Analysis of American Airlines' Capacity
Write about the Aerospace Industry for Latin American Markets.
Renouncing its posture of maintaining high discipline, American airlines improved its holding capacity (in regards to the available seat miles) to 22.1 billion in April, 1.3% above the previous capacity of the previous year. However, the airlines could not change this increase to passenger traffic because of the strengthening of the US currency/ dollar. The passenger traffic declined annually by 0.3% due to the tremendous change in the domestic traffic than the Atlantic and Latin American markets. Furthermore, the Texas-based airline’s load factor percentage of seats decreased on a monthly basis.
Despite the fact that the American airline is the world’s leading traffic airline, there’s a notable decrease in the amount of income received from the passengers per mile by around 4-6% in the second quarter. In addition the airline has reviewed its second quarter fuel price upwards from $1.94-$1.99 per gallon, 10% above the previous level since there was a significant improve in the crude oil cost (Obeng and Sakano 2012, p. 42-48). Resulting to a downward shift in the pre-tax margin from 18-20% to 17-19%. American had decreased the check level for total system capacity growth in 2015 from 2-3% to only 2% annually as compared to the previous quarter. Its main aim is to increase its domestic capacity by 2-3% and international holding ability by approximately 1% during the financial period (Armen 2013, p. 405). During the press conference on 2017 the American was named the award winner of the year, an annual award.
PEST is an abbreviation of political, economical, social and technological strategy of analysis what encompasses the external factors that influences the airlines. PEST analysis majorly focuses on these components.
These factors outline how the government policies affect or influence American Airlines in this case. The policies include taxation, legislation on labours and environment trade bottlenecks tariffs and stability. The legal factors like employment laws, antitrust law, safety and discrimination laws influences the day to day operation of company in terms of cost and demand of goods and services.
Entail mainly focus on the factors in America that influence business operation such as economic growth, changes in interest rates, currency exchange rates and inflation.
Social factors are in charge of influencing the managerial and operation strategies to conform to the organisation surrounding norms like population change, age distribution, cultural practices of the employees and clients and the career attitude (Chang et al., 2014, p. 46-50). These factors many a times influence the recycling the old employees and training of workers in workshops and seminars organised by the firm.
American Airlines' Market Mix
These factors refer to changes in technology, automation and innovation in the technology. Environmental factors include the elements of both the ecology and environment like climatic change and weather. They can act as guidelines of investing in new areas in case others fails.
American airline market mix analyses the 4 Ps, which are product, price, place and promotion (Armstrong et al., 2015). The major product category in the marketing mix of American airline include selling of seat tickets for flights, hotel and conference room booking, cruises, vacations and cars for hire. The seats are charged according to their category that is business class, choice class, premium economy class and first class. The customers are not in any way inconvenienced by the American airline since it offers both the direct and connecting travels/ flights. There is flagship suite for the international first class passengers which are available on Boeing 777 with privileges and access to the flagship lounge. Lounges such as Admirals club for celebrities, politicians, loyal passengers and VIP and flagship lounge for clients from the other parts of the continent and citizens within the country too. American airline also earn income from selling seats on British Airways. Main cabin extra is a plus product of American airline economy which is mainly available on marine fleet and regional aircraft fleet.
American airline set their prices based on the individual customer choice and demand. The options available different depending on the traveller, flexible, and cost effective. Choice is just an ordinary economy ticket plus other charges on additional features and baggage. Different choices give guarantee clients permission to change the ticket without any charges. (Sun and Kim 2013, p. 68-77). However, elite members get 3 complimentary check bags. Choice plus is the same as the essential with 50% additional miles, premium beverage and same day change in flight and standby. Flexible give the customers an opportunity of 25% mile bonus, priority baggage privileges and delivery (Adler and Gellman, 2012, p. 34-35). B The business class gives 25%- 50% mileage bonus, 2-3 checked bags, premium beverage, same day flight change and standby, and priority baggage privileges and delivery and dedicated check in counters.
American airline has five main hubs that is in New York, Dallas, Miami, Los Angeles and Chicago. It as well operates in Washington D.C, Charlotte and Phoenix on a low scale as compared to the 5 major hubs (Burghouwt 2016). Together with its operating partner in the regions, the American airline has managed to develop a large local and international network. Their travels goes up to above 50 countries including approximately 350 stop points by 6700 flights daily on a normal operations of the company. Dallas is the leading hub with approximately 140000 passengers per day but the American airline maintains other basses such as LaGuardia, Pitsburgh and Tulsa International airports with Tulsa handling the Boeing fleet. A lot of loyalty programs are also provided by American airlines which are used by passengers’ on board during the journey. Nonetheless, American Airlines use the distance in a journey upgrades to First of Business class even on partner airlines, car rentals, hotels and other retail products. The travellers enjoy such a privilege with their families together. American Airlines issue a classic Platinum or any other higher status, using a visa card. These cards permit travellers to fly and enjoy other additional benefits. (David et al., 2013, 75).
External Factors that Influence American Airlines
In addition to activities for promoting the industry, the firm has other ways like use of billboard, On-board magazines and inflight, airport entertainment solutions as well as social media forums like Twitter, Facebook and YouTube. Booking is made easier for customers since they can book without necessarily visiting the station. In other words the processes have been made digital. During vacation for esteemed customers, American Airlines offer discounts and hotel services. Compared to any other company, they are leading with forty billion dollars used as operating revenue.
In the year 2017 as the best accounting period for American Airlines compared to 2015 and 2016. The Chief Executive Accountant of the American Airlines confirms the year was completely different from any other year. It was year that the company recorded best result outcome ever hence the need to give credit. (Warren and Jones, 2018). At least everyone in the team contributed in a way to finally achieve good results. A section took delivery of new aircraft and much more – all while running a solid operation and taking great care of our customers. In order to maintain a positive growth like the previous year where the company did well, American airline must be ready to put in practise exceptional achievements and capabilities in every department of operation be it in finance, customer care desk, and security and labour relations. (Bamber 2013). Its executive leadership must also clearly show innovation and strategic thinking that sets the company apart.
Delta airline has a unique tremendous change. Delta’s stock DAL, +0.70% shot up 6.6%, the biggest one-day percentage gain since January 2015. Trading volume reached 16.1 million shares, compared with the full-day average of 8.3 million shares. Delta`s September load factor declined to 84.4% from 84.6%, as a 0.6% increase in capacity outpaced 0.3% growth in traffic. The air carrier said in the wake of Hurricanes Irma and Maria, it now expects third-quarter adjusted operating margin in the range of 15.5% to 16.5%, down from guidance provided a month ago of 16.5% to 17.5%. Earlier before Delta Air Lines Alaska Airlines was the best ever in entire America. Delta surpassed every factor of hindrance in the country, even with multiple meltdowns that resulted in thousands of cancelled flights and tens of thousands of passengers stranded. The outlook for unit revenue for the next couple months continues to improve.
Just like American Airlines, Delta Airlines operations are also affected by political, economic, social, technological, and environmental, in different ways though.
PEST Analysis of American Airlines
One political factor that contribute widely to airline business id basically, political stability. Delta’s business operates in a number of nations which impliy the political status and its environs matter to the flights. Give for instance, most restricted rules were eliminated in the US reducing on a lot of barriers to the airlines industry operations. Since then, a positive impact has been recorded on the Delta airlines. Nonetheless, this political is almost similar in other countries. According to most of the markets, rules and regulations still apply. Therefore, the amounts generated as profits by businesses in such restrictive environment is very high. Most airlines opt to partner with countries purposefully to generate the best services and products. Apparently, individual countries that give in to partnership demonstrate they no longer restrict the environment for other airline businesses among others.
The economy of any nations does automatically well with airlines. Several governments consider this factor and implement in strategies to promote and protect airline businesses. However many government are yet to introduce laws to open up their market to the airlines companies. In circumstances of economic shortcomings the airlines industry and their business usually get severe and adverse impacts (Hooley et al., 2012). A close assessment previous studies explain downturn impacted no longer impact on the airlines business. Not only did the business class economy fliers too saw a decline in business but both the passengers and the airlines companies were impelled to revisit their prices.
Recession impact on the revenue and employment levels in the global economy (Edelman and Singer, 2015, p. 88-100). Both of these things attribute to the consumers ability to buy goods and services. A lot of the world’s economic activities are determining factors determine the Airline brand. (Doganis 2013). When estimated, then current status of the economy equals profits and revenues of Delta. Nonetheless a lot has changes and the status of employment improves, hence more business ideas pertaining to airline industry (Lim and Hong 2014, p. 530). Rapidly growing middle class is also an economic importance for Delta airlines. A big groups of people are using air travel for tours at time business travel too. In sum, the economic alteration imply an increased demand of air-travel.
Social factors are also an important factor determining the demand for air travel. The demographic changes in population in particular are significant to Airline Company. The only convenient means of movement for the generation yet to come and the current ones. Any increase in population determine the demand for air travel. The social capital developed by the airlines industry is also an effective technique behind the rising popularity of the airlines industry. Delta airlines industry is a large employer globally. Delta airlines alone have created job opportunity for thousands of people. The entire society, both business and work are acquired from the wide network of flights in the world. This network has added speed to business and common life.
Product, Price, Place, and Promotion in American Airlines' Market Mix
Technology is currently of more concern and significant for organisation than ever. In case of the airlines industry, from fuel efficiency to range and convenience, technology is important in all these regards. As a matter of time, the Airlines plans to have better and fuel efficient planes, which everyone desires to have around. Information technology attributed change in many issue, for instance, in terms of booking and managing operations, IT as it is referred has a big role. In addition, the use of mobile devices has spread all over the world. Delta Airline companies are utilizing digital technology to promote their brands and market their services. Technology make things easier and efficient for customers to check and make remote booking without necessarily travelling to the booking offices that making life more good for clients.
The external factors influencing the operation of the company are such that, the airlines industry is responsible for around 2% of the entire emissions globally. Sustainability is a equal concern for the airlines companies like any other business. However, the airlines companies have tried on reducing the emissions and cut down their CO2 emissions.
Delta also takes its environmental responsibility seriously and has made improvements across its operations both on the ground and in the air. Delta has started several initiatives across its operations to reduce emission of carbon II oxide, acknowledging the environment is worth care by society today. Sustainability initiatives developed good reputation are significant in managing operations in a better way. For reward, any brands that manages its environment have more customer loyalty and also grow a larger customer base unlike to rivals with the environment. Investing in environmental initiatives has its own benefits and it is why Delta’s is putting much effort.
The 4 P`s of marketing theories are similarly applicable to Delta Airlines despite different products, Price, place of operation and promotions. In terms of product, Delta Airlines provides two key products, transportation and cargo services, which is the marketing mix product strategy of the company. The company has a wide network worldwide. Approximately, the company runs 5,400 plus flights every day without any technicality. (Jarach 2017). Delta Airlines provides good and distinct products to satisfy different groups of its customers. It is transforming its service to be more merchandised approached. Five distinct travel experiences are offered which include Delta One TM, First Class, Delta Comfort+ TM, Main Cabin and Basic Economy. The first three include premium amenities and services such as complimentary refreshments, alcoholic beverages, extra leg room whereas main and esteemed customers get the classic services upgraded as per their preferences (Ferrell and Hartline 2012). Delta cargo hires cargo space on regularly scheduled passenger aircraft to transport cargo within its localities and outside the world.
Prices charges in the airline industry are often determined by the level of competition and since Delta Airlines is one of the most largely operated airlines in US. Flight prices also rely on jet fuel prices. Delta, as they are known uses a fuel hedging program in minimising the risk of changes in fuel prices. In different ranges, Delta Airlines offers differentiated services to accommodate all preferences. The Delta One TM, First Class, Delta Comfort+ TM are premium services and are therefore expensive. The Main and basic are affordable classes however passengers can buy extra amenities as per their requirements (Shaw 2012, p. 30-55). Customers can also avail discounts through Delta’s frequent flyer program
Delta Airlines has a network of 312 destinations in 54 countries. The place strategy in the marketing mix of Delta Airlines can be related with its extensive reach. The main hubs include Amsterdam, Atlanta, Boston, Detroit, London-Heathrow, Los Angeles, Minneapolis, St. Paul, New York-LaGuardia, New York-JFK, Paris-Charles - de Gaulle, Salt Lake City, Seattle and Tokyo-Narita. The network is centered on a system of hub, international gateway and key airports. With individual hub gathering traffic from neighbouring regions and distributes to other hubs. Delta Airlines has collaborations with international as well as regional operators to magnify its network.
Delta Airlines has a strong brand image (Coursaris, Osch, and Balogh, 2016, p. 6-24).A good illustration was in 2007 when Delta brought a new livery to oversee its rebrand. Delta Airlines has an extensive and common loyalty frequent flyer program called sky miles. Customers earn the privilege by flying on Delta or its associates or by using partner companies such as credit card, hotels, car rental. The mileage credit can also be used to represent membership at Delta Sky Clubs. Inclusive is a website app where it markets itself.
Notably, Delta Airlines had 2015 as the best accounting period followed by 2016 then 2014. The company had registered income of 12.05 billion (Parise 2016). According to the Board of management, 2015 performance was such an amazing production in all it departments. The result at the end of financial year illustrates the willingness and hard work the Delta team portrayed, thus considered running the best airline in the entire world. The management ascertained, the success of their hard work had allowed them get to the top. The overall demand environment remains solid as they looked ahead, (Redondi et al., 2012, p. 1-4). The breadth of their network scale allows them to focus our commercial efforts on those areas of the business with the best opportunity such as the domestic marketplace, while limiting their activities to any sort of threats
The company should consider investing in this market because it has proven that international expansion is a more profitable opportunity than increasing domestic flights (Kimes and Wirtz 2015, p. 1-68). This strategic step confirms Delta's current lead position in international travel, and it prevents low-cost competition from Southwest (the airline continuing to expand into and dominate domestic markets). According to Delta's plan of reorganization filed in Delta plans to diversify their international capacity. The company plans on having a domestic/international capacity mix of 60 to 40 despite the mix at 70 to 30. Delta is on-track to sustain profitability in the airline industry when it can plan to improve its scope specifically in the Asia/Pacific, Latin America, and Africa/Middle East/India regions,
Delta airline should adopt its marketing promotion it had in the beginning. Every research gives it an organized one with one the most powerful strategy among other companies. These recommendations considers Delta's past-the fact that this airline is the longest-running, founded in 1924. In the 1930's and 40's, flying was a privilege, an event that often required a patron to dress up. By then, airlines operated 100% on-time and customer satisfaction was part and parcel of the purchased ticket. Delta Air Lines return such years and make flying an extravagant event to be experienced again (Kaufman, 2013, p. 343-377). Apparently, such a change must not impact on the flight charges, maybe by minimal variation in the margin. In least complicated process the company can importantly commence in business class, and work its way to regular coach as a short-term promotional investment (O'Connell and Williams 2016, p. 195-220).
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