Essay on How Demand and Supply Will Influence a Company’s Strategy
Number of words: 587
Currently, American Airlines begins to retake its former leading positions on the U. S. airline market, despite a recent threat of bankruptcy. In addition, although American Airlines faced various challenges like occasional terroristic hazards and a massive oil price spike, the airline company possesses relevant positions to achieve long-term profitability. On this basis, it is crucial to thoroughly analyze the factors of demand and supply which may have the greatest impact on adjusting American Airlines’ corporate strategy.
Regarding demand, a vital role here occupies the drastic reduction of a jet fuel price. Specifically, American Airlines is currently able to lower their ticket fares, thereby, contributing to tickets’ affordability. At the same time, due to a nearly 84-percent control of domestic traffic, the company has opportunities to reintroduce larger regional jets with more than 50 seats for inland transportations (Bachman). Unlike the rivals, United and Delta, American Airlines can achieve an essential advantage by seizing the customer share of corporate travel buyers who prefer as many options as possible for their frequent flights. However, because of approximately 40 monopolized domestic routes, American Airlines still tends to avoid low fare carrier competition by providing fewer seats and higher ticket prices. Consequently, a considerable number of American Airlines’ customers shift their preferences in favor of a cheaper carrier.
The factors affecting supply in American Airlines predominantly concern the issue of how many seats it is possible to provide per a time period. In these terms, American Airlines keeps developed partnerships with large aircraft manufacturers of spacious airliners like Boeing and McDonnell Douglas. Particularly, the aircraft fleet of American Airlines consists of Boeing and McDonnell Douglas planes in the proportion 60/40 (Cullen et al. 18). Importantly, due to the fact that Boeing planes represent 75% of their owned equipment, a technical maintenance is generally not long and requires average expenses. It must be also noted that the supply of American Airlines may be significantly improved by introducing the network of extensive inventories where expendable and repairable parts will be constantly available. Since expendable parts are of low value, the replacement of such elements as landing gear, wing flaps, and altimeters will make a technical maintenance even more cheaper and faster.
Based on abovementioned, it is clear that the management strategy of American Airlines must be focused on ensuring full passenger load on a company’s each plane. To achieve this, the company should pay considerable attention to developing discount programs and online booking tools. Crucially, a certain balance must be maintained since few discounts will still leave high fares unattractive for customers, whereas excessively big discounts may limit the number of flights to schedule. Nevertheless, American Airlines has to contribute to previously reducing its labor costs since comparing to rivals, American Airlines’ labor costs remain to be one of the highest in an entire industry (Cullen et al. 19). With these measures, the company will be capable to utilize current supply and demand possibilities fully.
To sum up, American Airlines possesses beneficial market opportunities to thrive as the U. S. dominant airline company. As it can be seen, the appropriate analysis of supply and demand factually determines a company’s course of successful development, if achieving the best productiveness is a priority. It is crucial to realize that both supply and demand are closely intertwined, and changes in one inevitably cause changes in another.
Bachman, Justin . “Is the New American Airlines Proof That the Industry Is Finally Fixed?” Bloomberg. N.p., 10 Dec. 2013. Web. 15 Feb. 2017.