1. Amy Kakuk, Beth Theriault, and Jessica Bourgoin All images from www.aa.com

2. Agenda  Company History  A Little More About Us  Our Planes  Where We Fly  Vision Statement  Mission Statement  Company Ratios  External Analysis  Opportunities  Threats  CPM  EFE  Internal Analysis  Strengths  Weaknesses  IFE  Matrix Analysis  SWOT Analysis  Space  IE matrix  Grand Strategy  QSPM  Recommended Strategies  Future Plans  AMR in the News

3. AMR Timeline Started in New York City in 1929 under the name Aviation Corporation. It was founded by Sherman Fairchild. Started in New York City in 1929 under the name Aviation Corporation. It was founded by Sherman Fairchild. 1930, renamed American Airways after combining 85 small airlines. 1930, renamed American Airways after combining 85 small airlines. 1934, airmail was suspended causing difficulty and the cause for new ideas. 1934, airmail was suspended causing difficulty and the cause for new ideas. Renamed to its current American Airlines and the first plane to pay off itself without the need for postal revenues was built.Renamed to its current American Airlines and the first plane to pay off itself without the need for postal revenues was built. 1964, AMR introduced the first computerized airline ticket reservation system (SABRE) 1964, AMR introduced the first computerized airline ticket reservation system (SABRE) 1980, new CEO Bob Crandall introduces frequent fliers program. 1980, new CEO Bob Crandall introduces frequent fliers program. 1982, Purchase of domestic airline. 1982, Purchase of domestic airline. 1987, Nashville Eagle was renamed American Eagle. 1987, Nashville Eagle was renamed American Eagle. 1989, Donald Trump was prevented from purchasing American Airlines and new routes to Japan, Latin America, and London were bought. 1989, Donald Trump was prevented from purchasing American Airlines and new routes to Japan, Latin America, and London were bought. 1996, 20% of SABRE was sold and a code-sharing agreement was made with British Airways. 1996, 20% of SABRE was sold and a code-sharing agreement was made with British Airways. 1999, One world (alliance of major airlines around the world) was formed because of agreement with British Airways. 1999, One world (alliance of major airlines around the world) was formed because of agreement with British Airways. 2000, AMR sold its shares of Canadian Airlines along with the remaining of SABRE. 2000, AMR sold its shares of Canadian Airlines along with the remaining of SABRE. 2001, AMR bought the assets of the failed TWA for $743m. 2001, AMR bought the assets of the failed TWA for $743m. 2003, AMR was on the brink of bankruptcy after losing $1.3B 2003, AMR was on the brink of bankruptcy after losing $1.3B Text Book: Strategic Management Author: Fred R. David

4. Location AMR Corporation 4333 Amon Carter Boulevard Fort Worth, TX 76155 Phone: 1-817-963-1234 Fax: 1-817-967-9641 AMR Corporation 4333 Amon Carter Boulevard Fort Worth, TX 76155 Phone: 1-817-963-1234 Fax: 1-817-967-9641 Sector Name: Transportation Industry Name: Airline Employees: 92,100 Market Cap (Mil) $ : 1,724.425 Complete Financials: Dec 2004 Updated: 03/31/2005 Sector Name: Transportation Industry Name: Airline Employees: 92,100 Market Cap (Mil) $ : 1,724.425 Complete Financials: Dec 2004 Updated: 03/31/2005 www.AA.com

5. Stock Quote (AMR - NYSE) Price$10.45 Change 0.25 Volume3,486,700 Trades2,773 Day Low10.33 Day High10.89 52 Week Low6.34 52 Week High14.50 As of 4:02 PM ET on April 1, 2005 http://www.shareholder.com/aa/stock.cfm

6. Vision Statement (proposed)  To become the largest airline in the world.

7. Mission Statement (proposed)  AMR Corporation is committed to providing every citizen of the world with the highest quality air travel to the widest selection of destinations possible. AMR will continue to modernize its fleet while maintaining its position as the largest air carrier in the world, with a goal of becoming the most profitable airline. AMR is the airline that treats everyone with equal care and respect, which is reflected in the way each AMR employee is respected. AMR recognizes that its employees are the key to the airlines success and invests in the futures and lives of its employees. By investing in tomorrow’s technologies and by following a strict adherence towards environmental regulations, AMR demonstrates its commitment to the world environment.

8. Customer Service Plan  American Airlines and American Eagle are in business to provide safe, dependable, and friendly air transportation to our customers, along with numerous related services. We are dedicated to making every flight you take with us something special. Your safety, comfort, and convenience are our most important concerns. www.AA.com

9. See Our New Campaign, We Know Why You Fly.

10. Our Planes…  Airbus A300-600 Airbus A300-600 Airbus A300-600  Boeing MD-80(S80) Boeing MD-80(S80) Boeing MD-80(S80)  Boeing 737-800 Boeing 737-800 Boeing 737-800  Boeing 757 Boeing 757 Boeing 757  Boeing 767 Boeing 767 Boeing 767  Boeing 777 Boeing 777 Boeing 777 www.AA.com

11. Our Planes…  ATR 72 - Super ATR ATR 72 - Super ATR 72 - Super ATR  Bombardier CRJ-700 Bombardier CRJ-700 Bombardier CRJ-700  ERJ-145 ERJ-145  ERJ-140 ERJ-140  ERJ-135 ERJ-135  SAAB 340B SAAB 340B SAAB 340B www.AA.com

12. Airbus A300-600 Seats: 267 Lavatories: 7 www.AA.com

13. Boeing MD-80 (S80) Seats: 131 Lavatories: 3 www.AA.com

14. Boeing 777 (777) Seats: 245 Lavatories: 9 www.AA.com

15. Where we fly…

16. USA (North & South West) All Maps from www.AA.com

17. USA (North & South Central)

18. USA (North & South East)

19. Canada

20. Mexico

21. Asia

22. Australia & New Zealand

23. Central America

24. Caribbean

25. Africa

26. Europe

27. Middle East

28. South America

29. Eurasia

30. Company Worth Analysis Year ending 2001,2002,2003 average Stockholders equity 2,125,000,000 Net Income X 5 (10,835,000,000 ) (Share price/EPS) X Net Income (2,436,937,716) Number of Shares Outstanding X Share Price 2,015,000,000 Method Average 2,282,984,429

31. Key Company Ratios CompanyIndustrySectorS&P 500 Valuation Ratios Beta2.771.380.621.00 Price to Sales (TTM)0.101.241.623.33 Price to Cash Flow (TTM)11.8610.0313.1917.32 % Owned Institutions95.0070.9059.8764.19 Growth Rates % Sales (MRQ) vs Qtr 1 Yr Ago3.9312.979.0413.40 Sales (TTM) vs TTM 1 Yr Ago0.1212.798.2711.90 Sales - 5 Yr Growth Rate-0.098.396.949.30 EPS (MRQ) vs Qtr 1 Yr AgoN/A48.32-4.5728.69 EPS (TTM) vs TTM 1 Yr AgoNA70.641.9221.92 EPS - 5 Yr Growth RateNM-2.276.8012.15 Capital Spending - 5 Yr Growth Rate-21.915.490.824.06 Financial Strength Quick Ratio (MRQ)0.521.201.181.26 Current Ratio (MRQ)0.711.431.421.76 LT Debt to Equity (MRQ)285.351.090.510.68 Total Debt to Equity (MRQ)302.831.190.590.85 Interest Coverage (TTM)-1.204.8619.2411.86

32. Key Company Ratios (cont.) Profitability Ratios % CompanyIndustrySectorS&P 500 Gross Margin (TTM)17.2626.5233.1547.32 Operating Margin (TTM)-4.846.8811.7220.33 Pre-Tax Margin (TTM)-7.508.3410.2417.27 Net Profit Margin (TTM)-7.045.276.7713.12 Management Effectiveness % Return on Assets (TTM)-4.154.716.666.40 Return on Investment (TTM)-5.456.518.599.97 Return on Investment - 5 Yr Avg-3.166.118.5110.93 Return on Equity - 5 Yr Avg-66.332.7814.3819.22 Efficiency Revenue/Employee (TTM)180,913191,714198,139622,866 Receivable Turnover (TTM)17.2335.2114.589.76 Inventory Turnover (TTM)25.3642.7839.4010.46 Asset Turnover (TTM0.590.831.100.92 www.investor.stockpoint.com March 2004

33. External Audit Opportunities   Favorable wage negotiation climate   Travel increasing in general   Low interest rates   Government backed loans   Information technology   New fuel efficient engines   Partnerships with Asian Airlines Threats Threats   Increased air travel inconvenience (security related)   Business travel declining   Increased competition from point-to-point competitors   Availability of pricing information   Overcapacity in industry

34. EFE Matrix Key External Factors Weight RatingWeighted Score Opportunities 1. Favorable Wage Negotiation Climate0.1540.60 2.Travel Increasing0.0520.10 3 Low Interest Rates0.0530.15 4. Government Backed Loans0.0540.20 5. Information Technology0.0530.15 6. New Fuel Efficient Engines0.0530.15 7. Partnership with Asian Airlines0.1030.30 Threats 1. Security inconvenience with Increased air travel 0.0520.10 2. Business Travel is Declining0.1030.30 3. Increased Competition with Competitors 0.1530.45 4. Availability of Pricing Information0.1030.30 5. Overcapacity of Industry0.1020.20 Total1.00 3.00

35. CPM American AirlinesDeltaSouthwest Critical Success Factors WeightRatingWeighted Score RatingWeighted Score RatingWeighted Score Advertising Product Quality Price Competitiveness Management Financial Position Customer Loyalty Global Expansion Market Share Reward Programs Security.15.11.14.09.14.08.06.05.13 24231233232423123323 0.30 0.44 0.28 0.27 0.14 0.16 0.18 0.15 0.10 0.39 44232343434423234343 0.60 0.44 0.28 0.27 0.28 0.24 0.15 0.20 0.39 33444312233344431223 0.45 0.33 0.56 0.36 0.56 0.24 0.06 0.10 0.39 Total1.002.413.523.15

36. Internal Audit Strengths Size of fleet Number of routes Partnerships IT infrastructure Government relations Weaknesses Financial position Cost structure Unprofitable routes Too many divisions Reliance of business fares

37. IFE Matrix Key Internal FactorsWeightRatingWeighted Score Strengths 1. Size of fleet0.1040.40 2. Number of routes0.1040.40 3. Partnerships0.1540.60 4. IT infrastructure0.1030.30 5. Government relations0.0540.20 Weaknesses 1. Financial position0.051 2. Cost structure0.1520.30 3. Unprofitable routes0.1520.30 4. Too many divisions0.051 5. Reliance of business fares0.1020.20 TOTAL1.002.80

38. SWOT Matrix S-O  Develop new partnerships in Asia utilizing the number of routes as a key negotiating point. S-T  Use IT to reduce the check-in and wait times on flights. Such as more curb side check-ins and e-tickets.  Use market position by reducing number of unprofitable flights and reducing industry capacity. W-O  Sell unprofitable/smaller divisions to improve financial positions.  Negotiate lower wage rates with unions to improve cost structure. W-T  Use a mixed model. Some operations point-to-point to improve cost structure and reduce customer inconvenience.  Eliminate unprofitable routes to improve financial position and reduce industry capacity.

39. SPACE Matrix ConservativeFSAggressive CAIS DefensiveESCompetitive Y axis *Financial strength 1 *Environmental stability -5 Y axis: 1 + (-5) = -3 X axis *Industry strength 2 *Competitive advantage -5 X axis: 2 + (-5) = -3 1.Retrenchmnet 2.Diversification 3.Divestiture 4.Liquidation

40. The Internal-External (IE) Matrix 1.0 to 1.99 IXVIIIVIILow 2.0 to 2.99The EFE Total Weighted Score VIVIVMedium American Airlines 3.0 to 3.99 IIIIIIHigh 1.0 to 1.992.0 to 2.993.0 to 4.0 WeakAverageStrong The IFE Total Weighted Score Market Penetration Market Development Product Development

41. Grand Strategy Matrix RAPID MARKET GROWTH WEAK Quadrant IIQuadrant ISTRONG COMPETITIVE POSITION American Airlines Quadrant IIIQuadrant IV SLOW MARKET GROWTH 1.Retrenchmnet 2.Diversification 3.Divestiture 4.Liquidation

42. QSPM (Internal Factors) Strategic Alternatives Key Internal Factors WeightInternational Expansion Domestic Expansion StrengthsASTASASTAS 1. Size of fleet0.10--- 2. Number of routes0.1040.1810.12 3. Partnerships0.151---2 4. IT infrastructure0.10---0.20---0.20 5. Government relations0.05---0.24---0.18 Weaknesses 1. Financial position0.0510.2830.07 2. Cost structure0.1540.1230.18 3. Unprofitable routes0.1510.0840.12 4. Too many divisions0.05--- 5. Reliance of business fares0.10--- SUBTOTAL1.001.351.60

43. QSPM (External Factors) QSPM (External Factors) Key External Factors Weight International Expansion Domestic Expansion OpportunitiesASTASASTAS 1. Favorable wage negotiation climate.15---0.24---0.24 2. Travel increasing in general.054---1 3. Low interest rates.054---1 4. Government backed loans.053---1 5. Information Technology.051---4 6. New fuel efficient engines.0540.0510.15 7. Partnerships with Asian Airlines.10---0.06---0.03 Threats 1. Increased air travel inconvenience (security related).05---0.20---0.15 2. Business travel declining.10---0.16---0.08 3. Increased competition from point-to-point competitors.1530.084 4. Availability of pricing information.103---3 5. Overcapacity in industry.101---4 SUBTOTAL1.001.651.70 SUM TOTAL ATTRACTIVENESS SCORE3.003.30

44. Strategies Summary  Alternative StrategiesIESPACE GRANDCOUNT  Forward Integration -  Backward Integration -  Horizontal Integration -  Market Penetration X 1  Market Development X 1  Product Development X 1  Concentric Diversification X X 2  Conglomerate Diversification X 1  Horizontal Diversification X 1  Joint Venture -  Retrenchment X X 2  Divestiture X X 2  Liquidation X X 2

45. ??Which Strategies??  Concentric Diversification which is the addition of new but related product, may be something that AMR would want to look into. They could add something to attract new customers too their company.  Another option they could look into in Retrenchment. This is the regrouping by reducing costs and assets. (This option is already being explored).  AMR may also want to think about Divestiture, selling its American Eagle division.  If these strategies do not work, AMR’s last option is Liquidation. With the financial trouble that AMR has been having, this may be the only way.

46. Future Plans AMR plans to raise their profitability in the future. This is a much needed event in order for the company to stay in business. In order to boost their profitability, AMR is currently in the process of doing some restructuring. This restructuring includes: AMR plans to raise their profitability in the future. This is a much needed event in order for the company to stay in business. In order to boost their profitability, AMR is currently in the process of doing some restructuring. This restructuring includes: –Reducing Number of flights from the Dallas/Fort Worth and the O’Hare Hubs. –In 2003, 27,000 employees were laid off and more will be needed to keep the company alive. –Retiring older aircrafts that are too expensive to keep running. AMR also needs to start getting rid of some of its least profitable routes, this will simplify their program and eliminate the spending of money to fly on them. Text Book: Strategic Management Author: Fred R. David

47. News Releases  March 30 | American Airlines Cargo Division Announces Increase in Fuel Surcharge American Airlines Cargo Division Announces Increase in Fuel SurchargeAmerican Airlines Cargo Division Announces Increase in Fuel Surcharge  March 29 | American Airlines to Resume Seasonal Nonstop Service From New York to Rome on April 3 American Airlines to Resume Seasonal Nonstop Service From New York to Rome on April 3American Airlines to Resume Seasonal Nonstop Service From New York to Rome on April 3  March 28 | Sizzlin' Summer Travel Deals - Get 'Em While They're Hot Sizzlin' Summer Travel Deals - Get 'Em While They're HotSizzlin' Summer Travel Deals - Get 'Em While They're Hot  March 28 | New Online Program Lets American Airlines AAdvantage Members Redeem Miles for Hotel Stays and More New Online Program Lets American Airlines AAdvantage Members Redeem Miles for Hotel Stays and MoreNew Online Program Lets American Airlines AAdvantage Members Redeem Miles for Hotel Stays and More