Business
2016-06-02
Company Overview
The company for this study is American Airlines (AA). It is an American company and nowadays it is in the first place by the total number of passenger-kilometers in the world. The history of this company has started in 1926. The huge growth was characteristic for the company in 1980-1990s. Today the company American Airlines has 964 aircrafts in its fleet. The company offer flights on four continents. At the same time, the majority of flights are in the US. There are at least five hubs in the US, which are used by the company for regional flights as well as for international ones (American Airlines. About Us., 2016).
The company has entered the Asian market in 2000s. Flights to Russia (Moscow) have been introduced in 2008. It should be noted that American Airlines can be considered as a generator of innovation in the airline industry. For example, the company has started to provide Internet-service (WI-FI) during flights. American Airlines conducts regular marketing activities and has a quite effective bonus program for passengers. It is called “AAdvantage” (Official Site of American Airlines, 2016). It is the first program of such type and continues to be the biggest one in the whole world.
External Environment
The external environment of the company American Airlines includes the following elements: customers, government, economy and competitors. It should be noted that airline industry is quite susceptible to different changes. Competition level constantly increases in the airline industry. The main competitors of the chosen company are the following: UAL Corp, Delta Air Lines, US Airways (until 2011) and United Continental). The profit of the company AA has decreased since 2007 in comparison with its main competitors. Problems with employees and inability to pay high salaries have got the company into a dead end. It should be noted that American Airlines has introduced about its bankruptcy in 2011 (HuffPost Business, 2013). As a solution to this situation, the merger of American Airlines with US Airways has been conducted in 2013.
The company AA focuses on the customers with high and more than average incomes. The first and business classes provide the company the huge part of its revenues (Official Site of American Airlines, 2016). The company AA seeks to satisfy passengers’ needs in Internet – service, improve the seats on the board, and offer additional products and services during the flight.
According to the experts’ opinion, the airline industry will characterize by the following trends:
social place of the company (in the social networks) will play a crucial role in the future;
offline channel of customers will remain as important as online channel;
analytic tools will be the main in the airline industry and will play the role of “altimeter” in the industry;
regulatory and standardization route will be one among priorities of the airline companies.
In this case, one can suppose that the company American Airlines will face crucial changes in the future. That’s why; its current strategy may be not the most suitable for further development and growth of the company.
Thus, the main question, which stays before senior management of the company, is how the company could adapt its strategy to new trends in the market and benefit from them.
Current Strategies and Objectives
Let’s analyze current strategy and main objectives of the company American Airlines in order to analyze possible gaps between company’s strategy and future market trends.
The main objectives of the company are the following:
Based on the objectives, the strategy of the company aims to increase revenues and profit of the company through the impeccable quality of provided services. The company has more than twenty strategic analysts among employees. Diversity Leadership Strategy is current for the company. There are four main principles in the current strategy of the company:
The present strategy and the place of the company on the market in five years
The present strategy of the company shows quite good results, given the recent financial results of the company. At the same time, the modern market is very susceptible to any changes. That’s why; there is no a single strategy that would ensure the growth of the company in any conditions. It needs to revise the company’s strategy at least two times per year in order to make sure that the company is on the right way.
If the company does not change its present strategy, it could lose its current position in the market in five years. There are several reasons for it. Firstly, the flights become cheaper from year to year and more people fly each year. In this case, the low cost airline companies (for example, JetBlue, Frontier Airlines, Allegiant Air, Spirit Airlines and others) can strengthen their positions on the market. Secondly, more and more people are interested to fly on so-called bare fares. It provides customers more opportunities to choose the most suitable tickets. Thus, the company’s strategy must be based on the relative indicators and comparisons of the company’s current offer to its competitors.
Recommended Strategy
If I were CEO, I would recommend the company to change its current strategy in accordance with the future market trends. It should be noted that competition level in the airline industry grows from year to year. Thus, it can say that search for new customers will become more and more difficult every passing year. In this case, the company American Airlines should change its current strategy in the following way:
almost all marketing activities should be transferred to the Internet. It can help to find more new clients. At the same time, it does not forget the offline customers.
employees with their families are also the potential clients of the American Airlines. In this case, it is possible to promote employees through regular discounts and bonuses for flights;
the further development of the company can be connected with the ticket price cuts together with the increase in the number of customers;
Strategies of the Main Competitors
The main current competitors of the company American Airlines are the following: UAL Corp, Delta Air Lines and United Continental. All of them focus on the US airline market more than on others. Their strategies also include active usage of social network and online services in order to attract new clients, support loyal clients and investigate their preferences and needs. At the same time, the strategy of the company Delta Air Lines focuses on the variety of the tickets proposal. Mostly of them are regional flights within the territory of the US (WNS Perspective, 2016).
The most effective strategy is characterized for the company United Continental. This company has the most comprehensive route network in the world. It achieves such result due to the diversity principle in supplier partnership, in executive council. This company operates on five continents and carries more than 140 million passengers per year. The main principles of the company: a huge fleet, new equipment and facilities on board of aircrafts; fair prices (Official Site of the United Continental, 2016). The company American Airlines can combat above mentioned strategies through the decline in profitability level or reduction the wage fund in order to save its position on the market and does not to lose the competitive advantage of the company on the market.
In my opinion, the most viable airline companies must characterize by the following features:
the airline company differs by the highest productivity and a high level of operational efficiency;
the airline company has a close contact with customers and get more information about their needs through the provision of services with higher added value.
References
American Airlines. About Us. (2016). American Airlines Group. About us. American Airlines. Aa.com. Retrieved 2 June 2016, from https://www.aa.com/i18n/aboutUs/corporateInformation/facts/americanairlinesgroup.jsp
HuffPost Business. (2013). U.S. Airways, American Airlines Reach Settlement With Regulators Over Merger. The Huffington Post. Retrieved 2 June 2016, from http://www.huffingtonpost.com/2013/11/12/us-airways-american-merger-justice-department_n_4260845.html
Official Site of American Airlines. (2016). Diversity at American Airlines: American Airlines. Hub.aa.com. Retrieved 2 June 2016, from http://hub.aa.com/en/dv/our-employees
Official Site of American Airlines. (2016). Diversity Leadership Strategy.. Aa.com. Retrieved 2 June 2016, from https://www.aa.com/pubcontent/en_US/aboutUs/diversityInclusion/diversityLeadershipStrategy.jsp
Official Site of the United Continental. (2016). Corporate Fact Sheet. United - Newsroom. Retrieved 2 June 2016, from http://newsroom.united.com/corporate-fact-sheet
WNS Perspective,. (2016). Article: Five Trends for the Global Airlines Industry. Wns.com. Retrieved 2 June 2016, from http://www.wns.com/insights/articles/articledetail/62/5-trends-for-the-global-airline-industry
