Continue American Airlines Essay Example | Topics and Well Written Essays - 2000 words

Continue American Airlines - Essay Example 352). The airline industry is gravely affected by the rising fuel costs in the global market, rapid evolution of the internet, and other technological factors. 2. Competitive Forces of the Airline Industry Competition in the airline industry is becoming more aggressive since the â€Å"world is experiencing massive expansion of both domestic and international air travel† (Williams, 2009, p. 80). However, the industry has been shakedown by highly dynamic environment that influenced the industry’s competitive forces which include entry of competitors; threat of substitutes; bargaining power of suppliers; bargaining power of buyers; and rivalry among the existing players (Hubbard, 2004). The entry of competitors is determined by the existing barriers that include intense competition, differentiation and the high capital costs of entry. However, when the market is deregulated the liberalized the industry is becoming saturated with new entrants like the LCCs. In terms of thre at of substitutes, customers can also use other carriers such as train, bus or cruise lines in order to reach the desired destination. Furthermore, the bargaining power of buyers and suppliers is among the critical competitive forces of the airline industry because of its direct impact on prices, volume, and profit (Porter, 1998, p. 45). Air travel carriers particularly those that are sharing the same routes need to have their own effective strategies in order to attract travelers, considering that the industry is centered on Boeing and Airbus suppliers. Lastly, competitive rivalry in the airline industry is high because of its low-cost nature; high fixed costs and competitive pricing make the industry grow at a very slow rate. 3. Airlines Firm Competes Today In the history, the airline industry is heavily regulated wherein almost all of the firm’s activities are highly supervised. This isolated manner of competition had initiated in the U.S.; however, it has been remodeled a nd â€Å"for the first time of history of commercial aviation, an open market situation in which competitive market pricing was to be the norm, and market entry was to become legally open to new airlines† (Williams, 2009, p. 78). The fact that U.S. is one of the highest performing countries in the world, and the reform strategy has been effective in the country, then the other countries are encouraged to adopt the diverse market deregulation. Today, airline firms are competing based on their sizes, assets count, competitive pricing and technological advancement. 1. Firm Competitiveness: Their Key Strengths and Weaknesses AA is one of the world’s largest air freight carriers, and they remain to be competitive despite of the existence of LCCs because they believe on their strengths from the principles of low costs, valued customers, cooperation, and strong financial condition (Subbarao & Murthy, 2005, p. 75). AA’s key strengths include 621 passenger fleet in more than 251 destinations in 41 countries, its alliances and partnerships with American Eagle and AmericanConnection (regional affiliates), Oneworld Airline Alliance, and trans-Atlantic and trans-Pacific joint business agreement. All these activities are realized by AA because of their strong relations with the government. Their key weaknesses include unstable financial position because of on-going economic crisis, high operating expenses and