American Airlines Business Analysis

In April 1992, American Airlines launched "Value Pricing" -- a radical simplification of the complex pricing structure that had evolved over more than a decade following deregulation of the U.S. domestic airline industry. American expected that the new pricing structure would benefit consumers and restore profitability to both American and the industry as a whole. The critical issue raised is: Would American's bold initiative work?

issues encountered in exercising price leadership to switch industry practice from a complex structure of differential prices and promotions to a simplified, everyday-low-pricing structure.

American Airlines Marketing cases AMERICAN AIRLINES

1. Issues 2. American Airlines’ objectives 3. The airline industry 4. Market 5. Consumer needs 6. Brand image 7. Distribution system 8. Pricing 9. Marketing related strategies 10. Assumptions and risks

1- Issues The main issue of this case is the lack of profits of the airline industry, an industry that should be more than profitable due to the large amount of customers, the necessity of using airlines’ services and the high prices charged by most of these airlines. What we are going to deal with is, why is this happening? And how is American airlines dealing with this problem?. To be able to discuss how American airlines wants to regain profitability, we must identify and analyse different issues such as, the company’s background, the airline industry as a whole, the demand for air travel, the marketing strategies, the distribution systems, pricing policies etc.

2- American Airlines’ objectives American Airlines’ prime objective is to bring back value to air travel, through stimulating business travel, lowering prices etc. So in other words America...

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...its competitors. -Hubbing: With hubbing, flights from various origins on spokes of the network are channelled through an intermediate location, where they change planes and are re-routed to their final destination. This way the airline can serve more locations with fewer planes. -Frequent Flyer programmes: These programmes provide discounts or bonuses to frequent travellers. The value of the bonuses increase as the mileage flown increase, the bonuses can take various forms such as, fare reductions, upgrades to better classes or even free tickets.

10- Assumptions and risks In my opinion all of this strategies are brilliant, the only risk I see is in hubbing, customers sometimes don’t want spend additional time changing planes, there is the risk of missing connecting planes, luggage may get lost, etc. In the rest of the strategies I don’t see any risks what so ever.