A Swot Analysis Of American Airline

A rig out depth psychology Of American AirlineAbstractThe air lane attention has everlastingly been and continues to be the most fiercely competitive business sector in all facets of its operations. Operating on paper thin margins the drop in passenger traffic brought on by the events of folk 11th, 2001 cave in affected interior(prenominal) get together States airways as advantageously as all spherical mailmans. The events of that day have caused presidential termal intervention in the form of impart guarantees, compensation for terrorist attack losses, as well as insurance associate to war risk (Shane, 2003). The Associate deputy secretary of Transportation give tongue to that the persistence is in its worst financial crisis(Shane, 2003), since the effort was deregulated in 1978. It is meaning(a) to understand that two differing types of air lane carriers exist in the United States. The study refer to airlines earning revenues in excess of $1 billion USD annual ly and in the main they provide national as well as international serve. These airlines furnish to the business crystallize client and passengers who either expect or appetency panoptic in leakage work such as meals and link amenities. American Airlines, Delta Air Lines, United Air Lines, U.S. Airways, Continental Airlines and Northwest Airlines play off these designations (Mayer, 2002). The synthesis air carriers have changed the face of the airline industry with their no frills, confused-cost air derives and have put pressure on the major in terms of eroding their market place share.The preceding battle between discount carriers has further exacerbated the majors thin operating(a) margins and has resulted in Delta, Continental, Northwest, United and US Airways (Beck, 2005) filing for protection under Chapter 11 of the United States bankruptcy laws turn they restructure and renegotiate union contracts and creditor agreements. United States Senate Commerce Committee chairman John McCain has stated that the United States government should be reluctant to do anything that might keep inefficient businesses afloat (Shane, 2003). This is the climate in which the qualified airline, American Airlines operates.Chapter 1 American AirlinesPEST AnalysisThe utilization of a PEST analysis with regard to American Airlines takes into account the policy-making, stinting, social and technical (NetMBA, 2004) surround the industry is embroiled in and how this has, is and will threaten to force its operations and profitability. It must be remembered that the itemize of possibilities concerning macro-environmental aspects is almost limitless, therefore engrossment will be paid to those areas perceived to have the highest impaction.PoliticalThe political stability of the United States was severely shaken by the terrorist events of September 11, 2001, and this straightway resulted in a catastrophic drop in business as well as personal air belong (Ito et al , 2003). The preceding along with the following areas have impacted negatively on earnings as well as profitability among the majorsPricing regulationsWage formula and union requirementsDeregulation policies of 1978Increased emphasis on national and drome securityEconomicThe overall economic climate in the United States prior to the events of September 11, 2001 called for a mild recession and the airline industry was wrestling with discount carriers. The pre 9-11 airline climate forecast a push aside contraction as a result of the reversionary climate which was dramatically impacted by the events of 9-11 and the resulting economic aftermath (Ito et al, 2003)Dramatic behinddown of the economic growth rateIncrease in enkindle costs rest period of trade accountsInflationary and fluctuations of the dollars against the Euro, and YenSocialThe emphasis on September 11th throughout these varied analysis is due to the sweeping impact that event had on ball-shaped events in all theatres . The social implications gum olibanum shaped or amplified are as follows (Mayer, 2002)Increased layoffs impacting all income groups subtile decrease in lower and middle class function autumn in airline related vacations destinationsNegative impact of air travel safety brought on by the events of 9-11Decrease in general airline related travel plans by consumers woeful- get on with travel stigma attitude slip of paper to an acceptable alternativeTechnologicalThe Internets impact on business and consumer buying habits heralded in a new age of information trans congeal which changed the manner in which airline tickets are sold.Airline cut carcassDecrease in airline travel agenciesIntroduction of Internet airline ticket reservations and ticketingEntry of Travelometropolis, Orbitz, Cheaptickets, Expedia and other best wrong shopping workThe availability of the Internet as a consumer and business serve and flight shopping toolPorters Five ForcesMichael Porters Five Forces lay (Q uickMBA, 2005) provides a model to view the airline industry from the perspective of five forces that influence it ambitionAmerican ranks as the worlds largest airline in terms of passengers carried, however is rated number 11th in terms of overall airline quality (Holderbach, 2004).Low- arrive airlines garnered trey of the top four spots in airline quality ratings, 1. park Blue, 2. Alaska, 3. Southwest, 4. America West. All but Alaska Airlines are low fare carriers. The remain airlines are 5. US Airways, 6. Northwest, 7. Continental, 8. AirTran, 9. United, 10. ATA, 11. American, 12. Delta, 13. American Eagle and 14 Atlantic south-east (Holderbach, 2004).Some of the more important facets within this category of the Five Forces model areslow market growth since 9-11high fixed operating costslow relative levels of product differentiation among the majorsinroads of the low-fare carriers in the changing perception of air travelshake out of the industry since 9-11 in terms of bankru ptcies and failuresThreat of SubstitutesWithin Porters model substitute services come into play when demand exceeds supply, or vice versa. In the airline industry the excess supply has been attacked by low-fare carriers who have continually gained market share.Buyer PowerThe airline industry suffers from oversupply as well as fixed costs which served as the constitute of operations for low fare carriers who offer no frill flights in return for discounted fares. This approach effectively pulled the casual traveler and spread to frequent travelers and some classes of business travel for companies seeking to cut costs. Buyer demand is re-shaping the airline industry as a result of these options.Supplier PowerIn terms of this category, fuel is the single largest airline cost expenditure item which affects all firms equally. Low Fare carriers by eliminating frills lower their per flight operating costs which have and is attracting s pumps of travelers to their fold.Barriers to Entry / Threat of EntryTraditionally, the high cost of portal in the airline industry reduced the treat of entry by competitive companies. However the business model offered by low fare carriers exploited the lower end segment of the market via price and provided a foundation for the entry of Southwest, Jet Blue, America West and others (Ito et al, 2003).SWOT AnalysisThe strengths, weaknesses, opportunities or threats internal to a confederacy salute the strategic environment known as a SWOT analysis (QuickMBA, 2004).StrengthsSome of the advantages that American Airlines has in comparison to its competitors are (American Airlines, 2005)Recognizable brand nameLargest global airline in terms of passenger trafficNational and international highways serving all corners of the globePerception as a major carrier with the commensurate levels of serviceWeaknessesinternal flight amenities run profitsinability to deal with low fare carriers on pricelack of competitive pricing to attract casual traveler understructurevulnerability to pricingOpportunities (American Airlines, 2005).code sharing agreements with domestic and international airlinesSABRE ticketing systemPresence at most airportsAmerican Eagle regional routesLucrative route structureThreatsthin operating margins favoring low fare carrierspublic acceptance of low fare carrier conceptcustomer quality perception of low fare carriers that exceeds the majorsprolonged slow economy favors low fare carrier pricing structurecleavage of the industry into business and discount carrier classificationshigh fuel pricesgovernment interventionChapter 2 ConclusionThe intense competition in the airline industry along with thin operating margins and fuel costs along with other expenditures existed before the dramatic events of September 11th. The strengths of American Airlines in creation the worlds largest airline provides it with a huge customer trading floor that is familiar with the airline. This represents the core of all marketing, customer retention as well as the foundation to attract new customer trial. Customer retention and utilization represent the primary advantage that American Airlines enjoys and needs to utilize to protect its coiffe as well as build upon. The American Eagle grade provides the troupe with an additional customer thingmajig marketing tool via intra city (regional) destination traffic. In order to accomplish the preceding objective the company must increase its quality of service from its current 11th position to increase customer satisfaction. The 50/50 mix of business and untenanted travelers that comprise its customer base has remained relatively constant and business class travelers contribute heavily to profits as a result of the high fares paid for first class and business class seating (American Airlines, 2005). economic consumption of goat marketing with concentration on the frequent flier base represents Americans primary advantage to capitalize upon since is does not compete in a low fare platform. Tightened restrictions on fares has closed a lot of the gap, thus consumer perceptions in the higher income categories represent a huge customer base for American to capitalize on in stealing customers from the other majors as a primary strategy and eroding the fringe low fare customer base as a secondary target market. Technology in terms of software advances along with code sharing, peaking and Americans route and connection structures offer convenience. Increased international travel also helps the company as a result of its global routes and destinations. Americans size, reach, reputation, fleet and presence at over 154 airports reinforces the preceding (American Airlines, 2005). The companys corporate vision states its objectives are toset industry standard for safety and security,provide superior customer service,produce returns for stakeholders and shareholders by increasing business and thus revenue opportunities for vendors and allie d firmsfurther change integrity the brand name and image as a premier carrierincrease creative ticketing, promotions, vacation packages and associated areas to distance the company from low fare carriers and thus minimize their effects,capitalize upon inherent advantagesAs the worlds largest carrier American Airlines business and leisure base provides the customer foundation to enable it to compete successfully against other majors as well as assure itself from low fare carriers. This ability to be the choice in the full flight service category along with the number of airports, seamless domestic and international route structure that enable it to offer direct service to the most destinations via its own branded airline represents a key convenience and thus marketing factor to garner success in this exceedingly competitive environment.