American Airlines Case Study

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Distribution at American Airlines Case Analysis

Key marketing issue or challenge facing American Airlines

American Airline’s key marketing issue is its distribution system. Over the past decade, the airline industry, Global Distribution Systems (GDSs), and travel agencies have battled with full content agreements. The GDSs have pursued content equality to each other, direct channels, and emerging technologies (web-based bookings) to prevent a loss in market share. The idea behind the agreements is that they create a fair, level playing field. American Airlines is increasingly critical of full content agreements. Full content agreements limit American Airlines ability to differentiate its airline through travel agencies because they are obligated to provide lowest common denominator content to all agencies. For GDSs, full content agreements mean lower revenues in segment fees. With less revenue, spending on technical innovation, products, and services has been cut back. There is less money available for agency incentives, which leads to lower customer satisfaction levels and less ability to attract new customers. Agencies are negatively impacted by full content agreements because they receive lower incentives and reduced innovation from their GDS. The airlines are more motivated to invest in new selling initiatives for their direct channels than for agencies. Agencies are unable to differentiate themselves from competitors through the ability to provide unique content. Many agencies find themselves competing largely on the basis of transaction fees. Two distinct possible solutions/alternatives

American Airline's has already designed the Direct Connect program which allows free access to travelers that go directly to AA.com to search and book flights but has not brought the program from the design stage. One option that American Airlines can consider, as a solution to its distribution problem, is finish developing and implement...
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