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United States Securities and Exchange Commission
 Washington, D.C. 20549
 
 Form 10-K/A
 (Amendment No. 1)
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2006
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File Number: 1-2691
 American Airlines, Inc.
  Delaware
    
    13-1502798(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer
Identification Number)
 4333 Amon Carter Blvd.
Fort Worth, Texas 76155
 (817) 963-1234
 
  Title of Each Class
    
    Name of Exchange on Which RegisteredNONE
    
    NONE
 NONE
 
 þ o
 o þ
 þ o
 þ
  o o þ
 o þ




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EXPLANATORY NOTE
   
    
    The line item Adjustment resulting from adoption of SFAS 158 that reduced
stockholders equity (deficit) by $998 million in 2006 was inadvertently included as a
component of the subtotal of total comprehensive income (loss) for 2006 in the
Consolidated Statement of Stockholders Equity (Deficit) in the original Form 10-K.
Total comprehensive income (loss) has been revised to exclude the line item
Adjustment resulting from adoption of SFAS 158, which is now shown below the Total
comprehensive income (loss) subtotal. Revised Total comprehensive income for 2006 is
$850 million.




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##### 



TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERSITEM 6. SELECTED CONSOLIDATED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. CONSOLIDATED FINANCIAL STATEMENTSITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESPART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES2007 Annual Incentive Plan for American, as Amended2007 Employee Profit Sharing PlanComputation of Ratio of Earnings to Fixed ChargesConsent of Independent Registered Public Accounting FirmCertification of Chief Executive OfficerCertification of Chief Financial OfficerCertification Pursuant to Section 906 
 PART I
 
 ITEM 1. BUSINESS
  ® ®
 Recent Events
    1




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Competition
 Domestic Air Transportation
 ®
   International Air Transportation
  2




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one one one one one
 Price Competition
  Regulation
 General
   3




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International
  Security
  Airline Fares
 Airport Access st
  4




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5




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Environmental Matters
      6




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Labor
   7




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Fuel
  Average
    
    Percent ofGallons
    
    
    
    
    
    Cost Per
    
    AmericansConsumed
    
    Total Cost
    
    Gallon
    
    OperatingYear
    
    (in millions)
    
    (in millions)
    
    (in cents)
    
    Expenses2004
    
    
    3,014
    
    
    
    3,653
    
    
    
    121.2
    
    
    
    19.22005
    
    
    2,948
    
    
    
    5,080
    
    
    
    172.3
    
    
    
    24.22006
    
    
    2,881
    
    
    
    5,784
    
    
    
    200.8
    
    
    
    26.7
   8




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Frequent Flyer Program
   Other Matters
 Seasonality and Other Factors
  Insurance
   Other Government Matters
 9




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Available Information www.aa.com www.aa.com www.aa.com
 10




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##### Table of Contents



ITEM 1A. RISK FACTORS
  As a result of significant losses in recent years, our financial condition has been materially
weakened.
  Our initiatives to generate additional revenues and to reduce our costs may not be adequate or
successful.
  Our business is affected by many changing economic and other conditions beyond our control, and our
results of operations tend to be volatile and fluctuate due to seasonality.
  
    
    actual or potential changes in international, national, regional and local economic,
business and financial conditions, including recession, inflation and higher interest
rates, war, terrorist attacks or political instability;
    
    changes in consumer preferences, perceptions, spending patterns or demographic trends;
    
    changes in the competitive environment due to industry consolidation and other factors;
    
    actual or potential disruptions to the air traffic control system;
    
    increases in costs of safety, security and environmental measures;
    
    outbreaks of diseases that affect travel behavior; or
    
    weather and natural disasters.
  Our indebtedness and other obligations are substantial and could adversely affect our business and
liquidity.
  11




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
    
    limit our ability to obtain additional financing for working capital, capital
expenditures, acquisitions and general corporate purposes, or adversely affect the terms on
which such financing could be obtained;
    
    require us to dedicate a substantial portion of our cash flow from operations to
payments on our indebtedness and other obligations, thereby reducing the funds available
for other purposes;
    
    make us more vulnerable to economic downturns;
    
    limit our ability to withstand competitive pressures and reduce our flexibility in
responding to changing business and economic conditions; or
    
    limit our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate.
 We may be unable to comply with our financial covenants.
  We are being adversely affected by increases in fuel prices, and we would be adversely affected by
disruptions in the supply of fuel.
     12




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The airline industry is fiercely competitive and we are subject to increasing competition.
     We compete with reorganized and reorganizing carriers, which may result in competitive
disadvantages for us or fare discounting.
   13




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Fares are at low levels and our reduced pricing power adversely affects our ability to achieve
adequate pricing, especially with respect to business travel.
  We may need to raise additional funds to maintain sufficient liquidity, but we may be unable to do
so on acceptable terms.
     Our corporate or business strategy may change.
  Our business is subject to extensive government regulation, which can result in increases in our
costs, limits on our operating flexibility, reductions in the demand for air travel, and
competitive disadvantages.
  14




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
    
    changes in law which affect the services that can be offered by airlines in particular
markets and at particular airports;
    
    the granting and timing of certain governmental approvals (including foreign government
approvals) needed for codesharing alliances and other arrangements with other airlines;
    
    restrictions on competitive practices (for example court orders, or agency regulations
or orders, that would curtail an airlines ability to respond to a competitor);
    
    the adoption of regulations that impact customer service standards (for example new
passenger security standards); or
    
    the adoption of more restrictive locally-imposed noise restrictions.
  We could be adversely affected by conflicts overseas or terrorist attacks.
   Our international operations could be adversely affected by numerous events, circumstances or
government actions beyond our control.
  15




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We could be adversely affected by an outbreak of a disease that affects travel behavior.
  Our labor costs are higher than our competitors.
  We could be adversely affected if we are unable to maintain satisfactory relations with any
unionized or other employee work group.
  Our insurance costs have increased substantially and further increases in insurance costs or
reductions in coverage could have an adverse impact on us.
    We may be unable to retain key management personnel.
  16




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We could be adversely affected by a failure or disruption of our computer, communications or other
technology systems.
  17




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ITEM 1B. UNRESOLVED STAFF COMMENTS
  ITEM 2. PROPERTIES
 Flight Equipment  Operating
  AverageAverage Seating
    
    
    
    
    
    Capital
    
    Operating
    
    
    
    
    
    AgeEquipment Type
    
    Capacity
    
    Owned
    
    Leased
    
    Leased
    
    Total
    
    (Years)American Airlines AircraftAirbus A300-600R
    
    
    267
    
    
    
    10
    
    
    
    
    
    
    
    24
    
    
    
    34
    
    
    
    17Boeing 737-800
    
    
    148
    
    
    
    67
    
    
    
    
    
    
    
    10
    
    
    
    77
    
    
    
    7Boeing 757-200
    
    
    187
    
    
    
    87
    
    
    
    6
    
    
    
    49
    
    
    
    142
    
    
    
    12Boeing 767-200 Extended Range
    
    
    167
    
    
    
    3
    
    
    
    11
    
    
    
    1
    
    
    
    15
    
    
    
    20Boeing 767-300 Extended Range
    
    
    220
    
    
    
    47
    
    
    
    
    
    
    
    11
    
    
    
    58
    
    
    
    13Boeing 777-200 Extended Range
    
    
    246
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    46
    
    
    
    6McDonnell Douglas MD-80
    
    
    136
    
    
    
    138
    
    
    
    72
    
    
    
    115
    
    
    
    325
    
    
    
    17Total
    
    
    
    
    
    
    398
    
    
    
    89
    
    
    
    210
    
    
    
    697
    
    
    
    14
   Flight Equipment  Non-Operating
  Capital
    
    OperatingEquipment
Type
    
    Owned
    
    Leased
    
    Leased
    
    TotalAmerican Airlines AircraftBoeing 777-200 Extended Range
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Boeing 767-200
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    2Boeing 767-200 Extended Range
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Fokker 100
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    4McDonnell Douglas MD-80
    
    
    13
    
    
    
    6
    
    
    
    6
    
    
    
    25Total
    
    
    15
    
    
    
    6
    
    
    
    13
    
    
    
    34
   18




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2012andEquipment Type
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    ThereafterAmerican Airlines AircraftAirbus A300-600R
    
    
    
    
    
    
    3
    
    
    
    3
    
    
    
    9
    
    
    
    9
    
    
    
    Boeing 737-800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Boeing 757-200
    
    
    14
    
    
    
    9
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    30Boeing 767-200 Extended Range
    
    
    
    
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    6Boeing 767-300 Extended Range
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8McDonnell Douglas MD-80
    
    
    1
    
    
    
    7
    
    
    
    4
    
    
    
    12
    
    
    
    21
    
    
    
    14215
    
    
    
    24
    
    
    
    9
    
    
    
    22
    
    
    
    33
    
    
    
    196
  Ground Properties
   19




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ITEM 3. LEGAL PROCEEDINGS
 Westways World Travel, Inc. v. AMR Corp., et al.
 Tam Travel et. al., v. Delta Air Lines et. al Paula Fausky d/b/a Timeless Travel v. American Airlines, et. al, Swope
Travel et al. v. Orbitz et. al Fausky Swope
 Miami-Dade County, Florida v. Advance Cargo
Services, Inc., et al.
 20




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##### Table of Contents



Harrington v. Delta Air Lines, Inc., et al.
 Ann M. Marcoux, et al., v.
American Airlines Inc., et al. (Sherry Cooper, et al. v. TWA Airlines, LLC, et al. Marcoux
 21




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##### Table of Contents



In re Air Cargo Shipping Services
Antitrust Litigation McKay v. Ace Aviation Holdings, et al
 In re International Air Transportation Surcharge Antitrust
Litigation
 Love Terminal Partners, L.P. et al. v. The City of Dallas,
Texas et al.)
 22




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Ronald A. Katz Technology Licensing, L.P. v. American Airlines,
Inc., et al.
 Kelley Kivilaan v. American Airlines, Inc.
 23




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  PART II
 ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS
  ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
  24




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ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Abbreviated pursuant to General Instructions I(2)(a) of Form 10-K).
 Forward-Looking Information
  Overview
     25




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26




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LIQUIDITY AND CAPITAL RESOURCES
 Cash, Short-Term Investments and Restricted Assets
  Significant Indebtedness and Future Financing
  Credit Ratings
  Credit Facility Covenants
  27




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Cash Flow Activity
   Working Capital
  Off Balance Sheet Arrangements
  28




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29




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Commitments
 Pension Obligations
 Other Commitments
  ®
   Year Ended December 31,2006
    
    
    2005Revenues:Regional Affiliates
    
    $
    2,502
    
    
    $
    2,148Other
    
    
    100
    
    
    
    88$
    2,602
    
    
    $
    2,236Expenses:Regional payments
    
    $
    2,390
    
    
    $
    2,238Other incurred expenses
    
    
    308
    
    
    
    277$
    2,698
    
    
    $
    2,515
 30




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Results of Operations
   31




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Revenues
 2006 Compared to 2005
 Year Ended December 31, 2006RASM
    
    Y-O-Y
    
    ASMs
    
    Y-O-Y(cents)
    
    Change
    
    (billions)
    
    ChangeDOT Domestic
    
    
    10.24
    
    
    
    9.3
    %
    
    
    111
    
    
    
    (3.2
    )%International
    
    
    10.30
    
    
    
    7.8
    
    
    
    63
    
    
    
    2.7DOT Latin America
    
    
    10.78
    
    
    
    13.7
    
    
    
    30
    
    
    
    (2.1
    )DOT Atlantic
    
    
    10.34
    
    
    
    2.6
    
    
    
    25
    
    
    
    4.6DOT Pacific
    
    
    8.49
    
    
    
    4.6
    
    
    
    8
    
    
    
    16.7
 ®
    32




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Operating Expenses
 2006 Compared to 2005
 Year ended(in millions)
    
    December 31,
    
    
    Change
    
    
    PercentageOperating Expenses
    
    2006
    
    
    from 2005
    
    
    ChangeWages, salaries and benefits
    
    $
    6,202
    
    
    $
    29
    
    
    
    0.5
    %Aircraft fuel
    
    
    5,784
    
    
    
    704
    
    
    
    13.9
    (a)Regional payments to AMR Eagle
    
    
    2,189
    
    
    
    141
    
    
    
    6.9
    (b)Other rentals and landing fees
    
    
    1,154
    
    
    
    9
    
    
    
    0.8Commissions, booking fees and
credit card expense
    
    
    1,076
    
    
    
    (37
    )
    
    
    (3.3
    )Depreciation and amortization
    
    
    967
    
    
    
    (10
    )
    
    
    (1.0
    )Maintenance, materials and repairs
    
    
    771
    
    
    
    (31
    )
    
    
    (3.9
    )Aircraft rentals
    
    
    587
    
    
    
    16
    
    
    
    2.8Food service
    
    
    500
    
    
    
    
    
    
    
    Other operating expenses
    
    
    2,445
    
    
    
    (154
    )
    
    
    (5.9
    )(c)Total operating expenses
    
    $
    21,675
    
    
    $
    667
    
    
    
    3.2
    %
 
 (a)
    
    Aircraft fuel expense increased primarily due to a 16.5 percent increase in the
Companys price per gallon of fuel (considering the benefit of a $55 million fuel
excise tax refund received in March 2005 and the impact of fuel hedging) offset by a
2.3 percent decrease in the Companys fuel consumption.(b)
    
    Regional payments to AMR Eagle increased primarily as a result of increased
capacity and fuel costs.(c)
    
    Other operating expenses decreased due to charges taken in 2005. Included in 2005
expenses was a $155 million charge for the retirement of 27 MD-80 aircraft, facilities
charges of $56 million as part of the Companys restructuring initiatives and an $80
million charge for the termination of an airport construction contract. These charges
were somewhat offset by a $37 million gain related to the resolution of a debt
restructuring and a $22 million credit for the reversal of an insurance reserve. The
2006 expenses were impacted by a $38 million increase in costs associated with
third-party maintenance contracts obtained by the Companys maintenance and engineering
group. 33




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Other Income (Expense)
  2006 Compared to 2005
 Income Tax Benefit
  34




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Outlook
  35




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ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk Sensitive Instruments and Positions
  Aircraft Fuel
 Foreign Currency
 Interest
 36




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Other
 37




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##### 



ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
 PageReport
of Independent Registered Public Accounting Firm
    
    
    39Consolidated
Statements of Operations
    
    
    40Consolidated
Balance Sheets
    
    
    41-42Consolidated
Statements of Cash Flows
    
    
    43Consolidated
Statements of Stockholders Equity (Deficit)
    
    
    44Notes
to Consolidated Financial Statements
    
    
    45-73
  38




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Report of Independent Registered Public Accounting Firm
 
      /
s/ Ernst & Young LLP
 
 39




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AMERICAN AIRLINES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004RevenuesPassenger
    
    $
    17,862
    
    
    $
    16,614
    
    
    $
    15,021Regional Affiliates
    
    
    2,502
    
    
    
    2,148
    
    
    
    1,876Cargo
    
    
    827
    
    
    
    784
    
    
    
    738Other revenues
    
    
    1,299
    
    
    
    1,111
    
    
    
    973Total operating revenues
    
    
    22,490
    
    
    
    20,657
    
    
    
    18,608ExpensesWages, salaries and benefits
    
    
    6,202
    
    
    
    6,173
    
    
    
    6,224Aircraft fuel
    
    
    5,784
    
    
    
    5,080
    
    
    
    3,653Regional payments to AMR Eagle
    
    
    2,189
    
    
    
    2,048
    
    
    
    1,700Other rentals and landing fees
    
    
    1,154
    
    
    
    1,145
    
    
    
    1,066Commissions, booking fees and credit card expense
    
    
    1,076
    
    
    
    1,113
    
    
    
    1,107Depreciation and amortization
    
    
    967
    
    
    
    977
    
    
    
    1,124Maintenance, materials and repairs
    
    
    771
    
    
    
    802
    
    
    
    821Aircraft rentals
    
    
    587
    
    
    
    571
    
    
    
    588Food service
    
    
    500
    
    
    
    500
    
    
    
    552Other operating expenses
    
    
    2,445
    
    
    
    2,599
    
    
    
    2,194Total operating expenses
    
    
    21,675
    
    
    
    21,008
    
    
    
    19,029Operating Income (Loss)
    
    
    815
    
    
    
    (351
    )
    
    
    (421
    )Other Income (Expense)Interest income
    
    
    275
    
    
    
    146
    
    
    
    64Interest expense
    
    
    (795
    )
    
    
    (712
    )
    
    
    (650
    )Interest capitalized
    
    
    29
    
    
    
    64
    
    
    
    77Related party interest  net
    
    
    (47
    )
    
    
    (12
    )
    
    
    (2
    )Miscellaneous  net
    
    
    (113
    )
    
    
    (27
    )
    
    
    111(651
    )
    
    
    (541
    )
    
    
    (400
    )Income (Loss) Before Income Taxes
    
    
    164
    
    
    
    (892
    )
    
    
    (821
    )Income tax
    
    
    
    
    
    
    
    
    
    
    Net Earnings (Loss)
    
    $
    164
    
    
    $
    (892
    )
    
    $
    (821
    )
  40




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AMERICAN AIRLINES, INC.
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2006
    
    
    2005AssetsCurrent AssetsCash
    
    $
    120
    
    
    $
    133Short-term investments
    
    
    4,527
    
    
    
    3,637Restricted cash and short-term investments
    
    
    468
    
    
    
    510Receivables, less allowance for uncollectible
accounts (2006 - $44; 2005 - $59)
    
    
    957
    
    
    
    967Inventories, less allowance for obsolescence
(2006 - $364; 2005 - $363)
    
    
    465
    
    
    
    474Other current assets
    
    
    213
    
    
    
    321Total current assets
    
    
    6,750
    
    
    
    6,042Equipment and PropertyFlight equipment, at cost
    
    
    18,913
    
    
    
    18,501Less accumulated depreciation
    
    
    7,389
    
    
    
    6,80511,524
    
    
    
    11,696Purchase deposits for flight equipment
    
    
    177
    
    
    
    277Other equipment and property, at cost
    
    
    4,932
    
    
    
    4,989Less accumulated depreciation
    
    
    2,589
    
    
    
    2,6372,343
    
    
    
    2,35214,044
    
    
    
    14,325Equipment and Property Under Capital LeasesFlight equipment
    
    
    1,743
    
    
    
    1,880Other equipment and property
    
    
    215
    
    
    
    1971,958
    
    
    
    2,077Less accumulated amortization
    
    
    1,094
    
    
    
    1,059864
    
    
    
    1,018Other AssetsRoute acquisition costs and airport
operating and gate lease rights, less
accumulated amortization (2006 - $317; 2005
- $290)
    
    
    1,143
    
    
    
    1,167Other assets
    
    
    3,049
    
    
    
    3,4894,192
    
    
    
    4,656Total Assets
    
    $
    25,850
    
    
    $
    26,041
  41




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AMERICAN AIRLINES, INC.  CONSOLIDATED BALANCE SHEETS
 December 31,2006
    
    
    2005Liabilities and Stockholders Equity (Deficit)Current LiabilitiesAccounts payable
    
    $
    987
    
    
    $
    998Accrued salaries and wages
    
    
    516
    
    
    
    603Accrued liabilities
    
    
    1,648
    
    
    
    1,602Air traffic liability
    
    
    3,782
    
    
    
    3,615Payable to affiliates
    
    
    1,071
    
    
    
    544Current maturities of long-term debt
    
    
    1,012
    
    
    
    829Current obligations under capital leases
    
    
    101
    
    
    
    138Total current liabilities
    
    
    9,117
    
    
    
    8,329Long-Term Debt, Less Current Maturities
    
    
    7,787
    
    
    
    8,785Obligations Under Capital Leases,
Less Current Obligations
    
    
    824
    
    
    
    922Other Liabilities and CreditsDeferred gains
    
    
    370
    
    
    
    422Pension and postretirement benefits
    
    
    5,340
    
    
    
    4,998Other liabilities and deferred credits
    
    
    3,478
    
    
    
    3,7649,188
    
    
    
    9,184Commitments and ContingenciesStockholders Equity (Deficit)Common stock  $1 par value;
1,000 shares authorized, issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    3,667
    
    
    
    3,406Accumulated other comprehensive loss
    
    
    (1,399
    )
    
    
    (1,087
    )Accumulated deficit
    
    
    (3,334
    )
    
    
    (3,498
    )(1,066
    )
    
    
    (1,179
    )Total Liabilities and Stockholders Equity (Deficit)
    
    $
    25,850
    
    
    $
    26,041
  42




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##### Table of Contents



AMERICAN AIRLINES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Cash Flow from Operating Activities:Net income (loss)
    
    $
    164
    
    
    $
    (892
    )
    
    $
    (821
    )Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:Depreciation
    
    
    835
    
    
    
    849
    
    
    
    976Amortization
    
    
    132
    
    
    
    128
    
    
    
    148Equity based stock compensation
    
    
    129
    
    
    
    
    
    
    
    Provisions for asset impairments and restructuring charges
    
    
    
    
    
    
    134
    
    
    
    21Gain on sale of investments
    
    
    
    
    
    
    
    
    
    
    (146
    )Redemption payments under operating leases for special
facility revenue bonds
    
    
    (28
    )
    
    
    (104
    )
    
    
    Change in assets and liabilities:Decrease (increase) in receivables
    
    
    11
    
    
    
    (146
    )
    
    
    (83
    )Decrease (increase) in inventories
    
    
    (5
    )
    
    
    (53
    )
    
    
    7Increase (decrease) in accounts payable
and accrued liabilities
    
    
    (206
    )
    
    
    158
    
    
    
    (102
    )Increase in air traffic liability
    
    
    168
    
    
    
    432
    
    
    
    377Increase in other liabilities and deferred credits
    
    
    380
    
    
    
    196
    
    
    
    32Other, net
    
    
    17
    
    
    
    30
    
    
    
    11Net cash provided by operating activities
    
    
    1,597
    
    
    
    732
    
    
    
    420Cash Flow from Investing Activities:Capital expenditures, including purchase deposits on
flight equipment
    
    
    (508
    )
    
    
    (381
    )
    
    
    (391
    )Net increase in short-term investments
    
    
    (890
    )
    
    
    (850
    )
    
    
    (313
    )Net decrease (increase) in restricted cash and short-term
investments
    
    
    42
    
    
    
    (32
    )
    
    
    49Proceeds from sale of equipment and property and
investments
    
    
    31
    
    
    
    30
    
    
    
    233Other
    
    
    (8
    )
    
    
    1
    
    
    
    (12
    )Net cash used for investing activities
    
    
    (1,333
    )
    
    
    (1,232
    )
    
    
    (434
    )Cash Flow from Financing Activities:Payments on long-term debt and capital lease obligations
    
    
    (955
    )
    
    
    (870
    )
    
    
    (1,472
    )Proceeds from:Reimbursement from construction reserve account
    
    
    145
    
    
    
    
    
    
    
    Issuance of long-term debt and special facility bond
transactions
    
    
    
    
    
    
    934
    
    
    
    1,030Securitization transactions
    
    
    
    
    
    
    133
    
    
    
    Funds transferred from affiliates, net
    
    
    533
    
    
    
    319
    
    
    
    455Net cash provided by (used in) financing activities
    
    
    (277
    )
    
    
    516
    
    
    
    13Net increase (decrease) in cash
    
    
    (13
    )
    
    
    16
    
    
    
    (1
    )Cash at beginning of year
    
    
    133
    
    
    
    117
    
    
    
    118Cash at end of year
    
    $
    120
    
    
    $
    133
    
    
    $
    117Activities Not Affecting CashFunding of construction and debt service reserve accounts
    
    $
    
    
    
    $
    284
    
    
    $
    Capital lease obligations incurred
    
    $
    
    
    
    $
    13
    
    
    $
    13
  43




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##### Table of Contents



AMERICAN AIRLINES, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 Additional
    
    
    AccumulatedCommon
    
    
    Paid-in
    
    
    Other Comprehensive
    
    
    AccumulatedStock
    
    
    Capital
    
    
    Loss
    
    
    Deficit
    
    
    TotalBalance at January 1, 2004
    
    $
    
    
    
    $
    3,023
    
    
    $
    (893
    )
    
    $
    (1,785
    )
    
    $
    345Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (821
    )
    
    
    (821
    )Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    129
    
    
    
    
    
    
    
    129Changes in fair value of
derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )Unrealized loss on investments
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (700
    )Transactions with Parent (Note 13)
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    250Balance at December 31, 2004
    
    
    
    
    
    
    3,273
    
    
    
    (772
    )
    
    
    (2,606
    )
    
    
    (105
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (892
    )
    
    
    (892
    )Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    (379
    )
    
    
    
    
    
    
    (379
    )Changes in fair value of
derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    58Unrealized gain on investments
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,207
    )Transactions with Parent (Note 13)
    
    
    
    
    
    
    133
    
    
    
    
    
    
    
    
    
    
    
    133Balance at December 31, 2005
    
    
    
    
    
    
    3,406
    
    
    
    (1,087
    )
    
    
    (3,498
    )
    
    
    (1,179
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164
    
    
    
    164Pension liability
    
    
    
    
    
    
    
    
    
    
    748
    
    
    
    
    
    
    
    748Changes in fair value of
derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    (62
    )
    
    
    
    
    
    
    (62
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    850Reclassification and
amortization of stock
compensation plans
    
    
    
    
    
    
    261
    
    
    
    
    
    
    
    
    
    
    
    261Adjustment resulting from
adoption of SFAS 158
    
    
    
    
    
    
    
    
    
    
    (998
    )
    
    
    
    
    
    
    (998
    )Balance at December 31, 2006
    
    $
    
    
    
    $
    3,667
    
    
    $
    (1,399
    )
    
    $
    (3,334
    )
    
    $
    (1,066
    )
  44




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Accounting Policies
 Basis of Presentation
 New Accounting Pronouncements
    Reclassifications
 Use of Estimates
 Restricted Cash and Short-term Investments
 45




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##### Table of Contents



1. Summary of Accounting Policies (Continued)
 Inventories
 Maintenance and Repair Costs
 Intangible Assets
 Statements of Cash Flows
 Measurement of Asset Impairments
 Equipment and Property
 Depreciable LifeAmerican jet aircraft and engines
    
    20  30 yearsMajor rotable parts, avionics and assemblies
    
    Life of equipment to which applicableImprovements to leased flight equipment
    
    Lesser of lease term or expected
useful lifeBuildings and improvements (principally on
leased land)
    
    5  30 years or term of lease,
including estimated renewal options
when renewal is economically
compelled at key airportsFurniture, fixtures and other equipment
    
    3  10 yearsCapitalized software
    
    3  10 years
 46




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##### Table of Contents



1. Summary of Accounting Policies (Continued)
    Regional Affiliates
 Passenger Revenue
 Frequent Flyer Program
 Income Taxes
 47




---



##### Table of Contents



1. Summary of Accounting Policies (Continued)
 Advertising Costs
 2. Restructuring Charges
  Aircraft
    
    
    Facility
    
    
    EmployeeCharges
    
    
    Exit Costs
    
    
    Charges
    
    
    Other
    
    
    TotalRemaining accrual at
January 1,
2004
    
    $
    194
    
    
    $
    56
    
    
    $
    26
    
    
    $
    
    
    
    $
    276Restructuring charges
    
    
    21
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    62Adjustments
    
    
    (20
    )
    
    
    (21
    )
    
    
    (11
    )
    
    
    
    
    
    
    (52
    )Non-cash charges
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )Payments
    
    
    (48
    )
    
    
    (9
    )
    
    
    (21
    )
    
    
    
    
    
    
    (78
    )Remaining accrual at
December 31,
2004
    
    
    126
    
    
    
    26
    
    
    
    35
    
    
    
    
    
    
    
    187Restructuring charges
    
    
    155
    
    
    
    19
    
    
    
    
    
    
    
    (37
    )
    
    
    137Adjustments
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    (2
    )Non-cash charges
    
    
    (119
    )
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    (82
    )Payments
    
    
    (12
    )
    
    
    (7
    )
    
    
    (35
    )
    
    
    
    
    
    
    (54
    )Remaining accrual at
December 31,
2005
    
    
    150
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    186Adjustments
    
    
    (3
    )
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    (19
    )Payments
    
    
    (21
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (22
    )Remaining accrual at
December 31,
2006
    
    $
    126
    
    
    $
    19
    
    
    $
    
    
    
    $
    
    
    
    $
    145
  Other
  48




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##### Table of Contents



3. Investments
  December 31,2006
    
    
    2005Overnight investments and time deposits
    
    $
    29
    
    
    $
    210Corporate and bank notes
    
    
    4,476
    
    
    
    3,340U. S. government agency mortgages
    
    
    7
    
    
    
    74U. S. government agency notes
    
    
    15
    
    
    
    13$
    4,527
    
    
    $
    3,637
  Due in one year or less
    
    $
    3,446Due between one year and three years
    
    
    1,074Due after three years
    
    
    7$
    4,527
   49




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##### Table of Contents



4. Commitments, Contingencies and Guarantees
    ®
    50




---



##### Table of Contents



4. Commitments, Contingencies and Guarantees (Continued)
        51




---



##### Table of Contents



5. Leases
  Capital
    
    
    OperatingLeases
    
    
    LeasesYear Ending December 31,2007
    
    $
    194
    
    
    $
    1,0762008
    
    
    236
    
    
    
    1,0182009
    
    
    175
    
    
    
    9222010
    
    
    139
    
    
    
    8542011
    
    
    142
    
    
    
    8502012 and thereafter
    
    
    653
    
    
    
    6,6891,539
    
    
    $
    11,409
    (1)Less amount representing interest
    
    
    614Present value of net minimum lease payments
    
    $
    925
 
 (1)
    
    As of December 31, 2006, included in Accrued liabilities and Other liabilities and
deferred credits on the accompanying consolidated balance sheet is approximately $1.4
billion relating to rent expense being recorded in advance of future operating lease
payments.   52




---



##### Table of Contents



5. Leases (Continued)
   6. Indebtedness
  December 31,2006
    
    
    2005Secured variable and fixed rate indebtedness due through 2021
(effective rates from 5.41% - 11.36% at December 31, 2006)
    
    $
    3,366
    
    
    $
    3,677Enhanced equipment trust certificates due through 2012
(rates from 3.86% - 12.00% at December 31, 2006)
    
    
    2,968
    
    
    
    3,4246.0% - 8.5% special facility revenue bonds due through 2036
    
    
    1,697
    
    
    
    1,697Credit facility agreement due through 2010
(effective rate of 8.60% at December 31, 2006)
    
    
    740
    
    
    
    788Other
    
    
    28
    
    
    
    288,799
    
    
    
    9,614Less current maturities
    
    
    1,012
    
    
    
    829Long-term debt, less current maturities
    
    $
    7,787
    
    
    $
    8,785
    53




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##### Table of Contents



6. Indebtedness (Continued)
     Four Quarter Period Ending
    
    Cash Flow Coverage RatioMarch 31, 2007
    
    
    1.30:1.00June 30, 2007
    
    
    1.30:1.00September 30, 2007
    
    
    1.35:1.00December 31, 2007
    
    
    1.40:1.00March 31, 2008
    
    
    1.40:1.00June 30, 2008
    
    
    1.40:1.00September 30, 2008
    
    
    1.40:1.00December 31, 2008
    
    
    1.40:1.00March 31, 2009
    
    
    1.40:1.00June 30, 2009 (and each fiscal quarter thereafter)
    
    
    1.50:1.00
   54




---



##### Table of Contents



6. Indebtedness (Continued)
     55




---



##### Table of Contents



7. Financial Instruments and Risk Management
   Fuel Price Risk Management
   56




---



##### Table of Contents



7. Financial Instruments and Risk Management (Continued)
  Foreign Exchange Risk Management
  Fair Values of Financial Instruments
  December 31,2006
    
    
    2005Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueSecured variable and
fixed rate indebtedness
    
    $
    3,366
    
    
    $
    3,418
    
    
    $
    3,677
    
    
    $
    3,613Enhanced equipment trust
certificates
    
    
    2,968
    
    
    
    3,068
    
    
    
    3,424
    
    
    
    3,4146.0% - 8.5% special
facility revenue bonds
    
    
    1,697
    
    
    
    1,978
    
    
    
    1,697
    
    
    
    1,673Credit facility agreement
    
    
    740
    
    
    
    743
    
    
    
    788
    
    
    
    791Other
    
    
    28
    
    
    
    28
    
    
    
    28
    
    
    
    28$
    8,799
    
    
    $
    9,235
    
    
    $
    9,614
    
    
    $
    9,519
 57




---



##### Table of Contents



8. Income Taxes
  Year Ended December 31,2006
    
    
    2005
    
    
    2004Statutory income tax provision (benefit)
    
    $
    57
    
    
    $
    (312
    )
    
    $
    (287
    )State income tax expense (benefit),
net of federal tax effect
    
    
    8
    
    
    
    (18
    )
    
    
    (13
    )Meal expense
    
    
    6
    
    
    
    7
    
    
    
    8Deferred tax assets not benefited
    
    
    (77
    )
    
    
    318
    
    
    
    286Other, net
    
    
    6
    
    
    
    5
    
    
    
    6Income tax benefit
    
    $
    
    
    
    $
    
    
    
    $
    
    58




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##### Table of Contents



8. Income Taxes (Continued)
  December 31,2006
    
    
    2005Deferred tax assets:Postretirement benefits other than pensions
    
    $
    1,067
    
    
    $
    1,109Rent expense
    
    
    470
    
    
    
    500Alternative minimum tax credit carryforwards
    
    
    544
    
    
    
    545Operating loss carryforwards
    
    
    2,179
    
    
    
    2,043Pensions
    
    
    661
    
    
    
    725Frequent flyer obligation
    
    
    320
    
    
    
    302Gains from lease transactions
    
    
    132
    
    
    
    155Other
    
    
    664
    
    
    
    588Total deferred tax assets
    
    
    6,037
    
    
    
    5,967Valuation allowance
    
    
    (1,773
    )
    
    
    (1,740
    )Net deferred tax assets
    
    
    4,264
    
    
    
    4,227Deferred tax liabilities:Accelerated depreciation and amortization
    
    
    (3,994
    )
    
    
    (3,886
    )Other
    
    
    (270
    )
    
    
    (341
    )Total deferred tax liabilities
    
    
    (4,264
    )
    
    
    (4,227
    )Net deferred tax liability
    
    $
    
    
    
    $
    
   59




---



##### Table of Contents



9. Share Based Compensation
         60




---



##### Table of Contents



9. Share Based Compensation (Continued)
  2005
    
    
    2004Net earnings (loss), as reported
    
    $
    (892
    )
    
    $
    (821
    )Add: Stock-based employee
compensation expense included
in reported net earnings (loss)
    
    
    127
    
    
    
    20Deduct: Total stock-based
employee compensation expense
determined under fair value
based methods for all awards
    
    
    (169
    )
    
    
    (84
    )Pro forma net earnings (loss)
    
    $
    (934
    )
    
    $
    (885
    )
 Stock Options/SSARs
   2006
    
    2005
    
    2004Expected volatility
    
    52.5% to 55.0
    %
    
    
    55.0
    %
    
    
    55.0
    %Expected term (in years)
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.0 to 4.5Risk-free rate
    
    4.35% to 5.07
    %
    
    3.71% to 3.98
    %
    
    2.79% to 3.69
    %Annual forfeiture rate
    
    
    10.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
 61




---



##### Table of Contents



9. Share Based Compensation (Continued)
  LTIP Plans
    
    
    The Pilot Plan and the 2003 PlanWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseOptions/SSARs
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding at January 1
    
    
    19,279,192
    
    
    $
    25.70
    
    
    
    39,773,837
    
    
    $
    8.35Granted
    
    
    796,250
    
    
    
    23.68
    
    
    
    18,830
    
    
    
    19.49Exercised
    
    
    (4,053,551
    )
    
    
    20.57
    
    
    
    (18,061,415
    )
    
    
    8.93Forfeited or Expired
    
    
    (419,563
    )
    
    
    22.03
    
    
    
    (171,818
    )
    
    
    6.55Outstanding at December
31
    
    
    15,602,328
    
    
    $
    27.03
    
    
    
    21,559,434
    
    
    $
    7.89Exercisable at December
31
    
    
    13,194,458
    
    
    $
    28.71
    
    
    
    20,015,199
    
    
    $
    7.64Weighted Average
Remaining Contractual
Term of Options
Outstanding (in years)
    
    
    4.1
    
    
    
    
    
    
    
    5.3Aggregate Intrinsic
Value of Options
Outstanding
    
    $
    49,943,248
    
    
    
    
    
    
    $
    481,669,842
   WeightedAverageGrant Date FairOptions/SSARs
    
    
    ValueOutstanding at January 1
    
    
    16,838,541
    
    
    $
    3.55Granted
    
    
    815,080
    
    
    
    10.90Vested
    
    
    (13,396,444
    )
    
    
    2.96Forfeited
    
    
    (305,072
    )
    
    
    4.54Outstanding at December
31
    
    
    3,952,105
    
    
    $
    6.98
  62




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##### Table of Contents



9. Share Based Compensation (Continued)
  Performance Share Awards
    WeightedAverageRemainingContractual
    
    
    AggregateAwards
    
    
    Term
    
    
    Intrinsic ValueOutstanding at January 1
    
    
    Reclassified from liability
awards
    
    
    5,804,705Granted
    
    
    7,094Settled
    
    
    (1,529,841
    )Forfeited or Expired
    
    
    (86,369
    )Outstanding at December 31
    
    
    4,195,589
    
    
    
    1.0
    
    
    $
    202,441,788
  63




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##### Table of Contents



9. Share Based Compensation (Continued)
 Deferred Awards
   WeightedAverageRemainingContractual
    
    
    AggregateShares
    
    
    Term
    
    
    Intrinsic ValueOutstanding at January 1
    
    
    2,324,561Reclassified from liability
awards
    
    
    1,262,382Granted
    
    
    92,600Settled
    
    
    (132,922
    )Forfeited or Expired
    
    
    (70,582
    )Outstanding at December 31
    
    
    3,476,039
    
    
    
    5.4
    
    
    $
    105,080,658
  Other Awards
   64




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##### Table of Contents



10. Retirement Benefits
      Effect of
    
    As Reported atPrior to adopting
    
    adopting
    
    December 31,SFAS 158
    
    SFAS 158
    
    2006Intangible asset (pension)
    
    $
    118
    
    
    $
    (118
    )
    
    $
    Accrued pension and postretirement
benefits liability
    
    
    4,657
    
    
    
    880
    
    
    
    5,537Total liabilities
    
    
    26,036
    
    
    
    880
    
    
    
    26,916Accumulated other comprehensive loss
    
    
    (458
    )
    
    
    (998
    )
    
    
    (1,456
    )Total stockholders equity (deficit)
    
    
    (68
    )
    
    
    (998
    )
    
    
    (1,066
    )
 65




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##### Table of Contents



10. Retirement Benefits (Continued)
  Pension Benefits
    
    
    Other Benefits2006
    
    
    2005
    
    
    2006
    
    
    2005Reconciliation of benefit obligationObligation at January 1
    
    $
    11,003
    
    
    $
    10,022
    
    
    $
    3,384
    
    
    $
    3,303Service cost
    
    
    399
    
    
    
    372
    
    
    
    78
    
    
    
    75Interest cost
    
    
    641
    
    
    
    611
    
    
    
    194
    
    
    
    197Actuarial (gain) loss
    
    
    (390
    )
    
    
    649
    
    
    
    (212
    )
    
    
    (12
    )Plan amendments
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    Benefit payments
    
    
    (605
    )
    
    
    (651
    )
    
    
    (161
    )
    
    
    (179
    )Obligation at December 31
    
    $
    11,048
    
    
    $
    11,003
    
    
    $
    3,256
    
    
    $
    3,384Reconciliation of fair value of plan assetsFair value of plan assets at January 1
    
    $
    7,778
    
    
    $
    7,335
    
    
    $
    161
    
    
    $
    151Actual return on plan assets
    
    
    1,063
    
    
    
    779
    
    
    
    31
    
    
    
    11Employer contributions
    
    
    329
    
    
    
    315
    
    
    
    171
    
    
    
    178Benefit payments
    
    
    (605
    )
    
    
    (651
    )
    
    
    (161
    )
    
    
    (179
    )Fair value of plan assets at December 31
    
    $
    8,565
    
    
    $
    7,778
    
    
    $
    202
    
    
    $
    161Funded status at December 31
    
    $
    (2,483
    )
    
    $
    (3,225
    )
    
    $
    (3,054
    )
    
    $
    (3,223
    )Amounts recognized in the
consolidated balance sheetsCurrent liability
    
    $
    8
    
    
    $
    251
    
    
    $
    187
    
    
    $
    Noncurrent liability
    
    
    2,475
    
    
    
    2,012
    
    
    
    2,867
    
    
    
    2,984$
    2,483
    
    
    $
    2,263
    
    
    $
    3,054
    
    
    $
    2,984Amounts recognized in
other comprehensive lossNet actuarial loss (gain)
    
    $
    1,310
    
    
    $
    
    
    
    $
    70
    
    
    $
    Prior service cost (credit)
    
    
    153
    
    
    
    
    
    
    
    (77
    )
    
    
    $
    1,463
    
    
    $
    
    
    
    $
    (7
    )
    
    $
    For plans with accumulated benefit
obligations exceeding the fair value
of plan assetsProjected benefit obligation (PBO)
    
    $
    11,048
    
    
    $
    11,003
    
    
    $
    
    
    
    $
    Accumulated benefit obligation (ABO)
    
    
    10,153
    
    
    
    10,041
    
    
    
    
    
    
    
    Accumulated postretirement benefit
obligation (APBO)
    
    
    
    
    
    
    
    
    
    
    3,256
    
    
    
    3,384Fair value of plan assets
    
    
    8,565
    
    
    
    7,778
    
    
    
    202
    
    
    
    161ABO less fair value of plan assets
    
    
    1,588
    
    
    
    2,263
    
    
    
    
    
    
    
    
 66




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##### Table of Contents



10. Retirement Benefits (Continued)
   Pension Benefits2006
    
    
    2005
    
    
    2004Components of net periodic benefit costDefined benefit plans:Service cost
    
    $
    399
    
    
    $
    372
    
    
    $
    358Interest cost
    
    
    641
    
    
    
    611
    
    
    
    567Expected return on assets
    
    
    (669
    )
    
    
    (658
    )
    
    
    (569
    )Amortization of:Transition asset
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )Prior service cost
    
    
    16
    
    
    
    16
    
    
    
    14Unrecognized net loss
    
    
    81
    
    
    
    52
    
    
    
    58Net periodic benefit cost for
defined benefit plans
    
    
    467
    
    
    
    392
    
    
    
    427Defined contribution plans
    
    
    150
    
    
    
    154
    
    
    
    156$
    617
    
    
    $
    546
    
    
    $
    583
 Other Benefits2006
    
    
    2005
    
    
    2004Components of net periodic benefit costService cost
    
    $
    78
    
    
    $
    75
    
    
    $
    75Interest cost
    
    
    194
    
    
    
    197
    
    
    
    202Expected return on assets
    
    
    (15
    )
    
    
    (14
    )
    
    
    (11
    )Amortization of:Prior service cost
    
    
    (10
    )
    
    
    (10
    )
    
    
    (10
    )Unrecognized net loss
    
    
    1
    
    
    
    2
    
    
    
    8Net periodic benefit cost
    
    $
    248
    
    
    $
    250
    
    
    $
    264
  67




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10. Retirement Benefits (Continued)
 Pension Benefits
    
    Other Benefits2006
    
    2005
    
    2006
    
    2005Weighted-average
assumptions used to
determine benefit
obligations as of
December 31Discount rate
    
    
    6.00
    %
    
    
    5.75
    %
    
    
    6.00
    %
    
    
    5.75
    %Salary scale (ultimate)
    
    
    3.78
    
    
    
    3.78
    
    
    
    
    
    
    
    
 Pension Benefits
    
    Other Benefits2006
    
    2005
    
    2006
    
    2005Weighted-average assumptions
used to determine net
periodic benefit cost for the
years ended December 31Discount rate
    
    
    5.75
    %
    
    
    6.00
    %
    
    
    5.75
    %
    
    
    6.00
    %Salary scale (ultimate)
    
    
    3.78
    
    
    
    3.78
    
    
    
    
    
    
    
    Expected return on plan assets
    
    
    8.75
    
    
    
    9.00
    
    
    
    8.75
    
    
    
    9.00
   2006
    
    2005Long duration bonds
    
    
    37
    %
    
    
    37
    %U.S. stocks
    
    
    30
    
    
    
    31International stocks
    
    
    21
    
    
    
    21Emerging markets stocks and bonds
    
    
    6
    
    
    
    6Alternative (private) investments
    
    
    6
    
    
    
    5Total
    
    
    100
    %
    
    
    100
    %
  68




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10. Retirement Benefits (Continued)
 Pre-65 Individuals
    
    Post-65 Individuals2006
    
    2005
    
    2006
    
    2005Assumed health care
trend rates at
December 31Health care cost
trend rate assumed
for next year
    
    
    9.0
    %
    
    
    4.5
    %
    
    
    9.0
    %
    
    
    9.0
    %Rate to which the
cost trend rate is
assumed to decline
(the ultimate trend
rate)
    
    
    4.5
    %
    
    
    4.5
    %
    
    
    4.5
    %
    
    
    4.5
    %Year that the rate
reaches the
ultimate trend rate
    
    
    2010
    
    
    
    
    
    
    
    2010
    
    
    
    2010
  One Percent
    
    One PercentIncrease
    
    DecreaseImpact on 2006 service and interest cost
    
    $
    26
    
    
    $
    (24
    )Impact on postretirement benefit obligation
as of December 31, 2006
    
    $
    243
    
    
    $
    (235
    )
   Pension
    
    Other2007
    
    $
    543
    
    
    $
    1872008
    
    
    584
    
    
    
    1962009
    
    
    689
    
    
    
    2042010
    
    
    681
    
    
    
    2142011
    
    
    662
    
    
    
    2232012  2016
    
    
    3,843
    
    
    
    1,163
 69




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##### Table of Contents



11. Intangible Assets
   2006Accumulated
    
    
    Net BookCost
    
    
    Amortization
    
    
    ValueAmortized intangible assets:Airport operating rights
    
    $
    449
    
    
    $
    217
    
    
    $
    232Gate lease rights
    
    
    182
    
    
    
    100
    
    
    
    82Total
    
    $
    631
    
    
    $
    317
    
    
    $
    314
 2005Accumulated
    
    
    Net BookCost
    
    
    Amortization
    
    
    ValueAmortized intangible assets:Airport operating rights
    
    $
    449
    
    
    $
    200
    
    
    $
    249Gate lease rights
    
    
    179
    
    
    
    90
    
    
    
    89Total
    
    $
    628
    
    
    $
    290
    
    
    $
    338
  70




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##### Table of Contents



12. Accumulated Other Comprehensive Loss
  UnrealizedUnrealized
    
    
    Gain/(Loss)Gain/(Loss)
    
    
    on Derivative
    
    
    IncomePension
    
    
    on
    
    
    Financial
    
    
    TaxLiability
    
    
    Investments
    
    
    Instruments
    
    
    Benefit
    
    
    TotalBalance at January 1, 2004
    
    $
    (956
    )
    
    $
    2
    
    
    $
    25
    
    
    $
    36
    
    
    $
    (893
    )Current year net change
    
    
    129
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    125Reclassification of derivative
financial instruments into
earnings
    
    
    
    
    
    
    
    
    
    
    (89
    )
    
    
    
    
    
    
    (89
    )Change in fair value of
derivative financial
instruments
    
    
    
    
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    85Balance at December 31, 2004
    
    
    (827
    )
    
    
    (2
    )
    
    
    21
    
    
    
    36
    
    
    
    (772
    )Current year net change
    
    
    (379
    )
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    (373
    )Reclassification of derivative
financial instruments into
earnings
    
    
    
    
    
    
    
    
    
    
    (50
    )
    
    
    
    
    
    
    (50
    )Change in fair value of
derivative financial
instruments
    
    
    
    
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    108Balance at December 31, 2005
    
    
    (1,206
    )
    
    
    4
    
    
    
    79
    
    
    
    36
    
    
    
    (1,087
    )Current year net change
    
    
    748
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    748Reclassification of derivative
financial instruments into
earnings
    
    
    
    
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    (88
    )Change in fair value of
derivative financial
instruments
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    26Adjustment resulting from
adoption of SFAS 158
    
    
    (998
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (998
    )Balance at December 31, 2006
    
    $
    (1,456
    )
    
    $
    4
    
    
    $
    17
    
    
    $
    36
    
    
    $
    (1,399
    )
  71




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13. Transactions with Related Parties
    .
    72




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##### Table of Contents



14. Segment Reporting
   Year Ended December 31,2006
    
    
    2005
    
    
    2004DOT Domestic
    
    $
    14,086
    
    
    $
    13,190
    
    
    $
    12,155DOT Latin America
    
    
    4,024
    
    
    
    3,568
    
    
    
    3,115DOT Atlantic
    
    
    3,409
    
    
    
    3,115
    
    
    
    2,678DOT Pacific
    
    
    971
    
    
    
    784
    
    
    
    660Total consolidated revenues
    
    $
    22,490
    
    
    $
    20,657
    
    
    $
    18,608
  15. Quarterly Financial Data (Unaudited)
  First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter2006Operating revenues
    
    $
    5,327
    
    
    $
    5,959
    
    
    $
    5,830
    
    
    $
    5,374Operating income (loss)
    
    
    52
    
    
    
    420
    
    
    
    220
    
    
    
    123Net earnings (loss)
    
    
    (106
    )
    
    
    280
    
    
    
    1
    
    
    
    (11
    )2005Operating revenues
    
    $
    4,737
    
    
    $
    5,296
    
    
    $
    5,471
    
    
    $
    5,153Operating income (loss)
    
    
    (44
    )
    
    
    153
    
    
    
    (25
    )
    
    
    (435
    )Net earnings (loss)
    
    
    (171
    )
    
    
    41
    
    
    
    (161
    )
    
    
    (601
    )
  73




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  ITEM 9A. CONTROLS AND PROCEDURES
 Managements Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
   Internal Control  Integrated Framework .
  /s/ Gerard J. ArpeyGerard J. ArpeyChairman, President and Chief Executive Officer/s/ Thomas W. HortonThomas W. HortonExecutive Vice President and Chief Financial Officer
 74




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     .
  /
s/ Ernst & Young LLP
 
 75




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##### Table of Contents



PART III
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  ITEM 11. EXECUTIVE COMPENSATION
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  2006
    
    
    2005Audit Fees
    
    $
    2,550
    
    
    $
    2,220Audit Related Fees
    
    
    373
    
    
    
    348Tax Fees
    
    
    35
    
    
    
    111Total
    
    $
    2,958
    
    
    $
    2,679
 Audit Fees:Consists of fees billed for professional services rendered for the audit of the
Companys consolidated financial statements, the review of the interim condensed consolidated
financial statements included in quarterly reports, services that are normally provided by Ernst
& Young in connection with statutory and regulatory filings or engagements and attest services,
except those not required by statute or regulation. In 2006 and 2005 this includes completion
of the internal control audit required by Sarbanes-Oxley
Section 404.Audit-Related Fees:Consists of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of the Companys consolidated
financial statements and are not reported under Audit Fees. These services include employee
benefit plan audits, accounting consultations and auditing work on proposed transactions, attest
services that are not required by statute or regulation, and consultations concerning financial
accounting and reporting standards.Tax Fees:Consists of tax compliance/preparation and other tax services. Tax
compliance/preparation consists of fees billed for professional services related to federal,
state and international tax compliance, assistance with tax audits and appeals, expatriate tax
services, and assistance related to the impact of mergers, acquisitions and divestitures on tax
return preparation. Other tax services consist of fees billed for other miscellaneous tax
consulting and planning.
 76




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##### Table of Contents



Audit Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
  PART IV
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  PageReport of Independent Registered Public Accounting Firm
    
    
    39Consolidated Statements of Operations for the Years Ended
December 31, 2006, 2005 and 2004
    
    
    40Consolidated Balance Sheets at December 31, 2006 and 2005
    
    
    41-42Consolidated Statements of Cash Flows for the Years Ended
December 31, 2006, 2005 and 2004
    
    
    43Consolidated Statements of Stockholders Equity (Deficit) for the
Years Ended December 31, 2006, 2005 and 2004
    
    
    44Notes to Consolidated Financial Statements
    
    
    45-73
 (2)
    
    The following financial statement schedule is filed as part of this report:
 PageSchedule II Valuation and Qualifying Accounts and
Reserves
    
    
    82
 Schedules not included have been omitted because they are not applicable or because the
required information is included in the consolidated financial statements or notes
thereto.(3)
    
    Exhibits required to be filed by Item 601 of Regulation S-K. (Where the amount of
securities authorized to be issued under any of Americans long-term debt agreements does
not exceed 10 percent of Americans assets, pursuant to paragraph (b)(4) of Item 601 of
Regulation S-K, in lieu of filing such as an exhibit, American hereby agrees to furnish
to the Commission upon request a copy of any agreement with respect to such long-term
debt.)
 77




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##### Table of Contents



Exhibit
 10.1
    
    Information Technology Services Agreement, dated July 1, 1996, between
American and The Sabre Group, Inc., incorporated by reference to Exhibit 10.6 to The
Sabre Group Holdings, Inc.s Registration Statement on Form S-1, file number
333-09747. Confidential treatment was granted as to a portion of this
document.10.2
    
    Bylaws of American Airlines, Inc., amended January 22, 2003, incorporated
by reference to Americans report on Form 10-K for the year
ended December 31, 2002.10.3
    
    American Airlines, Inc. 2004 Employee Profit Sharing Plan, incorporated
by reference to Exhibit 10.1 to AMRs report on Form 10-Q for the quarterly period
ended March 31, 2004.10.4
    
    American Airlines, Inc. 2004 Annual Incentive Plan, incorporated by
reference to Exhibit 10.2 to AMRs report on Form 10-Q for the quarterly period
ended March 31, 2004.10.5
    
    American Airlines, Inc. 2005 Annual Incentive Plan, incorporated by
reference to Exhibit 99.1 to AMRs current report on Form 8-K dated February 4,
2005.10.6
    
    American Airlines, Inc. 2006 Annual Incentive Plan, incorporated by
reference to Exhibit 99.1 to AMRs current report on Form 8-K dated February 10,
2006.10.7
    
    Amended and Restated Executive Termination Benefits Agreement between
AMR, American Airlines and Gerard J. Arpey dated May 21, 1998, incorporated by
reference to Exhibit 10.61 to AMRs report on Form 10-K for the year ended December
31, 1998.10.8
    
    Amended and Restated Executive Termination Benefits Agreement between
AMR, American Airlines and Peter M. Bowler, dated May 21, 1998, incorporated by
reference to Exhibit 10.63 to AMRs report on Form 10-K for the year ended December
31, 1998.10.9
    
    Amended and Restated Executive Termination Benefits Agreement between
AMR, American Airlines and Daniel P. Garton, dated May 21, 1998, incorporated by
reference to Exhibit 10.66 to AMRs report on Form 10-K for the year ended December
31, 1998.10.10
    
    Amended and Restated Executive Termination Benefits Agreement between
AMR, American Airlines and Monte E. Ford, dated November 15, 2000, incorporated by
reference to Exhibit 10.74 to AMRs report on Form 10-K for the year ended December
31, 2000.10.11
    
    Amended and Restated Executive Termination Benefits Agreement between
AMR, American Airlines and Henry C. Joyner, dated January 19, 2000, incorporated by
reference to Exhibit 10.74 to AMRs report on Form 10-K for the year ended December
31, 1999.10.12
    
    Amended and Restated Executive Termination Benefits Agreement between
AMR, American Airlines and Charles D. MarLett, dated May 21, 1998, incorporated by
reference to Exhibit 10.70 to AMRs report on Form 10-K for the year ended December
31, 1998.10.13
    
    Amended and Restated Executive Termination Benefits Agreement between
AMR, American Airlines and William K. Ris, Jr., dated October 20, 1999, incorporated
by reference to Exhibit 10.79 to AMRs report on Form 10-K for the year ended
December 31, 1999.
 78




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##### Table of Contents



Exhibit10.14
    
    Amended and Restated Executive Termination Benefits Agreement between AMR,
American Airlines and Ralph L. Richardi dated September 26, 2002, incorporated
by reference to Exhibit 10.54 to AMRs report on Form 10-K for the year ended
December 31, 2002.10.15
    
    Amended and Restated Executive Termination Benefits Agreement between
AMR, American Airlines and Gary F. Kennedy dated February 3, 2003, incorporated by
reference to Exhibit 10.55 to AMRs report on Form 10-K for the year ended December
31, 2002.10.16
    
    Amended and Restated Executive Termination Benefits Agreement between
AMR, American Airlines and Robert W. Reding dated May 20, 2003, incorporated by
reference to Exhibit 10.71 to AMRs report on Form 10-K for the year ended December
31, 2003.10.17
    
    Employment agreement between AMR, American Airlines and William K. Ris,
Jr. dated November 11, 1999, incorporated by reference to Exhibit 10.73 to AMRs
report on Form 10-K for the year ended December 31, 2003.10.18
    
    Employment agreement between AMR, American Airlines and Robert W. Reding
dated May 21, 2003, incorporated by reference to Exhibit 10.94 to AMRs report on
Form 10-K for the year ended December 31, 2004.10.19
    
    Amended and Restated Executive Termination Benefits Agreement between
AMR, American Airlines and Jeffrey J. Brundage dated April 1, 2004, incorporated by
reference to Exhibit 10.5 to AMRs report on Form 10-Q for the quarterly period
ended March 31, 2004.10.20
    
    Supplemental Executive Retirement Program for Officers of American
Airlines, Inc., as amended on October 15, 2002, incorporated by reference to Exhibit
10.60 to AMRs report on Form 10-K for the year ended December 31, 2002.10.21
    
    Aircraft Purchase Agreement by and between American Airlines, Inc. and
The Boeing Company, dated October 31, 1997, incorporated by reference to Exhibit
10.48 to AMR Corporations report on Form 10-K for the year ended December 31, 1997.
Confidential treatment was granted as to a portion of this document.10.22
    
    Letter Agreement dated November 17, 2004 and Purchase Agreement
Supplements dated January 11, 2005 between the Boeing Company and American Airlines,
Inc., incorporated by reference to Exhibit 10.99 to AMRs report on Form 10-K for
the year ended December 31, 2004. Confidential treatment was granted as to a portion
of these agreements.10.23
    
    Letter Agreement between the Boeing Company and American Airlines, Inc.
dated May 5, 2005, incorporated by reference to Exhibit 10.7 to AMRs report on Form
10-Q for the quarterly period ended June 30, 2005. Confidential treatment was
granted as to a portion of this agreement.
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##### Table of Contents



Exhibit10.24
    
    Credit Agreement dated as of December 17, 2004, among American Airlines, Inc.,
AMR Corporation, the Lenders from time to time party thereto, Citicorp USA,
Inc., as Administrative Agent for the Lenders, JPMorgan Chase Bank, N.A., as
Syndication Agent and Citigroup Global Markets Inc. and J.P. Morgan Securities
Inc., as Joint Lead Arrangers and Joint Book-Running Managers, incorporated by
reference to Exhibit 10.103 to AMRs report on Form 10-K for the year ended
December 31, 2004.10.25
    
    2007 Annual Incentive Plan for American, as amended February 21, 2007.10.26
    
    American Airlines 2007 Employee Profit Sharing Plan.12
    
    Computation of ratio of earnings to fixed charges for the years ended
December 31, 2006, 2005, 2004, 2003, and 2002.23
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a).32
    
    Certification pursuant to Rule 13a-14(b) and section 906 of the
Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of
title 18, United States Code).
 80




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##### Table of Contents



SIGNATURES
  American Airlines, Inc.By:
    
    /s/ Gerard J. ArpeyGerard J. ArpeyChairman, President and Chief Executive Officer(Principal Executive Officer)




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##### Table of Contents



AMERICAN AIRLINES, INC.
Schedule II  Valuation and Qualifying Accounts and Reserves
(in millions)
 Changescharged to
    
    
    
    
    
    
    
    
    
    Sales,Balance
    
    statement
    
    
    
    
    
    
    
    
    
    retire-
    
    Balanceat
    
    of
    
    
    
    
    
    Write-offs
    
    ments
    
    atbeginning
    
    operations
    
    
    
    
    
    (net of
    
    and
    
    end ofof year
    
    accounts
    
    Payments
    
    recoveries)
    
    transfers
    
    yearYear ended December 31, 2006Allowance for
obsolescence of inventories
    
    $
    363
    
    
    $
    21
    
    
    $
    
    
    
    $
    
    
    
    $
    (20
    )
    
    $
    364Allowance for
uncollectible accounts
    
    
    59
    
    
    
    3
    
    
    
    
    
    
    
    (25
    )
    
    
    7
    
    
    
    44Reserves for environmental
remediation costs
    
    
    40
    
    
    
    2
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    33Year ended December 31, 2005Allowance for
obsolescence of inventories
    
    $
    329
    
    
    $
    28
    
    
    $
    
    
    
    $
    
    
    
    $
    6
    
    
    $
    363Allowance for
uncollectible accounts
    
    
    58
    
    
    
    6
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    59Reserves for environmental
remediation costs
    
    
    62
    
    
    
    (18
    )
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    40Allowance for insurance
receivable
    
    
    22
    
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Year ended December 31, 2004Allowance for
obsolescence of inventories
    
    $
    374
    
    
    $
    35
    
    
    $
    
    
    
    $
    
    
    
    $
    (80
    )
    
    $
    329Allowance for
uncollectible accounts
    
    
    61
    
    
    
    8
    
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    58Reserves for environmental
remediation costs
    
    
    72
    
    
    
    (2
    )
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    62Allowance for insurance
receivable
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22
 82