American Airlines Essay Example for Free

American Airlines Essay1. Issues 2. American Airlines objectives 3. The airline labor 4. Market 5. Consumer c solely for 6. Brand image 7. Distribution trunk 8. Pricing 9. Marketing related strategies 10. Assumptions and risks1- Issues The of import issue of this case is the lack of profits of the airline industry, an industry that should be more than fat receivable to the large amount of customers, the necessity of using airlines services and the in high spirits prices charged by most of these airlines. What we are going to deal with is, why is this happening? And how is American airlines traffic with this problem?. To be able to discuss how American airlines wants to regain profitability, we must identify and analyse disparate issues such as, the comp alls background, the airline industry as a whole, the demand for air travel, the marketing strategies, the statistical distribution systems, determine policies and so forth2- American Airlines objectives American Airli nes prime objective is to bring back value to air travel, by dint of stimulating trading travel, inflicting prices etcetera So in other words American Airlines main objective is to become as profitable as possible. To understand better the companys objectives we premiere have to concenter on the companys background, this way we will find verboten why the airline is not as profitable as it should, and what kind of a change is needed. American Airlines had been the largest airline in the United States for a commodious time. In 1990 and 1991 due to a recession and the Gulf War, demand for air travel dropped drastic aloney, for this sympathy, fare wars started and all the airlines incurred massive losses.3- The Airline industry and the market The airline industry is large, particular(prenominal)ly in the United States, in the first move due to the Deregulation of the industry. In 1938, the Civil Aeronautics Board was created to control the growth of the air dose industry. This board had the authority to control entry, exit, prices and methods of competition. In the late 1970 this structure was found inefficient and in 1978 deregulating took place. Due to the deregulation of the industry competition intensified, prices dropped, and the number of people travelling increased. Many modern companiesemerged and regional airlines saw deregulation as an opportunity to expand.Due to the rise in competition, by 1986 mergers started to defy place and in 1987 64.8% of the market was controlled by the four largest airlines. The demand for air travel is determined mainly by price, studies revealed that half of the leisure travellers and on quarter of business travellers did not have a preference for a particular airline, which means that prices determined the preference. So the strategy to compete for customers consisted mainly in pricing and leakage schedules. The demand for pips varies depending on the season or the business cycle therefore airlines have to develop different pricing strategies and offers depending on the season or the business cycle period. An other determinant for demand is technology, the impertinent telecommunication possibilities have made air travelling unnecessary in some cases, which of bunk has impact airlines revenues.4- Consumer needs. Consumer needs are clear, what airline consumers need is canonically god prices and good flight schedules. These are the basic needs, apart from these ones we could also point out other needs such as big, comfortable seating room for long flights, good service on board, good food, punctual departures, check-in facilities, movie channels, etc. every(prenominal) these are consumer needs, but studies have shown that demand is mainly determined by price and a flight schedules, the rest just add value to these two, therefore companies must focus on ways to lower prices and provide good flight timetables. There are two types of travellers, business travellers and leisure trave llers, these two of course have different needs, for the first ones price is not so eventful because usually the company pays for it on the other hand punctuality and flight schedules are very important to them. For leisure travellers the most important thing is usually price, and the rest comes after that. But as I said before consumer needs can be summarised in these to price and schedules.5- Brand image American Airlines brand image is good, due to its successful background and its sweet marketing strategies. In 1991 American Airlines was the biggest airline in the United States, and the reason for it is that this airline was pioneer in many fields gaining competitive advantage over the other airlines. When deregulation took part in 1978, American transformed insuch a way that it became the industrys market dower leader. American had also pioneered several policies that affected the industrys structure and standard practices.In the late 1960s, American introduced the first com puterised airline reserve system, which revolutionised the marketing and distribution of the travel industry. American also introduced the super saver fares in 1977, which was the first programme of deep rabbets for leisure travellers, and in 1981, American launched the first frequent-flier programme, which created brand loyalty towards the airline. American Airlines is constantly developing new strategies, and introducing new technologies, and this is why its brand image is so high. Some of the new innovations that American Airlines is introducing are, the any time fares for business, new plan ahead for leisure, lower first class fares, etc.6- The distribution system The main distribution system for air travel is the travel agent, which provides not simply the flight ticket, but also supplementary services such as car rentals, hotels, excursions, etc. Airlines demand the agents to make reservations and deliver tickets. There is a difference in the distribution of tickets for bu siness travellers and leisure travellers. untenanted travellers deal always with the agent, but for business travellers sometimes the airlines make deals directly with the companies. Airlines also make special offers to large corporate buyers, like price discount for frequent flier travellers, or quantity discounts. at present there are other distribution systems, such as on line booking, and airlines home legal transfer tickets.7- Pricing After the deregulation, pricing policies changed drastically, airlines started to offer a wide variety of fares discounted below the regular price. These discount were accompanied by several restrictions such as advanced booking, no refund, no changing dates, etc. Therefore people unwilling to meet these restrictions paid a higher price. At American Airlines circumspection was viewed as selling the right seat to the right person, this means that they search for ways to find out who is willing to pay a higher price, and how can they make him pa y a higher price. By 1991, the industrys pricing structure had become enormously complex. Americans flights involved maintaining 500,000 fares. By late 1991 93% of the ticketswere sold at one kind of a discount or another. And the average discount was 63%. Due to the complex pricing structure American developed the value pricing plan. This plan consisted in First for any given flight there would be only four different fares. Second, all fares would be mileage-related, and finally, the new fares were set below the levels of comparable existing fares so lower prices would be available to more business and leisure travellers.8- Marketing related strategies Some the marketing strategies carried out by American Airlines have been -Computerised reservation Systems This system changed the industrys marketing and distribution systems. This system stored information about, flights, seats availability and fares. Which made the booking and distribution a lot easier. CRS systems gave American Airlines a great competitive advantage over the other airlines, as booking fees by CRS enabled American to earn substantial amounts from its competitors.-Hubbing With hubbing, flights from various origins on spokes of the network are channelled finished an intermediate location, where they change planes and are re-routed to their final destination. This way the airline can serve more locations with fewer planes. -Frequent Flyer programmes These programmes provide discounts or bonuses to frequent travellers. The value of the bonuses increase as the mileage flown increase, the bonuses can take various forms such as, fare reductions, upgrades to better classes or even free tickets.9- Assumptions and risks In my opinion all of this strategies are brilliant, the only risk I see is in hubbing, customers sometimes dont want spend supernumerary time changing planes, there is the risk of missing connecting planes, luggage may get lost, etc. In the rest of the strategies I dont see any risk s what so ever.