American Airlines 2002 Annual Report Download - page 31

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29
OPERATING EXPENSES
2002 Compared to 2001 The Company’s operating expenses decreased 3.8 percent, or $804 million, to $20.6
billion. American's operating expenses per ASM decreased 1.5 percent to 11.14 cents, including the impact of
special charges and U.S. Government grant of $625 million and $10 million, respectively, in 2002 and $1.2 billion
and $827 million, respectively, in 2001. The decrease in operating expenses and operating expenses per ASM is
largely due to cost savings initiatives implemented in late 2001 and 2002. Wages, salaries and benefits increased
4.5 percent, or $360 million, to $8.4 billion, reflecting (i) higher salaries, largely offset by a decrease in the average
number of equivalent employees and (ii) increases in the Company’s pension and health insurance costs, the latter
reflecting rapidly rising medical care and prescription drug costs. Aircraft fuel expense decreased 11.3 percent, or
$326 million, to $2.6 billion, primarily due to a 3.3 percent decrease in the Company’s fuel consumption and a 6.4
percent decrease in the Company’s average price per gallon. Depreciation and amortization decreased $38
million, or 2.7 percent, to $1.4 billion due primarily to discontinuing amortization of goodwill and route acquisition
costs in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets”. Commissions, booking fees and credit card expense decreased 25.4 percent, or $384 million, to $1.1
billion, due primarily to an 8.1 percent decrease in passenger revenues and commission structure changes
implemented in March 2002. Food service decreased 10.3 percent, or $80 million, to $698 million, due primarily to
the Company’s reduced operating schedule and reductions in the level of food service. Special charges for 2002
included approximately $658 million related to aircraft charges, $57 million in employee charges and $3 million in
facility charges. Special charges for 2001 included approximately $1.2 billion related to aircraft charges, $115
million in facility charges, $71 million in employee charges and $43 million in other charges. U.S. Government
grant includes a $10 million and $856 million benefit recognized for the reimbursement from the U.S. Government
under the Air Transportation Safety and System Stabilization Act (the Act) for 2002 and 2001, respectively. See a
further discussion of special charges and U.S. Government grant in Note 3 to the consolidated financial
statements. Other operating expenses decreased 12.9 percent, or $389 million, to $2.6 billion, due primarily to
decreases in contract maintenance work that American performs for other airlines, and decreases in travel and
incidental costs, advertising and promotion costs, and data processing expenses, which were partially offset by
higher insurance and security costs.