HISTORY OF AMERICAN AIRLINES American Airlines, Inc. (AA) is a major airline of the United States. It is the world’s largest airline in regards to accumulated passenger miles. American Airlines took off on April 15, 1926 when Charles Lindbergh flew a bag of mail from Chicago to St. Luis in a DH-4 biplane. A year later the first passenger flight flew from Boston to New York, heralding the real first passenger airplane travel by American Airlines. A subsidiary of AMR Corporation, the head quarters of American Airlines is in Fort Worth, Texas adjacent to the Dallas/Fort Worth International Airport.
American operates scheduled flights throughout the United States and flights to Canada, Latin America, the Caribbean, Europe, Japan, the People’s Republic of China, and India. On June 25, 1936 American Airlines flew the world’s first commercial DC-3 trip from Chicago to New York. In 1941, American Airlines starting serving Mexico. In 1953, American Airlines began non-stop transcontinental service using DC-7’s. On January 25, 1959 American was the first airline to introduce coast to coast jet service with the introduction of Boeing 707’s. In 1981 the AA advantage program which is the frequent flyer project, was introduced.
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American Airline holds the distinction of many firsts in the aviation history. By regularly adding new airplanes it has kept pace with the changing face of technology and requirements. American Airlines is credited with the introduction of the first true in flight meal services. The airlines have evolved with the invention of newer airplanes that are capable of carrying more passengers to meet the growing need of people to fly. Traffic control system and ticket reservation system are also the innovations of American Airlines (History of American Airlines, 2006). MISSION STATEMENT
AMR Corporation is committed to providing every citizen of the world with the highest quality air travel to the widest selection of destinations possible. AMR will continue to modernize its fleet while maintaining its position as the largest air carrier in the world, with a goal of becoming the most profitable airline. AMR is the airline that treats everyone with equal care and respect, which is reflected in the way each AMR employee is respected. AMR recognizes that its employees are the key to the airlines success and invests in the futures and lives of its employees.
By investing in tomorrow’s technologies and by following a strict adherence towards environmental regulations, AMR demonstrates its commitment to the world environment (History of American Airlines, 2006). CUSTOMER SERVICE PLAN American Airlines and American Eagle are in business to provide safe, dependable and friendly air transportation to our customers, along with numerous related services. We are dedicated to making every flight you take with us something special. Your safety, comfort and convenience are our most important concerns (Customer Commitment, 2009). AMERICAN AIRLINES ORGANIZATIONAL STRENGTHS
Constructing a profitable schedule is of utmost importance to an American Airlines because its profitability is critically influenced by its flight offerings. AA’s fleet assignment involves assigning aircraft types to flight legs which will maximize revenue and minimize operating cost. American Airlines knows that in order to be profitable they have to be equipped to service their passengers to ensure they have the ultimate experience in air travel. This will assure that they have repeat passengers and new customers. Their fleet is definitely an organizational strength as it enables AA to keep up with the demands of air travel.
By having such a large size fleet of aircraft, AA is able to service their passenger’s needs. As of October 2009, the American Airlines fleet consists of 603 aircraft. The large size of fleet of AA is definitely a distinctive competence as they are the third largest fleet of airlines in the world (History of American Airlines, 2006). Another strength is definitely AA’s their customer service skills. American Airlines trains its’ staff members in superior customer service skills. Being able to assist customers in their travel needs puts American Airlines above the rest of the airlines in customer service.
They train their staff to uphold the mission statement and manage customer expectations. With the competition in air travel, AA’s customer service skills would be considered a distinctive competence. This is proven by its number of repeat customers and rise in new customers. AA has nonstop and seasonal routes throughout the US and also internationally. They make it possible for people to travel to all parts of the world while experiencing superior air travel. They help the public to get to where they want and need to go. American Airline’s schedule design involves determining when and where to offer flights such that profits are maximized.
AMERICAN AIRLINES ORGANIZATIONAL WEAKNESSES One organizational weakness of American Airlines is the fact that it does have unprofitable routes. They would have to eliminate these routes in order to maximize their profit. In May 2008, more than 300 flights were eliminated that were not proving to be profitable to the company (Reed, 2008). Another weakness is the financial position of the airline which can be attributed to the weak economy and the rise in fuel prices. AA lost $359 million in revenue in the third quarter of 2009 according to their filing with the SEC (Stewart, 2009).
Less people are travelling in these times which may be due to layoffs, cutbacks or simply prioritizing their expenses. Travel seems to have been one way in which the public reduced their expenses which caused great losses in the airline industry. Businesses have also cut back on travel expenses that may not be deemed necessary within the firm’s budget and operating costs. The cost structure of American Airlines can be considered another organizational weakness. It is difficult for the airline to regain its strength against the tide of high fuel prices and a weak economy with less purchasing power.
One way to deal with this is to negotiate with the unions in regards to lower wage rates for employees. They could also improve their operations by making it more efficient with the use of more technology. AMERICAN AIRLINES ORGANIZATIONAL OPPORTUNITIES Information technology is at its peak; technology advances can result in cost savings, from more fuel efficient aircraft to more automated processes on the ground. Technology can also result in increased revenue due to customer-friendly service enhancements like in-flight Internet access and other value-added products for which a customer will pay extra.
This opportunity comes from the technological dimension of the general environment. The growth of integrated systems allows American Airlines to be more efficient and able to pass the cost savings down to their passengers. Link-ups with other carriers can greatly increase passenger volumes. By coordinating schedules, airlines can offer service to destinations via a code share agreement with a partner carrier. Link-ups allow airlines to collaborate in areas such as shared revenues, code-sharing and frequent-flyer offerings. British Airways has just received the go ahead to link-up with American Airlines to service the transatlantic route.
It has been estimated that a BA/AA transatlantic joint venture would have 80 per cent of flights from the UK airport to Boston and 70 per cent of flights to Miami (Flanagan, 2009). This is an opportunity that is affected by the international dimension of the general environment. Both airlines will profit from the alliance and therefore revenue and sales will increase due to the impact of this link-up. Air travel remains a large and growing industry. It facilitates economic growth, world trade, international investment and tourism and is therefore central to the globalization taking place in many other industries.
Airline market growth offers continual expansion opportunities for both leisure and business destinations. This is particularly true for international destinations. Once the economy stabilizes, this opportunity would be created by the economic dimension of the general environment. More and more people will continue to travel for business and personal reasons. AMERICAN AIRLINES ORGANIZATIONAL THREATS The price of fuel is now the greatest cost for many airlines. An upward spike can destabilize the business model. Global recession has lead to high oil prices all around the world.
The inflated oil prices have posed a significant threat to the world economy, by causing a worsening of current account imbalances and by triggering a rise in interest rates. For the airline industry who heavily relies on the oil industry, this is clearly the biggest threat facing American Airlines. It is without a doubt their largest cost on their income statement. Oil has posed a great threat to the airline industry which has affected the overall economic system of the company as an economic dimension of the general environment. With credit drying up across the sector, Boeing and Airbus could be stuck sitting on hundreds of unsold ircraft. Leasing companies also face very lean times. It seems hardly anyone can afford the next-generation planes that have almost bankrupted their makers. The Credit crunch has made it difficult for AA to finance new aircraft. Some orders have been cancelled and delivery dates have been deferred. Airlines are finding it enormously difficult to get financing for their deliveries planned in 2009 and banks just won’t lend them money. The credit crunch has affected American Airlines economic situation which is the economic dimension of the general environment (Stewart, 2009).
Another major threat to American Airlines is a plague or terrorist attack anywhere in the world. This can negatively affect air travel. After 9-11, people were more reluctant to fly which posed a threat to the airline industry. It can be detrimental and if lucky, only cause flight delays and increased security measures. Planes have to turn back in order to investigate to see if the threat is valid or not. This puts pressure on passengers and causes inconveniences to say the least. It poses a security threat to passengers, crew and airport facilities.
This can be attributed to the political-legal dimension of the general environment. Most bomb threats are politically motivated and results in a disruption of the normal activities of the airline and facilities where the device is purportedly placed. Anxiety and panic are created as well due to the bomb threat. More training has been implemented after 9-11 in how to deal with these types of situations. The legal dimension allows for new laws and regulations to ensure safety to the airline industry and its passengers. AMERICAN AIRLINES STRATEGIES AND CONCLUSION
The global financial crisis is threatening the air transport sector in two ways: Demand for air travel in many of the most lucrative markets is declining and airlines are finding it enormously difficult to get financing for their deliveries planned in 2009. Banks are not willing to lend money due to the risk involved. After I have completed the SWOT Analysis on American Airlines I think they are using the Differentiation strategy. They continue to strive to be the best in customer service and keeping their clients satisfied in order to prolong good customer relations.
They are upholding their mission statement and vision in these tough economic times which are rough for everyone. I would recommend that American Airlines cut out their most unprofitable routes in order to maximize profit. This reduces their revenue and increases their costs. They could also look into retiring the older aircraft that have proven to be more costly in upkeep and maintenance. They are just too expensive to keep on their books. They could also look into mergers and acquisitions mainly in international destinations to boosts profit and revenue on a global scale.
The link-up with international airlines is a great way to prime the pump during this financial crisis. More revenue will be generated and they can become more marketable in the international arena once they continue to uphold their high standards in the airline industry. REFERENCES Customer Commitment, (2009). American Airlines. Retrieved November 8, 2009 http://www. aa. com/i18n/aboutUs/customerCommitment/main. jsp Flanagan, M. (2009, October 25). British Airways link-up with American Airlines set to go-ahead. Scotland on Sunday. Retrieved on November 15, 2009. http://business. scotsman. com/business/British-Airways–linkup-with. 763913. jp History of American Airlines, (2006). Associated Content/Business and Finance. Retrieved November 8, 2009 http://www. associatedcontent. com/article/31923/history_of_american_airlines. html? cat=3 Reed, D. (2008 May 21). American Airlines to cut about 300 flights. USA Today. Retrieved November 8, 2009 http://www. usatoday. com/travel/flights/2008-05-21-american-airlines-capacity-cuts_N. htm Stewart, D. R. (2009 October 21). American Airlines loses $359 million in third quarter. Tulsa World. Retrieved November 8, 2009 http://www. tulsaworld. com/business/article. aspx? subjectid=45&articleid=20091021_45_0_AMRCor843194