American Airlines Term Paper

Total Length: 406 words ( 1 double-spaced pages)

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American Airlines

AMR is the parent company of American Airlines and American Eagle and represents a poor investment opportunity for many reasons. AMR lost 761 million dollars in 2004 with more bad news expected. AMR and the airline industry in general are affected by two negative industry dynamics, high fuel costs on the supply side and low revenue yields on the demand side (Chakravorty, 2005). Jet fuel accounts for twelve to fourteen percent of airlines' operating costs and is the industry's second-biggest expense after labor. Crude oil prices have risen eleven percent since the start of 2005. Further, airline fares are at historic lows and rivals such as Delta Airlines has ignited fare wars after capping its coach fares at $499 each way in January 2005 (Reed, 2005).
The low-cost model of carriers such as Southwest Airlines and JetBlue are also putting price pressures on the industry. Less revenue and higher costs can only mean less profit for AMR.

On a more positive note, American Airlines is still this nation's largest airline. On the threat of bankruptcy, it was able to get unions to agree to just over $1.6 billion in annual concessions in 2003 that included pay cuts and layoffs for pilots,….....

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