American Airlines Essay

1556 words - 7 pages

American Airlines - The economic aspects

Introduction
American Airlines exhibits all of the characteristics of a firm in airlines industry where good tactical management is the key to success. This company and its regional airline partner American eagle serve almost 250 cities around the world and operate more than 3600 daily flights. Its goal is to provide safe, dependable and friendly air transportation along with related services. It is one of the airlines that have played an important part in the history of air transportation in the United States. The company has 69 years of History in the industry. As per American Airlines website, Starting as a mail company called ...view middle of the document...

 The Merger with US Airways that was once seen as US Airways was about to takeover American Airlines.
As for the threat of new entrant there is a very little threat exists for the current market in the airline industry. JetBlue one of the newest and most successful competitors has survived and thrived in an industry with high initial capital costs and many legal requirements. JetBlue has differentiated itself and started taking up the slack of the major players by providing better customer service and lower fare tickets. Like JetBlue Southwest Airlines had a rough time getting into the market. New entrants have to be different and count on that niche in service or price to be able to gain competitive advantage.
The threat of substitute service availability is enormous. With the popularity of the internet since 1990s, many smaller airlines have taken advantage and been able to undercut the larger airlines in pricing strategies as advertising and providing online ticketing and check-in capabilities are helping them cut cost. Getting to one place from another at the lowest price appeals to most consumers and this makes the threat of substitutes a key factor to be dealt.
American Airlines (American) made four fundamental changes to its rates. First, it moved to a four-tier rate structure; American offered first-class rates and three tiers of coach: full-fare, 21-day advance purchase and 7-day advance purchase. Overall, it expected to reduce coach fares by 38% and first-class fares by 20% to 50%. Though full fare coach prices dropped by about 38%, advance-purchase fares dropped by 6% when compared to the advance purchase tickets already being offered. Through this fare structure, American also eliminated deep discount tickets. Second, American eliminated the negotiated discount contracts of many large companies. Though it intended to fulfill any outstanding contracts, it did not intend to renew any of these contracts. Third, American realigned its pricing with its costs. Under the new structure, American fares were more distance based (therefore cost-based) than they had been in the past. Finally, American changed its non-refundable policy. Advance purchase tickets could now be rescheduled for a $25 processing fee. 
Justification
Major challenges are faced by the larger carriers including high debt loads and pension funding deficiencies. American's purchase of TWA couldn't have come at a worse time. American and other large carriers are famous for their high amount of unfunded pension liability accounts. Cullen, Yamazaki, and Chew (2010) defines “In 2009, AMR recorded a net loss of $1.47 billion, compared with a 2008 net loss of $2.1 billion.9 This past year’s loss was driven by a decrease in air travel as a result of the economic downturn, leading to significant reduction in passenger revenue. Industry-wide fare discounting exacerbated such declines, further American Airlines diminishing American’s passenger revenue...

Other Papers Like American Airlines

Southwest Airlines Essay

2899 words - 12 pages been forced to close down. In fact, Southwest Airlines was the only major US air carrier to | |remain profitable since then; albeit Southwest Airlines were affected by the poor economic conditions. Few of their main | |competitors are Continental Airlines and American Airlines. Substitute products include the train (Amtrak) and bus (Greyhound) | |which cover long distances. While these alternates cannot offer the speed of travel

Delta Airlines Essay

3483 words - 14 pages $10 billion in loans. However, despite this influx of government money, carriers such as US Airways, United, and American Airlines laid off over 80,000 employees, and the industry as a whole reported an operating loss of more than $10 billion dollars in 2001 with even larger losses in 2002. Out of all the carriers in the market, during this time the only carriers that generated profits were the low cost carriers Southwest, JetBlue and AirTran

Porter Airlines

1177 words - 5 pages Porter Airlines Case Brief Embry-Riddle Aeronautical University Background Porter Airlines is another unlikely success story in the fierce and cutthroat regional airline industry. Founded in 2002 by Robert Deluce, a regional airline veteran, Porter Airlines wanted to take advantage of a small but crucial market in the Toronto area and grow from that beginning. The Toronto area is considered Canada’s financial hub and thus created a

Delta Airlines

1578 words - 7 pages Delta Airlines and the Trainer Refinery American Public University Strategic Management 05 July 2015 By Jon Kaercher Abstract The airline industry is a highly competitive service industry that operates on thin profit margins the airlines have to be flexible and adjust quickly to changes in customer’s preferences, increased fuel costs, and changes in the economy that can have a direct impact on profitability. The airlines look for

Southwest Airlines

741 words - 3 pages Introduction:Southwest Airlines Corporation was incorporated in Texas in 1971 with only three Boeing 737 aircraft's and gradually expanded to 417 Boeing 737 jets that drive the company to success. Southwest provides services to 60 airports in 31 states throughout the United States competing with airlines such as United, American, Delta and JetBlue. Southwest Airlines prides themselves as the nation's low-fare and high customer satisfaction

Classic Airlines

2322 words - 10 pages merger is not feasible at this time but an alliance would definitely be beneficial. The strategic alliance suggested by Josef Wymann between CA, Sky Way Airlines, and a top Latin American airline will help to meet the goal of growing Classic Rewards membership as well as allow CA to better serve its global operations. The alliance would open up more destinations for Classic Rewards members by allowing them to travel to any destination serviced

Airlines Affected

2079 words - 9 pages Page PAGE \* MERGEFORMAT 1 Page PAGE \* MERGEFORMAT 3 Airlines AffectedWritten by Mandie BodenUniversity of PhoenixAirlines AffectedThe United States airline companies are enigmas, they are a giant industry that has billions of dollars in equipment and gross revenue, they employ thousands of people, but the airline companies can be toppled by the equivelant of a feather when the economy takes a turn for the worse. The United States Airline

Delta Airlines

1466 words - 6 pages acquisition of Northwest, some recent M&A’s include Southwest with AirTran, United with Continental, and more recently, US Airways with American Airlines. Each M&A has a direct impact on Delta, as a merge completely changes the industry in terms of competition, pricing, and service offerings. 4. References Carey, S., & Prada, P. (n.d.). Economy takes toll on premium airline passengers; carriers say that many business customers, who

Delta Airlines - 5864 words

5864 words - 24 pages Contact Center CO PY Delta already had a number of reservations centers in Latin America. The company had acquired its Mexico office in 1987, after it took over Western Airlines’ Mexico operations in a merger. This had been Delta’s only office for reservations and sales in Latin America until 1998, when the company began to open reservation centers in other Latin American countries. In 1998, Delta began a rapid expansion in Latin

Classic Airlines Week 1

702 words - 3 pages boost additional revenue is a marketing concept called strategic alliance. Strategic alliance allows a company to form an alliance with domestic or multinational companies that complement or leverage their capabilities and resources to obtain greater sales impact at less cost (Kotler and Keller, p. 57,  2006). In the case of Classic Airlines, it would be in their best interest to form an alliance with the top Latin American airline as Kevin

Classic Airlines Marketing Solution

2362 words - 10 pages step four. We must consider alternatives to the solutions that we have decided on. Classic Airlines may consider merging with a competitor airline. If done successfully, mergers can reduce costs, increase revenue, and increase airline efficiency (Airline Merger, 2008). They may consider connecting with new program partners, like American Express, or various retailers. In step 5, we must evaluate the alternatives. A merger will provide access

Related Essays

American Airlines Essay

1028 words - 5 pages | AA | [Marketing in downturn] | American Airlines American Airlines (AA) is a major U.S. airline and a subsidiary of AMR Corporation. Founded in 1930, AA flies throughout North and South America, the Caribbean, Europe, and Asia/Pacific with 260 destinations in total. AA has a fleet size of 605 planes. The revenue of 2010 was US$ 22.17 billion and this shows that AA is still one of the biggest airline companies

American Airlines Revenue Management Response To Eastern

569 words - 3 pages Airlines, and it’s main competitors, Eastern and TWA. This will allow him to make the correct downstream calculations such as changes in revenue, profits/losses, and capacity along the New York-San Juan route. A breakdown of the busiest times/routes (for all airlines, but especially American) would be useful to determine which flights need to be targeted, if any, with a response. Most of the other information Doug should collect relates to the

Jetblue Airways Corporation Vs American Airlines Group Inc

1754 words - 8 pages JetBlue Airways Corporation vs American Airlines Group Inc. JetBlue Airways Corporation vs American Airlines Group Inc. JetBlue Airways Corporation JetBlue Airways is an airline American of low cost belonging to the JetBlue Airways Corporation. The company is headquartered in Forest Hills, near the district of Queens in the city of New York. Its main base is located at the John F. Kennedy International Airport .In 2001 , JetBlue began

Southwest Airlines Essay

1639 words - 7 pages . (See Exhibit 1 for financial information used to make our decision.)Question (3)If we were CEOs of American Airlines in order to compete with Southwest Airlines, we would study the success of Southwest Airlines and evaluate what areas could be incorporated into our business. Evaluating customer service would be a definite priority. Making sure that customers are satisfied with the service of American Airlines and finding ways to improve service