Planning and Ethics in American Airlines
It is not a good time for any of the airlines; although passenger loads are at an all time high and projections are good for passengers for the summer, fuel prices are also way up and there is a price war between all of the carriers, driving costs up and profits down. American Airlines has expanded rapidly in both domestic and international markets, building a reputation for dependable and quality service. American Airlines has managed to grow in an industry that has been characterized by many startups and failures, and has emerged as an industry leader competing effectively on a global scale. The purpose of this paper is to discuss and evaluate the planning function of management in American Airlines.
American Airlines has been suffering due to the recession, labor relations problems and the public relations fiasco of its airplanes being used in the 9/11 terrorist attack. It faces staggering payments on its $25 billion debt load and its pension plans are underfunded by $2.7 billion.
It was estimated that unless American could effect dramatic cuts in their cost of doing business, the airline would run out of cash by mid-2003. Just before March31, 2003, the three labor unions with which American must deal agreed to $1.6 billion in ægivebacksÆ. It was a tight agreement, barely passed, and required huge goodwill on the part of employees. Even workers at the top of the food chain, the pilots, have been knocked off stride. Chris Manno, a 19-year veteran of American's cockpits, last year sold his "captain's house" in Fort Worth and moved to a smaller home after a 23% pay cut. Across all work groups, he says, American employees are making difficult adjustments: Spouses are going back to work, and kids are being pulled from private schoolsö (Reed, 2004).
Shortly afterward, it was revealed that American was giving huge compensation to its upper management; this was clearly bad f...