American Airlines 2002 Annual Report Download - page 68

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66
6. Commitments, Contingencies and Guarantees (Continued)
In addition, in its aircraft financing agreements, the Company generally indemnifies the financing parties,
trustees acting on their behalf and other related parties against liabilities (including certain taxes) resulting from the
financing, manufacture, design, ownership, operation and maintenance of the aircraft regardless of whether these
liabilities (or taxes) relate to the negligence of the indemnified parties.
The Company is not able to estimate the potential amount of any liability resulting from the indemnities
discussed above.
Under certain contracts with third parties, the Company indemnifies the third party against legal liability
arising out of an action by the third party, or certain other parties. The terms of these contracts vary and the
potential exposure under these indemnities cannot be determined. Generally, the Company has liability insurance
protecting the Company for its obligations it has undertaken under these indemnities.
AMR and American have event risk covenants in approximately $2.1 billion of indebtedness as of
December 31, 2002. These covenants permit the holders of such indebtedness to receive a higher rate of return
(between 75 and 650 basis points above the stated rate) if a designated event, as defined, should occur and the
credit rating of such indebtedness is downgraded below certain levels within a certain period of time. No
designated event, as defined, has occurred as of December 31, 2002.
Miami-Dade County is currently investigating and remediating various environmental conditions at the
Miami International Airport (MIA) and funding the remediation costs through landing fees and various cost
recovery methods. American and AMR Eagle have been named as potentially responsible parties (PRPs) for the
contamination at MIA. During the second quarter of 2001, the County filed a lawsuit against 17 defendants,
including American, in an attempt to recover its past and future cleanup costs (Miami-Dade County, Florida v.
Advance Cargo Services, Inc., et al. in the Florida Circuit Court). In addition to the 17 defendants named in the
lawsuit, 243 other agencies and companies were also named as PRPs and contributors to the contamination.
American’s and AMR Eagle’s portion of the cleanup costs cannot be reasonably estimated due to various factors,
including the unknown extent of the remedial actions that may be required, the proportion of the cost that will
ultimately be recovered from the responsible parties, and uncertainties regarding the environmental agencies that
will ultimately supervise the remedial activities and the nature of that supervision. In addition, the Company is
subject to environmental issues at various other airport and non-airport locations for which it has accrued $92
million at December 31, 2002. Management believes, after considering a number of factors, that the ultimate
disposition of these environmental issues is not expected to materially affect the Company’s consolidated financial
position, results of operations or cash flows. Amounts recorded for environmental issues are based on the
Company’s current assessments of the ultimate outcome and, accordingly, could increase or decrease as these
assessments change.
The Company is involved in certain claims and litigation related to its operations. In the opinion of
management, liabilities, if any, arising from these claims and litigation would not have a material adverse effect on
the Company’s consolidated financial position, results of operations, or cash flows.