<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 March 31, 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 1-8400.
AMR Corporation
(Exact name of registrant as specified in its charter)
Delaware 75-1825172
(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 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 - 149,684,717 as of May 5, 2000.
<PAGE> 2
INDEX
AMR CORPORATION
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations -- Three months ended March
31, 2000 and 1999
Condensed Consolidated Balance Sheets -- March 31, 2000 and
December 31, 1999
Condensed Consolidated Statements of Cash Flows -- Three months
ended March 31, 2000 and 1999
Notes to Condensed Consolidated Financial Statements -- March 31,
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
AMR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Revenues
Passenger - American Airlines, Inc. $ 3,770 $ 3,320
- AMR Eagle 338 271
Cargo 167 145
Other revenues 302 271
Total operating revenues 4,577 4,007
Expenses
Wages, salaries and benefits 1,617 1,467
Aircraft fuel 553 349
Depreciation and amortization 288 253
Maintenance, materials and repairs 271 257
Commissions to agents 257 288
Other rentals and landing fees 237 229
Food service 185 167
Aircraft rentals 153 160
Other operating expenses 804 791
Total operating expenses 4,365 3,961
Operating Income 212 46
Other Income (Expense)
Interest income 32 24
Interest expense (119) (93)
Interest capitalized 38 33
Miscellaneous - net (6) 30
(55) (6)
Income from Continuing
Operations Before
Income Taxes 157 40
Income tax provision 68 23
Income from Continuing Operations 89 17
Income from Discontinued
Operations, Net of Applicable Income
Taxes and Minority Interest 43 77
Gain on Sale of Discontinued
Operations, Net of Applicable
Income Taxes - 64
Net Earnings $ 132 $ 158
</TABLE>
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Continued on next page.
<PAGE> 4
AMR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(Unaudited) (In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Earnings Per Common Share
Basic
Income from Continuing Operations $ 0.60 $ 0.11
Discontinued Operations 0.29 0.88
Net Earnings $ 0.89 $ 0.99
Diluted
Income from Continuing Operations $ 0.57 $ 0.11
Discontinued Operations 0.29 0.85
Net Earnings $ 0.86 $ 0.96
Number of Shares Used in
Computation
Basic 149 159
Diluted 154 164
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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<PAGE> 5
AMR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (In millions)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
Assets
<S> <C> <C>
Current Assets
Cash $ 76 $ 85
Short-term investments 1,893 1,706
Receivables, net 1,493 1,134
Inventories, net 717 708
Deferred income taxes 612 612
Other current assets 208 179
Total current assets 4,999 4,424
Equipment and Property
Flight equipment, net 11,771 11,323
Other equipment and property, net 1,466 1,433
Purchase deposits for flight equipment 1,573 1,582
14,810 14,338
Equipment and Property Under Capital Leases
Flight equipment, net 1,825 1,851
Other equipment and property, net 99 98
1,924 1,949
Route acquisition costs, net 880 887
Other assets, net 1,701 2,776
$ 24,314 $ 24,374
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 1,231 $ 1,115
Accrued liabilities 1,818 1,956
Air traffic liability 2,758 2,255
Current maturities of long-term debt 241 302
Current obligations under capital leases 231 236
Total current liabilities 6,279 5,864
Long-term debt, less current maturities 4,018 4,078
Obligations under capital leases, less
currrent obligations 1,526 1,611
Deferred income taxes 1,886 1,846
Other liabilities, deferred gains,
deferred credits and
postretirement benefits 4,183 4,117
Stockholders' Equity
Common stock 182 182
Additional paid-in capital 3,047 3,061
Treasury stock (2,075) (2,101)
Accumulated other comprehensive income (2) (2)
Retained earnings 5,270 5,718
6,422 6,858
$ 24,314 $24,374
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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<PAGE> 6
AMR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Net Cash Provided by Operating Activities $ 521 $ 152
Cash Flow from Investing Activities:
Capital expenditures, including purchase
deposits for flight equipment (781) (965)
Net decrease (increase) in short-term
investments (187) 614
Acquisitions and other investments - (55)
Proceeds from:
Dividend from Sabre, Inc. (Sabre) 559 -
Sale of equipment and property 80 18
Sale of discontinued operations - 259
Sale of other investments - 31
Net cash used for investing activities (329) (98)
Cash Flow from Financing Activities:
Payments on long-term debt and capital
lease obligations (306) (120)
Repurchase of common stock - (405)
Proceeds from:
Issuance of long-term debt 97 83
Exercise of stock options 8 4
Short-term loan from Sabre - 300
Sale-leaseback transactions - 54
Net cash used for financing activities (201) (84)
Net decrease in cash (9) (30)
Cash at beginning of period 85 87
Cash at end of period $ 76 $ 57
Cash Payments For:
Interest $ 77 $ 72
Income taxes 28 10
Activities Not Affecting Cash:
Distribution of Sabre shares to
AMR shareholders $ 581 $ -
Capital lease obligations incurred - 54
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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<PAGE> 7
AMR CORPORATION
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. The
results of operations, cash flows and net assets for Sabre, Inc.
(Sabre), AMR Services, AMR Combs and TeleService Resources have
been reflected in the consolidated financial statements as
discontinued operations (see Note 5 below), including restatement
of this information previously reported in the March 31, 1999 Form
10-Q. For further information, refer to the consolidated financial
statements and footnotes thereto included in the AMR Corporation
(AMR or the Company) Annual Report on Form 10-K for the year ended
December 31, 1999.
2.Accumulated depreciation of owned equipment and property at March
31, 2000 and December 31, 1999, was $7.6 billion and $7.4 billion,
respectively. Accumulated amortization of equipment and property
under capital leases at March 31, 2000 and December 31, 1999, was
$1.3 billion.
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 Airlines, Inc. (American), a wholly-owned subsidiary of
the Company, 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 March 31, 2000, the Company had commitments to acquire the
following aircraft: 77 Boeing 737-800s, 22 Boeing 777-200IGWs, 83
Embraer EMB-135s and 25 Bombardier CRJ-700s. In addition, in May
2000, the Company announced its agreement to purchase 20 Boeing 757-
200 aircraft and retire five McDonnell Douglas MD-90 aircraft.
Deliveries of all aircraft continue through 2006. Payments for all
aircraft will approximate $1.8 billion during the remainder of 2000,
$2.3 billion in 2001, $650 million in 2002 and an aggregate of
approximately $1.0 billion in 2003 through 2006.
5.During the first quarter of 1999, the Company completed the sales
of AMR Services, AMR Combs and TeleService Resources. As a result
of these sales, the Company recorded a gain of approximately $64
million, net of income taxes of approximately $19 million.
Effective after the close of business on March 15, 2000, AMR
distributed 0.722652 shares of Sabre Class A common stock for each
share of AMR stock owned by AMR's shareholders. The record date
for the dividend of Sabre stock was the close of business on March
1, 2000. In addition, on February 18, 2000, Sabre paid a special
one-time cash dividend of $675 million to shareholders of record of
Sabre common stock at the close of business on February 15, 2000.
Based upon its approximate 83 percent interest in Sabre, AMR
received approximately $559 million of this dividend. These funds
will be used for general corporate purposes, including the
acquisition of aircraft. The dividend of AMR's entire ownership
interest in Sabre's common stock resulted in a reduction to AMR's
retained earnings in March of 2000 equal to the carrying value of
the Company's investment in Sabre on March 15, 2000, which
approximated $581 million. In addition, effective March 15, 2000,
the Company reduced the exercise price and increased the number of
stock options and awards by approximately 18 million to offset the
dilution to the holders, which occurred as a result of the spin-
off. These changes were made to keep the holders in the same
economic position as before the spin-off.
-5-
<PAGE> 8
AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
This dilution adjustment was determined in accordance with Emerging
Issues Task Force Consensus No. 90-9, "Changes to Fixed Employee
Stock Option Plans as a Result of Equity Restructuring," and
accordingly, had no impact on earnings.
The results of operations for Sabre, AMR Services, AMR Combs and
TeleService Resources have been reflected in the consolidated
statements of operations as discontinued operations. The net
assets of Sabre of approximately $1.0 billion were classified in
the condensed consolidated balance sheet as of December 31, 1999 in
other assets. Other summarized financial information of the
discontinued operations is as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Sabre
Revenues $ 542 $ 638
Minority interest 10 16
Income taxes 36 56
Net income 43 77
AMR Services, AMR Combs and TeleService
Resources
Revenues $ - $ 97
Income taxes - -
Net income - -
</TABLE>
6.In connection with a secondary offering by Equant N.V. in
February 1999, the Company sold approximately 923,000 depository
certificates for a pre-tax gain of $66 million. Of this amount,
approximately 489,000 depository certificates, or a pre-tax gain of
$35 million, related to depository certificates held by the Company on
behalf of Sabre and is included in income from discontinued operations
on the condensed consolidated statements of operations.
7.The following table sets forth the computations of basic and
diluted earnings per share (in millions, except per share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Numerator:
Income from continuing operations -
numerator for basic and diluted
earnings per share $ 89 $ 17
Denominator:
Denominator for basic earnings per
share - weighted-average shares 149 159
Effect of dilutive securities:
Employee options and shares 14 12
Assumed treasury shares purchased (9) (7)
Dilutive potential common shares 5 5
Denominator for diluted earnings per
share - adjusted weighted-average shares 154 164
Basic earnings per share from
continuing operations $ 0.60 $ 0.11
Diluted earnings per share from
continuing operations $ 0.57 $ 0.11
</TABLE>
-6-
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 2000 and 1999
Summary AMR's income from continuing operations during the first
quarter of 2000 was $89 million, or $0.57 per common share diluted,
as compared to $17 million, or $0.11 per common share diluted, for
the same period in 1999. AMR's operating income of $212 million
increased $166 million compared to the same period in 1999. AMR's
first quarter 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, or $0.85
per common share diluted, partially offset by an approximate $19
million after-tax gain, or $0.12 per common share diluted, related to
the sale of a portion of American's holdings in Equant, N.V.
(Equant).
The Company's revenues increased $570 million, or 14.2 percent, in
the first quarter of 2000 versus the same period last year.
American's passenger revenues increased by 13.6 percent, or $450
million. American's yield (the average amount one passenger pays to
fly one mile) of 13.95 cents increased by 6.2 percent compared to the
same period in 1999. Domestic yields increased 6.1 percent from the
first quarter of 1999. International yields increased 7.0 percent,
primarily due to an increase of 22.6 percent, 6.7 percent and 5.3
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 and a
favorable pricing climate. In addition, the first quarter of 1999
includes a schedule disruption which impacted the Company's
operations.
American's traffic or revenue passenger miles (RPMs) increased 6.8
percent to 27.0 billion miles for the quarter ended March 31, 2000,
due primarily to the labor disagreement in the first quarter of 1999.
American's capacity or available seat miles (ASMs) of 40.0 billion
miles increased 6.1 percent compared to the first quarter of 1999.
American's domestic traffic increased 5.4 percent on capacity
increases of 5.1 percent and international traffic increased 10.2
percent on capacity growth of 8.6 percent. The increase in
international traffic was driven by a 24.6 percent increase in
traffic to the Pacific on capacity growth of 10.0 percent, a 12.2
percent increase in traffic to Europe on a capacity increase of 14.0
percent and a 6.4 percent increase in traffic to Latin America on
capacity growth of 4.6 percent.
AMR Eagle's passenger revenues increased $67 million, or 24.7
percent, due primarily to the acquisition of Business Express, Inc.
in March 1999.
Cargo revenues increased 15.2 percent, or $22 million, due primarily
to the impact of the labor disagreement which impacted the Company's
operations in the first quarter of 1999.
The Company's other revenues increased $31 million, or 11.4 percent,
primarily as a result of higher employee travel service charges and
increased administrative service charges and code-share revenues.
The Company's operating expenses increased 10.2 percent, or $404
million. American's cost per ASM increased 3.4 percent to 9.96
cents. Wages, salaries and benefits increased 10.2 percent, or $150
million, 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 in
the provision for profit-sharing and stock-based compensation.
Aircraft fuel expense increased 58.5 percent, or $204 million, due to
a 47.4 percent increase in American's average price per gallon and a
6.3 percent increase in American's fuel consumption. The increase in
fuel expense is net of gains of approximately $122 million recognized
during the first quarter of 2000 related to the Company's fuel
hedging program. Depreciation and amortization expense increased $35
million, or 13.8 percent, due to the addition of new aircraft.
Commissions to agents decreased 10.8 percent, or $31 million, despite
an increase of approximately 14 percent in passenger revenues, due
primarily to the benefit from the international base commission
structure change implemented in October 1999 and a decrease in the
percentage of commissionable transactions. Food service increased
10.8 percent, or $18 million, due primarily to an increase in
passengers boarded and rate increases.
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<PAGE> 10
Other Income (Expense) increased $49 million due primarily to a $26
million increase in interest expense resulting from an increase in
long-term debt, partially offset by an increase of $8 million in
interest income as a result of higher investment balances. In
addition, in March 1999, the Company recognized a $31 million gain on
the sale of a portion of American's interest in Equant.
<TABLE>
<CAPTION>
OPERATING STATISTICS
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
American Airlines
Revenue passenger miles (millions) 27,022 25,290
Available seat miles (millions) 40,020 37,703
Cargo ton miles (millions) 546 431
Passenger load factor 67.5% 67.1%
Breakeven load factor 63.7% 66.4%
Passenger revenue yield per
passenger mile (cents) 13.95 13.13
Passenger revenue per available
seat mile (cents) 9.42 8.81
Cargo revenue yield per ton mile (cents) 30.32 33.18
Operating expenses per available
seat mile (cents) 9.96 9.63
Fuel consumption (gallons, in millions) 730 687
Fuel price per gallon (cents) 72.1 48.9
Fuel price per gallon, excluding
fuel taxes (cents) 66.6 44.6
Operating aircraft at period-end 703 683
AMR Eagle
Revenue passenger miles (millions) 861 706
Available seat miles (millions) 1,514 1,211
Passenger load factor 58.9% 58.3%
Operating aircraft at period-end 271 256
</TABLE>
Operating aircraft at March 31, 2000, included:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
American Airlines Aircraft: AMR Eagle Aircraft:
Airbus A300-600R 35 ATR 42 31
Boeing 727-200 67 Embraer 135 12
Boeing 737-800 28 Embraer 145 50
Boeing 757-200 102 Super ATR 43
Boeing 767-200 8 Saab 340 110
Boeing 767-200 Extended Saab 340B Plus 25
Range 22
Boeing 767-300 Extended Total 271
Range 49
Boeing 777-200IGW 15
Fokker 100 75
McDonnell Douglas DC-10-10 3
McDonnell Douglas DC-10-30 5
McDonnell Douglas MD-11 10
McDonnell Douglas MD-80 279
McDonnell Douglas MD-90 5
Total 703
</TABLE>
Average aircraft age is 10.8 years for American's aircraft and 6.4
years for AMR Eagle aircraft.
-8-
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities in the three-month period
ended March 31, 2000 was $521 million, an increase of $369 million
over the same period in 1999. This increase resulted primarily from
an increase in the air traffic liability due to higher advanced sales
and an increase in income from continuing operations, partially
offset by an increase in accounts receivable as compared to the same
period in 1999. Capital expenditures for the first three months of
2000 were $781 million, and included the acquisition of four Boeing
777-200IGWs, four Boeing 737-800s, five Embraer 145s and three
Embraer 135 aircraft. These capital expenditures were financed with
internally generated cash and the $559 million of cash received from
the Sabre dividend, except for the Embraer aircraft acquisitions,
which were funded through secured debt agreements.
As of March 31, 2000, the Company had commitments to acquire the
following aircraft: 77 Boeing 737-800s, 22 Boeing 777-200IGWs, 83
Embraer EMB-135s and 25 Bombardier CRJ-700s. In addition, in May
2000, the Company announced its agreement to purchase 20 Boeing 757-
200 aircraft and retire five McDonnell Douglas MD-90 aircraft.
Deliveries of all aircraft continue through 2006. Payments for all
aircraft will approximate $1.8 billion during the remainder of 2000,
$2.3 billion in 2001, $650 million in 2002 and an aggregate of
approximately $1.0 billion in 2003 through 2006. The Company expects
to fund its remaining 2000 capital expenditures from the Company's
existing cash and short-term investments, internally generated cash,
and new financing depending upon capital market conditions and the
Company's evolving view of its long-term needs.
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 consent of either city, 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 less (the 1997 Amendment).
In October 1997, the City of Fort Worth filed suit in state
district court against the City of Dallas and others seeking to
enforce the Bond Ordinance. Fort Worth contends that the 1997
Amendment does not preclude the City of Dallas from exercising its
proprietary rights to restrict traffic at Love Field in a manner
consistent with the Bond Ordinance and, moreover, that Dallas has an
obligation to do so. American joined in this litigation. On October
15, 1998, the state district court granted summary judgment in favor
of Fort Worth and American, which summary judgment is being appealed
to the Fort Worth Court of Appeals. In the same lawsuit, DFW filed
claims alleging that irrespective of whether the Bond Ordinance is
enforceable, the DFW Use Agreement prohibits American and other DFW
signatory airlines from moving any interstate operations to Love
Field. These claims remain unresolved.
Dallas filed a separate declaratory judgment action in the United
States District Court for the Northern District of Texas, Dallas
Division, seeking to have the court declare that, as a matter of law,
the 1997 Amendment precludes the City of Dallas from exercising any
restrictions on operations at Love Field. Further, in May 1998,
Continental Airlines and Continental Express filed a lawsuit in Dallas
federal court seeking a judicial declaration that the Bond Ordinance
cannot be enforced to prevent them from operating flights from Love
Field to Cleveland using regional jets. These two federal court
lawsuits were consolidated and stayed.
-9-
<PAGE> 12
In December 1998, the Department of Transportation (DOT) issued
an order on the federal law questions concerning the Bond Ordinance,
local proprietary powers, DFW's Use Agreement with DFW carriers such
as American, and the Wright and 1997 Amendments, and concluded that
the Bond Ordinance was preempted by federal law and was therefore not
enforceable. The DOT also found that the DFW Use Agreement did not
preclude American from conducting interstate operations at Love Field.
Fort Worth, American and DFW appealed the DOT's order to the Fifth
Circuit Court of Appeals, and on February 1, 2000, the Fifth Circuit
affirmed the DOT's order in all respects. On March 3, 2000, Fort
Worth filed a petition for writ of certiorari with the United States
Supreme Court asking the Court to review the Fifth Circuit's decision.
On May 1, 2000, American similarly filed a petition for writ of
certiorari with the United States Supreme Court asking the Court to
review the Fifth Circuit's decision to the extent it found that the
Bond Ordinance's restrictions on service at Love Field are preempted.
On May 1, 2000, DFW also filed a petition for writ of certiorari
asking the Supreme Court to review the portion of the Fifth Circuit
decision that found that the DFW Use Agreement was preempted to the
extent that it precludes DFW signatory carriers from operating
interstate service at Love Field.
In January 2000, the Department of Justice, at the behest of the
DOT, filed a lawsuit in the United States District Court for the
Northern District of Texas, Dallas Division, against Fort Worth and
American seeking to enforce the DOT's order and to prevent any party
from interfering with any carrier operating under that order. DOT
subsequently filed a motion for summary judgement which American and
Fort Worth are opposing.
On May 1, 2000 American commenced new service from Love Field to
Chicago and Los Angeles using space leased from Continental Express
through May 28, 2000. American is seeking facilities at Love Field
from the City of Dallas to use for this new service starting May 29,
2000. As a result of the foregoing, the future of interstate flight
operations at Love Field and American's DFW hub are uncertain. An
increase in operations at Love Field to new interstate destinations
and/or the inability of American to effectively compete at Love Field
could adversely impact American's business.
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.
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<PAGE> 13
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, although to date no notice has been
sent to the class.
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 at least 4,700 unredeemed new miles in his or
her account that were earned before January 1, 1992. 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 and the cost of administering the
settlement, which amounts were accrued as of December 31, 1999. In
consideration for the relief provided for 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. Before the settlement can become
effective, the court must give final approval of the settlement
agreement after providing any objectors an opportunity to be heard.
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 all 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 has filed an appeal of the dismissal of the lawsuit.
On March 30, 2000, the Texas Court of Appeals in Austin affirmed the
granting of defendants' motion for summary judgment.
-11-
<PAGE> 14
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).
Plaintiffs are 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. APA filed cross claims
against American alleging that American must indemnify pilots who put
themselves on the sick list. APA also filed a motion to dismiss all
claims against it. A United States District Court Magistrate
recommended that the court dismiss all the claims in the lawsuit,
concluding that certain claims are preempted by federal law and that
certain other claims should be brought in state court, rather than
federal court. The Magistrate's recommendations are pending before
the court. American is vigorously defending all claims against it.
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. 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.
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 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.
-12-
<PAGE> 15
PART II
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
months ended March 31, 2000 and 1999.
27.1 Financial Data Schedule as of March 31, 2000.
27.2 Restated Financial Data Schedule as of March 31, 1999.
On January 20, 2000, AMR filed a report on Form 8-K relative to a
press release issued to report the Company's fourth quarter and full
year 1999 earnings.
On February 9, 2000, AMR filed a report on Form 8-K relative to a
press release issued to announce that the Company declared on February
7, 2000, its intent to distribute a dividend on all outstanding shares
of AMR's common stock and to set the timeline for the Sabre spin-off.
-13-
<PAGE> 16
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amended report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMR CORPORATION
Date: May 11, 2000 BY: /s/ Thomas W. Horton
Thomas W. Horton
Senior Vice President and Chief
Financial Officer
-14-
<PAGE> 17
Exhibit 12
AMR CORPORATION
Computation of Ratio of Earnings to Fixed Charges
(in millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
<S> <C> <C>
Earnings:
Earnings from continuing operations
before income taxes $ 157 $ 40
Add: Total fixed charges (per below) 328 301
Less: Interest capitalized 38 33
Total earnings $ 447 $ 308
Fixed charges:
Interest $ 115 $ 91
Portion on rental expense
representative of the interest factor 209 208
Amortization of debt expense 4 2
Total fixed charges $ 328 $ 301
Ratio of earnings to fixed charges 1.36 1.02
</TABLE>
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 76
<SECURITIES> 1,893
<RECEIVABLES> 1,532
<ALLOWANCES> 39
<INVENTORY> 717
<CURRENT-ASSETS> 4,999
<PP&E> 25,614
<DEPRECIATION> 8,880
<TOTAL-ASSETS> 24,314
<CURRENT-LIABILITIES> 6,279
<BONDS> 5,544
0
0
<COMMON> 1,154
<OTHER-SE> 5,268
<TOTAL-LIABILITY-AND-EQUITY> 24,314
<SALES> 0
<TOTAL-REVENUES> 4,577
<CGS> 0
<TOTAL-COSTS> 4,365
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119
<INCOME-PRETAX> 157
<INCOME-TAX> 68
<INCOME-CONTINUING> 89
<DISCONTINUED> 43
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132
<EPS-BASIC> .89
<EPS-DILUTED> .86
</TABLE>
