STRATEGIC MANAGEMENT ANALYSIS

American Airlines

American Airlines

Introduction

American Airlines, started as The Aviation Corporation in the year 1929, which was established to get hold of young aviation organizations, which finally evolved to turn into American Airlines, Inc or AA (Ito, 2003). At present, AA is the largest airline all over all world with respect to the fleet size and number of transported.

Financial Analysis

Profitability Analysis

Return on equity: The return on equity of American Airlines does not show potential as it has had an extraordinary decrease in the last few years which denotes that the owners are not in profit.

Profit Margin: American Airlines' profit margin is generally pretty low, showing negative numbers in 2010 and 2011. However, it became positive in 2012, even though it is still very low; it demonstrated a development on profit.

Earnings per Share: AA exhibits a progress and a slow development in this point of view, having figures of 0.17, -0.88 and -0.83 in 2010, 2011 and 2012 respectively.

On the whole, with respect to profitability American Airlines has carried out a number of cost savings plans, and approximated savings more or less $3.8 billion in yearly expense. The organization has also carried out efforts to look for extra revenue sources and rise the present ones. In common with progress in cargo and core passenger revenues which has played a crucial part with a 33% rise in other revenues to $1.4 billion in 2012.

Current Strategies

Being world's leading carrier, the leisure base and business of American Airlines offers the customer foundation to facilitate it to contend effectively against other competitors as well as make a distinction with low fare carriers (American Airlines, 2013). This aptitude to be the preference in the complete flight service category together with the number of airports, faultless international and domestic route structure that allow it to provide direct services to the majority of destinations through its own branded airline stands for a major expediency and hence marketing aspect to acquire success in this extremely competitive milieu.

Current Situation

American Airlines, in 2012 experienced a net loss of $1.48 billion, in comparison with the net loss of $2.3 billion recorded in the year 2011. This loss was seen due to reduction in air travel on account of the economic recession, brining about significant decline in passenger proceeds. Industry-wide discounts in fares aggravated such turn downs, further deteriorating the passenger revenues for each seat per mile. In general, the revenue cut down from $24.78 billion in 2011 to $20.91 in 2012.

SWOT Analysis

Strengths

Highest quantity of usable seating capacity with legacy carriers

Staffing of more than fifty million

Brand Strength and reputation (American Airlines, 2013)

Strategic and premeditated Airport Locations

One of the most established and oldest carriers in the airline industry

Hub locations in Chicago, Miami, Dallas (American Airlines, 2013)

Investor assurance Powerful presence in leading business hubs

Weaknesses

Union and labour Issues

Incapability to contend on international flights

Reliance on resurgence sought-after (Ito, 2003)

Credit rating slows down the ability to get into fuel hedging agreements

Opportunities

Management has designed a strategy for the ...