1. American Airlines’ Asset / Liability Management Wyatt Crumpler Vice President, Asset Management American Beacon Advisors, Inc.

2. Asset / Liability Management Phase I – 1981 / 1982 Cash matched dedicated bonds for retirees – Using Treasury Bonds yielding 16.1% Cash matched “near retirees over age 55” – Using Treasury Bonds yielding 15.3% Asset allocation of 60% bonds and 40% stocks

3. Asset / Liability Management Phase II – 1987 Converted to dollar duration bond portfolio 50% of assets invested in 26-year duration strips – Hedged 100% of liabilities with 13-year duration Yield on bonds exceeded 9%

4. Asset / Liability Management Phase III – Early 2000s Converted 40% of strips to corporate bonds with 12-13 year duration to introduce credit spread exposure (approx 150 bps) Better hedged corporate bond rate used by FASB Entered interest rate swaps to maintain duration and hedge ratio

5. Asset / Liability Management Phase VI –2002 Eliminated swaps due to concerns on leverage in “Enron” environment Reduced duration to 18 years Reduced bond allocation to 40% Resulted in hedge ratio of 40%

6. Asset / Liability Management Phase V – 2007 & 2008 Reintroduced swaps in 2007 to increase hedge to 50% Developed hedge ratio matrix based on corporate bond rates and funded status of the defined benefit plan

7. Asset / Liability Management Phase VI – 2009 to current Eliminated swaps in early 2009 as the spread between AA rates and swap rates widened Reintroduced swaps in mid-2010 to maintain a 40% hedge Reduced hedge to 35% in April 2011 and to 30% in August 2011 by removing swaps

8. Asset / Liability Management Corporate Bond Rate Funded Status (PBO) Below 5%5% to 7%7% to 8%Above 8% Below 65% 30%40%50%60% Below 75% 30%40%60%70% Below 85% 40%50%60%70% Below 95% 50%60% 70% Above 95% 60%70% Current Liability Hedge Matrix