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AMR Corporation Reports 1q 2011 Financial Results

Amr Corporation Reports 1Q 2011 Net Loss Of $436 Million
Compared To A Net Loss Of $505 Million In 1Q 2010

Despite Much Higher Fuel Prices, AMR Reduces 1Q Net Loss by
$69 Million Versus Prior Year Period

Excluding Special Items, 1Q Net Loss Was $405 Million
Compared to a Net Loss of $452 Million in 1Q 2010

AMR 1Q 2011 Revenue Was Up 9 Percent Over Same Period a Year Ago

AMR Further Reduces 2011 Capacity

Gerard J. Arpey
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Thomas W. Horton
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Isabella D. Goren
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AMR Corporation, the parent company of American Airlines, Inc., today reported a net loss of $436 million for the first quarter of 2011, or $1.31 per share. The first quarter 2011 results include the impact of approximately $31 million in one-time non- cash charges related to certain sale/leaseback transactions. Excluding this special item, the Company incurred a loss of $405 million for the first quarter of 2011, or $1.21 per share.

The results for the first quarter of 2011 compare to a net loss of $505 million, or $1.52 per share, in the first quarter of 2010. The first quarter 2010 results included a $53 million, or $0.16 per share, special item related to the devaluation of the Venezuelan currency. Excluding that special item, AMR's loss was $452 million, or $1.36 per share, in the first quarter of 2010.

“High fuel prices remain one of the biggest challenges to our industry and our company. We believe our steps to aggressively increase revenues, reduce capacity, control non-fuel operating costs, and bolster liquidity will help us to better manage the challenges we currently face,” said AMR Chairman and CEO Gerard Arpey. “While we clearly must achieve better results as we continue to strengthen our business, we have made some meaningful progress. I want to thank our people for their commitment to serving our customers, and I am confident that our overall strategy positions American well to address our current challenges and sets the stage for long-term success.”

4Q Capacity Additional Cut Facilitated by the Flexibility provided by MD-80 Fleet

Today, American announced that it plans to reduce its fourth quarter 2011 system capacity by an incremental 1 percent. This cut is in addition to the capacity reduction already announced by American in March and further demonstrates the flexibility provided by its MD-80 fleet. American now intends to retire at least 25 MD-80s in 2011, as part of the company’s plan to continue renewing its fleet, while addressing the current fuel environment.

The Company also highlighted several recent developments that demonstrate its determination in executing on its strategic plan:

Joint Business with British Airways and Iberia – Newly Aligned Summer Schedule

On March 27, American Airlines, British Airways and Iberia implemented a newly aligned schedule through which, for the first time ever, the airlines' flight times across the North Atlantic are fully coordinated – including American's London express service with 15 flights per day from New York to London. Customers traveling between JFK and LHR will benefit from more conveniently timed flights during peak periods.

American Airlines and oneworld Partners Add European Service from the East Coast

American Airlines launched new and more frequent services between the East Coast and the European cities of Budapest, Hungary, as well as Barcelona and Madrid, Spain.

American Airlines and Japan Airlines Launch Trans-Pacific Joint Business

On April 1, American Airlines and Japan Airlines (JAL) launched their trans-Pacific joint business between North America and Asia. Furthermore, American is firmly committed to assisting the Japanese people and supporting Japan Airlines in the aftermath of the March 11 earthquake and tsunami that struck Japan. To date, American Airlines and American Eagle customers and employees have donated more than $1.6 million in aid to relief efforts in Japan.

Los Angeles Focus

In early April, American Airlines and American Eagle significantly enhanced their services from Los Angeles International Airport (LAX) with 10 new destinations, including new daily nonstop service to Shanghai. American is the first U.S. airline to offer daily nonstop service from Los Angeles to Shanghai, the largest U.S.-China air travel market.

Fleet Renewal and Flexibility for the Future: 777-300ER

As part of the Company’s fleet renewal efforts, American Airlines now has five 777-300ERs that are scheduled for delivery in 2012 and 2013, including two additional aircraft for which options were recently exercised. These 777-300ERs will complement American’s fleet, offering additional flexibility in the future, and providing increased efficiency due to better seat mile economics and performance characteristics.


In the early part of the first quarter, American Airlines began processing Priceline transactions through its direct connect technology. In April, American and Expedia, Inc. entered into a memorandum of understanding (MOU) that allows the companies to resume doing business together, effective April 4.

On April 12, American Airlines filed a civil antitrust lawsuit against Travelport, LLC, and Orbitz Worldwide to stop their exclusionary and anticompetitive business practices and recover monetary damages.

American intends to honor its existing contractual obligations with Travelport throughout the proceedings of this action and expects it will continue to do so for the foreseeable future. American continues to have discussions with other GDS companies with the intent of distributing its content through these systems under competitive terms.

American Airlines Completes Private Offering of Senior Secured Notes

In March, American strengthened its liquidity by completing a private offering of $1 billion aggregate principal amount of 7.50% senior secured notes due 2016.

Financial and Operational Performance (Excluding Impact of Special Items)

  • AMR reported first quarter consolidated revenues of approximately $5.5 billion, an increase of 9.2 percent year over year.
  • American, its regional affiliates, AA Cargo, as well as the ‘other revenue’ category, experienced year-over-year increases, as total operating revenue was approximately $465 million higher in first quarter 2011 compared to the first quarter of 2010.Consolidated passenger revenue per available seat mile (unit revenue) grew 5.2 percent, while mainline unit revenue at American grew 5.0 percent, in each case compared to the first quarter of 2010.
  • The Company’s first quarter unit revenue performance reflects an improved fare environment and a recovering economy, as well as a more robust business travel market. AMR achieved this improvement despite significant disruption of its operations due to unusually severe weather, a fuel farm fire at Miami International Airport, and the earthquake/tsunami in Japan, all of which reduced revenue in the first quarter.Passenger yield, which represents the average fares paid, increased at American by 6.2 percent year over year in the first quarter.Mainline unit costs in the first quarter decreased 1.8 percent year over year, excluding fuel costs and special items. Non-fuel unit cost performance was driven by American’s cost control efforts and a modest increase in capacity.Mainline capacity, or total available seat miles, in the first quarter increased by 2.7 percent compared to the prior year’s first quarter, as the Company selectively allocated capacity to key markets, such as Asia.American’s mainline load factor – or percentage of total seats filled – was 77.1 percent during the first quarter of 2011, 0.8 points lower than the year-ago period.

Balance Sheet Update
  • AMR ended the first quarter with approximately $6.3 billion in cash and short-term investments, including a restricted balance of $455 million and approximately $390 million of collateral relating to fuel hedging transactions. This compares to a balance of $5.0 billion in cash and short-term investments, including a restricted balance of $460 million, at the end of the first quarter of 2010. AMR’s Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax-exempt bonds, and the present value of aircraft operating lease obligations, was $17.4 billion at the end of the first quarter of 2011, compared to $15.9 billion a year earlier.AMR’s Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, was $11.6 billion at the end of the first quarter, compared to $11.4 billion in the first quarter of 2010.

Mainline and Consolidated Capacity
  • In light of its announced 2011 capacity reductions, AMR expects its full-year mainline capacity to be 1.4 percentage points lower than originally planned or up 2.2 percent versus 2010, with domestic capacity down 0.5 percent and international capacity up 6.2 percent compared to 2010 levels. On a consolidated basis, full-year capacity will be up 2.8 percent.AMR expects mainline capacity in the second quarter of 2011 to be 2.9 percent higher than last year, with domestic capacity expected to be down 0.4 percent and international capacity expected to be up 8.1 percent. AMR expects consolidated capacity in the second quarter of 2011 to be up 3.9 percent.
Fuel Expense and Hedging
  • The cost of jet fuel has been increasing and remains very volatile. Based on the April 1 forward curve, AMR is planning for an average system price of $3.10 per gallon in the second quarter of 2011 and $3.07 per gallon for all of 2011. This compares to an average system price of $2.32 per gallon in 2010. Consolidated consumption for the second quarter is expected to be 713 million gallons of jet fuel.
  • AMR has 49 percent of its anticipated second quarter 2011 fuel consumption hedged at an average cap of $2.66 per gallon of jet fuel equivalent ($86 per barrel crude equivalent), with 39 percent subject to an average floor of $2.04 per gallon of jet fuel equivalent ($60 per barrel crude equivalent).
  • AMR has 41 percent of its anticipated full-year consumption hedged at an average cap of $2.63 per gallon of jet fuel equivalent ($84 per barrel crude equivalent), with 35 percent subject to an average floor of $2.02 per gallon of jet fuel equivalent ($58 per barrel crude equivalent).
Mainline and Consolidated Cost per Available Seat Mile (CASM), Excluding Special Items
  • Fuel prices are expected to be a significant cost headwind in 2011. AMR remains intensely focused on containing costs, despite significant fuel price and other headwinds in a number of areas, including, among others, facilities and healthcare costs.
  • As a result, cost per available seat mile for 2011, excluding fuel and the potential impact of any new labor agreements, is expected to be about flat to 2010.
  • The Company intends to accomplish this through a number of additional initiatives since incremental capacity reductions will put additional pressure on unit costs.
2Q2011 (est.) vs. 2Q2010
Full year 2011 (est.) vs. 2010

Mainline CASM
9.2% - 9.6%
8.4% - 9.4%
    Excluding Fuel
1.1 -1.5
(0.5) - 0.5
Consolidated CASM
9.23 - 9.7
8.5 - 9.5
    Excluding Fuel
1.1 - 1.5
(0.5) - 0.5

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