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December 10, 2013 
Authored by: Christopher Dale, Alex Edwards, Brandon Thomson 
Mercyhurst University Institute for Intelligence Studies
A m e r i c a n A i r l i n e s C o m p e t i t i v e I n t e l l i g e n c e R e p o r t | 1 
For Questions or Comments, Please Contact the Authors: 
Christopher Dale Email: cdale81@lakers.mercyhurst.edu 
Alex Edwards Email: aedwar44@lakers.mercyhurst.edu 
Brandon Thomson Email: bthoms45@lakers.mercyhurst.edu
A m e r i c a n A i r l i n e s C o m p e t i t i v e I n t e l l i g e n c e R e p o r t | 2 
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x Restructuring of American 
Airlines, “the new American.” 
x Implementation of cost cutting 
programs including the 
purchasing of new airplanes. 
x Rely on the AAdvantage Loyalty 
Program to be the backbone of 
our consumer base. 
Response Profile: 
Current Strategy: 
x In a bad financial position, but looking to emerge from 
bankruptcy and dominate the market. 
x Introducing new airplanes that are technologically 
advanced and will help in reducing costs, most notably fuel. 
x Merger with U.S. Airways will increase an already expansive 
route system. 
x The AAdvantage program will grow with the pending 
merger and increase loyalty among business travelers. 
Capabilities: 
Strengths 
x Part of the oneworld alliance. 
x Approximately 900 aircrafts that serve 
3,400 flights daily. 
x Largest airline loyalty program. 
Weaknesses 
x Negative net income. 
x Filed for chapter 11 reorganization. 
x Will be disorganized due to the 
merger initially. 
Future Goals: 
x Implement innovative ideas and 
wise investments to minimize 
our environmental footprint. 
x Become the largest airline in 
the world. 
x Increase international presence. 
Assumptions: 
x Fuel costs will continue to rise. 
x The merger with U.S. Airways 
will return American Airlines to 
financial prosperity. 
x Passengers will seek more 
technologically friendly airlines.
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purchase their assets. 
 
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company is able to meet its short-term 
obligations. 
 
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current assets, it only uses cash, short-term 
investments, and current receivables, a 
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produce income. A higher ratio indicates 
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American Airlines Competitive Intelligence Report
American Airlines Competitive Intelligence Report
American Airlines Competitive Intelligence Report
American Airlines Competitive Intelligence Report

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  • 59. A m e r i c a n A i r l i n e s C o m p e t i t i v e I n t e l l i g e n c e R e p o r t | 37 $05RUSRUDWLRQ)LQDQFLDO$QDOVLV ([HFXWLYH6XPPDU $05RUSRUDWLRQLVFXUUHQWOVLWWLQJLQDSRRUILQDQFLDOOVLWXDWLRQKDYLQJQHWWHGQHJDWLYH LQFRPHVLQFH,Q$PHULFDQ$LUOLQHVILOHGIRUEDQNUXSWFLQKRSHVWRUHVWUXFWXUHWR FUHDWHSURILWLQWKHIXWXUH7KHSRRUSRVLWLRQLVKLJKOLJKWHGE$05¶VLQDELOLWWRWXUQDVVHWVLQWR YDOXDEOHFRPSHWLWLYHUHVRXUFHV$05DOVRSRVVHVVHVDQHJDWLYHSURILWPDUJLQUDWLRDVZHOODVD QHJDWLYH3(UDWLRGXHWRWKHIDFWWKDWWKHKDYHQ¶WQHWWHGDSURILW2QHRIWKHPDLQUHDVRQVLQ ZKLFK$05RUSRUDWLRQLVQ¶WFUHDWLQJDSURILWLVEHFDXVHWKHLUQHWXQLWUHYHQXHLV,Q $05RUSRUDWLRQH[SHULHQFHGDQHWORVVRIELOOLRQZLWKELOOLRQGHVLJQDWHGWR UHRUJDQL]DWLRQFRVWV,QWKHIXWXUHUHWXUQRQDVVHWVDQGSURILWPDUJLQUDWLRZLOOGHWHUPLQH ZKHWKHURUQRWWKLVUHRUJDQL]DWLRQVWUDWHJZLOOEHDVXFFHVVRUQRW $FWLYLWDQG(IILFLHQF $VVHW7XUQRYHU5DWLR±This ratio shows how much money the business has tied up in assets for each dollar of sales revenue. A higher ratio is better, as it indicates that the business is effectively using its assets to generate sales. $05RUSRUDWLRQ¶VDVVHWWXUQRYHUUDWLRKDV LQFUHDVHGVOLJKWOHDFKHDUIURPWR 7KHFRPSDQ¶VDVVHWWXUQRYHUUDWLRZDV LQZKLFKLPSURYHGWRLQ DQGLQ
  • 60. A m e r i c a n A i r l i n e s C o m p e t i t i v e I n t e l l i g e n c e R e p o r t | 38 $FFRXQWV5HFHLYDEOH7XUQRYHU5DWLR± The accounts receivable turnover ratio is used to show how effective a company is at extending credit and collecting debt. A higher ratio is better because it indicates that the business is efficient at extending credit. $05¶VDFFRXQWVUHFHLYDEOHWXUQRYHUUDWLR KDVGHFUHDVHGHYHUHDUVLQFH7KDW HDUWKHUDWLRZDVZKLFKGURSSHGWR LQDQGWRLQ :RUNLQJDSLWDO7XUQRYHU5DWLR±This ratio shows the relationship between the money used to fund operations and the money generated from those operations. A higher ratio is better, as a higher ratio means that the business is generating a higher amount of sales from the money used to fund those sales. 7KHFRPSDQ¶VZRUNLQJFDSLWDOWXUQRYHU UDWLRKDVUHPDLQHGQHJDWLYHIRUWKHSDVWHDUVEHFDXVHWKHFRPSDQKDVPRUHFXUUHQWOLDELOLWLHV WKDQFXUUHQWDVVHWV,QWKHUDWLRZDV,WGURSSHGIXUWKHUWRLQDQGURVH VOLJKWOWRLQ $YHUDJH,QYHQWRU,QYHVWPHQW3HULRG± The average inventory investment period is the number of days that it takes to convert a dollar of cash used to purchase inventory into a dollar of sales. A smaller time period is better, as this means that the business has to invest less of their cash in inventory. $05RUSRUDWLRQ¶VLQYHQWRUOLNHO FRQVLVWVPRVWORIIXHODORQJZLWKIRRGDQG RWKHUDLUFUDIWDPHQLWLHV$05¶VDYHUDJH LQYHQWRULQYHVWPHQWSHULRGUHPDLQHGDWLQDQGDQGGURSSHGWRLQ
  • 61. A m e r i c a n A i r l i n e s C o m p e t i t i v e I n t e l l i g e n c e R e p o r t | 39 ,PSOLFDWLRQV$OWKRXJKVRPHRI$05¶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±The debt to equity ratio compares how many funds are provided by creditors and how many funds are provided by owners. A low debt to equity ratio is good, as a high ratio indicates increases in debt. $05¶VGHEWWRHTXLWUDWLRKDVUHPDLQHG QHJDWLYHEHFDXVHWKHFRPSDQKDVQHJDWLYH VWRFNKROGHU¶VHTXLW$OWKRXJKWKHUDWLRLV VXSSRVHGWREHORZDQHJDWLYHUDWLRLVQRWGHVLUDEOH,QLWZDVZKLFKGURSSHGWR LQ7KHGHEWWRHTXLWUDWLRLQZDV 'HEWWR$VVHWV±The debt to assets ratio shows how many assets are funded by creditors and how many are funded by owners. A low ratio is better, as this indicates that the company did not have to take on much debt to purchase their assets. $05¶VGHEWWRDVVHWVUDWLRKDVLQFUHDVHGVLQFH LQGLFDWLQJDQLQFUHDVHLQWKHFRPSDQ¶V GHEW,WZDVLQLQFUHDVHGWR LQDQGLQFUHDVHGIXUWKHUWRLQ ,PSOLFDWLRQV%RWKRIWKHOHYHUDJHDQGVROYHQFUDWLRVLOOXVWUDWH$05¶VILQDQFLDOLVVXHV7KH GHEWWRHTXLWUDWLRLVQHJDWLYHGXHWRQHJDWLYHVWRFNKROGHU¶VHTXLWZKLFKUHIOHFWVYHUSRRUO RQWKHFRPSDQ,QDGGLWLRQWKHGHEWWRDVVHWVUDWLRKDVLQFUHDVHGVLQFHWKHFRPSDQLVWDNLQJRQ PRUHGHEWSRVVLEOGXHWREDQNUXSWFDQGUHVWUXFWXULQJ
  • 62. A m e r i c a n A i r l i n e s C o m p e t i t i v e I n t e l l i g e n c e R e p o r t | 40 /LTXLGLW XUUHQW5DWLR±The current ratio compares a company’s current assets and their current liabilities. A higher ratio is better, as a company with more liabilities than assets is a higher financial risk. Ratios greater or equal to 2 indicate that a company is able to meet its short-term obligations. $05¶VFXUUHQWUDWLRGURSSHGVOLJKWOIURP WREXWKDVUHPDLQHGUHODWLYHOFRQVWDQWDOEHLWORZ7KHUDWLRZDVLQERWK DQGDQGGHFUHDVHGWRLQ $FLGWHVW5DWLR±This ratio is similar to the current ratio, however, instead of using all current assets, it only uses cash, short-term investments, and current receivables, a company’s most liquid assets. A higher ratio is better and any ratio higher than 1 is considered good. /LNHLWVFXUUHQWUDWLR$05¶VDFLGWHVWUDWLR RYHUWKHSDVWHDUVKDVEHHQORZHUWKDQLV GHVLUDEOHDQGKDVGURSSHGVOLJKWO,WZDV LQLQDQG ,PSOLFDWLRQV%RWKRI$05¶VOLTXLGLWUDWLRVDUHORZHUWKDQWKHLQGXVWUVWDQGDUGIRU FXUUHQWUDWLRDQGIRUDFLGWHVWUDWLR
  • 64. A m e r i c a n A i r l i n e s C o m p e t i t i v e I n t e l l i g e n c e R e p o r t | 41 3URILWDELOLW 5HWXUQRQ$VVHWV±This ratio indicates how well a business is using its assets to produce income. A higher ratio indicates that the company is using its assets well. $05KDVKDGDQHJDWLYHUHWXUQRQDVVHWV UDWLRIRUWKHSDVWHDUVEHFDXVHRIWKHLU QHJDWLYHQHWLQFRPH,QWKHFRPSDQ¶V UDWLRZDVZKLFKGURSSHGWR LQ,QWKHUDWLRLQFUHDVHGVOLJKWO WR 5HWXUQRQ(TXLW±The return on equity ratio compares a company’s net income to the company’s stockholder’s equity to determine what return that company is providing. A higher ratio is better, as it indicates that the company is producing more income with less stockholder’s equity. $OWKRXJKWKHFRPSDQ¶VUHWXUQRQHTXLW UDWLRDSSHDUVSRVLWLYHLWLVFDOFXODWHGE GLYLGLQJQHJDWLYHQHWLQFRPHEQHJDWLYHVWRFNKROGHU¶VHTXLW7KHUHIRUHWKHQXPEHUVDUH EDVLFDOOLUUHOHYDQWDVWKHDUHDOOEDG,QWKHUDWLRZDVLQDQG LQ 3URILW0DUJLQ5DWLR±The profit margin ratio determines how much income a company makes for every dollar of sales. A higher ratio is better, as this means that a company is making more income off of its sales. /LNHWKHUHWXUQRQDVVHWVUDWLR$05¶VSURILW PDUJLQUDWLRZDVQHJDWLYHGXHWRQHJDWLYHQHW LQFRPH,QWKHFRPSDQ¶VUDWLRZDV ,WGURSSHGIXUWKHUWRLQ DQGLQFUHDVHGVOLJKWOWRLQ
  • 65. A m e r i c a n A i r l i n e s C o m p e t i t i v e I n t e l l i g e n c e R e p o r t | 42 ,PSOLFDWLRQV7KHFRPSDQ¶VSURILWDELOLWUDWLRVDUHDOOQHJDWLYHEHFDXVHRIQHJDWLYHQHWLQFRPH ZLWKWKHH[FHSWLRQRIUHWXUQRQHTXLWZKLFKLVRQOSRVLWLYHEHFDXVHHTXLWLVDOVRQHJDWLYH 7KHQXPEHUVDQGWKHFKDQJHHDFKHDUDUHOHVVLPSRUWDQWWKDQWKHIDFWWKDWWKHQXPEHUVDUH QHJDWLYH7KHFRPSDQKRSHVWKDWWKHPHUJHUZLWK86$LUZDVZLOODOORZWKHPWRPDNHSRVLWLYH QHWLQFRPHLQWKHIXWXUH 9DOXDWLRQ (DUQLQJVSHU6KDUH±Earnings per share is a measure of how much income a company makes for each share of stock it has issued. A high earnings per share ratio is better than a low one. $05¶VHDUQLQJVSHUVKDUHUDWLRZDVQHJDWLYH RYHUWKHSDVWHDUVEHFDXVHRIWKH FRPSDQ¶VQHJDWLYHQHWLQFRPH(36LQ ZDVZKLFKGURSSHGWRLQ 7KHUDWLRZDVLQ 3(5DWLR±The P/E ratio is a measure of the projected earnings of a company. It is calculated by dividing the current market value per share by the earnings per share. The ratio indicates the market price of $1 of earnings, with a high ratio indicating high projected earnings. 6LQFHWKH3(UDWLRLVEDVHGRQHDUQLQJVSHU VKDUH$05¶VUDWLRZDVQHJDWLYHIRUWKHSDVW HDUV,WZDVLQLQLQ DQGLQ ,PSOLFDWLRQV/LNHWKHSUHYLRXVFDWHJRUERWKRIWKHVHUDWLRVDUHQHJDWLYHEHFDXVHRI$05¶V QHJDWLYHQHWLQFRPH7KHQHJDWLYH3(UDWLRIRU$PHULFDQ$LUOLQHVUHIOHFWVWKHVWRFNPDUNHW¶V SRRUYLHZRIWKHFRUSRUDWLRQ,GHDOOWKHPHUJHUDQGHPHUJHQFHIURPEDQNUXSWFZLOOUHVWRUH WKHFRPSDQWRSURILWDELOLWDQGWKHLU(36DQG3(UDWLRZLOOEHFRPHSRVLWLYH
  • 66. A m e r i c a n A i r l i n e s C o m p e t i t i v e I n t e l l i g e n c e R e p o r t | 43 RPSHWLWRURPSDULVRQ
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