American Airlines Impact on the Aviation Industry

American Airlines Impact on the Aviation Industry

American Airlines Impact on the Aviation Industry

American Airlines was founded in the 1926 by Charles Lindbergh, flying mail routes for eight years, and then it began to become the reality we see today (Airlines, 2017). With a history long ninety years, its impact on the Aviation Industry is undeniable: one of the many examples possible, the DC-3 airline became the first one where it was advantageous carrying passengers, starting de facto the modern aviation era (Airlines, 2017).

American Airlines Impact on the Aviation Industry

The aim of this paper is to explore the impact of the airline, conducting a research based on the inner strengths and weakness of the company, comparing them to the principal competitors, like Delta Airlines and United Airlines. External threads and opportunities will be also discussed as elements that can provide a better understanding of the corporation.

The assessment is going to proceed looking first at the inner characteristics of the group, then a comparison will be done between those and the one of the main competitors, Delta Airlines and United Airlines, as those are similar to American Airlines,  moving then to the external factors. All this elements will be used as a base to determine the impact of the company on the Aviation Industry, with a conclusion that is going to close this paper.

American Airlines Impact on the Aviation Industry

It is possible to begin this research looking at the Figure 1, where all the elements of the discussion are been represented in a brief and visual graphic. This will constitute the base for the essay, as well as a useful tool to synthesize what it is going to be discussing in details after this brief introduction.

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To support the evidence the sources used in this paper are mostly based on the American Airlines website, with also other credible web site used where needed.

American Airlines Impact on the Aviation Industry

The strengths of a company like American Airlines can be found just looking at its history: ninety years of presence in the market is surely a great place to begin with: a long, successful history it is probably of the reasons why the company has so much destinations and carriers, with 350 destination daily (American Airlines, 2017) and 945 aircraft in service (“American Airlines Fleet Details and History”, 2017). With so many destinations and carriers, American Airlines can take customers all around the globe, from a different numbers of airports located in America, Europe, Asia and Australia, and with some new destinations are going to open in 2018, such as the one from the Dallas/Fort Worth Hub to Iceland (“American Airlines Announces New Service to Reykjavik, Iceland – NASDAQ.com”, 2017) this is a prominent strength of the company. More over the presence of a Hub such as the Dallas/Fort Worth is important for its positions in the US territory and constitute another plus for the corporation.  Customers loyalty is perhaps the greatest strength of a business, and on this matter this year, American Airlines has taken home the Freddie Awards for Best Elite Program (“Winner’s Circle | Freddie Awards”, 2017), which contributes to a great length to the general good brand image and positioning on the market.

American Airlines Impact on the Aviation Industry

Of course, every company has its weakness, and American Airlines isn’t outside this basic fact. Again, like many business in our world, certain strengths can also be weakness in a different point of view, and in the particularly case of the American Airlines the history of the brand can work in both ways: a long story can be perceived, both as a strength, as already seen, and as weakness because it can be seen as old and incapable of being modern, in a sector such as the aviator one where technology changes the game almost every day. In a context where low fares companies are on the rises, American Airlines can lose its position due to the cost, and in the effort to gain access to this part of the market, it can make decisions that could be risky (“USATODAY.com – American Airlines squeezes passengers in tighter to make money”, 2017). Another factor of weakness is the financial position: while it seems to have stabilize its unit revenue in the current fourth trimester from -2% to 0 (“United Airlines expects unit revenue to be -2% to 0% in 4Q2017 | CAPA”, 2017), the 7% fall in the second trimesters of the 2015 is surely not forgotten yet (American Airlines’ financial performance is clouded by concerns over unit revenue degradation | CAPA, 2017), which is maybe the top weakness of the company in these days.

American Airlines Impact on the Aviation Industry

Looking at the principal competitors of the company, two takes the primary spot, due to their importance and position relatively to the American Airlines, which are the Delta Airlines and the United Airlines.

Starting with the Delta Airlines, it can easily seen that its history is two years longer than American Airlines (“About Delta: Delta Air Lines”, 2017), so the period time of business it is almost identical. With 864 aircraft in services (“Delta Airlines Fleet Details and History”, 2017), the number is relatively smaller than the one  from the company subject of the paper, with a similar comparison in the number of destinations, where Delta alone flights 233 destinations, which become 320 with its regional affiliate, Delta Connection (Flight Schedules, 2017).

American Airlines Impact on the Aviation Industry

One of the major elements of difference between the two company is the average age of the carriers, which is higher in the Delta Airlines, up to 17 years (“Delta Airlines Fleet Details and History”, 2017), in comparison with the 10.1 years of the American Airlines (“American Airlines Fleet Details and History”, 2017).  This could play a huge difference, especially when in almost every other area the two airlines are very similar, because now the customers are more informed and so the age of carriers could be seen as a potential weakness in the process of choosing a company to flight with, in a context where security is one of the most important factor customer are looking for not only in the civil aviator sector but in all business.

American Airlines Impact on the Aviation Industry

The other principal competitor, United Airlines, share the same year of foundation of the American Airlines, with a difference of only few months (“History of United Airlines”, 2017). Again, the period of business is not a key difference in the comparison of the two companies. While with Delta the major difference with the researched company is almost only in the average age of the carriers, this is not the case for the United Airlines: with only 743 aircrafts Airlines (“United Airlines Fleet Details and History”, 2017) and less than 200 destinations (“Destination Information and Routes | United Airlines”, 2017), its position is a little bit down relatively with the American Airlines. The average age of the carriers, 14.4 years (“United Airlines Fleet Details and History”, 2017), is a little under the Delta Airlines but higher than the American Airlines. In this context, the striking difference is in the number of destinations: customers nowadays want to be able to fly everywhere, and this could easily be one of the greatest factors when someone is choosing its company.

American Airlines Impact on the Aviation Industry

Costs are similar for the three companies, so it doesn’t play a major factor in this comparison, while of course it will be a huge disparity as soon as low fares companies will be able to offer long flights with lower fares.

This is a theme that is going to return later as soon as the paper will explorer external threads, but there are several external opportunities to analyze first.

American Airlines Impact on the Aviation Industry

The Code Share Agreement is one on the many external opportunities for American Airlines to explore: A code share is an aviation business agreement in which two or more airlines share the same flight number, and indeed the name Code Share comes from American Airlines itself and Qantas in 1989 (Financial Review, 1989). These types of agreements give the company the means to expand its influence and area of action well beyond its capability only; moreover creating a network of allies and companies alike that can help gain customers, resources and share of market. It’s already said that American Airlines is opening some new international lines, and while this is an internal strength of the company, due to its success, it is also an opportunity to grow and acquire new customers. Then, there is of course the great theme of the environment, which is currently under scrutiny. This issue will be analyzed in a moment, but looking at the opportunity, American Airlines in its Corporate Responsibility Report of 2015 has addressing this issue and is taking real action that in the medium and long run can provide a unique possibility for the business to gain new customers that are deeply concerned with the environment (American Airlines Corporate Responsibility Report, 2016).

American Airlines Impact on the Aviation Industry

As for the threats, they are been already cited throughout this paper, but now they will be analyzed in details. There is the real, persistent thread of the low fares companies that are gained momentum and are trying actively to expand even in sectors like transatlantic and transpacific flights which were where companies like American Airlines have much of their core business, beside from national routes. This is a short term threads, and while some companies seems to have change their mind about this two years ago (Topham, 2015), this is still a concrete scenario that American Airlines must face in the future. One of the other great threads, where the company has this in common with practically all the aviator sector is fuel cost, which only this year is beyond 20% (“IATA – Price Analysis”, 2017). This of course have some serious repercussions on the price people pay to flight, and linking this with the low fares thread that it is been already talked about, this threads is even bigger, because it means that American Airlines could not give the same service for the same price in the future. The last thread which it is analyzed in this context in the environmental one and perhaps it is the biggest to face. A single transatlantic flight emits on average 1.6 tCO2e, and in one study is listed as one of the four most important things individuals can do to reduce their environmental impact (Wynes & Nicholas, 2017). This is a threat that every business should take in mind, as it comes from how we, as humanity, have treated nature up from today, and in the next few years it is going to be even bigger, so American Airlines must have a strategy to face it.

American Airlines Impact on the Aviation Industry

From this analysis it is clear that the impact of American Airlines on the aviator sector is consistent: its long history, from the importance of the company on the development of passengers carriers (Airlines, 2017), to its prominent position in the market for its number of destinations and air carriers, it is relatively easy to see the importance and the significance of the company in the specific sector. The factor that makes American Airlines one step ahead of other companies similar to it, is the average age of the carrier, which is an important strength and also an opportunity to expand customer base, visibility and market. Looking at the principal competitors, it is again clear how American Airlines continues to be a leader in the market, particularly in the sector of middle to upper fares, where the company has its excellence trait. The allies that the company has and its top quality Elite Program contributes even today to give this company a prestigious profile and an undeniable power in the aviator sector. But the scenarios that the future holds are uncertain, and there are many great threads that the sector and the company must face in the short and long run if both want a part to play in the next years. American Airlines is taking serious measurement to face the environmental threat of climate change, and while it seems that the company has taken this issue in a consistent way, as visible by the Corporate Responsibility Report environment (American Airlines Corporate Responsibility Report, 2016), yet there is so much that a company could do that surely there will be other counteractions, especially if American Airlines wants to remain in its spot in the sector. There are also other threads that the company must take action to strategy as fuel cost increase and low fares company expand their influence, and the company has many ways to deal with this issues, looking inside at its strengths and outside at its opportunities. The factors that have helped American Airlines to become one the leader of the Aviation Industry, and that this paper have written about in length, are also those which can describe in greater details about the impact of the society in the past, in the present, and if the company will be smart enough, even in the future.  Perhaps, continuing to focus on the middle and upper fares, and giving a top excellence service could be two ways to have an identity in a world where most companies tries to become low fares companies in the hope of maximize their income, while they do not realize that low fares will always have a market, but also middle and upper fares, as there is a customer base that prefers to pay more for an great quality service both in flights and off flight, and the two worlds can coexist where companies like American Airlines continues to make history and impact in the aviator industry .

American Airlines Impact on the Aviation Industry

Starting from the history of the American Airlines company, the paper has researched the characteristics of the airline, looking at its inner strengths, weakness, then making a comparison with two principal competitors, Delta Airlines and United Airlines, in terms of history, destinations, carriers and average age of the airplanes. Then, analyzing external opportunities and threats has provide elements to see what positive or negative issues the business must face and where there is a strategy to carry with the actual success of the company.

American Airlines Impact on the Aviation Industry

This has constitute the base for the analysis of the impact of the society on the aviator industry, which was great at the beginning of the history of sector, in the first decades of the XX century, and continues to have a primary spot thanks to its modern fleets and also thanks to the numbers of destinations and carriers. As no one can knows what the future may uphold, American Airlines is surely of the company that has a clear strategy in mind, and this is one of the key in which even in the years to come the company can continue to have a great impact on the aviator industry, even when the biggest threads that the company has yet to face is a threat that will have consequence on everyone.

American Airlines Impact on the Aviation Industry