Essay about American Airlines Competitive Strategy

Low quality, no frills, lowest price base fare are features of the economy pricing model. Since Spirit Airline adopts 'the a la carte pricing model,' the basic fare paid buys only the flight itself and frills are charged separately. Furthermore, the airline asserts that customers should only pay for the services they request and should not subsidize other customers’ needs.More so, Spirit assumes that lower fares will stimulate the demand for air travel by attracting customers who would otherwise use other means of transportation. Hidden fees and questionable policies are dubious distinctions of Spirit Airlines.

The Risk of Entry by Potential Competitors – Since the deregulation of the airline industry in 1978 over 1,300 new airlines have opened for business. However, most now are bankrupt or merged with the other carriers to stay workable. The established giants were Delta (merged with Northwest), American Airlines (merged with U.S. Airways), United Airlines (merged with Continental), and now Alaska Airlines (merged with Virgin America). Now the Low-Cost Carriers (LCCs) are posing a massive threat which includes Southwest Airlines (merged with Air Tran), and JetBlue.

Spirit Airlines is actually an economical carrier dominating the industry and it enthusiastically utilizes contributory revenues. Spirit brands itself an Ultra Low Cost Carrier (ULCC) and epitomizes floating on the low-cost. The low-cost and “pleased with it” reaction is now part of Spirit ’s no advertising, marketing cachet. The company was founded in 1964 as Clippert Trucking Company and is incorporated in Michigan. Spirit prides itself on having a few of minimum fares within the air service activity. Spirit further displays itself as a airline that enables customers to decide on precisely what they need to pay related additional products and services such as bags, advance seating option, and snacks. This pricing policy has reached a contentious

mergers of Delta and Northwest, United and Continental, Southwest and AirTran, and now, American and US Airways definitely brought an end to competitive pricing on tickets.

Trends significant to the commercial aircraft are mainly revenue increase. “Since the 1950s, airline yields (defined as the average fare paid by a passenger per kilometer) have consistently dropped” (2015, Aviation). With the competitiveness regarding cheaper flights for customers in order to lure more customers, the industry as a whole as seen a decrease in their revenue. So, in order to increase their revenue, they are constantly offering perks to their customers at an increased rate which will make their flight more enjoyable and also bring revenue to them. Spirit airlines are offering a member club for $9.00 which is allows all members to ride Spirit airlines at a discounted rate. The members club also gives discounts for baggage and any

Since deregulation, the most influential driver of profit in the airline industry has been the control of ticket distribution (Shaw, 2013). Spirit Airlines, the leading ultra-low-cost, no-frills

The recent economical and financial downturn severely impacted the airline industry in 2009 and brought only small increases in 2010. The recession negatively influenced the discretional income of travellers. More precisely, the leisure travellers’ and business travellers’ budget changes resulted with a sudden decrease in their demand. Therefore, corporate policies tightened and generally the demand for travelling decreased. On the other hand, demand for substitute products, such as video conferences and surface travel, has increased. As a result, many airlines, including Southwest Airlines, responded with capacity cuts and fare discounting. On the other hand, Southwest used the opportunity also to further expand and because of its low-fare services, it could enter new markets as well.

Economies at the hub. Major airlines acquire and maintain large market shares at their hubs even with higher prices and higher costs than competitors. For example, AAL has a price 31 percent price premium in DFW, a 70 percent share of the non-stop passengers in DFW, and a higher cost per available seat-mile (ASM) due to union contracts. However, they achieve economies of scope and scale that are not captured in the measures of cost per ASM (Edlin, & Farrell, 2002). Economies of scope come flight sharing from passengers flying to another destination beyond the hub, such as from Wichita to Dallas then to Miami.

well the airline is doing is in a matter of opinion some people are saying that the benefits from American were not transferred over others are saying to the benefits from past American were transferred, the same thing as being said of US Airways past customers.

It was surprising for most customers that airlines currently decide to increase fares for U.S. domestic flights even though their expected costs decrease due to lower fuel prices. The prices are generally a process of revenue management that reacts on demand and competition, though domestic flight fares aren’t directly connected with the costs trends (Koenig, 2014). Airlines rely heavily on the brand loyalty of their customers in order not to be forced to offer the lowest prices. A common approach of a competitive edge is the implementation of improved in-flight services. One example in the past was the shift of

Surprisingly enough, the corroboration that the real cost has not declined after the act does not relate to airlines profit. Steven A. Morrison, the chair of the Department of Economics at Northeastern University, discusses the deregulation affects in his article. Although he evaluates deregulation to be good for the consumers, he argues that the deregulation act has been detrimental to the airlines despite the increase in load factors. Deregulation has created ever-increasing competition that even after mergers, increased efficiency and load factors, the continuous pressure of keeping fares low has resulted in losses for the airlines. His remarks address the airlines’ concerns over the costs. This emphasizes that deregulation has not only harmed the consumers, but also the airlines.

The advantages for business travelers is that, they no longer need to worry about restrictions attached to reduced fares, forcing them to pay higher prices. They can now get the advantage of being able to book at short notice but guarantee that they will still receive the same 28% off full Coach with no restrictions with anytime fares. Furthermore, if they can book in advance they can pay even less.

Normally, in competitive market and profit maximization goal all other company tend to follow the trend which hit the market and easy to adopt. After the value pricing and categorized pricing structure of AA mostly the trend was followed by all the Airline companies in United States and customers started shifting towards different airlines. That leads to industry growth and overall the use of airline service by customer has increased and customer have enjoyed the low prices flight due to high competition among the airlines. AA who has founded the concept in airline industry was beaten by the high volume of competition which started very quickly. Overall, majority of airline companies tried their best to beat each other in the competition and kept on introducing different promotional prices to attract the customers. Initially, mostly has made the profit which lead to break even and loss for few

- Reduced demand and Customer inability to pay: Average ticket prices have jumped 10 percent in the last several years, potentially turning off consumers that can reach their destination in other ways and specially After the global downturns and the hard financial times customers ability to pay for tickets for certain destinations that are tend to be expensive had declined. So the company had to compensate these loss by offering promotions and discounts over tickets to

The airline industry is a competitive method of travel and continues to grow at a rapid rate globally. In fact, the industry has doubled over the course of a decade from $369 billion in 2004 to $746 billion by 2014 per the International Air Transport Association. However, is the airline industry “hampered by slim profit margins, forcing carriers to focus on both cost reduction and revenue growth through better customer interactions?” (Industry Perspectives, 2015) With revenue growth comes concerns for airline firms like that of Southwest Airlines. Examples of these concerns are the variety of costs. Costs include: fuel, labor, professional services, food and beverage, landing fees, maintenance material, etc. Fuel costs are about 10% to 12%