This report was completed during the Fall 2009 Ohio University Business Cluster, it is a report on the overview of AMR and some recommendations for the company

1. An overview of AMR corporation's past and future finances AMR Corporation By: Team 1E Patrick Ayers Maggie Bihn Julie Brunton Adam DeBellis KabirUppal Professors: Jeff Anderson Jamie Carter Mike Martel Scott Wright

2. Outcome Appendices Introduction Analysis Recommendations & Conclusions Table of Contents Introduction Letter of Transmittal……………………………………………….……….4 Executive Summary………………………………………………….………5 Mission Statement……………………………………………………………6 Corporate Responsibility………………………………………....………..7 Key Strategic Issues Facing AMR……………………………………….8 Analysis Corporation Overview………………………………………………………9 Industry overview …………………………………………………..………11 Current Competition……………………………………………..………...12 Porter’s 5 Forces…………………………………………………..…………13 SWOT Analysis……………………………………………………..…………14 Strategic Direction………………………………………………..…………15 Financial Analysis………………………………………………..………….16 Fuel Analysis…………………………………………………......……………18 Stock Analysis…………………………………………………..……………..20 Debt Analysis…………………………………………………..………………22 Employee Analysis…………………………………………..………………23

3. Outcome Appendices Introduction Analysis Recommendations & Conclusions Table of Contents Recommendations……………………………………………………………23 #1: International Growth Recommendation………………….24 Foreign Student Growth Plan……………………………………26 Study Abroad Market……………………………………………….27 The Contract…………………………………………………....………30 Incoming Foreign Students…………………………….…………31 Recommendation for Incoming Foreign Students….…..33 Benefits & Limitations………………………………………..…….35 Conclusion: International Growth Plan……………..………36 #2: oneworld & Open Skies Recommendation……..………..37 oneworld not Revolving………………………………..…………38 Global Sporting Events………………………………..……………39 Olympic Games…………………………………………...……………40 Men’s FIFA World Cup……………………………………………….41 Conclusion: oneworld & Global Sporting events……..…42 Low-Cost Carriers Analysis……………………………………….44 #3: American Eagle Recommendation……………………………45 Cost Comparison (Fleet)…………………………………………...48 Benefits & Limitations………………………………………………49 Conclusion………………………………………………………………..50 Outcome and Effects of Forecasting…………………………………….51 Appendices………………………………………………………………………..52 References…………………………………………………………………………62

4. 4 Outcome Appendices Introduction Analysis Recommendations & Conclusions Letter of Transmittal October 11, 2009 AMR Corp. Board of Directors 4333 Amon Carter BlvdFort Worth, TX 76155 Dear Board of Directors: As requested by AMR Corp., our consulting firm prepared a report of recommendations to improve your corporation’s revenues during this period of economic turbulence and thereafter. Our recommendations to increase international travel, manage fleet efficiently, and capitalize on global opportunities through oneworld were based on the following criteria: Internal/External Forces Porter’s Five Forces model Current position and market share within the industry Benchmark against competitors Financial data and trends of revenue International travel is steadily increasing and it is essential for American Airlines to market themselves for opportune global customers. Currently American Eagle is showing weakness within the company. Investing in more efficient aircrafts to increase the load factor would generate more revenue. Our recommendation for oneworld is based upon the fact that it has low market share compared to other trans-Atlantic alliances. Capitalizing on global opportunities through strategic marketing can improve oneworld’s situation. These recommendations are beneficial to the corporation because they entail a positive outlook for the future and better times to come for the company. Thank you for the opportunity to analyze AMR Corp. current business strategies and recommend improvements for the future success of the company. If there is anything more you may need assistance with, please feel free to contact us. Sincerely, Group 1E Patrick Ayers, Maggie Bihn, Julie Brunton, Adam DeBellis KabirUppal

5. 5 Outcome Appendices Introduction Analysis Recommendations & Conclusions Outcome Appendices Introduction Analysis Recommendations & Conclusions Executive Summary This report presents a comprehensive assessment of AMR Corporation’s current economic and financial position in relation to it’s competitors and industry. AMR’S major business segments will be analyzed and evaluated. We provide recommendations in which its affects will be outlined and rationalized in addition to a five year financial forecast Current Problems facing the AMR Corporation Global and domestic recessions have led to a decline in air traffic. Regional airline American Eagle is in a struggle to earn profits oneworld Alliance is losing global market shares. Solutions Strengthen global market position of AA Optimize American Eagles fleet Increase oneworld’s market shares though capitalizing on opportunities

6. 6 Outcome Appendices Introduction Analysis Recommendations & Conclusions AMR’S Mission Statement “American Airlines and American Eagle are in business to provide safe, dependable and friendly air transportation to our customers, along with numerous related services. We are dedicated to making every flight you take with us something special. Your safety, comfort and convenience are our most important concerns.” Team 1E’s Mission Statement “The purpose of our team is to analyze the AMR Corporation and the current industry climate to make recommendations that will help AMR successfully adapt their company to be more profitable in the Airline Travel and Cargo industry.”

7. 7 Outcome Appendices Introduction Analysis Recommendations & Conclusions Corporate Responsibility As a global airline carrying more than 100 million passengers and more than 500,000 tons of cargo a year, AMR promotes commerce, trade, and economic prosperity, as well as a sense of global community and citizenship. Our business also affects the environment around us, and we are committed to being good stewards by minimizing our environmental footprint…Our commitment to corporate responsibility is more than a business decision. It’s an important part of our culture— part of who we are. At AMR, operating in a responsible manner is not just an aspiration; it’s the way we do business. Source: 2008 AA Corporate Responsibility Report

8. 8 8 Outcome Appendices Introduction Analysis Recommendations & Conclusions Key Strategic Issues Facing AMR

10. Founder of OneWorld Alliance

11. 3rd Largest Fleet in the World

12. Only Airline that hasn’t declared bankruptcy

13. Total revenue for 08 was 23.8 Billion

14. $18.2 B from Mainline division

15. $2.49B from Regional

17. Operates fleet of 305 aircrafts

18. Hubs in Boston, Chicago O’Hare, Dallas/Fort Worth, Los Angeles, Miami, New York LaGuardia and San Juan

19. Employs more than 13,000

21. AA could last 52 days on its current cash, which is significantly lower then it’s other competitors

22. AA outsources around 11% of profits to its regional partner.

23. International travel is steadily increasing, thus AA should continue to promote “going global”.

25. Major carriers in the industry dominate hubs domestically and globally, defining themselves as key players in the market.

26. Regional carriers substantiate the domestic markets.

27. Substitutes for airline travel have increased due to the effects of volatile fuel prices.

28. Lost profits continually threaten labor, as capacity cuts are the easiest way to relieve expenses and other costs.

30. Southwest Airlines

31. United Airlines

32. U.S Airways

33. America West Airlines

34. Northwest Airlines

35. Continental Airlines

37. Delta: 08’ Revenues of $22.7 Billion, will earn $.54 per share in 09’

38. United: 08’ Revenues of $20.2 Billion, will lose $4.97per share in 09’

39. Continental: 08’ Revenues of $15.2 Billion, will lose $.33 per share in 09’.

40. U.S Airways: 08’ Revenues of $12.1 Billion, will lose $1.16 per share in 09’.

41. SouthWest: 08’ Revenues of $11 Billion, will earn $.33 per share in 09’.COM∙PE∙TI∙TION - THE EFFORT OF TWO OR MORE PARTIES ACTING INDEPENDENTLY TO SECURE THE BUSINESS OF A THIRD PARTY BY OFFERING THE MOST FAVORABLE TERMS

42. 13 Outcome Appendices Introduction Analysis Recommendations & Conclusions Porter’s 5 Forces

44. Strong Alliances & Marketing Tie-Ups

45. New Financing

46. Solid Capital Structure

47. Frequent Flyer Program

48. Growth of Global Airline Market

49. Growing Domestic

51. Declining Premium Cabin sales in Long-Haul Flights

52. Fleet Management

53. Inefficient Use of Employees

54. Global Economic Slowdown

55. Competition for Market Share

56. Price Competition

57. Fuel PricesExternal Forces

59. Sold $1 billion in frequent flier miles to Citigroup.

60. Borrowed approx. $300 million from General Electric Capital Aviation Services (GECAS), using their aircrafts as collateral.

61. Initiated financing agreement with GECAS worth $1.6 billion to buy new Boeing 737 aircrafts

62. 737’s will help to conserve cash and replace the less-efficient MD-80s

63. GECAS granted a exclusive agreement to purchase AMRs NextGen engines to power the newly ordered 787’s.AA identifies New York, Dallas/Fort Worth, Chicago, Miami, and Los Angles as its most profitable hubs. 57 new flights are being added to the Chicago O’ Hare Hub, which includes 12 domestic cities and 3 international ones, including Beijing and Vancouver. The Dallas-Ft. Worth hub is adding 19 new flights, Miami is adding 23, Los Angeles 3, while JFK seeks 6 new destinations, including Madrid, Manchester, UK, and Costa Rica. These additional profitable routes are made possible by replacing 46 flights from St. Louis and service to 20 cities. In addition, Raleigh-Durham is scheduled to lose 9 flights and cutback on 3 destinations.

67. The debt to equity ratio is at a disadvantage compared to its competitors, this can be attributed to the company’s resistance of bankruptcy

68. The total debt has fluctuated between 91-112% within the past three fiscal years

69. The debt to equity ratio is at a disadvantage compared to its competitors, this can be attributed to the company’s resistance of bankruptcyIndustry Comparison

71. It has the highest GPM in 2008 compared to its competitors

72. Revenue began to increase due to capacity cuts

74. 19 19 Outcome Appendices Introduction Analysis Recommendations & Conclusions Fuel Analysis (continued) This graph shows the major airlines profit excluding fuel, compared to its fuel expense. American is doing very well in comparison to its competition This graph shows the major airlines total system ASM costs with fuel and without, compared to its competition. The most important factor is the CASM ex-fuel, which reflects the actual cost of running the airline. Only United and Continental have higher costs then American. (Delta and U.S Airways numbers are skewed because of their bankruptcy)

75. 20 Outcome Appendices Introduction Analysis Recommendations & Conclusions Stock Analysis This graph represents the high, low, and closing stock prices for AMR from years 1999 to 2008. AMR stock is considered a moderate buy by many financial analysts because of its large cash position, good free cash flow generation, hidden assets, and a focused, financially oriented management team.(Forbes) AMR Corporation reported annual 2008 losses of $4.57 per share on 01/21/2009. (BuisnessWeekly)

77. Around $9 Billion in debt

78. Will pay $1.8 Billion of principal payments on long-term debt alone in 09’

79. This debt leaves American vulnerable if the economy further suffers.

81. AA ASM Per Employee was $2,277,563

82. AA Labor Cost Per Employee was $88,251

83. AA Employees per Aircraft was 117

85. Stripped weather and air-traffic issues from its employee-specific performance metric

87. Study Abroad students

89. Olympics

90. Fifa World Cup

92. Replacing current fleet not operating profitably on certain routes with more efficient aircrafts.

95. Can further add to market share of long-haul traffic going from the US to EU and other study abroad destinations.

96. Establish contracts with states that operate schools sending students for study abroad programs.Ultimate Result The Combination of the specially designed package in alliance with Jet Airways and the contract with states and universities, we expect the gain in AA’s share in the global market to generate an increase in sales and revenues by at least 10%.

97. 27 Outcome Appendices Introduction Analysis Recommendations & Conclusions Study Abroad Market “International experience needs to be a component of every student’s education, equipping them for 21st century careers and for global citizenship,” Allan E. Goodman, President & CEO of the Institute of International Education Recognizing the magnitude of an international education in today’s global society, U.S. students are studying abroad in record numbers. Over the past decade, the number of U.S. students studying abroad has increased by over 150 percent. In academic year 2006-2007, 241,791 U.S. studentsstudied abroad, an increase of 8.5 percent from the previous year.

98. 28 Outcome Appendices Introduction Analysis Recommendations & Conclusions Study Abroad Market A portion AMR’s recent financing of $2.9 Billion will be allocated to its main hubs, in order to satisfy the highly profitable international market and improve the future for AA growth by gaining more global share. AA defines its major and most profitable hubs as Chicago, Dallas-Fort Worth, Miami, New York and Los Angeles. AA also receives a substantial amount of traffic through their Philadelphia and Boston markets. Our recommendation calls for a sales /promotion contract with individual states education programs. AMR has the potential to dominate the market for American students who study abroad, because of the high density of students traveling abroad through their main focus hub’s cities. Currently, the common way for students to travel to their global destinations is to book tickets at current price. If Texas, New York, California, Illinois, Florida, Massachusetts, and Pennsylvania all accept contract bids with American Airlines to have exclusive packages with their students, the students would get cheaper flights, and bonus miles added to their AAdvantage account. This plan would have introduced 90,381 flyers in 2006, and 96,841 flyers in 2007. With the numbers of students taking the opportunity to study abroad steadily increasing, AA can take advantage of their new international flight strategies.

99. 29 Outcome Appendices Introduction Analysis Recommendations & Conclusions Study Abroad Market Not only has the number of students increased, but 17 of the 20 leading destinations of U.S. study abroad students witnessed increases in the number of American students studying at those destinations. U.S students have recognized that China and India are economies with high growth rates, which in turn lead to better opportunities. The numbers of U.S students that studied in China has increased by 25% and 24% in India. U.S students have also recognized the importance of learning the highest growing language in their country, Spanish.

100. 30 Outcome Appendices Introduction Analysis Recommendations & Conclusions The Contract One part of our recommendation for AA’s international growth plan is that they should develop a contract with states and specific universities that have a high rate of students being sent for study abroad programs. Most students travelling out of the states are likely to fly out of large hubs present in them. For example, a student travelling out of Illinois would probably fly out of Chicago which is one of AA’s main hubs. It wouldn’t be wise to just develop a contract for states as they only fund state universities, we also recommend that AA makes a contract for private universities that send students abroad for programs. Presently most study abroad programs require students to book their flights, the university usually takes care of living arrangements. Through this contract, the university or state would get special discounts and packages for their program students.

101. 31 Outcome Appendices Introduction Analysis Recommendations & Conclusions Incoming Foreign Students The inflow of foreign students is increasing . Acquiring a good education is being seen as an essential element to surviving in today’s shifty job market. According to the Institute of International Education (IIE), just in 2008 623,805 foreign students landed in the US to pursue an education, a 7% increase from 2007. The top places of origin bringing in foreign students were India and China. Foreign Student Increase India – Increased from 76,503 in 05-06 to 94,563 in 07-08 China – Increased from 62,582 in 05-06 to 81,127 in 07-08

102. 32 Outcome Appendices Introduction Analysis Recommendations & Conclusions Incoming Foreign Students IIE prepared a table on number of international students in US states and how much they contributed to them in 2008: CA- $2,452.3 million NY - $1,952.7 million TX - $1,055.4 million MA - $1,004.0 million IL - $710.2 million IIE also recorded the number of foreign family members that were accompanying the students. AA and Jet can offer special discounts and services for students flying with there families.

104. More RASM for both with higher load factors on respective routes.

105. Increased traffic for Jet at Brussels hub.

106. Increased load factor for Eagle, as they would handle regional flights with these customers.

108. 35 Outcome Appendices Introduction Analysis Recommendations & Conclusions Benefits & Limitations Benefits Increased share in global market as a result of: Contracts with states and their universities as well as private universities Larger customer base through Jet and CEA Service to students that if satisfied could be potential loyal customers Expansion of AAdvantage incentive program Increased operations in Europe, Latin America and Asia through oneworld and other codesharers. Limitations Students that are already travelling have established preferred service Ineffective marketing strategy that isn’t sensitive to important factors such as culture, language and finances in a foreign market Strengthening dollar could affect the number of foreign students coming to the US During high flying season availability of seating will determine offer of discounts for students as a normal passenger would be paying more

109. 36 Outcome Appendices Introduction Analysis Recommendations & Conclusions Conclusion: International Growth Plan Both the strategies that have been recommended for travelling students can be operated in coordination. Many of the study abroad students are going to India and China as well. The deal with Jet and CEA will also include students going from the US to India and China, students will gain miles with AA, Jet as well as CEA. Jet also met with the members of oneworld in June 2009, its potential entry could add to the alliances feed and reach. The new hub in China will open the Asian market for AA to expand their base. The full effects of student targeted strategies can only be realized in the long-term as more students adopt the package. The marketing mix must be carefully established in order to capture the share desired. We have put together a marketing mix for AA to market their services: Product – A specialized package for students pursuing an education in a place away from home to provide safe, affordable and satisfactory transportation. Price – Discounted rates for booking 1 or 2 round-trips that can be used in a 2 year span. Place – Offer package through universities, states, travel agents, recruiters and company websites. Promotion – Advertising through universities, foreign media, College Board and ETS. All students have to submit SAT and TOEFL(test of English as foreign language) scores .

110. 37 Outcome Appendices Introduction Analysis Recommendations & Conclusions Recommendation #2: OneWorld & Open Skies One World(stylized as oneworld) whose founding member is American Airlines was formed in 1999. In February 2009, they celebrated their ten year anniversary along with its members British airways, Cathay pacific, Iberia, Finnair, Japan Airlines, Malév, LAN, Qantas and Royal Jordanian. In today’s global market, trying to capture a significant share is not easy as an independent airline. To capture huge flows of passengers and goods between different regions(countries and continents) being part of a transatlantic alliance is necessary. Each airline in the alliance contributes to total traffic captured making it possible for all members to service traffics they would not have seen otherwise. This alliance provides AA with incremental feed and a virtual connection to places where AA cannot fly profitably or where aircrafts and assets would not provide sufficient return on investments. Open Skies Closing Business: The US-EU open skies agreement essentially allows any EU carrier to fly anywhere within US boundaries and conversely allows any US carrier to fly within the EU countries. This doesn’t help AA much as the US is a country and the EU is a union of multiple nations in Europe. The opening of the EU skies unleashes a swarm of US carries that are competing to service them. Before the OpenSkies agreement AA and BA through oneworld dominated the US-UK service as they had slots. Other airlines had to fly through Gatwick. OpenSkies has weakened the US-Heathrow traffic for AA.

111. 38 Outcome Appendices Introduction Analysis Recommendations & Conclusions Oneworld Not Revolving Oneworld is currently #3 in the US-EU market after Skyteam and Star Alliance. It is also behind its competitors when comparing capacity scheduled at each key gateways. They are competing for their hub in Heathrow as well as trying to gain a higher share at other high-traffic EU hubs It has the highest share at Heathrow but stands third with respect to share from Paris, fourth from Frankfurt and has no share at Amsterdam .

113. Held in or around a “Host-City”

114. Tend to be with a 2-4 years gap between every event

115. Countries send national teams to each competition

116. Large amount of money spent on these events.NA·TION·AL·ISM DEVOTION TO THE INTERESTS OR CULTURE OF ONE'S NATION Fans of large nations tend to be very loyal in attending events world-wide. The population of these fans will continue to always travel because of a loyalty to an “imagined community.” It creates a sense of common identity even among people who have never met one another and probably never will. (Billing)

118. Uniquely every two years the games switch from summer games to winter games.

119. The last 7 Summer Games had average ticket sales of 5,323,428

120. The previous 6 Winter Games had average ticket sales of 1,235,000

121. The host city for an Olympic Games is usually chosen seven years before their set event.

122. Summer Olympics typically happen occur around late summer-early autumn.

124. 32 Nations compete for the World Cup at venues within the host nation(s) over a period of around a month.

125. The World Cup is very popular, it is the most viewed sporting event in the world, with an estimated 715.1 million people watching the 2006 final(FIFA.COM)

126. 2010 In South Africa

127. 2014 In Brazil

129. JAL gets refinanced by AA, British Airways and Qantas and stays in Oneworld.

130. Japanese government bails out JAL and it remains in Oneworld.

131. The 2nd and 3rd result would be beneficial for AA and Oneworld.With oneworld not doing very well in comparison to its competitors, it must take advantage of these international sporting events to increase revenues and market share. Oneworld and all its members should develop a preplanned itinerary in the form of a travel package to market to the mass amounts of people attending these sporting events. Marketing Mix: Product: Travel packages for Olympic Games(Summer and Winter) and Fifa World Cups. Price : Discounted rates for early bookers, groups larger than 8 and Families larger than 4 Place: oneworld website, travel agents. Promotion: Advertise on Sports channels and journals, at qualifying events leading up to final event.

133. The Asia/Pacific, European, and North American market all incurred passenger per kilometer declines between 10%-12%.

134. The 3 major markets also experienced capacity cuts.Winter Olympics take place February 2012 in Vancouver, Canada. February is the least traveled month in the global market. Oneworld can gain a significant share if they market their package plan well before 2012. A team set up by the Japanese government is analyzing JAL’s situation to advise on the company’s overhaul and should decide by the end of November. If the JAL situation results in AA and Oneworld’s favor, they can use the ERJ-145(50-seater) cut out from Eagle’s fleet to add to JAL’s current fleet. This can increase scheduled capacity and introduce new routes in the North-Eastern pacific market. The Fifa World Cup will be held in the summer of 2010 in South Africa. This event will bring in millions of fans from around the globe. Mexicana Airlines which services Mexico and Central America is joining the Oneworld alliance in November,2009. Mexicana will further increase feeds and scheduled capacities for oneworld and its members. Being able to reach as many regions to transport fans for these sporting events and utilizing the resources we have will contribute to ultimate goal of creating a strong position in the global market.

136. Demand has declined for every segment of this industry and easy-entry markets have been exhausted.

137. Trying to enter larger airports to take share from other carriers as opposed to stimulating new traffic through lower fares

139. Affected by the same market forces as the CNC’s.

140. All main players of LCC sector are reducing capacity.

141. Based on currently filed schedules, Southwest is cutting 6.2% capacity this year across its current route system.

142. As of 4Q of 2009, it will have reduced its service at 90% of the cities served in January 2008.

144. Has 266 units under its wing which comprises 29% of AA’s fleet.

146. Eagle’s fleet is making significant losses coming out of all its main hubs. Especially with the flights with 50 or under seating.Our Solution AMR corp. can take advantage of the potential drop in the share of Southwest and other regional carriers by rethinking the way they operate American Eagle. Our recommendation to redesign the fleet of American Eagle will allow them to use less aircrafts and not waste resources that are being fed into American Eagle currently. This is not a recommendation for them AA to increase revenues, but to cut costs and utilize the resources available more efficiently.

148. 59 44-seater jets (Embraer-140)

150. ASM cost of 17 ¢

151. Average 80% load factor generates 21.3 ¢ per mile. 37-seater: bringing Eagle down: 37-seater jets are doing worse. At current fuel costs with a 22.5 ¢ ASM cost, the 37-seater would have to generate about 28 ¢ from the feed passenger on the 300 mile route. Embraer ERJ-135

152. 47 Outcome Appendices Introduction Analysis Recommendations & Conclusions American Eagle Recommendation We analyzed the 50-seaters and under that are flying out of DFW, only three are making profits in the over 600 mile market. Some flights have a frequency of about 4 or more times a day. Their average load factor is 80% but the routes that are losing the most money have a load factor between 60% and 70%. For example the route from DFW to CVG in Cincinnati made a loss of over one million dollars in 2008 as well as the route to Lexington which lost about 1.1 million. SEE TABLE Our recommendation for AA is to redesign their regional fleet, cutting out all the 50 and 44-seater airplanes and replacing them with the Embraer 190 which has 98 to 114 seats. The costs associated with the Embraer-190 are the same or less than the Embraer-145(Table on next slide). As shown in the table, the EMB-190 can transport the same amount of people on a route with less frequency. Although this could hinder the competitive strategy to capture traffic, at high density hubs this could help AA optimize their fleet. For example AA’s flight schedules from Boston to Chicago in one day run 9 flights. This could be cut down to 5 by the EMB-190. Load Factor CVG - Cincinnati, OH – 63.1% LEX - Lexington, KY – 65.4% PNS - Pensacola, FL – 73.4% VPS – Northwest Florida Airport, FL - 67.8%

153. 48 Outcome Appendices Introduction Analysis Recommendations & Conclusions Cost comparison of ERJ-145 & EMB-190 ERJ-145 EMB-190

155. Increased load factor and RASM

156. Efficient use of available resources

158. Still could incur low capacity rates

159. Increase in fuel price could cause cost of operating of EMB-190 to exceed cost of ERJ-145.

161. 51 51 Outcome Appendices Introduction Analysis Recommendations & Conclusions Outcome & Effects of Forecasting International Growth plan to increase revenue by 10% oneworld alliance plan and global sporting event plan to increase revenues by 7% Increase in revenues from Eagles new fleet, cutting losses on failing routes. Increase in revenue by 1%. 2009 – 3% increase in revenue and passenger load – Student package sales in Fall and Winter. 2010 – 4% increase in revenues and passenger load – Fifa World cup(summer) + Student packages(summer, fall and winter) 2011 – 3% increase in revenues and passenger load – student growth 2012 – 5% increase in revenues and passenger load - Olympic games in February, increase in assets(Investment in New aircrafts) Decrease in cash and retained earnings. 2013 – 3% increase in revenues and passenger load – Student package plan oneworld and global sporting event recommendation to increase share by: Entering high traffic EU hubs Establishing new hubs in Latin America and Asia By efficiently using Mexicana and JAL to generate feed at oneworld hubs American Eagle fleet recommendation to increase load factors , cut expenses by using more efficient fleet. Putting old fleet into JAL and creating new routes in North-East pacific region.

162. 52 Outcome Appendices Introduction Analysis Recommendations & Conclusions Appendix A: Liquidity & Efficiency Ratios

163. 53 Outcome Appendices Introduction Analysis Recommendations & Conclusions Appendix B: Solvency & Profitability Ratios

164. 54 Outcome Appendices Introduction Analysis Recommendations & Conclusions Appendix C: Market Value Ratios

165. 55 Outcome Appendices Introduction Analysis Recommendations & Conclusions Appendix D: Interview Interview: Captain Mike Morrison, American Airlines Date: October 1st Topic: Any issues with labor unions or any side of the current employment staff. About me: Bachelor of Science in Operations and Systems Analysis from Indiana University School of Business, 1980.Management trainee, Bank One of Columbus 1980-1982. Product Analyst Check free Systems Inc., 1983-1986. Pilot, Ohio Air National Guard 1981- 1992; USAF Ready Reserve 1992-2001. Almost every pilot at American has a college degree, many with advanced degrees. The pilots are represented by a labor union. It is an efficient way to manage a large work force that essentially perform the same job. Flight Attendants, Mechanics, & Ramp workers are all represented by labor unions also. For the first time in AA's history, all of these union contracts are expiring or have expired. The company does not have an agreement with any of these unions. I don't believe any of the unions is even close. There is tremendous resentment among the unions toward management about agreements from 2003 made under the threat of bankruptcy. Don Carty, the previous CEO, was forced out shortly after the signing of these agreements due to compensation, retirement and bonus packages for executives that were secretly exempted from bankruptcy (if declared). Gerard Arpey had a tremendous opportunity to unite the company after the effects of 9/11/2001 and then this bankruptcy scare. Instead, the top executives at American have received over $295 million in bonuses in the last 4 years while wages concessions of over 25% were taken by everyone else and the workforce has been cut by over 27000 employees. I feel I am as qualified as most, if not all, of our management team. Many pilots feel the same, yet we are probably the most wasted group of talent in the entire company. There are plenty of loose cannons in the pilot group, just as in any group. However, there is a tremendous amount of people capital that is being wasted. Mike Morrison

166. 56 Outcome Appendices Introduction Analysis Recommendations & Conclusions Appendix E: Future Ratios

167. 57 57 Outcome Appendices Introduction Analysis Recommendations & Conclusions Appendix F: Income Statement

168. 58 58 Outcome Appendices Introduction Analysis Recommendations & Conclusions Appendix G: Forecasted Income Statement

169. 59 59 Outcome Appendices Introduction Analysis Recommendations & Conclusions Appendix H: Balance Sheet

170. 60 60 Outcome Appendices Introduction Analysis Recommendations & Conclusions Appendix I: Forecasted Balance Sheet EFN is needed because for all five years because we are not paying long-term debt, which is increasing our liabilities. Retained earnings in the year 2012 were used to invest in new aircrafts for the American Eagle recommendation.

171. 61 Outcome Appendices Introduction Analysis Recommendations & Conclusions Appendix J: Retained Earnings

172. 62 Outcome Appendices Introduction Analysis Recommendations & Conclusions References American Airlines, Inc. (2009). American Airlines, Inc. overview. Retrieved September 29, 2009, from http://www.aa.com/i18n/amrcorp/newsroom/american-airlines- inc.jsp American Airlines, Inc. (2009). AMR Corporation – American’s Parent Company. Retrieved September 28, 2009, from http://www.aa.com/i18n/amrcorp/corporateInformation/facts/amr.jsp American Airlines Inc. (2009). Fuel Smart. Retrieved October 10, 2009, http://www.aa.com/i18n/amrcorp/newsroom/fuel-smart.jsp American Airlines. (4, May, 2009). News and Advisories. Retrieved October 9, 2009, from https://aacargo.com/content/news_article_09.jhtml?cargoID=article21 American Airlines, Inc.(19 February, 2009) Spotlight on Fuel Hedging. Arpey, G. (17 September, 2009). Letter from Chairman and Chief Executive Officer at American Airlines. AV JOBS. (2009). Online Journal. Boyd Group International. (July 2009). 2009 Economic Report To The Membership American Airlines/AMR & The US Airline Industry. Cowell, S. 19 (July, 2009). Top 10 European airports. Retrieved October 6, 2009, from http://www.arabiansupplychain.com/article-353- top_10_european_airports/1/print/ Fidelity Investments (2009). Key Statistics: AMR. Retrieved October 9, 2009, from http://eresearch.fidelity.com/eresearch/evaluate/fundamentals/keyStatistics.jh tml?stockspage=keyStatistics&symbols=AMR Hettermann, M. (Summer 2009) Flights Deck Online. Journal of Operational Excellence.

173. 63 Outcome Appendices Introduction Analysis Recommendations & Conclusions References Hoovers. (2009). Online Journal. Horton, T. (Third Quarter 2009) Flagship News. American Airlines, Vol 63. No 3. Institute of International Education. (2008). Leading places of origin. Retrieved October 2, 2009, fromhttp://opendoors.iienetwork.org/?p=131534 Journal of Commerce Online. (17 Sep 2009). American Airlines Cargo Wins Envirotainer Accreditation for New Temperature-Controlled Solution. Retrieved October 6, 2009, from http://www.joc.com/node/413446 Morrison M. Personal communication, October 1, 2009. Oneworld (2009). Oneworld.com. Retrieved October 29, 2009, from http://www.oneworld.com/ Reuters. (23 July, 2009). Fitch Downgrades Southwest Airlines to ‘BBB’; Outlook Negative. Retrieved October 3, 2009. http://www.reuters.com/article/ pressRelease/idUS177063+23-Jul-2009+BW20090723 Standard & Poor. (2009). Online Journal. Which? Reviews. (2009). Best airlines: Best long-haul airlines. Retrieved September 29, 2009,http://www.which.co.uk/reviews-ns/best-airlines/best-long-haul `airlines/index.jsp The New York Times. (14 September, 2009). Japan airlines in Talks with U.S. Rivals. Retrieved October 10,2009 ,http://www.nytimes.com/2009/09/15/business/global/15air.html