American Airlines

In: Business and Management

Submitted By zboyrard
Words 1011
Pages 5
| 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 gone up to more than $130 per barrel. The increasing cost of oil has cost the company almost $3 billion since the beginning of 2008. The stock prices went down in response to the crisis and the increasing oil prices. In November 2011, AMR filed for bankruptcy protection in an effort to reduce labour costs and shed its heavy debt load.

American Airlines until the crisis in 2008

Due to the high price of oil, resulting in very high costs of fuel for American Airlines and a decline in travel demand; American Airlines had to decrease the amount of domestic flights by 12 % after the end of summer 2008. Earlier American airlines had only meant to lower the amount of flights by 4.6 %.

As the oil crisis started to have a larger impact on American Airlines, adjustments had to be made in order to stay profitable. A new policy was introduced that required customers to pay $15 for a single bag, and $25 extra for checking in a second bag. American Airlines also started to charge its customers extra for reservations and transporting larger luggage. These services were previously offered for free.

Employees of American Airlines were also affected by the crisis. The employment rate was…...

Similar Documents

Singapore Airline & Delta Airline

... ways. The two airlines are facing largely different competitive pressures. While Delta has a growing presence overseas, they still have a sizeable portion of their business in the continental United States. A large part of their business is subject to the intense competition of the American markets. In order to stay competitive and chase limited investment dollars, Delta is forced to defer expenses as far as possible. They appear to accomplish this in two ways. The first is maintaining a great deal of their fleet on operating leases, keeping the planes off of the books. The second way is deferring the depreciation expense on the planes they do own over as long a period as possible. The downside is that Delta ends up paying more in the long term due to the increased cost of operating leases, and is denied the cash inflow from disposal of the aircraft. Additionally, Delta may be realizing a lower residual on their sold planes due to a longer assumed life of the planes. When they finally sell their planes off, they will be worth less. Singapore Air is subject to a different set of pressures. They operate largely in Asia, which is subject to more regulatory pressures than Delta. Singapore Airlines owns all of their aircraft, leading them to a larger depreciation expense on the books. It appears that Singapore Airlines took on much less debt than Delta, and tried to own their aircraft to mitigate larger lease expenses. While this may somewhat impair their...

Words: 1477 - Pages: 6


...Discuss the trends in the U.S. airline industry and how these trends might impact a company’s strategy Airline industry is a clearly structured industry. Trends in the U.S airline industry have an impact the strategies of the airlines especially the Jet Blue airline. U.S airline industry trends including increased crude oil prices, new technology advancement and the impact on post 911 aviation securities. Technologies place an important role in the airline industry today. Technology helps to develop great convenience offer to the customers. Internet as a way to book flights, check in, and check flight status. After the terrorist attack of the 911-airline industry have security systems protecting for the passengers. There are some main changes in the airline industry after attack of 911 such as baggage screening and passenger screening. After 911 federal government increased the air passenger safety. Screening procedures for passengers and their baggage including requiring passengers to remove their shoes and limiting carrying fluids on to the plane. Finally crude oil prices impact a company strategies in the airline industry. Crude oil prices increased dramatically and caused airlines to struggle. When the crude oil price increase they began to increase passenger fees for heavy bags, snacks and even blankets and pillows. Discuss Jet Blue’s strategic intent Discuss Jet Blue’s financial objectives and whether or not the company has been successful in...

Words: 454 - Pages: 2

Airline Industries

...A low-cost carrier or low-cost airline (also known as a no-frills, discount or budget carrier or airline) is an airline that generally has lower fares and fewer comforts. To make up for revenue lost in decreased ticket prices, the airline may charge for extras like food, priority boarding, seat allocating, and baggage etc. The term originated within the airline industry referring to airlines with a lower operating cost structure than their competitors. While the term is often applied to any carrier with low ticket prices and limited services, regardless of their operating models, low-cost carriers should not be confused with regional airlines that operate short flights without service, or with full-service airlines offering some reduced fares. Some low-cost carriers operate aircraft configured with a single passenger class, and most operate just a single type of aircraft. In the past, low-cost carriers tended to operate older aircraft, older models of the Boeing 737. Since 2000, fleets generally consist of smaller, newer, more fuel efficient aircraft, commonly the Airbus A320 or Boeing 737 families, reducing training and servicing costs. Airlines often offer a simpler fare scheme, such as charging one-way tickets half that of round-trips. Typically fares increase as the plane fills up, which rewards early reservations. Often, the low cost carriers fly to smaller, less congested secondary airports and/or fly to airports in off-peak hours to avoid air traffic delays and...

Words: 365 - Pages: 2


.... This route to Japan then links to points throughout Asia. United no longer uses the Chicago, Illinois as its biggest hub. That location is now Houston, Texas. They adopted the “hub and Spoke method” to deal moving passengers. All passengers move to a hub and take additional flights to their destination. Smaller regional airlines and commuter flights offer easy travel to smaller destinations. This streamlines the airline and makes it more fuel efficient than point to point flights. United operates the Star Alliance which has 25 members and has many advantages over other airlines. Code sharing, mutual frequent flyer program benefits, co-ordination of reservation, ticketing, passenger handling, baggage handling, and flight scheduling. This gives the airline protection in many countries. United outside agreements have increased available flights and has provided less waiting times for passengers (Delta Airlines. (2012, May). Delta Airlines Newsroom [Fact sheet]. Retrieved May 26, 2012, from Weaknesses As of February 2012, United is ranked fourth in the domestic share of the market. This accounts for a 10.3% in all US air travel. Delta, Southwest, and American still have bigger shares of the domestic market. (RITA: Research and Innovative Technology Administration Bureau of Transportation Statistics. (2012). Transtats. Retrieved from United Airlines received the worst......

Words: 3568 - Pages: 15


... development and production of the plane’s fuselage, arguably the mosttechnically complex part of an airplane. To aid Embraer’s in-house technologicaldevelopment, the company invited international leaders in the field of aeronautics to become minority shareholders.To offset the risk of developing and producing some of the most costly andtechnologically challenging components, Embraer has also formed risk-sharing partnerships. Partners make major components such as wings, flaps and engines, based onEmbraer’s design specifications. These manufacturers are international firms withheadquarters outside of Brazil; however, as Embraer has continued to expand, many of them have set up operations in Brazil to supply parts in a timely and low-cost manner.In 2002, C&D Aerospace of the U.S. built a plant in Brazil to supply Embraer withcabin interiors for its jets. Sonaca, a Belgian company that produces fuselage equipment,instituted Sobraer in Brazil as a subsidiary solely focused on servicing Embraer. PilkintonAerospace, an American firm, built a plant to supply aircraft windows. And most recently,in 2004, ENAER, a Chilean firm that supplies the rear fin and other parts, and Gamesa, aSpanish firm that makes engine parts, have built a plant in Sao Jose dos Campos, whereEmbraer is headquartered.6Subcontractors that receive raw materials and designs from Embraer constitute a thirdlevel of supplier.According to Embraer’s statistics, 93.4 percent of the firm’s employees are employed......

Words: 1962 - Pages: 8

Classic Airline

... issues. Expanding too quickly created a financial crisis with a domino effect.   Falling stock prices, declining customer loyalty, and low employee morale have resulted.   In addition, the media has nothing positive to say about the airline industry because of increasing fuel and labor costs.   As a result, the Board of Directors is mandating a 15 percent across-the-board cost reduction over the next 18 months (University of Phoenix, 2011). Classic offers a rewards program to its frequent flying customers, however the program is difficult to understand and frustrating for the employees to explain. Identify Alternatives Delta Airlines is the leader in the airline industry and Classic Airlines is the world’s second largest. American Airlines is a secondary of the AMR Corporation they have their head office in Fort Worth, Texas. The airline is placed 120 on the Fortune 500 list. American Airlines is greater than before the shareholder value by constructing unions with other airline partners. In accumulation, the corporation improved customer miles and points with every single purchase of entitled flight tickets. Unions were generated with partners such as the British Airlines, Jet Airways, Gulf Air, and Hawaiian Airlines. The airline runs over 1500 flights for each day with 160 destinations and more in Unites States of America, Mexico, Bahamas, and North America. The organization growth earnings rate is 81.600. American Airlines was successful for several years as the......

Words: 2140 - Pages: 9

Airline Report

... incident, it is clearly seen that the management team does play a part in upholding the social responsibility by possibly coming up with ideas to regain the public’s trust once again, despite the economical factors. In any industry, high level of employment is important for any economic success, as employment is very well one of the key indicators of a growing economy. As such, employees in the airline industry keep it driving and thriving. Despite that, there are certain ethical and social responsibility issues surrounding just the group of employees themselves. Issues, ranging from welfare of the employees to ‘rightful’ working attitudes, raise concerns within the industry. Therefore, it is essential for most airline industries to follow several “guidelines” closely because, as discussed, not to lose the public’s and the employees’ trust in them.6 The management team in any airline industry also has to face the social responsibility of looking after the welfare of employees in order to keep them motivated working in airline industries. This is because certain employees, specifically pilots and air stewards, stands to lose more than others due to irregular working conditions.7 Hence, the management team has to come up with welfare benefits to compensate with the poor working environment. Airline industries, such as the American Airlines, are a good example of portraying social responsibility towards its workers. They had successfully, over the years, provide...

Words: 2287 - Pages: 10


... they see that you are making good profits and that reduces your prices down. ( Mindtool, 2010) Size of industry Increase at an annualized rate of 2.9% to $636.0 billion over the five years to 2012. Industry revenue is expected to experience more stable growth during 2012 compared with the past five years, with revenue estimated to grow 5.0%, the total number of passengers flying in 2009 reduced by 1.1% (Global Airlines Market Research Report, 2013). In European Union 777 million passengers were carried by air in 2011. (Eurostat, 2011). Scope of industry The airline industry provides travel for all passengers but also words in combination with big businesses for transportations of machinery and goods. The industry also fulfills many operations around the world. Growth Rate According to keynote in 2006-2008 the airline industry witnessed a steady expansion but then in 2008 it faces some decline due to the recession. European Union airline industry got affected by the weather condition occurred in 2010 with volcanic and ash cloud. Key Note estimates that operating revenue for UK airlines fell in 2010 to £17.31bn, which is a 3% fall in revenue from 2009. Also in decline were the figures regarding passengers uplifted — these fell from 124.8 million to 122.4 million. Similarly, falls were recorded in seat kilometres used, which were down by 2.8%. Cargo kilometres used, however, increased slightly in 2010 (up by 1.6%), partly as a result of airlines turning to cargo......

Words: 738 - Pages: 3

Emirates Airline

... Name Instructor Course Date Emirates Airlines In the Middle East, Emirates Airlines is one of the market leaders in the air transport industry. It operates about 2,200 flights in a week across the whole world with its main hub in Dubai, UAE (Shaw 67). The company engages in offering commercial air transport services both in the UAE and internationally. This includes cargo, postal and passenger carriage services. Moreover, the company engages in offering retail and wholesale consumer goods, institutional and in-flight catering and hotel operations. Its headquarters is in Dubai where the coordination of all operations including flight takes place. The company was founded following the collapse of the Gulf Air in 1985 (Doganis, The Airline Business in the Twenty-first Century 56). It serves approximately 134 destinations in about 60 countries with a fleet size of 218. The mission of the airline mission is to deliver the best in-flight experience in the world. The values and visions of the company involve a stable and strong leadership team. The company believes in business ethics as the foundation of its success. It cares for both stakeholders and employees, the environment and the society it servers (Doganis, Flying Off Course: The Economics of International Airlines 75). The company plays a major role in shaping the future of the air transport industry. Given the associated dangers of terrorism in the Middle East, the airline airport surveillance and security is...

Words: 1578 - Pages: 7

British American Airline

... construction loans cost the City of Denver $1.1m per day, throughout the delay. The embarrassing missteps along the way included an impromptu demonstration of the system to the media which illustrated how the system crushed bags, disgorged content and how two carts moving at high speed reacted when they crashed into each other. When opening day finally arrived, the system was just a shadow of the original plan. Rather than automating all 3 concourses into one integrated system, the system was used in a sing concourse, by a single airline and only for outbound flights. All other baggage handling was performed using simple conveyor belts plus a manual tug and trolley system that was hurriedly built when it became clear that the automated system would never achieve its goals. Although the usage of the system continued for 10years, the system never worked well and in August 2005, United Airlines announced that they would abandon the system completely. The Airport owners and the airlines both suffered losses to the extent that Automated Baggage System did not deliver the productivity and efficiency that they had bargained for. Airlines and airport management have learnt from the unfortunate experience of this project. The most fundamental problems with the Automated Baggage system designed for Denver were predicted by consultants, experts and other concerned stakeholders in order to guide against missteps, but these messages were ignored. The basic lesson learnt is that...

Words: 2625 - Pages: 11

American Airline 1992 Value Pricing Strategy

...American Airlines 1992 Value Pricing Strategy Evaluate American’s 1992 announcement of a new rate structure: a. What changes did American make? To replace the old domestic air-fare system with 16 different prices, discounts, and restrictions that are constantly changing, American made four key changes to its fares. 1. Instead of 16 different prices, American simplified its pricing structure to include only 4 kinds of fares: a first-class fare, a coach fare that can be bought anytime before flight time (full-fare), 21-day advance-purchase fare, and 7-day advance-purchase fare. The new fare structure was expected to reduce administrative labor costs related to managing different fares by $25 million annually. The change was also expected to reduce coach fares by 38% on average and first-class fares by 20% to 50%, while the cuts in discount rates were smaller. American believed that the fare cuts will produce an increase in travel (number of air tickets sold) which would not only cover but also exceed the reductions in prices per ticket. American anticipated the new system will eventually increase annual revenue by as much as $350 million. 2. Unlike the old fare system which did not allow refunds or reschedule, passengers who buy advance-purchase tickets under the new system will have the option to reschedule their flights if their travel plans change by paying a $25 processing fee. First-class and coach tickets are refund-able, which stays the same from the old...

Words: 1144 - Pages: 5


... constant source of encouragement. (Sandeep Singh) (Amit Chopra) Certificate To whom it may concern This is to certify that “Airlines Reservation System” submitted by Mr. Sandeep Singh and Mr. Amit Chopra to Lyallpur Khalsa College, Jalandhar is a student of B.Sc (IT) and collect the information under my supervision and guidance. This project is built in Visual Basic 6.0 and Oracle 8i. This project is for the management of the reservation system of British Airways. This project has reduced all the manual work and it also is very useful for keeping the records for lifetime. The project ported by them is good. They have done a lot to make the project user friendly and up to our expectations. I wish their success in his life. Project Guide (Sandeep Bassi) Lecturer in Department of Computer Science INTRODUCTION • PURPOSE:- The following is a software system that helps processing airline tickets reservation. The application system lets customers buy airline tickets. A customer can give the preferences and the details of journey, depending on the status of available flights; tickets are allotted accordingly through the system. • DESIGN CONSTRAINTS:- A computerized, automated solution strategy for online airlines reservation system will helpful in the current situation and provides better organization, by utilizing a database. The project has......

Words: 9647 - Pages: 39

Easyjet Airline

... past age 75, creating rapidly aging populations (Population Reference Bureau Fact Sheet: World Population Trends 2012) Airlines will have to try and appeal to the older traveller who is more likely to travel with a traditional carrier though in turn the recession may have impacted on their disposable income (O’Connell J F ,Williams G 2005) Technological The use of the Internet has changed the way consumers organize their travel with as many as 80% of people now booking their holiday via the internet and it is considered that budget airlines paved the way for the online revolution in the travel industry (Travel Weekly 2012) often using flight price checker sites and checking in online is seen as a time saver rather than just a way of the airline saving money with check-in staff. Use of the websites also allows the airlines to build a profile of their customers by tracking their session history. Technological advancements in aircraft design and manufacturing are constantly being sought to make airlines more competitive Easyjet announced it was testing the use of drone technology to assist engineers in inspecting its aircraft for faults. Easyjet said the drones will help cut the inspection time on its 220-strong fleet of Airbus aircraft from a day down to “a couple of hours, Easyjet is exploring other advances in technology, such as the use of robotic arms, lasers and avatars and American Airline passengers already have the use of Wi Fi on board and this is something...

Words: 4011 - Pages: 17

Airline Deragulation

...Interamerican University of Puerto Rico School of Aeronautics Airline Deregulation a Failure Jose Manuel Lopez Team 4 AWCS 2000 Prof. Ocasio Airline deregulation is a failure while the commercial airliner industry has sky rocketed in safety, lower fares. But the industry itself has seen many companies merge and this has made the top 5 airline companies have more power in the market than before the 1978 Airline deregulation act. If we look at them now their control in the market is at an 80% with normal traffic fares and the International fares all together. This make it so the top 5 airline companies have more control than they did before giving these airlines more control of routes and this created a series of unforeseen problems at the time the high congestion of air traffic, delays of flights, overcrowded airports that made the airports targets for terrorist attacks which made air travel more difficult, how this would affect the workers of these companies in making, and customer unsatisfactory, and “The limited Reemergence of monopoly power” stated by Alfred E. Khan Professor of Political Economy, at University of Cornwell, and former economic advisor to President Carter and chairman of the Civil Aeronautics Board. Airline deregulation while it blossomed in some areas it started to create a growing problem where companies started to exclude competition and this would create an industry that more and more airlines would have to merge with the bigger companies......

Words: 325 - Pages: 2

Southwest Airline

...Southwest Airlines was founded by Rollin King and Herb Kelleher in 1967. The airline was originally incorporated to serve three major cities in Texas (Dallas, Houston and San Antonio). The idea was to create an airline with low fares, easy scheduling and quality customer service. Some of the dominant airlines at that time initiated a series of litigations against southwest airlines in an attempt to prevent them from launching their first flight. After winning the legal battles, other problems started to ensue e.g. the company needed to strategize on how to maximize profits and at the same time compete with other players within the airline industry. The following are some issues the company faced and the strategies used to tackle it. The company was faced with the challenge of How to make more profit with fewer plans and they came up with the idea of “10-minute turnaround” which was designed to enable their planes to fully unload and reload within ten minutes. At some point, the Company CEO was forced to slash the flight price to $13 for the Dallas to San Antonio routes in other to compensate for low turnout of passengers travel to San Antonio. Southwest also had to compete with Braniff airline after the latter slashed its price to $13 for it Dallas to Houston route which was the most profitable route for South west airline, the main aim of this strategy was to drive southwest to a state of bankruptcy if the company was to attempt to meet the $13 price, but rather than...

Words: 522 - Pages: 3