American Airlines 1998 Annual Report Download - page 32

30
upgrading of certain hardware and software that supports its
IT Systems by June 30, 1999.
NON-IT SYSTEMS The Company has substantially com-
pleted the testing and validation phase of its critical Non-IT
Systems, such as aircraft avionics and flight simulators,
and expects to complete the remainder of the testing and
validation phase and the quality assurance review phase by
June 30, 1999. In addition, the Company expects to com-
plete the quality assurance review phase for substantially
all of its other Non-IT Systems by June 30, 1999. The
Company believes that its business, financial condition
and results of operations would not be materially
adversely affected, and that it has adequate contingency
plans to ensure business continuity if its other Non-IT
Systems are not Year 2000 ready.
THIRD PARTY SERVICES The Company relies on third
party service providers for many items, such as the Federal
Aviation Administration, the Department of Transportation,
airport authorities, telecommunications, electrical power,
and data and credit card transaction processing. Those ser-
vice providers depend on their hardware and software
systems and on interfaces with the Company’s IT Systems.
The Company has polled its critical service providers
regarding their Year 2000 plans and state of readiness. The
Company has received responses from approximately 68
percent of its critical service providers, other than providers
of discretionary services that will not materially adversely
affect the Company’s business, financial condition, and
results of operations. Most of the respondees assured the
Company that their software and hardware is or will be Year
2000 ready. To the extent practical, the Company intends to
seek alternatives for third party service providers that have
not responded to their Year 2000 Readiness by June 30, 1999.
COSTS OF YEAR 2000 PROJECT The Company expects to
incur significant hardware, software and labor costs, as well
as consulting and other expenses, in its Year 2000 Project.
third parties by The Sabre Group, are designed to operate
and properly manage dates beyond December 31, 1999
(Year 2000 Readiness). The Company has assessed (i) the
Company’s over 1,000 information technology and operat-
ing systems that will be utilized after December 31, 1999
(IT Systems); (ii) non-information technology systems,
including embedded technology, facilities, and other sys-
tems (Non-IT Systems); and (iii) the Year 2000 Readiness of
its critical third party service providers. The Year 2000
Project consists of six phases: (i) awareness, (ii) assessment,
(iii) analysis, design and remediation, (iv) testing and valida-
tion, (v) quality assurance review (to ensure consistency
throughout the Year 2000 Project) and (vi) creation of busi-
ness continuity strategy, including plans in the event of Year
2000 failures. In developing the Company’s proprietary soft-
ware analysis, remediation and testing methodology for Year
2000 Readiness, it studied the best practices of the Institute
of Electrical and Electronics Engineers and the British
Standards Institution.
IT SYSTEMS The Company has completed the first three
phases of the Year 2000 Project for all of its IT Systems. The
Company has completed the testing and validation phase
and quality assurance review phase for 94 percent of its
IT Systems, including its computer reservations and flight
operating systems that perform such “mission critical” func-
tions as passenger bookings, ticketing, passenger check-in,
aircraft weight and balance, flight planning and baggage and
cargo processing. As of February 28, 1999, approximately
38 percent of the IT Systems (including the computer
reservations systems) are already processing Year 2000
dates correctly.
Using dedicated testing environments and applying
rigorous test standards, the Company is actively testing its
other IT Systems to determine if they are Year 2000 ready or
if further remediation is necessary. The Company expects to
complete the testing and validation phase and quality assur-
ance review phase for its remaining IT Systems, and the