AMR Announces Early Debt Payment

| About: American Airlines (AAL)

Shares of American Airlines parent AMR Corp. closed up 4.3% at $23.25 Monday after the company announced it will prepay $545 million in aircraft debt in Q4. The payment will be in addition to $1.3 billion in scheduled debt payments for 2007. The prepayment is forecast to slash $25 million in annual net interest expense as well as release 16 aircraft used to secure the loan, which has been outstanding since December 2002 and is set to mature in December 2012. The company also announced that subsidiary American Eagle Airlines made a $32 million debt prepayment in Q3. AMR, which has a market cap of $5.76 billion, expects to close Q4 with total debt of $16.6 billion. "With our improving financial performance, we have bolstered our liquidity position and we have opportunistically strengthened our balance sheet by reducing debt," said AMR CFO Thomas W. Horton. Net interest expense for the first three quarters was approximately $130 million lower than in the year-ago period. AMR estimates that it closed Q3 with $5.7 billion in cash and short-term investments, up from $5.5 billion last year. The company was profitable in 2006 for the first time since 2000, but remains under pressure from shareholders. A week ago, Icelandic investment fund FL Group, which holds a 9.14% stake in AMR, urged the company to consider strategic alternatives, including the possible spinoff of the AAdavantage frequent-flier program.

Sources: Wall Street Journal, Forbes,, Reuters
Commentary: AMR Ready for Take Off - Barron'sAMR Urged to Spin Off Frequent Flyer ProgramRussell 1,000 Stocks With the Lowest PE/Growth Ratios
Stocks/ETFs to watch: AMR. Competitors: DAL, NWA, UAUA. ETFs: PPA, ITA
Earnings call transcript: AMR Q2 2007

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