American Airlines 1998 Annual Report Download - page 4

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am pleased to report that 1998 was a very good
year for AMR Corporation. From a financial
perspective, the company’s net earnings of $1.3
billion were by far its best ever, a result which
reflects the commitment of every member of the AMR
family to our customers and to our shareholders.
Our record financial performance was also a func-
tion, in part, of a very favorable economic environment
enjoyed by AMR’s largest business, American Airlines.
The continued health of the U.S. economy resulted in
strong demand for air travel, in turn enabling American
and most other carriers to fill their aircraft without
dramatic fare discounting. Full aircraft and stable ticket
prices led to a very good year on the revenue side of
the ledger, while lower fuel prices helped offset cost
increases in other areas.
The improved economic fundamentals of the
airline industry have given us greater confidence
in the future success of our largest business, and that
confidence is reflected in a new strategic plan we
launched in 1998.
Long-time observers of our company are
likely familiar with the Transition Plan — the AMR
strategy launched in the early 1990s, while the airline
industry was in the midst of a depression. The Transition
Plan had three main tenets. The first tenet was to
strengthen our airline businesses — American Airlines
and our regional affiliate American Eagle — wherever we
could do so profitably. The second part of the plan was
to withdraw from airline markets where our financial
performance was unsatisfactory and where we did not
believe we could compete effectively. And the third
tenet was to invest in and grow our profitable
non-airline businesses.
The Transition Plan had some very positive results.
By focusing on our areas of strength, AMR was able to
survive some very difficult years and become profitable
again. Another very important result was that during
this period, we developed a stable of successful non-
airline businesses.
While the Transition Plan served AMR well, by
1998, the time had come for a new strategic plan. The
plan we have put in place has four key objectives.
The first objective is to invest in and grow
2
LETTER FROM THE CHAIRMAN
I
To our Stockholders, Customers and Employees: