American Airlines Executive Summary

Executive Summary

American Airlines, in its journey to become the biggest and most profitable carrier in the world, is faced with some impactful challenges related to cost reductions, changing social environments, and safety concerns. While other carriers are electing to remedy increasing expenses through bankruptcy or bankruptcy protection, American Airlines has refused to pursue that avenue. AA is tasked with finding ways to lower labor costs, maximize the passenger experience while increasing security measure, use fuel more efficiently, and appeal to more business travelers.

To combat increasing labor costs, we recommend AA implement a productivity based compensation program to reward employees for adding value beyond the standard expectations. To best compete in the sector of passenger experience with enhanced security measures, AA should reduce the number of allowed tickets to avoid overbooking flights, while creating a stronger alliance with TAA to make the security check process more efficient. Passengers are currently frustrated with long security lines and random pat downs. While fuel expense is now being overshadowed by rising labor costs, it still remains the number two largest line item for airlines. American Airlines can improve fuel efficiency by better organizing flight schedules and routes along with implementing technical initiatives such as lower cruising speeds, single engine taxiing, and minimizing drag opportunities. With an increased number of business men and women utilizing technology to communicate, such as Skype and other video conferencing programs, the number of business travelers has declined. American Airlines should offer an enhanced frequent flyer program that is targeted towards business travelers.

These strategies, coupled with an increased customer awareness, will create a competitive advantage for American Airlines to best compete in a cost driven industry.