American Airlines 2002 Annual Report Download - page 17

15
The number of free travel awards used for travel on American and American Eagle in 2002 was 3.5
million, representing approximately 8.1 percent of passengers boarded. Comparatively, the number of free travel
awards used for travel on American and American Eagle (excluding TWA LLC) was 2.7 million in 2001 and 2.8
million in 2000, representing approximately 7.4 percent of total passengers boarded in 2001 and 7 percent in 2000
(excluding TWA LLC). The Company believes displacement of revenue passengers is minimal given the
Company’s load factors, its ability to manage frequent flyer seat inventory, and the relatively low ratio of free award
usage to total passengers boarded.
H. Other Matters
Seasonality and Other Factors The Company’s results of operations for any interim period are not necessarily
indicative of those for the entire year, since the air transportation business is subject to seasonal fluctuations.
The results of operations in the air transportation business have also significantly fluctuated in the past in
response to general economic conditions. In addition, fears of terrorism or war, fare initiatives, fluctuations in fuel
prices, labor actions and other factors could impact this seasonal pattern. Unaudited quarterly financial data for
the two-year period ended December 31, 2002 is included in Note 18 to the consolidated financial statements.
No material part of the business of AMR and its subsidiaries is dependent upon a single customer or very
few customers. Consequently, the loss of the Company's largest few customers would not have a materially
adverse effect upon the Company.
Insurance The Company carries insurance for public liability, passenger liability, property damage and all-risk
coverage for damage to its aircraft, in amounts which, in the opinion of management, are adequate.
As a result of the September 11, 2001 events, aviation insurers have significantly reduced the amount of
insurance coverage available to commercial air carriers for liability to persons other than employees or passengers
for claims resulting from acts of terrorism, war or similar events (war-risk coverage). At the same time, they
significantly increased the premiums for such coverage as well as for aviation insurance in general.
The U.S. government has provided commercial war-risk insurance for U.S. based airlines until June 13,
2003 covering losses to employees, passengers, third parties and aircraft. The Company believes this insurance
coverage will be extended beyond June 13, 2003 because the Homeland Security Act provides for this insurance
to remain in place until August 31, 2003. In addition, the Secretary of Transportation may extend the policy until
December 31, 2003, at his discretion. See Part A of Item 1 for a discussion of recent legislation which would
provide for the extension of war-risk insurance through September 30, 2004.
In the event the commercial insurance carriers further reduce the amount of insurance coverage available
to the Company or significantly increase the cost of aviation insurance, or if the Government fails to renew the war-
risk insurance that it provides, the Company’s operations and/or financial position and results of operations would
be materially adversely affected.
Other Government Matters In time of war or during an unlimited national emergency or civil defense
emergency, American and other air carriers can be required to provide airlift services to the Air Mobility Command
under the Civil Reserve Air Fleet program (CRAF). The Air Mobility Command, which runs CRAF, has activated
stage one of CRAF as part of the U.S. government's build-up for military action in Iraq and has notified American
that it requires five airplanes including three 777s and two 767-300s with crews. American has been planning for
the potential activation of stage one of CRAF and is having no problems meeting its current CRAF obligations. If
the Air Mobility Command activates stage two of CRAF, American will be obligated to provide up to 18 additional
aircraft. In the event the Company has to provide a substantial amount of additional services, its operations could
be adversely impacted.
Available Information The Company makes its annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Securities and Exchange Act of 1934 available free of charge on its website, www.amrcorp.com, as soon as
reasonably practicable after such reports are electronically filed with the Securities and Exchange Commission.