Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the AMR fourth quarter 2008 Earnings Conference Call. At this point, we do have all of your phone lines in a muted or in listen-only mode. After the executive team's presentation today, there will be opportunities for your questions. As a note, we'll be taking questions first from the members of the analyst community, and then after a short break, move into our immediate Q&A session. As a reminder, today's call is being recorded. We are very pleased to have on the call with us today, AMR's Chairman and Chief Executive Officer, Gerard Arpey; and Executive Vice President of Finance and Planning, and Chief Financial Officer, Tom Horton. And here with our opening remarks is AMR's Managing Director of Investor Relations, Eric Briggle. Please go ahead Sir.

Good afternoon everyone. Thank you for joining us on today's earning call. During 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 fourth quarter, along with some perspective on 2009. 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 continues to provide additional information regarding entity performance and cost guidance, which should assist you in having accurate information about our performance and outlook. In addition, the earnings release contains reconciliations of any non-GAAP financial measurement that we may discuss. This release along with the webcast of today's call is available on the Investor Relations section of aa.com. Finally, let me note that many of our comments today regarding our outlook for revenue and cost, as well as forecast of capacity, traffic, load factor, fuel costs, re-plans 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 the economic, business and financial conditions, high fuel prices and other factors referred to in our SEC filings including our 2007 Annual Report on Form 10-K, and our Quarterly Report for the third quarter of 2008 on Form 10-Q. And, with that I'll turn the call over to Gerard.

Thank you, Eric. Good afternoon everyone. As you have seen in our press release, we reported a net loss of $2.1 billion for the full-year 2008 compared to a net profit of $504 million in 2007 including several special charges in both years. As all of you know too well, the biggest challenge of 2008 was the price of fuel. While the cheaper oil prices have dominated the headlines for the past few months, in 2008 we paid about $2.7 billion more for fuel than we would have paid at 2007's prices. To put that in some perspective, our largest net profit in our company's history was $1.3 billion in 1998. The run-up in fuel during the first half of the year was extraordinary, and the fall of oil prices since then has been nearly as remarkable. We took action by cutting capacity levels and by stepping up our efforts to unbundle our product, both of which were critical to our ability to weather 2008 severe storm. As it turns out, the capacity reductions that we and our competitors put in place during the run-up in oil prices has left us, and arguably the industry in better shape as we face another significant hurdle presented by the global economic downturn. Nevertheless, one only need to look at our fourth quarter and our full-year results to see that high fuel prices left a lot of damage in their wake. And of course now the downturn in the global economy is top of mind for everyone, it's certainly no secret that demand for air travel has declined. But while the airline industry is certainly affected by this downturn, as I mentioned, the industry's capacity reductions last year turned out to be very well timed. I think it is fair to say that…

Thanks, Gerard, and good afternoon, everyone. As you can see, detailed in the press release, we recognized a few special items during the quarter. The most significant of these was the $103 million pension charge associated with the early retirement of pilots and a $23 million charge associated with our capacity reduction. In the fourth quarter of 2007, we had a one-time gain of $39 million related to the expiration policy for advantage miles, a charge of $63 million for the write-down of retired MD-80s, and $138 million gain on the sale of ARINC. For the remainder of the call, I will exclude the impact of special items more accurately reflect our performance on an ongoing basis. So excluding these special items, we lost $214 million versus a loss of $184 million in the fourth quarter of 2007, a change of $30 million. Clearly, fuel prices continued to impact our results. We started the quarter with oil spot prices near $100, and thus the average fourth quarter fuel prices remained relatively high. As a result, we paid $133 million more for fuel than we would have paid at fourth quarter '07 fuel prices. The fall in the price of oil has been nothing short of remarkable. And while fuel may have abated for the time being, fuel prices remain volatile and we will continue to do our best to dampen that volatility through our systematic hedging program that continues to serve its purpose. That seems too often in the case in this industry, a new challenge has been posed to American Airlines and to our industry, and that is the impact of the global economic downturn and its resulting impact on demand. Through other efforts over the past several years, we have better positioned ourselves to face troubling times and…

(Operator Instructions). And your first question today will come from the line of Jamie Baker with JPMorgan, and your line is open.

Good afternoon. A question for Gerard or Tom. You moved last year to strengthen and enhance the value of the Infinity agreement with Citi. But you didn't do a forward mileage sales I recall, which is something that at least we've been assuming you may still have in your back pocket should you seek additional liquidity. First question is, if there is any allowance for this in the $3.5 billion unencumbered asset level that you identify? Second, do you care to share any thoughts or comments given the situation at Citi and whether a mileage sale is still something that externally we should be considering?

Yes, Jamie, it's a very good question. You are correct. We have not capped a forward mileage sale as many of our competitors have. So, we do contribute do that a potential source of liquidity moving forward and it is reflected in the $3.5 billion, I mentioned earlier.

Okay. That's helpful. That'll be good.

Thank you, Jamie.

Thank you. Our next question in the queue that will come from the line of Gary Chase with Barclays Capital and your line is open.

Good afternoon.

Hi, Gary.

Two questions for you. First on the dependability initiatives that you described, sounds like the pension headwind year-on-year is about $400 million; do you have a dollar amount in the caseum that comes from trying to run a better operation the way you described in the release?

Gary, I think you're pretty accurate on the pension number, its north of $400 million and dependability, initiatives plus or minus about a $100 million.

And then when you give the book load factors, its been a little confusing over the last couple of years because it feels like those have been all over the place to a much a greater extent in the revenue trend. Can you help us think about what it might mean to be running at down eight book load factor internationally and down two domestic? Maybe could you give us some perspective on where we started the fourth quarter with an overall load factor that was only down two?

Well, Gary, it's Tom. I wish I knew the answer to that question. I mean I think its going be dependent partly on -- how the economy starts off the year and how progressive it is during the first half of the year. And I don't think any of us have totally good visibility on that. At this point, as I mentioned our first quarter system book load factor is down 4.5 points. One point I would make to you though is that the Easter shift historically accounts for about one to two points of load factor from March into April. So that's going to be driving a portion of the decline, but clearly, we're in an environment where demand is weak. You just to have look at our fourth quarter results and even though our RASM was respectable, we had 10% less traffic. And I think sometimes that gets lost in the -- when we all look at RASM and load factors and things like that, but we had 10% less traffic on our airline.

Is there a way to think go about this on a trend line, like you've been running down one or two, and now it's down 4.5?

I think it's too early to say. I really do. I just don't know. It depends. It is conceivable that we would have some stronger build later in the quarter. But as we look at the quarter right now, it's down and March, in particular looks weak.

I think, Gary, it's somewhat indicative of other markets, not that it's a perfect analogy, but I think there is a lot of volatility generally and I think we have a lot of volatility in advanced bookings. So, I wouldn't be surprised to see advanced bookings build closer into the actual travel date in light of the economic climate we're in. So I agree with Tom, I think it's too early to tell.

Okay. Thanks.

Thank you, Gary.

Our next question in queue that will come from the line of Mike Linenberg with Merrill Lynch. Please go ahead.

Yes, just two questions on that pension, Tom. I just want to make sure I heard correctly for 2009, there you are not required to make any cash contributions, is that right?

That's correct, Mike.

Okay, good. And then just my second, in the press release you gave us the ABO funded status, 69%. Is that a GAAP calculation or is that an ERISA calculation?

That's a GAAP calculation.

Okay, that's it. Thanks.

You bet.

Thank you. And the next question in queue that will come from the line of William Greene with Morgan Stanley. Please go ahead.

Hi. Can I follow-up a little bit on Gary's question? Gerard, you'd mentioned that the industry and American in particular had benefited so much from cutting in advance, the changes, particularly in the domestic market on the demand side.

Right.

And yet we're not really cutting that much in the way of international capacity at this point yet, load factors are down 8 points. So why wouldn't you be cutting a lot more at this point just to address that before it happens, because I think it's inevitable that we'll see a slowdown in international more sooner than we are already seeing.

Bill we were not aggressively adding international capacity last year like many of our competitors. And as I indicated in my remarks, we're going to be looking at capacity very carefully this year and looking at economic trends just as we did last year at this time. And if it would be prudent to make a cut in our international capacity or our domestic capacity, we'll be prepared to do that. It's difficult as that is to do but I think, as we sit here today we're not prepared to take that step based on what we're looking at but we're certainly watching the trends very carefully and we'll be prepared to act in a manner similar to what we did last year if we think that's prudent.

Well, I think we said last year, as maybe others in the industry were adding international capacity faster than we were that this industry has a tendency to overshoot and try to chase profitability, and with kind of a bad ultimate effect, and we did not add a lot of international capacity when it looked like perhaps that was the tractionable thing to do. So as a consequence, I think we probably have less to pull down today but as Gerard said, we're going to keep a close eye on it throughout the year, and if that makes sense that's right, there is something we'll do.

Okay. And then on your CASM ex-fuel guidance, does that include a profit sharing assumption for 2009?

It does not.

Okay. Thanks for your help.

Thank you. And the next question in queue that will come from the line of Ray Neidl with Calyon Securities. And your line is open.

Yeah, just some general things. Regarding the FAA with some of the investigations they're doing, is there potential of a large cash liability for any fines that they may put to American?

Not that I'm aware of, Ray.

Okay. And as far as the unencumbered assets that you talked about, the $3.5 billion, you commented on one item that might be in there. What are some of the other items? Is it pretty much unencumbered value on aircraft and ground facilities, as well as maybe your loyalty program or things like that, is that what you're are calculating in there?

You hit the nail on the head; it's all of those things. We've also got a big portfolio of Heathrow slots. We've never encumbered that, aircraft and the frequent flyer program, and then some other corporate real state type assets. So it's a collection of things.

Okay. And then finally, British Airways; if they don't get antitrust they have been talking about dropping out of the alliance. Is there any danger there?

Ray, I certainly read those comments from BA's Chairman with interest, and having not been there during that discussion, I'm not sure exactly in what contacts those comments were made but I think I would just come back to the fact that global alliance is a very strong alliance. It represents, we believe the best global brands in the world. Oneworld is designed to emphasize quality over quantity, and it's no secret that we have felt to some degree handicapped by the fact that we don't have immunity across the North Atlantic, and we very much want to level that playing field so we can compete effectively with Star and SkyTeam. And based on the facts, if the facts guide the regulators, we will get that playing field leveled this year, and that will be a good thing for American, it will be a good thing for Oneworld. If we don't get it approved this year, which I think would be unlikely; I do not think that that spells the end of Oneworld.

Okay.

I think it would be a big setback, it would be a disappointment. But it would not be in my view, the end of oneworld by any means.

Okay, great. Thanks.

Thank you.

Thank you. And the next question in the queue that will come from the line of Hunter Keay with Stifel Nicolaus. Please go ahead.

Hey guys, thank you very much. Question, can you just enlighten us to sort of, without getting to specifics, just sort of procedurally how the change in presidential administration is going to impact things, your labor relations with NMB. I assume media (inaudible) will remain in place. But I am just wondering if there is going to be any kind of impact that we may not be aware of in terms of shift the people that are involved or any kind of major change in say philosophy from NMB given the new appointments or any kind of reversal of groundwork that may have already been put in place which regarding the negotiations you've already done so far.

Well, Hunter, I really don't know how to respond to that because I just think it's hard to say. You've got a change in administration and party, and you're going to have lots of players change in all kinds of organizations in Washington. So, I think to predict the implications of that for our company or labour negotiations, I think it's very difficult at this point to say. I don't think it changes at although our approach to our labour negotiation, I think we are going to continue to try to strike the right balance towards trying to get ratified agreements with all of our unions that on the one hand protect the long-term interest of our employees and on the other hand allow our company to be competitive. Because, if the company doesn't have a competitive cost structure over the long run, then it will be bad for the employees, so we're trying to strike that balance have reached to common ground with organized labour remains our objective. So, I don't think that changes irrespective of what happens in Washington.

Sure. Again, of course, I actually understand that, but just in terms of the media that's going to be involved, I mean there is not going to be anything, I don't know if it's going to be disrupted in terms of sort of who you are dealing with in that regard. I mean there should be no potential change there right in terms of media that's involved in dealing with the unions, just because of the presidential confession change.

No, I don't think that that is the seminal, there will be seminal, any seminal changes there.

Okay, great. And, just one quick follow-up. With regard to the impact of the delays from the craft deliveries because of the Boeing strike, is there going to be any kind of incremental cash flow tail end here or maybe expense you have budget for that might be helping a little than the cash flow line in '09, in terms of deposits and what not.

Yes, a little bit, Hunter. It's reflected in the CapEx and financing numbers that I quoted.

Okay, very good. Thank you.

Thank you, and our next question in queue that will come from the line of Helane Becker with Jesup & Lamont. Please go ahead. Helane Becker - Jesup & Lamont: Thank you very much, operator. Hi, gentlemen.

Hi, Helane.

Hi. Helane Becker - Jesup & Lamont: So I just have two questions. One is with respect to the salary line in the fourth quarter. I would think that with capacity coming down that number should not be increasing so much. So, could you talk about third quarter or fourth quarter, could you talk about what was in those numbers that would cause it to the do that? And how we should think about it in the first quarter?

Yes, Helane, I think most of what's going on that you are seeing is the special charges. We called out the $100 million pension charges in there, and then much of the severance charges in there as well. Helane Becker - Jesup & Lamont: Okay. And then in terms of as we think about the pricing and the demand, normally we would see capacity or rather traffic down something on the order of 5% or 7% or 10%, and we would see airlines quick to cut prices. But you don't seem so much to be doing that in the first quarter of '09. Can you just talk a little bit about how you think about that and whether or not you can hold the line on prices going forward?

Well, I think that remains to be seen. Obviously, our view is that air travel remains incredible bargain and thus is underpriced. And you'll have to keep an eye on the demand environment where every day our revenue management guys are out there trying to make the right trade-off between fares and availability and demand to maximize our revenue. They do that on a market-by-market, flight-by-flight basis and we'll continue to do that. So I think as we've seen in the latter part of the last quarter and rolling into this quarter, while fare levels have remained relatively tame, we have seen some shift in the fare mix and that's reflected in the yield numbers. So, we're just going to keep managing that on a day-by-day basis, try to maximize our revenue.

So, Helane, the only thing I would add to that is I think if you look historically at our company, I think you'll see that we have been consistent capacity either reducers or constrainer, consistent price leaders in terms of increasing prices and we certainly have advocated or initiated a number of service charges that we believe are appropriate and serve the industry well. So, going forward, I think that those principles will continue to guide us, but certainly we have to be mindful of elasticity. We got to be mindful of what our competitors are doing. but those kind of the philosophy of being disciplined about capacity, raising prices, because I agree with Tom, airfares have been an extraordinary bargain since 9/11, and unbundling in charging modest service charges are all appropriate and needed ways to raise revenue in an industry that needs more revenue, so that it can produce the profits that it needs to continue to reinvest in itself. And, of course there has been a lot of dislocation in the industry because of desperate hedging positions that have led to different views on pricing and capacity. And that just is what it is. It hasn't been helpful. Helane Becker - Jesup & Lamont: Got you. Thank you very much.

Thank you, Helane.

Thank you and our next question in queue that will come from the line of Bob McAdoo with Avondale Partners and your line is open.

Thank you, just another round on the pension question. If you could talk to me about what the accounting rules are, what the process is. Give us a couple of kind of points here on $400 million and three points in your CASM. When there is a shortfall, because of pension asset performance in the year, how do they calculate what needs to be made up and how quick it needs to be made up? How much has to be piled in to '09 versus future years of a short fall that occurred because of losses in '08 how does that work?

Bob, this is Tom. It gets amortized in over a period of time, and in our case, that's approximately 12 years. So that's given rise to this year's increase in pension expense. Tom, when we get to this time next year we will have had a meaningful rise in the pension assets owing to stronger returns in '09. I don't know whether that will happen or not, but if it does, it may mean that we have the converse effect next year. So we'll just to have wait and see. This is obviously an extraordinary year from a return standpoint across all asset classes. I will say that Bill Clinton and American Beacon Advisors who manage our pension money have done a terrific job even in a very difficult market and as a consequence our asset return on average was roughly a negative 19%, which while it's a very unhappy story, I think that will compare pretty well to…

It beats negative 35 and 40.

Exactly.

One other quick thing. Gerard, I think earlier a couple of quarters ago or so had said when he was looking at all the kinds of things that might happen that we might be able to do, go out and get money. One of the kind of the single biggest item was this whole issue of bag -- charging to check bags. And as I recall, there were some number upwards of 300 million it seems likely the number that you guys quoted and I am curious is that number turning out to be anywhere near the right number and on what line do you find those kind of dollars or is it varied in terms of what line in the revenue stream?

It's in the other revenue line, and it's pretty much tracking with the run rate we had expected.

Okay. One last quick one. When Obama put out this regulation, this thing it stopped all changes in regulations that were being considered or in process or whatever. Does that have any effect on this issue of trying to force people to give up slots at LaGuardia? Does that put a hold on that?

I think that's a good question, Bob, that I don't know the answer too.

Okay. Thank you.

Thank you. And our next question in queue that will come from the line of Bill Mastoris with Broadpoint Capital. And your line is open.

Thank you. Tom, recognizing that we're in the most difficult credit market environment certainly in either one of our careers, but also giving account to the fact you got a lot of collateral as you previously indicated that's free enough. I'm wondering do you have financing lined out for anyone of the following transaction due to the spare parts deal, which matures obviously in February and the EETC transaction which I think matures right around mid October. I know you have back stuff financing but are there any other transactions for which at least there is at least a letter of intent or there is a reasonable certainty that at least a portion is going to be refinanced?

We do not have anything lined up for either of those Bill. Though, as I mentioned earlier we got pretty good tool on encumbered assets, which will increase as we pay down some of the debt that has collateral associated with it. So, I think we're going to have to wait and see how the capital markets evolve, but when they do begin to thaw I think we have got a pretty good story to tell and pretty good pool of assets to finance against. And as you pointed out it was pretty good that we last year were very aggressive in financing and got a little bit ahead of this situation particularly with respect to our new deliveries coming in 2009. Those all being financed, but I think we're going to have wait and see how the capital markets behave this year.

And, Tom, I assume the same is also true, I skipped over the bank debt agreement. I assume the same comments are also true for the collateral which would be free for the bank debt, is that correct?

That is correct.

Okay. Historically, you have indicated in the past you'd like to maintain a much higher liquidity position then what is now I think it is about a 15% liquidity position as a percent of LTM revenues, I think historically in the past you preferred anywhere between 20-25 which is where you've been in the past. Where would you anticipate you might be at year end?

Well, we're not ready to comment on that just yet. We don't typically forecast our cash. But I will say that I think holding higher cash balances has served our company well as we've gone into this period of incredible market turmoil. And one of the reasons we've carried higher cash balances in the last year or so has been that, given the state of the industry, it's very difficult to have a sensible standby credit facility as you might in another sensible industry, if you can find a sensible industry right now. And so, we think it's made a lot of sense to keep ourselves more liquid and financially flexible. And we'll continue to do so.

Okay. Thank you.

Thank you, and ladies and gentlemen, this will be our last question for this session of the analyst Q&A. Next question will come from the line of Kevin Crissey of UBS. Please go ahead.

Hey, good afternoon, everybody.

Hi, Kevin.

When I look at your CASM ex-fuel guidance, I think it's reasonably high. Does it include any accrual for labor increases?

It does not, Kevin. We don't have any insight on that. And so, we're not going to guess at it. But it certainly appreciates your perspective on that, Kevin. But if you take out oil from our cost guidance for the year, our expenses are up $125 million, but if you take out, what Tom talked about, the [pension bad guy] is over $400 million. So if you neutralize for that or set that aside, our expenses are down on a budget basis about 2% on 6.5%, 7% reduction in capacity. If you take out fuel and the [pension bad guy], I think we haven't lost sight of managing our cost in this tough environment, but it is more difficult when you are reducing capacity to control your unit cost obviously then when you are increasing your capacity. So, we worked hard on our budgets for this year with an eye towards continued vigilance on the cost front, but also some reinvestment in the quality of our product which we think will pay dividends on the revenue side of the equation. And so we'll continue to work the cost side along with the revenue side throughout the years and if we can do better, we will, on both fronts.

Thanks. And the last follow-up would be on foreign exchange, and you may have touched on there. I may have missed it, just there's been a lot of detail here. If the foreign exchange stays where it is today, which seems at this point headwinds, what does that create from a RASM perspective?

Well, it is a headwind. I don't know if I can give you a number right at hand, but you are quite right that the strength of the dollar has impacted our business in the various markets we operated around the world, not just on the Atlantic and Pacific, but also in Latin America where if you just look at the fourth quarter results, we saw an impact from the stronger dollar on particularly the premium, Kevin.

And that's the translation effect, Tom? Because there should be some booking benefit right from point of sale going to the U.S., or am I wrong on that?

Well, the net effect we find is negative.

Okay. Thank you very much.

You bet.

Thank you. And ladies and gentlemen, members of the analyst and financial community, that does conclude your question-and-answer session for today. After a brief break, we will begin the media Q&A session.