In the 1st issue of the Turnaround Management Journal in 2012 Dr. Christoph Lymbersky, director of the Turnaround Management Society takes a close look at American Airways and how to save the company.
Online PR News – 12-August-2012 – Hamburg, Hamburg – The US airline market has been consolidating for several years, which is a healthy development. Until recently, there were four big US carriers, which is probably too many for the size of the market, as there might only be two that can operate profitably in the long run. This consolidation is an international development, although it will probably take longer in Europe because some airlines are governmentially backed (AirFrance/KLM, Alitalia) and because Europe consits of many countries with different laws, which stretches the merger process. Still, there are signs that, even in Europe, the consolidation process has begun. Hungarian Malev and Spainair are bankrupt, Olympic is almost there, Alitalia has never been very profitable, and Air Berlin survives only because Ethiad is backing it up financially. In the long run, we will see some substanitial consolidation that might end in Lufthansa’s and AirFrance/KLM’s dominating the European market.
Currently, AMR, the group to which American Airlines and American Eagal belong, operates about 900 airplanes, serves more than 250 airports in about 50 countries, and employs about 88,000 employees. In December 2011 alone, the company lost US$ 904 million.
Once a strong airline that survived this serious crisis on its own account, American was forced to file for chapter 11 protection in November 2011. Since it did not use its time and financial power to restructure the company to make it more competitive, its competitors have lower costs and can operate more profitably. What followed had to happen since American didn’t adapt to its competition’s lower cost structure. The fleet is much too old, maintenance costs and labor costs are too high to compete efficiently. Therefore they filed for Chapter 11 at the beginning of 2012.
In this case, leading the company into Chapter 11 made sense, as it will allow management to renegotiate employees’ contracts, which would otherwise be difficult given the traditionally strong unions in the airline industry.
Possible ways out of the situation are examined by Dr. Christoph Lymbersky and can be found in the 2012 Turnaround Management Journal.
This first issue in 2012 can be bought over Amazon and trough the Turnaround Management Society.
The Turnaround Management Journal gets published by the:
Turnaround Management Society
About Time Corporate Press:
The Turnaround Management Society is an industry specific organization for Turnaround Management. Its members are turnaround professionals, distressed dept investors and academics.