The Future Of American Airlines - Term Paper Example

The Future Of American Airlines        American Airlines commenced in 1934 is now considered the second largest airline company in the world in terms of passenger miles, operating revenues and passenger fleet size. American Airlines continues to be the most formidable airline in the industry catering to 2, 86,000 passengers and employing over 86,000 people. The airline operates comprehensively domestic as well as international networks and caters extensively to North America, South America, Europe, Asia and Caribbean. American airlines are very strong in domestic and transcontinental markets as the airline carries at least 12.1million passengers across between Latin America and US. (American Airlines, n.d) HISTORY American airlines was formed and developed by acquiring and restructuring 82 different airlines and some of them included Southern Air Transport, Southern Air Fare Express, Universal Aviation in the Midwest, Colonial Air Transport and Thompson Aeronautical Services. In 1934, this company was incorporated as a single company under the name American airways with headquarters based in Texas. (American Airlines, n.d) American Airways was later acquired by E.L Cord and named it “American Airlines”, this was the first airline to help and develop the airport at New York City. American Airlines was the first airline to fly Douglas DC-3 and by the end of the decade, the airlines was considered as the country’s number one domestic airline in terms of popularity, revenue passenger miles. In 1942, the airlines also entered into catering food services to the passengers with a subsidiary called the “Sky Chefs”, it was the first attempt made by any airline company. In 1944, airlines also introduced the first domestic freight service with the DC-3. After the Second World War, American Airlines had commenced international subsidiary to serve European countries which was called American Overseas Airlines. It also subsequently launched another subsidiary to serve Mexico and it was called Lineas Aereas Americanas De Mexico. This had not only helped the airlines to expand the boundaries internationally but also develop airports in different countries. (American Airlines, n.d)       After the world war, the airlines had launched a family fare plan which would enable a family travel together at economic and concessional rates. American airlines were also the first airway to introduce Magenetronic Reservisor to keep track of the available and unavailable seats in the flight. In 1959, it offered the first coast to coast air service with Boeing 707. In 1970, American airlines also acquired several Caribbean routes through its merger with Trans Caribbean Airways and this helped in expanding services to new routes and destinations around the world. By 1985, the business expanded so much that it had more than 10,000 agencies across the US for travel reservations. On Jan 16th 1992, American Airlines opened its first state of the art airline maintenance facility which had raised the standard of the global air travel. (American Airlines, 2010) Overall this company has a very good impressive record with introducing coast to coast jet service, launching the first electronic reservation and being the first to promote the major frequent flier program in the 80’s. ECONOMIC GROWTH       The growth experienced by American Airlines during 1990’s was more than expected. This airline today serves more than 250 cities around the world and on an average operates 3600 flights in a day. There was a drastic change in the economic growth in the industry after the terrorists’ attack 2001. The airline industry had recorded a total loss of $7.7 billion in that year and the airline industry is still struggling to recover from the devastation. As a result, American airlines had recorded profits for only 3 years of the last 10 years. There has been an increase in overhead costs such as security costs, oil prices and maintenance costs and the price change had to be made to cover up for the overheads. Restructuring of production costs, manufacturing, distribution was done to maximize revenues. American Airlines is the only major airways that has never filed for bankruptcy and as a result of that, the company has forced in to cut costs, terminate pension plans and restructure the debt.   LABOR RELATIONS: American Airlines always aimed at hiring diverse and talented people and also managing costs associated with hiring the workforce. The primary focus of the company was to provide development opportunities, good working environment, competitive pay package, benefits and other fringe benefits to the current and future workforce. Although many of the airline companies have stopped the retirement benefits, American airline continue to provide retirement benefits, health insurance policies are also covered for all the employees and their families. Approximately 75% of the total American Airline employees belong to one of the 3 labor unions- the Allied Pilots Association (APA), the association of professional Flight Attendants (APFA) and Transport Workers Union (TWU) (Strengthening our workforce, n.d) Around 66% of the American eagle employees are also represented by 3 union groups namely- the Airline Pilots Association (ALPA), the association of Flight Attendants (AFA) and the Transport Workers Union (TWU). American airlines work with the trade unions and trade leaders throughout the negotiation process, not only address the issues and challenges but also provide good compensation packages. The company is also looking for cost reduction and improvements by increasing the productivity of each employee. Recently, there has been a proposal from the Association of Professional Flight attendants in the areas of healthcare, compensation, hours of service and other benefits. In return to the increase in 3% bonus increase the company has proposed to increase the monthly schedule for flight attendants from 77 to 89 hours. (Flight Attendant Negotiation, n.d)  FUTURE GROWTH: Some of the network and alliances expected in the future are- American to launch new international services between Chicago and Beijing To strengthen the position in New York by introducing 13 new routes to England, Spain and Costa Rica American to tie up with Japan Airlines for antitrust immunity American Airlines have announced their expansion in New York City airports which includes JFK and LaGuardia Airports. The airlines are planning to refurbish the Admirals Club and connect both the Concourses which would make it easier for passengers. The airlines have also included a number of routes to Atlanta, Charlotte and Minneapolis from LaGuardia Airport. At the JFK airport, AA are planning to renovate and extend Terminal 8 to making it easier to connect with the flights. There are also many new routes added from JFK to Spain, Madrid, Costa Rica and San Jose. In March 2010, American Airlines had made official, the announcement on interline agreement with JetBlue airways which states that there would be interlining of routes between JetBlue and American Airlines. The airlines are also now negotiating for a codeshare agreement with JetBlue airlines. The airlines have also increased the frequencies of flights to Chicago, Dallas, Miami and Las Vegas. Both airlines have offered its customers more convenient travel options from New York and Boston and they have also agreed to launch a frequent travel relationship in 2010. (American Airlines, n.d)       American Airlines and Japanese Airlines together had filed applications with the US transport department for antitrust immunity for both the countries; both the countries have implemented a Joint Business Agreement (JBA) which would help in governing the flights between America and Asia. The airlines have also agreed to sign a memorandum of understanding with India’s leading domestic and 5 star carrier-Kingfisher airlines which would enable its expansion in India. The US transport department has also given the right for American Airlines to have a nonstop service to Tokyo and Shanghai from JFK airport from Jan 2011. Although American has expanded in Asia, the expected revenue and success was not achieved and hence has to pull back some of the carriers to Asia. In July 2010, AA also announced signing a contract with Air Berlin which would not only have a frequent flyer relationship but also have a codeshare agreement between both the airlines. (American Airlines, n.d)  TYPES OF FLIGHTS: American Airlines consists of 900 aircrafts as on March 2010 which aims at ensuring safety, good maintenance and comfortable traveling with 255 McDonnell Douglas MD-80 as their largest operator. Some of the highlights are- American Airlines to procure 84 more Boeing 737 by end of 2011 American Airlines to acquire additional of 58 Boeing 787 aircrafts which is expected to be fuel efficient American eagle to acquire 22 CRJ- 700 which will be equipped with first class cabin service. As a part of the replacement plan, the MD-80 are being replaced by Boeing 737 and Boeing 800, therefore offering an increase of 35% more mileage with an average savings of 800,000 gallons of fuel per year for every aircraft. AA also will have the MD-80 run until 2024 and would be later swapped with the new Boeing Y1 aircrafts. In 1930, AA started off with Ford 5-AT and DC-3 aircrafts and the company also briefly owned DC-8’s which was never operated and sold off to other airways. Some of the retired Boeing 747’s were used by NASA as a shuttle carrier aircraft. American also briefly owned and operated Boeing 717, MD-87 which was acquired from Trans World Airlines and Reno Air respectively. In July 2010, AA management had announced the procuring of 35 next generations Boeing 737-800’s which is in addition to the 84 new 737’s purchased in 2009 as a part of the replacement plan for its MD-80 fleets. (American Airlines, n.d) American Airlines has also an in-house maintenance department as maintenance of the aircrafts play a very important role in the fleet industry. Strengths of American Airlines company- Strong brand name in the airline industry The only legacy airway not to have filed for bankruptcy Major improvement made in labor management Best management in the airway carriers Dominant airways in Latin American and the Caribbean Weaknesses: Large amount of debt and poor maintaining fleets Aging fleet of planes Poor Asia route structure AA should focus in optimizing and making full use of its current assets and also by reducing and cost cutting on controllable costs such as non-fuel and non-labor aspects. (AA- The future of American Airlines, 2006) The company has also launched a new strategic plan which aims at sustaining and increasing the revenues and also providing its customers with the best experience in the industry- Customer loyalty which would mean providing good services so that the customers favourtise the airlines and hence there is a lot of effort to enhance the services and improve the traveling experiences Improving infrastructure- to opt for the best aircrafts, facilities and maintenance Strengthen the global market by expanding the network to all the continents To provide good work environment and also help in maintaining a good work place To increase the profitability by cutting costs where possible, operate efficiently and also provide job security for its employees (Strengthening our workforce, n.d)                                                  Literary References  American Airlines (n.d) retrieved December 9th 2010 from Wikipedia http://en.wikipedia.org/wiki/American_Airlines American Airlines (2010) retrieved December 9th 2010 from American Airlines website http://www.aa.com/i18n/amrcorp/corporateInformation/facts/history.jsp AA- The future of American Airlines (2006) retrieved December 9th 2010 from website http://www.airliners.net/aviation-forums/general_aviation/read.main/3016874/ Strengthening our workforce, retrieved December 9th 2010 from American Airlines website http://www.aa.com/i18n/aboutUs/corporateResponsibility/employees/strengthening-our-workforce.jsp Flight Attendant Negotiation (n.d) retrieved December 10th 2010 from American Airlines Negotiation website http://www.aanegotiations.com/apfaFlightAttendantNegotiationsNews.asp        Read More