The commercial air carrier system in America is one of the most reliable and comfortable ones in the world. It concerns not only the passenger safety during the flight but also comfortable conditions, costs, and route structure. American Airlines is one of the most popular air carriers in the USA. It is the major company, and it is famous for its successful flights almost without some issues threatening to people’s life. American Airlines conducts both domestic and international air flights. Nevertheless, the popularity of AA among the customers has emerged from the long time history of safe and comfortable service. American Airlines has had many different transformations in the system of transportation. In addition to it, the company has experienced economic collapse and the process of deregulation. However, the air carrier has improved its status and has become the world’s biggest airline by the profits and size. Although American Airlines has lost its power as the biggest air carrier by the size and route system as the result of bankruptcy and deregulation, an appropriate revenue management and the product differentiation means have helped it overcome the failure.
History and Development
The history of American Airlines began after the First World War. The emergence of the company was more accidental in character rather than a special event. The incorporation of the small, insignificant transporters into one company gave an essential impulse to the emergence of American Airlines. Those independent transporters were the first who used the title American Airlines; however, they did not have an intention to unite their cooperation into one company. Despite this, the company appeared late as the domestic air transporter and used small inconvenient planes made of wood for the flight from New York to Boston or to other cities of the USA. However, after that, American Airlines created flights for special, privileged passengers. That innovation made the airlines the most successful company in the USA. The company got new possibilities and had enough means to take active part in the new airport building. The company had quite a high level of development and it became one of the most profitable air carriers in America. However, the terroristic attack of 11/9 caused a significant economic collapse. The company was almost a bankrupt since the American Airlines’ plane was one of those that had hit the WTC towers in New York.
Deregulation and Competitive Characteristics
Economic prosperity, structure, and competitive characteristics can be divided into two periods – before and after the deregulation. Deregulation was a significant reformation in the sphere of native airlines. As Robson (1998) writes, “On 24 October 1978, President Carter signed the Airline Deregulation Act. That date will stand as a Red-Letter day in the history of America’s commercial aviation industry” (p. 17). Deregulation was an attempt to reduce the governmental influence on the air transportation system (Reed & Reed, 2014, p. 51). American Airlines became one of the airways that transformed significantly because of it. American Airlines was forced to change the system of routs. Therefore, the structural and competitive characteristics had changed. The system was quite convenient for the customers because they could compare the costs for the service. Thus, the competition between the companies increased. American Airlines experienced some modification but generally, it did not suffered much as the company had offered the most comfortable conditions to its clients. AA extended the system of routs and initiated not only acceptable domestic but also transatlantic flights.
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American Airlines achieved its fame because of the most convenient flights in the world. The system of routs had many changes during the long period. The first transportations were placed in Texas, and the only few flights from New York or Dallas were available to the customers. However, now, American Airlines has the biggest structure of routs and product alternatives. Apart from making domestic flights, the company has several aircrafts for the transatlantic flights. The biggest part of routs is concentrated in the Northern part of America, and it begins in the airports of Los Angeles, Dallas, and Miami (“Elite status benefits”, n.d.). The longest routs propose the most convenient conditions of the business class. In fact, the routes of American Airlines are directed to four continents of the planet. Moreover, the beginning of the new century was associated with the extension of the air transportation to Asia. American Airlines was the first company that used the internet resources for the convenient reservation of the tickets. American Airline Groups applied the system of the electronic tickets in all the countries, where it had the international flights (Reed & Reed, 2014). It was the biggest innovation in the sphere of air transportation. Those transformations were quite useful as they helped people save money. The benefits of the AA groups made the company the leading air carrier in America and the most convenient one in the aspect of prices.
Means for Achieving Products Differentiation
The reason of the company’s prosperity is a successful system of the means for achieving products differentiation. It concerns not only electronic system but also a successful advertising. The company underlines its title, associating it with the national notions. The advertisement stressed the safety of AA and its priority among other companies. American Airlines has made a decision to merge with Trans World Airlines with the attempt to get certain benefits. However, an unexpected bankruptcy interrupted the rapid extension of the company economic success. The 9/11 events in America compromised not only the security system of the country but also the air transportation section. Although American Airlines was the major carrier, it lost that position at once as the result of the highjacking the company’s plane by terrorists. Consequently, American Airlines lost the half of its clients. Nevertheless, the company’s staff worked on the reconstruction and innovation of the flight conditions to achieve a significant product differentiation. Thus, American Airlines conducted a “striking a deal with Southern Californian Communications Company ViaSat to bring satellite-powered Wi-Fi to 100 Boeing 737 MAX aircrafts by September of next year” (Heater, 2016). AA had a deal with a different company, but a Wi-Fi service was not appropriate. The cooperation with the Southern Californian Communication Company will be a new step in modification of the flight service and achieving the highest level of product differentiation. The company Gogo continues to provide American Airlines with the internet services; however, new planes will be equipped with ViaSat technologies. The company plans to implement these innovations for all its aircrafts until the end of 2019 (Heater, 2016). American Airlines plans to get back its status of the major air carrier in America and in the world by achieving the differentiation in services and proposing the most comfortable conditions for its customers.
American Airlines’ Departments Structure
The personnel of the various departments of the company also had a significant contribution of the promotion of American Airlines in the USA and in the world in general. After the merger with Trans World Airlines, the pilots of the TWA lost their possibility to be the major pilots. The AA personal structure developed a system of successful cooperation.
The complex of the airline department is quite big. It contains several important sections, responsible for various activities. For example, the line personnel is the biggest department in the company since it includes the pilots, mechanics, flight attendants, airport clerks for supporting convenient service, and security. Thus, the main function of the line personnel is the service. However, during the bankruptcy period, the company had to reduce the amount of this department’s personnel.
The department of operations deals with the more serious issues and it has the greatest responsibility – the safety of flight. The personnel of this department develop schedules, plan the routs, and take into consideration the weather and other factors. The department of the maintenance is responsible for the safe systems of the plane and the comfort of the passengers. Although this department is quite important, it includes the smallest amount of workers. Nevertheless, after the 9/11 events, American Airlines had a reorganization and increased the amount of workers in the maintenance department. The department of reservation deals with the problems concerning tickets and their reservation. American Airlines was the first company to apply the electronic reservation and ticketing. It helps to save money for the passengers and the company (Lenoir & Bontemps, 2011). American Airlines works on the development of new electronic technologies since it is a profitable project. It rejects the necessity of the reserving department. One should admit the work of other departments – marketing and staff personnel. They usually do not take an active part in the airline system coordination. Their mission is to control the work of other departments and to support them with necessary financial, legislative, and other type of information. The marketing department works on the promotion of the American Airlines company. This department observes and influences the regulation of costs.
Economic and Marketing Characteristics of the Company
The nature of the fixed, variable, and controllable costs develops the economic structure of the company. The bankruptcy affected the company’s affairs and violated the costs system. The problem is that American Airlines has developed a complicated system of fixed and variable costs. One should note that it was a quite successful system but after the deregulation and the bankruptcy issues, the available comparison of the prices had forced the company to reduce the costs for the service. The fixed expenditures were the same when the profits reduced and brought the company to the economic collapse. In addition to it, the skyrocketing prices for oil significantly affected the company’s economic system. American Airlines applied the fuel control program created in 2005, known as the Fuel Smart (Jones, 2011). This program developed several methods to get the lowest expenditure for fuel; thus, “using lighter materials on board or cutting back engine burn on a taxiway, may save the carrier 139 million gallons of fuel or $371 million in costs a year” (Jones, 2011). American Airlines continues to look for the new methods to cut the fuel expenditures. The company used new cargo containers made of lighter materials and applied different chemical substances for treating the aircraft wings to reduce drag on the aircrafts (Jones, 2011). The American Airlines Group has applied many different methods to reduce the expenditures and increase profit, but those modifications have not helped avoid bankruptcy. One should assume that it was possible to achieve that goal by the help of the price reduction since American Airlines had quite a profitable status.
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The economic situation of the company was complicated, and AA tried to improve its costs position in 2001 (Robson, 1998). The groups had an aggressive costs politics. This issue needed some efforts. Therefore, American Airlines initiated the changes in the procedure, the increase in health plan contributions by employees, the increase of reliance on check in kiosks instead of gate, the shutting down of the Kansas City maintenance facility, the reduction of certain commissions to travel agents, and the renegotiations of IT supplier contracts (Robson, 1998). The complicated economic situation forced the company’s management to apply the revenue management system. This type of management is directed only at achieving certain profit. Otherwise, the company conducts the flights without receiving benefits. American Airlines reduced the prices for the seats on the plane not only with the purpose of attracting the biggest amount of customers but also with the purpose of having the biggest revenue from the flights. Thus, the revenue management for American Airlines was an attempt to overcome the company bankruptcy. Furthermore, it had no influence on the fixed prices, as they had been already paid. The success of American Airlines during the long period was the result of a qualitative work of the market department in the direction of revenue management (Lynagh, Pinkus, Ralph, & Sutcliffe, 2013). The company successfully predicted the consumer behavior and tried to compel people to use the company’s services. In other words, the revenue management operates at the micro market’s level, when the most important target is the potential client. The revenue management in American Airlines affairs has played the most significant role for its rescue. The problem is that other companies often apply the same method of revenue management and try to make a strong influence on people.
Thus, American Airlines is one of the most famous and safest airlines in the country and in the world in general. The history reveals the secrets of the company’s success as one of the oldest air carriers in America and in the world. American Airlines lost its primarily fame as the result of deregulation modifications that had the purpose to reduce the influence of government on people. However, it did not make the company less successful. The events of 9/11 were the most striking point in the history of the company. Moreover, American Airlines suffered from it. The period of bankruptcy gave a strong impulse to the strategic transformation. Therefore, the personnel applied the revenue management that was directed at the customers and that intended to compel them to use the company’s services. American Airlines management aimed to get back the leading position of the company on the aircraft transportation market.