American Airlines has been a leading US airline since the 1930s. It was a pioneer in the passenger air travel business with the advent of the then-revolutionary DC-3, for which its president, C.R. Smith, made the specifications. After that, American grew and prospered generally, until airline deregulation in the US in the 1980s. Since then, especially in the 1990s, the firm has experienced significant problems in coping with the new environment of increased competition and the consequent need to minimize fares and costs. The company's high wage structure and the strong unions for pilots and flight attendants have led to labor strife through this decade, culminating in a costly strike by flight attendants in 1993 and a threatened strike by pilots in 1997.
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 process. However, in 1934, postal regulations force the separation of the airline from its airplane manufacturer parent because of antitrust concerns. This was possible because the US mail heavily subsidized the airlines in those days, rendering it great influence and power in the industry. Yet starting in 1936, thanks to its purchase and use of the highly successful DC-3 passenger airliner, American Airlines became profitable because of its passenger service and shed its dependence of the mail-carrying busi...