American Airlines Executive Summary American Air

As a result of the problems cited above, American is attempting to optimize its operations by cutting costs and its high debt level. In addition, it is rationalizing its route structure and divesting those that are uneconomic. In summary, therefore, American is trying to adjust to the modern era of a deregulated, more competitive airline industry.

American Airlines started out as the Aviation Corporation (AVCO) in 1929 when Sherman Fairchild formed it as a subsidiary of his Fairchild Aviation Corporation (American Airlines, 1996). In the following year, it purchased about 85 separate airlines and rationalized and united their routes, creating American Airlines in the

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nized workforce (Boisseau, 1997). This has created labor strife with both its flight attendants and pilots, the former resulting in a devastating strike in 1993, which cost the company millions. In 1997, the main pilot's union threatened to strike largely because American's pilots in its commuter services are paid much less and re in a different union. As a result, high-paid pilots on the main routes feel that their salaries and jobs are threatened by potential competition from their much-lower-paid colleagues on the commuter routes. In effect, the airline has a two-tier roster of pilots, which invariably engenders intense labor strife. Yet American's management faces vigorous post-deregulation competition, putting pressure on them to keep fares and costs, including wages, at a minimum. Thus, until American resolves its labor problems, they will continue to undermine the company and its profits. American Airlines' huge debt load and low liquidity level (see Financial Analysis) constitute another weakness of the firm. The debt drains the company's finances due to the high principal and interest payments. Such debt service has helped put the firm in a chronically short-cash position, which is potentially dangerous because i
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