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News Release

Thursday, July 19, 2007

AMR Corporation Reports A Second Quarter Profit Of $317 Million, A $26 Million Improvement Year Over Year

AMR Continues to Strengthen Balance Sheet, Improve Liquidity and Reinvest in its Products and Services

FORT WORTH, Texas - AMR Corporation, the parent company of American Airlines, Inc., today reported a net profit of $317 million for the second quarter of 2007, or $1.08 per diluted share.

The current quarter results compare to a net profit of $291 million, or $1.14 per diluted share, in the second quarter of 2006.

"Our company overcame exceptional weather challenges and historically high fuel prices to earn our fifth consecutive quarterly profit and our largest quarterly net profit since we launched our Turnaround Plan more than four years ago," said AMR Chairman and CEO Gerard Arpey. "Weather has been an enormous obstacle this year, but our employees have stepped up to help take care of customers and continue our momentum toward long-term success. Our improved performance has allowed us to strengthen our balance sheet and reinvest in products and services to create a stronger company, but we must remain mindful that painfully high fuel prices and continuing intense competition present formidable challenges for the remainder of the year and beyond."

Operational Performance
American mainline passenger revenue per available seat mile (unit revenue) increased by 3.6 percent in the second quarter compared to the year-ago quarter.

American's mainline load factor or the percentage of total seats filled was a record 83.6 percent during the second quarter, compared to 82.6 percent in the second quarter of 2006. American second-quarter yield, which represents average fares, increased 2.3 percent compared to the second quarter of 2006, its ninth consecutive quarter of year-over-year yield increases.

AMR reported second quarter consolidated revenues of approximately $5.9 billion, a decrease of 1.6 percent year over year. AMR estimates that severe weather disruptions reduced second quarter consolidated revenue by nearly $50 million and reduced its net profit for the second quarter by approximately $0.12 per diluted share.

American's mainline cost per available seat mile (unit cost) in the second quarter increased 2.4 percent year over year, which was 1.2 percentage points higher than it would have been if not for the significant weather impact. Excluding fuel, mainline unit costs in the second quarter increased by 3.5 percent year over year.

Due to weather impact and as previously disclosed on June 22, 2007, during the period from April 1 through June 20 American cancelled 1.8 percent of its scheduled second quarter mainline departures. Thereafter, American had more than 1,000 weather-related cancellations during the last 10 days of June, increasing total weather-related cancellations during the quarter to 2.1 percent of second quarter scheduled mainline departures.

Mainline capacity, or total available seat miles, in the second quarter decreased by 4.4 percent compared to the same period in 2006.

"While our year-over-year capacity decline in the second quarter includes some impact from weather cancellations, we believe that our disciplined and careful approach to managing capacity has been an important factor in our improved financial performance," Arpey said. This approach has helped us to improve profitability and generate better returns on our investments in the business.

Balance Sheet Improvement
Arpey noted that AMR continued to strengthen its balance sheet in the second quarter by reducing debt and improving its liquidity position.

AMR ended the second quarter with approximately $6.4 billion in cash and short-term investments, including a restricted balance of $470 million, compared to a balance of $5.7 billion in cash and short-term investments, including a restricted balance of $525 million, at the end of the second quarter of 2006.

AMR reduced Total Debt, which the Company 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, to $17.3 billion at the end of the second quarter of 2007, compared to $19.4 billion a year earlier. AMR reduced Net Debt, which the Company defines as Total Debt less unrestricted cash and short-term investments, from $14.2 billion at the end of the second quarter of 2006 to $11.4 billion at the end of the second quarter of 2007. The Company interest expense was $235 million in the second quarter of 2007, a 9.6 percent year-over-year decrease.

AMR contributed $118 million to its employees' defined benefit pension plans in the second quarter and contributed an additional $86 million on July 13, 2007. The Company has contributed a total of $266 million to these plans in 2007 as part of its expected full-year contribution amount of $364 million.

Second Quarter Highlights
  • American accelerated the delivery of six additional Boeing 737-800 aircraft into the first half of 2009 as the Company moves forward on fleet renewal and the MD-80 replacement process while working toward its goal of improving fleet fuel efficiency by more than 20 percent by 2020. The announcement means that American has accelerated a total of nine 737s for delivery in the first half of 2009.
  • Overhaul & Maintenance Magazine honored American and the Transport Workers Union (TWU) with its Outstanding Achievement Award for their work together as partners to transform the airline Maintenance & Engineering organization from a cost center to a profit center.
  • American announced plans to make upgrades on its entire fleet of 124 Boeing 757 aircraft, including installation of new seats, new cabin interiors and updated in-flight entertainment systems.
  • American announced that it is providing new in-flight personal entertainment media players that offer free on-demand video and audio options for passengers in its premium-class cabins on transcontinental flights. American also began conducting an entertainment media player test on some of its MD-80 aircraft that fly between Los Angeles and Chicago.
  • AMR continued to improve its balance sheet by refinancing the $442 million floating rate term loan portion of its credit facility, refinancing $236 million in airport facility bonds, and prepaying $48 million in aircraft debt. These actions are expected to eliminate approximately $12 million in annual net interest expense.
  • American announced and implemented a significant upgrade to AA.com that offers customers a faster and easier way to shop for and purchase travel. The new shopping and ticket purchase functionality on AA.com empowers customers to quickly evaluate flight options by providing a convenient display of schedule, price and levels of service combinations.
Guidance for the Third Quarter and 2007

Mainline and Consolidated Capacity
AMR expects its full-year mainline capacity to decrease by 2.1 percent in 2007 compared to 2006, with a 2.6 percent reduction in domestic capacity and a 1.3 percent decrease in international capacity. On a consolidated basis, AMR expects full-year capacity to decrease by 1.9 percent in 2007 compared to 2006. The impact of weather-related cancellations that occurred in the first and second quarters is included in mainline and consolidated capacity forecasts for 2007.

AMR expects mainline capacity in the third quarter of 2007 to decrease by 2.4 percent year over year. It expects consolidated capacity to decrease by 2.3 percent in the third quarter of 2007 compared to the prior-year period.

Fuel Expense and Hedging
While the cost of jet fuel remains volatile, as of now AMR is planning for an average system price of $2.24 per gallon in the third quarter and $2.11 per gallon for all of 2007. AMR has 35 percent of its anticipated third quarter fuel consumption capped at an average crude equivalent of $62 per barrel (jet fuel equivalent of $1.94 per gallon), with 31 percent of its anticipated full-year consumption capped at an average crude equivalent of $63 per barrel (jet fuel equivalent of $1.96 per gallon). Consolidated consumption for the third quarter is expected to be approximately 800 million gallons of jet fuel.

Mainline and Consolidated Unit Costs
AMR expects mainline unit costs excluding fuel to be 1.3 percent higher in 2007 versus 2006 while 2007 consolidated unit costs excluding fuel are expected to increase 1.9 percent year over year.

In the third quarter, mainline unit costs excluding fuel are expected to increase 1.9 percent year over year while consolidated unit costs excluding fuel are expected to increase 2.7 percent from the third quarter of 2006.

Following the weather impact in the first and second quarters, full-year mainline unit costs are expected to increase 2.3 percent in 2007 compared to 2006, while full-year consolidated unit costs are expected to increase 2.7 percent in 2007 compared to 2006.

For the third quarter, mainline unit costs are expected to increase 2.4 percent compared to the third quarter of 2006, while third quarter consolidated unit costs are expected to increase 2.9 percent compared to the third quarter of 2006.

AMR continues to target $300 million in incremental savings for 2007, driven by such cost initiatives as distribution cost savings, schedule simplification and on-going fuel conservation initiatives.