AMR Corporation Reports Break-Even Results

PRNewswire-FirstCall FORT WORTH, Texas Oct. 22 :

Continuing to build financial momentum, AMR Corporation , the parent
company of American Airlines, Inc., today reported operating earnings of
$165 million and net earnings of $1 million for the third quarter. In last
year`s third quarter, AMR reported an operating loss of $1.3 billion and a
net loss of $924 million, or $5.93 per share.

Both this year`s quarter and last year`s third quarter included special
items—both gains and losses—resulting mostly from the company`s
restructuring efforts. In addition, in keeping with the provisions of SFAS
109, AMR`s third quarter 2003 results do not reflect a provision for
federal and state income taxes.
Conversely, AMR`s third quarter 2002 results reflected a tax benefit. To
provide a better comparison between the two periods, after adjusting for
these special items and taxes, the company recorded a loss of $23 million
this quarter, or $0.15 per share, versus a loss of $741 million, or $4.76
per share, in the third quarter of last year. (A reconciliation of all
non-GAAP measures included in this earnings release is provided in the
attachments).

“We are making good progress under the focus and discipline of our four-
point Turnaround Plan,” said Gerard Arpey, AMR`s president and CEO.
“Nevertheless, the third quarter is a peak season for the airline
industry, and under normal circumstances, we should be doing much better
at this time of year than simply breaking even. We have a lot of work to
do to achieve sustained profitability at acceptable levels, but we are
clearly on the right track.
“When you look at everything we have had to overcome and compare our
results in the third quarter with the huge losses in the same period last
year,” Arpey said, “the progress is very gratifying. Our third quarter
performance is unmistakable evidence that we are building critical
momentum on the cost side of the business and that those improvements,
coupled with other aspects of the Turnaround Plan, are beginning to
produce significant financial results.

“Most especially, AMR has been aided over the past several months by the
sacrifices and hard work of our employees, who have rallied behind the
Pull Together, Win Together tenet of the Turnaround Plan to help us
overcome our financial crisis and take good care of our customers under
some very challenging circumstances,” Arpey said.

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Third quarter highlights included:—An 8.1 percent increase in
American`s mainline unit revenues, reflecting record load factors in July
and August.—An 8.6 percent decrease in American`s mainline unit costs
(excluding special items), despite a 6.3 percent drop in capacity and
higher fuel prices.—A strong Sept. 30 cash and short-term investment
balance of $3.3 billion (including $540 million in restricted cash and
short- term investments), more than double the low of $1.6 billion last
April.—Improved access to the capital markets, underscored by a $300
million convertible debt transaction closed in September.—Cash
contributions of $173 million to the company`s pension plans, bringing the
year`s total pension contributions to more than $300 million.

One of the biggest challenges facing AMR, Arpey said, is an uncertain
revenue environment. There was an encouraging year-over-year increase in
quarterly yield, the first such increase since the first quarter of 2001.
American`s third quarter yield was 11.63 cents, up 2.5 percent from a
yield of 11.35 cents in the same period a year ago. But overall, the
revenue environment is disappointing, Arpey said, and is negating much of
the progress being made in lowering AMR`s costs. This, he said, makes all
the more important the cost principles of AMR`s Turnaround Plan, aimed at
lowering the company`s costs so it can compete effectively in an industry
marked by ever- expanding low-cost competition.

Still, Arpey said, AMR remains confident as it continues to implement
initiatives throughout this year and in 2004 that should have a positive
effect on the company`s financial performance.
For example:
—In 2004, American will benefit for the entire year from the revenue and
cost improvements associated with the realignment of its mid- continent
hubs at Chicago, Dallas/Fort Worth and St. Louis.—American has just
begun adding back coach seats on its Boeing 757 and Airbus A300 fleets,
both of which will be assigned to predominantly leisure markets. These
steps, and the reconfiguration of its Boeing 767-300s and 737-800s, should
increase American`s passenger revenue in 2004.—The recent launch of
American`s codeshare service with British Airways and the addition of
SWISS International to the oneworld alliance will expand American`s
network and revenue opportunities in the fourth quarter and beyond.—
American today announced an understanding with Kansas City and the state
of Missouri that retains portions of AA`s Kansas City maintenance base and
completes plans for the more efficient allocation of work among the
airline`s three maintenance bases, giving the company $100 million in
incentives from the base communities and on-going operating efficiencies.
—American`s position is enhanced by the focused efforts of its employees
as they pull together and win together, sharing in the value they help
create through the 38 million employee stock options issued earlier this
year.—Continued implementation of AMR`s $2 billion in strategic
initiatives. These include completing the simplification of AMR`s fleet
from 14 to 6 aircraft types when the last F-100 is retired in September,
and rolling out more self-service alternatives for customers at airports
and on-line.—A recent partnership with American Express to issue a
co-branded American Express Business ExtrAA Corporate Card that offers
rebates and rewards, at the corporate level, for air travel spending on
American.—Continued emphasis on customer service was recognized at the
10th Annual World Travel Awards, where American was named North America`s
Leading Airline for the sixth straight year and also won for World`s
Leading Economy Class and World`s Leading Airline Internet Site.
“These and other steps will give us added financial impetus in 2004 that
we will use to build on the momentum we are gathering this year,” Arpey
said. “We have begun a recovery process that should be helped
substantially in 2004 by many of the initiatives now underway.”

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