American Airlines 2002 Annual Report Download - page 32

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2001 Compared to 2000 The Company’s operating expenses increased 17 percent, or approximately $3.1
billion. However, excluding TWA LLC’s expenses for the period April 10, 2001 through December 31, 2001, the
Company’s expenses would have increased approximately $888 million versus 2000. In addition to the specific
explanations provided below, the significant decline in passenger traffic resulting from the terrorist acts of
September 11, 2001 and resulting reduced operating schedule caused a favorable impact on certain passenger-
related operating expenses, including aircraft fuel, other rentals and landing fees, commissions to agents and
booking and credit card fees, and food service. American's cost per ASM increased 9.4 percent to 11.46 cents,
excluding TWA LLC and including the impact of special charges and U.S. Government grant. The increase in
American’s cost per ASM was driven partially by a reduction in ASMs due to the Company’s More Room
Throughout Coach program. Removing the impact of this program, American’s cost per ASM grew approximately
6.3 percent, excluding TWA LLC and including the impact of special charges and U.S. Government grant.
Wages, salaries and benefits increased 18.4 percent, or $1.3 billion, and included approximately $920 million
related to the addition of TWA. The remaining increase of approximately $329 million related primarily to an
increase in the average number of equivalent employees and contractual wage rate and seniority increases that
are built into the Company’s labor contracts. During 2001, the Company recorded approximately $300 million in
additional wages, salaries and benefits related primarily to the Company’s new contracts with its flight attendants
and Transport Workers Union work groups. This was mostly offset by a $328 million decrease in the provision for
profit-sharing as compared to 2000. Aircraft fuel expense increased 15.8 percent, or $393 million, and included
approximately $322 million related to the addition of TWA LLC. The remaining increase in aircraft fuel expense
was due to a 4.2 percent increase in the Company’s average price per gallon, partially offset by a 3.7 percent
decrease in the Company’s fuel consumption, excluding TWA LLC. Depreciation and amortization expense
increased 16.8 percent, or $202 million, due primarily to the addition of new aircraft and an increase of
approximately $88 million related to TWA. Commissions to agents and booking and credit card fees decreased
8.6 percent, or $142 million, and included approximately $174 million related to TWA LLC. The decrease in
commissions, booking fees and credit card expense was due primarily to a 13.2 percent decrease in passenger
revenues, excluding TWA LLC, and the benefit from commission structure changes implemented in 2000. Other
rentals and landing fees increased $198 million, or 19.8 percent, and included approximately $130 million related
to the addition of TWA LLC. The remaining increase of $68 million was due primarily to higher facilities rent and
landing fees across the Company’s system. Aircraft rentals increased $222 million, or 36.6 percent, due primarily
to the addition of TWA LLC aircraft. Other operating expenses increased 11.4 percent, or $308 million, and
included approximately $244 million related to TWA LLC. Special charges included approximately $1.2 billion
related to aircraft charges, $115 million in facility exit costs, $71 million in employee charges and $43 million in
other charges. U.S. Government grant included an $856 million benefit recognized for the reimbursement from
the U.S. Government under the Act. See a further discussion of special charges and U.S. Government grant in
Note 3 to the consolidated financial statements.
OTHER INCOME (EXPENSE)
Other income (expense) consists of interest income and expense, interest capitalized and miscellaneous - net.
2002 Compared to 2001 Other expense increased $244 million, or 85.3 percent, to $530 million due primarily to
the following: Interest income decreased $39 million, or 35.5 percent, to $71 million due primarily to decreases in
interest rates. Interest expense increased $147 million, or 27.3 percent, to $685 million resulting primarily from the
increase in the Company’s long-term debt of approximately $2.6 billion. Interest capitalized decreased $58 million,
or 40.3 percent, to $86 million due primarily to a decrease in purchase deposits for flight equipment.
2001 Compared to 2000 Interest income decreased $44 million, or 28.6 percent, resulting from lower investment
balances throughout most of 2001. Interest expense increased $71 million, or 15.2 percent, resulting primarily
from the increase in long-term debt of approximately $4.2 billion. Miscellaneous – net decreased $70 million due
primarily to Miscellaneous – net in 2001 including a $45 million gain from the settlement of a legal matter related to
the Company’s 1999 labor disruption, offset by the write-down of certain investments held by the Company. This
compares to Miscellaneous-net in 2000 including a $57 million gain on the sale of the Company’s warrants to
purchase 5.5 million shares of priceline.com Incorporated (priceline) common stock and a gain of approximately
$41 million from the recovery of start-up expenses from the Canadian Airlines International Limited (Canadian)
services agreement.