American Airlines Essay

1. Issues 2. American Airlines verifiables 3. The lineageline diligence 4. Market 5. Consumer of indispensability 6. Brand simulacrum 7. Distribution system 8. Pricing 9. Marketing cogitate to strategies 10. Assumptions and risks1- Issues The main issue of this case is the lack of profits of the line of productsline assiduity, an manufacture that should be more than profitable callable to the handsome amount of customers, the necessity of using airlines services and the high expenditures charged by most of these airlines. What we argon going to deal with is, why is this happening? And how is American airlines dealing with this occupation?. To be able to discuss how American airlines wants to regain profitability, we must pick out and analyse opposite issues much(prenominal) as, the teleph sensationrs derriereground, the airline industry as a whole, the withdraw for air travel, the marketing strategies, the scattering systems, determine policies etc.tera2- Amer ican Airlines objectives American Airlines prime objective is to bring back repute to air travel, through stimulating cable travel, set outing prices etc. So in separate words American Airlines main objective is to become as profitable as possible. To understand break in the comp whatevers objectives we offset printing have to focus on the companys background, this way we will find out why the airline is non 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 long time. In 1990 and 1991 due to a recession and the Gulf War, demand for air travel dropped drastically, for this reason, make wars started and all the airlines incurred massive losses.3- The Airline industry and the market The airline industry is large, specially in the United States, mainly due to the Deregulation of the industry. In 1938, the Civil Aeronautics Board was created to control the growth of the air impartation indu stry. This board had the authority to control entry, exit, prices and methods of competition. In the late 1970 this structure was form inefficient and in 1978 deregulation took place. Due to the deregulation of the industry competition intensified, prices dropped, and the number of people travelling increased. Many new companiesemerged and regional airlines power saw deregulation as an opportunity to expand.Due to the rise in competition, by 1986 mergers started to take place and in 1987 64.8% of the market was controlled by the four largest airlines. The demand for air travel is fixed mainly by price, studies revealed that half of the vacant travellers and on quarter of telephone circuit travellers did not have a perceptiveness for a particular airline, which means that prices determined the preference. So the strategy to deal for customers consisted mainly in pricing and passage schedules. The demand for rushs varies depending on the era or the business cycle in that l ocationfore airlines have to develop different pricing strategies and offers depending on the season or the business cycle period. An other(a) determinant for demand is technology, the new telecommunication possibilities have made air travelling unnecessary in some cases, which of course has affected airlines revenues.4- Consumer need. Consumer needs atomic number 18 clear, what airline consumers need is basically god prices and strong flight schedules. These be the basic needs, apart from these ones we could besides point out other needs such as big, comfortable seats for long flights, good service on board, good food, punctual departures, check-in facilities, movie channels, etc. All these are consumer needs, but studies have shown that demand is mainly determined by price and a flight schedules, the rest just enlarge value to these two, therefore companies must focus on ways to set down prices and provide good flight timetables. There are two types of travellers, busine ss travellers and leisure travellers, these two of course have different needs, for the first ones price is not so important 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. scarcely as I said before consumer needs can be summarised in these to price and schedules.5- Brand image American Airlines grade image is good, due to its successful background and its new 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 share leader. American had withal pioneered several policies that affected the industrys structure and standard practices.In the late 196 0s, American introduced the first computerised airline backlog 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 discounts 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 consort fares, etc.6- The distribution system The main distribution system for air travel is the travel agent, which provides not only the flight ticket, but also supplementary services such as car rentals, hotels, excursions, etc. Airlines gather up the agents to make reservations and deliver tickets. There is a differ ence in the distribution of tickets for business travellers and leisure travellers. Leisure 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. Nowadays there are other distribution systems, such as on line booking, and airlines home delivery tickets.7- Pricing later on the deregulation, pricing policies changed drastically, airlines started to offer a wide variety of fares discounted below the fastness price. These discount were accompanied by several restrictions such as ripe(p) booking, no refund, no changing dates, etc. Therefore people backward to meet these restrictions paid a high price. At American Airlines guidance was viewed as selling the right seat to the right person, this means that they inquisition for ways to find out who is willing to pay a higher pr ice, and how can they make him pay 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 teaching about, flights, seats availability and fares. Which made the booking and distribution a hoi pol loi 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(a) origins on spokes of the network are channelled through 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 outweart want spend additional time changing planes, there is the risk of missing connecting planes, luggage may get lost, etc. In the r est of the strategies I dont see any risks what so ever.