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Aa 2001

The annual report summarizes a very challenging year for AMR Corporation and American Airlines due to the slowing economy and then the devastating impacts of 9/11 and Flight 587. In response, the company drastically cut capacity by retiring aircraft, reduced both capital spending and operating expenses significantly, and reduced its workforce by 20,000 jobs through attrition and voluntary programs. Despite the difficulties, the integration of Trans World Airlines was successfully completed, adding to American's network. The report expresses confidence that with flexible planning and a focus on customers, safety, service and technology, the company can weather the challenges and continue leading the industry.

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0% found this document useful (0 votes)
84 views

Aa 2001

The annual report summarizes a very challenging year for AMR Corporation and American Airlines due to the slowing economy and then the devastating impacts of 9/11 and Flight 587. In response, the company drastically cut capacity by retiring aircraft, reduced both capital spending and operating expenses significantly, and reduced its workforce by 20,000 jobs through attrition and voluntary programs. Despite the difficulties, the integration of Trans World Airlines was successfully completed, adding to American's network. The report expresses confidence that with flexible planning and a focus on customers, safety, service and technology, the company can weather the challenges and continue leading the industry.

Uploaded by

Antonia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
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You are on page 1/ 48

The can do spirit is evident

not just in our name, but in


every one of our employees.
Weve never been more proud
to bear the name American.
Donald J.Carty

AMR CORPORATION

2001 ANNUAL REPORT

AMR CORPORATION
P.O. Box 619616, Dallas/Fort Worth, Texas 75261-9616
The American Airlines internet address is www.aa.com
The AMR internet address is www.amrcorp.com

TABLE

OF

CONTENTS

Letter to Shareholders,
Customers and Employees

Financial Table of Contents

Operating Aircraft Fleets

41

Board of Directors

42

Corporate Information

44

ABOUT OUR ANNUAL REPORT

Many would say its no coincidence that the


word American ends in I can. For the
cover of this years annual report, we felt it
particularly appropriate to highlight those
four letters that are also found in the name
of our airline. We think they speak strongly
to the indomitable spirit that has made our
country great and to the spirit that helped
pull our airline through an incredibly challenging year. If youd prefer to view the
annual report online, youll find it at:
http://www.amrcorp.com/ar2001/index.htm.

LETTER
AND

TO

SHAREHOLDERS, CUSTOMERS

EMPLOYEES

down for several days. And though we were able to handle a


slew of new security-related operational demands and get our
airline up and running again, passenger traffic for the entire

In recent years, I have had the pleasure, and the honor

industry was dramatically lower. In the days and weeks follow-

in my role as Chairman and CEO of AMR to highlight

ing the attacks, we acted quickly by reducing our capacity to

in these pages the achievements of our Company during the

get supply and demand better aligned.

preceding year. In some respects, 2001 was like most other

When we fly less, we need fewer aircraft, so we also

years the American Airlines and American Eagle teams rose

hastened the retirement of many older aircraft, while elimi-

to meet incredible challenges, and from a strategic standpoint,

nating others through lease returns. All told, we removed

we did quite a bit to position our airline for long-term com-

about 70 aircraft from our fleet. And as we ratcheted down

petitive success.

capacity, we also focused very hard on reducing both capital

But as everyone knows, 2001 was not just another year.

spending and operating expenses. Earlier in the year, in

It was a year that brought enormous pain and unprecedented

response to the weakening revenue environment, we removed

challenges to our country, to our industry and certainly to

close to $1 billion from our 2001-2002 capital plan. In the

AMR Corporation. For American Airlines, every accomplish-

post-9/11 environment, we took that initiative quite a bit

ment, indeed every other event, was overshadowed by the

further by drastically reducing capital spending for aircraft

twin calamities of the September 11 attacks and the loss of

and non-aircraft items.

Flight 587 in Queens, New York, on November 12.


Prior to September 11, our Companys greatest obstacle had

In terms of our fleet, we deferred 35 of the 45 firm 2002


deliveries until sometime beyond 2003. We also made

been the slowing U.S. economy, which triggered a substantial

significant cutbacks in our non-essential aircraft modifica-

decline in air travel generally, and business travel in particular.

tions, scaled back facilities projects in a number of cities, cut

The previously stable relationship between industry supply

our information technology development budget and drasti-

and demand deteriorated badly, and as revenues fell, many of

cally cut spending on ground equipment and training

our costs continued to rise. As a consequence, AMR posted

simulators. All told, we were able to remove another $2.5

significant losses in the first half of the year.

billion from our capital plan on top of the $1 billion

The September 11 attacks turned a difficult year into a

we cut earlier. As a result, our capital spending for 2001

catastrophe. The nations aviation system was completely shut

was approximately $3.6 billion, and we expect it to be just

$1.9 billion in secured financing. And, during 2001, we

$1.8 billion in 2002.

received $730 million from the government as part of the

Our capital controls have been complemented by our


myriad expense-reduction efforts, which include: trimming

Airline Stabilization Act passed in September. We expect to


receive another $130 million in 2002.

in-flight amenities, closing most of our city ticket offices and

All that leaves us with a balance sheet which, relative to

some lesser-used airport lounges and cutting back on advertis-

the rest of the industry, remains strong. We ended 2001 with

ing and promotions, information technology and corporate

about $3 billion in cash and a large stockpile of unencum-

overhead. We have also been able to negotiate some meaning-

bered aircraft assets we can draw upon, if necessary. Nonethe-

ful cost reductions with many of our suppliers.

less, the losses we incurred for the year were staggering. The

None of these initiatives were particularly pleasant,

net loss of about $1.8 billion in 2001, which includes a loss

but worst of all, in the face of staggering losses we took the

of $800 million for the fourth quarter alone, dwarfed any

painful step of reducing our workforce by the equivalent of

previous years loss.

20,000 jobs. Fortunately, through creative and collaborative

2001 was a painful year for all three of our major con-

work on the part of our management team and union leaders,

stituency groups. We lost many valued customers, friends and

we were able to mitigate at least some of the effect on our

colleagues on both September 11 and November 12. For

people through initiatives like voluntary leaves, job sharing,

many others, the joy of flight has been dampened, at least

military leaves and reductions in overtime.

temporarily. Thousands of AMR employees lost their jobs,

Controlling both capital spending and operating costs was,

and all of us were deeply troubled by the attacks on our coun-

and is, a critically important part of our efforts to rebuild our

try. Customers and employees alike have had to make some

Company. Moreover, our determination to prudently manage

dramatic adjustments to deal with the new security require-

our balance sheet in recent years paid off in a big way as we

ments of the post-9/11 world. And of course, our shareholders

sought a cash cushion to help weather the storm of late 2001.

have taken a tremendous hit, as AMR shares fell significantly

For some time, AMR had a sizeable undrawn bank line,

in the aftermath of the September attacks.

which we drew down shortly after September 11. In the days

And yet, despite all the bad news, 2001 which, among

following, we were also able to complete a deal that provided

other things, marked our Companys 75th anniversary did


contain a number of important highlights and milestones.

In April, we acquired substantially all of the assets of Trans

our recent financial performance has caused us to shelve, at

World Airlines (TWA), and in the months that followed, our

least temporarily, some technology-related initiatives, we are

people despite all the aforementioned problems in our busi-

nonetheless committed to leading the industry when it comes

ness completed the biggest, the most complex, and the most

to the development and application of technology on behalf

successful integration of two airlines in the history of our

of our customers, shareholders and employees.

industry. The TWA acquisition was a huge step forward for

As we begin 2002, we face a business environment and an

our domestic network, and it made American Airlines, once

industry landscape that has been dramatically altered during

again, the largest airline in the world.

the past year. But as we learned in 2001, the values and prin-

The More Room Throughout Coach campaign, which

ciples that have guided our Company through the past three

we launched in 2000, gained real traction in 2001, giving

quarters of a century are as solid as ever and the change

us an important point of differentiation versus the rest of

swirling around us makes sticking to those principles all the

the industry. In February 2002, American completed the

more important.

implementation of More Room, which included the flawless

One principle that served us well in 2001 was the flexi-

reconfiguration of more than 850 aircraft and the removal of

bility we built into our plans during the prosperous years of

about 9,000 seats from AA and TWA jets.

the mid-to-late-1990s. By not over-leveraging our balance

Despite the massive changes of late 2001, our people never

sheet, and by consciously keeping our fleet plans as flexible

took their eyes off the ball when it came to providing high-

as possible, we were better positioned to respond to the cata-

quality customer service. In fact, as the year drew to a close,

strophic events of late 2001.

Americans on-time performance steadily improved. Im

Despite all thats happened, the six tenets of our Airline

pleased to report that this momentum carried over into the

Leadership Plan Safety, Service, Product, Network, Technol-

first months of 2002 as American climbed to within an

ogy and Culture remain our blueprint for industry leader-

eyelash of the top spot in on-time performance in January.

ship. While individual strategies within those broad categories

At the airports, in our reservations centers and indeed

must evolve, we are as convinced as ever that the only way to

throughout our Company, our people are creatively applying

create the best possible outcomes for all of our constituencies

new technologies to streamline processes, generate revenue,

is by leading the airline industry in all six. Thats the goal we

reduce costs and improve the customer experience. And while

are determined to achieve. Underlying that goal is the need to

the Transportation Security Administration to achieve that

establish and sustain strong relationships. Indeed, we could

goal. Nothing we do is more important than ensuring the

not have emerged from 2001 intact were it not for the sup-

safety of air travel for our customers and our employees.

port of the government, the communities we serve, our sup-

Finally, our discussion of 2001 would not be complete

pliers, our airline partners, the financial community and, most

without acknowledging the leadership and contributions of

of all, the people of American Airlines and American Eagle.

Charles Pistor who joined the AMR and American Airlines

At the same time, it is distressing to note that not all of


our relationships within the Company have lived up to our

Boards of Directors in 1982 and retired in 2001.


As we begin 2002 there are some hopeful signs on the

standards. While we have made company-wide progress in the

horizon. In fact, as of this writing we have in response to a

area of diversity, we have seen pockets of resistance similar to

steady increase in passenger and cargo traffic begun slowly

those that other companies have experienced. Even isolated

adding back some of the capacity we withdrew in the fall of

reports of harassment within our various workgroups are

2001. In the months to come, we will take full advantage of

cause for concern.

the addition of TWA to our network. That, along with our

To eliminate this behavior and capitalize on the benefits

much-improved dependability and the fully implemented

of a diverse workforce, I have directed managers throughout

More Room product, ought to give us a leg up in the even-

the Company to clearly articulate our zero-tolerance policies

tougher-than-usual competition for each airline customer.

as they relate to discrimination and harassment. In fact, we

With a strong balance sheet, a premium brand image, a

have rewritten and strengthened those policies to make it clear

powerful network and steadily improving operational per-

that we will terminate people for unacceptable behavior. We

formance, I believe AMR is ready to meet whatever challenges

have also asked four members of our Board of Directors

await us in 2002. But more important than any of those fac-

Earl Graves, Judith Rodin, Armando Codino and Roger

tors are the men and women of our Company. As employees,

Staubach to monitor our progress and help us maintain our

as human beings, our people were put through more in 2001

position of cultural leadership within the industry.

than any of us could possibly have imagined a year ago. And

We are equally resolved to making travel

yet the dignity, the strength and the grace they exhibited as we

on American Airlines as safe and secure

started rebuilding the airline are something Ill never forget.

as it can possibly be, while at the same

As a colleague, I am humbled by it. I know I speak for all of

time doing all we can with tools such as

us on the senior management team when I say we will be

airport automation and premium


queues at security checkpoints to

doing our best in 2002 and beyond to live up to the


example they have set for us.

help our customers get through


the airport more quickly. We

Sincerely,

firmly believe that air travel can


be both safe and convenient,

and we are working actively with

Donald J. Carty

the Air Transport Association and

Chairman, President and CEO

FINANCIAL TABLE OF CONTENTS

Managements Discussion
and Analysis

Consolidated Statements
of Operations

14

Consolidated Statements
of Cash Flows
Consolidated Balance Sheets

15
16

Consolidated Statements
of Stockholders Equity

18

Notes to Consolidated
Financial Statements

19

Report of Independent
Auditors

39

Report of Management

40

Operating Aircraft Fleets

41

Board of Directors

42

Management Divisions
and Subsidiaries

43

Corporate Information

44

MANAGEMENTS DISCUSSION AND ANALYSIS

AMR Corporation (AMR or the Company) was incorporated in October 1982. AMRs principal subsidiary, American
Airlines, Inc., was founded in 1934. On April 9, 2001, American Airlines, Inc. purchased substantially all of the assets and
assumed certain liabilities of Trans World Airlines, Inc. (TWA). Accordingly, the operating results of TWA since the date of
acquisition have been included in the accompanying consolidated financial statements for the year ended December 31, 2001
(see Note 3 to the consolidated financial statements). American Airlines, Inc., including TWA (collectively, American), is the
largest scheduled passenger airline in the world. AMRs operations fall almost entirely in the airline industry.
RESULTS OF OPERATIONS
AMRs net loss in 2001 was $1.8 billion, or $11.43 loss per share. AMRs net earnings in 2000 were $813 million, or
$5.43 per share ($5.03 diluted). On September 11, 2001, two American Airlines aircraft were hijacked and destroyed in terrorist
attacks on The World Trade Center in New York City and the Pentagon in northern Virginia. On the same day, two United Air
Lines aircraft were also hijacked and used in terrorist attacks. In response to the terrorist attacks, the Federal Aviation Administration (FAA) issued a federal ground stop order on September 11, 2001, prohibiting all flights to, from and within the United
States. Airports did not reopen until September 13, 2001 (except for Washington Reagan Airport, which was partially reopened
on October 4, 2001). The Company was able to operate only a portion of its scheduled flights for several days thereafter. When
flights were permitted to resume, passenger traffic and yields on the Companys flights were significantly lower than prior to the
attacks. As a result, the Company reduced its operating schedule to approximately 80 percent of the schedule it flew prior to
September 11, 2001. Somewhat offsetting the impact of the September 11 events, the Company recorded $856 million in
reimbursement from the U.S. Government under the Air Transportation Safety and System Stabilization Act (the Act) (see
Note 2 to the consolidated financial statements).
REVENUES
2001 Compared to 2000 The Companys 2001 revenues, yield, revenue passenger miles (RPMs) and available seat miles
(ASMs) were severely impacted by the September 11, 2001 terrorist attacks, the Companys reduced operating schedule, a
worsening of the U.S. economy that had already been dampening the demand for travel both domestically and internationally
prior to the September 11, 2001 events, business travel declines as a result of the September 11, 2001 attacks, and increased fare
sale activity occurring subsequent to the September 11 attacks to encourage passengers to resume flying. The Companys revenues
decreased approximately $740 million, or 3.8 percent, versus 2000. However, excluding TWAs revenues for the period April 10,
2001 through December 31, 2001, the Companys revenues would have decreased approximately $2.6 billion versus 2000.
For comparability purposes, the following discussion does not combine Americans and TWAs results of operations or
related statistics for 2001. Americans passenger revenues decreased by 14 percent, or $2.3 billion. In 2001, American derived
approximately 68 percent of its passenger revenues from domestic operations and approximately 32 percent from international
operations. Americans domestic revenue per available seat mile (RASM) decreased 11.3 percent, to 9.28 cents, on a capacity
decrease of 5 percent, or 104 billion ASMs. International RASM decreased to 9.07 cents, or 5.2 percent, on a capacity decrease
of 4.9 percent. The decrease in international RASM was led by an 11.8 percent and 10.8 percent decrease in Pacific and European
RASM, respectively, slightly offset by a 0.9 percent increase in Latin American RASM. The decrease in international capacity was
driven by a 6.5 percent and 4.7 percent reduction in Latin American and European ASMs, respectively, partially offset by an
increase in Pacific capacity of 2.8 percent.
TWAs passenger revenues were approximately $1.7 billion for the period April 10, 2001 through December 31, 2001.
TWAs RASM was 7.74 cents on capacity of 21.7 billion ASMs.
AMR Eagles passenger revenues decreased $74 million, or 5.1 percent. AMR Eagles traffic remained flat compared to
2000, at 3.7 billion RPMs, while capacity increased to 6.5 billion ASMs, or 3.4 percent. Similar to American, the decrease in
AMR Eagles revenues was due primarily to the September 11, 2001 terrorist attacks and a worsening of the U.S. economy that
had already been dampening the demand for air travel prior to that date.
Cargo revenues decreased 8.2 percent, or $59 million, for the same reasons as noted above.
2000 Compared to 1999 The Companys revenues increased approximately $2.0 billion, or 11.1 percent, versus 1999.
Americans passenger revenues increased by 11.3 percent, or $1.7 billion. The increase in revenues was due primarily to a strong
U.S. economy, which led to strong demand for air travel both domestically and internationally, a favorable pricing climate, the
impact of a domestic fuel surcharge implemented in January 2000 and increased in September 2000, a labor disruption at one of
the Companys competitors which positively impacted the Companys revenues by approximately $80 to $100 million, and a
schedule disruption which negatively impacted the Companys operations in 1999. In 2000, American derived approximately
70 percent of its passenger revenues from domestic operations and approximately 30 percent from international operations.

Americans domestic RASM increased 12.4 percent, to 10.42 cents, on a capacity decrease of 1.6 percent, or 109.5 billion
ASMs. The decrease in domestic capacity was due primarily to the Companys More Room Throughout Coach program. International RASM increased to 9.64 cents, or 10.7 percent, on a capacity increase of 3.2 percent. The increase in international
RASM was led by a 16.5 percent, 13.4 percent and 7.8 percent increase in Pacific, European and Latin American RASM,
respectively. The increase in international capacity was driven by a 6.6 percent, 2.7 percent and 0.5 percent increase in European,
Pacific and Latin American ASMs, respectively.
AMR Eagles passenger revenues increased $158 million, or 12.2 percent. AMR Eagles traffic increased to 3.7 billion
RPMs, up 10.7 percent, while capacity increased to 6.3 billion ASMs, or 10.9 percent. The increase in revenues was due primarily
to growth in AMR Eagle capacity aided by a strong U.S. economy, which led to strong demand for air travel, and a favorable
pricing environment.
Cargo revenues increased 12.1 percent, or $78 million, due primarily to a fuel surcharge implemented in February 2000
and increased in October 2000, and the increase in cargo capacity from the addition of 16 Boeing 777-200ER aircraft in 2000.
OPERATING EXPENSES
2001 Compared to 2000 The Companys operating expenses increased 17 percent, or approximately $3.1 billion. However,
excluding TWAs expenses for the period April 10, 2001 through December 31, 2001, the Companys expenses would have
increased approximately $888 million versus 2000. In addition to the specific explanations provided below, the significant
decline in passenger traffic resulting from the terrorist acts of September 11, 2001 and resulting reduced operating schedule
caused a favorable impact on certain passenger-related operating expenses, including aircraft fuel, other rentals and landing fees,
commissions to agents and food service. Americans cost per ASM increased 6.3 percent to 11.14 cents, excluding TWA and
the impact of special charges net of U.S. Government grant. The increase in Americans cost per ASM was driven partially by
a reduction in ASMs due to the Companys More Room Throughout Coach program. Removing the impact of this program,
Americans cost per ASM grew approximately 3.3 percent, excluding TWA and the impact of special charges net of U.S.
Government grant. TWAs cost per ASM, excluding the impact of special charges net of U.S. Government grant, was
10.58 cents. Wages, salaries and benefits increased 18.4 percent, or $1.3 billion, and included approximately $920 million
related to the addition of TWA. The remaining increase of approximately $329 million related primarily to an increase in the
average number of equivalent employees and contractual wage rate and seniority increases that are built into the Companys
labor contracts. During 2001, the Company recorded approximately $300 million in additional wages, salaries and benefits
related primarily to the Companys new contracts with its flight attendants and Transport Workers Union work groups. This
was mostly offset by a $328 million decrease in the provision for profit-sharing as compared to 2000. Aircraft fuel expense
increased 15.8 percent, or $393 million, and included approximately $322 million related to the addition of TWA. The
remaining increase in aircraft fuel expense was due to a 4.2 percent increase in the Companys average price per gallon,
partially offset by a 3.7 percent decrease in the Companys fuel consumption, excluding TWA. Depreciation and amortization
expense increased 16.8 percent, or $202 million, due primarily to the addition of new aircraft and an increase of approximately
$88 million related to TWA. Other rentals and landing fees increased $198 million, or 19.8 percent, and included approximately
$130 million related to the addition of TWA. The remaining increase of $68 million was due primarily to higher facilities rent
and landing fees across the Companys system. Commissions to agents decreased 19.5 percent, or $202 million, and included
approximately $59 million related to TWA. The decrease in commissions to agents was due primarily to a 13.2 percent decrease
in passenger revenues, excluding TWA, and the benefit from commission structure changes implemented in 2000. Aircraft rentals
increased $222 million, or 36.6 percent, due primarily to the addition of TWA aircraft. Other operating expenses increased
11.1 percent, or $368 million, and included approximately $358 million related to TWA. Special charges net of U.S. Government grant included: (i) a $685 million asset impairment charge recorded in the second quarter of 2001 related to the write-down
of the carrying value of the Companys Fokker 100, Saab 340 and ATR-42 aircraft and related rotables, (ii) charges resulting from
the September 11, 2001 terrorist events, including approximately $552 million related to aircraft charges, $115 million in facility
exit costs, $71 million in employee charges and $43 million in other charges, and (iii) an $856 million benefit recognized for the
reimbursement from the U.S. Government under the Act. See a further discussion of special charges net of U.S. Government
grant in Note 2 to the consolidated financial statements.
2000 Compared to 1999 The Companys operating expenses increased 10.5 percent, or approximately $1.7 billion. Americans
cost per ASM increased by 10.3 percent to 10.48 cents, partially driven by a reduction in ASMs due to the Companys More
Room Throughout Coach program. Removing the impact of this program, Americans cost per ASM grew approximately
6.9 percent. Wages, salaries and benefits increased $663 million, or 10.8 percent, primarily due to an increase in the average
number of equivalent employees and contractual wage rate and seniority increases that are built into the Companys labor
contracts, an increase of approximately $93 million in the provision for profit-sharing, and a charge of approximately $56 million
for the Companys employee home computer program. Aircraft fuel expense increased $799 million, or 47.1 percent, due to an
increase of 42.0 percent in the Companys average price per gallon and a 3.7 percent increase in the Companys fuel consumption.
The increase in fuel expense is net of gains of approximately $545 million recognized during 2000 related to the Companys fuel
hedging program. Depreciation and amortization expense increased $110 million, or 10.1 percent, due primarily to the addition
7

of new aircraft, many of which replaced older aircraft. Maintenance, materials and repairs expense increased $92 million, or
9.2 percent, due primarily to an increase in airframe and engine maintenance volumes at the Companys maintenance bases and
an approximate $17 million one-time credit the Company received in 1999. Commissions to agents decreased 10.8 percent, or
$125 million, despite an 11.4 percent increase in passenger revenues, due primarily to commission structure changes implemented
in October 1999 and January 2000, and a decrease in the percentage of commissionable transactions.
OTHER I NCOME (EXPENSE)
Other income (expense) consists of interest income and expense, interest capitalized and miscellaneous net.
2001 Compared to 2000 Interest income decreased $44 million, or 28.6 percent, resulting from lower investment balances
throughout most of 2001. Interest expense increased $71 million, or 15.2 percent, resulting primarily from the increase in longterm debt of approximately $4.2 billion. Miscellaneous net decreased $70 million due primarily to 2001 including a $45 million
gain from the settlement of a legal matter related to the Companys 1999 labor disruption, offset by the write-down of certain
investments held by the Company. This compares to 2000 including a $57 million gain on the sale of the Companys warrants to
purchase 5.5 million shares of priceline.com Incorporated (priceline) common stock and a gain of approximately $41 million from
the recovery of start-up expenses from the Canadian Airlines International Limited (Canadian) services agreement.
2000 Compared to 1999 Interest income increased $59 million, or 62.1 percent, due primarily to higher investment balances.
Interest expense increased $74 million, or 18.8 percent, resulting primarily from financing new aircraft deliveries. Interest
capitalized increased 28 percent, or $33 million, due to an increase in purchase deposits for flight equipment. Miscellaneous
net increased $38 million due primarily to a $57 million gain on the sale of the Companys warrants to purchase 5.5 million
shares of priceline common stock and a gain of approximately $41 million from the recovery of start-up expenses from the
Canadian services agreement. During 1999, the Company recorded a gain of approximately $75 million from the sale of a portion
of Americans interest in Equant N.V. and a gain of approximately $40 million related to the sale of the Companys investment in
the preferred stock of Canadian. These gains were partially offset by the provision for the settlement of litigation items and the
write-down of certain investments held by the Company during 1999.
OPERATING STATISTICS
The following table provides statistical information for American (excluding TWA) and AMR Eagle for the years ended
December 31, 2001, 2000 and 1999.

2001
American Airlines
Revenue passenger miles (millions)
Available seat miles (millions)
Cargo ton miles (millions)
Passenger load factor
Breakeven load factor *
Passenger revenue yield per passenger mile (cents)
Passenger revenue per available seat mile (cents)
Cargo revenue yield per ton mile (cents)
Operating expenses per available seat mile (cents) *
Operating aircraft at year end
AMR Eagle
Revenue passenger miles (millions)
Available seat miles (millions)
Passenger load factor
Operating aircraft at year end
* Excludes the impact of special charges net of U.S. Government grant

Year Ended December 31,


2000

1999

106,224
153,035
2,058
69.4%
78.1%
13.28
9.22
30.24
11.14
712

116,594
161,030
2,280
72.4%
65.9%
14.06
10.18
31.31
10.48
717

112,067
161,211
2,068
69.5%
63.8%
13.14
9.13
30.70
9.50
697

3,725
6,471
57.6%
276

3,731
6,256
59.6%
261

3,371
5,640
59.8%
268

LIQUIDITY AND CAPITAL R ESOURCES


The impact of the terrorist attacks of September 11, 2001 and their aftermath on the Company and the sufficiency of its
financial resources to absorb that impact will depend on a number of factors, including: (i) the magnitude and duration of the
adverse impact of the terrorist attacks on the economy in general, and the airline industry in particular; (ii) the Companys ability
to reduce its operating costs and conserve its financial resources, taking into account the increased costs it will incur as a consequence of the attacks, including those referred to below; (iii) the higher costs associated with new airline security directives,
including the impact of the Aviation and Transportation Security Act, and any other increased regulation of air carriers; (iv) the
significantly higher costs of aircraft insurance coverage for future claims caused by acts of war, terrorism, sabotage, hijacking and
other similar perils, and the extent to which such insurance will continue to be available; (v) the Companys ability to raise
additional financing and the cost of such financing; (vi) the price and availability of jet fuel, and the availability to the Company
of fuel hedges in light of current industry conditions; and (vii) the extent of the benefits received by the Company under the Act,
taking into account any challenges to and interpretations or amendments of the Act or regulations issued pursuant thereto.
In response to the September 11, 2001 terrorist attacks, the Company initiated the following measures: reduced capacity
by approximately 20 percent, grounded aircraft and deferred certain aircraft deliveries to future years, significantly reduced capital
spending, closed facilities, reduced its workforce (see Note 2 to the consolidated financial statements for additional information)
and implemented numerous other cost reduction initiatives.
Operating activities provided net cash of $511 million in 2001, $3.1 billion in 2000 and $2.3 billion in 1999. The
$2.6 billion decrease from 2000 to 2001 resulted primarily from a decrease in income.
On April 9, 2001, American purchased substantially all of the assets and assumed certain liabilities of TWA for
approximately $742 million, which was funded from the Companys existing cash and short-term investments.
Capital expenditures in 2001 totaled $3.6 billion, compared to $3.7 billion in 2000 and $3.5 billion in 1999. In 2001,
American took delivery of 26 Boeing 737-800s, 13 Boeing 777-200ERs and 16 Boeing 757-200s. AMR Eagle took delivery
of 15 Embraer 140s, seven Embraer 135s, six Embraer 145s and one Bombardier CRJ-700 aircraft. These expenditures were
financed primarily through secured mortgage and debt agreements. Ten Boeing 737-800 aircraft were financed through saleleaseback transactions, resulting in cash of approximately $352 million being received by the Company. Proceeds from the sale
of equipment and property and other investments of $401 million included the proceeds received upon the delivery of five
McDonnell Douglas MD-11 aircraft to FedEx.
During the fourth quarter of 2001, the Company reached an agreement with Boeing that included a combination
of aircraft delivery deferrals, substitutions and limited additional aircraft orders. As a direct result of the agreement with
Boeing, the Companys 2002 and 2003 aircraft commitment amounts have been reduced, in the aggregate, by approximately
$700 million. Following this agreement, at December 31, 2001, the Company had commitments to acquire the following aircraft:
47 Boeing 737-800s, 14 Boeing 777-200ERs, nine Boeing 767-300ERs, seven Boeing 757-200s, 124 Embraer regional jets and
24 Bombardier CRJ-700s. Deliveries of all aircraft extend through 2008. Future payments for all aircraft, including the estimated
amounts for price escalation, will approximate $1.3 billion in 2002, $1.7 billion in 2003, $1.2 billion in 2004 and an aggregate
of approximately $1.9 billion in 2005 through 2008. These future payments are net of approximately $470 million related to
deposits made for 2002 aircraft deliveries which have been deferred as part of the agreement with Boeing that will be applied
to future aircraft deliveries. In addition to these commitments for aircraft, the Company expects to spend approximately
$500 million in 2002 for modifications to aircraft, renovations of and additions to airport and off-airport facilities, and
the acquisition of various other equipment and assets.
During 2001, American issued approximately $2.6 billion of enhanced equipment trust certificates which has been
recorded as long-term debt. These enhanced equipment trust certificates are secured by aircraft, bear interest at 6.8 percent to
9.1 percent, and mature in 2006 to 2019. Also during 2001, as mentioned above, the Company entered into approximately
$1.1 billion of various debt agreements secured by aircraft. Effective rates on these agreements are fixed or variable (based upon
the London Interbank Offered Rate [LIBOR] plus a spread), ranging up to approximately 4.5 percent, and mature over various
periods of time, ranging from 2007 to 2021.
American has an $834 million credit facility that expires December 15, 2005. At Americans option, interest on this facility
can be calculated on one of several different bases. For most borrowings, American would anticipate choosing a floating rate based
upon LIBOR. During the fourth quarter of 2001, American amended this credit facility to include, among other items, a revision
of its financial covenants, including modifications to its fixed charge covenant and the addition of certain liquidity requirements.
The next test of the fixed charge covenant will occur on June 30, 2003 and will consider only the preceding six-month period.
American secured the facility with previously unencumbered aircraft. In addition, the facility requires that American maintain
at least $1.5 billion of liquidity, as defined in the facility, which consists primarily of cash and short-term investments, and
50 percent of the net book value of its unencumbered aircraft. As of December 31, 2001, $814 million was outstanding under
this credit facility, at an interest rate of 5.09 percent. The interest rate on the entire credit facility will be reset on March 18, 2002.

In addition, American has available a $1 billion credit facility that expires September 30, 2002. Interest on this facility
is based upon LIBOR plus a spread. This facility is immediately available subject to the Company providing specified aircraft
collateral as security at the time of borrowing. At December 31, 2001, no borrowings were outstanding under this facility.
Following the September 11, 2001 events, Standard & Poors and Moodys downgraded the credit ratings of AMR and
American, and the credit ratings of a number of other major airlines. The long-term corporate credit ratings of AMR and
American were initially retained on review for possible downgrade by Moodys, and following subsequent downgrades, were given
a negative outlook. In addition, the long-term corporate credit ratings of AMR and American remain on Standard & Poors
CreditWatch with negative implications. Any additional reductions in AMRs or Americans credit ratings could result in
increased borrowing costs to the Company and might limit the availability of future financing sources.
The following table summarizes the Companys obligations and commitments to be paid in 2002 and 2003 (in millions):
Nature of commitment
Operating lease payments for aircraft and facility
obligations *
Firm aircraft commitments
Long-term debt **
Capital lease obligations **
Total obligations and commitments

2002
$

1,336
1,300
556
326
3,518

2003
$

1,276
1,700
296
243
3,515

Certain special facility revenue bonds issued by municipalities which are supported by operating leases executed by American
are guaranteed by AMR and American. See Note 6 to the consolidated financial statements for additional information.
** Excludes related interest amounts

In addition to the Companys approximately $3.0 billion in cash and short-term investments as of December 31, 2001,
the Company has available a variety of future financing sources, including, but not limited to: (i) the receipt of the remainder
of the U.S. Government grant, which approximates $128 million, (ii) additional secured aircraft debt (as of December 31, 2001,
the Company had approximately $4.4 billion net book value of unencumbered aircraft), (iii) the availability of the Companys
$1 billion credit facility, (iv) sale-leaseback transactions of owned property, including aircraft and real estate, (v) tax-exempt
borrowings for airport facilities, (vi) securitization of future operating receipts, (vii) unsecured borrowings, and (viii) borrowings
backed by federal loan guarantees as provided under the Act. No assurance can be given that any of these financing sources will be
available on terms acceptable to the Company. However, the Company believes it will meet its financing needs as discussed above.
AMR (principally American) historically operates with a working capital deficit as do most other airline companies. The
existence of such a deficit has not in the past impaired the Companys ability to meet its obligations as they become due and is not
expected to do so in the future.
OTHER I NFORMATION
Environmental Matters Subsidiaries of AMR have been notified of potential liability with regard to several environmental
cleanup sites and certain airport locations. At sites where remedial litigation has commenced, potential liability is joint and
several. AMRs alleged volumetric contributions at these sites are minimal compared to others. AMR does not expect these
matters, individually or collectively, to have a material impact on its results of operations, financial position or liquidity.
Additional information is included in Note 5 to the consolidated financial statements.
Critical Accounting Policies and Estimates The preparation of the Companys financial statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. The Company believes its estimates and assumptions
are reasonable; however, actual results and the timing of the recognition of such amounts could differ from those estimates. The
Company has identified the following critical accounting policies and estimates utilized by management in the preparation of the
Companys financial statements: accounting for long-lived assets, passenger revenue, frequent flyer accounting, and pensions and
other postretirement benefits.
Accounting for Long-Lived Assets The Company has approximately $21 billion of long-lived assets as of December 31,
2001, including approximately $19 billion related to flight equipment and related fixed assets. In addition to the original
cost of these assets, their recorded value is impacted by a number of policy elections made by the Company, including
estimated useful lives, salvage values and in 2001, impairment charges. In accordance with Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of (SFAS 121), the Company records impairment charges on long-lived assets used in operations when events
and circumstances indicate that the assets may be impaired and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amount of those assets. In this circumstance, the impairment charge is determined
10

based upon the amount the net book value of the assets exceeds their fair market value. In making these determinations,
the Company utilizes certain assumptions, including, but not limited to: (i) estimated fair market value of the assets, and
(ii) estimated future cash flows expected to be generated by these assets, which are based on additional assumptions such as
asset utilization, length of service the asset will be used in the Companys operations and estimated salvage values. During
2001, the Company determined its Fokker 100, Saab 340 and ATR 42 aircraft and related rotables were impaired under
SFAS 121 and recorded impairment charges of approximately $1.1 billion. In addition, during the fourth quarter of 2001,
the Company completed an impairment analysis of its long-lived assets, including aircraft fleets, route acquisition costs,
airport operating and gate lease rights, and goodwill. The impairment analysis did not result in any additional impairment
charges. See Notes 1 and 2 to the consolidated financial statements for additional information with respect to each of the
policies and assumptions utilized by the Company which affect the recorded values of long-lived assets.
Passenger revenue Passenger ticket sales are initially recorded as a component of air traffic liability. Revenue derived from
ticket sales is recognized at the time service is provided. However, due to various factors, including the complex pricing
structure and interline agreements throughout the industry, certain amounts are recognized in revenue using estimates
regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are
generally based upon the evaluation of historical trends, including the use of regression analysis and other methods to
model the outcome of future events based on the Companys historical experience. Due to the uncertainties surrounding
the impact of the September 11, 2001 events on the Companys business (see Note 2 to the consolidated financial
statements) and the acquisition of TWA in April 2001 (see Note 3 to the consolidated financial statements), historical
trends may not be representative of future results.
Frequent flyer accounting The Company utilizes a number of estimates in accounting for its AAdvantage frequent flyer
program. Additional information regarding the Companys AAdvantage frequent flyer program is included in Note 1 to
the consolidated financial statements. Changes to the percentage of the amount of revenue deferred, deferred recognition
period, cost per mile estimates or the minimum award level accrued could have a significant impact on the Companys
revenues or incremental cost accrual in the year of the change as well as in future years. In addition, the Emerging Issues
Task Force of the Financial Accounting Standards Board is currently reviewing the accounting for both multipledeliverable revenue arrangements and volume-based sales incentive offers, but has not yet reached a consensus that would
apply to programs such as the AAdvantage program. The issuance of new accounting standards could have a significant
impact on the Companys frequent flyer liability in the year of the change as well as in future years.
Pensions and other postretirement benefits The Companys pension and other postretirement benefit costs and liabilities are
calculated utilizing various actuarial assumptions and methodologies prescribed under Statements of Financial Accounting
Standards No. 87, Employers Accounting for Pensions and No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions. The Company utilizes certain assumptions including, but not limited to, the selection of the:
(i) discount rate, (ii) expected return on plan assets, and (iii) expected health care cost trend rate. The discount rate
assumption is based upon the review of high quality corporate bond rates and the change in these rates during the year.
The expected return on plan assets and health care cost trend rate are based upon an evaluation of the Companys historical
trends and experience taking into account current and expected market conditions. In addition, the Companys future
pension and other postretirement benefit costs and liabilities will be impacted by the acquisition of TWA and the new
labor agreements entered into during 2001. See Note 11 to the consolidated financial statements for additional
information regarding the Companys pension and other postretirement benefits.
New Accounting Pronouncements In July 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations (SFAS 141) and No. 142, Goodwill and Other Intangible
Assets (SFAS 142). SFAS 141 prohibits the use of the pooling-of-interests method for business combinations initiated after
June 30, 2001 and includes criteria for the recognition of intangible assets separately from goodwill. SFAS 142 includes the
requirement to test goodwill and indefinite lived intangible assets for impairment rather than amortize them. The Company
will adopt SFAS 142 in the first quarter of 2002, and currently estimates the impact to the Companys results of operations of
discontinuing the amortization of goodwill and route authorities to be approximately $66 million on an annualized basis. The
Company is currently evaluating what additional impact these new accounting standards may have on the Companys financial
position or results of operations. However, with the decline in the Companys market capitalization, in part due to the terrorist
attacks on September 11, 2001, the adoption of SFAS 142 may result in the impairment of the Companys goodwill.

11

OUTLOOK
Due in part to the lack of predictability of future traffic, business mix and yields, the Company continues to have difficulty
in estimating the impact of the events of September 11, 2001. However, given the magnitude of these unprecedented events, the
Company expects that the adverse impact to the Company and to the airline industry as a whole will continue to be significant in 2002. Because of the high degree of uncertainty, the Company is not currently able to provide an estimate for the full year
2002. However, the Company does expect to incur a sizable loss in the first quarter, and will likely incur a loss for 2002.
Capacity for American which reflects TWA in the first quarter of 2002 but not in the first quarter of 2001 is expected
to increase two to three percent in the first quarter of 2002 compared to last years first quarter levels. American Eagles capacity
will be down slightly. Capacity for the remainder of 2002 is less clear and depends on a number of factors, including, but not
limited to, how quickly demand returns and what levels of capacity the Companys competitors deploy. Traffic continues to
remain challenging to predict. However, for the first quarter of 2002, the Company expects traffic to be up about three percent
from last years first quarter levels. In response to the September 11 terrorist attacks, the Company put in place numerous cost
reduction initiatives, including, but not limited to: cutting capacity, grounding aircraft and deferring certain aircraft deliveries to
future years, sharply reducing capital spending, closing facilities, trimming food service and reducing its workforce. In addition,
the Company expects to see lower fuel prices in the first quarter of 2002 compared to 2001. Somewhat offsetting these cost
savings, however, will be higher wages, salaries and benefit costs, higher security costs and insurance premiums, and greater
interest expense. Americans unit costs for the first quarter of 2002 are expected to be three to five percent higher than last years
first quarter.
FORWARD -LOOKING INFORMATION
The preceding Letter to Shareholders, Customers and Employees and Managements Discussion and Analysis
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 Companys expectations or beliefs
concerning future events. When used in this document and in documents incorporated herein by reference, the words expects,
plans, anticipates, believes, and similar expressions are intended to identify forward-looking statements. Forward-looking
statements include, without limitation, the Companys expectations concerning operations and financial conditions, including
changes in capacity, revenues and costs, expectations as to future financing needs, overall economic conditions and plans and
objectives for future operations, the ability to continue to successfully integrate with its operations the assets acquired from TWA
and the former TWA workforce, and the impact of the events of September 11, 2001 on the Company and the sufficiency of the
Companys financial resources to absorb that impact. Other forward-looking statements include statements which do not relate
solely to historical facts, such as, without limitation, statements which discuss the possible future effects of current known trends
or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or
assured. 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. The following factors, in addition to other possible factors not listed,
could cause the Companys actual results to differ materially from those expressed in forward-looking statements: uncertainty
of future collective bargaining agreements and events; economic and other conditions; fuel prices/supply; competition in the
airline industry; changing business strategy; government regulation; uncertainty in international operations; adverse impact of
the terrorist attacks; availability of future financing; and availability of the Act. Additional information concerning these and other
factors is contained in the Companys Securities and Exchange Commission filings, including but not limited to Form 10-K for
2001, copies of which are available from the Company without charge.
MARKET RISK SENSITIVE INSTRUMENTS AND P OSITIONS
The risk inherent in the Companys market risk sensitive instruments and positions is the potential loss arising from
adverse changes in the price of fuel, foreign currency exchange rates and interest rates as discussed below. The sensitivity analyses
presented do not consider the effects that such adverse changes may have on overall economic activity, nor do they consider
additional actions management may take to mitigate the Companys exposure to such changes. Actual results may differ. See
Note 8 to the consolidated financial statements for accounting policies and additional information.

12

Aircraft Fuel The Companys earnings are affected by changes in the price and availability of aircraft fuel. In order to provide
a measure of control over price and supply, the Company trades and ships fuel and maintains fuel storage facilities to support its
flight operations. The Company also manages the price risk of fuel costs primarily by utilizing jet fuel, heating oil, and crude swap
and option contracts. Market risk is estimated as a hypothetical 10 percent increase in the December 31, 2001 and 2000 cost per
gallon of fuel. Based on projected 2002 fuel usage, such an increase would result in an increase to aircraft fuel expense of approximately $169 million in 2002, net of fuel hedge instruments outstanding at December 31, 2001, and assumes the Companys fuel
hedging program remains effective under Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. Comparatively, based on projected 2001 fuel usage, such an increase would have resulted in
an increase to aircraft fuel expense of approximately $194 million in 2001, net of fuel hedge instruments outstanding at December
31, 2000. The change in market risk is due primarily to the decrease in fuel prices. As of December 31, 2001, the Company had
hedged approximately 40 percent of its estimated 2002 fuel requirements, approximately 21 percent of its estimated 2003 fuel
requirements, and approximately five percent of its estimated 2004 fuel requirements, compared to approximately 40 percent of
its estimated 2001 fuel requirements, 15 percent of its estimated 2002 fuel requirements, and approximately seven percent of its
estimated 2003 fuel requirements hedged at December 31, 2000.
Foreign Currency The Company is exposed to the effect of foreign exchange rate fluctuations on the U.S. dollar value of
foreign currency-denominated operating revenues and expenses. The Companys largest exposure comes from the British pound,
Euro, Canadian dollar, Japanese yen and various Latin American currencies. The Company uses options to hedge a portion of its
anticipated foreign currency-denominated ticket sales. The result of a uniform 10 percent strengthening in the value of the U.S.
dollar from December 31, 2001 and 2000 levels relative to each of the currencies in which the Company has foreign currency
exposure would result in a decrease in operating income of approximately $40 million and $33 million for the years ending
December 31, 2002 and 2001, respectively, net of hedge instruments outstanding at December 31, 2001 and 2000, due to the
Companys foreign-denominated revenues exceeding its foreign-denominated expenses. This sensitivity analysis was prepared
based upon projected 2002 and 2001 foreign currency-denominated revenues and expenses as of December 31, 2001 and 2000.
Interest The Companys earnings are also affected by changes in interest rates due to the impact those changes have on its
interest income from cash and short-term investments, and its interest expense from variable-rate debt instruments. The Company has variable-rate debt instruments representing approximately 35 percent and 29 percent of its total long-term debt at
December 31, 2001 and 2000, respectively, and interest rate swaps on notional amounts of approximately $148 million and
$158 million, respectively, at December 31, 2001 and 2000. If interest rates average 10 percent more in 2002 than they did at
December 31, 2001, the Companys interest expense would increase by approximately $10 million and interest income from cash
and short-term investments would increase by approximately $16 million. In comparison, at December 31, 2000, the Company
estimated that if interest rates averaged 10 percent more in 2001 than they did at December 31, 2000, the Companys interest
expense would have increased by approximately $11 million and interest income from cash and short-term investments would
have increased by approximately $15 million. These amounts are determined by considering the impact of the hypothetical
interest rates on the Companys variable-rate long-term debt, interest rate swap agreements, and cash and short-term investment
balances at December 31, 2001 and 2000.
Market risk for fixed-rate long-term debt is estimated as the potential increase in fair value resulting from a hypothetical
10 percent decrease in interest rates, and amounts to approximately $318 million and $148 million as of December 31, 2001 and
2000, respectively. The change in market risk is due primarily to the increase in the Companys fixed-rate long-term debt during
2001. The fair values of the Companys long-term debt were estimated using quoted market prices or discounted future cash flows
based on the Companys incremental borrowing rates for similar types of borrowing arrangements.
In addition, the Company holds investments in certain other entities which are subject to market risk. However, the
impact of such market risk on earnings is not significant due to the immateriality of the carrying value and the geographically
diverse nature of these holdings.

13

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)


Revenues
Passenger American Airlines
AMR Eagle
Cargo
Other revenues
Total operating revenues

Year Ended December 31,


2000

2001
$

Expenses
Wages, salaries and benefits
Aircraft fuel
Depreciation and amortization
Other rentals and landing fees
Maintenance, materials and repairs
Commissions to agents
Aircraft rentals
Food service
Other operating expenses
Special charges, net of U.S. Government grant
Total operating expenses
Operating Income (Loss)
Other Income (Expense)
Interest income
Interest expense
Interest capitalized
Miscellaneous net

15,780
1,378
662
1,143
18,963

8,032
2,888
1,404
1,197
1,165
835
829
778
3,695
610
21,433
(2,470)

Earnings (Loss) Per Share:


Basic
Income (loss) from continuing operations
Discontinued operations
Extraordinary loss
Net earnings (loss)
Diluted
Income (loss) from continuing operations
Discontinued operations
Extraordinary loss
Net earnings (loss)

$
$

The accompanying notes are an integral part of these financial statements.


14

6,783
2,495
1,202
999
1,095
1,037
607
777
3,327
18,322
1,381

110
(538)
144
(2)
(286)

Income (Loss) From Continuing Operations Before Income


Taxes and Extraordinary Loss
Income tax provision (benefit)
Income (Loss) From Continuing Operations Before
Extraordinary Loss
Income From Discontinued Operations, Net of Applicable
Income Taxes and Minority Interest
Gain on Sale of Discontinued Operations, Net of Applicable
Income Taxes
Income (Loss) Before Extraordinary Loss
Extraordinary Loss, Net of Applicable Income Taxes
Net Earnings (Loss)

16,394
1,452
721
1,136
19,703

1999
14,724
1,294
643
1,069
17,730

6,120
1,696
1,092
942
1,003
1,162
630
740
3,189
16,574
1,156

154
(467)
151
68
(94)

95
(393)
118
30
(150)

(2,756)
(994)

1,287
508

1,006
350

(1,762)

779

656

43

265

822
(9)
813

64
985
985

(1,762)
(1,762)

(11.43)
(11.43)

(11.43)
(11.43)

5.20
0.30
(0.07)
5.43

4.81
0.27
(0.05)
5.03

4.30
2.16
6.46
4.17
2.09
6.26

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)
Cash Flow from Operating Activities:
Income (loss) from continuing operations after extraordinary loss
Adjustments to reconcile income (loss) from continuing operations after
extraordinary loss to net cash provided by operating activities:
Depreciation
Amortization
Provisions for asset impairments
Deferred income taxes
Extraordinary loss on early extinguishment of debt
Gain on disposition of equipment and property and other investments
Change in assets and liabilities:
Decrease (increase) in receivables
Increase in inventories
Increase in accounts payable and accrued liabilities
Increase (decrease) in air traffic liability
Other, net
Net cash provided by operating activities

2001
$

Cash Flow from Investing Activities:


Capital expenditures, including purchase deposits on flight equipment
Acquisition of Trans World Airlines, Inc.
Net increase in short-term investments
Proceeds from:
Sale of equipment and property and other investments
Dividend from Sabre Holdings Corporation
Sale of discontinued operations
Other
Net cash used for investing activities
Cash Flow from Financing Activities:
Payments on long-term debt and capital lease obligations
Proceeds from:
Issuance of long-term debt
Sale-leaseback transactions
Exercise of stock options
Short-term loan from Sabre Holdings Corporation
Repurchase of common stock
Net cash provided by financing activities

Year Ended December 31,


2000
1999

(1,762)

656

928
274
461
14
(57)

864
228
183
(110)

120
(39)
379
(276)
226
511

(169)
(111)
579
438
15
3,142

261
(140)
42
84
196
2,264

(3,640)
(742)
(728)

(3,678)
(438)

(3,539)
(253)

401
18
(4,691)

332
559
(50)
(3,275)

164
259
(81)
(3,450)

(922)

(766)

(280)

4,744
352
37
4,211

836
67
137

1,956
54
25
300
(871)
1,184

4
85
89

(2)
87
85

$
$
$

581
-

$
$
$

31
89
120

Activities Not Affecting Cash


Distribution of Sabre Holdings Corporation shares to AMR shareholders
Payment of short-term loan from Sabre Holdings Corporation
Capital lease obligations incurred

$
$
$

15

770

1,122
282
1,214
(731)
(24)

Net increase (decrease) in cash


Cash at beginning of year
Cash at end of year

The accompanying notes are an integral part of these financial statements.

300
54

CONSOLIDATED BALANCE SHEETS

December 31,
(in millions)
Assets

2001

Current Assets
Cash
Short-term investments
Receivables, less allowance for uncollectible accounts
(2001 $52; 2000 $27)
Inventories, less allowance for obsolescence
(2001 $383; 2000 $332)
Deferred income taxes
Other current assets
Total current assets

120
2,872

2000

89
2,144

1,414

1,303

822
790
522
6,540

757
695
191
5,179

21,707
6,727
14,980

20,041
6,320
13,721

Purchase deposits for flight equipment

929

1,700

Other equipment and property, at cost


Less accumulated depreciation

4,202
2,123
2,079
17,988

3,639
1,968
1,671
17,092

2,658
163
2,821
1,154
1,667

2,618
159
2,777
1,233
1,544

1,325
1,392
3,929
6,646

1,143
385
870
2,398

Equipment and Property


Flight equipment, at cost
Less accumulated depreciation

Equipment and Property Under Capital Leases


Flight equipment
Other equipment and property
Less accumulated amortization

Other Assets
Route acquisition costs and airport operating and gate lease rights,
less accumulated amortization (2001 $556; 2000 $498)
Goodwill, less accumulated amortization (2001 $110; 2000 $83)
Other

Total Assets

The accompanying notes are an integral part of these financial statements.

16

32,841

26,213

December 31,
(in millions, except shares and par value)
Liabilities and Stockholders Equity

2001

Current Liabilities
Accounts payable
Accrued salaries and wages
Accrued liabilities
Air traffic liability
Current maturities of long-term debt
Current obligations under capital leases
Total current liabilities

2000

1,785
721
1,471
2,763
556
216
7,512

1,267
955
1,276
2,696
569
227
6,990

Long-Term Debt, Less Current Maturities

8,310

4,151

Obligations Under Capital Leases, Less Current Obligations

1,524

1,323

1,627
520
2,538
5,437
10,122

2,385
508
1,706
1,974
6,573

Other Liabilities and Credits


Deferred income taxes
Deferred gains
Postretirement benefits
Other liabilities and deferred credits

Commitments and Contingencies


Stockholders Equity
Preferred stock 20,000,000 shares authorized; None issued
Common stock $1 par value; 750,000,000 shares authorized;
182,278,766 shares issued
Additional paid-in capital
Treasury shares at cost: 2001 27,794,380; 2000 30,216,218
Accumulated other comprehensive loss
Retained earnings

Total Liabilities and Stockholders Equity

182
2,865
(1,716)
(146)
4,188
5,373

17

32,841

182
2,911
(1,865)
(2)
5,950
7,176

26,213

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(in millions, except share amounts)


Balance at January 1, 1999
Net earnings
Adjustment for minimum pension
liability, net of tax of $1
Unrealized loss on investments,
net of tax of $1
Total comprehensive income
Repurchase of 14,062,358 common
shares
Issuance of 955,940 shares from
Treasury pursuant to stock option,
deferred stock and restricted stock
incentive plans, net of tax of $4
Balance at December 31, 1999
Net earnings
Adjustment for minimum pension
liability, net of tax of $3
Unrealized gain on investments,
net of tax of $2
Total comprehensive income
Distribution of Sabre Holdings
Corporation shares to AMR
shareholders
Issuance of 3,817,892 shares from
Treasury pursuant to stock option,
deferred stock and restricted stock
incentive plans, net of tax of $11
Balance at December 31, 2000
Net loss
Adjustment for minimum pension
liability, net of tax of $60
Changes in fair value of derivative
financial instruments, net of
tax of $29
Unrealized gain on investments,
net of tax of $2
Total comprehensive loss
Issuance of 2,421,838 shares from
Treasury pursuant to stock option,
deferred stock and restricted stock
incentive plans, net of tax of $58
Balance at December 31, 2001

Common
Stock
$ 182
-

Additional
Paid-in
Capital
$ 3,075
-

Treasury
Stock
$ (1,288)
-

Accumulated
Other
Comprehensive
Loss
$ (4)
-

Retained
Earnings
$ 4,733
985

Total
$ 6,698
985

(1)

(1)
987

(871)

182
-

(14)
3,061
-

(871)

58
(2,101)
-

(2)
-

5,718
813

(5)

182
-

(150)
2,911
-

44
6,858
813
(5)
5
813

(581)

(581)

236
(1,865)
-

(2)
-

5,950
(1,762)

86
7,176
(1,762)

(101)

(101)

(46)

(46)

3
(1,906)

$ 4,188

103
$ 5,373

$ 182

(46)
$ 2,865

The accompanying notes are an integral part of these financial statements.

18

149
$ (1,716)

$ (146)

On September 22, 2001, President Bush signed into law the Air Transportation Safety and System Stabilization Act (the
Act), which for all U.S. airlines and air cargo carriers (collectively, air carriers) provides for, among other things: (i) $5 billion in
compensation for direct losses (including lost revenues) incurred as a result of the federal ground stop order and for incremental
losses incurred through December 31, 2001 as a direct result of the attacks; (ii) subject to certain conditions, the availability of up
to $10 billion in federal government guarantees of certain loans made to air carriers for which credit is not reasonably available as
determined by a newly established Air Transportation Stabilization Board; (iii) the authority of the Secretary of Transportation to
reimburse air carriers (which authority expires 180 days after the enactment of the Act) for the increase in the cost of insurance,
for coverage ending before October 1, 2002, over the premium in effect for the period September 4, 2001 to September 10, 2001;
(iv) at the discretion of the Secretary of Transportation, a $100 million limit on the liability of any air carrier to third parties with
respect to acts of terrorism committed on or to such air carrier during the 180-day period following the enactment of the Act;
(v) the extension of the due date for the payment by air carriers of certain excise taxes; and (vi) compensation to individual
claimants who were physically injured or killed as a result of the terrorist attacks of September 11, 2001. In addition, the Act
provides that, notwithstanding any other provision of law, liability for all claims, whether compensatory or punitive, arising from
the terrorist-related events of September 11, 2001 against any air carrier shall not exceed the liability coverage maintained by
the air carrier.
Based upon estimates provided by the Companys insurance providers, the Company has recorded a liability of
approximately $2.3 billion for claims arising from the events of September 11, 2001, after considering the liability protections
provided for by the Act. In addition, the Company has recorded a receivable for the same amount which the Company expects to
recover from its insurance carriers as claims are resolved. This insurance receivable and liability are classified as Other assets and
Other liabilities and deferred credits on the accompanying consolidated balance sheets, respectively, and are based on reserves
established by the Companys insurance carriers. These estimates may be revised as additional information becomes available
concerning the expected claims.
Under the airline compensation provisions of the Act, each air carrier is entitled to receive the lesser of: (i) its direct and
incremental losses for the period September 11, 2001 to December 31, 2001 or (ii) its proportional available seat mile allocation
of the $5 billion compensation available under the Act. The Company has received a total of $728 million from the U.S.
Government under the Act. The Company expects to receive additional payments in 2002 aggregating approximately
$128 million. As of December 31, 2001, the Company recognized approximately $856 million as compensation under the Act,
which is included in Special charges net of U.S. Government grant on the accompanying consolidated statements of operations.
Adjustments to the amount of compensation received by the Company may be recognized in 2002 as the rules governing the
distribution of the government grant are finalized. The finalized rules could result in more or less compensation to the Company
under the Act.
Special charges net of U.S. Government grant for the year ended December 31, 2001 included the following
(in millions):
Year Ended
December 31, 2001
$
1,237
115
71
43
1,466
(856)
$
610

Aircraft charges
Facility exit costs
Employee charges
Other
Total special charges
Less: U.S. Government grant

Aircraft charges In conjunction with the acquisition of TWA, coupled with revisions to the Companys fleet plan to accelerate
the retirement dates of its Fokker 100, Saab 340 and ATR 42 aircraft, during the second quarter of 2001 the Company determined these aircraft were impaired under SFAS 121. As a result, during the second quarter of 2001, the Company recorded an
asset impairment charge of approximately $685 million relating to the write-down of the carrying value of 71 Fokker 100 aircraft,
74 Saab 340 aircraft and 20 ATR 42 aircraft and related rotables to their estimated fair market values. Management estimated the
undiscounted future cash flows utilizing models used by the Company in making fleet and scheduling decisions. In determining
the fair market value of these aircraft, the Company considered outside third party appraisals and recent transactions involving
sales of similar aircraft.
Following the events of September 11, 2001, and decisions by other carriers to ground their Fokker 100 fleets, the
Company determined that the estimated fair market value of its Fokker 100, Saab 340 and ATR 42 aircraft had further declined
in value. Therefore, during the third quarter of 2001, the Company recorded an additional charge of approximately $423 million
reflecting the diminution in the estimated fair market value of these aircraft and related rotables.

21

In addition, due primarily to fleet plan changes implemented by the Company as a result of the events of September 11,
2001, the Company recorded a charge of approximately $64 million related primarily to the write-down of certain other aircraft
and aircraft modifications to their estimated fair market value. Included in this charge is the write-down of five owned Boeing
727-200 non-operating aircraft and one owned McDonnell Douglas MD-80 non-operating aircraft.
As a result of the write-down of these aircraft to fair market value, as well as the acceleration of the retirement dates,
including the acceleration of the Companys remaining 50 owned Boeing 727-200 aircraft to May 2002, and changes in salvage
values, depreciation and amortization expense will decrease by approximately $57 million on an annualized basis.
Due to the events of September 11, 2001, and subsequent impact on the Company and the rest of the airline industry,
during the fourth quarter of 2001, the Company completed an impairment analysis of its long-lived assets, including aircraft
fleets, route acquisition costs, airport operating and gate lease rights, and goodwill in accordance with applicable accounting
standards. The impairment analysis did not result in any additional impairment charges beyond those recorded in the second and
third quarters of 2001.
The Company also retired all McDonnell Douglas DC-9 aircraft and eight McDonnell Douglas MD-80 aircraft during the
third and fourth quarters of 2001, and accelerated the retirement of its entire Boeing 717-200 fleet to June 2002 (these aircraft
were acquired from TWA). In conjunction therewith, the Company recorded a charge of approximately $65 million related
primarily to future lease commitments and return condition costs on the operating leased aircraft past the dates they will be
removed from service. As of December 31, 2001, cash outlays are estimated to be approximately $58 million and will occur over
the remaining lease terms, which extend through 2010.
Facility exit costs Also in response to the September 11, 2001 terrorist attacks, the Company announced that it would
discontinue service at Dallas Love Field and discontinue or reduce service on several of its international routes. In addition,
the Company announced it would close six Admirals Clubs, five airport Platinum Service Centers and approximately 105 offairport Travel Centers in 37 cities, all effective September 28, 2001. As a result of these announcements, the Company recorded
an $87 million charge related primarily to future lease commitments and the write-off of leasehold improvements and fixed assets.
As of December 31, 2001, cash outlays related to the accrual of future lease commitments are estimated to be approximately
$20 million and will occur over the remaining lease terms, which extend through 2018.
In addition, in December 2001, American agreed to sell its terminal facilities lease rights at the Raleigh-Durham
International Airport to the Raleigh-Durham Airport Authority. As a result of this transaction, the Company recorded a
$28 million charge in the fourth quarter of 2001 to accrue the residual cost less sales proceeds.
Employee charges On September 19, 2001, the Company announced that it would be forced to reduce its workforce by
approximately 20,000 jobs across all work groups (pilots, flight attendants, mechanics, fleet service clerks, agents, management
and support staff personnel). The reduction in workforce, which the Company accomplished through various measures, including
leaves of absence, job sharing, elimination of open positions, furloughs in accordance with collective bargaining agreements and
permanent layoffs, resulted from the September 11, 2001 terrorist attacks and the Companys subsequent reduction of its
operating schedule by approximately 20 percent. In connection therewith, the Company recorded a charge of approximately
$71 million for employee termination benefits. Cash outlays for the employee charges were incurred substantially during 2001
and approximated the amount of the charge recorded.
3. Acquisition of TWA Assets
On April 9, 2001, American purchased substantially all of the assets of TWA and assumed certain liabilities. TWA was the
eighth largest U.S. carrier, with a primary domestic hub in St. Louis. American funded the acquisition of TWAs assets with its
existing cash and short-term investments. The acquisition of TWA was accounted for under the purchase method of accounting
and, accordingly, the operating results of TWA since the date of acquisition have been included in the accompanying consolidated
financial statements for the year ended December 31, 2001.
The accompanying consolidated financial statements reflect the allocation of the purchase price, which was based on
estimated fair values of the assets acquired and liabilities assumed. American paid approximately $742 million in cash (subject to
certain working capital adjustments) for the purchase of TWA, which included the $625 million purchase price paid to TWA and
various other acquisition costs, primarily the purchase of aircraft security deposits and prepaid rent, and assumed the following
obligations: $638 million in current liabilities, $734 million in postretirement benefits other than pensions, $519 million in
capital lease obligations and approximately $175 million of other long-term liabilities. The purchase price was allocated as follows:
approximately $812 million to current assets, $574 million to fixed assets, primarily capital lease aircraft, and approximately
$320 million to other assets, resulting in goodwill of approximately $1 billion, which is being amortized on a straight-line basis
over 40 years.

22

The following table provides unaudited pro forma consolidated results of operations, assuming the acquisition had
occurred as of January 1, 2000 (in millions, except per share amounts):
(Unaudited)
Year Ended December 31,
2001
2000
$
19,830
$
23,265
(1,769)
687
(1,769)
730
$
(11.48)
$
4.51

Operating revenues
Income (loss) from continuing operations
Net earnings (loss)
Earnings (loss) per share diluted

The unaudited pro forma consolidated results of operations have been prepared for comparative purposes only. These
amounts are not indicative of the combined results which would have occurred had the transaction actually been consummated
on the date indicated above and are not indicative of the consolidated results of operations which may occur in the future.
4. Investments
Short-term investments consisted of (in millions):

Overnight investments and time deposits


U. S. Government agency notes
Corporate and bank notes
U. S. Treasury notes
Asset backed securities
U. S. Government agency mortgages
Other

December 31,
2001
2000
460
$
361
722
649
906
500
333
361
130
442
78
74
2,872
$
2,144

Short-term investments at December 31, 2001, by contractual maturity included (in millions):
Due in one year or less
Due between one year and three years
Due after three years

1,950
692
230
2,872

All short-term investments are classified as available-for-sale and stated at fair value. Unrealized gains and losses, net of
deferred taxes, are reflected as an adjustment to stockholders equity.
American has standby letter of credit agreements (see Note 6) which are secured by approximately $490 million of shortterm investments.
During 1999, the Company entered into an agreement with priceline.com Incorporated (priceline) whereby ticket
inventory provided by the Company may be sold through pricelines e-commerce system. In conjunction with this agreement,
the Company received warrants to purchase approximately 5.5 million shares of priceline common stock. In the second quarter
of 2000, the Company sold these warrants for proceeds of approximately $94 million, and recorded a gain of $57 million which
is included in Miscellaneous net on the accompanying consolidated statements of operations.
Also during 1999, the Company sold approximately 2.7 million depository certificates which were convertible, subject
to certain restrictions, into the common stock of Equant N.V. (Equant), a public company, for a net gain of approximately
$118 million, after taxes and minority interest. Of this amount, approximately $75 million is included in Miscellaneous net and
approximately $71 million, net of taxes and minority interest, related to depository certificates held by the Company on behalf of
Sabre is included in income from discontinued operations on the accompanying consolidated statements of operations. During
2001, as a result of the merger between France Telecom and Equant, the Company converted its remaining depository certificates
into France Telecom common stock and subsequently sold those shares for a net gain of approximately $5 million which is
included in Miscellaneous net on the accompanying consolidated statements of operations.

23

In December 1999, the Company entered into an agreement to sell its investment in the cumulative mandatorily
redeemable convertible preferred stock of Canadian Airlines International Limited (Canadian) for approximately $40 million,
resulting in a gain of $40 million which is included in Miscellaneous net on the accompanying consolidated statements of
operations. In addition, the Company recognized a tax benefit of $67 million resulting from the tax loss on the investment,
representing the reversal of a deferred tax valuation allowance since it is more likely than not that the tax benefit will be realized.
The valuation allowance was established in 1996 when the investment was written-off because, at that time, it was not more likely
than not that the tax benefit of the write-off would be realized. During 2000, the Company recorded a gain of approximately
$41 million from the recovery of start-up expenses (previously written-off) from the Canadian services agreement entered into
during 1995 which is included in Miscellaneous net on the accompanying consolidated statements of operations.
5. Commitments and Contingencies
During the fourth quarter of 2001, the Company reached an agreement with Boeing that included a combination
of aircraft delivery deferrals, substitutions and limited additional aircraft orders. As a direct result of the agreement with
Boeing, the Companys 2002 and 2003 aircraft commitment amounts have been reduced, in the aggregate, by approximately
$700 million. Following this agreement, at December 31, 2001, the Company had commitments to acquire the following aircraft:
47 Boeing 737-800s, 14 Boeing 777-200ERs, nine Boeing 767-300ERs, seven Boeing 757-200s, 124 Embraer regional jets and
24 Bombardier CRJ-700s. Deliveries of all aircraft extend through 2008. Future payments for all aircraft, including the estimated
amounts for price escalation, will approximate $1.3 billion in 2002, $1.7 billion in 2003, $1.2 billion in 2004 and an aggregate
of approximately $1.9 billion in 2005 through 2008. These future payments are net of approximately $470 million related to
deposits made for 2002 aircraft deliveries which have been deferred as part of the agreement with Boeing that will be applied
to future aircraft deliveries. In addition to these commitments for aircraft, the Company expects to spend approximately
$500 million in 2002 for modifications to aircraft, renovations of and additions to airport and off-airport facilities, and
the acquisition of various other equipment and assets.
Miami-Dade County is currently investigating and remediating various environmental conditions at the Miami International Airport (MIA) and funding the remediation costs through landing fees and various cost recovery methods. American
and AMR Eagle have been named as potentially responsible parties (PRPs) for the contamination at MIA. During the second
quarter of 2001, the County filed a lawsuit against 17 defendants, including American, in an attempt to recover its past and future
cleanup costs (Miami-Dade County, Florida v. Advance Cargo Services, Inc., et al. in the Florida Circuit Court). In addition to the
17 defendants named in the lawsuit, 243 other agencies and companies were also named as PRPs and contributors to the
contamination. Americans and AMR Eagles portion of the cleanup costs cannot be reasonably estimated due to various factors,
including the unknown extent of the remedial actions that may be required, the proportion of the cost that will ultimately be
recovered from the responsible parties, and uncertainties regarding the environmental agencies that will ultimately supervise the
remedial activities and the nature of that supervision. 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 Companys consolidated financial position, results of operations
or cash flows. Amounts recorded for environmental issues are based on the Companys current assessments of the ultimate
outcome and, accordingly, could increase or decrease as these assessments change.
The Company is involved in certain claims and litigation related to its operations. In the opinion of management,
liabilities, if any, arising from these claims and litigation would not have a material adverse effect on the Companys consolidated
financial position, results of operations, or cash flows.
The Company has agreed to sell its McDonnell Douglas MD-11 aircraft to FedEx Corporation (FedEx). No significant
gain or loss is expected to be recognized as a result of this transaction. As of December 31, 2001, the carrying value of the
remaining aircraft American has committed to sell was approximately $143 million. The Company expects to deliver the
remaining aircraft to FedEx by the third quarter of 2002.
AMR and American have event risk covenants in approximately $2.2 billion of indebtedness as of December 31, 2001.
These covenants permit the holders of such indebtedness to receive a higher rate of return (between 75 and 650 basis points
above the stated rate) if a designated event, as defined, should occur and the credit rating of such indebtedness is downgraded
below certain levels within a certain period of time following the event. No designated event, as defined, has occurred as of
December 31, 2001.

24

6. Leases
AMRs subsidiaries lease various types of equipment and property, primarily aircraft and airport facilities. The future
minimum lease payments required under capital leases, together with the present value of such payments, and future minimum
lease payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as
of December 31, 2001, were (in millions):
Capital
Leases
$
326
243
295
229
231
1,233
2,557
817
$
1,740

Year Ending December 31,


2002
2003
2004
2005
2006
2007 and subsequent
Less amount representing interest
Present value of net minimum lease payments
1

Operating
Leases
$
1,336
1,276
1,199
1,138
1,073
11,639
$
17,661 1

As of December 31, 2001, included in Other liabilities and deferred credits on the accompanying consolidated balance sheets is approximately
$1.6 billion relating to rent expense being recorded in advance of future operating lease payments.

At December 31, 2001, the Company had 342 jet aircraft and 41 turboprop aircraft under operating leases and 76 jet
aircraft and 55 turboprop aircraft under capital leases which includes both operating and non-operating aircraft. The aircraft
leases can generally be renewed at rates based on fair market value at the end of the lease term for one to five years. Most aircraft
leases have purchase options at or near the end of the lease term at fair market value, but generally not to exceed a stated
percentage of the defined lessors cost of the aircraft or at a predetermined fixed amount.
Special facility revenue bonds have been issued by certain municipalities primarily to purchase equipment and improve
airport facilities that are leased by American and accounted for as operating leases. Approximately $2.3 billion of these bonds
(with total future payments of approximately $6 billion as of December 31, 2001) are guaranteed by AMR and American. These
guarantees can only be invoked in the event American defaults on the lease obligation and certain other remedies are not available.
In addition, of the $2.3 billion, American may be required to purchase up to $558 million under various remarketing agreements
which are supported by standby letters of credit with terms ranging from one to three years.
Rent expense, excluding landing fees, was $1.7 billion for 2001 and $1.3 billion for 2000 and 1999.
7. Indebtedness
Long-term debt (excluding amounts maturing within one year) consisted of (in millions):
December 31,
2001
Secured variable and fixed rate indebtedness due through 2021
(effective rates from 2.4% 9.6% at December 31, 2001)
Enhanced equipment trust certificates due through 2019
(rates from 6.8% 9.1% at December 31, 2001)
Credit facility agreement due in 2005
(5.09% at December 31, 2001)
9.0% 10.20% debentures due through 2021
7.875% 10.55% notes due through 2039
6.0% 7.10% bonds due through 2031
Unsecured variable rate indebtedness due through 2024
(3.55% at December 31, 2001)
Other
Long-term debt, less current maturities

25

3,591

2000
$

2,656

3,006

553

814
332
302
176

332
345
176

86
3
8,310

86
3
4,151

Maturities of long-term debt (including sinking fund requirements) for the next five years are: 2002 $556 million;
2003 $296 million; 2004 $359 million; 2005 $1.2 billion; 2006 $886 million.
During 2001, American issued approximately $2.6 billion of enhanced equipment trust certificates and entered into
approximately $1.1 billion of various debt agreements. These financings are secured by aircraft. Effective rates on these financings
are fixed or variable (based upon the London Interbank Offered Rate [LIBOR] plus a spread).
In April 2001, the Board of Directors of American approved the guarantee by American of AMRs existing debt
obligations. As of December 31, 2001, this guarantee covered approximately $676 million of unsecured debt and approximately
$573 million of secured debt. (American is a Securities and Exchange Commission registrant and has filed consolidated financial
statements included in its Form 10-K for the year ended December 31, 2001.)
During the third quarter of 2000, the Company repurchased prior to scheduled maturity approximately $167 million in
face value of long-term debt. Cash from operations provided the funding for the repurchases. These transactions resulted in an
extraordinary loss of $14 million.
American has an $834 million credit facility that expires December 15, 2005. At Americans option, interest on this facility
can be calculated on one of several different bases. For most borrowings, American would anticipate choosing a floating rate based
upon LIBOR. During the fourth quarter of 2001, American amended this credit facility to include, among other items, a revision
of its financial covenants, including modifications to its fixed charge covenant and the addition of certain liquidity requirements.
The next test of the fixed charge covenant will occur on June 30, 2003 and will consider only the preceding six-month period.
American secured the facility with previously unencumbered aircraft. In addition, the facility requires that American maintain
at least $1.5 billion of liquidity, as defined in the facility, which consists primarily of cash and short-term investments, and
50 percent of the net book value of its unencumbered aircraft. The interest rate on the entire credit facility will be reset on
March 18, 2002.
In addition, American has available a $1 billion credit facility that expires September 30, 2002. Interest on this facility
is based upon LIBOR plus a spread. This facility is immediately available subject to the Company providing specified aircraft
collateral as security at the time of borrowing. At December 31, 2001, no borrowings were outstanding under this facility.
Certain debt is secured by aircraft, engines, equipment and other assets having a net book value of approximately
$8.5 billion. In addition, certain of Americans debt and letter of credit agreements contain restrictive covenants, including a
minimum net worth requirement, which could limit Americans ability to pay dividends. At December 31, 2001, under the most
restrictive provisions of those debt and credit facility agreements, approximately $400 million of the retained earnings of American
was available for payment of dividends to AMR.
Cash payments for interest, net of capitalized interest, were $343 million, $301 million and $237 million for 2001, 2000
and 1999, respectively.
8. Financial Instruments and Risk Management
As part of the Companys risk management program, AMR uses a variety of financial instruments, including fuel swap
and option contracts, interest rate swaps, and currency option contracts and exchange agreements. The Company does not hold
or issue derivative financial instruments for trading purposes.
The Company is exposed to credit losses in the event of non-performance by counterparties to these financial instruments,
but it does not expect any of the counterparties to fail to meet its obligations. The credit exposure related to these financial
instruments is represented by the fair value of contracts with a positive fair value at the reporting date, reduced by the effects of
master netting agreements. To manage credit risks, the Company selects counterparties based on credit ratings, limits its exposure
to a single counterparty under defined guidelines, and monitors the market position of the program and its relative market
position with each counterparty. The Company also maintains industry-standard security agreements with the majority of its
counterparties which may require the Company or the counterparty to post collateral if the value of these instruments falls below
certain mark-to-market thresholds. The Companys outstanding collateral as of December 31, 2001 was not material.
Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities, as amended (SFAS 133). SFAS 133 requires the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings. The ineffective portion of a derivatives change in fair value will be
immediately recognized in earnings. The adoption of SFAS 133 did not result in a cumulative effect adjustment being recorded to
net income for the change in accounting. However, the Company recorded a transition adjustment of approximately $64 million
in Accumulated other comprehensive loss in the first quarter of 2001. The amounts included in the following discussion are not
comparable in that the 2001 amounts reflect the January 1, 2001 adoption of SFAS 133 whereas the 2000 amounts do not.

26

Fuel Price Risk Management American enters into jet fuel, heating oil and crude swap and option contracts to protect against
increases in jet fuel prices. These instruments generally have maturities of up to 36 months. In accordance with SFAS 133, the
Company accounts for its fuel swap and option contracts as cash flow hedges. Upon the adoption of SFAS 133, the Company
recorded the fair value of its fuel hedging contracts in Other assets and Accumulated other comprehensive loss on the consolidated
balance sheets. Effective gains or losses on fuel hedging agreements are deferred in Accumulated other comprehensive loss and are
recognized in earnings as a component of fuel expense when the underlying fuel being hedged is used. The ineffective portion of
the fuel hedge agreements is based on the change in the total value of the derivative relative to the change in the value of the fuel
being hedged and is recognized as a component of fuel expense on the accompanying consolidated statements of operations.
For the year ended December 31, 2001 and 2000, the Company recognized net gains of approximately $29 million and
$545 million, respectively, as a component of fuel expense on the accompanying consolidated statements of operations related
to its fuel hedging agreements. The net gains recognized in 2001 included approximately $72 million of ineffectiveness expense
relating to the Companys fuel hedging agreements. At December 31, 2001, American had fuel hedging agreements with brokerdealers on approximately 2.3 billion gallons of fuel products, which represented approximately 40 percent of its expected 2002
fuel needs, approximately 21 percent of its expected 2003 fuel needs, and approximately five percent of its expected 2004 fuel
needs. The fair value of the Companys fuel hedging agreements at December 31, 2001 and 2000, representing the amount the
Company would receive to terminate the agreements, totaled $39 million and $223 million, respectively.
Interest Rate Risk Management American utilizes interest rate swap contracts to effectively convert a portion of its fixed-rate
obligations to floating-rate obligations. Under SFAS 133, the Company accounts for its interest rate swap contracts as fair value
hedges whereby the fair value of the related interest rate swap agreement is reflected in Other assets with the corresponding liability being recorded as a component of Long-term debt on the consolidated balance sheets. The Company has no ineffectiveness
with regard to its interest rate swap contracts. The fair value of the Companys interest rate swap agreements, representing the
amount the Company would receive if the agreements were terminated at December 31, 2001 and 2000, was approximately
$11 million and $4 million, respectively.
Foreign Exchange Risk Management To hedge against the risk of future exchange rate fluctuations on a portion of Americans
foreign cash flows, the Company enters into various currency put option agreements on a number of foreign currencies. These
instruments generally have maturities of up to 12 months. In accordance with SFAS 133, the Company accounts for its currency
put option agreements as cash flow hedges. Upon the adoption of SFAS 133, the Company recorded the fair value of its foreign
currency put option agreements in Other assets and Accumulated other comprehensive loss on the consolidated balance sheets.
Effective gains and losses on currency put option agreements are deferred in Accumulated other comprehensive loss and are
recognized in earnings as a component of passenger revenue when the underlying hedged revenues are recognized. The ineffectiveness associated with the Companys currency put option agreements was not material. For the year ended December 31, 2001,
the Company recognized net gains of approximately $14 million as a component of passenger revenue related to its foreign
currency put option agreements. The fair value of the Companys foreign currency put option agreements totaled approximately
$12 million and $20 million as of December 31, 2001 and 2000, respectively, representing the amount the Company would
receive to terminate these agreements.
The Company has entered into Japanese yen currency exchange agreements to effectively convert certain yen-based lease
obligations into dollar-based obligations. Under SFAS 133, the Company accounts for its Japanese yen currency exchange agreements as cash flow hedges whereby the fair value of the related Japanese yen currency exchange agreements is reflected in Other
liabilities and deferred credits and Accumulated other comprehensive loss on the consolidated balance sheets. The Company has
no ineffectiveness with regard to its Japanese yen currency exchange agreements. The fair value of the Companys yen currency
exchange agreements, representing the amount the Company would pay to terminate the agreements, were $45 million and
$5 million as of December 31, 2001 and 2000, respectively. The exchange rates on the Japanese yen agreements range from
66.5 to 113.5 yen per U.S. dollar.

27

Fair Values of Financial Instruments The fair values of the Companys long-term debt were estimated using quoted market
prices where available. For long-term debt not actively traded, fair values were estimated using discounted cash flow analyses,
based on the Companys current incremental borrowing rates for similar types of borrowing arrangements. The carrying amounts
and estimated fair values of the Companys long-term debt, including current maturities, were (in millions):
December 31,
2001

2000

Carrying
Value
Secured variable and fixed rate
indebtedness
Enhanced equipment trust certificates
Credit facility agreement
7.875% 10.55% notes
9.0% 10.20% debentures
6.0% 7.10% bonds
Unsecured variable rate indebtedness
Other

Fair
Value

3,989
3,094
814
343
332
176
86
32
8,866

Carrying
Value

3,751
3,025
814
310
293
143
86
32
8,454

Fair
Value

2,799
567
749
332
176
86
11
4,720

2,879
576
759
358
179
86
11
4,848

All other financial instruments are either carried at fair value or their carrying value approximates fair value.
9. Income Taxes
The significant components of the income tax provision (benefit) were (in millions):

Current
Deferred

$
$

2001
(263)
(731)
(994)

Year Ended December 31,


2000
$
47
461
$
508

$
$

1999
167
183
350

The income tax provision (benefit) includes a federal income tax provision (benefit) of $(911) million, $454 million
and $290 million and a state income tax provision (benefit) of $(90) million, $47 million and $49 million for the years ended
December 31, 2001, 2000 and 1999, respectively.

28

The income tax provision (benefit) differed from amounts computed at the statutory federal income tax rate as follows
(in millions):

Statutory income tax provision (benefit)


State income tax provision (benefit), net of federal
tax effect
Foreign tax credit carryforwards
Meal expense
Change in valuation allowance
Other, net
Income tax provision (benefit)

2001
(965)

(58)
(7)
18
7
11
(994)

Year Ended December 31,


2000
$
450

30
19
9
508

1999
352
32
19
(67)
14
350

The change in valuation allowance in 2001 related to the Companys uncertainty regarding the realization of the foreign
tax credit carryforward, and in 1999 related to the realization of a tax loss on the sale of the Companys investment in Canadian
(see Note 4).
The components of AMRs deferred tax assets and liabilities were (in millions):
December 31,
2001
Deferred tax assets:
Postretirement benefits other than pensions
Rent expense
Alternative minimum tax credit carryforwards
Operating loss carryforwards
Frequent flyer obligation
Gains from lease transactions
Other
Valuation allowance
Total deferred tax assets

Deferred tax liabilities:


Accelerated depreciation and amortization
Purchased intangible assets
Pensions
Other
Total deferred tax liabilities
Net deferred tax liability

925
765
572
412
409
216
784
(7)
4,076

(4,065)
(369)
(157)
(322)
(4,913)
(837)

2000
$

632
522
184
362
225
541
2,466

(3,822)
(89)
(245)
(4,156)
(1,690)

At December 31, 2001, AMR had available for federal income tax purposes an alternative minimum tax credit carryforward of approximately $572 million which is available for an indefinite period, and federal and state net operating losses
of approximately $1.1 billion for regular tax purposes which will fully expire, if unused, in 2021.
Cash payments (receipts) for income taxes were $(28) million, $49 million and $71 million for 2001, 2000 and
1999, respectively.

29

10. Stock Awards and Options


Under the 1998 Long Term Incentive Plan, as amended, officers and key employees of AMR and its subsidiaries may be
granted stock options, stock appreciation rights (SARs), restricted stock, deferred stock, stock purchase rights, other stock-based
awards and/or performance-related awards, including cash bonuses. The total number of common shares authorized for
distribution under the 1998 Long Term Incentive Plan is 23,700,000 shares. The 1998 Long Term Incentive Plan, the successor
to the 1988 Long Term Incentive Plan, which expired May 18, 1998, will terminate no later than May 21, 2008. Options granted
under the 1988 and 1998 Long Term Incentive Plans (collectively, the Plans) are awarded with an exercise price equal to the fair
market value of the stock on date of grant, become exercisable in equal annual installments over five years following the date of
grant and expire 10 years from the date of grant. SARs may be granted in tandem with options awarded; however, no SARs have
been granted. As of December 31, 2001, approximately 3.5 million shares were available for future grant under the Plans.
As a result of the Sabre spin-off in March 2000, AMRs stock price was adjusted from $60 9/16 to $25 9/16 by the New
York Stock Exchange. Accordingly, all outstanding stock options and other stock-based awards, including the related exercise
prices, were adjusted to preserve the intrinsic value of the stock options and awards. See Note 14 for information regarding the
Sabre spin-off.
In 2001, 2000 and 1999, the total charge for stock compensation expense included in wages, salaries and benefits expense,
primarily related to the Companys performance share plan, was $21 million, $52 million and $53 million, respectively. No
compensation expense was recognized for stock option grants under the Plans since the exercise price was the fair market value
of the underlying stock on the date of grant.
Stock option activity was:

2001

16,568,907
4,180,595
(951,191)
(286,025)

Weighted
Average
Exercise
Price
$ 25.42
28.35
38.34
23.04

19,512,286

$ 26.46

16,568,907

7,161,346

$ 22.95

5,334,444

Options
Outstanding at January 1
Sabre adjustment
Granted
Exercised
Canceled
Outstanding at
December 31
Exercisable options
outstanding at
December 31

Year Ended December 31,


2000
Weighted
Average
Options
Exercise
Price
5,219,634
$ 52.06
7,150,899
6,003,111
30.21
(1,557,034)
32.85
(247,703)
23.38

1999

4,147,124
1,539,585
(258,875)
(208,200)

Weighted
Average
Exercise
Price
$ 46.60
63.19
68.17
49.96

$ 25.42

5,219,634

$ 52.06

$ 19.79

2,012,889

$ 40.63

Options

The following table summarizes information about the stock options outstanding at December 31, 2001:

Range of
Exercise
Prices
Under $20
$20 $30
Over $30

Number of
Options
Outstanding
2,403,770
9,945,874
7,162,642
19,512,286

Weighted
Average
Remaining
Life (years)
3.60
7.74
8.51
7.51

Weighted
Average
Exercise Price
$ 15.16
24.16
33.45
$ 26.46

30

Number of
Options
Exercisable
2,368,838
3,172,758
1,619,750
7,161,346

Weighted
Average
Exercise Price
$
15.14
24.19
31.92
$
22.95

In May 1997, in conjunction with the labor agreement reached between American and members of the Allied Pilots
Association (APA), the Company established the Pilots Stock Option Plan (The Pilot Plan). The Pilot Plan granted members of
the APA the option to purchase 11.5 million shares of AMR stock at $41.69 per share, $5 less than the average fair market value
of the stock on the date of grant, May 5, 1997. These shares were exercisable immediately. In conjunction with the Sabre spin-off,
the exercise price was adjusted to $17.59 per share. Pilot Plan option activity was:

2001
10,990,190
(1,174,865)
9,815,325

Outstanding at January 1
Sabre adjustment
Exercised
Outstanding at December 31

Year Ended December 31,


2000
5,420,028
7,421,048
(1,850,886)
10,990,190

1999
5,791,381
(371,353)
5,420,028

The weighted-average grant date fair value per share of all stock option awards granted during 2001, 2000 and 1999 was
$12.23, $16.54 and $23.17, respectively.
Shares of deferred stock are awarded at no cost to officers and key employees under the Plans Career Equity Program and
will be issued upon the individuals retirement from AMR or, in certain circumstances, will vest on a pro rata basis. Deferred stock
activity was:

2001
4,956,497
(98,566)
(72,219)
4,785,712

Outstanding at January 1
Sabre adjustment
Granted
Issued
Canceled
Outstanding at December 31

Year Ended December 31,


2000
2,310,680
3,165,632
(479,177)
(40,638)
4,956,497

1999
2,401,532
146,200
(122,042)
(115,010)
2,310,680

The weighted-average grant date fair value per share of career equity awards granted during 1999 was $63.54.
A performance share plan was implemented in 1993 under the terms of which shares of deferred stock are awarded at no
cost to officers and key employees under the Plans. The fair value of the performance shares granted is equal to the market price
of the Companys stock at the date of grant. The shares vest over a three-year performance period based upon certain specified
financial measures of the Company. Performance share activity was:

2001
2,507,755
913,422
(194,128)
(706,302)
(33,945)
2,486,802

Outstanding at January 1
Sabre adjustment
Granted
Issued
Awards settled in cash
Canceled
Outstanding at December 31

Year Ended December 31,


2000
1,215,644
1,665,432
1,277,539
(399,517)
(1,200,177)
(51,166)
2,507,755

1999
1,565,616
509,822
(208,265)
(513,370)
(138,159)
1,215,644

The weighted-average grant date fair value per share of performance share awards granted during 2001, 2000 and 1999 was
$28.27, $32.93 and $62.95, respectively.

31

The Company has adopted the pro forma disclosure features of Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123). As required by SFAS 123, pro forma information regarding income
(loss) from continuing operations before extraordinary loss and earnings (loss) per share from continuing operations before
extraordinary loss have been determined as if the Company had accounted for its employee stock options and awards granted
subsequent to December 31, 1994 using the fair value method prescribed by SFAS 123. The fair value for the stock options was
estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for
2001, 2000 and 1999: risk-free interest rates ranging from 4.58% to 6.15%; dividend yields of 0%; expected stock volatility
ranging from 31.3% to 45.2%; and expected life of the options of 4.5 years for the Plans and 1.5 years for The Pilot Plan.
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that
have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective
assumptions, including the expected stock price volatility. Because the Companys employee stock options have characteristics
significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect
the fair value estimate, in managements opinion, the existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.
The following table shows the Companys pro forma income (loss) from continuing operations before extraordinary loss
and earnings (loss) per share from continuing operations before extraordinary loss assuming the Company had accounted for its
employee stock options using the fair value method (in millions, except per share amounts):

2001

Year Ended December 31,


2000

1999

Income (loss) from continuing operations before


extraordinary loss:
As reported
Pro forma

$ (1,762)
(1,779)

Basic earnings (loss) per share from continuing operations


before extraordinary loss:
As reported
Pro forma

$ (11.43)
(11.54)

$ 5.20
5.15

$ 4.30
4.27

Diluted earnings (loss) per share from continuing


operations before extraordinary loss:
As reported
Pro forma

$ (11.43)
(11.54)

$ 4.81
4.77

$ 4.17
4.14

779
772

656
651

11. Retirement Benefits


All regular employees of the Company are eligible to participate in pension plans. The defined benefit plans provide
benefits for participating employees based on years of service and average compensation for a specified period of time before
retirement. Airline pilots also participate in a defined contribution plan for which Company contributions are determined as a
percentage of participant compensation.
Effective January 1, 2001, American established a defined contribution plan for non-contract employees in which the
Company will contribute a match up to 5.5 percent on employee contributions of pensionable earnings to the Companys existing
401(k) plan. During 2000, American provided a one-time election for current non-contract employees to remain in the defined
benefit plan or discontinue accruing future credited service in the defined benefit plan as of January 1, 2001 and begin participation in the defined contribution plan. Effective January 1, 2002, all new non-contract employees of the Company will become
members of the defined contribution plan.
In addition to pension benefits, other postretirement benefits, including certain health care and life insurance benefits, are
also provided to retired employees. The amount of health care benefits is limited to lifetime maximums as outlined in the plan.
Substantially all regular employees of American and employees of certain other subsidiaries may become eligible for these benefits
if they satisfy eligibility requirements during their working lives.
Certain employee groups make contributions toward funding a portion of their retiree health care benefits during their
working lives. AMR funds benefits as incurred and makes contributions to match employee prefunding.
In connection with the acquisition of TWA in April 2001 (see Note 3), the Company assumed certain retiree benefit plan
liabilities of TWA, primarily its postretirement benefit obligation. As such, the following information reflects the inclusion of
these obligations from the date of acquisition. In addition, effective January 1, 2002, TWA employees were eligible to begin
participation in Americans pension plans. However, these employees were not granted prior credited service.

32

The following table provides a reconciliation of the changes in the plans benefit obligations and fair value of assets for the
years ended December 31, 2001 and 2000, and a statement of funded status as of December 31, 2001 and 2000 (in millions):
Pension Benefits
2001
2000
Reconciliation of benefit obligation
Obligation at January 1
Service cost
Interest cost
Actuarial loss
Plan amendments
Acquisition of TWA
Benefit payments
Obligation at December 31
Reconciliation of fair value
of plan assets
Fair value of plan assets at January 1
Actual return on plan assets
Employer contributions
Benefit payments
Transfers
Fair value of plan assets at
December 31
Funded status
Accumulated benefit obligation (ABO)
Projected benefit obligation (PBO)
Accumulated postretirement benefit
obligation (APBO)
Fair value of assets
Funded status at December 31
Unrecognized loss (gain)
Unrecognized prior service cost
Unrecognized transition asset
Accrued benefit cost

6,434
260
515
416
168
(371)
7,422

5,731
1
121
(371)
-

5,628
213
467
499
(373)
6,434

5,282
735
85
(373)
2

5,482

6,041
7,422

5,482

(1,940)
1,454
286
(5)
(205)

1,708
66
175
205
(12)
734
(117)
2,759

88
(5)
129
(117)
-

72
5
88
(77)
-

5,731

95

88

5,306
6,434

5,731

Other Benefits
2000

2001

(703)
523
129
(6)
(57)

1,306
43
108
328
(77)
1,708

2,759
95

1,708
88

(2,664)
168
(42)
(2,538)

(1,620)
(51)
(35)
(1,706)

As of December 31, 2001, the accumulated benefit obligation and the fair value of plan assets for pension plans with
accumulated benefit obligations in excess of plan assets were approximately $4.2 billion and $3.6 billion, respectively.
At December 31, 2001 and 2000, other benefits plan assets of approximately $93 million and $88 million, respectively,
were invested in shares of mutual funds managed by a subsidiary of AMR.

33

The following tables provide the components of net periodic benefit cost for the years ended December 31, 2001, 2000
and 1999 (in millions):
Pension Benefits
2000

2001
Components of net periodic benefit cost
Defined benefit plans:
Service cost
Interest cost
Expected return on assets
Amortization of:
Transition asset
Prior service cost
Unrecognized net loss
Net periodic benefit cost for
defined benefit plans
Defined contribution plans
Total

260
515
(539)

213
467
(490)

(1)
11
22
268
244
512

2001
Components of net periodic benefit cost
Service cost
Interest cost
Expected return on assets
Amortization of:
Prior service cost
Unrecognized net gain
Net periodic benefit cost

236
433
(514)

(1)
10
17
216
174
390

(4)
5
21

Other Benefits
2000

66
175
(9)

(5)
227

1999

177
155
332

1999

43
108
(7)

(5)
(14)
125

56
108
(6)
(5)
153

The following table provides the amounts recognized in the consolidated balance sheets as of December 31, 2001 and 2000
(in millions):

Prepaid benefit cost


Accrued benefit liability
Additional minimum liability
Intangible asset
Accumulated other comprehensive income
Net amount recognized

Pension Benefits
2001
2000
123
$
107
(328)
(225)
(335)
(21)
163
72
172
10
(205)
$
(57)
Pension Benefits
2001
2000

Weighted-average assumptions as of
December 31
Discount rate
Salary scale
Expected return on plan assets

7.50%
4.26
9.50

7.75%
4.26
9.50

Other Benefits
2001
2000
$
(2,538)
(1,706)
(2,538)
$ (1,706)
Other Benefits
2001
2000

7.50%
9.50

7.75%
9.50

The assumed health care cost trend rate was six percent in 2001, decreasing gradually to an ultimate rate of 4.5 percent by
2004. The previously assumed health care cost trend rate was seven percent in 2000, decreasing gradually to an ultimate rate of
four percent by 2004.

34

A one percentage point change in the assumed health care cost trend rates would have the following effects (in millions):
One Percent
Decrease
$
(24)

Impact on 2001 service and interest cost


Impact on postretirement benefit obligation
as of December 31, 2001

One Percent
Increase
$
26
206

(196)

12. Accumulated Other Comprehensive Loss


The components of accumulated other comprehensive loss are as follows (in millions):

Balance at December 31, 1998


Current year net change
Balance at December 31, 1999
Current year net change
Balance at December 31, 2000
Current year net change
Cumulative effect of adoption of
SFAS 133 as of January 1, 2001,
net of tax of $38
Reclassification of derivative financial
instruments into earnings, net of tax
of $37
Change in fair value of derivative
financial instruments, net of tax
of $30
Balance at December 31, 2001

Minimum
Pension
Liability
$
(4)
3
(1)
(5)
(6)
(101)

Unrealized
Gain/(Loss)
on
Investments
$
(1)
(1)
5
4
3

Unrealized
Gain/(Loss)
on
Derivative
Financial
Instruments
$
-

Total
$
(4)
2
(2)
(2)
(98)

64

64

(62)

(62)

(107)

(48)
(46)

(48)
(146)

As of December 31, 2001, the Company estimates during the next twelve months it will reclassify from accumulated other
comprehensive loss into net earnings approximately $33 million relating to its derivative financial instruments.

35

13. Earnings Per Share


The following table sets forth the computation of basic and diluted earnings (loss) per share (in millions, except per
share amounts):
Year Ended December 31,
2000

2001
Numerator:
Numerator for earnings (loss) per share income
(loss) from continuing operations before
extraordinary loss

Denominator:
Denominator for basic earnings (loss) per share
weighted-average shares

(1,762)

154

Effect of dilutive securities:


Employee options and shares
Assumed treasury shares purchased
Dilutive potential common shares

656

152

27
(15)
12

154

Basic earnings (loss) per share from continuing


operations before extraordinary loss
Diluted earnings (loss) per share from continuing
operations before extraordinary loss

150

Denominator for diluted earnings (loss) per


share adjusted weighted-average shares

779

1999

12
(7)
5

162

157

(11.43)

5.20

4.30

(11.43)

4.81

4.17

For the year ended December 31, 2001, approximately 11 million potential dilutive shares were not added to the
denominator because inclusion of such shares would be antidilutive.
14. Discontinued Operations
During the first quarter of 1999, the Company sold AMR Services, AMR Combs and TSR. As a result of these sales, the
Company recorded a gain of approximately $64 million, net of income taxes of approximately $19 million.
On February 7, 2000, the Company declared its intent to distribute AMRs entire ownership interest in Sabre as a dividend
on all outstanding shares of its common stock. To effect the dividend, AMR exchanged all of its 107,374,000 shares of Sabres
Class B common stock for an equal number of shares of Sabres Class A common stock. 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
AMRs 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. The dividend of AMRs entire ownership interest in Sabres common stock resulted
in a reduction to AMRs retained earnings in March of 2000 equal to the carrying value of the Companys investment in Sabre
on March 15, 2000, which approximated $581 million. The fair market value of AMRs investment in Sabre on March 15, 2000,
based upon the quoted market closing price of Sabre Class A common stock on the New York Stock Exchange, was approximately
$5.2 billion. In addition, effective March 15, 2000, the Company reduced the exercise price and increased the number of
employee stock options and awards by approximately 19 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. 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 had no impact on earnings.

36

The results of operations for Sabre, AMR Services, AMR Combs and TSR have been reflected in the consolidated
statements of operations as discontinued operations. Summarized financial information of the discontinued operations is
as follows (in millions):
Year Ended December 31,
2000
1999
Sabre
Revenues
Minority interest
Income taxes
Net income
AMR Services, AMR Combs and TSR
Revenues
Income taxes
Net income

542
10
36
43

2,435
57
196
265

97
-

15. Segment Reporting


Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information, as amended (SFAS 131), requires that a public company report annual and interim financial and descriptive
information about its reportable operating segments. Operating segments, as defined, are components of an enterprise about
which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance.
The Company has two primary operating segments, consisting primarily of American and AMR Eagle, which represent one
reportable segment. Following the acquisition of TWA in April 2001 (see Note 3), American is the largest scheduled passenger
airline in the world. At the end of 2001, American provided scheduled jet service to more than 161 destinations throughout
North America, the Caribbean, Latin America, Europe and the Pacific. American is also one of the largest scheduled air freight
carriers in the world, providing a full range of freight and mail services to shippers throughout its system. AMR Eagle owns two
regional airlines which do business as American Eagle American Eagle Airlines, Inc. and Executive Airlines, Inc. The American
Eagle carriers provide connecting service from eight of Americans high-traffic cities to smaller markets throughout the United
States, Canada, the Bahamas and the Caribbean.
Revenues from other segments are below the quantitative threshold for determining reportable segments and consist
primarily of revenues from AMR Investment Services, Inc. and Americas Ground Services, Inc. The difference between the
financial information of the Companys one reportable segment and the financial information included in the consolidated
statements of operations and balance sheets as a result of these entities is not material.
The Companys operating revenues by geographic region are summarized below (in millions):

Domestic
Latin America
Europe
Pacific
Total consolidated revenues

2001
13,657
2,732
2,076
498
18,963

Year Ended December 31,


2000
$
13,881
2,907
2,338
577
$
19,703

1999
12,563
2,697
1,984
486
17,730

The Company attributes operating revenues by geographic region based upon the origin and destination of each flight
segment. The Companys tangible assets consist primarily of flight equipment which is mobile across geographic markets and,
therefore, has not been allocated.

37

16. Quarterly Financial Data (Unaudited)


Unaudited summarized financial data by quarter for 2001 and 2000 (in millions, except per share amounts):
First
Quarter *
2001
Operating revenues
Operating loss
Net loss
Loss per share:
Basic
Diluted
2000
Operating revenues
Operating income
Income from continuing operations
before extraordinary loss
Net earnings
Earnings per share:
Basic
From continuing operations
before extraordinary loss
Net earnings
Diluted
From continuing operations
before extraordinary loss
Net earnings

Second
Quarter

4,760
(4)
(43)

(0.28)
(0.28)

5,583
(760)
(507)

Third
Quarter
$

(3.29)
(3.29)

4,577
212

5,011
517

4,816
(558)
(414)

Fourth
Quarter
$

(2.68)
(2.68)

5,256
572

3,804
(1,148)
(798)
(5.17)
(5.17)

4,859
80

89
132

321
321

322
313

47
47

0.60
0.89

2.15
2.15

2.14
2.08

0.31
0.31

0.57
0.86

1.96
1.96

1.96
1.91

0.29
0.29

* Certain amounts for the first quarter of 2001 related to the Companys fuel hedging program have been reclassified to conform with
the 2001 presentation.

The following table summarizes the special charges net of U.S. Government grant recorded by the Company during the
second, third and fourth quarters of 2001 (in millions):

Aircraft charges
Facility exit costs
Employee charges
Other
Total special charges
Less: U.S. Government grant

Second
Quarter
$
685
685
$
685

Third
Quarter
$
496
61
55
20
632
(809)
$
(177)

Fourth
Quarter
$
56
54
16
23
149
(47)
$
102

See Note 2 for a further discussion of special charges net of U.S. Government grant.
In addition to the above items, during the second quarter of 2001, the Company recorded a gain of $45 million from the
settlement of a legal matter related to the Companys 1999 labor disruption.
During the second quarter of 2000, the Company recorded a gain of approximately $57 million from the sale of the
Companys warrants to purchase 5.5 million shares of priceline common stock (see Note 4). During the third quarter of 2000, the
Company recorded a $14 million extraordinary loss on the repurchase prior to scheduled maturity of long-term debt (see Note 7).
Results for the fourth quarter of 2000 included a gain of approximately $41 million for the recovery of start-up expenses related to
the Canadian services agreement (see Note 4) and a charge of approximately $56 million for the Companys employee home
computer program.

38

REPORT OF I NDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND STOCKHOLDERS


AMR CORPORATION
We have audited the accompanying consolidated balance sheets of AMR Corporation as of December 31, 2001 and 2000,
and the related consolidated statements of operations, stockholders equity, and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of AMR Corporation at December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows
for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
As discussed in Note 8 to the consolidated financial statements, effective January 1, 2001 the Company changed its
method of accounting for its derivative and hedging activities as required by Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended.

2121 San Jacinto


Dallas, Texas 75201
January 15, 2002

39

REPORT OF MANAGEMENT

The management of AMR Corporation is responsible for the integrity and objectivity of the Companys financial
statements and related information. The financial statements have been prepared in conformity with accounting principles
generally accepted in the United States and reflect certain estimates and judgments of management as to matters set forth therein.
AMR maintains a system of internal controls designed to provide reasonable assurance, at reasonable cost, that its financial
records can be relied upon in the preparation of financial statements and that its assets are safeguarded against loss or unauthorized
use. An important element of the Companys control systems is the ongoing program to promote control consciousness
throughout the organization. Managements commitment to the program is evidenced by organizational arrangements that
provide for divisions of responsibility, effective communication of policies and procedures, selection of competent financial
managers and development and maintenance of financial planning and reporting systems.
Management continually monitors the system for compliance. AMR maintains a strong internal auditing program
that independently assesses the effectiveness of the internal controls and recommends possible improvements. Ernst & Young,
independent auditors, is engaged to audit the Companys financial statements. Ernst & Young obtains and maintains an understanding of the internal control structure and conducts such tests and other auditing procedures considered necessary in the
circumstances to render the opinion on the financial statements contained in their report.
The Audit Committee of the Board of Directors, composed entirely of independent directors, meets regularly with the
independent auditors, management and internal auditors to review their work and confirm that they are properly discharging
their responsibilities. In addition, the independent auditors and the internal auditors meet periodically with the Audit Committee,
without the presence of management, to discuss the results of their work and other relevant matters.

Donald J. Carty
Chairman, President and Chief Executive Officer

Thomas W. Horton
Senior Vice President and Chief Financial Officer

40

OPERATING AIRCRAFT FLEETS

As of December 31, 2001


American Airlines Aircraft
Airbus A300-600R
Boeing 727-200 1
Boeing 737-800
Boeing 757-200
Boeing 767-200
Boeing 767-200
Extended Range
Boeing 767-300
Extended Range
Boeing 777-200
Extended Range
Fokker 100
McDonnell Douglas MD-80
Total
TWA LLC Aircraft
Boeing 717-200 2
Boeing 757-200
Boeing 767-300
Extended Range
McDonnell Douglas MD-80
Total
AMR Eagle Aircraft
ATR 42
Bombardier CRJ-700
Embraer 135
Embraer 140
Embraer 145
Super ATR
Saab 340B
Saab 340B Plus
Total
1
2

Seating
Capacity

Owned

Capital
Leased

Operating
Leased

Total

Average
Age (Years)

178/250/251
138
134
176
160

10
33
67
75
8

11
-

24
10
31
-

34
33
77
117
8

12
23
1
8
19

158

12

21

16

190/228

32

10

49

223/245/252
87
129

40
67
130
471

3
20
53

4
109
188

40
74
259
712

2
9
14
10

30
27

30
27

1
4

215/233
131

19
19

23
23

9
61
127

9
103
169

7
9
7

46
70
37
44
50
64/66
34
34

20
1
40
15
56
40
17
189

49
49

10
3
25
38

30
1
40
15
56
43
66
25
276

11
2
3
7
10
6
7

100
168

The Boeing 727-200 fleet will be removed from service by May 2002.
The Boeing 717-200 fleet will be removed from service by June 2002.

In addition, the following owned and leased aircraft were not operated by the Company as of December 31, 2001:
15 owned and five operating leased Boeing 727-200s, 16 operating leased McDonnell Douglas DC-9s, 10 owned McDonnell
Douglas DC-10-10s, six operating leased and one owned McDonnell Douglas MD-80s, three owned McDonnell Douglas
MD-11s, two owned McDonnell Douglas DC-10-30s, and five owned, six capital leased and three operating leased Saab 340Bs.

41

BOARD OF DIRECTORS

BOARD OF DIRECTORS

John W. Bachmann
Managing Partner
Edward Jones
(Financial Services)
St. Louis, Missouri
Named a Director in 2001
David L. Boren
President
University of Oklahoma
(Educational Institution)
Norman, Oklahoma
Elected in 1994
Edward A. Brennan
Retired Chairman, President
and Chief Executive Officer
Sears, Roebuck and Co.
(Merchandising)
Chicago, Illinois
Elected in 1987
Donald J. Carty
Chairman, President and
Chief Executive Officer
AMR Corporation/
American Airlines, Inc.
(Air Transportation)
Fort Worth, Texas
Elected in 1998
Armando M. Codina
Chairman and Chief Executive Officer
Codina Group, Inc.
(Real Estate Investments,
Development and Construction,
Property Management
and Brokerage Services)
Coral Gables, Florida
Elected in 1995
Earl G. Graves
Chairman and Chief Executive Officer
Earl G. Graves, Limited
(Communications and Publishing)
Publisher and Chief Executive Officer
Black Enterprise Magazine
General Partner Black
Enterprise/Greenwich Street
Corporate Growth Partners, L.P.
New York, New York
Elected in 1995

Ann McLaughlin Korologos


Chairman Emeritus
The Aspen Institute
(Educational and Public Policy
Organization)
Aspen, Colorado
Elected in 1990
Michael A. Miles
Special Limited Partner
Forstmann Little & Co.
(Investment Banking)
New York, New York
Elected in 2000
Charles H. Pistor, Jr.
Retired Vice Chair
Southern Methodist University
(Educational Institution)
Dallas, Texas
Elected in 1982
Retired in March 2001

BOARD COMMITTEES
EXECUTIVE COMMITTEE

Donald J. Carty, Chairman


David L. Boren
Earl G. Graves
Michael A. Miles
Philip J. Purcell
AUDIT COMMITTEE

Ann McLaughlin Korologos, Chairman


Armando M. Codina
Joe M. Rodgers
Judith Rodin
COMPENSATION/NOMINATING COMMITTEE

Edward A. Brennan, Chairman


Armando M. Codina
Michael A. Miles
Joe M. Rodgers
Judith Rodin
GOVERNANCE COMMITTEE

Philip J. Purcell
Chairman and Chief Executive Officer
Morgan Stanley Dean Witter & Co.
(Financial Services)
New York, New York
Elected in 2000
Joe M. Rodgers
Chairman
The JMR Group
(Investment Company)
Nashville, Tennessee
Elected in 1989
Judith Rodin
President
University of Pennsylvania
(Educational Institution)
Philadelphia, Pennsylvania
Elected in 1997
Roger Staubach
Chairman and Chief Executive Officer
The Staubach Group
(Real Estate Services)
Addison, Texas
Named a Director in 2001

42

Edward A. Brennan, Chairman


David L. Boren
Earl G. Graves
Ann McLaughlin Korologos
Philip J. Purcell
The Executive Committee of the American
Airlines Board of Directors is identical
to the AMR Executive Committee.

MANAGEMENT DIVISIONS AND SUBSIDIARIES (as of March 31, 2002)

AMERICAN AIRLINES, INC.

Donald J. Carty*
Chairman, President and
Chief Executive Officer

Timothy J. Ahern
Vice President
Safety, Security and
Environmental

Robert W. Baker*
Vice Chairman

Jane G. Allen
Vice President
Flight Service

Gerard J. Arpey*
Executive Vice President
Operations

Walter J. Aue
Vice President
Capacity Planning

Daniel P. Garton*
Executive Vice President
Customer Service

James A. Beer
Vice President
Corporate Development
and Treasurer

Michael W. Gunn*
Executive Vice President
Marketing and Planning
Peter J. Dolara
Senior Vice President
Miami, Caribbean and
Latin America
Monte E. Ford
Senior Vice President
Information Technology
and Chief Information
Officer
Thomas W. Horton*
Senior Vice President
Finance and Chief
Financial Officer
Dan P. Huffman
Senior Vice President
Maintenance and
Engineering
Henry C. Joyner
Senior Vice President
Planning
Anne H. McNamara*
Senior Vice President and
General Counsel

David R. Brooks
President
American Airlines
Cargo Division
Jeffrey J. Brundage
Vice President
Employee Policy and
Relations
David L. Campbell
Vice President
Alliance Base
Maintenance
Jeffrey C. Campbell
Vice President
Europe
John A. Carpenter
Vice President
Corporate Affairs
Robert C. Cordes
Vice President
St. Louis
Lauri L. Curtis
Vice President
Reservations and eTDS

Susan M. Oliver
Senior Vice President
Human Resources

C. David Cush
Vice President
International Planning
and Alliances

William K. Ris, Jr.


Senior Vice President
Government Affairs

Thomas R. Del Valle


Vice President
Customer Service

Timothy J. Doke
Vice President
Corporate Communications
Bella D. Goren
Vice President
Customer Services Planning
William T. Greene
Vice President
Finance and Planning
for Maintenance
and Engineering

Ralph L. Richardi
Vice President
Operations Planning
and Performance
Carmine J. Romano
Vice President
Tulsa Base Maintenance
John R. Samuel
Vice President
Customer Technology

Gregory F. Hall
Vice President
Line Maintenance

Di Ann Sanchez
Vice President
Diversity and Talent
Management

Douglas G. Herring
Vice President and
Controller

Peggy E. Sterling
Vice President
Dallas/Fort Worth

Gary F. Kennedy
Vice President
Corporate Real Estate

Andrew O. Watson
Vice President
e-Business

Craig S. Kreeger
Vice President and
General Sales Manager

Kenneth D. Wilcox
Vice President
Technology Services

Robert P. Kudwa
Vice President
Flight

Carolyn E. Wright
Vice President
Human Resources
Strategic Partnerships

Dennis LeBright
Vice President
Miami

AMERICAN EAGLE
AIRLINES, INC.

John R. MacLean
Vice President
Purchasing

Peter M. Bowler
President

Charles D. MarLett*
Corporate Secretary

Thomas F. Bacon
Senior Vice President
Marketing and Planning

Scott D. Nason
Vice President
Operations Technology,
Research and Analysis

R. Stan Henderson
Senior Vice President
Customer Services

Robert E. Olson
Vice President
Revenue Management
Randy H. Phillips
Vice President
Engineering and Quality
Assurance

Bernard J. DeSena
Vice President Chicago
* AMR Corporation Officers
43

Robert W. Reding
Chief Operations Officer
AMR INVESTMENT
SERVICES, INC.

William F. Quinn
President

CORPORATE INFORMATION

STOCK EXCHANGES

9%, 9.88%

The AMR Corporation Trading Symbol is AMR. The


common stock of AMR Corporation is listed for trading
on the New York Stock Exchange. The common stock
is also traded unlisted on the Pacific Stock Exchange.

Trustee & Paying Agent


The Bank of New York
101 Barclay Street
New York, NY 10286

FORM 10-K

9 34%, 9.8% AND


10% DEBENTURES AND 7.875%
PUBLIC INCOME N OTES

A copy of the AMR Corporation Annual Report


to the Securities and Exchange Commission for
2001 (Form 10-K) will be furnished without charge
upon written request to:

AND

10.20% DEBENTURES

Trustee & Paying Agent


Citibank, N.A.
111 Wall Street
New York, NY 10043

Corporate Secretary
AMR Corporation
Mail Drop 5675
P.O. Box 619616
Dallas/Fort Worth Airport, TX 75261-9616

9% DEBENTURES

Trustee & Paying Agent


U.S. Bank, N.A.
100 Wall Street, Suite 2000
New York, NY 10005

COMMON STOCK

Transfer Agent & Registrar


EquiServe Trust Co., N.A.
P.O. Box 2500
Jersey City, NJ 07303-2500
(201) 324-1225

PRINCIPAL O FFICES

AMR Corporation
Mail Drop 5675
P.O. Box 619616
Dallas/Fort Worth Airport, TX 75261-9616
(817) 963-1234

MEDIUM T ERM N OTES

Trustees
The Bank of New York
101 Barclay Street
New York, NY 10286
Citibank, N.A.
111 Wall Street
New York, NY 10043
Paying Agents
Chase Manhattan Bank
Corporate Trust Securities Window
Room 234 North Building
55 Water Street
New York, NY 10041
Citibank, N.A.
111 Wall Street
New York, NY 10043

44

MARKET PRICE

AND

DIVIDENDS

Common Stock*
High
Low
2001

1st Quarter
2nd Quarter
3rd Quarter
4th Quarter

$ 43 34
39 38
37 1516
23 516

$ 31
33
17
16

16
1
4
7
8
1
2

$ 67 38
37 78
34 1116
39 316

$ 30
26 716
26 18
27 1516

2000**

1st Quarter
2nd Quarter
3rd Quarter
4th Quarter

* No cash dividends were paid during the periods.


** Effective after the close of business on March 15, 2000, AMR distributed 0.722652 shares
of Sabre Holdings Corporation (Sabre) Class A common stock for each share of AMR stock
owned by AMRs shareholders. As a result of the dividend, AMRs stock price was adjusted
from $60 916 to $25 916 by the New York Stock Exchange after the market close on March
15, 2000 to exclude the value of Sabre. The pre-March 15, 2000 stock prices in the above
table have not been adjusted to give effect to this distribution.

Shareholders can also visit AMRs Internet site on the World Wide Web at www.amrcorp.com
to receive financial and other company information, or to request a printed copy of financial
materials.
Additionally, shareholders in the United States, Canada and most of the Caribbean can
call (800) AMR-6177 to hear the most recent quarterly results or request a printed copy of
financial materials. Shareholders residing in other areas should call (402) 573-9855.

2002 quarterly results will be released on the following dates with the shareholder
information line and Web site updated shortly thereafter:
First Quarter:
Second Quarter:
Third Quarter:
Fourth Quarter:

April 17, 2002


July 17, 2002
October 16, 2002
January 15, 2003

AMR CORPORATION
P.O. Box 619616, Dallas/Fort Worth, Texas 75261-9616
The American Airlines internet address is www.aa.com
The AMR internet address is www.amrcorp.com

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