American Airlines 1998 Annual Report Download - page 29

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convertible debentures were converted into AMR common
stock, resulting in an $834 million decrease in long-term
debt. Interest capitalized increased $10 million due to
additional aircraft purchase deposits. Interest income
increased approximately 29.1 percent, or $30 million, due
primarily to higher investment balances. Miscellaneous -
net for 1996 included a $21 million provision for a cash
payment representing American’s share of a multi-carrier
travel agency class action litigation settlement.
The Sabre Group
Year Ended December 31,
(dollars in millions) 1998 1997 1996
Revenues $ 2,306 $1,789 $ 1,625
Operating Expenses 1,956 1,476 1,295
Operating Income 350 313 330
Other Income (Expense) 21 11 (24)
Earnings Before Income Taxes $ 371 $324 $ 306
Average number of equivalent employees 11,400 8,500 7,900
REVENUES
1998 COMPARED TO 1997 Revenues for The Sabre
Group increased $517 million, or 28.9 percent. Electronic
travel distribution revenues increased approximately $120
million, or 10.0 percent, due to growth in bookings and
an overall increase in the average price per booking.
Revenues from information technology solutions increased
approximately $397 million, or 68.4 percent, primarily
due to the services performed under the information tech-
nology services agreement with US Airways, and Year
2000 testing and readiness enhancements for certain AMR
units and Canadian Airlines International Limited
(Canadian).
1997 COMPARED TO 1996 Revenues for The Sabre
Group increased 10.1 percent, or $164 million. Electronic
travel distribution revenues increased approximately
$99 million, or 8.9 percent, primarily due to growth in
booking fees. The growth in booking fees was due to an
increase in booking volumes primarily attributable to
international expansion in Europe and Latin America and
an overall increase in the price per booking charged to
associates. Revenues from information technology solu-
tions increased approximately $65 million, or 12.1
percent. Revenues from unaffiliated customers increased
approximately $39 million due to an increase in software
development, consulting and software license fee revenues.
Revenues from other AMR units increased $24 million due
to an increase in software development revenue and data
processing volumes, offset by a decrease in data network
revenue from the sale, in July 1996, of data network
equipment to a third party which began direct billing
certain items to American.
OPERATING EXPENSES
1998 COMPARED TO 1997 Operating expenses increased
32.5 percent, or $480 million, due primarily to increases
in salaries, benefits and employee-related costs, subscriber
incentive expenses, depreciation and amortization expense
and other operating expenses. Salaries, benefits and
employee-related costs increased due to an increase in the
average number of employees necessary to support The
Sabre Group’s business growth, and wage and salary
increases for existing employees. Subscriber incentive
expenses increased in order to maintain and expand The
Sabre Group’s travel agency subscriber base. The increase
in depreciation and amortization expense is primarily due
to the acquisition of information technology assets to sup-
port the US Airways’ contract, and normal additions.
Other operating expenses increased primarily due to
equipment maintenance costs, other software development
expenses related to The Sabre Group’s Year 2000 Readiness
program, and increased data processing costs, other ser-
vices purchased and facility costs.
AMR CORPORATION