1. Political: “In some cases, foreign governments limit U. S. air carriers’ rights to carry passengers beyond designated gateway cities in foreign countries. ” This can affect the American Airlines company in the competitive airline industry because if some foreign governments deny the rights to U. S. air carriers to carry passengers beyond designated cities, the loyal customers of American Airlines would choose another airline that would be accepted by foreign governments, which will ultimately decrease American Airline ticket sales followed by a decrease in profits. . Economic: “The airline industry is subject to extensive government fees and taxation that negatively impact our revenue. The U. S. airline industry is one of the most heavily taxed of all industries. ” With American Airlines having competition in both domestic and international markets it can have both a negative and somewhat positive effect on the company. With the US government enforcing fees and taxations to all US airline companies, it will not have a negative nor positive effect on the competitive US airline market.
These fees will have a negative impact on American Airlines revenue stream when they are trying to compete in the international market. 3. Sociocultural: “Our business is affected by many changing economic and other conditions beyond our control, and our results of operations tend to be volatile and fluctuate due to seasonality, such as, changes in consumer preferences, perceptions, spending patterns or demographic trends. ” Just like in any other industry, if uncontrollable economic conditions take action it can cause certain consumer trends that may either hurt or help our current financial standing. American Airlines is affected by these economic changes on a yearly basis that alters their customers’ perceptions about the company which ultimately hurt their competitiveness in the airline market.
For example, if an American Airlines customer bought an airfare ticket from a main competitor that could have not bought a ticket from American Airlines Company due to the economic changes; Sales would decline and have a negative effect on the company, hurting their competitive standing. . Technological: “Air traffic controllers rely on outdated technologies that routinely overwhelm the system and compel airlines to fly inefficient, indirect routes. ” In a competitive airline industry it is crucial to stay updated in the technological advances being made. If American Airlines continues to rely on outdated technologies that tend to overwhelm their system and disrupt the airline trafficking, it can have a destructive effect on the company.
Customers would not like to be stuck any longer in an aircraft than they have to due to computer malfunction. If American Airlines wants to maintain in the competitive airline industry they must maintain and keep up to date on new technological advances being made. 5. Environmental: “The U. S. Environmental Protection Agency and other federal agencies have been authorized to promulgate regulations that have an impact on the Company’s operations. ”
The Company is subject to several laws and government guidelines concerning environmental matters in the U. S. and other countries. Concerns about climate change and greenhouse gas emissions, in particular, may result in the obligation for more regulation that could eventually hurt the competitive standing of American Airlines Company. With these environmental regulations, American Airlines and their competitors must reintegrate certain characteristics of their business that will be approved by the environmental protection agency. . Legal: “Transactions outside the ordinary course of business will be subject to the prior approval of the Bankruptcy Court, which may limit our ability to respond in a timely manner to certain events or take advantage of certain opportunities. ” If the bankruptcy court takes action in the approval of transactions outside the ordinary course of business it will take American Airlines a longer time to respond to certain events or take advantage of opportunities that might enhance their competitive standing.
If the Bankruptcy court follows up with this action, the American Airlines company will fall off as being one of the top competitors in this airline industry or end up shutting down and not even existing as a company. 7. Current Competitors: “The Company faces competing service from at least one, and sometimes more than one, domestic airline including: Alaska Airlines (Alaska), Delta Air Lines (Delta), Frontier Airlines, JetBlue Airways (JetBlue), Hawaiian Airlines, Southwest Airlines (Southwest) and AirTran Airways (Air Tran)”
With the majority of American Airlines competitors in domestic industry, it is crucial for them to keep up to date with the latest business strategies their competitors are integrating in to their businesses. Depending on what strategy American Airlines Company decides on, it needs to be differentiated compared to their competitors in order to succeed in this airline industry. 8. Threat of New Entrants: “There are a number of low-cost carriers (LCCs) in the domestic market and the Company competes with LCCs over a very large part of its network. ”
Throughout American Airlines’ 10K the company does not discuss the current threats of new entrants to the domestic airline industry, however in the statement above discusses that there are a high number of low-cost carriers in the market that American Airlines competes with. This can potentially hurt this competitive industry if a high-cost carrier potentially enters this market with low barriers of entry. 9. Supplier Power: “We may be adversely affected by increases in fuel prices, and we would be adversely affected by disruptions in the supply of fuel. The fuel suppliers are a major role in this huge airline market, without these suppliers this industry would fail. American Airlines has to rely and remain flexible to the fluctuations in fuel prices. These main fuel companies have the upper hand when supplying fuel to the US airline industry due to the fact that the price of fuel being supplied affects the prices of American Airlines airfare tickets and other company costs.
10. Buyers Power: “Fare discounting by competitors has historically had a negative effect on the Company’s financial results because the Company is generally required to match competitors’ fares, as failing to match would provide even less revenue due to customers’ price sensitivity. ” Just like the many other big companies buyers normally have the power to hopefully affect the company’s prices for their products. In American Airlines situation competitors discounting has led to an adverse effect.
Customers’ price sensitivity has hurt the company because the discounting in ticket prices favored the target customers, in return relied on the competitors rather than American Airline services. 11. Threat of Substitutes: “Several major airlines, including the Company, have implemented efforts to lower their costs since lower cost structures enable airlines to offer lower fares. ” In certain situations customers have the advantage to substitute one thing from another when making a purchase.
From a competitive stand point the American Airlines Company have suffered in the decline in ticket sales due to the fact the competitors in the market have made strides to lower their production cost, in return allow them to lower airline tickets which allows the consumers to choose which airline they would rather choose, or substitute one company for another. 12. Strengths: “The Company believes that the AAdvantage program is one of its competitive strengths. ”
When trying to develop a certain reward that allows customers to earn benefits from their customer loyalty and offer something that the current competitors don’t, American Airlines came up with the AAdvantage program. This program offers exclusive rewards to loyal American Airlines customers, such as discounts, flyer miles, and free airfare. When this new program came into the market, this jumpstarted their competitiveness in the airline industry and put American Airlines in front. 13. Weaknesses: “We compete with reorganized carriers, which results in competitive disadvantages for us. Competing with reorganized carriers can always be difficult when competing in the same market. This is definitely a weakness that American Airlines would hopefully like to overcome. Reorganized or also known as mergers are basically two companies that decided to joint their companies. When two companies decide to merge it takes a lot for competitors to keep up. For American Airlines it is a step in the wrong direction because they are competing against bigger and better everything, companies tend to merge when they want to take control of a market and draw customers towards them.
14. Opportunities: “On February 1, 2012, we announced the principal terms of a new business plan that is designed to transform the Company and restore it to industry leadership, profitability and growth. ” American Airlines, as of the date above, have developed a new business plan in efforts to restore what they once had in the airline industry. This new business plan poses as great opportunity for American Airlines to become again a major competitor in the growing market. With this new business plan it give American Airlines the opportunity to reiterate and restore the company with strong leadership, profitability, and potential growth.
5. Threats: “Higher than normal number of pilot retirements could adversely affect our operations and financial results. ” It can be a major concern for any company when certain threats have the potential to affect your company in a negative way. From the statement about, American Airlines could have a competitive downfall if the normal number of pilot retirements continues to rise. The higher this retirement number gets for its pilots the more affect it will have on American Airlines business operations and a negative effect on their financial results.
Overall Strategy “Forward-looking statements include the Company’s expectations concerning operations and financial conditions, including changes in capacity, revenues, and costs; future financing plans and needs; the amounts of its unencumbered assets and other sources of liquidity; overall economic and industry conditions; plans and objectives for future operations, and the sufficiency of its financial resources to absorb that impact” When analyzing a company’s 10-K it is easy to understand what the company’s overall business strategy just by reading one statement.
American Airlines had many opportunities and many weaknesses that have either hurt or help this company in the past. After looking over the above statement of what I think is a good understanding of what this company wants to do, I can say that I strongly agree with the actions American Airlines has in store the company’s future. This company has the ability to overcome the obstacles and pursue the business plan they put into place. Many of these suggestions made in the overall strategy supports the overall competitive strategy whether it’s allocating its resources or selling assets to increase liquidity.
The company’s main concern to address is its expectations concerning their company operations and financial conditions. One of the major strengths this company has that might enhance both operation and financial conditions is the AAdvantage program. This will offer new and existing passengers to keep coming back and purchasing airfare; this will benefit both the company with financial profits and provide the consumer with awards or purchasing benefits. Also the objective for future operations is supported above by the fact of the percentage of high retirements by pilots.
American Airlines needs to decrease this percentage and hopefully hire new, enthusiastic pilots who are willing to work and improve the overall operations of the company. Compare and Contrast “Delays Irk American Airlines Passengers” In such a strong competitive market, major problems can either make or break a publicly traded company. The article that I have found in the Wall Street Journal, Delays Irk American Airlines Passengers, discusses many of the problems that were pointed out in the above fifteen points about the struggles American Airlines Company have been dealing.
All of these setbacks happening to this company have taken its toll on the competitiveness of the American Airlines. This article vents about American Airlines and its passengers struggling with reoccurring late and canceled flights, multiple maintenance requests and a shortage of crew members all within a labor dispute. A number of flight terminations at American Airlines are taking place anywhere from 3% to 5% a day in a competitive market where a 1% rate is considered a bad day. And only about half of American’s flights are arriving on time, compared with more than 80% for most large carriers.
Ever since the bankruptcy court allowed the company to cancel American Airline pilot’s labor agreement, American Airlines operations have been affixed. Another main concern in this article is the amount of maintenance requests that have been made by pilots at the boarding gates that have delayed many angry customers. American Airlines owner, AMR Corporation, faults these delays on a number of these pilot maintenances complaints. These maintenances problems deal with a majority of either serious mechanical items or simple things like seat belts and tray tables.
After analyzing this article I have noticed that there are some similarities that have discussed before that can be tied into this Wall Street article. American Airlines have been integrating a new business plan that they feel will help them as a competitive company. This business plan will try to increase its strengths while limiting its weaknesses. For instance, the Company feels that its new AAdvantage program will bring out the loyal customers and reward them with certain benefits with purchasing air fare tickets.
If flight cancellations were rating at an industry high of about 3% to 5% a day it would be in American Airlines best interest to started offering this new AAdavantage program so new customers to feel like they’re apart of this company in hope to keep them coming back. Also discussed in the new business strategy is that this company wants to make changes in capacity, revenues, and costs. Given that the article gives statements made from past American Airline customers saying that they “Don’t think for a minute that I believe AA employees aren’t playing games with their customers. If the company wanted to make drastic changes to revenues and cost the need to start with new pilots or maybe even new employees. Company operating costs can be decrease if they took away the pilots taking advantage of the benefits and the AA employees not treating customers like they should. Coming back to the company’s overall business strategy, American Airlines would like to try to find new ways to either increase or decrease its capacity. Referring to the article, the company pilots have made higher than expected sick calls just so they can fly just the minimum required hours for American Airline pilots.
Pilots have been going to work but just aren’t willing to work at the same enthusiastic levels as other competitors. If American Airlines wants to keep pursue this business strategy they should clean house with their less enthusiastic pilots and develop new ones. With these problems developing within the company, they have begun to eliminate flights each month starting at 300 flights or 1% of its schedule. Hopefully this company can turn around and start increasing their overall competitiveness in this airline industry.