Today, American Airlines is third after Delta and United which bought out other airlines. Delta Airlines filed for bankruptcy in 2005 while United Continental filed for it in 2002.Unlike other airlines, American Airline has not made profit returns for the last two years. The global crisis has made the situation at American Airline worse. The company filed for bankruptcy in 29th November 2011(Monday) after considering various options for many months. It is highly anticipated that there will be a short-term reduction of staff to correspond with the temporary reduction of flight schedule in the US as Thomson announced on Monday night. This will help to cut costs because of the weak demand and high volatile fuel costs. This is in the view of recovering in less than 15 months to become a profitable global airline. Since most of the competitor firms have merged with other airlines to give them larger route networks which seems more attractive to the corporate travel clients, American Airlines has to work towards reorganising their marketing strategies and customer relations. This will enable them to maintain existing customers and attracting prospective customers. Initially, this may be an uphill task but eventually it will pay off handsomely and lead the company to regain its market leader position (Michaels, 2011). According to airlinefinancials.com, American Airline and US Airways are at the extreme end when it comes to labour costs per mile. My recommendation is that American Airline should merge with an existing airline. Mergers result in considerable savings on costs through layoffs and many other cost reduction strategies. With the filing of bankruptcy of a company, the fear of layoffs creeps in among the members of the work force. A merger would help ease tension among the workforce by cutting fewer jobs than when American airline stands alone. A merger will give the airline operating diversity in the fleet of planes and present opportunities for potential cost synergies on the operational front. Merging two airlines will optimize schedules, increase savings, increase passenger revenue, and more market control. This presents a win-win situation for both the management and the employees (Reed, 1993).
Having being a market leader once, I believe American airline will spring back to its position.