AMR REPORTS SECOND QUARTER 2002 LOSS OF $465 MILLION BEFORE A SPECIAL ITEM

17 July 2002

AMR Corporation, the parent company of American Airlines, Inc., today reported a second quarter net loss of $465 million before a special item, or $3.00 per share. This compares with a net loss of $105 million before special items, or $0.68 per share, in the second quarter of 2001.

"We continued to see a very weak revenue environment in the second quarter," said Don Carty, AMR’s chairman and chief executive officer, "and although traffic has rebounded nicely since last fall, average fares are at 15-year lows, sharply depressing yields."

In response, the company has taken a number of steps, including trimming capacity, sharply reducing capital spending and lowering its operating costs. These actions resulted in AMR’s unit cost rising less than one percent year over year, despite 10.4 percent less capacity.

"We’ve made good progress on the cost side," Carty said, "and we’re not done. The company is in the midst of an exhaustive, top-to-bottom review of its business, and despite our financial challenges, our employees are doing an outstanding job of focusing on our customers and providing great service."

One result of all this effort, Carty said, is that during the second quarter, American completed nearly 99 percent of its scheduled flights, and more than 82 percent of American’s flights arrived on time, as reported to the Department of Transportation.

AMR’s second quarter results include a $30 million after-tax special charge ($0.19 per share) that stems from a provision of Congress’ economic stimulus package that changes the period for carrybacks of net operating losses (NOLs). This change allows companies to carry back 2001 and 2002 NOLs for five years, rather than two under the previous law, allowing AMR to more quickly recover its NOLs and thereby achieve a significant cash benefit. The extended NOL carryback does, however, result in the displacement of foreign tax credits taken in prior years which are now expected to expire before they can be used. As a result, the company recorded a charge to reflect the anticipated forfeiture of the foreign tax credits.

Including this special item, AMR reported a second quarter net loss of $495 million, or $3.19 per share.