American Airlines Case Study Essay

1205 Words Nov 13th, 2014 5 Pages

Part 1: Executive Summary 3
Part 2: Issues Identification 4
Part 3: Environmental & Root Cause Analysis 5
Part 4: Alternatives and Options 6
Part 5: Recommendations 8
Part 6: Implementation Plan 9
Part 7: Monitor and Control 10

Part 1: Executive Summary
With 1988 operating income of $801 million on a revenue of $8.55 billion, American Airlines, Inc. (American), principal subsidiary of Dallas/Fort Worth-based AMR Corporation, was the largest airline in the United States. At year-end 1988 American operated 468 aircraft on 2,200 flights daily to 151 destinations in the United States, Bermuda, Canada, Mexico, the Caribbean, France, Great Britain, Japan, Mexico, Puerto Rico, Spain, Switzerland, Venezuela, and West Germany.
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American needs to identify and develop a detailed revenue management and yield management plan to capitalize on this opportunity.
Airline deregulation in 1979 led to additional complexity in the practice of yield management. Two major changes took place. First, the number and variety of discount fares increased. Second, airline began offering connecting service, using centrally located airports as hubs, to serve more of the traveling public and provide national service. The resulting airline environment is very complex.
The following factors complicated the yield management task:
(1) the demand for full- and discount-fare seats on any given flight was uncertain;
(2) the demand was variable over time;
(3) in certain cases, for example leisure flights, the demand was also "lumpy";
(4) there was a bewildering multitude of fare types and restrictions;
(5) the hub-and-spoke system made some customers in one fare type more attractive than other customers in the same fare type;
(6) some customers booked seats but did not show up for their flights.

Part 4: Alternatives and Options
Below is a detailed breakdown of the alternatives and options for the issues identified above.
Option 1: Marketing
American Airlines could focus its priorities on marketing in order to realize its full potential from a demand, capacity and yield perspective. Offering last minute vacation packages or more aggressive

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