Amy Kakuk, Beth Theriault, and Jessica Bourgoin

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American Airlines AMR Inc.

• Amy Kakuk, Beth Theriault, and Jessica Bourgoin

All images from www.aa.com
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Agenda

• 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

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AMR Timeline

• 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

Text Book Strategic Management Author Fred R.
David
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Location

• AMR Corporation4333 Amon Carter
  BoulevardFort Worth, TX 76155Phone
  1-817-963-1234Fax [phone]
• Sector Name TransportationIndustry Name
  AirlineEmployees 92,100Market Cap (Mil)
  1,724.425Complete Financials Dec 2004Updated
  03/31/2005

www.AA.com
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Stock Quote (AMR - NYSE)
http//www.shareholder.com/aa/stock.cfm
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Vision Statement (proposed)

• To become the largest airline in the world.

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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 tomorrows
  technologies and by following a strict adherence
  towards environmental regulations, AMR
  demonstrates its commitment to the world
  environment.

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

• Airbus A300-600
• Boeing MD-80(S80)
• Boeing 737-800
• Boeing 757
• Boeing 767
• Boeing 777

www.AA.com
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Our Planes

• ATR 72 - Super ATR
• Bombardier CRJ-700
• ERJ-145
• ERJ-140
• ERJ-135
• SAAB 340B

www.AA.com
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Airbus A300-600
Seats 267 Lavatories 7
www.AA.com
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Boeing MD-80 (S80)
Seats 131 Lavatories 3
www.AA.com
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Boeing 777 (777)
Seats 245 Lavatories 9
www.AA.com
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Where we fly
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USA (North South West)
All Maps from www.AA.com
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USA (North South Central)
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USA (North South East)
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Canada
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Mexico
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Asia
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Australia New Zealand
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Central America
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Caribbean
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Africa
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Europe
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Middle East
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South America
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Eurasia
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Company Worth AnalysisYear ending 2001,2002,2003
average

• Stockholders equity 2,125,000,000
• Net Income X 5 (10,835,000,000)
• (Share price/EPS) X Net Income (2,436,937,716)
• Number of Shares Outstanding X Share Price
  2,015,000,000
• Method Average 2,282,984,429

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Key Company Ratios
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Key Company Ratios (cont.)
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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

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EFE Matrix
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CPM
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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

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IFE Matrix
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SWOT Matrix

• 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.

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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.L
iquidation
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The Internal-External (IE) Matrix
The IFE Total Weighted Score
Market Penetration Market Development Product
Development
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Grand Strategy Matrix
1.Retrenchmnet 2.Diversification 3.Divestiture 4.L
iquidation
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QSPM (Internal Factors)
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QSPM (External Factors)
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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

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??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, AMRs last
  option is Liquidation. With the financial
  trouble that AMR has been having, this may be the
  only way.

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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 OHare 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
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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