American Airlines Company Overview:
American Airlines was founded in 1930 as a mail carrier and eventually evolved into a major U.S. airline. The company is headquartered in Fort Worth, Texas, and employs more than 100,000 people worldwide. As of 2021, American Airlines serves more than 350 destinations in over 50 countries. The airline industry is highly competitive, and American Airlines faces significant competition from rivals such as Delta, United, and Southwest. American Airlines also competes with a number of regional airlines and ultra-low-cost carriers. Let’s now go over the company’s Porter’s Five Forces Model Analysis.
American Airlines Competitive Rivalry:
The airline industry is extremely competitive, primarily due to the large number of companies that provide each type of service. In addition to traditional competitors such as United Airlines and US Airways, airlines have also been forced to compete with an increasing number of non-traditional alternatives. For example, Southwest Airlines competes primarily with traditional carriers by selling low fares and operating on thin profit margins. However, they have also begun to compete with rail and bus lines providers by expanding their route network. Finally, the entry of low-cost carriers such as AirTran Airways have increased competition among airlines.
American Airlines Bargaining Power of Suppliers:
The airline industry is capital-intensive, and American Airlines relies on a limited number of suppliers for aircraft, engines, and other major components. As a result, American Airlines faces significant bargaining power from its suppliers.
American Airlines Bargaining Power of Buyers:
The airline industry is also demand-driven, and airlines must compete for passengers. American Airlines faces significant bargaining power from its buyers, as passengers can easily switch to other carriers.
American Airlines Threat of New Entrants:
The barriers to entry are quite high for this industry since the airline requires large capital investments in order to build an adequate fleet. Besides, there are other barriers such as licenses and permits, international agreements on air transportation, slot allocations at congested airports, and environmental restrictions that protect incumbent firms.
American Airlines Threat of Substitutes:
Airlines are facing a lot of substitutes, from the train to the bus. Car rental agencies, hotel chains, and credit card companies have all created their own loyalty programs in an effort to keep customers from using airline miles. In particular, the growth of low-cost carriers has led to increased price competition for both leisure and business travelers.
American Airlines Porter’s Five Forces Conclusion:
In conclusion, American Airlines faces significant competition in the airline industry. The airline must compete with other carriers on price and service, while also facing competition from alternative modes of transportation. Additionally, the airline industry is capital-intensive, and new entrants face significant barriers to entry. Finally, suppliers have significant bargaining power due to the number of companies competing for business.