Swot Analysis Of American Airlines

Today Southwest Airlines is the biggest domestic passenger carrier in the United States of America operating more than 3,400 flights a day. They provide service to 93 cities and 5 countries internationally. Last year Southwest Airlines, “Enplaned approximately 136 million Customers (About Southwest). The airline has grown since it’s first years flying out of Love Field in Dallas, Texas. In the beginning, Southwest provided flight service to only three Texas cities in 1971. One of Southwest Airlines’ early advertisements was a double page ad that ran in Dallas newspapers during May announcing their first flight on June 18, 1971 (Lusk). This advertisement introducing a new airline would soon revolutionize the airline industry and create the new category, of low cost carrier, to the world.

This research is being submitted on June 14, 2010, for Mr. Bergeen’s Microeconomics course at Rasmen College by John Divler.

At the time of the article, American had several competitive advantages. First, because they were a larger airline, their brand is preferred by consumers when all other factors (price, availability of flights, volume) remain equal. Also because of their size, many travelers have incentive to use them because of reward programs such as frequent flyer miles. American was also a major carrier hub at many cities around the country. Because of their hub status they were able to offer a larger volume of flights giving consumers more selection. Travel agents seemed to prefer American as well.

In between other revolutionary marketing programs, in 1981, American introduced the AADVANTAGE travel awards program to reward frequent flyers. On May 19, 1982, the company had a reorganization plan and a new holding company called AMR Corporation, which became the parent company of American Airlines. This reorganization brought to the company new frontiers. A year after AMR Services was formed as a subsidiary to provide aviation services to the other airlines, and AMR Consulting group which would provide consulting services in airline related business. Since 1990 American airlines has conquered most of its objectives, some of them are: the expansion of its routes all over the planet, the creation of a world wide web site for the convenience of its passengers and formed a customer-driven global alliance named “one world” with other airlines designing a raised standard of global air travel.

According to Greyhound, it takes a total of sixty-five hours to drive from New York to Los Angeles by bus with no transfer (“Choose your outgoing trip,” 2016). The same trip with Southwest Airlines takes approximately eight hours (“Select Departing Fight,” 2016). In 1971 Southwest Airlines became an official airline company when they won a U.S Supreme Court ruling and purchased three Boeing 737 (Thomas, Peteraf, Gamble &Strickland, 2016, p. c-341). As of 2014 Southwest’s fleet has grown to an astonishing 665 aircraft that recorded 902 thousand flights in 2013 (Thomas, et al., 2016, p. c-341). By evaluating Southwest’s industry maturation, strategies, their success in the sector it will be possible to make recommendations for Southwest 's future growth.

According to Fortune 500 (2015), Delta airlines is the largest airline in the world today and is able to fly to 567 worldwide destinations in over 100 countries. Delta airlines owns and operates its own reservations system and data and they give the employees stock in the company with profit sharing and stock ownership. One weakness of Delta airlines is the relying on it 's much older refurbished airplanes. Since oil prices are low they are able to save on costs but that could change if they oil prices increase again. US Airways has merged with American Airlines and the two have since become the world 's largest airline but both have since faced losses since the 2008-2009 economic crisis. US Airways has also had poor customer service

American airline industry is steadily growing at an extremely strong rate. This growth comes with a number economic and social advantage. This contributes a great deal to the international inventory. The US airline industry is a major economic aspect in both the outcome on other related industries like tourism and manufacturing of aircraft and its own terms of operation. The airline industry is receiving massive media attention unlike other industries through participating and making of government policies. As Hoffman and Bateson (2011) show the major competitors include Southwest Airlines, Delta Airline, and United Airline.

After watching the CNBC special about American Airlines and a week inside their business I noticed several interesting things. Though it was dated few years ago many of the issues are still the same. They had several Revenue drivers; Cargo income, excess baggage fees, last minute departure fees, Postal cartage, and miscellaneous charges for meals, drinks, and accessories. These are not needed but sometimes are needed on certain longer flights. They provide an extra income that may just keep a transcontinental flight from losing money.

To formulate a strategy that will help Southwest Airlines maintain its competitive edge in the US airline industry.

Being the largest airline in the world comes with some significant advantages, one of the most important is a physical presence in the locations that passengers want to travel. As part of the anti-trust settlement, American Airlines agreed to sell approximately 15% of their takeoff and landing slots in Washington D.C. and New York . Even with this sale of slots, American Airlines is still able to offer flights to over 250 destinations daily. Just by their sheer size, American Airlines should be capturing a significant share of the market.

In April 1992, American Airlines launched "Value Pricing" -- a radical simplification of the complex pricing structure that had evolved over more than a decade following deregulation of the U.S. domestic airline industry. American expected that the new pricing structure would benefit consumers and restore profitability to both American and the industry as a whole. The critical issue raised is: Would American's bold initiative work?

In conclusion American Airlines continues to be the epitome of what utilizing all the knowledge and technology advances that one has to conquer success in the given field. And is the ideal example of what best practices

Although there are pros to ‘value pricing’, their are many cons as well. For American Airlines, the price sensitive customers will be highly discontented by the new ‘value pricing’ and they will be encouraged to switch to low cost airlines. American Airlines will no longer benefit from the business travelers that were typically price insensitive but time sensitive and so prepared to pay the higher costs. This will have effects on yield and profitability as the high fixed costs of airlines previously depended on business travelers to buy higher priced tickets. For air travel demand, which in turn creates the lack of customer brand loyalty to airlines, a 38% reduction in American Airline prices in theory would cause customers to switch to American Airlines. However, American Airlines has failed to consider competitors reaction in their value pricing, therefore competitor 's reactions will prevent American Airlines from reaching their estimated revenue for 1992. Lowering the prices to match American Airline prices to guarantee the consumer the lowest

With 1988 operating income of $801 million on a revenue of $8.55 billion, American Airlines, Inc. (American), principal subsidiary of Dallas/Fort Worth-based AMR Corporation, was the largest airline in the United States. At year-end 1988 American operated 468 aircraft on 2,200 flights daily to 151 destinations in the United States, Bermuda, Canada, Mexico, the Caribbean, France, Great Britain, Japan, Mexico, Puerto Rico, Spain, Switzerland, Venezuela, and West Germany.

One of the world’s most competitive and prominent industries is the airlines industry. It generates huge amounts of income as well as employment each year. Some of the common names in US air travel service providers are Alaska, Northwest, Southwest, US airways, American etc.