Pest Analysis: American Airlines Essay example

1532 Words Nov 9th, 2013 7 Pages
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
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The social implications here in included staff layoffs, decline in both lower and middle class travels, it impacted negatively on safety of air travel; decline in consumer travel plans in regard to air travel and low fare became an acceptable alternative.
Technology: Technological aspects – The internet has profoundly impacted on the consumer behavior. This is because this new mode of communication has influenced the mode of airline ticket sales. Some of the technological developments in American Airlines include: The SABRE system, shopping services, which include Travelocity, Orbitz, and Expedia, the internet has become a tool for flight shopping, online reservations of tickets and ticketing and a decrease in the number of travel agencies.
Porter’s Five Forces Analysis
Supplier Forces
For an airline company, aircrafts are costly and vital pieces of equipment. With regard to commercial passenger aircraft manufacturers, there are really only two suppliers that exist: Boeing and Airbus. The limited nature of this industry gives these aircraft supplier’s greater power in setting prices. Air travel is also a fuel-intensive industry, thus making the airlines very sensitive to swings in fuel prices offered by fuel suppliers. As a result the power of supplier forces is very high. The airline industry is an oligopoly, there is limited competition. The market is only shared by a small number of companies.

Buyer Forces
Buyers of airline tickets include

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