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…...