According to the FAA’S Air Traffic Organization (ATO) nearly 42,000 planes are provided service to a day, which would mean nearly 2.5 million people are flying daily. The FAA ATO flies these passengers over 29 million square miles. With that much air travel taking place that’s an immense responsibility on American Airlines. There are many factors that play part in running a business, but there are even more that have to be functioning properly to run an airline (Segal, 2018). This is why the industry is often referred to as an oligopoly, which means the market is controlled by small firms (Segal, 2018). Though this is focused on the U.S. industry in many ways the industry based state side is intertwined with global airlines because it people flying all over the world, so there may be international factors that come into play as well in the success of the industry.
When it comes to dissecting the industry itself there is a base framework that is used to analyze a company’s position within its industry (DePersio, 2018). This was developed by Michael Porter in 1979 (DePersio, 2018). This framework dissects vertical and horizontal threats to the company in its future (DePersio, 2018). By dissecting these possible threats the company is able to see the possibility of competition hindering their sales and hiccups that may be possible within the supply chain (DePersio, 2018). With a framework such as this a company with so many small firms within it like the airline industry is able to pinpoint things that may go wrong with their plans before it occurs.
Macro-environmental analysis includes a few key factors, which are political, economical, social, environmental and technological influences on the industry. Each airline company within the industry has different advantages when these factors come into play— American Airlines had a feud with an upcoming retail traveling agency, which was attempting to embrace new ways of travel with cooperation with American Airlines, Sabre (Skift, 2018). Sabre chose to resist the efforts because of costs and control. This issue caused strife within the industry. Once this happened American Airlines decided to encourage their customers to purchase with their company directly rather than through miscellaneous travel agencies (Skift, 2018). By keeping purchases within the company there are exclusive content opportunities and benefits (Skift, 2018). With technology growing quickly the distribution standards are on a rise as well, especially through tech vendors (Skift, 2018). Technology as a whole was meant to help society grow but in time maybe it’s roots have overgrown making it harder for industries with such vast reach to run more functionally.
It is crucial that companies stay on their toes especially financially, like many other airline companies, United Airlines has chosen to capitalize on fees for certain economy seats (Pascus, 2018). This fee has been enacted for quite some time by airlines, such as American Airlines and Delta. Separating the costs of various travel services into their own fee group is an industry practice known as “unbundling.” (Pascus, 2018). This has been a prominent tactic since the earlier 2000s (Pascus, 2018). Is this brilliant? In some ways, yes because no one enjoys sitting near the back of the plane. This tactic allows the airline to gain more funds at the convenience of their patrons (Pascus, 2018). If these seats aren’t filled the company will allow upgrades upon boarding (Pascus, 2018). Within an industry especially with multiple companies comes competitiveness, so when American Airlines was one of the first to charge twenty dollars for baggage check, it was no surprise that other airlines followed this trend (Pascus, 2018).
The industry is constantly on its toes trying to stay up with what its consumers need. This year American Airlines intends on allowing passengers to bring more than just one personal item they can now bring a carry-on as well (Hawkins, 2018). By doing this American Airlines is allowing their prices to become a threat to other competitors with their basic economy tickets (Hawkins, 2018). By changing this notion it may seem groundbreaking but American Airlines still has its downfalls when it comes to putting their customers first. There are still many restrictions that stand in regards to flying economy through American Airlines, like not being able change their seat (Hawkins, 2018). By doing this companies like American Airlines are cornering their market into spending more money to fly comfortably whether they see it as a necessity or not (Hawkins, 2018).
Politically the government wants to do nothing but strengthen their own economy so they may implement rules and regulations, similar to preferential rights (November, 2013). But political affiliation isn’t a crucial aspect of industry airlines especially regarding budget airlines (November, 2013). When it comes to the economic involvement in the industry it’s been a long uphill battle since the horrific attacks on 9/11 (Pestle, 2014). The recession and rising oil prices have been no help to the industry either (Pestle, 2014). The industry as a whole needs to put consumers first because of their demands becoming more well-known (Pestle, 2014). This means costs have needed to be stabilized in order to please those flying (Pestle, 2014).