American Airlines

Definition: A large U.S. air carrier of passengers and cargo based in Dallas-Fort Worth, Texas.
Significance: American Airlines is considered to be the largest airline in the world based on total revenue generated in a given year.

Early Years

It is not surprising that an airline with a history going back to the airmail days of Charles A. Lindbergh would become the largest airline in the world. The ride has not always been a smooth one. Like the industry itself, American Airlines has had its ups and downs. Along the way, American Airlines and the people who ran it have helped to change the face of aviation, introducing many of the ideas and innovations that have shaped the way the airline industry does business.
On April 15, 1926, Charles A. Lindbergh, chief pilot for the Robertson Aircraft Corporation of Missouri, flew an airplane containing a bag of mail from Chicago, Illinois, to St. Louis, Missouri. Later that day, he and two other pilots flew three aircraft full of mail from St. Louis back to Chicago. Robertson Aircraft Corporation became the second company to receive a contract to fly U.S. mail and was one of nearly eighty companies that were eventually consolidated to form American Airlines. Lindbergh went on to make aviation history in May, 1927, with the first solo flight across the Atlantic.
In 1929, the Aviation Corporation was formed to begin acquiring newly developing aviation companies in the United States, including Robertson Aircraft Corporation. The airline subsidiary of the Aviation Corporation was called American Airways. The name was changed in 1934 to American Airlines, and Cyrus Rowlett Smith, more commonly known as C. R. Smith, was named president of the company. Smith was largely responsible for molding the dozens of small, poorly financed airlines purchased by the Aviation Corporation into a dominant U.S. carrier. He also became one of the leaders of the aviation industry itself and helped to develop executives who would later manage many other U.S. airlines.
Smith continued as the chief executive of American Airlines until 1968, when he was named secretary of commerce by President Lyndon B. Johnson. Under Smith’s leadership, in 1932 American Airlines became the first airline to introduce a coupon program targeted at business travelers. The coupon topics were sold to businesses and could be redeemed for discounted ticket purchase. In 1936, American became the first airline to fly the new DouglasDC-3. The introduction of “Admirals Clubs” VIP lounges in airports was another American first, aimed at attracting the frequent-traveling business passenger. By 1940, American Airlines had become the leading domestic air carrier in terms of revenue passenger miles.
Like many of the other large U.S. carriers, American Airlines helped the war effort during World War II by using its fleet to transport men and supplies for the Air Transport Command. Nearly half of American’s fleet was eventually placed into action, along with their crews. C. R. Smith also left the airline temporarily to serve during the war. However, the company did not neglect its domestic operation. In 1942, the company established Sky Chefs, an airline catering subsidiary that remains one of the largest airline caterers in the world. It also introduced the first scheduled cargo services in 1944.
After the war, American established another first in 1949 by becoming the only airline in the United States with an entire fleet of pressurized passenger aircraft. These aircraft allowed American Airlines pilots to fly at higher altitudes, improving gas mileage and avoiding inclement weather. In 1952, American introduced the Magnetronic Reservisor to keep track of seats available on its flights. Before introducing the Reservisor, the airline had kept track of available seats through a large display board posted in each reservation office. As passenger volume expanded, this system was simply unable to keep up with demand. The Reservisor used a matrix of relays in which shorting plugs could be manually inserted to indicate a sellout. Agents worked at electrical keypads into which they keyed their requests for seating. If a light began blinking, the request was accepted. This system, designed by Tele register Corporation, marked the first time any airline had attempted to use an electronic device to handle reservations. The Reservisor was replaced in 1960 by a new electronic system called the Semi-Automated Business Research Environment (SABRE). The SABRE system was developed in conjunction with IBM and ran off two IBM mainframe computers. The system, which cost almost $40 million, was capable of processing 84,000 telephone calls per day. By 1964, the SABRE network extended from coast to coast. Meanwhile, American Airlines introduced the first nonstop, transcontinental service in 1957 and became the first U.S. airline to fly the Lockheed Electra, a U.S.-designed turboprop aircraft, and the Convair 990, a fanjet-powered airplane.


End of an Era

With the retirement of C. R. Smith, George Spater assumed the leadership of American Airlines. Spater, a lawyer and the former general counsel of American Airlines, did not prove to be equal to the challenge of running the airline. The years between 1968 and 1973, when Spater was replaced, are considered one of the low points in American’s history. The airline’s profits began declining in 1968 and it posted a loss of$48 million in 1973, one of its worst years ever. Part of the problem was that American began receiving the first of its newly ordered Boeing 747′s, the largest passenger plane built, at a time when air traffic volume began a sharp decline. For the airline industry as a whole, there were too many seats and not enough passengers. Although the Boeing 747 was ideal for long-haul international flights, it did not suit the shorter domestic routes of American. A second major problem was the oil crisis of the early 1970′s, which sent jet fuel prices soaring. To add to American’s troubles, several of its executives were charged with taking kickbacks from American suppliers. A final blow came when Spater himself resigned in 1973 after admitting that he had authorized an illegal contribution to the 1972 Committee to Re-Elect the President, Richard M. Nixon.
In February, 1974, Albert V. Casey, a former executive of the Times Mirror Company, was elected president and chief executive officer after receiving the endorsement of C. R. Smith, who had temporarily agreed to run the airline after Spater’s resignation. Although Casey had no airline experience, he proved to be an excellent judge of managerial talent and a man willing to make hard choices. Casey went on to sell all of American’s Boeing 747′s and the Americana chain of hotels owned by the company. These actions, combined with the flight schedule reduction precipitated by the Arab oil embargo of1973 and the fare increases authorized by the Civil Aeronautics Board, allowed American to post a $20.4 million profit in Casey’s first year. However, to keep American profitable, Casey needed a long-term strategic vision for the company. One of the people who helped him shape that vision was Robert L. Crandall. Bob Crandall had left Trans World Airlines (TWA) after being passed over for the job of chief financial officer. Crandall had initially worked in American’s finance department but was transferred to marketing, where he moved quickly to revive the SABRE system, which had suffered from underinvestment during the Spater years. American began marketing the SABRE system to travel agents in 1975. By 1976, the system had been installed in 130 locations, including most of the top travel agencies. In 1977, American became the first airline to offer a restricted discount fare, the Super Saver.
Following the deregulation of the airline industry in 1978, American Airlines began a major expansion of its route structure throughout the United States and the Caribbean. It began to retire its older, less fuel-efficient aircraft. The company headquarters were moved to Dallas-Fort Worth, which became one of American’s hubs in 1981. Meanwhile, in 1980 Robert Crandall was elected president and chief operating officer of the company. Crandall then became the chairman and chief executive officer in 1984 on the retirement of Al Casey.

Events in American Airlines History

1930: The Aviation Corporation, a holding company acquiring small aviation companies, is incorporated into American Airways.
1934: American Airways is renamed American Airlines.
1936: American Airlines becomes the first in the nation to fly the Douglas DC-3 for passenger service.
1940: American becomes the first in the nation in revenue passenger miles flown.
1942: Sky Chefs, an American Airlines subsidiary, begins airline catering operations.
1944: American introduces regularly scheduled freight service, the first in the United States.
1949: American becomes the first airline with a fleet consisting entirely of postwar pressurized aircraft.
1959: American becomes the first airline to offer transcontinental jet service, with the Boeing 747.
1960′s: With IBM, American develops the Semi-Automated Business Research Environment (SABRE), a real-time data processing system that allows agents to track flight reservations.
1974: American introduces one-stop automated check-in service.
1977: American introduces its popular Super Saver fare on routes from New York and California.
1979: The airline moves its headquarters from New York City to Dallas/ Fort Worth, Texas.
1981: American introduces its revolutionary Advantage frequent-flyer award program and establishes its first hub at Dallas/F ort Worth, strengthening its hub-and-spoke network throughout the 1980′s.
1984: American introduces its regional American Eagle network and retires its freight fleet.
1994: American institutes nonsmoking transatlantic service.
1999: American joins the one world Alliance, a global network of airlines, to greatly expand customer service.
2001: American acquires TWA.
2001: On September 11, in one of the worst acts of terrorism in world history, two American Airlines jetliners are hijacked; one is flown into the World Trade Center in New York City and one into the Pentagon in Washington, D.C. Thousands are killed. On November 12, in an unrelated incident, yet another American Airlines jet crashes, within moments of takeoff from New York’s JFK Airport.


The Crandall Years

Under Crandall, a new structure was created for the airline. A holding company, AMR Corporation, was created in 1982 and became the parent of American Airlines. A second subsidiary, AMR Services, was formed in 1983 to provide aviation services to other airlines. The AMR Consulting Group was created in 1992. This group was joined in 1993 by the SABRE Technology Group, which become its own separate company in 2000.
Crandall and American were busy on other fronts as well, creating the American Eagle network and a host of new fares, including the Ultimate Super Saver and the Senior Saavers Club. The American Eagle network of regional carriers linked small-to-medium-sized cities with the American network, while the new fares appealed to an ever-wider customer base. The American Airlines network of routes was also increasing. By 1994, American Airlines had more flights to London than any other U.S. carrier. Unfortunately, this fact worked against the airline when it announced its plan to form an alliance with British Airways. Crandall, who had once opposed alliances, had decided to bow to the inevitable. If other carriers were going to form alliances, then American would as well. In fact, American would do it better. In 1994, American Airlines reported having eight alliances in Airline Business magazine’s first yearly alliance survey. Five years later, this number had grown to twenty-eight alliances. American sought antitrust immunity in the United States, which would have allowed American and British Airways to cooperate more closely, particularly in the area of harmonizing price. The fact that the two carriers would control the majority of the transatlantic traffic and the landing slots at London Heathrow caused both the U.S. government and the European Commission to reject the immunity. The carriers have continued in a more limited alliance, called one world Alliance, which also includes Japan Airlines and Cathay Pacific.
When Crandall retired in 1998, he left his successor, Donald J. Carty, a much stronger company that he himself had inherited. Carty had joined the company in 1978 to help resolve financial problems with the Americana hotels. After taking over, Carty expanded the American network through two acquisitions. The first occurred in 1998, when Reno Air, aregional carrier based in Reno, Nevada, was added to the American family. Reno Air brought to American an excellent network in the western states, particularly California. It also brought a brief strike from American Airlines pilots concerned with the pay differences between Reno Air and American pilots, as well as the merging of pilot seniority lists. In 2001, American purchased TWA’s assets, which included TWA’s 180 jets, its St. Louis hub, and its twenty thousand employees.
By 2001, the airline that began as a collection of small, underfunded air carriers in the 1930′s was serving over fifty countries with more than 4,100 flights per day. The SABRE system it created had gone on to become a very successful company in its own right, breaking new ground when it introduced Travelocity.com, the first World Wide Web site to offer travel reservations over the Internet. The airline was tested, however, by the terrorist attacks of September 11,2001, in which two of the hijacked planes were from American’s fleet. Like all airlines, American was hurt financially but helped by the emergency aid package signed by President George W. Bush that month.

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