Pest Analysis: American Airlines

Topics: American Airlines, Airline, Delta Air Lines Pages: 5 (1542 words) Published: October 30, 2013


Analysis of the Airline Industry

Parameters of the Industry
American Airlines is a subsidiary of AMR Corporation and one of the leading airlines in the U.S. It has two subsidiaries, that is American Eagle and American Connection. It is the second largest airline in the world based on revenues used in its operation, its size of fleet and miles covered in passenger transport. It has an extensive operation of both domestic and international flights in North America, Latin America, Europe, Asia and the Caribbean. It was formed through acquisitions by around 82 small airlines in 1930 and has extensively grown since then. It was only six years from when it was founded and it was already the number one domestic carrier. Three years later is opened up at the New York Stock Exchange. In 1950, it merged with Pan American World Airways, making it into a bigger airline than it was before. In 1959, it became the first airline to offer east coast- west coast travel. With all these major improvements, American Airlines created two membership programs. In 1981, a frequent flyer program called AAdvantage was created. Another membership program they created was called American Airlines Admirals Club. These programs started as an “airline invitation” flyer member program were celebrities and VIPs were members. It is a paid membership program. It was a reward program that helped customers to be able to earn miles and preferential services. In 2001, American Airlines planes were hijacked on September 11. American Airlines is one of the world’s largest airlines. Its headquarters is in Fort Worth, Texas. It has two major affiliates American eagle and American connection. The largest hub is the Dallas International Airport. It is the one of the founding members of the one world airline alliance. It is one of the world’s three largest global alliances. It serves 260 destinations in 4 continents. The main focus city is LaGuardia Airport (New York). The four main hubs are Dallas, Texas for the Americas, Chicago, Illinois for Europe and Asia, JFK New York for Americas and Europe and Los Angeles, California serves Asia and Pacific. They have over 300 planes that are serviced by Boeing, 200 planes in service by McDonnell Douglas. Right now, they have orders for 260 planes by Airbus. The goal is to replace McDonnell Douglas. The main competitors of American Airlines are Delta and United Airlines. As for regional airlines, their main competition is Southwest Airlines. On a financial standpoint, American Airlines filed for bankruptcy in 2011, unblocking $4 billion of cash. The annual revenue for 2011 was $22 billion. The net income was -$470 million, and this was a loss. PEST Analysis

The general environment effects upon the industry are
Political: In regard to American Airways, PEST analysis puts into account the political, economic, social and technological environments within which this company operates. Within the macro-environmental aspects, focus is put on those factors that impact more on the airline. The September 11, 2011 terrorist attack markedly shook the political stability of the United States. This led to a fall in business and air travel. This had negative implications on income generation and profits. Other factors that implicated negatively on the Airlines business include regulation on pricing, legislation of wages and trade union requirements, emphasis was put on the airport, and the national security as well and the policies of 1978 being deregulated. Prior to the September 11 attack, the United States economy was in some mild recession. The industry was fighting carriers on discounts. Economic: The economic aftermath of September 11 impacted dramatically on the airline industry which was in a slight contraction. This led to deceleration on economic growth, fuel costs went high trade accounts had to be balanced, and there was a tremendous fluctuation on the exchange rates of the dollar against the Yen and the Euro....
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