American Airlines and the airline industry

American Airlines

The airline industry in the United States of America is a developed one and there is the possibility of further development. American Airlines is the biggest air carrier in the U.S. And has numerous strategic advantages, such as the capacity to take millions of people to five continents on a very well organized schedule, proving them with all the desired comfort using safe planes and a well organized route network. The company must nevertheless face the competition represented amongst others, by Delta Airlines and Northwest Airlines. The major competitive advantages of these companies is represented by their capacity to take people to continents where American does not fly, such as Africa, their efficacious organization and their fare policies. Considering this facts, it could be stated that American could improve its strategy in order to use its resources better and make sure that it will maintain its position of market leader, regardless of the evolution of its competitors.

II. Analysis of the industry

The airline industry in the United States of America can be considered attractive from an economical point-of-view, taking into consideration the contemporary tendencies recorded by travelling and businesses. The evolution of the industry has not been a linear one. The events from September 11, 2001 have affected the market, leading a huge number of people to loose confidence in the security provided by this specific means of transportation. The direct consequence of the terrorist attack upon the American airlines was a considerable loss of profit.

Nevertheless, the situation started to change, once people began to forget about the 9/11 incident. It was not only a change in the public attitude towards flying that brought about the boost of the airline industry in the U.S.A. What also made a difference was the appearance of Current and projected trends of the so called "low fare" companies. The low fare companies offered more or less the same services (the same routes, but smaller baggage quantity allowed, etc.) for prices which were far smaller.

Even if the regular companies offered discounts for tickets acquired in advance, the low cost companies sold their tickets at any time for prices which still smaller than the special offers one could get from a regular company. The success of the this type of companies reflected upon travelling, in the sense that people began to travel by plane more frequently whether they were going on vacation or on business trips. The increase of the demand was followed by the increase of the supply. In other words, the airline market in the United States recorded a development worth mentioning.

One of the consequences of the development of the low -cost flights industry was that the companies providing services for bigger prices were starting to record losses. Concerned with the possibility of a further development of the low-fare industry and the risk of witnessing the diminishment of their profits continue, companies found the best solution to be the creation of an additional flight line, a low-cost one, under their name and management. A successful market thus, offers businesses the opportunity to record important earnings, rendering it attractive for investors.

The demand trends for airline services are most likely to develop, taking into consideration the trends of development recorded by tourism, as well as by the increasing popularity of the airline as a cheap and fast means of transportation. The fact that there is no governmental regulation regarding the setting of domestic fares is another element which renders the industry attractive from an economical point-of-view.

The factors that could have a negative impact upon the industry of airlines in the U.S. are represented by the extra costs. Extra costs (insurance costs, the federal ticket tax, further security measures, the rise of energy costs, etc.) would be reflected upon fares, possibly leading to the diminishment of the demand, and therefore, of the profits. Another issue might be represented by the trend of downsizing, which might affect the efficacious functioning of the companies through the pressure caused by the desire to cut costs and the commitment to the staff.

Analysis of competitors

Any profitable market is characterized by the presence of competitors. Such is the case with the airline industry in the U.S.A. There are however, various types of competition that American Airlines must handle. On the one hand, there is the competition in the area of domestic transportation. Any air carrier has the possibility to provide domestic transportation services, and most of the existing companies are offering hub-and- spoke systems. The greater competition is to be found between cities that need a connection point.

On the other hand, considering that American Airlines also operates on the routes to Europe, Asia, Canada, Latin America and the Caribbean, the international air transportation area represents a source of competitors as well (companies owned by other states). The main issue of competition is represented by price (low cost carriers influence the customers' price sensitivity).

Two of the main competitors that American Airlines has are represented by Delta Airlines and Northwest Airlines. Delta is the third largest carrier in the United States of America, while Northwest is the forth one. The main competitive advantage that both the mentioned companies have is represented by the low costs that they offer for their services.

Delta Airlines

Delta airlines is a network operating in the area of domestic and international flights. Its flights reach fifty two countries located on five continents. It provides high volume flights.. The brand has three "divisions": the main one, the one which operates short-haul (Delta shuttle) and Delta Connection.

The main competitive advantage that the company has is represented by the network of routes which it includes. The network is the biggest one in the world. A further competitive advantage derives from the fact that Delta Airlines is the only American carrier which flies to Africa.

Taking into consideration the latest tendencies recorded by tourism, which imply a high attraction for the exotic places, it could be stated that the flights to the African continent represent an important opportunity for Delta as a source of extra revenues. Not only does Delta have the biggest route network from all the existing airlines, but it is also the owner of the biggest and busiest hub in the world. The hub is situated in Atlanta. The management strategies that the company has been applying have allowed it to become the leader carrier taking passengers on the route to Florida, as well as over the Atlantic ocean.

One of the key capabilities of the Delta Airlines company which transforms it into an important competitor for American Airlines is represented by the manner in which it has managed to organize its route network. From this point-of-view, it can me underlined that the company uses one of its "divisions," Delta Connection in order to take passengers from small airports where the bigger planes could have difficulty having access to and takes them to the actual hubs. This actually allows the company to cover more than three hundred eleven destinations.

Northwest Airlines

Northwest Airlines is the fourth biggest American carrier.Among the key capabilities of the company, one can mention the fact that Northwest is the biggest American carrier of domestic cargo. In addition, it seems to be the airline which takes most passengers over the Pacific ocean.

The competitive advantages that the company benefits from derive from its overall functioning strategy. Here we could mention the involvement in community issues. The company gets actively involved in the solving of social problems in the communities where its staff members and clients come from. In this manner, Northway manages to underline the importance that it gives to its social corporate responsibility. Programs such as AirCare partners, or Kidcares are worth mentioning. The latter one refers to aiding the children who need to travel for medical reasons. From the point-of-view of the involvement into social issues and their solving, it can be said that Northwest represents a strong competition for American Airlines. Other competitive advantages derive from its capacity of transporting people to more than nine hundred locations and the policy regarding the quality of the offered services and the members of the personnel.

Firm Analysis

Current competitive position

American Airlines is currently one of the two biggest carriers in the United States of America. It is also the largest scheduled passenger airline in the entire world. It also provides freight carrying, being one of the largest providers of this type in the world. It has been rewarded as the best Northamerican company by the Business Traveller magazine..

The company managed to expand horizontally when it merged with Trans World Airlines, taking over the route destinations of the latter company. The gain was not just one in terms in clients and destinations, but it also allowed American to move some of its flight locations to less crowded airports. The consequence of this action was obvious on the organization of the flights timetable, which became better and thus, attracted ore customers.

Key resources, Key capabilities, Sources of competitive advantage

American Airlines wishes to provide services which meet the highest quality standards. In order to reach and maintain this business standards, the company has created a set of basic rules for itself, regarding the respect for the customer and the ethic principles.

One of the sources of competitive advantage that the company benefits from is represented by its Human Resources policy. The importance of the relation that the company has with the members of its staff is worth underlining. One third of the American Airlines expenses go to wages and benefits. The proper motivation of the employees makes the company function in an efficacious manner. The god relations that American Airlines has are not just with the employees themselves. The company has reached agreements with three major labour unions, obtaining mutual advantages in terms of costs and payments.

Another source of competitive advantage for American Airlines is represented by the strategies which it uses in order to obtain and maintain the loyalty of its passengers. From this point-of-view, an important program that can be mentioned is represented by the AAdvantage frequent flyer program. People who are members of the program accumulate mileage credits. They do so by flying with the airplanes of American and/or by using the services offered by the other participants to the program, such as hotels, car renters, etc. The mileage credits can be transformed into travelling awards. In this way, the company tries to stimulate the continuous use of the service by its actual clients and at the same time to stimulate the acquisition of its services by potential customers.

American Airlines differs from its competitors through its proactive management strategy. In this regard, it can be stated that the company is using various strategies that could attract any potential client who wants to fly from and to the United States of America. Besides the program mentioned above, which is designed to obtain the loyalty of the American passengers, the company made sure that people were aware of its concern for any potential hazards.

The events from September 11, 2001 changed the way in which the American public opinion thought about flying and planes. A higher degree of risk was associated with planes, people were afraid of further terrorist attacks. Even if meanwhile the panic has disappeared, it is still important to prove that in case something should happen, the company is already well organized and ready to respond to the emergency situation, no matter if it has been caused by a terrorist act or by a calamity, etc.

The program to be mentioned in this regard is called CARE (Customer Assistance Relief Effort) and it consists in a number of more than one thousand volunteers speaking more than fifty languages who are ready to provide assistance to the people and the relatives of the people who may have been involved in an accident.

Taking into consideration the contemporary tendencies underwent by the patters of acquisition behaviour, it is important to mention that one of the key resources that American Airlines uses is represented by the Internet. There are various advantages that derive from the use of the web. First of all, the very well organized web site that the company has is a means of self-promotion. The link to the web site can be found on other web sites, belonging to companies which collaborate with AA, such as hotels, companies renting cars, tour operators, etc.

Secondly, the site responds to one of the most important needs of the potential customer, the one of being able to purchase a ticket online, comparing the prices. There is a numerous target audience that uses the internet as the main medium for acquisition and the company is doing a good job responding to this specific need that they have.

Not only does the company obtain a higher rate of ticket acquisitions by using the internet as the medium, but it also manages to record time and money savings for booking and ticket emission and reservation. Although it may not seem an important thing, from a long-term perspective, the strategy proves to be rather efficient.

Speaking about competitive advantages, it must be added that the company has been careful to create an image of itself as an organization with respect for its clients (through the quality of the offered services and the numerous services themselves), its staff members, for the environment and for all the people who may be in need of help.

In this regard, it is worth mentioning that American Airlines has been collaborating with the United Nations' Children's Fund, through an initiative called "Change for good." The program is one of the most famous ones run by UNICEF. Over the years, it has proved to be one of the most efficient programs of fund raising from all over the world. The concept according to which the program functions has the people travelling to international locations donating the unused currency or the U.S. dollars for the children in need.

Recommendations

American Airlines is one of the top American companies in the field of flying. It has the biggest market share and benefits from highly important strategic advantages, such as the ownership of the biggest and busiest hubs, the one situated in Atlanta. The company is not however free from problems or safe from potential risks.

One of the risks that American is facing is represented by the development of one of its rivals. The third biggest airline company in the United States of America, Delta Airlines, is extremely well organized and benefiting from important competitive advantages. The circumstances might help it acquire more clients, clients that would come from the present customers that American has. This would allow it not only to record an increase of profits, but it would also support the growth of its market share.