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Load Factors, Stock Price, and Safety Records - a Profile of American Airlines as It Approached Bankruptcy

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  • September 1, 2014
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Stock Price, Load Factor and Safety Records:

A Case Study of American Airlines Approaching Bankruptcy

Graduate Capstone Proposal

Submitted to the Worldwide Campus

In Partial Fulfillment of the Requirements of the Degree of

Master of Aeronautical Science

Abstract

American Airlines is one of the largest and most successful airlines in American history. But, its plunge into bankruptcy in 2011 was a dreaded and fearful outcome for stakeholders. Safety provision theory holds that market conditions impact safety protocols in the airline industry. Healthy financial profiles will be reflected in greater safety records, and market failure will result in increasing accidents. This study seeks to gather secondary data representing load factors, stock prices, and accident/incident data as a test of safety provision theory. A secondary hypothesis is that stock price should improve after the bankruptcy according to process theory because the proper function of bankruptcy is to restore value for stakeholders. This study as a test of safety provision theory will describe the way a major airline grappled with issues of safety, profitability, and public perception while it simultaneously grappled with the realities of immanent bankruptcy. It is this philosophy that is at the heart of the AA corporate strategy and the hypotheses tested in this project will suggest how continual concerns with being competitive in the industry, as well as continued trouble remaining financially healthy, played a role in the safety provisions at AA as it approached bankruptcy. Keywords: American Airlines, safety, safety provision theory, bankruptcy, process theory

Load Factors, Stock Price, and Safety Records:

A Profile of American Airlines as it Approached Bankruptcy

Objective
The case of American Airlines (AA) provides an opportunity to consider how load factors, stock price, and safety records were related to each...