-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GeudRpDsuywW6Bj4Di1D6fBaj3dALG2H72gEIwpfbI81u9KzINcQ9KJkgajgSi2H Itf6wEMWUDfkuVYJV0iXew== 0000004515-00-000002.txt : 20000512 0000004515-00-000002.hdr.sgml : 20000512 ACCESSION NUMBER: 0000004515-00-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN AIRLINES INC CENTRAL INDEX KEY: 0000004515 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 751825172 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02691 FILM NUMBER: 626660 BUSINESS ADDRESS: STREET 1: 4333 AMON CARTER BLVD CITY: FT WORTH STATE: TX ZIP: 76155 BUSINESS PHONE: 8179631234 MAIL ADDRESS: STREET 1: P O BOX 619616 MD5661 CITY: DALLAS FORT WORTH AI STATE: TX ZIP: 75261-9616 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN AIRWAYS INC DATE OF NAME CHANGE: 19670629 10-Q 1 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 1-2691. 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 May 5, 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. 2 INDEX AMERICAN AIRLINES, INC. 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 3 PART I: FINANCIAL INFORMATION Item 1. Financial Statements AMERICAN AIRLINES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In millions)
Three Months Ended March 31, 2000 1999 Revenues Passenger $ 3,770 $ 3,320 Cargo 166 143 Other 266 246 Total operating revenues 4,202 3,709 Expenses Wages, salaries and benefits 1,514 1,383 Aircraft fuel 527 336 Depreciation and amortization 256 226 Commissions to agents 242 272 Maintenance, materials and repairs 222 218 Other rentals and landing fees 216 211 Food service 182 165 Aircraft rentals 140 150 Other operating expenses 717 721 Total operating expenses 4,016 3,682 Operating Income 186 27 Other Income (Expense) Interest income 30 18 Interest expense (70) (51) Interest capitalized 36 31 Related party interest - net 5 11 Miscellaneous - net (6) 31 (5) 40 Earnings Before Income Taxes 181 67 Income tax provision 76 32 Net Earnings $ 105 $ 35
The accompanying notes are an integral part of these financial statements. -1- 4 AMERICAN AIRLINES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions)
March 31, December 31, 2000 1999 Assets Current Assets Cash $ 70 $ 72 Short-term investments 1,837 1,645 Receivables, net 1,492 1,124 Receivable from affiliates, net 395 651 Inventories, net 617 616 Deferred income taxes 597 597 Other current assets 205 176 Total current assets 5,213 4,881 Equipment and Property Flight equipment, net 10,292 9,916 Other equipment and property, net 1,412 1,383 Purchase deposits for flight equipment 1,482 1,495 13,186 12,794 Equipment and Property Under Capital Leases Flight equipment, net 1,602 1,623 Other equipment and property, net 99 98 1,701 1,721 Route acquisition costs, net 880 887 Other assets, net 1,428 1,436 $ 22,408 $ 21,719 Liabilities and Stockholder's Equity Current Liabilities Accounts payable $ 1,172 $ 991 Accrued liabilities 1,677 1,790 Air traffic liability 2,758 2,255 Current maturities of long-term debt 65 61 Current obligations under capital leases 205 210 Total current liabilities 5,877 5,307 Long-term debt, less current maturities 2,219 2,231 Obligations under capital leases, less current obligations 1,334 1,414 Deferred income taxes 1,622 1,581 Other liabilities, deferred gains, deferred deferred credits and postretirement benefits 4,104 4,036 Stockholder's Equity Common stock - - Additional paid-in capital 1,836 1,840 Accumulated other comprehensive income (2) (2) Retained earnings 5,418 5,312 7,252 7,150 $ 22,408 $ 21,719
The accompanying notes are an integral part of these financial statements. -2- 5 AMERICAN AIRLINES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions)
Three Months Ended March 31, 2000 1999 Net Cash Provided by (Used in) Operating Activities $ 626 $ (231) Cash Flow from Investing Activities: Capital expenditures, including purchase deposits for flight equipment (669) (864) Net decrease (increase) in short-term investments (192) 616 Proceeds from: Sale of other investments - 31 Sale of equipment and property 70 16 Net cash used for investing activities (791) (201) Cash Flow from Financing Activities: Payments on long-term debt and capital lease obligations (93) (80) Proceeds from: Short-term loan from Sabre, Inc. - 300 Sale-leaseback transactions - 54 Funds transferred from affiliates, net 256 127 Net cash provided by financing activities 163 401 Net decrease in cash (2) (31) Cash at beginning of period 72 85 Cash at end of period $ 70 $ 54 Cash Payments For: Interest $ 37 $ 45 Income taxes 28 9 Activities Not Affecting Cash: Capital lease obligations incurred $ - $ 54
The accompanying notes are an integral part of these financial statements. -3- 6 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 March 31, 2000 and December 31, 1999, was $7.1 billion and $7.0 billion, respectively. Accumulated amortization of equipment and property under capital leases at March 31, 2000 and December 31, 1999, was $1.1 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, 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 and 22 Boeing 777-200IGWs. 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 2004. Payments for all aircraft will approximate $1.5 billion during the remainder of 2000, $1.8 billion in 2001, $500 million in 2002 and an aggregate of approximately $300 million in 2003 and 2004. 5.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 as a result of this transaction. -4- 7 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 American recorded net earnings for the three months ended March 31, 2000 of $105 million. This compares to net earnings of $35 million for the first quarter of 1999. American's operating income of $186 million increased $159 million compared to the same period in 1999. The Company'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. 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. American's revenues increased $494 million, or 13.3 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. Cargo revenues increased 16.1 percent, or $23 million, due primarily to the impact of the labor disagreement which impacted the Company's operations in the first quarter of 1999. American's operating expenses increased 9.1 percent, or $335 million. American's cost per ASM increased 3.4 percent to 9.96 cents. Wages, salaries and benefits increased 9.6 percent, or $132 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 56.8 percent, or $191 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 $114 million recognized during the first quarter related to the Company's fuel hedging program. Depreciation and amortization expense increased $30 million, or 13.3 percent, due to the addition of new aircraft. Commissions to agents decreased 11.0 percent, or $30 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 10.3 percent, or $17 million, due primarily to an increase in passengers boarded and rate increases. Other Income (Expense) decreased $45 million due primarily to a $19 million increase in interest expense resulting from an increase in long-term debt, partially offset by an increase of $12 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. -5- 8 AIRCRAFT INFORMATION As of March 31, 2000, the Company had commitments to acquire the following aircraft: 77 Boeing 737-800s and 22 Boeing 777-200IGWs. 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 2004. Payments for all aircraft will approximate $1.5 billion during the remainder of 2000, $1.8 billion in 2001, $500 million in 2002 and an aggregate of approximately $300 million in 2003 and 2004. 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. 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. -6- 9 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. -7- 10 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. -8- 11 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. -9- 12 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 Financial Data Schedule Reports on Form 8-K: None -10- 13 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: May 11, 2000 BY: /s/ Thomas W. Horton Thomas W. Horton Senior Vice President - Finance and Planning and Chief Financial Officer -11- 14 Exhibit 12 AMERICAN AIRLINES, INC. Computation of Ratio of Earnings to Fixed Charges (in millions)
Three Months Ended March 31, 2000 1999 Earnings: Earnings from continuing operations before income taxes $ 181 $ 67 Add: Total fixed charges (per below) 263 246 Less: Interest capitalized 36 31 Total earnings $ 408 $ 282 Fixed charges: Interest $ 70 $ 51 Portion on rental expense representative of the interest factor 193 195 Amortization of debt expense - - Total fixed charges $ 263 $ 246 Ratio of earnings to fixed charges 1.55 1.15
-12- EX-27 2
5 1,000,000 3-MOS DEC-31-2000 MAR-31-2000 70 1,837 1,530 38 617 5,213 23,146 8,259 22,408 5,877 3,553 0 0 1,836 5,416 22,408 0 4,202 0 4,016 0 0 70 181 76 105 0 0 0 105 0 0
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