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Amy Kakuk, Beth Theriault, and Jessica Bourgoin

American Airlines AMR Inc. Amy Kakuk, Beth Theriault, and Jessica Bourgoin. All images from www.aa.com. Company History A Little More About Us Our Planes Where We Fly Vision Statement Mission Statement Company Ratios External Analysis Opportunities Threats CPM EFE. Internal Analysis

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Amy Kakuk, Beth Theriault, and Jessica Bourgoin

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  1. American Airlines AMR Inc. Amy Kakuk, Beth Theriault, and Jessica Bourgoin All images from www.aa.com

  2. Company History A Little More About Us Our Planes Where We Fly Vision Statement Mission Statement Company Ratios External Analysis Opportunities Threats CPM EFE Internal Analysis Strengths Weaknesses IFE Matrix Analysis SWOT Analysis Space IE matrix Grand Strategy QSPM Recommended Strategies Future Plans AMR in the News Agenda

  3. Started in New York City in 1929 under the name Aviation Corporation. It was founded by Sherman Fairchild. 1930, renamed American Airways after combining 85 small airlines. 1934, airmail was suspended causing difficulty and the cause for new ideas. Renamed to its current American Airlines and the first plane to pay off itself without the need for postal revenues was built. 1964, AMR introduced the first computerized airline ticket reservation system (SABRE) 1980, new CEO Bob Crandall introduces frequent fliers program. 1982, Purchase of domestic airline. 1987, Nashville Eagle was renamed American Eagle. 1989, Donald Trump was prevented from purchasing American Airlines and new routes to Japan, Latin America, and London were bought. 1996, 20% of SABRE was sold and a code-sharing agreement was made with British Airways. 1999, One world (alliance of major airlines around the world) was formed because of agreement with British Airways. 2000, AMR sold its shares of Canadian Airlines along with the remaining of SABRE. 2001, AMR bought the assets of the failed TWA for $743m. 2003, AMR was on the brink of bankruptcy after losing $1.3B AMR Timeline Text Book: Strategic Management Author: Fred R. David

  4. Location AMR Corporation4333 Amon Carter BoulevardFort Worth, TX 76155Phone: 1-817-963-1234Fax: 1-817-967-9641 Sector Name: TransportationIndustry Name: AirlineEmployees: 92,100Market Cap (Mil) $ : 1,724.425Complete Financials: Dec 2004Updated: 03/31/2005 www.AA.com

  5. Stock Quote (AMR - NYSE) http://www.shareholder.com/aa/stock.cfm

  6. Vision Statement (proposed) • To become the largest airline in the world.

  7. Mission Statement (proposed) • AMR Corporation is committed to providing every citizen of the world with the highest quality air travel to the widest selection of destinations possible. AMR will continue to modernize its fleet while maintaining its position as the largest air carrier in the world, with a goal of becoming the most profitable airline. AMR is the airline that treats everyone with equal care and respect, which is reflected in the way each AMR employee is respected. AMR recognizes that its employees are the key to the airlines success and invests in the futures and lives of its employees. By investing in tomorrow’s technologies and by following a strict adherence towards environmental regulations, AMR demonstrates its commitment to the world environment.

  8. Customer Service Plan • American Airlines and American Eagle are in business to provide safe, dependable, and friendly air transportation to our customers, along with numerous related services. We are dedicated to making every flight you take with us something special. Your safety, comfort, and convenience are our most important concerns. www.AA.com

  9. See Our New Campaign, We Know Why You Fly. www.AA.com

  10. Our Planes… • Airbus A300-600 • Boeing MD-80(S80) • Boeing 737-800 • Boeing 757 • Boeing 767 • Boeing 777 www.AA.com

  11. Our Planes… • ATR 72 - Super ATR • Bombardier CRJ-700 • ERJ-145 • ERJ-140 • ERJ-135 • SAAB 340B www.AA.com

  12. AirbusA300-600 Seats: 267 Lavatories: 7 www.AA.com

  13. Boeing MD-80 (S80) Seats: 131 Lavatories: 3 www.AA.com

  14. Boeing 777 (777) Seats: 245 Lavatories: 9 www.AA.com

  15. Where we fly…

  16. USA (North & South West) All Maps from www.AA.com

  17. USA (North & South Central)

  18. USA (North & South East)

  19. Canada

  20. Mexico

  21. Asia

  22. Australia& New Zealand

  23. Central America

  24. Caribbean

  25. Africa

  26. Europe

  27. Middle East

  28. South America

  29. Eurasia

  30. Company Worth AnalysisYear ending 2001,2002,2003 average Stockholders equity2,125,000,000 Net Income X 5(10,835,000,000) (Share price/EPS) X Net Income(2,436,937,716) Number of Shares Outstanding X Share Price2,015,000,000 Method Average 2,282,984,429

  31. Key Company Ratios

  32. Key Company Ratios (cont.)

  33. External Audit Opportunities • Favorable wage negotiation climate • Travel increasing in general • Low interest rates • Government backed loans • Information technology • New fuel efficient engines • Partnerships with Asian Airlines Threats • Increased air travel inconvenience (security related) • Business travel declining • Increased competition from point-to-point competitors • Availability of pricing information • Overcapacity in industry

  34. EFE Matrix

  35. CPM

  36. Internal Audit • Strengths • Size of fleet • Number of routes • Partnerships • IT infrastructure • Government relations • Weaknesses • Financial position • Cost structure • Unprofitable routes • Too many divisions • Reliance of business fares

  37. IFE Matrix

  38. S-O Develop new partnerships in Asia utilizing the number of routes as a key negotiating point. S-T Use IT to reduce the check-in and wait times on flights. Such as more curb side check-ins and e-tickets. Use market position by reducing number of unprofitable flights and reducing industry capacity. W-O Sell unprofitable/smaller divisions to improve financial positions. Negotiate lower wage rates with unions to improve cost structure. W-T Use a mixed model. Some operations point-to-point to improve cost structure and reduce customer inconvenience. Eliminate unprofitable routes to improve financial position and reduce industry capacity. SWOT Matrix

  39. SPACE Matrix Y axis *Financial strength 1 *Environmental stability -5 Y axis: 1 + (-5) = -3 X axis *Industry strength 2 *Competitive advantage -5 X axis: 2 + (-5) = -3 1.Retrenchmnet 2.Diversification 3.Divestiture 4.Liquidation

  40. The Internal-External (IE) Matrix Strong Average Weak 3.0 to 4.0 2.0 to 2.99 1.0 to 1.99 High I II III 3.0 to 3.99 American Airlines Medium IV V VI The EFE Total Weighted Score 2.0 to 2.99 Low VII VIII IX 1.0 to 1.99 The IFE Total Weighted Score Market Penetration Market Development Product Development

  41. Grand Strategy Matrix 1.Retrenchmnet 2.Diversification 3.Divestiture 4.Liquidation

  42. QSPM (Internal Factors)

  43. QSPM (External Factors)

  44. Strategies Summary • Alternative Strategies IE SPACE GRAND COUNT • Forward Integration - • Backward Integration - • Horizontal Integration - • Market Penetration X 1 • Market Development X 1 • Product Development X 1 • Concentric Diversification X X 2 • Conglomerate Diversification X 1 • Horizontal Diversification X 1 • Joint Venture - • Retrenchment X X 2 • Divestiture X X 2 • Liquidation X X 2

  45. ??Which Strategies?? • Concentric Diversification which is the addition of new but related product, may be something that AMR would want to look into. They could add something to attract new customers too their company. • Another option they could look into in Retrenchment. This is the regrouping by reducing costs and assets. (This option is already being explored). • AMR may also want to think about Divestiture, selling its American Eagle division. • If these strategies do not work, AMR’s last option is Liquidation. With the financial trouble that AMR has been having, this may be the only way.

  46. Future Plans AMR plans to raise their profitability in the future. This is a much needed event in order for the company to stay in business. In order to boost their profitability, AMR is currently in the process of doing some restructuring. This restructuring includes: • Reducing Number of flights from the Dallas/Fort Worth and the O’Hare Hubs. • In 2003, 27,000 employees were laid off and more will be needed to keep the company alive. • Retiring older aircrafts that are too expensive to keep running. AMR also needs to start getting rid of some of its least profitable routes, this will simplify their program and eliminate the spending of money to fly on them. Text Book: Strategic Management Author: Fred R. David

  47. News Releases • March 30 | American Airlines Cargo Division Announces Increase in Fuel Surcharge • March 29 | American Airlines to Resume Seasonal Nonstop Service From New York to Rome on April 3 • March 28 | Sizzlin' Summer Travel Deals - Get 'Em While They're Hot • March 28 | New Online Program Lets American Airlines AAdvantage Members Redeem Miles for Hotel Stays and More

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