American Airline Executive Summary

Industry background/history The airline industry experienced growing revenues throughout the 1990s. At the turn of the new millennium, there was a drastic change to this trend. A major devastation to the airline industry came after the terrorist attacks on September 11, 2001. The industry recorded losses of $7.7 billion for the year and revenues went down 13.5% after a record $93.6 billion in 2000. The industry struggled throughout the following years. Recovery from losses was difficult in those times due to increased security costs, increasing oil prices, a struggling economy, and low ticket fares. In 2008, oil prices reached a record high and the top 10 U.S. carriers lost $4 billion, followed by a $5 billion loss in 2009. Conditions have begun to look better for the industry. There is evidence of improving demand and revenues for the top 10 U.S. carriers in the first half of 2010, and oil prices remain lower than the 2008 record highs. This could be the beginning of more profitable years for the industry.
Since its creation in 1934, American Airlines has developed into the world’s second largest airline in passenger miles. It is a subsidiary of the AMR Corporation and has its headquarters in Ft. Worth, Texas. American operates an extensive network of travel throughout North and South America, Europe, Asia, and the Caribbean. After years of losses following the devastation of the 2001 terrorist attacks, American Airlines finally announced net earnings of $231 million in 2006. This came after a net loss of $857 million in 2005, and larger losses in the four years prior to that time. Fortunately for the airline industry, it is forecasted that volume will reach 2.4 billion passengers in 2012, a 13.7% increase since 2007. The U.S. air freight market is projected to see similar growth up to 2012. This is a promising for American Airlines, one of the largest scheduled air freight carriers in the world.
A possible obstacle to American Airlines’ future growth is