AMR Corporation (AMR or the Company) was incorporated in October 1982. Virtually
all of AMR’s operations fall within the airline industry. AMR’s
principal subsidiary, American Airlines, Inc. (American), was founded in 1934.
AMR Eagle Holding Corporation (AMR Eagle), a wholly-owned subsidiary of AMR,
owns two regional airlines which do business as “American Eagle”
— American Eagle Airlines, Inc. and Executive Airlines, Inc. American
also contracts with an independently owned regional airline, which does business
as “AmericanConnection” (the AmericanConnection® carrier).
The AMR Eagle fleet is operated to feed passenger traffic to American pursuant
to a capacity purchase agreement between American and AMR Eagle under which
American receives all passenger revenue from flights and pays AMR Eagle a fee
for each flight. The capacity purchase agreement reflects what the Company believes
are current market rates received by other regional carriers for similar flying.
Amounts paid to AMR Eagle under the capacity purchase agreement are available
to pay for various operating expenses of AMR Eagle, such as crew expenses, maintenance
and aircraft ownership.
American, AMR Eagle and the AmericanConnection® airline serve more than
250 cities in approximately 50 countries with, on average, 3,400 daily flights.
The combined network fleet numbers approximately 900 aircraft. American Airlines
is also a founding member of oneworld® alliance, which enables member airlines
to offer their customers more services and benefits than any member airline
can provide individually. These services include a broader route network, opportunities
to earn and redeem frequent flyer miles across the combined oneworld network
and more airport lounges. Together, oneworld members serve 750 destinations
in approximately 150 countries, with about 8,500 daily departures. American
is also one of the largest scheduled air freight carriers in the world, providing
a wide range of freight and mail services to shippers throughout its system
onboard American’s passenger fleet.
Competition
Domestic Air Transportation The domestic airline industry is fiercely competitive.
Currently, any United States (U.S.) air carrier deemed fit by the U.S. Department
of Transportation (DOT) is free to operate scheduled passenger service between
any two points within the U.S. and its possessions. Most major air carriers
have developed hub-and-spoke systems and schedule patterns in an effort to maximize
the revenue potential of their service. American operates in five primary domestic
markets: Dallas/Fort Worth (DFW), Chicago O’Hare, Miami, New York City
and Los Angeles.
The American Eagle® carriers increase the number of markets the Company
serves by providing connections at American’s primary markets. The AmericanConnection®
carrier currently provides connecting service to American through Chicago O’Hare.
American’s competitors also own or have marketing agreements with regional
carriers which provide similar services at their major hubs and other locations.
On most of its domestic non-stop routes, the Company faces competing service
from at least one, and sometimes more than one, domestic airline including:
AirTran Airways (Air Tran), Alaska Airlines (Alaska), Continental Airlines (Continental),
Delta Air Lines (including Northwest Airlines) (Delta), Frontier Airlines, JetBlue
Airways (JetBlue), Hawaiian Airlines, Southwest Airlines (Southwest), Spirit
Airlines, United Airlines (United), US Airways, Virgin America Airlines and
their affiliated regional carriers. Competition is even greater between cities
that require a connection, where the major airlines compete via their respective
hubs. In addition, the Company faces competition on some of its connecting routes
from carriers operating point-to-point service on such routes. The Company also
competes with all-cargo and charter carriers and, particularly on shorter segments,
ground and rail transportation. On all of its routes, pricing decisions are
affected, in large part, by the need to meet competition from other airlines.
In providing international air transportation, the Company competes with foreign
investor-owned carriers, foreign state-owned carriers and U.S. airlines that
have been granted authority to provide scheduled passenger and cargo service
between the U.S. and various overseas locations. In general, carriers that have
the greatest ability to seamlessly connect passengers to and from markets beyond
the nonstop city pair have a competitive advantage. In some cases, however,
foreign governments limit U.S. air carriers’ rights to carry passengers
beyond designated gateway cities in foreign countries. To improve access to
each other’s markets, various U.S. and foreign air carriers — including
American — have established marketing relationships with other airlines
and rail companies. American currently has marketing relationships with Air
Berlin, Air Pacific, Air Tahiti Nui, Alaska Airlines, British Airways, Cape
Air, Cathay Pacific, China Eastern Airlines, Dragonair, Deutsche Bahn German
Rail, EL AL, Etihad Airways, EVA Air, Finnair, GOL, Gulf Air, Hawaiian Airlines,
Iberia, Japan Airlines (JAL), Jet Airways, JetStar Airways, LAN (includes LAN
Airlines, LAN Argentina, LAN Ecuador and LAN Peru), Malév Hungarian Airlines,
Niki Airlines, Qantas Airways, Royal Jordanian, S7 Airlines, and Vietnam Airlines.
