no one is watching the long term debt for AA. In 2003, we were told it was 20 billion dollars and now it is 8.7 billion dollars how does one explain that? Was it just a miracle?
No miracle at all.
From AMR's 2003 financial statements; the balance sheet's long term liabilities section:Long term debt (excluding capital leases, pension and other post retirement benefits, etc) was $11.901 billion.
From AMR's 2007 financial statements; the balance sheet's long term liabilities section:Long term debt (excluding capital leases, pension and other post retirement benefits, etc.) was $9.413 billion.
The long term debt was reduced by$2.48 billion over a period of 4 years- good but not great.
If you add the long term debt amount to everything else in the long term liabilities section of the balance sheet (pensions, capital leases, pension and other post retirement benefits) you get:
For 2003: $22.62 billion
For 2007: $17.43 billion
A reduction of $5.19 billion in total long term liabilities over a period of 4 years; again, good but not great.
I believe I remember AA saying that they reduced the capital lease amount by prepaying it.
Also, I believe that they also include other items in their long term debt figure such as the cost of aircraft operating leases (rentals, which is off balance sheet financing) and some facilities debt.
The number can vary widely depending on what one considers long term debt.
In my view, the calculation of long term liabilities, for analytical purposes, should include all long term commitments whether they are on the balance sheet or off.