Eric Briggle – Managing Director Investor Relations Gerard J. Arpey – Chairman of the Board, President & Chief Executive Officer Thomas W.

Horton – Chief Financial Officer, Executive Vice President Finance

Michael Linenberg – Merrill Lynch James Higgins – Solebury Research/Soleil Securities Gary Chase – Lehman Brothers Frank Boroch – Bear Stearns William Greene – Morgan Stanley Jamie Baker – J.P. Morgan Kevin Crissey – UBS Michael Derchin – FTN Midwest Securities Ray Neidl – Calyon Securities

Good afternoon everyone. Thank you for joining us on today’s earning call.

During the call Gerard Arpey will provide an overview of our performance and outlook and then Tom Horton will provide the details regarding our earnings for the first quarter along with some perspective on the remainder of 2008. After that we’ll be happy to take your questions.

In the interest of time, please limit your questions to one with a follow up. Our earnings release earlier today contained highlights of our financial results for the quarter.

This release continued to provide additional information regarding any performance and costs guidance which should assist you in having accurate information about our performance and outlook. In addition, the earnings release contains reconciliation of any non-GAAP financial measurements that we may discuss.

This release along with the webcast of today’s call is available on the investor relations section of www.AA.com. Finally, let me note that many of our comments today regarding our outlook for revenue and costs as well as forecasts of capacity, traffic, load factor, fuel costs, fleet span and other matters will constitute forward-looking statements.

These matters are subject to a number of factors that could cause actual results to differ from our expectations. These factors include changes in economic, business and financial conditions, high fuel prices and other factors referred to in our SEC filing including our 2007 annual report on Form 10K.

With that, I’ll turn the call over to Gerard.

Good afternoon everyone. As you have seen in the press release we issued this morning we loss $328 million in the first quarter or $1.32 per share after six straight profitable quarters this is our second consecutive quarter we’ve loss and it was $409 million worse than last year.

It is a disappointing result and it is indicative of the challenges we’re facing in 2008. I want to take some time to talk about some of these challenges and I also want to reinforce some of the steps we’re taking to mitigate some of the impacts associated with them.

Top of mind for the industry is obviously the price of fuel. Fuel expense for the quarter was $2.1 billion.

A $665 million fuel price increase versus last year. For the quarter fuel prices represented about 35% of our total operating costs.

Not only are prices high but they are also extremely volatile. Every dollar per barrel increase in the price of fuel equates to increased expense of about $80 million on an annualized basis through AMR earnings.

In 14 of 60 trading days during the quarter the price per barrel of jet fuel changed by at least $3 so that equates to about a quarter of a billion dollars annual swing in earnings and this uncertainty obviously presents a challenge in planning for the future but this of course has become the new reality for American and for the industry and there’s certainly no silver bullet to that problem. The bottom line is that fuel prices look to present a very significant challenge for us and the industry for the foreseeable future.

While our fuel bill is an obvious problem there are other challenges that we faced this year including operational disruptions driven by the weather and the ATC system and growing concerns about the economy. In terms of operations, last year’s first quarter set a record for us in terms of weather disruptions but unfortunately this year was almost as challenging.

Severe weather disruptions in Dallas and Chicago drove weather cancellations for the quarter totaling about 3% of our scheduled departures. As all of you unfortunately know we had about 450 cancellations during the quarter due to the first round of inspections of wiring bundles on our MD80s that added to our under fly.

Last week we had about 3,000 cancellations relating to precise compliance with this airworthiness directive. Because we believe this week that no safety of flight issue was involved we applied for an alternative means of compliance with the FAA that would have avoided the grounding but we were not successful.

And, as I mentioned last week in two press conferences we continue to work in good faith with the FAA to demonstrate our ongoing commitment to ensure full technical compliance to their directive. I’d like to once again thank our customers for their patience and their employees for their perseverance and their dedication to our customers during some very difficult times.

Like everyone else, we’re obviously keeping a close eye on the health of the economy. Our unit revenue for the quarter held up well versus last year but we are mindful of what seems like a growing chorus of concern about the country’s economic growth or lack therefore and certainly our unit revenue is in no way keeping pace with the extraordinary increase in the price of oil.

Fortunately, we have been working hard for a number of years to strengthen our balance sheet reducing and refinancing debt and building our cash reserves so we believe we are in far better shape to endure a slowing economy coupled with record fuel prices than we would have been just a few years ago. We were very opportunistic in taking these actions while the capital markets were more stable and favorable and in hindsight I really can’t over estimate the importance of those decisions given the conditions we now face.

That doesn’t mean we’re standing back in fact, we are taking further action to mitigate risk and improve our results. We have been very conservative in managing our capacity for the past several years and I believe our growth has been very disciplined relative to some in the industry.

We entered the year with a conservative capacity plan for 2008 and revised our capacity forecast downward in our 10K in February. Today, as we outlined in our press release we’re taking additional steps to pull down domestic capacity in the back half of this year and we now expect domestic mainline capacity to be down 4.6% versus 2007, a decrease of nearly five points versus what was reflected in previous guidance.

The volatility of fuel makes long term planning more difficult but we think this capacity decrease is a sensible move that will allow us to better weather fuel prices and the deteriorating economic environment. We have also put in place a management and support staff hiring freeze.

We’re clamping down on all of our capital spending moving forward and taking prudent steps in light of the economic environment that we’re faced with. We are also picking up the pace on our fleet renewal strategy.

We’ve announced our intent to accelerate 14 more 737 800 aircraft. We now expect to have 34 deliveries of these aircraft in 2009 and 36 deliveries in 2010.

In light of what our fuel prices are and the fuel efficiency of the MD80 versus the 737 it makes good sense to accelerate this process. We are very focused on improving our dependability metrics so we are initiating several dependability and maintenance programs to help bolster our dependability of our operation across our maintenance and engineering organization.

We’ll have some targeted additions scheduled ground time to our operations to create some more cushion around our system among other things. Before I turn things over to Tom, I’d like to also mention that as part of our ongoing strategic review we also announced today our plan to divest American Beacon Advisors.

I think many of you who have followed the company for a long time know that we have been working on this for quite some time and we have now found the right partner and have an agreement that reflect full value for AMR shareholders and results in a remaining equity stake for our shareholders for further upside potential in the future. With that I’ll turn things over to Tom to take you through some of the details and the outlook for the balance of the year.

Good afternoon everyone. The first quarter was a challenging time for the airline industry and for AMR.

In the first quarter we loss $328 million versus a profit of $81 million in the first quarter of last year. This is as Gerard said, our second straight loss and highlights the steep climb facing AMR and the industry as a whole in 2008.

As Gerard pointed out we’re finishing several hurdles this year. Of course, the events of last week were a very trying time for our company and for our customers and we’ve been working very hard to get the operation back to normal and take care of our customers.

But, we’ve got other big challenges to face down this year. Fuel prices seem to be hitting record highs every few days and some experts thing the US economy has already entered a recession.

Clearly, there is a lot of uncertainty facing the industry today but it’s also important to point out that we have put ourselves in a much better position to face these uncertainties than just a few years ago by repairing our balance sheet and bolstering our liquidity position. That said, we’re not sitting around hoping that oil prices drop or that the economy holds up and, as I’ll talk about later we’ve outlined several steps that will help us better handle these uncertainties including capacity reductions, acceleration of our fleet replacement plan and costs and capital controls.

Before I move to the numbers, let me first point out that we’ve reclassified the marketing component of the sales of Advantage Miles from passenger revenue in to other revenue. We’ve outlined this change in our earnings release for the current quarter as well as the aggregate impact for the second, third and fourth quarters of 2007.

I’ll point out that the first quarter was helped by the timing of the Easter holiday. That said, our first quarter main line unit revenue increased by 6.5% year-over-year on record low factors and improved yield while unit revenue for our consolidated system was up 6.7%.

In our domestic markets first quarter main line unit revenue increased by 6.9% compared to last year on 3.5% less capacity. Unit revenue improvements were particularly strong in Dallas, Chicago and St.

Louis. On the international front we saw solid unit revenue growth in the first quarter versus 2007 on both yield and load factor improvement.

We saw significant unit revenue improvements in the Pacific and Latin entities with the Atlantic entity about flat versus last year. Pacific revenue performance was strong with significant yield improvements and load factors that were flat versus last year on a 2.5% capacity decline.

Atlantic first quarter unit revenues were down slightly versus last year on increased capacity. We saw higher load factors but yields were lower by 1.6% versus last year.

We’re making good progress on our International progress enhancements. As many of you know, we completed our business seat upgrade on all of our 767 300s at the end of last year.

We’ve also standardized the 777 fleet around our flagship fleet and the next generation business class seat will be on the entire 777 fleet by midyear. We shifted both of our DFW to London flights from Gatwick to Heathrow and we look forward to starting service from JFK to Barcelona and Milan as well as Chicago to Moscow in the coming months.

Finally, Latin America continued its positive performance in the quarter as unit revenue increased year-over-year despite an increasingly competitive environment in some markets. In particular we experienced very strong unit revenue growth on our Central and South American routes as well as routes in to Mexico.

And, we were pleased to announce last week that Mexicana will be joining the One World Alliance in 2009 as we continue to grow our alliance by adding quality airlines. Turning to other revenue items, first quarter passenger revenue for our regional affiliate operation increased by 4.1% compared to last year and showed a unit revenue improvement versus last year of 9.8%.

Total cargo revenue increased by 7% year-over-year. As in the last three quarters our freight and mail traffic is lower year-over-year however, we’re seeing significantly higher yields that have offset these declines.

Finally, in the first quarter our other revenue line was $522 million an increase of 6.1% year-over-year. We’ve made a lot of progress in this category and for the quarter we saw significant improvement in Admiral’s Club revenue, change fees and baggage fees.

To sum up, total RASM was up 6.9% on a consolidated basis versus last year. While this is strong unit revenue growth by historical standards unfortunately, it is far from sufficient to offset the cost increases facing us with the escalation of fuel prices and that’s reflected in our first quarter main line unit costs which increased 15.8% year-over-year.

On a consolidated basis our unit costs was up 15.7% year-over-year. Our fuel price came in at $2.74 consolidated, a staggering increase of 48% raising our consolidated fuel cost in the quarter by $655 million more than we would have paid at last year’s prices.

While we continue to focus on conservation, it is clear that more must be done. With today’s earnings we’re also announcing our intention to accelerate new aircraft deliveries under our fleet replacement plan.

We now expect to take delivery of 34 737 800 aircraft in 2009 and 36 more in 2010. Given that the 737 800 is about 25% more fuel efficient than the MD 80 and in light of high fuel prices, it makes sense to accelerate the replacement of our MD 80s.

Because of the results of our recent efforts to improve our balance sheet along with the significant flexibility of our Boeing contract, we believe we can meet the fleet renewal needs to the company in a way that makes a whole lot of financial sense. Excluding fuel our netted costs rose 3.3% main line and 3.6% consolidated.

The majority of this increase was driven by reduced flying due to severe weather disruptions in the first quarter. However, we’re also experiencing costs headwinds on a variety of fronts during the quarter.

These included higher material and repair costs, added distribution costs associated with the increase in passenger revenue and higher depreciation expense as a result of our fleet replacement strategy. In light of reduced capacity we’ll likely face some unit cost headwinds moving forward and we intend to keep a close eye on our cost structure as we progress throughout the year.

Moving to non-operating costs, on a consolidated basis these were better year-over-year by $26 million in the quarter driven primarily by reduced interest expense associated with our balance sheet repair. Now, turning to the balance sheet we ended the quarter with $4.9 billion leaving $426 million in restricted cash.

Keep in mind that while this is about $900 million lower than a year ago we paid off about $2.3 billion of debt in 2007 including $1 billion in debt prepayments. In the first quarter our scheduled principal payments on long term debt capital leases totaled $254 million and our capital expenditures totaled $216 million.

On the pension front, we contributed $25 million to our defined benefit pension plans during the quarter and we contributed another $50 million yesterday. Our total debt as defined in the earnings release is now $15.2 billion.

Our net debt defined as total debt less unrestricted cash and short term investments is now $10.7 billion, its lowest level since the end of 1998. This represents a $1.5 billion or 12% reduction in net debt versus the same time last year.

As we move to guidance, let me point out that we’ve included preliminary estimates of the effect of the cancellations of last week in to both our capacity and unit costs forecasts. In total, about 3,300 flights were cancelled and we expect the impact of these cancellations to be in the high 10s of millions of dollars.

With that said, second quarter booked load factor is seven tenths of a point lower than last year with international holding flat and domestic off by a little over a point. Although our booked load factor is only down slightly, we’re keeping an eye on it given the growing concerns about the economy.

While we don’t comment on unit revenue guidance I should point out that we will be facing a more difficult comparable period in the second quarter due to the timing of the Easter holiday versus last year. In light of this uncertainty combined with record high fuel prices we are revising what was already a very conservative capacity plan.

As you may recall in our February guidance we reduced our full year capacity guidance to be about flat compared to 2007. We now expect full year main line capacity to be down 1.4% driven by a 3.6% decrease in domestic and a 2.5% increase in international.

In addition to main line capacity we’re also pulling down our regional flying. For the full year, we now expect regional affiliate capacity to decline by 2.1% year-over-year with the majority of the decrease coming in the fourth quarter.

So, on a consolidated basis we expect full year capacity to decrease by 1.5%. These decreases are driven primarily by a four quarter pull down of almost 5% of domestic mainline capacity.

In the second quarter we expect mainline capacity to decrease 1.4% year-over-year with domestic down 3% and international up 1.4%. On a consolidated basis for the second quarter capacity will be done 1.6%.

Turning to fuel, we forecast fuel prices to remain high with second quarter fuel price of $3.01 and a full year price of $2.98 on a consolidated basis. That is based on the April forward curve.

In regard to hedging we have 36% of anticipated second quarter consumption capped at an average price of $72 per barrel or $2.42 per gallon and a full year hedge of about 30% of anticipated consumption capped at an average price of $75 per barrel or $2.41 per gallon. Consolidated consumption for the second quarter is estimated at $771 million gallons.

And, of course, as we reduce capacity in the near term we will face unit costs pressure because it takes time to extract related costs from the system. Our aim this year is to at least partially offset this and other cost pressures such as our increased maintenance expense and accelerated depreciation on MD 80s that we’ll see as we move faster on our retirement plan for that fleet.

We are still working through many of the details associated with the capacity reductions but as a first step towards lowering our non-fuel costs we have implemented a hiring freeze for management support staff work groups. In total, we anticipate both the main line and consolidated X fuel unit cost to increase by about 3.9% for 2008 versus last year.

In the second quarter we’d expect our X fuel main line unit costs to increase 5.9% year-over-year and consolidated unit costs to increase 5.6%. Given our expectations for starkly higher fuel prices we expect overall unit costs to increase about 15% year-over-year for the main line, 14.7% for our consolidated system.

For the second quarter we anticipate overall unit costs to increase 17.7% year-over-year for main line and 17% for consolidated. Moving to cash forecasts, our scheduled principal payment from debt and capital leases are expected to equal about $1 billion for the full year.

We expect capital expenditures of almost $1.2 billion in 2008. This includes over $600 million in pre-delivery payments associated with 737s.

While it makes sense in light of our current fuel prices to accelerate our fleet replacement strategy we have put in place additional restrictions around our non-aircraft capital expenditures. Many of the projects associated with our January guidance are either continuing due to operational necessity or have already progressed to a point where it will be costly to discontinue them.

For this reason, these hurdles will only minimally affect our current 2008 outlays but we expect reductions in capital expenditures for projects commencing in 2009 and beyond. To summarize our outlook, high fuel prices are a very serious concern for the foreseeable future and uncertainties around the broader economy are top of mind.

With that said, we think actions highlighted today will better help us deal with the challenges ahead. Now, before I concluded I also want to highlight the latest developments under our review of strategic assets that we highlighted last fall.

Over the past six months we have discussed our thinking about the ownership structure of American Beacon and provided some additional details about the business during the last two calls and on our 10K. As we announced today we plan to divest American Beacon from AMR and have a definitive agreement with TPG and Pharos Capital Group.

The sale is intended to allow AMR and its shareholders to recognize the full value of American Beacon while allowing AMR to focus on its core airline business. AMR expects to receive total consideration for the sale of $480 million and we expect a substantial portion of this amount to be realized as we gain upon closure of this deal this summer.

This will be primarily a cash transaction but AMR will retain 10% equity interest. As many of you will recall, last November we also announced our intentions to divest AMR Eagle.

We are still in the process of determining the best structure for the transaction and will provide an update when that process is completed and we’re still planning to finalize the transaction by the end of the year. With all of that, Gerard and I would be happy to take any questions you may have.

A couple of questions, I guess regarding the catastrophe cuts which come later this year, how should we look at that? Is that reduced utilization?

Is that MD 80s getting put down? Are other airplanes getting put down like 767 200s?

Any color on that would be great.

There will be some number of MD 80s that will be retired. We’re still working through that number because we may choose to reinvest some of the freed up aircraft for improved dependability as Gerard mentioned.

So, there will be some retirement of MD 80s and in addition we’ll have three A300s that will come off lease this year which we will return to lessors.

Okay. My next question is when we look at that gain on Beacon Tom that you talked about, the significant gain, when we look at calculations of the various metrics for the various debt covenants does that figure in to that calculation?

Is that a good guide net calculation or is that excluded because a lot of times charges and gains are out? And, when is the next measurement date?

I think there was a measurement date 12 months through year end 07 and I’m specifically referring to the covenant related to the credit facility?

We run the covenant calculation quarterly.

Okay.

We’ll do that every quarter. And, with respect to the gain I believe that’s excluded for purposes of debt calculation.

I’m wondering do you have any early read on how revenues in and out of London are fairing with all the additional capacity that’s gone in to Heathrow recently?

Well, it hasn’t been helpful.

I should have guessed that.

Yeah. What we’re seeing is our Trans Atlantic revenue for ASM in the first quarter was actually down slightly.

The rest of Europe was up pretty significantly so the net of those two leaves to the number I reported to you earlier. So, what we’re seeing in the UK in particular is year revenue performance that’s been driven by load factor declines in the premium cabins and I think that’s to be expected given more capacity.

But also, I think softer demand as reflected in some of the weakness in the banking sector.

Any read on what the credit markets look like for debt refinancing? Can you just review for us what you have coming due this year?

Well, we have about $1 billion of debt repayments this year which are embedded in the guidance we’ve offered up and that includes the convertible debt facility that we have that is about $300 million. Obviously, the financing markets are not very good.

I think with respect to secured financing on new 737 aircraft probably not too bad given the very strong demand for that aircraft worldwide. But, as to secured debt, it’s obviously not a very good market.

A couple of revenue questions first. Gerard, I think I saw somewhere and it might have been a communiqué issued to employees something about you were hopeful that capacity reduction in the second half would help get price a little bit towards this fuel challenge.

Do you guys think that we’ve seen enough come out to date through the shutdowns and announcements that you’ve seen from American and others to have some optimism there? Can you just walk us through your thought process there?

Well, Gary I did in my letter to employees talk about the fact that a number of smaller carriers have not only filed for bankruptcy but actually liquidated and while I certainly feel for the employees of those companies it’s surprising how much of an impact a small airline can have on pricing in a particular market. So, the reason I put that in the letter is because I do think this is a business that pricing is driven by supply and demand and for many, many years we have been talking about capacity, we’ve been constraining our capacity.

We took further steps today and the industry and our competitors will do whatever they’re going to do but we’ve got to get supply and demand to the point where we can recover our costs. I can’t remember what I said in the employee letter, a glimmer of hope or something, but certainly it’s positive when capacity comes out of an industry that is consistently selling its product way below the cost to produce it.

Do you think enough has come out through these announcements or are you just noting that there’s a trend here that seems favorable?

Well, maybe I come at it this way and say based on where we sit today we are nowhere near recovering our extraordinary increase in fuel price. So, we’ve got a long way to go and I don’t know capacity is entirely the answer but we’ve got a long way to go to get our prices to the point where we’re recovering our costs and of course every business has got to do that.

Gary, in the capacity plan that we shared with you today was put in place when oil prices were lower. They’ve continued to rise over the last several weeks as you know.

So, I think we, and I suspect the rest of the industry are going to have to go back and take a sharp pencil to capacity plans and take one more look at it.

You alluded to in your comments just the volatility of fuel is – I mean, it’s almost incomprehensible when you think about the potential impact to you. The last time you were in a down cycle, a standard deviation in oil was $5, today it’s closer to $30.

What kind of changes do you think you need and obviously there’s cost reduction, there’s capacity reduction due to the fact that oil prices are high but how do you deal with the fact that energy is so volatile? You think about a $30 swing, boy that’s a heck of a lot of difference.

I think $30 to the downside we’d see a different environment on that.

Well, yeah you’re absolutely right so leverage is extraordinary so we kept the pace up on our fuel hedging. I think Tom said we got 32% in the second quarter somewhere in the $70 range.

Again, the leveraging Gary is extraordinary. I just pulled out this morning, I was looking at the history and if you go back a few years our oil bill in 2003 for essentially the same size airline, actually a little bit smaller today than we were then we spent $2.8 billion for fuel in 2003 and the guidance that we’ve given you today would have our fuel bill at $9.2 billion o, over $6 billion increase in fuel.

Obviously, a lot of our hard work in the company has been obscured by this oil phenomena and we’re doing everything we can to recover that on the revenue side of the equation because as you point out there are limits to what we can do on the costs side of the equation and that’s why we’ve been pushing hard on it in [fillery] revenues for years now, why we have been a consistent price leader in the industry. But, I think we have to acknowledge that yes, it’s very volatile and makes it difficult to do long range planning and we have to plan in a disruptive environment and do the best that we can.

That’s what we’re trying to do is continue to look at our capacity real time, look at everything we’re doing on the revenue side and try to do everything we can to mitigate this.

Could it change your longer term appetite to re-fleet? I mean just with the uncertainty that it could be a lot higher how does that affect the decision to re-fleet?

Well, Tom talked about that. I mean certainly there’s a direct linkage to our decision to accelerate the pace on the 737 800s.

I think we’ve spent a lot of time thinking about the next generation narrow body airplane that Boeing and Airbus are going to build that’s going to be the equivalent of the 787 in the narrow body field. But as that date continues to move out in to the future and oil prices continue to be high you can get very clear ROI just on the oil nearer term.

So yeah, it is definitely impacted our fleet plan and that’s why we’ve accelerated airplanes in the next year and have outlined our plans for 2010.

Gary, you’re hitting the nail on the head, there’s really no play book right now for $110 oil. What it means is the revenue and expense equation is broken and we need to go about trying to fix that and that’s going to be everything we talked about today but it may very well mean for the industry a smaller industry, less capacity flying around.

I guess that’s what I’m driving at, it could be $130 and I’m just wondering if the flexibility you have with the MD 80s is valuable and if you loss some of that by having a new fleet?

Well, I think we’ve had a lot of flexibility there so it’s a long way before we exhaust that flexibility. We have 300 of those airplanes, we’re moving forward with fleet replacement at a faster pace but we have a lot of flexibility to move the fleet up or down.

Tom, I have a question about the cap ex, what’s the plan to finance or to pay for the PDPs today? Are you looking for external financing or is that going to come from cash on hand?

Well, we’re looking at a PDP financing and we’ve done that in the past and that seems to be a sensible way to handle PDPs but we also have as I pointed out earlier ample cash on hand. So, if we can find the sensible financing we will probably do it that way.

Okay. Then, a follow up on a question Mike had about the fixed charge covenant.

I guess, are you exploring at present a relaxation of the covenant for the second quarter test?

We have not had any discussions on that subject as of yet.

Then, when you talked about the advanced book loads was that just really for April? Or, was that just sort of a six week glance?

Is there anything you could tell us about May bookings?

What I gave you was the advanced bookings for the rest of the second quarter so sales were down about .7% year-over-year. So, down a little but I think it’s fair to say bookings have held up fairly well relative to what we’ve seen in downturns past.

Okay, great. And, maybe one for Gerard, is there ever a point where the fleet replacement needs it could make sense to look at another small carrier that maybe has a large supply of new generation aircraft as a means of addressing some of the fleet issues?

Well, I wouldn’t completely rule that out but the costs of standardizing these airplanes is considerable and because of the flexibility we have in our Boeing contract where we can step u deliveries on pretty short notice compared to most in the industry that is probably – and because of the pricing we have in that deal is probably the most practical and efficient way for us to buy airplanes.

I think we kind of have to ask about this, it looks like if your competitors are successful merging you will no longer be the largest airline here. I know you guys think you make money where you’re big but do you think that’s all that critical particularly as we go in to a period of weaker demand I worry that perhaps there are cost synergies that are bigger as you get bigger.

Can you just comment a little bit about how important size is?

Well Bill, we’re fortunate to have a very strong network irrespective of any consolidation that may or may not take place in the industry. We have built a very strong position in Dallas Fort Worth, in Miami, in Latin America and across the Atlantic Heathrow and to other major European cities.

We have what we believe is the most powerful frequent flyer program in the world. We also have very competitive positions in key business markets in the United States.

I think we’re very competitive in Chicago, LA and New York. All those locations have international service around the world to Asia and elsewhere and I think our One World Partnership represents a collection of the best global airlines and brands in the world.

So, we believe we will remain competitive irrespective of any consolidation that occurs. The real challenge is being profitable and I think we are not unique in our struggle to meet that challenge.

Consolidation may be one of the factors that lead to a more profitable industry but it is just one factor. Having said all that we may or may not participate in consolidation.

Your cautious remarks, we are very mindful of having been down this path before. Any steps we take domestically or globally on that front would have to make sense for our employees, our customers and our shareholders so that’s the way I see it.

Tom, you can add any thoughts you have.

Can I just ask about antitrust community with BA, is there any reason you wouldn’t pursue this now?

Well Bill, that’s been a continuing subject of discussion between us and British Airways. I certainly don’t speak for BA but historically there has been a lot of opposition because the notion was when we got to Open Skies in London and at Heathrow folks weren’t really going to be able to get in there and fly.

They weren’t going to be able to get slots, they weren’t going to be able to get facilities and if you go back in the past we were saying, “That’s not true. You can get slots, you can get facilities, we did it.”

We didn’t get in to Heathrow by a gift, we bought our way in to Heathrow and what you’ve seen is our competitors have found a way to access the Heathrow market so we think that letting that play out, letting the regulators see that there has been access is going to be helpful to our case. Speaking from American’s perspective I think there will be an appropriate time to cross that bridge.

And if you look at what’s actually happened since the Open Skies agreement the US and [inaudible] carriers alone have found 16 slot pairs to operate US London service in that critical Trans Atlantic window and that’s equivalent to American’s operation so there’s no shortage of slots if you’re willing to go out and trade for them and that’s what has happened. We think that blunts the argument that American and BA need to give out slots.

Tom then maybe I could ask just a couple of final little detail questions. Do you have the estimate of the exchange rate on your yields in the quarter?

No but I’ll have Eric try to run that down for you.

Then, just to clarify the reason you mentioned that the credit markets don’t seem to be open to you for unsecured debt, if you will, the convertibles, what not I assume that you means that you will end up paying these out of cash if you are required to? Is that a fair characterization of what you meant?

No, I didn’t say that. In fact, I just said that it was a tough credit market, no secret to any one on this phone call that the credit markets are tough.

But, we haven’t approached banks, we haven’t yet included or required a waiver on the credit facility. If we did we could go out and pursue that as we have in the past and if we were unable to resolve that on terms that we thought were sensible we’d simply pay it off.

Its $400 million against the cash balance of $5 billion.

That number use to be a lot bigger years ago. It’s not nearly the number it was years ago.

Okay. But, it’s not in the $1 bill you referred to?

No, it’s not. As to the convertible the market does seem to be open to doing convert deals.

I’m not sure that’s in the interest of our shareholders but that’s something we would certainly have as an option as does every company. So, that market is vibrant.

As you probably know, we have the ability under our current convert to satisfy those either with cash or with stock or to do a replacement financing so those are all alternatives we’ll be considering this year.

Do you have a number for unencumbered assets? That’s my last question.

I do not. We typically don’t disclose that.

Gerard, if we look at the equity performance as of late and particularly where credit to [inaudible] are trading the market seems to be reaching the conclusion that an AMR bankruptcy filing is increasingly shall we say difficult to completely rule out. I realize this is a very sensitive question to ask you point blank and you did touch on the huge steps you’re taking in your prepared remarks but I think what we need to hear is first what you consider your minimum liquidity threshold to be and second, just how hard is this management willing to work in order to avoid Chapter 11 given what some would argue is a competitive disadvantage you have for not having gone through it already?

Well Jamie, I think we have demonstrated we have a demonstrated track record of how hard we are willing to work to protect the interest of our shareholders. And in fact, having spent the first two years on this job teetering on the edge of bankruptcy in 2003 and 2004 I have been very mindful of that experience and that is why we have for many years been working very hard on our capital structure and our cash balance and the pay down of debt and putting ourselves in the best possible position to weather this kind of storm.

In terms of the guidance in terms of the risks for this company or any other airline for that matter in this oil or economic environment I’d just point you to our 10K and 10Q and you can look at the highlights of all of the risk factors. But, there’s a reason why we built that cash balance and you will recall me being heavily criticized in the 2006 era for building such a large cash balance but I think there was a reason for that.

Jamie, maybe just to add to that when I went to CFO school I learned never comment on stock price or the CDS market but as you know we’ve chosen to carry a significant amount of cash given the volatility that we’ve seen in the business particularly around oil price. So we stack up pretty well versus virtually all of our legacy competitors whether you’re looking at absolute cash balances or cash as a percent of revenues and we’ve been working very hard to strengthen the balance sheet considerably over the last couple of years.

As we’ve paid down debt we have created significant amounts of unencumbered aircraft. The last point I’d make is our sale of American Beacon which we announced earlier today was really all about creating value for our shareholders, something we’ve been working on for some time.

It does have the benefit of adding to the liquidity cushion that I just referred to. So, at the end of the day I think liquidity is an industry issue at $110 oil but I think it would be in correct to single out American.

Jamie, on your point on our costs structure because we didn’t file for bankruptcy like all the other legacy carriers have done in their history at least one time. If you actually break it down, in total our total costs structure is not that far on the stage of length adjusted basis off some of those guys that went bankrupt.

Our disadvantage is in our labor costs, it’s not secret on average we have the highest paid people in the industry but on the non-labor cost side we’ve done a very good job of controlling those costs and one of the effects you’re seeing is this Delta Northwest merger is actually completed is you’re going to see some labor conversions as a consequence of that. I think we have to continue to work hard to make our costs structure competitive but if you actually look at us compared to United or US Air or a lot of these guys we’re really not that far off the mark in total.

And to your credit Gerard, on hording cash it’s just amazing to me to think that six or eight months ago there was so much pressure being applied to you to pay a dividend. Is there a heightened sense of urgency here to complete the sale of Eagle or monetize Advantage or consider capital infusion from a partner?

Or, is there not that sense of urgency just yet?

Well, we’re proceeding with Beacon and with Eagle because we think those are sensible things for the shareholder. I think there is a heightened sense of urgency around righting the revenue cost equation for us and for the whole industry so that’s what the steps we talked about were all about and we’re going to keep looking at all of those things.

I guess to be more specific, Jamie mentioned it but the Advantage sale is that not on the table? Or, it hasn’t been on the table and now may become on the table?

Well, as we’ve mentioned in the past we’re looking at all of our strategic assets under this review. With respect to Advantage the thought there has been that there’s an ability to unlock some value for shareholders that may not be reflected in AMR stock today.

But, I think also still important to keep in mind that what’s being considered or what’s being talked about is a separation of Advantage and which sort of involved dividing AMR into two parts, a cash flow driven business with a potential to generate ongoing dividends and the remaining business without the Advantage cash flow. That, as we said in the past, raises some fundamental questions that must be addressed around cash usage and risk profile and such and in the current economic environment, fuel prices, that seems a pretty long pass.

But, it’s something we’ll keep looking at and thinking about and if there is value to be created there we’ll give it very serious consideration.

The follow up question then would be AMR’s view on the treatment by the Department of Justice of multiple mergers simultaneously. Is there a three week, a month window?

Do you have a view that you can share on if you were involved in some sort of consolidation the time under which you would have to do it to be considered somewhat simultaneous with Delta Northwest?

We don’t really have a strong view on that. I think some in the industry have though that the current administration would be more accommodating to mergers and if that’s the case then a subsequent deal would need to be done relatively quickly.

But, I think it’s unclear to whether that is even true given that we don’t know how the presidential election is going to shake out.

I guess I’ll break the rule if I could just real quick ask one more follow up. Did you mention the multiple that was paid for Beacon?

I did not mention it but you can do the math, it was over a 10 times EBTIDA multiple.

One of the problems that you’ve got with oil is the crack spread up in the $30 to $35 range. Can you give us any insights on anything going on structurally in the refining business in the Gulf to account for that level of crack spread?

Mike, we cannot and despite great efforts to understand the difference between crude and after you lay the crack spread on it, we don’t have a good explanation for that. And, if there is one, I certainly ask a lot of informed folks and I have not gotten straight answers so I think it’s a commodity.

It’s driven by commodity forces and we can’t make any sense out of it.

Do you have any guess or what is your assumption going forward on when you forecast going forward what are you using?

We can’t predict the forward terms for oil.

Being an ex bond analyst I congratulate you guys for building up such a large cash reserves in good times because we knew this was coming, something like this anyway.

Thank you. That means a lot coming from you.

Now, related to the cash reserves though with what’s going on in the industry, M&A activity, you kind of put your thoughts out on that but as other airlines merge, if certain assets become available that you thought were valuable to American Airlines would you want to get in that type of gain and use some of your precious cash reserves to corner that which might be a one time opportunity?

Ray, I think we’ll be paying careful attention to that. If that opportunity develops of course, we’ll then have to weigh the risk reward for our shareholders in any such situation should it develop.

We’ll definitely pay close attention and as I said earlier we may not participate in consolidation. Anything we do domestically or globally will have to make sense for all our stakeholders and if we do something tactically we’ll put it through the same way.

Okay. Regarding the possible spin off for selling of American Eagle, I guess eventually you’re going to break out some of those numbers for us so we can take a look at it.

But, I think in the past you’ve indicated that your labor costs there are very high and it might make it difficult to spin that off. Is that still the case or are you making reforms in that area?

Plus, the Eagle balance sheet regarding the aircraft, how is that being reformed?

Well Ray, we’re working on all that. Our primary issues at Eagle is not – we do have a little bit higher labor cost but that’s primarily driven by high seniority level at Eagle versus our competitors and we’re working on that whole issue of depending on which form the separation takes where the ownership of the airplanes ends up and how that will work and that’s not ready for primetime yet.

Okay. And the balance sheet, do you have any idea how the aircraft will be financed?

On leas basis or turned over to you? Or, are you still working on that too?

We’re still working on that.

Just a couple of quick ones, first I think you alluded to some cuts in cap ex non-aircraft related in 2009 and beyond. Can you just give some color as to where you’re going to be making those adjustments?

Chris, really what we’re commenting on there is in this oil economic environment is we’re going to be real cautious with our discretionary and capital spending to make sure that anything we do in this environment we get a very quick pay back. That’s really what Tom was highlighting there.

So, anything that’s discretionary we’ll just be really cautious in this environment going forward until perhaps we get a little bit more stable environment to deal with.

That sounds like sensible decision. Then, just a quick detail, I think you mentioned an estimate of $75 to $80 million on loss revenue related to the weather and cancellations this quarter.

Is it possible to parse out the split between the two?

I think what we said high 10s of millions of dollars. I think that is what we’re on record saying.

Okay. So, in total for the two of them high 10s of millions of dollars.

I’m just trying to get at the differential between the two.

As we think about breaking that out loss revenue is in the neighborhood of $75 million. Again, that’s an early estimate because we’re just off of the event.

You get some costs savings obviously because you’re not flying the airplanes and you’ve got some cost headwinds associated with disrupted passengers. So, you net it all out and the number we gave is sort of high 10s of millions of dollars until we’ve got some better information.