American Airlines Essay

This essay has a total of 1400 words and 10 pages.

American Airlines








American Airlines
Marketing cases

















AMERICAN AIRLINES


1. Issues
2. American Airlines’ objectives
3. The airline industry
4. Market
5. Consumer needs
6. Brand image
7. Distribution system
8. Pricing
9. Marketing related strategies
10. Assumptions and risks


1- Issues
The main issue of this case is the lack of profits of the airline industry, an industry
that should be more than profitable due to the large amount of customers, the necessity of
using airlines’ services and the high prices charged by most of these airlines.

What we are going to deal with is, why is this happening? And how is American airlines dealing with this problem?.
To be able to discuss how American airlines wants to regain profitability, we must
identify and analyse different issues such as, the company’s background, the airline
industry as a whole, the demand for air travel, the marketing strategies, the distribution
systems, pricing policies etc.


2- American Airlines’ objectives
American Airlines’ prime objective is to bring back value to air travel, through
stimulating business travel, lowering prices etc. So in other words American Airlines’
main objective is to become as profitable as possible.

To understand better the company’s objectives we first have to focus on the company’s
background, this way we will find out 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 long time. In
1990 and 1991 due to a recession and the Gulf War, demand for air travel dropped
drastically, for this reason, fare wars started and all the airlines incurred massive
losses.


3,4- 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
transportation 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
deregulation took place. Due to the deregulation of the industry competition intensified,
prices dropped, and the number of people travelling increased. Many new companies emerged
and regional airlines 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 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 flight schedules.

The demand for flights 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 new telecommunication possibilities
have made air travelling unnecessary in some cases, which of course has affected airlines
revenues.


5- Consumer needs.
Consumer needs are clear, what airline consumers need is basically 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 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 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 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. But as I said before consumer needs can be summarised in
these to price and schedules.

Continues for 5 more pages >>




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