Thursday, January 17, 2008

AMR Corporation reports 2007 net profit of $504 million, company's second consecutive annual profit and a $273 million improvement over 2006 results

Record fuel prices contribute to company's $69 million net loss in fourth quarter, company's first quarterly loss since first quarter of 2006

In Spite of Soaring Fuel Costs and Significant Weather Challenges, AMR Makes Progress in 2007 with Improved Profitability, Stronger Balance Sheet and Additional Investments to Improve its Products and Services

FORT WORTH, Texas AMR Corporation, the parent company of American Airlines, Inc., today reported a net loss of $69 million for the fourth quarter of 2007, or $0.28 per share.

The results for the fourth quarter of 2007 include the impact of several special items that were identified in AMR's Dec. 21 investor update and amounted to a cumulative positive impact of approximately $115 million, or $0.46 cents per diluted share. These items include: a $138 million gain on the sale of AMR's stake in ARINC; a $39 million gain to reflect the positive impact of the previously announced change to an 18-month expiration of AAdvantage® miles; and a $63 million charge associated with the retirement of 24 MD-80 aircraft that previously had been temporarily stored.

The current quarter results compare to a net profit of $17 million for the fourth quarter of 2006, or $0.07 per diluted share.

For all of 2007, AMR posted a net profit of $504 million, or $1.78 per diluted share. In addition to the special items from the fourth quarter, the full-year 2007 results also include the impact of a $30 million charge, disclosed in the third quarter, to reflect an adjustment for additional salary and benefit expense accruals related to years 2003 through 2006.

AMR's full-year 2007 results compare to a net profit of $231 million net profit, or $0.98 per diluted share, for all of 2006.

"Our employees overcame enormous challenges from unprecedented weather disruptions, air traffic control problems and record fuel prices to help our company take another important step forward in 2007. We earned our second straight annual profit, achieving our first back-to-back profitable years since 1999-2000, and made progress in many areas, including strengthening our balance sheet, focusing on customers, renewing our fleet, bolstering our network and investing in products and services," said AMR Chairman and CEO Gerard Arpey. "While record fuel prices contributed significantly to our fourth quarter loss - our first quarterly loss after six straight profitable quarters - they are a reminder of the challenges we must continue to overcome as we strive for consistent and adequate profitability. As we thank our employees for their efforts in 2007, it is also clear that we have more work ahead as we seek to maintain momentum in 2008 and beyond."

Operational Performance

American's mainline passenger revenue per available seat mile (unit revenue), excluding special items, increased by 4.5 percent in the fourth quarter compared to the year-ago quarter.

Mainline capacity, or total available seat miles, in the fourth quarter increased 0.4 percent compared to the same period in 2006. The year-over-year increase in capacity was largely the result of previously announced aircraft density initiatives, mitigated somewhat by weather-related cancellations. Fourth quarter mainline departures declined slightly year over year.

American's mainline load factor - or the percentage of total seats filled was a record 80.2 percent during the fourth quarter, compared to 78.8 percent in the fourth quarter of 2006. Americans fourth-quarter yield, which represents average fares paid, excluding special items, increased 2.6 percent compared to the fourth quarter of 2006, its 11th consecutive quarter of year-over-year yield increases.

Excluding special items, AMR reported fourth quarter consolidated revenues of approximately $5.6 billion, an increase of 4.6 percent year over year.

American's mainline cost per available seat mile (unit cost) in the fourth quarter, excluding special items, increased 8.6 percent year over year. The largest contributor to the year-over-year increase in unit costs was fuel. In the fourth quarter, American paid $367 million more than it would have paid at fourth quarter 2006 fuel prices. Consolidated fuel expense in the fourth quarter was $412 million higher than it would have been at fourth quarter 2006 fuel prices.

Excluding fuel and special items, mainline unit costs in the fourth quarter increased by 0.6 percent year over year, largely reflecting a $44 million accrual in the fourth quarter for a one-time payment to eligible employees under the Companys broad-based variable compensation plans. For the full year, the accrual for the one-time payment totaled $67 million.

Arpey said the Company's Board of Directors had approved the one-time payment "in recognition of the collective effort of our employees and the special circumstances that existed in 2007." Each eligible American Airlines employee is expected to receive a payment of $800 under the Customer Service Component of the Companys Annual Incentive Plan (AIP). "This is a tangible way of saying 'thank you' for all that our employees did for our company in a challenging year," he said.

Balance Sheet Improvement

AMR continued to strengthen its balance sheet in the fourth quarter.

AMR ended the fourth quarter with $5.0 billion in cash and short-term investments, including a restricted balance of $428 million, compared to a balance of $5.2 billion in cash and short-term investments, including a restricted balance of $468 million, at the end of the fourth quarter of 2006. As previously disclosed, AMR paid off $865 million in debt in the fourth quarter, including scheduled debt payments and an unscheduled $545 million aircraft debt prepayment. Of the Companys $2.3 billion in debt payments for all of 2007, approximately $1 billion of those were prepayments.

AMR reduced 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, to $15.6 billion at the end of the fourth quarter of 2007, compared to $18.4 billion a year earlier. AMR reduced Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, from $13.6 billion at the end of the fourth quarter of 2006 to $11.0 billion in the fourth quarter of 2007.

As a result of scheduled principal payments as well as prepayments, refinancings and other efforts to strengthen its balance sheet, AMR's net interest expense for 2007 was $174 million lower than in 2006, a 23.2 percent reduction.

As announced in October, AMR met its projected 2007 commitment to fund its defined benefit pension plans for employees by contributing $380 million to these plans through the first three quarters of the year. AMR has contributed nearly $2 billion to these plans since 2002, as the Company continues to meet this important commitment to employees. The Company's 2007 pension contributions, along with strong investment returns, higher market discount rates and legislative changes to the mandatory pilot retirement age, helped to improve the accumulated benefit obligation funded status of AMR's pension plans to 96 percent, up from 84 percent at the end of 2006.

Highlights

Fourth Quarter 2007 and Recent

• Since providing a fleet renewal update in October, American has increased the number of additional Boeing 737-800s that will be delivered in 2009 by 10 aircraft. Six of the 10 737s are part of American's announced plan to accelerate the deliveries of 47 previously ordered 737s into the 2009-2012 timeframe, while the other four 737s are incremental to the 47 aircraft. Including the 10 737s cited today, American so far has scheduled delivery of a total of 23 737s throughout 2009 (representing 18 of the initial 47 aircraft and five incremental aircraft).
• AMR announced plans to divest American Eagle, its wholly-owned regional airline. AMR said that the divestiture of American Eagle is intended to provide it with the structure, incentives and opportunities to win new business and provide new opportunities for its employees. AMR also said that it believes that the divestiture will enable American to focus on its mainline business, while ensuring Americans continued access to cost-competitive regional feed.
• American announced that it will begin nonstop service from Chicago's O'Hare International Airport to Moscows Domodedovo International Airport on June 2, 2008. From Chicago, American is - or soon will be - providing links to the worlds key developing economies in Russia, China, and India as well as the established markets of Japan, Europe, and Latin America.
• American launched its inaugural nonstop service between New Yorks John F. Kennedy International Airport and Londons Stansted Airport. American's second daily round trip between JFK and Stansted, to be added in April 2008, will give customers the choice of an early or late evening departure from New York to Stansted and a morning or late afternoon departure from Stansted to New York.
• American launched new service from South Florida, including: Miami-Barranquilla, Colombia; Ft. Lauderdale-Santo Domingo, Dominican Republic; and Ft. Lauderdale-San Jose, Costa Rica. American also launched: Chicago-Buenos Aires, Argentina; DFW-Panama City, Panama; and DFW-Providenciales, Turks & Caicos.