AMR Corporation Reports Fourth Quarter 2008 Loss of $340 Million

EXCLUDING SPECIAL CHARGES, FOURTH QUARTER LOSS WAS $214 MILLION COMPANY REPORTS $2.1 BILLION LOSS FOR 2008; LOSS WAS $1.2 BILLION EXCLUDING SPECIAL ITEMS, WITH HIGHER FUEL PRICES DRIVING $2.7 BILLION OF ADDITIONAL FUEL EXPENSE...


AMR ended the fourth quarter with $3.6 billion in cash and short-term investments, including a restricted balance of $459 million, compared to a balance of $5.0 billion in cash and short-term investments, including a restricted balance of $428 million, at the end of the fourth quarter of 2007. In line with previously disclosed expectations, AMR had posted approximately $575 million in cash collateral with fuel hedge counterparties at the end of the fourth quarter of 2008. Also affecting the 2008 year-end cash balance were more than $1 billion in scheduled principal payments on long-term debt and capital leases and approximately $880 million in capital expenditures that the Company made during the year, and the $2.7 billion increase in its 2008 fuel costs compared to 2007 fuel prices.

In spite of increasingly challenging capital and credit markets, during 2008 AMR raised nearly $2 billion from a variety of sources, including: the sale of American Beacon Advisors, an equity sale of common stock; a draw on its revolving line of credit; and aircraft-related financings, including approximately $200 million from an aircraft sale-leaseback transaction that closed in the fourth quarter of 2008. The Company also arranged financing, subject to certain conditions, for the majority of the 76 Boeing 737-800s it has scheduled for delivery.

AMR's Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax-exempt bonds, and the present value of aircraft operating lease obligations, was $15.1 billion at the end of the fourth quarter of 2008, compared to $15.6 billion a year earlier. AMR's Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, was $12.0 billion at the end of the fourth quarter, compared to $11.0 billion in the fourth quarter of 2007.

AMR made the full amount of its required $78 million of contributions to its defined benefit pension plans for employees during 2008. The Company has contributed more than $2 billion to these plans since 2002, as the Company continues to meet this important commitment to employees.

Highlights

Fourth Quarter 2008 and Recent

Guidance

Mainline and Consolidated Capacity

AMR expects its full-year mainline capacity to decrease by more than 6.5 percent in 2009 compared to 2008, with a reduction of domestic capacity of approximately 9 percent and a reduction of international capacity of more than 2.5 percent compared to 2008 levels. On a consolidated basis, AMR expects full-year capacity to decrease by nearly 7 percent in 2009 compared to 2008.

AMR expects mainline capacity in the first quarter of 2009 to decrease by more than 8.5 percent compared to the first quarter of 2008, with domestic capacity expected to decline by more than 11.5 percent and international capacity expected to decline by nearly 4 percent compared to first quarter 2008 levels. AMR expects consolidated capacity in the first quarter of 2009 to decrease by more than 8.5 percent compared to the first quarter of 2008.

AMR expects regional affiliate capacity to decline by about 9.5 percent in the first quarter of 2009 compared to the prior-year period and expects full-year regional affiliate capacity to decline by more than 8 percent in 2009 compared to 2008 levels.

Fuel Expense and Hedging

While the cost of jet fuel remains volatile, AMR is planning for an average system price of $2.04 per gallon in the first quarter of 2009 and $2.06 per gallon for all of 2009. AMR has 45 percent of its anticipated first quarter 2009 fuel consumption hedged at an average cap of $2.58 per gallon of jet fuel equivalent ($93 per barrel crude equivalent), with 42 percent subject to an average floor of $1.97 per gallon of jet fuel equivalent ($68 per barrel crude equivalent). AMR has 35 percent of its anticipated full-year consumption hedged at an average cap of $2.59 per gallon of jet fuel equivalent ($94 per barrel crude equivalent), with 32 percent subject to an average floor of $1.94 per gallon of jet fuel equivalent ($67 per barrel crude equivalent). As of Jan. 16 , the average 2009 market forward price of crude oil was more than $51 per barrel. Consolidated consumption for the first quarter is expected to be 677 million gallons of jet fuel.

Mainline and Consolidated Unit Costs (Excluding the impact of special items)

For the first quarter of 2009, mainline unit costs are expected to decrease 2.9 percent compared to the first quarter of 2008, while first quarter consolidated unit costs are expected to decrease 3.2 percent compared to the first quarter of 2008.

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