Company Situation Analysis: America Airlines Group Inc - Assignment Example

Company Situation Analysis: America Airlines Group Inc COMPANY SITUATION ANALYSIS: AMERICA AIRLINES GROUP INC American Airline group incorporation is an aviation company based in the United States. American Airlines provide both international and local flight services. The company was formed in 2003 because of a merger between AMR Corporation and United States Airways Group. The parent company of America Airlines before the merger was AMR Corporation. AMR Corporation was founded in 1930 by a collection of 82 small airlines. This was done through acquisitions and mergers. This paper carries a situation analysis to examine the strengths, weaknesses, threats, and opportunities that the current market presents to American Airlines (Airlines, 2015). Company resources Financial resources Being the largest airline in the world, American Airlines has a broad base of financial resources. Based on the organization statement of financial position for the year ended 30 September 2014, American Airlines had current assets amounting to $13.45 billion. American Airlines is listed in the stock exchange with its existing shares going for $51.52 per share. In case the company needs extra capital to invest, issuing shares, and rights could be a viable option. American Airlines had a $924 million after-tax profit in the last financial year. With such enormous profits, it can source finances internally by committing part of its profits. American Airline does not possess significant ability to source finances externally. The company has a negative debt liquidity ratio. According to financial reports, the debt liquidity ratio stands at – 0.59 (Airlines, 2015). The table below summarizes the recent debt liquidity ratio. 2012 2013 2014 Debt / Liquidity ratio 0.46 0.55 0.41 Physical resources American Airlines has a significant amount of physical assets. Most notably, the company has over 630 aircrafts. American Airlines has ordered nearly 363 aircraft awaiting arrival. The Aircrafts, the company, owns are estimated to have a total value of $ 702 million. The company’s headquarters are situated at Fort Worth, Texas. The location is very convenient as it is just a short distance from Dallas international airport. American Airlines also has offices in every area it operates. According to the American airlines financial reports, the company’s Property, plant and machinery are valued at around $34.196 billion (Airlines, 2015). The table below shows the company’s gross plant, property, and machinery since 2012 ‘Millions’ Year 2012 2013 2014 Gross plant & machinery 24,333 30,392 35,343 Human resources American airline is well equipped in the human resource department. The company has employed close to 60,000 people. American airline employees serve different functions and possess various levels of skill. The airline provides competitive wages and employs people from all over the world. The company recently offered its employees a 4% to 6% pay raise. According to American airline balance sheet, for the year ended 31 December 2013, the company has a wage bill accumulating to approximately $330 million for the year 2013. American Airlines is equipped with very highly skilled managers. The company’s chief executive officer, Doug Parker has over thirty years’ experience in the airline industry. He has spent a relevant amount of time in junior positions in the industry. Parker became vice president of American Airlines in 1995. Parker measures up very well against rival chief executive officers from Delta and Jet Blue Airlines. The amount of experience Parker has gained makes him arguably the best Chief Executive Officer in the aviation industry (Airlines, 2015). Organizational resources For a long time, American Airlines has maintained an excellent reputation among its clients. American Airlines has been rated very highly by recent studies. Studies reveal that the airline was among the top service providers in the United States. The airline maintains a very strong brand presence. American Airline has a graphically rich brand that is readily identifiable by its customers. According to financial reports, the company’s goodwill is valued at $4.086 million. The company has very capable lawyers who protect the company from violations concerning copyrights, trademarks and patents (Airlines, 2015). Company capabilities Distribution and operation capabilities American Airlines has a current inventory turnover ratio of 2.095. This indicates that the company converts its inventory into sales at a high rate. American Airlines serves as the best distribution service provider for most American businesses. The airline maintains a commanding presence in many airports in strategic cities across the globe. American Airlines supply chain faces a couple of challenges. Common challenges facing the company’s supply chain include flight cancelations, fluctuating dollar exchange rates, and rising fuel prices. Flight cancelations are mostly brought about by bad weather and air traffic congestion. According to financial statements, the company’s inventory cost accumulated to $1.138 billion by September 2014. American airline employees value relationships. The company maintains an exceptional relationship with over 7000 entities. The company’s staff has hence received significant awards for having good relationships with their suppliers (Airlines 2015). The table below shows American Airlines’ inventory turnover as from 2012 2012 2013 2014 Inventory Turnover 1.05 0.81 0.99 Human resource capabilities American Airlines have a very high standard of human resource capacities. The airline offers attractive salaries. American Airlines has recently up-scaled its employees’ wages by 6%. The airline spends an average of $300 million on employees’ remuneration. Other than that, American Airline provides employment opportunities for people from all over the globe. This gives its employees an opportunity to interact with people from different cultures and backgrounds. American Airlines offers bonuses and other benefits to highly performing employees. American Airlines employees also enjoy free flights to any destination provided by the airline. The airline provides job training and career development programs. Good health and wellness covers are also supplied by the airline. American Airlines employees are also offered opportunities to be involved in the community. The airline currently employs over 60000 employees. Working at American Airlines presents prospect employees with an incredible working experience and a chance to grow their careers (Airlines 2015). Management information system capabilities American Airline has highly advanced point of sale platforms. The company’s website offers a platform for its clients to access the airline’s services. Airlines American website, aa.com, receives around 12,000,000 visitors per day. The website offers a broad range of products to choose from. The company has recently invested in two ambitious modernization projects called Jetstream and Horizontal. The projects look to upgrade its passenger service system and flight operating system. Successful implementation of this project will lead to the company offering quicker and flexible services to its customers. The Horizontal plan will hasten flight operation functions like scheduling and route planning. The Jetstream project will quicken customer reservations and other services (Airlines 2015). Marketing capabilities American airline has a strong brand presence. The brand identity is very popular with the American public. With this brand high presence, the company can effectively market its products to the public. The company spends close to $50 million on marketing and promotions annually. As at September 2014, the amount day sales stood at $11.139 million. Day sales outstanding value reflects how the company efficiently handles account receivables. American Airlines’ current advertising intensity ratio is 250.6. The figure shows that in every dollar utilized in advertising, there is a yields $250 worth of sales (Airlines 2015). Product technology development Americans Airlines usually reacts swiftly to customer demands. All services offered by the airline can be accessed remotely on its website. Eliminating the physical effort made by clients to enjoy American Airline services. Customers can buy tickets and book flights on the company’s website. American Airlines invests heavily into research and design to ensure it maintains technically updated services to its customers. The company spends close to $120 million on research and development annually. The research and development intensity ratio stands at 13.32. Indicating that for every dollar spent on research and design leads to a sale worth $13.32 (Airlines 2015). References Airlines, A. (2015). American Airlines Annual Report 2013. Aa.com. Retrieved 26 February 2015, from http://www.aa.com Read More