Marketing Problems

Comparative Analysis of American Airlines &

British Airways

Marketing Problems 2011 Andrew Corliss Brittani Knott

Nicholas Whitcraft

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This report is a company analysis for American Airlines and British Airways. Both

companies are direct competitors within the airline industry. The purpose of this report is

to analyze and compare the two firms through their financials, marketing, management

and differentiation of strategies. After completing the comparisons, recommendations for

each of the companies are given.

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Company Overview-British Airways

British Airways was established in 1919, founded as an air travel and freight industry.

The companys first daily flight was sent between London and Paris. It was nationalized

in 1939 along with competitor Imperial Airways to form British Overseas Airways to

handle long haul service, and British European Airways to over domestic flights. BEA

developed a domestic network over the United Kingdom most locations British Airways

is still active in today while BOAC slowly introduced services to many countries from

the United States to Japan. British Airways became privatized in a merger with British

Caledonian. Today its annual revenue is over $12.176 billion dollars, BA has a fleet

numbering over 238 planes built for international travel and freight, and carry more than

31.8 million passengers a year. This includes 62 flights a week from Heathrow and 55

weekly flights out of the Gatwick port. British services more than 300 different

destinations outside of the United Kingdom. The primary operation of British Airways

focuses on the consumer business and non-airline services such as freight servicing. In

the consumer sector British Airways include domestic and International travel even

offering chartered services. Primarily based out of the London Heathrow airports a

premier location in the world has service over a wide geographical area and easy point-

to-point business access. British Airways second location is located at Gatwick, London.

British also lease space in many other locations throughout England including

Manchester and Edinburgh. Last year British Airways experienced a small drop in cargo

and freight shipping due to the slowly recovering market.1 The company operates on

1 Discussed in SWOT analysis

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using two main aircraft a Boeing 757 and 747, most recently British Airways added on

the newly developed A318s Airbus to operate the long haul service. In July of last year

British Airways included an order of 24 new 787 Airbus to join their services. Majority

of British Airways revenues, come from Europe (61.2%) these financials have decreased

by 12.9%. British Airways in America decreased from 24% to 20%, revenues were hit

harder in Africa, the Middle Ease and India by 16.5%. Revenues in the Airlines are cut

throat and many are in dire straights with many still in or have just recently declared

bankruptcy the field will need to become more secure. There are also many threats and

weaknesses that are faced by all airline services with the one being able to capitalize first

becoming the clear winner. British Airways as seen in the map below service two-thirds

of the world, with the larger markets again in North Africa, Europe, and North America.

SWOT Analysis- British Airways

4 Like many airlines there are similar Threats and Weaknesses but British overcomes some

with their unique strengths and opportunities that can be created.

Strengths

British Airways strongest area rests in their market position and brand image recognition

in the UK and many other countries. British Airways distinguished itself in 2001 and

through the rest of the decade during the oil price raises, when many airlines began

charging more per ticket British Airways kept their same pricing with a greater difference

in customer service. A key trait of British Airlines has always been part of the British

Airways tradition focusing more on customer relationships and better relations with

business travelers than trying to compete on price with every airline in the industry,

competing on price has also been known to be a killer, for example you do not compete

with Wal-Mart on price instead you compete on service. British Airways can be seen to

take this approach.

British Airways also creates one of the strongest fleets across the globe. Using 49 Boeing

747, 46 Boeing 777, 38 Airbus A320, 33 Airbus A319, 19 Boeing 737, 21 Boeing 767, 9

Boeing 757, plus many more along with the 24 newly ordered Boeing Dreamliner that

will increase their size and offering of services plus there will be some savings in fuel

costs with the Dreamliner that is 30% more fuel efficient than the 767 that in the process

of being replaced and only a small amount of noise compared to the 747. The large fleet

size and the effectiveness of the utilization to service over 300 destinations.

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Now with more and more consumers starting online searches for flights and pricing

British Airways have become focused on offering its same service online. The company

books over half of all UK bookings and a third in the worldwide market. British Airways

have started focusing on e-services that actually help drive down costs. This also

includes mobile applications; to allow customers to check-in, check flight status, and real

time arrivals all factors helping to attract more customers.

Weaknesses

Many airlines are facing labor disputes, with the rise in unions and collective bargaining.

These factors give British Airways and many other airlines a low bargaining power

against suppliers in this case the supply of labor. Last year the union Unite went on strike

for 22 days costing BA $249,972,086 in American Dollars. Unite represents 25,000

laborers from baggage handlers, to check-in staff. This also includes higher expenses to

meet the expectations. With growing labor power growing the airline industry will

continue to become a weakness across the board.

British Airways serves over 300 destinations have been experiencing rather poor profit

from all of its regions. Discussed earlier you can see the disparities in revenues

compared to previous years to areas of sale. British Airways can see effects from many

external factors; switching costs, oil price increases, and third party sellers.

British Airways has also been recording a decline in efficiency when looking at just

operating profits and margins for the past three years. Operating profits have declined

6 10% over the past three years implying an inefficient cost management and unfavorable

environmental factors leading to the decrease.

Opportunities

One of the greatest upcoming opportunities results in a recovering freight industry. This

recovery where British Airways receives half of its yearly income from becomes a great

asset. Worldwide cargo demand was up nearly 50% last year with the main operation of

British Airways being international and domestic air services for freight and mail, plus

military services. Giving the company a chance to capitalize on the market.

The freight industry is not the only industry currently recovering, the Tourism industry

also saw a rebound in 2010 and has been predicted to keep growing over the next year.

In the first few months of 2010 the increase was 7%. The global rebound has shifted the

travel industry into more positive light. With an increase in both the leisure market and

freight industry will support British Airways increasing revenue and hopefully derail the

rising cost of operations due to fleet size and rising fuel costs.

Current Ratio 0.78 0.7150

Quick Ratio 0.71 0.6890

Debt Ratio 0.4439 0.2143

Debt To Equity -2.8228 1.0828

ROA -0.0188 -0.0398

ROE 0.1194 -0.2011

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The One World Alliance has help British Airways expand across the globe and now

further into North Africa and the Spain with the recent merger of Iberia. In part because

of the recession. With strong positions in both United Kingdom and Spain this creation

of merger has allowed the two to capitalize on strategic positions held in both markets.

Enhancing customer benefits, combined balance sheet, with the synergy created will

strengthen the One World Alliance, and its new position with the gateway to Latin

America open with Madrids position secure.

Threats

Opened with the Introduction previously mentioned the extreme competition among

competitors in the airline industry. The prices are extremely sensitive to the slight

change in the industry and passenger demand. Many airlines try to compete through

price discounting and matching trying to gain even the slightest margin against

competitors.2 Especially since the Open Sky agreement between the US and UK in 2009

altered some of the competitive landscape, and changing transatlantic routes. Along with

a wider airplane body being introduced many competitors are constantly adjusting prices

and keeping in line against competitors to gain the margin and the control.

Prices are further influenced by one of the biggest environmental factors present; Oil.

One of the most volatile prices that can be seen in airline costs lies within petroleum

markets. Historically cyclical prices can be seen with huge fluctuation beginning in the

summer and drop-offs in fall and winter. Fuel prices will continue to fluctuate and rise

2 Discussed later in Pricing Section

8 which presents both a threat but opportunity as all airlines will be affected by the oil

prices and can allow British Airways to differentiate.

The final threat lies within the regulations to the industry. Every function of the airlines

is heavily regulated to cover compliances

and legal procedures as well as

international laws, regulations, and

restrictions that can be installed on any

company. With many airlines always

expecting to pay for fines or compliance

issues to continue operations with more

fees to be incurred through the rest of the companies life affecting ticket prices, reduction

in revenues and constant increasing costs.

Revenue Trends-British Airways

British Airways has suffered major downturns in 2008 and some in 2010. These are

reflective on the industry in general. Many companies have faced backlash in 2002 and

2009. The backlash was mainly subjected to and increased fear in security in 2002 after

the effects of 9/11 on the psychological perspective of flying. In 2009 the Downturn was

due to the economic market and circumstances. This effect carried through the 2010

fiscal year affected much of British Airways. With many revenues being affected by

passenger attendance with a decrease in revenue per kilometer showing in 2009 and

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larger effect in 2010. Cargo also affected the revenues but to a less extent because of the

less extent that BA derives revenue from total profit. In an industry struggling to stay

above regulations and constant threat of competitors and creating a pricing battle that

rivals the supermarket chains across the United States. BA are one of the weaker airlines

at this point in time but conquer the market on service rather than price and serve at a

higher class.

When looking at the financial ratios compared to partner airline American you can see a

dramatic difference though are within the industry averages.

Marketing-Promotions-British Airways

British Airways uses multiple procedures to attract their target market discussed earlier in

which their primary focus is on the business traveler. In their strategy it uses social

media to connect with its end user. Promoting the brand online with easy to access

information and transforming the power the consumer has. BA current promotion

provides a new idea to airline food allowing consumers to go online and recommend or

change the current menu change. Thus, ending the old staple of the Airline Food market.

British Airways also released a new slogan Seize the Opportunity to Travel. This

slogan managed to capture part of the secondary travel market and the business segment

through the imagery of being able to travel becoming a part of the culture and seizing the

chances working off of a popular Latin phrase Carpe Diem-Seize the day.

10 British Airways made a stunning redirection in its advertising over the past few years one

of the biggest changes in two decades. This change comes from the outsourcing of

advertising agency Bartle Bogle Hegarty or BBH for short. An advertising firm based

out of London redesigned the current British Airways advertising to focus greatly on the

exceptional customer service and treatment that all passengers receive before, during, and

after any flight. These efforts come from the owning of Terminal 5 the main hub of

British Airways at the Heathrow Airport. This combination allows British to expand

service into all facets of the airport before the flight leaves from England. BBH redesign

of the British Airways perspective has help strengthen customer views of the airline.

Advertising alone is not the only expansion of the business BA also looks into many

different partnering opportunities. Partnerships include credit card companies, rental

cars, Diners Club, One World Alliance3, Terminal 5, Hotels, and Walt Disney. The

partnerships with these corporations allow an increase in services offered through British

Airways. At ba.com the site has been set up to create easier access by allowing users to

book their flight, car, and hotel online with ease of access. By creating less work for

users online ba.com can capitalize on this market. Along with partnerships from Visa

and American Express will allow frequent fliers to rack up mileage programs along with

these two partners and become more integrated into the airlines. The Disney partnerships

allows BA to sponsor a ride in Walt Disney Theme parks reaching out to many audiences

across the globe with recognized characters and becoming more recognized.

Customer Perception

3 Discussed later in the paper

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BA has a widely recognized brand ranked high above many airlines. For its main focus

relies on the service to the client and becoming more apparent. Fixing cost per ticket as

much as possible and still maximizing service created a boom for BA in the industry but

now that boom slowly drizzling. With more customers concentrating greater attention on

price more than service the airline is in a straight to stand out from the others in the

industry, trying to compete on both price and service without giving in to the other. The

graph to the right shows BA in the all other category with Southwest beating out many

airlines. Service is a primary goal but increasingly difficult to compete against all

competitors.

American Airlines Company Overview

Started in 1926 by Charles Lindbergh as a mail deliver that took three planeloads of mail

between St. Louis and Chicago. In the 1930s American Airlines was the best airline in

the United States and flew its one millionth passenger in 1936 just ten years after starting

as mail delivery business. By 1959 AA was the first airline was the first to offer coast-to-

coast service of the Boeing 707. 1960 American Airlines took another giant step forward

by partnering with IBM to create the second greatest real time database SABRE second

only to the US Government SAGE systems. The SABRE system became a greater asset

by 1970 where it was offered for sale to many travel agencies to access the tremendous

amount of data gathered by the flight giant and by 1985 over 10,000 agencies had signed

onto the SABRE system to access data on clients, flight information, conditions etc.

12 From there American Airlines took off in the nineties offering further services through

SABRE becoming first in line to offer a ticketless service and automatic check-in.

Generating greater partnerships with international airlines for more information, access to

planes, and equipment. Deals with NBC to offered to programs in-flight entertainment

packages. American has also expanded its mobile boarding pass procedures since 2008

with the introduction of the Apple iPhone starting the craze. Also, outfitting their planes

with better fuel efficiency that is estimated to save over 800,000 gallons of fuel over the

coming years a huge bonus with the constant rise of fuel pricing. Late in 2010 American

Airlines introduced its iPhone and iPod application allowing users greater access to

online entertainment during flights along with any information, the bonus being the

application is free and creates users who want to be a part of American Airlines. Today

American Airlines serves over 260 destinations and carries more than 270,000 passengers

a day on average. You can see in the map below the total destinations offered by

American Airlines.

SWOT Analysis American Airlines

American Airlines much like British Airways faces the same challenges, threats, and

opportunities as many of the airlines in the industry do. This creates a culture that

competes to reduce their threats and be the first to expand on the opportunities one area

where American Airlines excel over its competitors as seen in the company overview.

Strengths

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Again a strong fleet operation much like British Airways offering a wide array of flight

services and combined fleet sizes and alliances with over 900 aircraft supporting this

system and over 3,400 flights a day through ports around the world. Continued

cooperation will allow them to maintain a competitive advantage in this area. Strong

fleet operations also include their supply to the US government for a wide arrange of

planes and supplies creating a great alliance that allows American to become the

worldwide contender that it has become.

Thanks to many alliances around the world that has come about thanks to the creation of

the One World which British Airways is also a part of. As the principle subsidiary it is

one of the largest scheduled passenger airlines in the world. Offering a range of services

from freight and passenger to its most renowned and first service of mail carriers.

Partnering with several smaller airlines American is able to offer services to many

smaller markets that much larger airline is not able to become a part of. The company

has also experienced a large boom in foreign markets, these now account for 40% of its

annual revenue.

With passengers having a greater choice between airlines distinguishing one from another

becomes a difficult task. American Airlines has taken the call and begun differentiating,

creating a well-known frequent flyer program. Credits can be earned by flying the

airline, or any participating airline, including any other service or participant including

stores of the AAdvantage program. There are over 1,000 participants, including; hotels,

credit cards, car rentals, and many others. The amount of members has become greater

14 with more than 64 million participants in the program and 600 billion miles accrued.

With a strong program at its foundation further customers are encouraged to continue

return.

Weaknesses

Another commonality between British and American are its declining operating

efficiency. American Airlines unlike British has begun to see a rise in their operating

profit there is still a decline but there has recently turned at a decrease-increasing rate.

Compared with 2007 before the crash in the market drove many away from using airline

services.

Many lawsuits have surfaced against the airline for what is believed to be violations in

maintenance of aircraft steaming from repair lapses. These regulations will only continue

to rise with the recent events of the Southwest flight that resulted with a hole being

formed in the fuselage.

Opportunities and threats remain the same for the airline as seen in the depiction of the

SWOT analysis for British Airways. There are no differences to these sectors. American

Airlines does have advantage over many competitors by becoming a first mover on many

new technologies offering in-flight internet, applications for apple products allowing

easier transfer to flights with many areas still being developed to offer greater services.

Revenues

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American Airlines has greater revenue over the British Airways mainly due to larger fleet

size and a greater number of corporations owned under American Airlines giving a

greater access to a wider variety of ports around the world. Seen in the chart are British

Airways and American Airlines revenue in American US dollars. Much of American

Airlines revenue is derived from its wide variety of services and equality in serving

markets across the world rather than a focus on just one area particularly that allows

American Airlines greater resources. Note also the financial ratios that favor American

over British.

Market Promotions- American Airlines

Along with partner British Airways, American Airlines focuses on the Target Market

Business travelers. This engineers a similar campaign strategy. American Airlines again

focus on worldwide travel with elegant displays in advertisements creating greater pull to

consumers. American Airlines are more focused on featuring the lowest cost fares.

American Airlines has created many interactive displays in key demographic areas.

These displays feature world-renowned spots and a key interactive piece that allows users

to see themselves in such situations.

American Airlines hires an outside agency TM to handle and create the advertisements in

many areas across the United States. The agency focuses on the slogan Milestones in

Life tying in to the perception of visiting many of the luxurious locations featured by

American Airlines and celebrating the airline as life and memories being created.

16 As mentioned previously American Airlines offers partnerships through its rewards

program. Rewards include being able to rent from car rental, and stay at luxurious hotels

across the world through the accruement of the miles earned. Miles can also be added by

making purchases through Visa and American Express adding with purchases where

applicable. The partnerships also allow users to cash in points at stores, and for services

where the partnerships extend. Building the recognition of the program continues to

engage users and create repeating guests to earn the miles and reap rewards.

British Airlines Pricing and Market Approach

British Airlines assess the market with a substantially different approach in comparison to

other industry competitors. Over the past five years, most companies in the airline

industry have operated on low profit margins in order to provide appealing prices to a

broad range of customers. As this approach may seem appealing, it has proven to be high

risk and unstable within the market. British Airlines, on the other hand, has taken a much

different market approach. BA believes that there is a large target market of individuals

who are more than willing to pay a premium price for exceptional customer service. This

may seem to be a new-revolution of marketing tactics for the industry, but British has

been using this pricing strategy for decades.

British Airlines is continually adding benefits and additional services in order to

constantly meet the needs and desires of customers. The company believes in building

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brand equity and recognition by pricing their services in accordance to the quality of

service the customer is receiving. British strives to accommodate consumers in a genuine,

personal and caring way in order to meet expectations. As stated on their website, British,

collectively arranges every element of quality service so the company can create a

particular experience for customers. In essence, the consumer is not only paying for

transportation, but for the services and benefits that are associated with flying.

British Airlines pricing strategy is simple, has no hidden fees, and allows the consumer to

have confidence in the quality of service when purchasing a British ticket. British claims

that the price you see is the price you pay, and the company emphasizes their efforts

around providing a quality service, not just a low cost carrier. This provides BA with an

current opportunity to hold a niche place within the larger market, as they utilize their

internal and external factors in order to create an experience that sells itself. While the

worlds airlines racked up billions of dollars in losses in the last five years, British

Airways remained solidly profitable, (Prokesch).

The company makes it known to the market what their objectives and strategies are and

British even provides their customers a tool to directly compare the prices and services to

other competitors. British believes that the environment and service that they can provide

will lead to the retaining of customers. This is essential because 35% of Britishs

customers account for 60% of total sales (ba.com). Even though British does not strive to

be a low cost carrier, the company still does provide a pricing promise on their website.

Any customer that finds a more inexpensive plane ticket to the same destination for the

18 same day can fill out the Pricing Promise form on the website within twenty-four hours

and will be reimbursed the difference between the tickets. This is just another benefit of

flying with British Airways.

British competes in the industry by offering customers with more than just a standard

service. The company strives to create an environment that fills the customers value-

driven needs (ba.com). The company assess this primary objective through measuring a

number of key variables in order to understand the experience that customers are

receiving. BA attempts to measure the key performance indicators through the customers

eyes. This is the primary benefit that has enabled British Airways to be successful over

the past several years. By not focusing on a price point and centralizing their efforts

around the idea of providing a premium experience, the company has found a large

amount of success.

Sure, British Airways has a superior marketing approach and pricing strategy that has

been successful, but how does the company create an environment that customers are

willing to pay a premium for? Customer Impressions. Each key indicator that is measured

is evaluated by the impression and/or feelings that are associated with the interactions.

British trains their in-flight crews to not only provide premium customer service, but the

company gives specifics. For example, British asks their crew members to not just load

up passengers with food and drinks and then disappear. The employees are instructed to

make an attempt to develop additional conversation or services in accordance to the

customers desires. British is not like other airline companies in the sense of loading up

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their customers with a snack and one drink and then disappearing. British does do

primary research in order to fully understand the target market and develop the

atmosphere that the customers are paying for. Through the conduction of focus groups

the company has been successful in adapting to the needs and desires of the market.

British asks individuals in the focus groups specific questions involving the feeling and

visual description of the desired atmosphere. Through the analyzation of the responses,

British has built them into company wide goals.

British has integrated not only basic benefits into their strategy, but has developed

programs and additional services that customers can engage in off the plane. The Well-

Being in the air program is one of these additional benefits that is offered. The program is

built around frequent-flyers, primarily business flyers, who consistently are dealing with

fatigue during long flights. The program provides options for healthy meal choices,

exercise videos (to help with circulation), first class sleeper-services, and arrival lounges

of two sorts. The first type of arrival lounges are located in British Airways primary

hubs (Heathrow and Gatwick). The lounges located there offer message relaying services,

breakfast, newspapers, showers, haircuts, manicures, shaving areas and services to get

clothing pressed. The smaller lounges are not as exotic, in the fact that they offer much

more simple services and snacks.

British Airways operates under a simple idea, Nothing to small, nothing to big. With

this mentality, they believe that it lets the customer know that services are created around

their individual needs. In fact, British is continuing to study the market in attempt to

20 provide services to a few smaller market segments: women, unaccompanied minors and

consultants.

Evaluation of British Services

The company is continually benchmarking itself against all the other companies in the

industry. The have been successful in creating benchmarks by creating Marketplace

Performance Units (beginning in 1983). There are ten members in each unit and the

primary purpose is to track a list of 350 key performance indicators. The company

believes that if the information doesnt exist, then create it. British provides specific

designed aircraft seating, in flight entertainment programs that are created to meet

specific lifestyle indicators. The overwhelmingly equipped airport lounges provide

customers with an experience that no other airline offers, and the employees are trained

to provide customers with the best customer service in the business. Their alliance in

One-World also provides additional benefits that are listed later in the paper.

American Airlines Market Approach

American Airlines has developed a much different marketing approach in comparison to

British Airways. American Airlines strives to be a low-cost carrier and is continually

making profits off of low-profit margins. This has enabled American Airlines to be

inconsistent in growth and revenue generation.

American Airlines is currently making an attempt to change online ticket booking that

will have a significant effect on customers. AA attempts to cut out middleman ticket

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books in order to up-sell more benefits that the company offers, for a fee. American

believes that they are missing an opportunity to generate revenue in this segment when

customers are purchasing tickets through intermediaries. As they centralize their pricing

strategies around providing low-cost tickets, the company is relying on an increase on

addition paid services. In effect of making these changes, American is no longer focusing

on the consumer benefits, and has transitioning their focus on to making a profit. In

essence, this is creating a lack in customer service.

The third-party online ticketing agencies are known as Global Distribution Systems.

American is having travel agents bypass the booking on the Global Distribution System

and only use the airlines direct website to book the tickets. American states that,

they are trying to work with the middlemen; they want tickets booked directly on their

system so that they can up-sell customers with services that add fees (more leg space,

extra points, etc.), thereby improving the average ticket price. This is an issue for

customers and does not provide the market with benefits. The purpose of Global

Distribution Systems, are to force the companies to compete by comparing various airline

prices. If this system is cut out, customers will reap the disadvantages.

In the past, American Airlines was known to be the most flexible airline at meeting flight

flexibility. Since 2009, American Airlines has experienced significant problems. In 2009,

American Airlines was accused of predatory pricing. This had effects on Americans

brand image and became a very well-known topic all over the United States. In return,

American Airlines suffered the consequences. Since that point, the company has be

22 struggling to make a presence in the market and develop strategies to become profitable

and gain more market share.

Despite Americans efforts, the company has experienced even more problems.

According to current statistics, American has had more complaints about service and

mishandled baggage. Consumers are increasingly disappointed with Americans ability to

coordinate on-time arrivals.

Evaluation of American Airline Services

American Airlines is continually struggling to generate positive reviews for customer

service and over-all quality airline rating. Post researching this topic, it is evident that

there are not any bells and whistles associated with Americans service and quality. Most

people are unsatisfied with the value of their money and would not recommend the airline

(airlinequality.com).

American vs. British

It is evident that American Airlines and British Airways have marketing approaches that

sit on opposite ends of the spectrum. While American focuses on price, British takes the

initiative of providing the best customer service. It is clear that British spends the time

and money to effectively research their target market. The customers are the heart of all

operating activities. This has provided to be of great success for British Airways. In

return, American Airlines has taken the strategic approach of being a low-cost carrier. In

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todays current economy it seems as if this would be a profitable approach, but after

analyzing the reviews and services, it is evident that customers want more for their buck.

A good way to compare companies is to evaluate each airlines mission statement. The

mission statement tells us what exactly the main goal for the company is and who they

are targeting exactly. By analyzing the mission statement we can distinguish the

background behind each companys actions and can glance at their future and success.

First of all is British Airways, their mission statement reads, To be the undisputed leader

in world travel for the next millennium (ba.com). This statement tells us that British

Airways is not only committed to the work they are doing now but they do this work in

order to be the leader in travel. It is interesting to note that British Airways doesnt want

to be the leader for the next year or the next month, but they are hoping to lead world

travel for the next millennium. This is a bold statement to make, British Airways is

striving to become the one and only world travel leader and when we look at all they do

and the services they provide it is easy to tell that they are taking steps in the right

direction.

As for American Airlines they take a longer approach when defining their mission

statement. We continuously strive to make a positive impact in the lives of our

customers, employees, shareholders, and the communities and environments we live,

work, and play (aa.com). American gives some very bold and interesting messages in

their statement. First of all they say how they are striving to make a positive impact in not

only their customers lives but the lives of their employees and shareholders as well as

24 their communities. This statement makes us realize that American is not out for only

profits, they are working to make long lasting personal relationships that make people

feel they are apart of something bigger and brighter. The employees are just as important

to the company as the customers and as well as their investors and communities. This

makes us understand that everything American Airlines is doing is for the company as a

whole and not only for profits. By putting customers, shareholders, employees, etc. on the

same level, American Airlines is forming a team of brand loyal people that want to

improve not only their lives with the company but improve the customers lives during

travel periods. American Airlines mission statement reveals a much deeper feeling when

it comes to a company, we feel a family setting and a welcoming setting. This company is

working towards making people feel more comfortable with travel and for their

employees they are creating a strong safe haven to work at where people feel valued and

part of a team and not just a member of a company.

After looking at the mission statement we can start to analyze the companies target

market. British Airways has many repeat customers and they take pride in their target

market of upscale international business travelers and pleasure travelers. Because of this

most of the travelers with British Airways take advantage of their miles card. The

Executive Club prices may be increased but with repeat customers they are able to use

their miles with British Airways or any alliance member which I will talk about later. As

for American Airlines, they target two groups of business travelers; group one which

travels one time per year and group two which travels five or more times per year.

American also uses a miles card and like British Airways many members take advantage

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of this premium service. As for American the big target they market to is the decision

makers. They target the actual physical person who is entering account information and

reservation details. This can be a boss for a company, a dad for a family, or a leader of a

group. By targeting the person who purchases the tickets for a large group they are able

to reduce their efforts at attracting new customers. American Airlines has a strong

customer base and this is because of the bulk amount of tickets that is purchased at one

time by targeting group leaders. It is easy to see that both British and American are

business orientated and will continue to market towards their customer base of business

travelers. The differences we will see with the companies comes in the actual strategies

of the companys.

As you could see from British Airways mission statement they want to be the number one

choice for air travel. This is their first strategy, British Airways will do anything

necessary to grow the customer base and expand into newer and better opportunities. As

their business grows, so will the benefits and services to each customer. This leads

directly into British Airways second strategy, to deliver an outstanding service for

customers at every touch point. This means that from ticket purchase to baggage pickup

British Airways strives to have the most personal and direct customer service that they

can. This strategy describes British Airways very highly in that no matter what problems

or mistakes may happen, British Airways will always be there to assist you on your trip.

The next strategy that British has is to grow a presence in key global cities. Mainly you

see British Airways flying out of larger cities where more of their target market is. The

point British wants to make with this strategy is that they want to grow in larger cities

26 that may not be the biggest or the brightest but are there for opportunity. One example is

here in Denver, British is not that big of an airline choice at Denver International, but in

time hopefully British Airways can make a stronger influence on more centralized cities.

British Airways next strategy is to build a leading position in London. London is where

they are hubbed at and this city is the main take off point for their business. British

Airways hopes to continue to grow and lead London into a new area of air travel. With

upgraded lounges and check in points, British Airways has already made steps to say they

will be in London for a long time. Finally British Airways has a strategy to meet

customers needs and improve margins through new revenue streams. This means that

whatever is necessary to make customers happy should be done. This can be through

their upgraded lounges or with upgraded aircrafts. The key point that British Airways

wants people and customers to know is that they will never stop striving to meet their

overall goal of being the number one choice in air travel.

American Airlines has similar but unique strategies when it comes to air travel. Their first

strategy is to customer commitment. American understands that without their customers

there would be no business and no opportunity to grow. By treating customers as equals

and as there family they are able to have a strong brand loyal market group that will

continue to use American Airlines as their choice for travel. Next, American has a

strategy to the commitment and expansion into Miami, Caribbean, Latin America and

Mexico. This is a major strategy for American Airlines in that they are not known for

their international flights, instead they are more domestic in the United States. By

expanding into more international flights they would be able to reach levels that British

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Airways has already made, even if not many people use American for international

flights the option is there and expansion is possible. This is one of many steps forward

American Airlines wishes to make. Another strategy American has is for a safety

commitment. With the recent events on Southwest airlines and for many fears that

customers have, American Airlines is striving to make sure that customers are safe on all

their flights and are able to relax when on board many of their aircrafts. Safety is

extremely important when it comes to air travel and it is vital that businesses understand

how important it is to make customers feel at ease on flights. By having many safety

regulations customers feel at ease and are able to relax which makes them comfortable in

making future travel plans.

As you can see both airlines have many strategies to move forward and continue to grow

in the airline industry. Of course both businesses strive to have great relationships and are

able to have a steady business by understanding the conduct and services that they

provide. The ethical actions of both airlines make them leaders in the industry and an

example for all airlines to follow. The key strategy I get from both these airlines is the

idea of customer commitment and satisfaction. By understanding the customer group and

their wants and needs you are able to give to the customer exactly what they want and

keep people happy and relaxed when traveling.

When analyzing these companies it is impossible to truly understand each company

without understanding the environment of the airline industry as a whole. There are many

external environment factors that influence the Airline industry. First of all is the climate,

28 the big idea with climate is to reduce the amount of emissions into the environment. This

can be done in four main areas.

1.) Improve carbon efficiency:

This is done by making sure aircrafts are up to code and follow all regulations for

travel along with proper maintenance of aircrafts is key to ensuring maximum fuel

efficiency. This is also used to determine when planes should no longer be used

and newer and more advanced aircrafts will need to be created. When a plane is

not up to code, it is better to replace that plane than continue to waste resources.

2.) Develop low carbon fuels

Many studies are taking place in order to produce an alternative fuel; the key is

answering the million dollar question, what is the alternative? By finding

alternatives and more efficient fuel sources plane flights prices could ultimately

be reduced and more travel could be seen as a result. The truth is eventually we

will need an alternative and the sooner we can find it the stronger the airline

industry will be.

3.) Promote voluntary carbon offset schemes

American and British airlines currently both try to reduce the amount of carbon

foot printing by ensuring proper cabin reductions. This is done through offering

passengers different flights for a better seat if they give up their current seat.

Overfilling aircrafts or under filling aircrafts both negatively affect the amount of

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energy used. By regulating and understanding this problem each airline can and

will make a difference by ensuring proper cabin restrictions.

4.) Support research into aviations climate change impacts

Any positive impact airlines can make on reducing the amount of flights or

increasing/ reducing the amount of passengers per flight can improve the overall

efficiency of the aircrafts used especially in international travel. Airlines currently

work with International Air Transport Association to reduce CO2 emissions by

50% by 2050, to achieve this goal will require new technology, sustainable bio

fuels, and the creating of global carbon trading markets. Basically a new

alternative for fuel is desired as well as more technologically advanced aircrafts

are desired.

The next big environmental problem with the airline industry is the amount of waste

produced by each airline. Since 2004 over 425,000 tons of waste is produced by airlines

each year. Each passenger leaves behind about 1.3 lbs. of trash per trip. 75% of all this

waste is recyclable and in the industry only about 20% or less participates in some type of

recycling program. The goal of reducing waste is to reduce the amount of landfill space

and to take advantage of the resources we have at hand. Here is a little insight into what

waste can make. In the US every year we throw away enough cans to build 58 new 747s

this is the same for plastic as well as paper. The goal is not just to reduce waste but to not

30 use anything we already have. This can reduce time that is spent mining, logging, or

drilling, which would also positively affect the climate with less emissions.

The recent recession has led to a change is airline workforce. Many employees with

airlines were laid off or changed from full time to part time workers. A big environmental

factor with this is to reestablish labor relations and make the jobs seem stable for all

employees. By having a stable workforce, customer relations will increase because of

employees feeling comfortable with their jobs and work to benefit each airline. The final

step in improving the environment of the airline industry is with fleet modification. This

is done by making sure aircrafts are upgraded to consumer demand. Especially for

American airline and British which are both huge when it comes to paying that little extra

for better services. Fleet modification can be from better fuel efficiency to personal TVs

at every seat. The key is making sure that your airline has the best and will continue to

upgrade its fleet when desired.

As you can see the airline industry has some areas of improvement they need to take

especially with the environment. Many internal problems are regulated separately by each

airline but as an industry it will take the cooperation of each airline working together to

solve these problems.

As we touched on earlier airlines sometimes need to work together to ensure survival in

the industry this is where alliances come into play. American Airlines and British

Airways are part of an alliance known as the One World Alliance. One world alliance is

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one of the worlds 3 largest airline alliances. It is comprised of 12 airlines that work

together to gain customer commitment as well as increase travel opportunities for every

customer. By having an alliance resources are combined and destinations are increased as

well as overall fleet size and customer service. A few facts about the alliance is that it was

founded in 1999 by American, British, Canadian, Cathay Pacific, and Qantas airlines.

They are hubbed out of Vancouver, Canada and , their slogan is, One World Revolves

Around You. This slogan gives good insight into how big the alliance actually is. When

they say they revolve around you, it is the truth. By combining forces with airlines this

alliance can reach 870 destinations and 145 countries. There are approximately 9,300

daily flights and 335 million passengers and 2,400 aircrafts used. This is huge when it

comes to air travel. The main benefit each airline receives by joining forces is

specifications across engineering and maintenance procedures reduced costs through bulk

buying and parts sharing. When planes break down or other problems are faced airlines

are able to call up their partners and fix problems rapidly and quickly. The key is having

fully functional aircrafts with little ground time. Airlines only make money when planes

are in motion. Also e-ticketing was introduced for all airlines involved in the alliance.

This makes check in extremely easy and effective. Less time is spent in line and more

time is spent relaxing and getting ready for flights instead of worrying about checking in

on time.

The One World alliance has won many awards since it started including eight consecutive

years of winning worlds leading airline alliance as well as best airline alliance award in

2010.

32

Awards won since 2002:

Year Organisation Award 2002 Business Traveller Awards

Best Airline Alliance[119]

2003 World Travel Awards World's Leading Airline Alliance[120]

2004 Business Traveller Awards Best Airline Alliance[121]


2005 Business Traveller Awards Best Airline Alliance[122]





2009 Business Traveller Cellars in the Sky Awards Overall Best Airline Alliance[123]


2010 Skytrax World Airline Awards Best Airline Alliance[124]


2010 Global Traveler Tested Reader Survey 2010 Awards

Best Airline Alliance[125]

There are many benefits available to customers by traveling with a participating One

World Alliance member. First of all is the amount of lounges available. The One World

Alliance has approximately 550 lounges available with more than 311,000 employees

able to serve you. This is a huge strength of joining the alliance because of the amount of

33 | P a g e

attention you receive from not only your airline but other airlines involved in the alliance.

Each customer is able to be personally serviced and with the amount of employees

available not one customer should ever be ignored. Personal attention and relationships

are built through this alliance and customers feel as though their business is appreciated.

By far the greatest benefit customers receive through using a One World Alliance

member is the mileage program. Miles can be accumulated and used throughout the

industry. By using one airline it can transfer miles to another airline. This makes it

possible for customers to use the cheapest options available while being able to transfer

miles to any particular airline in the alliance whenever desired. By accumulating miles

customers are able to work their way up the One World Tier system to receive even more

benefits. The first tier is called One World Ruby and it is awarded to customers who have

reached the first level of a member airline's frequent flyer program. The benefits include:

priority reservations wait listing, priority airport stand-by; business class priority check-

in, and pre-reserved preferential seating.

The next level of the tier is called One World Sapphire and it is awarded to customers

who have reached the second highest level of a member airline's frequent flyer program.

The benefits of include: priority reservations wait listing, priority airport stand-by,

business class priority check-in, pre-reserved preferential seating; business class airport

lounge access, and priority boarding. The final tier of One World mileage program is One

World Emerald and it is awarded to customers who have reached the highest level of a

member airline's frequent flyer program. The benefits of the include: priority reservations

34 wait listing, priority airport stand-by, business and first class priority check-in, pre-

reserved preferential seating, business and first class airport lounge access, and priority

boarding.

As you can see there are many benefits available for not only the customer but each and

every airline associated with the One World Alliance. As stated earlier not one airline can

make a difference alone but by working together the airline industry can make a

difference to improve the lives of customers and employees alike.

Recommendations- British Airways

There are several recommendations to be made given the current health of both British

Airways and American Airlines. First, taking a look to British Airways with steps to be

taken to maximize profits.

1. Focus on pricing strategy to deal with fluctuating economies. The focus should

be more on creating a general flat rate to attract more consumers. Instead of

continually focusing on competing with competitors on pricing and lowest price,

focus more on creating on general price. This will attract more people to the flat

rate that does not bounce instead of fluctuating and constantly changing. So that

way the person sitting in Seat A and the one next to him in Seat B pay the same

price. By creating a general pricing rate that does not compete solely on price

35 | P a g e

will not lead anywhere. Continue with the original strategy and compete on

service offerings.

2. More advertising focusing in the early winter months, and at key points through

the year. This has two key points; the first to attract consumer travelers. This will

increase the reception rate of all BA messages. Targeting earlier in the year when

those are planning trips for summer vacation leads to a greater brand recognition

while trip planning is taking place and becoming more prevalent. To increase

targeting markets to business travelers by forming partnerships with companies

and creating strategic alliances in the Business to Business market. By creating a

greater awareness for the company during times when travel planning is at a peak

becomes imperative when competing for flights and passengers.

3. Change of advertising campaigns on a one to two year basis. With customers

loosing focus to greater media events messages can easily become lost. Even the

pattern of the six messages to break through the barriers seems to be loosing more

focus. The point is to create new and stickier advertising and a message change

on a quicker basis. British Airways lost an amount of consumers through one

message that was lost in the avalanche in the airline business.

4. Offering of services through more specialties. Meaning creating reason for

business travelers to continue coming back. These services include but are not

limited to; online services, offering the ability to go online and update emails,

documents, and Facebook. Creating a greater niche of services and adding to

increase the pleasure for business travelers.

36 Recommendations- American Airlines

American Airlines has a rich history of success and being able to enter the market first

with new products and innovation. Now, it has an identity crisis trying to continually

compete on price in the industry and its brand begins suffering.

1. American Airlines must recreate the Customer Service. American Airlines was

once renowned for its amazing customer service. American Airlines should

create more focus on its service to customers, being the first able to offer in-flight

Internet, and many services through electronic devices.

2. Using the One World Alliance to offer better customer service by better flight

accommodations on connecting flights or creating more services through rewards,

miles on other One World flights.

3. Offer a better pricing schedule. Much like British Airways, American must

become a part of the Service industry offering greater customer service than its

competitors without focusing so much on price. Creating a regular schedule will

drive more customers due to a flatter rate and more stability versus other airlines

services currently being offered.

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Bibliography

1.) Plantes, Kay. "American Airlines Business Model Strategy Bet ." Business Model Innovation. N.p.,

n.d. Web. 11 Apr. 2011. .

2.) Airline Reviews. SkyTrax, 2011. Web. 13 Apr. 2011. .

3.) Marshall, Colin, Sir. Interview by Steven E. Prokesch. Harvard Business Review. Harvard Business Review, 2010. Web. 14 Apr. 2011. . 4.) British Airways. British Airways, n.d. Web. 12 Apr. 2011. . 5.) American Airlines. American Airlines, n.d. Web. 8 Apr. 2011. . 6.) Airliners. The Wings of the Web, 2011. Web. 25 Mar. 2011. . 7.) "Premium Economy Explained and Compared." Seat Guru. Trip Advisor, 2010. Web. 4 Apr. 2011. . 8.) "Compare Airlines." Compare Airlines: Ba vs AA. LAX International Airport , 2011. Web. 2 Apr. 2011. . 9.) "American Airlines vs British Airways." Find The Best. N.p., 2011. Web. 15 Mar. 2011. .

10.) One World Alliance. One World, 2011. Web. 4 Apr. 2011. .

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