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American Airlines Essay

1028 words - 5 pages

| AA |

[Marketing in downturn] |

American Airlines

American Airlines (AA) is a major U.S. airline and a subsidiary of AMR Corporation. Founded in 1930, AA flies throughout North and South America, the Caribbean, Europe, and Asia/Pacific with 260 destinations in total. AA has a fleet size of 605 planes. The revenue of 2010 was US$ 22.17 billion and this shows that AA is still one of the biggest airline companies in the U.S.

Impact of the financial crisis

The financial crisis hit AA hard as it was already suffering due to the inflation of oil prices. The high price of oil resulted in a very high cost of fuel for the company’s jets. Oil prices have ...view middle of the document...

But after the oil crisis, American airlines had to lay off thousands of its employees.

After the oil and financial crisis

Even though American Airlines survived the oil and financial crisis in 2008, the organization realized they needed to make changes in order to keep the company healthy. One rule when it comes to bankruptcy is that it is smart not to wait too long before making drastic changes within the company, something American Airlines forgot. American Airlines filed for bankruptcy and continued operating without any changes. Their competitors such as Delta Airlines and United Airlines however, cut costs and later even merged. American Airlines picked up and followed the same changes as the competitors, but it was too late. Even though AMR decide to make some changes and replace their chairman and chief executive, there were more problems to solve.

The AMR shares decreased from $8.89 to $1.34, while the shares of competitors were rising. AMR also reported assets of $24.72 billion, liabilities of $29.55 billion and $4.1 billion in cash. There is a possibility AMR is still negotiating with other organizations and does not want to put all the figures on paper, as they could influence the negotiations.

The Internal factors that affected American Airlines

In the beginning of the whole situation, a merge with TWA caused many financial problems and complaints from unhappy employees. The new chief executive could not assure any good future deals. His successor, Tom Horton, helped sell AT&T and was braver when it came to making important decisions.

Another problem was that American Airlines had much higher costs than its competitors and much lower revenues. There was one quarter when Delta earned $429 million and United $653 million, whereas, American Airlines suffered a loss of $162 million.

What really destroyed AA, was their financial and organizational problems. It all started with a great decrease of customers. The revenue was not enough to cover the costs. In an effort to save costs, plans to lay off employees were made. Some of the...

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