<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2000.
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From to .
Commission file number 1-2691.
American Airlines, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-1502798
(State or other (I.R.S. Employer
jurisdiction Identification No.)
of incorporation or
organization)
4333 Amon Carter Blvd.
Fort Worth, Texas 76155
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, (817) 963-1234
including area code
Not Applicable
(Former name, former address and former fiscal year , if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, $1 par value - 1,000 shares as of October 19, 2000
The registrant meets the conditions set forth in, and is filing
this form with the reduced disclosure format prescribed by,
General Instructions H(1)(a) and (b) of Form 10-Q.
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INDEX
AMERICAN AIRLINES, INC.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations -- Three and nine months
ended September 30, 2000 and 1999
Condensed Consolidated Balance Sheets -- September 30, 2000 and
December 31, 1999
Condensed Consolidated Statements of Cash Flows -- Nine months
ended September 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements -- September
30, 2000
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
<PAGE> 3
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues
Passenger $4,385 $3,900 $ 12,341 $ 10,971
Cargo 182 158 525 463
Other 266 259 779 769
Total operating revenues 4,833 4,317 13,645 12,203
Expenses
Wages, salaries and
benefits 1,617 1,435 4,701 4,284
Aircraft fuel 616 436 1,682 1,167
Depreciation and
amortization 273 247 790 713
Commissions to agents 249 294 747 845
Other rentals and
landing fees 231 228 684 661
Maintenance, materials
and repairs 228 218 674 616
Food service 202 195 581 543
Aircraft rentals 140 147 420 445
Other operating expenses 760 737 2,192 2,158
Total operating expenses 4,316 3,937 12,471 11,432
Operating Income 517 380 1,174 771
Other Income (Expense)
Interest income 40 19 104 53
Interest expense (71) (62) (210) (165)
Interest capitalized 35 25 104 83
Related party interest -net 2 11 8 31
Miscellaneous - net (8) (8) 40 16
(2) (15) 46 18
Earnings Before Income Taxes 515 365 1,220 789
Income tax provision 199 145 475 318
Net Earnings $ 316 $ 220 $ 745 $ 471
</TABLE>
The accompanying notes are an integral part of these financial statements.
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AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (In millions)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
<S> <C> <C>
Assets
Current Assets
Cash $ 168 $ 72
Short-term investments 2,098 1,645
Receivables, net 1,476 1,124
Receivable from affiliates, net 509 651
Inventories, net 626 616
Deferred income taxes 597 597
Other current assets 177 176
Total current assets 5,651 4,881
Equipment and Property
Flight equipment, net 11,450 9,916
Other equipment and property, net 1,543 1,383
Purchase deposits for flight equipment 1,523 1,495
14,516 12,794
Equipment and Property Under Capital Leases
Flight equipment, net 1,479 1,623
Other equipment and property, net 97 98
1,576 1,721
Route acquisition costs, net 865 887
Other assets, net 1,370 1,436
$ 23,978 $ 21,719
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 1,229 $ 991
Accrued liabilities 2,141 1,790
Air traffic liability 2,929 2,255
Current maturities of long-term debt 101 61
Current obligations under capital leases 248 210
Total current liabilities 6,648 5,307
Long-term debt, less current maturities 2,245 2,231
Obligations under capital leases,
less current obligations 1,235 1,414
Deferred income taxes 1,867 1,581
Other liabilities, deferred gains, deferred
credits and postretirement benefits 4,088 4,036
Stockholders' Equity
Common stock - -
Additional paid-in capital 1,836 1,840
Accumulated other comprehensive income (2) (2)
Retained earnings 6,061 5,312
7,895 7,150
$ 23,978 $ 21,719
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In millions)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
<S> <C> <C>
Net Cash Provided by Operating Activities $2,681 $ 604
Cash Flow from Investing Activities:
Capital expenditures, including net change
in purchase deposits for flight equipment (2,485) (1,786)
Net decrease (increase) in
short-term investments (453) 271
Acquisitions and other investments (15) (44)
Proceeds from sale of equipment
and property 206 40
Proceeds from sale of other investments 94 31
Net cash used for investing activities (2,653) (1,488)
Cash Flow from Financing Activities:
Payments on long-term debt and capital
lease obligations (176) (98)
Proceeds from issuance of long-term debt 102 612
Sale-leaseback transactions - 54
Funds transferred from affiliates, net 142 275
Net cash provided by financing activities 68 843
Net increase (decrease) in cash 96 (41)
Cash at beginning of period 72 85
Cash at end of period $ 168 $ 44
Activities Not Affecting Cash:
Capital lease obligations incurred $ - $ 54
</TABLE>
The accompanying notes are an integral part of these financial statements.
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AMERICAN AIRLINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, these
financial statements contain all adjustments, consisting of normal
recurring accruals, necessary to present fairly the financial
position, results of operations and cash flows for the periods
indicated. Results of operations for the periods presented herein
are not necessarily indicative of results of operations for the
entire year. The balance sheet at December 31, 1999 has been
derived from the audited financial statements at that date. For
further information, refer to the consolidated financial statements
and footnotes thereto included in the American Airlines, Inc.
(American or the Company) Annual Report on Form 10-K for the year
ended December 31, 1999. Certain amounts from 1999 have been
reclassified to conform with the 2000 presentation.
2.Accumulated depreciation of owned equipment and property at
September 30, 2000 and December 31, 1999, was $7.5 billion and $7.0
billion, respectively. Accumulated amortization of equipment and
property under capital leases at September 30, 2000 and December 31,
1999, was $1.2 billion and $1.1 billion, respectively.
3.As discussed in the notes to the consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999, the Miami International Airport Authority
is currently remediating various environmental conditions at Miami
International Airport (Airport) and funding the remediation costs
through landing fee revenues. Future costs of the remediation
effort may be borne by carriers operating at the Airport, including
American, through increased landing fees and/or other charges. In
addition, the Company is subject to environmental issues at various
other airport and non-airport locations. Management believes,
after considering a number of factors, that the ultimate
disposition of these environmental issues is not expected to
materially affect the Company's consolidated financial position,
results of operations, or cash flows. Amounts recorded for
environmental issues are based on the Company's current assessments
of the ultimate outcome and, accordingly, could increase or
decrease as these assessments change.
4.As of October 2, 2000, the Company had commitments to acquire the
following aircraft: 67 Boeing 737-800s, 21 Boeing 777-200IGWs and 20
Boeing 757-200s. Deliveries of these aircraft extend through 2004.
Payments for these aircraft will approximate $520 million during the
remainder of 2000, $2.1 billion in 2001, $830 million in 2002 and an
aggregate of approximately $310 million in 2003 and 2004.
5.During 1999, the Company entered into an agreement with
priceline.com Incorporated (priceline) whereby ticket inventory
provided by the Company may be sold through priceline's e-commerce
system. In conjunction with this agreement, the Company received
warrants to purchase approximately 5.5 million shares of priceline
common stock. In the second quarter of 2000, the Company sold
these warrants for proceeds of approximately $94 million, and
recorded a pre-tax gain of $57 million ($36 million after-tax),
which is included in Miscellaneous - net on the consolidated
statements of operations.
6.In connection with a secondary offering by Equant N.V. in February
1999, the Company sold approximately 433,000 depository
certificates for proceeds of $31 million. The Company recorded a
pre-tax gain of $31 million ($19 million after-tax) as a result of
this transaction which is included in Miscellaneous - net on the
consolidated statements of operations.
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AMERICAN AIRLINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
7.Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133), as amended, is
required to be adopted in fiscal years beginning after June 15,
2000. SFAS 133 will require the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If
the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset
against the change in fair value of the hedged assets, liabilities,
or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings. The Company will
adopt SFAS 133 in the first quarter of fiscal year 2001. The
Company is currently evaluating the impact of SFAS 133 on the
Company's financial condition and results of operations.
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<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
For the Nine Months Ended September 30, 2000 and 1999
American recorded net earnings for the nine months ended September
30, 2000 of $745 million. This compares to net earnings of $471
million for the nine months ended September 30, 1999. American's
operating income of $1.2 billion increased $403 million compared to
the same period in 1999. The Company's 2000 results include the
effect of a labor disruption at one of the Company's major
competitors which positively impacted the Company's net earnings and
an after-tax gain of approximately $36 million related to the sale
of the Company's warrants to purchase 5.5 million shares of
priceline.com Incorporated (priceline) common stock. The Company's
1999 results include a labor disagreement that disrupted the Company's
operations and negatively impacted the Company's 1999 net earnings by
an estimated $140 million. This was partially offset by the after-tax
gain related to the sale of a portion of American's holdings in
Equant, N.V. (Equant) of approximately $19 million.
The Company's revenues increased approximately $1.4 billion, or 11.8
percent, during the first nine months of 2000 versus the same period
last year. American's passenger revenues increased by 12.5 percent,
or approximately $1.4 billion. American's yield of 13.86 cents
increased by 6.8 percent compared to the same period in 1999.
Domestic yields increased 6.6 percent from the first nine months of
1999. International yields increased 7.5 percent, reflecting an
increase of 12.0 percent, 10.4 percent and 4.8 percent in Pacific,
Europe and Latin American yields, respectively. The increase in
revenues was due primarily to a strong U.S. economy, which led to
strong demand for air travel both domestically and internationally, a
favorable pricing climate, and a labor disruption at one of the
Company's major competitors which positively impacted the Company's
revenues by approximately $80 million to $100 million. The first
quarter of 1999 includes a schedule disruption which negatively
impacted the Company's operations.
American's traffic or revenue passenger miles (RPMs) increased 5.4
percent to 89.1 billion miles for the nine months ended September 30,
2000. American's capacity or available seat miles (ASMs) increased
1.0 percent to 121.5 billion miles in the first nine months of 2000.
American's domestic traffic increased 4.2 percent on a capacity
decrease of 0.5 percent and international traffic increased 7.8
percent on capacity increases of 4.2 percent. The decrease in
domestic capacity was due primarily to the Company's "More Room
Throughout Coach" initiative. The increase in international traffic was
driven by a 12.7 percent increase in traffic to the Pacific on capacity
growth of 3.5 percent, a 10.1 percent increase in traffic to Europe on a
capacity increase of 7.9 percent and a 4.6 percent increase in
traffic to Latin America on capacity growth of 1.4 percent.
Cargo revenues increased $62 million, or 13.4 percent, due primarily
to a fuel surcharge implemented in February 2000, the Company's
increase in cargo capacity from the addition of new aircraft in late
1999 and 2000, and a labor disruption at one of the Company's major
competitors.
The Company's operating expenses increased 9.1 percent, or
approximately $1.0 billion. American's cost per ASM increased by 8.4
percent to 10.17 cents. Wages, salaries and benefits increased $417
million, or 9.7 percent, primarily due to an increase in the average
number of equivalent employees, contractual wage rate and seniority
increases that are built into the Company's labor contracts and an
increase of approximately $117 million in the provision for profit-
sharing. Aircraft fuel expense increased 44.1 percent, or $515
million, due to a 39.7 percent increase in the Company's average
price per gallon and a 3.3 percent increase in the Company's fuel
consumption. The increase in fuel expense is net of gains of
approximately $371 million recognized during the nine months ended
September 30, 2000 related to the Company's fuel hedging program.
Depreciation and amortization expense increased $77 million, or 10.8
percent, due primarily to the addition of new aircraft. Commissions
to agents decreased 11.6 percent, or $98 million, despite an increase
of approximately 12.5 percent in passenger revenues, due primarily to
the benefit from the international base commission structure changes
implemented in October 1999 and January 2000, respectively, and a
decrease in commissionable transactions.
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<PAGE> 9
RESULTS OF OPERATIONS (Continued)
Interest income increased $51 million, or 96.2 percent, due primarily
to higher investment balances. Interest expense increased $45
million, or 27.3 percent, due to an increase in the average
outstanding long-term debt balance in 2000. Interest capitalized
increased 25.3 percent, or $21 million, due primarily to an increase
in purchase deposits for flight equipment. Related party interest -
net decreased $23 million due primarily to lower affiliate
intercompany balances with American. Miscellaneous - net increased
$24 million due primarily to the gain on sale of the Company's
warrants to purchase 5.5 million shares of priceline common stock in
the second quarter of 2000, which resulted in a $57 million gain. In
the first quarter of 1999, the Company recorded an approximate $31
million gain on the sale of a portion of the Company's interest in
Equant.
OTHER INFORMATION
Aircraft Commitments
As of October 2, 2000, the Company had commitments to acquire the
following aircraft: 67 Boeing 737-800s, 21 Boeing 777-200IGWs and 20
Boeing 757-200s. Deliveries of these aircraft extend through 2004.
Payments for these aircraft will approximate $520 million during the
remainder of 2000, $2.1 billion in 2001, $830 million in 2002 and an
aggregate of approximately $310 million in 2003 and 2004. The Company
expects to fund these capital expenditures from the Company's existing
cash and short-term investments, internally generated cash, and new
financing depending upon market conditions and the Company's evolving
view of its long-term needs.
Dividend to AMR
On October 18, 2000, the Board of Directors of American Airlines
declared a $1.5 billion cash dividend payable on or about November 1,
2000 to AMR. The purpose of the dividend is to establish a cash
management function at AMR to implement future decisions regarding
uses of cash and to improve efficiency.
Dallas Love Field
In 1968, as part of an agreement between the cities of Fort Worth and
Dallas to build and operate Dallas/Fort Worth Airport (DFW), a bond
ordinance was enacted by both cities (the Bond Ordinance). The Bond
Ordinance required both cities to direct all scheduled interstate
passenger operations to DFW and was an integral part of the bonds
issued for the construction and operation of DFW. In 1979, as part of
a settlement to resolve litigation with Southwest Airlines, the cities
agreed to expand the scope of operations allowed under the Bond
Ordinance at Dallas' Love Field. Congress enacted the Wright
Amendment to prevent the federal government from acting inconsistent
with this agreement. The Wright Amendment limited interstate
operations at Love Field to the four states contiguous to Texas (New
Mexico, Oklahoma, Arkansas, and Louisiana) and prohibited through
ticketing to any destination outside that perimeter. In 1997, without
the agreement of the cities, Congress amended the Wright Amendment by
(i) adding three states (Kansas, Mississippi, and Alabama) to the
perimeter and (ii) removing some federal restrictions on large
aircraft configured with 56 seats or fewer.
From October 1997 through May 2000, American, the cities of Fort Worth
and Dallas, and other parties were involved in litigation regarding
flight restrictions at Love Field. On May 1, 2000, American commenced
service from Love Field to Chicago and Los Angeles using Fokker 100
aircraft reconfigured to hold 56 seats. These flights depart from
terminal space leased from Continental Express on a short-term basis.
On August 31, 2000, American commenced service from Love Field to New
York's LaGuardia airport using the same facilities. American is seeking
long-term facilities at Love Field from the City of Dallas for its Love
Field operations. Consultants for the City of Dallas are drafting a master
plan for Love Field and expect to make recommendations to the City of
Dallas by the end of November 2000. As a result of the foregoing, an
increase in operations at Love Field and/or the inability of American
to obtain adequate facilities to compete effectively at Love Field
could adversely impact American's business.
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Industry Consolidation
Two competitors of the Company, UAL Corporation and US Airways Group,
Inc., recently announced that they have entered into a definitive
merger agreement. The Company is considering its strategic response
to the possibility of industry consolidation, and from time to time is
engaged in discussions with other carriers regarding potential
significant business combinations and acquisitions of assets. To date
these discussions have not resulted in a definitive agreement between
the Company and any other carrier to enter into such a business
combination or asset acquisition; however, there can be no assurance
that the Company will not enter into such a transaction in the future.
If any significant airline industry consolidation were to occur,
including any business combination involving the Company or
significant asset acquisition by the Company, the financial condition
and prospects of the Company or the resulting corporation could be
materially different from those of the Company currently.
FORWARD-LOOKING INFORMATION
Statements in this report contain various forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which represent the Company's expectations or beliefs
concerning future events. When used in this report, the words
"expects," "plans," "anticipates," and similar expressions are
intended to identify forward-looking statements. All forward-looking
statements in this report are based upon information available to the
Company on the date of this report. The Company undertakes no
obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.
Forward-looking statements are subject to a number of factors that
could cause actual results to differ materially from our expectations.
Additional information concerning these and other factors is contained
in the Company's Securities and Exchange Commission filings, included
but not limited to the Form 10-K for the year ended December 31, 1999.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in market risk from the
information provided in Item 7A. Quantitative and Qualitative
Disclosures About Market Risk of the Company's Annual Report on Form
10-K for the year ended December 31, 1999 except as discussed below.
Based on projected fuel usage for the next twelve months, a
hypothetical 10 percent increase in the September 29, 2000 cost per
gallon of fuel would result in an increase to American's aircraft
fuel expense of approximately $192 million for the next twelve
months, net of fuel hedge instruments outstanding at September 30,
2000. The change in market risk from December 31, 1999 is due
primarily to the increase in fuel prices. As of September 30, 2000,
the Company has hedged approximately 70 percent of its remaining 2000
fuel requirements and approximately 35 percent of its 2001 fuel
requirements.
During 2000, the Company terminated interest rate swap agreements
on notional amounts of approximately $425 million which had
effectively converted a portion of its fixed-rate obligations to
floating-rate obligations. The cost of terminating these interest
rate swap agreements was not material and the impact of the termination
of these interest rate swap agreements on the Company's interest rate
market risk was not significant.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
In connection with its frequent flyer program, American was sued in
several purported class action cases currently pending in the Circuit
Court of Cook County, Illinois. In Wolens et al. v. American
Airlines, Inc. and Tucker v. American Airlines, Inc. (hereafter,
"Wolens"), plaintiffs seek money damages and attorneys' fees claiming
that a change made to American's AAdvantage program in May 1988, which
limited the number of seats available to participants travelling on
certain awards, breached American's agreement with its AAdvantage
members. (Although the Wolens complaint originally asserted several
state law claims, only the plaintiffs' breach of contract claim
remains after the U.S. Supreme Court ruled that the Airline
Deregulation Act preempted the other claims). In Gutterman et al. v.
American Airlines, Inc. (hereafter, "Gutterman"), plaintiffs also seek
money damages and attorneys' fees claiming that the February 1995
increase in the award mileage required to claim a certain AAdvantage
travel award breached the agreement between American and its
AAdvantage members. On June 23, 1998, the court certified the
Gutterman case as a class action.
In February 2000, American and the Wolens and Gutterman plaintiffs
reached a settlement of both lawsuits. Pursuant to the agreement,
American and the plaintiffs agreed to ask the court to consolidate the
Wolens and Gutterman lawsuits for purposes of settlement. Further,
American and the Wolens plaintiffs agreed to ask the court to certify
a Wolens class of AAdvantage members who had at least 35,000
unredeemed AAdvantage miles as of December 31, 1988. In addition,
American and the Gutterman plaintiffs agreed to ask the court to
decertify the existing Gutterman class and to certify a new Gutterman
class of AAdvantage members who as of December 31, 1993 (a) had
redeemed 25,000 or 50,000 AAdvantage miles for certain AAdvantage
awards and/or (b) had between 4,700 and 24,999 unredeemed miles in his
or her account that were earned in 1992 or 1993. Depending upon
certain factors, Wolens and Gutterman class members will be entitled
to receive certificates entitling them to mileage off certain
AAdvantage awards or dollars off certain American fares.
As part of the settlement, American agreed to pay the Wolens and
Gutterman plaintiffs' attorneys fees and the cost of administering the
settlement, which amounts were accrued as of December 31, 1999. In
consideration for the relief provided in the settlement agreement,
Wolens and Gutterman class members will release American from all
claims arising from any changes that American has made to the
AAdvantage program and reaffirming American's right to make changes to
the AAdvantage program in the future. On May 2, 2000, the court
preliminarily approved the settlement and authorized sending notice of
the settlement to class members. On September 28, 2000, the court
heard arguments from a number of class members who are objecting to
various terms of the settlement. The court did not rule on the merits
of any objections, and therefore has not yet decided whether it will
finally approve the settlement agreement.
On August 7, 1998, a purported class action was filed against
American Airlines in state court in Travis County, Texas (Boon Ins.
Agency v. American Airlines, Inc., et al.) claiming that the $75
reissuance fee for changes to non-refundable tickets is an
unenforceable liquidated damages clause and seeking a refund of the
fee on behalf of passengers who paid it, as well as interest and
attorneys' fees. On September 23, 1998, Continental, Delta, and
America West were added as defendants to the lawsuit. On February 2,
1999, prior to any discovery being taken and a class being certified,
the court granted the defendants' motion for summary judgment holding
that plaintiff's claims are preempted by the Airline Deregulation
Act. Plaintiff appealed and on March 30, 2000, the Texas Court of
Appeals in Austin affirmed the granting of defendants' motion for
summary judgment. On August 17, 2000, the Texas Supreme Court denied
the plaintiff's petition for review.
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<PAGE> 12
PART II
Item 1. Legal Proceedings (continued)
On May 20, 1999, several class action lawsuits filed against the
Allied Pilots Association (APA) seeking compensation for passengers
and cargo shippers adversely affected by a labor disagreement that
disrupted operations in February 1999 were consolidated in the United
States District Court for the Northern District of Texas, Dallas
Division (In re Allied Pilots Association Class Action Litigation).
Although American was named as a defendant, plaintiffs were not
seeking to hold American independently liable. Instead, Plaintiffs
named American as a defendant because American has a $45.5 million
judgment against the APA, the value of which is believed to exceed
the APA's total assets. The APA moved to dismiss all claims alleged
against it, and on September 26, 2000, the court dismissed all of the
Plaintiffs' claims against the APA. In so doing, however, the court
refused to dismiss certain state law claims with prejudice, but
instead concluded that these state law claims were not preempted by
federal law and could proceed in a state court. On October 3, 2000,
Plaintiffs filed a complaint in Texas state court against the APA.
In the complaints, Plaintiffs allege that in the event the APA does
not have enough assets to satisfy American's $45.5 million judgment
and any judgment the Plaintiffs' recover, any judgment in their case
should be considered equal to or superior to American's interest in
the $45.5 million judgment against the APA. American intends to
vigorously defend all claims against it in this action.
On July 26, 1999, a class action lawsuit was filed, and in November
1999 an amended complaint was filed, against AMR Corporation,
American Airlines, Inc., AMR Eagle Holding Corporation, Airlines
Reporting Corporation, and the Sabre Group Holdings, Inc. in the
United States District Court for the Central District of California,
Western Division (Westways World Travel, Inc. v. AMR Corp., et al.).
The lawsuit alleges that requiring travel agencies to pay debit memos
to American for violations of American's fare rules (by customers of
the agencies) (1) breaches the Agent Reporting Agreement between
American and American Eagle and plaintiffs, (2) constitutes unjust
enrichment, and (3) violates the Racketeer Influenced and Corrupt
Organizations Act of 1970 (RICO). The as yet uncertified class
includes all travel agencies who have been or will be required to pay
monies to American for debit memos for fare rules violations from
July 26, 1995 to the present. Plaintiffs seek to enjoin American
from enforcing the pricing rules in question and to recover the
amounts paid for debit memos, plus treble damages, attorneys' fees,
and costs. Defendants' motion to dismiss all claims is pending.
American intends to vigorously defend the lawsuit.
On May 13, 1999, the United States (through the Antitrust Division
of the Department of Justice) sued AMR Corporation, American
Airlines, Inc., and AMR Eagle Holding Corporation in federal court in
Wichita, Kansas. The lawsuit alleges that American unlawfully
monopolized or attempted to monopolize airline passenger service to
and from Dallas/Fort Worth International Airport (DFW) by increasing
service when new competitors began flying to DFW, and by matching
these new competitors' fares. The Department of Justice seeks to
enjoin American from engaging in the alleged improper conduct and to
impose restraints on American to remedy the alleged effects of its
past conduct. The case has been set for trial on May 22, 2001.
American intends to defend the lawsuit vigorously.
Between May 14, 1999 and June 7, 1999, seven class action lawsuits
were filed against AMR Corporation, American Airlines, Inc., and AMR
Eagle Holding Corporation in the United States District Court in
Wichita, Kansas seeking treble damages under federal and state
antitrust laws, as well as injunctive relief and attorneys' fees.
(King v. AMR Corp., et al.; Smith v. AMR Corp., et al.; Team Electric
v. AMR Corp., et al.; Warren v. AMR Corp., et al.; Whittier v. AMR
Corp., et al.; Wright v. AMR Corp., et al.; and Youngdahl v. AMR
Corp., et al.). Collectively, these lawsuits allege that American
unlawfully monopolized or attempted to monopolize airline passenger
service to and from DFW by increasing service when new competitors
began flying to DFW, and by matching these new competitors' fares.
Two of the suits (Smith and Wright) also allege that American
unlawfully monopolized or attempted to monopolize airline passenger
service to and from DFW by offering discounted fares to corporate
purchasers, by offering a frequent flyer program, by imposing certain
conditions on the use and availability of certain fares, and by
offering override commissions to travel agents. The suits propose to
certify several classes of consumers, the broadest of which is all
persons who purchased tickets for air travel on American into or out
of DFW since 1995 to the present. On November 10, 1999, the District
Court stayed all of these actions pending developments in the case
brought by the Department of Justice. As a result, to date no class
has been certified. American intends to defend these lawsuits
vigorously.
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<PAGE> 13
PART II
Item 1. Legal Proceedings (continued)
On March 1, 2000, American was served with a federal grand jury
subpoena calling for American to produce documents relating to de-
icing operations at DFW since 1992. American has produced documents
to the grand jury, but is not able at this time to determine either
the full scope of the grand jury's investigation or American's role
in the investigation. American intends to fully cooperate with the
government's investigation.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
12 Computation of ratio of earnings to fixed charges for the three
and nine months ended September 30, 2000 and 1999.
27 Financial Data Schedule
On July 20, 2000, American filed a report on Form 8-K relative
to a press release issued by AMR to report AMR's second quarter 2000
earnings.
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<PAGE> 14
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AMERICAN AIRLINES, INC.
Date: October 26, 2000 BY: /s/ Thomas W. Horton
Thomas W. Horton
Senior Vice President - Finance and
Chief Financial Officer
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<PAGE> 15
Exhibit 12
AMERICAN AIRLINES, INC.
Computation of Ratio of Earnings to Fixed Charges
(in millions)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Earnings:
Earnings before income taxes $515 $365 $1,220 $789
Add: Total fixed charges
(per below) 265 261 800 757
Less: Interest capitalized 35 25 104 83
Total earnings $745 $601 $1,916 $1,463
Fixed charges:
Interest, including interest
capitalized $ 71 $ 62 $ 210 $ 165
Portion of rental expense
representative of the
interest factor 194 199 589 591
Amortization of debt expense - - 1 1
Total fixed charges $265 $261 $800 $757
Ratio of earnings to fixed charges 2.81 2.30 2.40 1.93
</TABLE>
-13-
