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AMR Corporation Reports Substantial Improvement

AMR Corporation ,  the parent company of American Airlines, Inc., today reported a net loss of $166 million for the first quarter, or $1.03 per share. This is a
marked improvement over last year’s first quarter, when AMR had a net loss
of $1.04 billion, or $6.68 per share. Continuing the financial momentum it established last year, and once again
making tremendous progress in driving down costs, AMR posted its third
straight quarter of positive operating income, excluding special items.
AMR achieved these results despite a very significant increase in fuel
prices, which increased its fuel expense $55 million from a year ago for
the quarter.

“We are never satisfied to be reporting net losses, but we are nonetheless
pleased with how far we have come over the past 12 months,” said Gerard
Arpey, AMR’s President and CEO. “It is also worth noting that the first
quarter is seasonally a difficult quarter—and that difficulty has been
compounded this year by extremely high fuel prices. The fact that despite
these challenges we had operating income in the quarter, generated solid
net income in March and continued to produce positive cash flows is

The company’s progress, Arpey said, “is a tribute to our employees and a
testament to the power of the changes we are making. We’re maintaining
great momentum under the Turnaround Plan,” he said, “but we recognize we
still have a lot of work to do in order to achieve sustained profitability
at acceptable levels.”

Year-over-year mainline unit costs in the first quarter dropped more than
16 percent, Arpey said. This followed two previous quarters of equally
impressive cost results. “Our success in removing costs from the operation
has paved the way for our improved results and has given us the ability to
stand and fight rather than retreat and shrink,” he said. “Without the
negative impact of rising fuel prices, our progress would have been even
more dramatic, with a year-over-year decline in mainline unit costs
(holding fuel prices at first quarter 2003 levels) of more than 17

Arpey noted that during the first quarter, AMR continued to make
significant progress under its four-point Turnaround Plan. These were
among the more notable achievements:


—In January, American held “Customer Strategy” sessions with employees
to develop ways of better serving the airline’s customers. Work teams,
which also include front-line employees, are reviewing, analyzing and
implementing ideas from these sessions.—AMR was able once again to
access the capital markets with two financing deals during the quarter,
raising $499 million.—American completed the addition of seats to its
757 and A300 fleets, allowing it to make more seats available in leisure
markets where customer demand is particularly high.—Service also was
enhanced by the shift of capacity to international markets, including the
start of Los Angeles-Tokyo service, American’s fifth route to Japan.—
Expanding on the efficiencies created by the restructuring of the DFW,
Chicago and St. Louis hubs, American solidified plans during the quarter
for the depeaking of the Miami hub on May 1.—At London Gatwick,
American is consolidating its operations with British Airways, thus
reducing costs and also letting American provide better connecting
opportunities and an overall better travel experience for its customers.
—Year to date, American has contributed $319 million to its defined
pension plans, including using its strengthened cash position to make an
early contribution of $147 million.—American, based on improvements in
customer service performance as measured by Survey America, is making the
first payout to the airline’s employees under the company’s new Annual
Incentive Plan—the third piece of a success-sharing package for
employees that also includes a Broad Based Employee Stock Plan and Profit