Term Paper on "American Airlines Brief Description"

Term Paper 12 pages (4887 words) Sources: 7 Style: APA

[EXCERPT] . . . .

American Airlines

Brief description of the Airline History:

American Airlines -- AA till date is credited to have the twin distinction of being the world's largest scheduled passenger airline as also the biggest scheduled air freight carriers extending a broad range of freight and mail services across its systems. At the latest count, AA operates scheduled jet service to nearly 150 destinations in the entire N. America, the Caribbean, Latin America, Europe and Asia. ("AMR Corporation 2006 Annual Report," 2006) A table showing the top ten airline by traffic as on June 2007 is stated in Exhibit -I ("IATA Economic Briefing: World Air Transport Statistics 51st Edition June 2007.," 2007)

Looking back, April 15, 1926 was a momentous occasion in the history of American aviation.

On that date, Missouri's Robertson Aircraft Corporation's chief pilot Charles A. Lindbergh took off from Chicago in his small DH-4 biplane headed for St. Louis with bag of mail. Subsequently it was one of the many companies which finally consolidated to constitute the present day American Airlines. The consolidation started in 1929 when the Aviation Corporation was constituted to take over young aviation companies, Robertson included. During 1930, the Aviation Corporation's airline subsidiaries were incorporated into American Airways, Inc. And it was in 1934 when American Airways came to be known as American Airlines, Inc. AA became the first airline in June 25, 1936 to fly the Douglas DC-3 in a commercial trip. By the end of the decade, AA achieved the unique distinction of becoming the country's top most domestic aircraft as regards revenue passenger miles is concerned and on Feb 16, 1937 reached a major milestone in flying its one-millionth passenger. ("American Airlines History," 2007)

From the period 1945 to 1950, AA ran American Overseas Airlines -- AOA, a transatlantic division servicing several European nations and with it forayed into Europe. AA started the Family Fare Plan during 1948 helping families to travel together at lower rates and the year 1953 saw AA flagging off the transcontinental service without break in both directions across the U.S. with Douglas DC-7. Another first for AA was becoming the first airline to offer coast-to-coast service with Boeing 707. In the initial part of 1960, AA tied up with IBM to launch and implement the SABRE -- Semi-Automated Business Research Environment which is the biggest electronic data processing system for business application. ("American Airlines History," 2007)

Over the years it came to be recognized as the biggest real-time data processing system, just next to U.S. government's SAGE system. Fleet additions were made during 1960s and 1970s including the Boeing 727 and Boeing 747 and in 1968 AA achieved the unique distinction to place orders for the McDonnnel Douglas DC 10 that began its first scheduled flight in 1971. AA made history by launching the most popular fare i.e. The SuperSaver. During the initial stages giving discount fares from New York and California, the Super Saver was extended to every AA route during March 1978 and thereafter to Mexico and Canada. Deregulation in the airline industry took place in 1978 and in January 1979, AA started with a major route expansion, starting off with new routes and new destinations in the U.S. And the Caribbean. During 1981, AA launched the ADVANTAGE travel awards program, an innovatory frequent flier marketing program. During May 1982, stockholders consented to a plan of reorganization that led to the formation of a new holding company, known as AMR Corporation that came to be the parent company of AA. ("American Airlines History," 2007)

More marketing offers were introduced with Ultimate Super Saver fares in 1985, thereby offering AA passengers up to 70% discounts and competition for the low-service, cut-rate carriers that had come up in the stir of deregulation. Besides, AA also began its Senior SAAVers Club that gave discounts to senior citizens. In its foray into freight delivery, AA expanded its network to give delivery into same-day service by 1988. AA grew rapidly making investments in infrastructure for expanding the facilities at DFW International Airport. Besides, expansion of the pilot-training facilities at AA's Flight Academy in the headquarters complex was done as also new reservations center in Tucson. An ultra-modern System Operations Control -- SOC was also opened in 1990. The year 1990 also marked the launching of the AA's premiere international service, International Flagship Service. The following year AA again broke new ground to fly its billionth passenger and expanded its European routes, opened its western reservations office in Tuscon and purchased its first McDonnell Doughlas MD-11 and Fokker 100 airplane. ("American Airlines History," 2007)

During 1993, AMR Corporation, the parent of AA constituted the SABRE Technology Group that consisted of the AMR Information Services -- AMRIS, SABRE Travel Information Network -- STIN, SABRE Computer Services -- SCS, SABRE Development Services -- SDS and AMR Project Consulting and Risk Assessment Units. Carrying on with its policy of various programs, AA and four other airlines launched a new customer -driven global alliance called OneWorld which is a multimillion dollar scheme systemized to upgrade the standard of global air travel and the new alliance was launched on Feb1, 1999. The year also marked the introduction of the Boeing 777 and the 737-800 with installation of defibrillators in all its aircraft. Besides, AA also earned recognition in becoming the first airline to give the facility of DVD in-flight video players in its scheduled flights. In 2000, AMR did the spin-off of SABRE into its own company. In 2001, AA received the recognition of State of California EPA's 2001 Governor's Environmental and Economic Leadership Awards Program. ("American Airlines History," 2007)

During October 2001, AA made a major announcement for speeding up construction of its new $1.3 billion terminal at New York's JFK Airport, slated to complete by September 2006. AA celebrated its 30th anniversary on January 14, 2004 of running the first commercial flight. More addition to infrastructure was made with AA opening its first phase of its latest 1.5 million square foot terminal at NY's Kennedy International Airport. In Nov, 2005, AA started a daily nonstop service between Chicago and Delhi covering 7,500 miles earning itself the distinction of running its longest nonstop route with Boeing 777 aircraft. The AAdvantage Program completed its 25th anniversary during 2006 which was the first frequent flyer program which transformed the airline history and initiated the standard for such type of projects in a lot of other businesses. Starting with just 3, 00,000 members, the AAdvantage program's membership have risen to a mammoth 50 million. AA again broke new ground by launching its first ever service to China on April 2, 2006 by launching a daily nonstop Boeing 777 flight between Chicago and Shanghai. During October 2006, C.R. Smith, the pioneer of aviation and chief of AA since long was included into the Texas Transportation Hall of Honor. ("American Airlines History," 2007)

2. Financial performance in the post deregulation environment:

Deregulation within the U.S. airline industry was brought about during 1978. Deregulation, through lifting constraints on operations, allows airlines to build efficient economic systems. These are the hub-and-spoke networks which have developed to typify the airline operations in the U.S. during the past decade. It is a fact that the hub-and-spoke let airlines to gather passengers to and from a lot of destinations, to put them on a bigger and more economical aircraft, and therefore cater to the lower density routes with greater frequency and lower fares. Through lifting constrains on fares and services, the policy of deregulations pushes airlines to make experiments? They react by regularly altering their patterns of performances. (Neufvillee; Barber, n. d.)

The year 2006 was a turnaround year for AA as the company recorded net earnings of $231 million in 2006 as against a net loss of $857 million during 2005. AA's revenue saw an upward rise of roughly $1.9 billion in 2006 compared to 2005. The passenger revenues went up 7.5% in spite of a capacity decrease of 1.2%. Whereas the passenger yield displayed a considerable year-over-year enhancement as AA instituted fare hike to partly cover the relentless rise in the cost of fuel. ("AMR Corporation 2006 Annual Report.," 2006)

Before deregulation in 1978, the Civil Aeronautics Board -- CAB used to control entry, routes and fares in order to promote stability within the air transportation system. The Airline Deregulation Act of 1978 removed CAB's authority over routes and domestic fares which set the ball rolling that reshaped domestic air travel demand. The spiraling of air transportation following deregulation can be witnessed through rise in capacity in terms of Available Seat Miles -- ASMs and traffic that is calculated through Revenue Passenger Miles -- RPMs. Scheduled RPMs went up at a very faster rate following deregulation compared to earlier periods. Within 1954 and 1978, RPMs went up at an average annual rate of 5.8 million RPMs annually, however this more than doubled in the period between 1978 and 2002 to clock an average rate of more than 11.7 million RPMs annually. Capacity in… READ MORE

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