AMR knows America's spacious skies -- and lots of others. Its main subsidiary is American Airlines, one of the largest airlines in the world. Together with sister company American Eagle and a regional carrier that operates as AmericanConnection under contract, American Airlines serves more than 250 destinations in 50+ countries in the Americas, Europe, and Asia/Pacific. The overall fleet exceeds 880 aircraft; American Airlines operates about 600 jets. The carrier extends its geographic reach through code-sharing arrangements and is part of the oneworld Alliance, along with British Airways, Cathay Pacific, Iberia, Qantas, and others. The company filed for Chapter 11 bankruptcy protection in November 2011.
The company's November 2011 Chapter 11 bankruptcy filing calls for American Airlines and American Eagle to continue operating as usual while AMR reorganizes. AMR's operational costs for labor, fuel, aircraft fleet, and facilities are far larger than its rivals, and the company saw bankruptcy protection as the only way to get back on its feet.
Change of Company Type
In early 2013 AMR agreed to merge with rival US Airways in a deal worth $11 billion. The milestone transaction will create the world's largest airline. The combined entity will take the American Airlines name, but it will be led by the CEO for US Airways, Doug Parker.
Following the truism that you have to spend money to make money, AMR ordered 460 single-aisle jets -- 200 Boeing 737s and 260 Airbus A320s for delivery between 2013 and 2022; it is the largest aircraft order in history. The new aircraft are designed for fuel efficiency and should save in operating costs.
The 2011 deal followed a 2008 agreement to acquire 42 Boeing 787-9 Dreamliners, with an option to order 58 more. The first plane of the 2008 deal was set to be delivered in 2014; however, the ongoing struggles of getting the Dreamliner launched have pushed the delivery date back.
Cost control and debt reduction continues to be a focus for AMR as it restructures and prepares for its merger with US Airways (announced in early 2013). While its net revenues have gradually increased over the last four years, AMR hasn't been profitable since before the recession.
The company suffered net losses of almost $2 billion in 2011 and $1.9 billion in 2012. The net loss for 2012 reflects $2.2 billion in charges of reorganization items and significant year-over-year fuel price increases ($413 million), offset by the 4% increase in total net revenues.
With its many alliances and code share agreements, American Airlines generates the lion's share of revenues for its parent (about 75%). American's 2012 year-over-year mainline passenger revenues increased 4% due in part to an increase in year-over-year passenger yield. The regional affiliates' passenger revenue rose 7% year-over-year in 2012.
AMR's growth strategy revolves around its $11 billion proposed merger with US Airways, which was announced in February 2013. Hastening AMR's exit from bankruptcy, the historic deal is expected to close in the third quarter of 2013. The combined entity will take the American Airlines name and be led by US Airways CEO Doug Parker. The combination is also projected to provide substantial cost savings and synergistic benefits to AMR.
Earlier in 2012 AMR announced a plan to create $2 billion in annual savings and $1 billion in revenue enhancement. The plan includes proposed job cuts of about 13,000. The company also launched an effort to obtain union or court approval of changes in union contracts that will pave the way for the proposed job eliminations. As a result, a federal judge terminated the pilots' union contract, and the company has won concessions from the unions of flight attendants, maintenance workers, and other employees. Soon after those developments, AMR announced it was laying off more than 11,000 workers, but added that actual job cuts would affect about 4,400 employees.
AMR plans to use alliances and network scale to increase service from its five key markets of DFW, Chicago, Miami, Los Angeles, and New York, by about 20% over five years. American Airlines is also engaged in marketing relationships with about 30 airlines, many of them based overseas, such as Air Berlin and China Eastern Airlines. In 2011 American added 30 new destinations through relationships with other airlines, such as JAL and Qantas.
PRIMECAP Management Company owns nearly 13% of AMR Corp.