The airline business needs to consider many things to be successful. It is not only the pricing policy or the destination offerings that make an excellent service. The world is changing rapidly, and airline companies must pay attention to modern trends to keep their customers loyal. American Airlines is one of the most famous companies specializing in passenger and cargo transportation. Although the strategies of American Airlines perfectly address the situation that prevails in the external environment, there are still issues that need to be tackled for surviving in unstable economic conditions.
Company Overview
Description of the Business
American Airlines is the nation’s largest leading airline company. According to the information on the corporation’s official website, it takes around 6,700 flights a day to 350 destinations in 50 countries (American Airlines, 2016, para. 1). Its number of planes, income levels, and lengths of flights are rated as number one in the world. The website also states that American Airlines has reached the top position in the Fortune’s ranking by its turnaround (American Airlines, 2016, para. 2). The company also has the second place for the number of destinations it serves. American Airlines is a part of Oneworld, which is the alliance of the world’s major airlines. Other members of Oneworld are, for example, British Airways and Finnair.
External Environment
The environment in the modern world is rapidly changing. Businesses need to adapt to stay profitable and keep their customers. Identifying opportunities and threats are crucial for understanding which direction should be taken and what strategies must be developed. The airline industry is very consolidated and ruled by several key players. It means that all technological development is pre-determined by their interests. However, public opinion and economic state are pressuring these companies to make changes according to the modern realities.
The top opportunity for American Airlines is the globalization trend. As businesses become global, there is more need for workers to travel around the world to control the processes in the branch offices. They need a developed network of airports in each country they travel to. It creates a demand for the diversification of the destinations, as well as the pricing policies. Moreover, ordinary people are nowadays traveling for tourism and education as much as never before. For instance, the scientific environment is not limited to a particular country, and scholars have to travel to various events and conferences to raise their proficiency level. Many people learn more than one language, which allows them to travel the world.
However, there are several threats to the airline business. Firstly, it is a concern about the environmental state of the planet. Governments and communities start to realize the threat imposed by the greenhouse effect. Unfortunately, airplanes are among the technologies with the largest CO2 emissions, which lowers their popularity among the ecologically responsible citizens. Secondly, the current economic recession affects tourism very much. It is not only the cost of the airline tickets that are becoming higher but also the price of services in the countries of destination. Tourists from countries with other currencies may find it hard to save for the trip if their local economy experiences currency instability.
Current Strategies and Objectives
The current strategies of American Airlines are defined in their yearly report (American Airlines, 2015). They are designed concerning the external environment situation described above. One of the strategies concerns the future changes of the fleet according to the environmental policy. The fleet renewal strategy is targeted on purchasing new planes that would enhance the onboard experience. The elements of the new planes would include more space, better climate control, and lower noise level. Moreover, the new fleet will be using eco-friendly fuel technologies. The environmental strategy follows this plan and introduces the company’s goals on reducing the CO2 emissions, managing water and waste in sustainable ways, and developing the new rules of the green operations. For instance, the waste management strategy includes in-flight recycling, sending all materials that cannot be reused to special facilities, and saving the wrapping paper during logistics operations.
Another strategy answering the trends of the external environment is making the flying experience easier for the passengers. Firstly, it is the loyalty program for customers who regularly use the services of American Airlines. Its AAdvantage program was the first one introduced in the world. The main idea of the program is collecting the so-called miles for the booked flights, which can later be exchanged for bonuses like discounts on future trips, hotels, car rentals, and other retail services. Secondly, American Airlines tries to improve customer experience in airports. This strategy includes, for example, the applications for easy flight registrations and the lobbies with a wider variety of food and services. The improvement of airports is, in fact, the popular trend nowadays (Cho, 2016). Active work in social media also enhances customer services, as the company has a chance to receive feedback and improve its operations according to it.
Predictions
American Airlines has a very effective environmental strategy. If it is successful in implementing all the points, there will be an increase in customers. Since more people become ecologically responsible these days, they might make this company as their number one choice for travel options. As the globalization trend develops, American Airlines may expect this number to rise significantly. Another benefit may come from the possible governmental policies targeted at saving nature. The United States government might pass laws that would ban airline companies, which produce greenhouse gas over the norm.
The current strategy of American Airlines that views social media as the marketing platform might also turn out beneficial. The traditional marketing tools are gradually losing their positions regarding the ability to reach customers. The growing generation of Millennials will soon become the major customer force shaping the demand for products and services. This group uses the Internet as their number one choice for information search, and their auditory outreach has grown dramatically compared to other generations (Thompson & Gregory, 2012, p. 242).
Feedback is crucial as it becomes the primary element to defines the product quality for potential customers. Moreover, customers want to feel that their feedback is important for the company. American Airlines’ strategy of communicating with customers through social media like Facebook and Twitter may help the company to grow its auditory and sell more tickets and other services. Finally, the customer loyalty programs will ensure that people do not switch airlines for their trips. There is, of course, a risk that the number of destinations would be limited and people would have to choose another company. However, American Airlines has a promising trend of developing its routes, and the problem should not present a great threat.
Recommended Strategies
If I were the CEO of American Airlines, I would recommend paying more attention to the pricing policies. There has already been mentioned the adverse economic situation in the world and the lowering of the customers’ purchasing ability. If the company keeps the current pricing policy, it may lose customers who are now experiencing financial instability. The company’s current economy offers are still not as cheap as the competitors’ products (Cross, 2017, para. 3). Tourism is suffering during the recession, and it must be the company’s top concern to prevent a decline in revenues. Besides, the existing strategies are very financially consuming, and poor performance could prevent the company from its implementation. Moreover, the current war conflicts in the world have closed several destinations, which has caused a decline in revenues. I believe that American Airlines should create strategies like selling cheaper tickets during the vacation season in summer and winter. It will keep the company popular among the wider auditory.
Competitors’ Strategies
The main competitors of American Airlines are the other flight companies based in the United States. The overall idea of them presenting threats is that they generally have lower operational costs. It allows those companies to lower the prices of tickets and more passengers chose them for this reason. Two of the main competitors are Southwest Airlines and JetBlue Airways.
Southwest Airlines is the largest national carrier of passengers. They keep their operational costs low by implementing strategies like fuel hedging (Southwest Airlines, 2013). Fuel hedging is a type of contract made by a company and an oil supplier that fixes the prices. It is very important in the modern world as the oil price is very unstable and businesses are put at risk of the growing operational costs of logistics. The fuel hedging allows Southwest Airlines to be independent of the oil price fluctuations for a certain period, and the company can be more flexible. American Airlines could also use this strategy to keep the operational costs stable for the next several years. It would allow the company to keep the changes to the ticket prices minimal, thus offering its customers service that is more appealing than that of the competitors’.
JetBlue Airways is also successful in competing with American Airlines due to the smart fuel consumption strategy. The company has a very modern fleet, which is currently the youngest in the domestic industry. The technology in new planes allows them to cut down the amount of fuel they use, consequently lowering the operational costs. Moreover, the fuel efficiency strategy of JetBlue Airways answers the current demand for green technologies. It has already been mentioned that American Airlines views the renewal of its fleet among the priority strategies for the future. If the company is successful with this step, it will be able to leave this competitor far behind.
Conclusion
The analysis of the current strategies of American Airlines shows that the company is heading the right way in trying to improve its business in an unstable environment. The change in technology is a strategy that is required in the modern world to answer the demand for sustainable operations, while the loyalty programs help to keep the existing customers during the recession. The company could review its pricing policy to ensure it is suitable for the less wealthy customers, as well as change the oil supply strategy to help reduce the operational costs.
References
American Airlines. (2015). Corporate responsibility report. Web.
American Airlines. (2016). American Airlines Group. Web.
Cho, A. (2016, October 10). New planes of existence. ENR: Engineering News-Record. Web.
Cross, M. (2017). A tiered approach to economy class. Kiplinger’s Personal Finance, 71(2), 16. Web.
Southwest Airlines. (2013). 2013 Southwest Airlines online report. Web.
Thompson, C., & Gregory, J. B. (2012). Managing Millennials: A framework for improving attraction, motivations, and retention. The Psychologist-Manager Journal, 15(4), 237-246. Web.
