Teacher: RESEARCH AND ANALYSIS BUSINESS PROBLEMS Question Problem: The Decline of AMR Corporation in Symptom 1: Becoming Bankrupt The major symptom behind AMR’s decline is filing for bankruptcy in 2011. The airline company had recorded significant losses as of 2010, losing over 1 billion in revenue. The company was unable to handle its operating costs and filed for bankruptcy. GAP: AMR has been on the decline since 2009, when it recorded its last profits of $491 million. Poor management has meant that the company was unable to use its revenue in measures that would sustain the company, and it has resulted in the loss of revenue and a sharp decline in the company’s services (Bijan, 54).
It has generated a string of losses from 2010 to 2012, and the trend looks more likely to continue than subside. Symptom 2: Poor Management A major symptom of the decline in the company is the poor management of the company’s resources, which were not utilized to foster the development of the company and grow the customer base. It has led to the decline in the market for the airline’s services, and the decline in the US economy in 2011-2012 has only added fuel to the fire. GAP: AMR recorded a loss of over $1.4 Billion in 2011, which is an indication of a drop of over 16% in revenues since 2008.
The company has had significant changes in the management field, which have not served as to improve the fortunes of the company. Job cuts have occurred in 2012, but the steep decline seems to continue for the company, and management has played a key role in this decline. (Bijan, 76) Symptom 3: Increase in Costs A major problem for AMR was the growing costs in labor and resources.
This is attributed to the reduction in the customer volume and it is symbolic of the declining economic conditions in the United States GAP: AMR had lot let go of 13,000 employees, which is roughly 20% of the company’s workforce in order to reduce the toll of the losses incurred. The company attributes the new measures of providing medical care for its employees and the decline of the US economy. It has pushed the company to tighten its expenditure in order to lessen the strain from the decline in the airline’s market.
Competition is affecting the firm’s ability to increase its market (Bijan, 103). This is attributed to the company’s inability to compete with the offers provided by its competitors (they provide cheaper rates in comparison to AMR). It makes it difficult for the company to meet its annual expenditure of $2 Billion. Problem Statement AMR Corp recorded an $807 million net loss on March, and it is said to have spent $ 2 billion on wages, fuels among other expenses.
$779 million was spent on fuel while $597 million was spent on salaries, wages and benefits. The operating costs hence totaled to $2.10 billion with operating revenue amounting to $2.20 billion in the month of March. AMR Corp has stated that it is working towards reducing its operation cost with $2 billion annually. Question 2 The book is a description of how economical conditions can affect the success or failure of airlines. The book provides and illustration of how competition in the airline industry has become cutthroat and how firms have had to change their operation structure in order to generate some level of success over their competition.
The book provides an indication of the decline of a number of airlines, who have fallen victim to the demanding nature of the airline industry in the United States. The decline in the demand for air transport has led to airlines altering their operation strategy to suite the customers. This involves making their rates suitable to the declining factors of the US economy. The book gives a broad outlook on the influences and elements that define the airline industry in the United States. Work Cited: Bijan Vasigh et.
Al. Introduction to Air Transport Economics: From Theory to Application, Ashgate Publishing, New York. 2008. Print.