AMR EXPECTS THIRD QUARTER LOSS, RETIRES MORE AIRCRAFT IN RESPONSE TO SLUGGISH ECONOMY

AMR Corp., the parent company of American Airlines, Inc. and TWA Airlines LLC, said today that it expects a third quarter loss considerably larger than its second quarter loss as it continues to feel the combined effects of a weak economic climate, high fuel prices and increased labor costs. The company said that it also expects a significant fourth quarter loss.

To further rein in capacity while demand is weak, the company announced today that it would retire five more Boeing 727 aircraft earlier than originally planned. These five aircraft, which would have been retired during 2003, will now be retired during first quarter 2002. This latest change means that American will retire its entire Boeing 727 fleet by the end of 2002, a full year ahead of the original plan.

This latest round of capacity cuts brings to 41 the number of active aircraft that AMR will retire early in response to poor economic conditions and falling demand. As a result, capacity for the combined American/TWA entity will be flat in 2001 and will fall by almost one and a half percent in 2002.

American will continue to accept aircraft that are already on firm order and currently scheduled for delivery through 2004. However, the company has passed on recent purchase rights for additional aircraft that would have been delivered in 2002 and 2003.

By not exercising these purchase rights, and trimming other spending, American has reduced its 2001-2002 capital-spending plan by almost $1.2 billion since the beginning of this year.

Tom Horton, AMR’s chief financial officer said the company is committed to sustaining its industry-leading financial strength. "We’ll continue to take prudent steps consistent with this very tough operating climate. American’s financial strength and flexibility are important assets at a time like this."