Substantially Increases Liquidity and Continues to Lay the Foundation for Network and Fleet of the Future Company Announces $2.9 billion in Additional Liquidity and New Aircraft Financing; Strengthens Network at Hub Cities and Makes New Strides on Fleet Renewal
AMR Corporation ~ September 17, 2009,
FORT WORTH, Texas, Sept. 17 /PRNewswire-FirstCall/ --
Editor's Note: AMR's Chairman and Chief Executive Officer, Gerard Arpey, and its Executive Vice President and Chief Financial Officer, Thomas Horton, will make a presentation to analysts regarding matters covered in this press release during a teleconference on Thursday, September 17 at 9 a.m. EDT. To access the Webcast of the teleconference, visit the Investor relations section of AA.com. Following the analyst call, they will hold a question-and-answer conference call for media. Reporters interested in listening to the presentation or participating in the media Q&A should call 817-967-1577.
AMR Corporation (NYSE:
AMR -
News) , the parent company of American Airlines and American Eagle, today announced a series of actions that will better position it to meet the industry's near-term economic challenges while continuing to build on its foundation and strategy for long-term success.
The Company has obtained a total of $2.9 billion in additional liquidity and new aircraft financing, announced plans to strengthen its network by reallocating capacity to hubs in Dallas/Fort Worth, Chicago, Miami and New York, and will enhance its fleet to better serve customers.
The $2.9 billion consists of: $1.3 billion in new liquidity, including $1 billion in cash from the advance sale of AAdvantage(TM) frequent flyer miles to Citi and $280 million in cash under a loan facility from GE Capital Aviation Services (GECAS) secured by owned aircraft; and $1.6 billion in sale-leaseback financing commitments from GECAS for Boeing 737s previously ordered by the Company. Regarding fleet renewal, American selected GE's GEnx-1B 74/75 engine for American's future 787 deliveries. The Company's progress with upcoming 737 deliveries and 787 engine selection are the latest examples of its commitment to renew its mainline fleet with more efficient aircraft and improve its product offerings.
American Eagle announced plans to enhance its fleet. Eagle plans to add a First Class cabin to its fleet of 25 Bombardier CRJ700 regional jets and also signed a letter of intent with Bombardier, Inc. to exercise options for the purchase of 22 additional CRJ700 aircraft for delivery beginning in the middle of 2010. The new CRJ700 aircraft will be fully financed.
"Today's announcement positions our company well to face today's industry challenges and allows us to remain focused on the future and on returning to profitability," said Gerard Arpey, AMR's Chairman and CEO. "I want to thank our strategic business partners, GE and Citi, for their roles in these important developments and for their vote of confidence in our company. We have a long history of meeting our obligations to stakeholders, and we believe our track record played no small role in today's accomplishments."
"AMR is an important and long time customer in an industry we know well," said Jeff Immelt, Chairman and Chief Executive Officer of GE. "GE is very proud to be supporting a great company and a venerable American institution on its path to success."
"Our agreement with AMR illustrates our belief in and commitment to the highly successful 22-year partnership between two great American brands and companies," said Citi Chief Executive Officer Vikram Pandit. "More than that, it also demonstrates our commitment to invest capital for the good of the economy, the customers and communities we serve, and shareholders. Both companies will benefit from this industry-leading relationship for years to come."
Arpey added that AMR will remain disciplined with seating capacity in 2010 as it continues to seek the right balance between supply and demand. AMR's mainline capacity for 2010 is expected to increase by approximately 1 percent versus 2009, with domestic capacity flat and international capacity up approximately 2.5 percent year over year. AMR expects consolidated capacity to rise approximately 1 percent in 2010 versus 2009. Excluding the impact of 2009 cancellations from the H1N1 virus and the 2010 launch of Chicago-Beijing service, which was deferred from 2009, mainline capacity in 2010 is expected to be roughly flat compared to 2009.
Because affected employees would be given opportunities to relocate, the Company anticipates the overall employee impact of the network changes to be minimal, and it intends to mitigate potential job impact as much as possible, including the use of voluntary options where applicable. Said Arpey, "Today's announcement is obviously positive for the Company and our employees, as this new financing will help us navigate through a tough environment and lay the groundwork for future success. But we must remain mindful of the fact that being consistently profitable is the key to ensuring our long-term future. We believe our network and fleet strategies serve as important building blocks toward that goal by making us more competitive today and for the long haul."
Liquidity
In spite of challenging capital markets, throughout 2009 AMR has succeeded in completing several financings that have bolstered its liquidity and improved its financial flexibility. Today, the Company announced it has raised an additional $1.3 billion in liquidity by:
Amending an existing agreement under which AMR will receive $1 billion in cash from the advance sale of AAdvantage frequent flyer miles to Citi, American's long-standing credit card partner. The advance sale of AAdvantage miles largely will be treated as a loan for accounting purposes. Citibank has the right to use the miles in equal monthly installments over the 2012-2016 timeframe. The transaction provides other benefits for Citi, including an extension of the co-branded credit card program.
Obtaining a loan facility to receive $280 million from GECAS, secured by owned aircraft in American's fleet. The Company has received $225 million in cash under the facility, which is currently secured by 10 owned aircraft. The Company expects to pledge three more owned aircraft to secure the facility in October 2009 and to receive $55 million in additional cash proceeds at that time.
Of the $1.3 billion in new liquidity announced today, all but $55 million will be included in the Company's third quarter 2009 cash and short-term investment balance. The $2.9 billion in total liquidity and financing commitments announced today are in addition to the nearly $1.3 billion the Company raised earlier this year through both private and public financings on owned aircraft and the financing of new 737s to be delivered through 2011.
Network
American and Eagle are refocusing their collective network strategy by bolstering areas of strength to best meet the needs of customers. This strategy primarily aims to eliminate unprofitable flying and reallocate resources to hubs in Dallas/Fort Worth, Chicago, Miami and New York. These four cities, along with Los Angeles, serve as the cornerstones of the Company's network. American and Eagle plan to build on previous investments in those critical markets, which are expected to offer important feed and global synergies for American's planned Joint Business with British Airways and Iberia, and its other oneworld partners.
Planned network changes for the Summer 2010 schedule versus Winter 2009/2010 include:
Chicago
The Company will add 57 daily flights at O'Hare International Airport for a total of 487 daily departures. Customers will have access to 12 new domestic destinations and three new international destinations.
American has reaffirmed its commitment to Chicago as its primary Asia gateway and will start new service to Beijing, China in Spring 2010. Other new destinations will include mainline service to Honolulu; Anchorage, Alaska; and Vancouver, British Columbia. Eagle will offer new service to Calgary, Alberta; Allentown, Pa.; Scranton-Wilkes Barre, Pa.; Charleston, W.Va.; Dayton, Ohio; Fargo, N.D.; Sioux Falls, S.D.; Jacksonville, Fla.; Lexington, Ky.; Harrisburg, Pa.; and Rapid City,S.D.
In addition, another service enhancement at O'Hare will occur as Eagle deploys most of its 25 CRJ700 aircraft, which will be reconfigured to offer a First Class cabin, in the Chicago market.
New York and Los Angeles
JFK will expand service to six new destinations, three international and three domestic. New mainline service includes Madrid, Spain; Manchester, England; San Jose, Costa Rica; and Austin, Texas. Eagle will introduce service to Columbus, Ohio and St Louis. Overall, JFK daily departures will grow by seven to 96, while two daily flights will be added at LaGuardia Airport. Combined, American and Eagle will offer nearly 200 daily flights at JFK and LaGuardia.
At Los Angeles, American and Eagle will add two daily flights for a total of 129. The Company's commitment to Los Angeles also complements its relationship with oneworld partners, which also have a significant presence in that market.
Dallas/Fort Worth
The Company remains committed to its largest hub and will add 19 daily departures for a total of 780. The increase will consist of 17 mainline jet departures. In addition, service to San Salvador, El Salvador will be re-instated after a two-year hiatus, bringing total non-stop destinations from DFW to 160.
Miami
At Miami, American and Eagle will add 23 additional flights for 294 total daily departures. Including changes that will take place by the end of 2009, Miami will serve four new domestic and three new international destinations. They are Birmingham, Ala.; Charleston, S.C.; Pensacola, Fla.; and Knoxville, Tenn., as well as North Eleuthera, Governors Harbour and Treasure Cay in the Bahamas.
St. Louis and Raleigh/Durham,N.C.
As a result of the Company's network strategy, American and its regional affiliates plan to reduce operations at St. Louis and Raleigh/Durham. At St. Louis, they will reduce daily departures by 46 and discontinue service to 20 destinations. After the reductions, American and Eagle will provide 36 departures per day to nine destinations.
In Raleigh/Durham, service to three destinations will be discontinued and a total of nine departures will be eliminated. Raleigh/Durham will continue to provide service to eight destinations with 44 departures per day.
Fleet
American and Eagle continued their commitment to renewing their respective fleets with more efficient aircraft and other improvements.
American has received a commitment for $1.6 billion in sale-leaseback financing from GECAS covering previously ordered 737s, as it continues to replace its MD-80 fleet with aircraft that are 35 percent more fuel efficient per seat. American plans to take delivery of 84 737s during 2009-2011, with 16 having already been delivered. This latest financing commitment means American has the ability to finance all of its remaining 737 deliveries through 2011 with traditional financing sources other than its existing backstop financing agreement.
American also announced it has selected GE Aviation as the provider of engines for its expected order of Boeing 787-9 Dreamliners. American previously announced plans to acquire 42 787-9s with the right to acquire 58 additional 787s, which Boeing estimates are 20 percent more fuel efficient than the widebodies they would replace. In addition to supporting widebody replacement, the 787s are expected to support the growth American expects in the future from its planned Joint Business with British Airways and Iberia.
The fleet enhancements also extend to the Company's regional fleet. Eagle's plan to add First Class cabins to its 25 CRJ700 aircraft, which are expected to be available for service beginning in mid-2010, would complement the planned addition of the 22 new CRJ700 aircraft, which would also offer two-class service.
For further information on the terms of the Citibank and GECAS financing transactions and other information, please refer to AMR Corporation's and American Airlines Inc.'s Current Reports on Form 8-K filed with the Securities Exchange Commission today.
Statements in this release contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. When used in this document, the words "expects", "plans," "anticipates," "indicates," "believes," "forecast," "guidance," "outlook", "may," "will," "should", "seeks", "targets" and similar expressions are intended to identify forward-looking statements. Similarly, statements that describe our objectives, plans or goals are forward-looking statements. Forward-looking statements include, without limitation, the Company's expectations concerning operations and financial conditions, including changes in capacity, revenues, and costs; future financing plans and needs; the amounts of the Company's unencumbered assets and other sources of liquidity; fleet plans; overall economic and industry conditions; plans and objectives for future operations; regulatory approvals and actions, including the Company's application for antitrust immunity with other one world alliance members; and the impact on the Company of its results of operations in recent years and the sufficiency of its 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 release are based upon information available to the Company on the date of this release. 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. This document includes forecasts of unit cost and revenue performance, fuel prices and fuel hedging, capacity and traffic estimates, other income/expense estimates, share count, statements regarding the Company's liquidity, and statements regarding expectations of regulatory approval of our application for antitrust immunity with other oneworld members, each of which is a forward-looking statement. Forward-looking statements are subject to a number of factors that could cause the Company's actual results to differ materially from the Company's expectations. The following factors, in addition to other possible factors not listed, could cause the Company's actual results to differ materially from those expressed in forward-looking statements: the materially weakened financial condition of the Company, resulting from its significant losses in recent years; weaker demand for air travel and lower investment asset returns resulting from the severe global economic downturn; the Company's need to raise substantial additional funds and its ability to do so on acceptable terms; the ability of the Company to generate additional revenues and reduce its costs; continued high and volatile fuel prices and further increases in the price of fuel, and the availability of fuel; the Company's substantial indebtedness and other obligations; the ability of the Company to satisfy existing financial or other covenants in certain of its credit agreements; changes in economic and other conditions beyond the Company's control, and the volatile results of the Company's operations; the fiercely and increasingly competitive business environment faced by the Company; potential industry consolidation and alliance changes; competition with reorganized carriers; low fare levels by historical standards and the Company's reduced pricing power; changes in the Company's corporate or business strategy; government regulation of the Company's business; conflicts overseas or terrorist attacks; uncertainties with respect to the Company's international operations; outbreaks of a disease (such as SARS, avian flu or the H1N1 virus) that affects travel behavior; labor costs that are higher than those of the Company's competitors; uncertainties with respect to the Company's relationships with unionized and other employee work groups; increased insurance costs and potential reductions of available insurance coverage; the Company's ability to retain key management personnel; potential failures or disruptions of the Company's computer, communications or other technology systems; losses and adverse publicity resulting from any accident involving the Company's aircraft; changes in the price of the Company's common stock; and the ability of the Company to reach acceptable agreements with third parties. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Annual Report on Form 10-K for the year ended December 31, 2008 (as updated by the Company's Current Report on Form 8-K filed on April 21, 2009), and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.
The daily quoted Brett Godfrey as telling an aviation gathering on Wednesday that Virgin Blue aimed to replace a large portion of its 65-strong 737 domestic fleet from 2011 onwards. Many of its existing planes are leased, The Age added.
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