues over a period approximating the period during which the mileage credits
are used.
At December 31, 1995 and 1994, American estimated that approximately 4.7
million and 4.5 million free travel awards, respectively, were eligible for
redemption. At December 31, 1995 and 1994, American estimated that approximately
4.0 million and 3.6 million free travel awards, respectively, were expected to
be redeemed for free travel. In making this estimate, American has excluded
mileage in inactive accounts, mileage related to accounts that have not yet
reached the lowest level of free travel award, and mileage in active accounts
that have reached the lowest level of free travel award but which is not
expected to ever be redeemed for free travel. The liability for the program
mileage that has reached the lowest level of free travel award and is expected
to be redeemed for free travel and deferred revenues for mileage sold to others
participating in the program was $370 million and $329 million, representing 7.0
percent and 7.9 percent of American's total current liabilities, at December 31,
1995 and 1994, respectively.
The number of free travel awards used for travel on American during the
years ended December 31, 1995, 1994 and 1993, was approximately 2,204,000,
2,198,000, and 2,163,000, respectively, representing 8.4 percent, 8.5 percent
and 9.5 percent of total revenue passenger miles for each period, respectively.
American believes displacement of revenue passengers is insignificant given
American's load factors, its ability to manage frequent flyer seat inventory,
and the relatively low ratio of free award usage to revenue passenger miles.
OTHER MATTERS
SEASONALITY AND OTHER FACTORS American's results of operations for any interim
period are not necessarily indicative of those for the entire year, since the
air transportation business is subject to seasonal fluctuations. Higher demand
for air travel has traditionally resulted in more favorable operating results
for the second and third quarters of the year than for the first and fourth
quarters.
The results of operations in the air transportation business have also
significantly fluctuated in the past in response to general economic conditions.
In addition, fare initiatives, fluctuations in fuel prices, labor actions and
other factors could impact this seasonal pattern. Unaudited quarterly financial
data for the two-year period ended December 31, 1995, is included in Note 14 to
the consolidated financial statements.
No material part of the business of American and its subsidiaries is
dependent upon a single customer or very few customers. Consequently, the loss
of the Company's largest few customers would not have a materially adverse
effect upon American.
INSURANCE American carries insurance for public liability, passenger liability,
property damage and all-risk coverage for damage to its aircraft, in amounts
which, in the opinion of management, are adequate.
OTHER GOVERNMENT MATTERS In time of war or during an unlimited national
emergency or civil defense emergency, American and other major air carriers may
be required to provide airlift services to the Military Airlift Command under
the Civil Reserve Air Fleet program.
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ITEM 2. PROPERTIES
FLIGHT EQUIPMENT
Owned and leased aircraft operated by American at December 31, 1995, included:
<TABLE>
<CAPTION>
Weighted
Current Average
Equipment Type Seating Capital Operating Age
Capacity Owned Leased Leased Total (Years)
- - -------------------------- -------- ------- ------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
JET AIRCRAFT
Airbus A300-600R 266/267 10 - 25 35 6
Boeing 727-200 150 53 14 - 67 19
Boeing 757-200 188 46 9 31 86 4
Boeing 767-200 172 8 - - 8 13
Boeing 767-200 Extended 172 9 13 - 22 10
Range
Boeing 767-300 Extended 215 16 3 22 41 5
Range
Fokker 100 97 66 5 4 75 3
McDonnell Douglas DC-10-10 237/290 13 4 - 17 19
McDonnell Douglas DC-10-30 273 4 1 - 5 21
McDonnell Douglas MD-11 251/271 19 - - 19 4
McDonnell Douglas MD-80 139 119 25 116 260 8
--- --- --- --- --
Total 363 74 198 635 8
=== === === === ==
</TABLE>
For information concerning the estimated useful lives and residual values
for owned aircraft, lease terms and amortization relating to aircraft under
capital leases, and acquisitions of aircraft, see Notes 1, 3 and 4 to the
consolidated financial statements. See Management's Discussion and Analysis for
discussion of the retirement of certain aircraft from the fleet.
In April 1995, American announced an agreement to sell 12 of its McDonnell
Douglas MD-11 aircraft to Federal Express Corporation (FedEx), with delivery of
the aircraft between 1996 and 1999. In addition, American has the option to sell
its remaining seven MD-11 aircraft to FedEx with deliveries between 2000 and
2002.
Lease expirations for American's leased aircraft included in the above
table as of December 31, 1995, were:
<TABLE>
<CAPTION>
2001
and
Equipment Type 1996 1997 1998 1999 2000 Thereafter
- - --------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
JET AIRCRAFT
Airbus A300-600R - - - - - 25
Boeing 727-200 - - - 2 4 8
Boeing 757-200 - - - - 2 38
Boeing 767-200 Extended - - - - - 13
Range
Boeing 767-300 Extended - - - - - 10
Range
Fokker 100 - - - - - 9
McDonnell Douglas DC-10-10 3 1 - - - -
McDonnell Douglas DC-10-30 - - 1 - - -
McDonnell Douglas MD-80 - - - - 3 138
-- -- -- -- -- ---
3 1 1 2 9 241
== == == == == ===
</TABLE>
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The table excludes leases for 15 Boeing 767-300 Extended Range aircraft
which can be canceled with 30 days' notice during the initial 10-year lease
term. At the end of that term in 1998, the leases can be renewed for periods
ranging from 10 to 12 years.
Substantially all of American's aircraft leases include an option to
purchase the aircraft or to extend the lease term, or both, with the purchase
price or renewal rental to be based essentially on the market value of the
aircraft at the end of the term of the lease or at a predetermined fixed rate.
GROUND PROPERTIES
American leases, or has built as leasehold improvements on leased property, most
of its airport and terminal facilities; certain corporate office, maintenance
and training facilities in Fort Worth, Texas; its principal overhaul and
maintenance base and computer facility at Tulsa International Airport, Tulsa,
Oklahoma; its regional reservation offices; and local ticket and administration
offices throughout the system. American has entered into agreements with the
Tulsa Municipal Airport Trust; the Alliance Airport Authority, Fort Worth,
Texas; and the Dallas/Fort Worth, Chicago O'Hare, Raleigh/Durham, Nashville, San
Juan, New York, and Los Angeles airport authorities to provide funds for
constructing, improving and modifying facilities and acquiring equipment which
are or will be leased to American. American also utilizes public airports for
its flight operations under lease or use arrangements with the municipalities or
governmental agencies owning or controlling them and leases certain other ground
equipment for use at its facilities.
For information concerning the estimated lives and residual values for
owned ground properties, lease terms and amortization relating to ground
properties under capital leases, and acquisitions of ground properties, see
Notes 1, 3 and 4 to the consolidated financial statements.
ITEM 3. LEGAL PROCEEDINGS
In January, 1985, American announced a new fare category, the "Ultimate
SuperSaver," a discount, advance purchase fare that carried a 25 percent penalty
upon cancellation. On December 30, 1985, a class action lawsuit was filed in
Circuit Court, Cook County, Illinois entitled Johnson vs. American Airlines,
Inc. The Johnson plaintiffs allege that the 10 percent federal excise
transportation tax should be excluded from the "fare" upon which the 25 percent
penalty is assessed. The case has not been certified as a class action. Summary
judgment has been granted for American and the matter is currently on appeal.
American believes the matter is without merit and is vigorously defending the
lawsuit.
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.
Currently, the plaintiffs allege that, on that date, American implemented
changes that limited the number of seats available to participants traveling on
certain awards and established blackout dates during which no AAdvantage seats
would be available for certain awards and that these changes breached American's
contracts with AAdvantage members. Plaintiffs seek money damages for such
alleged breach and attorneys' fees. Previously the plaintiffs also alleged
violation of the Illinois Consumer Fraud and Deceptive Business Practice Act
(Consumer Fraud Act) and sought punitive damages, attorneys' fees and injunctive
relief preventing American from making changes to the AAdvantage program.
American originally moved to dismiss all of the claims asserting that they were
preempted by the Federal Aviation Act and barred by the Commerce Clause of the
U.S. Constitution.
Initially, 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, the 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'
9
<PAGE> 11
claims seeking an injunction are preempted, but that identical claims for
compensatory and punitive damages are not preempted. On February 8, 1994,
American filed a 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.
The matter was argued before the U.S. Supreme Court on November 1, 1994, and on
January 18, 1995, the U.S. Supreme Court issued its opinion ending a portion of
the suit against American. The U.S. Supreme Court held that a) plaintiffs' claim
for violation of the Illinois Consumer Fraud Act is preempted by federal law --
entirely ending that part of the case and eliminating plaintiffs' claim for
punitive damages; and b) certain breach of contract claims are not preempted by
federal law.
The Court did not determine, however, whether the contract claims
asserted by the plaintiffs are preempted, and therefore, remanded the case to
the state court for further proceedings. Subsequently, plaintiffs filed an
amended complaint seeking damages solely for a breach of contract claim. In the
event that the plaintiffs' breach of contract claim is eventually permitted to
proceed in the state court, American intends to vigorously defend the case.
In December, 1993, American announced that the number of miles required
to claim a certain travel award under American's AAdvantage frequent flyer
program would be increased effective February 1, 1995. On February 1, 1995 a
class action lawsuit entitled Gutterman vs. American Airlines, Inc. was filed in
the Circuit Court of Cook County, Illinois. The Gutterman plaintiffs claim that
this increase in mileage level violated the terms and conditions of the
agreement between American and AAdvantage members. On February 9, 1995, a
virtually identical class action lawsuit entitled Benway vs. American Airlines,
Inc. was filed in District Court, Dallas County, Texas. After limited discovery
and prior to class certification, a summary judgment dismissing the Benway case
was entered by the Dallas County Court in July 1995. On March 11, 1996,
American's motion to dismiss the Gutterman lawsuit was denied, although
American's motion for summary judgment is still pending. No class has been
certified in the Gutterman lawsuit and to date no discovery has been undertaken.
American believes the Gutterman complaint is without merit and is vigorously
defending the lawsuit.
On February 10, 1995, American capped travel agency commissions for
one-way and round trip domestic tickets at $25 and $50, respectively.
Immediately thereafter, numerous travel agencies, and two travel agency trade
association groups, filed class action lawsuits against American and other major
air carriers (Continental, Delta, Northwest, United, USAir and TWA) that had
independently imposed similar limits on travel agency commissions. The suits
were transferred to the United States District Court for the District of
Minnesota, and consolidated as a multi-district litigation captioned In Re:
Airline Travel Agency Commission Antitrust Litigation. The plaintiffs assert
that the airline defendants conspired to reduce travel agency commissions and to
monopolize air travel in violation of sections 1 and 2 of the Sherman Act. The
case has been certified as a class action on behalf of approximately 40,000
domestic travel agencies and two travel agency trade associations. In June 1995
after extensive, expedited discovery, the travel agents moved for a preliminary
injunction to enjoin the commission caps, and the defendants simultaneously
moved for summary judgment. On August 31, 1995, the District Court denied both
motions. Pre-trial activities against the defendants, including American, are
continuing. American is vigorously defending the lawsuit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(c) of Form 10-K.
PART II
- - --------------------------------------------------------------------------------
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
American is a wholly-owned subsidiary of AMR Corporation and there is no market
for the Registrant's Common Stock.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(a) of Form 10-K.
10
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Abbreviated pursuant to General Instruction J(2)(a) of Form 10-K).
American Airlines, Inc., the principal subsidiary of AMR, was founded in 1934.
For financial reporting purposes, American's operations fall within two major
lines of business: the Airline Group and the Information Services Group.
AIRLINE GROUP
The Airline Group consists primarily of American's Passenger and Cargo
divisions.
AMERICAN'S PASSENGER DIVISION is one of the largest scheduled passenger airlines
in the world. At the end of 1995, American provided scheduled jet service to
more than 160 destinations, primarily throughout North America, the Caribbean,
Latin America, Europe and the Pacific.
AMERICAN'S CARGO DIVISION is one of the largest scheduled air freight carriers
in the world. The 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.
INFORMATION SERVICES GROUP
The Information Services Group consists primarily of four divisions of American:
SABRE Travel Information Network (STIN), SABRE Computer Services (SCS), SABRE
Development Services (SDS) and SABRE Interactive.
STIN markets SABRE -- one of the largest privately owned, real-time computer
systems in the world -- which provides travel distribution and information
services to nearly 30,000 travel agencies in 74 countries on six continents.
SCS manages and maintains AMR's technology infrastructure. This includes the
planning, installation and operation of AMR's data centers, as well as
technology and architectural planning for AMR units and for external customers.
SCS also provides voice and data communication services to AMR, but is currently
in negotiations with a third party to outsource this function.
SDS provides decision support systems, application software packages, systems
development and consulting services to other AMR units and to external companies
in the transportation, travel and other industries worldwide.
SABRE INTERACTIVE is a distribution strategy division formed by The SABRE Group
in 1995 to develop opportunities for consumer-direct travel distribution via
personal computer, CD-ROM, interactive television, cable television and other
media.
These business units and certain other units of AMR form The SABRE Group, one of
AMR's three major lines of business.
11
<PAGE> 13
HIGHLIGHTS
SUMMARY American's net income in 1995 was $208 million. During the fourth
quarter of 1995, American recorded a charge of $485 million ($302 million after
tax) related to the cost of future pension and other postretirement benefits for
voluntary early retirement programs offered in conjunction with recently
renegotiated labor contracts covering members of the Transport Workers Union
(TWU) and the Association of Professional Flight Attendants (APFA), as well as
provisions for the writedown of certain McDonnell Douglas DC-10 aircraft, and
other restructuring activities. Before the special charge, net earnings were
$510 million. In addition to the restructuring charge, the Company's 1995
earnings include a charge of $41 million ($26 million after tax) related to the
loss of an aircraft operated by American. The expiration of the airline
industry's fuel tax exemption increased the Company's costs by approximately $21
million before tax. In 1994, American recorded net income of $268 million.
During the fourth quarter of 1994, American recorded a charge of $276 million
($173 million after tax) related to the cost of future pension and other
postretirement benefits for agent and management/support staff voluntary early
retirement programs, severance and other restructuring activities. Before the
special charge, net earnings were $441 million. The Company's 1995 operating
income was $968 million, compared to operating income of $912 million in 1994.
In response to the increasing competitive emphasis on lower costs and
lower fares, in 1993 AMR 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, encourage and support the growth of the
profitable information and management services businesses.
American's improved results reflect progress on each of these three
tenets, as well as strong economies in most of the markets it serves, relatively
low jet fuel prices, and a healthier pricing environment which is attributable
in part to more modest industry capacity growth.
American continued its effort to find the most productive use for each of
its aircraft. During 1995, the Company made major changes to its schedule.
American reallocated resources to longer flights and reduced its short-haul
flying, thus improving plane miles per jet aircraft by more than four percent.
To improve the mix of traffic, American increased frequency in major markets
while simultaneously ending hub operations at Raleigh/Durham and Nashville and
reducing or eliminating jet service in 72 city pairs. On the international
front, American increased the scope of its service to Latin America and the
United Kingdom, and took advantage of the new U.S. - Canadian bilateral
agreement to open service on several new Canadian routes and expand its
code-sharing program with Canadian Airlines International (CAI).
To reduce interest expense, the Company retired prior to maturity $139
million in face value of long-term debt, net of sinking fund balances. In
addition, $616 million in outstanding principal of certain debt and lease
obligations was refinanced during 1995. These transactions resulted in an
extraordinary loss of $21 million ($13 million after tax) in 1995.
Meanwhile, the Company's non-airline businesses continued their strong
performances. As a result of its increased domestic booking share and the steady
pace of international growth, The Information Services Group's revenues were up
13.5 percent from 1994 and its operating margin was approximately 26 percent.
12
<PAGE> 14
REVENUES
1995 COMPARED TO 1994 American's operating revenues increased 5.2 percent to
$15.6 billion in 1995, compared to $14.8 billion in 1994. Passenger revenues
increased 4.0 percent, $509 million. The increase in passenger revenues resulted
primarily from a 4.1 percent increase in passenger traffic, partially offset by
a 0.1 percent decrease in passenger yield (the average amount one passenger pays
to fly one mile) from 12.97 to 12.96 cents. American's average stage length
increased approximately 8.2 percent from 1994 to 1995, which contributed to the
decrease in passenger yield since per mile fares for longer trips tend to be
lower than for shorter trips. For the year, domestic yield decreased 0.9 percent
and Latin American yields decreased 4.2 percent; yield increased 8.1 percent in
Europe and 8.2 percent in the Pacific. In 1995, American derived 69.4 percent of
its passenger revenues from domestic operations and 30.6 percent from
international operations.
American's domestic traffic increased 1.7 percent, to 71.2 billion revenue
passenger miles (RPMs), while domestic capacity, as measured by available seat
miles (ASMs), decreased 1.3 percent. International traffic grew 9.8 percent, to
31.7 billion RPMs on capacity growth of 9.6 percent. The increase in
international traffic was led by a 13.4 percent increase in Latin America on
capacity growth of 12.4 percent, and a 7.4 percent increase in Europe on
capacity growth of 7.9 percent.
Other revenues, consisting of contract maintenance and ground handling
services, fees for passenger services such as certain ticketing charges, and
miscellaneous other revenues, increased 15.5 percent, $98 million, primarily as
a result of an increase in contract maintenance and airport ground services
performed by American for other airlines. The remaining portion of the increase
is attributable to the growth in passenger traffic.
Information Services Group revenues increased 13.5 percent, $171 million,
primarily due to increased booking volumes, as a result of international
expansion in Europe, Latin America and Asia, booking fee price increases and
revenue generated from AMR's services agreement with CAI.
EXPENSES
1995 COMPARED TO 1994 Operating expenses in 1995 included restructuring charges
of $485 million, primarily related to the cost of future pension and other
postretirement benefits for voluntary early retirement programs offered in
conjunction with recently renegotiated labor contracts covering members of the
TWU and the APFA, as well as provisions for the writedown of certain DC-10
aircraft, and other restructuring activities. Excluding the restructuring costs,
the Company's operating expenses increased 3.7 percent, $508 million. American's
capacity increased 1.7 percent, to 155.3 billion ASMs. American's Passenger
Division cost per ASM, excluding restructuring costs, increased 1.1 percent to
8.43 cents.
Despite a 1.5 percent decrease in the average number of equivalent
employees, wages, salaries and benefits expense rose 2.9 percent, $145 million.
The increase was due primarily to contractual wage rate and seniority increases
that are built into the Company's labor contracts and an increase in the
provision for profit sharing.
Fuel expense increased 0.6 percent, $9 million, due to the October 1995
expiration of the fuel tax exemption for the airline industry. The expiration of
the exemption resulted in additional fuel expense of $21 million for 1995.
Absent the fuel tax, fuel expense would have decreased $12 million due primarily
to lower jet fuel prices.
Commissions to agents decreased 2.9 percent, $37 million, due principally
to a reduction in average rates paid to agents attributable primarily to the
change in commission structure implemented in February 1995, partially offset by
commissions on increased passenger revenues.
Maintenance materials and repairs expense increased 12.8 percent, $56
million, primarily due to reduced expense in 1994 as a result of warranty
recoveries as well as certain engine and airframe service checks that became due
for the first time in 1995.
Other operating expenses (including communications charges, crew travel
expenses, credit card fees, advertising, purchased services, and booking fees)
increased 14.8 percent, $317 million, primarily due to costs associated with the
outsourcing of passenger and aircraft handling functions at certain airports,
costs
13
<PAGE> 15
associated with The Information Services Group's continuing efforts to increase
product development and take further steps to preserve and enhance SABRE's
market position, and costs associated with increased contract maintenance work
that American performed for other airlines. In addition, American recognized
approximately $19 million in foreign currency exchange losses attributable to
unfavorable exchange rates, primarily in Latin America.
Interest expense, net of amounts capitalized, increased 24.5 percent, $107
million, due primarily to a change in the terms of American's intercompany
subordinated note agreement with AMR, and also due to the effect of rising
short-term interest rates on floating rate debt and interest rate swap
agreements, partially offset by reductions due to the repurchase and retirement
of debt. Effective September 30, 1994, the subordinated promissory note bears
interest based on the weighted average rate on AMR's long-term debt and
preferred stock. Prior to September 30, 1994, interest on the subordinated note
was based on the London Interbank Offered Rate (LIBOR).
Miscellaneous - net for 1995 includes a $41 million charge related to the
loss of an aircraft operated by American.
OTHER INFORMATION
ENVIRONMENTAL MATTERS American has been notified of potential liability with
regard to several environmental cleanup sites. At sites where remedial
litigation has commenced, potential liability is joint and several. American's
alleged volumetric contributions at the sites are minimal. American does not
expect these matters, individually or collectively, to have a significant impact
on its financial position or liquidity. Additional information is included in
Note 3 to the consolidated financial statements.
CORPORATE STRUCTURE AMR plans to more fully develop and market its distinct
information technology expertise through The SABRE Group and continues to
investigate opportunities for further enhancing the value of its information
technology businesses. In furtherance of these opportunities, AMR is taking
preliminary steps, such as obtaining certain consents, that will allow it to
proceed expeditiously should it decide that a reorganization of The SABRE Group
into one or more subsidiaries of AMR is desirable. This reorganization, if
concluded, may involve the transfer to AMR, by means of a dividend, of
American's STIN, SCS, SDS and SABRE Interactive divisions. A final decision to
proceed with a reorganization has not been made, however, and AMR could
determine that conducting the business activities of The SABRE Group within the
current corporate structure continues to be in the best interests of AMR's
shareholders.
14
<PAGE> 16
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors 16
Consolidated Statement of Operations 17
Consolidated Balance Sheet 18
Consolidated Statement of Cash Flows 20
Consolidated Statement of Stockholder's Equity 21
Notes to Consolidated Financial Statements 22
</TABLE>
15
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
American Airlines, Inc.
We have audited the accompanying consolidated balance sheets of American
Airlines, Inc. as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholder's equity, and cash flows for each of the
three years in the period ended December 31, 1995. Our audits also included the
financial statement schedules listed in Item 14(a). These financial statements
and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of American
Airlines, Inc. at December 31, 1995 and 1994, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
As discussed in Note 9 to the consolidated financial statements,
effective January 1, 1995, the Company changed its method of accounting for the
impairment of long-lived assets to conform with Statement of Financial
Accounting Standards No. 121.
ERNST & YOUNG LLP
2121 San Jacinto
Dallas, Texas 75201
January 15, 1996
16
<PAGE> 18
AMERICAN AIRLINES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Airline Group:
Passenger $ 13,335 $ 12,826 $ 12,900
Cargo 668 648 637
Other 732 634 527
-------- -------- --------
14,735 14,108 14,064
Information Services Group 1,439 1,268 1,167
Less: Intergroup revenues (564) (539) (494)
-------- -------- --------
Total operating revenues 15,610 14,837 14,737
-------- -------- --------
EXPENSES
Wages, salaries and benefits 5,183 5,038 4,927
Aircraft fuel 1,565 1,556 1,818
Commissions to agents 1,236 1,273 1,393
Depreciation and amortization 1,138 1,138 1,115
Other rentals and landing fees 802 780 787
Food service 675 663 693
Aircraft rentals 604 620 639
Maintenance materials and repairs 494 438 542
Other operating expenses 2,460 2,143 2,259
Restructuring costs 485 276 --
-------- -------- --------
Total operating expenses 14,642 13,925 14,173
-------- -------- --------
OPERATING INCOME 968 912 564
OTHER INCOME (EXPENSE)
Interest income 23 13 5
Interest expense (557) (457) (408)
Interest capitalized 14 21 49
Miscellaneous - net (55) (47) (136)
-------- -------- --------
(575) (470) (490)
-------- -------- --------
EARNINGS BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS 393 442 74
Income tax provision 172 174 51
-------- -------- --------
EARNINGS BEFORE EXTRAORDINARY LOSS 221 268 23
EXTRAORDINARY LOSS, NET OF TAX BENEFIT (13) -- --
-------- -------- --------
NET EARNINGS $ 208 $ 268 $ 23
======== ======== ========
</TABLE>
- - --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 19
AMERICAN AIRLINES, INC.
CONSOLIDATED BALANCE SHEET
(in millions)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
-----------------
1995 1994
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 70 $ 13
Short-term investments 816 744
Receivables, less allowance for uncollectible
accounts (1995 - $13; 1994 - $14) 1,013 877
Inventories, less allowance for obsolescence
(1995 - $228; 1994 - $171) 516 590
Deferred income taxes 310 270
Other current assets 128 115
------- -------
Total current assets 2,853 2,609
EQUIPMENT AND PROPERTY
Flight equipment, at cost 12,442 12,522
Less accumulated depreciation 3,346 3,285
------- -------
9,096 9,237
Other equipment and property, at cost 3,911 3,765
Less accumulated depreciation 2,091 1,899
------- -------
1,820 1,866
------- -------
10,916 11,103
EQUIPMENT AND PROPERTY UNDER CAPITAL LEASES
Flight equipment 1,958 2,098
Other equipment and property 254 267
------- -------
2,212 2,365
Less accumulated amortization 778 823
------- -------
1,434 1,542
OTHER ASSETS
Route acquisition costs, less accumulated amortization
(1995 - $153; 1994 - $124) 1,003 1,032
Airport operating and gate lease rights, less
accumulated amortization (1995 - $89; 1994 - $72) 323 337
Prepaid pension cost 268 99
Other 832 601
------- -------
2,426 2,069
------- -------
TOTAL ASSETS $17,629 $17,323
======= =======
</TABLE>
- - --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 20
AMERICAN AIRLINES, INC.
CONSOLIDATED BALANCE SHEET
(in millions, except shares and par value)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 742 $ 831
Payables to affiliates 907 266
Accrued salaries and wages 686 581
Accrued liabilities 1,138 853
Air traffic liability 1,467 1,473
Current maturities of long-term debt 49 49
Current maturities of long-term debt due to parent 193 --
Current obligations under capital leases 101 110
-------- --------
Total current liabilities 5,283 4,163
LONG-TERM DEBT, LESS CURRENT MATURITIES 1,318 1,518
LONG-TERM DEBT DUE TO PARENT 1,676 3,196
OBLIGATIONS UNDER CAPITAL LEASES,
LESS CURRENT OBLIGATIONS 1,777 1,964
OTHER LIABILITIES AND CREDITS
Deferred income taxes 480 268
Deferred gains 696 732
Postretirement benefits 1,431 1,247
Other liabilities and deferred credits 1,322 1,002
-------- --------
3,929 3,249
COMMITMENTS, LEASES AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock - $1 par value;
1,000 shares authorized, issued and outstanding -- --
Additional paid-in capital 1,699 1,699
Minimum pension liability adjustment (1) (199)
Retained earnings 1,948 1,733
-------- --------
3,646 3,233
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 17,629 $ 17,323
======== ========
</TABLE>
- - --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 21
AMERICAN AIRLINES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net earnings $ 208 $ 268 $ 23
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,138 1,138 1,115
Deferred income taxes 54 51 (4)
Provision for restructuring costs 485 276 --
Provisions for losses 41 -- 125
Change in assets and liabilities:
Decrease (increase) in receivables (136) (146) 11
Increase in inventories (15) (12) (6)
Increase (decrease) in accounts payable
and accrued liabilities 408 10 (6)
Increase (decrease) in air traffic liability (6) 13 (64)
Other, net (181) 93 79
------- ------- -------
Net cash provided by operating activities 1,996 1,691 1,273
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (842) (899) (1,873)
Net decrease (increase) in short-term investments (72) (238) 287
Other, net 59 36 35
------- ------- -------
Net cash used for investing activities (855) (1,101) (1,551)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from:
Issuance of long-term debt 184 130 330
Sale-leaseback transactions -- 280 --
Net short-term borrowings (repayments)
with maturities of 90 days or less -- -- (350)
Other short-term borrowings -- 200 --
Payments on other short-term borrowings -- (200) (30)
Payments on long-term debt and capital lease (582) (206) (294)
obligations
Funds transferred from (to) affiliates, net (686) (839) 551
Other, net -- 3 81
------- ------- -------
Net cash provided by (used for) financing
activities (1,084) (632) 288
------- ------- -------
Net increase (decrease) in cash 57 (42) 10
Cash at beginning of year 13 55 45
------- ------- -------
Cash at end of year $ 70 $ 13 $ 55
======= ======= =======
</TABLE>
- - --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 22
AMERICAN AIRLINES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(in millions)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Minimum
Additional Pension
Common Paid-in Liability Retained
Stock Capital Adjustment Earnings Total
------ ---------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $ -- $1,699 $-- $ 1,448 $ 3,147
Net earnings -- -- -- 23 23
Other -- -- -- (2) (2)
------ ------ ----- ------- -------
Balance at December 31, 1993 -- 1,699 -- 1,469 3,168
Net earnings -- -- -- 268 268
Adjustment for minimum
pension liability -- -- (199) -- (199)
Other -- -- -- (4) (4)
------ ------ ----- ------- -------
Balance at December 31, 1994 -- 1,699 (199) 1,733 3,233
Net earnings -- -- -- 208 208
Adjustment for minimum
pension liability -- -- 198 -- 198
Other -- -- -- 7 7
------ ------ ----- ------- -------
Balance at December 31, 1995 $ -- $1,699 $ (1) $ 1,948 $ 3,646
====== ====== ===== ======= =======
</TABLE>
- - --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
BASIS OF CONSOLIDATION American Airlines, Inc. (American or the Company) is a
wholly-owned subsidiary of AMR Corporation (AMR). The consolidated financial
statements include the accounts of American and its wholly-owned subsidiaries.
All significant intercompany transactions have been eliminated. Certain amounts
from prior years have been reclassified to conform with the 1995 presentation.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
TRANSACTIONS WITH AFFILIATES Transactions with affiliates are on a basis
determined by the parties.
American invests funds, including funds of affiliates, in a combined
short-term investment portfolio and passes through interest income on such funds
at the average rate earned on the portfolio. To the extent funds transferred to
American exceed the invested portfolio, such amounts are converted to Long-Term
Debt due to Parent under a subordinated note agreement with AMR. To the extent
American invests its excess cash flows in the short-term investment portfolio,
Long-Term Debt due to Parent is reduced with a corresponding increase in
Payables to Affiliates. The subordinated promissory note bears interest based on
the weighted-average rate on AMR's long-term debt and preferred stock (8.67
percent at December 31, 1995). The interest rate is reset every six months. The
note is due September 30, 2004, unless extended. American may prepay the note
without penalty at any time. Under the provisions of such note agreement,
approximately $1.68 billion and $2.94 billion was included in Long-Term Debt due
to Parent as of December 31, 1995 and 1994, respectively.
Interest paid to affiliates in addition to interest income passed through
on invested funds was approximately $254 million, $187 million and $132 million
for the years ended December 31, 1995, 1994 and 1993, respectively.
Interest expense includes $17 million for the years ended December 31,
1995 and 1994 and $16 million for the year ended December 31, 1993, relating to
debentures held by AMR calculated at a 9.03 percent effective interest rate.
American paid affiliates $137 million, $140 million and $138 million in
1995, 1994 and 1993, respectively, for ground handling services provided at
selected airports, consulting services and investment management and advisory
services with respect to short-term investments and the assets of its retirement
benefit plans.
American issues tickets for flights on its American Eagle affiliate
regional carriers, owned by AMR Eagle, Inc., a subsidiary of AMR. As a result,
the revenue collected for such tickets is prorated between American and the AMR
Eagle carriers based on the segments flown by the respective carriers. In
addition, in 1995, 1994 and 1993, American paid fees of $201 million, $174
million and $261 million, respectively, included in Other Operating Expenses, to
AMR Eagle primarily for passengers connecting with American flights.
American charges AMR affiliates for the use of its communications,
accounting and information processing systems, as well as for other services.
American recognizes compensation expense associated with certain AMR
common stock-based awards for employees of American.
22
<PAGE> 24
1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
INVENTORIES Spare parts, materials and supplies relating to flight equipment are
carried at average cost and are expensed when used in operations. Allowances for
obsolescence are provided, over the estimated useful life of the related
aircraft and engines, for spare parts expected to be on hand at the date
aircraft are retired from service. These allowances are based on management
estimates, which are subject to change.
EQUIPMENT AND PROPERTY The provision for depreciation of operating equipment and
property is computed on the straight-line method applied to each unit of
property, except that spare assemblies are depreciated on a group basis. The
depreciable lives and residual values used for the principal depreciable asset
classifications are:
<TABLE>
<CAPTION>
Residual
Depreciable Life Value
---------------------------- --------
<S> <C> <C>
Boeing 727-200 21 years(1) 5%
DC-10-10 December 31, 1998(2) 0%
DC-10-30 December 31, 1999(2) 5%
Other aircraft 20 years 5%
Major rotable parts, avionics and assemblies Life of equipment to which 10%
applicable
Improvements to leased flight equipment Term of lease None
Buildings and improvements (principally on 10-30 years or term of lease None
leased land)
Other equipment 3-20 years None
</TABLE>
(1) In 1991, American changed the estimated useful lives of its Boeing
727-200 aircraft and engines from a common retirement date of December
31, 1994, to projected retirement dates by aircraft, which results in an
average depreciable life of approximately 21 years.
(2) Approximate common retirement date.
Equipment and property under capital leases are amortized over the term of
the leases and such amortization is included in depreciation and amortization.
Lease terms vary but are generally 10 to 25 years for aircraft and 7 to 40 years
for other leased equipment and property.
MAINTENANCE AND REPAIR COSTS Maintenance and repair costs for owned and leased
flight equipment are charged to operating expense as incurred.
INTANGIBLE ASSETS The Company continually evaluates intangible assets to
determine whether current events and circumstances warrant adjustment of the
carrying values or amortization periods.
Route acquisition costs and airport operating and gate lease rights
represent the purchase price attributable to route authorities, airport take-off
and landing slots and airport gate leasehold rights acquired and are being
amortized on a straight-line basis over 10 to 40 years.
PASSENGER REVENUES Passenger ticket sales are initially recorded as a component
of air traffic liability. Revenue derived from ticket sales is recognized at the
time transportation is provided. However, due to various factors, including the
complex pricing structure and interline agreements throughout the industry,
certain amounts are recognized in revenue using estimates regarding both the
timing of the revenue recognition and the amount of revenue to be recognized.
Actual results could differ from those estimates.
ADVERTISING COSTS The Company expenses the costs of advertising as incurred.
Advertising expense was $187 million, $196 million, and $197 million for the
years ended December 31, 1995, 1994, and 1993.
FREQUENT FLYER PROGRAM The estimated incremental cost of providing free travel
awards is accrued when such award levels are reached. American sells mileage
credits to companies participating in its frequent flyer program. A portion of
the revenue from the sale of mileage credits is deferred and recognized over a
period approximating the period during which the mileage credits are used.
23
<PAGE> 25
1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES AMR and its eligible subsidiaries, including American, file a
consolidated federal income tax return. Deferred income taxes reflect the net
tax effects of temporary differences between the financial reporting carrying
amounts of assets and liabilities and the income tax amounts.
DEFERRED GAINS Gains on the sale and leaseback of equipment and property are
deferred and amortized over the terms of the related leases as a reduction of
rent expense.
STATEMENT OF CASH FLOWS Short-term investments, without regard to remaining
maturity at acquisition, are not considered as cash equivalents for purposes of
the statement of cash flows.
2. SHORT-TERM INVESTMENTS
Short-term investments consisted of (in millions):
<TABLE>
<CAPTION>
December 31,
-----------------
1995 1994
---- ----
<S> <C> <C>
Overnight investments and time deposits $136 $324
Corporate notes 457 246
Other debt securities 223 174
---- ----
$816 $744
==== ====
</TABLE>
Short-term investments at December 31, 1995, by contractual maturity was
(in millions):
<TABLE>
<S> <C>
Due in one year or less $458
Due after one year through three years 278
Due after three years 80
----
$816
====
</TABLE>
All short-term investments were classified as available-for-sale and
stated at fair value.
3. COMMITMENTS AND CONTINGENCIES
The Company has on order four Boeing 757-200 jet aircraft scheduled for
delivery in 1996. Remaining payments for these aircraft and related equipment
will be approximately $100 million in 1996. In addition to these commitments for
aircraft, the Company has authorized expenditures of approximately $850 million
for aircraft modifications, renovations of, and additions to, airport and office
facilities and various other equipment and assets. American expects to spend
approximately $350 million of this amount in 1996.
In April 1995, American announced an agreement to sell 12 of its McDonnell
Douglas MD-11 aircraft to Federal Express Corporation (FedEx), with delivery of
the aircraft between 1996 and 1999. In addition, American has the option to sell
its remaining seven MD-11 aircraft to FedEx with deliveries between 2000 and
2002. The carrying value of the 12 aircraft American has committed to sell was
approximately $837 million as of December 31, 1995. Included in depreciation
expense are charges related to these aircraft which totaled approximately $23
million for the year ended December 31, 1995.
American has included an event risk covenant in approximately $2.9 billion
of lease agreements. The covenant permits the holders of such instruments to
receive a higher rate of return (between 50 and 700 basis points above the
stated rate) if a designated event, as defined, should occur and the credit
rating of the debentures or the debt obligations underlying the lease agreements
is downgraded below certain levels.
24
<PAGE> 26
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Special facility revenue bonds have been issued by certain municipalities,
primarily to purchase equipment and improve airport facilities which are leased
by American. In certain cases, the bond issue proceeds were loaned to American
and are included in long-term debt. Certain bonds have rates that are
periodically reset and are remarketed by various agents. In certain
circumstances, American may be required to purchase up to $437 million of the
special facility revenue bonds prior to maturity, in which case American has the
right to resell the bonds or to use the bonds to offset its lease or debt
obligations. American may borrow the purchase price of these bonds under standby
letter-of-credit agreements. At American's option, these letters of credit are
secured by funds held by bond trustees and by approximately $429 million of
short-term investments.
The Miami International Airport Authority is currently remediating various
environmental conditions at the Miami International Airport (Airport) and
funding the remediation costs through landing fee revenues. Some of the costs of
the remediation effort may be borne by carriers currently operating at the
Airport, including American, through increased landing fees since certain of the
potentially responsible parties are no longer in business. The future increase
in landing fees may be material but cannot be reasonably estimated due to
various factors, including the unknown extent of the remedial actions that may
be required, the proportion of the cost that will ultimately be recovered from
the responsible parties, and uncertainties regarding the environmental agencies
that will ultimately supervise the remedial activities and the nature of that
supervision. The ultimate resolution is not, however, expected to have a
significant impact on the financial position or the liquidity of American.
American's collective bargaining agreement with the Allied Pilots
Association (APA) became amendable on August 31, 1994. In January 1996, the APA
filed a petition with the National Mediation Board (NMB) to appoint a federal
mediator. A mediator has been appointed, and initial meetings have been held
between the APA and the NMB mediator and between American and the NMB mediator.
Joint meetings began in March 1996. The outcome of these negotiations and the
impact on the Company cannot be determined at this time.
4. LEASES
American leases various types of equipment and property, including
aircraft, passenger terminals, equipment and various other facilities. The
future minimum lease payments required under capital leases, together with the
present value of net minimum lease payments, and future minimum lease payments
required under operating leases that have initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 1995, were (in millions):
<TABLE>
<CAPTION>
Capital Operating
Year Ending December 31, Leases Leases
-------- ---------
<C> <C> <C>
1996 $ 203 $ 843
1997 228 892
1998 224 905
1999 219 898
2000 285 860
2001 and subsequent 1,704 14,353
------- -------
2,863(1) $18,751(2)
=======
Less amount representing interest 983
-------
Present value of net minimum lease payments $ 1,880
=======
</TABLE>
(1) Future minimum payments required under capital leases include $205 million
and $203 million guaranteed by AMR and American, respectively, relating to
special facility revenue bonds issued by municipalities.
(2) Future minimum payments required under operating leases include $6.2
billion guaranteed by AMR relating to special facility revenue bonds
issued by municipalities.
25
<PAGE> 27
4. LEASES (CONTINUED)
At December 31, 1995, the Company had 198 jet aircraft under operating
leases and 74 jet aircraft under capital leases.
The aircraft leases can generally be renewed at rates based on fair market
value at the end of the lease term for one to five years. Most aircraft leases
have purchase options at or near the end of the lease term at fair market value,
but generally not to exceed a stated percentage of the defined lessor's cost of
the aircraft. Of the aircraft American has under operating leases, 15 Boeing
767-300 Extended Range aircraft are cancelable upon 30 days' notice during the
initial 10-year lease term. At the end of that term in 1998, the leases can be
renewed for periods ranging from 10 to 12 years.
Rent expense, excluding landing fees, was $1.2 billion for 1995, 1994 and
1993.
5. INDEBTEDNESS
Long-term debt (excluding amounts maturing within one year) consisted of
(in millions):
<TABLE>
<CAPTION>
December 31,
-------------------
1995 1994
------ ------
<S> <C> <C>
7.67% - 9.59% notes due through 2014 $ 624 $ 686
Variable rate indebtedness due through 2024
(3.83% - 7.19% at December 31, 1995) 475 578
6.0% - 9.25% bonds due through 2031 176 181
Other 43 73
------ ------
Long-term debt, less current maturities $1,318 $1,518
====== ======
</TABLE>
Maturities of long-term debt (including sinking fund requirements) for the
next five years are: 1996 - $49 million; 1997 - $47 million; 1998 - $55 million;
1999 - $53 million; 2000 - $57 million.
Certain debt is secured by aircraft, engines, equipment and other assets
having a net book value of approximately $1.3 billion.
During 1995, American retired prior to maturity $139 million in face value
of long-term debt, net of sinking fund balances. Cash from operations provided
the funding for the retirements. In addition, $616 million in outstanding
principal of certain debt and lease obligations was refinanced during 1995.
These transactions resulted in an extraordinary loss of $21 million ($13 million
after tax) for the year ended December 31, 1995.
American has a $1.0 billion credit facility agreement which expires in
1999. Interest on the agreement is calculated at floating rates based upon the
London Interbank Offered Rate (LIBOR). At January 15, 1996, no borrowings were
outstanding and $1.0 billion was available under this facility.
Certain of American's debt and credit facility agreements contain certain
restrictive covenants, including a cash flow coverage test, a minimum net worth
requirement and limitations on indebtedness and limitations on the declaration
of dividends. At December 31, 1995, under the most restrictive provisions of
those agreements, approximately $857 million of American's retained earnings
were available for payment of dividends to AMR.
26
<PAGE> 28
6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
As part of the Company's risk management program, American uses a variety
of financial instruments, including interest rate swaps, fuel swaps and collars
and currency exchange agreements. The Company does not hold or issue derivative
financial instruments for trading purposes.
NOTIONAL AMOUNTS AND CREDIT EXPOSURES OF DERIVATIVES
The notional amounts of derivative financial instruments summarized in the
tables which follow do not represent amounts exchanged between the parties and,
therefore, are not a measure of the Company's exposure resulting from its use of
derivatives. The amounts exchanged are calculated based on the notional amounts
and other terms of the instruments, which relate to interest rates, exchange
rates or other indices.
The Company is exposed to credit losses in the event of non-performance by
counterparties to these financial instruments, but it does not expect any of the
counterparties to fail to meet its obligations. The credit exposure related to
these financial instruments is represented by the fair value of contracts with a
positive fair value at the reporting date, reduced by the effects of master
netting agreements. To manage credit risks, the Company selects counterparties
based on credit ratings, limits its exposure to a single counterparty under
defined guidelines, and monitors the market position of the program and its
relative market position with each counterparty. The Company also maintains
industry-standard security agreements with the majority of its counterparties
which may require the Company or the counterparty to post collateral if the
value of these instruments fall below certain mark-to-market thresholds. As of
December 31, 1995, no collateral was required under these agreements, and the
Company does not expect to post collateral in the near future.
INTEREST RATE RISK MANAGEMENT
American enters into interest rate swap contracts to effectively convert a
portion of its fixed-rate obligations to floating-rate obligations. These
agreements involve the exchange of amounts based on a floating interest rate for
amounts based on fixed interest rates over the life of the agreement without an
exchange of the notional amount upon which the payments are based. The
differential to be paid or received as interest rates change is accrued and
recognized as an adjustment of interest expense related to the obligation. The
related amount payable to or receivable from counterparties is included in
current liabilities or assets. The fair values of the swap agreements are not
recognized in the financial statements. Gains and losses on terminations of
interest rate swap agreements are deferred as an adjustment to the carrying
amount of the outstanding obligation and amortized as an adjustment to interest
expense related to the obligation over the remaining term of the original
contract life of the terminated swap agreement. In the event of the early
extinguishment of a designated obligation, any realized or unrealized gain or
loss from the swap would be recognized in income coincident with the
extinguishment. Because American's operating results tend to be better in
economic cycles with relatively high interest rates and its capital investments
tend to be financed with long-term fixed-rate instruments, interest rate swaps
in which American pays the floating rate and receives the fixed rate are used to
reduce the impact of economic cycles on American's net income.
The following table indicates the notional amounts and fair values of the
Company's interest rate swap agreements (in millions):
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1995 1994
------------------------- -------------------------
Notional Notional
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Interest rate swap agreements $1,980 $12 $1,980 $(174)
</TABLE>
The fair values represent the amount the Company would receive or pay to
terminate the agreements at December 31, 1995 and 1994, respectively.
27
<PAGE> 29
6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
At December 31, 1995, the weighted average remaining duration of the
interest rate swap agreements in effect was 3.1 years. The weighted average
floating rates and fixed rates on the contracts outstanding were:
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
------ ------
<S> <C> <C>
Average floating rate 5.786% 5.720%
Average fixed rate 5.304% 5.207%
</TABLE>
Floating rates are primarily based on LIBOR and may change significantly,
affecting future cash flows. The net impact of the interest rate swap program on
interest expense was an increase of $18 million in 1995 and a decrease of $14
million in 1994. The impact on the Company's weighted-average borrowing rate for
the periods presented is immaterial.
FUEL PRICE RISK MANAGEMENT
American enters into fuel swap contracts to protect against increases in
jet fuel prices. Under the agreements, American receives or makes payments based
on the difference between a fixed price and a variable price for certain fuel
commodities. Gains and losses on fuel swap agreements are recognized as a
component of fuel expense when the underlying fuel being hedged is used. At
December 31, 1995, American had agreements with broker-dealers to exchange
payments on approximately 295 million gallons of fuel products, which represents
approximately 11 percent of its expected 1996 fuel needs. The Company does not
expect the fuel price hedging program to have a material effect on liquidity.
The fair value of the Company's fuel swap agreements at December 31, 1995,
representing the amount the Company would receive to terminate the agreements,
was immaterial.
FOREIGN EXCHANGE RISK MANAGEMENT
To hedge against the risk of future currency exchange rate fluctuations on
certain debt and lease obligations and related interest payable in foreign
currencies, the Company has entered into various foreign currency exchange
agreements. Changes in the value of the agreements due to exchange rate
fluctuations are offset by changes in the value of the foreign currency
denominated debt and lease obligations translated at the current exchange rate.
Discounts or premiums are accreted or amortized as an adjustment to interest
expense over the lives of the underlying debt or lease obligations. The related
amounts due to or from counterparties are included in other liabilities or other
assets. The net fair values of the Company's currency exchange agreements,
representing the amount American would receive to terminate the agreements,
were:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1995 1994
----------------------------- -----------------------------
Notional Fair Value Notional Fair Value
Amount (in millions) Amount (in millions)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Japanese Yen 25.0 billion $ 28 25.6 billion $ 41
</TABLE>
The exchange rates on the Japanese Yen agreements range from 66.50 to
137.26 Yen per U.S. dollar.
To hedge against the risk of future exchange rate fluctuations on a
portion of American's foreign cash flows, the Company entered into various
currency put option agreements during 1995 on a number of foreign currencies.
The option contracts are denominated in the same foreign currency in which the
projected foreign cash flows are expected to be denominated. These contracts are
designated and effective as hedges of probable quarterly foreign cash flows for
various periods through September 30, 1998, which otherwise would expose the
Company to foreign currency risk. Realized gains on the currency put option
agreements are recognized as a component of passenger revenue. At December 31,
1995, the notional amount related to these options totaled approximately $743
million and the fair value, representing the amount American would receive to
terminate the agreements, totaled approximately $16.5 million.
28
<PAGE> 30
6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair values of the Company's long-term debt were estimated using
quoted market prices, where available. For long-term debt not actively traded,
fair values were estimated using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements. The carrying amounts and fair values of the Company's long-term
debt, including current maturities, were (in millions):
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
1995 1994
------------------------ --------------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Long-term debt due to Parent $ 1,869 $ 2,077 $ 3,196 $ 2,917
7.67% - 9.59% notes 636 718 698 641
Variable rate indebtedness 501 501 606 605
6.0% - 9.25% bonds 176 183 181 187
Other 54 60 82 69
---------- ---------- ---------- ----------
$ 3,236 $ 3,539 $ 4,763 $ 4,419
========== ========== ========== ==========
</TABLE>
7. INCOME TAXES
American, as a wholly-owned subsidiary, is included in AMR's consolidated
tax return. Under the terms of American's tax sharing agreement with AMR,
American's provision for income taxes has been computed on the basis that
American files separate consolidated income tax returns with its subsidiaries.
The significant components of the income tax provision were (in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current $ 118 $ 123 $ 55
Deferred 54 96 204
Benefit of operating loss carryforwards - (45) (208)
---------- ---------- ----------
$ 172 $ 174 $ 51
========== ========== ==========
</TABLE>
The income tax provision includes a federal income tax provision of $148
million, $146 million and $43 million for the years ended December 31, 1995,
1994 and 1993, respectively.
29
<PAGE> 31
7. INCOME TAXES (CONTINUED)
The income tax provision differed from amounts computed at the statutory
federal income tax rate as follows (in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Statutory income tax provision $ 137 $ 155 $ 26
Meal expense 19 19 8
State income tax provision, net 12 13 3
Other, net 4 (13) 14
--------- --------- ---------
Income tax provision $ 172 $ 174 $ 51
========= ========= =========
</TABLE>
The components of American's deferred tax assets and liabilities were (in
millions):
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
------- -------
<S> <C> <C>
Deferred tax assets:
Postretirement benefits other than pensions $ 501 $ 436
Gains from lease transactions 253 267
Alternative minimum tax credit carryforwards 566 456
Operating loss carryforwards 426 474
Other 629 588
Valuation allowance (10) (10)
------- -------
Total deferred tax assets 2,365 2,211
------- -------
Deferred tax liabilities:
Accelerated depreciation and amortization (2,244) (2,013)
Pensions (65) (5)
Other (226) (191)
------- -------
Total deferred tax liabilities (2,535) (2,209)
------- -------
Net deferred tax asset (liability) $ (170) $ 2
======= =======
</TABLE>
At December 31, 1995, American had available under the terms of its tax
sharing agreement with AMR approximately $566 million of alternative minimum tax
credit carryforwards available for an indefinite period, and approximately $1.2
billion of net operating loss carryforwards for regular tax purposes, which
expire as follows: 2007 - $390 million, 2008 - $572 million and 2009 - $254
million.
30
<PAGE> 32
8. RETIREMENT BENEFITS
Substantially all employees of American are eligible to participate in
pension plans. The defined benefit plans provide benefits for participating
employees based on years of service and average compensation for a specified
period of time before retirement. Airline pilots and flight engineers also
participate in defined contribution plans for which company contributions are
determined as a percentage of participant compensation.
Total costs for all pension plans were (in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1995 1994 1993
------- ----- -----
<S> <C> <C> <C>
Defined benefit plans:
Service cost - benefits earned during
the period $ 162 $ 201 $ 167
Interest cost on projected benefit
obligation 323 292 285
Loss (return) on assets (1,288) 232 (638)
Net amortization and deferral 1,008 (541) 356
------- ----- -----
Net periodic pension cost for defined
benefit plans 205 184 170
Defined contribution plans 124 119 118
Early retirement programs(1) 220 154 --
------- ----- -----
Total $ 549 $ 457 $ 288
======= ===== =====
</TABLE>
(1) In late 1995 and 1994, American offered early retirement programs to
select groups of employees as part of its restructuring efforts. In
accordance with Statement of Financial Accounting Standards No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits", American recognized
additional pension expense of $220 million and $154 million associated
with these programs in 1995 and 1994, respectively. Of these amounts, $118
million and $120 million were for special termination benefits and $102
million and $34 million were for the actuarial losses resulting from the
early retirements for 1995 and 1994, respectively.
31
<PAGE> 33
8. RETIREMENT BENEFITS (CONTINUED)
The funded status and actuarial present value of benefit obligations of
the defined benefit plans were (in millions):
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------
1995 1994
------------------------------ ------------------------------
Plans with Plans with Plans with Plans with
Assets in Accumulated Assets in Accumulated
Excess of Benefit Excess of Benefit
Accumulated Obligation Accumulated Obligation
Benefit in Excess of Benefit in Excess of
Obligation Assets Obligation Assets
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Vested benefit obligation $ 4,145 $ 42 $ 1,063 $ 2,118
======= ==== ======= =======
Accumulated benefit
obligation $ 4,279 $ 46 $ 1,113 $ 2,175
Effect of projected future
salary increases 728 20 251 308
------- ---- ------- -------
Projected benefit obligation 5,007 66 1,364 2,483
------- ---- ------- -------
Plan assets at fair value 4,545 6 1,161 2,144
Plan assets less than
projected benefit obligation (462) (60) (203) (339)
Unrecognized net loss 703 19 223 719
Unrecognized prior service
cost (benefit) 14 9 47 (46)
Unrecognized transition
asset (45) (1) (14) (44)
Adjustment to record
minimum pension liability -- (12) -- (329)
------- ---- ------- -------
Prepaid (accrued) pension
cost(1) $ 210 $(45) $ 53 $ (39)
======= ==== ======= =======
</TABLE>
(1) American's funding policy is to make contributions equal to, or in excess
of, the minimum funding requirements of the Employee Retirement Income
Security Act of 1974.
Plan assets consist primarily of domestic and foreign government and
corporate debt securities, marketable equity securities, and money market fund
and mutual fund shares, of which approximately $119 million and $141 million of
plan assets at December 31, 1995 and 1994, respectively, were invested in shares
of mutual funds managed by a subsidiary of AMR.
The projected benefit obligation was calculated using weighted average
discount rates of 7.25% and 8.75% at December 31, 1995 and 1994, respectively;
rates of increase for compensation of 4.20% and 4.40% at December 31, 1995 and
1994, respectively; and the 1983 Group Annuity Mortality Table. The weighted
average expected long-term rate of return on assets was 9.50% in 1995 and 1994,
and 10.50% in 1993. The vested benefit obligation and plan assets at fair value
at December 31, 1995, for plans whose benefits are guaranteed by the Pension
Benefit Guaranty Corporation were $4.1 billion and $4.5 billion, respectively.
In addition to pension benefits, other postretirement benefits, including
certain health care and life insurance benefits, are also provided to retired
employees. The amount of health care benefits is limited to lifetime maximums as
outlined in the plan. Substantially all employees of American and employees of
certain other subsidiaries may become eligible for these benefits if they
satisfy eligibility requirements during their working lives.
32
<PAGE> 34
8. RETIREMENT BENEFITS (CONTINUED)
Certain employee groups make contributions toward funding a portion of
their retiree health care benefits during their working lives. American funds
benefits as incurred and began, effective January 1993, to match employee
prefunding.
Net other postretirement benefit cost was (in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 48 $ 62 $ 47
Interest cost on accumulated other
postretirement benefit obligation 99 86 86
Return on assets (2) (1) --
Net amortization and deferral (6) (4) (4)
----- ----- -----
Net other postretirement benefit cost $ 139 $ 143 $ 129
===== ===== =====
</TABLE>
In addition to net other postretirement benefit cost, in late 1995 and
1994, American offered early retirement programs to select groups of employees
as part of its restructuring efforts. In accordance with Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions," American recognized additional other postretirement
benefit expense of $93 million and $71 million associated with these programs in
1995 and 1994, respectively. Of these amounts, $26 million and $43 million were
for special termination benefits and $67 million and $28 million were for the
net actuarial losses resulting from the early retirements for 1995 and 1994,
respectively.
The funded status of the plan, reconciled to the accrued other
postretirement benefit cost recognized in American's balance sheet, was (in
millions):
<TABLE>
<CAPTION>
December 31,
-------------------
1995 1994
------- ------
<S> <C> <C>
Retirees $ 705 $ 542
Fully eligible active plan participants 176 207
Other active plan participants 546 422
------- ------
Accumulated other postretirement benefit obligation 1,427 1,171
Plan assets at fair value 28 14
------- ------
Accumulated other postretirement benefit obligation
in excess of plan assets 1,399 1,157
Unrecognized net loss (29) --
Unrecognized prior service benefit 61 90
------- ------
Accrued other postretirement benefit cost $ 1,431 $1,247
======= ======
</TABLE>
Plan assets consist primarily of shares of a mutual fund managed by a
subsidiary of AMR.
For 1995 and 1994, future benefit costs were estimated assuming per capita
cost of covered medical benefits would increase at an eight and nine percent
annual rate, respectively, decreasing gradually to a four percent annual growth
rate in 2000 and thereafter. A one percent increase in this annual trend rate
would have increased the accumulated other postretirement benefit obligation at
December 31, 1995, by approximately $128 million and 1995 other postretirement
benefit cost by approximately $18 million. The weighted average discount rate
used in estimating the accumulated other postretirement benefit obligation was
7.25% and 8.75% at December 31, 1995 and 1994, respectively.
33
<PAGE> 35
9. RESTRUCTURING COSTS
In 1995 and 1994, the Company recorded $485 million and $276 million,
respectively, for restructuring costs which included (in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994
---- ----
<S> <C> <C>
Special termination benefits:
Pension $118 $120
Other postretirement benefits 26 43
Other termination benefits 19 --
Actuarial losses:
Pension 102 34
Other postretirement benefits 67 28
---- ----
Total cost of early retirement programs 332 225
Provisions for aircraft impairment and retirement 145 --
Severance -- 28
Other 8 23
---- ----
$485 $276
==== ====
</TABLE>
In 1995, approximately 2,100 mechanics and fleet service clerks and 300
flight attendants elected early retirement under programs offered in conjunction
with renegotiated union labor contracts, and the majority of these employees
will leave the Company's workforce during 1996. The Company recorded
restructuring costs of $332 million in 1995 related to these early retirement
programs. A large portion of the funding for the programs was done in 1995. The
remaining cash payments associated with these programs will be expended as
required for funding the appropriate pension and other postretirement benefit
plans in future years.
The aircraft portion of the 1995 restructuring costs consists of a $145
million provision related to the writedown of certain McDonnell Douglas DC-10
aircraft. Effective January 1, 1995, American adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," which requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. In 1995, the Company
evaluated its fleet operating plan with respect to the DC-10-10 fleet and, as a
result, believes that the estimated future cash flows expected to be generated
by these aircraft will not be sufficient to recover their net book value.
Management estimated the undiscounted future cash flows utilizing models used by
the Company in making fleet and scheduling decisions. As a result of this
analysis, the Company determined that a writedown of the DC-10-10 aircraft to
the net present value of their estimated discounted future cash flows was
warranted, which resulted in a $112 million charge. In addition, the Company
recorded a $33 million charge to reflect a diminution in the estimated market
value of certain DC-10 aircraft previously grounded by the Company. No cash
costs have been incurred or are expected as a result of these DC-10 writedowns.
The writedowns are expected to reduce 1996 depreciation expense by approximately
$19 million.
In 1994, approximately 1,700 agents and 600 management employees elected
early retirement under programs offered to select groups of employees and left
the Company's workforce during 1995. The Company recorded restructuring costs of
$225 million in 1994 related to these early retirement programs. A large portion
of the funding for these programs was done in 1994. The remaining cash payments
associated with these programs will be expended as required for funding the
appropriate pension and other postretirement benefit plans in future years.
34
<PAGE> 36
9. RESTRUCTURING COSTS (CONTINUED)
The $28 million severance provision recorded in 1994 was for additional
workforce reductions affecting approximately 2,300 agent and management
personnel as a result of scheduled service reductions and improved
administrative efficiencies. Cash outlays for severance payments in 1995 totaled
approximately $22 million, with the remaining $6 million expected to occur
during 1996.
The remaining $23 million included in the 1994 restructuring costs
represents provisions for excess leased facilities and other restructuring
activities. Cash outlays are estimated to be approximately $18 million, of which
approximately $3 million occurred in 1995.
10. REVENUE AND OTHER EXPENSE ITEMS
During 1994, the Company changed its estimate of the usage patterns of
miles awarded by participating companies in American's AAdvantage frequent flyer
program. The positive impact of the change in estimate on passenger revenues for
1994 was $59 million. Passenger revenues for 1993 include a $115 million
positive adjustment resulting from a change in estimate relating to certain
earned passenger revenues.
Miscellaneous - net in 1995 includes a $41 million charge related to the
loss of an aircraft operated by American. Miscellaneous - net in 1993 includes a
$125 million charge related to the retirement of certain McDonnell Douglas DC-10
aircraft.
11. FOREIGN OPERATIONS
American conducts operations in various foreign countries. American's
operating revenues from foreign operations were (in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Latin America $2,316 $2,134 $1,888
Europe 2,059 1,839 1,659
Pacific 373 347 362
------ ------ ------
Foreign operating revenues $4,748 $4,320 $3,909
====== ====== ======
</TABLE>
35
<PAGE> 37
12. SEGMENT INFORMATION
American's operations fall within two industry segments: the Airline
Group and the Information Services Group. For a description of each of these
groups, refer to Management's Discussion and Analysis on page 11.
The following table presents selected financial data by industry segment
(in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Airline Group:
Revenues $14,735 $14,108 $14,064
Operating profit 600 570 307
Depreciation and amortization 974 966 949
Restructuring costs 485 270 --
Capital expenditures, including route
acquisition costs 729 731 1,704
Identifiable assets 16,839 16,580 16,801
Information Services Group:
Revenues $ 1,439 $ 1,268 $ 1,167
Operating profit 368 342 257
Depreciation and amortization 164 172 166
Restructuring costs -- 6 --
Capital expenditures 113 168 169
Identifiable assets 480 473 446
</TABLE>
Identifiable assets are gross assets used by a business segment, including
an allocated portion of assets used jointly by more than one business segment.
General corporate and other assets not allocated to business segments were $310
million, $270 million and $279 million at December 31, 1995, 1994 and 1993,
respectively, and consist primarily of income tax assets.
Intergroup revenues consist of revenues earned by the Information Services
Group from the Airline Group.
13. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of cash flow information and non-cash activities
(in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash payments (refunds) for:
Interest (net of interest capitalized) $542 $406 $ 356
Income taxes 49 34 (8)
Financing activities not affecting cash:
Capital lease obligations incurred $-- $280 $--
</TABLE>
36
<PAGE> 38
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Unaudited summarized financial data by quarter for 1995 and 1994 (in
millions):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1995
Operating revenues $ 3,679 $3,978 $4,096 $ 3,857
Operating income (loss) 251 456 478 (217)
Earnings (loss) before
extraordinary loss 56 192 212 (239)
Net earnings (loss) 56 192 212 (252)
1994
Operating revenues $ 3,508 $3,763 $3,890 $ 3,676
Operating income (loss) 104 373 471 (36)
Net earnings (loss) (3) 172 220 (121)
</TABLE>
Results for the fourth quarter of 1995 include $485 million in
restructuring costs, primarily representing the cost of early retirement
programs for Airline Group employees and provisions for the writedown of certain
DC-10 aircraft. Results for the fourth quarter of 1995 also include a $41
million charge related to the loss of an aircraft operated by American.
Results for the fourth quarter of 1994 include $276 million in
restructuring costs, primarily representing the cost of early retirement
programs and severance for Airline Group employees. During the second quarter of
1994, the Company changed its estimate of the usage patterns of miles awarded by
participating companies in American's AAdvantage frequent flyer program. The
positive impact of the change in estimate on revenues for the second, third and
fourth quarters of 1994 was $35 million, $14 million and $10 million,
respectively, as compared to the same quarters in 1993.
37
<PAGE> 39
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
- - -------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(c) of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(c) of Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(c) of Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted under the reduced disclosure format pursuant to General Instruction
J(2)(c) of Form 10-K.
PART IV
- - -------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The financial statements listed in the accompanying index to
financial statements and schedules are filed as part of this report.
(2) The schedules listed in the accompanying index to financial
statements and schedules are filed as part of this report.
(3) Exhibits required to be filed by Item 601 of Regulation S-K. (Where
the amount of securities authorized to be issued under any of
American's long-term debt agreements does not exceed 10 percent of
American's assets, pursuant to paragraph (b)(4) of Item 601 of
Regulation S-K, in lieu of filing such as an exhibit, American hereby
agrees to furnish to the Commission upon request a copy of any
agreement with respect to such long-term debt.)
<TABLE>
<CAPTION>
EXHIBIT
-------
<S> <C>
3(a) Composite of the Certificate of Incorporation of American,
incorporated by reference to Exhibit 3(a) to American's
report on Form 10-K for the year ended December 31, 1982,
file number 1-2691.
3(b) Amended Bylaws of American, incorporated by reference to
Exhibit 3(b) to American's report on Form 10-K for the year
ended December 31, 1990, file number 1-2691.
10(a) Purchase Agreement, dated as of February 12, 1979, between
American and the Boeing Company, relating to the purchase of
Boeing Model 767-323 aircraft, incorporated by reference to
Exhibit 10(b)(3) to American's Registration Statement No.
2-76709.
10(b) Description of American's Split Dollar Insurance Program,
dated December 28, 1977, incorporated by reference to
Exhibit 10(c)(1) to American's Registration Statement No.
2-76709.
</TABLE>
38
<PAGE> 40
<TABLE>
<S> <C>
10(c) American's 1992 Incentive Compensation Plan incorporated by
refernce to Exhibit 10(c) to American's report on Form 10-K
for the year ended December 31, 1991, file marker 1-2691.
10(d) 1979 American Airlines (AMR) Stock Option Plan, as amended,
incorporated by reference to Exhibit 10(d) to American's
report on Form 10-K for the year ended December 31, 1982,
file number 1-2691.
10(e) 1979 American Airlines (AMR) Stock Option Plan, as amended,
incorporated by reference to Exhibit 10(e) to American's
report on Form 10-K for the year ended December 31, 1982,
file number 1-2691.
10(f) Form of Stock Option Agreement for Corporate Officers under
the 1979 American Airlines (AMR) Stock Option Plan,
incorporated by reference to Exhibit 10(c)(5) to American's
Registration Statement No. 2-76709.
10(g) Form of Stock Option Agreement under the 1974 and 1979
American Airlines (AMR) Stock Option Plans, incorporated by
reference to Exhibit 10(c)(6) to American's Registration
Statement No. 2-76709.
10(h) Deferred Compensation Agreement, dated April 14, 1973, as
amended March 1, 1975, between American and Robert L.
Crandall, incorporated by reference to Exhibit 10(c)(7) to
American's Registration Statement No. 2-76709.
10(i) Deferred Compensation Agreement, dated October 18, 1972, as
amended March 1, 1975, between American and Gene E.
Overbeck, incorporated by reference to Exhibit 10(c)(9) to
American's Registration Statement No. 2-76709.
10(j) Deferred Compensation Agreement, dated June 3, 1970, between
American and Francis H. Burr, incorporated by reference to
Exhibit 11(d) to American's Registration Statement No.
2-39380.
10(k) Description of informal arrangement relating to deferral of
payment of directors' fees, incorporated by reference to
Exhibit 10(c)(11) to American's Registration Statement No.
2-76709.
10(l) Purchase Agreement, dated as of February 29, 1984, between
American and the McDonnell Douglas Corporation, relative to
the purchase of McDonnell Douglas Super 80 aircraft,
incorporated by reference to Exhibit 10(l) to American's
report on Form 10-K for the year ended December 31, 1983,
file number 1-2691.
10(m) Purchase Agreement, dated as of June 27, 1983, between
American and the McDonnell Douglas Corporation, relative to
the purchase of McDonnell Douglas Super 80 aircraft,
incorporated by reference to Exhibit 4(a)(8) to American's
Registration Statement No. 2-84905.
10(n) Form of Executive's Termination Benefits Agreement
incorporated by reference to Exhibit 10(p) to American's
report on Form 10-K for the year ended December 31, 1985,
file number 1-2691.
10(o) Amendment, dated June 4, 1986, to Purchase Agreement in
Exhibit 10(l) above, incorporated by reference to Exhibit
10(l) to American's report on Form 10-K for the year ended
December 31, 1986, file number 1-2691.
10(p) Acquisition Agreement, dated as of March 1, 1987, between
American and Airbus Industrie relative to the lease of
Airbus A300-600R aircraft, incorporated by reference to
Exhibit 10(p) to American's report on Form 10-K for the year
ended December 31, 1986, file number 1-2691.
</TABLE>
39
<PAGE> 41
<TABLE>
<S> <C>
10(q) Acquisition Agreement, dated as of March 1, 1987, between
American and the Boeing Company relative to the lease of
Boeing 767-323ER aircraft, incorporated by reference to
Exhibit 10(q) to American's report on Form 10-K for the year
ended December 31, 1986, file number 1-2691.
10(r) Acquisition Agreement, dated as of July 21, 1988, between
American and the Boeing Company relative to the purchase of
Boeing Model 757-223 aircraft, incorporated by reference to
Exhibit 10(r) to American's report on Form 10-K for the year
ended December 31, 1988, file number 1-2691.
10(s) Acquisition Agreement, dated as of February 4, 1989, among
American and Delta Airlines, Inc. and others relative to
operation of a computerized reservations system incorporated
by reference to Exhibit 10(s) to American's report on Form
10-K for the year ended December 31, 1988, file number
1-2691.
10(t) Purchase Agreement, dated as of May 5, 1989, between
American and the Boeing Company relative to the purchase of
Boeing 757-223 aircraft, incorporated by reference to
Exhibit 10(t) to American's report on Form 10-K for the year
ended December 31, 1989, file number 1-2691.
10(u) Purchase Agreement, dated as of June 9, 1989, between
American and Fokker Aircraft U. S. A., Inc. relative to the
purchase of Fokker 100 aircraft, incorporated by reference
to Exhibit 10(u) to American's report on Form 10-K for the
year ended December 31, 1989, file number 1-2691.
10(v) Purchase Agreement, dated as of June 23, 1989, between
American and the Boeing Company relative to the purchase of
Boeing 767-323ER aircraft, incorporated by reference to
Exhibit 10(v) to American's report on Form 10-K for the year
ended December 31, 1989, file number 1-2691.
10(w) Purchase Agreement, dated as of August 3, 1989, between
American and the McDonnell Douglas Corporation relative to
the purchase of MD-11 aircraft, incorporated by reference to
Exhibit 10(w) to American's report on Form 10-K for the year
ended December 31, 1989, file number 1-2691.
10(x) Amendment, dated as of August 3, 1989, to the Purchase
Agreement in Exhibit 10(l) above, incorporated by reference
to Exhibit 10(x) to American's report on Form 10-K for the
year ended December 31, 1989, file number 1-2691.
10(y) Purchase Agreement, dated as of October 25, 1989, between
American and AVSA, S. A. R. L. relative to the purchase of
Airbus A300-600R aircraft, incorporated by reference to
Exhibit 10(y) to American's report on Form 10-K for the year
ended December 31, 1989, file number 1-2691.
10(z) Amendment, dated as of November 16, 1989, to Employment
Agreement among AMR Corporation, American Airlines and
Robert L. Crandall, incorporated by reference to Exhibit
10(z) to American's report on Form 10-K for the year ended
December 31, 1989, file number 1-2691.
10(aa) Management Severance Allowance, dated as of February 23,
1990, for levels 1-4 employees of American Airlines, Inc.,
incorporated by reference to Exhibit 10(aa) to American's
report on Form 10-K for the year ended December 31, 1989,
file number 1-2691.
</TABLE>
40
<PAGE> 42
<TABLE>
<S> <C>
10(bb) Management Severance Allowance, dated as of February 23,
1990, for level 5 and above employees of American Airlines,
Inc., incorporated by reference to Exhibit 10(bb) to
American's report on Form 10-K for the year ended December
31, 1989, file number 1-2691.
10(cc) Amendment, dated as of December 3, 1990, to Employment
Agreement among AMR Corporation, American Airlines and
Robert L. Crandall incorporated by reference to Exhibit
10(cc) to American's report on Form 10-K for the year ended
December 31, 1990, file number 1-2691.
10(dd) Amendment, dated as of May 1, 1992, to Employment Agreement
among American, American Airlines and Robert L. Crandall
incorporated by reference to Exhibit 10(dd) to American's
report on Form 10-Q for the period ended June 30, 1992, file
number 1-2691.
10(ee) Aircraft Sales Agreement by and between American Airlines,
Inc. and Federal Express Corporation, dated April 7, 1995.
19 The 1974 and 1979 American Airlines (AMR) Stock Option plans
as amended March 16, 1983, incorporated by reference to
Exhibit 19 to American's report on Form 10-K for the year
ended December 31, 1983, file number 1-2691. Refer to
Exhibits 10(d) and 10(e).
23 Consent of Independent Auditors appears on page 43 hereof.
</TABLE>
(b) Reports on Form 8-K:
None.
41
<PAGE> 43
AMERICAN AIRLINES, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
COVERED BY REPORT OF INDEPENDENT AUDITORS
[ITEM 14(A)]
<TABLE>
<CAPTION>
Page
--------
<S> <C>
FINANCIAL STATEMENTS
Report of Independent Auditors 16
Consolidated Statement of Operations for the Years Ended
December 31, 1995, 1994 and 1993 17
Consolidated Balance Sheet at December 31, 1995 and 1994 18-19
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 20
Consolidated Statement of Stockholder's Equity for the Years Ended
December 31, 1995, 1994 and 1993 21
Notes to Consolidated Financial Statements 22-37
CONSOLIDATED SCHEDULES FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
Schedule II Valuation and Qualifying Accounts and Reserves 44-46
</TABLE>
All other schedules are omitted since the required information is included in
the financial statements or notes thereto, or since the required information is
either not present or not present in sufficient amounts.
42
<PAGE> 44
AMERICAN AIRLINES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(DEDUCTED FROM ASSET TO WHICH APPLICABLE)
YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
CHARGED TO
---------- SALES, BALANCE
BALANCE AT OTHER DEPREC. RESTRUC- NET RETIREMENTS AT
BEGINNING OPERATING AND TURING WRITE- AND END OF
OF YEAR EXPENSES AMORT. COSTS OFF TRANSFERS YEAR
-------- -------- ------ ----- --- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for
uncollectible accounts $ 14 $ 14 $ - $ - $(15) $ - $ 13
Allowance for
obsolescence of inventories 171 - 36 9 - (12) 228
</TABLE>
43
<PAGE> 45
AMERICAN AIRLINES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(DEDUCTED FROM ASSET TO WHICH APPLICABLE)
YEAR ENDED DECEMBER 31, 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
CHARGED TO
---------- SALES, BALANCE
BALANCE AT OTHER DEPREC. RESTRUC- NET RETIREMENTS AT
BEGINNING OPERATING AND TURING WRITE- AND END OF
OF YEAR EXPENSES AMORT. COSTS OFF TRANSFERS YEAR
-------- -------- ------ ----- --- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for
uncollectible accounts $ 26 $18 $ - $ - $(30) $ - $ 14
Allowance for
obsolescence of inventories 162 - 28 - - (18) 171
Reserve for anticipated loss
on fleet retirement 50 - - 4 (34) - 20
</TABLE>
44
<PAGE> 46
AMERICAN AIRLINES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(DEDUCTED FROM ASSET TO WHICH APPLICABLE)
YEAR ENDED DECEMBER 31, 1993
(IN MILLIONS)
<TABLE>
<CAPTION>
CHARGED TO
---------- SALES, BALANCE
BALANCE AT OTHER DEPREC. RESTRUC- NET RETIREMENTS AT
BEGINNING OPERATING AND TURING WRITE- AND END OF
OF YEAR EXPENSES AMORT. COSTS OFF TRANSFERS YEAR
-------- -------- ------ ----- --- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for
uncollectible accounts $ 28 $19 $ - $ - $(21) $ - $ 26
Allowance for
obsolescence of inventories 130 - 10 - - 22 162
Reserve for anticipated loss
on fleet retirement 20 - - 125 (83) (12) (a) 50
</TABLE>
(a) Transfer to Allowance for obsolescence of inventories.
45
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ Robert L. Crandall
- - ---------------------------------------------
Robert L. Crandall
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ Gerard J. Arpey
- - ---------------------------------------------
Gerard J. Arpey
Senior Vice President - Finance and Planning and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: March 20, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates noted:
Directors:
/s/ Howard P. Allen /s/ Dee J. Kelly
- - ---------------------------------- -----------------------------------
Howard P. Allen Dee J. Kelly
/s/ David L. Boren /s/ Ann D. McLaughlin
- - ---------------------------------- -----------------------------------
David L. Boren Ann D. McLaughlin
/s/ Edward A. Brennan /s/ Charles H. Pistor, Jr.
- - ---------------------------------- -----------------------------------
Edward A. Brennan Charles H. Pistor, Jr.
/s/ Armando M. Codina /s/ Joe M. Rodgers
- - ---------------------------------- -----------------------------------
Armando M. Codina Joe M. Rodgers
/s/ Christopher F. Edley /s/ Maurice Segall
- - ---------------------------------- -----------------------------------
Christopher F. Edley Maurice Segall
/s/ Charles T. Fisher, III /s/ Eugene F. Williams, Jr.
- - ---------------------------------- -----------------------------------
Charles T. Fisher, III Eugene F. Williams, Jr.
/s/ Earl G. Graves
- - ----------------------------------
Earl G. Graves
Date: March 20, 1996
46
<PAGE> 48
INDEX TO EXHIBIT
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
10(ee) Aircraft Sales Agreement by and between American Airlines,
Inc. and Federal Express Corporation, dated April 7, 1995.
23 Consent of Independent Auditors.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10(ee)
================================================================================
AIRCRAFT SALES AGREEMENT
BY AND BETWEEN
AMERICAN AIRLINES, INC.
AND
FEDERAL EXPRESS CORPORATION
DATED APRIL 7, 1995
================================================================================
SALE OF TWELVE McDONNELL DOUGLAS MODEL MD-11 AIRCRAFT
GRANT OF OPTIONS ON SEVEN McDONNELL DOUGLAS MODEL MD-11 AIRCRAFT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE/SECTION PAGE
- - --------------- ----
<S> <C>
ARTICLE 1 DEFINITIONS; CONSTRUCTION
Section 1.01 Primary Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2 PURCHASE OF AIRCRAFT
Section 2.01 Firm Aircraft, Purchase Prices and Delivery Dates . . . . . . . . . . . . . . . . 9
Section 2.02 Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.03 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.04 Designation and Substitution of Airframes and Engines . . . . . . . . . . . . . . 12
Section 2.05 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.06 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3 AIRCRAFT DELIVERY, TITLE, RISK OF LOSS
Section 3.01 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.02 Inspection, Flight Checks and Discrepancies . . . . . . . . . . . . . . . . . . . 14
Section 3.03 [ * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]
Section 3.04 Delivery Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.05 Delayed Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.06 Delivery Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.07 Adjustments to Purchase Price for Delivery Condition . . . . . . . . . . . . . . . 23
Section 3.08 Aircraft Delivery Certificate; Engine Delivery Certificate . . . . . . . . . . . . 23
Section 3.09 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.10 Title and Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 4 SPARE PARTS
Section 4.01 MD-11 Spare Parts List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.02 MD-11 Spare Parts Purchase Obligation. . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.03 Spare Engine, Spare APU and Spare Thrust Reverser Purchase Obligation . . . . . . 26
Section 4.04 Effect of Expiration of Put Options on Certain Spare Parts Purchase Obligations . 28
Section 4.05 Designation of MD-11 Spare Parts to be Acquired and Delivery . . . . . . . . . . . 28
Section 4.06 MD-11 Spare Parts Documentation . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 5 REPRESENTATIONS AND WARRANTIES
Section 5.01 American's Representations and Warranties . . . . . . . . . . . . . . . . . . . . 29
Section 5.02 No Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.03 FedEx's Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 6 DOCUMENTATION
Section 6.01 Availability of Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.02 Technical Data and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 7 ASSIGNMENT OF WARRANTIES, SERVICE LIFE POLICIES AND PATENT INDEMNITIES
Section 7.01 Assignment of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 8 PAYMENT OF TAXES
Section 8.01 Payment of Taxes by FedEx . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.02 Tax Consequences of Certain Deliveries . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.03 After-Tax Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 9 EXCUSABLE DELAY
Section 9.01 Excusable Delay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 9.02 Time Limits on Excusable Delays . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 10 INDEMNIFICATION
Section 10.01 FedEx's Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.02 American's Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 11 INSURANCE
Section 11.01 Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.02 Hull Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 11.03 Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 12 DEFAULT AND REMEDIES
Section 12.01 American Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.02 FedEx Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.03 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.04 Limitation of Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 13 DISPUTE RESOLUTION
Section 13.01 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 13.02 Notice of Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 13.03 Dispute Resolution Through Negotiation . . . . . . . . . . . . . . . . . . . . . . 41
Section 13.04 Dispute Resolution Through Mediation . . . . . . . . . . . . . . . . . . . . . . . 42
Section 13.05 Dispute Resolution Through Arbitration . . . . . . . . . . . . . . . . . . . . . . 42
Section 13.06 Forbearance During Resolution Process . . . . . . . . . . . . . . . . . . . . . . 43
Section 13.07 Limitation of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 13.08 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 14 CONDITIONS
Section 14.01 Conditions to FedEx's Obligations . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 14.02 Conditions to American's Obligations . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 15 CONFIDENTIALITY
Section 15.01 Confidentiality Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 16 FURTHER ASSURANCES
Section 16.01 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 17 MISCELLANEOUS
Section 17.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 17.02 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 17.03 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 17.04 No Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 17.05 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 17.06 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 17.07 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 17.08 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 17.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 17.10 Brokers' Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 17.11 No Remedy Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 17.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 17.13 Survival of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
iv
<PAGE> 6
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Aircraft Subject to Aircraft Purchase Agreement
Exhibit B Aircraft Delivery Certificate
Exhibit C Warranty Bills of Sale
Exhibit D Data Relating to the Aircraft and Engines
Exhibit E Designation of an Airframe for Delivery on Scheduled Delivery Date
Exhibit F Designation of a Substitute Airframe for Delivery on Scheduled Delivery Date
Exhibit G Form of Assignment of Assignable Manufacturer's Warranties
Exhibit H Designation of Engines for Conveyance on Scheduled Delivery Date
Exhibit I Put Option Exercise
Exhibit J Purchase Option Notice
Exhibit K Purchase Option Exercise
Exhibit L Purchase Price Adjustment Formula-Airframe
Exhibit M Purchase Price Adjustment Formula-Engines
Exhibit N Purchase Price Adjustment Formula-Gear
Exhibit O Purchase Price Adjustment Formula-APU
Exhibit P Engine Delivery Certificate
Exhibit Q Spare Parts Purchase Schedule and Prices
Exhibit R Procedure for Engine Borescope Inspections
Exhibit S Form of [ * ]Agreement
Exhibit T Spares Purchase Price Adjustment Formula-Spare Engines
Exhibit U High-Hour and High-Cycle Airframe Certificate
</TABLE>
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
v
<PAGE> 7
AIRCRAFT SALES AGREEMENT
This AIRCRAFT SALES AGREEMENT (the "Agreement") is made on April 7,
1995 by and between AMERICAN AIRLINES, INC., a Delaware corporation
("American") and FEDERAL EXPRESS CORPORATION, a Delaware corporation ("FedEx").
RECITALS
1. American owns twelve (12) McDonnell Douglas Model MD-11
aircraft that American desires to sell. American has agreed to sell to FedEx
and FedEx has agreed to buy from American twelve (12) of its McDonnell Douglas
Model MD-11 aircraft. In addition, FedEx has agreed to grant to American put
options to sell to FedEx up to seven (7) additional McDonnell Douglas Model
MD-11 aircraft.
2. American and FedEx desire to document the terms and conditions
for the sale and purchase of the Firm Aircraft, the Put Options with respect to
the Put Option Aircraft and the Purchase Options with respect to the Put Option
Aircraft, each as defined below.
FOR AND IN CONSIDERATION of the mutual covenants contained in this
Agreement and other good and valuable consideration, the receipt of which is
hereby acknowledged FedEx and American (each a "Party" and together the
"Parties") agree as follows:
ARTICLE 1
DEFINITIONS; CONSTRUCTION
Section 1.01. Primary Definitions. In addition to words and terms
elsewhere defined in this Agreement, the following words and terms shall have
the meanings set forth below:
"Affiliate" shall mean any person, directly or indirectly, through one
or more intermediaries, controlling, controlled by or under common control with
American or FedEx, as the case may be.
"Aircraft" shall mean any or all of the nineteen (19) McDonnell
Douglas Model MD-11 aircraft, the U.S. Registration Numbers and Manufacturer's
Serial Numbers of which are listed on Exhibit A, each such aircraft consisting
of an Airframe, three Engines and the Gear, the APU and any and all Parts
installed therein or thereon at Delivery.
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<PAGE> 8
"Aircraft Delivery Certificate" shall mean a tender and acceptance
certificate, in the form of Exhibit B, executed by FedEx and American
concurrently with the Delivery of each Aircraft.
"Aircraft Records" shall mean that portion of the Data listed under
the caption "RECORDS" in Exhibit D.
"Airframe" or "Airframes" shall mean one or more, as the case may be,
of the McDonnell Douglas Model MD-11 airframes bearing one of the
Manufacturer's Serial Numbers set forth in Exhibit A.
"Airworthiness Directive" or "Airworthiness Directives" shall mean one
or more of the airworthiness directives prescribed in Part 39 of the FAR or any
successor regulation thereto to the extent such airworthiness directives apply
to the Aircraft other than the Passenger Parts.
"Airworthy" shall mean the condition of an Aircraft (1) which includes
the existence of a validly issued, current individual aircraft FAA Certificate
of Airworthiness with respect to the Aircraft and which satisfies all
requirements for the effectiveness of such FAA Certificate of Airworthiness,
(2) which complies with: (A) the MD-11 Type Design Data Certificate, including
all applicable supplemental type certificates which have been incorporated on
the Aircraft; (B) subject to the nondiscrimination covenant of American in
Section 3.06(a)(ii), all applicable FAA Airworthiness Directives which are
required to be complied with by the Scheduled Delivery Date of such Aircraft
and the requirements for maintaining data substantiating the status and method
of compliance for each such Airworthiness Directive; and (C) the Aircraft
records requirements of FAR Section 121.380; and (3) in which such Aircraft's
structure, systems and components are functioning in accordance with their
intended use as set forth in FAA-approved documentation, including, but not
limited to, any applicable original manufacturer's manuals, technical standard
orders, parts manufacturing approval certificates or American engineering
specification orders, provided, however, that clauses (1), (2) and (3) above
are subject in all respects to any discrepancies or deviations of such Aircraft
from, or failures of such Aircraft to comply with, the foregoing standards
which are solely the result of the removal of the Passenger Parts from the
Aircraft as contemplated by Sections 3.02 and 3.06(a)(x).
"American ESM" shall mean the American Airlines MD-11 Engineering
Specification Maintenance (ESM) Program as in effect on the Delivery Date of
the Aircraft to which the standards in such program are being applied.
"American Program" shall mean American's FAA-approved Maintenance
Program for the Airframes and the Engines as in effect from time to time,
including, without limitation, the American ESM. When used in Section 3.06 and
Exhibits L, M, N and O (whether expressly used therein or whether used in
the definition of
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<PAGE> 9
any other defined term appearing therein), references to the American Program
shall be to the American Program as in effect on the Delivery Date of the
Aircraft to which the standards in such Section 3.06 and such exhibits are
being applied.
"American Serviceable Tag" shall mean a document containing
appropriate entries detailing conformity to type design of the Spare Parts,
and, if applicable, the maintenance certification of repair, which is properly
executed in accordance with the American's General Maintenance Policy and
Procedures Program. The American Serviceable Tags will be acceptable to FedEx
when signed by an FAA-certified individual or accompanied by a certificate of
repair or a certificate signifying conformity to type design and specifying
that the Spare Parts are serviceable. The affixing of an American Serviceable
Tag to a Spare Part shall signify that the Spare Part is in a serviceable
condition for operation on American's fleet of McDonnell Douglas MD-11 aircraft
and complies with applicable manufacturer's service bulletins, Airworthiness
Directives, and the aircraft records requirements of FAR Section 121.380.
"AMR Rate" shall mean [ * ].
"APU" shall mean [ * ].
"Average Unit Price" shall mean American's average unit price for any
Spare Parts as shown on the books of American as of January 20, 1995.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banking institutions in Ft. Worth, Texas, New York, New York
or Memphis, Tennessee are authorized or required by law to be closed.
"C Check" shall mean any C check of a McDonnell Douglas Model MD-11
airframe as prescribed by the American Program.
"Change Designation" shall mean a notice in the form set forth in
Exhibit F exercising the right to substitute Airframes set forth in Section
2.04.
"Citibank Prime" shall mean the rate of interest announced by
Citibank, N.A. from time to time as its prime lending rate to its most credit
worthy commercial customers, which rate shall not necessarily be its lowest
lending rate.
"Data" shall mean all of the manuals, documents, drawings, charts, records
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 10
and other written materials described in Exhibit D, on whatever medium, and
any successor, supplemental, modifying, amending or replacement manuals,
documents, drawings, charts, records and other written materials, on whatever
medium, all of which shall be current with the latest revisions available with
respect thereto at the time such Data is delivered to FedEx.
"Delayed Delivery Engine" or "Delayed Delivery Engines" shall mean one
or more, as the case may be, of the Engine or Engines which (i) are conveyed
with an Aircraft, but which are not installed on the Aircraft at Delivery, (ii)
which American will deliver within ninety (90) days after the Delivery of such
Aircraft and (iii) which, at the time of the Delivery of the Aircraft, American
expects to be and which, upon its delivery by American to FedEx, must be in the
condition required by Section 3.06 for Engines upon delivery to FedEx.
"Delivery" shall mean, with respect to any Aircraft, the occurrence of
all the following events, which events are to be performed in accordance with
this Agreement: (a) tender of the Aircraft by American to FedEx as evidenced by
American's execution and delivery to FedEx of an Aircraft Delivery Certificate
with respect to such Aircraft, (b) acceptance by FedEx of the Aircraft, as
evidenced by FedEx's execution and re-delivery of such Aircraft Delivery
Certificate to American, (c) sale by transfer of title of the Aircraft by
American to FedEx as evidenced by delivery to FedEx of the executed FAA Bill of
Sale and the executed Warranty Bill of Sale, and (d) payment by FedEx to
American of the Purchase Price for the Aircraft.
"Delivery Condition" shall mean the condition that an Aircraft must be
in at the time it is tendered by American to FedEx for Delivery as prescribed
by Section 3.06.
"Delivery Date" shall mean any date on which the Delivery of an
Aircraft is complete.
"Deposits" shall mean the cash deposits made by FedEx with American
pursuant to Section 2.06.
"Designation" shall mean a written notice in the form set forth in
Exhibit E designating a particular Airframe for delivery on a Scheduled
Delivery Date, either in connection with the sale of the Firm Aircraft, the
exercise of a Put Option, or the exercise of a Purchase Option.
"Direct Maintenance Costs" shall mean, with respect to a particular
maintenance bill of work, all direct labor costs, the aggregate Average Unit
Price of all materials and the cost of all outside services, less any warranty
payments and reimbursements.
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<PAGE> 11
"Engine" or "Engines" shall mean one or more, as the case may be,
General Electric CF6-80C2D1F aircraft engines to be conveyed to FedEx under
this Agreement as a part of an Aircraft, including Replacement Engines and
Delayed Delivery Engines, but excluding Non-Conforming Engines.
"Engine Designation" shall mean a written notice in the form set forth
in Exhibit H designating the Engines to be conveyed by American to FedEx as a
part of a Firm Aircraft, a Put Option Aircraft or a Purchase Option Aircraft.
"Engine Heavy Maintenance" or "EHM" shall mean that engine maintenance
build level in which there is complete refurbishment of all modules in a
General Electric CF6-80C2D1F aircraft engine in accordance with the "Detailed
Program Requirements" listed in American's Engineering Specification 6-3/DH/JP
contained in American's GE-CF6-80C2 Engine Manual or in any successor
engineering specification.
"Engine Maintenance" shall mean a HSC, HSM or EHM.
"Engine Records" shall mean that portion of the Data relating to the
Engines and the Spare Engines, including that portion of the Data set forth
under the caption "ENGINE RECORDS" in Exhibit D.
"Engine Lease Agreement" shall mean an engine lease agreement
substantially in the form attached hereto as Exhibit S.
"Event of Default" shall mean, as to American, any of the events of
default set forth in Section 12.01 and, as to FedEx, any of the events of
default set forth in Section 12.02.
"Excusable Delay" shall mean, subject to the time limitations set
forth in Section 9.02, any delay in the timely discharge and performance by a
Party of its obligations and duties under this Agreement to the extent such
delay shall be the result of (i) the occurrence of a Force Majeure Event with
respect to the Party whose performance is delayed, (ii) the fault of the other
Party, whether such fault arises from the failure of the other Party to
discharge and perform its obligations and duties hereunder or otherwise, (iii)
any other event that excuses as a matter of applicable law a Party's timely
performance of its contractual obligations and duties or (iv) with respect to
American only, any damage to, partial destruction of, total loss of, or
substantially complete or complete destruction of an Aircraft.
"FAA" shall mean the United States Federal Aviation Administration or
any successor agency thereto.
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<PAGE> 12
"FAR" shall mean the United States Federal Aviation Regulations, 14
C.F.R Section 1 et seq., as promulgated pursuant to Title 49 Section 40101 et
seq. of the United States Code, and any successor statute thereto, as such
regulations are in effect from time to time.
"FAA Bill of Sale" shall mean a Federal Aviation Administration Bill
of Sale (AC Form 8050-2 or any successor form thereto) conveying title to the
Aircraft to FedEx.
"Firm Aircraft" shall mean any or all of the Aircraft to be sold by
American to FedEx pursuant to Section 2.01.
"First Interval Items" shall mean those maintenance significant items
set forth in pages 52-1 through 52-2 (as revised on April 21, 1993), pages 53-1
through 53-44 (as revised on February 8, 1995), pages 54-1 through 54-6 (as
revised through December 21, 1994), pages 55-1 through 55-12 (as revised on
February 2, 1994) and pages 57-1 through 57- 21 (as revised on February 8,
1995) of the American ESM which are required to be accomplished for the first
time sixty (60) months after the delivery of an Airframe to American by the
Manufacturer.
"Force Majeure Event" shall mean any act of God, action or regulation
of any governmental authority, fire, weather, flood, earthquake, accident,
mechanical or electrical failure other than with respect to an Aircraft being
delivered, act of the public enemy, war, civil disturbance, rebellion,
insurrection, work stoppage, work slow down, other labor or work action, labor
dispute, restraint of government or other cause or event beyond the control of
the Party claiming the benefit of the occurrence of any such force majeure.
"Gear" shall mean one or more, as the case may be, of the nose,
center, left and right landing gears on any Airframe.
"Hot Section/Compressor Maintenance" or "HSC" shall mean the engine
maintenance build level in which there is refurbishment of the HPT Rotor, HPT
1st Stage Nozzle Assembly, the 2nd Stage Nozzle Assembly and the HPC Rotor as
described in the American Program.
"Hot Section Maintenance" or "HSM" shall mean the engine maintenance
build level in which there is refurbishment of the HPT Rotor, HPT 1st Stage
Nozzle Assembly, and the 2nd Stage Nozzle Assembly as described in the American
Program.
"Lien" shall mean any mortgage, pledge, security interest, lien,
claim, encumbrance or other charge or rights of others of any kind on property.
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<PAGE> 13
"Life Limited Part" or "Life Limited Parts" shall mean one or more, as
the case may be, Parts which must be removed from an Engine, a Spare Engine, an
APU or a Spare APU upon having been in such Engine, Spare Engine, APU or Spare
APU for the maximum permissible calendar time, flight cycles or flight hours
specified for such Part by its manufacturer.
"Manufacturer" shall mean McDonnell Douglas Corporation as to the
Airframes and General Electric Corporation as to the Engines.
"MD-11 Spare Part" or "MD-11 Spare Parts" shall mean any or all Parts
listed on the Spares List.
"More Restrictive" shall mean that measure of the interval between
maintenance events for an Airframe, Engine, Gear or APU or of the useful life
or the interval between maintenance events of a Part which yields the lowest
percentage of such interval remaining until the next such required maintenance
event or the lowest percentage of such useful life, as applicable.
"Non-Conforming Engine" or "Non-Conforming Engines" shall mean one or
more, as the case may be, General Electric C6F-80C2D1F engines installed on an
Aircraft which do not meet the delivery conditions for Engines set forth in
Section 3.06, but which are otherwise in a condition suitable for the purpose
of permitting ferry flights of the Aircraft on which such engines are installed
to the facilities of one or more third party vendors for conversion of such
Aircraft to a cargo configuration or for transition maintenance for such
Aircraft.
"Part" or "Parts" shall mean any item or items of avionics,
appliances, parts, furnishings, instruments, accessories and equipment suitable
for installation and use on an Aircraft.
"Passenger Parts" shall mean any Parts installed in the passenger
cabin of an Aircraft that relate to the passenger configuration of such
Aircraft, but excluding any Part in the passenger cabin of an Aircraft which is
necessary for the Aircraft to be modified into FedEx's freighter configuration,
including, without limitation, the forward starboard lavatory, the slide rafts
on the R1, R4, L1 and L4 doors and the forward starboard galley installed on
such Aircraft.
"Power Assurance Run Test" shall mean a power assurance run test on an
Engine conducted in accordance with the procedures in Test No. 6 in Chapter
71-00-00-5-1 of the McDonnell Douglas Aircraft Maintenance Manual pertaining to
McDonnell Douglas Model MD-11 aircraft.
"Purchase Option" and "Purchase Options" shall have the meanings set
forth in Section 2.03.
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<PAGE> 14
"Purchase Option Aircraft" shall mean any Put Option Aircraft as to
which FedEx has delivered a Purchase Option Exercise.
"Purchase Option Exercise" shall mean a written notice given by FedEx
to American exercising a Purchase Option as to any Put Option Aircraft, which
notice shall be in the form attached hereto as Exhibit K.
"Purchase Option Notice" shall mean a written notice, in the form
attached hereto as Exhibit J, given by American to FedEx notifying FedEx of
American's intent to offer for sale, or to otherwise permanently transfer
possession of, any of the Put Option Aircraft other than pursuant to the Put
Options or any agreements entered into by American pursuant to which American
has granted a security interest in the Aircraft in connection with the
financing of the Aircraft.
"Purchase Price" shall mean, as applicable, the purchase price of a
Firm Aircraft on a Scheduled Delivery Date as set forth in Section 2.01, of a
Put Option Aircraft on a Scheduled Delivery Date as set forth in Section 2.02
and of a Purchase Option Aircraft applicable for the month of the Delivery of
the Purchase Option Aircraft as set forth in Section 2.03, as adjusted in
accordance with Section 3.07.
"Put Option" and "Put Options" shall have the meanings set forth in
Section 2.02.
"Put Option Aircraft" shall mean any or all of the Aircraft as to
which FedEx has granted to American options to sell such Aircraft to FedEx
pursuant to Section 2.02.
"Put Option Exercise" shall mean a written notice given by American to
FedEx exercising a Put Option as to any Put Option Aircraft, which notice shall
be in the form attached hereto as Exhibit I.
"Replacement Engine" or "Replacement Engines" shall mean one or more,
as the case may be, General Electric C6F- 80C2D1F engines to be conveyed by
American to FedEx in the stead of a Delayed Delivery Engine pursuant to Section
3.03, each of which engines meets the delivery condition requirements of
Section 3.06 with respect to Engines.
"Scheduled Delivery Date" shall mean a date on which an Aircraft is to
be delivered as set forth in Section 2.01 as to the Firm Aircraft, and Section
2.02 as to the Put Option Aircraft and Section 2.03 as to any Purchase Option
Aircraft or, as to any of the Aircraft, such other date as the Parties may
agree in writing.
"Second Interval Items" shall mean those maintenance significant items
set forth in pages 52-1 through 52-2 (as revised on April 21, 1993), pages 53-1
through 53-44 (as revised on February 8, 1995), pages 54-1 through 54-6 (as
revised through
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<PAGE> 15
December 21, 1994), pages 55-1 through 55-12 (as revised on February 2, 1994)
and pages 57-1 through 57-21 (as revised on February 8, 1995) of the American
ESM which are required to be accomplished for the first time ninety (90) months
after the delivery of an Airframe to American by the Manufacturer.
"Shop Findings Report" shall mean a report stating the root cause of
the failure of a Part and the materials used in returning such Part to a
serviceable condition which is executed by an authorized repairman, all in
accordance with the American Program.
"Spare APU" and "Spare APU's" shall mean one or more, as the case may
be, of the five (5) APU's owned by American which are not installed on an
Aircraft, which APU's shall include a shipping stand.
"Spare Engine" and "Spare Engines" shall mean one or more, as the case
may be, of the ten (10) General Electric CF6-80C2D1F engines owned by American
that are not installed on the Aircraft. Each such engine shall be in a wing or
tail quick engine change configuration and shall include an engine shipping
stand suitable for such engines.
"Spares List" shall mean the list of Parts dated as of January 20,
1995 which American is delivering to FedEx pursuant to Section 4.01.
"Spare Part" and "Spare Parts" shall mean any or all of the MD-11
Spare Parts and the Spare APU's, the Spare Engines and the Spare Thrust
Reversers.
"Spares Purchase Price" shall mean the purchase price paid or to be
paid for Spare Parts or portions thereof pursuant to Article 4.
"Spare Thrust Reversers" shall mean one or more, as the case may be,
of the three (3) pairs of thrust reverser assemblies usable on the Engines of
the Aircraft which are not installed on an Aircraft.
"Warranty Bill of Sale" shall mean a warranty bill of sale conveying
title to an Aircraft to FedEx, which warranty bill of sale shall be in the form
attached hereto as Exhibit C.
Any defined term used in this Agreement and not expressly defined
herein shall have the meaning ascribed to it in the FAR if such term is
expressly defined in the FAR or, if not expressly defined in the FAR, such term
shall have the meaning customarily ascribed to it in the aircraft industry.
Section 1.02. Rules of Construction. The words "hereof," "herein,"
"hereunder," "hereto" and other words of similar import refer to this Agreement
in its entirety.
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<PAGE> 16
The terms "agree" and "agreements" contained herein are intended to
include and mean "covenant" and "covenants".
All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections, subsections
and other subdivisions of this Agreement unless otherwise expressly provided.
All references in this Agreement to exhibits shall refer to the exhibits to
this Agreement unless otherwise provided.
The article and section headings in this Agreement have been inserted
solely for convenience and shall not be considered in construing this
Agreement.
ARTICLE 2
PURCHASE OF AIRCRAFT
Section 2.01. Firm Aircraft, Purchase Prices and Delivery Dates.
On the terms and subject to the conditions set forth herein, American agrees to
sell to FedEx, and FedEx agrees to purchase from American, the Firm Aircraft,
with one Firm Aircraft to be so sold and purchased on each Scheduled Delivery
Date as set forth below. The Purchase Price of each Firm Aircraft to be
delivered on each Scheduled Delivery Date and the latest date by which a
Designation as to a Scheduled Delivery Date may be given are as set forth in
the following table:
<TABLE>
<CAPTION>
LATEST SCHEDULED
DELIVERY DESIGNATION DELIVERY PURCHASE
NUMBER DATE DATE PRICE
-------------- ---------------- -----------------
<S> <C> <C> <C> <C>
1 7-May-95 17-Jan-96 $
2 12-June-95 12-June-96 $
3 16-Oct-95 16-Oct-96 $
4 12-Feb-96 12-Feb-97 $
5 11-June-96 11-June-97 $
6 15-Oct-96 15-Oct-97 $ *
7 14-Jan-97 14-Jan-98 $
8 17-June-97 17-June-98 $
9 14-Oct-97 14-Oct-98 $
10 17-Feb-98 17-Feb-99 $
11 16-June-98 16-June-99 $
12 13-Oct-98 13-Oct-99 $
</TABLE>
Subject to Section 3.05(d), if due to the loss or, in American's sole
discretion,
substantially complete destruction of one or more Aircraft, American tenders to
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 17
FedEx for Delivery pursuant to this Agreement fewer than twelve (12) Firm
Aircraft, then on or before October 13, 1999 or such later date as the Parties
agree will be the Scheduled Delivery Date for the twelfth (12th) Firm Aircraft,
American will pay to FedEx $[* ] for each Firm Aircraft fewer than twelve
(12) that American delivers to FedEx. American will make such payment by a
wire transfer of immediately available funds.
Section 2.02. Put Options. (a) FedEx hereby grants to American
seven (7) options (the "Put Options" and each a "Put Option"), each of which
shall give American the right to sell one Aircraft to FedEx on each of the
Scheduled Delivery Dates set forth in the table in Section 2.02(c). Upon
American's exercise of each Put Option, FedEx shall purchase one Aircraft on
the terms and subject to the conditions set forth herein.
(b) A Put Option will be exercisable as to an Aircraft by American
giving to FedEx a Put Option Exercise on any date not later than the "Latest
Exercise Date" as set forth in Section 2.02(c).
(c) The latest date by which a Put Option may be exercised (each a
"Latest Exercise Date"), the latest date by which a Designation for a Scheduled
Delivery Date may be given, the Scheduled Delivery Dates for the Put Option
Aircraft and the Purchase Price of each Put Option Aircraft are as set forth in
the following table:
<TABLE>
<CAPTION>
LATEST LATEST SCHEDULED
DELIVERY EXERCISE DESIGNATION DELIVERY PURCHASE
NUMBER DATE DATE DATE PRICE
------ ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
13 15-Feb-00 $
14 14-June-00 $
15 11-Oct-00 $
16 * * 14-Feb-01 $ *
17 12-June-01 $
18 16-Oct-01 $
19 12-Feb-02 $
</TABLE>
(d) American and FedEx intend the exercise of the Put Options to be
sequential and consistent with the schedule set forth above. If American fails
to give FedEx a Put Option Exercise exercising a particular Put Option on or
before the Latest Exercise Date for such Put Option, that Put Option will
expire. If a Put Option expires, the remaining Put Options may be cancelled by
FedEx giving to
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 18
American written notice of such cancellation on or before the earlier of (i)
the next following Latest Exercise Date set forth in Section 2.02(c) and (ii)
the seventh (7th) day next following the day on which FedEx receives a written
notice from American that FedEx has the right to cancel the remaining Put
Options. If FedEx fails to give American timely written notice of the
cancellation of the remaining, unexercised Put Options, the remaining,
unexercised Put Options will remain in full force and effect. The failure of
American to give to FedEx any notice that FedEx may cancel the remaining,
unexercised Put Options shall not be a breach, default or Event of Default
under the terms of this Agreement.
Section 2.03. Purchase Options. (a) If American intends to offer
any Put Option Aircraft not designated as a Firm Aircraft for sale to a third
party, FedEx shall have the right, but not the obligation, to purchase such Put
Option Aircraft from American on the terms and subject to the conditions set
forth in this Section 2.03 (the "Purchase Options" and each, a "Purchase
Option"). American shall give FedEx a Purchase Option Notice before American
makes an offer to sell any or all of the Put Option Aircraft to any third
party. FedEx may exercise the Purchase Options as to any or all of the Put
Option Aircraft stated in a Purchase Option Notice by giving American a
Purchase Option Exercise within fourteen (14) days after its receipt of the
Purchase Option Notice. The failure of FedEx to give American a Purchase
Option Exercise within [ * ] of its receipt of the Purchase
Option Notice will entitle American to sell the Put Option Aircraft to any
person or persons free of the Purchase Options, but such failure shall not be a
breach by FedEx of, or a default or an Event of Default under, the terms of
this Agreement. If FedEx does not exercise a Purchase Option as to a
particular Put Option Aircraft, (i) American may offer for sale and may sell
such Put Option Aircraft in such manner, at such time or times, for such price
or prices and on such other terms and subject to such conditions as American,
in its sole discretion, deems acceptable and (ii) American may nevertheless
exercise the remaining, unexpired Put Options in accordance with the terms and
subject to the conditions set forth in Section 2.02 without regard to any prior
Purchase Option Notice. American will provide a Designation with respect to
any Purchase Option Aircraft on or before the later to occur of (i) one year
prior to the Scheduled Delivery Date and (ii) the thirtieth (30th) day after
its receipt of a Purchase Option Exercise.
(b) The Purchase Price for any Purchase Option Aircraft which is
tendered by American for Delivery and which FedEx is obligated to purchase in
or before January, 1996, shall be $[ * ]. The Purchase Price for
any Purchase Option Aircraft which is tendered by American for Delivery and
which FedEx is obligated
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 19
to purchase in any month thereafter shall be decreased by the amount of $[ *
] for each month after [ * ] to, but excluding, the month in which such
tender for Delivery occurs.
(c) The Scheduled Delivery Date of the Purchase Option Aircraft to
be sold to FedEx by American pursuant to FedEx's exercise of a Purchase Option
shall be the date or dates specified by American in the Purchase Option Notice
as the Scheduled Delivery Date or Scheduled Delivery Dates of the Purchase
Option Aircraft; provided, however, that no such Scheduled Delivery Date shall
be less than [ * ] after the date of the Purchase Option Notice
specifying such Scheduled Delivery Date.
(d) If American sells one or more Purchase Option Aircraft to
FedEx pursuant to FedEx's exercise of one or more Purchase Options or sells any
Put Option Aircraft as to which FedEx does not exercise a Purchase Option after
a Purchase Option Notice is given, the number of Put Options that American can
exercise shall be reduced by a number equal to the number of Purchase Option
Aircraft and/or Put Option Aircraft so sold. Any Put Options terminated by any
such reduction shall be terminated in the reverse order of the Scheduled
Delivery Dates to which the Put Options relate. The remaining Put Options
shall remain in full force and effect.
(e) If one or more Put Options expire or are terminated for any
reason, American may dispose of an equivalent number of Aircraft free of the
Purchase Options at any time thereafter and an equivalent number of Purchase
Options will terminate simultaneously and automatically. Upon such expiration
or termination, the terminated Purchase Options shall be without further force
and effect, provided, however, that any such termination of Purchase Options
shall not affect any prior exercise of any Purchase Option with respect to any
Aircraft. American shall have the right to sell or otherwise dispose of such
number of the Put Option Aircraft as to which Purchase Options are reduced free
of the Purchase Options and the provisions of this Agreement and may determine
which Put Option Aircraft are so free of the Purchase Options in its sole
discretion.
Section 2.04. Designation and Substitution of Airframes and
Engines. (a) American will designate an Airframe from among all the
Airframes as a Firm Aircraft, a Put Option Aircraft, or a Purchase Option
Aircraft for Delivery on a Scheduled Delivery Date in accordance with Section
2.01, Section 2.02 and Section 2.03, respectively, by giving FedEx a
Designation on or before the latest date for giving such Designation specified
in the applicable such section. Each Airframe to *Blank space contained
confidential information which has been filed separately with the Securities
and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934.
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<PAGE> 20
be designated by American to be part of a Firm Aircraft, a Put Option Aircraft
or a Purchase Option Aircraft to be delivered on any Scheduled Delivery Date as
to which a Designation is given will be chosen by American in its sole
discretion. American shall have the right as a result of operational
considerations to substitute a different Airframe for a previously designated
Airframe for delivery on a Scheduled Delivery Date by delivering a Change
Designation (i) on any date before the [ *
] prior to such Scheduled Delivery Date or (ii) if
such designation of a different Airframe for delivery on such Scheduled
Delivery Date would not cause a material delay in the conversion of such
different Airframe from a passenger configuration to a cargo
configuration, on any date before the [ * ] prior
to the original Scheduled Delivery Date, provided in either instance that,
within [ * ] after its receipt of FedEx's invoice setting
forth in detail the nature and amount of such costs, American reimburses FedEx
for any incremental engineering costs, incremental transition maintenance costs
and incremental modification costs incurred by FedEx solely as the result of
the substitution of the Airframe.
(b) No later than [ * ] prior to the Scheduled
Delivery Date for an Aircraft, American shall designate to FedEx the three
Engines to be conveyed to FedEx as part of such Aircraft to be delivered on
such Scheduled Delivery Date by giving FedEx a completed Engine Designation.
After designating such Engines, American will use its commercially reasonable
efforts to avoid substituting other Engines for such designated Engines, but
may do so upon written notice to FedEx, which notice shall be given by American
as soon as practicable after it determines to substitute Engines. Each Engine
to be designated by American to be a part of a Firm Aircraft, a Put Option
Aircraft or a Purchase Option Aircraft to be delivered on the various Scheduled
Delivery Dates as to which Designations are given will be chosen by American in
its sole discretion.
Section 2.05. Payment of Purchase Price. Each Purchase Price and
each Spares Purchase Price payable to American by FedEx shall be net of any
and all taxes, recording expenses, assessments, duties and similar governmental
charges and fees charged on or with respect to the sale of the Aircraft, any
and all of which amounts shall be paid by FedEx, subject, however, to the
provisions of Section 3.01. The Purchase Price for each Aircraft shall be paid
on the Delivery Date for such Aircraft, net of any applicable Deposit and the
interest calculated at the AMR Rate. The Spares Purchase Price for any Spare
Parts purchased pursuant to Article 4 shall be paid on the date the Spare Parts
being sold to FedEx are delivered by American to FedEx. The Purchase Prices,
the Spares Purchase Prices and any Deposits shall be paid by FedEx in United
States Dollars by wire transfer of *Blank space contained confidential
information which has been filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.
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<PAGE> 21
immediately available funds to American's account at Chase Manhattan Bank in
New York, New York, ABA No. 021000021 Account 910-1-019884, Reference, as
applicable, Aircraft N[Insert Relevant FAA Registration Number] or MD-11 Spare
Parts.
Section 2.06. Deposits. FedEx will pay to American on the Business
Day next following the date of execution of this Agreement a cash deposit in
the amount of $[ * ] for each Firm Aircraft. FedEx will pay to American
within the ten-day period next following the date on which each Put Option is
exercised, a cash deposit of $[* ] in respect of the Put Option Aircraft
as to which such Put Option is exercised. FedEx will pay to American upon the
Business Day next following the exercise of any Purchase Option, a cash deposit
of $[ * ] in respect of each Purchase Option Aircraft. [ *
]. If American shall fail to perform its obligation to deliver an Aircraft in
accordance with this Agreement, American will return to FedEx, upon FedEx's
written request, any Deposits made with respect to such Aircraft, with interest
thereon calculated at a rate equal to the AMR Rate. The Deposit applicable to
a particular Aircraft, with an amount of interest thereon calculated at the AMR
Rate, will be applied to the payment of the Purchase Price of such Aircraft on
the Delivery Date. Neither the retention of any Deposit by American in
connection with the failure of FedEx to perform its obligations under this
Agreement nor the return of any Deposit by American in connection with the
failure of American to perform its obligations under this Agreement shall be
the exclusive remedy of the non-defaulting Party in connection with any such
default. Except as set forth above, American shall be entitled to retain any
interest earned on the Deposits.
ARTICLE 3
AIRCRAFT DELIVERY, TITLE, RISK OF LOSS
Section 3.01. Delivery. American shall deliver each Firm Aircraft and
any Put Option Aircraft as to which a Put Option is exercised and each Purchase
Option Aircraft to FedEx on the Scheduled Delivery Date for each such Aircraft
pursuant to the procedures set forth in this Article 3. American shall tender
each Aircraft required to be delivered to FedEx under this Agreement by
delivering an Aircraft Delivery Certificate (completed as to the tender related
portion thereof) to FedEx with respect to such Aircraft. Delivery of each
Aircraft shall be made at (i) *Blank space contained confidential information
which has been filed separately with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.
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<PAGE> 22
Dallas/Fort Worth International Airport ("DFW"), (ii) at the option of
American, at an airport in the State of Nevada if American so advises FedEx at
least seven (7) days prior to the Scheduled Delivery Date for such Aircraft or
(iii) at such other location on FedEx's route system as American designates in
writing to FedEx at least ninety (90) days prior to the Scheduled Delivery Date
and to which FedEx consents, such consents not to be unreasonably withheld. If
any Scheduled Delivery Date is not a Business Day, the Aircraft to be delivered
shall be delivered and accepted on the Business Day next preceding the
Scheduled Delivery Date.
Section 3.02. Inspection, Flight Checks and Discrepancies. (a) FedEx
shall have access to each Aircraft no later than [ * ] prior to
the Scheduled Delivery Date for such Aircraft at American's maintenance
facility at the Tulsa International Airport in Tulsa, Oklahoma ("TUL"). At
such time, FedEx shall have the right to: (i) conduct all ground inspections
reasonably necessary to determine whether the Aircraft is in Delivery
Condition, including, but not limited to, engine borescopes conducted in
accordance with Exhibit R, (ii) functionally ground and flight check such
Aircraft in accordance with the requirements and procedures contained in the
McDonnell Douglas Model MD-11 Production Flight Procedure Manual (the "MDAC
PFPM") applicable to aircraft that are completing a C Check and (iii) conduct
on each Engine being delivered (other than a Non-Conforming Engine) a Power
Assurance Run Test to ensure that the exhaust gas temperature margin for such
Engine conforms to the requirements of Section 3.06(i)(B)(4). Subject to
Section 3.02(b), any such checks or test flights shall be of a reasonable
duration. In determining if an Aircraft is in Delivery Condition, if there are
differences in the tolerances stated in the MDAC PFPM and the American Program,
the more lenient tolerances will apply.
(b) The initial flight test of an Aircraft shall not be more than [ *
] in duration. American will permit at least [ *
] of FedEx to observe any functional flight check of an Aircraft
made in conjunction with the Delivery of such Aircraft. During the functional
flight check, American shall provide a pilot who shall function as
pilot-in-command and who shall maintain operational control and responsibility
for the Aircraft. FedEx shall provide a pilot who shall occupy a pilot's seat
(left or right, at the discretion of the pilot- in-command). FedEx's pilot
shall physically exercise the flight controls in such phases of flight as
necessary to verify the functional operation of the Aircraft. Insurance for
all functional flight checks shall be provided by American, at its sole expense
under its existing insurance policies, provided, however, that any FedEx
personnel who are to be present on such Aircraft during any such flight shall
execute and *Blank space contained confidential information which has been
filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 under the Securities Exchange Act of 1934.
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<PAGE> 23
deliver to American prior to such flight a release and waiver of liability
containing terms and conditions reasonably satisfactory to American. American
shall provide the fuel necessary for such flight check.
(c) Upon completion of functional ground and flight check of an
Aircraft, American shall, at American's expense and in accordance with the
applicable criteria set forth in the American Program: (i) correct and/or
clear any items noted in the Aircraft's log book by American and which remain
un-cleared or un-corrected at the Scheduled Delivery Date and (ii) correct
and/or clear any discrepancies of the Aircraft from the Delivery Condition
otherwise noted during the functional ground and flight checks of such
Aircraft. If an additional flight check is required to demonstrate that a
discrepancy from the Delivery Condition for such Aircraft has been corrected,
such additional flight check shall be conducted in the manner set forth in
Section 3.02(a) and (b). Any additional flight check made to inspect the
correction of any discrepancy of such Aircraft from the required Delivery
Condition previously noted shall be limited to the time necessary to inspect
such discrepancy. If additional discrepancies from the Delivery Condition are
noted during a subsequent flight check (or the original discrepancy is not
satisfactorily corrected), American shall correct the discrepancy from the
Delivery Condition noted during the subsequent flight check. Notwithstanding
the foregoing, American shall not be required to correct or clear any items or
discrepancies of the Aircraft from Delivery Condition that are (x) cosmetic in
nature, (y) related solely to any Passenger Parts or (z) which the Parties
agree in writing in the Aircraft Delivery Certificate to correct and/or clear
after the Delivery of the Aircraft.
(d) Upon completion of the items in Sections 3.02(a) through 3.02(c)
on an Aircraft, FedEx shall execute and deliver to American the Aircraft
Delivery Certificate for such Aircraft pursuant to which FedEx shall certify
that it has accepted the Aircraft and that the Aircraft is in the Delivery
Condition, except to the extent that (i) any remaining discrepancies of the
Aircraft from the Delivery Condition are noted by the Parties in such Aircraft
Delivery Certificate or (ii) the failure of the Aircraft to meet Delivery
Condition requires an Adjustment (as defined below). Thereafter, American
shall not change or alter the configuration or operate such Aircraft for any
reason prior to Delivery (except as necessary to ferry such Aircraft to any
other location at which Delivery will occur) without the prior written consent
of FedEx.
Section 3.03. [ *
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 24
]
[ *
]
[ *
]
[ *
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 25
*
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 26
*
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 27
*
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 28
Section 3.04. Delivery Procedure. At the time of Delivery of each
Aircraft:
(i) FedEx shall execute and deliver to American the Aircraft
Delivery Certificate as provided in Section 3.02(d);
(ii) American shall execute and deliver to FedEx the FAA Bill of
Sale and the Warranty Bill of Sale;
(iii) FedEx shall pay American the Purchase Price in accordance with
Section 2.05, net of the Deposit applicable to the Aircraft being delivered and
the interest accrued on such Deposit at the AMR Rate;
(iv) Subject to the provisions of Section 6.01, American shall
deliver to FedEx the Data with respect to such Aircraft;
(v) American shall execute and deliver to FedEx an assignment of
any warranties with respect to the Aircraft that are assignable by American by
their terms and without the payment by American to the grantor of the warranty
of more than a nominal amount;
(vi) Concurrently with the delivery of the Warranty Bill of Sale
described in clause (ii) above, American shall cause the FAA Bill of Sale
executed by American to be filed and recorded with the FAA Aircraft Registry in
Oklahoma City, Oklahoma and FedEx shall cause an Application for Registration
of the Aircraft to be filed with the FAA Aircraft Registry. FedEx shall be
responsible for all costs of filing or recording of the FAA Bill of Sale, the
Application for Registration of the Aircraft and any such other acceptance
certificates, delivery receipts and any other documents as shall be agreed to
by the Parties as appropriate for the sale, purchase and Delivery of such
Aircraft;
(vii) At the time and upon completion of Delivery of each Aircraft,
Messrs. Daugherty, Fowler & Peregrin, special FAA counsel to FedEx, shall
confirm to FedEx that such counsel will furnish FedEx its opinion, addressed to
FedEx, to the effect that: (A) the FAA Bill of Sale with respect to the
Aircraft being delivered by American to FedEx and the FAA Application for
Registration relating thereto have been duly filed with the FAA; (B) legal
title to such Aircraft is vested in FedEx or its designee, and (C) such
Aircraft, including the Engines conveyed to FedEx in connection with such
Aircraft, is free and clear of all Liens, other than Liens arising by, through
or under FedEx or its designee, if any, that has taken title to the Aircraft.
Such opinion may be subject to the type of assumptions and qualifications
regularly included by experienced FAA counsel in similar opinions; and
(viii) If a Non-Conforming Engine which is not conveyed to FedEx
pursuant to Section 3.03(d) is installed on the Aircraft at the Delivery Date,
each of American
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<PAGE> 29
and FedEx shall execute and deliver the Engine Lease Agreements with respect to
such Non-Conforming Engine and applicable Delayed Delivery Engine.
Section 3.05. Delayed Delivery. (a) If FedEx is obligated to accept
delivery of and purchase an Aircraft tendered by American for delivery on a
Scheduled Delivery Date, which Aircraft is in Delivery Condition and FedEx
fails to accept such Aircraft for delivery in accordance with this Agreement,
unless such failure is an Excusable Delay, FedEx will [*
]
If American is unable to deliver an Aircraft on a Scheduled Delivery Date,
unless such delay is an Excusable Delay (other than one arising as a result of
a Force Majeure Event involving any work stoppage, work slow down, other labor
or work action or labor dispute, if and to the extent such Excusable Delay
exceeds four (4) weeks in duration), [ *
] The payment of any such amounts shall not be
the exclusive remedy of American if FedEx fails to accept delivery of an
Aircraft on a Scheduled Delivery Date other than in circumstances constituting
an Excusable Delay nor the exclusive remedy of FedEx if American fails to
deliver an Aircraft on a Scheduled Delivery Date other than in circumstances
constituting an Excusable Delay.
(b) Notwithstanding the foregoing, with respect to non-excusable
delays resulting from American's actions or omissions, American shall not be
required to pay interest on the Purchase Price of any Aircraft as set forth
above if (i) delivery of such Aircraft is delayed for [ * ] or
less and (ii) the aggregate number of days for which deliveries of all the
Aircraft have been delayed [ * ]
If, as to non- excusable delays resulting from American's actions or omissions,
the number of days by which any delivery of an Aircraft is delayed exceeds [ *
] or the number of days by which all deliveries of Aircraft are delayed exceeds
[ *
] in the aggregate, interest (computed as provided above) on
the Purchase Price of the Aircraft as to which a delay in excess of [ *
] occurs (less the amount of applicable Deposit) or the aggregate Purchase
Prices of the Aircraft as to which aggregate delays in excess of [ *
] occur (less the amount of applicable Deposit) shall be paid by American to
FedEx as provided above for each day for which deliveries of the Aircraft by
American are delayed. Notwithstanding the foregoing, with respect to
non-excusable delays resulting from FedEx's actions or omissions, FedEx shall
not be required to pay interest on the Purchase Price of any Aircraft as set
forth above if (i) its acceptance
_____________________
* Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 30
of an Aircraft is delayed for [ * ] or less and (ii) the aggregate
number of days for which FedEx's acceptances of all the Aircraft are delayed
does not exceed [ * ] If, as to non-excusable delays resulting
from FedEx's actions or omissions, the number of days by which any delivery of
an Aircraft is delayed exceeds [ * ] or the number of days by which
all deliveries of Aircraft are delayed exceeds [ * ] in the
aggregate, interest (computed as provided above) on the Purchase Price of the
Aircraft as to which the delay in excess of [ *
] occurs or the aggregate Purchase Prices of the Aircraft as to which
aggregate delays in excess of [ * ] occur shall be paid by FedEx to
American as provided for above for each day for which the acceptances of
the
Aircraft by FedEx are delayed.
(c) If an Aircraft which has been designated for delivery to FedEx on
a particular Scheduled Delivery Date sustains any damage or is partially
destroyed and such damage or partial destruction can be repaired or restored
and such Aircraft can be tendered for Delivery on the date (the "Partial
Casualty Delivery Date") that is the later to occur of (i) the Scheduled
Delivery Date with respect to such Aircraft or (ii) the date which is [ *
] after the occurrence of such damage or partial destruction, as promptly as
practicable after the occurrence of the damage or destruction of such Aircraft,
American shall notify FedEx in writing of such occurrence and whether American
elects (i) at American's sole cost and expense, to repair or restore the
damaged or partially destroyed Aircraft so that it will be in Delivery
Condition or (ii) to substitute another Aircraft, if any, for the damaged
Aircraft. Any repair required by damage to or partial destruction of the
Aircraft shall not (i) impose any restrictions on the FAA-certified
limitations, performance or operation as set forth in the Manufacturer's
FAA-approved Airplane Flight Manual for the Aircraft or (ii) materially impair
the fuel mileage performance of the Aircraft or (iii) increase the empty weight
of the Aircraft by more than [ * ]pounds.
(d) If, before the Delivery Date of any Committed Delivery (as
defined below), one or more Aircraft (each a "Casualty Aircraft") are lost or,
in American's sole judgment, substantially completely destroyed, or if American
determines, in its sole judgment, that repairing any substantial damage to any
Aircraft would be uneconomical, then American shall designate or re-designate
other Aircraft, if any, pursuant to Section 2.04 (without regard to the times
for taking actions set forth in such Section 2.04, but subject to Section 9.02)
in order to deliver an Aircraft to FedEx for each Committed Delivery (as
defined below) by the later to occur of (i) the Scheduled Delivery Date for
each Committed Delivery or (ii) the date which is [ * ] after the
occurrence of the loss or substantially complete destruction of
__________________
* Blank space contained confidential information which has been filed
separately with the Securities and Exchange Commission pursuant to Rule 24b-2
under the Securities Exchange Act of 1934.
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<PAGE> 31
such Aircraft (the "Casualty Delivery Date"); provided, however, that
notwithstanding any such designation, one Committed Delivery per each such
Casualty Aircraft shall automatically terminate in reverse chronological order
of Scheduled Delivery Dates. If a Committed Delivery is terminated under this
Section 3.05(d), American and FedEx shall have no further obligation to sell or
purchase any Aircraft with respect to such Committed Delivery or sell or
purchase any Spare Parts associated with such cancelled Committed Delivery.
For purposes of this Section 3.05(d), the term "Committed Delivery" shall mean
a commitment to sell and deliver any Firm Aircraft or any Aircraft as to which
a Put Option has been properly exercised, whether or not a particular Aircraft
had been designated for such delivery.
Section 3.06. Delivery Condition. (a) At the time of the tender
of an Aircraft by American to FedEx in connection with its Delivery, the
Aircraft shall be in the following condition:
(i) The Aircraft shall meet the following standards:
(A) the Airframe of such Aircraft shall have:
(1) [ * ] of the number of flight hours or
calendar time, whichever is More Restrictive, between
C Checks as prescribed by the American ESM remaining
until its next C Check is required to be performed;
(2) [ * ] of the interval in days prescribed
by the American ESM as the time between
accomplishment of the First Interval Items remaining
until the date on which such items are required to be
next performed; and
(3) [ * ] of the interval in days prescribed
by the American ESM as the time between
accomplishment of the Second Interval Items remaining
until the date on which such items are required to be
next performed.
(B) Each Engine conveyed with the Airframe shall have:
(1) not more than [ * ] flight cycles since
the latest to occur of a HSM, HSC or EHM as
prescribed by the American Program;
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 32
(2) not more than [ * ] flight cycles since the
last high pressure compressor refurbishment as
prescribed by the American Program;
(3) on its Life-Limited Parts, as specified by the
Manufacturer's Engine Overhaul Manual, not more than
the total flight cycles on the highest flight cycle
Airframe (whether or not previously delivered to
FedEx); and
(4) an exhaust gas temperature ("EGT") margin of not
less than [ * ] degrees Celsius as
determined by a Power Assurance Run Test conducted as
described in Section 3.02(a) in connection with the
acceptance of the Aircraft by FedEx and an EGT margin
of not less than [ * ] degrees Celsius
at its last test cell run immediately following the
latest Engine Maintenance to be accomplished.
(C) each Gear installed on such Aircraft shall have [ * ]
of the calendar time or flight cycles, whichever is More
Restrictive, between major overhauls as prescribed by the
American Program for such Gear remaining until the next
scheduled overhaul for such Gear ("Gear Half Time"); and
(D) the APU installed on such Aircraft shall have remaining
at Delivery, [ * ] of the total flight cycles or hours,
whichever is More Restrictive, in the service life of the
parts in such APU which are life limited, as specified by the
manufacturer of such APU ("APU Time Limit").
[ *
]
(ii) The Airframe, each Engine conveyed to FedEx along with the
Aircraft, each Gear, the APU installed on such Aircraft and all other
life-limited parts comprising part of the Aircraft shall have been
maintained by American on a non-discriminatory basis with all other
McDonnell Douglas Model MD-11 aircraft then in operation
by American.
- - ---------------------
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 33
(iii) No Engine being transferred with the Aircraft shall be subject
to any reduced inspection intervals or reduced calendar time, flight
hours or flight cycles restrictions that require the removal of the
Engine from an aircraft upon reaching such calendar time, flight hour,
or flight cycle thresholds. The results of any engine borescope
inspection conducted on an Engine pursuant to Section 3.02(a) shall
indicate that such Engine is within the serviceable limits prescribed
by the McDonnell Douglas Aircraft Maintenance Manual Chapter 72-00-
07.
(iv) The Aircraft, each Engine conveyed to FedEx at the time of the
Delivery of the Aircraft, each Gear and the APU shall be in compliance
with American's Part 121 Maintenance Program, the Aircraft shall be
Airworthy and the Aircraft Records relating to such Aircraft, Engines,
Gear and APU shall be in compliance with American's Part 121
Maintenance Program and the applicable Federal Aviation Regulations
requiring the maintenance of such Aircraft Records. At the Scheduled
Delivery Date, no deferred or carryover maintenance items shall exist
with respect to the Aircraft, and all temporary repairs to the
Aircraft shall have been made permanent.
(v) The delivery of any Engine or other General Electric CF6-80C2D1F
engine installed on an Aircraft upon its Delivery shall be subject in
all respects to Section 3.03.
(vi) The Aircraft shall be registered on the United States Federal
Aviation Administration aircraft registry.
(vii) The Aircraft shall be in a configuration which complies with
American's operating specifications for McDonnell Douglas Model MD-11
aircraft at such time, except to the extent that any discrepancies or
deviations from such operating specifications shall result from the
removal of Passenger Parts from the Aircraft.
(viii) The Aircraft (including the Engines to which title is conveyed
therewith) shall be free of all Liens.
(ix) Prior to the delivery of the Aircraft, American shall have
painted over or stripped from the Aircraft any insignia, trademark or
tradename on the Aircraft identifying the Aircraft as an American
aircraft.
(x) American may, at its sole option and expense, deliver an Aircraft
after removing from such Aircraft any Passenger Parts. Any Passenger
Parts removed from an Aircraft by American in accordance with the
foregoing provisions shall be "AS IS" and may be retained by American,
along with the
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<PAGE> 34
Aircraft Records and other Data relating thereto, as its property,
free of any Lien of FedEx.
(b) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
AIRCRAFT SHALL BE DELIVERED BY AMERICAN AND ACCEPTED BY FEDEX "WHERE IS", "AS
IS" AND "WITH ALL FAULTS".
(c) American shall not be responsible for compliance with any
Airworthiness Directive outstanding with respect to any Aircraft on the
Scheduled Delivery Date for such Aircraft if the final date for compliance with
such Airworthiness Directive is after such date, provided that American shall
not discriminate against any of the Firm Aircraft or Put Option Aircraft in
connection with its compliance with Airworthiness Directives applicable to the
McDonnell Douglas Model MD-11 aircraft in its fleet. American will require any
lessee of an Aircraft that may be delivered to FedEx to comply with any
Airworthiness Directive applicable to such leased Aircraft in the same manner
as American complies with such Airworthiness Directive with respect to the
Aircraft in its fleet. With respect to any Aircraft delivered by American to
FedEx, American shall not have complied with or terminated any Airworthiness
Directive applicable to McDonnell Douglas Model MD-11 airframes and the
accessories thereto or General Electric CF6-80C2D1F engines by the use of
FAA-approved alternative means of compliance, unless FedEx expressly approves
compliance with or termination of such Airworthiness Directive by such
alternative means or FedEx's then current FAA-approved maintenance program
permits compliance with or termination of such Airworthiness Directive by such
alternative means of compliance.
Section 3.07. Adjustments to Purchase Price for Delivery Condition. [ *
]
_____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 35
Section 3.08. Aircraft Delivery Certificate; Engine Delivery
Certificate. Subject to any discrepancies from the Delivery Condition expressly
noted by the Parties in the applicable Aircraft Delivery Certificate, FedEx's
execution and delivery of an Aircraft Delivery Certificate with respect to an
Aircraft as to which a Delivery occurs shall be a binding acknowledgment and
agreement by FedEx that the Aircraft delivered was in the Delivery Condition
upon its Delivery to FedEx. Subject to any discrepancies from the delivery
conditions set forth in Section 3.06 that are applicable solely to Engines that
are expressly noted by the Parties in the applicable Engine Delivery
Certificate, FedEx's execution and delivery of an Engine Delivery Certificate
with respect to an Engine or Spare Engine which is delivered to FedEx by
American shall be a binding acknowledgment and agreement by FedEx that such
Engine or Spare Engine, as the case may be, was in the condition required by
Section 3.06 upon its delivery to FedEx by American.
Section 3.09. Liability. FEDEX HEREBY RELEASES AMERICAN FROM AND
AMERICAN SHALL NOT BE LIABLE FOR ANY DEFECT, KNOWN OR UNKNOWN, LATENT OR
PATENT, IN SUCH AIRCRAFT, THE ENGINES, ANY PART OR COMPONENT OF SUCH AIRCRAFT
AND ANY SPARE PART DELIVERED TO IT ON SUCH DELIVERY DATE OR ANY OTHER DATE OR,
EXCEPT AS EXPRESSLY SET FORTH HEREIN WITH RESPECT TO THE AIRCRAFT RECORDS
AND/OR THE DATA, THE DATA, AND, EXCEPT AS EXPRESSLY AGREED BY THE PARTIES, ANY
DELAYED DELIVERY OF ANY AIRCRAFT, ANY DELAYED DELIVERY ENGINE OR ANY SPARE
PART, AND FOR ANY ACTUAL, INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL,
PUNITIVE OR EXEMPLARY DAMAGES SUSTAINED BY FEDEX AS A RESULT OF ANY SUCH DEFECT
OR DELAYED DELIVERY, INCLUDING, WITHOUT LIMITATION, LOSS OF REVENUE, LOSS OF
USE OF THE AIRCRAFT, THE ENGINES, THE SPARE PART, OR THE DATA OR ANY
INTERRUPTION IN FEDEX'S BUSINESS RESULTING FROM OR OCCASIONED BY FEDEX'S
INABILITY TO USE THE AIRCRAFT, THE ENGINES OR, EXCEPT AS EXPRESSLY SET FORTH
HEREIN, WITH RESPECT TO THE AIRCRAFT RECORDS, ENGINE RECORDS AND/OR THE DATA,
THE DATA.
Section 3.10. Title and Risk of Loss. (a) Concurrently with each
Delivery of an Aircraft but not prior thereto, title to, and risk of loss of,
damage to or destruction of such Aircraft (other than to or for any Non-
Conforming Engine installed on such Aircraft, title to which American is not
conveying to FedEx) shall pass from American to FedEx. FedEx shall not, by
virtue of this Agreement
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<PAGE> 36
(including, without limitation, as a result of the payment of any Deposit, the
previous Delivery of another Aircraft or the delivery of any Spare Part by
American to FedEx pursuant to this Agreement, or the designation or
identification by American of any particular Aircraft as a Firm Aircraft, a Put
Option Aircraft or the Aircraft to be delivered by American to FedEx on a
particular Scheduled Delivery Date) acquire any insurable or other ownership
interest in an Aircraft prior to the Delivery of such Aircraft by American to
FedEx in accordance with the terms of this Agreement.
(b) Title to, and risk of loss of, damage to and destruction of each
Delayed Delivery Engine and each Replacement Engine delivered to FedEx by
American shall pass to FedEx upon the delivery of such Delayed Delivery Engine
or Replacement Engine to FedEx by American. Notwithstanding the foregoing, the
risk of loss of, damage to or destruction of (i) any Non-Conforming Engine to
which FedEx holds title shall be as set forth in Section 3.03(d) and (ii) any
other Non-Conforming Engine and any Delayed Delivery Engine shall be governed
by any applicable Engine Lease Agreement. Upon Delivery of an Aircraft, FedEx
shall take title to any fuel on board of the Aircraft at no additional cost to
FedEx.
ARTICLE 4
SPARE PARTS
Section 4.01. MD-11 Spare Parts List. (a) On the date of
execution of this Agreement, American will provide FedEx with the Spares List
which will be a list of rotable spare parts that American held in its inventory
as of January 20, 1995 and that are unique to McDonnell Douglas Model MD-11
aircraft or that can be used on the McDonnell Douglas Model MD-11 and Model
DC-10 aircraft but no other aircraft within American's fleet. The Spares List
will set forth for each type of MD-11 Spare Part, American's and the
manufacturer's part numbers for each type of MD-11 Spare Part, the quantity of
each type of MD-11 Spare Part held by American at the date on which the Spares
List is delivered and the Average Unit Price for each type of MD-11 Spare Part.
The Spares List will be provided via electronic storage media mutually
acceptable to American and FedEx. American will also provide FedEx with a hard
copy of the Spares List.
Section 4.02. MD-11 Spare Parts Purchase Obligation. (a)
On each date on which FedEx is obligated to accept delivery of a Firm Aircraft
pursuant to this Agreement, American will sell to FedEx, and FedEx will
purchase from American, MD-11 Spare Parts having an average, aggregate Average
Unit Price of $[ * ] for each Firm Aircraft as to which Delivery occurs
or which FedEx is obligated to *Blank space contained confidential information
which has been filed separately with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.
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<PAGE> 37
purchase; provided, however, that so long as the Delivery of three Aircraft
occurs in each of the years from 1996 through 1999 (i) the aggregate Average
Unit Prices of MD-11 Spare Parts that shall be sold by American to FedEx, and
purchased by FedEx from American, in each year from 1996 through 1999 shall be
$[ * ]. On each date on which FedEx is obligated to accept
delivery of a Put Option Aircraft pursuant to the exercise of a Put Option or a
Purchase Option Aircraft, American will sell to FedEx, and FedEx will purchase
from American, MD-11 Spare Parts having an aggregate Average Unit Price of $[ *
] for each of the first eighteen (18) Aircraft and $[ * ] for
the nineteenth (19th) Aircraft as to which Delivery occurs or which FedEx is
obligated to purchase.
(b) If the MD-11 Spare Parts are being purchased in
conjunction with the purchase by FedEx of a Firm Aircraft or an Aircraft as to
which American has exercised a Put Option, the Spares Purchase Price for such
MD-11 Spare Parts shall be as set forth in Section 1 of Exhibit Q. If the
MD-11 Spare Parts are being purchased in conjunction with the purchase by FedEx
of any Purchase Option Aircraft, the Spares Purchase Price for such MD-11 Spare
Parts shall be determined by reference to Section 2 of Exhibit Q. FedEx will
pay to American the Spares Purchase Price for the portion of the MD-11 Spare
Parts being purchased on the date such MD-11 Spare Parts are delivered to FedEx
by American.
(c) The MD-11 Spare Parts that American will sell to FedEx
and FedEx will purchase from American in any lot of MD-11 Spare Parts pursuant
to the first sentence of Section 4.02(a) will be a pro rata portion of each
type of MD-11 Spare Part, based on a total of nineteen Aircraft. If the number
of a particular type of MD-11 Spare Parts held by American on any Delivery Date
does not permit the mix of MD-11 Spare Parts sold to FedEx in each such lot to
be a perfectly pro rata portion of all of the various types of MD-11 Spare
Parts, American and FedEx shall cooperate to set the mix of MD-11 Spare Parts
so that the inventories of MD-11 Spare Parts of American and FedEx shall be as
nearly pro rata as possible at all times. If for operational reasons American
or FedEx shall desire to change the mix of MD-11 Spare Parts that American
would deliver on any date, American and FedEx shall attempt in good faith, but
shall not be obligated, to effect such change in the mix of MD-11 Spare Parts
in order to accommodate each other's operational requirements. If American and
FedEx shall change such a mix of MD-11 Spare Parts in any lot of MD-11 Spare
Parts delivered to FedEx by American, the mix of MD-11 Spare Parts delivered to
FedEx in the next lot shall contain such MD-11 Spare Parts as are necessary to
cause compliance with requirements of the first two sentences of this Section
4.02(c) once such MD-11 Spare Parts are purchased by and delivered to FedEx.
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 38
Section 4.03. Spare Engine, Spare APU and Spare Thrust
Reverser Purchase Obligation. (a) (i) American will sell to FedEx, and FedEx
will purchase from American, on the dates and for the Spares Purchase Prices
set forth in or determined as set forth in Exhibit Q, the Spare Engines set
forth in Exhibit Q. If FedEx desires to change the quick engine change
configuration of any Spare Engine delivered by American to FedEx, American
shall provide to FedEx in exchange for conveyance by FedEx to American of the
Parts removed from the Spare Engine in question, the Parts necessary to change
the quick engine change configuration of such Spare Engine to a tail
configuration or a wing configuration, as the case may be, if American has the
necessary parts in its inventory of spare Parts and such spare Parts are
determined by American, in good faith, to be surplus to its needs. If American
delivers any such spare Parts to FedEx, FedEx shall deliver to American any of
the Parts removed from such Spare Engine in connection with the change in the
configuration of such Spare Engine. Upon its delivery by American to FedEx,
each of the first five (5) Spare Engines delivered by American to FedEx will be
in the condition an Engine is required by Section 3.06(a)(i)(B), 3.06(a)(iii)
and 3.06(a)(iv) to be in upon its delivery by American to FedEx, and FedEx
shall have the right to conduct an engine borescope on each such Spare Engine
delivered in accordance with Exhibit R. The Spares Purchase Price for each of
the first five (5) Spare Engines shall be adjusted in accordance with Exhibit
M.
(ii) American will, at its sole option, either (A) deliver each Spare
Engine to be sold to and purchased by FedEx on one of the last five (5) Spare
Engine delivery dates set forth in Exhibit Q (each a "Last Group Engine" and
collectively, the "Last Group Engines") without such Last Group Engine having
been operated on wing since its last EHM, in which case the Spares Purchase
Price for such Last Group Engine shall be adjusted in accordance with Exhibit
M, or (B) if any such Last Group Engine does not comply with the standard in
clause (A) of this sentence, adjust the Spares Purchase Price of such Last
Group Engine in accordance with the adjustment formula set forth in Exhibit T;
provided, however, that the obligation set forth in clause (A) of this sentence
shall be reduced as to and no longer apply to one (1) such Last Group Engine
for each Spare Engine among the first five (5) Spare Engines delivered by
American to FedEx that is delivered without having been operated on wing since
its last EHM. Upon delivery of any Last Group Engine to which the obligation
set forth in clause (A) of the first sentence of this Section 4.03(a)(ii) no
longer applies, the Spares Purchase Price of such Last Group Engine shall be
adjusted in accordance with Exhibit M (instead of Exhibit T). Each Last Group
Engine delivered will be in the condition required by Section 3.06(a)(iii) and
Section 3.06(a)(iv), and FedEx shall have the right to conduct an engine
borescope on each such Last Group Engine delivered in accordance with Exhibit
R. At the time of delivery of any Last Group Engine whose Spares Purchase
Price is adjusted in accordance with clause (B) of the foregoing
sentence, American will issue to
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<PAGE> 39
FedEx a credit memorandum for [ * ] of the cost of an EHM
(the "EHM Credit") on a General Electric CF6-80C2D1F engine operated by FedEx
which was acquired from American (a "Purchased Engine"). The EHM Credit will
be redeemable by FedEx at any time during the [ * ] period
commencing on the date it is issued to pay a portion of the cost of the EHM
performed on a Purchased Engine. Subject to the foregoing sentence, if any
Last Group Engine does not comply with the standard in clause (A) of the first
sentence of this Subsection 4.03(a)(ii), FedEx must use an EHM Credit, if one
is available to it, to pay a portion of the cost of an EHM on such Last Group
Engine to be accomplished by American when such Last Group Engine next requires
an EHM. FedEx may apply two EHM Credits previously issued to it to the payment
of the cost of the EHM on such engine. The cost of an EHM on an engine against
which an EHM Credit may be applied shall be the cost of an EHM as set forth in
Table A to Exhibit M for the year in which the EHM on such engine is
accomplished. The costs set forth in Table A to Exhibit M do not include the
cost of any Life Limited Parts replaced during an EHM. To use an EHM Credit,
FedEx must deliver its engine to American at TUL or such other location to
which American and FedEx mutually agree. Upon delivery of the engine to
American's maintenance facility, American will perform the EHM work on the
engine and provide the materials required in performing the EHM, other than
Life Limited Parts. American will invoice FedEx for the balance of the cost of
an EHM not covered by the application of the EHM Credit, including, without
limitation, the cost of the Life Limited Parts replaced, within 30 days of the
completion of the EHM. FedEx will pay the amount of American's invoice
promptly after receipt of such invoice. FedEx will be responsible for the
costs of packing and shipping the engines to and from American's maintenance
facility for such an EHM.
(b) American will sell to FedEx, and FedEx will purchase from
American, on the dates and for the Spares Purchase Prices set forth in or
determined as set forth in Exhibit Q, the Spare APU's set forth in Exhibit Q.
Upon its delivery by American to FedEx, such Spare APU's will (i) be in
serviceable condition with an American Serviceable Tag attached to it and (ii)
will not have been installed on an aircraft subsequent to the Spare APU's last
accomplished APU C&R (as defined below) or APU EHM (as defined below), which
APU C&R or APU EHM shall have been accomplished through an American repair shop
or a FAA-approved third party repair facility. "APU C&R" shall mean a check
and repair of a Spare APU involving disassembly only to the extent required to
correct malfunctions and/or obvious visual damage. "APU EHM" shall mean the
complete disassembly and refurbishment of the LP Compressor and LP Turbine
sections, HP Compressor and HP Turbine sections of a Spare APU and the check &
repair of the gearbox and all components of the Spare APU. *Blank space
contained confidential information which has been filed separately with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.
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<PAGE> 40
(c) American will sell to FedEx, and FedEx will purchase from
American, on the date and for the Spares Purchase Prices set forth in or
determined as set forth in Exhibit Q, the Spare Thrust Reversers as set forth
in Exhibit Q. Upon its delivery by American to FedEx, each Spare Thrust
Reverser will (i) be in serviceable condition with an American Serviceable Tag
attached to it and (ii) will not have been installed on an aircraft subsequent
to the Spare Thrust Reversers' last accomplished Reverser C&R (as defined
below) or RHM (as defined below), which Reverser C&R or RHM shall have been
accomplished through an American repair shop or a FAA-approved third party
repair facility. "Reverser C&R" shall mean a check and repair of the Spare
Thrust Reverser involving a complete tap check of the translating cowl and core
cowl for delamination, an overall check of the unit for external damage,
excessive wear or binding, a check of the flexdrive shaft cores and casings for
condition, a check of the condition of the ballscrew actuators, rig of
actuator/translating cowl system, and check of all latches and forward latch
ring. "RHM" shall mean the maintenance build level involving the disassembly
to the extent necessary to accomplish all the required checks and
reconditioning of a Spare Thrust Reverser as specified in the American Program
in which all components will be checked and repaired and sent to their
appropriate repair sources for repair processing.
Section 4.04. Effect of Expiration of Put Options on Certain
Spare Parts Purchase Obligations. If (i) any Put Option expires as to a Put
Option Aircraft or (ii) FedEx does not exercise a Purchase Option as to a Put
Option Aircraft which has a Scheduled Delivery Date on which a Spare Engine,
Spare APU or Spare Thrust Reversers is to be sold to FedEx, American will have
no obligation to sell, and FedEx will have no obligation to purchase, such
Spare Parts otherwise to be sold and purchased by the Parties on such Scheduled
Delivery Date. If any remaining Put Options are not cancelled by FedEx in
accordance with Section 2.02(d) after American fails to exercise a Put Option,
the Scheduled Delivery Date on which each of the remaining, unpurchased Spare
Engines, Spare APU's or Spare Thrust Reversers are to be sold by American to
FedEx, and purchased by FedEx from American as set forth in Exhibit Q (an
"Original Sale Date") shall be changed to be the Scheduled Delivery Date for a
Put Option Aircraft as set forth in Exhibit Q next scheduled to occur after the
Original Sale Date of each such Spare Engine, Spare APU or Spare Thrust
Reversers (a "Modified Sale Date") and the obligation of American to sell and
of FedEx to purchase the Spare Engines, Spare APU's and/or Spare Thrust
Reversers on the last remaining, uncancelled Scheduled Delivery Date for a Put
Option Aircraft as set forth in Exhibit Q shall be terminated and without
further force or effect. If American shall sell, and FedEx shall be obligated
to purchase, a Put Option Aircraft on the Modified Sale Date for any Spare
Engine, Spare APU or Spare Thrust Reversers, American shall sell such Spare
Part or Spare Parts scheduled to be sold and purchased by the Parties on such
Modified Sale Date for the Spares Purchase Price or Spares Purchase Prices, as
the case may
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<PAGE> 41
be, on the Modified Sale Date as set forth in or determined in accordance with
Exhibit Q.
Section 4.05. Designation of MD-11 Spare Parts to be Acquired and
Delivery. At least [ * ] days prior to the proposed date for
the delivery of a lot of MD-11 Spares to be purchased by FedEx from American,
FedEx shall notify American in writing of the date on which it will take
delivery of such MD-11 Spare Parts, any particular mix of MD-11 Spare Parts
that it desires to have in such lot of MD-11 Spare Parts and the destination
within the forty- eight (48) contiguous United States to which the MD-11 Spare
Parts are to be shipped. As to any other Spare Parts, [ *
] days prior to the proposed date of delivery FedEx shall give American
written notice of the destination within the United States to which such Spare
Parts are to be shipped. American shall ship all of the Spare Parts to
Memphis, Tennessee, unless it is mutually agreed in writing that any or all of
the Spare Parts will be shipped to another destination within the forty-eight
(48) contiguous United States.
Section 4.06. MD-11 Spare Parts Documentation. At the time of
delivery of the MD-11 Spare Parts sold by American to FedEx, the MD-11 Spare
Parts delivered will, to the best of American's then current knowledge, be free
and clear of all Liens and will be serviceable condition. Such MD-11 Spare
Parts will be packaged in accordance with ATA 300 specifications and be
accompanied by an American Serviceable Tag. Any Spare Parts delivered to FedEx
may be in a form modified by American in order to comply with applicable FAR's,
Airworthiness Directives, manufacturer's service bulletins and recommendations
for modification by the respective manufacturers of such Spare Parts. In
addition, any Spare Parts delivered to FedEx by American shall be in compliance
with any outstanding Airworthiness Directives and service bulletins required to
be complied with or terminated on or before the delivery date of such Spare
Parts. Upon FedEx's request at the time of the delivery of a particular MD-11
Spare Part, American will also provide FedEx with the last Shop Findings Report
which American has in its records with respect to that MD-11 Spare Part if
American regularly creates and retains Shop Findings Reports for such type of
MD-11 Spare Part pursuant to the American Program. FedEx will not be required
to accept any Spare Part tendered by American for sale to FedEx that does not
meet the applicable requirements of FAR Section 43.9. American will make no
representations or warranties with respect to the Spare Parts sold to FedEx
pursuant to this provision other than that such Spare Parts are free and clear
of all Liens and are serviceable. Subject to Section 7.01, American will
assign any manufacturer's warranties that it owns and that are assignable by
American without the consent or approval of the manufacturer (with the payment
of no more than nominal consideration) in connection with the Spare *Blank
space contained confidential information which has been filed separately with
the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 42
Parts at the time the Spare Parts are sold to FedEx. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT, THE SPARE PARTS SHALL BE DELIVERED BY
AMERICAN AND ACCEPTED BY FEDEX "WHERE IS", "AS IS" AND "WITH ALL FAULTS".
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.01. American's Representations and Warranties.
(a) American hereby represents and warrants to FedEx as follows:
(i) Organization and Existence. American is a corporation
validly existing, duly organized and in good standing under the laws
of the State of Delaware and is qualified to do business as a foreign
corporation and is in good standing as such in the State of Texas.
(ii) Due Authorization. American has all requisite corporate
power and authority to execute and enter into this Agreement and to
perform its obligations under this Agreement. The execution and
delivery of this Agreement by American and the performance by American
of its obligations hereunder have been duly authorized by all
necessary corporate action, do not contravene any law, statute, rule,
regulation, ordinance, writ, decree, judgment or injunction applicable
to American, or result in the violation of, the breach of, or a
default or event of default under any indenture, agreement, mortgage,
contract, agreement, other instrument or document, or any contractual
restriction to which American is a party, which is binding on it,
which affects American or by which its assets are bound or affected to
the extent that the contravention, violation or breach thereof or the
occurrence of a default or event of default thereunder would have a
material adverse effect on the ability of American to satisfy its
obligations hereunder, and do not result in or require the creation of
any lien, security interest or other charge or encumbrance upon or
with respect to any of its assets.
(iii) Approvals. Except for the necessary approvals under
the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended,
all authorizations, consents, approvals, waivers and other actions
required by, and all notices to and filings required to be made with,
all governmental authorities and regulatory bodies for the due
execution, delivery and performance by American of this Agreement or
the consummation of the transactions contemplated by this Agreement
have been obtained.
(iv) Enforceability. This Agreement constitutes the
legally valid and binding obligation of American, enforceable against
American in accordance
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with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or other laws affecting creditors' rights
generally or general equitable principles, whether applied in a court
of law or in a proceeding at equity.
(b) With respect to any Aircraft being delivered, American hereby
represents and warrants to FedEx that upon Delivery of such Aircraft:
(i) Except as expressly agreed to in writing by FedEx or as expressly
permitted in this Agreement, the Aircraft shall be in the Delivery
Condition;
(ii) American shall have full power and lawful authority to convey
its ownership interest in the Aircraft to FedEx; and
(iii) upon execution, filing and recordation with the FAA of the FAA
Bill of Sale and delivery of the Warranty Bill of Sale to FedEx, FedEx
shall have received good legal and beneficial title to the Aircraft,
including the Engines conveyed to FedEx in connection with such
Aircraft, free and clear of all Liens, other than Liens arising by,
through or under FedEx or any designee of FedEx that has taken title
to the Aircraft.
Section 5.02. No Warranties. EXCEPT FOR WARRANTIES OF TITLE AND
ANY ASSIGNED MANUFACTURERS' WARRANTIES AND EXCEPT AS OTHERWISE EXPRESSLY SET
FORTH HEREIN WITH RESPECT TO THE AIRCRAFT RECORDS, THE AIRCRAFT, THE ENGINES,
THE SPARE PARTS AND THE DATA SHALL BE PURCHASED "WHERE IS", "AS IS" AND "WITH
ALL FAULTS" AND WITHOUT WARRANTIES OR REPRESENTATIONS OF ANY KIND, EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER WITH RESPECT TO ANY AIRCRAFT, THE ENGINES,
THE SPARE PARTS OR DATA INCLUDING, BUT NOT LIMITED TO: ANY OBLIGATION OR
LIABILITY IN NEGLIGENCE, STRICT LIABILITY OR TORT; AIRWORTHINESS; THE
CONDITION, DESIGN, QUALITY OR CAPACITY OF THE AIRCRAFT OR THE DATA OR THEIR
FITNESS FOR ANY PARTICULAR PURPOSE; COMPLIANCE OF THE AIRCRAFT, THE ENGINES,
THE SPARE PARTS OR THE DATA WITH THE REQUIREMENTS OF ANY LAW, ORDER, RULE,
REGULATION, SPECIFICATION OR CONTRACT PERTAINING THERETO; PATENT INFRINGEMENT;
OR ABSENCE FROM KNOWN, PATENT OR LATENT DEFECTS. EXCEPT FOR WARRANTIES OF
TITLE, AMERICAN SHALL NOT BE DEEMED TO MAKE OR HAVE MADE AND DISCLAIMS, AND
FEDEX SHALL ACKNOWLEDGE AND CONFIRM THAT AMERICAN HAS NOT MADE ANY
REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND WHATSOEVER, EXPRESS OR
IMPLIED, CONCERNING THE AIRCRAFT, THE DATA, ANY ENGINE, ANY PART OR ANY
COMPONENT, OR ANY SPARE PART INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY
OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
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AMERICAN IS NOT A MANUFACTURER OR A DEALER IN AIRCRAFT AND FEDEX HEREBY
ACKNOWLEDGES AND CONFIRMS TO AMERICAN THAT EACH AIRCRAFT IS OF A MAKE, SIZE,
DESIGN AND CAPACITY DESIRED BY FEDEX AND IS A USED AIRCRAFT.
EXCEPT FOR THE EXPRESS WARRANTIES OF TITLE GIVEN BY AMERICAN OR
MANUFACTURER'S WARRANTIES, FEDEX IRREVOCABLY AND UNCONDITIONALLY WAIVES THE
BENEFIT OF ANY WARRANTY OR REPRESENTATION AMERICAN MAY BE DEEMED TO MAKE OR
HAVE MADE AND ALL RIGHTS AND REMEDIES IT MAY HAVE AGAINST AMERICAN RELATING TO
ANY OTHER REPRESENTATIONS AND WARRANTIES MADE BY AMERICAN, IF ANY, WHETHER THE
REMEDIES ARISE BY LAW OR OTHERWISE, OR ARISE IN CONNECTION WITH ANY DAMAGES
SUSTAINED BY FEDEX, INCLUDING, WITHOUT LIMITATION, ANY ACTUAL, INDIRECT,
SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES, INCLUDING
WITHOUT LIMITATION, AS A RESULT OF ANY LOSS OF USE OF THE AIRCRAFT, THE
ENGINES, ANY SPARE PART OR THE DATA OR ANY INTERRUPTION IN FEDEX'S BUSINESS
RESULTING FROM OR OCCASIONED BY FEDEX'S INABILITY TO USE THE AIRCRAFT, THE
ENGINES, ANY SPARE PART OR THE DATA.
Section 5.03. FedEx's Representations. FedEx hereby represents and
warrants to American as follows:
(i) Organization and Existence. FedEx is a corporation
validly existing, duly organized and in good standing under the laws
of the State of Delaware and is qualified to do business as a foreign
corporation and is in good standing as such in the State of Texas.
(ii) Due Authorization. FedEx has all requisite corporate
power and authority to execute and enter into this Agreement and to
perform its obligations under this Agreement. The execution and
delivery of this Agreement by FedEx and the performance by FedEx of
its obligations hereunder have been duly authorized by all necessary
corporate action, do not contravene any law, statute, rule,
regulation, ordinance, writ, decree, judgment or injunction applicable
to FedEx, or result in the violation of, the breach of or a default or
event of default under any indenture, agreement, mortgage, contract,
agreement, other instrument or document, or any contractual
restriction to which FedEx is a party, which is binding on it, which
affects FedEx or by which its assets are bound or affected to the
extent that the contravention, violation or breach thereof or the
occurrence of a default or event of default thereunder would have a
material adverse effect on the ability of FedEx to satisfy its
obligations hereunder, and do not result in or require the creation of
any lien, security interest or other charge or encumbrance upon or
with respect to any of its assets.
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(iii) Approvals. Except for the necessary approvals under
the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended,
all authorizations, consents, approvals, waivers and other actions
required by, and all notices to and filings required to be made with,
all governmental authorities and regulatory bodies for the due
execution, delivery and performance by FedEx of this Agreement or the
consummation of the transactions contemplated by this Agreement have
been obtained.
(iv) Enforceability. This Agreement constitutes the legally
valid and binding obligation of FedEx, enforceable against FedEx in
accordance with its respective terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, insolvency,
fraudulent conveyance or transfer, moratorium or other laws affecting
creditors' rights generally or general equitable principles whether
applied in a court of law or in a proceeding at equity.
(v) Use of Aircraft Acquired pursuant to Purchase Option.
Any Purchase Option Aircraft acquired by FedEx pursuant to an exercise
of a Purchase Option will be converted into a cargo configuration.
FedEx intends to operate any such Purchase Option Aircraft in its air
freight business.
ARTICLE 6
DOCUMENTATION
Section 6.01. Availability of Documentation. FedEx may, upon
giving American [ * ] review Aircraft and Engine specific
historical engineering, operational and maintenance records, manuals and
documentation forming a part of the Data and specific to the next Aircraft to
be delivered. Such review will occur during the [ * ] period
prior to the Scheduled Delivery Date for such Aircraft at American's Tulsa,
Oklahoma Maintenance and Engineering Center. Such review shall be done during
normal working hours and shall not unreasonably interfere with the business
operations of American at such site.
Section 6.02. Technical Data and Documents. (a) American shall
provide to FedEx all Data applicable to each Aircraft, Engine and Spare Engine
on or before the Delivery Date with respect to such Aircraft, provided,
however, that any Aircraft Records or Engine Records generated within the [ *
]
____________________
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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immediately prior to the Delivery Date may be delivered to FedEx within the
[ * ] next following the Delivery Date of the relevant Aircraft
to FedEx. If FedEx shall need any other information pertaining to the Aircraft
cor an Engine thereon after the delivery of the Aircraft Records or Engine
Records, as the case may be, during the [ *
] period immediately after the delivery
of the Aircraft Records, upon FedEx's written request, American will search its
records for such information. If such information is found, American shall
deliver such information to FedEx at American's expense. American shall not be
required to create any records regarding the Aircraft, any Engine or any Part
that American is not required to retain in its records by the FAA under the
American Program. If American is normally required by the FAA under the
American Program to retain a particular Aircraft Record or Engine Record
respecting an Aircraft or any Part thereof, but during the [ *
] period immediately after delivery of the Aircraft Records or
Engine Records, as the case may be, such Aircraft Record or Engine Record or a
part of such Aircraft Record or Engine Record is found to be missing,
incomplete or in error with respect to any Aircraft delivered to FedEx,
American will, at its sole option, either create an accurate and complete
reconstruction of such Aircraft Record or Engine Record, replace the Part or
Parts on the Aircraft as to which the missing, incomplete or erroneous Aircraft
Record or Engine Record relates or take such other corrective action as shall
permit FedEx to operate the Aircraft in accordance with its then current
operations specifications, as approved by the FAA primary maintenance inspector
assigned to FedEx.
(b) At the Delivery Date of any Aircraft, the Aircraft Records and/or
Engine Records relating to the Aircraft and Engines delivered to FedEx by
American as provided above shall be, to the best of American's knowledge,
accurate and complete in accordance with the aircraft records requirements of
FAR 121.380 at the time of the delivery of such Aircraft Records and/or Engine
Records to FedEx. To the extent any such Aircraft Record or Engine Record is
not accurate or complete, FedEx's sole remedy shall be to cause American, at
its sole option and expense, to research and correct such inaccurate or
incomplete Aircraft Record or Engine Record, replace the Part or Parts on the
Aircraft as to which the missing, incomplete or erroneous Aircraft Record or
Engine Record relates, or take such other corrective action as shall permit
FedEx to operate the Aircraft in accordance with its then current operations
specifications, as approved by the FAA primary maintenance inspector assigned
to FedEx.
(c) If the FAA changes the regulations or issues national policy
guidance related to existing regulations pertaining to any documentation
required to *Blank space contained confidential information which has been
filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 under the Securities Exchange Act of 1934.
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substantiate Airworthiness Directive compliance, American shall provide to
FedEx, to the extent it is available, all such required documentation not
previously delivered for any previously delivered Aircraft, Engine, Gear or
APU.
(d) Except as noted in Exhibit D, American shall provide to FedEx (i)
one legible, reproducible copy of each item of Data that is not related to any
particular Aircraft (which shall be delivered on the Delivery Date for the
first Firm Aircraft) and the subsequent revisions thereto occurring prior to
the last Delivery Date (each of which revisions shall be delivered on the
Delivery Date next following the date on which the revision is issued), (ii)
one legible, reproducible copy of any item of Data (other than the Aircraft
Records) related to each Aircraft that is delivered to FedEx by American and
(iii) originals (or if an original copy is not available, one legible
reproducible copy) of the Aircraft Records with respect to each Aircraft that
is delivered to FedEx by American. All items of Data delivered shall be in
hard copy except as noted in Exhibit D. If American does not have hard copy,
the Data shall be provided on microfilm or by other agreed medium. At FedEx's
request, all manufacturer's manual revision services for the Aircraft, if any,
shall be transferred to FedEx.
(e) When Data are forwarded to FedEx, American shall include a list
of those items using the reference numbers in Exhibit D.
All Data not delivered with an Aircraft shall be forwarded to:
Federal Express Corporation
Tchulahoma Administration Building
3101 Tchulahoma Road
Memphis, Tennessee 38118
Attn: Manager, Fleet Development
ARTICLE 7
ASSIGNMENT OF WARRANTIES, SERVICE LIFE POLICIES
AND PATENT INDEMNITIES
Section 7.01. Assignment of Warranties. At Delivery of each
Aircraft, an Assignment of Assignable Manufacturer's Warranties in the form of
Exhibit G shall be executed by American and delivered to FedEx pursuant to
which American will assign to FedEx, effective upon Delivery of such Aircraft,
all of American's interests in any and all existing and assignable warranties,
service life policies and patent indemnities of manufacturers and maintenance
and overhaul providers relating to such Aircraft. Further, upon FedEx's
request, American shall (i) give written notice to any such manufacturers and
maintenance and overhaul providers of the assignment of such warranties,
service life polices and patent indemnities to FedEx,
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and (ii) at FedEx's expense, take all such actions as may be reasonably
requested by FedEx in assisting FedEx in the enforcement of its rights pursuant
to this Article 7. Notwithstanding the foregoing, to the extent American may
assign any warranty, service life policy and patent indemnity only with the
consent of the provider of such, American will use its commercially reasonable
efforts to obtain any required consent to such an assignment, provided,
however, that American shall not be required to make any payment, give up any
rights or make any other concession to any provider in order to obtain any such
consent. In connection with the assignment of the Aircraft Support Services
provisions of Exhibit C to the Purchase Agreement by and between the
Manufacturer of the Airframes and American, dated August 3, 1989, as amended
and supplemented (the "MD-11 Purchase Agreement"), FedEx agrees to be bound by
the terms and provisions of Article 13 of, and Exhibit C to, the MD-11 Purchase
Agreement, copies of which have been provided to FedEx.
ARTICLE 8
PAYMENT OF TAXES
Section 8.01. Payment of Taxes by FedEx. (a) The Purchase Price
of an Aircraft and the Spares Purchase Prices do not include the amount of any
sales, use, withholding, transfer or excise taxes whatsoever. Except as
provided in Section 8.01(b) and Section 8.02 hereof, any and all taxes,
excises, duties and assessments whatsoever (including any related penalty,
interest or other additions to tax) arising out of the sale, transfer or
delivery of the Aircraft or the Spare Parts under this Agreement, or the
ownership, possession, condition, maintenance, use, operation or disposition of
the Aircraft after Delivery or any Spare Parts after their delivery to FedEx,
in any manner levied, assessed or imposed by any government or subdivision or
agency thereof having jurisdiction, shall be the sole responsibility and
liability of FedEx and FedEx shall indemnify and hold American harmless from
any and all such taxes, excises, duties and assessments whatsoever. American
and FedEx will cooperate in good faith and take such reasonable actions as are
practicable to minimize or, if possible, eliminate any such taxes, excises,
duties or assessments.
(b) The indemnity provided for in Section 8.01(a) shall not extend to
any of the following:
(i) taxes based upon, measured by or with respect to the net income,
gross receipts in the nature of an income tax not in the nature of a transfer
tax, items of tax preference or minimum tax or excess profits, capital,
franchise, net worth or conduct of business or other similarly-based taxes of
American;
(ii) any penalty, interest or other additions to taxes related to
taxes imposed on American that would not have been imposed, but for the willful
misconduct or gross negligence of American; or
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(iii) taxes, excises, duties or assessments imposed by the State of
[.* ]
(c) With respect to any tax which FedEx has assumed responsibility
for under this Article 8, FedEx shall either (i) pay (x) at the Delivery Date
for an Aircraft, (y) at the delivery date of any Engine sold to FedEx and not
conveyed by American to FedEx at the Delivery Date for an Aircraft, or (z) at
the delivery date for any Spare Parts sold by American to FedEx, all sales or
other similar taxes payable with respect to the sale and/or purchase of such
Aircraft, Engines or Spare Parts, respectively, or (ii) provide to American an
exemption certificate, resale certificate, or other evidence reasonably
acceptable to American that the sale and purchase of any Aircraft, Engine or
Spare Part is exempt from any such tax. Other evidence includes, but is not
limited to, a letter specifying the applicable taxing authority's statute,
regulation, rule or case law authority providing for such exemption; provided,
however, that acceptance of such certificates or other evidence by American
shall not constitute willful misconduct or gross negligence by American for
failure to collect taxes determined to be due.
(d) If any tax, excise, duty or assessment described in this Section
8.01 for which FedEx has assumed the responsibility for payment pursuant to
this Article 8 is levied, assessed or imposed upon American, American shall
promptly give FedEx notice of such levy, assessment or imposition, whereupon
FedEx shall promptly pay and discharge the same or, if permitted by law, may
contest or protest such liability before payment. If American fails to notify
FedEx, FedEx will be relieved of its indemnity obligations under this Section
8.01 with respect to that tax to the extent such failure materially adversely
impacts FedEx. Upon the written request and at the sole expense of FedEx,
American shall reasonably cooperate with FedEx in contesting or protesting the
validity or application of any such tax (including, but limited to, permitting
FedEx to proceed in American's name if required or permitted by law, provided,
in each case, that such contest does not involve, or can be separated from, the
contest of any tax or other issues unrelated to the transactions described in
this Agreement). If proceeding in American's name, FedEx must first receive a
power of attorney from American which American may not unreasonably withhold,
and, further, any retention of outside counsel to assist FedEx must be mutually
agreed upon by FedEx and American. In lieu of permitting FedEx to proceed
using American's name, American may, if permitted by law, assign its claim to
FedEx as the real party in interest with respect to such claim. FedEx also
shall have the right to participate in any contest conducted by American with
respect to a tax or other charge indemnifiable under this Article 8, including,
without limitation, the right to attend conferences with the taxing authority
and the right to review submissions to the taxing authority or any court to the
extent,
- - ----------------------
*Blank space contained confidential information which has been filed
separately with the Securities and Exchange Commission pursuant to Rule 24b-2
under the Securities Exchange Act of 1934.
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<PAGE> 50
but only to the extent, such contest does not involve, or can be separated
from, the contest of any tax or issues unrelated to the transactions
contemplated in this Agreement. In the event American shall receive a refund
of all or any part of such tax, excise, duty or assessment (including a refund
of interest and penalties, if any, in connection therewith) which FedEx has
paid and discharged, the amount of such refund shall promptly be remitted to
FedEx by American, less any expenses of American associated with contesting
and/or protesting the validity or application thereof which have not been
previously reimbursed by FedEx.
Section 8.02. Tax Consequences of Certain Deliveries. (a) If the
delivery of the Aircraft at any destination other than one in [ * ] or [ *
] would result in an increased state, federal or local sales, transfer or
similar tax being payable by FedEx in connection with the delivery of the
Aircraft, FedEx may, in its sole discretion, withhold its consent to take the
Delivery of such Aircraft in that state unless American agrees to indemnify
FedEx for any such increased tax.
(b) If the delivery of the Aircraft to FedEx in [ * ] results in
any sales, transfer or similar tax being imposed on FedEx with respect to such
Aircraft as a result of the tender of the Aircraft in [ * ], American will
agree to indemnify FedEx or provide FedEx with a written statement from
the taxing authority in [ * ] that such sale is exempt from tax in [ *
] and that, if the exemption is lost, American will indemnify FedEx for any tax
due unless the loss was due to the negligence or willful misconduct of FedEx.
(c) If any Spare Parts are delivered to FedEx at a location other
than Tennessee, American shall indemnify FedEx for any (or an increased)
federal, state or local sales, transfer or similar tax imposed on FedEx with
respect to such Spare Parts unless such other delivery location was mutually
agreed upon or was chosen at the request of FedEx in which case FedEx shall
indemnify American if the delivery of any of the Spare Parts to FedEx would
result in any or any increased federal, state or local sales, transfer or
similar tax to American. If the delivery of any Spares Parts to FedEx would
result in any (or an increased) federal, state or local sale, transfer or
similar tax to American or FedEx, as the case may be, American and FedEx will
choose a jurisdiction on FedEx's route system within the contiguous forty-
eight (48) United States in which to make such delivery or re-delivery to
minimize such tax or eliminate such tax, if possible.
(d) If the delivery of a Delayed Delivery Engine or Replacement
Engine by American to FedEx or the re-delivery of a Non-Conforming Engine to
American by FedEx at the location of the Aircraft on which the Delayed Delivery
Engine or Replacement Engine will be installed results in any (or an
increased) federal,
- - --------------------
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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foreign, state or local sales, transfer or similar tax being imposed on FedEx,
American will indemnify FedEx for the tax or the increased amount of the tax to
the extent, but only to the extent, that FedEx would not have been responsible
for the payment of an equivalent amount of tax if the Delayed Delivery Engine
or Replacement Engine had been installed on the Aircraft at the time of the
Delivery of such Aircraft.
Section 8.03. After-Tax Basis. Any payment of an indemnity pursuant
to this Article 8 shall be made on a basis such that any payment received or
deemed to have been received by an indemnified party shall be supplemented by a
further payment to such party so that the sum of the two payments, after
deduction of all taxes resulting from the receipt or accrual of such payments,
shall be equal to the payment received or deemed to have been received.
ARTICLE 9
EXCUSABLE DELAY
Section 9.01. Excusable Delay. (a) Subject to Section 3.05,
neither Party shall be responsible to the other Party for any Excusable Delay
in the discharge and performance of its respective obligations and duties under
this Agreement or for any delay or failure in the discharge and performance of
its respective obligations and duties under this Agreement as a result of the
action or omission of the other Party.
Section 9.02. Time Limits on Excusable Delays. Notwithstanding the
provisions of Section 3.05, if an Excusable Delay shall have caused the delay
of the Delivery of an Aircraft on a Scheduled Delivery Date (i) until a date
after the Partial Casualty Delivery Date as to any Aircraft described in
Section 3.05(c), (ii) until a date after the Casualty Delivery Date, as to any
substitute Aircraft as described in Section 3.05(d) or (iii) for a period of
more than twenty-eight (28) consecutive days after the Scheduled Delivery Date
in every other instance, the Party not claiming the right to delay performance
of its obligations shall have the right (x) to terminate its obligations with
respect to the Delivery of such Aircraft at any time prior to the Delivery of
such Aircraft or a substitute Aircraft therefor or (y) to permit the other
Party to complete its performance in connection with the Delivery of such
Aircraft. If a Party chooses to terminate its obligations with respect to the
Delivery of an Aircraft or a substitute Aircraft therefor, the Party claiming
the Excusable Delay shall have no further obligation with respect to the
Delivery of the Aircraft as to which the Excusable Delay occurred. To the
extent an Excusable Delay relates to the performance of any obligation other
than one respecting the Delivery of an Aircraft, such delay shall be an
Excusable Delay for a period not to exceed twenty- eight (28) consecutive days
from the date that performance was due.
ARTICLE 10
INDEMNIFICATION
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Section 10.01. FedEx's Indemnification. After the Delivery of an
Aircraft, Engines or Spare Parts to FedEx, FedEx shall defend, indemnify and
hold harmless American, its Affiliates and each of their respective directors,
officers, employees, independent contractors who are individuals, and permitted
assignees (collectively the "American Indemnitees") from and against all
claims, demands, suits, causes of action, obligations, liabilities, damages,
losses and judgments, costs and expenses, WHETHER OR NOT ARISING FROM THE
NEGLIGENCE OF SUCH INDEMNIFIED PARTIES, asserted against any of them by reason
of injury or death of any person, or by reason of loss of or damage to
property, including such Aircraft, Engines and Spare Parts, arising out of or
in any manner connected with any of the Aircraft, Engines and Spare Parts,
including, without limitation, the purchase, sale, ownership, possession, use,
operation, flight testing (if the event giving rise to the American
Indemnitees' right to indemnity involves the Aircraft and occurs while a pilot
who is an employee or an agent of FedEx is in control of the Aircraft being
flight tested), storage, maintenance, financing, sale, lease or sublease of any
Aircraft, Engine or Spare Part.
Section 10.02. American's Indemnification. American agrees to
defend, indemnify and hold harmless FedEx, its Affiliates, and each of their
respective directors, officers, employees, independent contractors who are
individuals and permitted assignees from and against all claims, demands,
suits, causes of action, obligations, liabilities, damages, losses and
judgments, costs and expenses, asserted against any of them by reason of any
claim adverse to FedEx's title to the Aircraft by any party claiming by or
through American.
ARTICLE 11
INSURANCE
Section 11.01. Liability Insurance. Commencing with the delivery of
the first Aircraft to FedEx, FedEx shall maintain until the [ * ]
anniversary of the Delivery Date of each Aircraft, with insurance carriers
reasonably acceptable to American, comprehensive airline liability insurance in
an amount not less than USD $[ * ] which shall: include aircraft
liability, cargo liability, and comprehensive general liability insurance;
insure, inter alia, FedEx's indemnification obligations to the American
Indemnitees; and name the American Indemnitees as additional insureds. The
insurers shall waive any right of subrogation, set-off or counterclaim against
the American Indemnitees as to the coverage of the American Indemnitees,
breaches of representations and warranties
- - -----------------------
*Blank space contained confidential information which has been filed
separately with the Securities and Exchange Commission pursuant to Rule 24b-2
under the Securities Exchange Act of 1934.
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<PAGE> 53
by FedEx. In the event of cancellation of or material change in the policy,
such insurance shall continue in force for the benefit of the American
Indemnitees for at least thirty (30) days after written notice to American.
Section 11.02. Hull Insurance. If FedEx, or any successor to
FedEx's interest in the Aircraft, maintains hull insurance on the Aircraft,
FedEx shall require its, or its successor's, hull insurers to waive any and all
rights of subrogation, set-off, counterclaim and deduction, whether by
attachment or otherwise, which they may have against the American Indemnitees,
for any loss, damage or destruction of the Aircraft.
Section 11.03. Insurance Certificates. Upon Delivery, FedEx shall
furnish American with insurance certificates from certifying (a) that the
policies of insurance required by this Article 11 are in full force and effect
(together with required waivers of subrogation) and (b) that American shall be
given thirty (30) days' prior written notice by the insurers in the event of
either cancellation or material change in coverage or cancellation of the
waivers of subrogation, except in the event of war risk coverage, in which case
the notice period shall be seven (7) days or such other period as shall be
customary in the insurance market.
ARTICLE 12
DEFAULT AND REMEDIES
Section 12.01. American Events of Default. The following events
shall constitute Events of Default as to American:
(a) American shall fail to deliver the Aircraft in accordance with
the terms and conditions of this Agreement;
(b) American shall fail to perform any other covenant of American
contained in this Agreement, and such failure is not cured within [ *
] after written notice of such default is given by FedEx to
American or, if such failure cannot be cured within [ *
] is not cured within [ *
] after receipt of such notice if American promptly commences taking
and diligently pursues all necessary actions to cure such failure;
(c) If any representation or warranty made by American herein or made
in any statement or certificate furnished or required hereunder or in
connection with the execution and delivery of this Agreement, proves untrue in
any material adverse respect;
- - ----------------------
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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(d) If American shall file a voluntary petition in bankruptcy, shall
be adjudicated as bankrupt or insolvent, shall file any petition or answer
seeking any reorganization, composition, readjustment, liquidation or similar
relief for itself under any present or future statute, law or regulation, shall
seek or consent to or acquiesce in the appointment of any trustee, shall make
any general assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due; or
(e) If a petition shall be filed against American seeking any
reorganization, composition, readjustment, liquidation or similar relief under
any present or future statutes, law or regulation, and shall remain undismissed
or unstayed for an aggregate of [ * ] (whether or not
consecutive), or if any trustee, receiver or liquidator of either Party is
appointed, which appointment shall remain unvacated or unstayed for an
aggregate of [ *
] (whether or not consecutive).
Section 12.02. FedEx Events of Default. The following events shall
constitute Events of Default as to FedEx:
(a) FedEx shall fail to accept delivery and pay the Purchase Price
for any Aircraft tendered by American for delivery to FedEx in accordance with
this Agreement;
(b) FedEx shall fail to perform any other covenant of FedEx contained
in this Agreement and such failure is not cured within [ *
] after written notice of such default is given by American to FedEx or,
if such failure cannot be cured within [ * ] is
not cured within [ * ] after receipt of such notice if FedEx promptly commences
taking and diligently pursues all necessary actions to cure such failure;
(c) If any representation or warranty made by FedEx herein or made in
any statement or certificate furnished or required hereunder or in connection
with the execution and delivery of this Agreement proves untrue in any material
adverse respect;
(d) If FedEx shall file a voluntary petition in bankruptcy, shall be
adjudicated as bankrupt or insolvent, shall file any petition or answer seeking
any reorganization, composition, readjustment, liquidation or similar relief
for itself under any present or future statute, law or regulation, shall seek
or consent to or acquiesce in the appointment of any trustee, shall make any
general assignment for
- - ----------------------
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
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<PAGE> 55
the benefit of creditors, or shall admit in writing its inability to pay its
debts generally as they become due; or
(e) If a petition shall be filed against FedEx seeking any
reorganization, composition, readjustment, liquidation or similar relief under
any present or future statutes, law or regulation, and shall remain undismissed
or unstayed for an aggregate of [ * ] (whether or not
consecutive), or if any trustee, receiver or liquidator of either party is
appointed, which appointment shall remain unvacated or unstayed for an
aggregate of [ *
] (whether or not consecutive).
Section 12.03. Remedies. (a) Subject in all respects to
Article 13, upon the occurrence of an Event of Default by American, FedEx (i)
shall, at its option, be relieved from its obligation to accept delivery of and
pay the Purchase Price for the Aircraft or to purchase any Spare Parts from
American, (ii) may, at its option, terminate this Agreement and have the
Deposits returned to it to the extent they have not been previously applied to
the Purchase Price of an Aircraft, together with any interest thereon
calculated at the AMR Rate, and (iii) shall have all other rights and remedies
available to it at law and in equity, including, but not limited to, the
equitable remedy of specific performance.
(b) Subject in all respects to Article 13, upon the occurrence of an
Event of Default by FedEx, American (i) shall retain the Deposits and the
interest thereon relating to the Aircraft, (ii) may, at its option, be relieved
from its obligation to deliver any Aircraft or sell any Spare Parts to FedEx,
(iii) may, at its option, terminate this Agreement and (iv) shall have all
other rights and remedies available to it at law and in equity, including, but
not limited to, the equitable remedy of specific performance.
Section 12.04. Limitation of Damages. NEITHER PARTY SHALL HAVE ANY
LIABILITY FOR ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR
EXEMPLARY DAMAGES SUSTAINED BY THE OTHER PARTY ARISING OUT OF THE FIRST PARTY'S
DEFAULT UNDER THE TERMS OF THIS AGREEMENT. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY REMEDIES IT MAY HAVE AS A RESULT OF ITS INCURRENCE OF ANY INDIRECT,
SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES ARISING OUT
OF A DEFAULT BY THE OTHER PARTY UNDER THIS AGREEMENT.
- - ----------------------
*Blank space contained confidential information which has been filed separately
with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
ARTICLE 13
DISPUTE RESOLUTION
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Section 13.01. Dispute Resolution. American and FedEx desire to
resolve any dispute or alleged dispute that may arise in connection with the
interpretation of any provision in this Agreement or the performance by either
of them of their obligations under this Agreement (a "Dispute") without resort
to the courts. If any Dispute shall arise, American and FedEx agree to follow
the procedure set forth in this Article 13 (the "ADR Procedure") to resolve
such Dispute.
Section 13.02. Notice of Dispute. The Party believing a Dispute to
exist shall give the other Party written notice that the Dispute exists. Such
notice shall set forth in reasonable detail the facts alleged to give rise to
such Dispute, the provision or provisions of this Agreement giving rise to the
obligations implicated in the Dispute, the nature of any default claimed to
exist with respect to this Agreement and a statement of the manner in which
such Party believes the Dispute should be resolved. Within five (5) Business
Days after such notice is given the Party receiving such notice shall respond
in writing to the Party giving the notice. Such response (the "Response")
shall state whether the responding Party believes such Dispute exists, set
forth its view of the facts alleged to give rise to the Dispute and, if the
responding Party agrees that a Dispute exists, indicate what action the
responding Party believes should be taken with respect to the claim that a
Dispute exists.
Section 13.03. Dispute Resolution Through Negotiation. If the
Parties do not agree as to the action to be taken in resolution of the Dispute,
American and FedEx shall have a meeting no later than the fifth (5th) Business
Day following the date on which the Response is given. Such meeting shall be
held in the offices of the Party receiving the original notice of the Dispute
unless the Parties agree to meet elsewhere. Each of the Parties shall have in
attendance at such meeting an executive who shall have the authority to make
decisions and bind the Party he or she represents to any agreement that may be
made by the Parties at such meeting (a "Company Representative"), as well as
such other persons as the Parties may desire. At the meeting, the Parties
shall negotiate in good faith in an attempt to agree if a Dispute exists, upon
the exact nature of any Dispute agreed to exist, the manner in which any such
Dispute should be resolved and the date by which the resolution of any such
Dispute should be effected. If a resolution of such Dispute is not reached at
the initial meeting, before adjourning the meeting, the Parties shall determine
if an additional meeting or meetings should be held to negotiate further a
resolution of the Dispute. If American and FedEx determine an additional
meeting should be held, they shall agree to the time and place of such meeting.
Any agreement as to the resolution of such Dispute reached during such
negotiations shall be evidenced by a written agreement setting forth in
reasonable detail the actions that the Parties agree will be taken to resolve
or remedy the Dispute.
Section 13.04. Dispute Resolution Through Mediation. If American
and FedEx cannot resolve the Dispute pursuant to the procedure set forth in
Section 13.03 above (the "Negotiation Procedure") within ten (10) Business Days
after the first
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meeting held by the Parties pursuant to the Negotiation Procedure, American and
FedEx shall mediate the Dispute through a panel of three mediators (the
"Mediation Panel"). The Mediation Panel shall be appointed within ten (10)
Business Days after the date on which the Parties determine that they cannot
resolve the Dispute (the "Determination Date"). The Mediation Panel shall
consist of a professional mediator appointed by American, a professional
mediator appointed by FedEx and a professional mediator appointed by the two
mediators appointed by American and FedEx. When possible, each mediator shall
be familiar with the aircraft industry. The mediation shall take place on the
fifteenth (15th) Business Day after the Determination Date or such earlier
date as the Parties and the Mediation Panel may agree. Each Party shall
prepare and submit to the Mediation Panel at least two (2) Business Days before
the mediation occurs, written submissions setting forth their respective
positions with respect to the Dispute. Each Party shall send a Company
Representative and such other persons, including professional advisors, as they
desire to such mediation. The Parties agree to work in good faith to reach an
agreement settling the Dispute at the mediation. Any agreement as to the
resolution of such Dispute reached during such mediation shall be evidenced by
a written agreement setting forth in reasonable detail the actions that the
Parties agree will be taken to resolve the Dispute. The mediation shall be
deemed unsuccessful if so declared by the Mediation Panel.
Section 13.05. Dispute Resolution Through Arbitration. American and
FedEx agree that if they cannot resolve the Dispute pursuant to the Negotiation
Procedure or mediation as described in Section 13.04 above (the "Mediation")
within ten (10) Business Days after the commencement of the first meeting of
the Parties with the Mediation Panel, they will submit the Dispute to binding
arbitration (the "Arbitration") pursuant to the New York Arbitration Statute
and the American Arbitration Association's (the "AAA") Commercial Arbitration
Rules as in effect at the time of the submission of the Dispute to the AAA (the
"CAR"). American and FedEx shall submit the Dispute to the AAA for binding
arbitration within five (5) Business Days after the unsuccessful conclusion of
the Mediation Process. The arbitration shall take place (i) in Dallas, Texas
or such other place as American, FedEx and the arbitrators assigned to the case
shall agree and (ii) on such date and at such time as the arbitrators shall
establish. The Dispute shall be arbitrated by a panel of three arbitrators
(the "Panel") who shall, if possible, each be experienced in the aircraft
industry and who shall be chosen in accordance with the CAR. The Panel shall
issue a reasoned decision and award of damages, specific performance or
injunction. American and FedEx agree to abide by and perform any award
rendered by the Panel. American and FedEx intend that the Dispute will be
resolved by application of the laws of the State of New York and that the
Panel's authority to make any award in the arbitration of the Dispute shall be
based on and limited by the laws of the State of New York, the terms and
conditions of this Agreement and the CAR. The Panel's determination of facts
shall be final and binding on American and FedEx if there is substantial
evidence in the record of such arbitration to support such determination, it
being the intention of the Parties
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that the standard for any judicial review of the findings or award of the Panel
be the same standard as applies in the case of appeals to actions of
administrative agencies in the State of New York. Judgment on the award in the
arbitration may be entered by any court having jurisdiction of the Dispute.
Subject to the CAR, the Parties will endeavor in good faith to conclude the
arbitration by no later than thirty (30) Business Days after it commences.
Section 13.06. Forbearance During Resolution Process. American and
FedEx agree to forbear from pursuing any remedy under this Agreement or
otherwise available under law, including the institution of any lawsuit, while
the ADR Procedure is in operation with respect to any Dispute.
Section 13.07. Limitation of Remedies. American and FedEx agree
that, notwithstanding anything to the contrary herein, in the laws of the State
of New York, Tennessee or Texas or the CAR, the result of any agreement reached
by them in the Mediation or any award made by the Arbitration Panel in the
Arbitration shall be consistent with the terms and conditions of this Agreement
and that any award shall be only a remedy that would available to a Party to
this Agreement as a result of a breach of this Agreement had the ADR Procedure
not been in effect. IN NO EVENT SHALL THE PANEL AWARD ANY INDIRECT,
INCIDENTAL, CONSEQUENTIAL, PUNITIVE, SPECIAL, EXEMPLARY OR OTHER THAN DIRECT
DAMAGES.
Section 13.08. Expenses. Each of American and FedEx shall pay its
own out-of-pocket expenses in connection with the conduct of the ADR Procedure
as to any Dispute. The costs and expenses of any Mediation, other than
American's and FedEx's out-of-pocket expenses in connection therewith, shall be
borne equally by American and FedEx. The costs and expenses of any
Arbitration, other than American's and FedEx's out-of-pocket expenses in
connection therewith, shall be payable in accordance with the CAR.
ARTICLE 14
CONDITIONS
Section 14.01. Conditions to FedEx's Obligations. The obligation of
FedEx to accept any Aircraft and purchase any Spare Parts from American shall
be subject to the following conditions precedent:
(a) compliance by American with all applicable laws and regulations of
all jurisdictions which are applicable to the transactions contemplated hereby,
including, without limitation, the Hart-Scott-Rodino Anti-Trust Improvements
Act of 1974, as amended;
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(b) receipt by FedEx of all necessary licenses, permits, approvals,
consents, waivers and authorities which are applicable to the transactions
contemplated hereby;
(c) receipt by FedEx of a satisfactory opinion of counsel to American,
which opinion may be rendered by in- house counsel, regarding due
authorization, no conflicts with organization documents, agreements and
instruments to which American is a party or its assets are bound or any court
order, and enforceability of this Agreement and any ancillary agreements, and
such other matters as may be reasonably requested. In such opinion, such
counsel may assume that the documents, agreements and instruments are governed
by Texas law and render their opinions based solely on the federal laws of the
United States, the corporate laws of the State of Delaware and the laws of the
State of Texas. Such opinion may be subject to the type of assumptions and
qualifications regularly included by experienced corporate counsel in similar
opinions;
(d) the execution of this Agreement and consummation of the
transactions contemplated by it shall not breach, or result in a default under,
any document, agreement, statute, treaty, regulation or other regulatory
directive, foreign or domestic, binding upon American or any of its respective
Affiliates;
(e) FedEx shall not be unable to perform its obligations with respect
to one or more of the Aircraft as the result of the occurrence of a Force
Majeure Event or other Excusable Delay (other than a Force Majeure Event or
other Excusable Delay which is a result of the fault, act or omission of
American);
(f) the Aircraft shall be in Delivery Condition; and
(g) the approval of this Agreement and the performance of the
transactions contemplated by this Agreement by FedEx's board of directors.
Section 14.02. Conditions to American's Obligations. The obligation
of American to deliver any Aircraft and sell any Spare Parts to FedEx shall be
subject to the following conditions precedent:
(a) compliance by FedEx with all applicable laws and regulations of
all jurisdictions which are applicable to the transactions contemplated hereby,
including, without limitation, the Hart-Scott-Rodino Anti-Trust Improvements
Act of 1974, as amended;
(b) receipt by American of all necessary licenses, permits, approvals,
consents, waivers, and authorities which are applicable to the transactions
contemplated hereby;
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(c) receipt by American of a satisfactory opinion of counsel to FedEx,
which opinion may be rendered by in- house counsel, regarding due
authorization, no conflicts with organizational documents, agreements and
instruments to which FedEx is a party or its assets are bound or any court
order, and enforceability of this Agreement and any ancillary agreements, and
such other matters as may be reasonably requested. In such opinion, such
counsel may assume that the documents, agreements and instruments are governed
by Tennessee law and render their opinions based solely on the federal laws of
the United States, the corporate laws of the State of Delaware and the laws of
the State of Tennessee. Such opinion may be subject to the type of assumptions
and qualifications regularly included by experienced corporate counsel in
similar opinions;
(d) the execution of this Agreement and consummation of the
transactions contemplated by it shall not breach, or result in a default under,
any document, agreement, statute, treaty, regulation or other regulatory
directive, foreign or domestic, binding upon FedEx or any of its Affiliates;
(e) American shall not be unable to perform its obligations with
respect to one or more of the Aircraft as the result of the occurrence of a
Force Majeure Event, other Excusable Delay or the fault of FedEx; and
(f) the approval of this Agreement and the performance of the
transactions contemplated hereby by American's Chairman of the Board, Chief
Executive Officer and President.
ARTICLE 15
CONFIDENTIALITY
Section 15.01. Confidentiality Obligations. (a) Each of American
and FedEx agrees to keep the economic terms of this Agreement confidential and
not to disclose, transfer, use or otherwise make available such information to
any third party without the prior written consent of the other Party. Each of
American and FedEx agrees to exercise care that is at least equal to the care
it uses to protect the confidentiality of its own confidential and proprietary
information of similar importance to prevent the disclosure to outside parties
or unauthorized use of such information. Notwithstanding the above, American
and FedEx may disclose confidential information to their respective officers,
directors, employees and/or tax, legal and other professional advisors who are
informed of the confidential nature of the information and of the restrictions
on disclosure and use of the information as set forth herein and may disclose
confidential information as required by law (including, but not limited to,
pursuant to a request by the Internal Revenue
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Service or a state taxing authority for information). In the event of a breach
of or a default under the terms of this Section 15.01, the non-breaching Party
shall be entitled to pursue and seek all legal and equitable remedies available
to it, including the equitable remedies of specific performance and injunction,
which remedies shall not be deemed exclusive, but shall be cumulative. If
either of the Parties desire to make a press release, information release or
otherwise provide information to any third party for release to the news media
with respect to the transactions contemplated by this Agreement, subject to its
obligations under applicable securities laws, the Party desiring to make the
release or provide the information shall provide the text of such release or
information to the other Party for its review at least three (3) Business Days
in advance of the proposed distribution of the release or information. Subject
to legal requirements and other legally compelled disclosures, each Party shall
obtain the prior written consent of the other Party to release of any such news
or press release or information and the text of any written or oral statement
or any release of information to be provided to the news media and the timing
of the distribution of such information.
(b) FedEx understands that certain of the information that may be
provided to FedEx by American concerning the Airframes is the subject of a
confidentiality agreement between American and the Manufacturer of the
Airframes (the "Manufacturer Confidentiality Agreement"). FedEx agrees for the
benefit of American and the Manufacturer of the Airframes (i) to be bound by
the terms and conditions of the Manufacturer Confidentiality Agreement, (ii)
that FedEx's use, possession and dissemination of such information to any
person shall be subject to and governed by the Manufacturer Confidentiality
Agreement and (iii) that the Manufacturer of the Airframes shall be a third
party beneficiary of this Section 15.01(b) and entitled to enforce its
respective rights under the Manufacturer Confidentiality Agreement against
FedEx as if it were a party to this Agreement.
ARTICLE 16
FURTHER ASSURANCES
Section 16.01. Further Assurances. (a) American recognizes that in
the course of (i) the conversion of the Aircraft from a passenger configuration
to a cargo configuration and (ii) the transition of the Aircraft from the
American Program to FedEx's FAA-approved maintenance program, issues will arise
in which American may possess information and expertise regarding the Aircraft
that FedEx would find useful, Aircraft Records or Engine Records that may be
necessary to the transition of the Aircraft to FedEx's maintenance program, and
other knowledge that will be useful to FedEx in connection with such
activities. Subject to any restrictions on the disclosure of confidential
information and consistent with the protection of its confidential information
and proprietary information, including, without limitation, any trade secrets,
American agrees to cooperate with FedEx and to assist FedEx by providing such
confidential, proprietary and trade secret
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information pursuant to a mutually acceptable non-disclosure agreement and any
non-confidential information regarding the Aircraft that American may possess
which would be helpful to FedEx in achieving its goals. American also agrees
to meet with representatives of FedEx and the FAA at mutually agreeable times
and locations to discuss the Aircraft and American's maintenance of the
Aircraft. In no event shall the assistance to be provided by American to FedEx
require the incurrence by American of more than nominal expense.
(b) American will provide to FedEx a supplemental type certificate (a
"STC") and the substantiating data covering any modification of an Aircraft
that is delivered to FedEx by American pursuant to this Agreement if that
modification is designed by American. FedEx may use such STC to make the same
modification covered by the STC to any other McDonnell Douglas Model MD-11
aircraft owned and operated by FedEx. American will not charge FedEx for the
use of such a STC by FedEx on any of FedEx's McDonnell Douglas Model MD-11
aircraft. AMERICAN SHALL NOT BE DEEMED TO MAKE OR HAVE MADE AND DISCLAIMS, AND
FEDEX SHALL ACKNOWLEDGE AND CONFIRM THAT AMERICAN HAS NOT MADE, ANY
REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND WHATSOEVER, EXPRESS OR
IMPLIED, OR THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT OR OTHER RIGHT OF ANY
THIRD PARTY CONCERNING ANY STC OR ANY MODIFICATION COVERED BY ANY STC.
ARTICLE 17
MISCELLANEOUS
Section 17.01. Notices. Unless otherwise specified in writing by
the affected Party, all notices, approvals, requests, consents and other
communications given pursuant to this Agreement shall be in writing and shall
be deemed effective when received if hand-delivered, sent by facsimile (which
facsimile shall be confirmed by the executed counterpart thereof being sent by
another means for giving notice specified herein), Federal Express priority
service (except for notices sent relating to defaults or Events of Default
under this Agreement or with respect to the Put Options or the Purchase
Options, which may be sent by any courier that provides a written confirmation
of delivery), or sent by United States certified or registered mail, addressed
as follows:
If to American: American Airlines, Inc.
4333 Amon Carter Boulevard, MD 5566
Fort Worth, Texas 76155
Attention: Vice President Corporate and Fleet Planning
Telephone No. (817) 967-1227
Facsimile No. (817) 967-2199
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If to FedEx: Federal Express Corporation
2005 Corporate Avenue
Memphis, Tennessee 38132
Attention: Vice President, Fleet
Development and Acquisitions
Telephone No. (901) 395-3830
Facsimile No. (901) 395-3828
Section 17.02. Exhibits. All exhibits described in this Agreement
shall be deemed to be incorporated and made a part of this Agreement, except
that if there is any inconsistency between this Agreement and the provisions of
any Exhibit, the provisions of this Agreement shall control.
Section 17.03. Assignments. This Agreement, and American's rights
and obligations hereunder, shall not be assignable or delegable by American
without the prior written consent of FedEx, which consent may be withheld in
FedEx's sole discretion; provided, however, that American may assign its rights
and delegate its obligations under this Agreement to another Affiliate of AMR
Corporation without FedEx's consent so long as American shall remain primarily
liable for the obligations under this Agreement, with such continuing
obligations to be evidenced by such agreements and instruments as FedEx may
reasonably request. American acknowledges and agrees that FedEx, one of
FedEx's subsidiaries or a financial institution or other entity may be
designated by FedEx as the contracting party with American hereunder and that
this Agreement may be assigned by FedEx to any of such said entities without
restriction and upon written notice to American so long as FedEx shall remain
primarily liable for its obligations under this Agreement, with such continuing
obligations to be evidenced by such agreements and instruments as American may
reasonably request.
Section 17.04. No Offset. The amounts payable by either Party to
the other Party under this Agreement shall be absolute and unconditional and
shall not be subject to any abatement, reduction, set off, defense,
counterclaim or recoupment of or by the Party obligated to make such payment as
a result of any claim, cause of action or other rights that such Party may have
against the other Party.
Section 17.05. Binding Effect. This Agreement and the rights and
obligations of the Parties hereunder, shall be binding upon and inure to the
benefit of each of the Parties, their respective permitted successors, assigns
and legal representatives.
Section 17.06. Applicable Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without regard to the laws of conflict of laws of the State of New York.
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Section 17.07. Entire Agreement. This Agreement shall constitute
the entire agreement between the Parties with respect to the transactions
contemplated herein and shall not in any manner be supplemented, amended or
modified except by a written instrument executed on behalf of each of the
Parties by their duly authorized representatives.
Section 17.08. Expenses. Each of the Parties hereto shall be
responsible for its own costs and expenses incurred in connection with the
negotiation, preparation and execution of this Agreement.
Section 17.09. Counterparts. This Agreement may be executed in
separate counterparts, each of which when so executed shall be deemed to be an
original and which, taken together, shall constitute one and the same
instrument.
Section 17.10. Brokers' Commissions. Each of FedEx and American
represent to the other Party that each has negotiated this Agreement directly
with the other and that no brokers are entitled to a commission as a result of
their actions. FedEx and American agree to indemnify and hold one another
harmless from and against all claims, demands, liabilities, damages, losses or
judgments which may be suffered by the other and which arise out of the actions
of or employment by the other with any agent or broker.
Section 17.11. No Remedy Exclusive. Except as expressly set forth
herein, no remedy herein conferred upon or reserved to a Party herein is
intended to be exclusive of any other available remedy or remedies, but each
and every such remedy shall be cumulative and in addition to every other remedy
given under this Agreement or now or hereafter existing at law, in equity or by
statute. Except as expressly set forth herein, no delay or omission to
exercise any right or power accruing upon any default shall impair any such
right or power or be construed to be a waiver thereof, but any such right and
power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle a Party to exercise any remedy reserved to it
in this Agreement, it shall not be necessary to give any notice other than such
notice as may be herein expressly required.
Section 17.12. Severability. If any provision of this Agreement or
any application of any provision of this Agreement to any person or
circumstances shall be invalid or unenforceable to any extent, the remainder of
this Agreement and the application of that provision to other persons or
circumstances shall not be affected by the invalidity or unenforceability of
the provision generally or as to any person or circumstance. The other
provisions of this Agreement shall be enforced to the greatest extent permitted
by applicable law and in a manner to give effect to the intent of the Parties
to the greatest extent possible.
Section 17.13. Survival of Provisions. The rights, benefits and
obligations of the Parties under Section 3.09, Section 3.10, Article 5, Article
8, Article 10, Article
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11, Article 12 and Article 13 shall survive the completion of performance of
this Agreement and its termination or expiration and continue in full force and
effect thereafter in accordance with their respective terms.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, American and FedEx do hereby execute this
Agreement on the day and year first above written.
FEDERAL EXPRESS CORPORATION
By: /S/ James R. Parker
Name: James R. Parker
Title: Vice President-Fleet Development &
Acquisitions
AMERICAN AIRLINES, INC.
By: /S/ Jeffery M. Jackson
Name: Jeffery M. Jackson
Title: VicePresident-Corporate & Fleet Planning
<PAGE> 67
EXHIBIT A
TO THE AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX") AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
AIRCRAFT SUBJECT TO AIRCRAFT PURCHASE AGREEMENT
The McDonnell Douglas Model MD-11 aircraft bearing the U.S.
Registration Numbers, Manufacturer's Serial Numbers, American Nose Numbers and
American Fuselage or Line Numbers set forth below are the Aircraft subject to
the Agreement.
<TABLE>
<CAPTION>
REGISTRATION MANUFACTURER'S NOSE FUSELAGE OR
NUMBER SERIAL NUMBER NUMBER LINE NUMBER
---------------- ----------------- ------ --------------
<S> <C> <C> <C>
N1750B 48419 1AA 450
N1751A 48420 1AB 451
N1752K 48421 1AC 452
N1753 48487 1AD 469
N1754 48489 1AE 492
N1755 48490 1AF 499
N1756 48491 1AG 503
N1757A 48505 1AH 462
N1758B 48527 1AJ 504
N1759 48481 1AK 482
N1760A 48550 1AM 526
N1761R 48551 1AN 527
N1762B 48552 1AP 530
N1763 48553 1AR 531
N1764B 48554 1AS 535
N1765B 48596 1AT 537
N1766A 48597 1AU 540
N1767A 48598 1AV 550
N1768D 48436 1AL 483
</TABLE>
A-1
<PAGE> 68
EXHIBIT B
TO THE AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
AIRCRAFT
DELIVERY CERTIFICATE
This Aircraft Delivery Certificate is given by American Airlines, Inc.
("American") and Federal Express Corporation ("FedEx") pursuant to the
Agreement. Any capitalized term used herein and not expressly defined herein
shall have the meaning ascribed to it in the Agreement.
TENDER OF THE AIRCRAFT BY AMERICAN.
American hereby tenders to FedEx for Delivery pursuant to the terms
and subject to the conditions of the Agreement, the McDonnell Douglas Model
MD-11 Aircraft described below:
Registration Number: N__________________
Manufacturer's Serial Number: ________________
American Fuselage or Line Number: ______________________
American Nose Number: _______________________,
along with three (3) General Electric Company CF6-80C2D1F engines, bearing
Manufacturer's Serial Numbers:
Position (1) ________________
Position (2) ________________
Position (3) ________________,
(the "Delivered Aircraft") with the operating times and cycles as accumulated
on the Aircraft up to the time of Delivery and the EGT margins as of the last
test cell run accomplished immediately following the latest Engine Maintenance
accomplished on each such Engine as described on
B-1
<PAGE> 69
Attachment 1 hereto and made a part hereof, together with the Aircraft Records,
listed on Attachment 2 hereto and made a part hereof. American hereby restates
and confirms each of its representations and warranties set forth in Section
5.01 of the Agreement.
As of the date of this Certificate, (i) the high-time and high-cycle
highest flight cycle Airframe not yet delivered by American to FedEx is the
Airframe bearing U.S. Registration No. __________________, and Manufacturer's
Serial No. _________________ and Nose No. ____________________, and (ii) such
Airframe ____________________ flight hours and had _______________ flight
cycles since it was new.
Tender of the Aircraft is made by American at
__________________________, at _______/a.m./p.m. ____________ time, on this
____ day of _____________________, _____.
AMERICAN AIRLINES, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
ACCEPTANCE OF THE AIRCRAFT BY FEDEX.
FEDERAL EXPRESS CORPORATION ("FedEx") hereby accepts and acknowledges
receipt of the Delivered Aircraft from American, in accordance with the terms
and conditions of the Agreement, at ______________________, at
_________/a.m./p.m. ____________ time, on ________________, __________,
together with the Aircraft Records listed in Attachment 2 hereto and made a
part hereof.
By its execution and delivery of this Certificate, FedEx hereby (i)
restates and confirms each of its representations and warranties set forth in
Section 5.03 of the Agreement and (ii) acknowledges and agrees that upon
delivery by American to FedEx, except as to those
B-2
<PAGE> 70
discrepancies expressly set forth in Attachment 1 and Attachment 3 to this
certificate, the Delivered Aircraft was in Delivery Condition.
FEDERAL EXPRESS CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
DISCREPANCIES FROM DELIVERY CONDITION.
American and FedEx hereby agree that the remaining discrepancy or
discrepancies of the Delivered Aircraft from the Delivery Condition, if any,
and the manner of, and deadline for, the correction of any such discrepancy or
discrepancies are as set forth in Attachment 3 hereto.
Dated: ______________________, __________.
AMERICAN AIRLINES, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
FEDERAL EXPRESS CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
B-3
<PAGE> 71
ATTACHMENT 1 TO AIRCRAFT DELIVERY CERTIFICATE
AIRCRAFT HOURS AND CYCLES
AS OF_________________,________
MCDONNELL DOUGLAS MODEL MD-11 AIRCRAFT
REGISTRATION NUMBER: N_______; FUSELAGE OR LINE NUMBER ____;
MANUFACTURER'S SERIAL NUMBER ____________ AND NOSE NUMBER ___.
A. AIRFRAME:
<TABLE>
<CAPTION>
TO FIRST
TOTAL SINCE TO NEXT INTERVAL TO SECOND INTERVAL
NEWDELIVERY C CHECK ITEMS ITEMS
<S> <C> <C> <C> <C>
FLIGHT HOURS __________ __________ _____________ ______________
FLIGHT CYCLES __________ __________ _____________ ______________
CALENDAR TIME __________ __________ _____________ ______________
</TABLE>
B. GENERAL ELECTRIC COMPANY CF6-80C2D1F ENGINES:
<TABLE>
<CAPTION>
TOTAL FLIGHT TOTAL CYCLES TOTAL CYCLES TOTAL CYCLES
ENGINE MANUFACTURER'S TOTAL FLIGHT HOURS SINCE SINCE LAST SINCE LAST SINCE LAST
POSITION SERIAL NUMBER CYCLES SINCE NEW NEW HSM HSC EHM
<S> <C> <C> <C> <C> <C> <C>
1 ____________ __________ __________ ___________ __________ ___________
2 ____________ __________ __________ ___________ __________ ___________
3 ____________ __________ __________ ___________ __________ ___________
</TABLE>
The EGT margin of each of the Engines after (i) its last test cell run
accomplished immediately following the latest Engine Maintenance accomplished
on such Engine and (ii) the Power Assurance Run Test conducted pursuant to
Section 3.02(a) of the Agreement was as follows:
B-4
<PAGE> 72
<TABLE>
<CAPTION>
EGT MARGIN FOLLOWING EGT MARGIN FOLLOWING
ENGINE POSITION LAST TEST CELL RUN POWER ASSURANCE RUN TEST
- - --------------- ------------------ ------------------------
<S> <C> <C>
No. 1 _______ degrees Celsius _______ degrees Celsius
No. 2 _______ degrees Celsius _______ degrees Celsius
No. 3 _______ degrees Celsius _______ degrees Celsius
</TABLE>
The flight cycles or flight hours remaining to the limitation on each
life limited part in each Engine are as set forth in Annex 1 to this Attachment
1 to the Aircraft Delivery Certificate.
C. LANDING GEAR
<TABLE>
<CAPTION>
TOTAL
MANUFACTURER'S FLIGHT CYCLES TOTAL DAYS TOTAL CYCLES TO TOTAL DAYS TO
POSITION SERIAL NUMBER SINCE NEW SINCE NEW NEXT OVERHAUL NEXT OVERHAUL
-------- ------------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Nose _______________ __________ ___________ ____________ _________
Left Main _______________ __________ ___________ ____________ _________
Center Main _______________ __________ ___________ ____________ _________
Right Main _______________ __________ ___________ ____________ _________
</TABLE>
D. AUXILIARY POWER UNIT
APU INSTALLED IN THE DELIVERED AIRCRAFT:
MANUFACTURER'S SERIAL NUMBER _____________________
NUMBER OF FLIGHT CYCLES SINCE NEW _____________________
NUMBER OF FLIGHT HOURS SINCE NEW _____________________
B-5
<PAGE> 73
LIFE LIMITED PARTS CONTAINED IN SUCH APU:
<TABLE>
<CAPTION>
MANUFACTURER'S TOTAL FLIGHT TOTAL FLIGHT NUMBER OF CYCLES OR
SERIAL CYCLES SINCE HOURS SINCE HOURS TO FIRST LIFE
PART DESCRIPTION NUMBER NEW NEW LIMITED PART LIMITATION
- - ---------------------------------------- -------------- ----------- ------------ -----------------------
<S> <C> <C> <C> <C>
First Stage Low Pressure Compressor ______________ ___________ ____________ _______________________
Second Stage Low Pressure Compressor ______________ ___________ ____________ _______________________
Third Stage Low Pressure Compressor ______________ ___________ ____________ _______________________
High Pressure Turbine ______________ ___________ ____________ _______________________
First Stage Low Pressure Turbine ______________ ___________ ____________ _______________________
Second Stage Low Pressure Turbine ______________ ___________ ____________ _______________________
</TABLE>
Dated:__________________________, _________.
AMERICAN AIRLINES, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
B-6
<PAGE> 74
ANNEX 1 TO ATTACHMENT 1 TO AIRCRAFT
DELIVERY CERTIFICATE
FLIGHT CYCLES AND FLIGHT HOURS
REMAINING ON LIFE LIMITED PARTS ON
ENGINES
<TABLE>
<CAPTION>
ENGINE NO. 1 ENGINE NO. 2 ENGINE NO. 3
FLIGHT HOURS FLIGHT HOURS FLIGHT HOURS
PART DESCRIPTION OR CYCLES OR CYCLES OR CYCLES
<S> <C> <C> <C>
FAN ROTOR PARTS
- - ---------------
Disk, Fan Rotor Stage 1 ___________ ____________ ___________
Spool, Fan Rotor Stages 2-5 ___________ ___________ ___________
Fan, Forward Shaft ___________ ___________ ___________
Fan, Mid-Shaft ___________ ___________ ___________
HIGH PRESSURE
COMPRESSOR ROTOR PARTS
- - ----------------------
Disk, Stage 1 ___________ ___________ ____________
Disk, Stage 2 ___________ ___________ ____________
Disk, Stage 3-9 ___________ ___________ ____________
Disk, Stage 10 ___________ ___________ ____________
Spool/Shaft ___________ ___________ ____________
CDP Seal Disk ___________ ___________ ____________
HIGH PRESSURE
TURBINE ROTOR PARTS
- - -------------------
Disk, Stage 1 ___________ ___________ ____________
Disk, Stage 2 ___________ ___________ ____________
Spacer/Impeller ___________ ___________ ____________
Vane, -Ring Diffuser ___________ ___________ ____________
LOW PRESSURE
TURBINE ROTOR PARTS
- - -------------------
Disk, Stage 1 ___________ ___________ ____________
Disk, Stage 2 ___________ ___________ ____________
Disk, Stage 3 ___________ ___________ ____________
Disk, Stage 4 ___________ ___________ ____________
Disk, Stage 5 ___________ ___________ ____________
Shaft, LPTR ___________ ___________ ____________
</TABLE>
B-7
<PAGE> 75
ATTACHMENT 2 TO AIRCRAFT DELIVERY CERTIFICATE
AIRCRAFT RECORDS AND ENGINE RECORDS
DELIVERED WITH DELIVERED
AIRCRAFT
The following Aircraft Records (as defined in the Agreement) were
delivered with the Delivered Aircraft:
DRAWINGS/CHARTS:
1. Fuel Distribution Chart, Compass Correction Card, Major Avionic List,
Drawings: FDM1062 or FDM1058, DDM1079 or DDM1080, FDM1063 or FDM1072
RECORDS:
1. Aircraft Flight Log (includes Aircraft, Engines, Components) with
required certification
2. Heavy Maintenance Checks - History Log
3. Deferred Items List (Damage Log and FMR)
4. Last Bill-of-Work Prior to Delivery
5. Report 182Y (with required certification):
- Time-Control Components with 3500 Hrs. or less to go and
calendar
6. Report 188Y (with required certification):
- Time Control Components by Cycles to go
7. Report 190Y (with required certification):
- Airframe Time Control Components by Aircraft and Position
- Engine Item Time Control Components by Aircraft and Position
- Airframe Calendar Control Components by Aircraft and
Position
8. Report ET026 (with required certification):
- Component Time Control Status by S/N of Parts
9. Report ET049 (with required certification):
- Component Time - Special Item by RSPAM
10. AD Summary Report with certification per attached Appendix 1,
including accomplishment documents for the last
action taken and stating specific method of compliance and any
alternate means of compliance, if any, including
FAA approval
11. Report EC014:
- Modification History by AD/FAR Number
12. Report EC014:
- Modification History by AA Job Number and cross reference
13. Report EC015:
- Modification History by Service Bulletin Number - Limited to
AD/FAR
14. Report EC015:
- Modification History by Service Bulletin Number
15. Report D065:
- Engine Life Limited Parts/Life Limited Parts
16. Report D066 (with required certification):
- Engine Time Monitored Parts (including tags and tear-down
reports)
17. Report CML011:
- Engine Condition Monitoring - Last Run Before Delivery
18. Weight and Balance Report
19. Landing Gear Records
B-8
<PAGE> 76
20. Component Shop Records (including tags and tear-down reports)
21. APU Records
22. Engine Records
23. Aircraft Airframe Records
24. Accident Report or Accident-Free Certification Letter
ENGINE RECORDS:
1. Aircraft Flight Log (includes Aircraft, Engines, Components) with
certification per attached Appendix 1
2. Report 190Y (with required certification):
- Engine Item Time Control Components by Aircraft and Position
3. Report D065 (with required certification):
- Engine Life Limited Parts/Life Limited Parts
4. Airworthiness Directive Summary Report (with required certification)
B-9
<PAGE> 77
ATTACHMENT 3 TO AIRCRAFT DELIVERY CERTIFICATE
DISCREPANCIES OF DELIVERED AIRCRAFT FROM DELIVERY CONDITION
Any capitalized term used herein and not expressly defined herein
shall have the meaning ascribed to it in the Agreement.
The following remaining discrepancy or discrepancies from Delivery
Condition exist with respect to the Delivered Aircraft (as defined in the
Aircraft Delivery Certificate of which this Attachment 3 is a part):
B-10
<PAGE> 78
American and FedEx have agreed that the foregoing discrepancy or
discrepancies will be corrected in the following manner and by the following
date or dates:
Dated: __________________________, _______.
AMERICAN AIRLINES, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
FEDERAL EXPRESS CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE> 79
EXHIBIT C
TO THE AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX") AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
WARRANTY BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS:
THAT the undersigned, [INSERT TRANSFEROR'S CORPORATE NAME], a Delaware
Corporation ("Transferor"), has the power and right to convey the legal and
beneficial title to that:
[NOTE: INSERT THE FOLLOWING LANGUAGE IF THE WARRANTY BILL OF SALE RELATES TO
AN AIRCRAFT:] [certain McDonnell Douglas MD-11 aircraft bearing Federal
Aviation Administration Registration Number N_________ and Manufacturer's
Serial Number _______________, together with three (3) General Electric Company
CF6-80C2D1F turbofan jet engines [installed thereon], bearing Manufacturer's
Serial Numbers ____________________, _____________________, and
__________________________, together with all fixed equipment, parts,
components and accessories installed on said aircraft and engines.]
[NOTE: INSERT THE FOLLOWING LANGUAGE IF THE WARRANTY BILL OF SALE RELATES TO A
SPARE ENGINE, [* ], A REPLACEMENT ENGINE OR A DELAYED DELIVERY
ENGINE:] [certain General Electric Company CF6-80C2D1F turbofan jet engine,
bearing Manufacturer's Serial Number ____________________, together with all
fixed equipment, parts, components and accessories installed on said engine.]
THAT for and in consideration of the sum of Ten Dollars ($10) and
other valuable consideration, Transferee does, this ____ day of
________________, _________, grant, convey, transfer, bargain, sell, deliver
and set over all of its rights, title and interests to and in the above
described [aircraft, engines], [NOTE: INSERT THE FOREGOING WORD IF THE WARRANTY
BILL OF SALE RELATES TO AN AIRCRAFT] [engine] [NOTE: INSERT THE FOREGOING IF
THE WARRANTY BILL OF SALE RELATES TO AN ENGINE ALONE.], fixed equipment, parts,
components and accessories unto [INSERT TRANSFEREE'S CORPORATE NAME], a
Delaware corporation ("Transferee").
Transferor hereby warrants to Transferee, its successors and assigns,
that there is hereby conveyed to Transferee title to the aforesaid [aircraft,
engines]] [NOTE: INSERT THE FOREGOING WORD IF THE WARRANTY BILL OF SALE RELATES
TO AN AIRCRAFT], [engine,] [NOTE: INSERT THE FOREGOING IF THE WARRANTY BILL OF
SALE RELATES TO AN ENGINE ALONE.] fixed equipment, parts, components and
accessories free and clear of all liens, encumbrances and rights of others
arising by, through or under Transferor and that it shall warrant and defend
such title forever against all claims and demands whatsoever; and that this
bill of sale is made and delivered pursuant to the provisions of the Aircraft
Sales Agreement between Transferor and Transferee, dated April 7, 1995.
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
C-1
<PAGE> 80
IN WITNESS WHEREOF, Transferor has executed this Warranty Bill of Sale
on the _____ day of __________________________, __________.
[INSERT TRANSFEROR'S CORPORATE NAME]
By: ___________________________
Name: _________________________
Title: ________________________
C-2
<PAGE> 81
EXHIBIT D
TO THE AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
DATA RELATING TO THE AIRCRAFT AND
ENGINES TO BE DELIVERED BY AMERICAN
TO FEDEX PURSUANT TO ARTICLE 6 OF THE
AGREEMENT
Originals or copies of the following items of Data will be supplied in
accordance with Section 6.02(d) on the specified medium or on microfiche,
microfilm, paper, disk or any then current medium or a combination of these
media, with revision updates revised as of the applicable Delivery Dates. The
required certifications for Aircraft time and cycles, life-limited parts,
Airworthiness Directives and hard-time components for Airframes and Engines
shall be signed by a manager or higher management personnel in the
Airworthiness, Quality Assurance, Quality Control or Aircraft/Powerplant
Records department of American. Any required certification of any item of Data
shall be in the form attached as Appendix 1 to this Exhibit D.
MANUALS:
1. FAA Approved Aircraft Flight Manual
2. Aircraft Maintenance Manual (Microfilm)
3. Aircraft Overhaul Manual (Microfilm)
4. Aircraft Wiring Manual (Microfilm)
5. Aircraft Structure Repair Manual (Microfilm)
6. Aircraft Illustrated Parts Catalog (Microfilm)
7. Aircraft Weight and Balance Manual, Loading Manual, Basic & Supplement
8. McDonnell Douglas Procedure for Actual Weighing/Balancing of MD-11
Series Aircraft
9. Aircraft Minimum Equipment List & Configuration
10. McDonnell Douglas Aircraft Readiness Log
11. McDonnell Douglas Aircraft Detail Specification
12. CF6 Maintenance Manual (Microfilm-See Aircraft MM)
13. CF6 Overhaul Manual (Microfilm)
14. CF6 Illustrated Parts Catalog (Microfilm)
15. CF6 Service Bulletin (Microfilm)
16. Maintenance Check Manual (Microfilm)
17. Engineering Specification Maintenance Manual
18. AA Part Number versus Mfgr's Part Number (Fiche)
D-1
<PAGE> 82
DOCUMENTS:
1. Certificate of Airworthiness (on Aircraft)
2. Certificate of Registration (on Aircraft)
3. Sanitary Certificate (on Aircraft)
4. [Radio Station License (on Aircraft)]
DRAWINGS/CHARTS:
1. Fuel Distribution Chart, Compass Correction Card, Major Avionic List,
Drawings: FDM1062 or FDM1058, DDM1079 or DDM1080, FDM1063 or FDM1072
RECORDS:
1. Aircraft Flight Log (includes Aircraft, Engines, Components) with
certification per attached Appendix 1
2. Heavy Maintenance Checks - History Log
3. Deferred Items List (Damage Log and FMR)
4. Last Bill-of-Work Prior to Delivery
5. Report 182Y (with certification per attached Appendix 1):
- Time-Control Components with 3500 Hrs. or less to go and
calendar
6. Report 188Y (with certification per attached Appendix 1):
- Time Control Components by Cycles to go
7. Report 190Y (with certification per attached Appendix 1):
- Airframe Time Control Components by Aircraft and Position
- Engine Item Time Control Components by Aircraft and Position
- Airframe Calendar Control Components by Aircraft and
Position
8. Report ET026 (with certification per attached Appendix 1):
- Component Time Control Status by S/N of Parts
9. Report ET049 (with certification per attached Appendix 1):
- Component Time - Special Item by RSPAM
10. AD Summary Report with certification per attached Appendix 1,
including accomplishment documents for the last action taken and
stating specific method of compliance and any alternate means of
compliance, if any, including FAA approval
11. Report EC014:
- Modification History by AD/FAR Number
12. Report EC014:
- Modification History by AA Job Number and cross reference
13. Report EC015:
- Modification History by Service Bulletin Number - Limited to
AD/FAR
14. Report EC015:
- Modification History by Service Bulletin Number
15. Report D065:
- Engine Life Limited Parts/Life Limited Parts
16. Report D066 (with certification per attached Appendix 1):
- Engine Time Monitored Parts (including tags and tear-down
reports)
17. Report CML011:
- Engine Condition Monitoring - Last Run Before Delivery
18. Weight and Balance Report
19. Landing Gear Records
20. Component Shop Records (including tags and tear-down reports)
D-2
<PAGE> 83
21. APU Records
22. Engine Records
23. Aircraft Airframe Records
24. Accident Report or Accident-Free Certification Letter
ENGINE RECORDS:
1. Aircraft Flight Log (includes Aircraft, Engines, Components) with
certification per attached Appendix 1
2. Report 190Y (with certification per attached Appendix 1):
- Engine Item Time Control Components by Aircraft and Position
3. Report D065 (with certification per attached Appendix 1):
- Engine Life Limited Parts/Life Limited Parts
4. Airworthiness Directive Summary Report (with the certification per
attached Appendix 1)
D-3
<PAGE> 84
APPENDIX 1 TO EXHIBIT D
AIRCRAFT REGISTRATION NO. ____________
MANUFACTURER'S SERIAL NO. __________
DATE:__________________, ________
[TITLE]
I HEREBY CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD TO THE BEST OF MY
KNOWLEDGE.
_________________________________ ___________________________________
SIGNATURE DATE
_________________________________ ___________________________________
PRINTED NAME TITLE
AIR CARRIER
_________________________________ ___________________________________
COMPANY NAME COMPANY CERTIFICATE TYPE
AA4A025A
_________________________________
COMPANY CERTIFICATE NUMBER
D-4
<PAGE> 85
EXHIBIT E
TO THE AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
DESIGNATION OF AN AIRFRAME FOR DELIVERY
ON SCHEDULED DELIVERY DATE
Any capitalized term used herein shall have the meaning ascribed to it
in the Agreement.
1. The Scheduled Delivery Date for which the Designated Airframe
(as defined below) is being designated is ________________________________.
2. The following are the identification numbers of the Airframe
designated for delivery on the Scheduled Delivery Date set forth in Paragraph
1. above (the "Designated Airframe"):
FAA Registration Number: N_____________________
Manufacturer's Serial Number: _________________________________
Nose Number: _______________________
Fuselage or Line Number: ______________________________
3. The total flight hours and flight cycles on the Designated
Airframe since delivery of the Designated Airframe by the Manufacturer to
American and the number of flight hours and flight cycles remaining on the
Designated Airframe to certain C Checks as of the date and time of this
Designation are as follows:
<TABLE>
<CAPTION>
TOTAL SINCE TO NEXT TO FIRST INTERVAL TO SECOND INTERVAL
NEW C CHECK ITEMS ITEMS
<S> <C> <C> <C> <C>
FLIGHT HOURS ___________ ___________ ___________ ___________
FLIGHT CYCLES ___________ ___________ ___________ ___________
CALENDAR TIME ___________ ___________ ___________ ___________
</TABLE>
4. The total flight hours and flight cycles remaining to the next
major overhaul of each of the Gears that are installed on the Designated
Airframe at the date and time of this Designation are as follows:
E-1
<PAGE> 86
<TABLE>
<CAPTION>
TOTAL
MANUFACTURER'S FLIGHT CYCLES TOTAL DAYS TOTAL CYCLES TO TOTAL DAYS TO
POSITION SERIAL NUMBER SINCE NEW SINCE NEW NEXT OVERHAUL NEXT OVERHAUL
-------- ------------- --------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Nose ____________ __________ ___________ ____________ ___________
Left Main ____________ __________ ___________ ____________ ___________
Center Main _____________ __________ ___________ ____________ ___________
Right Main _____________ __________ ___________ ____________ ___________
</TABLE>
5. The total flight hours or flight cycles since new for (x) the
APU installed on the Designated Airframe and (y) the Life Limited Parts
contained in such APU and the flight cycles or flight hours remaining to the
first limit of the Life Limited Parts contained in the APU installed on the
Designated Airframe at the date and time of this Designation are as follows:
APU INSTALLED ON THE DESIGNATED AIRFRAME:
MANUFACTURER'S SERIAL NUMBER _____________________
NUMBER OF FLIGHT CYCLES SINCE NEW _____________________
NUMBER OF FLIGHT HOURS SINCE NEW _____________________
LIFE LIMITED PARTS CONTAINED IN SUCH APU:
<TABLE>
<CAPTION>
MANUFACTURER'S TOTAL FLIGHT TOTAL FLIGHT NUMBER OF CYCLES OR
SERIAL CYCLES SINCE HOURS SINCE HOURS TO FIRST LIFE
PART DESCRIPTION NUMBER NEW NEW LIMITED PART LIMITATION
- - ---------------------------------- -------------- ------------ ----------- -----------------------
<S> <C> <C> <C> <C>
First Stage Low Pressure Compressor ______________ ____________ ___________ _______________________
Second Stage Low Pressure Compressor ______________ ____________ ___________ _______________________
Third Stage Low Pressure Compressor ______________ ____________ ___________ _______________________
High Pressure Turbine ______________ ____________ ___________ _______________________
First Stage Low Pressure Turbine ______________ ____________ ___________ _______________________
Second Stage Low Pressure Turbine ______________ ____________ ___________ _______________________
</TABLE>
6. The estimated usage of the Aircraft from the date of this
Designation until the Scheduled Delivery Date is __________________ flight
cycles and _____________ flight hours.
This Designation is made by American on the ____ day of _____________,
_____ at _________, [a.m.] [p.m.], _______________________ time.
E-2
<PAGE> 87
AMERICAN AIRLINES, INC.
By: ________________________
Name: ______________________
Title: _____________________
E-3
<PAGE> 88
EXHIBIT F
TO THE AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
DESIGNATION OF A SUBSTITUTE AIRFRAME FOR
DELIVERY ON SCHEDULED DELIVERY
DATE
1. This Designation of a Substitute Airframe for delivery on a
Scheduled Delivery Date (this "Change Designation") is being provided by
American to FedEx in order to designate an Airframe for delivery on the
Scheduled Delivery Date indicated below in substitution for an Airframe
previously designated by American for delivery to FedEx on such Scheduled
Delivery Date (the "Previously Designated Airframe"). Any capitalized term
used herein and not expressly defined herein shall have the meaning ascribed to
it in the Agreement.
2. The Scheduled Delivery Date for which the Previously
Designated Airframe was to be delivered and for which the Substitute Airframe
(as defined below) is now being designated for delivery and sale to FedEx is
________________________________.
3. The following are the identification numbers of the Previously
Designated Airframe:
FAA Registration Number: N_________________________
Manufacturer's Serial Number: _______________________________
Nose Number: __________________________
Fuselage or Line Number: ___________________________
4. The following are the identification numbers of the Airframe
being substituted for the Previously Designated Airframe which is hereby
designated for delivery on the Scheduled Delivery Date set forth in Paragraph
2. above in the stead of the Previously Designated Airframe (the "Substitute
Airframe"):
F-1
<PAGE> 89
FAA Registration Number: N__________________________
Manufacturer's Serial Number: _________________________________
Nose Number: ________________________
Fuselage or Line Number: _________________________
5. The total flight hours and flight cycles on the Substitute
Airframe since delivery of the Substitute Airframe by the Manufacturer to
American and the number of flight hours and flight cycles remaining on the
Substitute Airframe to the certain C Checks as of the date and time of this
Change Designation are as follows:
<TABLE>
<CAPTION>
TOTAL SINCE TO NEXT TO FIRST INTERVAL TO SECOND INSPECTION
NEW C CHECK ITEMS ITEMS
<S> <C> <C> <C> <C>
FLIGHT HOURS ___________ ___________ ___________ ___________
FLIGHT CYCLES ___________ ___________ ___________ ___________
CALENDAR TIME ___________ ___________ ___________ ___________
</TABLE>
6. The total flight hours and flight cycles remaining to the next
major overhaul of each of the Gears that are installed on the Substitute
Airframe at the date and time of this Designation are as follows:
<TABLE>
<CAPTION>
TOTAL
MANUFACTURER'S FLIGHT CYCLES TOTAL DAYS TOTAL CYCLES TO TOTAL DAYS TO
POSITION SERIAL NUMBER SINCE NEW SINCE NEW NEXT OVERHAUL NEXT OVERHAUL
-------- ------------- --------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Nose ______________ _________ ___________ ___________ _________
Left Main ______________ _________ ___________ ___________ _________
Center Main ______________ _________ ___________ ___________ _________
Right Main ______________ _________ ___________ ___________ _________
</TABLE>
7. The total flight hours or flight cycles since new for (x) the
APU installed on the Substitute Airframe and (y) the Life Limited Parts
contained in such APU and the flight cycles or flight hours remaining to the
first limit of the Life Limited Parts contained in the APU installed on the
Substitute Airframe at the date and time of this Change Designation are as
follows:
F-2
<PAGE> 90
APU INSTALLED ON THE SUBSTITUTE AIRFRAME:
MANUFACTURER'S SERIAL NUMBER _____________________
NUMBER OF FLIGHT CYCLES SINCE NEW _____________________
NUMBER OF FLIGHT HOURS SINCE NEW _____________________
LIFE LIMITED PARTS CONTAINED IN SUCH APU:
<TABLE>
<CAPTION>
MANUFACTURER'S TOTAL FLIGHT TOTAL FLIGHT NUMBER OF CYCLES OR
SERIAL CYCLES SINCE HOURS SINCE HOURS TO FIRST LIFE
PART DESCRIPTION NUMBER NEW NEW LIMITED PART LIMITATION
- - ---------------------------------- -------------- ------------ ----------- -----------------------
<S> <C> <C> <C> <C>
First Stage Low Pressure Compressor ______________ ____________ ___________ _______________________
Second Stage Low Pressure Compressor ______________ ____________ ___________ _______________________
Third Stage Low Pressure Compressor ______________ ____________ ___________ _______________________
High Pressure Turbine ______________ ____________ ___________ _______________________
First Stage Low Pressure Turbine ______________ ____________ ___________ _______________________
Second Stage Low Pressure Turbine ______________ ____________ ___________ _______________________
</TABLE>
This Change Designation is made by American on the ____ day of
_____________, _____ at _________, [a.m.] [p.m.], _______________________ time.
AMERICAN AIRLINES, INC.
By: ________________________
Name: ______________________
Title: _____________________
F-3
<PAGE> 91
EXHIBIT G
TO THE AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
FORM OF
ASSIGNMENT OF ASSIGNABLE MANUFACTURER'S WARRANTIES
In connection with delivery of the Aircraft described in Annex A
hereto, including the Engines conveyed therewith (the "Aircraft") by American
Airlines, Inc. ("American") to Federal Express Corporation ("FedEx"), American
hereby assigns and conveys to FedEx, its successors, assigns and legal
representatives, all of American's right, title and interest in and to any and
all of the manufacturer's, vendor's and other warranties relating to the
Aircraft, including the Engines conveyed therewith (but not with respect to any
Non-Conforming Engine) to the extent, but only to the extent, that such
warranties are assignable without consent of the grantor of any such warranty
or the payment of consideration to the grantor of any such warranty (the
"Warranties") and all rights to enforce, exercise any rights with respect to or
retain any recovery or benefit with respect to the Warranties, except to the
extent that such rights and recoveries relate to work completed or to be
completed by American or any of its affiliates in connection with its
performance of its obligations under the Aircraft Sales Agreement between FedEx
and American dated April 7, 1995 (the "Agreement") prior to or in connection
with the Delivery (as defined in the Agreement) of the Aircraft.
Notwithstanding the foregoing, American does not assign or convey to FedEx any
outstanding claims or rights, whether liquidated or contingent, or know or
unknown, that it may have against the grantor of any of the Warranties arising
prior to the tender of the Aircraft by American for Delivery pursuant to the
Agreement.
Dated : ______________, _________.
AMERICAN AIRLINES, INC.
By: ___________________________
Name:__________________________
Title:_________________________
G-1
<PAGE> 92
ANNEX A TO ASSIGNMENT OF ASSIGNABLE
MANUFACTURER'S WARRANTIES
One McDonnell Douglas Model MD-11 Aircraft described below:
Registration Number: N__________________________
Manufacturer's Serial Number: __________________________
American Fuselage or Line Number: ______________________________
American Nose Number: ___________________________________,
along with three (3) General Electric Company CF6-80C2D1F engines, bearing
Manufacturer's Serial Numbers:
Position (1) ____________________
Position (2) ____________________
Position (3) ____________________
G-2
<PAGE> 93
EXHIBIT H
TO THE AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
DESIGNATION OF ENGINES FOR CONVEYANCE ON SCHEDULED DELIVERY DATE
Any capitalized term used in this Designation of Engines for
conveyance on a Scheduled Delivery Date shall have the meaning ascribed to it
in the Agreement unless expressly defined herein.
1. The Scheduled Delivery Date for which the Designated Airframe
(as defined below) is being designated is ________________________________.
2. The following are the identification numbers of the Airframe
designated for delivery on the Scheduled Delivery Date set forth in Paragraph
1. above (the "Designated Airframe"):
FAA Registration Number: N________ Nose Number: _____
Manufacturer's Serial No.: ________________ Fuselage or Line Number: ________
3. The following are the Engines to be conveyed with the Designated
Airframe on the Scheduled Delivery Date set forth in Paragraph 1. above (the
"Designated Engines"):
GENERAL ELECTRIC COMPANY CF6-80C2D1F ENGINES:
<TABLE>
<CAPTION>
TOTAL FLIGHT TOTAL FLIGHT TOTAL CYCLES TOTAL CYCLES TOTAL CYCLES
ENGINE MANUFACTURER'S CYCLES HOURS SINCE SINCE LAST SINCE LAST SINCE LAST
POSITION SERIAL NUMBER SINCE NEW NEW HSM HSC EHM
<S> <C> <C> <C> <C> <C> <C>
1 ____________ __________ ___________ __________ ___________ ___________
2 ____________ __________ ___________ __________ ___________ ___________
3 ____________ __________ ___________ __________ ___________ ___________
</TABLE>
H-1
<PAGE> 94
4. The flight cycles or flight hours remaining to the limitation
on each life limited part in each Engine are as set forth in Annex 1 to this
Designation of Engines for Delivery on Scheduled Delivery Date.
5. The EGT margin of each of the Designated Engines after (i) its
last test cell run accomplished immediately following the latest Engine
Maintenance accomplished on each such Designated Engine and (ii) the Power
Assurance Run Test conducted pursuant to Section 3.02(a) of the Agreement was
as follows:
<TABLE>
<CAPTION>
EGT MARGIN FOLLOWING EGT MARGIN FOLLOWING
ENGINE POSITION LAST TEST CELL RUN POWER ASSURANCE RUN TEST
- - --------------- --------------------------- ------------------------
<S> <C> <C>
No. 1 _______ degrees Celsius _______ degrees Celsius
No. 2 _______ degrees Celsius _______ degrees Celsius
No. 3 _______ degrees Celsius _______ degrees Celsius
</TABLE>
6. As of the date of this Engine Designation, (i) the highest
flight cycle Airframe not yet delivered by American to FedEx is the Airframe
bearing U.S. Registration No. __________________ and Manufacturer's Serial No.
_________________ and (ii) such Airframe had ________________ flight cycles
since it was new.
This Engine Designation is made by American on the ____ day of
_____________, _____ at _________, [a.m.] [p.m.], _______________________ time.
AMERICAN AIRLINES, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
H-2
<PAGE> 95
ANNEX 1 TO
DESIGNATION OF ENGINES FOR DELIVERY ON SCHEDULED DELIVERY DATE
REMAINING FLIGHT CYCLES AND FLIGHT
HOURS REMAINING ON LIFE LIMITED PARTS
ON ENGINES
<TABLE>
<CAPTION>
ENGINE NO. 1 ENGINE NO. 2 ENGINE NO. 3
FLIGHT HOURS FLIGHT HOURS FLIGHT HOURS
PART DESCRIPTION OR CYCLES OR CYCLES OR CYCLES
<S> <C> <C> <C>
FAN ROTOR PARTS
- - ---------------
Disk, Fan Rotor Stage 1 ___________ ____________ ___________
Spool, Fan Rotor Stages 2-5 ___________ ___________ ___________
Fan, Forward Shaft ___________ ___________ ___________
Fan, Mid-Shaft ___________ ___________ ___________
HIGH PRESSURE
COMPRESSOR ROTOR PARTS
- - ----------------------
Disk, Stage 1 ___________ ___________ ____________
Disk, Stage 2 ___________ ___________ ____________
Disk, Stage 3-9 ___________ ___________ ____________
Disk, Stage 10 ___________ ___________ ____________
Spool/Shaft ___________ ___________ ____________
CDP Seal Disk ___________ ___________ ____________
HIGH PRESSURE
TURBINE ROTOR PARTS
- - -------------------
Disk, Stage 1 ___________ ___________ ____________
Disk, Stage 2 ___________ ___________ ____________
Spacer/Impeller ___________ ___________ ____________
Vane, -Ring Diffuser ___________ ___________ ____________
LOW PRESSURE
TURBINE ROTOR PARTS
- - -------------------
Disk, Stage 1 ___________ ___________ ____________
Disk, Stage 2 ___________ ___________ ____________
Disk, Stage 3 ___________ ___________ ____________
Disk, Stage 4 ___________ ___________ ____________
Disk, Stage 5 ___________ ___________ ____________
Shaft, LPTR ___________ ___________ ____________
</TABLE>
H-3
<PAGE> 96
EXHIBIT I
TO THE AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
PUT OPTION EXERCISE
1. This Put Option Exercise is provided by American to FedEx
pursuant to Section 2.02(b) of the Agreement. Any capitalized term used in
this Put Option Exercise shall have the meaning ascribed to it in the
Agreement.
2. American hereby exercises a Put Option granted by FedEx as set
forth in Section 2.02 of the Agreement for the sale of a Put Option Aircraft to
FedEx with respect to the following Scheduled Delivery Date:
_______________________________, ______. A Designation and an Engine
Designation will be provided by American to FedEx in accordance with Section
2.04 of the Agreement designating the Airframe and the Engines that will be
tendered by American to FedEx on such Scheduled Delivery Date.
This Put Option Exercise is made by American on the ____ day of
_____________, _____.
AMERICAN AIRLINES, INC.
By: ____________________________
Name: __________________________
Title: _________________________
I-1
<PAGE> 97
EXHIBIT J
TO THE AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
PURCHASE OPTION NOTICE
1. Pursuant to Section 2.03(a) of the Agreement, American hereby
notifies FedEx that American intends to offer for sale _________________
[specify number of Put Option Aircraft] of the Put Option Aircraft. Any
capitalized term used in this Purchase Option Notice shall have the meaning
ascribed to it in the Agreement.
2. The Scheduled Delivery Dates for the Put Option Aircraft that
American will be marketing are as follows:
1. _____________________________________, ________
2. _____________________________________, ________
3. _____________________________________, ________
4. _____________________________________, ________
5. _____________________________________, ________
6. _____________________________________, ________
7. _____________________________________, ________
Please be advised that pursuant to Section 2.03(a) of the Agreement,
FedEx has a period of fourteen (14) days after its receipt of this Purchase
Option Notice in which to exercise its Purchase Option under the terms of the
Agreement.
This Purchase Option Notice is given by American on the ____ day of
_____________, _____.
AMERICAN AIRLINES, INC.
By: _________________________
Name: _______________________
Title: ______________________
J-1
<PAGE> 98
EXHIBIT K
TO THAT CERTAIN
AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND AMERICAN AIRLINES, INC.
("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
PURCHASE OPTION EXERCISE
1. This Purchase Option Exercise is provided by FedEx to American
pursuant to Section 2.03(a) of the Agreement. Any capitalized term used in this
Purchase Option Exercise shall have the meaning ascribed to it in the
Agreement.
2. FedEx hereby exercises the Purchase Options granted by
American as set forth in Section 2.03 of the Agreement for the purchase of
_______________[specify number] Put Option Aircraft from American on the
following Scheduled Delivery Date(s) as specified in American's Purchase Option
Notice, dated _________________________, __________:
1. _____________________________________, ________
2. _____________________________________, ________
3. _____________________________________, ________
4. _____________________________________, ________
5. _____________________________________, ________
6. _____________________________________, ________
7. _____________________________________, ________
3. A Deposit of [* ] as required by Section 2.06 of the
Agreement is hereby tendered with this Purchase Option Exercise with respect to
each Purchase Option Aircraft.
4. FedEx hereby restates and confirms its representation and
warranty to American in Section 5.03(v) of the Agreement.
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
K-1
<PAGE> 99
This Purchase Option Exercise is given by FedEx on the ____ day of
_____________, _____.
FEDERAL EXPRESS CORPORATION
By: ______________________________
Name: ____________________________
Title: ___________________________
K-2
<PAGE> 100
EXHIBIT L
TO THAT CERTAIN
AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND AMERICAN AIRLINES, INC.
("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
PURCHASE PRICE ADJUSTMENT FORMULA -- AIRFRAME
Any capitalized term used herein and not expressly defined herein
shall have the meaning ascribed to it in the Agreement.
[* ]
*
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
L-1
<PAGE> 101
*
[*
]
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
L-2
<PAGE> 102
TABLE A TO EXHIBIT L
AMERICAN AIRLINES, INC.
AIRFRAME MAINTENANCE
The following table sets forth the estimated maintenance cost for
accomplishment of a C Check, First Interval Items and Second Interval Items in
twelve-month periods noted below.
<TABLE>
<CAPTION>
TWELVE-MONTH
PERIOD ENDED C CHECK FIRST INTERVAL SECOND INTERVAL
MAY 31 COST ITEMS COST ITEMS COST
<S> <C> <C> <C>
* * * *
</TABLE>
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
L-3
<PAGE> 103
EXHIBIT M
TO THAT CERTAIN
AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND AMERICAN AIRLINES, INC.
("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
PURCHASE PRICE ADJUSTMENT FORMULA -- ENGINES
Any capitalized term used herein and not expressly defined herein
shall have the meaning ascribed to it in the Agreement.
[*
]
*
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
M-1
<PAGE> 104
*
[*
]
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
M-2
<PAGE> 105
TABLE A TO EXHIBIT M
AMERICAN AIRLINES, INC.
ENGINE HEAVY MAINTENANCE
The following table sets forth the estimated maintenance cost for an
HSM, HSC and EHM in the calendar years noted below.
<TABLE>
<CAPTION>
CALENDAR
YEAR EHM HSC HSM
<S> <C> <C> <C>
* * * *
</TABLE>
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
M-3
<PAGE> 106
EXHIBIT N
TO THAT CERTAIN
AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND AMERICAN AIRLINES, INC.
("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
PURCHASE PRICE ADJUSTMENT FORMULA -- GEAR
Any capitalized term used herein and not expressly defined herein
shall have the meaning ascribed to it in the Agreement.
[*
]
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
N-1
<PAGE> 107
*
[*
]
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
N-2
<PAGE> 108
EXHIBIT O
TO THAT CERTAIN
AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX")
AND AMERICAN AIRLINES, INC.
("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
PURCHASE PRICE ADJUSTMENT FORMULA -- APU
Any capitalized term used herein and not expressly defined herein
shall have the meaning ascribed to it in the Agreement.
[*
]
*
[*
]
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
O-1
<PAGE> 109
EXHIBIT P
to that certain
Aircraft Sales Agreement between
Federal Express Corporation ("FedEx") and
American Airlines, Inc. ("American")
Dated April 7, 1995 (the "Agreement")
ENGINE
DELIVERY CERTIFICATE
This Engine Delivery Certificate is given by American Airlines, Inc.
("American") and Federal Express Corporation ("FedEx") pursuant to the
Agreement. Any capitalized term used herein and not expressly defined herein
shall have the meaning ascribed to it in the Agreement.
TENDER OF EACH ENGINE.
____________________ ("Tenderor") hereby tenders to ______________
("Recipient") for delivery pursuant to the terms and subject to the conditions
of the Agreement, ______ [specify number of engines] General Electric Company
CF6-80C2D1F engines, bearing Manufacturer's Serial Number(s):
________________________
________________________
________________________
(each a "Delivered Engine" and collectively, if applicable, the "Delivered
Engines") with (i) if American is the Tenderor, the operating times and cycles
as accumulated on each Engine up to the time of Delivery as described on
Attachment 1A hereto and made a part hereof or (ii) if FedEx is the Tenderor,
the operating times and cycles as accumulated on each Engine from the time
FedEx took delivery of the Delivered Engine or Delivered Engines, as the case
may be, from American up to the time of delivery of such Delivered Engine or
Delivered Engines, as the case may be, pursuant to this Engine Delivery
Certificate described on Attachment 1B hereto and made a part hereof, at
_______/a.m./p.m. ____________ time, on ____________________, _________,
together with any Data, listed on Attachment 2 hereto and made a part hereof.
Tenderor hereby restates and confirms each of its representations and
warranties set forth in Article 5 of the Agreement.
P-1
<PAGE> 110
Tender of each Engine is made by _________________ this ____ day of
_____________________, _____.
[AMERICAN AIRLINES, INC.]
[FEDERAL EXPRESS CORPORATION]
By:____________________________________
Title:_________________________________
ACCEPTANCE OF EACH ENGINE.
Recipient hereby accepts and acknowledges receipt of each Delivered
Engine from Tenderor in accordance with the terms and conditions of the
Agreement, which Delivered Engine or Delivered Engines has or have, as the case
may be, the operating times and flight cycles as accumulated on the Aircraft up
to the time of delivery as described on Attachment 1 hereto and made a part
hereof, at ___________________, at _________/a.m./p.m. ____________ time, on
___________________, __________, together with the Data listed in Attachment 2
hereto and made a part hereof. Recipient hereby restates and confirms each of
its representations set forth in Article 5 of the Agreement.
If it is FedEx which is executing the Acceptance portion of this
Engine Delivery Certificate and accepting a Delayed Delivery Engine or
Replacement Engine, by its execution and delivery of this Certificate, FedEx
hereby acknowledges and agrees that upon delivery by American to FedEx, except
as to those discrepancies expressly set forth in Attachment 1 to this
certificate, the Delivered Engine met the requirements for the condition of the
Engines upon delivery as set forth in the Agreement.
Acceptance of each Delivered Engine is made by _____________________
this _____ day of ______________________, ______.
[FEDERAL EXPRESS CORPORATION]
[AMERICAN AIRLINES, INC.]
By:____________________________________
Name:__________________________________
Title:_________________________________
HIGHEST FLIGHT CYCLE AIRFRAME CERTIFICATION.
As of the date of this Certificate, (i) the highest flight cycle
Airframe not yet delivered by American to FedEx is the Airframe bearing U.S.
Registration No. __________________ and Manufacturer's Serial No.
_________________ and (ii) such Airframe has _______________ flight cycles
since it was new.
AMERICAN AIRLINES, INC.
By:____________________________________
Name:__________________________________
Title: ________________________________
P-2
<PAGE> 111
ATTACHMENT 1A TO ENGINE DELIVERY CERTIFICATE
ENGINE INFORMATION
AS OF ___________________, ______
GENERAL ELECTRIC COMPANY CF6-80C2D1F ENGINES:
<TABLE>
<CAPTION>
TOTAL FLIGHT TOTAL FLIGHT TOTAL CYCLES TOTAL CYCLES TOTAL CYCLES
ENGINE MANUFACTURER'S CYCLES HOURS SINCE SINCE LAST SINCE LAST SINCE LAST
POSITION SERIAL NUMBER SINCE NEW NEW HSM HSC EHM
<S> <C> <C> <C> <C> <C> <C>
1 ____________ __________ ___________ __________ ___________ ___________
2 ____________ __________ ___________ __________ ___________ ___________
3 ____________ __________ ___________ __________ ___________ ___________
</TABLE>
The EGT margin of each of the Delivered Engines after (i) its last
test cell run accomplished immediately following the latest Engine Maintenance
accomplished with respect to each such Delivered Engine and (ii) the Power
Assurance Run Test conducted pursuant to Section 3.02(a) of the Agreement was
as follows:
<TABLE>
<CAPTION>
EGT MARGIN FOLLOWING EGT MARGIN FOLLOWING
ENGINE POSITION LAST TEST CELL RUN POWER ASSURANCE RUN TEST
- - --------------- -------------------------- ------------------------
<S> <C> <C>
No. 1 _______ degrees Celsius _______ degrees Celsius
No. 2 _______ degrees Celsius _______ degrees Celsius
No. 3 _______ degrees Celsius _______ degrees Celsius
</TABLE>
The flight cycles or flight hours remaining to the limitation on each
life limited part in each Engine are as set forth in Annex 1 to this Attachment
1 to the Engine Aircraft Delivery Certificate.
P-3
<PAGE> 112
Dated:__________________________, _________.
AMERICAN AIRLINES, INC.
By: _______________________________
Name: _____________________________
Title: ____________________________
P-4
<PAGE> 113
ANNEX 1 TO ATTACHMENT 1A TO
ENGINE DELIVERY CERTIFICATE
REMAINING FLIGHT CYCLES AND FLIGHT
HOURS REMAINING ON LIFE LIMITED PARTS ON ENGINES
<TABLE>
<CAPTION>
ENGINE NO. 1 ENGINE NO. 2 ENGINE NO. 3
FLIGHT HOURS FLIGHT HOURS FLIGHT HOURS
PART DESCRIPTION OR CYCLES OR CYCLES OR CYCLES
<S> <C> <C> <C>
FAN ROTOR PARTS
- - ---------------
Disk, Fan Rotor Stage 1 ___________ ____________ ___________
Spool, Fan Rotor Stages 2-5 ___________ ___________ ___________
Fan, Forward Shaft ___________ ___________ ___________
Fan, Mid-Shaft ___________ ___________ ___________
HIGH PRESSURE
COMPRESSOR ROTOR PARTS
- - ----------------------
Disk, Stage 1 ___________ ___________ ____________
Disk, Stage 2 ___________ ___________ ____________
Disk, Stage 3-9 ___________ ___________ ____________
Disk, Stage 10 ___________ ___________ ____________
Spool/Shaft ___________ ___________ ____________
CDP Seal Disk ___________ ___________ ____________
HIGH PRESSURE
TURBINE ROTOR PARTS
- - -------------------
Disk, Stage 1 ___________ ___________ ____________
Disk, Stage 2 ___________ ___________ ____________
Spacer/Impeller ___________ ___________ ____________
Vane, -Ring Diffuser ___________ ___________ ____________
LOW PRESSURE
TURBINE ROTOR PARTS
- - -------------------
Disk, Stage 1 ___________ ___________ ____________
Disk, Stage 2 ___________ ___________ ____________
Disk, Stage 3 ___________ ___________ ____________
Disk, Stage 4 ___________ ___________ ____________
Disk, Stage 5 ___________ ___________ ____________
Shaft, LPTR ___________ ___________ ____________
</TABLE>
P-5
<PAGE> 114
ATTACHMENT 1B TO ENGINE DELIVERY CERTIFICATE
ENGINE FLIGHT CYCLES AND FLIGHT HOURS
AS OF ___________________, ______
GENERAL ELECTRIC COMPANY CF6-80C2D1F ENGINES:
<TABLE>
<CAPTION>
TOTAL FLIGHT CYCLES TOTAL FLIGHT HOURS
ENGINE MANUFACTURER' ACCUMULATED WHILE IN FEDEX'S ACCUMULATED WHILE IN FEDEX'S
POSITION SERIAL NUMBER CONTROL CONTROL
<S> <C> <C> <C>
1 __________________ ________________ _______________
2 __________________ ________________ _______________
3 __________________ ________________ _______________
</TABLE>
Dated:__________________________, _________.
FEDERAL EXPRESS CORPORATION
By: ________________________________
Name: ______________________________
Title: _____________________________
P-6
<PAGE> 115
ATTACHMENT 2 TO ENGINE DELIVERY CERTIFICATE
ENGINE RECORDS DELIVERED
WITH DELIVERED ENGINE
1. Aircraft Flight Log (includes Aircraft, Engines, Components) with
required certification
2. Report 190Y (with required certification ):
- Engine Item Time Control Components by Aircraft and Position
3. Report D065 (with required certification):
- Engine Life Limited Parts/Life Limited Parts
4. Airworthiness Directive Summary Report (with required certification)
P-7
<PAGE> 116
EXHIBIT Q TO AIRCRAFT SALES AGREEMENT BETWEEN
AMERICAN AIRLINES, INC. ("AMERICAN:) AND
FEDERAL EXPRESS CORPORATION ("FEDEX")
DATED APRIL 7, 1995 (THE "AGREEMENT")
SECTION 1--MD -11 SPARE PARTS PURCHASE DATES,
PURCHASE OBLIGATIONS, AND DELIVERY OBLIGATIONS TO BE
PURCHASED IN CONJUNCTION WITH DELIVERIES
OF FIRM AIRCRAFT AND PUT OPTION AIRCRAFT SOLD PURSUANT TO THE PUT OPTIONS
<TABLE>
<CAPTION>
SPARES
PURCHASE
SPARES PRICE OF
SPARES PURCHASE A PAIR OF
PURCHASE PRICE OF SPARE
SCHEDULED AVERAGE PRICE TO BE NUMBER OF A SPARE SPARE THRUST
DATE OR UNIT PRICE PAID FOR SPARE APU THRUST REVERSERS
YEAR FOR THE MD-11 OF MD-11 MD-11 APU'S PURCHASED REVERSERS PURCHASED
PURCHASE OF SPARE SPARE PARTS SPARE SCHEDULED ON SCHEDULE ON THE
THE MD-11 PARTS TO BE PARTS TO BE TO BE THE DATE TO BE DATE
SPARE PARTS PERCENTAGE PURCHASED PURCHASED PURCHASED SHOWN* PURCHASED SHOWN*
----------- ---------- --------- --------- --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
* * * * * * * *
[*
]
[*
]
</TABLE>
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
Q-1
<PAGE> 117
EXHIBIT Q TO AIRCRAFT SALES AGREEMENT BETWEEN
AMERICAN AIRLINES, INC. ("AMERICAN:) AND
FEDERAL EXPRESS CORPORATION ("FEDEX")
DATED APRIL 7, 1995 (THE "AGREEMENT")
SECTION 2--MD -11 SPARE PARTS PURCHASE DATES, PURCHASE OBLIGATIONS, AND
DELIVERY OBLIGATIONS TO BE PURCHASED IN CONJUNCTION WITH DELIVERIES OF
PURCHASE OPTION AIRCRAFT SOLD PURSUANT TO THE PURCHASE OPTIONS
Any capitalized term used herein shall have the meaning ascribed to it
in the Agreement unless expressly defined herein.
[*
]
<TABLE>
<CAPTION>
MD-11 MD-11
SPARE SPARE MD-11
MONTH PARTS MONTH PARTS MONTH SPARE PARTS
AND YEAR PERCENTAGE AND YEAR PERCENTAGE AND YEAR PERCENTAGE
- - -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
* * * * * *
</TABLE>
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
Q-2
<PAGE> 118
EXHIBIT Q TO AIRCRAFT SALES AGREEMENT BETWEEN
AMERICAN AIRLINES, INC. ("AMERICAN:) AND
FEDERAL EXPRESS CORPORATION ("FEDEX")
DATED APRIL 7, 1995 (THE "AGREEMENT")
SECTION 3-- SPARE ENGINE PURCHASE DATES AND PURCHASE PRICES
Any capitalized term used herein shall have the meaning ascribed to it
in the Agreement unless expressly defined herein.
The dates on which FedEx shall purchase from American and American
shall sell the Spare Engines to FedEx in conjunction with the sale of the Firm
Aircraft and the Spares Purchase Price for each such Spare Engine are as
follows:
SPARE PURCHASE PRICE
SPARE ENGINE PURCHASE DATE FOR SPARE ENGINE
-------------------------- --------------------
* *
In the event that all the Put Option Aircraft are purchased pursuant
to an exercise of the Put Options by American or the Purchase Options by FedEx,
FedEx will purchase from American and American will sell to FedEx on the
following Spare Engines on the following dates:
SPARE PURCHASE PRICE
ORIGINAL SALE DATE FOR SPARE ENGINE
-------------------------- --------------------
* *
[*
]
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
Q-3
<PAGE> 119
EXHIBIT R
TO THAT CERTAIN
AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX") AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
PROCEDURES FOR ENGINE BORESCOPE INSPECTIONS CONDUCTED PURSUANT TO
SECTION 3.02(A) OF THE AGREEMENT
The borescope inspections of Engines to be conducted by FedEx pursuant
to Section 3.02(a) of the Agreement shall be conducted in accordance with the
procedures set forth in the following Maintenance Work Cards that are set forth
in Section 7 (Maintenance Visits, Power Plant Inspect) of the American MD-11
Maintenance Check Manual, copies of which have been previously provided to
FedEx by American (the "Work Cards"). Any capitalized term used herein and not
expressly defined herein shall have the meaning ascribed to it in the
Agreement.
<TABLE>
<CAPTION>
CARD NO 4419 CARD NO. 4429 CARD NO. 4439
ENGINE #1 ENGINE #2 ENGINE #3
- - ---------------------------------------------------------------------------------------------------------------
CARD CARD PAGE CARD
PAGE NO. REVISION DATE NO. REVISION DATE. PAGE NO. REVISION DATE.
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 February 8, 1995 1 February 8, 1995 1 February 8, 1995
- - ---------------------------------------------------------------------------------------------------------------
2 April 21, 1993 2 April 21, 1993 2 April 21, 1993
- - ---------------------------------------------------------------------------------------------------------------
3 May 4, 1994 3 May 4, 1994 3 May 4, 1994
- - ---------------------------------------------------------------------------------------------------------------
4 January 19, 1994 4 April 21, 1993 4 April 21. 1993
- - ---------------------------------------------------------------------------------------------------------------
5 January 19, 1994 5 January 19, 1994 5 January 19, 1994
- - ---------------------------------------------------------------------------------------------------------------
6 August 19, 1992 6 Sept. 30, 1992 6 Sept. 30, 1992
- - ---------------------------------------------------------------------------------------------------------------
7 January 19, 1994 7 January 19, 1994 7 January 19, 1994
- - ---------------------------------------------------------------------------------------------------------------
8 August 19, 1992 8 August 19, 1992 8 August 19, 1992
- - ---------------------------------------------------------------------------------------------------------------
9 October 6, 1993 9 August 19, 1992 9 Sept. 1, 1994
- - ---------------------------------------------------------------------------------------------------------------
10 January 19, 1994 10 August 19, 1992 10 August 19, 1992
- - ---------------------------------------------------------------------------------------------------------------
11 April 10, 1991 11 January 19, 1994 11 January 19, 1994
- - ---------------------------------------------------------------------------------------------------------------
12 April 10, 1991 12 April 10, 1991 12 April 10, 1991
- - ---------------------------------------------------------------------------------------------------------------
13 January 19, 1994 13 April 10, 1991 13 April 10, 1991
- - ---------------------------------------------------------------------------------------------------------------
14 March 25, 1992 14 January 19, 1994 14 January 19, 1994
- - ---------------------------------------------------------------------------------------------------------------
15 January 19, 1994 15 March 25, 1992 15 March 25, 1992
- - ---------------------------------------------------------------------------------------------------------------
16 April 10, 1991 16 January 19, 1994 16 January 19, 1994
- - ---------------------------------------------------------------------------------------------------------------
17 April 10, 1991 17 April 10, 1994
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
The procedures set forth in the Work Cards shall not be revised for
purposes of determining the procedures to be followed by FedEx in conducting
borescope inspections pursuant to Section 3.02(a) of the Agreement with respect
to any Engine even if the Work Cards are subsequently revised by American.
R-1
<PAGE> 120
EXHIBIT S
TO THAT CERTAIN
AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX") AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
FORM OF [* ] AGREEMENT
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
S-1
<PAGE> 121
*
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
S-2
<PAGE> 122
*
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
S-3
<PAGE> 123
*
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
S-4
<PAGE> 124
*
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
S-5
<PAGE> 125
EXHIBIT T
TO THAT CERTAIN
AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX") AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
Any capitalized term used herein and not expressly defined herein
shall have the meaning ascribed to it in the Agreement.
[* ]
*
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
T-1
<PAGE> 126
*
[*
]
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
T-2
<PAGE> 127
TABLE A TO EXHIBIT T
AMERICAN AIRLINES, INC.
ENGINE HEAVY MAINTENANCE
The following table sets forth the estimated maintenance cost for an
HSM, HSC and EHM in the years noted below.
<TABLE>
<CAPTION>
YEAR EHM HSC HSM
---- --- --- ---
<S> <C> <C> <C>
* * * *
</TABLE>
_______________________
*Blank space contained information which has been filed separately with the
Securities and Exchange Commission pursuant to rule 24b-2 under the Securities
Exchange Act of 1934.
T-3
<PAGE> 128
EXHIBIT U
TO THAT CERTAIN
AIRCRAFT SALES AGREEMENT BETWEEN
FEDERAL EXPRESS CORPORATION ("FEDEX") AND
AMERICAN AIRLINES, INC. ("AMERICAN")
DATED APRIL 7, 1995 (THE "AGREEMENT")
CERTIFICATE OF HIGH-HOUR AND HIGH-CYCLE AIRFRAME
This Certificate of High-Hour and High-Cycle Airframe is given by
Federal Express Corporation ("FedEx") pursuant to the Agreement. Any
capitalized term used herein and not expressly defined herein shall have the
meaning ascribed to it in the Agreement.
FedEx hereby certifies that as of the date of this Certificate, (i)
the highest flight cycle Airframe delivered to FedEx by American and accepted
by FedEx pursuant to the Agreement was the Airframe bearing U.S. Registration
No. ________________ and Manufacturer's Serial No. ______________ and (ii)
such Airframe had _______________ flight cycles since it was new. In making
the determination and certification of the number of flight hours and flight
cycles on such Airframe, FedEx is relying, without investigation, on the
information concerning the number of flight hours and flight cycles on the
Airframe on its Delivery Date contained in the Aircraft Delivery Certificate
that American delivered to FedEx in connection with the Delivery of the
Aircraft of which the Airframe identified above is a part.
Dated: _______________________________________
FEDERAL EXPRESS CORPORATION
By: _________________________________
Name: ________________________________
Title: _______________________________
U-1
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post Effective Amendment No. 2
to the Registration Statement (Form S-3 No. 33-42998) of American Airlines,
Inc., and in the related Prospectus, of our report dated January 15, 1996,
with respect to the consolidated financial statements and schedules of American
Airlines, Inc. included in this Annual Report (Form 10-K) for the year ended
December 31, 1995.
ERNST & YOUNG LLP
Dallas, Texas
March 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 70
<SECURITIES> 816
<RECEIVABLES> 1,026
<ALLOWANCES> 13
<INVENTORY> 516
<CURRENT-ASSETS> 2,853
<PP&E> 18,565
<DEPRECIATION> 6,215
<TOTAL-ASSETS> 17,629
<CURRENT-LIABILITIES> 5,283
<BONDS> 0
<COMMON> 1,699
0
0
<OTHER-SE> 1,947
<TOTAL-LIABILITY-AND-EQUITY> 17,629
<SALES> 0
<TOTAL-REVENUES> 15,610
<CGS> 0
<TOTAL-COSTS> 14,157
<OTHER-EXPENSES> 485
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 557
<INCOME-PRETAX> 393
<INCOME-TAX> 172
<INCOME-CONTINUING> 221
<DISCONTINUED> 0
<EXTRAORDINARY> (13)
<CHANGES> 0
<NET-INCOME> 208
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
