American Airlines Case Study

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In 2011, AMR Corporation, American Airlines (AA) holding company, filed for bankruptcy protection and was looking to get approved for a merge with US Airways. In the last decade, the U.S airline industry has experienced a novel challenges, due to fuel price volatility, the limited to organic growth and the slowing demand of air travel. Most of the LCC’s and legacy airlines have all responded to the developments with a bankruptcy, reorganization, or just a new pricing strategy. Consolidation among the airlines may actually the most common remedy for domestic airline industry. There has been five major merges amongst the airlines: Continental Airlines with United Airlines (2010), Republic Airlines with Frontier (2009), US Airways with America West Airlines (2005), Delta Air with Northwest Airlines (2008), and Southwest with AirTran Airways, which was one of the first transaction involving a LLC.
In 2011, American Airlines announced that they would be filing for Chapter 11 bankruptcy. This chapter was originally designed to accommodate complicated reorganization of publicly help corporations. It allows companies with a court approval reject agreements that were made under collective bargaining and renegotiate contracts with creditors. On April 15, AMR Corporation, which is the parent company of American Airlines, Inc. and a subsidiary to providing aviation services approved a plan of reorganization plan to exit bankruptcy protection based on the merge with US Airways (American Airlines , 2008). There was also the drop in the air travel due to the September 11th terror attacks. American Airlines were created by a combination of 80 smaller carriers in 1930. In 2008, AA was considered the world’s biggest airlines until compet...

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...es was the jet fuel cost. Management and operation loaded the aircrafts with more fuel than it needed, which was a huge expense to the airlines. This caused them to cruise at higher altitudes to burn fuel prior to landing. The fuel strategy is a risk that can either mitigate or increase cost, depending on the contract and market pricing of the fuel. For future contract they need to negotiate on locking in fuel pricing no matter of the economy issue. The merge may have been a life changer for many of those invested in the airline industry. Many employees were facing layoffs and pay cuts prior to the decision to merge. Bankruptcy in recent years has led many airlines to merging amongst each other. We can’t exactly say if there will be any changes in the next couple of years. We will see a difference in ticket price with the airline industry being competitive.

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