RUNNING HEAD: AMERICAN AIRLINES American Airlines and US Airway’s Merger By Aveon Sims Strayer University BUS 508 Contemporary Business Professor Jean Fonkoua August 24, 2014 Abstract American Airlines has suffered tremendous profit losses over the last few years. The losses have been so great that the company filed Chapter 11 bankruptcy. The news for the Chapter 11 bankruptcy protection was a shock to many, considering the fact that they had enough money to operate and cover their losses through the following year. The merger indeed was a great decision on behalf of American Airlines. The merger itself was questionable.
The Causes of the Great Depression The Great Depression was an economic downfall that to this day is the worst economic downfall in U.S history. The depression started in the United States. People all over the world were affected by it, especially in Europe, Germany, Great Britain and other industrialized areas of the world. Mainly because America was a big creditor to those countries after World War I. The Great Depression lasted in America for at least ten years, but it took twenty-seven years to get the economy back above depression levels.
1. Which were the key characteristics of the buyout industry in the US in 2005? The U.S. LBO industry had evolved substantially from the roaring days of the 1980’s where it was easy to find and acquire companies that were underperforming or underleveraged and could provide a quick turnaround opportunity. Now, companies had learned how to operate more efficiently so it was harder to find potential targets. Additionally, even if a good potential target was identified, the change in federal regulations had made obtaining the necessary leverage a challenging task, forcing LBO firms to put up over 30% of the buyout in equity, thereby reducing the possible returns.
Presently, gas prices have dropped. However, the airlines continue to pass along the fees to its passengers to increase revenue. Clearly, the fees that began originally in response to fuel prices continue to be part of the revenue generating strategies of airlines. (2) Shortage of Pilots: As baby boomers retire by the thousands, the airline industry is experiencing a shortage of pilots. Before becoming captains, pilots must earn sufficient fly hours.
It was during his leadership that Miniscribe introduced several new product lines in the market which was generally accepted and led to high sales record for Miniscribe. Still, talks around the industry claims that cash flow and inventories were still a problem. To verify this rumour, an investigation was conducted to know its real financial disposition. Thorough analysis of the company’s profitability and liquidity using the unaudited financial statement in the year 1998 was made. The company’s statement of cash flow was examined to determine if the company has still enough cash to continue its operation.
It was universally considered one of the United State’s most innovative companies. Although it faced a number of financially difficult years, the company managed to survive. “By 1988, the company redefined its business from “energy delivery” to “energy broker” and therefore changed from a surviving company to a thriving one” (Sims & Brinkmann, 2003). Besides buying and selling gas and electricity futures, it created whole new markets for such oddball “commodities” as broadcast time for advertisers, weather futures, and internet bandwidth (Li, 2010). The business community rewarded Enron for its cleverness and ethicalness and this encouraged its executives to sustain the exponential growth.
Especially the entry activity in the largest 1,000 markets caused a general downward trend in concentration for the sample period as indicated by the Herfindahl-Hirschman Index developments. Since the deregulation of the U.S. airline industry in 1978, a substantial number of new carriers emerged; particularly those following a low cost strategy. Given those airlines’ rapid growth and market success
Failing businesses led to double digit unemployment rates and a huge cutback in consumer spending on even the most basic items. Most Americans felt the effects because it was so widespread throughout all sectors of the country’s financial structure. It was not until World War II, a decade later, that the country finally made a full recovery. Due to the greater need for laborers and new technology during the war, unemployment decreased and government spending helped strengthen the nation’s economy. Ben S. Bernanke is currently concluding up his 8-year term as the Chairman of the Federal Reserve Bank in the United
The first major reason was the nature of the airline industry. It was found that nearly half of leisure travelers and more than a quarter of business travelers did not have a preferences when it came to airlines. There were only two real concern of the passengers: first, the price and second, the frequent service (lots of time-of-day choices). There was also major consolidation in the airline industry in the early nineties due to extremely high fuel costs. Many firms filed for bankruptcy or were acquired by other firms.
At that time the company was in trouble. On the verge of filing for their third bankruptcy, Continental ranked worst in many categories amongst leading airlines including on-time performance, mishandled baggage, customer complaints, and denied boarding due to overbooking. Continental had also burned through ten different CEOs in the previous ten years. It was obvious Continental needed a change, and real-time BI was exactly what they were looking for to foster that change. Continental and Bethune realized they needed to take better care of their customers by providing a better overall service.