Market Update - 10:45 am

ANNOUNCES SIGNIFICANT CAPACITY REDUCTIONS, AIRCRAFT RETIREMENTS AND ADDITIONAL REVENUE GROWTH EFFORTS

- Co announced significant reductions to its 2008 domestic flight schedule, including a fourth quarter mainline domestic capacity reduction of 11% to 12% from the previous year. It also

- To retire at least 75 mainline and regional aircraft and unveiled several revenue growth initiatives, as the company responds to record fuel prices, growing concerns about the economy and a difficult competitive environment.

- Regional affiliate capacity is expected to decline by 10% to 11% in the fourth quarter y/y. Previously, regional affiliate capacity in the Q4 was expected to increase by 2.0% from 2007 levels.

- Expects to retire 40 to 45 mainline aircraft from American’s fleet, the majority of which will consist of MD-80s but will also include some Airbus A300 aircraft. Reductions will also result in the retirement of 35 to 40 regional jets, as well as a number of turbo-prop aircraft from AMR’s regional affiliate fleet

- Capacity reductions aim to significantly reduce costs as well as create a more sustainable supply-and-demand balance in the market.

- The capacity changes will result in workforce reductions at both American Airlines and American Eagle Airlines and could result in facility closures or facility consolidation.

- AMR introduced a $15 fee for the first checked bag, given the increasing costs of transporting checked baggage and is effective for tickets purchased on or after June 15.

The economic picture continues to get worse.