Creditors to Help Airline Survive Outside Chapter 11

AMR Corp. reached another major milestone in its long-term cost restructuring efforts Thursday with the announcement that it has completed agreements on concessions with more than 100 suppliers, aircraft lessors, and other key creditors that will save AMR in excess of $175 million a year. These agreements will generate cumulative savings for the company of more than $1 billion.

A billion here, a couple billion there -- pretty soon it's 'real money'

During the past two years, AMR has identified approximately $2 billion a year in cost savings through a wide range of initiatives, and last month AMR's three major labor unions ratified new agreements which, when coupled with changes in pay plans for management and non-union employees, will reduce AMR's costs by an additional $1.8 billion a year.

The final piece of AMR's overall $4 billion-a-year cost-reduction effort was to reach agreement on meaningful concessions with AMR's suppliers, lessors, and other creditors.

"We are grateful to each supplier, lessor, and creditor who tangibly expressed support for our company by granting these significant concessions," said AMR Chief Executive Officer and President Gerard J. Arpey. "We continue to move through the most challenging period in our history, and our success is still far from assured, but reaching these cost-reduction agreements with our suppliers, lessors, and creditors is another step forward and further strengthens AMR as we seek to put the company on a solid financial footing."

To Pay With Stock

In a move that's not really designed to lift the spirits of AMR's present stockholders, AMR will issue up to three million shares of common stock to suppliers, lessors, and other creditors to enable them to share in the upside of the company's future in return for their support of AMR's cost reduction efforts.

FMI: www.amrcorp.com